Tuesday, August 31, 2010

It Looks Like It Will be a While Before iSoft Recovers from This Mess!

iSoft released its annual 2010 Full Year results just on market open today.

You can read the gruesome details here:


and for the real details here:


The result has already be covered here:

iSoft CEO steps down after poor result

ISOFT Group chief Gary Cohen has stepped down as part of a review after a horror full-year result.

Shares in the Sydney health information technology company slumped more than 20 per cent to 12.5 cents, after it reported a $382.9 million loss, following $34.7m profit last year.

The company's shares have now fallen about 83 per cent this year.

The result included a $341m one-off impairment charge, primarily related to goodwill. Total revenue fell 20 per cent to $431 million and earnings before interest tax depreciation and amortisation tumbled 77 per cent to $30m.

Chairman Robert Moran, who described the result as "disappointing", said iSOFT's board has commenced an in-depth review of the company's business operations.

A number of aspects of the review are already being implemented, including the departure of Mr Cohen who will remain with the company to assist with its transition and strategic development.

iSOFT has engaged an executive search firm to assist in finding a new CEO, with chief operating officer Andrea Fiumicelli to serve as acting chief.

The company has also commenced a "board renewal" process to identify candidates from both Britain and Australia to join the board.

On the result, Mr Moran said: "A difficult economic environment, adverse currency impact, delays to the implementation of the National Program for IT in the UK and an increased cost structure all contributed to this result."

iSOFT changed its name back to iSOFT last year after IBA Health acquired the group in 2007.

Mr Moran said the review has already targeted annualised operational cost savings of $50m by end of June 2011, with more than half of this to come through headcount reductions.

More here:


There is also some additional information here:


* Health information company iSoft (ISF.AX)


31 August,2010

ISF.AX, (0.135, -0.030, -18.180%), the market's most active stock, lost a quarter of its value to hit a 6-½ year low of A$0.125 after it reported a loss of A$383 million due to a hefty writedown of goodwill.

It said it needed to restructure its senior debt facilities, review its capital structure and was considering asset sales. Its chief executive stepped aside to work with the board on strategic options for the company.

Full article is here:


Clearly all this is pretty bad news for iSoft investors – to say nothing about how the ex-CEO (Gary Cohen) must feel to essentially lose his job.

While it is hard to be sure it does seem we are in part seeing in the figures the effects of the takeover transaction from a year or so ago impacting – as well as all the issues around the UK National Program for Health IT which have harmed cash flow and the need to recognise that there has been a major reduction in the value of the company’s intangible assets.

The 2009 annual report reveals there was over a billion dollars of intangible assets on the company and with the write down in these results this amount has been essentially halved but it is still a rather large $480 million.

Given that the company has a very substantial amount of ongoing legacy and maintenance revenue and many customers all over the world as well as a very newly developed and apparently quite good product in Lorenzo we can only hope the steps planned will turn the ship around!

For all concerned it would be sad if this can’t be achieved, but I doubt it will be quick!



Anonymous said...

Perhaps a good time to buy some cheap shares? I's off to get some....

Anonymous said...

This demonstrates why State Health Departments should always ensure they select more than one supplier of hospital software to service the states' hospitals.

The ramifications of this commercial failure will have major impact across many facets of Australia's healthcare system. iSoft is actively promoting its products well beyond hospitals to medical practices and residential aged care facilities.

When a company of this size gets into this sort of trouble the whole health care system suffers. A megalomaniacal desire to be the biggest in the world carries big commercial risk; not just for the company's investors but also for the clients it aspires to service.

A very sharp knife will now be wielded inside iSoft.

The company's capacity to respond to the needs of its hospital, media and aged care clients will be diminished enormously perhaps for 3 to 5 years.

It takes a long time to resuscitate organizations as sick as iSoft. A new culture is required and this will take a long time to develop and embed in the company; globally.

iSoft will inevitably be acquired by private equity at an attractive price, and many of its product offerings will be sold off to slim the company down to those aspects of its core business which will generate maximum profits as quickly as possible.

Some compelling spin can be expected from the likes of NEHTA and HealthSmart as they attempt to reassure the hospital sector and distance themselves from iSoft's problems. Hospitals are far more exposed that medical practices and aged care facilities. It is much harder for hospitals to move across to another vendor because the choice is so limited owing to the bureaucracy's preference for a single vendor strategy. On the other hand medical practices have plenty of good vendors to choose from if they elect to move away from Practix.

Anonymous said...

The UK economy is in a bad way. It will have a major impact on iSoft for a number of years. This will be further exacerbated by the system wide restructuring of the entire NHS which is just beginning. The only mitigating factor is that as hospitals need and will continue increasing their use of ICT the impact on iSoft will be softened to some degree but will that be enough to ward of the vultures snapping at its heels? Probably not.

Anonymous said...

iSOFT has a great Aussie company at its core, and I can only hope that with time they get the ship stabilised. When your major market collapses, there is nothing much to do but adjust and wait. We wish you well iSOFT.