Shares Hipgnosis (SONG) were marginally down at 70p in morning trading as the music royalty fund finally published its results for the six months ending 30 September.

The music royalty firm was scheduled to publish its results earlier this week, but this was delayed due to an issue surrounding the valuation of the company’s assets by auditor Citrin Cooperman.

Net asset value (NAV) fell 9.2% to $1.74 compared to $1.92 as of 31 March 2023 ‘driven primarily by a reduction in the fair value of the portfolio’.

Numis analysts said: 'We believe that investors were widely expecting a write down to NAV, although the nature of the write-down might be slightly different to expectations and the board have may the highly unusual statement of stating that investors should treat the fair value/operative NAV with 'a higher degree of caution and less certainty'. The discount rate has remained unchanged at 8.5%, and the write-down instead reflects a series of accounting adjustments, some of which had been flagged, whilst others were new today. 

'There have been various changes to accounting since then which have negatively impacted the portfolio, but we believe ultimately it is best to get to a basis where investors can feel that the accounts are on a conservative basis. The interims have much more detail on revenue per catalogue, as well as confirming which types of rights investors own in each catalogues. We expect the trend of increased disclosure will be welcome.'

MORE DISAPPOINTMENT FOR SHAREHOLDERS

The music royalty firm said it was suspending the payment of any dividend for ‘at least the remainder of the financial year’.

The October dividend was withdrawn.

Hipgnosis looks to steady ship with appointment of ex-Roundhill chair after suspending dividends

Recently appointed chair and non-executive director Robert Naylor reaffirmed that he was delighted to be on the Hipgnosis board ‘with strong backing from shareholders’ and the strategic review was ongoing.

‘The board, through its advisers, has begun due diligence on the company’s assets with Shot Tower LLC, a specialist music rights practice, acting as lead adviser. This process will help the new board bring forward proposals for delivering value to shareholders.’

Analyst at Stifel remain upbeat about the music royalty firm saying in a research note: 'Cutting through the noise, these results should at least be reassuring to investors especially as sector and macro tailwinds (lower interest rates) should provide some support. It is likely to become noisier in the months ahead, but the results are broadly in line with our expectations. We think shareholders wanted a board with more teeth and it appears this is what they are getting.'

Disclaimer: The author (Sabuhi Gard) owns shares in Hipgnosis Songs Fund.

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