RNS Number:6103U
Quadnetics Group PLC
26 January 2004


Press Release                                                    26 January 2004



                              Quadnetics Group plc


                   Proposed acquisition of Look CCTV Limited


          Placing of 3,031,368 new ordinary shares at a price of 265p



Quadnetics Group plc, a leader in the design, integration and control of
advanced CCTV and networked video systems, has agreed to acquire the entire
issued share capital of Look Closed Circuit TV Limited ("Look") for a maximum
consideration of #6.811 million.


The consideration comprises an initial cash consideration of #4.9 million,
unsecured loan notes of #349,650 and new ordinary shares valued at #1.06
million.  Deferred consideration of up to #0.5 million may be payable in cash
based upon Look's adjusted audited net assets as at May 2004.


Look is a UK leader in the development and supply of CCTV systems for bus
manufacturers and operators.  In the year to 31 January 2003, Look achieved a
turnover of #4.7 million with an operating profit of #1.2 million.


In order to fund the acquisition and provide additional working capital,
Quadnetics proposes to raise approximately #8 million (before expenses) by way
of a conditional placing of 3,031,368 new ordinary shares at 265p per share.  At
the same time 3,516,883 existing ordinary shares are being placed at the same
placing price.  The Board believes that introducing a greater number of
institutional investors will help increase liquidity in the Company's shares.


An Extraordinary General Meeting is to be held on 18 February 2004 to authorise
the issue and placing of new shares.


Russ Singleton, Chief Executive of Quadnetics Group plc, said: "Look has a
leading position within its field in the transport sector, and is a profitable
and well managed business.  The acquisition is a good strategic fit with our own
operations and will complement our existing activities.  Look has a similar
business ethos with a focus on customer service.  We are confident that Look
will benefit from Quadnetics' technical resources, infrastructure, and financial
and managerial resources."


For further information, please contact:
Quadnetics Group plc                                   Tel: +44 (0) 1527 850 080
Russ Singleton, Chief Executive
Email: r.singleton@quadnetics.com


Brewin Dolphin Securities                              Tel: +44 (0) 113 241 0130
Neil Baldwin


Media enquiries:


Bankside Consultants Limited                           Tel: +44 (0) 20 7444 4140
Peter Curtain / Ariane Vacher
Email: peter.curtain@bankside.com




                              Quadnetics Group plc


                 Proposed acquisition of Look CCTV Limited and

          Placing of 3,031,368 new ordinary shares at a price of 265p


                                  Introduction


Quadnetics Group plc is pleased to announce that it has agreed to acquire the
entire issued share capital of Look CCTV Limited ("Look").  Look develops and
supplies closed circuit television ("CCTV") systems, mainly to bus manufacturers
and operators.  In the year to 31 January 2003, Look achieved a turnover of #4.7
million with an operating profit of #1.2 million.  The Directors believe Look's
business will make a good strategic fit with Quadnetics' existing businesses and
are encouraged by the prospects for the Enlarged Group.  The consideration for
the Acquisition will amount to up to #6.811 million.  To facilitate the
Acquisition and to provide the Group with additional funds to continue the
development of its business, the Company is seeking to raise #8.033 million
(before expenses) through a conditional placing by Brewin Dolphin and J M Finn
of 3,031,368 New Ordinary Shares at a Placing Price of 265p per New Ordinary
Share.  At the same time 3,516,883 Existing Ordinary Shares are being placed on
behalf of Selling Shareholders at the same Placing Price.


The Interim Results for the six months ended 30 November 2003 were announced
today.  In this period, the Company achieved a profit of #648,000 before tax and
amortisation of goodwill on turnover of #7.05 million.


Background to and Reasons for the Acquisition


Quadnetics Group is a specialist electronic systems company, operating in the
areas of CCTV security and video network control. Over a number of years, it has
developed a leading position in large scale and complex surveillance systems in
the UK, especially for town centres and other public spaces.


The increasing demand of digital and networked systems, in which the Company
specialises, has led to strong organic growth of revenues and profit over recent
years. The Company's strategy is to build on the strengths of its technology and
market positions, by expanding its presence in wider geographic and end-user
applications.


The On-Bus CCTV Market


The Directors believe that Look is now the dominant supplier of digital CCTV
systems for use on buses in the UK.  This is a growing and attractive sector of
the market, in which Quadnetics does not currently compete, with distinct
specialised requirements because of space constraints on vehicles and the need
to withstand continuous jolts and vibration.


Research commissioned by the Company indicates that there are approximately
45,000 public service buses (excluding coaches) in the UK, of which around 5,000
are estimated to be currently fitted with CCTV.  Both the position of buses
within the transport network and the use of CCTV on buses are receiving active
support from various levels of government.  In particular, Transport 2010, the
UK Government's 10 year Plan for transport calls for a substantially increased
role for buses within public transport.  As an example, Transport for London is
promoting growth with subsidies, creation of more bus lanes in cities and
investment in infrastructure.  CCTV plays a role in this by increasing the
public perception of safety and security. It is now compulsory for all new buses
being brought into service within the Transport for London area to be fitted
with CCTV, and a retrofit programme for the existing fleet is due to be
completed by 2005.


For the bus operators, research indicates there is a strong economic incentive
to install CCTV resulting from the reduction in litigation claims where CCTV
footage is available to provide evidence of the circumstances surrounding road
traffic accidents or personal injury.  CCTV is seen by a significant number of
operators as not only increasing the safety of passengers and staff, but
providing a defence against the effects of the growing "compensation culture"
and rising insurance premiums.


Fit with Quadnetics Group


The Directors believe that the success of Look has been due mainly to a rigorous
focus on customer service, as well as an ability to integrate technology from
multiple suppliers with certain of their own proprietary applications, to
provide a complete solution to their customers. This is directly analogous to
the historical development of the Quadnetics business, where focus on customer
service and technical expertise has led to the development of specific
proprietary systems solutions that can then be further developed into products
with wider application.  For these reasons, the business ethos of Look should
fit well within the Group.


The Directors and the Vendors also believe that Look's business will benefit in
the future from being part of the Group in a number of ways, including:


-          direct access to the technical resources within Synectics to enable
further and continued differentiation from competitors;

-          availability of corporate infrastructure and financial and managerial
resources, currently lacking, to support further growth of the business;

-          ability to call on an established network of CCTV field engineering
and service personnel, and a 24-hour service call centre, to further strengthen
its customer service offering.


In its turn, the Company will benefit from acquiring a strong market position in
an attractive sector within its core strategic focus, and from Look's
substantial current profit base.


Growth  Opportunities


Around half of Look's turnover comprises 'new build' sales to bus manufacturers
and operators, with the balance relating to "retrofit" systems to existing buses
which do not have CCTV capability.  The Company's own research indicates that
there are over 20,000 existing buses which represent the potential market for
retrofit systems.  In addition, the Directors believe there is potential to
extend Look's sales reach into other transport areas such as taxis, trains and
tankers.


Information on Look


Look was founded in 1990 to provide CCTV systems initially to the leisure,
retail and manufacturing sectors.  As it has developed it has increasingly
focused upon supplying dedicated systems to bus operators and manufacturers
which currently make up the major part of its business.  Look is based in
Poulton-le-Fylde, near Blackpool in Lancashire from which it operates a
nationwide service.  A mobile team of engineers is based in Poulton and
installation/maintenance engineers are based in London and Scotland.


In recent years Look has established itself at the forefront of its sector, with
a proven track record  that has enabled it to generate strong growth and
profitability.  In the year to 31 January 2003 Look produced an audited profit
before tax of #1.2 million on turnover of #4.7 million. For the full Deferred
Consideration to become payable, Look will have to produce an adjusted audited
profit before tax (adjusted for dividends to the Vendors and certain additional
costs that may be imposed by Quadnetics following the Acquisition) in the 16
months to 31 May 2004 of #2.2 million.


The current managing director of Look, Alan Myers, has agreed to continue to
lead the business following the Acquisition, and has agreed to take a
substantial proportion of his share of the Consideration in Quadnetics shares.
He has undertaken to keep all of these shares for a minimum of 2 years and at
least half for 3 years.


Details of the Acquisition


The Company has agreed to purchase Look from the Vendors for a consideration of
up to #6.811 million, comprising #6.311 million of initial consideration and up
to #0.5 million of deferred consideration.  The initial consideration comprises
cash, payable upon Completion, of #4.9 million, unsecured loan notes of #349,650
and 400,000 New Ordinary Shares at the Issue Price, totalling #1.06 million.


Deferred consideration of #0.5 million in cash will be payable if Look's
adjusted audited net assets (as defined in the Acquisition Agreement) as at 31
May 2004 exceed #2.453 million.  To the extent that the adjusted audited net
assets are less than #2.453 million, the deferred consideration payable will be
reduced by #1 for every #1 shortfall.  If the adjusted audited net assets are
less than #1.953 million, no deferred consideration will be payable.


Completion of the Acquisition is conditional upon the service of a completion
notice by the Company to the Vendors.  This notice may be served at the absolute
discretion of the Company at any time up to a backstop date of 27 February 2004,
at which point the Vendors may choose to rescind the agreement (or agree with
the Company an extension of the time for service of the completion notice).  The
Company will only serve the completion notice if the Resolution is duly passed
at the EGM or any adjournment thereof.


Management Changes


Jean-Marc Cangardel and Jeremy Taylor have indicated their wish to leave the
Board following Admission.


Reasons for disapplying pre-emption rights


The Directors have given consideration to the most appropriate method of
conducting the fundraising given the circumstances.  The Board has balanced the
desire to allow Shareholders the opportunity to participate in the fundraising
against the time and cost of so doing, and the likely level of take up in such
an issue by those Shareholders.


In principle the Board would have preferred to offer Shareholders the
opportunity to participate in the fundraising by effecting it on a pre-emptive
basis, for example, by way of a rights issue.  However, it was decided that
seeking Shareholders' approval for disapplying pre-emption rights and conducting
the fundraising by way of a limited marketing exercise and Placing was a more
suitable course of action.  The principal reasons for this are as follows:


1.   The extra time and cost involved in conducting a rights issue would be
considerable as a full prospectus would have been required to be produced. This
would not only involve greater cost but it would also tie up significant
management time that the Board judges would be better allocated in delivering
the Group's strategy.


2.   The current stock market environment is attractive for a fundraising with
potential institutional investors.  It is uncertain whether this condition will
prevail over the longer time period required if the Company were required to
produce a prospectus.


3.   A small number of Shareholders currently own a majority of the issued share
capital of the Company.  The likely take up by these Shareholders in the context
of the size of fundraising would not be material, indeed several of the major
Shareholders are selling existing Ordinary Shares in the Placing as part of the
Proposals.  In addition the high level of share ownership by the Board and
related or associated parties (which totals 53.5 per cent. of the issued share
capital) has restricted the liquidity of the Company's shares.  The Board
believes it is in the Company's and its shareholders' best interests to
introduce a greater number of institutional investors to help increase liquidity
in the Shares.


Your Board has therefore resolved to propose a fundraising by way of a Placing,
and to seek approval of the Resolution which is needed to effect the Placing at
the EGM.


Application will be made to the London Stock Exchange for the New Ordinary
Shares to be admitted to trading on AIM.  It is expected that, conditional upon
the passing at the EGM of the Resolution necessary to effect the Placing,
dealings in the Placing Shares will commence on 19 and 20 February 2004 as set
out below.  The New Ordinary Shares will, when issued, rank pari passu with the
existing Ordinary Shares.  Dealing in the Consideration Shares is expected to
commence on 25 February 2004.


Placing Arrangements


The Company is seeking to raise #8.033 million, before expenses. The Company has
entered into the Placing Agreement with Brewin Dolphin and J M Finn under which
Brewin Dolphin and J M Finn have agreed, conditionally, to place the Placing
Shares with institutional and other clients of Brewin Dolphin and J M Finn.  The
Placing is conditional, inter alia, upon the passing of the Resolution at the
EGM and Admission of the Placing Shares to AIM.  The Placing Agreement contains
warranties and indemnities given by the Company pursuant to the Placing
Agreement in favour of Brewin Dolphin and J M Finn as to the accuracy of the
information contained in the documents connected with the Placing and other
matters relating to the Company and its business, and limited warranties from
the Selling Shareholders.


Brewin Dolphin and J M Finn  are conditionally placing 2,899,316 Existing
Ordinary Shares on behalf of the following shareholders : Carlton Communications
(320,000 shares),  Union Discount (500,000 shares) and Silverslaggen a.b.
(595,000 shares); and 140,000, 917,125, and 427,191 existing Ordinary Shares
respectively on behalf of Jeremy Taylor, Jean-Marc Cangardel, and Peter Rae,
Directors of the Company.


In addition certain employees of the Company, including Directors Nigel Poultney
and Russ Singleton, have agreed to sell 617,567 Ordinary Shares in the Placing.
These shares will be allotted and issued, following the exercise of options
under the Company's share option schemes, on or around 13 February 2004 and
these individuals have irrevocably committed to exercise these options before 13
February 2004, subject to the Placing Agreement not being terminated prior to
that date.


Admission of the Placing Shares is expected to occur in two tranches: of
2,652,500 new Ordinary Shares on 19 February and 378,868 new Ordinary Shares on
20 February.  The Placing has been structured this way to allow the first
tranche of shares to be eligible as investments under the Venture Capital Trust
and Enterprise Investment Scheme legislation.


Brewin Dolphin's and J M Finn's obligations under the Placing Agreement are
conditional upon, inter alia, Admission occurring not later than 8.30 am on 20
February 2004 or such later date (being not later than 5 March 2004) as Brewin
Dolphin, J M Finn and the Company may agree.


Under the terms of the Placing Agreement, the Company, the Selling Shareholders
and the Directors have given certain warranties and indemnities to Brewin
Dolphin and J M Finn.

The Company has also agreed to pay costs, charges and expenses relating and
incidental to the Placing. Brewin Dolphin and J M Finn have the right, in
certain circumstances, to terminate the Placing Agreement prior to, but not
after, Admission.


Use of Funds


The proceeds will be used for:


a)       satisfying the Initial Cash Consideration of #4.9 million, and
potentially the #0.5 million Deferred Consideration, in relation to the
Acquisition,

b)       expenses of the issue of #0.5 million,

and the balance for :

c)       working capital in connection with the development of the Group, and
redemption, when they fall due, of the loan notes to be issued to the vendors of
Look.


Extraordinary General Meeting


An Extraordinary General Meeting of the Company is to be convened to be held at
the offices of Brewin Dolphin, 5 Giltspur Street, London EC1A 9BD at 10.30 a.m.
on 18 February 2004. At this meeting the Resolution will be proposed to
authorise the Directors to allot shares up to a nominal amount of #1,008,125.80;
and to authorise the Directors to allot the Placing Shares for cash as if
section 89 (1) of the Act did not apply.


The Resolution is a special resolution.


Recommendations


As all the Directors except David Coghlan are selling shares as part of the
Proposals it is inappropriate for those directors to make a recommendation in
relation to the Resolution.


David Coghlan recommends that shareholders vote in favour of the Resolution. The
Directors and their associated parties have undertaken to vote in favour of the
Resolution in respect of their beneficial holdings which in, aggregate, amount
to 4,000,441 Ordinary Shares, representing approximately 53.5 per cent. of the
existing issued share capital of the Company.




                         FINANCIAL INFORMATION ON LOOK


Nature of Financial Information


The financial information contained in this Part 2 does not constitute statutory
accounts within the meaning of section 240 of the Act.


For the three years ended 31 January 2003 Look has filed abbreviated accounts
under section 246 of the Companies Act 1985, copies of which have been delivered
to the Registrar of Companies.  The financial information set out below has been
extracted, without material adjustment, from the full accounts prepared for and
delivered to shareholders in Look.  The auditors of Look have made reports under
section 235 of the Act in respect of the full and abbreviated statutory accounts
and such reports were unqualified and did not contain statements under section
237(2) or (3) of the Act.


Profit & Loss account for the year ended 31st January


                                     NOTE                   2003                 2002                 2001
Turnover                             1.2,2             4,666,657            1,730,118            1,108,326
Cost of sales                                        (2,834,760)          (1,030,499)            (586,503)

Gross profit                                           1,831,897              699,619              521,823
Administrative expenses                                (608,054)            (362,024)            (273,773)

Operating profit                     3                 1,223,843              337,595              248,050
interest receivable                                            -                   44                  499

Profit on ordinary activities
Before taxation                                        1,223,843              337,639              248,549

Taxation on profit
on ordinary activities               4                 (346,222)             (75,530)             (49,188)

Profit on ordinary activities after                      877,621              262,109              199,361
taxation
Dividends                                              (577,620)            (150,100)            (140,730)

Retained profit for the year                             300,001              112,009               58,631
Retained profit brought forward                          219,239              107,230               48,600

Retained profit carried forward                         #5l9,240             #219,239              107,231



BALANCE SHEET AS AT 31ST JANUARY


FIXED ASSETS                               NOTE          2003               2002                 2001

Tangible assets                           1.3,5        95,279             95,522               76,278

CURRENT ASSETS

Stocks                                      1.5       201,016             71,194               41,096

Debtors                                       6       982,743            450,423              196,502

Cash at bank and in hand                               18,618             49,940                   44

                                                    1,202,377            571,557              237,642

CREDITORS: amounts falling due
within one year                               7     (662,136)          (446,840)            (205,689)

Net Current Assets                                    540,241            124,717               31,953

Total Assets Less Current Liabilities                 635,520            220,239              108,231
Provisions for liabilities and charges              (115,280)           (25,950)                    -

NET ASSETS                                            520,240            220,239              108,231

CAPITAL & RESERVES

Called up Share Capital                       9         1,000              1,000                1,000

General Reserves                                      519,240            219,239              107,231

Shareholders' funds                                   520,240            220,239              108,231



Notes to the financial statements for the period ended 31st January 2003


1.         Accounting Policies


1.1        Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention, and
in accordance with the financial reporting standard for smaller entities
(effective June 2002)


1.2        Turnover

Turnover comprises the invoiced value of goods and services supplied by the
company, net of Value Added Tax and trade discounts.


1.3        Tangible fixed assets and depreciation


Tangible fixed assets are stated at cost less depreciation.


Depreciation is provided at rates calculated to write off the cost of fixed
assets,

less their estimated residual value, over their expected useful lives on the
following bases: -


Motor vehicles                             25% reducing balance basis
Alterations                                25% reducing balance basis
Office Equipment                           25% reducing balance basis
Rental Equipment                           50% Straight line basis


1.4        Development expenditure is written off during the period of
expenditure.


1.5        Stocks and work in progress are valued at the lower of cost and net
realisable value, after making allowance for slow moving and obsolete stock.
Cost includes all direct costs and an appropriate proportion of fixed and
variable overheads


2.         Turnover

In the period to 31st January 2003 the whole of the turnover and profit before
taxation is attributable to the one principal activity of the company, all
turnover relates to sales in the United Kingdom.


3.                   Operating profit

The operating profit is after charging: -


                                                                    2003               2002

Depreciation of tangible fixed assets                             27,948             21,699
Auditor's remuneration                                             2,400              2,200
Directors emoluments                                              12,507             10,044


4.                   Taxation

                                                                     2003               2002

UK current year taxation                                          354,150             76,500
(Overprovided) in previous year                                   (7,928)              (970)
                                                                  346,222             75,530


5.                   Tangible fixed assets


                           Alterations            Rental            Office          Motor          Total
                                               equipment         equipment       Vehicles

Cost at 1st Feb 2002             9,150            10,987            14,164        103,575        137,876
Additions                        1,922                 -             2,203          50000         54,125
Disposals                            -                 -                 -       (38,390)       (38,390)

At 31st Jan 2003                11,072            10,987            16,387        115,185        153,611

Depreciation

At 1st Feb 2002                  2,631            10,987             8,316         20,420         42,354
Charge for the year                  -                 -                 -       (11,970)       (11,970)
On disposals                     2,110                 -             2,013         23,825         27,948

At 31st Jan 2003                 4,741            10,987            10,329         32,275         58,332

Net book values
At 31st Jan 2003                 6,331                 -             6,038         82,910         95,279

At 31st Jan 2002                 6,519                 -             5,848         83,155         95,522


6.                   Debtors

                                                      2003                    2002
Due within one year
Trade debtors                                      977,185                 427,886
Other debtors                                        5,558                  22,537
                                                   982,743                 450,423


Included within other debtors is a loan to Mr J. Haworth of #592 (2001: #8,074)
The maximum amount of the loan during the year was #8,074.


7.         Creditors
                                                       2003                    2002
Amounts falling due within 1 year
Bank loans and overdrafts                             5,729                       -
Trade creditors                                     182,845                  86,632
Corporation tax                                     354,157                  76,500
Other taxes and social security costs               103,984                 130,718
Other creditors                                      15,421                 152,990
                                                    662,136                 446,840


8.         Provisions for liabilities and charges
                                                       2003                    2002
Provision for maintenance warranties
At 1st February 2002                                 25,950                       -
Arising during year                                  89,330                  25,950

At 31st January 2003                                115,280                  25,950


9.         Share Capital
                                               2003                     2002

Authorised - ordinary shares of #1            1,000                    1,000
each

Allotted, called up and fully paid
ordinary shares of #1 each                    1,000                    1,000


10.        Transactions with Directors

The company occupies premises owned by Mr  & Mrs  J. Haworth.  A normal
commercial rent of #8,250 (2001: #7,800) was payable during the year, and at the
balance sheet date no amount was outstanding.


11.        Controlling parties

The controlling parties are Mr  & Mrs  J. Haworth by virtue of their ownership
of 67% of the issued ordinary share capital of the company



                                    - Ends -




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