EPIC GROUP PLC ("Epic")

(The UK's leading e-learning company)

• Preliminary results for the year ended 31st May 2002
• Chairman’s Statement
• Consolidated Profit and Loss Account
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement

PRELIMINARY RESULTS FOR THE YEAR ENDED
31 MAY 2002

• A year of market leadership
• Strong cash generation
• Looking to commence payment of dividends
• Increased public sector revenues
• Continued strength in financial services sector
• Product sales contribute £250,000 to revenues
• Repeat business 77%
• Management team strengthened
• Looking forward to a year of good progress for Epic
  

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BACKGROUND NOTE:

ABOUT EPIC

Epic Group plc is the leading e-learning company in the UK. For nearly 20 years Epic has been a consistent leader and innovator, producing ground-breaking and award winning work. Services range from consultancy through content production and technology solutions (both bespoke and generic) to testing and localisation.

Epic's extensive client list includes:

• In the financial sector, Barclays, Lloyds TSB and The Royal Bank of Scotland
• In the government sector, central government departments (DWP, DfES, FCO), the Cabinet Office, regional bodies (Scottish Enterprise, the Welsh Development Agency) and Inland Revenue, Customs & Excise

CHAIRMAN'S STATEMENT

Against a backdrop of restricted training and IT spend, Epic is profitable and strongly cash generative with an outcome that is ahead of market expectation. We have continued to increase and strengthen our client list and widen our offer to those clients.

For the year ended 31 May 2002, turnover was £7,227,000 (2001: £8,041,000) with profits before taxation of £835,000 (2001: £1,569,000). Included in our turnover is £250,000 from the sale of the PRIME product, which as expected, has not given a profit contribution due to the development costs all of which have been written off as they were incurred. Therefore future sales of PRIME will have a significant impact on our profitability.

Earnings per share were 3.2p (2001: 6.3p). We have continued to manage our working capital closely and this combined with our profitability has led to cash generation of £2,810,000 (2001: £1,847,000). After other cashflows, our total cash balances at the year end were £9,449,000 (2001: £6,634,000).

Dividend

Based on current trading and our growing financial strength, it is the Board's intention to commence paying dividends during the course of the current financial year. As a fast growing business it is essential that a large proportion of the profits should be retained for investment within the business in order to fund our continuing expansion. However, it is the Board's intention to follow a progressive dividend policy.

Market leadership

Epic is the market leader in e-learning in the UK with a strong client list, high levels of repeat business, profitability, no debt and a strong balance sheet. This has been achieved by increasing revenue generation from the public sector, which this year accounts for 50% (2001: 30%) of all revenues. As the e-learning market develops we have responded with several initiatives including a successful e-learning leadership product. Sales of this product are exceeding expectations.

Our consultancy business (3% of total revenues) has been active in the corporate, government and education sectors, shaping strategic e-learning initiatives in large organisations. We will continue to expand this division of the business with strategic decision making tools that give us better awareness of work within those organisations. This approach has already led to opportunities in our newer clients.

E-learning

Our strength in the corporate sector is in finance, with repeat business from Barclays, The Royal Bank of Scotland, Lloyds TSB, Amex and others. These companies have strategic and long-term plans in e-learning, and all have Epic as a key supplier. Other revenues came from retail, telecommunications, IT and media.

As government spend continues to increase, especially in education and health, but also across many other government agencies, we have benefited from our position as the primary supplier of e-learning production in this sector. Major government departments, local authorities and other government agencies are increasingly active as buyers of e-learning.

In education we have contracts with the several major universities. This market will continue to grow as e-learning impacts on further and higher education as well as lifelong learning.

Our e-learning production amounted to 86% of total revenues for the year.

Products

Our new e-learning products have taken initial revenues of £250,000 and we look forward to further revenues from these sources. Our first product PRIME: Leadership has been sold to 5 government departments, some on a pilot basis and some on a full departmental licence. With additional sales opportunities in hand, we expect further revenues from this product in the forthcoming year.

Services

Our testing service (10% of all revenues) continues to be the primary service of its kind and has continued to win work in both the public and private sector. Testing ensures that products, including those developed by our competitors, work as designed. Localisation is the re-versioning of online materials for foreign language. Projects have come from the UK, Europe and the US and we are now at the forefront of standards and accessibility testing.

People

We have strengthened our management team with the Board appointment of Steve Rayson, our Sales and Marketing Director, on 19 June 2002. Our sales team has also recently grown with the addition of four new sales staff, giving us coverage in the Midlands, West Country, Wales and Scotland. Low staff turnover has also provided stability and growth in the skills base. All of our work is a tribute to the talents of all our people.

Prospects

The need for strategic consultancy is growing as large organisations see e-learning as a 'strategic' spend. This leads to revenues on content production, products and services. Education continues to be a major political issue with the government being judged on its performance in this area, along with health. We therefore see high levels of spend continue in the public sector with several large e-learning initiatives in education, other government departments, local authorities, government agencies, the NHS and MOD. In the corporate sector, our focus on financial services, an increasingly regulated environment, along with activity in a spread of other sectors, is expected to lead to increased sales as companies continue to look for cost savings in training budgets.

Despite prevailing market conditions, we have a sound order book and have made a positive start to the new financial year. In addition we expect a profitable revenue flow from existing and developing products. Against this background, I look forward to the current year which I am confident will be a year of good progress for Epic.

Epic Group plc.
Consolidated profit and loss account
for the year ended 31 May 2002

There is no material difference between 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 other than the above results.

Epic Group plc.
Consolidated balance sheet
at 31 May 2002

Epic Group plc.
Consolidated cash flow statement
for the year ended 31 May 2002

Reconciliation of operating profit to net cash inflow from operating activities
for the year ended 31 May 2002

Notes

1. The calculation of the undiluted earnings per share is based on the profit after tax of £813,000 (2001: £1,569,000) and on 24,472,7760 ordinary shares (2001: 24,725,400), being the weighted average number of shares in issue during the year ended 31 May 2002.

   The calculation of the diluted earnings per share is calculated on 26,175,921 ordinary shares (2001: 25,928,625) being the weighted average number of shares in issue adjusted for the effects of dilutive potential shares at 31 May 2002.

   The fully taxed earnings per share is calculated on the basis of the full rate of corporation tax 30% (2001: 30%) applying to the profit for the period and using the weighted average number of shares in issue for the period. As the group has tax losses that are not reflected in the balance sheet, the directors consider that this figure provides a useful additional indicator of performance

2. The preliminary announcement does not amount to full accounts within the meaning of section 240 of the Companies Act 1985.

   The contents of the preliminary announcement have been extracted from the audited financial statements of the company for the year ended 31 May 2002 which will be filed with the Registrar of Companies. The audit report on these financial statements is unqualified and does not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.

3. Copies of the annual report and financial statements for 2002 will be posted to shareholders and will be available from the Company's registered office, 52 Old Steine, Brighton, BN1 1NH.