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Cupid chief frustrated as his firm suffers loss

BILL Dobbie, chief executive of under-pressure internet dating company Cupid, has complained of "deeply frustrating" accusations about its business practices as the Edinburgh-based company plunged to a £2.8 million first half pre-tax loss.

SETBACKS: Cupid boss Bill Dobbie said that the firm had suffered from a number of distractions in the first half of the year.
SETBACKS: Cupid boss Bill Dobbie said that the firm had suffered from a number of distractions in the first half of the year.

Investors responded by sending shares in the former stock market darling down 1p to 64p, just slightly above its 60p flotation price of three years ago.

"There is nothing fundamentally wrong with the business," Mr Dobbie said. "We are in a good, growing market place in the UK and internationally."

After months of pressure on its share price Cupid agreed in July to sell its casual dating websites, including BeNaughty and Flirt, to former Cupid executive Max Polyakov for £45.1m.

The company is now focused on its more mainstream sites including Cupid and GirlsDateforFree.

The acquisition of Uniform Dating and French business Assistance Genie Logiciel last year added £4.3m to revenues which rose 12.4% year-on-year to £43.4m for the six months to June 30.

The UK, US, France, Canada, Australia and Germany together account for 90% of Cupid's income.

But costs also soared with administrative expenses rising from £2.7m to £4.7m. Cupid said it has embarked on a cost-cutting programme.

Cupid booked £289,000 of exceptional costs in legal and professional fees after it was accused of using fake flirtatious messages to encourage users to take out subscriptions.

An investigation by accountant KPMG, paid for by Cupid, exonerated it of any deliberate wrongdoing but recommended changes to some of its practices.

Mr Dobbie said: "This was a deeply frustrating experience, but the business has gained strength from it."

It also incurred £100,000 of costs due to a legal case in France.

Cupid's bottom line was hit by £4.3m in amortisation of intangible assets. This included eliminating nearly £1.3m of goodwill previously recognised in the formation of the business in is current form in 2009.

Stripping out the casual sites it is selling, Cupid's continuing operations made a £2.5m loss for the period, against a £1.1m profit for the previous year.

Mr Dobbie said: "We have had a number of distractions in the first half of 2013, however, we have commenced a streamlining and refocusing of the business, which will provide us with an excellent opportunity going forward to take more of the opportunities the sector has to offer.

"We have a robust business and strong brands upon which to build.

"The remainder of 2013 will be a transitional period as we complete the separation of the divested casual assets and reshape our continuing business for the future."

He highlighted the "new management team" and "new products" in place at the company.

One of Cupid's targets is older people and it is revamping its offering to this segment.

"We have seen our revenues in the older segment grow without attention from the business," Mr Dobbie said.

"Therefore that is a good indicator that there is a good market opportunity there."

The company had made progress in separating out the assets it is selling to Mr Polyakov's Grendall Investment, Mr Dobbie said and is on course for these to be transferred by December 31.

Cupid was an investor favourite after its 2010 listing on the Alternative Investment Market with its shares rising from a listing price of 60p to reach as high as 240p little more than a year later.

But it has come under pressure, particularly since the start of 2013 with several hedge funds taking short positions, betting on falls in its share price.

Mr Dobbie insisted on the long-term case for Cupid's strategy.

"We have a strong, differentiated strategy in place, which we firmly believe will benefit both shareholders and product users, and are focused on delivering this," he said.

"We are now reinvesting our considerable experience and expertise in developing our portfolio of brands based around a distinctive positioning and the quality of the customer experience.

"We expect to deliver a stronger financial performance in 2014 from the foundation of a leaner more focused organisation."

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