ION Media will take a cut to its cash flow this year to build the business. The network and station group formerly known as PAX expects to log $10.4 million cash flow before expenses and investment this year, versus $98.3 million last year.
“With our recapitalization process completed, we have turned our attention to building a sustainable business,” said ION Chairman and Chief Executive Officer Brandon Burgess. “2008 will require greater investment to grow our network through higher programming spending, consumer marketing and digital capital expenditures.”
ION has budgeted $27.3 million for programming and $19.5 million in capex for fiscal ’08, ending Dec. 31.
ION’s ’07 figure of $98.3 million was a 65 percent improvement over the previous year’s cash flow of $59.7 million. Free cash flow after expenses and spending was $4.2 million in the red last year, versus negative $26.1 million in 2006. ION attributed the year-over-year improvement to “operational streamlining” and “restructuring actions,” the effects of which were offset by $107.9 million in interest payments.
For 2008, pre-expense cash flow is projected at $10.4 million; free cash flow at negative $94.8 million--again, considering the $46.8 million earmarked for programming and capex. ION also said it would borrow money to cover an interest payment due in July on $405 million worth of debt.
ION issued its expectations for the year with a caveat about how it’s already unfolded.
“Year-to-date, 2008 has shown unexpectedly difficult market conditions compared to plan, driven by three factors: a recessionary environment, a slow television commerce product pipeline, marked by a downturn in infomercial spending by real estate related businesses, and increased competition from other local stations making more time periods available for infomercials.”
As a countermeasure, ION said it would adopt a more traditional prime time programming/advertising model rather than relying so heavily on infomercials.
“This may require further increasing investment in programming and expanding entertainment time periods,” the company stated. “Additionally, given the upfront cash payment nature of the infomercial business compared to the collection cycle in general advertising, such a mitigation strategy will also involve additional net working capital investment.”
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