Companies: QDG   

Investors who held Quadnetics on our advice have seen the price spike dramatically from 220p to current levels and further upside remains with order books looking very healthy.

Interims to November from the CCTV and networked video systems group were strong, with turnover rising by 74% to £30.9m, from which chief executive Russ Singleton delivered a 91% ‘underlying’ pre-tax profits surge to £1.8m. The dividend was lifted from 1.5p to 2p.

The figures enjoyed a full six-month turn from the £10m October 2005 Protec acquisition, with operational benefits from that ‘highly complementary’ deal pushing gross margins to 32% (29%). ‘Protec gave us access to sectors such as defence, through its military activities, as well as prisons and petrochemicals,’ enthused Singleton, who lauded the benefits of the group’s new ‘single brand, single focus and single management structure’.

He is focusing efforts on sectors where the group has scale and a strong competitive position. Security services arm Quadrant Security is scoring healthy sales and profits growth and has maintained its leadership in prisons and secure hospitals, where a number of large new orders have been won. This business has benefited from a resurgent town centre CCTV sector and is seeing encouraging results in the onshore petrochemical sector, and greater scale is helping it  secure higher-margin recurring work.

Meanwhile, security technology outfit Synectics delivered a strong result despite delays to two large casino contracts (a sector where further large wins are expected), which will now be delivered in the second half. With the electronic surveillance systems market continuing to burgeon and the move from analogue to digital creating demand for new products and services, Quadnetics is not for selling. Product acquisitions, or deals in related services areas, could also feature. Hold.