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Thursday, June 17, 2010

I Don’t Think I Can Go Much Longer Without a Comment on iSoft.

Since the 1st of June things have gone from bad to worse for iSoft.

On the 2nd the company updated the market with what will go down in history as the classic ‘good news, bad news’ press release.

The good news was the ‘go live’ of the core and crucial Hospital Product Lorenzo at the Morcambe Bay NHS Trust.

The bad news, in the same release, was as follows:

“At the same time, political uncertainty in the lead up to the recent UK election and the subsequent change in government, have together led to the deferral of decisions in relation to the English NPfiT program particularly for our partner Computer Sciences Corporation, Inc. For iSOFT, this has affected the timing and conclusion of negotiations surrounding the potential of an agreement with CSC in relation to the market opportunities in England and in particular the Southern cluster of English hospitals, as well as delays in milestone payments. The revenues associated with this agreement had been anticipated in fiscal 2010 and are now anticipated in fiscal 2011. However, as with any commercial negotiation, there is no certainty that revenues will ultimately flow.

Typically the Company earns disproportionately higher revenues in the final quarter of the fiscal year. The factors outlined above, which together with currency impacts as a result of the strong Australian dollar, have resulted in revised revenue, EBITDA and cash flow expectations for the period. Revenue for the 2010 fiscal year is being revised to the range of $440m to $455m. 2010 fiscal year EBITDA is likely to be in the range of $45M - $60M, before exceptional items. 2010 fiscal year operating cash flow has been impacted accordingly.”

----- End Extract.

Sadly for iSoft only a couple of months previously they had guided EBITDA to be around $109M with profit to be above $30M.

You simply do not give surprises to the market on this scale and expect there not to be a pretty severe reaction! There was.

As it was the share price has halved almost instantly and is now only 1/3 of what it was only six months ago.

Since the initial profit warning there have been further releases, (providing some extra explanations and also announcing Board changes) which have seemed to make things worse with the share price as I type being just 25.0 cents.

You can see the later releases and a good deal of other information here:

http://www.abnnewswire.net/companies/en/29476/iSOFT-Group-Limited

There is an article on the topic from the Australian here:

http://www.theaustralian.com.au/business/city-beat/shake-up-for-isoft-group-board/story-fn4xq4zx-1225880115973

From an investor perspective there is no way this is a ‘buying opportunity’, probably until either the share stabilises or someone decides the company is now so cheap it is time to buy it out / take it over. To benefit from the latter you will want to be very sure the share price has bottomed any take a stake the day before the take-over offer is announced!

I wonder is the German e-Health company Compumed sniffing around as they say (they wanted to buy some/all of iSoft as I recall before IBA managed its merger / takeover). See here:

http://www.compumed.de/de/index.php

(If your German is up to it)

Right now all this is much too risky for me and note this is NOT financial advice!

From the e-Health perspective this is all quite sad and I really do hope our only substantial Australian company in the space can regain its footing, sort out the debt issues and move forward. There is clearly now a business that has proven it can deliver a complex e-Health product in Lorenzo and it would be a pity if just as this milestone is reached the company trips for a range of circumstances – some of which (currency value changes, government policy changes with new government in the UK) it clearly could not control.

There is also good news such as this:

http://www.computerworld.com.au/article/350131/isoft_rolls_patient_management_system_tasmania/?eid=-6787

iSOFT rolls out patient management system in Tasmania

Setting the basis for its $4.6 million agreement with the DHHS

Hot on the heels of an ASX update aimed at reassuring investors about the state of the company, iSOFT (ASX:ISF) has announced it has completed the rollout of its $4.6 millionpatient management system across Tasmania.

The system, which claims to set the foundation for the Tasmanian Department of Health and Human Services' (DHHS) for a shared electronic health record system, was first announced in February 2008.

As reported by Computerworld Australia, the system will integrate patient information across all of Tasmania's public hospitals including the Royal Hobart, Launceston General, and North West Regional Acute Hospitals.

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I also believe we need a substantial scale in our e-Health provider participants to assist in keeping NETHA and DoHA practically focussed and it would be a pity if all the major players were from off shore.

I do hope this can all work out as there is a valuable business in the middle of all this temporary mess.

David.

For those with a long memory, some will recall I used to hold some iSoft shares.

These can I say I sold before the present issues arose, while I was still in the black from an investor perspective! I fear it will be a while before the shares recover to their year high of 93 cents or the all time high, near listing of $1.74. The perils of investing in the share-market!

David.

1 comment:

Anonymous said...

When a company is not performing, one should look at the company’s culture and management.
The main problem with iSOFT is that it is still two companies – IBA Health operating in the private sector and iSOFT focusing on the public hospitals.
Too many solutions are overlapping, for example, whilst the iSOFT people are trying to promote Lorenzo, IBA has developed a clinical viewer to enhance their webPAS offering, giving no reason to their private customers to even consider Lorenzo….