Cerner confident of delivery in the South

Leading NHS clinical software supplier Cerner Corporation announced last week that it was on track to deliver in the Southern region of the NHS having had a successful go live within four months of signing a contract with Fujitsu.

During the course of 2006 Cerner predicted that revenues from the Fujitsu Alliance local service provider contract will be in the region of $50-$70m (£28.7-£40.2m) and indicated that total revenues from its contract to modernise clinical software in the South of England would be worth approximately $400m.

Cerner’s total bookings for the fourth quarter of 2005 reached a new record partly thanks to booking of $65.5m (£37.6m) of revenue for the successful delivery of the first phase of its contract with Fujitsu, the local service provider for the South of England.

In a call with analysts on 2 February, the firm said that it was on track to deliver its contract with Fujitsu on schedule and did not anticipate any problems. Asked by one analyst whether the company had been surprised by the news of delays from iSoft, Cerner’s chief financial officer Marc Naughton, said: "Our contract with Fujitsu has deliverables and dates and we are signed up to those we are meeting those deliverables on date”

Asked whether the delays in other NHS regions would impact Cerner he added: “Based on our contract it has little or no impact on us.”

During the conference call Naughton explained: "The bookings for the Fujitsu contract was triggered by the delivery of the first phase of the project…"

The trigger referred to was the initial go-live in the South at the Nuffield Orthopaedic Hospital NHS trust: "As reported we had initial go-live in December in the Southern cluster in the fourth quarter, four months after signing the contract with Fujitsu," Naughton told analysts.

He added that there are two more phases of the NHS contract "that are booked over the next couple of years". Cerner said that the remainder of the payments related to the Fujitsu contract to occur in smaller increments over the next several years as milestones are met.

"We’ve taken around half the bookings for that contract, to date around $200m (£114.8m). There’s another half still to be taken," said Naughton.

The analyst briefing also made clear that the Southern NHS contract is currently being delivered at cost by Cerner, with the US-based company not expecting to make any margin on the contract until mid-2008 when the last element of software is delivered.

"Once all the software is delivered we can then recognise all of the margin on that contract," explained Naughton.

Asked whether Cerner believed that problems in other regions of the NHS IT project could create an opportunity for the company to win another region, a Cerner executive responded: "You’re trying to predict the behaviour of a federal government, and I don’t think any of us can do that… there all kinds of variables that come into your question most of which are out of our control.”