Company registration number 11425132 (England and Wales)
HIPGNOSIS SONG MANAGEMENT LIMITED
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
HIPGNOSIS SONG MANAGEMENT LIMITED
COMPANY INFORMATION
Directors
Mr HH Tian
Mr B Katovsky
(Appointed 14 April 2023)
Mr D Pounder
(Appointed 29 July 2024)
Secretary
Ocorian Administration (UK) Limited
Company number
11425132
Registered office
27-28 Eastcastle House
Eastcastle Street
London
W1W 8DH
Auditor
CC Young & Co Limited
3rd Floor
The Bloomsbury Building
10 Bloomsbury Way
Holborn
WC1A 2SL
Business address
5th Floor
United House
9 Pembridge Road
London
W11 3JY
HIPGNOSIS SONG MANAGEMENT LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 21
HIPGNOSIS SONG MANAGEMENT LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Business Review

Hipgnosis Songs Management Limited (“HSM”) is a Song management company and an Investment Adviser. During the year ended 31 December 2023, HSM was Investment Adviser for Hipgnosis Songs Fund Limited, a FTSE250 listed fund (LSE: SONG.L) and Hipgnosis Songs Assets (“HSA”), a partnership with alternative investment manager Blackstone (NYSE: BX).

 

The Company sources iconic and culturally significant Songs and purchases them on behalf of its clients. It then proactively manages these assets to maximise long-term value.

 

The management of Songs includes seeking opportunities to promote Songs within the Catalogue from activities including placing Songs in movies, TV programmers, video games, advertisements etc.; promoting Catalogues to drive consumption; enabling or creating opportunities such as interpolations or cover versions, and ensuring that due royalty revenues are effectively and efficiently collected and using the Company’s profile to campaign for Songwriters to be fairly remunerated within the music industry.

 

During the year ended 31 December 2023, Hipgnosis Songs Fund Limited (“SONG”) was fully invested. However, HSA remained focussed on the purchase of new Catalogues having acquired Justin Bieber, Erika Ender and David Foster during 2023.

 

HSM’s largest contributor to revenue was the Investment Adviser fee earned from SONG. SONG paid a fee based on the market capitalisation of the business. SONG’s share price continued to trade at a significantly lower share price than in the previous year resulting in turnover decreasing by 9.4% to £10.6 million for the 12 months ending 31 December 2023 (12 months ending 31 December 2022: £11.7 million).

 

Delisting of SONG

On 29 July 2024, Lyra Bidco Limited acquired the entire issued and to be issued share capital of SONG and the fund was delisted from the London Stock Exchange on the same day. Following this transaction, the share capital of HSM was transferred to BTO The Family Music (Cayman) NQ L.P., an entity managed and controlled by Blackstone.

 

The assets of SONG will be consolidated in HSA, which will be the sole client of HSM going forward.

Principle risks and uncertainties

The Directors consider that the principal risks and uncertainties for the Company include:

 

In line with most companies, other risks include those associated with foreign currency exchange rate risk, major changes to market trends, failure to perform adequate due diligence to identify issues and/or failure by professional advisors or financial counterparties (including banks holding HSM’s deposits).

HIPGNOSIS SONG MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Key Perfomance Indicators

Notwithstanding the disappointing revenue as a result of the decline in the SONG share price, the Directors are satisfied with the overall performance of the business.

 

The Board uses the following metrics as Key Performance Indicators (KPIs):

 

 

1 January 2023 to 31 December 2023

1 January 2022 to 31 December 2022

 

£

£

Turnover

10,601,928

11,706,145

Administrative expenditure

(14,208,220)

(14,411,503)

Operating profit (loss)

(5,193,257)

(3,393,160)

Net Assets

2,397,834

8,603,338

 

Financial Risk Management

Liquidity Risk

The Company has received an intra group loan of £XX million ($18.3 million) from its UK parent on 31 July 2024, which will provide sufficient liquidity to the Company for a period of 12 months from the date of this report.

 

Credit Risk

Cash surpluses are held as deposits in banks and companies which must fulfil credit rating criteria approved by the Board.

 

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an on-going basis and provision is made for expected credit losses where necessary.

 

Post Balance Sheet Events

Other than the events previously noted, no further post balance sheet events have occurred.

On behalf of the board

Mr D Pounder
Director
1 October 2024
HIPGNOSIS SONG MANAGEMENT LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -

The directors present their annual report and audited financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company continued to be that of investment management and advice to a music catalogue investment funds.

Results and dividends

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

No preference dividends were paid.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr M Mercuriadis
(Resigned 29 July 2024)
Mr SQ Abbas
(Resigned 19 August 2023)
Mr HH Tian
Mr B Katovsky
(Appointed 14 April 2023)
Mr D Pounder
(Appointed 29 July 2024)
Mr K Dolan
(Appointed 19 August 2023 and resigned 29 July 2024)
Auditor

CC Young & Co Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

HIPGNOSIS SONG MANAGEMENT LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
On behalf of the board
Mr D Pounder
Director
1 October 2024
HIPGNOSIS SONG MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF HIPGNOSIS SONG MANAGEMENT LIMITED
- 5 -
Opinion

We have audited the financial statements of Hipgnosis Song Management Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

HIPGNOSIS SONG MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF HIPGNOSIS SONG MANAGEMENT LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We assessed the susceptibility of the company's financial statements to material misstatement, including considering how fraud might occur.

We obtained an understanding of the legal and regulatory frameworks applicable to the Company and the industry in which it operates, and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included, but were not limited to, compliance with FRS102, including Section 1A (UK GAAP), the Companies Act 2006 and relevant UK taxation laws. We discussed amongst the audit engagement team the identified laws and regulations, and remained alert to any indications of non-compliance.

We understood how the Company is complying with those legal and regulatory frameworks by making enquiries of management and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of legal accounts and supporting papers. We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included, but were not limited to:

HIPGNOSIS SONG MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF HIPGNOSIS SONG MANAGEMENT LIMITED
- 7 -

The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance and management. As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. There are inherent limitations in the audit procedures described above, and the more removed from the financial transactions, the less likely it is that we would become aware of non-compliance with laws and regulations.

 

We did not identify any irregularities, including fraud, leading to a material misstatement.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Colin Young
Senior Statutory Auditor
For and on behalf of CC Young & Co Limited
Chartered Accountants
Statutory Auditor
3rd Floor
The Bloomsbury Building
10 Bloomsbury Way
Holborn
WC1A 2SL
1 October 2024
HIPGNOSIS SONG MANAGEMENT LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
2
10,601,928
11,706,145
Cost of sales
(1,586,965)
(774,950)
Gross profit
9,014,963
10,931,195
Administrative expenses
(14,208,220)
(14,460,836)
Operating loss
3
(5,193,257)
(3,529,641)
Interest receivable and similar income
6
13,919
9,890
Fair value losses on financial instruments
7
(50,551)
(136,805)
Loss before taxation
(5,229,889)
(3,656,556)
Taxation on loss
8
1,159,191
828,217
Loss for the financial year
(4,070,698)
(2,828,339)

All operations derive from continuing operations.

HIPGNOSIS SONG MANAGEMENT LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
9
663,852
628,307
Investments
10
274,723
305,073
938,575
933,380
Current assets
Debtors - deferred tax
14
1,989,790
822,066
Debtors - other
12
1,224,685
1,001,925
Cash at bank and in hand
1,603,405
8,592,229
4,817,880
10,416,220
Creditors: amounts falling due within one year
13
(2,078,860)
(3,609,180)
Net current assets
2,739,020
6,807,040
Total assets less current liabilities
3,677,595
7,740,420
Provisions for liabilities
Deferred tax liability
14
112,037
104,164
(112,037)
(104,164)
Net assets
3,565,558
7,636,256
Capital and reserves
Called up share capital
16
1,140
1,140
Share premium account
18,399,893
18,399,893
Other reserves
41
41
Profit and loss reserves
(14,835,516)
(10,764,818)
Total equity
3,565,558
7,636,256
The financial statements were approved by the board of directors and authorised for issue on 1 October 2024 and are signed on its behalf by:
Mr D Pounder
Director
Company Registration No. 11425132
HIPGNOSIS SONG MANAGEMENT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Share premium account
Redenomination reserve
Profit and loss reserves
Total
£
£
£
£
£
Balance at 1 January 2022
1,140
18,399,893
41
(7,936,479)
10,464,595
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
-
-
(2,828,339)
(2,828,339)
Balance at 31 December 2022
1,140
18,399,893
41
(10,764,818)
7,636,256
Year ended 31 December 2023:
Loss and total comprehensive income for the year
-
-
-
(4,070,698)
(4,070,698)
Balance at 31 December 2023
1,140
18,399,893
41
(14,835,516)
3,565,558
HIPGNOSIS SONG MANAGEMENT LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
21
(6,369,621)
(2,040,546)
Income taxes paid
(660)
(1,980)
Net cash outflow from operating activities
(6,370,281)
(2,042,526)
Investing activities
Purchase of tangible fixed assets
(247,807)
(170,193)
Purchase of investments
(20,201)
-
0
Repayment of loans
(364,454)
(101,362)
Dividends received
13,919
9,890
Net cash used in investing activities
(618,543)
(261,665)
Net decrease in cash and cash equivalents
(6,988,824)
(2,304,191)
Cash and cash equivalents at beginning of year
8,592,229
10,896,420
Cash and cash equivalents at end of year
1,603,405
8,592,229
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
1
Accounting policies
Company information

Hipgnosis Song Management Limited is a private company limited by shares incorporated in England and Wales. The registered office is 27-28 Eastcastle House, Eastcastle Street, London, W1W 8DH.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company has taken advantage of the exemption under section 402 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

1.2
Going concern

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.3
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for investment management and advice services provided in the normal course of business to a listed music catalogue investment fund.

Revenue from contracts for the provision of professional services represents a fixed monthly fee adjusted for the change in market capitalisation of the fund.

1.4
Research and development expenditure

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

1.5
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Leasehold improvements
25% on reducing balance
Fixtures and fittings
25% on reducing balance, 100% on vinyls and over term of contract for cycles
Computers
25% on reducing balance
Artwork
0%
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
1.6
Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

Other investments are held revalued at their closing rate per the London Stock exchange with any gain or loss recognised in profit and loss.

1.7
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

1.8
Financial instruments

The company only has financial instruments which are classified as basic financial instruments.

 

Short-term debtors and creditors are measured at the settlement value. Any losses from impairment are recognised in profit and loss.

 

Bank loans are initially recorded at the transaction price including transaction costs. Subsequently, they are measured at amortised cost using the effective interest rate method.

1.9
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.10
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
1.11
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.12
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.13
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

1.14
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

2
Turnover
2023
2022
£
£
Turnover analysed by class of business
Management fees
10,045,328
11,611,975
Other income
238,157
94,170
Production income
318,443
-
10,601,928
11,706,145
2023
2022
£
£
Turnover analysed by geographical market
Guernsey
8,981,369
11,049,720
United States of America
1,620,559
656,425
10,601,928
11,706,145
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
3
Operating loss
2023
2022
Operating loss for the year is stated after charging/(crediting):
£
£
Exchange losses/(gains)
264,200
(1,262,343)
Research and development costs
3,585
19,432
Fees payable to the company's auditor for the audit of the company's financial statements
14,121
21,613
Depreciation of owned tangible fixed assets
212,262
200,618
Operating lease charges
886,536
1,001,273
4
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
54
51

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
8,777,374
8,733,730
Social security costs
1,053,084
1,070,810
Pension costs
165,159
164,979
9,995,617
9,969,519
5
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
1,937,210
1,573,199
Remuneration disclosed above include the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
1,536,210
1,573,199
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 16 -
6
Interest receivable and similar income
2023
2022
£
£
Other income from investments
Dividends received
13,919
9,890
7
Fair value losses on financial instruments
2023
2022
£
£
Loss on financial assets held at fair value through profit or loss
(50,551)
(136,805)
8
Taxation
2023
2022
£
£
Current tax
Foreign current tax on profits for the current period
660
1,456
Deferred tax
Origination and reversal of timing differences
7,873
(7,607)
Tax losses carried forward
(1,167,724)
(822,066)
Total deferred tax
(1,159,851)
(829,673)
Total tax credit
(1,159,191)
(828,217)

The main rate of corporation tax in the UK increased from 19% to 25% from 1 April 2023.

2023
2022
£
£
Loss before taxation
(5,229,889)
(3,656,556)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
(1,229,024)
(694,746)
Tax effect of expenses that are not deductible in determining taxable profit
102,969
75,775
Tax effect of income not taxable in determining taxable profit
(3,271)
(1,879)
Unutilised tax losses carried forward
-
0
(197,296)
Effect of change in corporation tax rate
(70,064)
-
0
Permanent capital allowances in excess of depreciation
31,666
(3,920)
Deferred tax movement
7,873
(7,607)
Foreign tax
660
1,456
Taxation credit for the year
(1,159,191)
(828,217)
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
9
Tangible fixed assets
Leasehold improvements
Fixtures and fittings
Computers
Artwork
Total
£
£
£
£
£
Cost
At 1 January 2023
100,409
257,410
479,713
211,647
1,049,179
Additions
170,293
63,838
9,626
4,050
247,807
At 31 December 2023
270,702
321,248
489,339
215,697
1,296,986
Depreciation
At 1 January 2023
43,929
161,276
215,667
-
0
420,872
Depreciation charged in the year
60,787
83,282
68,193
-
0
212,262
At 31 December 2023
104,716
244,558
283,860
-
0
633,134
Carrying amount
At 31 December 2023
165,986
76,690
205,479
215,697
663,852
At 31 December 2022
56,480
96,134
264,046
211,647
628,307
10
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
11
2
2
Listed investments
274,721
305,071
274,723
305,073
Fixed asset investments revalued

The above investments are publicly listed investments valued at closing list price.

Movements in fixed asset investments
Shares in subsidiaries
Other investments
Total
£
£
£
Cost or valuation
At 1 January 2023
2
305,071
305,073
Valuation changes
-
(30,350)
(30,350)
At 31 December 2023
2
274,721
274,723
Carrying amount
At 31 December 2023
2
274,721
274,723
At 31 December 2022
2
305,071
305,073
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
11
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Song Management Ltd
England and Wales
Ordinary
100.00
Song Management (Music) Ltd
England and Wales
Ordinary
100.00
12
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
-
0
311,664
Other debtors
624,673
343,709
Prepayments and accrued income
600,012
346,552
1,224,685
1,001,925
2023
2022
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 14)
1,989,790
822,066
Total debtors
3,214,475
1,823,991
13
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
463,249
366,019
Taxation and social security
872,077
1,255,273
Other creditors
38,333
616,051
Accruals and deferred income
705,201
1,371,837
2,078,860
3,609,180
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
14
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Balances:
£
£
£
£
Accelerated capital allowances
112,037
104,164
-
-
Tax losses
-
-
1,989,790
822,066
112,037
104,164
1,989,790
822,066
2023
Movements in the year:
£
Asset at 1 January 2023
717,902
Credit to profit or loss
1,159,851
Asset at 31 December 2023
1,877,753

The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period. The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

15
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
165,159
164,979

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

16
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of $0.01 each
101,000
101,000
743
743
HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
16
Share capital
(Continued)
- 20 -
2023
2022
2023
2022
Preference share capital
Number
Number
£
£
Issued and fully paid
Preference shares of $0.01 each
54,000
54,000
397
397
Preference shares classified as equity
397
397
Total equity share capital
1,140
1,140
17
Financial commitments, guarantees and contingent liabilities

On 7 March 2024, Hipgnosis Song Management Limited received a particular of claim pertaining to intended legal action from Hipgnosis Music Limited that has subsequently been filed in the High Court of England and Wales.  The directors consider that merits of the case mean that the likelihood of a liability crystalizing is low, further that the claim amount cannot be reliably measured, and any liability is contingent on the outcome of the court proceedings.  Currently, the directors note that the case is unlikely to be heard by the High Court any earlier than during 2026.

18
Operating lease commitments
Lessee

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2023
2022
£
£
Within one year
44,595
974,023
Between two and five years
-
0
81,169
44,595
1,055,192
19
Related party transactions

Debtors include £482,243 (2022: £117,789) owed by the company directors. No interest has been charged on this balance. The balance was repaid after the year end.

20
Ultimate controlling party

The company is controlled by BTO The Family (Music) Cayman - NQ L.P. which holds 51% of the shares in the company. Subsequent to the year end, BTO The Family (Music) Cayman - NQ L.P. acquired the remaining share capital of the company.

HIPGNOSIS SONG MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
21
Cash absorbed by operations
2023
2022
£
£
Loss for the year after tax
(4,070,698)
(2,828,339)
Adjustments for:
Taxation credited
(1,159,191)
(828,217)
Investment income
(13,919)
(9,890)
Depreciation
212,262
200,618
Other gains and losses
50,551
136,805
Movements in working capital:
Decrease in debtors
141,694
796,274
(Decrease)/increase in creditors
(1,530,320)
492,203
Cash absorbed by operations
(6,369,621)
(2,040,546)
22
Analysis of changes in net funds
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
8,592,229
(6,988,824)
1,603,405
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