AIM/OFEX: Epic profits soar

"Profits soared at the online learning company (EPI) in the interim period, albeit from a low base, reaching the £1m point for the six months to end November 2002, compared to £200,000 a year ago.

Turnover was ahead a substantial 39pc at £4.6m, and fully taxed earnings per share came out at 2.7p, up 350pc. There's also a maiden interim dividend of 0.4p.

Even more impressive was the cash generation, which led to a 41pc rise in cash balances and has the £21m market cap company sitting on £10m of cash.

The public sector accounted for half of all revenues in the period, although revenues from the private sector were up 20pc. Epic said it had won a broad spread of new clients and launched a new services division. Gross profit margins for the period remained consistent at 49pc, and although the launch of the service division may lower overall gross profit margins, the company believes this is a requirement when dealing with blue chip customers.

With its significant cash Epic is investigating acquisitions but found none suitable in two and a half years. In the meantime however the strong balance sheet has been helpful in winning major government related business. Among private sector customers, financial services and, in particular, retail banks remain the largest individual sector.

Epic said consolidation, regulatory compliance and the need to increase productivity in the private sector will continue to drive revenue this year. An increased focus on the public sector resulted in revenue growth in the period of 30pc, with more activity in education and a first major project with the NHS.

On prospects, chairman Michael Inwards said: 'We believe that online learning is irreversible, as the cost savings once implemented are considerable."

Comment

For any share to rise in these markets is an achievement. Epic's rose 6pc on announcement of the results, which reinforce the company's position as the leading online learning company in the UK, with what should remain a dominant position.

Epic has the largest single online learning and skills base in the UK, and more quantifiable experience than any other company, which places it in a strong position to win the larger contracts. The recovery of Epic's deserved high rating - reflecting its market position and impressive financial strength - is continuing.

We recommended the shares at 56.5p in the October edition and even though at the current level they are on nearly 19 times forecast earnings, 40p per share is accounted for by cash. BUY."