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Isoft, the software developer chosen to overhaul the National Health Service’s IT systems, on Friday confirmed long-held investor suspicions by issuing a profit warning.
The company, which issued a severe profit warning in January because of delays to its NHS work, said the latest shortcomings were not linked to its health service contracts.
Investors have been concerned about the future of the NHS contract, which accounts for a large slice of the Manchester-based group’s earnings. News the problems had spread to other parts of the business was a surprise.
Analysts expected full-year profits, due out in July, of £24m-£42m, but yesterday Isoft said profit was unlikely to exceed £22m.
Since early April Isoft’s shares have taken investors on a rollercoaster ride, falling when analysts published notes questioning its balance sheet accounting, and later on rumours of an NHS-related profit warning, only to soar on unconfirmed reports that rival Misys was plotting to buy the company.
The January profit warning alerted the market to problems with its NHS business, and concerns intensified shortly after when Accenture, the US consulting firm, blamed Isoft, its subcontractor on the NHS contract, for some of its own losses.
Analysts at Investec this month said the company’s apparent practice of making loans to itself could hurt cashflow. “The company has effectively received cash up front for work that it has committed to do in the future,” said Investec.
Also of concern was the decline in the amount of money the company had on hand to cover unexpected costs or customers’ defaulting on payments.
The latest profit warning prompted further speculation that Isoft could soon be consumed by another company.
Misys, the UK software company whose rumoured interest this week boosted Isoft’s shares, has been selling insurance businesses in favour of healthcare units, said Gareth Healy, director of corporate finance at Close Brothers.
Isoft shares fell 16.5 per cent to 117½p, making its market cap £271m.