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Matthew Vella
A British member of parliament is to ask the UK secretary of state for trade and industry to consider a full investigation of the conduct of iSoft’s directors.
iSoft, which is currently tendering for a EUR29 million contract to supply an IT system for Mater Dei hospital, is now facing the possibility of a formal investigation after irregularities were uncovered in the troubled software company’s accounts.
Richard Bacon, a Conservative MP and member of the public accounts committee, will be asking the trade secretary about advance payments made by the National Health Service to iSoft, and whether these had been intended to be repaid.
iSoft is one of two finalists tendering for the provision of an integrated health information system at Mater Dei, which is expected to be in place by December 2007. The other bidders are AME consortium, which includes Austrians AME, Inso SpA, the Italian firm supplying Mater Dei’s medical equipment, and Maltese firm Intercomp. The consortium has presented a EUR29,133,600 bid. iSoft presented a higher price at EUR29,630,153.
The experts chosen by the Maltese government to consult with the committees evaluating the tender, Gartner, recently issued revised their rating for iSoft downwards to “caution”. Gartner have stated that iSoft’s reduced profitability could impair its ability to accelerate work on the IT project for the NHS, for which it is the main supplier of software.
While a spokesperson had told MaltaToday that iSoft was a “strong” company, the beleaguered company has seen its share price fall by 90 per cent since January.
The reason why iSoft is in trouble is due to its first profit warnings in January when it announced its full-year revenues would be below expectations. The reason: “rescheduling” on the National Programme for IT, a GBP6.2 billion project to get British patients’ records on computer.
Earlier this week, auditors Deloitte found that iSoft had been booking its revenues earlier than they should have been. That’s because software licences usually span over several years, and that means payment for these licences are also spread over the lifetime of the licence. Under chief executive Tim Whiston, iSoft had been recognising these revenues before actually materialising.
Then in June 2006, iSoft announced a change accounting policies which would cut its revenues by about GBP70m in 2005 and GBP55m in 2004. Whiston resigned soon after.
The revelations in the Deloitte audit have uncovered irregularities due to the change in policy. The Financial Times reported that there had long been “some contention in the City about Isoft’s method of accounting for revenues.
iSoft must now present its preliminary full year results by 25 August, or risk having its shares suspended.
mvella@mediatoday.com.mt
Links:
www.maltatoday.com.mt/2006/08/06/top_story.html
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