Results

Epic is listed on the AIM market of the London Stock Exchange. We report financial information twice-yearly.

FOR RELEASE 07.00AM 14 July 2005

EPIC
(The UK’s leading online learning company)

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2005

Epic, leaders in online learning, announce preliminary results for the year ended 31 May 2005.

• Record profitability
• £3m returned to shareholders in the year
• Dividend increased to 4.8p
• Business broadening in all sectors
• Potential offer talks in progress

For further information:

BACKGROUND NOTE:

ABOUT EPIC

Epic is the UK market leader in e-learning, blended learning and knowledge solutions. Using the best of new technologies alongside traditional methods, Epic helps people to know more, learn faster, perform better - bringing benefits to both organisations and individuals.

Epic has an unrivalled client list in both the private and public sectors. Private sector clients include the major banks, retailers and consultancies. In the public sector, Epic has clients in government departments, education, health and defence.

WEBSITE

www.epic.co.uk

EPIC
(The UK’s leading online learning company)

PRELIMINARY RESULTS for the YEAR ENDED 31 MAY 2005 (Extracted from the audited financial statements)

CHAIRMAN’S STATEMENT

Overview
Epic has maintained its position as market leader in e-learning and it is pleasing for Epic to release financial results showing its best ever profitability.

Results
For the year ended 31 May 2005, turnover increased by 11% to £8.1m (2004: £7.3m). Effective cost control this year has meant that operating profit, before interest receivable and taxation, increased by 77% to £1.6m (2004: £0.9m) and profits before tax were up by 52% to £2.1m (2004: £1.4m). After providing for corporation tax, earnings per share for the year were 6.3p (2004: 4.0p) an increase of 57%.

Cash generated from operating activities was £0.7m (2004: £0.8m) as our debtor balances increased pending payments by our customers. Returns to shareholders during the year (in the form of dividends and share buy-backs) totalled £3.0m (2004: £0.5m) and consequently cash balances decreased during the year by £2.2m (2004: increase £0.8m). At 31 May 2005 cash balances were £10.3m (2004: £12.5m).

Potential offer for Epic
As shareholders will know from our formal announcement to the London Stock Exchange on 28 June 2005 and my letter alerting them to this, Epic is in preliminary discussions with a third party that may or may not result in an offer being made for the Company. Whilst this approach was not actively sought, the talks are continuing at present and we will keep shareholders informed of developments as appropriate.

Dividends
During the year the directors doubled the interim dividend to 1.6p per share (2004: 0.8p). The Board have recommended a final dividend of 3.2p (2004: 1.0p) giving a total ordinary dividend of 4.8p (2004: 1.8p) more than double the previous year. Shareholders should only expect to receive the final dividend if the potential offer does not proceed. The dividend is, as is usual, subject to shareholders voting for its approval at the annual general meeting to be held in due course.

It is the directors’ intention to follow a policy of distributing the major part of earnings each year, having due regard to the working capital and cash position of Epic.

Return of capital

During the course of the year, the directors determined that Epic, from its successful trading, had generated cash balances in excess of its requirements. Following shareholder approval at an extraordinary general meeting on 13 April 2005 and the consent of the High Court, a capital re-construction was undertaken creating further distributable reserves. Accordingly the sum of £4.1m has been transferred to the profit and loss account. It is the intention of the directors that, if the potential offer does not proceed, not less than £5m of these cash balances should be returned to shareholders.

Trading
The balance of work between the private and public sector remains approximately even. Margins have been healthy in both sectors and we continue to be active in both. Successful integration of Epic technology in the client base with Arena (learning management software) and Context (content management software) has resulted in stronger long term relationships with clients.

In the private sector, Epic has increased both the number of clients and those clients where it has ‘approved supplier’ status. We have therefore broadened our client base across finance, retail, manufacturing, pharmaceutical, oil, telecommunications and consultancies.

In the public sector, after the May 2005 election and a considerable reorganisation in the National Health Service and the central government departments, we are beginning to see a more settled landscape. We have been particularly successful in the defence and education markets.

People
Steve Rayson has today announced his resignation from the Board to pursue a career outside of e-learning. I thank Steve for his past hard work. Epic is very much a people business and the thanks of the directors and shareholders go to all our staff for their contribution to these outstanding results.

Prospects
The current year has started satisfactorily in both public and private sectors and we maintain our position as the leading e-learning company in the UK.

John Gordon
Chairman
14 July 2005

Summary Consolidated Profit and Loss Account

There is no material difference between the 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 during the current or previous periods other than the above results. All of the results derive from continuing operations.

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Reconciliation of net cash flow to movement in net funds

1 Basis of preparation
The preliminary announcement does not constitute the company’s statutory accounts within the meaning of section 240 of the Companies Act 1985. The same accounting policies have been used as stated in the accounts for the year ended 31 May 2004. Statutory accounts for the year ended 31 May 2004 have been filed with the Registrar of Companies on which the auditors have reported and their report was unqualified and does not contain a statement under Section 237 (2) or (3) 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 2005 that will be filed with the Registrar of Companies following the Annual General Meeting.

Copies of the annual report and financial statements for 2005 will be posted to shareholders and will be available from the Company’s registered office, 52 Old Steine, Brighton, BN1 1NH in due course. They will also be available from the company website www.epic.co.uk

2 Taxation
Corporation tax is calculated on the profit for the year using the standard rate of corporation tax 30%. The taxation charge for 2005 is reduced by the deduction of amounts relating to share option exercises, which do not otherwise appear in the profit and loss account.

3 Dividends
The final dividend of 3.2p per share will be paid on 25 November 2005 to shareholders on the register at 28 October 2005. The payment of the dividend is subject to approval by the AGM to be held on 10 October 2005.

4 Earnings per share
Earnings per share have been calculated on the profit after tax of £1,535,000 (2004:£1,034,000) divided by the weighted average number of shares in issue during the period. The weighted average number of shares in issue during the year was 24,511,055 (2004: 26,061,643).

The calculation of the diluted earnings per share is calculated on 24,603,576 shares (2004: 26,650,815) being the weighted average number of shares in issue adjusted for the effects of dilutive potential shares arising from share option grants.

5 Reserves

Following a review of the group structure, the directors decided that some dormant subsidiary companies within the group were no longer required and have commenced the process to have these dissolved. As a result, the other capital reserve of £1,090,000 has been transferred to the profit and loss account.

Under a court approved capital reconstruction in May 2005 the balance then outstanding on the share premium account was transferred to the profit and loss account.

6 Summary of movements in shareholders’ funds

During the year the company repurchased 2,828,473 ordinary shares of 1p each at a cost of £2,444,000. It also issued 396,500 ordinary shares of 1p each as a result of exercises under share option agreements, the proceeds to the company were £84,000.

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