Key NHS provider delays results and axes staff

NHS software provider iSOFT has delayed its financial results and changed its accounting rules, which will result in a fall in turnover and profits

NHS software provider iSOFT has delayed its financial results and changed its accounting rules, which will result in a fall in turnover and profits

The company is also making redundant 150 of its UK staff, 15% of its UK headcount.

Its shares fell heavily on the news, following a serious decline earlier this year, after reporting delays in rolling out systems for the NHS National Programme for IT (NPfIT).

The company's Lorenzo electronic patient-record system has been selected as the care-record service component in three out of the five local-service provider areas.

iSoft said the fall in likely profit and revenue was due to a change in the way the group recognises its revenues from product licences and services.

Its statement said it is now increasingly difficult to distinguish between the supply of product licences and their implementation and, in the case of managed services, additional support services.

The company had previously reported licence sales once deals had been signed for, but before they had been paid for, which was usually when systems were implemented.

Under the changes, said iSOFT, licence revenues will now typically be recognised over the same period as implementation revenues, which may range from a few months to a number of years from contract signatures, and over the full duration of a contract in the case of managed services.

On 28 April iSOFT had announced that it expected to record revenues of £210m to£215m and profit before tax in the range of £17m to £22m for the year ended 30 April 2006.

Under the new accounting policy, subject to audit, the group now expects to report revenues for the year ended 30 April in the range of £195m to £200m. As a result, profit before tax is likely to be between £3m and £7m, said the company.

ISOFT will also re-state its accounts for 2005, 2004, and 2003, which will result in reduced sales and profits being shown for those years.

ISOFT acknowledged that the NHS’s tough stance on only paying for delivered systems had had an effect on its cash flow.

The company said, “Tough financial constraints within healthcare environments have reduced the availability of up front payments. We expect the majority of the outstanding customer up front payments to unwind over the next three years, following which the revised accounting policies will mean that operating cash flows will become more closely aligned with operating results.”

On delivery to the NHS, the company said, “The National Programme for IT in England is taking place later than originally predicted. Discussions to facilitate a rescheduling of the contractual delivery schedule are ongoing. A further update will be provided in due course.”

To help cut its operating costs, the company said it was axing 150 jobs in the UK. The firm has also sold off it loss-making Swiss operation.

 

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