Growth Company Investor: Epic Leaping Ahead Online

Epic is one of the UK's leading online learning ventures. It has an impressive client list, boasts strong cash flow and is benefiting from increased government spending in its markets.

Brighton-based Epic is one of the country's leading online learning ventures, boasting top blue chip customers spanning both the public and private sectors. These operate in a variety of fields such as education, retail, financial services and media.

Government clients include the Inland Revenue, Customs and Excise and the Cabinet Office. Financial services groups number the Royal Bank of Scotland, Lloyds TSB and Barclays. Other household names on the roster are telecoms outfit Cable & Wireless, retailer B&Q, drinks group Diageo, airline Virgin Atlantic and the BBC.

The group provides services ranging from consulting to production of courses and technology solutions. Although its market is in "reflective mood", there is still a definite trend towards online learning, backed by Whitehall. This means prospects are excellent for this strong cash-generating company...

Michael Inwards said, 'Having steered ourselves successfully through the first phase of this market, we are now in a period of reflection, just prior to the next phase of solid and consistent spend'. Indeed, Epic is so confident in the medium term that it has indicated it will use its cash pile to double the interim dividend to 0.8p a share when it reports in February.

The cash cushion also means Epic is in a strong position to make acquisitions. In past months, Epic has been in talks with several targets but without yet breaking the deadlock. 'Almost all of my attentions are focused in that area (acquisitions) at the moment,' asserts Clark, 'we've had quite a few close calls.'

Management

Epic's management boasts some impressive experience in this sector. Chief executive Clark is one of the company's original founders. He is also regularly invited to speak on e-learning.

He has worked with clients in the UK, the US, Europe, Japan and Australia, developing all aspects of e-learning management and production on most major platforms such as the internet, interactive TV and mobile devices.

Backing up Clark on the board is chief finance office Stephen Oliver, who joined the company in 2001. Within the accountancy profession, Oliver was a manager at KPMG, working extensively with plc and regional companies.

Epic's non-executive chairman Michael Inwards is also a chartered accountant. He joined the board in 1992, becoming chairman in 1996. He has also held a number of senior positions within the electronics giant Philips...

Prospects

Epic's long-term prospects in the growing e-learning arena are excellent. Independent research suggests that 27 per cent of business skills training will be provided via this online method by 2005. In addition, the European business skills market will have to grow to $13 billion by 2006. This shows the scope for growth in this huge market.

There is also a growing acceptance of online learning, particularly when blended with other training methods. A report from the American Society for Development and Training suggests that there is substantial growth within the overall training mix from e-learning, despite the pressure on training budgets in tough economic times.

Throw in the ongoing rise in public sector spending, especially on the twin pillars of education and health, and Epic cannot be ignored. Significantly, the company is active in most of the Government's e-learning initiatives...

Epic generates lots of cash from its business, and the cash position has improved since the year-end, when it was £11.7million. 'We’re sitting on about £12 million cash', claims Clark, which is just under half the current market value of £24.5 million. Epic can easily ride out a slow sales cycle, and even transform the business if need be.

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