Hard lessons from Lastminute.

Byline: ANTHONY HILTON

LASTMINUTE.COM, the internet travel service, did investors an unintended favour today.

In the past few months there have been signs that the revival in technology stocks, which was to be welcomed, was beginning to spill over into a repeat of the silly euphoria that cost so many people so much money. But today a wheel fell off the Lastminute wagon when it reported full-year earnings before depreciation, interest and tax of [pounds sterling]24 million - some 10% lower than analysts' already-reduced expectations - and gave the market a cold shower.

It was a timely and explicit reminder of how hard it can be to turn even the best internet-based ideas into proper functioning businesses.

In a way, Lastminute's problem is that it has had to do its growing up in public. So the kind of wobbles most businesses go through behind closed doors when still private, it has suffered in the full glare of publicity. The plus side is that it has had to produce a grownup response, so the announcement of the bad news comes complete with the recovery package straight from the PR equivalent of Central Casting.

Thus there is appropriate bloodlettingin the management ranks - finance director on bike, tough new head of audit committee parachuted in and a new, hands-on chairman to replace Allan Leighton, who was already stepping down to turn his attentions elsewhere - with a major change in the focus of the business.

Out go land-grabbing acquisitions to extend the product range, to be replaced by a total focus on squeezing profit out of assets and businesses already under ownership.

Through acquisition it has got to the position where it is the biggest "direct to the consumer" travel business in Europe. Now it has to raise its operational game and improve financial controls.

Some say this is the moment of uncomfortable truth - and that margins in the late-booking sector are so thin the business will never make good money.

Chief executive Brent Hoberman and his team disagree, but now they have to prove it.

They do have one thing going for them. Lastminute is a tiny business - pre-tax profits were barely [pounds sterling]5 million, a sum that would be lost as a rounding error in the accounts of most FTSE 100 companies. But it has a level of name recognition to die for.

tors what it has already decided to do anyway - and repeat the explanations two or three times if necessary - before moving to the legislation it had planned from the outset.

Yesterday, however, there was an exception that may disprove the rule.

When the Treasury launched its consultation on regulation of the investment trust industry it achieved a measure of surprise: it seems genuinely not to have a pre-set agenda.

Perhaps it is just very well hidden, but a more charitable view is that in the months between the knee-jerk "something must be done" reaction to the split-capital crisis in investment trusts when the consultation was announced and publication of yesterday's paper, politicians and civil servants have realised they have no idea what to do.

They have probably learnt that all sorts of investment trust activities are already monitored or carried out by people - such as fund managers - who have to be authorised, so the obvious bases have already been covered. They might also realise how incredibly difficult and complicated it would be to try to change the regulatory system further because investment trusts are companies and any special treatment would cut across existing company law, probably creating all manner of anomalies and inconsistencies. And for what?

Clearly the splits crisis was a disaster, but that does not mean there is anything to be gained now by turning the whole industry inside out.

Investment trusts have served private investors well for years and they still remain by far the most sensible investment for people with a little money who want exposure to the stock market.

Firms like JP Morgan Fleming, Foreign and Colonial, Aberdeen Asset Management, among others, should get credit for the good trusts they have run over the years as well as censure for one product that went wrong. It should be more widely recognised that they provide professional fund management for the retail market at remarkably low cost.

So if the Treasury does really want to encourage more grassroots saving, this is the time it should be encouraging the industry to work on new ways to make the public aware of what investment trusts have to offer - not saddling them with a mass of new regulation.