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iSoft first issued a profit warning at the start of the year announcing that the delay in the NPfIT would diminish total revenue by GBP55 million below previous expectations, to GBP30 million this year.
A second profit warning was issued on 28 April.
But the change in accounting policy, announced on 8 June 2006, meant iSoft’s profits would have to be readjusted to GBP3-GBP7 million, compared with a previous forecast of GBP17-22 million.
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 also announced it would be reducing its total operating costs and that some 150 employees, approximately 15 per cent of its UK workforce, will be made redundant.
The company also entered into talks with its banks to rebase its covenants. Only two weeks ago, the firm announced it could be launching a probe over accounting irregularities.
Background: Mater Dei
iSoft is a Manchester-based firm which is competing for a multi-million tender to provide Mater Dei’s IT system.
Its main competitors for the final bid include Inso, the Italian firm at the heart of another controversial contract for the provision of the hospital’s medical equipment. In December 2003, Inso was awarded the multi-million euro tender for the supply of medical equipment. After Dutch bidder Simed appealed the decision, the appeals tribunal reversed the decision. But the Foundation for Medical Services stuck with the decision to choose Inso, the cheapest bidder, with the director of contracts as well as the government standing by that decision.
Simed claimed Inso’s bid had been disqualified, and that there were several irregularities in the contract, which did not comply with tender specifications after technical experts found that only 53 per cent of the equipment was compliant with the tender.
Since then, Malta’s procurement record received negative ratings by the German ministry for economy and labour, which claimed the tender award to Inso was unacceptable since the Italian firm was allowed to review its tender bid. The ministry claimed: “circles close to the Malta government explained the tender was awarded to the Italian company because Italy helped the Maltese economy at the end of 2003 with the renewed ‘Financial Protocol.’ The award of the tender was a ‘reward’ for the financial protocol.”
In July 2004, scandal broke out when police started investigations into false evidence drawn up by private investigator Joe Zahra. Zahra was commissioned by Simed to look into the contract award to Inso. Zahra implicated falsely that the director of contracts and his daughter, along with the brother of the finance minister John Dalli, of having conspired together on the award. But travel records failed to corroborate allegations of meetings in Italy.
Zahra told Simed he required an extra Lm1 million to get sources to substantiate allegations, which police claim was intended to discourage the Dutch firm from demanding him to stand by his report. Simed passed on Zahra’s false report to PM Lawrence Gonzi, who then gave it to the police to investigate.
In November 2004, as delays and expenses hamper the beleaguered hospital, Gonzi took on Swedish construction giants Skanska and finalisesed a new agreement, setting the final construction cost of Mater Dei at Lm139 million or Lm45 million more than what was projected in 2000 when the contract signed with Skanska included projections that put the hospital’s construction cost at Lm93 million. Gonzi also waived penalties that accrued over the last four years amounting to Lm5 million for delays in the opening of various sections of the hospital. Gonzi also set the final inauguration date: his 54th birthday on 1 July, 2007.
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