NDS Group plc Fourth Quarter and Full Year Financial Results; NDS Business Resumes Growth.LONDON London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. -- NDS Group NDS Group plc is a DRM and conditional access firm. It is listed on the NASDAQ (symbol NNDS), but its major shareholder is News Corporation. The company is headquartered in West Drayton (near Heathrow), United Kingdom. The CEO of NDS is Abe Peled. plc (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NNDS NNDS Norsk Nettverk for Down Syndrom (Norway) )(Euronext  Euronext N.V. is a pan-European stock exchange based in Paris[1] Brussels Brussels (brŭ`səlz), Fr. Bruxelles, Du. Brussel, city and region (1995 pop. 948,122), 63 sq mi (162 sq km), capital of Belgium, central Belgium, on the Senne River and at the junction of the Charleroi-Brussels and Willebroek :NNDS):Highlights: --Q4 revenues at top range of target at GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 64 million; EBITA EBITA Earnings Before Interest Taxes Amortization GBP 10 million --Full year profitability targets exceeded at EBITA of GBP 45 million --GBP 42 million cash generated before acquisition costs --Third win in Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. ; CJ CableNet selects NDS See eDirectory. NDS - Netware Directory Services for digital OpenCable OpenCable is a set of hardware and software specifications under development in the United States by CableLabs to "define the next-generation digital consumer device" for the cable television industry. cable TV network expansion --MediaHighway integration on course; new business wins --NDS resumes smart card shipments for DIRECTV DirecTV (trademarked as "DIRECTV") is a direct broadcast satellite (DBS) service based in El Segundo, California, USA, that transmits digital satellite television and audio to households in the United States, the Caribbean and Latin America except for Mexico. --44 million active digital TV smart cards Example of widely used contactless smart cards are Hong Kong's Octopus card, Paris' Calypso/Navigo card and Lisbon' LisboaViva card, which predate the ISO/IEC 14443 standard. The following tables list smart cards used for public transportation and other electronic purse applications. - up 28% on last year NDS Group plc (NASDAQ/Euronext Brussels:NNDS), a News Corporation company, and the leading provider of technology solutions for digital pay-TV pay-TV n. A system for receiving television broadcasts by making subscription payments, as by renting a device that unscrambles the broadcaster's scrambled signal. Also called pay television. , today announced its preliminary results for the fourth quarter and year ended 30 June June: see month. 2004. Commenting on NDS's performance, Dr Abe Peled Dr. Abe Peled is an Israeli businessman. Education Dr. Peled graduated from the Technion with BSc, and MSc in 1967 and 1971 respectively, both degrees in Electrical Engineering. , President and Chief Executive Officer, said: "We ended last year with a promise to remain focussed on business issues and to fully concentrate on supporting our customers and laying the foundations for the future growth of the company. I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in very pleased to be able to report that we have delivered on our promises. Our successes this year included seven new conditional access Conditional Access (acronymized CA) is the protection of content by requiring certain criteria to be met before granting access to this content. The term is commonly used in relation to digital television systems, most notably satellite television. contracts spanning three continents and four new XTV customers. We remain committed to ensuring that NDS and its customers are at the forefront of digital TV technology." Rick Medlock, Chief Financial Officer, added: "We characterised this year as a year of transition and a year of investment. We have made significant investments in our resources and staffing, undertaken a major acquisition and continued our global expansion -- all of which have strengthened the business. With the win-back of DIRECTV and the strong business pipeline, we enter the next financial year with great revenue and earnings momentum."
Key Statistics
3 months to 3 months to %
30 June 30 June change
2004 2003
----------------------------------------------------------------------
GBP '000
----------------------------------------------------------------------
Revenues 64,319 53,122 +21%
----------------------------------------------------------------------
Operating Income,
before amortisation 9,934 11,649 -15%
----------------------------------------------------------------------
Operating Margin % 15.4% 21.9% -6.5%
----------------------------------------------------------------------
Regular amortisation (2,860) (2,058)
Impairment charge (6,510) -
----------------------------------------------------------------------
Operating profit under
UK GAAP, after
impairment charge 564 9,591
----------------------------------------------------------------------
Net Income 666 7,164
----------------------------------------------------------------------
Diluted EPS 1.2p 13.3p
----------------------------------------------------------------------
----------------------------------------------------------------------
$'000
----------------------------------------------------------------------
Revenues 117,704 97,213 +21%
----------------------------------------------------------------------
Operating Income,
before amortisation 18,179 21,318 -15%
----------------------------------------------------------------------
Operating Margin % 15.4% 21.9% -6.5%
----------------------------------------------------------------------
Regular amortisation (5,234) (3,766)
Impairment charge (11,913) -
----------------------------------------------------------------------
Operating profit under
UK GAAP, after
impairment charge 1,032 17,552
----------------------------------------------------------------------
Net Income 1,219 13,110
----------------------------------------------------------------------
Diluted EPS 2.2(cents) 24.3(cents)
----------------------------------------------------------------------
----------------------------------------------------------------------
Subscribers
----------------------------------------------------------------------
Net Subscriber
Additions 3.0 million 1.8 million
----------------------------------------------------------------------
Subscribers at end of
period 44.0 million 34.4 million
----------------------------------------------------------------------
Year ended Year ended %
30 June 30 June change
2004 2003
----------------------------------------------------------------------
GBP '000
----------------------------------------------------------------------
Revenues 220,533 237,237 -7%
----------------------------------------------------------------------
Operating Income,
before amortisation 44,583 46,405 -4%
----------------------------------------------------------------------
Operating Margin % 20.2% 19.6% +0.6%
----------------------------------------------------------------------
Regular amortisation (12,252) (9,602)
Impairment charge (6,510) -
----------------------------------------------------------------------
Operating profit under
UK GAAP, after
impairment charge 25,821 36,803
----------------------------------------------------------------------
Net Income 18,469 26,040
----------------------------------------------------------------------
Diluted EPS 33.1p 48.4p
----------------------------------------------------------------------
----------------------------------------------------------------------
$'000
----------------------------------------------------------------------
Revenues 403,575 434,144 -7%
----------------------------------------------------------------------
Operating Income,
before amortisation 81,587 84,921 -3%
----------------------------------------------------------------------
Operating Margin % 20.2% 19.6% +0.6%
----------------------------------------------------------------------
Regular amortisation (22,421) (17,572)
Impairment charge (11,913) -
----------------------------------------------------------------------
Operating profit under
UK GAAP, after
impairment charge 47,253 67,349
----------------------------------------------------------------------
Net Income 33,798 47,653
----------------------------------------------------------------------
Diluted EPS 60.6(cents) 88.6(cents)
----------------------------------------------------------------------
----------------------------------------------------------------------
Subscribers
----------------------------------------------------------------------
Net Subscriber
Additions 9.6 million 4.8 million
----------------------------------------------------------------------
Subscribers at end of
period 44.0 million 34.4 million
----------------------------------------------------------------------
1. For the convenience of the reader only, pounds sterling amounts for
all periods have been translated into US dollar amounts at the
exchange rate of US$1.83 = GBP 1.00, the closing rate of exchange
on 30 June 2004.
2. The Company has defined operating income before charges for the
amortisation of intangible assets acquired as part of a business
combination (EBITA) as a key measure of operating performance, so
that period on period comparisons are not distorted by the impact
of the amortisation charge arising from acquisitions. Operating
income after such amortisation represents operating profit
determined under accounting practice generally accepted in the UK.
OPERATIONAL REVIEW NDS has continued to benefit from the growth in digital pay-TV penetration around the world and now has 44 million active digital TV smart cards. This is an increase of 28% over the course of the year. Towards the end of June we completed the transitional arrangements with DIRECTV and resumed shipments of smart cards under the new contract. We have purchased substantial quantities of inventory to meet orders to supply DIRECTV over the coming months. We purchased additional card processing equipment for our facility at Lake Forest, California Lake Forest is a city in Orange County, California, United States. The population was 78,243 as of 2007. [1] With 6,274 people per square mile, it is the densest-populated city in South County to this day. and recruited some additional employees, who were previously employed by DIRECTV. We have made further investments in laboratory equipment to support DIRECTV. We are pro-actively developing additional products which might be used to enhance the services offered to DIRECTV's subscribers. The initial integration of the MediaHighway MediaHighway is interactive television middleware software introduced in 1993 by Paris-based Canal+ Technologies, part of the Canal+ Group. It is currently owned and developed by the NDS Group, which acquired it from Thomson SA in 2003. business with the rest of the NDS organisation is now substantially complete. The operations in Paris moved to new premises in May and product development plans are being executed to offer our customers a range of middleware Software that functions as a conversion or translation layer. It is also a consolidator and integrator. Custom-programmed middleware solutions have been developed for decades to enable one application to communicate with another that either runs on a different platform or comes from a functionality, from basic to the most advances, all under the MediaHighway brand. The novation The substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement. A novation ordinarily arises when a new individual assumes an obligation to pay that was incurred by the original party of existing customer contracts to NDS is proceeding on schedule and new customer contract wins have been secured. New contracts in the quarter include: --CJ CableNet - one of the largest MSOs in Korea is to deploy an OpenCable TV system and has selected NDS's OCAP OCAP Ontario Coalition Against Poverty (Canada) OCAP Open Cable Application Platform (middleware software specification) OCAP Out of Control Action Plan compliant conditional access, VideoGuard VideoGuard (sometimes referred to simply as NDS), produced by NDS, is a digital encryption system for use with conditional access television broadcasting. It is used almost exclusively on digital satellite television (DVB-S) systems operated by News Corporation, which owns (R), and together we are developing one of the world's first OCAP compliant electronic program guides. This new contract brings NDS's overall wins in Korea up to three. --Cablevision - one of the US's leading entertainment and telecommunications companies See telecom company. which serves 3 million households in the New York metropolitan area New York–Northern New Jersey–Long Island is the most populous metropolitan area in the United States and the third most populous in the world, after Tokyo and Mexico City. has deployed seven high-quality, interactive TV games from NDS. Cablevision For the unrelated Canadian company, see . Cablevision Systems Corporation is an American cable television company. It is the 5th largest cable provider in the USA, with most customers residing in New York, New Jersey, Connecticut, and Pennsylvania. has launched the games as part of its iO: Interactive Optimum digital television platform. --Euro I AG - the interactive and digital TV service provider in Bremen Bremen (brā`mən), city (1994 pop. 551,600), capital of the state of Bremen, NW Germany, on the Weser River. Known as the Free Hanse City of Bremen (Ger. , Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). has selected NDS's MediaHighway Advanced interactive TV platform which combines a DVB-MHP-certified middleware with PVR See DVR. capabilities, an HTML HTML in full HyperText Markup Language Markup language derived from SGML that is used to prepare hypertext documents. Relatively easy for nonprogrammers to master, HTML is the language used for documents on the World Wide Web. engine and broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). return channel. --NDS is to provide the mobile video service MOBSVIDEO.COM (1) (Computer Output Microfilm) Creating microfilm or microfiche from the computer. A COM machine receives print-image output from the computer either online or via tape or disk and creates a film image of each page. with an OMA (1) See Object Management Architecture. (2) (Open Mobile Alliance Ltd., La Jolla, CA, www.openmobilealliance.org) An organization formed in June of 2002 by the consolidation of the WAP Forum group and the Open Mobile Architecture Initiative. compliant end to end mobile DRM (1) (Digital Radio Mondiale) A digital audio broadcasting (DAB) system for AM radio in Europe. See HD Radio. (2) (Digital Rights M solution. The NDS solution will protect video content to mobile customers. FINANCIAL REVIEW The results of the period and the comparison with prior periods are significantly affected by business conducted with DIRECTV. Until 13 August 2003, NDS provided conditional access services, including the supply of smart cards to DIRECTV in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The contract came to an end on 13 August 2003 and subsequently NDS received payments under transitional support arrangements. Additionally, NDS received payments in the first and second quarters of FY2004 from DIRECTV for use of NDS technology contained within cards which DIRECTV had procured from a third party. In March 2004, NDS and DIRECTV signed a new six-year contract for conditional access services, which was effective from 1 March 2004. Under the new contract, NDS receives monthly fees for the provision of conditional access services, which includes NDS taking on the obligation to provide periodic replacement smart cards in the future. In June 2004, NDS also took on the supply of new smart cards. Comparisons are also affected by the results of the MediaHighway business which, we acquired on 16 December December: see month. 2003. Revenues Revenues for the quarter were GBP 64.3 million, compared to GBP 53.1 million in the final quarter of the prior year. Full year revenues were GBP 220.5 million, compared to GBP 237.2 million in the prior year. The reduction in revenues from FY03 to FY04 is wholly accounted for by the decrease in revenues from DIRECTV; excluding DIRECTV and the acquisition of the MediaHighway business, underlying revenues have increased by 19%. Conditional access revenues were GBP 38.9 million for the quarter and GBP 118.9 million for the full year, compared to GBP 29.7 million and GBP 144.8 million, respectively, in the equivalent periods of the prior year. Last year, we shipped substantial volumes of smart cards to DIRECTV for their card changeover (programming) changeover - The time when a new system has been tested successfully and replaces the old system. . These shipments ceased in May 2003 and resumed, following completion of transitional arrangements in the new contract, in June 2004. Conditional access services income from DIRECTV, based on the number of authorised Adj. 1. authorised - endowed with authority authorized lawful - conformable to or allowed by law; "lawful methods of dissent" legitimate - of marriages and offspring; recognized as lawful cards and subscribers ceased on expiry of the old contract in August 2003 and resumed, at a higher level, in March 2004. Subscriber growth has continued across most platforms. As at June 2004, 44.0 million authorised smart cards containing NDS technology were in use, a rise of 3.0 million in the quarter and 9.6 million over the full year. In addition to growth at DIRECTV, there has also been substantial shipment of cards and growth in subscribers at Sky Italia SKY Italia is an Italian digital satellite television platform owned by News Corporation. It is similar in many ways to BSkyB's Sky Digital in the United Kingdom and Ireland, and like that network it is a major sports broadcaster. (which is in the process of switching all its subscribers to NDS technology), ViaSat in Scandinavia Scandinavia (skăn'dĭnā`vēə), region of N Europe. It consists of the kingdoms of Sweden, Norway, and Denmark; Finland and Iceland are usually considered part of Scandinavia. (where NDS conditional access is being rolled-out to replace an incumbent supplier) and FoxTel in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. (which launched a full digital service in March 2004). Integration, development and support revenues were GBP 6.8 million for the quarter and GBP 32.0 million for the full year, compared to GBP 6.5 million and GBP 33.2 million in the equivalent periods in the prior year. Revenue in the quarter included on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" development work for Sky Italia and FoxTel, together with change requests and routine maintenance income across most broadcast platforms. Licence fee and royalty income was GBP 7.0 million for the quarter and GBP 29.1 million for the full year, compared to GBP 6.4 million and GBP 22.3 million in the equivalent periods in the previous financial year. The increase is due to higher volumes of set-top boxes The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. reported by manufacturers across many platforms, reflecting the growth in their subscribers. This revenue stream includes royalties from set-top box manufacturers in respect of MediaHighway middleware, arising principally from the Canal+ platform family. Revenues from new technologies increased to GBP 10.6 million for the quarter (from GBP 9.4 million in the prior year) and to GBP 37.0 million for the full year (from GBP 32.5 million in the prior year). The increase reflects an increasing penetration of our MediaHighway advanced middleware and of our PVR technology into deployed set-top boxes. The comparison of reported revenues has been adversely affected by the relative weakness of the US Dollar in the current year compared to the previous year. Margins Gross margin was 66.9% for the quarter compared to 68.3% in the prior year. Full year gross margin was 72.1%, compared to 60.2% in the prior year. As with revenues, comparative margins are materially affected by the DIRECTV contracts. In 2003, card sales to DIRECTV were very high and at a discounted price reflecting the size of the order. This lowered the margin over the year as a whole, but the effect was less marked in the fourth quarter as the order was completed. Margins in the first two quarters of 2004 were boosted by compensatory conditional access payments from DIRECTV which had no associated material cost of sales. Margins have been lower since March 2004 as the new DIRECTV contract has come into effect. A major component of cost of sales is now the provision for future DIRECTV card changeovers. Prior year numbers were also adversely affected by a bad debt charge, part of which was reversed in the current year on the partial payment of debts previously written off, due to two customers emerging from bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. We made a decision to increase substantially the resources and capacity of the NDS business in FY04, as we believed that this would be fundamental to the positioning of NDS to take full advantage of renewed economic growth and the plans of our major customers further to develop their businesses. As a result, headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. has risen substantially. At June 2004 we employed just over 2,000 staff (including contractors). We have recruited 245 new employees since June 2003 and the MediaHighway acquisition added a further 320 employees, resulting in increased operating expenses. This has been especially marked in the research and development departments where costs (including facilities and support costs) have increased from GBP 61.3 million to GBP 82.5 million for the full year and from GBP 15.5 million to GBP 24.3 million for the quarter. This includes all of the costs of the MediaHighway operations in France. The increase in underlying costs is greater than the reported amounts would indicate, as the costs of our Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. facilities are denominated in US dollars and therefore reported sterling amounts have benefited from the weaker dollar/sterling exchange rate. Sales and marketing costs have remained flat year-on-year. The decrease in the quarter is due to the timing of exhibition costs. General and administrative expenses have declined. The comparative periods included costs incurred in connection with litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. of GBP 3.8 million and GBP 0.9 million respectively, which were previously presented as exceptional costs. Litigation costs have continued to be incurred in the current year, albeit it at a lower level. Included within operating costs operating costs npl → gastos mpl operacionales in the current quarter is a net amount of GBP 0.2 million related to the matter described in Note 4 to the financial information, and foreign exchange losses resulting from the volatility in the dollar/sterling exchange rate. EBITA Our preferred operating measure of profitability, EBITA (defined as operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. before amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. of intangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → acquired as part of a business combination) was GBP 9.9 million for the quarter, compared to GBP 11.6 million in the prior year. Full year EBITA was GBP 44.6 million, compared to GBP 46.4 million for the prior full year. This reflects a combination of changed gross margins related primarily to the DIRECTV contracts and increased operating costs. Much of the increased operating cost has been devoted to new product development and has not yielded additional revenues in the current period. Additionally, the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. operational costs resulting from the MediaHighway acquisition have, as expected, exceeded the incremental revenues. Together, all these factors have depressed the operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: percentage in the current period. Amortisation The charge for the amortisation of intangible fixed assets acquired as part of a business combination includes amounts relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the MediaHighway acquisition. During the quarter we obtained an independent valuation of the separable sep·a·ra·ble adj. Possible to separate: separable sheets of paper. sep intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. acquired. We also examined in detail the plans and projections of the acquired business and the way in which it has been integrated quickly into the rest of the NDS organisation. As a result of this assessment we have concluded that the values attributed to the intellectual property rights and products of the MediaHighway business are supported by our business plans and cash flow projections A Cash Flow Projection is an attempt to forecast the cash flows that will be generated by an asset, often a company, over a specified time frame. Methodology Projections can be made with varying levels of detail, but any cash flow projection for a business entails . However, because the acquired business has rapidly become merged with our other middleware operations, it can no longer be regarded as a separate cash generating unit. We have concluded that the incremental goodwill arising on acquisition is not supported by projections of the incremental future cash flows attributable to the acquired business. Accordingly we have recorded an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge to write down the acquired goodwill from its cost of GBP 6.5 million to nil. Net income As a result of the factors outlined above, operating profit as measured under UK GAAP UK GAAP United Kingdom Generally Accepted Accounting Principles was GBP 0.6 million for the quarter (compared to GBP 9.6 million in the prior year) and GBP 25.8 million for the full year (compared to GBP 36.8 million for the prior year). Interest income was higher in the current year due to higher average cash balances. Our effective tax rate has increased compared with the prior year due to a greater proportion of disallowable dis·al·low tr.v. dis·al·lowed, dis·al·low·ing, dis·al·lows 1. To refuse to allow: "[The government] amortisation charges, including the goodwill impairment charge. We have also generated tax losses in certain subsidiaries for which no immediate relief is available and for part of which, no deferred tax asset has been recognised. This is partially off-set by the availability of certain research and development tax credits in the UK. The net profit attributable to shareholders was GBP 0.7 million for the quarter (compared to GBP 7.2 million in the prior year) and GBP 18.5 million for the full year (compared to GBP 26.0 million for the prior year). Capital expenditure During fiscal 2004, we have spent GBP 10 million on capital equipment, approximately double what was incurred in the previous year. This follows from the increase in headcount and includes equipment that we acquired from DIRECTV upon signing the new conditional access contract with them. We have also invested in additional laboratory facilities to assist in the development and testing of increasingly complex applications and systems provided to our customers. We have expanded our research and development facilities in all regions, including India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. and Korea. Our MediaHighway operations in Paris have relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. to new premises following the acquisition. We have increased our smart card processing capacity in the US. This investment will continue into fiscal 2005, when we expect to take possession of new leased premises in Jerusalem Jerusalem (jər  `sələm, –zələm), Heb. Yerushalayim, Arab. Al Quds, city (1994 pop. 578,800), capital of Israel. .Working capital and cash flow Cash generated from operating activities amounted to GBP 25.6 million for the quarter and GBP 62.4 million for the full year. The growth in the business has resulted in large movements in working capital. Receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed have increased by GBP 30 million over the year. This is due to higher billings, especially in the fourth quarter. Debtors days were 60 at 30 June 2004, compared to 65 last quarter. Customer deposits and deferred income have increased by GBP 17 million over the year as a result of orders received and partially paid, for cards and services to be delivered in fiscal 2005. Inventory has increased by GBP 12 million over the year as a result of NDS procuring Procuring, in general, is the act of acquiring goods or services, usually by contract. It may refer to:
Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. and provisions have increased by GBP 34 million due to higher liabilities in respect of card changeover obligations, very large inventory purchases towards the end of the year and increases in other liabilities reflecting the growth in the number of employees and general trading activity. In particular, the obligations to DIRECTV to supply future changeover cards will become very significant in the future and generate large movements in working capital. After interest, tax and capital expenditure, we generated cash of GBP 42 million. Net cash generated in the year, after acquisition payments of GBP 38 million, was GBP 4 million and we ended the year with cash of GBP 125 million. CFO See Chief Financial Officer. - Rick Medlock Resigns Rick Medlock, NDS Chief Financial Officer for the last 8 years will leave NDS at the end of September September: see month. 2004 upon completing all FY04 reporting and audit procedures. Rick has resigned to pursue a career change, joining Inmarsat Inmarsat: see Communications Satellite Corporation; communications satellite. (Inmarsat plc, London, www.inmarsat.com) A satellite communications company that provides voice and data services to the maritime, transportation and aeronautics markets as well , a global mobile satellite provider, as Chief Financial Officer. Abe Peled commented: "I would like to thank Rick for his significant contribution to the success of NDS over the past eight years." A search for a new CFO has already been started and NDS will announce a new appointment in due course. About NDS NDS Group plc (NASDAQ/Euronext Brussels:NNDS) is a leading supplier of open end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. digital pay TV solutions for the secure delivery of entertainment and information to television set-top boxes and IP devices. See www.nds.com for more information about NDS. Cautionary Statement Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. The statements contained in this release which are not historical facts may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements relate to the plans, projections or future performance of NDS, which involve certain risks and uncertainties, including risk of market acceptance, the effect of economic conditions, possible regulatory changes, technological developments, the impact of competitive pricing and the ability of NDS and its commercial partners to develop systems and solutions which meet the needs of the broadcasting industry in a timely and cost-efficient Adj. 1. cost-efficient - productive relative to the cost cost-effective efficient - being effective without wasting time or effort or expense; "an efficient production manager"; "efficient engines save gas" manner, as well as certain other risks and uncertainties which are detailed in NDS's filings with the SEC. Company or product names have been used for identification purposes only and may be the trademarks or registered trademarks of their respective companies. CONFERENCE CALL Dr. Abe Peled, President and Chief Executive Officer and Rick Medlock, Chief Financial Officer, will host a conference call to discuss this announcement and answer questions at 3:00 pm BST (convention) BST - British Summer Time. The name for daylight-saving time in the UK GMT time zone. (10:00 am EST EST electroshock therapy. EST abbr. electroshock therapy ) on Monday Monday: see week. 2 August 2004.
Dial-in
UK Free Dial-in: 0800 953 1444
US Free Dial-in: 1-866-220-1452
Std International Dial-in: +44 1452 542 300
Replay
(Available until 9 August 2004)
Replay passcode: 1610730#
UK Toll Free Replay: 0800 953 1533
US Toll Free Replay: 1-866-247 4222
Std International Replay: +44 1452 550 000
An audio replay will also be available on the NDS website www.nds.com from midday
adj. Moving or tending forward. adv. also on·wards In a direction or toward a position that is ahead in space or time; forward. Adv. 1. .
NDS GROUP PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE THREE MONTHS ENDED 30 JUNE 2004
3 months ended 3 months ended
30 June 30 June
2004 2003
GBP '000 GBP '000
Revenues
Conditional access 38,942 29,678
Integration, development & support 6,833 6,516
Licence fees & royalties 6,982 6,368
New technologies 10,611 9,444
Other revenue 951 1,116
-------------- --------------
Total revenues 64,319 53,122
-------------- --------------
Cost of sales
Smart card & changeover provisions (12,556) (8,591)
Operations & support (7,643) (5,187)
Royalties (924) (1,421)
Other (184) (1,657)
-------------- --------------
Total cost of sales (21,307) (16,856)
-------------- --------------
Gross profit 43,012 36,266
-------------- --------------
Gross profit % 66.9% 68.3%
Operating expenses, excluding
amortisation of intangible fixed
assets
Sales & marketing (3,451) (3,908)
Research & development (24,297) (15,526)
General & administration (4,547) (5,450)
Foreign exchange gains (losses) (539) 267
Losses on investments (see note 4) (244) -
-------------- --------------
Total (33,078) (24,617)
-------------- --------------
Operating income before amortisation of
intangible fixed assets acquired as
part of a business combination 9,934 11,649
Operating income % 15.4% 21.9%
Regular amortisation of intangibles (2,860) (2,058)
Impairment charge (see note 3) (6,510) -
-------------- --------------
Operating profit 564 9,591
Net interest income 989 822
-------------- --------------
Profit on ordinary activities before
tax 1,553 10,413
Taxation (1,301) (3,351)
-------------- --------------
252 7,062
Equity minority interests 414 102
-------------- --------------
Net profit 666 7,164
-------------- --------------
---------------------------------------------------------------------
Earnings per share (see Note 5)
Basic 1.2p 13.3p
Diluted 1.2p 13.0p
Adjusted - Basic 17.3p 16.8p
Adjusted - Diluted 16.6p 16.5p
---------------------------------------------------------------------
NDS GROUP PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2004
Year ended Year ended
30 June 30 June
2004 2003
GBP '000 GBP '000
Revenues
Conditional access 118,880 144,789
Integration, development & support 32,044 33,234
Licence fees & royalties 29,101 22,254
New technologies 36,950 32,451
Other revenue 3,558 4,509
----------- ----------
Total revenues 220,533 237,237
----------- ----------
Cost of sales
Smart card & changeover provisions (28,352) (63,309)
Operations & support (27,322) (21,124)
Royalties (4,250) (4,638)
Other (1,669) (5,396)
----------- ----------
Total cost of sales (61,593) (94,467)
----------- ----------
Gross profit 158,940 142,770
----------- ----------
Gross profit % 72.1% 60.2%
Operating expenses, excluding amortisation of
intangible fixed assets
Sales & marketing (14,455) (14,208)
Research & development (82,491) (61,294)
General & administration (18,252) (21,528)
Foreign exchange gains 1,085 1,130
Losses on investments (see note 4) (244) (465)
----------- ----------
Total (114,357) (96,365)
----------- ----------
Operating income before amortisation of
intangible fixed assets acquired as part of
a business combination 44,583 46,405
Operating income % 20.2% 19.6%
Regular amortisation of intangibles (12,252) (9,602)
Impairment charge (see note 3) (6,510) -
----------- ----------
Operating profit 25,821 36,803
Share of associate's operating loss - (280)
Net interest income 4,214 2,887
----------- ----------
Profit on ordinary activities before tax 30,035 39,410
Taxation (12,038) (13,472)
----------- ----------
17,997 25,938
Equity minority interests 472 102
----------- ----------
Net profit 18,469 26,040
----------- ----------
---------------------------------------------------------------------
Earnings per share (see Note 5)
Basic 34.1p 48.4p
Diluted 33.1p 48.0p
Adjusted - Basic 66.4p 65.2p
Adjusted - Diluted 64.4p 64.7p
---------------------------------------------------------------------
NDS GROUP PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2004
30 June 30 June
2004 2003
GBP '000 GBP '000
Fixed assets
Intangible fixed assets 86,321 64,049
Tangible fixed assets 17,749 14,697
--------- ---------
104,070 78,746
--------- ---------
Current assets
Investments 414 -
Stocks 19,682 7,617
Deferred tax asset 3,081 4,273
Trade debtors and accrued income 58,073 31,087
Other debtors 11,818 5,028
Cash 125,086 121,520
--------- ---------
218,154 169,525
--------- ---------
Creditors falling due within one year
Customer deposits and deferred income (33,323) (14,137)
Other current liabilities (61,837) (39,944)
--------- ---------
(95,160) (54,081)
--------- ---------
Net current assets 122,994 115,444
--------- ---------
Total assets less current liabilities 227,064 194,190
Creditors falling due after one year (1,083) (1,533)
Provisions for liabilities and charges (22,804) (6,328)
--------- ---------
203,177 186,329
Equity minority interests - (58)
--------- ---------
Net assets 203,177 186,271
--------- ---------
Equity and capital reserves (see Note 6)
Equity share capital 340 339
Share premium & merger reserve 178,841 177,593
Profit and loss account (151,269) (166,926)
Capital contribution 133,265 133,265
--------- ---------
161,177 144,271
Non-equity capital 42,000 42,000
--------- ---------
Total capital employed 203,177 186,271
--------- ---------
NDS GROUP PLC
UNAUDITED SUMMARISED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2004
3 months ended Year ended Year ended
30 June 30 June 30 June
2004 2004 2003
GBP '000 GBP '000 GBP '000
Operating profit 564 25,821 36,803
Non-cash operating costs 11,391 27,030 17,998
Movement in working capital 13,670 9,597 (10,004)
-------------- ---------- ----------
Net cash inflow from operating
activities 25,625 62,448 44,797
Net interest received 983 3,942 2,922
Tax paid (4,292) (14,103) (14,591)
Capital expenditure (5,760) (10,245) (5,175)
Acquisitions and disposals (478) (38,012) (3,189)
-------------- ---------- ----------
Cash generated 16,078 4,030 24,764
Proceeds from issue of shares 128 1,249 -
Loan and equity finance provided
by minority interests - 24 526
-------------- ---------- ----------
Increase in cash balances 16,206 5,303 25,290
Cash, beginning of period 109,250 121,520 98,502
Foreign exchange translation
differences (370) (1,737) (2,272)
-------------- ---------- ----------
Cash, end of period 125,086 125,086 121,520
-------------- ---------- ----------
NOTES 1. Basis of preparation and presentation These unaudited financial statements have been prepared using the accounting policies disclosed in the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the year ended 30 June 2003 which are in compliance with UK GAAP. They do not constitute statutory accounts. Figures for 30 June 2003 and for the year ended on that date have been extracted from the consolidated financial statements of NDS Group plc on which the auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together gave an unqualified audit report. In the opinion of management, the unaudited quarterly results and the preliminary results for the year reflect all adjustments necessary to present fairly the financial position, results of operations and cash flows of NDS. The unaudited quarterly results and the preliminary results for the year should be read in conjunction with the audited consolidated financial statements as of 30 June 2003. 2. Litigation On 6 June 2003, Echostar Communications Corporation EchoStar Communications Corporation (NASDAQ: DISH) is the parent company of DISH Network and the maintainer of the satellite fleet that provides the signal that DISH Network markets. , Echostar Satellite Corporation, Echostar Technologies Corporation and Nagrastar L.L.C. (collectively, "Echostar") filed an action against NDS in the United States District Court United States District Court In the U.S., any of the 94 trial courts of general jurisdiction in the federal judicial system. Each state, as well as the District of Columbia and the Commonwealth of Puerto Rico, has at least one federal district court. for the Central District of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . Echostar filed an amended complaint amended complaint n. what results when the party suing (plaintiff or petitioner) changes the complaint he/she has filed. It must be in writing, and can be done before the complaint is served on any defendant, by agreement between the parties (usually their lawyers), on 8 October 2003. The amended complaint purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv. to allege To state, recite, assert, or charge the existence of particular facts in a Pleading or an indictment; to make an allegation. allege v. claims for violation of the Digital Millennium Copyright Act The Digital Millennium Copyright Act (DMCA) is a United States copyright law which implements two 1996 WIPO treaties. It criminalizes production and dissemination of technology, devices, or services that are used to measures that control access to copyrighted works (commonly ("DMCA (Digital Millennium Copyright Act) A U.S. law enacted in late 1998 that provides penalties for developing hardware or software that overrides copy protection schemes for digital media. "), the Communications Act The establishment of the Federal Communications Commission (FCC) in 1934, the regulatory body for interstate and foreign telecommunications. Its mission is to provide high-quality services at reasonable cost to everyone in the U.S. on a nondiscriminatory basis. of 1934 ("CA"), the Electronic Communications Privacy Act
On 25 July 2003, Sogecable, S.A. and its subsidiary Canalsatellite Digital, S.L., Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. satellite broadcasters and customers of Canal+ Technologies SA (together, "Sogecable"), filed an action against NDS in the United States District Court for the Central District of California. Sogecable filed an amended complaint on 9 October 2003. The amended complaint purported to allege claims for violation of the DMCA and the federal RICO statute. The amended complaint also purported to allege claims for interference with contract and prospective business advantage. The complaint sought injunctive relief, compensatory and exemplary damages and restitution. On 22 December 2003, all of the claims were dismissed by the court. Sogecable filed a second amended complaint. NDS intends vigorously to defend the action, and filed a motion to dismiss the second amended complaint on 31 March 2004. On 23 July 2004, the Court heard oral argument on the motion and advised that a formal ruling should be issued by early August. 3. MediaHighway acquisition On 16 December 2003, NDS acquired the MediaHighway middleware business from a subsidiary of Thomson SA  This article or section may contain a proseline.Please help [ convert this timeline] into prose or, if necessary, a . and licensed certain related patents from Thomson SA for a total consideration of EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 60 million in cash. During the quarter ended 30 June 2004, NDS commissioned an independent valuation of the separable intangible fixed assets acquired, together with an assessment of their expected useful lives. As a result of this assessment and following agreement with Thomson SA on the accounts of the acquired business as at completion, the following assets and liabilities have been recognised in the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as at acquisition:
GBP '000
Separable intangible fixed assets, other than goodwill 34,745
Goodwill 6,510
Tangible fixed assets 2,048
Stock 31
Debtors and prepayments 4,634
Cash 5,882
Current liabilities (10,817)
--------
Fair value of acquired business 43,033
--------
Consideration, including costs, settled in cash 43,033
--------
Having assessed the fair values of the assets and liabilities acquired and the budgets and plans of the acquired business, NDS has concluded that the value of the goodwill arising on acquisition is not supported by the projected discounted cash flows of the acquired business. Accordingly an impairment charge has been recorded in the quarter to write down the book value of goodwill to nil. 4. Loss on investments On 5 April 2004, NDS sold its 80% interest in Fancy a Flutter Flutter (aeronautics) An aeroelastic self-excited vibration with a sustained or divergent amplitude, which occurs when a structure is placed in a flow of sufficiently high velocity. Flutter is an instability that can be extremely violent. Limited to Yoomedia plc. The consideration was in the form of shares in Yoomedia plc. The transaction yielded a profit of GBP 223,000. Subsequent to the transaction, the share price of Yoomedia has declined and a charge of GBP 467,000 has been recorded to write the value of the investment down to its year end market price. Together, this resulted in a net loss on investments of GBP 244,000. The prior year item related to the discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of an investment in a technology fund. 5. Earnings per share Earnings per share is calculated on the basis of the net profit for each period. The weighted average number of shares and the weighted average number of potential shares in issue for each period have been determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with FRS FRS abbr. Fellow of the Royal Society FRS, n “flexed rotated side-bent,” an osteopathic abbreviation used to describe vertebral position in cases of spinal dysfunction. 14. These quantities are therefore a function of, amongst other things, the average quoted share price for the period. The figures used in the calculations are as follows:
Period Average Weighted Weighted
share average average
price shares in number of
issue potential
shares
3 months ended 30 June 2004 $25.43 54,178,377 56,265,406
3 months ended 30 June 2003 $13.95 53,984,681 54,998,439
Year ended 30 June 2004 $21.73 54,093,083 55,715,566
Year ended 30 June 2003 $9.52 53,856,141 54,267,114
---------- ----------- -----------
In addition to earnings per share calculated on the basis of net income, figures are also presented for earnings per share adjusted to exclude effect of amortisation charges on intangible fixed assets acquired as part of a business combination. A reconciliation of the profits used in the calculations is as follows:
3 months ended 3 months ended
30 June 30 June
2004 2003
GBP '000 GBP '000
Net profit 666 7,164
Add back: Amortisation of intangibles 9,370 2,058
Less: Tax effect of the above (673) (132)
-------------- --------------
Adjusted net profit 9,363 9,090
-------------- --------------
Year ended Year ended
30 June 30 June
2004 2003
GBP '000 GBP '000
Net profit 18,469 26,040
Add back: Amortisation of intangibles 18,762 9,602
Less: Tax effect of the above (1,319) (527)
----------- ----------
Adjusted net profit 35,912 35,115
----------- ----------
6. Share capital and reserves Movements on consolidated capital and reserves and reconciliation of movements in shareholders' funds for the year ended 30 June 2004 are as follows:
Equity Share premium Non-equity
share & merger share
capital reserve capital
-------------- -------------- -------------
GBP '000 GBP '000 GBP '000
As at 30 June 2003 339 177,593 42,000
Profit for the period - - -
Shares issued 1 1,248 -
Share options - - -
Foreign exchange movement
- - -
-------------- -------------- -------------
As at 30 June 2004 340 178,841 42,000
-------------- -------------- -------------
Profit and Total
Capital loss Shareholders'
contribution account funds
-------------- -------------- -------------
GBP '000 GBP '000 GBP '000
As at 30 June 2003 133,265 (166,926) 186,271
Profit for the period - 18,469 18,469
Shares issued - - 1,249
Share options - (32) (32)
Foreign exchange movement
- (2,780) (2,780)
-------------- -------------- -------------
As at 30 June 2004 133,265 (151,269) 203,177
-------------- -------------- -------------
During the year ended 30 June 2004, 202,917 Series A ordinary shares were issued on exercise of employee share options for cash consideration of GBP 1,249,000. As at 30 June 2004, there were 12,186,598 Series A ordinary shares in issue and 42,001,000 Series B ordinary shares in issue, a total of 54,187,898 ordinary shares. |
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