IDE.L Regulatory News (IDE)

Cupid plc

Final Results for the year ended 31 December 2010

Cupid plc (AIM: CUP), a leading UK online dating company, is pleased to announce its final results for the year ended 31 December 2010.

Financial Highlights

§ Revenues increased by 202% to £25.7m (FY09: £8.5m)

§ EBITDA increased by 367% to £5.6m (FY09: £1.2m)

§ Organic UK revenues increased by 101% to £15.1m (FY09: £7.5m)

§ International expansion continues with 42% of Q4 revenues from outside the UK (FY09: 13%)

§ Strong cash flows of £5.1m from operating activities in FY10

§ Cash position increased to £6.0m at 31 Dec 2010 (31 Dec 2009: £0.2m)

Operational Highlights

§ Both Allegran and Cupid acquisitions performing exceptionally well

§ Rapid growth in user key metrics

§ Establishing strong foothold into North American market

§ Launched Smartphone versions of products

§ Rapid growth of Facebook user sign ups

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

"Our maiden full year results show rapid growth and reflect a very successful period since our AIM debut. 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:

As the Cupid plc Group was formed in November 2009 as part of a restructuring of the IDE Group and therefore only traded for 2 months of 2009, the FY09 numbers referred to throughout this announcement are those that were presented as audited pro-forma numbers within the AIM admission document in June 2010. These pro-forma numbers give a more informative 12 month prior year comparison. A copy of the AIM admission document is available at www.cupidplc.com.

Notes to Editors

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

§ Cupid has built a base of over 13 million registrants and over 9 million members in 29 countries (those countries with over 1,000 members), with a growing proportion of members coming from outside of the United Kingdom.

§ 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.speeddater.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

In the nine months since I became Chairman of Cupid plc we have seen tremendous growth, international expansion and business improvement.

Having completed the acquisition of the Allegran business from the Daily Mail General Trust ("DMGT") in March 2010, the Company then listed on AIM in June 2010, and went on to complete the acquisitions of Cupid Inc and Flirt.com in the second half of 2010. It has been a year of significant change for the business.

The AIM listing has allowed us to develop from a UK focused business, into one of the top global dating companies with a growing international profile.

The acquisitions made in 2010 have 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.

Continual innovative development of new products and features is a core part of our business. As an exciting example we see the increasing volume of iphone and android product downloads providing a new fast growing route to market for our products.

The rebranding of our corporate entity to Cupid plc took place in January 2011 and allows us to build upon the strength of one of our core brands Cupid.com. During 2010 the Board and management team has continued to grow and develop. The success that has been achieved so far is due to their dedication and commitment. The progress of Cupid plc throughout 2010, with such strong growth, gives me great confidence in the future prospects of the Company. Finally I would like to take this opportunity to thank our shareholders for their support during our first year as a public company.

George Elliott

Non Executive Chairman

7 March 2011

Chief Executive Officer's review

2010 was a transformational year for Cupid plc. After five years of investment in the business while growing revenues and profits steadily, the Board decided to accelerate this progress by raising £10m through a successful placing of shares on the London Stock Exchange's AIM market.

As well as this significant corporate development, we have grown the Company in all aspects: revenue, profit, products, domestic and international markets, organization and systems, while delivering significant financial progress for shareholders in terms of value and dividends.

Revenue has more than tripled in the year growing from £8.5M in 2009 to £25.7m in 2010, and EBITDA has grown from £1.2m in the year to 31 December 2009 to £5.6m in 2010.

Our Company also completed three acquisitions within the year in the UK and the USA, as well as purchasing two smaller customer databases in the UK and Spain. All these were integrated successfully, and are growing healthily with no additional staff costs.

We continue to grow strongly and look for earnings and value enhancing opportunities in the UK and overseas, with the goal of becoming a recognized global player in the growing market for on line dating, mobile and social network based dating services.

All of this was achieved through the commitment of our 280 staff and management team, and I thank them for a great effort, and look forward to a bright future for them and the Company.

The Market

One in five relationships starts online*, and that ubiquity sparks word of mouth. Now, it seems like any stigma surrounding online dating is gone. The market size is estimated to be more than $3-4 billion worldwide* and it is growing - the growth of phenomena such as Facebook and iPhones contributing to this growth.

* source: Canaan Partners, Economist, Dec 2010

Facebook has become a significant channel to market for Cupid plc, and the spend on promoting our iPhone and Android Apps is also growing in line with increased mobile Internet usage. In December 2010 the Cupid network of sites had 7.3m monthly active users (MAU) on its Facebook applications.

The market is clearly global, and while Cupid's 2011 focus is to continue UK growth, and demonstrate meaningful financial progress in the USA, it is anticipated that we should also start trading in mainland Europe. In 2012 onwards it is anticipated that we should see further expansion in Australasia and developing countries such as India.

Our goal is to have more than 50% of revenues coming from overseas by the end of 2011, while continuing UK growth.

Operational Review

Steady trading growth from 2009 was accelerated with the completion of the Allegran acquisition from Daily Mail and General Trust Group (DMGT) for £3.3m on 31 March 2010.

Group Revenues for the first quarter of 2010 averaged £1.18m per month, and for the final quarter of 2010 they averaged £3.30m per month.

The successful share placing in June 2010 allowed us to raise funds to continue expansion in the UK and USA through the purchases of Cupid.com (£4.6m in Sep 2010) and Flirt.com ($1m in Nov 2010). Revenue and profits from both of these acquisitions are currently ahead of management's expectations, and significantly they have been integrated with no additional staff or infrastructure investment.

All of this activity has happened while we continue to deliver strong organic growth with revenues, excluding acquisitions, growing from £8.5m in FY 2009 to £21.8m in FY 2010.

Our products have been internationalized (our core network of Cupid, BeNaughty, GirlsDateforFree and Flirt were revenue generating/operating in 10 countries as at December 2010), and are also available on Apple, Android and Facebook apps. International revenues were 42% of revenues in the last quarter of 2010, and 29% for the whole of 2010. The number of monthly installations of our product via Facebook has grown from 140,000 per month in January 2010 to 1,500,000 per month in January 2011.

Our marketing mix continues to evolve and our online marketing strategy delivers a highly competitive cost per acquisition (CPA). We will experiment with some TV advertising in the UK in 2011, to test if it will improve our on line customer conversion rates.

Customer service has at times been challenged in the year as the growth in customer queries, photo and profile approvals and related issues has been dramatic. I am happy to report that investment in staff and systems in this area, has led to significant progress on all related operating metrics in the early part of 2011. Servicing our growing international customer base will remain a priority throughout 2011.

Financial Review

The 2010 financial results show rapid growth in revenue, EBITDA and cashflows. This has been achieved through a combination of organic and acquisitive growth.

§ UK organic monthly revenues have grown from £7.5m in FY 09 to £15.1m in FY 10.

§ Acquired Allegran revenues have grown from £180k per month at acquisition in March 2010 to £440k per month in December 10.

The strong profitability within the 2010 financial year has been achieved whilst investing in the US acquisition of Cupid Inc and also spending heavily on online marketing to North American consumers during Q4. This increased marketing spend was undertaken to grow our market share. As a result this has allowed us to grow our North American customer base and position ourselves for a strong performance there in North America in 2011.

§ Profit contribution from North American revenues was only £65k in 2010

§ North American revenues grew from £200k in August 2010 to £850k in December 2010

§ North American revenues were £3.33m in 2010 (FY 2009 : £0.03m)

The growth in international revenues and profits shall be an ongoing theme for the business as we have progressed from delivering 13% of 2009 revenues from overseas users, to 29% of 2010 revenues.

The largest single cost within Cupid plc is for online marketing spend. In 2010 we spent £13.84m on online marketing alone. Our ability to spend this wisely has been developed over five years, and we believe that this one of the barriers to successful growth for other businesses wishing to compete in this market.

Over the past 12 months we have been able to add to and enhance the Cupid plc team to allow us to deliver this rapid growth, and maintain and develop the financial systems and processes to control it.

Dividend

In May 2010 an interim dividend of £497,000 was paid. This was declared and paid prior to Cupid plc restructuring its share capital, completing an IPO and listing on AIM.

The directors intend to propose a final ordinary dividend in respect of the current financial year of 0.5p per share. This has not been included within creditors as it was not approved before the year end. Subject to approval at the Annual General Meeting on 17 June 2011, the final dividend will be paid on 26 July 2011 to shareholders on the register on 24 June 2011.

The level of dividend is intended to deliver a dividend yield the directors believe is appropriate for a company of this size and nature. In future years the directors intend to continue with a progressive dividend policy based on the Group's retained annual earnings. The level of distributions will be subject to the Group's working capital requirements and the ongoing needs of the business.

Outlook

We are in the middle of another period of growth, and remain confident that we will grow value for shareholders in 2011 and beyond.

The market for our services is global and growing and our team and infrastructure is talented and robust. Our growing database of members and profiles gives us a unique and meaningful insight into their online relationship habits and trends, as well as meaningful data on other complementary on line activities.

We remain resolute in our ambition to be a recognized global player in the digital dating and relationship sector.

Bill Dobbie

Chief Executive Operator

7 March 2011

Consolidated Statement of Comprehensive Income

for year ended 31 December 2010

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent company statement of comprehensive income.

Consolidated Statement of Comprehensive Income

for year ended 31 December 2010

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent company statement of comprehensive income.

Balance Sheet

at 31 December 2010

Consolidated statement of changes in equity

Cash Flow Statement

for year ended 31 December 2010

Notes

(forming part of the financial statements)

1. Background and basis of preparation

The financial information set out in the announcement does not constitute the Company's IFRS statutory accounts for the years ended 31 December 2010 or 31 December 2009 as defined by Section 434 of the Companies Act 2006 but is derived from the 2010 accounts.

The financial information for the year ended 31 December 2009 are those that were presented as audited numbers within the AIM admission document in June 2010.

The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

2. Acquisitions of subsidiaries

On 15 December 2009, the Company acquired the trade and assets of Easy Date Limited and all of the ordinary shares in Easy Date Ukraine, Easy Date Dnepr, Easy Date (Ireland) Limited and Datingbiz Inc in return for the issue of £1,419,956 of share capital.

As the business combination arose from the transfer of interests in entities that are under common control of the shareholders, the assets and liabilities are recognised at the carrying amounts previously recorded.

The fair value adjustment relates wholly to internal development costs which were re-assessed at date of acquisition and the recognition of deferred taxation in connection with development costs.

Effect of acquisition

The acquisition had the following effect on the Group's assets and liabilities.

Goodwill has arisen on the acquisition because of the difference between the value of the shares in Easydate plc and the fair value of the net assets acquired and is supported by value attributed to the trade and Company employees.

On 22 September 2010 the Company acquired 100% of the share capital of US based Cupid.com Inc from On Target Jobs Inc for £4.2 million. The Company acquired this business to allow expansion into new markets and realise the benefits from synergies.

Effect of acquisition

The Company incurred expenses of acquisition totalling £62,000 which were expensed.

The acquisition contributed revenue of £0.7 million and EBITDA of nil in the period from acquisition to 31 December 2010

The consideration consisted of an initial cash payment of £4.2million plus a contingent consideration which was based on certain performance criteria. The directors believe these performance conditions will be satisfied so have taken this into account in calculating the fair value of the deferred consideration.

Goodwill has arisen and represents the value of synergies and the benefits of additional volume which will be realised by the Company on integration.

Other acquisitions:

Allegran

On 31 March 2010, the Company acquired the trade and assets of Allegran Ltd from Associated North Cliff Digital Group Limited for £3.3m of which £200,000 was initially settled in cash and £3,100,000 was deferred. At 31 December 2010 £1,700,000 remains deferred. This acquisition consisted of domain names, trademarks, customer database and computer equipment. The primary reason for the acquisition was to provide additional members and domain names to the group's existing portfolio.

Goodwill arose on the acquisitions because of the difference between the consideration paid and the fair value of the net assets acquired. The goodwill represents synergies which will be revalued on integration.

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

The Company incurred expenses on acquisition of £25,000 which were expensed.

The acquisition contributed revenue of £3.2 million and EBITDA of £1.7 million in the period from acquisition to 31 December 2010

The deferred consideration for the Allegran purchase has been discounted using an interest rate of 5.15%. This rate was selected based on benchmarking similar commercial borrowing rates available at March 2010 when the acquisition took place.

Goodwill represents the value of synergies which will be realised by the Company on integration.

Flirt.com

On 10 December 2010 the Company purchased the trade and assets of Flirt.com for £800,000 from Belamo Corp. The consideration was satisfied by cash.The primary reason for the acquisition was to provide additional members and domain names to the group's existing portfolio.

The acquisition had the following effect on the Company's assets and liabilities.

The Company incurred expenses on acquisition of £6,000 which were expensed.

The acquisition contributed revenue of £50,000 and EBITDA of £nil in the period from acquisition to 31 December 2010

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 on this basis 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.

\* The CEO assesses the performance of the Operating Segments before deduction of Other Direct Costs. Other Direct Costs are shown above to provide reconciliation to reported Gross Profit.

4. Taxation

Recognised in the income statement

Tax recognised directly in equity (ie, not in comprehensive income)

Reconciliation of effective tax rate

5. Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2010 was based on the profit attributable to ordinary shareholders of £3,134,000 (2009: loss of £49,000) and a weighted average number of ordinary shares outstanding of 66,143,806 (2009: 1,419,956) calculated as follows:

Weighted average number of ordinary shares

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2010 was based on profit attributable to ordinary shareholders of £3,134,000 (2009: loss £49,000) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 1,519,190 thousand (2009: n/a), calculated as follows:

Weighted average number of ordinary shares (diluted)

The average market value of the Company's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.

6. Intangible assets - Group

Amortisation charge

The amortisation charge is recognised in the following line item in the consolidated statement of comprehensive income:

No impairment charges have been booked.

Impairment testing

Goodwill considered significant in comparison to the Group's total carrying amount of such assets have been allocated to cash generating units or groups of cash generating units as follows:

The recoverable amount of goodwill has been calculated with reference to its value in use. The key assumptions of this calculation are shown below:

Forecasts used for the 2011 to 2013 years reflect internal management forecasts for the Group based on past performance and the experience of growth rates. The growth rates used in value in use calculation beyond 2013 reflect the average growth rate experienced by the online dating industry in North America and the UK. The Group itself is growing currently at a faster rate than the rest of the industry.

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flows) there was no probable scenario where the CGU's recoverable amount would fall below its carrying amount.

Amortisation charge

The amortisation charge is recognised in the following line items in the income statement:

No impairment charges have been booked.

Impairment testing

Goodwill considered significant in comparison to the Company's total carrying amount of such assets have been allocated to cash generating units or groups of cash generating units as follows:

The recoverable amount of goodwill has been calculated with reference to its value in use. The key assumptions of this calculation are shown below:

Forecasts used for the 2011 to 2013 years reflect internal management forecasts for the Group based on past performance and the experience of growth rates. The growth rates used in value in use calculation beyond 2013 reflect the average growth rate experienced by the online dating industry in North America and the UK. The Group itself is growing currently at a faster rate than the rest of the industry.

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flows) there was no probable scenario where the CGU's recoverable amount would fall below its carrying amount.

7. Trade and other payables

8. Capital and reserves - Group and Company

Share capital