Sunday Business:
Aim Investor

by Andrew Griffiths

The most recent results from e-learning group Epic were impressive by anyone's standards. Profits before tax soared 12.5% to £1.8m in the year to the end of May and fully-taxed earnings per share were 113% ahead at 4.9p.

All this was achieved on sales 21% ahead, showing the high operational gearing of this business, and was capped by a maiden 1.4p annual dividend. Administrative expenses, which might be expected to creep up, remained in line with the previous year at just over £3m.

…The cash pile continues to grow. At the year-end it stood at £11.7m (a third of market capitalisation), providing a war chest for acquisitions or investment.

Revenues of £8.7m were split almost equally between public and private sectors, making a nicely balanced business, though new business wins are increasingly coming from the public sector. Epic said online learning was now 'mainstream and irreversible'.

Growth in online training has coincided with a period when overal training demand has declined. Corporations may be cutting back but more of the budget is going online, which is cheaper and seen as more cost-efficient.

Epic said public sector spending was continuing, particularly in education and health. In education, Epic is involved in most government e-learning initiatives and has won several health contracts. Private sector work is concentrated in finance, retail and telecoms.

Chairman Michael Inwards said the company was targeting further growth but, despite detailed discussions with a number of firms, had not found a suitable candidate that met its strict acquisition criteria.

We highlighted the merits of Epic last year at 76.5 when we described the rating as demanding but still recommended buying. The shares have had a great run, reflecting Epic's market dominance and consistent performance. Andrew Griffiths is editor-in-chief of redskyresearch.com