iSoft shares fall record 30% as outlook figures are revised

The share price of iSoft, a major software supplier to the NPfIT, fell by the most on record in Sydney, Australia, according to Bloomberg.

It said that iSoft’s shares slumped 30 percent to 39 Australian cents at the close of trading on the Australian stock exchange. iSoft’s shares rose 34 percent last year but have fallen 49 percent this year, said Bloomberg.

Today (2 June 2010) iSoft revised down markedly its profits outlook for the current financial year.

iSoft expects its pre-tax [EBITDA] profits in 2010 to be in the range of $45 to $60m [£25m to £34m]. In February the company reported a full fiscal 2010 outlook of  $113m [64.6m] pre-tax profits.

In its statement to the Australian Stock Exchange, iSoft said its turnover for the 2010 financial year is being revised to the range of $400m to $455m [£251-£260m].

In February the company had reported a full fiscal 2010 outlook of $470m [£268.7m].

iSoft’s latest announcement says:

“Australia’s largest listedhealth information technology has acheived a significant milestone withthe go-live of the University Hospitals of Morecambe Bay NHS Trust.However delays in the rollout (which were beyond the control of iSoft),uncertainty associated with the change in UK government and a weakEuropean economic environment have created the need to clarify iSoft’searnings for the current fiscal year…

“The go-live at MorecambeBay, which occurred over the weekend of 29 to 31 May 2010, is asignificant milestone as it represents a validation of the coreunderlying Lorenzo platform and the first implementation of LorenzoRelease 1.9 in a complex hospital environment.

“At the same time,the political uncertainty in the lead up to the recent UK election andthe subsequent change in government have together led to the deferral ofdecisions in relation to the English NPfIT [programme] particularly forour partner Computer Sciences Corporation.

For iSoft this hasaffected the timing and conclusion of negotiations surrounding thepotential of an agreement with CSC in relation to the marketopportunities in England and in particular the Southern cluster ofEnglish hospitals, as well as delays in milestone payments.

“Therevenues associated with this agreement had been anticipated in fiscal2010 and are now anticipated in fiscal 2011. However, as with anycommercial negotiation, there is no certainty that revenues willultimately flow…”

**

In September 2009 iSoft declared:

“Today, having succeeded beyondour expectations, iSoft can truly take its place as a global leader inhealthcare information technology..

“The clarity surrounding theimplementation of Lorenzo Regional Care in England has resulted ingreater understanding of the solution’s capabilities among customers inother markets…”

In March 2010 iSoft said it expected theconclusion of a revised agreement with CSC “in the coming weeks”. It also said at the time:

“In view of thecombination of the expected revised agreement with CSC and the growth iniSoft’s pipeline during the first quarter of fiscal 2010, the companyexpects the full-year revenue growth, in local currency terms, towardsthe upper end of its guidance of between 6-10 per cent.”

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Comment

It’s not the first time iSoft has been wrong in its forecasts, which raises the question: why do regulatory authorities allow and even encourage companies to make predictions about their future profits? How much value is there for markets,investors, potential investors and customers in these predictions?

[BT got it wildly wrong in its figures – and revised them downward by more than £1bn] 

It may also be worth pointing out that iSoft is revising down itspre-tax profits by a lot more than its turnover. I am not clear whyprojected turnover for 2010 is down by a fairly small amount – about£10m – but projected pre-tax profits for the same period are expected tobe down by about £30m.

Any explanation from iSoft will be most welcome.

**

Links

iSOFT reaffirms FY10 guidance and says NPfIT commitments on track – March 2010

iSoft shares fall record 30% – Bloomberg

iSoftloses a senior executive – IT Projects Blog

iSoftrevises down 2010 results – Computerworld Australia

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