Half Yearly Report

Cupid plc

Half Yearly Report

Cupid plc (AIM: CUP), the internet-based dating operator, is pleased to announce its half year results for the six months ended 30 June 2012 ("H1 2012"). The comparison period is the half year to 30 June 2011 ("H1 2011").

Financial Highlights

§ Revenues increased by 51% to £38.6m (H1 2011: £25.5m).

§ Revenues from New Markets (USA, Canada, France, Italy, Spain, Germany) increased by 122% from £10.0m to £22.2m.

§ Revenues from Established Markets (UK, Australia, New Zealand, Ireland) increased by 6% from £15.1m to £16.0m.

§ Revenues from Developing Territories (Brazil and India) increased by 67% from £0.3m to £0.5m.

§ Higher revenues generated by increased marketing spend during the seasonally strong sign up period from late December 2011 to April 2012.

§ Marketing spend scaled back from May 2012 onwards to allow increased revenues to translate into higher profitability.

§ Adjusted EBITDA1 of £5.9m (H1 2011: £5.9m).

§ Strong cash position of £7.7m at 30 June 2012 (31 Dec 2011: £7.8m) after payout of dividend.

Operational Highlights

§ Rapid organic growth in H1 2012 was delivered through effective marketing spend.

§ Strong growth in North American market share gives increasing confidence in Cupid plc's ability to capture a significant portion of this market in the next few years.

§ The acquisition of Assistance Genie Logiciel ("AGL") should accelerate growth in France in H2 2012.

§ Continued growth in proportion of users accessing sites via mobile and across multiple devices.

§ Creating exciting new products to enhance Cupid plc's presence in the social and mobile environment.

§ Strong trading in July and August supports the planned improvement in profitability in H2 2012 and management's expectations for the year to 31 December 2012.

1 Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share based payment charges and acquisition related costs.

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

"Over the past six months we have taken the business on to a new tier, growing from £53.6m annual revenues in 2011 to annualised revenues of £77.2m based on H1 2012 figures, largely through organic growth delivered through intelligent and targeted marketing spend using our in-house software platform that allows us to measure marketing performance in real-time.

During the period we concentrated on growth within our existing global footprint, particularly in the USA, where our strong performance gives us increased confidence in our ability to continue to unlock further sustained growth at rates that are well above market trends. We remain in a very strong position and are confident that we will continue to deliver value for shareholders in 2012 and beyond. The market for our services is global and growing and we are well positioned to take advantage of the numerous opportunities that exist."

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Notes to Editors

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

§ Cupid plc generates significant and growing revenues in 15 countries within the markets of North and South America, Europe, and Asia Pacific.

§ Cupid plc 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 and www.girlsdateforfree.com. The Group also promotes niche brands such as www.datingforparents.com, www.indiandating.com and www.maturedating.co.uk.

§ Cupid plc products are available across the web and also via mobile application stores.

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

Chief Executive Officer's Statement

Over the six months to 30 June 2012 we have considerably increased the scale and capability of Cupid plc. As well as being recognised in the UK and Europe as a top tier dating business we are increasingly becoming a business of substantial presence in the North American market.

International Progress

During H1 2012 we have grown revenues in all three of our geographical territory segments. These segments are Established Markets, New Markets, and Developing Territories. The composition of countries within each segment remains the same.

Our Established Markets are the four countries where we have traded for more than two years: UK, Australia, New Zealand, and Ireland. We continue to demonstrate consistent ongoing growth within these markets. We believe that the size of these markets amounts to approximately £200m in total, of which our market share is currently between 10%-20%. Within Established Markets our UK market position continues to grow at rates in line with forecast and expectation; our recent TV advertising experiment was positive and we plan to increase this activity in line with our seasonal marketing spend in Q1 2013.

New Markets are those that we have entered within the last two years: USA, Canada, France, Italy, Spain and Germany. We believe that the New Markets in total amount to somewhere between £1.25bn and £1.5bn of total addressable market. We currently have a much lower market share within these countries and are increasingly confident of our ability to capture a significant portion of these markets. This will drive sizeable ongoing growth for Cupid plc over the next few years. Within New Markets the progress within USA and France has been a focus throughout 2012 and will continue. We have seen our USA revenues grow to 2% market share of a market of around £800m after only two years within this market, and we see significant opportunity for the business to grow further in the USA. We have opened a small support services office in Dallas, Texas to enable us to develop our corporate and local payment processing capability, while we are formulating more substantial plans to establish a commercially focused presence early in 2013.

Within France, Cupid's revenues have grown to around 10% market share during 2012 having only entered this market in early 2011. The acquisition of AGL in July 2012 represents a significant step forward in scale and capability in France, where we are increasingly catching up with our UK market share. In addition, Canada, Italy, Spain, and lately Germany have been making steady revenue growth progress.

Within Developing Territories (Brazil and India) we continue to make positive progress and see medium to long term potential.

KPIs

Overall we have produced another set of growing results backed by a solid KPI performance.

§ Revenues increased by 51% to £38.6m (H1 2011: £25.5m) and adjusted EBITDA stable at £5.9m.

§ We have created a significantly larger business, now delivering average monthly revenues exceeding £6.4m (H1 2011: £4.2m).

§ Marketing spend increased by 69% to £23.2m (H1 2011: £13.7m)

§ Other direct costs increased by 70% to £6.8m (H1 2011: £4.0m) due to slightly higher cost of transacting business in the USA and France.

§ Operating expenses increased by 42% to £2.7m (H1 2011: £1.9m) as the business expanded internationally.

§ We averaged over 540,000 monthly subscribers in H1 2012 (H1 2011: 410,000).

§ The rates of monthly subscriber churn within both Established Markets and New Markets are consistent with H1 2011, and are slightly higher than H2 2011 as is typical when marketing spend is increased and growth increases.

§ Increase in ARPU (average revenue per user) and "cost to acquire" subscribers.

§ We paid a dividend of 2.25pence per share on 29 June 2012 (total cash cost £1.8m).

§ We have a very strong net cash position of £7.7m at 30 June 2012 (31 Dec 2011: £7.8m).

§ In July 2012 we completed the acquisition of AGL in France for EUR 3.7m in cash.

Operations

Internally our FLEX software platform continues to deliver class leading products with multi device access points to our products, whether it be through mobile apps, tablet apps, Facebook, or more conventional web access. Our FLEX software platform allows our performance-based marketing spend to be scaled accordingly, and provides integration with all internal management systems.

We now deliver 30% of users via the mobile channel, and believe these volumes are well ahead of the levels within many other online businesses. We continue to develop our products to ensure optimum compatibility with mobile devices and mobile monetisation.

Acquisitions

We continue to make what we believe are good value bolt-on acquisitions. In February we completed the acquisition of the Friends Reunited Dating business which has been completely integrated on to our FLEX software platform. Then in July we announced completion of the acquisition of the French online dating business AGL for EUR 3.7m, which should grow by improved online marketing and fulfilling its international potential, in particular with the brand amour.com.

We continue to identify further acquisition candidates in attractive markets and niches, with price and performance characteristics that are similar to the acquisitions already delivered.

Outlook

Our business model of heavy and upfront marketing investment to generate new and potential subscribers continues to generate high levels of growth. We believe the rationale of marketing spend heavily weighted towards the January to April calendar months is a trend that will generate the best annual profit returns for shareholders. During the May to December period we typically generate our strongest profitability. This seasonal trend is also likely to be a template for the future. In the past this trend has been diluted by the fact that we have grown at different paces in a number of new geographies.

In North America, the world's largest online dating market, we are seeing with increased clarity the potential for sustained and exciting long term growth for the Group, enabling us to remain at the forefront of market trends. In the USA in particular we are noticing business models emerging under a new category known as "social discovery", which potentially enhance the longevity of our customer base. We will be launching products in this new area towards the end of this year, and through early next year.

We look forward with confidence to continuing to grow our business as a globally recognised player in the online dating market, and intend to maximise long term value through an increasing presence in emerging and complementary market sectors.

Bill Dobbie

Chief Executive Officer

Cupid plc

Interim results FY2012

Consolidated interim statement of comprehensive income

Cupid plc

Interim results FY2012

Consolidated interim statement of financial position at 30 June 2012

Cupid plc

Interim Results FY2012

Consolidated interim cashflow statement for the six months ended 30 June 2012

Cupid plc

Interim results FY2012

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

30 June 2012

Cupid plc

Interim results FY2012

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 2012.

These interim financial statements were authorised for issue by the Board of Directors on 3 September 2012. 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 2011 are 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 six month period ended 30 June 2012 is unaudited but has been reviewed by the auditors and their report to the Company is set out at the end of the statement.

The Group's projections, taking into account all risks and uncertainties outlined in note 9 to the interim statement indicate that the Group will continue to be self-funding. As a result, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

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 2011. Although there has been a number of new interpretations and amendments to existing standards in the period, these are not applicable to the Group and therefore have not had any impact on the net assets or results.

In the process of applying the Group's accounting policies, management necessarily makes judgements 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 judgement and estimation areas were noted in the Company's consolidated financial statements for the year ended 31 December 2011.

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

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

2. Accounting policies cont'd

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, including deferred consideration, and the fair value of the identifiable assets 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 allocated to cash-generating units and is not amortised but is tested annually for impairment. Goodwill is stated at cost less any accumulated impairment losses.

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 when, and only when, 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.

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

2. Accounting policies cont'd

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 asset lifespans for current intangibles are between eighteen months and ten years.

Share based payments

Share-based payment arrangements in which the Group receives services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions. 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 and/or 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.

Non-controlling interests

On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at their fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquire at the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date.

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

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

The three segments are:

·; Established markets (UK, Australia, New Zealand, Ireland)

·; New markets (USA, Canada, France, Italy, Spain, Germany plus any newly entered countries)

·; Developing territories (Brazil, India)

Each of the three segments has different performance characteristics within its Key Performance Indicators as they are at different levels of maturity and critical mass for the Group. The CEO transitioned to this basis of assessing progress from the previous basis due to the increasing volume of countries in which the Group operates, and the characteristics being better aligned by maturity rather than international region. The June 2011 numbers have been restated to ensure they are presented on a consistent basis with the current year.

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.

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 all are unallocated for segmental disclosure purposes. Segmental assets and liabilities are not presented to the CEO and therefore 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-segment transactions.

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

3. Segmental analysis cont'd

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

3. Segmental analysis cont'd

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

4. Taxation

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

5. Intangible assets cont'd

Amortisation

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

No impairment charges have been booked.

6. Related parties

Included in trade and other receivables is a balance due from related parties amounting to £2,527,000. This includes cash being processed through one of the payment gateways of Amorix Ltd as this was deemed the most effective method for ensuring a high collection rate. The corresponding figures for December 2011 and June 2011 are £2,614,000 and £662,000 respectively.

Cupid plc

Interim results FY2012

Notes to the accounts cont'd

Adjusted earnings per share H1 2012 H1 2011 FY 2011

Profit attributable to equity holders of the Company (£000) 2,904 3,129 5,665

Add: Amortisation of intangible assets (£000) 1,561 1,729 3,368 Add: Acquisition costs (£000) 280 - 160

Add: Share based payments (£000) 186 140 563

Less: Tax impact of adjusted items (£000) (497) (495) (1,084)

Adjusted profit attributable to equity holders (£000) 4,434 4,503 8,672

Adjusted basic earnings per share (p per share) 5.45p 5.80p 10.94p

Adjusted diluted earnings per share (p per share) 5.31p 5.74p 10.58p

The measure of adjusted earnings per share, as calculated above, is a non-statutory measure which we believe is useful to investors and is commonly used to evaluate the performance of businesses where M&A activity is significant.

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 skills, experience, and commitment of its employees and especially a relatively small number of senior staff. The Group seeks to recruit and

Cupid plc

Interim results FY 2012

Notes to the accounts cont'd

9. Principal risks and uncertainties cont'd

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 programmes 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 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. Contingencies

In May 2012 Cupid plc was served with a summons by a business called Unified Messaging Solutions within the Eastern District of Texas court alleging patent infringement for web methods of storing, delivering and managing messages. In the opinion of the directors the resolution of this claim is not expected to impact materially on the Group's financial position or results of operations.

11. Post balance sheet events

On 23 July 2012 the Company completed the acquisition of French dating company Assistance Genie Logiciel (AGL) for a total consideration of EUR 3.7m.

INDEPENDENT REVIEW REPORT TO Cupid PLC