Shares in iSoft Group have plunged by over 40% after the healthcare software provider slashed revenue and profit forecasts for the fiscal year because of delays in delivering new applications to the UK’s National Health Service.
iSoft has reduced revenue and profit forecasts following setbacks in its NHS contract.
The Manchester, UK-based company said it now expects to generate just GBP30 million ($53 million) in revenue from the National Health Service’s (NHS) Connecting for Health program this financial year, some GBP55 million ($97 million) less than expected, which will reduce expected operating profits by GBP45 million ($80 million). Following the announcement, a shocked market sent the company’s shares down by 43% on the London Stock Exchange.
While iSoft said it does not expect to recognize any revenue from the contracts during the second half of its financial year, it stated that the amount of revenue it recognized over the course of the program remains broadly in line with its initial expectations, which were estimated at approximately GBP500 million ($884 million). However, it admitted it does not know what the impact of delays will be for the following financial year because the contracts are going through a rescheduling process which is not expected to be completed for months.
The NHS’ Connecting for Health program is one of the most expensive and ambitious public-sector projects in the world. It involves a total overhaul of its IT and the introduction of an electronic patient-records system to enable doctors and hospital clinicians to access patient information from anywhere in the country.
iSoft is the main application provider on three of the five main contracts which cover five geographic ‘clusters’ of England. It is partnering with Accenture on the North-East and East of England clusters, and with CSC Computer Sciences on the North-West and West Midlands cluster.
iSoft’s announcement has worried investors that it could be dropped from the upgrade program. Closing the stable doors just after the horse had bolted, investment analysts downgraded iSoft on the news.
Analysts believe Richard Granger, director general of NHS IT, has negotiated tough terms with vendors in response to a number of high-profile government IT disasters. There are concerns that he may have alienated the vendors to such an extent that the financial successes will come at the cost of a poorly functioning system.