Final Results

RNS Number:7994N
Epic Group PLC
22 July 2003


FOR RELEASE                       7.00AM                            22 JULY 2003

                           EPIC GROUP PLC ("Epic")
                   (The UK's leading e-learning company)

             PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2003


                                         2003           2002            Change

Turnover                                 #8.7m          #7.2m              +21%
Profit before tax                        #1.8m          #0.8m             +125%
Earnings per share*                       4.9p           2.3p             +113%
Net cash                                #11.7m          #9.4m              +24%
Dividends                                 1.4p             -                 -
 * assuming a 30% tax rate


*  Record turnover, profits, earnings per share and cash

*  Maiden dividends total 1.4p per share

*  Strong revenue growth

     Revenue split:

          * 51% of revenues from Public Sector

          * 44% from Private Sector

          * 5 % from Products

*  E-learning now mainstream and 'irreversible'

*  Targeting further growth


For further information:

Epic Group plc
Michael Inwards (Chairman)                                        01273 728686
Donald Clark (Chief Executive Officer)                            01273 728686
Stephen Oliver (Chief Financial Officer)                          01273 728686

Beattie Financial
Brian Coleman-Smith / James Chandler / Gemma Smith               020 7398 3300



BACKGROUND NOTE: 

ABOUT EPIC

Epic Group plc is the leading e-learning company in the UK. For nearly 20 years
Epic has been a consistent leader and innovator, producing ground-breaking and
award winning work. Services range from consultancy through content production
and technology solutions (both bespoke and generic) to testing and localisation.

Epic's extensive client list includes:

Government     DWP, Inland Revenue, Customs & Excise, Environment Agency,
               Cabinet Office, LearnDirect (Ufi), I&DeA

Education      UKeUniversity, HEFCE, BECTA, SEEDA, Cambridge University,
               Sheffield Hallam, NLN

Health         NHSU, NPSA, PCTs, Department of Health BUPA

Financial      The Royal Bank of Scotland, Lloyds TSB, Barclays, PwC, AIB, AMEX,
Services       Deloittes, FSA

Telcos,        SAP, ntl, Cable&Wireless, Orange, BT, BBC
Media

Retail         B&Q, Whitbread, Diageo, British Airways, Virgin Atlantic,
               Kimberly Clark, Kraft


WORLDWIDE MARKET

IDC Begin Act II: Worldwide and U.S. Corporate eLearning Forecast, 2002-2006
(2003)

* worldwide corporate e-learning market $6.6 billion for 2002; 35%
  compound growth rate for e-learning through 2006;

* worldwide IT education & training market $23.7 billion by 2006

THE EUROPEAN MARKET

IDC

* European Business Skills market to reach $13 billion by 2006
* five-year compound annual growth rate (CAGR) of 14.9%
* 27% of business skills training provided via e-learning by 2005
* most advanced markets; UK, the Netherlands and Scandinavia

WEBSITE 

www.epic.co.uk


                            EPIC GROUP PLC ("Epic")
                    (The UK's leading e-learning company)

               PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2003
     
                            CHAIRMAN'S STATEMENT


Overview

In the past year, we have seen growth in the online learning market,
particularly in the public sector. This is in a period when the overall training
market has declined with major companies and public bodies realising the
significant benefits to be derived from adopting new methods of training people.

The expansion in the online market has enabled Epic to make significant progress
and the Group is reporting record turnover, profit before tax and earnings per
share. At the same time, the Group has remained strongly cash generative and has
commenced dividend payments.


Results

For the year ended 31 May 2003, turnover increased by 21% to #8.7m (2002: #7.2m)
including revenues of #0.4m (2002: #0.25m) from the sale of our PRIME product,
an increase of 60%. Profit before tax, excluding exceptional items, was up 137%
to #1.9m (2002: #0.8m). An exceptional charge of #0.1m arises from the
revaluation of one of our investments following a fund raising by that company.

Earnings per share were 6.8p (2002: 3.2p) and on a fully taxed basis (assuming
the full 30% rate of taxation on the results) were 4.9p (2002: 2.3p) an increase
of 113% in both measures. We have continued to manage our working capital
closely and this combined with the strength of our profit performance has led to
strong cash generation of #2.3m (2002: #2.8m) during the year. At the year end,
our cash balances were #11.7m (2002: #9.4m).


Dividend

This is the first year that we have paid a dividend. Taking into account the
earnings per share and the financial resources of Epic, the board are
recommending a final dividend payment of 1p per share, payable on 20 November
2003 to shareholders on the register on 17 October 2003. If approved at the
forthcoming AGM, the total dividend for the year of 1.4p per share would be
covered 3.5 times on fully taxed earnings.


Market leadership

Epic is the market leader in the UK with consistently high levels of repeat
business, rising profitability, no debt, a strong balance sheet and a blue- chip
client list. This year we have seen absolute growth in both the public and
private sector, with the public sector again representing over 50% of all
revenues. Our order intake in percentage terms has increasingly moved towards
the public sector, demonstrating the future potential for further growth in this
area.


Online learning

Public sector spending continues, especially on the twin pillars of education
and health. In education we are active in most of the government's main
e-learning initiatives in schools, further education, higher education and
lifelong learning. Health is a new market for Epic and, as current government
spending increases, skills are seen as a key area for improvement. We have won
several new health contracts, establishing a new health business that we expect
to grow rapidly in the coming year. Other public sector work comes from major
government departments, agencies and centrally funded bodies. Public sector
contracts accounted for 51% of revenue (12% government, 34% education, 5%
health).

Private sector work, which accounted for 44% of revenue, is concentrated in
finance, retail and telecommunications. The major retail banks continue to spend
on e-learning with cost control and increased regulation as the main business
drivers. Retailers with large numbers of staff, often spread across the UK, have
an increasing focus on customer service and e-learning is proving highly
effective in improving skills in this area. Telecommunications and telephony
companies are redefining their markets needing training in product knowledge,
regulations and project management. We have won several contracts with these
companies.


Products

PRIME, our first product, has delivered better than expected sales and profits.
Sales continue in both the UK and internationally. Our new 'Blended Learning
Portal - Arena' designed to provide blended solutions, has been launched and we
plan further product launches in the coming year. Products will continue to be a
core business activity. During the period, products accounted for 5% of revenue.


People

This year we have implemented our 'Optimise' strategy for on-going productivity
improvement. This has already led to improved margins in the second half of the
year. We also achieved the new ISO9001:2000 quality assurance standard. Stronger
internal staff communications and development has been achieved and we thank our
staff for their hard work and enthusiasm that has led to an excellent year.


Board Changes

Brian Stevens was appointed as Non-Executive Director in May 2003 and brings a
wealth of experience within both the public and private sector. Brian has both
government related online learning knowledge and experience of working in the
financial services sector. He has also been an advisor to the Commons Select
Committee on Education and Employment and served on the Secretary of State's
Advisory committee on School improvement. I look forward to working with Brian
in the future.

David Bull, Non-Executive Deputy Chairman resigned in May 2003 to undertake
greater responsibilities with Scotland Online. David made a substantial
contribution to Epic since his appointment in September 1999.


Prospects

Despite difficult conditions in the training market and limited IT spending, we
managed to significantly increase revenues, profitability and cash, as well as
expanding our client base. The market is maturing with e-learning spreading from
corporate training into all areas of the public sector. It is now becoming
mainstream with more sophistication such as blended learning, collaborative
learning, simulations and games in learning. We have anticipated all of these
changes to maintain our position as market leader.

The government has just issued a major consultation document 'Towards a Unified
e-Learning Strategy'. In this, Charles Clarke, the Secretary of State for
Education and Skills notes 'E-learning has the power to transform the way we
learn' stating that e-learning needs to be 'at the heart of the way we all
work.' Epic is already delivering this promise in schools, colleges,
universities and the workplace.

We continue to evaluate acquisition opportunities that will add value to our
clients' training needs but, despite detailed discussions with a number of
companies, we have not found a suitable candidate that meets our strict
acquisition criteria.

We are targeting further growth and will continue to keep shareholders informed
of our progress.

Michael Inwards
Chairman


Epic Group plc
Consolidated profit and loss account
for the year ended 31 May 2003

                                                    Year ended      Year ended
                                                        31 May          31 May
                                                          2003            2002
                                                          #000            #000

Turnover                                                 8,750           7,227

Cost of sales                                           (4,266)         (3,661)
                                                 --------------- ---------------
Gross profit                                             4,484           3,566

Administrative expenses                                 (3,059)         (3,044)
                                                 --------------- ---------------
Operating profit                                         1,425             522
Net interest receivable and similar income                 377             313
                                                 --------------- ---------------
Profit on ordinary activities before taxation            1,802             835
Tax on profit on ordinary activities                       (55)            (22)
                                                 --------------- ---------------
Profit on ordinary activities after taxation             1,747             813
Dividends paid and proposed                               (362)              -
                                                 --------------- ---------------
Profit retained for the financial year                   1,385             813
                                                    ==========      ==========
Earnings per share
Earnings per share                                         6.8p            3.2p
Fully taxed earnings per share                             4.9p            2.3p
Diluted earnings per share                                 6.6p            3.1p


There is no material difference between historical cost profits and those shown
above, therefore no separate note of historical cost profits and losses has been
presented.

The Group has no recognised gains or losses other than the above results.

All of the results arose from continuing operations during the current and
previous year.


Epic Group plc
Consolidated balance sheet
at 31 May 2003
                                    2003                        2002
                                    #000                        #000
Fixed assets
Tangible fixed assets                163                         231
Investments                          100                         245
                           ---------------             ---------------
                                     263                         476
                           ---------------             ---------------
Current assets
Debtors                            1,735                       2,112
Cash at bank and in hand          11,720                       9,449
                           ---------------             ---------------
                                  13,455                      11,561

Creditors: amounts falling        (3,384)                     (3,266)
due within one year
                           ---------------             ---------------
Net current assets                10,071                       8,295
                           ---------------             ---------------
                           ---------------             ---------------

Net assets                        10,334                       8,771
                               =========                   =========
Capital and reserves
Called up share capital              259                         255
Share premium account              4,018                       3,844
Other capital reserve              1,090                       1,090
Profit and loss account            4,967                       3,582
                           ---------------             ---------------
Equity shareholders'              10,334                       8,771
funds
                               =========                  ==========


Epic Group plc
Consolidated cash flow statement
for the year ended 31 May 2003
                                                     2003                 2002
                                                     #000                 #000

Net cash inflow from operating                      1,910                2,610
activities

Returns on investments and servicing                  397                  289
of finance

Taxation                                              (22)                   -

Capital expenditure and financial                     (91)                 (89)
investment

Equity dividends paid                                (101)                   -
                                            --------------       --------------
Cash inflow before financing                        2,093                2,810

Financing                                             178                    5
                                            --------------       --------------
Increase in cash in the year                        2,271                2,815
                                                 ========            =========


Reconciliation of operating profit to net cash 
inflow from operating activities for the year 
ended 31 May 2003

                                                        2003              2002
                                                        #000              #000

Operating profit                                       1,425               522
Depreciation                                             163               220
Profit on the disposal of fixed assets                    (4)               (1)
Provision against fixed asset investment                 145                 -
Decrease in debtors                                      357               865
(Decrease)/increase in creditors                        (176)            1,004
                                               ---------------   ---------------
Net cash inflow from operating activities              1,910             2,610
                                                   =========        ==========



Notes


1. The calculation of earnings per share is calculated on 25,569,071
ordinary shares (2002: 24,472,776) being the weighted average number of shares
in issue during the year and profit after tax. The calculation of the diluted
earnings per share is calculated on 26,455,748 ordinary shares (2002:
26,175,921) being the weighted average number of shares in issue adjusted for
the effects of dilutive potential shares.

The fully taxed earnings per share is calculated on the basis of the full rate
of corporation tax 30% (2002: 30%) applying to the profit for the period and
using the weighted average number of shares in issue for the period. As the
group has tax losses that are not reflected in the balance sheet, the directors
consider that this figure provides a useful additional indicator of performance

The profit after tax figure used in the calculation of earnings per share is as
follows:

                                                      2003               2002
                                                      #000               #000
Profit after tax:
For earnings per share                               1,747                813
Adjustment to full (30%) tax rate                     (485)              (228)
                                             ---------------    ---------------
For fully taxed earnings per share                   1,262                585
                                                 =========         ==========

2. The preliminary announcement does not amount to full accounts within
the meaning of section 240 of the Companies Act 1985.

The contents of the preliminary announcement have been extracted from the
audited financial statements of the company for the year ended 31 May 2003 that
will be filed with the Registrar of Companies. The audit report on these
financial statements is unqualified and does not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.

3. Copies of the annual report and financial statements for 2003 will be
posted to shareholders and will be available from the Company's registered
office, 52 Old Steine, Brighton, BN1 1NH and also on the company website
www.epic.co.uk


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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