Soaring costs help drive lastminute shares into reverse

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The Independent Online

Shares in the online travel retailer lastminute.com sank 15 per cent yesterday after the City took fright at the company's spiralling cost base.

Shares in the online travel retailer lastminute.com sank 15 per cent yesterday after the City took fright at the company's spiralling cost base.

The market was also spooked by the sale of 18 million shares reportedly by Threadneedle Asset Management, the company's third-largest shareholder.

The group unnerved shareholders by admitting it needed to plough an extra £3.6m into its marketing budget to attract customers during its crucial fourth quarter. It has announced plans to axe 350 jobs and shut 10 of its 25 offices across Europe, including six of its 10 UK offices.

Shares in lastminute.com fell 19p to a 12-month low of 107p.

James Ainley, an analyst at Dresdner Kleinwort Wasserstein, halved his full-year forecast for profits before tax and goodwill amortisation to £8m from £17m. He also slashed his forecast for 2005 by 30 per cent to £27.4m. "I'm not particularly confident they have their costs under control," Mr Ainley said.

The company, which has spent more than £180m on acquisitions over the past two years, is aiming to slash its cost base by 10 per cent during the next financial year. But it was cagey about how much it expected its costs, which have soared after acquiring companies such as Online Travel Corporation, Med Hotels, and its German namesake, lastminute.de, to rise.

Brent Hoberman, the chief executive, ruled out any further acquisitions: "We are well positioned strategically so we feel the time is right to focus on integrating them."

David Howell, the company's finance director, said the trend towards ever later holiday bookings, which has plagued the travel industry since the 11 September terror attacks, made it hard to predict how the group would fare during the key summer months. But Mr Hoberman said strong organic growth of 27 per cent in July across the group gave him confidence.

A difficult summer for the travel industry forced ebookers to issue a profit warning last week and InterActiveCorp, the US owner of Expedia.com, to cut its forecast for 2004.

Yesterday lastminute.com said transactions carried out on its website had risen 79 per cent to £268m during the three months to 30 June, but its losses for the period widened to £17m from £12.1m. For the nine months to 30 June, it reported losses of £56.5m compared with £38.4m the previous year.

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