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Matthew Vella
Isoft, the British healthcare firm currently tendering for the provision of the Mater Dei hospital IT system, has claimed it will meet delivery commitments after the firm’s financial future was thrown into doubt last week following a revision of its accounting policy.
Earlier this week, Isoft’s chief executive officer Tim Whiston resigned his post in the wake of profit warnings, a share plunge, and a change in accounting policy that prompted a revision of profits downwards.
The firm is now 30 months behind schedule and possibly GBP14 billion over budget to provide software for the British healthcare service, the NHS, that will give patients a lifetime electronic care record, London’s Telegraph has reported.
A dramatic change in accounting policy at Isoft has now thrown into doubt the much-delayed upgrade of the NHS computer system, which will put records of 50 million patients onto computers.
Isoft is one of two finalists for the provision of Mater Dei’s integrated health information system, estimated to range between Lm10 million and Lm15 million, which has to be delivered by December 2006.
A spokesperson for Isoft told MaltaToday that Malta was “an existing customer of Isoft and we are confident we can meet delivery commitments as per our submitted proposal.”
On 30 January, Isoft issued a profit warning announcing that delivery of the NHS programme would take place later than expected, meaning total revenue generated by the programme for the year was expected to be around GBP30 million, approximately GBP55 million below previous expectations.
The warning sent share prices plummeting from 360.75p to 200p over the weekend.
But the change in accounting policy, announced on 8 June 2006, meant Isoft’s profits would be readjusted to GBP3-GBP7 million, compared with a previous forecast of GBP17-22 million, after eliminating GBP165 million of historic revenue.
Previously the company had been entering revenues in its books upfront from software licences it sold for a number of years, instead of entering the revenues in staggered, yearly amounts.
Despite not making actual profits, CEO Tim Whiston was still paid a GBP290,000 performance bonus last year.
Critics said the change in policy should have occurred long ago, due to changes in accounting rules. Shares crashed by 38 per cent to 53-52p following the change in policy.
Isoft will now have to enter payments over the duration of the contract, rather than entering total revenues upfront, in line with standard practice.
The downwards revision of its revenues also meant the company had breached its banking covenants, because its debt with banks had exceeded its earnings three times over.
In a bid to shore up its finances, Isoft will be reducing its total operating costs and has announced that some 150 employees, approximately 15 per cent of its UK workforce, will be made redundant. It has also sold its Swiss operation to Nexus for GBP1 million.
The other finalist for the Mater Dei IT tender is AME, a consortium which includes Italian firm INSO, the providers of medical equipment for Mater Dei.
Another bidder, Intracomp, has lodged an appeal with the director of contracts after it was excluded due to alleged technical non-compliance. The group includes Greek firm Intralot, which owns the Maltese lottery provider Maltco.
The appeal is bound to delay the award of the contract to provide the IT system, which should be up and running by the end of the year.
mvella@mediatoday.com.mt
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