Cupid – eurozone crisis fails to stop continent’s love life

The Edinburgh-based company, which has built up a string of dating websites in 15 countries, signalled yesterday that its buying spree was likely to continue into next year while it will invest more than ever in marketing.

In a trading update, the owner of sites such as Flirt and Planet Sappho, said it was confident that its 2011 financial performance would be in line with City hopes. Analysts at Peel Hunt believe profits before tax and other deductions will reach £11 million this year, up from £5.6m in 2010, and should hit £20m by 2013.

Cupid said it was replicating last year’s strategy for growth by substantially increasing its online marketing spend during the second half of the year. It hopes the investment will underpin growth in revenue and profits in 2012 and beyond.

Chief executive Bill Dobbie said the firm was spending about £30m on advertising this year – more than half of estimated revenues. He said the figure would be “considerably” higher in 2012, all funded from cashflow as the company’s turnover grows.

“Marketing is the key expense,” he said. “People either find a partner or move on so you have to find new customers all the time.”

Cupid mainly advertises online but Dobbie said that adverts direct to mobile phones was a rapidly growing area.

Cupid – formerly Easydate – has expanded into markets such as Spain, France and the US by buying small privately-owned websites and converting them to its own software system. In the past four months it has made acquisitions in Brazil and Germany, which will be backed by the planned increase in marketing.

Dobbie said: “We are very pleased with the progress we have made expanding internationally whilst preserving our revenue and profit growth.”

He said the firm “continues to review opportunities” for further acquisitions and has the money to fund takeovers. He has an eye on emerging markets such as Mexico and Indonesia but noted that the group would consolidate its position in the countries it currently covers first.

He said the strongest performing markets had been in Europe, despite the economic turmoil that has been dominating the news there. “People are still looking for fun and love, thankfully,” he said.

In a note entitled “making love in 15 countries”, Numis analyst Ivor Jones said Cupid’s early trading update was a good sign.

“We suspect that management have enough in the tank to report materially higher profits.

“However, it is Cupid’s strategy to reinvest in marketing to drive top line growth and so we expect the positive surprise to come in the form of revenue growth next year rather than profit in this one.”