NDS Group plc Announces Strong Results for the Fiscal Year Ended June 30, 2007

NDS Group plc Announces Strong Results for the Fiscal Year Ended June 30, 2007

HIGHLIGHTS

* Revenues for fiscal 2007 up 18% to $709.5 million.

* Operating income for fiscal 2007 up 23% to $160.4 million.

* Diluted net income per share up 34% to $2.33 per share.

* 75.4 million active digital TV smart cards.

* 61.8 million cumulative middleware clients deployed.

* 7.3 million cumulative DVR clients deployed.

NEW YORK and LONDON, Aug. 7 /PRNewswire-FirstCall/ -- NDS Group plc ("NDS" or the "Company") (NASDAQ:NNDS), a majority-owned subsidiary of News Corporation that supplies open end-to-end digital technology and services to digital pay-television platform operations and content providers, announced today its results for the fiscal year ended June 30, 2007.

Commenting on NDS's performance, Dr. Abe Peled, Chairman and Chief Executive Officer of NDS said, "The transition to digital pay-television across the world is continuing to accelerate, changing the way people are entertained and informed worldwide. It is fueled by declining hardware prices for the underlying technologies and increasingly technology-literate and demanding consumers.

"NDS products and services that secure and enable the digital distribution of television are at the heart of this rapid change in the media landscape. We are pleased with our outstanding security record and with the adoption of our new technologies by our current customers, the most prominent being our DVR technology, now being shipped in 14 accounts across the world, with the fiscal 2007 number close to double the fiscal 2006 number. We are also gratified to see our investments in winning new platforms in Eastern Europe, China and India starting to translate into significant revenues and subscriber additions. Our middleware products have continued to gain acceptance in the marketplace and to outpace the competition. In addition, our Orbis subsidiary has performed very well, introducing new games and winning new customers.

"We have also made progress towards our vision of the convergence of broadcast and broadband delivery with the introduction of a number of pioneering new products, like VG DRM Key, as well as laid the foundation for integration in the home with the acquisition of Jungo. NDS continues to invest in better support for our customers, improving our current technologies and the development of new products and services that will enable our customers to benefit from the opportunities arising form the rapidly changing media distribution landscape."

Alex Gersh, Chief Financial Officer, commented, "2007 was another year of significant accomplishments for NDS. As we continue to invest additional

resources to support our customers and develop new products, we stay focused on achieving our financial goals."

KEY FINANCIAL MEASURES

Fiscal year ended June 30,
2007 2006

Revenue (in thousands) $709,492 $600,123
Operating income (in thousands) $160,356 $130,729
Operating margin 22.6% 21.8%
Net income (in thousands) $135,727 $100,950
Diluted net income per share $2.33 $1.74

KEY NON-FINANCIAL MEASURES

Fiscal year ended June 30,
2007 2006
Smart card deliveries (in millions)
Quantity delivered in period 26.3 24.4

Authorized cards (in millions)
Net additions 10.4 8.3
At end of period 75.4 65.0

Middleware clients deployed (in millions)
Middleware clients deployed in period 18.2 21.2
Acquisitions (1) 2.0 -
Cumulative deployments, end of period 61.8 41.6

DVR clients deployed (in millions)
DVR clients deployed in period 3.8 2.1
Cumulative deployments, end of period 7.3 3.5

Employees
Full-time equivalents, end of period 3,572(2) 2,989

(1) Acquisitions relates to OpenRG residential gateway middleware
devices, which were developed and deployed by Jungo and that were
recognized at the time of the acquisition of Jungo.

(2) Includes 136 employees of Jungo, acquired on December 31, 2006.

KEY DEVELOPMENTS IN THE FOURTH QUARTER
* NDS and KT, a leading telecommunications company in Korea, announced
that NDS has been selected by KT as the provider of content protection
solutions for KT's "Mega TV on Demand" television service via broadband.
The new Mega TV service will offer a multitude of video-on-demand
programming services and a range of interactive TV services, including
an electronic program guide developed by NDS.

* NDS announced that it signed a contract with Inteleca, a triple-play
operator in Siberia, Russia, to provide a VideoGuard Express(TM) system
for the planned launch of Inteleca's digital cable television services
in the region.

* Orbis, an NDS company and a leading provider of interactive gaming and
betting solutions, signed an agreement with Sportech, the owner of
Littlewoods Gaming, for Sportech to use Orbis' OpenBet(TM) platform and
Orbis' games content. Orbis also migrated Australian-based Centrebet
onto the OpenBet platform.

FINANCIAL REVIEW

Total revenue for the fiscal year ended June 30, 2007 was $709.5 million, an increase of 18% compared to the previous fiscal year.

The increase in conditional access revenues of 13% during the fiscal year ended June 30, 2007 as compared to the previous fiscal year was principally due to the increase in active subscribers and a higher volume of smart cards delivered to customers, especially to new customers in Europe, China and India. Integration, development and support revenues increased by 20% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year, primarily because more projects in the fiscal year ended June 30, 2007 met our revenue recognition criteria as compared to the previous fiscal year. License fee and royalty revenues increased by 21% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year, principally as a result of an increase in active subscribers due to an increase in the number of platform operators and services that deploy our technology. This increase was partially offset by a decrease in the number of middleware clients deployed during the fiscal year ended June 30, 2007 as compared to the fiscal year ended June 30, 2006. The volume of MediaHighway middleware clients deployed in the fiscal year ended June 30, 2006 was unusually high because DIRECTV commenced the initial download of our MediaHighway middleware and other of our related technologies to certain models of set-top boxes in use by their subscribers during that period. The increase in revenues from new technologies of 35% in the fiscal year ended June 30, 2007 compared to the prior fiscal year was principally due to higher revenues from DVR technologies and our advanced middleware, gaming applications and residential gateway devices. The former was largely a result of an increase in the cumulative number of DVR clients deployed in the fiscal year ended June 30, 2007.

In addition to the matters referred to above, comparisons of revenues for the fiscal year ended June 30, 2007 to the prior fiscal year were also affected by the relative weakness of the U.S. dollar over the periods. Approximately 50% of our revenues were denominated in currencies other than the U.S. dollar (principally pounds sterling and euros). We estimate that the weaker U.S. dollar has favorably impacted our total revenues for the fiscal year ended June 30, 2007 by approximately $26 million, or 4%, compared to the prior fiscal year.

Cost of goods and services sold increased by 11% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year principally due to an increase in the number of our employees working on development, integration and support activities for our customers and, to a lesser extent, wage, salary and benefit increases during the period.

Our main operating expenses are employee costs (including the cost of equity-based awards), facilities costs, depreciation and travel costs. Our main operating expenses have increased primarily due to a higher number of employees and the related increase in payroll, employee travel and facilities costs. Employee costs were approximately 24% higher during the fiscal year ended June 30, 2007 as compared to the prior fiscal year. The increase in costs also reflects the full-year impact of investments made in new facilities and infrastructure during the latter part of the fiscal year ended June 30, 2006.

Research and development costs increased by 20% during the fiscal year ended June 30, 2007, compared to the prior fiscal year, principally as a result of a higher employee headcount due to more research and development being performed. Sales and marketing expenses increased by 35% in the fiscal year ended June 30, 2007 as compared to the prior fiscal year as a result of higher employee headcount and travel costs, increased attendance at trade shows and a higher level of corporate communications activities. General and administrative expenses increased by 30% in the fiscal year ended June 30, 2007, compared to the previous fiscal year, primarily due to increased facilities and infrastructure costs, legal expenses, equity compensation costs and business development costs.

In addition to the matters referred to above, comparisons of expenses for the fiscal year ended June 30, 2007 with the prior fiscal year were also affected by the relative weakness of the U.S. dollar. In the fiscal year ended June 30, 2007, approximately 72% of our total expenses were denominated in currencies other than the U.S. dollar (principally pounds sterling, Israeli shekels and euros). We estimate that the weaker U.S. dollar has increased our total expenses in the fiscal year ended June 30, 2007 by approximately $28 million, or 5%, compared to the prior fiscal year.

As a result of the factors outlined above, operating income was $160.4 million, or 22.6% of revenue, for the fiscal year ended June 30, 2007, compared to $130.7 million, or 21.7% of revenue, for the prior fiscal year. Net income for the fiscal year ended June 30, 2007 was $135.7 million, or $2.37 per share ($2.33 per share on a diluted basis), compared to $101.0 million, or $1.80 per share ($1.74 per share on a diluted basis), for the previous fiscal year. We estimate that the weaker U.S. dollar has reduced our operating income in the fiscal year ended June 30, 2007 by approximately $2 million compared to the fiscal year ended June 30, 2006 and that this has reduced our operating margin by approximately 1%.

As of June 30, 2007, we had cash and cash equivalents totaling $592.8 million. Our accumulated cash is being held with the intention of using it for the future development of the business and there are currently no plans to pay any dividends to shareholders. During the fiscal year ended June 30, 2007, we paid a net $83.2 million in respect of business acquisitions and had a decrease in short-term investments of $184.4 million, primarily as a result of the fact that our short-term investments matured and we did not reinvest such funds as longer-term deposits because the differential in interest rates between longer- and shorter-term deposits was negligible. We had a net inflow of cash and cash equivalents of $267.9 million during the fiscal year ended June 30, 2007, as compared to an outflow of $23.4 million during the prior fiscal year.

FOREIGN EXCHANGE RATES

Average foreign exchange rates used in the year-to-date results are as follows:

Fiscal year ended June 30,
2007 2006

U.K. Pounds Sterling/U.S. Dollar $1.93 $1.78
Euro/U.S. Dollar $1.30 $1.22
Israeli Shekel/U.S. Dollar $0.24 $0.22

ABOUT NDS

NDS Group plc (NASDAQ:NNDS), a majority-owned subsidiary of News Corporation, supplies open end-to-end digital technology and services to digital pay-television operators and content providers. See www.nds.com for more information about NDS.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This document may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from these expectations due to changes in global economic, business, competitive market, regulatory and other factors. More detailed information about these and other factors that could affect future results is contained in our filings with the U.S. Securities and Exchange Commission. Any "forward-looking statements" included in this document are made only as of the date of this document and we do not have any obligation, nor do we undertake, to publicly update any "forward-looking statements" to reflect subsequent events or circumstances, except as required by law.

CONTACT
NDS Group plc Shared Value Breakaway Communications U.S.
Yael Fainaro Noah Schwartz Kelly Fitzgerald
(Investor Relations) Tel: +44 20 7321 5032 Tel: +1 212 616 6006
Tel: +44 20 8476 8287

CONFERENCE CALL

Dr. Abe Peled, Chairman and Chief Executive Officer, and Mr. Alex Gersh, Chief Financial Officer, will host a conference call to discuss this announcement and answer questions at 9.00 a.m. New York time (2.00 p.m. London time) on Tuesday, August 7, 2007.

Dial-in
U.S. toll free: 1 866 832 0717
U.K. free phone: 0800 073 8967
International dial-in: +44 (0)1452 562 716

Replay (available for seven days)

U.S. toll free replay: 1 866 247 4222
U.K. replay: 0845 245 5205
International replay: +44 (0)1452 550 000
Replay passcode: 6437458#

The live webcast and conference call will be available at: http://investor.shareholder.com/nds/webcasts.cfm starting at 9.00 a.m. New York time (2.00 p.m. London time) on Tuesday, August 7, 2007. Please register for the event now by clicking on the "Fourth Quarter Results 2007" link on that page. For those of you who are not able to attend this live broadcast online, the presentation will be recorded and available for viewing on the same page three hours following the original broadcast.

An audio replay will also be available on the NDS website (www.nds.com) from approximately 12.00 noon (London time) on August 8, 2007.

NDS Group plc

Consolidated Statements of Operations

(in thousands, except per For the three months For the year
share amounts) ended June 30, ended June 30,
2007 2006 2007 2006

Revenue:
Conditional access $103,734 $90,445 $396,420 $350,667
Integration, development
and support 17,768 10,816 56,201 46,903
License fees & royalties 32,427 18,185 107,349 88,686
New technologies 46,121 33,094 143,495 106,193
Other 1,827 1,681 6,027 7,674

Total revenue 201,877 154,221 709,492 600,123

Cost of goods and services
sold (exclusive of items
shown separately below):
Smart card costs (21,264) (16,697) (81,448) (83,021)
Operations & support (46,957) (38,512) (166,308) (139,772)
Royalties (4,420) (6,630) (16,332) (15,035)
Other (1,917) (1,224) (4,396) (4,794)

Total cost of goods and
services sold (74,558) (63,063) (268,484) (242,622)

Gross margin 127,319 91,158 441,008 357,501

Operating expenses:
Research & development (50,787) (42,470) (174,400) (145,523)
Sales & marketing (13,151) (8,946) (41,354) (30,713)
General & administrative (17,579) (12,065) (53,551) (41,083)
Amortization of other
intangibles (3,218) (2,415) (11,347) (9,453)

Total operating expenses (84,735) (65,896) (280,652) (226,772)

Operating income 42,584 25,262 160,356 130,729

Interest income 6,618 4,995 25,296 15,446

Income before income tax
expense 49,202 30,257 185,652 146,175

Income tax expense (8,078) (10,511) (49,925) (45,225)

Net income $41,124 $19,746 $135,727 $100,950

Net income per share:
Basic net income per share $0.71 $0.35 $2.37 $1.80
Diluted net income per
share $0.70 $0.34 $2.33 $1.74

NDS Group plc
Consolidated Balance Sheets

As of June 30,
(in thousands, except share amounts) 2007 2006

ASSETS
Current assets:
Cash and cash equivalents $592,750 $320,636
Short-term investments . 184,401
Accounts receivable, net 134,624 97,716
Accrued income 40,605 37,050
Inventories, net 54,133 39,340
Prepaid expenses 19,415 17,031
Other current assets 3,926 5,061

Total current assets 845,453 701,235

Property, plant & equipment, net 54,801 46,239
Goodwill 124,614 66,917
Other intangibles, net 63,080 43,299
Other non-current assets 56,905 39,431
Total assets $1,144,853 $897,121

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $22,110 $26,966
Deferred income 75,777 45,492
Accrued payroll costs 31,186 26,647
Accrued expenses 37,473 26,245
Income tax liabilities 17,693 19,039
Other current liabilities 18,287 16,762

Total current liabilities 202,526 161,151

Deferred income 157,517 134,529
Other non-current liabilities 46,537 33,747

Total liabilities 406,580 329,427

Commitments and contingencies
Shareholders' equity:
Series A ordinary shares, par value
$0.01 per share, 15,718,904 and
14,873,262 shares outstanding as of
June 30, 2007 and 2006, respectively 157 148
Series B ordinary shares, par value
$0.01 per share, 42,001,000 shares
outstanding as of June 30, 2007 and
2006 420 420
Deferred shares, par value
GBP1 per share 64,103 64,103
Additional paid-in capital 563,388 534,668
Retained earnings (deficit) 56,106 (79,621)
Other comprehensive income 54,099 47,976

Total shareholders' equity 738,273 567,694

Total liabilities and shareholders'
equity $1,144,853 $897,121

NDS Group plc
Consolidated Statements of Cash Flows

For the year ended June 30,
(in thousands) 2007 2006
Operating activities:
Net income $135,727 $100,950

Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation 19,240 17,058
Amortization of other intangibles 11,347 9,453
Equity based compensation 10,175 6,626
Other 795 2,206
Losses on investments - -

Change in operating assets and
liabilities, net of acquisitions:
Inventories (14,785) 2,168
Receivables and other assets (51,407) (48,429)
Deferred income 51,504 45,493
Accounts payable and other liabilities 11,357 28,383

Net cash provided by operating
activities 173,953 163,908

Investing activities:
Capital expenditure (25,149) (29,416)
Short-term investments (net) 184,401 (184,401)
Proceeds from sale of investments - -
Business acquisitions, net of cash
acquired (83,215) (3,118)

Net cash provided by (used in)
investing activities 76,037 (216,935)
Financing activities:
Issuance of shares 17,922 29,597

Net cash provided by financing
activities 17,922 29,597

Net increase (decrease) in cash
and cash equivalents 267,912 (23,430)

Cash and cash equivalents,
beginning of period 320,636 339,791
Currency exchange movements 4,202 4,275

Cash and cash equivalents, end
of period $592,750 $320,636

First Call Analyst:
FCMN Contact:

Source: NDS Group plc

CONTACT: Yael Fainaro, Investor Relations, of NDS Group plc,
+44 20 8476 8287, or Noah Schwartz of Shared Value, +44 20 7321 5032, or Kelly
Fitzgerald of Breakaway Communications U.S., +1-212-616-6006

Web site: http://www.nds.com/

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