Trading Statement

2nd May 2008
 
Quadnetics Group plc
 
Trading Update
 
Quadnetics Group plc ("the Company") provides the following update on
trading and new contract awards.
 
In recent weeks, Quadnetics has received a number of important orders
and  letters  of  intent,  including  a  3-year  security  management
contract for a major new retail customer for in excess of £1 million,
and surveillance systems for casinos in both Europe and North America
totalling around £2 million. Order intake overall in the second  half
so far has been strong,  with the total firm  order book at 31  March
standing at £31 million,  an increase of 14%  since the beginning  of
the current  financial year.  However, whilst  some segments  of  our
business have continued to perform well, in particular UK  integrated
systems and North American gaming,  other parts have performed  below
our expectations.
 
In our interim statement on 6 February 2008, we drew attention to the
substantial weighting of  expected product orders  towards the  final
months of the year, and therefore the Company's caution with  respect
to the  risk  of profit  slippage  from delayed  receipt  of  orders.
Despite the  orders noted  above, a  number of  other large  expected
orders for  Synectics  products  have  been  or  may  be  delayed  by
customers, and are now anticipated early next year.
 
In  addition,  recent  trading  within  the  Synectics   surveillance
technology division  has  been  adversely affected  by  two  factors.
Firstly, in the Defence and Offshore Oil & Gas applications  sectors,
Synectics has  experienced  cost overruns  leading  to  significantly
reduced margins  on two  large  contracts, and  knock-on  operational
impacts. The issues leading to  these cost overruns have been  firmly
addressed. Management changes have been made and process improvements
implemented  in  both  areas.   The  relevant  contracts  are   still
profitable, and no further negative impacts are anticipated.
 
Secondly, as reported at the time of the interim results, trading in
our core network surveillance products sector has been held back by
delays in completing development of Synectics' new specialist digital
video recorder, which will mean lower than expected customer
deliveries of these products in the second half, and consequently
reduced margins in this area.  The development issues have now been
resolved and we are pleased to report that trials of the new products
are underway with customers in live environments, and the reception
so far has been very positive. This is the core of a landmark new
product family for Synectics that is expected to produce substantial
sales and margin growth for the Company for several years.
 
Overall, the  Company  expects to  achieve  solid organic  growth  in
turnover for  the year  of around  20% compared  with last  year,  to
around £80 million. Underlying profits*, while still healthy, are now
likely to  be below  market expectations.  Net cash  at year  end  is
expected to be around £7 million.
 
Trading for the final quarter of the current financial year looks set
to be strong. With the order  book continuing to grow well, and  with
Synectics' new product suite now coming on line, the Company  expects
to have excellent momentum into  2008/9, and a considerably  improved
bottom line performance for next year as a whole.
 
 
*profit before tax, exceptional items, goodwill and share-based
payments charges
 
 

For further information, please contact:                          
 
Quadnetics Group plc                      Tel: [phone]
David Coghlan (Chairman)                                          
Russ Singleton (Chief Executive)
                                                                  
Brewin Dolphin                           Tel: [phone]
Neil Baldwin                                                      
                                          
Buchanan Communications                  Tel: [phone]
Tim Anderson/Isabel Podda                                         

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