Isoft losses £343.8m- NPfIT £20 Billion at greater risk
The company at heart of NHS reform in serious trouble- Isoft the troubled healthcare software company that is being investigated by the Financial Services Authority for issuing potentially misleading statements to the market, on Friday reported a full year pre-tax loss of £343.8m. The Manchester-based company also revealed that Accenture and Computer Sciences Corporation, its senior partners on different parts of the NHS IT project, have accused it of material breach of contract. It is denying the claims, but said that the most likely outcome was a commercial settlement.
At its peak iSoft was worth £1bn but, as the extent of its problems have become clear, shares have slumped. This year they have fallen by 90%. The company is now worth £101m.
The company's three founders have made £41m, £30m and £10m respectively by selling shares in the software provider between 2001 and 2005. The next generation of the group's software, which is being developed in India, is earmarked to cover 60% of Britain's GP practices, hospitals and other NHS trusts. It is to be used by about 600,000 clinicians and managers looking after up to 30 million patients.
The NHS's computer upgrade programme, one of the world's biggest IT projects, is already said to be more than two years behind schedule. The collapse of iSoft would paralyse the programme.
This month, an investigation into iSoft's books found serious accounting irregularities in 2004 and 2005, leading to the suspension of one of the firm's founders. Other former staff were also said to be involved in irregularities but were not named.
The company was bought by Roger Dickens, Patrick Cryne and Steve Graham from their then employer, KPMG, in 1998. All held executive positions at iSoft. Mr Dickens, who has since died, left the company in late 2003 and Mr Cryne departed late last year. Mr Graham was suspended earlier this month.
The company's directors were under pressure from investors to show ever-increasing revenues and profits. Their bonuses were directly tied to profits in an effort to motivate them.
A provisional inquiry by accounting firm Deloitte has found that advance payments to iSoft were wrongly included in its accounts. This is not illegal, and can be common practice among many software companies. However, iSoft's accounting practices were found to have overstepped the mark. When the Guardian approached iSoft with these allegations in 2004 the then chief executive Tim Whiston insisted there was nothing amiss.
"There are no questionable accounting practices. The accounts for the company have never been called into question. Indeed, the level of disclosure and the accounting standards applied have received nothing but positive commendations," he said.
Until this year, while iSoft's share price was soaring, the company's founders were busy selling their stakes in the software business. Mr Cryne, the former chairman, made £41m from selling almost 12m shares on four separate occasions between 2001 and 2005. Mr Dickens made £10m from selling 4.5m shares on two occasions in 2001 and 2003. Mr Graham made £30m from selling 9m shares on four occasions from 2001 to 2005.
The software company has been forced to restate its profits for the financial years 2004 and 2005 because of a radical change in its accounting practices. This has meant that operating profit for 2005 has been reduced from £72m to zero and revenues have been revised from £262m to £190m.
Paul Farrelly, Labour MP for Newcastle-under-Lyme, who has for years been urging the Department of Health to take a closer look at iSoft's affairs, last night said: "I have been extremely concerned about iSoft's attempts to deflect legitimate journalistic inquiry and to gag the Guardian. In my experience, when companies try to do this it often shows there is no smoke without fire ... This gagging order is now entirely redundant and it is high time it was lifted." He said he would be joining calls by Conservative MP Richard Bacon, a member of the public accounts committee, for the trade secretary Alistair Darling to appoint inspectors under the Companies Act to examine iSoft's affairs.
http://business.guardian.co.uk/story/0,,1856154,00.html
Health Direct noted that whilst questions have been asked about iSoft's accounting practices since 2004, when the NPfIT project was delayed last November in Choose and Book IT fiasco 'will be a year late' Thu 3 Nov- The flagship Choose and Book electronic booking application will be at least a year late by the time it is rolled out across England NHS chief executive, Sir Nigel Crisp, said yesterday."
Thus the matter of exactly when iSoft added the income generated from the NPfIT contract into their accounting sales column became more than of passing interest. And appears to be adding another nail in this white elephant's coffin.
At its peak iSoft was worth £1bn but, as the extent of its problems have become clear, shares have slumped. This year they have fallen by 90%. The company is now worth £101m.
The company's three founders have made £41m, £30m and £10m respectively by selling shares in the software provider between 2001 and 2005. The next generation of the group's software, which is being developed in India, is earmarked to cover 60% of Britain's GP practices, hospitals and other NHS trusts. It is to be used by about 600,000 clinicians and managers looking after up to 30 million patients.
The NHS's computer upgrade programme, one of the world's biggest IT projects, is already said to be more than two years behind schedule. The collapse of iSoft would paralyse the programme.
This month, an investigation into iSoft's books found serious accounting irregularities in 2004 and 2005, leading to the suspension of one of the firm's founders. Other former staff were also said to be involved in irregularities but were not named.
The company was bought by Roger Dickens, Patrick Cryne and Steve Graham from their then employer, KPMG, in 1998. All held executive positions at iSoft. Mr Dickens, who has since died, left the company in late 2003 and Mr Cryne departed late last year. Mr Graham was suspended earlier this month.
The company's directors were under pressure from investors to show ever-increasing revenues and profits. Their bonuses were directly tied to profits in an effort to motivate them.
A provisional inquiry by accounting firm Deloitte has found that advance payments to iSoft were wrongly included in its accounts. This is not illegal, and can be common practice among many software companies. However, iSoft's accounting practices were found to have overstepped the mark. When the Guardian approached iSoft with these allegations in 2004 the then chief executive Tim Whiston insisted there was nothing amiss.
"There are no questionable accounting practices. The accounts for the company have never been called into question. Indeed, the level of disclosure and the accounting standards applied have received nothing but positive commendations," he said.
Until this year, while iSoft's share price was soaring, the company's founders were busy selling their stakes in the software business. Mr Cryne, the former chairman, made £41m from selling almost 12m shares on four separate occasions between 2001 and 2005. Mr Dickens made £10m from selling 4.5m shares on two occasions in 2001 and 2003. Mr Graham made £30m from selling 9m shares on four occasions from 2001 to 2005.
The software company has been forced to restate its profits for the financial years 2004 and 2005 because of a radical change in its accounting practices. This has meant that operating profit for 2005 has been reduced from £72m to zero and revenues have been revised from £262m to £190m.
Paul Farrelly, Labour MP for Newcastle-under-Lyme, who has for years been urging the Department of Health to take a closer look at iSoft's affairs, last night said: "I have been extremely concerned about iSoft's attempts to deflect legitimate journalistic inquiry and to gag the Guardian. In my experience, when companies try to do this it often shows there is no smoke without fire ... This gagging order is now entirely redundant and it is high time it was lifted." He said he would be joining calls by Conservative MP Richard Bacon, a member of the public accounts committee, for the trade secretary Alistair Darling to appoint inspectors under the Companies Act to examine iSoft's affairs.
http://business.guardian.co.uk/story/0,,1856154,00.html
Health Direct noted that whilst questions have been asked about iSoft's accounting practices since 2004, when the NPfIT project was delayed last November in Choose and Book IT fiasco 'will be a year late' Thu 3 Nov- The flagship Choose and Book electronic booking application will be at least a year late by the time it is rolled out across England NHS chief executive, Sir Nigel Crisp, said yesterday."
Thus the matter of exactly when iSoft added the income generated from the NPfIT contract into their accounting sales column became more than of passing interest. And appears to be adding another nail in this white elephant's coffin.
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