Hum Network Limited (PSX: HUMNL) was incorporated in Pakistan as a public limited company in 2004. The company is engaged in the business of launching satellite channels with the aim of portraying cultural heritage. The core areas of operations include production, advertisement, media marketing, and entertainment.
Pattern of Shareholding
As of June 30, 2024, HUMNL has a total of 1134 million shares outstanding which are held by 4916 shareholders. Directors, their spouses, and minor children have the majority stake of around 54.6 percent in the company followed by the local general public holding 17.97 percent shares. Banks, DFIs, NBFIs, Modarabas, Insurance, Takaful, and Pension funds collectively account for a 13.53 percent stake in the company. Around 3.67 percent of HUMNL shares are held by Mutual Funds. The remaining ownership is distributed among other categories of shareholders.
Financial Performance (2019-24)
HUMNL’s topline slid in 2019 and 2020 resulting in net losses in both the years. However, the company never looked back and boasted a staggering rise in its net revenue and net profits in the subsequent years. HUMNL’s margins which drastically fell in 2019, recovered in 2020 and 2021. In 2022, gross profit picked up but operating and net margins posted a marginal downtick. In 2022, all the margins registered incredible growth. Gross margin continued its upward journey in 2023, however, operating and net margins slightly dipped. The detailed performance review of the period under consideration is given below.
In 2019, HUMNL’s topline dipped by 13.68 percent year-on-year. This was on account of the massive decline in advertisement, production, and film distribution revenue which offset the effect of robust subscription income and an uptick in digital revenue in 2019. Despite thinner revenue, production and transmission costs mounted by 22.5 percent and 8.63 [percent respectively on account of inflationary pressure which particularly took its toll on the salaries & benefits expense as well as the cost of in-house and outsourced programs. Gross profit shrank by 81.59 percent in 2019 with GP margin drastically falling down from 34.24 percent in 2018 to 7.3 percent in 2019. Distribution expense slid by 7.52 percent in 2019 due to lower salaries expense of marketing staff coupled with lesser advertising & promotion budget allocated for the year. Traveling & conveyance expenses also dropped in 2019. Administrative expenses slumped by 5.93 percent in 2019 due to lower payroll expenses as the company considerably downsized its workforce from 981 employees in 2018 to 791 employees in 2019. Other income strengthened by 54.19 percent in 2019 due to robust exchange gain, profit on bank accounts as well as interest income. Despite keeping a check on its operating expenses and recognizing a hefty other income, HUMNL posted an operating loss of Rs.311.48 million in 2019 as against an operating profit of Rs.845.30 million recorded in 2018. Finance costs escalated by 332.19 percent in 2019 due to a higher discount rate as well as a momentous spike in the company’s short-term borrowings. This resulted in a gearing ratio of 42.96 percent in 2019 versus a gearing ratio of 28.34 percent recorded in the previous year. The company posted a net loss of Rs.535.884 million in 2019 versus net profit of Rs.729.49 million posted in 2018. Loss per share stood at Rs.0.57 in 2019 versus EPS of Rs.0.77 recorded in 2018.
In 2020, HUMNL’s topline further slumped by 7.53 percent year-on-year. In line with the last year, advertisement, production, and film distribution revenue declined during the year while subscription income and digital revenue increased. Unlike last year where the cost of production and transmission continued to rise despite lesser revenue, in 2020, the company was able to cut down its production and transmission costs by 21.15 percent and 28 percent respectively. This was mainly because the company kept a check on its cost of outsourced and in-house programs and also incurred lesser salary expenses. Gross profit mounted by 169.84 percent in 2020 with GP margin picking up to 21.31 percent. Distribution expense shrank by 10.9 percent in 2020 primarily due to lesser salaries of the distribution network and also because of lesser traveling & conveyance as well as advertising & promotion budget allocated for the year. Administrative expenses slipped by 4.74 percent in 2020 as the company further curtailed its workforce to 771 employees. Other income weakened by 17.6 percent in 2020 due to lesser exchange gain and lesser profit on bank accounts. During the year, the company also recorded other expenses of Rs. 97.61 million owing to the provision of impairment booked on other receivables and investment in a subsidiary. HUMNL recorded an operating profit of Rs.105.33 million in 2020 with an OP margin of 2.86 percent. Finance costs escalated by 68.56 percent in 2020 due to higher discount rates for most part of the year. Lesser outstanding borrowings in 2020 resulted in a gearing ratio of 35.94 percent. Higher finance costs dragged the company’s bottom line to the negative zone. Net loss stood at Rs.113.239 million in 2020, down 78.87 percent year-on-year. This translated into a loss per share of Rs.0.12 in 2020.
In 2021, HUMNL’s net revenue grew by 17.61 percent year-on-year. This was mainly the result of robust 46 percent year-on-year growth in subscription income recorded in 2021. Except for film distribution, other revenue streams also performed well during the year. Cost of production inched up by just 0.39 percent in 2021 while transmission cost dipped by 34.97 percent. This resulted in 87.43 percent stronger gross profit in 2021 with GP margin climbing up to 33.97 percent. Distribution expenses tumbled by 15.88 percent in 2021 predominantly due to lower advertising & promotion budget. Conversely, administrative expenses grew by 7.46 percent in 2021 due to higher payroll expenses. This was despite the fact that the company kept squeezing its workforce which stood at 711 employees in 2021. Other income eroded by 7.53 percent in 2021 due to exchange loss incurred and considerably lower mark-up income recorded during the year. Other expenses spiked by 57.6 percent in 2021 mainly on account of provision booked for impairment of investment in the subsidiary, Sky Line Publication (Private) Limited. During the year, HUMNL also recognized a gain of Rs. 476.83 million on the sale of non-current assets (land located in Karachi) held for sale. This resulted in a marvelous operating profit of Rs.1207.51 million in 2021, up 1046.40 percent year-on-year. Finance costs slipped by 58.43 percent in 2021 due to a lower discount rate as well as the payment of a large portion of outstanding liabilities during the year. This pushed the gearing ratio down to 19.14 percent in 2021. HUMNL recorded a net profit of Rs.1014.396 million in 2021 with EPS of Rs.1.07 and NP margin of 23.44 percent.
HUMNL’s topline grew by 39.09 percent in 2022. While all the revenue streams performed quite well during the year, the show-stoppers were Hum news and digital media sector revenues which grew by 133 percent and 84 percent respectively. This was the result of a change in the company’s social media strategy. Cost of production and transmission grew by 24.85 percent and 10.76 percent respectively in 2022. Gross profit improved by 67.65 percent in 2022 with GP margin attaining a new high of 40.94 percent. This was due to efficient cost management. Distribution expenses mounted by 48.36 percent in 2022 due to an increased advertisement & promotion budget and increased salaries of the distribution network. Administrative expenses mounted by 14.31 percent on account of higher payroll expenses due to inflationary pressure while the workforce stood at almost the same level as last year. Other income slid by 47.10 percent in 2022 as the company recognized an unrealized loss on the revaluation of its investments and also incurred a loss on the sale of its investments. Other expenses dropped by 81.72 percent in 2022 due to the high-base effect as the company booked provisions for impairment of investment in a subsidiary last year. Operating profit strengthened by 31.53 percent in 2022 with OP margin slightly ticking down to 26.39 percent. HUMNL was able to cut down its finance cost by 26.91 percent in 2022 despite a high discount rate. This was because the company paid off a considerable portion of its outstanding liabilities. This resulted in a gearing ratio of 14.3 percent. Net profit improved by 34.45 percent in 2022 to clock in at Rs.1363.91 million with EPS of Rs.1.2 and NP margin of 22.66 percent.
In 2023, HUMNL’s topline increased by 13.4 percent. Advertisement and subscription income continued to impress during the year. Production revenue also posted an uptick. However, film distribution and digital revenue ticked down. The massive decline in fees paid for managing digital subscriptions of the company resulted in only a 2.48 percent uptick in the cost of production in 2023 despite acute inflationary pressure. Transmission cost hiked by 26.49 percent in 2023. The company recorded 28.18 percent improved gross profit in 2023 with GP margin climbing up to 46.28 percent. Elevated salaries of the distribution network and increased advertising budget resulted in a 17.23 percent spike in distribution expenses in 2023. Administrative expenses posted a whopping 51.7 percent surge in 2023 due to an increase in payroll expenses as well as generous donations distributed during the year. HUMNL increased its workforce from 676 employees in 2022 to 721 employees in 2023. A staggering growth of 640.77 percent in the company’s other income in 2023 was the result of massive exchange gain as the local currency reached its lowest level during the year. Besides, the reversal of ECL, reversal of liabilities no longer payable as well as robust dividend income and profit on bank deposits also contributed to driving up the other income in 2023. Other expenses dipped by 73.96 percent in 2023 as the company didn’t book any allowance for ECL during the year. Operating profit posted a 56.52 percent rise in 2023 with OP margin mounting to an unprecedented level of 36.42 percent. Finance cost shrank by 37.21 percent in 2023 due to payment of outstanding liabilities which squeezed the gearing ratio to 2.22 percent. HUMNL recorded a 57.58 percent improvement in its net profit which clocked in at Rs.2149.24 million in 2023 with EPS of Rs.1.9 and NP margin of 31.49 percent.
In 2024, HUMNL’s revenue grew by 21.71 percent. This was on account of superior performance across the segments – advertisement, production, subscription, film distribution, and digital revenue. Due to efficient cost control measures, the cost of production grew by just 13.10 percent in 2024, while transmission cost took a 4.37 percent dive. This resulted in 32.41 percent stronger gross profit in 2024 with GP margin attaining the highest ever level of 50.34 percent. Distribution expenses mounted by 28.28 percent in 2024 due to an increase in salaries as well as advertisement and promotion expenses incurred during the year. Administrative expenses surged by 11.83 percent in 2024 due to elevated payroll expenses on account of inflation and also because the workforce was enhanced to 756 employees. Other income slid by 34.74 percent in 2024 due to the high-base effect as the company recorded massive exchange gain and booked reversal of ECL in the previous year, both of which were not recorded in 2024. Other expenses escalated by 1471.87 percent in 2024 due to massive exchange loss and allowance for ECL booked during the year.
Operating profit picked up by 19.18 percent in 2024 with OP margin slightly ticking down to 35.66 percent. Finance costs continued to slide as the company discharged its liabilities. The gearing ratio diminished to 1.97 percent in 2024. HUMNL recorded 21.47 percent growth in its net profit which clocked in at Rs.2610.59 million in 2024 with EPS of Rs.2.3 and NP margin of 31.42 percent.
Future Outlook
With continuous diversification of revenue streams, cost optimization, and keeping a constant eye on new sales opportunities, HUMNL is well poised to face the future with full vigor. The recent acquisition of Ten Sports is a step in the right direction and has greatly contributed to the company’s overall performance. Besides, the company is embracing new technologies to keep up with the challenges of the fast-paced media industry and meet the evolving demands of wider audiences. The gradual recovery recorded in the economic activity will also be rewarding for the company as its customers are progressively expanding their advertising budgets.