Profit warnings edge NHS IT provider closer to restatement
The company is almost certain to restate its accounts after issuing two profit warnings this year
iSoft, the battered IT company involved in the NHS’s controversial national
programme for IT, is expected to restate its accounts when reporting final
results later this month in an effort to address concerns about its accounting
methods.
Analysts said the company was almost certain to restate its accounts after
issuing two profit warnings this year and fending off rumours about the strength
of its financial position.
The company recently changed its auditor from RSM Robson Rhodes to Deloitte,
and the final results will be the first the Big Four firm will look over as
auditor.
‘The profit warnings from iSoft earlier this year have given the company
scope to restate its accounts, and we are expecting some form of restatement
when the final results are released,’ one analyst said.
iSoft’s problems may stem from its accounting policies. Concerns have been
raised that the company has been using a £70m off-balance sheet credit facility
by issuing letters of credit against customer prepayments. The facility could
affect banking covenants and cash flows even though it does not count as
accounting debt.
There have also been concerns that local service providers rolling out the
NHS IT programme have been taking over two years to pay for IT contracts while
iSoft has been recognising the revenues upfront.
As result of these concerns, the company could be looking to bring additional
capital into the business. Last week iSoft sold off its operations in
Switzerland to Nexus, a local provider of healthcare IT solutions, for £995,000.
iSoft said the deal would allow it ‘to focus on other priorities in the short
term’ while leaving the door open to sell future products in the region. But
market watchers said the move was made to push more funding into the business.
‘Not so long ago we were all hearing how good the business in Switzerland
was, so the sale appears to have been done to add capital into the business,’ an
analyst said. ‘I don’t see the company selling its operations in Germany and
France.’