$CUP.L – Cupid – revenues up, but margins down

After TAST and RGS, it’s time to visit the Land Of Penny Dreadfuls. Try to ignore the smell.

On-line dating agency CUP (Cupid) released its interims today: http://is.gd/ElY9FH, sending the shares down 7.7% to 60p. Rarely a good sign.

Revenues increased by 12.4% to £43.3m. Usually that would be considered good, but what appears to have spooked the market is that its adjusted EBITDA sank to £2.6m from £5,9m, and its gross profit margin declined to 17% from 22%. Adjusted EPS was 0.80p, against comparables of 5.13p. Marketing spend has also increased, and it seems that investors fear that heightened levels of spend would need to be ongoing.

The company sold its casual dating company earlier this year. To borrow from Mr Grayson, “casual dating” should be taken to mean “has the train arrived at Paddington Station yet?”. Have I clarified?

The directors are bullish on the outlook: “I am confident that we remain well positioned to become a significant player in the growing online dating market.”

CUP seem to be “one of those companies” where a rosy outlook gives
investors thorny flesh-wounds, though. Maybe it will come good, I don’t know. It’s got a lot to prove, and the whole company just screams risk, despite the low valuation.

No holding.

About mcturra2000

Computer programmer living in Scotland.
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