Investors seek minority stake in lastminute.com parent as COVID impact is revealed

European OTA group reports full-year trading and profits slump but improved cash position

Investors have entered into negotiations to take a minority stake in the holding firm that controls the European OTA group that owns lastminute.com.

The firm revealed interest from a “pool of investors” in Freesailors, the investment vehicle that owns 100% of LMN (lastminute.com N.V.) and which is owned by lastminute.com group chief executive Fabio Cannavale.

In a full year results update, the firm said the potential transaction will not change the controlling structure of lastminute.com N.V., shares of which are traded on the SIX Swiss Exchange.

Lm holdings, parent of lastminute.com and sister brands Volagratis, Rumbo, weq.de, Bravofly, Jetcost and Hotelscan, also announced the sale of Destination Italia under a management buyout and a new incentive plan for key employees and executive directors.

Destination Italia is a joint venture with Banca Intesa established to boost incoming tourism to Italy.

Launched in 2016 after the acquisition of Gartour it was managed independently from lm group as a venture initiative.

However, it has seen yearly losses of €3 million and the firm has decided to sell a 63.6% stake to its management and write off its assets in 2020 full year results.

Under the new staff incentive plan key employees are being offered 750.000 share options under a three-year deal based on continual service and performance of the firm’s share price.

Detailed terms and conditions of the plan, including the mechanism to finance it with a buy-back of owned shares or dedicated capital increase, are due to be approved by directors at a board meeting on March 25.

Lm holding said: “The purpose and the structure of the incentive plan is to commit key employees on a long-term basis and to focus management on the delivery of strategic and financial goals.

“It will have the benefit of generating long-term company value and align management and shareholder interests.”

Details of lm holding’s financial performance in 2020 reflect the COVID-19 crisis from February onwards, which followed a record-breaking month for bookings for the group.

The firm said January’s performance reflected its success in addressing the online needs of travellers, but the pandemic forced it to turn from a booking engine to a “cancellation machine” as it fought to strengthen its finances.

“All this, significantly impacted the 2020 performance at all levels, across all geographies and all products,” the firm said.

“The main issue to be managed throughout the year was the refunding to customers that were forced to renounce their trips. Since the suppliers, primarily the airlines, awfully delayed the reimbursements, customers were bearing the risk of not being paid back timely.”

An ‘Everyone Loves Vouchers’ campaign which ensured customers retained the value of their booking for future dates and a cash protection programme saw it close the year with a sound cash position of €137.6 million, up 3.4% on 2019.

A cost reduction regime initiated in March 2020 saw savings of €36 million year on year, higher than the €30 million target previously reported. The benefits of this will be seen throughout 2021 and in the future.

The gross value of bookings for the year by core operations ended 63.2% down to just over €100 billion. This saw revenues plunge 61.8% to €129 million and profitability (EBITDA) slump 96.8% to €2.3 million.

Lastminute said it expects to see the first signs of a rebound by the second quarter of 2021 as a result of the rollout of the vaccination campaign and the market to stabilise between the third and fourth quarters as herd immunity it reached.

Cannavale said: “We have experienced the worst health and economic crisis that all of us remember.

“Despite all the difficulties and challenges we have faced in the course of the year, lm group has been capable of reacting quickly and effectively, not only securing its assets and the business continuity but also taking care of all its employees around Europe.

“Thanks to the comprehensive reorganisation process started in 2016 and culminated with the great 2019 performance, our very efficient machine, the scalable and flexible infrastructure, enabled the group to navigate the waves of the pandemic properly.

“We can look at the future with optimism, thanks to the robustness of our balance-sheet and conscious that our organization is well equipped to serve our customers even in a different context like the post-COVID world.

“Based on the current conditions, and provided that we foresee a rebound in the course of the 2Q2021, at this stage we would not expect to follow up with a capital injection going forward.”

Marco Corradino, lm Group chief executive, said: ”2020 was probably the most difficult year ever for the travel and tourism industry. It was a year of hard challenges, but we learned many lessons.

“We have built a very efficient machine, capable of quickly turning into a cancellation engine as a consequence of the C-19 outbreak.

“Once the crisis seemed to be under-control in the late spring, we started reinvesting and we managed the rebound effectively.

“Then, after the summer, when a second pandemic wave appeared to be the most likely scenario, on the contrary we decided to significantly limitate the marketing spend, to avoid potential issues arising from a second cancellation wave.”

Andrea Bertoli, managing director OTA, added: “From October until now, around 50% of European scheduled flights were cancelled in the few days prior to departure. This means that it was, and still is, not the right moment to push the throttle.

“We manage tons of data and run sophisticated algorithms that fuel our decision making process enabling us to constantly and rapidly change our strategy.

“Our capability of effectively managing the business even in such a fluid and difficult context is the result of a three-year plan of transformation successfully executed. We look at the future with optimism backed by solid assets and strengths.

“Our sound financial structure allows the Group to have cash-in-hands to invest and actively play a role of potential consolidator in the field.

“The diversified business model and geographical reach will be key to focus on products and countries where the rebound will come first.

“Our leading dynamic holidays packages technology will provide our customers with the most comprehensive catalogue of immediately-bookable travel options, built in real time as soon as a destination will reopen for leisure travel.”