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iSoft lives to restate another day

Long-awaited results show massive loss

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iSoft today revealed a cataclysmic loss but says it has gained enough breathing space to restructure the business back to profitability.

However, the NHS software provider's financial results contains a thicket of provisos and material uncertainties, with the company noting in the accounts that some of these could cast doubt on its ability to continue as a going concern.

iSoft's publication of the long-delayed year-end statement has staved off the prospect of a shares delisting and comes just days after the Financial Services Authority announced a formal probe into possible accounting irregularities in the firm's accounts for the years to 2004 and 2005.

Today's figures showed revenues of £210.7m for the year to April 30, 2006, compared to £186.1m the previous year. A massive charge of £351.4m for goodwill impairment has sent operating costs spiralling to £539.8m, resulting in pre-tax losses of £343.8m, compared to a £5.9m profit the previous year.

The accounts have been compiled under the new revenue recognition policy the adopted earlier this year. The firm is reversing revenues for the years 2005, 2004, and 2003, to the tune of £76m, £54m and £44m. This revenue should be recognised in subsequent years.

In the notes to the accounts, iSoft's board says it is not possible to anticipate the implications of the FSA investigation; and adjustments or restatements to the firm's figures may be necessary, which could affect its financial position.

The board also warns of issues relating to its work for the NHS's NPfIT upgrade, pointing to problems confirming status of delivery with some Local Service Providers (LSPs). This could lead to…adjustments or restatements to its financial statements.

It also points to allegations of contractual breaches by iSoft from two LSPs, Accenture and CSC. The company denies the accusations and says it will defend them, but it warns that should they be substantiated, it could give rise to, er, adjustments to the financial statements.

The brightest spot in today's statement is that iSoft has renegotiated its banking arrangements, on the back of its cash flow projections for the next 12 months, and a major restructuring, including the disposal of non-core businesses.

However, the board warns that in preparing its projections, it recognises "material uncertainties that may cast doubt on the Group's ability to continue as a going concern". ®

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