Companies: QDG   

Quadnetics, the designer of advanced CCTV and networked video systems guided by Russ Singleton, is buying AIM rival Protec in a recommended all-share deal. The offer, pitched at one new Quadnetics share for every 43 Protec shares, values the target at £9.9m. Singleton, chief executive, says both group’s supply and support large-scale and multi-site electronic security systems across a range of complementary markets, and argues that there’s ‘very little cross over on customers’, which means plenty of cross selling opportunities for the combined group. He also believes increased scale, the sharing of central costs and a more focused management approach will boost future competitiveness and growth. Quadnetics recently announced encouraging results for the year to end-May, with profits perking up from £1.9m to £2.3m, on improved turnover of £26.8m (£18.1m). Singleton admitted that the comparison was somewhat flattered by a first full year from the Look CCTV acquisition of early 2004, which boosted earnings and strengthened the group’s hand in the bus CCTV market. During the year, Quadnetics more than doubled sales of its Synetics security systems and software, winning a number of digital security systems contracts in the North American market against tough competition. In the UK, Singleton flagged up ‘evidence of renewed commitment’ to CCTV security from the public sector as well as a good pipeline of business for on-vehicle transport CCTV going forward. The global electronic security market has long-term appeal, and this deal gives Quadnetics (a Growth Company Investor recommendation at 142.5p back in 2003) real scale within it. If exposed, stay in. Hold.