Epic, the Brighton-based e-learning company, has announced better than expected annual results.

The firm, which was founded 20 years ago, recorded a pre-tax profit of £835,000, well down on last year's £1.5 million but higher than City predictions.

For the year to May 31, its turnover was £7.22 million, down from £8.04 million in 2000.

During the year, Epic sold its Prime Product division for £250,000 and wrote off development costs, hitting the company's profits.

Chairman Michael Inwards said: "Based on current trading and our growing financial strength, it is our intention to start paying dividends during the course of the current financial year.

"As a fast-growing business, it is essential a large proportion of the profits should be retained for investment with the business to fund our expansion. However, it is the board's intention to follow a progressive dividend policy."

Epic is a UK market leader in e-learning, with the government and some of the country's biggest banks and financial concerns, including Barclays, The Royal Bank of Scotland, Lloyds TSB and American Express, among its customers.

The company strengthened its board during the year with the appointment of Steve Rayson as sales and marketing director.

Mr Inwards said: "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. I'm confident this will be a year of good progress for Epic."

Last autumn, Epic warned of tough times as the events of September 11 had an immediate negative affect on business in the United States.

Growth estimates were reduced to 20 per cent of expectations for the year and profits were predicted to be closer to the £400,000 mark.

During September, the share price took a battering, falling from 148p to less than 60p.

But with more than £9 million cash in the bank, the company is in a strong position for further expansion.

The latest statement from the Alternative Investment Market-listed firm lifted its share price by three per cent to 70p.

Epic is a former Sussex Company of the Year and seen as a flagship among new media businesses.

Chief executive Donald Clark said the strong performance was likely to be repeated over the coming year.

He said: "Our brokers are predicting turnover of £8.1 million and a profit of £1.4 million. We had to reduce staff numbers last year but it is now likely we will need to take on additional staff soon."