NDS Group Plc Reports Fiscal 2006 Results; Continued Revenue and Operating Income Growth Through Increase in Subscribers, Middleware and DVR Deployments

Earnings Release for the Fiscal Year ended June 30, 2006

HIGHLIGHTS:

-- Revenues for fiscal 2006 up 8% to $600 million

-- Operating income for fiscal 2006 up 42% to $131 million

-- 65.0 million active digital TV smart cards

-- 41.6 million cumulative set-top boxes activated with NDS middleware

-- 3.5 million cumulative DVR deployments

NDS Group plc ("NDS" or the "Company") (NASDAQ / EuronextBrussels: NNDS), a supplier of open end-to-end digital technology andservices to digital pay-television platform operators and contentproviders, announced today its results for the fiscal year ended June30, 2006.

Commenting on NDS's performance, Dr. Abe Peled, Chairman and ChiefExecutive Officer of NDS, said: "We have achieved another year of goodgrowth as a result of delivering key new technologies; middleware,DVR, IPTV and leading interactive games and gaming applications. NDSis ready to meet the changing scene of content distribution with astrong portfolio of new products, and has also made good inroads intothe developing markets in Asia and Eastern Europe."

Alex Gersh, Chief Financial Officer commented: "Our impressive 42%operating income growth is a result of continued focus on high marginrevenue and operational efficiencies."
KEY FINANCIAL MEASURES

Year ended June 30,
----------------
2006 2005
------- -------
Revenue (in thousands) $ 600,123 $ 556,330

Operating income (in thousands) $ 130,729 $ 92,191

Operating margin 21.8% 16.6%

Net Income (in thousands) $ 100,950 $ 73,998

Diluted net income per share $ 1.74 $1.29
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KEY NON-FINANCIAL MEASURES
Year ended June 30,
----------------
2006 2005
------- -------
Smart card deliveries (in millions)
Quantity delivered in period 24.4 30.8
------- -------
Authorized cards (in millions)
Net additions 8.3 12.7
At end of period 65.0 56.7
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Middleware deployments (in millions)
Set-top boxes deployed in period 21.2 2.0
Cumulative set-top boxes, end of period 41.6 20.4
------- -------
DVR deployments (in millions)
Set-top boxes in period 2.1 1.0
Cumulative set-top boxes, end of period 3.5 1.4
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Employees
Full-time equivalents, end of period 2,989 2,508
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STRATEGIC DEVELOPMENTS

-- Premiere, a pay TV operator in Germany and Austria, has chosen the NDS MediaHighway middleware solution to set-up an interactive platform paving the way into advanced digital TV services.

-- Dutch satellite service provider CANALDIGITAAL has chosen NDS MediaHighway middleware for its new set top boxes in northern Belgium.

-- SKY Italia launched the first ever interactive betting platform for the Italian market, using NDS interactive technologies, allowing SKY Italia customers the ability to place bets through two of Italy's leading bookmakers across a range of sports and betting combinations.

FINANCIAL REVIEW

Revenue for fiscal 2006 was $600.1 million, an increase of 8%compared to the previous fiscal year. Conditional access revenueincreased; higher security fees resulting from growth in the number ofauthorized cards using NDS technologies were offset in part by lowerdeliveries of smart cards. Revenue from integration, development andsupport declined. Higher middleware development revenue in fiscal 2006did not compensate for the prior year revenue from the migration ofSky Italia subscribers to NDS technology. License fees and royaltiesrevenues continue to benefit from the Company's increased middlewareshipments. The increase in revenue from new technologies was due tohigher income from DVR technologies, the Company's Synamedia IPTVtechnologies, interactive infrastructure and gaming applications.

Cost of goods and services sold increased by 11% in fiscal 2006compared to fiscal 2005. Higher costs were due to a substantialincrease in technical resources working on customer support anddevelopment projects undertaken under customer contracts. Gross marginas a percentage of revenues was 59.6% in fiscal 2006 compared to 60.6%in fiscal 2005.

Total operating expenses declined by 8% in fiscal 2006 compared tofiscal 2005. This decrease was attributable to a higher proportion oftechnical resources being utilized on specific customer projects asopposed to internal research projects and development activities.Research and development costs in fiscal 2006 include a $5.3 millionbenefit related to grants from the French government. These benefitswere offset in part by higher employee and property costs and highercharges for employee stock options.

As a result of these factors, operating income was $130.7 millionfor fiscal 2006 compared to $92.2 million for fiscal 2005. Net incomefor fiscal 2006 was $101.0 million, or $1.80 per share ($1.74 pershare on a diluted basis), compared to $74.0 million, or $1.35 pershare ($1.29 per share on a diluted basis), for fiscal 2005.

Cash provided by operating activities increased from $117.7million in fiscal 2005 to $163.9 million in fiscal 2006. Afterallowing for $32.5 million in payments for capital items and businessacquisitions, and $29.6 million received from the exercise of 1.55million employee stock options, cash and short-term investmentsincreased to $505.0 million as of June 30, 2006.

About NDS

NDS Group plc (NASDAQ/ Euronext Brussels: NNDS), a majority-ownedsubsidiary of News Corporation, secures and enables content anytime,anywhere on any device. See www.nds.com for more information aboutNDS.

Cautionary Statement Concerning Forward-looking Statements

This document contains certain "forward-looking statements" withinthe meaning of the Private Securities Litigation Reform Act of 1995.These statements are based on management's views and assumptionsregarding future events and business performance as of the time thestatements are made. Actual results may differ materially from theseexpectations due to changes in global economic, business, competitivemarket and regulatory factors. More detailed information about theseand other factors that could affect future results is contained in ourfilings with the Securities and Exchange Commission. The"forward-looking statements" included in this document are made onlyas of the date of this document and we do not undertake any obligationto update any "forward-looking statements" to reflect subsequentevents or circumstances.

CONFERENCE CALL

Dr. Abe Peled, Chairman and Chief Executive Officer and AlexGersh, Chief Financial Officer, will host a conference call to discussthis announcement and answer questions at 9:00 am New York time (2:00pm UK time) on Tuesday, August 8, 2006.

Dial-in

US Dial-in: 1-866-832-0717
UK Dial-in: 0800 073 8967
International Dial-in: +44 1452 562 716

Replay (available for 7 days)
U.S. Toll Free Replay: 1-866-247-4222
U.K. Toll Free Replay: 0845 245 5205
International Replay: +44 1452 550 000
Replay passcode: 2999255#

An audio replay will also be available on the NDS website www.nds.com
from August 9, 2006.


NDS Group plc
Consolidated Statements of Operations
(in thousands, except per share amounts)

For the three For the year
months ended ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
------- ------- ------- -------
Revenue:
Conditional access $ 90,445 $ 95,659 $ 350,667 $ 339,414
Integration, development
& support 10,816 9,956 46,903 52,636
License fees & royalties 18,185 18,286 88,686 71,443
New technologies 33,094 21,304 106,193 85,945
Other 1,681 1,629 7,674 6,892
------- ------- ------- -------
Total revenue 154,221 146,834 600,123 556,330
------- ------- ------- -------
Cost of goods and services
sold:
Smart card costs (16,697) (37,128) (83,021) (131,466)
Operations (38,512) (19,894) (139,772) (72,254)
Royalties (6,630) (2,625) (15,035) (13,198)
Other (1,224) 623 (4,794) (2,020)
------- ------- ------- -------
Total cost of goods and
services sold (63,063) (59,024) (242,622) (218,938)
------- ------- ------- -------
Gross margin 91,158 87,810 357,501 337,392
------- ------- ------- -------
Operating expenses:
Research & development (42,470) (47,003) (145,523) (166,504)
Sales & marketing (8,946) (6,666) (30,713) (25,820)
General & administration (13,311) (11,072) (42,456) (43,352)
Amortization of other
intangibles (2,415) (2,773) (9,453) (12,349)
Other 1,246 (150) 1,373 2,824
------- ------- ------- -------
Total operating expenses (65,896) (67,664) (226,772) (245,201)
------- ------- ------- -------

Operating income 25,262 20,146 130,729 92,191
------- ------- ------- -------
Other income:
Interest, net 4,995 2,619 15,446 9,719
Other - (605) - (559)
------- ------- ------- -------
Total other income 4,995 2,014 15,446 9,160
------- ------- ------- -------
Income before income
tax expense 30,257 22,160 146,175 101,351

Income tax expense (10,511) (253) (45,225) (27,353)
------- ------- ------- -------
Net income $ 19,746 $ 21,907 $ 100,950 $ 73,998
======= ======= ======= =======
Net income per share:
Basic net income
per share $0.35 $0.40 $1.80 $1.35
Diluted net income
per share $0.34 $0.38 $1.74 $1.29
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NDS Group plc
Consolidated Balance Sheets
(in thousands)


As of June 30, As of June 30,
2006 2005
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 320,636 $ 339,791
Short-term investments 184,401 -
Accounts receivable, net 97,716 73,588
Accrued income 37,050 25,391
Income tax recoverable 1,411 -
Inventories, net 39,340 41,508
Prepaid expenses 17,031 15,795
Other current assets 3,650 3,595
------ ------
Total current assets 701,235 499,668

Property, plant and equipment, net 46,239 33,962
Goodwill 66,917 64,236
Other intangibles, net 43,299 48,537
Deferred tax assets 7,506 5,121
Other receivables 6,681 -
Other non-current assets 25,244 20,374
------ ------
Total assets $ 897,121 $ 671,898
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,966 $ 18,336
Deferred income 45,492 47,175
Accrued payroll costs 26,647 25,069
Accrued expenses 26,245 21,097
Income tax liabilities 19,039 4,070
Other current liabilities 16,762 13,498
------ ------
Total current liabilities 161,151 129,245

Accrued expenses 33,747 28,547
Deferred income 134,529 87,353
------ ------
Total liabilities 329,427 245,145
------ ------
Shareholders' equity:
Series A ordinary shares (14,873,262
and 13,318,546 shares outstanding
as of June 30, 2006 and 2005,
respectively) 148 133
Series B ordinary shares
(42,001,000 shares outstanding
as of June 30, 2006 and 2005,
respectively) 420 420
Deferred shares 64,103 64,103
Additional paid-in capital 534,668 498,363
Accumulated deficit (79,621) (180,571)
Other comprehensive income 47,976 44,305
------ ------
Total shareholders' equity 567,694 426,753
------ ------
Total liabilities and
shareholders' equity $ 897,121 $ 671,898
======= =======


NDS Group plc
Consolidated Statements of Cash Flows
(in thousands)

For the year ended
June 30,
-----------------
2006 2005
------- -------
Operating activities:
Net income $ 100,950 $ 73,998

Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 17,058 15,405
Amortization of other intangibles 9,453 12,349
Stock-based compensation 6,626 4,327
Other 2,206 559

Change in operating assets and
liabilities, net of acquisitions:
Inventories 2,168 (5,536)
Receivables and other assets (48,429) 6,273
Deferred income 45,493 36,664
Accounts payable and other liabilities 28,383 (26,347)
------ ------
Net cash provided by operating activities 163,908 117,692
------ ------
Investing activities:
Capital expenditure (29,416) (20,545)
Business acquisitions, net of cash acquired (3,118) (17)
Proceeds from sale of investments - 264
Short-term investments (184,401) -
------ ------
Net cash used in investing activities (216,935) (20,298)
------ ------
Financing activities:
Issuance of shares (inclusive of realized
excess tax benefits of $7,828 and $-) 29,597 13,294
------ ------

Net increase (decrease) in cash and
cash equivalents (23,430) 110,688

Cash and cash equivalents,
beginning of period 339,791 228,620
Exchange movements 4,275 483
------ ------
Cash and cash equivalents, end of period $ 320,636 $ 339,791
======= =======