PACRA Maintain Entity Ratings of HUM Network Limited
HNL is witnessing rapid improvement in its financial risk profile. This has been enabled by sustained – indeed enhanced – profitability of the company. Profits are witnessing substantial uptick due to change in tax regime. At the same, HNL has started paying back its debt: financial matrix is observing improvement. On performance side, stiff competition kept the business margin under check. To further strengthen and diversify its revenue stream, HNL is establishing income stream through (i) film distribution and production under the brand of "HUM Films" and (ii) ancillary domains including publications and holding events. The management expects improvement in performance as a result of these initiatives. However, these impacted the company's working capital cycle which witnessed further extension in the recent period. The same was funded through improved cashflows from operations. The ratings recognize HNL's experienced management team having sound understanding of the media industry.
The ratings are dependent on the company's ability to diversify its revenues while perpetuating margins at an adequate level. Meanwhile, any stress on financial profile either by decline in business margins, in turn, weakened operational cash flows or by further material increase in working capital cycle, would affect the ratings. At the same time, maintaining management control of the company and upholding governance standards would remain important.
HNL, listed on PSX, commenced its operations in January 2005. Over the recent period, the company's shareholding has experienced changes. Although sponsoring family continues to have majority stake; it is diluted to 29% (end-Mar17), mainly held by Duraid Qureshi (the CEO). A group of foreign funds, though unrelated, own a significant 28% stake; Ths Kingsway Fund (18%), and ACACIA Partners LP (10%). The rest (43%) is spread amongst institutions and individuals. HNL board has yet to experience any changes in lieu of changes in ownership structure. This is curtail from rating point of view. The board comprises eight members including five from sponsoring family, one nominee of JS group, one independent and one non- executive director. From five sponsoring family directors, three are non-executive while the remaining two hold executive positions - ED (Sultana Siddiqui) and CEO (Duraid Qureshi). The management team of the company comprises well-qualified and seasoned professionals of the media industry. The CEO and the ED have extensive experience in television production and media marketing.