Preliminary Results

Press Release 19 September 2006


Quadnetics Group plc

Preliminary Results for the year ended 31 May 2006
Quadnetics Group plc, a leader in the design, integration and control
of advanced CCTV and networked video systems, reports its preliminary
results for the year ended 31 May 2006.
Highlights

* Successful acquisition of Protec plc, creating leading independent
  CCTV security services provider in the UK
* Consolidation of enlarged Quadnetics Group into two focused
  electronic security business units with significant scale
* Investment in launch of new US subsidiary for local support of
  Synectics security systems technology
* Strengthened senior management team and group infrastructure to
  support growth
* Turnover £49.6 million (2004/5: £26.8 million), with 7 months
  contribution from Protec
* Profit before tax, exceptional costs and goodwill amortisation up
  36% to £3.6 million; underlying earnings per share up 21% to 24.2p
  (again benefiting from a reduced tax rate)
* Net cash £8.9 million
* Order books up 30% at year end
* Proposed final dividend 3.5p per share, making 5.0p for the full
  year (up 25%)
* Overall, a very satisfactory year, which has positioned the Group
  for further growth in a large and attractive market


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

"Over the last 12 months we have transformed Quadnetics.  Through the
successful acquisition and integration of Protec plc, Quadnetics  has
become a major CCTV security services business in the UK with  market
leading positions  in a  number  of customer  sectors. Backed  up  by
significant financial resources  and an enviable  management team  we
now have a great platform in place to move the Group forward"

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]
Martin Sutton
Email: [e-mail]

Chairman's Statement

Overview

In our last interim results statement, I commented that the
acquisition of Protec in November 2005 was a crucial development for
Quadnetics that would result in a doubling of the Group's sales
revenues as well as, more importantly, allowing us to consolidate and
integrate our activities into two focused security systems
businesses, Quadrant Security Group and Synectic Systems Group, each
with scale and significant market presence. I am happy to report that
the integration of these businesses and the post-acquisition
financial performance of the enlarged Group have been fully in line
with the Board's expectations.

Results and Dividend

In the year to 31 May 2006, Quadnetics produced a profit before tax,
exceptional costs and goodwill amortisation of £3.6 million (2004/5:
£2.7 million) on consolidated turnover of £49.6 million (2004/5:
£26.8 million). These results include seven months' contribution from
the Protec acquisition. Underlying earnings per share were ahead 21%
at 24.2 p (2004/5: 20.0p) including the benefit of a reduced tax rate
of 8% (2004/5: 13%) stemming mainly from useable tax losses in the
acquired Protec businesses.

Since the continuing and acquired businesses have been managed as
integrated activities for most of the second half, like-for-like
comparisons of performance against the previous year inevitably
involve some arbitrary cost allocations. Nevertheless, the broad
picture is that the Group's continuing activities produced
consolidated turnover growth of around 12%, on which underlying
operating profit (that is, operating profit before exceptional items
and goodwill amortisation) declined slightly to just under £2.5
million. This broadly static profit figure from continuing activities
stems primarily from reduced activity levels and margins in the UK
town centre security sector, and the additional costs associated with
establishing infrastructure for Synectics to support its growth in
North America. These were offset in part by increased turnover and
gross margins from Synectics. The performance of the individual
business segments is discussed in more detail below.

During the year, exceptional costs of £965,000 were incurred relating
to Protec, principally the cost of redundancies and provision for the
closure of one operating site following acquisition. A further
exceptional cost of £300,000 was provided against a claim for
dilapidations relating to a long lease held by a business sold by
Quadnetics many years ago.

Net cash on hand at the year end was £8.9 million (2005: £3.6
million). The Board is proposing a final dividend of 3.5p, making a
total dividend of 5p for the full year, an increase of 25% on the
amount distributed for the prior year.

Business Review

Quadrant Security Group ("QSG"), our security services business,
designs, installs and maintains electronic security systems, and
provides security monitoring and facilities management services, to
clients in the local government, retail, transport, police, prisons,
petrochemical, large corporate, military and specialist high security
sectors. It operates primarily in the UK, Middle East and the
Republic of Ireland. QSG has annualised current run-rate sales of
around £50 million and is significantly profitable. We believe it is
now the UK's largest independent CCTV security company.

On a like-for-like basis, the Quadnetics continuing businesses within
QSG increased turnover in the year by 8% to £18.3 million (2004/5:
£17.0 million). Underlying operating profit declined to £1.8 million
(2004/5: £2.1 million). Part of the profit decline arose from
deliberate decisions to improve the quality and growth prospects of
the businesses through, for example, long term contracts with large
customers that initially carry lower margins.  The major factor,
however, was temporarily reduced activity, and consequent tighter
margins, in the UK local government CCTV sector. As anticipated in
our interim report, this area of business improved in the second half
and the positive momentum continues.

The acquired Protec security services activities have performed well
since acquisition, particularly in the area of prisons and other
government high security applications. Planned integration benefits
were successfully realised, most notably in cost reductions from
consolidated purchasing. Further benefits are expected to arise in
the current year from cross-selling of services in different customer
segments, and from the marketing and sales advantages of the
business' significantly increased scale.

Synectics is the Group's security surveillance products and software
business. Over recent years, Synectics CCTV recording and control
systems have evolved to become what we believe is the industry
standard for public space CCTV systems in the UK and some overseas
markets, particularly South Africa. This strength has led on to
success in other market sectors, including police, financial
services, casinos, marine and offshore oil and gas. Protec's special
projects surveillance business has been integrated into Synectics to
capitalise on expansion opportunities in a further attractive market
sector that is a natural fit for Synectics' products and systems
expertise.

The continuing businesses within Synectics grew turnover for the year
by 25% to £12.9 million (2004/5: £10.3 million), and gross profit by
34% to £5.5 million (2004/5: £4.1 million). Growth in underlying
operating profits, however, was constrained to 15% (£1.4 million in
2005/6 versus £1.2 million in 2004/5), due to the costs of operating
the new US subsidiary and of additional research and development
expenditure for product enhancements required for the US market.

These investments in North America are now generating the sort of
customer response we had hoped for, and further substantial orders
are expected in the first half of the current year.

Outside North America, Synectics continued to achieve good sales
growth during 2005/6 in most of its traditional markets, including
the UK, Europe, South Africa and the Middle East.

Group Objectives

In Quadnetics' last interim statement I set out a summary of our
reasons for acquiring Protec and some background to the overall
objectives the Board has set for the enlarged Group. Developments
since have confirmed the Board's confidence in these objectives, and
our assessment of the opportunities and risks that accompany them, so
it is worth repeating them here.

Quadnetics' strategy has two principal objectives:

-          To maximise the growth opportunities of Synectics' digital
CCTV control systems and recording technology/solutions; and

-          To become one of the UK's leading electronic security
services companies through creating and building on market leadership
positions in key vertical customer sectors (and thereby increasing
penetration of Synectics' products into those sectors).

The acquisition of Protec will enable us substantially to accomplish
the second objective. In addition, the creation of the integrated
Quadrant Security structure should facilitate solid future profit
growth through continuous operational improvements in a single
business of market-leading scale. Obviously, there will be challenges
to overcome, requiring commitment, skill and clear direction, but the
path is reasonably well defined. We believe we now have the
management and resource requirements in place to achieve the new
goals the Board will be setting for this activity.

Synectics involves a potentially substantial growth opportunity on a
global scale and, of course, corresponding risks inherent in any
relatively new technology-based business. The essence of Synectics'
success to date has been to deliver innovative surveillance systems
that provide, in an integrated Synectics control environment, all the
benefits of the latest digital CCTV image storage and retrieval
technology, while enabling customers an upgrade path that protects
their investment in expensive installed CCTV cameras and
communications infrastructure.

In the US in particular, the market for large-scale digital CCTV
systems is new, rapidly evolving and potentially very large. The
market now has the attention of a number of the world's largest
electronics and information technology companies, as well as dozens
of smaller competitors. The Board believes that, in order to succeed,
Synectics must focus rigorously on its specific areas of experience
and technical competitive advantage in two sectors: casinos and
public space surveillance. Synectics has the advantages of a leading
position in its UK home market, technical solutions (especially
systems control software) we believe to be as good as anything
available, and successful reference sites in some of the largest
implementations to date of digital CCTV in casinos in North America.
This is an excellent base to build from.

People

In the face of potentially disruptive change in most areas, the
commitment, enthusiasm and energetic common sense demonstrated during
the year by the vast majority of employees in the enlarged Group have
been truly heartening. In large measure their efforts have been
responsible for the excellent progress the Group has made, and I am
delighted to pass on the Board's very sincere thanks.

The Group's senior management has been strengthened by a number of
new appointments, coming both from internal promotion and external
recruitment. Under our new structure, we believe the team now in
place is well capable of leading the Group through the next stage of
its development.

Quadnetics' Board expanded significantly last year. We were joined by
Bob Westcott and Dennis Bate as independent non-executive directors,
and by two new executive directors, David Orme as Operations
Director, and Glenn Robinson as Technical and Business Development
Director. The diversity of relevant experience and robust viewpoints
this group brings to the Board are proving of great benefit to us.

Outlook

Overall, 2005/6 was a very satisfactory year, which has positioned
Quadnetics for further growth. The Group has entered its current
financial year with confidence and a real sense of momentum.

Aggregate order books for the  continuing and acquired businesses  at
31 May 2006 were approximately  30% higher than at the  corresponding
date a year earlier.

Quadnetics  has   created  significant   opportunities  through   the
combination of strong  positions as  a service  provider in  specific
customer sectors, and market leading Synectics technology in  certain
key elements of security systems solutions. We plan to capitalise  on
these opportunities by increasing product development expenditure for
Synectics, both to  broaden the  product range  and to  enable it  to
scale more easily.

With strong order books and increased earnings visibility across  our
businesses, the  Board expects  further  good progress  in  financial
results for the current year.


David Coghlan

19 September 2006


















Consolidated Profit & Loss Account
For the year ended 31 May 2006

                         Before
                    exceptional
                      items and Exceptional                        Restated
                       goodwill        items     Goodwill     2006     2005
                   amortisation     (note 2) amortisation    Total    Total
             Notes        £'000        £'000        £'000    £'000    £'000

Turnover       1
Continuing               29,987            -            -   29,987   26,761
operations
Acquisitions             19,655            -            -   19,655        -
Total                    49,642            -            -   49,642   26,761
turnover
Cost of                (34,495)            -            - (34,495) (18,107)
sales
Gross profit             15,147            -            -   15,147    8,654
Net
operating              (11,680)        (965)        (740) (13,385)  (6,528)
expenses
Operating
profit
Continuing                2,452        (260)        (492)    1,700    2,126
operations
Acquisitions              1,015        (705)        (248)       62        -
Total
operating                 3,467        (965)        (740)    1,762    2,126
profit
Exceptional
item in
respect of a
subsidiary     3              -        (300)            -    (300)        -
disposed of
in a
previous
year
Net interest                147            -            -      147      139
receivable
Profit on
ordinary
activities                3,614      (1,265)        (740)    1,609    2,265
before
taxation
Tax charge
on ordinary    4                                             (178)     (48)
activities
Profit for
the                                                          1,431    2,217
financial
year

Basic
earnings per   6                                             10.4p    19.2p
ordinary
share
Diluted
earnings per   6                                             10.4p    19.1p
ordinary
share


All activities are continuing.
In 2005 net operating expenses included amortisation of goodwill
amounting to £396,000 and the tax charge on ordinary activities
included an exceptional tax credit of £302,000.













Consolidated Balance Sheet
31 May 2006

                                                             Restated
                                                      2006       2005
                                            Notes    £'000      £'000
Fixed assets
Intangible assets                           7       16,925      9,183
Tangible assets                                      2,049      1,280
                                                    18,974     10,463
Current assets
Stocks                                               4,281      3,040
Debtors                                             19,904      9,896
Cash at bank and in hand                             8,940      3,562
                                                    33,125     16,498

Creditors: amounts falling due within
one year                                          (21,758)    (7,527)

Net current assets                                  11,367      8,971

Total assets less current liabilities               30,341   19,434

Creditors: amounts falling due after
more than one year                                       -        (3)

Provisions for liabilities and charges      8      (1,763)    (1,102)

Net assets                                          28,578     18,329

Capital and reserves

Called up share capital                     9        3,263      2,341

Share premium account                       9       13,634     12,622

Merger reserve                              9        9,565          -

Other reserves                              9      (1,307)        715

Profit and loss account                     9        3,423      2,651

Equity shareholders' funds                          28,578     18,329




Consolidated Cash Flow Statement
For the year ended 31 May 2006

                                                       2006      2005
                                               Notes  £'000     £'000

Net cash inflow from operating activities             3,246     1,939
Returns on investments and servicing of                 132       107
finance
Taxation                                              (299)   (1,398)
Net capital expenditure and financial                 (238)     (497)
investment
Acquisitions                                    10    3,220     (867)
Equity dividends paid                                 (573)     (462)
Cash inflow/(outflow) before use of liquid            5,488   (1,178)
resources and financing
Management of liquid resources                            -     2,500
Financing                                             (110)        29
Increase in cash                                      5,378     1,351


Reconciliation of Net Cash Flow to Movements in Net Funds
For the year ended 31 May 2006

                                                 2006      2005
                                                £'000     £'000

Increase in cash in the year                    5,378     1,351
Decrease in bank deposits                           -   (2,500)
Decrease in debt and lease financing              395        63
Change in net funds resulting from cash flows   5,773   (1,086)
Acquisitions                                     (53)         -
Movement in net funds in the year               5,720   (1,086)
Opening net funds                               3,200     4,286
Closing net funds                               8,920     3,200


Statement of Total Recognised Gains and Losses
For the year ended 31 May 2006

                                                        2006     2005
                                                       £'000    £'000
Total gains recognised since the last annual
report:
Profit for the financial year                          1,431    2,217
Other recognised gains and losses relating to the
year -
currency translation adjustment                          (9)        -
                                                       1,422    2,217




Reconciliation of Movements in Shareholders' Funds
For the year ended 31 May 2006

                                                             Restated
                                                      2006       2005
                                                     £'000      £'000

Profit for the financial year                        1,431      2,217
Dividends                                            (573)      (462)
                                                       858      1,755
Other recognised gains and losses relating to
the year -
currency translation adjustment                        (9)          -
Issue of shares                                      9,477        410
Share buy-back                                        (77)          -
Net movement in shareholders' funds                 10,249      2,165
Opening shareholders' funds (originally
£17,978,000 (2005: £15,818,000) before adding
prior year adjustment of £351,000 (2005:
£346,000)) in respect of dividends                  18,329     16,164
Closing shareholders' funds                         28,578     18,329


Notes
1.        All turnover derives from the Group's continuing activities
comprising Quadnetics Group plc, Quadrant Video Systems plc, Synectic
Systems Limited, Synectic Systems, Inc., Look CCTV (trading as a
division of Quadnetics Group plc) and Coex Limited, together with
that of the businesses of Protec plc, trading as SSS Management
Services Limited, SDA Protec and Falcon Protec, which were acquired
in November 2005 (see note 10). The turnover and results of the
Protec businesses are shown under Acquisitions within these
statements.
2.        Exceptional operating expenses arise in relation to the
restructuring of the Group's business as a result of the acquisition
of Protec plc.
3.        The Company has made provision of £300,000 for
dilapidations and other costs in relation to its liabilities as a
former lessee of a property. The property was, until recently,
occupied by a former subsidiary which was sold in 1996, and which has
now gone into administration.
4.        The Group has tax losses available to be carried forward
for offset against the future taxable profits of certain group
companies amounting to approximately £2.7 million (2005: £1.1
million). These tax losses will reduce the corporation tax payable in
future years until the companies concerned achieve sufficient taxable
profits to utilise the losses. A deferred tax asset in respect of
part of these losses, amounting to £0.5 million, has been recognised
in the year as the Group believes that there will be future taxable
profits against which the losses will be relieved.
5.        A final dividend of 3.5p per share, totalling approximately
£542,000 will be paid on 7 December 2006 to shareholders on the
register on 10 November 2006, subject to approval at the Company's
Annual General Meeting.
In accordance with FRS21 and the Companies Act 1985, dividends are no
longer presented on the face of the profit and loss account but are
charged directly to reserves when they are paid or approved by
shareholders. As a result, comparative figures have been amended to
exclude the 2004/5 dividends of £467,000 from the face of the profit
and loss account, and to make a prior year adjustment of £351,000 to
exclude from reserves the proposed 2004/5 final dividend.






6.        Earnings per Ordinary share are as follows:

                                                2006    2005
                                               Pence   Pence
                                                 per     per
                                               share   share
Basic earnings per ordinary share               10.4    19.2
Diluted earnings per ordinary share             10.4    19.1
Underlying earnings per ordinary share          24.2    20.0
Underlying diluted earnings per ordinary share  24.2    19.9


The calculation of basic earnings per ordinary share is based on the
profit after taxation for the year of £1,431,000 (2005: £2,217,000)
and on 13,781,617 shares, being the weighted average number of shares
in issue and ranking for dividend during the year (2005:11,546,335).
The calculation of diluted earnings per ordinary share is based on
the profit after taxation for the year of £1,431,000
(2005: £2,217,000) and on 13,789,163 shares, being the weighted
average number of shares that would be in issue after conversion of
all the dilutive potential ordinary shares into ordinary shares
(2005:11,590,130).

                                              Weighted
                                               average   Earnings per
                             Profit after    number of       ordinary
                                      tax     ordinary          share
                                    £'000       shares    p per share
Year ended 31 May 2006
Basic earnings per ordinary         1,431   13,781,617           10.4
share
Dilutive potential ordinary
shares arising from share               -        7,546              -
options
Diluted earnings per                1,431   13,789,163           10.4
ordinary share
Year ended 31 May 2005
Basic earnings per ordinary         2,217   11,546,335           19.2
share
Dilutive potential ordinary
shares arising from share               -       43,795          (0.1)
options
Diluted earnings per                2,217   11,590,130           19.1
ordinary share


The calculation of underlying earnings per ordinary share, which the
Directors consider gives a useful additional indication of the
underlying performance of the Group, is based on the profit after
taxation for the year, but before deducting exceptional items (after
adjusting for their impact on the tax charge for the year) and
amortisation of goodwill, of £3,338,000 (2005: £2,311,000) and on
13,781,617 shares, being the weighted average number of shares in
issue and ranking for dividend during the year (2005:11,546,335).


                                              Weighted
                                               average   Earnings per
                             Profit after    number of       ordinary
                                      tax     ordinary          share
                                    £'000       shares    p per share
Year ended 31 May 2006
Basic earnings per ordinary         1,431   13,781,617           10.4
share
Exceptional items                   1,265            -            9.1
Impact of exceptional items          (98)            -          (0.7)
on tax charge for the year
Goodwill amortisation                 740            -            5.4
Underlying earnings per             3,338   13,781,617           24.2
ordinary share



Year ended 31 May 2005
Basic earnings per ordinary share      2,217   11,546,335    19.2
Exceptional items - tax credit         (302)            -   (2.6)
Goodwill amortisation                    396            -     3.4
Underlying earnings per ordinary share 2,311   11,546,335    20.0


The calculation of underlying diluted earnings per ordinary share is
based on the profit after taxation for the year, but before deducting
exceptional items (after adjusting for their impact on the tax charge
for the year) and amortisation of goodwill of £3,338,000 (2005:
£2,311,000) and on 13,789,163 shares being the weighted average
number of shares that would be in issue after conversion of all the
dilutive potential ordinary shares into ordinary shares
(2005:11,590,130).


                                              Weighted
                                               average   Earnings per
                             Profit after    number of       ordinary
                                      tax     ordinary          share
                                    £'000       shares    p per share
Year ended 31 May 2006
Underlying earnings per             3,338   13,781,617           24.2
ordinary share
Dilutive potential ordinary
shares arising from share               -        7,546              -
options
Underlying diluted earnings         3,338   13,789,163           24.2
per ordinary share
Year ended 31 May 2005
Underlying earnings per             2,311   11,546,335           20.0
ordinary share
Dilutive potential ordinary
shares arising from share               -       43,795          (0.1)
options
Underlying diluted earnings         2,311   11,590,130           19.9
per ordinary share


7.        Intangible assets include £8.5 million of goodwill arising
on the acquisition of Protec plc.
8.        Provisions for liabilities and charges comprises provision
for deferred consideration payable in respect of the trade and assets
of Alphapoint, Inc in May 2005 (£1.1million), restructuring
provisions (£0.2 million) and property provisions (£0.5 million).















9.        Movements on shareholders' funds in the period are as
follows:

                                                        Profit
                     Share    Share   Merger    Other and loss
                   capital  premium  reserve reserves  account  Total
                     £'000    £'000    £'000    £'000    £'000  £'000
b/f at 1 June
2005                 2,341   12,622        -      715    2,300 17,978
Restatement of
dividends                -        -        -        -      351    351
Restated             2,341   12,622        -      715    2,651 18,329
Profit after
tax for the
year                     -        -        -        -    1,431  1,431
Dividends paid           -        -        -        -    (573)  (573)
Issue of shares
to Protec share
option holders          15      130        -        -        -    145
Issue of shares
to Employee
Share Scheme           168    1,862        -  (2,030)        -      -
Transfer
between
reserves in
respect of
previous
acquisition              -    (980)      980        -        -      -
Consideration
for acquisition
of Protec plc
 - shares
issued                 623        -    7,160        -        -  7,783
 - shares to be
issued                 124        -    1,425        -        -  1,549
Share buy back         (8)        -        -        8     (77)   (77)
Currency
translation
adjustment               -        -        -        -      (9)    (9)
                     3,263   13,634    9,565  (1,307)    3,423 28,578


During the year ended 31 May 2006 842,000 ordinary shares of the
Company were allotted to the Quadnetics Group Employee Share Scheme
at a value of £2.03 million with the substantial majority of the
funding for subscription for these shares provided as an
interest-free loan by the Company. The value of own shares held
within the Quadnetics Group Employee Share Scheme has been deducted
from shareholders' funds and the number of shares has been excluded
from the earnings per share calculations.
The Merger reserve has been created in accordance with s131 of the
Companies Act 1985 whereby the premium on Ordinary shares in the
Company issued to acquire shares has been credited to the Merger
reserve rather than the Share premium account.

10.     On 9 November 2005 the Offer made by Brewin Dolphin
Securities Ltd on behalf of the Company for Protec was declared
wholly unconditional, and therefore the results of Protec and its
subsidiaries have been included in the results with effect from that
date.
Under the terms of the offer Protec shareholders would receive one
new Ordinary share of 20p each in Quadnetics Group plc for every 43
Ordinary shares of 1p each in Protec plc.
On 8 February 2006 notice was given to those Protec shareholders who
had not accepted the Offer informing them that Quadnetics would
compulsorily acquire their Protec shares by applying sections 428 to
430F of the Companies Act 1985. As a result the Company had issued
3,113,150 ordinary shares, valued at £2.50 each, to former holders of
Protec shares as at 31 May 2006. In addition, at that date, a further
619,711 ordinary shares remained to be issued to Protec shareholders
who had irrevocably accepted the Offer, thus transferring beneficial
interest in their Protec shares to the Company,  but who had not at
that time perfected their acceptance by submitting valid share
certificates to the Company's registrars.
Net cash inflows from acquisitions comprise bank balances acquired in
Protec of £4.1 million less acquisition expenses of £0.5 million. In
addition a payment of £350,000 was made during the year in settlement
of loan notes issued as consideration for Look Closed Circuit TV
Limited in February 2004.
11.     The preliminary results for the year have not been audited by
the Group's auditors and do not constitute statutory accounts. The
comparative figures for 2005 have been abridged from the statutory
accounts for the year ended 31 May 2005. The auditors' opinion on
these 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 2005 have been filed with the
Registrar of Companies.
12.     Copies of this preliminary statement are available from
Quadnetics Group plc, Haydon House, 5 Alcester Road, Studley,
Warwickshire B80 7AN or on the Company website at www.quadnetics.com.

                              - Ends -

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