iSoft’s financial troubles mount

Troubled UK health IT software firm iSoft was plunged into further financial crisis on Friday after it announced it had again delayed publication of its full year results because it had been unable to conclude negotiations with its banks.

The indications are that iSoft has been unable to complete renegotiation with its banks while its two key contracts with Accenture for the North-east and Eastern regions of the NHS National Programme for IT (NPfIT), valued at £300m, are uncertain.

iSoft is a key supplier to the delayed £6.2bn NHS IT modernisation programme, responsible for delivering new clinical software to three of five NHS regions in England. On Friday the company said it was in talks with Accenture and CSC, its key partners in the NHS National Programme for IT, raising concerns its prime contractors may be considering a possible change in software supplier.

The situation is further complicated by the expectation that for acute hospitals in London, NPfIT’s  prime contractor in the capital, BT, will replace GE Healthcare with iSoft’s US rival Cerner. Cerner already has a contract to supply software systems to the English NHS’s Southern region.

There are also, however, suggestions that a model may be announced that would allow clinical software providers iSoft and Cerner to sell outside their specific NPfIT regions in a limited fashion , providing NHS trusts with a modicum of choice. This is thought to run counter to the regional contracts awarded by NPfIT which were understood to be predicated on exclusivity.

iSoft is already understood to have an arrangement to continue to support a group of teaching hospitals in London, while Cerner has an agreement to supply the Wiral hospital in the North-west of England. Arrangements providing choice of systems have already been promised, though not yet implemented, to GPs in the primary care sector.

Given this degree of uncertainty it is unsurprising that iSoft’s banks have been unwilling to yet conclude a new deal. iSoft had hoped to complete negotiations early this month and announce its already delayed annual results on 11 July. But on Friday it admitted that the discussions would "not be concluded in time for the preliminary results announcement next week. The board has therefore decided to postpone the results announcement at this time."

The group has issued three profit warnings in the past five months largely due to delays in delivering software to the NHS. One month ago iSoft changed its accounting policy, wiping out £165m of historic revenues – effectively meaning it has never made a profit. Shortly afterwards chief executive Tim Whiston resigned.

The latest announcement led to a further fall in shares on Friday, which have now had 90% of their value wiped out in less than a year. The company gave no new date for the release of the results, which are expected to show a massive plunge into the red as it writes off goodwill from its balance sheet dating back to its merger with Torex.

Accenture in April said iSoft was partly responsible for the £240m loss provision it is making against its two the NHS IT programme contracts this year. On both regional NHS contracts iSoft is Accenture’s key clinical software sub-contractor.

Accenture boss Bill Green recently hinted to analysts that alternatives to iSoft are being considered for its two NHS contracts. "We are watching the iSoft situation closely" he said. adding that his company was "looking at ‘a series of alternatives."