iSoft restates accounts and axes 150 jobs

Healthcare software company iSoft has seen its shares tumble to a new low, on the back of an announcement this morning that it expects full-year revenue and profit to be significantly lower than expected due to a change in accounting policy.

The resulting restatement of accounts will result in the elimination of £165m of historic revenue previously recognised over the past three years, although the company said this will now instead be seen in future years.

The Manchester-based firm also announced that it will make 150 of its UK staff redundant by the end of the year as part of a cost cutting-drive to slash operating costs by £25m. A 90 day staff consultation began on 15 May. The company says it will also look at disposing of other assets.

iSoft has contracts to deliver clinical software in three of the five clusters of the NHS National Programme for IT (NPfIT). Currently providing versions of legacy products, the company is developing a next-generation Lorenzo product.

E-Health Insider understands that Lorenzo, originally due to be available for NHS implementation in 2004-2005, is now not expected to be available for significant numbers of NHS deployments until 2008-2009.

The company said that the process of rescheduling the late-running delivery software and services to the NHS, which it first announced in January, had not yet concluded. "Discussions to facilitate a rescheduling of the contractual delivery schedule are ongoing. A further update will be provided in due course."

iSoft said its accounting policy restatement "will involve reversing revenues of approximately £70m, £55m and £40m which were recognised in the years ended 30 April 2005, 2004 and 2003 respectively".

It said these revenues will now be recognised in future years. "The group believes that approximately £40-50m will now be recorded in each of the years ending 30 April 2007 and 2008, and the majority of the balance in the following two years."

The software company, which has already issued two profit warnings this year, said it now expects pretax profit for the year to 30 April to be between £3-7m, down from the £17-22m indicated in April.

Revenue is now expected to be between £195-200m, compared to £210-215m as previously indicated.

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

One financial analyst contacted by E-Health Insider said a restatement of accounts had been anticipated, but was worse than expected.