Lastminute hits 3-year high on takeover talk

ONLINE travel agencies are the outstanding success stories of the internet. They generate cash and their business models work.

Travel bookings are ideal for internet sales. The inventory is virtual, bookings do not need physical delivery to the customer and they move fast.

Business is brisk with thousands of punters booking late holidays, having been put off earlier because of the war in Iraq.

Martha Lane Fox and Ben Hoberman's lastminute.com traded above 200p for the first time since July 2000, closing 10p up at a year's peak of 204p. Turnover swelled to 5m-plus as takeover rumours did the rounds again.

TUI, the German tour operator behind Thomson Holidays and Lunn Poly, has often been rumoured as a bidder, but online travel giant Expedia is the new name in the frame. Dealers heard a whisper that it will pounce after lastminute's third-quarter earnings statement on 7 August. Hoberman and Fox own 9% of the equity.

Evolution Beeson Gregory's analyst Robin Chhabra reckons that the lastminute talk, which has been going on for six weeks, is moving from speculation to something resembling reality. If lastminute is gobbled up, he says attention will switch to ebookers - up 20p to 502 1/2p - one of the three leaders in the European online market. Profits growth will be substantial between 2003 and 2004, recovering from last year's pre-tax loss of £5.7m to profits of £12.1m and £28.6m respectively.

As Wall Street rallied following impressive overnight quarterly figures from Texas Instruments, the FTSE 100 recovered 35.4 to 4079.7. Sterling eased to $1.5991, while the euro held at 70.9p and $1.1331.

Debenhams' good quarterly figures and a UBS 'buy' recommendation helped fashion retailer Next jump 33p to a record 1120p. Dealers say the board should now consider a share split.

Water group Kelda gushed 12 1/4p to 442p on hopes that this week's annual general meeting will prove bullish. After selling its 45.5% stake of 54m shares in Waste Recycling to Guy Hands' Terra Firma for 285p a share, it has scope for a special dividend.

Mitchells & Butlers frothed 4 3/4p higher to 230p ahead of today's noon deadline for the first round of bids for the pubs and hotels of Scottish & Newcastle, 5 1/2p dearer at 368 1/4p. S&N's pub estate is valued at £2.3bn.

Prudential eased 3 1/4p more to 413p on continuing concern that the insurance giant will cut its dividend next week for the first time since 1914. ETrade Securities says 'sell' and forecasts a 40% dividend slice to 15p. Royal & SunAlliance lost 6 3/4p to 151 1/4p.

Software group Isoft plummeted 32 1/2p to 307p after analysts gave the thumbs-down to its planned merger with computer services group Torex, 25p higher at 537 1/2p, after 582 1/2p. Ian Spence, of Granville Baird, said: 'The only attraction has to be Torex's exposure to overseas markets.'

Struggling music group EMI improved 1 3/4p to 132 1/4p after director Harald Einsmann bought 113,000 shares at 129 3/4p.

Aim-listed techno minnow Intelliplus edged up 0.18p to 1.05p after cutting its full-year losses. Huntsworth, the public relations group, rose 1 3/8p to 10 5/8p. First-half trading is ahead of expectations and it has acquired 25% of City PR firm Grandfield.

An upbeat annual general meeting lifted insulation and scaffolding supplier Cape 5 1/4p to 41p. Trading after five months is well ahead of last year.

Cadbury Schweppes eased 1 1/2p to 349 1/2p ahead of results today. Deutsche Bank expects a flat first half and warns that Cadbury needs double digit growth in the second half to meet market expectations. Cadbury withdrew a million packs of Clorets strong mint chewing gum in Japan after it breached local rules on a peppermint additive.

Oil giant Shell rose 5 1/2p to 404 1/4p ahead of second-quarter earnings on Thursday. They are likely to fall short of the first quarter's record but Shell could still make net profits of $2.9bn (£1.8bn).