Lastminute plunges further into the red

Online travel business lastminute.com saw its share price nosedive today after annual results fell far short of hopes and losses nearly doubled.

The group spiralled £77.2m (€110.2m) into the red, compared with losses of £47.7m (€68.1m) last time, after a rapid expansion saddled it with higher-than-expected costs.

With summer trading also tough, lastminute said underlying profits came in at £4.6m (€6.6m) against £224,000 (€320,000) last year – lower than City forecasts which had already been downgraded after a recent profits warning.

The group, which has still to make a profit, has been on the acquisition trail and bought five businesses in the last year, including Med Hotels, First Option and Gem Travel.

But this was the main factor behind operating costs almost doubling to £150.5m (€215m) over the year.

The company hopes the strategy will still bear fruit as it moves into an “integration” phase that will involve the previously announced closure of 12 offices and loss of 355 jobs.

Analyst Hilary Cook at stockbroker Barclays said: “It’s very disappointing that the integration costs are high and they are still making a loss.”

She said she preferred the route taken by rival First Choice, which has been snapping up niche operations such as adventure holidays.

“You either want to buy into just airports or into some niche market,” she added.

Today’s update sent shares tumbling 13% to 104.75p, way off their peak of 560p during the dotcom boom.

Lastminute also announced the departure of finance director David Howell, although it did not give a reason for the decision.

The company floated in 2000 and provides travel and leisure offers directly in 13 European countries and also has three international joint ventures, employing around 2,400 people.

Another measure of the group’s performance – underlying earnings before goodwill and exceptional items – came in at £24.1m (€34.4m) in the year to September 30, lower than forecast by analysts but higher than last year’s £15m (€21.4m).

Chairman Allan Leighton said the group had performed “solidly” given the trading environment, and was well placed to cash in on consumers’ increasing confidence in buying online.

He said the shift from traditional booking methods towards the internet was continuing “at pace” and that this was expected to accelerate in the coming months.

Customers were becoming more confident buying online, particularly for travel purchases, looking to create short breaks and holidays that are unique to them.