Isoft refinances after posting £343.8m loss
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Isoft, the troubled healthcare software company that is being investigated by the Financial Services Authority for issuing potentially misleading statements to the market, on Friday reported a full year pre-tax loss of £343.8m.
The Manchester-based company also revealed that Accenture and Computer Sciences Corporation, its senior partners on different parts of the National Health Service IT project, have accused it of material breach of contract. It is denying the claims, but said that the most likely outcome was a commercial settlement.
Analysts also noted that the company’s auditors had not signed off on the accounts.
In spite of those questions, shares in the Manchester-based company surged after it said it had agreed new financing arrangements with a consortium of banks. The annual results statement was originally due last month, but was delayed to allow Isoft more time for discussions over its banking facilities.
The shares rose about 41 per cent to 60p in early trade.
Isoft said pre-tax losses were £343.8m in the year to April 30 compared with a pre-tax profit of £2.2m the previous year. Revenue rose 8.4 per cent to £201.7m, and the loss per share was 165.1p compared with earnings of 2.6p previously.
The company took an impairment charge of £351.4m, linked to the acquisition of Torex in 2004.
Shares in Isoft plunged at the start of the year when it issued a severe profits warning linked to delays to the £6.2bn upgrade of the NHS’s computer system. In March, Accenture publicly blamed Isoft for delays to the installation and development of the computer systems. Another profits warning followed in April.
In June, Isoft made a third revision to its full-year profit forecasts and announced a major change in accounting policy that involved reversing significant portions of reported revenues from the past three years.
The company said this week that it was now being investigated by the Financial Services Authority for “possible accounting irregularities”.
“The second half of the financial year ended 30 April 2006 was a turbulent period for Isoft and long-term shareholders will be feeling deeply disappointed by the events of recent months,” said John Weston, chairman and acting chief executive.
“I am determined to see through a series of actions and change that I believe are necessary to put this company back on a solid footing and enable it to capitalise on its underlying product strengths and experience.”
Mr Weston said that the the new arrangements with Isoft’s banks would give it a short-term platform from which to address the long-term future of the company.
He also highlighted an agreement, announced on Friday, that the company had signed with Computer Sciences Corporation worth £153m for the delivery of products and services. The company will also continue to supply services to seven NHS trusts in London and southern England until 2008, with options to extend until 2011.
Isoft said that it could not give accurate guidance for 2007 revenues, although it was likely that the second half of the year would be stronger than the first.
The company said that neither Accenture or Computer Sciences Corporation had made a formal claim for material breach of contract. Were any claims to be brought, Isoft said they would be contractually limited to £15m per year in aggregate for Accenture and £18m per year in aggregate for CSC, with an overall cap of £50m.
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