Interim Results

Quadnetics Group PLC
31 January 2005


                                                                 31 January 2005


                             Quadnetics Group plc

            Interim Results for the six months ended 30 November 2004


Quadnetics Group plc, a leader in the design, integration and control of
advanced CCTV and networked video systems, reports its interim results for the
half-year ended 30 November 2004.


Highlights

-     Profit before tax and goodwill amortisation: £1.2 million (2003: £0.6 million)

-     Underlying earnings per share up 18% at 7.7p (2003: 6.5p)

-     Interim dividend declared of 1p per share (2003: nil)

-     First multi-million dollar North American digital installation close to completion and exceeding
      expectations.

-     Relatively subdued UK public space CCTV market expected to revive in the second half and beyond.

-     Growing proportion of profits derived from proprietary digital systems and control products



Commenting on the results, Russ Singleton, Chief Executive, said:


'The integration of the two acquisitions, Look and Coex, is going well and is
already producing some interesting new opportunities for the Group outside of
our traditional areas of public space surveillance.


'The UK installation market has been relatively subdued in the first half,
reflecting changes in the source of budgets and the time taken for end-users and
operators to evaluate the full impact and benefits of new digital technology on
their operations. However our forward order books and pipelines indicate a
higher level of UK activity across our businesses in the second half.


'Sales from Synectics' digital systems and software are now growing
significantly. Following our multi-million dollar initial digital recording
system at a Canadian casino, we are now seeing further major opportunities
emerging in North America.'



For further information, please contact: 
 
Quadnetics Group plc                                    Tel: [phone]
Russ Singleton, Chief Executive
Email: [e-mail]                             www.quadnetics.com

Brewin Dolphin Securities                              Tel: [phone]
Neil Baldwin

Media enquiries:

Abchurch Communications Ltd                            Tel: [phone]
Peter Curtain / Ariane Comstive
Email: [e-mail]



Chairman's Statement


Overview

Our key objectives in the current year are the continuing integration of the two
successful acquisitions (Look CCTV and Coex) completed last year and most
importantly the international launch of our own unique products developed by
Synectic Systems. We believe this product set provides a compelling solution to
the complex problems of control, management and data storage which derive from
large scale networked digital CCTV systems. Previously diverse protocols and
standards are converging to the extent that successful products have the
potential to become dominant global winners. Our first multi-million dollar
installation in North America is now very close to completion, within budget,
and is exceeding expectations in terms of performance and functionality. A
similar scale system in the UK is to be completed in the second half year. A
proportion of the profits arising on these projects will fall into the second
half's results. We are now addressing the worldwide marketing of Synectics
products with particular attention being paid to the burgeoning demand from
North America. If we are successful, as we fully expect to be, we believe
shareholder value will be very considerably enhanced.

Results

In the half year to 30 November 2004 the Group produced a profit before tax and
goodwill amortisation of £1,180,000 (2003: £648,000).

After providing for goodwill amortisation of £198,000 (2003: £32,000) and
taxation of £286,000 (2003: £162,000) the profit on ordinary activities after
taxation attributable to shareholders was £696,000. Turnover for the period was
£12,743,000 (2003: £7,050,000).

Underlying earnings per share for the period (excluding goodwill amortisation
and exceptional items) were 7.7p (2003: 6.5p).

The Group ended the period with net funds of £3.6 million (31 May 2004: £4.3
million; 30 November 2003: £1.4 million).

Dividend

An interim dividend of 1p per ordinary share will be payable on 4 March 2005 to
shareholders on the register at 11 February 2005.

Operational Review

These interim results cover the first complete reporting period with a full
contribution from all the four Group subsidiaries: Synectic Systems, Quadrant
Video Systems, Look CCTV and Coex. Historically, the Group results have been
skewed in favour of the second half and this pattern is expected to continue.
However, elements of our business have been slower than we had hoped,
particularly the timing of contract awards for Town Centre CCTV system expansion
projects. This led to some reduction in activity levels for Quadrant Video
Systems during the period, although that business still contributed significant
profitability at good margins. Quadrant Video Systems' order book and bid
pipeline indicate substantial improvement for the second half.

Since its acquisition in February 2004, Look CCTV has performed very creditably
and maintained its strong market leadership position in on-bus CCTV systems. The
business has been successfully integrated into Quadnetics Group, with the
introduction of more advanced financial and operational control systems, and
attainment of its ISO9000 quality accreditation. We have invested in additional
sales personnel for wider geographical and customer access, and the business
will shortly be relocating to new premises to accommodate future growth.
Although accurate comparative figures are not available for the preceding year,
we believe that sales revenues have grown satisfactorily in the first half, and
although margins have declined slightly with some planned increases in the cost
base, they continue to be excellent. We expect further progress.

Coex was also acquired in February last year, and addresses the worldwide market
for CCTV for oil and gas, marine and hazardous environments, in which it has
earned an excellent reputation. We believe this is fundamentally a growth
market, driven by increased specialised security requirements and the advent of
digital networked systems that will allow cost reductions through remote
monitoring of processes in difficult locations. These trends will be important
in providing the opportunity for new Synectics products to be introduced to the
market. Coex is being re-organised under a new Managing Director, and is now
gathering momentum as it addresses larger and more complex projects. Development
of the first generation of Synectics in-house products for this market is
nearing completion. Results in the first half were just below breakeven, and are
expected to move ahead from the second half onwards.

The major achievement of this year so far has been the introduction of
Synectics' integrated digital CCTV systems to the North American market, through
successfully winning and installing what we believe is the largest such system
in the world so far. This casino project is expected to lead to follow-on orders
for other casinos in the near future and has raised the international profile of
the company considerably. Synectics' sales are on course to grow this financial
year by more than 100% compared to 2003/04, with operating profits well ahead of
expectations, the majority of which will fall in the second half. We believe
Synectics now has the opportunity to establish a significant market position
throughout North America, not only in the casino sector, but also in the wider
large-scale security field.

Outlook

Whilst the traditional public space CCTV market in the UK remains relatively
subdued, some large projects are now coming on stream, and we confidently expect
a healthier second half and beyond. More significantly, the proportion of the
Group's profits derived from proprietary digital systems and control products is
increasing rapidly, with the opportunities for continuing growth very
encouraging. We have been actively exploring options that may lead to a
significant acceleration of Synectics' growth in the United States market, and
we hope to make an announcement on this in the near future.



Peter Rae
Chairman
31 January 2005


Consolidated Profit & Loss Account
For the half year ended 30 November 2004


                                                              Unaudited        Unaudited          Audited
                                                           Half year to     Half year to          Year to
                                                                 30 Nov           30 Nov           31 May
                                                                   2004             2003             2004
                                                    Notes         £'000            £'000            £'000

Turnover                                                1        12,743            7,050           18,079
Cost of sales                                                   (8,700)          (4,606)         (11,570)
Gross profit                                                      4,043            2,444            6,509
Net operating expenses (including exceptional                   (3,143)          (1,840)          (4,637)
items and goodwill amortisation)
Operating profit                                                    900              604            1,872

Operating profit before exceptional items and                     1,098              636            2,286
goodwill amortisation
Exceptional items                                                     -                -            (240)
Goodwill amortisation                                             (198)             (32)            (174)

Net interest receivable                                              82               12               42
Profit on ordinary activities before taxation                       982              616            1,914

Profit before tax, exceptional items and                          1,180              648            2,328
goodwill amortisation
Exceptional items                                                     -                -            (240)
Goodwill amortisation                                             (198)             (32)            (174)

Tax charge on ordinary activities                       2         (286)            (162)            (494)
Profit on ordinary activities after taxation                        696              454            1,420
Dividends                                               3         (116)                -            (346)
Profit for the period - transferred to reserves                     580              454            1,074

Basic earnings per ordinary share                       4          6.0p             6.1p            16.4p
Diluted earnings per ordinary share                     4          6.0p             5.7p            16.3p
Underlying earnings per ordinary share                  4          7.7p             6.5p            21.2p




Consolidated Balance Sheet
30 November 2004
                                                              Unaudited       Unaudited       Audited
                                                                 30 Nov          30 Nov        31 May
                                                                   2004            2003          2004
                                                                  £'000           £'000         £'000
Fixed assets
Intangible assets                                                 7,523            1,201         7,721
Tangible assets                                                     933              526           956

                                                                  8,456            1,727         8,677
Current assets
Stocks                                                            2,407            1,488         2,710
Debtors                                                           8,220            4,636         7,945
Cash at bank and in hand                                          3,997            1,442         4,711
                                                                 14,624            7,566        15,366

Creditors: amounts falling due within one                       (6,569)          (3,306)       (7,767)
year

Net current assets                                                8,055            4,260         7,599

Total assets less current liabilities                            16,511            5,987        16,276

Creditors: amounts falling due after more than                      (4)             (24)         (375)
one year

Provisions for liabilities and charges                             (84)             (52)          (83)

Net assets                                                       16,423            5,911        15,818

Capital and reserves

Called up share capital                                           2,311            1,496         2,305

Share premium account                                            12,267            3,770        12,248

Other reserves                                                      715              835           715

Profit and loss account                                           1,130            (190)           550

Equity shareholders' funds                                       16,423            5,911        15,818



Consolidated Cash Flow Statement
For the half year ended 30 November 2004
                                                              Unaudited        Unaudited          Audited
                                                           Half year to     Half year to          Year to
                                                                 30 Nov           30 Nov           31 May
                                                                   2004             2003             2004
                                                   Notes          £'000            £'000           £'000
Net cash inflow/(outflow) from operating                            234          (1,845)                4
activities
Returns on investments and servicing of finance                      58               12               42
Taxation                                                          (437)                -             (13)
Net capital expenditure and financial investment                   (92)             (78)            (331)
Acquisitions and disposals                              5         (446)                -          (6,409)
Equity dividends paid                                                 -                -            (150)
Cash outflow before use of liquid resources and                   (683)          (1,911)          (6,857)
financing
Management of liquid resources - amounts withdrawn                2,500                -          (2,500)
from/(placed on) bank deposit
Financing                                                          (31)             (23)            8,192
Increase/(decrease) in cash                                       1,786          (1,934)          (1,165)



Reconciliation of net cash flow to movements in net funds
For the half year ended 30 November 2004
                                                             Unaudited        Unaudited          Audited
                                                          Half year to     Half year to          Year to
                                                                30 Nov           30 Nov           31 May
                                                                  2004             2003             2004
                                                                 £'000            £'000           £'000
Increase/(decrease) in cash in the year                          1,786          (1,934)          (1,165)
(Decrease)/increase in bank deposits                           (2,500)                -            2,500
Decrease in debt and lease financing                                55               23               35
Change in net funds resulting from cash flows                    (659)          (1,911)            1,370
Acquisitions                                                         -                -            (410)


Movement in net funds in the year                                (659)          (1,911)              960
Opening net funds                                                4,286            3,326            3,326
Closing net funds                                                3,627            1,415            4,286



Notes


1.       All turnover derives from the Group's continuing activities comprising
Quadnetics Group plc, Quadrant Video Systems plc, Synectic Systems Limited, Look
CCTV Limited and Coex Limited.

2.       The tax charge for the period is based on the estimated rate of
corporation tax that is likely to be effective for the full year to 31 May 2005.

3.       An interim dividend of 1.0p per share, totalling £116,000 will be paid
on 4 March 2005 to shareholders on the register at 11 February 2005.

4.       Earnings per share

Basic, diluted and underlying earnings per share have been calculated on the
following earnings and numbers of shares:

                                   Earnings                            Earnings per share

                      Half year    Half year         Year to    Half year     Half year     Year to
                      to 30 Nov    to 30 Nov          31 May    to 30 Nov     to 30 Nov      31 May
                           2004         2003            2004         2004          2003        2004

                          £'000        £'000           £'000            p             p           p

Basic                       696          454           1,420          6.0           6.1        16.4
Exceptional item              -            -             240            -             -         2.8
Goodwill                    198           32             174          1.7           0.4         2.0

amortisation
Underlying                  894          486           1,834          7.7           6.5        21.2
Diluted                     696          454           1,420          6.0           5.7        16.3

                                                                     '000          '000        '000

Weighted average number of ordinary shares - basic                 11,527         7,478       8,633
calculation
Dilutive potential ordinary shares arising from share                  38           455          61
options
Weighted average number of ordinary shares - diluted               11,565         7,933       8,694
calculation


5.       Net outflows on acquisitions and disposals of £446,000 in the half year
ended 30 November 2004 arise from payment of deferred consideration for Coex
Limited and Look CCTV Limited.

6.       The interim accounts and the comparative figures are prepared on the
basis of the accounting policies set out in the financial statements of the
Group for the year ended 31 May 2004.

7.       The half year results have not been audited by the Group's auditors and
do not constitute statutory accounts. The comparative figures for the year ended
31 May 2004 have been abridged from the statutory accounts for the year ended on
that date. The Auditors' opinion on those accounts was unqualified and did not
contain any statements under section 237(2) or (3) of the Companies Act 1985.
The statutory accounts for the year ended 31 May 2004 have been filed with the
Registrar of Companies.

8.       Copies of this statement will be sent to shareholders and will be
available on the Group's website (www.quadnetics.com) and from Quadnetics Group
plc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL.


                                    - Ends -





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