Interim results for the six months to 30 November 2004

Epic Group, leaders in online learning, announce interim results for the six months ended 30 November 2004.

• Cash balances of £10.14 million (2003: £12.47 million) after share buy-back of £2.4 million
• Dividend doubled to 1.6p (2003: 0.8p)
• Actively considering methods of returning surplus cash to shareholders
• New clients wins in both private and public sectors
• Reorganisation in some areas of the public sector affecting sales levels
• Overall revenue growth not as strong as anticipated, results for full year likely to be below market expectations
• Current orders ahead of last year
  

For further information:
John Gordon (Chairman) 01273 728686
Donald Clark (Chief Executive Officer) 01273 728686
Stephen Oliver (Chief Financial Officer) 01273 728686
Beattie Financial: Brian Coleman-Smith / James Chandler / Grace Marriner 020 7398 3300

EPIC GROUP PLC ("Epic") (The UK's leading online learning company)

Interim Results for the SIX MONTHS TO 30 NOVEMBER 2004

Introduction

Epic, the leading online learning company in the UK, reports increases in both revenue and profits for the six months ended 30th November 2004 compared to the corresponding period last year. Cash generation remained strong and this is reflected in a doubling of the interim dividend. In addition, we undertook a share buy-back in October 2004, enhancing earnings per share.

Trading results for the six months ended 30th November 2004
Turnover for the period was £3.87 million (2003: £3.73 million), an increase of 3.9 per cent. Gross margin for the period was 52 per cent (2003: 53 per cent). Profit before taxation for the period amounted to £0.89 million (2003: £0.82 million), an increase of 8.7 per cent. Basic earnings per share were 2.5p (2003: 2.3p), an increase of 8.7 per cent and diluted earnings per share were 2.4p (2003: 2.2p).

The net cash generated during the period was £0.3 million (2003: £0.5 million), excluding the outflows on share buy-backs and dividends paid to shareholders. Cash balances at 30th November 2004 were £10.14 million (31st May 2004: £12.47 million).

Dividend
The Board has decided that the interim dividend should be doubled to 1.6p per share (2003: 0.8p per share). This will be paid on 25th April 2005 to shareholders on the register on 18th March 2005. The Board believes that the Company has more than adequate cash reserves for its foreseeable requirements and that the major part of available earnings should be distributed to shareholders.

Share Buy-back
In accordance with authorities given to the Board by shareholders in General Meetings, the Company repurchased 2,828,473 ordinary shares for cancellation during October 2004 at prices between 85p and 87.5p per share. The total cost of these purchases was £2.4 million. This represented approximately 10.8% per cent of the issued share capital of the Company prior to the buy backs and should result in an enhancement of earnings per share in subsequent financial periods.

Return of Capital
The Board currently has the authority to repurchase a further 1,997,508 ordinary shares and is committed to utilising this authority if there would be demonstrable benefit to the Company in doing so.

In addition the Board, in association with the Company’s advisers, is actively considering the most appropriate method of returning surplus cash to shareholders. To this end the Board intends to make application to the Court to effect a capital reduction to create additional distributable reserves.

Board Changes
Michael Inwards stepped down as Chairman of the Company on 12th October 2004. He will continue as a non-executive Director until the end of the current financial year on 31st May 2005.

I was elected to the Board on 12th October 2004 and was appointed Chairman on the same date. By training a Chartered Accountant, my career was mostly spent in corporate finance in the City of London. I am also a director of several other public companies.

Trading
During the period under review, the Company increased the number of its approved supplier status contracts and clients in both the private and public sector. The balance between private and public sectors remained 50:50. We gained 10 new clients in the private sector, in finance, retail and manufacturing. In the public sector we achieved better than expected revenue in defence and some other areas of government.

Although we are opening up new clients in key sectors, reorganisation in the public sector, specifically in health and education, has resulted in some delays and uncertainty which is affecting sales levels. We expect that visibility in these sectors will become clearer after the forthcoming election.

People
Epic is very much a people business and the thanks of shareholders and directors go to all our staff for their contribution to these results.

Prospects
Some current contracts will deliver margin in excess of expectations but overall revenue growth will not be as strong as previously anticipated, so results for the current year are likely to be below current market expectations. However, orders are ahead of last year, and present indications are that results for the second half should be satisfactory. Epic maintains its position as the leading e-learning company in the UK and the Board continues to explore the possibilities of expanding the Group's activities.

John Gordon
1st February 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 above derive from continuing operations.

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Consolidated Balance Sheet

Consolidated Cash Flow Statement

Reconciliation of net cash flow to movement in net funds

NOTES

1 Basis of preparation
This interim report has been prepared using the accounting policies as set out in the annual report and accounts for the year ended 31 May 2004. This report is unaudited, but has been reviewed by the auditors and their independent review report is set out below.

The comparative figures for the financial year ended 31 May 2004 have been extracted from the statutory accounts that have been delivered to the Registrar of Companies and carried an unqualified audit report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The interim report and accounts are not full accounts within the meaning of section 240 of the Companies Act 1985.

2 Tax charge on profit on ordinary activities
The tax charge for the period has been calculated at the estimated effective rate for the full year.

3 Dividends
The interim dividend of 1.6p per share (2003 0.8p per share) will be paid on 25 April 2005 to shareholders on the register at 18 March 2005.

4 Earnings per share
Earnings per share have been calculated on the profit after tax for the financial period divided by the weighted average number of shares in issue during the period.

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Copies of this announcement will be posted to shareholders and are available from the registered office, 52 Old Steine, Brighton, Sussex, BN1 1NH or from the company website at www.epic.co.uk

Independent review report by Baker Tilly to
Epic Group Plc

Introduction
We have been instructed by the company to review the financial information set out above and we have read the other information in the interim statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report, including the conclusion, has been prepared for and only for the company for the purpose of their interim statement and for no other purpose. We do not, therefore in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Directors’ responsibilities
The interim statement, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Interim Statement in accordance with the Alternative Investment Market Rules which require that the accounting policies and presentation applied to the interim figures must be consistent with those that will be adopted in the company’s annual accounts.

Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board as if that Bulletin applied. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.

Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 November 2004.