Epic keeps its leading edge

by Andrew Griffiths, The Business

"Shareholders in e-learning group Epic were given a boost at the annual meeting last month when directors said first quarter results had met expectations. They were told there should be a strong financial performance in the current year - so long as economic conditions do not deteriorate further.

Epic has returned to a more normal growth pattern, reflecting its leading position in this market and the shares have started to recover.

Although anything beginning with "e" has to fight for support in the City these days, Epic has an excellent competitive position as a supplier of online and CD-based training programs. Growth may not be as fast as was anticipated a couple of years ago but, according to recently published research, e-learning will account for nearly all the growth in the training market until 2005.

Epic can boast big, corporate clients, including Prudential, Lloyds TSB and British Airways, but orders from the private sector are sharply down. It is the public sector that's providing the growth and is likely to represent 60% of group sales this year (nearly doubling over 12 months) and a certain amount of visibility to forward sales.

Epic is the obvious way to invest. What's more, the government's spending review is committed to increasing investment in education and targets all services coming online by 2005. This makes indispensable Epic's new Prime package, developed with the cabinet office and designed to train senior management.

Costs were tightly controlled and the group, which is fearsomely cash-generative, emerged with a strong balance sheet. Cash was £9.4m, against £6.6m the year before, mainly boosted by faster customer payments.

At 76.5p the shares trade on a demanding 17 times forward earnings. But, once 38p per share of cash has been stripped out, investors are paying a lot less for the operating business. Buy for long-term growth."

Andrew Griffiths is editor-in-chief of www.redskyresearch.com