Interim Results

EPIC Reconstruction PLC
26 October 2005



For immediate release

Preliminary Announcement of Results for the 6 month period to 31 July 2005

CHAIRMANS STATEMENT

EPIC Reconstruction Plc ('ER' or the 'Company') has continued to develop during
the first half of 2005, yielding £0.26m of total Profit before Tax (including
investment gains of £0.36m), and allowing the Company to return a dividend of
0.88p to shareholders. The Company has maintained a steady investment rate in
the first half of 2005. Three new deals were completed, one of which was
consolidated with a current asset. In addition, as part of those deals, three
properties have been acquired by EPIC Reconstruction Property Company, our
wholly owned subsidiary. Unfortunately, one of the businesses, Crystal Drinks,
continued to underperform, and has therefore been placed into Administration.
Whilst this is a setback for the Company, the loss was low in relation to our
asset base, and the write-off has been minimised.

Much of the available capital is now invested. The difference in the level of
debtor book assets underwritten in comparison to that expected at the time of
listing means that the potential gearing within the fund has been less than
anticipated. However, asset realisations are expected in the coming months which
will both facilitate increased returns to shareholders and provide additional
capital to invest.

The pipeline remains strong, and the Investment Advisor expects to complete a
similar number of deals in the next half of the year as were completed in the
first half. As the portfolio develops and settles, the key for the Company is to
minimise downside and generate acceptable yield from the remainder of the
portfolio. The residual equity stakes and preference shares on each investment
should realise benefit in the medium term, whilst the Investment Advisor moves
to an increased focus on long term capital gain over short term yield
generation.

Recent investments have had a positive start, and provide comfort that the
refinements and improvements in the investment model are proving successful.
With the level of available capital rapidly diminishing, and the core portfolio
returning a strong yield, there may come a point in the coming months where the
Company's investment capacity will be constricted, although an asset sale will
relieve this constriction. At some point, further funds may be required to
maintain the ongoing investment rate. However, the Company remains committed to
demonstrating strong performance, minimising downside, and driving asset
realisations to generate the returns that shareholders expect. I look forward to
reporting on the Company's progress early in the New Year.



INVESTMENT ADVISORS REPORT

SUMMARY

The current portfolio remains diversified and continues to generate yield. The
Investment Advisor expects the annual yield expectation (8%) to be driven by a
combination of yield from the current portfolio (4%) and asset realisations
(4%).

Three new investments have been made during the period, investing a further
£3.3m in Overlend, as well as underwritten debtor book facilities, and
investment in the properties of those investments (£5.5m). Those investments
have been in Kemutec, a mixers manufacturer, Gaskell MacKay, a carpeting
business and Autocue, an equipment manufacturer for the media industry. A total
of £8.3m of funds has been invested during the period, with additional funds
committed as a result of underwriting the debtor book facilities.

Crystal Drinks has proved a consistently difficult investment, and has now been
placed into Administration, resulting in a £0.4m write off against income for
the period to 31 July 2005. Whilst a set back for the Company, the Investment
Advisor believes that the reason for the write-off was driven by actions
somewhat beyond the Company's control. The Investment Advisor and the Board have
subsequently restructured the ongoing relationships with financing partners to
ensure that shareholders maintain the optimum risk profile for distressed
investing.

The debt on A.G. Brown continues to be collected. No further losses have been
crystallised during the period. £1.1m remains to be collected on the Debtor
Book, most of which is subject to legal action.

The Company is nearly fully invested. £20m is held on the security deposit,
required under the Eurosales guarantee to cover Eurosales debtor book risk,
Overlend, and plant and machinery risk on all of the investments. In addition,
property investments total £5.5m in EPIC Reconstruction Property Company. The
current portfolio should return capital to the Company in the coming months as
Overlend is repaid. However, due to the fact that many sizeable investments were
made over the past two quarters, and the average repayment period is circa 18
months, this leaves a period of relatively low cash availability for the
Company.


             EPIC Reconstruction plc: breakdown of Available Funds

The Investment Advisor proposes to increase the sum of available funds through
the sale or refinancing of the EPIC Reconstruction Property Company portfolio, a
reduction in the underwriting requirements with Eurosales, and a partial
refinancing of some of the Plant & Machinery finance, as well as the
aforementioned ongoing return of capital. All of these processes are currently
underway.

Going forward, as the precise level of risk associated with each type of
investment becomes more apparent, the Investment Advisor expects the investment
rate to decline marginally. However, as a significant proportion of the
Company's capital has already been invested, the Company is now moving to
protecting downside, and driving the maximum upside realisation from the current
portfolio.

The loss incurred on Crystal Drinks is expected to impact by circa 1% the half
year Dividend. However, capital upside within the portfolio, as well as
continued strong yield from a highly invested portfolio is expected to offset
these losses. Currently, the Investment Advisor expects to generate a 4% yield
from the portfolio, with an additional 4% from asset realisations required to
attain the full year dividend target of 8%.

NEW DEALS

Three new deals have been completed in the first half. The first of these was
Kemutec, in which the Company invested £0.9m Overlend and £2.7m in the property.
Kemutec is a manufacturer of high quality mixers, sifters and large machinery
for the chemicals, pharmaceuticals and food industries. Kemutec is contract
driven, and has had a successful opening first three months, performing well
ahead of budget. The Investment Advisor believes the strong management team, and
niche manufacturing skill will see this business develop in the coming months.

Hugh MacKay was integrated with the contract carpeting division of Gaskell Plc,
a business that focussed on retail and contracting carpeting and underlay that
went into administration driven by the decline in the retail side of the
business. The Company bought the contract carpeting element of Gaskell, and
integrated it with the current asset, Hugh MacKay, investing £1.9m in Overlend,
as well as underwritten debtor facilities. In addition, EPIC Reconstruction
Property Company purchased the property in a sale and leaseback transaction. The
Company is performing to budget, although export sales are marginally behind.
The investment remains in its early stages, with most post-Administration issues
now overcome.

Finally, the Company invested £0.5m in Autocue. Autocue is a business that
manufactures 'autocues' for newsrooms and TV studios across the world. In
addition, it has a range of software for use in the newsroom and with a wide
range of applications. The Investment Advisor backed a new management team to
reinvigorate the business. Initial indications are positive, although this
business again remains at a very early stage of its development.

OUTLOOK

The investment model continues to undergo changes as the Company matures. Some
of the earlier losses (A.G. Brown and Crystal Drinks) have emphasised the fact
that the investments carry fewer similarities to the provision of debtor book
finance as was originally envisaged. In addition, these investments have
emphasised the risks involved with underwriting the core debtor book. The gross
yield returned last year of 8.1% (before A.G. Brown write-off) comprised just 1%
of income received from the debtor book, with the majority of the return coming
from preference shares and asset sales. However, the debtor book represented a
significant element of the downside risk experienced on A.G. Brown.

The return pattern is expected to be similar in the coming year. The Investment
Advisor still expects that the targeted yield of 8% is achievable. However, the
way in which the yield is realised will be highly dependent on asset sales. The
Investment Advisor estimates that the yield on the portfolio for the year to 31
January 2006 will be circa 4%. Therefore, the remaining 4% targeted yield will
be realised from asset sales.

The return profile has impacted the Investment Advisor's approach to investment
opportunities. A model in which a large number of deals are undertaken is
unlikely to return shareholder value. This is due to the risks taken in highly
leveraged underperforming businesses resulting in a high level of write-off's,
that would prove unacceptable to the Company. The Investment Advisor believes
that the investment characteristics of propositions are more akin to equity than
debt in many cases. This increases the 'threshold' investment criteria for
investment, with any potential weakness less acceptable, due to reduced downside
protection. The Investment Advisor therefore expects to make fewer, but larger,
investments. Indeed, it may be that the underwriting of all debtor books is no
longer a facet of the Company going forward, if the risk profile is viewed to be
too great. The underwriting of the debtor book will now be considered on a deal
by deal basis.

Shareholder value will now be driven by the exit value of the equity holdings
the Company has built up. The yield received in the interim remains a
shareholder requirement and de-risking proposition, but itself places a
consistent cash burden on the portfolio businesses and therefore increases the
risk profile of each investment. The Company expects to invest at a slower rate,
structuring each deal with a higher interest rate on the debt instruments (to
reflect the higher risk), and continuing to take significant equity stakes. A
strong running yield will be generated from investments, but it is expected
asset realisations will result in the greater part of the ongoing shareholder
return.

CURRENT PORTFOLIO

Abingdon (2003)

The Company has significantly reduced exposure to Abingdon Flooring, the retail
carpet manufacturer with a turnover of circa £45m, with only £0.26m currently
outstanding. The business continues to perform well, and the Company has
received a strong return from the investment over the period.

Abbseal (2004)

Abbseal is a glass processor, selling to both the domestic and commercial
markets, with a turnover of circa £18.0m. The Investment Advisor used the
Administration process to restructure the cost base of the Company by reducing
the number of manufacturing plants. The Company has a £2.3m Overlend exposure to
Abbseal, with £2.9m funds in use at Eurosales, and £0.6m Plant & Machinery loan.
Abbseal has experienced a steady opening trading period and maintains a strong
order book. Sales are increasing and overheads have been radically reduced.

Autocue (2005)

The Company has a £0.5m Overlend exposure to Autocue, yielding 15%. Autocue is a
manufacturer of prompting equipment for the media industry, as well as the
developer and provider of a range of software for a similar customer base. The
business went into administration early in 2005 due to significant historic
leverage raised to expand the software side of the business, a strategy which
subsequently proved disastrous. The Company teamed up with another private
equity provider to buy the business out of Administration, employing a new
management team who have looked to fundamentally restructure the business,
through the removal of a number of unnecessary excess costs, and a realignment
of the business to its core prompter (rather than software) sales. There is also
a renewed focus on driving sales through new product development and sales
incentives. Initial signs are encouraging, as the business begins to stem
historic losses.

Bonne Bouche (2004)

Bonne Bouche, a manufacturer of frozen gateaux and puddings for the food service
and retail industries with a turnover of circa £13m, is currently in the build
up to Christmas. The Company invested £1.5m in Overlend, in addition to a stock
facility and the underwriting of the Debtor book. Due to the seasonality of the
business, it remains difficult to report on the ongoing success of the business
without visibility over the success of the Christmas period. However, the
Christmas listings are in place, and indications are that the Company will enjoy
a buoyant trading period during this season. The past three months have seen the
softest trading period for the business, and it has sustained consistent losses
over the summer. The Investment Advisor expects to financially support the
business as it builds stock in the run up to Christmas, in order to realise the
significant anticipated profits during this period.

Connections Plus (2004)

Connections Plus, a call centre operator with a turnover of circa £5m, has
experienced difficulties over the past three months. The loss of major customers
during the first half of 2005 has been mitigated by increased business from the
current customer base. The Company invested £0.5m in Overlend, and has provided
additional financing of £0.15m for the development of new customers. The
business is expected to return to profitability in the coming months through
business from confirmed new customers. However, the Investment Advisor remains
concerned that the business is sub-scale and would have difficulty sustaining
any further short term shocks. As such, the Investment Advisor is looking to
build the business through acquisition or merger in the coming months.

Ex-Pac (2004)

Ex-Pac, the provider of labels and signage for the bottling industry, continues
to perform on target. The Company invested £0.37m in Overlend in 2004, as well
as underwriting the debtor book. The business has commenced Overlend repayments
over the period, and is currently meeting budget.

Gaskell MacKay (2005)
Gaskell MacKay is the newly merged entity of the Gaskell contract carpeting
business and Hugh Mackay, the previously held asset of the Company. The Company
invested £1.9m in Overlend, as well as underwriting the debtor book, and buying
the property through EPIC Reconstruction Property Company. The greater scale
within the contract carpeting industry allows the business to leverage the
variety of the brands it holds, as well as develop the important export market.
In addition, the consolidation of two strong brands and manufacturing operation
onto a single manufacturing site facilitates a reduced cost base supported by an
improved customer proposition and product range. Since completion of the deal,
the business has continued to perform within budget expectations.

Kemutec (2005)

Kemutec is a manufacturer of mixing and sifting equipment for the chemical,
pharmaceutical and food industries, with sales of circa £10m. The Company
invested £0.9m in Overlend, as well as underwriting the debtor book (which has
minimal utilisation, due to the contract nature of the business), and purchasing
of the properties through EPIC Reconstruction Property Company. Since
acquisition, the business has performed strongly. A major new contract has been
won, worth £1m, and the business has outperformed budget significantly.

Newline (2004)

Newline is a provider of in-store retail displays with sales of circa £3.0m,
continues to perform steadily. The Company invested £0.15m in Overlend, and
provided underwritten debtor book facilities. The management issue with the
previous CEO has now been resolved and the remaining management team are focused
on the business. The repayment of the Overlend is nearly complete, and the
business continues to perform to expectation.

EPIC Reconstruction Property Company (2004)

EPIC Reconstruction Property Company has now acquired a portfolio of four key
properties, which are leased to Gaskell Mackay, Kemutec and Abbseal. The asset
purchase value of those properties was £5.5m, with each property generating
yields within a 10-15% range. The Investment Advisor is investigating the
potential to generate capital upside from this portfolio, which is likely to
impact the income yield at year end.

DISTRESSED INVESTMENTS

Crystal Drinks (2003)

The Company invested in Crystal Drinks in December 2003. Crystal Drinks is a
manufacturer of both own brand and branded soft drinks for large Retailers and
Foodservice sellers. The Company invested £0.75m as Overlend, and underwrote the
debtor book facilities. £0.40m of Overlend has been returned. In addition, a 'B
share' of £0.15m has been paid.

Trading in the business slowed in the early part of this year. Own brand
business proved less profitable than expected, and further investment was
required. The management team invested a further £0.15m, and the Company a
further £0.1m to support the business in the early parts of the year. In April
2005, it became apparent that a turnaround of the sales was not forthcoming and
therefore the business was insolvent.

PwC were appointed Administrators on the 23 May 2005. The Investment Advisor was
of the view that continuing to fund the business would have resulted in longer
term difficulties for the Company, and there were certain supply liabilities
during the summer season that made ongoing trading untenable. Therefore, the
Company will provision £0.4m which represents the expected loss on the
investment, not yet crystallised.

The investment has yielded, to date, a return (including interest) of £0.26m on
the initial investment of £0.75m, as well as the repayment of £0.4m of capital.
The level of impact is likely to be circa 1% on the full year Dividend.

A.G. Brown (2004)

The recovery of assets on A.G. Brown's debtor book is still ongoing. No further
losses have crystallised during the period. £1.1m remains to be collected on the
Debtor Book, most of which is subject to legal action. Administrators and
advisory fees have been incurred which will have an impact on the professional
fee expenses for the year to 31 January 2005.



Unaudited Consolidated Statement of Operations

For the period 1 February 2005 to 31 July 2005


                        6 months ended 31 July 2005         6 months ended 31 July 2004        25 July 2003 to 31       
                                 (unaudited)                        (unaudited)               January 2005 (audited)
                              £                £                £               £                £               £
Income 
Interest receivable     381,467                           456,470                        1,554,962
Dividends received            -                                 -                        1,225,000
Commission income       342,044                           106,886                          403,028
                                        --------                         --------                         --------
Total income                             723,511                          563,356                        3,182,990

Expenses:
Investment
advisory fees          (213,699)                         (199,825)                        (556,495)
Administration fees     (26,120)                          (24,959)                         (69,742)
Directors fees          (43,225)                          (55,672)                        (123,600)
Directors and
officers' insurance     (20,257)                          (21,191)                         (85,973)
Professional
fees paid               (72,813)                          (12,577)                         (66,592)
Crest service
provision                (1,735)                           (1,750)                          (3,797)
Printing and
advertising expenses     (2,478)                           (9,687)                          (9,904)
Travel expenses          (3,051)                           (3,512)                          (7,923)
Auditors'
remuneration            (17,248)                           (4,394)                         (12,169)
Bank interest
and other charges        (1,640)                             (292)                            (720)
Sundry expenses            (424)                             (208)                         (14,442)
Stock Exchange fees      (3,677)                           (3,050)                          (8,445)
Advisor and
broker fees             (15,048)                          (17,577)                         (48,674)
Provision for
bad debt               (400,000)                                -                         (435,000)
Total expenses:                        (821,415)                         (354,694)                       (1,443,476)
                                       --------                          --------                         ---------
Net investment
(expenses)/income                       (97,904)                          208,662                         1,739,514
                                       --------                          --------                         ---------
Capital gains
on investments
Net realised gain                       362,400                           165,537                           260,656
                                       --------                          --------                         ---------
Profit for the
period before
taxation                                264,496                           374,199                         2,000,170

Taxation                                      -                                 -                                 -
                                       --------                          --------                         ---------
Profit for the
period after
taxation                                264,496                           374,199                         2,000,170

Dividends paid                       (1,497,000)                                -                          (501,000)
                                       --------                          --------                          --------
(Loss)/profits
transferred
to reserves                          (1,232,504)                          374,199                         1,499,170
                                       ========                          ========                          ========

Basic earnings
per ordinary
share (pence)                            0.887p                            1.247p                            6.667p
                                       --------                          --------                          --------




Unaudited Consolidated Statement of Assets and Liabilities

As at 31 July 2005


              31 July 2005 (unaudited)   31 July 2004 (unaudited)   31 January 2005 (audited)
                       £             £            £             £             £             £

Non-current
assets
Investment
property                     5,513,600                          -                   1,100,000

Current assets
Loan             500,000                          -                           -
Accrued
interest and
other
receivables      221,520                    357,815                     850,687
Cash and cash
equivalents    4,495,116                 10,463,571                  12,887,931
Committed     18,648,312                 17,974,135                  15,406,414
cash            --------                   --------                    --------
              23,864,948                 28,795,521                  29,145,032
                --------                   --------                    --------
                       
Current liabilities
Accrued
expenses and
sundry
creditors       (126,403)                  (143,704)                   (160,383)
Provision for
bad debts       (835,000)                         -                    (435,000)
                --------                   --------                    --------
                (961,403)                  (143,704)                   (595,383)
                --------                   --------                    --------

Net current
assets                      22,903,545                 28,651,817                  28,549,649
                              --------                   --------                    --------
Net assets                  28,417,145                 28,651,817                  29,649,649
                              ========                   ========                    ========

Represented
by:
Share                          300,000                    300,000                     300,000
capital
Share                       27,850,479                 27,850,479                  27,850,479
premium
Revenue
reserves                       266,666                    501,338                   1,499,170
                              --------                   --------                    --------
                            28,417,145                 28,651,817                  29,649,649
                              ========                   ========                    ========
Net asset
value per
share (pence)                   94.724p                    95.506p                     98.832p
                              ========                   ========                    ========




Unaudited Statement of Cash Flow
For the period 1 February 2005 to 31 July 2005

                     6 months ended 31 July 2005    6 months ended 31 July 2004   25 July 2003 to 31 January 2005
                              (unaudited)                 (unaudited)                       (audited)
                                   £                             £                               £
Operating activities
Bank interest              1,217,886                       322,567                         831,527
received
Dividends received                 -                             -                       1,225,000
Commission income            398,898                       100,337                         280,177
Expenses paid               (354,101)                     (346,617)                       (852,494)
                      --------------                 -------------                  --------------
Net cash flows
from                       1,262,683                        76,287                       1,484,210
operating             --------------                 -------------                  --------------
activities

Investing activities
Purchase of 
investments              (4,913,600)                             -                      (1,100,000)

Sale of investments               -                              -                         260,656
Transfer to committed    (3,244,898)                   (12,724,135)                    (15,406,414)
cash                  --------------                 -------------                  --------------

Net cash
flows from               (8,158,498)                   (12,724,135)                    (16,245,758)
investing             --------------                 -------------                  --------------
activities

Financing activities
Proceeds on
issue of equity
shares net of issue               -                              -                      28,150,479
costs
Dividends                (1,497,000)                             -                        (501,000)
paid                  --------------                 -------------                  --------------

Net cash flows
from                     (1,497,000)                             -                      27,649,479
investing             --------------                 -------------                  --------------
activities

(Decrease) /
increase in
cash and cash            (8,392,815)                   (12,647,848)                     12,887,931
equivalents

Cash and cash
equivalents at           12,887,931                     23,111,419                               -
start of
period
                     --------------                  -------------                  --------------
Cash and
cash equivalents          4,495,116                     10,463,571                      12,887,931
at                   --------------                  -------------                  --------------
end of
period



Unaudited Consolidated Statement of Changes in Net Assets
For the period 1 February 2005 to 31 July 2005

          Share capital   Share Premium      Revenue        Total   25 July 2003 to
                                             Reserve                31 January 2005
                      £               £            £            £               £
Net
assets at
start of        300,000      27,850,479    1,499,170   29,649,649               -
period

Share
capital               -               -            -            -      28,150,479
proceeds

Profit
for the               -               -      264,496      264,496       2,000,170
period

Dividends             -               -   (1,497,000)  (1,497,000)       (501,000)
paid
               ----------     -----------   ----------    ---------     -----------
Net
assets at       300,000      27,850,479      266,666   28,417,145      29,649,649
end of         ----------     -----------   ----------    ---------     -----------
period


Basis of Preparation of Interim Financial Information

The interim financial information has been prepared on the basis of the
accounting policies set out in the group's statutory accounts for the period
ended 31 July 2005. The financial information contained in the interim statement
does not constitute statutory accounts under Isle of Man law.





P.P. Scales
Secretary




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