System C revenues slide as NPfIT stalls

System C has reported a 27% decline in half year revenues, down from £18.3m to £13.3m, as work deploying NPfIT systems dried up and national NHS IT contracts were scaled back.

In its half year results, the health and social care software firm said the period had been “a transitional six months… as we have accelerated the shift towards becoming a product-led business”.

The company posted a loss of £0.1m, compared to a profit of £3.2m for the same period last year.

System C said that it was moving away from being an implementer of software supplier by other firms under the National Programme for IT in the NHS to selling and deploying its own software products.

AIM-listed System C also cited the general reduction in public sector spending “and the software delivery problems of other suppliers working under the National Programme for IT” as factors that had led to a decline in service revenues.

“The focus of the company is shifting from time and materials work in support of the government’s National Programme for IT to the sale and deployment of our own large scale and high value products,” it said.

“As anticipated, this move has led to a reduction in short term revenues and a move towards increasing licensing revenues from system sales which are expected to start coming through in the second half of the year."

System C chief executive Dr Ian Denley said: "These results are in line with management expectations for this transitional year from a services to a products-led business.

"The demand for large scale hospital systems continues to accelerate and our sales pipeline has grown from just a handful of hospitals 12 months ago to 34 hospitals today.

"We are already engaged in eight major procurements for whole hospital patient administration and electronic patient record systems (PAS/EPR systems) and I am pleased to announce that we have already advanced to the shortlist in six of them.

"I am also pleased to announce that our services team has successfully renewed its services framework contract with NHS Connecting for Health for another year.

"This team’s unparalleled experience deploying hospital systems will be crucial as the procurement cycle starts maturing and we start the anticipated volume deployments of Medway.”

System C’s management offered a bullish forecast of market activity in the second half of 2011, saying that a “surge in procurement activity is underway."

It said NHS trusts would take advantage of a relaxation of central IT procurement policies, opening the market up to new PAS and EPR business.

“Looking forward, the latest product range, five years in development, has been deployed successfully and new procurements are progressing well. We now have a strong sales pipeline and are currently in negotiations with 34 trusts.”

The company anticipated “winning significant numbers of sales in this market during 2011 and beyond as more trusts move through the pipeline into formal procurement”, although it noted the timing of these sales and associated revenues remain difficult to predict.

Revenues in System C’s product division decreased by 16% to £7.4m compared with the first half of 2009. This was attributed to the scaling back of central NHS development contracts for portal and dashboard products.