Final Results

EPIC Reconstruction PLC
27 May 2005


EPIC Reconstruction plc


INVESTMENT HIGHLIGHTS

   • 4.99p final dividend


   • 6.66p full period dividend


   • Ten new transactions completed across range of sectors.


   • One divestment yielding healthy return on investment


   • One provision of £0.435m on A.G.Brown


   • £12.2m of total funds invested


   • Two deals completed after the period end


Chairman's statement

INTRODUCTION

EPIC Reconstruction plc ('the Company') has had an eventful first period. Over
the period, the Company has completed ten new transactions, and invested £12.2m
of Shareholders' capital. As I reported in the interim results, those
investments have been of a larger individual quantum, and fewer in number, than
was originally anticipated at the time of the listing.

One of the investments has already been exited, yielding an attractive return
for the Company, and the remainder, with one exception, continue to perform
within the limits of EPIC Specialist Investment's (the Manager) expectations.
The Board are recommending a 4.99p final dividend, bringing the full period
dividend to 6.66p.

EPIC Reconstruction plc is a company created with the mandate to invest in
distressed and insolvent assets. The Company will look to support failing
businesses which, with the support of a revised capital structure, the expertise
of the Manager, and a newly incentivised Management team can be revitalised and
turned around. The Company has purchased businesses out of Receivership or
Administration, as well as looking to implement operational changes in solvent
businesses. The range and diversity of the opportunities presented to the Board
by the Manager has been considerable, and the Company uses the forum of the
Board meeting to discuss each investment in detail. Whilst the majority of the
proposed investments have been completed, there have been a number where either
the Manager or the Board were of the view that certain of the operational or
financial risks were too great for the Company to take, and thus investments
have not been pursued.

The financial results for the period show total income, of £3.18m against
expenses of £1.44m, yielding net investment income of £1.74m. Adding the net
gains on investment of £0.26m, gives a net for the period of £2.00m. This
represents a Basic Earnings per Ordinary Share of 6.67p. As noted below, £0.435m
has been provided against the investment in A.G Brown. Without this provision
reported net profit would have been £2.435m and Basic Earnings per Ordinary
Share would have been 8.12p. The Company has distributed 1.67p as an interim
dividend leaving 4.99p to be distributed through the aforementioned final
dividend.

The income is driven by the interest and commission received on a range of
financial instruments utilised in each investment. The Company invests in
secured confidential Invoice Discounting facilities, Plant and Machinery
financing, Mezzanine financing, Shareholder Loans, and pure Equity. In addition,
where appropriate, the Company looks to isolate the property risk of the
investments through a wholly owned subsidiary of the Company, named EPIC
Reconstruction Property Company Limited. This offering, in close conjunction
with our partners at the Royal Bank of Scotland, provides a unique proposition
to the distressed UK business environment. This has been recognised at the Royal
Bank of Scotland, where the relationship with EPIC Reconstruction plc has been
awarded the 'Deal of the Year 2004' for the range of deals that have been
completed.

INVESTMENTS

A full description of each of the Company's investments is detailed in the
Investment Manager's report. However, I would like to detail some of the
highlights of the period.

The first investment of note completed in October 2003 was Abingdon Carpets, a
subsidiary of Carpets International, with a turnover of circa £50m. The Manager
supported the management team in reducing three operational sites to one, and
restructuring the workforce to create a single core unit focussed on the
manufacture of carpets for the UK Retail base. This investment has since proved
successful in repaying the Company's initial investment, and yielding additional
preference share returns.

A similar downsizing transaction was completed in December 2004, with the
Company investing in Abbseal, a glass processor and manufacturer, with turnover
of circa £20m. Having gone into Administration as a result of an overleveraged
capital structure, the Manager engaged in a lengthy due diligence process,
during which it was decided to purchase three of the four sites, and reduce the
capacity of the business to match the ongoing sales run rate.

The Company purchased an Internet camera retail business, Internet Direct, in
March 2004. The business had experienced short term working capital
difficulties, and the Company provided the requisite funding to support the
management team in restructuring the operation. After a successful start, the
business received significant interest from trade purchasers. The Company sold
the business to a French Internet retailer, yielding an IRR of over 100% for the
Company.

POST-BALANCE SHEET EVENTS


Since 31 January 2005 the Company has continued to see a strong flow of
investment opportunities, but has also had to deal with the difficulties
encountered by one of the earlier investments, A.G. Brown. The Company invested
in A.G. Brown in February 2004. A.G. Brown is a producer of profiled steel
sheets, flashings, gutters, purlins, rails, and ancillary items for the
construction and steel fabrication industries. Trading has been difficult,
exacerbated by difficulties with creditors and provision of accurate financial
information from the business. In December 2004 the Company recapitalised A.G.
Brown with £0.8m and the Manager replaced the incumbent management team with a
new team who invested a further £0.1m. However, since December 2004 A.G. Brown
has failed to perform and in April 2005 the Manager exited the investment
through a distressed sale via an Administration process.

As part of the sale of A.G. Brown the Company retained property and plant and
machinery assets. The Company has also obtained a 19.9% equity stake in the
acquisition vehicle. The retention of key assets and equity at book value, may
themselves result in a capital uplift post-deal. However at this time a
proportion of the Company's £0.95m exposure to the business is deemed
irrecoverable by the Manager and the Directors and therefore £0.435m has been
provided for to reflect the impairment of the assets. The Debtor Book, which is
subject to the Company's guarantee to Euro Sales, continues to be collected by
the Administrator and Euro Sales. Collection, some of which is subject to
litigation, will take between three and six months and any residual losses will
be charged against the Company's guarantee at that point.

Since 31 January 2005 the Company has completed the acquisition of two further
businesses, Kemutec and Gaskell plc, deploying funds of over £9.0m in debt and
overlend facilities.

Kemutec is a manufacturer of high quality capital machinery for the food,
pharmaceutical and chemical industries. The business found itself in
difficulties as a result of a shareholder who attempted to diversify from the
core business and change the area of expertise. The Company has backed the
management team to take the business back to its core offering. Gaskell plc is a
UK based Carpet manufacturer. Gaskell went into administration as a result of
the significant losses experienced since the integration of the Retail, Underlay
and Contract businesses in 2000, which did not prove successful due to the
different capital and customer requirements of each business. The Manager bought
the Contract business from the Gaskell administration process, and merged it
with the Company's current holding in Hugh Mackay, to create a single, high
quality, UK based contract carpeting manufacturer.

CONCLUSION

I believe the period ahead will continue to provide many more investment
opportunities. However,in a company focussed on distressed businesses, the Board
expect that there will be an inevitable percentage of businesses that may
experience either trading difficulties or short term working capital
requirements. The Manager monitors each investment closely, and is highly
involved in instigating elements of operational change to optimise performance
in such situations. In addition, new investments should continue to enable the
Company to put funds to use, yielding good return for the Shareholders. I
believe that the pipeline of opportunities remains strong, and I expect the
Company to complete one or two more sizeable transactions in the coming year, in
addition to developing the current portfolio of small to medium sized UK
businesses.

In summary, the first year has been successful in establishing the Company
within the market place, refining the investment model, and returning yield to
the Shareholders. The coming year will require resilience as new opportunities
and new deals continue to be seen, and some inevitable hiccups mastered. I
remain confident in the prospects of your Company, and look forward to reporting
again in six months' time.

D.L. Adamson
Chairman

27 May 2005


EPIC Reconstruction plc

Consolidated Statement of Operations
For the period 25 July 2003 (date of incorporation) to 31 January 2005

                                                                          2005
                                                            £                £
Income:
Interest receivable                                 1,554,962
Dividends receivable                                1,225,000
Commission income                                     403,028
                                                   ----------
Total income                                                         3,182,990

Expenses:
Investment advisory fees                             (556,495)
Administration fees                                   (69,742)
Directors' fees                                      (123,600)
Directors' and officers' insurance                    (85,973)
Professional fees paid                                (66,592)
Crest service provision                                (3,797)
Printing and advertising expenses                      (9,904)
Travel expenses                                        (7,923)
Auditors' remuneration                                (12,169)
Bank interest and other charges                          (720)
Sundry expenses                                       (14,442)
Stock Exchange fees                                    (8,445)
Advisor and broker fees                               (48,674)
Provision for bad debt                               (435,000)
                                                   ----------
Total expenses                                                      (1,443,476)
                                                                    ----------

Net investment income                                                1,739,514

Capital gains on investments
Net realised gain                                     260,656
                                                   ----------
                                                                       260,656
                                                                    ----------

Profit for the period before taxation                                2,000,170

Taxation                                                                     -
                                                                    ----------
Profit for the period after taxation                                 2,000,170

Dividends paid                                                        (501,000)
                                                                    ----------
Profit transferred to revenue reserve                                1,499,170
                                                                    ==========
                                          
Basic earnings per ordinary share (pence)                                 6.67p
                                                                    ==========

All items in the above statement are derived from continuing operations.


EPIC Reconstruction plc

Consolidated Statement of Assets and Liabilities
As at 31 January 2005

                                                                          2005

                                                            £                £

Non-current assets
Investment property                                                  1,100,000

Current assets
Accrued interest and other receivables                850,687
Cash and cash equivalents                          12,887,931
Committed cash                                     15,406,414
                                                 ------------
                                                   29,145,032
                                                 ------------

Current liabilities
Accrued expenses and sundry creditors                (160,383)
Provision for bad debt                               (435,000)
                                                 ------------
                                                     (595,383)
                                                 ------------

Net current assets                                                  28,549,649
                                                                    ----------
Net assets                                                          29,649,649
                                                                    ==========

Represented by:
Share capital                                                          300,000
Share premium                                                       27,850,479
Revenue reserve                                                      1,499,170
                                                                    ----------
                                                                    29,649,649
                                                                    ==========

Net asset value per share (pence)                                        98.83p
                                                                    ==========



EPIC Reconstruction plc

Consolidated Statement of Changes in Net Assets
For the period 25 July 2003 (date of incorporation) to 31 January 2005

                  Share capital    Share premium    Revenue reserve      Total

                              £                £                £            £

Shares issued           300,000       29,700,000                -   30,000,000

Shares issue
expenses                      -       (1,849,521)               -   (1,849,521)

Profit for the
period                        -                -        2,000,170    2,000,170

Dividend paid                 -                -         (501,000)    (501,000)
                   ------------       ----------      ----------- ------------
                        300,000       27,850,479        1,499,170   29,649,649
                   ============       ==========      =========== ============



EPIC Reconstruction plc

Consolidated Statement of Cash Flows
For the period 25 July 2003 (date of incorporation) to 31 January 2005

                                                                          2005
                                                                             £
Operating activities
Bank interest received                                                 831,527
Dividends received                                                   1,225,000
Commission income                                                      280,177
Expenses paid                                                         (852,494)
                                                                     ---------
Net cash flows from operating activities                             1,484,210
                                                                     ---------

Investing activities
Purchase of investment property                                     (1,100,000)
Sale of investment                                                     260,656
Transfer to committed cash                                         (15,406,414)
                                                                     ---------
Net cash flows from investing activities                           (16,245,758)
                                                                     ---------

Financing activities
Proceeds on issue of equity shares net of issue costs               28,150,479
Dividends paid                                                        (501,000)
                                                                     ---------
Net cash flows from financing activities                            27,649,479
                                                                     ---------

Increase in cash and cash equivalents                               12,887,931
                                                                     ---------
Cash and cash equivalents at end of period                          12,887,931
                                                                     =========

Annual General Meeting

The Annual General Meeting will be held at St James's Chambers, Athol Street,
Douglas, Isle of Man on 18 July 2005 at 10.00 a.m.

Annual Report and Accounts

The Reports and Accounts for the period ended 31 January 2005 will be posted to
shareholders shortly. Copies will also be available from the offices of the
Administrator, Barings (Isle of Man) Limited, St James's Chambers, Athol Street,
Douglas, Isle of Man.

Note

The financial information set out in the announcement does not constitute the
Company's statutory accounts for the period ended 31 January 2005. The statutory
accounts for the period to 31 January 2005 will be finalised on the basis of the
information presented by the Directors in this preliminary statement and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.



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