Half-year Report

Round Hill Music Royalty Fund Ltd

20 September 2023

 

20 September 2023

Round Hill Music Royalty Fund Limited

("Round Hill Music" or the "Company")

Registration number: 68002

Legal Entity Identifier: 213800752UO1CJTV8C39

Interim results for the six months to 30 June 2023

CONTINUED POSITIVE GROWTH TRAJECTORY SUPPORTED BY PORTFOLIO QUALITY, ACTIVE SONG MANAGEMENT AND MUSIC INDUSTRY OUTLOOK  

Round Hill Music (LSE: RHM), which invests in evergreen music catalogues with proven longevity and revenue streams that have growth potential, announces its interim results for the six months ending 30 June 2023. The Round Hill Music portfolio of catalogues includes songs by artists including iconic 90s Seattle band Alice In Chains, British rock band Bush, Céline Dion, country music star Carrie Underwood, The Supremes, Wilson Pickett and Whitesnake.

To view the Company's interim financial report please follow the link below:

www.roundhillmusic.com

In accordance with Listing Rule 9.6.1 copies of the documents will be submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

This announcement is made in accordance with DTR 6.3.5R (1A). 

H1 2023 HIGHLIGHTS

Financial highlights: Continued positive financial performance and valuation driven by active music catalogue management

·    37.6% increase in Group Revenue to US$17.8m (30 June 2022: US$ 12.9m), including a 51.6% adjusted uplift in synchronisation income to US$3.3m (30 June 2022: US$2.2m).

·    9.3% adjusted like-for-like NPS/NLS growth in Initial Investments reflecting quality of underlying catalogues.

·    Portfolio Fair Market Value and Economic Net Asset Value stable at US$606.0m (31 December 2022: US$602.6m) and US$519.5m (31 December 2022: US$519.6m); Economic Net Asset Value per Ordinary Share of US$1.27.

·    Economic NAV Total Return of 37.1% delivered since IPO in November 2020.

·    Dividend 1.5x covered, with total dividend in the period of US$0.0225 per Ordinary Share, reflecting the Company's positive performance and outlook.

·    The Company continues to meet IPO targets, including an annualised dividend yield of 4.5% (based on the IPO price of US$1.00 per Ordinary Share) and a net total return of 9% to 11% per annum over the medium term.

·    The Board and members of the Investment Manager are strongly aligned with Shareholders through a combined 6.4% stake in the Company.

Operational & portfolio highlights: Focus on maximising portfolio potential through active management of songs

·    Portfolio of over 150,000 songs across 51 catalogues, diversified by income source, genre and vintage, with 94% of Group Revenue from songs originating pre-1950s to early 2010s.

·    Income comprises revenues from music publishing rights (66%) and master rights (34%).

·    662 sync placements in the period with international brand partners across 21 territories including the crisp brand Lay's in its Champions League campaign featuring Lionel Messi, the French fragrance label Cacharel, F1 motor racing, Meta and Netflix. 

·    The highest value sync yet placed for the Company, with Lancôme using "What a Wonderful World" in its global campaign.

·    Post period end acquisition of the remaining share of the catalogue of music publishing rights of Big Loud Shirt Industries, LLC ("Big Loud Shirt"), bringing the Company's ownership of the high quality and globally renowned Country music catalogue to 100%, and 50% of the writer's income streams of Big Loud Shirt founder, Craig Wiseman, the multi award-winning Country music songwriter and producer.

Outlook: Music industry continues to outperform with positive outlook for foreseeable future

·    7.5% year-on-year global recorded music revenue growth to US$28.2 billion in 2023, with music publishing expected to become a near US$15 billion industry by 2030, according to the Goldman Sachs Music In The Air report.[1]

·    Continued upward trend in streaming, producing record numbers with on-demand audio streams on track to reach four trillion streams by the end of the year.[2] On 25 July 2023, in its second quarter 2023 results, Spotify reported 27% year-on-year growth in monthly active users to 551 million, 17% year-on-year increase in subscriptions to 220 million and 11% year-on-year uplift in total revenue to €3.2 billion.

Proposed offer:

·    On 8 September 2023, on behalf of the Company, the Board announced that it had reached an agreement with Alchemy Copyrights, LLC, trading as Concord ("Concord") on the terms of a recommended cash offer pursuant to which Concord Cadence Limited ("Concord Bidco"), a wholly-owned subsidiary of Concord, will acquire the entire issued and to be issued share capital of the Company (the "Acquisition") by way of a scheme (the "Scheme"). 

·    Under the terms of the Acquisition, Shareholders will receive US$1.15 in cash for each Ordinary Share, representing a premium of approximately 67.3 per cent to the Closing Price[3] of US$0.69 as at 7 September 2023. 

·    Shareholders will have received the dividend of US$0.01125 per Ordinary Share in respect of the quarter ended 30 June 2023 (as announced by the Company on 31 August 2023) and, in addition, the Company intends to declare a special dividend of US$0.005 per Ordinary Share to be declared and paid prior to the effective date of the Scheme from income accrued by reference to the quarter ended 30 September 2023. 

·    The Board intends to recommend unanimously that Shareholders vote in favour of the Scheme at the upcoming Court Meeting and that Shareholders vote in favour of the Shareholder Resolution at the upcoming General Meeting. 

Robert Naylor, Chairman of Round Hill Music Royalty Fund Ltd, commented:

"Following a strong performance in 2022 I am pleased that the Company's positive growth trajectory has continued through the first half of 2023. Our differentiated and diversified portfolio of high quality music rights, ably managed by the Investment Manager, has once again delivered strong like-for-like and Group revenue growth. These results and the ongoing positive developments have been reflected in the terms of the proposed offer."

Josh Gruss, CEO of Round Hill Music LP, the Company's investment manager, said:

"This has been another encouraging half year for the Round Hill Music Royalty Fund, with Group Revenue growing 38% year-on-year, driven by a growing music market combined with the success of our rights management platform which proactively works to maximise the value of the music we oversee. Our effectiveness at generating value from music is reflected in the 52% year-on-year adjusted increase in sync income, supported by high profile placements across adverts, Broadway shows, films and television series including White Lotus and the John Wick 4 trailer. The Investment Manager possesses the specific skillset, deep music knowledge and strong networks within the media and entertainment industries to unlock the potential of a song and, with a portfolio of this quality, alongside the expanding opportunities to generate income from music, we are confident in prospects for continued growth in the future."

WEBCAST / CONFERENCE CALL FOR INVESTORS AND ANALYSTS

A live webcast of the results presentation will be available today from 14:00 BST / 09:00 EST for investors and analysts.

Registration for the webcast is available via https://brrmedia.news/RHM_IR23

FOR FURTHER INFORMATION

Round Hill Music LP
Josh Gruss, Founder and CEO	Via Fourth Pillar below
Steve Clark, COO
Cavendish Securities, plc
Sales:
Justin Zawoda-Martin	[phone]
Daniel Balabanoff	[phone]
Andrew Worne	[phone]
Corporate:
James King	[phone]
Will Talkington	[phone]
Fourth Pillar (Financial PR)
Claire Turvey	[phone] / [e-mail]
Lynne Best	[phone] / [e-mail]
Tomas Nevrkla	[phone] / [e-mail]
JTC
Mariana Enevoldsen	[phone]

 About Round Hill Music Royalty Fund Limited

Round Hill Music Royalty Fund invests in high quality, evergreen music catalogues that have proven longevity and revenue streams, with the aim of providing investors with an attractive level of regular and growing income and capital returns, underpinned by the positive structural drivers of the global music industry.

The portfolio is diversified by income stream and music genre, with value created through the proactive and careful management and commercialisation of the repertoire through synchronisation (placement in films, television series and brand campaigns); licensing; data cleaning; and distribution (including across platforms such as Amazon Music, Apple Music, YouTube and Spotify). 

Its 51 catalogues, totalling over 150,000 songs, include music performed by artists such as Alice in Chains, Bonnie Tyler, Bruno Mars, Céline Dion, Lady A, Louis Armstrong, The Offspring, The Supremes, Whitesnake and Wilson Pickett.

The portfolio of rights includes copyright interests in a musical composition or song (which can be the writer's share, publisher's share and/or performance rights), the rights to the recording of a musical composition or song (the master recording rights), as well as music rights and assets that meet the Company's investment strategy and objectives.  The Company is a non-cellular Guernsey company.

A playlist of RHM's top 50 earners can be listened to on Spotify here. We recommend it served loud.

About Round Hill Music LP (the Investment Manager)

Founded in 2010, Round Hill Music LP is a fully integrated owner and operator of music copyright properties. It currently manages 150+ catalogues, totalling around 200,000 songs with a combined value of circa US$1.2 billion.

With circa 70 employees located in the major music and entertainment markets of Nashville, New York, Los Angeles and London, Round Hill Music LP has an experienced management and investment team with an established reputation and extensive expertise in the music and finance industries.

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[1] Goldman Sachs Music in the Air, June 2023.

[2] Luminate Midyear Music Report, July 2023.

[3] The closing middle market quotation of an Ordinary Share as derived from Bloomberg on any particular date.

 

END