Troubled NHS supplier rocked by major losses

NHS software supplier iSoft’s announcement last week that it has made a loss of £343.8m for the financial year to April is the latest in a series of setbacks.

The UK-based company is contracted to two major systems integrators, CSC and Accenture, to provide hospital administration software in three of the five regions of England’s £6.2bn National Programme for NHS IT (NPfIT). The plan is to install current iSoft products while the company develops its next-generation Lorenzo system.

But development of Lorenzo has been slower than anticipated, and implementation is more than a year behind schedule, which prompted two profit warnings earlier this year.

The company’s problems were compounded in June when it changed its accounting practice of booking money when deals were signed to the more conventional approach of waiting until contracts are paid.

The revision depressed historic earnings by £70m for 2005 and £55m for 2004. The resignation of chief executive Tim Whiston in June, the suspension of two other senior executives last month, and an investigation by City watchdog the Financial Services Authority have added to the company’s woes.

However, two announcements buy iSoft some breathing space and belie concerns that the company is either about to collapse or lose the NPfIT deals.

iSoft’s banks have agreed loans running until November 2007. The company has also revised its schedule for the NPfIT contracts and signed an agreement with CSC confirming delivery of products worth up to £153m, including the £36m already delivered.

‘The agreement with CSC gives iSoft some certainty that was lacking before,’ said Tola Sargeant, analyst at Ovum.

But the problems are not over. Negotiations with Accenture, contractor for the other two iSoft regions, were continuing as Computing went to press, and iSoft says it cannot yet provide financial forecasts for the coming year.

Not everyone is pleased at the stay of execution. One NHS IT director in an iSoft region told Computing: ‘I am disappointed that iSoft got backing because it could have been an opportunity to come up with a better solution, even though we might have had to wait longer.’

Speculation about the firm’s future has raised questions about what could replace it. Both the other two regions, London and the South, have changed their original software supplier and there are not many other candidates to choose from.

‘There are questions about capacity and capability that need to be addressed,’ said Nick Kalisperas, government practice director at trade group Intellect.

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