Capital Reduction

Quadnetics Group PLC
20 January 2003

                              QUADNETICS GROUP PLC

                               CAPITAL REDUCTION

Quadnetics Group plc, a leader in the development, design, integration and
control of advanced CCTV and networked video systems has today despatched a
circular to its shareholders seeking approval of a proposed reduction of its
Share Premium Account, cancellation of its Capital Redemption Reserve, and the
cancellation of unissued Deferred Shares in the Company.


Reduction of Share Premium Account and Capital Redemption Reserve


At 31 May 2002, the Company had accumulated losses on its profit and loss
account of approximately £8.2 million.  These losses have arisen principally on
disposals of the Company's investments in subsidiaries during the last decade.
The existence of these losses will prevent the Company from paying dividends to
its shareholders out of future profits until those losses have been eliminated.
Given the substantial size of the losses there is, in the opinion of the Board,
no reasonable prospect of their being eliminated in the short term. However, in
the Chairman's statement with the Annual Report on 9 October 2002, it was
reported that the Board intended to effect the appropriate restructuring of the
Company's reserves to enable dividend payments to be recommenced in the future,
when the Directors consider it appropriate.


Since 1994, the Company has built up a substantial share premium account through
the issue of shares for cash at prices in excess of the nominal value of those
shares. At the date of this document, the balance standing to the credit of the
share premium account is approximately £6.9 million.


In addition, the Company has a balance of approximately £4.2 million on a
capital redemption reserve created as a result of a number of purchases of its
own shares since 1991, but principally arising from the buy back of Deferred
Shares during the year ended 31 May 1998.


The Directors consider that the accumulated losses reflected in the Company's
profit and loss account represent a permanent loss of capital and they propose
that the permanence of this loss should be recognised by eliminating the deficit
on the profit and loss account. This would be achieved by the cancellation of
the balance standing to the credit of the capital redemption reserve and such
reduction in the balance on the share premium account as is necessary to
eliminate fully the deficit on the profit and loss account.  Eliminating the
deficit on the profit and loss account will enable the Company to pay dividends,
in due course, out of any future profits credited to that account. Shareholders
will be invited to approve this proposal by voting in favour of the special
resolution.


If this proposed reduction is approved by Shareholders, it will have to be
confirmed by the Court before it can become effective. If the special resolution
is passed at the Extraordinary General Meeting, application will be made to the
Court as soon as possible thereafter for the necessary confirmation.


In these circumstances, it is anticipated that confirmation will be obtained
from the Court at the beginning of March 2003.


Cancellation of unissued Deferred Shares


As part of the capital reorganisation of the Company in 1997, each ordinary
share of 10p was subdivided into a deferred share of 9p and a new ordinary share
of 1p. The new ordinary shares of 1p were then consolidated into ordinary shares
of 20p. All 37,475,663 Deferred Shares created by this process were subsequently
bought back by the Company, but will remain as authorised but unissued share
capital until they are cancelled. The Directors do not see any reason to retain
this class of share and are therefore proposing to cancel all of the Deferred
Shares.   An ordinary resolution shall therefore be proposed at the EGM in order
to effect this cancellation.  As the Deferred Shares are unissued, this
cancellation shall not be subject to the confirmation of the Court.


Extraordinary General Meeting


An Extraordinary General Meeting of the Company is to be held at the offices of
Brewin Dolphin Securities Limited, 5 Giltspur Street, London EC1A 9BD at 10.30
a.m. on 12 February 2003. At this meeting, resolutions will be proposed to:



 1. Approve the reduction of the Share Premium Account and cancellation of
    Capital Redemption Reserve; and

 2. Approve the cancellation of the unissued Deferred Shares.



Recommendation


The Board believes that both (i) the proposed reduction of share premium account
and cancellation of capital redemption reserve; and (ii) the proposed
cancellation of the Deferred Shares, described in the Circular are in the best
interests of the Company and the Shareholders.  Accordingly, the Board
recommends Shareholders to vote in favour of the Resolutions to be proposed at
the Extraordinary General Meeting, as they intend to do in respect of their own
beneficial holdings of 3,500,441 Shares, representing approximately 54.4 per
cent. of the existing issued share capital of the Company.



                                    - ends -





For further information please contact:



Quadnetics Group plc
Russ Singleton, Chief Executive                      01527 850 080
Nigel Poultney, Finance Director                     01527 850 080



Brewin Dolphin Securities
Neil Baldwin                                         0113 241 0126


Media enquiries:

Bankside Consultants Limited
Peter Curtain/Ariane Vacher                          0207 444 4140






Quadnetics Group plc - Background


Quadnetics Group plc is a leader in the development, design, integration and
control of advanced Closed Circuit Television (CCTV) systems and related control
and networking products.  The two operating subsidiaries are Quadrant Video
Systems plc and Synectic Systems Limited.  The company is listed on the
Alternative Investment Market (AIM) of the London Stock Exchange having
completed an extensive restructuring in 2001.






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