Half Yearly Report

Cupid plc

Half Yearly Report

Cupid plc (AIM: CUP), the provider of online dating services, is pleased to announce its half year results for the six months ended 30 June 2011 ("H1 2011"), which are ahead of market expectations. The comparison period is the half year to 30 June 2010 ("H1 2010").

Financial Highlights

§ Revenues increased by 189% to £25.4m (H1 2010: £8.8m)

§ EBITDA increased by 137% to £5.7m (H1 2010: £2.4m)

§ UK revenues increased by 68% to £11.9m (H1 2010: £7.1m)

§ International expansion continues with 53% of H1 2011 revenues from outside the UK

§ Revenue in new European markets growing rapidly (France, Italy, Spain)

§ Monthly revenues now exceeding £4.5m

§ Strong cash position of £8.4m at 30 June 2011 (31 Dec 2010: £6.0m)

Operational Highlights

§ Establishing strong foothold into North American market

§ European growth in France and more recently Italy and Spain

§ Recent German and Brazilian acquisitions position us well

§ Rapid growth of Facebook user sign ups

§ Mobile growth continues

Commenting on the results, Bill Dobbie, Chief Executive of Cupid plc, said:

"This has been another period of exciting growth and development for Cupid plc. In the first half of 2011 we have delivered similar revenues and profit to the whole of 2010 and we are pleased to report results ahead of market expectations.

We continue the transition from being a UK centric dating company into a true international player. Our global footprint is expanding and we continue to make acquisitions where we see potential for growth.

Our half year results demonstrate further growth in revenue and profit whilst at the same time we have borne the costs of entering new markets.

We are in a very strong position and remain confident that we will grow value for shareholders in 2011 and beyond. The market for our services is global and growing and we are well placed to take advantage of the numerous opportunities that exist."

For further information please contact:

Notes to Editors

§ Cupid plc listed on AIM in June 2010 and is a leading provider of online dating services

§ Cupid has built a base of over 34 million members.

§ Cupid offers a wide variety of online dating services allowing members to interact with each other and access the content available on the Group's websites. These websites are intended to appeal to dating users of diverse ages, cultures and social interest groups. The Group's most heavily visited websites include www.cupid.com, www.flirt.com, www.benaughty.com, www.girlsdateforfree.com and www.datetheuk.com. The Group also promotes the niche brands www.datingforparents.com, www.indiandating.com and www.maturedating.co.uk.

§ The majority of services are also available via Apple and Android App Stores for mobile users as well as through their own Facebook apps - e.g. http://apps.facebook.com/cupidcom and http://apps.facebook.com/benaughtynow.

§ Further information on the Company can be found at www.cupidplc.com.

Chairman's statement

During the past six months we have seen a continued transformation of Cupid plc from a UK focused internet dating business into one of only a handful of truly international internet dating companies.

The acquisitions made in 2010 have now been completely integrated into our business, their trading has been enhanced under our ownership, and they have provided platforms for further growth in both the UK and overseas.

Revenues continue to grow within the UK domestic market, and are now supplemented by substantial revenues in North America, Australasia and increasingly mainland Europe.

In mainland Europe, after less than a year of operation, we are now trading strongly in France, Italy and Spain. Our June 2011 acquisition of the German business run by Andreas von Maltzen in Munich has now provided us with an excellent opportunity to gain a foothold in the German-speaking markets.

Earlier this month we completed our first steps into South America, with the acquisition of the Brazilian dating business AondeNamoro. We see this market as an opportunity with excellent medium to longer term potential for Cupid plc.

Continual innovative development of new products and features remains a core part of our business. Our product integration within Facebook and the launch of our iPad product both demonstrate this.

We continue to be excited about the future for Cupid plc, with ongoing UK growth supplemented by rapid expansion in the eleven other countries where we already have sizeable revenues.

George Elliott

Non Executive Chairman

Chief Executive Officer's review

The last six months have seen continued progress from the end of year position: Cupid is now an international dating business, with an expanding global footprint; we have websites in six languages, producing significant and increasing revenues in twelve countries. European revenues are growing particularly strongly, with France, Italy and Spain leading this growth, which will soon be enhanced by the contribution from our recent German acquisition.

We were pleased to announce the acquisition of the growing Brazilian site Aondenamoro.com last week, which now gives us a presence in each continent. We intend to build from this, and to become a recognized global Internet player.

Our key staff and our overall team continue to grow in stature and capability as the company grows, and we should all congratulate them on their success so far. I expect our organisational development to continue, and we now have small numbers of staff in Germany and the USA complementing our main Ukrainian and UK bases. We will continue to seek talent as we continue to grow internationally.

As our user numbers grow and internationalization continues we have maintained focus on improving the capability of our customer support operations. This has included the development and implementation of integrated customer support IT systems and sourcing of additional customer support resource.

Our marketing strategy has always been focused 'online' as opposed to the traditional mix of 'off-line' and 'online', and whilst we continue to meet our ambitions we will continue with this strategy. It is interesting to note that both Facebook and other new mobile channels have become significant in this mix, and suit our performance-based online marketing skills and strategies. The usage of our products is changing in line with the development of our spend in these channels, with more than 40% of usage now through mobile devices and via our Facebook apps, as opposed to through our websites. We strive to offer our users an integrated experience so that they can use all our services on the Web, on their mobile device, and while on Facebook. Cupid is currently highly ranked within the top Facebook apps being downloaded globally, which is a measure of the innovative spirit and capability within the company.

Those three trends of international growth, management experience and successful marketing, have produced another set of improved financial results, which are ahead of market expectations and backed by solid KPI performance:

·; Revenue in the first half of 2011 was £25.4 million (H1 2010: £8.8million), and EBITDA grew to £5.7million (H1 2010: £2.4million)

·; We have created an enlarged global footprint with annualised revenues of more than £500,000 pa in 12 countries (June 2010: 3 countries)

·; Two recent acquisitions were completed (in Germany and Brazil)

·; Active members are now over 12 million (Dec 2010: 6million)

·; We have over 460,000 monthly subscribers during June 2011 (Dec 2010: 324,000)

·; We have net cash of £8.4million and no debt

Despite new territories often being unprofitable during the initial phase we have continued to grow profits whilst increasing our marketing spend and our monthly revenues are now over £4.5million per month.

We look forward with confidence in our ability to become a globally recognized player in the digital dating and relationship sector.

Bill Dobbie

Chief Executive Officer

Consolidated interim statement of comprehensive income

Consolidated interim statement of financial position at 30 June 2011

Consolidated interim cashflow statement for the 6 months ended 30 June 2011

Consolidated interim statement of changes in equity for the 6 months ended

30 June 2011

Notes to the accounts

1. Basis of preparation

The condensed interim financial statements set out above contain the interim financial information of Cupid plc (the "Company") for the six month period ended 30 June 2011.

These interim financial statements were authorised for issue by the Board of Directors on 29 August 2011.

A copy of this half-yearly financial report is available on the Company's website at www.cupidplc.com.

The comparative figures for the financial year ended 31 December 2010 are not the company's statutory accounts for that financial year. The auditors have reported on those accounts and they have been delivered to the Registrar of Companies. The auditor's report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

The interim financial information for the 6 month period ended 30 June 2011 is unaudited but has been reviewed by the auditors and their report to the Company is set out at the end of the statement.

2. Accounting Policies

As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2010.

The following new standards, amendments to standards and interpretations are mandatory for the first time for financial periods commencing on 1 January 2011:

Revised IAS 24 "Related party disclosures‟, issued in November 2009. It supersedes IAS 24, Related party disclosures' issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.

In the process of applying the Group's accounting policies, management necessarily makes judgments and estimates that have a significant effect on the amounts recognised in the condensed interim financial statements. Changes in the assumptions underlying the estimates could result in a significant impact to the interim financial statements. The most critical of these accounting judgment and estimation areas were noted in the Company's consolidated financial statements for the year ended 31 December 2010.

Income tax in the interim period is calculated using the tax rate that would be applicable to expected total annual pre-tax results.

Revenue recognition

Website membership income is recognised on a straight line basis over the length of the membership subscribed for.

Revenue from management contracts is recognised when the service is provided.

Intangible assets and goodwill

All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, associates and jointly controlled entities. Goodwill represents the difference between the cost of the acquisition and the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.

Negative goodwill arising on an acquisition is recognised immediately in profit or loss.

Other intangible assets

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally generated intangible assets can be recognised, development expenditure is expensed in the period as incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

·; the technical feasibility of completing the intangible asset so that it will be available for use or sale;

·; the intention to complete the intangible asset and use or sell it;

·; the ability to use or sell the intangible asset;

·; how the intangible asset will generate probable future economic benefits;

·; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

·; the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses.

Internally generated assets are amortised over their estimated lifespan depending on each asset. The asset lifespan is estimated by management based on experience of similar assets in the past.

Other intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and less accumulated impairment losses.

Amortisation

Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

·; Intellectual property over estimated asset lifespan

·; Internally generated R&D over estimated asset lifespan

Share based payments

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

The grant date fair value of options granted to employees/ external contractors is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees/ external contractors become unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting.

Where the Company grants options over its own shares to the employees of its subsidiaries, it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity.

Non-controlling interests

Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.

3. Segmental Analysis

The chief operating decision-maker has been identified as the Chief Executive officer ("CEO") of the Company. The CEO reviews the Group's internal reporting in order to assess performance and to allocate resources. The Company has determined its operating segments based on these reports.

The Group currently has four reportable segments, which are based upon geographical territories. The location of the user is the basis for determining the segment.

The four segments are:

·; UK

·; North America

·; Australia/NZ/Asia/Africa

·; Europe (except UK)

Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of the business at the operating segment level based on revenue and revenue less direct marketing costs, which gives a measure of the effectiveness and contribution after deduction of direct marketing costs.

The segment information is prepared using accounting policies consistent with those of the group as a whole.

The assets and liabilities of the Group are not reviewed by the CEO on a segment basis. Therefore none of the Group's assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. Segmental assets and liabilities are not presented to the CEO and the Group has not disclosed details of segmental assets and liabilities.

All segments are continuing operations. No customer accounts for more than 10% of external revenues. There are no inter-agreement transactions.

4. Acquisitions

On 30 June 2011, the company acquired 75% of the trade and assets of OnlineLiebe and WomanWeb for £2.4m (€2.75m). The fair value of the identifiable assets, consisting of domain names, trademarks and copyright, customer databases and contracts with suppliers and partners was £864,000 leading to a Non Controlling Interest of £216,000. The company also has an option to acquire the remaining 25%.

Goodwill arose on the acquisitions because of the difference between the cost of the acquisition and the book value of the net assets acquired.

Effect of acquisition

The acquisition had the following effect on the company's assets and liabilities:

On 4th February 2011, the company acquired the business of Indiandating.com for £93,000 ($150,000). A further $25,000 or $50,000, depending on revenues generated, is due to be paid in August 2011.

On 3rd May 2011, the company acquired the domain name cupidon.com for £180,000 ($300,000).

5. Taxation

Amortisation

Amortisation is recognised in the following line item in the income statement:

No impairment charges have been booked.

8. Called up share capital

9. Principal risks and uncertainties

The directors believe that the principal risks and uncertainties to the business are:

Staff

As with any service organisation the Group is dependent on the skill, experience and commitment of its employees and especially a relatively small number of senior staff. The Group seeks to recruit and retain suitably skilled and experienced staff by offering a challenging and rewarding work environment. This includes competitive and innovative reward packages and a strong commitment to training and development.

Datacentre operation

Any downtime experienced at our datacentres would immediately have an impact on our ability to provide customers with the level of service they demand. Our ongoing investment in preventative maintenance and lifecycle replacement programme ensures our datacentres continue to deliver operational efficiency and effectiveness.

Reputation

The Group operates a number of dating sites which are mainly marketed through the internet. In the event of the reputation of one or all of the sites being damaged, this would have an impact on consumer confidence in the Group's products and the Group's ability to generate revenues. As the business has been growing rapidly there has been significant investment in customer relationship systems and customer service staffing to meet the growing business demands.

Key suppliers

The group is dependent on certain key suppliers for the continued generation of internet marketing. The Group actively seeks to maintain good relationships with these suppliers. The Group also seeks to maintain an increasingly diversified range of other marketing partners to mitigate some of this risk.

Banking relationships

The group relies on relationships with credit card processing companies, banks and other payment processors to enable it to continue to receive customer payments. The Group actively manages these relationships through a dedicated in-house team, which includes having a wide enough spread of payment processing relationships to mitigate reliance on any particular provider.

10. Post balance sheet events

On 22nd August 2011 the Company completed the acquisition of several Brazilian online dating sites for a total maximum consideration of USD 0.75m (£0.5m).

INDEPENDENT REVIEW REPORT TO Cupid PLC