Lastminute

• About Lastminute.com

• The Business

• The Web site

•  Financial Highlights

• Stock Performance

• Reasons for the decline

• Has the Bubble Burst for Lastminute.com?

About Lastminute.com 

Brent Hoberman and Martha Lane Fox founded Lastminute.com in 1998. The web site (www.lastminute.com) was launched in the UK in October 1998.  Its business is based on the idea of matching supply and demand at the last minute via the Internet.  It provides services in a large variety including travel, entertainment, restaurant and gift industries and is dedicated to bringing its customers attractive products and services.  Lastminute.com aims to provide solutions to its customers at short notice.  On the 14^th of December 1999, the Prime Minister, Tony Blair, presented Lastminute.com with the ‘Millennium Product’ award. With the support of the Design council, Lastminute.com was recognised as one of the most innovative companies in the UK.

The Business

Lastminute.com started off using the Internet to offer customers last-minute bargains, particularly in airline tickets, hotel bookings and other time dependent goods and services.  Now, it has relationships with 9.500 suppliers, including international schedules airlines, hotels, package tour operators, theatre, sports and entertainment promoters, restaurants and gift suppliers, both in UK and internationally.  It has signed marketing and distribution agreements with companies across Europe including AOL, Netscape, World Online, Excite UK, Ericsson and many more.  In September, October and December 1999, localised versions of the web site were launched in France, Germany and Sweden respectively. 

Its business has since expanded across Europe and more agreements were signed with companies in those regions, for example T-Online in Germany, TPS interactive digital TV in France and NTL, CWC and Telewest giving access to customers in a potential 12 millions homes.  Recently, it acquired the Degriftour Group, which is the leading online travel in France.  Lastminute.com has also realised the WAP phone market and has worked with BT and Cellnet WAP in UK, T-telecom and France Telecom.

The Web site

The design of Lastminute.com’s home page only has a few graphics, resulting in a relatively short delay, approximately 4 to 5 seconds, to open the page. It contains almost all the information about the company, products and services provided, including links to learn more about the company, ‘today’s highlight’ and requests for visitors to sign up for its newsletter.

There is a link to a search engine for visitors who cannot find what he or she is looking for. If the search engine does not help and the visitor requires more information, there is another link, where a telephone number is provided so that you can call an operator who will provide guidance, helping you find what you are searching for. Calls are handled within 3 minutes with well-mannered operator who gives clear and helpful guidance. When one clicks on a specific icon, more detailed information is shown, usually in the form of a table, which make the page easier to read. The time consumed to search for this information is between the range of 3 seconds to 10 seconds. Queries that are left in the message box or sent through e-mail are handled within 1 day. An operator calls the customer, providing guidance and further information until the particular query is solved.

The company is registered under the Data Protection Act, which governs they way they deal with data relating to customers. The latest encryption technology, SSL, is used to protect customer’s credit card details from any possible errors or mishandling. Guarantees on other aspects are stated clearly on the web site, which gives confidence to their customers for buying their products or services. Guidance is given clearly during purchasing and an e-mail will be sent to the customer stating the reference code for that purchase and who to contact if there are more queries. 

The web site is designed in a clear and straightforward format with sufficient pictures and graphics. Lastminute.com has just set up a more reliable and faster Web site ahead of the Holiday season (11/2000). The upgraded site will be able to support more users, allow them to search for products and services faster and add new services and languages.

Financial Highlights

Lastminute.com released an interim report on the 4th May 2000 for the second fiscal year 1999-2000, six months ended 31 March 2000.  Highlights from the report include:

Important remarks:

The total transaction value grew 68% to £7.2 million compare to the last quarter, with 88% (£6.3 millions) from the travel business and 92% (£6.6 millions) from the business within the UK.

Gross profit increased by 102%

It possessed sufficient cash flow for its expenditure and investments.

The company only had liability in the first quarter of its first financial year and has a net current asset of £13 millions.  This indicates the company does not have a risk of insolvency.

Number of items sold in period was 75,541 with 65,387 customers and 2,466 suppliers.

From this report, a conclusion can be made, which is that Lastminute.com has been very successful in this online business.  Its business expanded rapidly across Europe and it gained much popularity from consumers and interested investors.  Media Metrix Corp statistics for March 2000 ranked lastminute.com as the most popular UK travel site, the third most popular German travel site and the fifth most popular French travel site. 

According to the financial report, it may seem clear that Lastminute.com is very successful and it is not a bubble.  However, analysing its behaviour in the stock market can draw a completely opposite conclusion.

Stock Performance

On the 21st March 2000, the company was launch onto the London Stock Exchange and on the NASDAQ National Market, raising £125 million before expenses. The shares were priced at 380p initially, closely followed by a historic high of 555p.  The company was once valued at £733 million, ahead of established high-street names such as Debenhams and Iceland. Lastminute.com has proven to be a legendary success.

Since then it has been declining and it reached 100p in November and fell below 80p before Christmas and is now stagnating at approximately 75p. Investors were allocated with a maximum of 35 shares each in March, with the current price, roughly 85p; it means the shareholding for the most retail investors is worth only about £30.  An investor is left with just £10 (including the £20 dealing charge) from £133 invested in March. 

From the ACE consensus estimation conducted by multex.com, lastminute.com shares are now considered to be worthy a ‘Hold’ recommendation.  Monitored by 3 Wall Street professionals, the weighted consensus ranking or AQO is 0.60, while the range of AQO for ‘Hold’ recommendation is 0.35 to 0.749.  The company has about £90 million cash at this stage, which is equivalent to around 64p per share.  The losses are expected to be $-1.01 per share in 2000.

Reasons for the decline

The current sell off is due to a party caused by the increasing pressure on US Internet stocks, which also has had a significant effect on the UK Net sector.  There has been a marked sell off of e-tail stocks across the Atlantic, which has no doubt affected Lastminute.com.  Indeed, other dot.com companies, including Amazon.com, Buy.com and more are also affected.

Establishing a brand on the Internet also involves spending vast amounts of money on advertising, buying out potential competitors, setting up foreign subsidiaries and other expensive expenditure.  A good example is when lastminute.com acquired the Degriftour Group for £58.9m in shares and cash in early August.  Degriftour is France’s market leader in online travel, with over 90% of its business is last minute, (within 30 days), and with 50% market share and 45% brand awareness.  Lastminute.com spent a large amount of its cash on this acquisition and this led to the company to a limited amount of cash flow.  

The numbers of competitors in this type of dotcom industry has been increased in the past year, and just to name a few, dreamtickets.com in July and thomascook.com in November.  According to figures released by MMXI Europe (a internet research company), the number of visitors to lastminute.com fell by 24% between August and September.  This is partly due to the fact that employers have prohibited surfing the Internet during working hours.

Some commentators are suggesting that the recent heavy sale of shares has been driven by venture Capitalists selling their stake after the September expiration of the institutional lock in.  Although senior management and leading institutional investors have agreed to a further three month’s lock-up, some investors will certainly be keen to sell their holdings. 

Has the Bubble Burst for Lastminute.com?

The share price of the company has fallen by more than 85% in less than a year.  From Figure 1, it can be clearly seen that the share price of the company has been decreasing since its launch onto the market.  This shows that the company was initially over-valued, giving retail investors a wrong indication of the potential of the company. 

Lastminute.com demonstrates a very good example of a bubble company. The bubble burst when it was launched on the market in March and within a month, it’s share price fell to 380p, and did not recover since then to it’s IPO.

 Its share price is very volatile compared to the general market as the share price of the company collapsed in September along with all other dot.com companies.  The company does not have a well-established business plan and several changes in the core of management has to be made. 

In November 2000, Martha Lane Fox’s brother, Henry, head of ideas at Lastminute.com resigned from the late booking deal company to start up his own B2B Internet venture.  Earlier this year, Nicola Denvir was appointed Head of Travel, a former Cathay Pacific Airways employee.  Allan Leighton, the former Asda chairman became non-executive director of Lastminute.com.  The co-founder, Martha Lane Fox, had recently been penalised by Independent that she had offered to buy-back shares in Lastminute.com from family and friends (f&fs) at the issue price.  She betrayed retail investors at the time of the float by allowing f&fs to buy thousands of pounds worth of shares when everyone else was limited to 35 shares.  The Independent claims that earlier this month Martha emailed some of the f&fs offering to buy back their shares at the offer price. 

She was voted the ‘most overrated businessperson’ in the beginning of 2001.  Bad management led to wrong decision resulting in a fatal situation.  The company could not respond to the rise of many competitors and could not shield itself from being affected by the negative factors in the general market.

Due to the unstable based of the company structure, Lastminute.com collapsed rapidly although it did have a very promising financial performance in its first two quarters.  The company was heavily over-valued without concern about its managerial and economical factors.  The stock market bubble that had inflated the values of the company eventually burst.  The volatility of its share price shows no correlation to its financial performance but mostly to the general structure of the whole business.  The company failed to continue its success and collapsed dramatically in less than one year.