• Preliminary Results for Year Ended 31 May 2003
• Chairman’s Statement
• Consolidated Profit and Loss Account
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement
• Reconciliation of net cash flow to movement in net funds

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

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2003

* assuming a 30% tax rate

• Record turnover, profits, earnings per share and cash

• Maiden dividends total 1.4p per share

• Strong revenue growth
  Revenue split:

  • 51% of revenues from Public Sector
  • 44% from Private Sector
  • 5 % from Products

• E-learning now mainstream and 'irreversible'

• Targeting further growth

For further information:

Epic Group plc

Beattie Financial

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:

Worldwide Market

IDC Begin Act II: Worldwide and U.S. Corporate eLearning Forecast, 2002-2006 (2003)

• worldwide corporate e-learning market $6.6 billion for 2002; 35% compound growth rate for e-learning through 2006;
• worldwide IT education & training market $23.7 billion by 2006

The European Market

IDC:

• European Business Skills market to reach $13 billion by 2006
• five-year compound annual growth rate (CAGR) of 14.9%
• 27% of business skills training provided via e-learning by 2005
• most advanced markets; UK, the Netherlands and Scandinavia

Chairman's Statement

Overview

In the past year, we have seen growth in the online learning market, particularly in the public sector. This is in a period when the overall training market has declined with major companies and public bodies realising the significant benefits to be derived from adopting new methods of training people.

The expansion in the online market has enabled Epic to make significant progress and the Group is reporting record turnover, profit before tax and earnings per share. At the same time, the Group has remained strongly cash generative and has commenced dividend payments.

Results

For the year ended 31 May 2003, turnover increased by 21% to £8.7m (2002: £7.2m) including revenues of £0.4m (2002: £0.25m) from the sale of our PRIME product, an increase of 60%. Profit before tax, excluding exceptional items, was up 137% to £1.9m (2002: £0.8m). An exceptional charge of £0.1m arises from the revaluation of one of our investments following a fund raising by that company.

Earnings per share were 6.8p (2002: 3.2p) and on a fully taxed basis (assuming the full 30% rate of taxation on the results) were 4.9p (2002: 2.3p) an increase of 113% in both measures. We have continued to manage our working capital closely and this combined with the strength of our profit performance has led to strong cash generation of £2.3m (2002: £2.8m) during the year. At the year end, our cash balances were £11.7m (2002: £9.4m).

Dividend

This is the first year that we have paid a dividend. Taking into account the earnings per share and the financial resources of Epic, the board are recommending a final dividend payment of 1p per share, payable on 20 November 2003 to shareholders on the register on 17 October 2003. If approved at the forthcoming AGM, the total dividend for the year of 1.4p per share would be covered 3.5 times on fully taxed earnings.

Market leadership

Epic is the market leader in the UK with consistently high levels of repeat business, rising profitability, no debt, a strong balance sheet and a blue- chip client list. This year we have seen absolute growth in both the public and private sector, with the public sector again representing over 50% of all revenues. Our order intake in percentage terms has increasingly moved towards the public sector, demonstrating the future potential for further growth in this area.

Online learning

Public sector spending continues, especially on the twin pillars of education and health. In education we are active in most of the government's main e-learning initiatives in schools, further education, higher education and lifelong learning. Health is a new market for Epic and, as current government spending increases, skills are seen as a key area for improvement. We have won several new health contracts, establishing a new health business that we expect to grow rapidly in the coming year. Other public sector work comes from major government departments, agencies and centrally funded bodies. Public sector contracts accounted for 51% of revenue (12% government, 34% education, 5% health).

Private sector work, which accounted for 44% of revenue, is concentrated in finance, retail and telecommunications. The major retail banks continue to spend on e-learning with cost control and increased regulation as the main business drivers. Retailers with large numbers of staff, often spread across the UK, have an increasing focus on customer service and e-learning is proving highly effective in improving skills in this area. Telecommunications and telephony companies are redefining their markets needing training in product knowledge, regulations and project management. We have won several contracts with these companies.

Products

PRIME, our first product, has delivered better than expected sales and profits. Sales continue in both the UK and internationally. Our new 'Blended Learning Portal - Arena' designed to provide blended solutions, has been launched and we plan further product launches in the coming year. Products will continue to be a core business activity. During the period, products accounted for 5% of revenue.

People

This year we have implemented our 'Optimise' strategy for on-going productivity improvement. This has already led to improved margins in the second half of the year. We also achieved the new ISO9001:2000 quality assurance standard. Stronger internal staff communications and development has been achieved and we thank our staff for their hard work and enthusiasm that has led to an excellent year.

Board Changes

Brian Stevens was appointed as Non-Executive Director in May 2003 and brings a wealth of experience within both the public and private sector. Brian has both government related online learning knowledge and experience of working in the financial services sector. He has also been an advisor to the Commons Select Committee on Education and Employment and served on the Secretary of State's Advisory committee on School improvement. I look forward to working with Brian in the future.

David Bull, Non-Executive Deputy Chairman resigned in May 2003 to undertake greater responsibilities with Scotland Online. David made a substantial contribution to Epic since his appointment in September 1999.

Prospects

Despite difficult conditions in the training market and limited IT spending, we managed to significantly increase revenues, profitability and cash, as well as expanding our client base. The market is maturing with e-learning spreading from corporate training into all areas of the public sector. It is now becoming mainstream with more sophistication such as blended learning, collaborative learning, simulations and games in learning. We have anticipated all of these changes to maintain our position as market leader.

The government has just issued a major consultation document 'Towards a Unified e-Learning Strategy'. In this, Charles Clarke, the Secretary of State for Education and Skills notes 'E-learning has the power to transform the way we learn' stating that e-learning needs to be 'at the heart of the way we all work.' Epic is already delivering this promise in schools, colleges, universities and the workplace.

We continue to evaluate acquisition opportunities that will add value to our clients' training needs but, despite detailed discussions with a number of companies, we have not found a suitable candidate that meets our strict acquisition criteria.

We are targeting further growth and will continue to keep shareholders informed of our progress

Michael Inwards

Chairman

Consolidated Profit and Loss Account
for the year ended 31 May 2003

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.

All of the results arose from continuing operations during the current and previous year.

Consolidated Balance Sheet
at 31 May 2003

Consolidated Cash Flow Statement
for the year ended 31 May 2003

Reconciliation of operating profit to net cash inflow from operating activities
for the year ended 31 May 2003

Notes:

1. The calculation of earnings per share is calculated on 25,569,071 ordinary shares (2002: 24,472,776) being the weighted average number of shares in issue during the year and profit after tax. The calculation of the diluted earnings per share is calculated on 26,455,748 ordinary shares (2002: 26,175,921) being the weighted average number of shares in issue adjusted for the effects of dilutive potential shares.

The fully taxed earnings per share is calculated on the basis of the full rate of corporation tax 30% (2002: 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

The profit after tax figure used in the calculation of earnings per share is as follows:

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 2003 that 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 2003 will be posted to shareholders and will be available from the Company's registered office, 52 Old Steine, Brighton, BN1 1NH and also on the company website www.epic.co.uk

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