Flanco takeover deepens Flamingo's losses

Flamingo International, one of the main players on the domestic retail market, ended the first half of the year with 4.2 million-euro loses, compared with an about 33,400-euro profit in the same time last year, under the international financial reporting standards.
The half-year results of the Flamingo group now include those of electronics and home appliances retailer Flanco, which it took over this year. Flanco’s data were included only for the May-June period, once the acquisition was completed.
A large part of the losses posted came from Flanco, as, according to the unconsolidated data, Flamingo International registered losses worth 1.74 million euros. Flamingo’s officials had said that they expected the group to be in the red at the end of the second quarter, too, when the two entities were expected to present their consolidated results.
Flanco’s takeover was not actually expected to make a positive impact on the profitability of the group this year, with Flamingo management forecasting no more than 2 million-euro losses for 2006.
The Flamingo group includes the parent company Flamingo International and its subsidiaries, Flanco International, Flamingo Computers and Flamingo Distribution Center.
Flamingo International had posted 0.85 million-euro losses for the first quarter by itself. Both Flamingo and Flanco would see little profitability or even losses in the first part of the year in the past, with the best profitability usually registered towards the end of the year.
Flamingo’s management says the six-month figure was mainly affected by the decline in the profit derived from sales and a high level of general and administrative costs. The decline in the profit from sales was due to the reduction of the mark-up applied by the group in order to gain market share in a extremely competitive environment, and on the other hand, in order to refresh stocks by getting rid of the old inventories to prepare for the season peak with “healthy” products, Flamingo International representatives explained in a report filed with the Bucharest Stock Exchange.