iSoft says recovery now underway

iSoft today said it has begun a "regeneration programme", stabilised its position and is ahead of schedule on stripping costs out of the business. The health software firm announced better than expected half-year results with pre-tax losses of £14.3m in the six months to 31 October, with revenues down 11.6%.

The software company said that it has met two delivery milestones for its Lorenzo product but declined to specify what these were. In a statement it indicated that introduction of Lorenzo from 2008 will be much more gradual than previously indicated, with a renewed emphasis instead on existing products.

The company, which is a key supplier in the £12.4bn NHS IT programme, has yet to secure the long-term funding it needs either through a rights issue or finding a buyer. Efforts to find a new CEO have temporarily been put on hold.

An iSoft spokesperson told EHI that it does not anticipate ever having its auditors fully sign off its 2005-2006 accounts, due to the changes in revenue recognition policy. "We will never have a set of fully audited accounts for last year."

The half-year results include £11.6m of exceptional costs relating to redundancies and closure of its Manchester HQ. Chairman and acting CEO John Weston told EHI that as part of the "regeneration plan" now underway iSoft’s annual run rate had been cut from £210m to £175m. "The results underly that the management team we’ve got in place are getting to grips with the business and delivering on cost cutting six-months early."

He added: "I’m pleased with the progress to date and pleased with where we go from here."

Of the additional costs incurred in the last six months £4m are tied to professional and banking costs, plus retaining lawyers to advise on the ongoing Financial Services Authority investigation.

While costs are being cut the clock continues to tick for iSoft, with the company facing progressively more expensive borrowing facilities which start to become punitive from Spring onwards, with increases in January, April and July. The spokesperson said: "We would like to get in place more long term funding of the business whether that’s the sale of the business or an equity issue as soon as possible."

The company says that following restructuring it is now on track to meet its delivery commitments under the NPfIT programme. Specifically iSoft today said that they had delivered the first two of 12 milestones agreed with CSC for the delivery of Lorenzo. But Weston said that due to commercial confidentiality he was unable to say what these two milestones were.

In a guidance note iSoft said that it would "apply maximum effort to complete the development of Lorenzo 3.5 for delivery to Computer Sciences Corporation (CSC), the prime contractor for the UK NHS, in the first quarter of 2008." The iSoft spokesperson clarified that any subsequent delivery to NHS organisations would occur some months after the software was initially provided to CSC.

iSoft made clear in its guidance that the introduction of Lorenzo from 2008 would be gradual: "Our aim over the next few years is to exploit fully the existing portfolio of strategic products – especially iPM and iCM – prior to the gradual introduction of Lorenzo from 2008 onwards."

It added: "We are currently supporting too many variants of our core portfolio of around 30 existing products". The aim is now "to rationalize the portfolio and standardise products on a single, configurable code stream across all of our international country operations".