Backers sought for beleaguered iSoft

Under-fire healthcare IT company iSoft has put itself in the shop window in a bid to resurrect its ailing fortunes. The decision concludes a catastrophic financial year for the once-booming AIM company as management decided to seek backers before iSoft fortunes took a further nosedive.

The news was released hours before iSoft’s AGM, which did nothing to appease its long-suffering shareholders, but hopes of attracting a potential buyer were dealt a massive blow on the eve of the highly-charged meeting.

It emerged that serious problems with one of iSoft’s most complex hospital computer system installations were threatening to wipe more than £16m off the expected income of an NHS Trust hospital.

The University Hospital of North Staffordshire, which is struggling to claw back debts from last year of £15m and is shedding 1,000 staff, is having problems getting the new IT system to generate basic information on patient treatments in order to send bills to the primary care trusts. It said the problem could leave the trust short by between £4.5m and £16.2m for the full year. ‘The sums look pretty scary,’ said its finance director, Mark Mansfield last week.

Shareholders approved all resolutions at the AGM, which included a controversial payment package for FD Gavin James, as well as Deloitte being retained as its auditors. iSoft incurred the wrath of a powerful investor group after proposing the share deal, described as a deferred bonus, equivalent to James’ base salary of about £200,000.

The Association of British Insurers tagged the company with a ‘red-top’ rating, its highest warning of corporate governance failures in response to the offer, which is only payable after James has completed three years at iSoft.

ISoft showed a pre-tax loss of £344m for the year to 30 April 2006. After this point, the company, currently the subject of an FSA investigation, had to overhaul its accounting policies. An imprudent revenue recognition and the use of an off-balance sheet credit facility forced it to write off millions of pounds of profits.

ISoft recently said that following changes to its accounting policies, it would have to de-recognise £174m of revenues for previous years.

Chairman John Weston faced shareholders at the AGM meeting to outline iSoft’s bid to resurrect its fortunes.

‘Recent events, including delays to the rescheduling of deliveries under the National Programme for IT (NPfIT) and media and market comment on a number of issues surrounding iSoft, have had a negative impact on the company’s business revenues. In updating its business plan, the company has reviewed its revenue outlook and expects a decline in revenues for the first half and for the full year ending 30 April 2007 of between 10% and 15%.’

‘The position on the NPfIT was clarified in a statement issued on 28 September 2006, which explained that CSC (Computer Sciences Corporation) will take over Accenture’s responsibilities in the north-east and eastern regions in January 2007, with iSoft as its software provider. The statement also ended speculation that iSoft might be subject to litigation from Accenture.’

COMPANY REPORTS

Taking off

The chief executive of Ryanair, Michael O’Leary, has appealed to workers at rival Aer Lingus to accept his offer for the company by offering a tax-efficient scheme for the employees to dispose of their shares. Ryanair has made a 2.80 euros-per-share, or 1.48bn euros (£990m) offer for Aer Lingus, and is now attempting to lure members of the Aer Lingus employee share ownership trust, by offering a scheme that will allow them to sell off their holding without paying any tax.

The scheme is expected to allow members to reinvest the proceeds of the sale of Aer Lingus shares in Ryanair stock, and then sell the Ryanair shares at a later date without incurring tax.

Even fatter

Research has shown that the average wage of a FTSE 100 chief executive rocketed by 43% in one year. According to the study compiled by Incomes Data Services, the chief executives of the country’s 100 largest listed companies earned an average of £2.9m in 2005-06, up from £2m the previous year. This means that the typical boss earns 86 times more than a typical employee.

Top of the list was Sir Martin Sorrell, head of advertising firm WPP, who earnt £17.1m in total remuneration. Next in line was Michael Davis from Xstrata who earned £15.3m, followed by Bart Becht from Reckitt Benckiser, who earned £13.6m.

Profits warning

Eighty-five profit warnings were issued by UK quoted companies in the third quarter of 2006, one more than the previous quarter, but an 18% decrease on quarter three of 2005, according to research released by Ernst & Young. The firm said difficult ‘trading conditions’ were once again the most used term with 40% of the companies giving this as the reason for the warning, while 21% reported contract delays and cancellations. Increased costs and overheads were cited by 16%, up from 11% last quarter.

The third quarter also saw a continuing increase in the number of warnings from AIM -listed companies, with 61% of profit warnings coming from the junior market. Andrew Wollaston, corporate restructuring partner at E&Y said: ‘Light regulation is a big attraction to some AIM companies, which make no bones about the fact that it is the primary reason why they are choosing to float on the alternative market. However, the argument from some quarters is that if AIM is to continue to attract investment, then AIM-listed companies must be able to better balance good investor relations and effective forecasting.’

Easy target

Budget airline easyJet has panned calls by the Environmental Change Institute at Oxford University that flying should be less attractively priced. The carrier believed airlines ‘still have their part to play in safeguarding the environment’ but it was important to note the European Commission’s own calculations, which state that aviation accounts for just 3% of CO2 emissions in Europe’. Calling for greater taxation on air travel is sloppy thinking and risks damaging the European economy,’ it said in a statement.