Health software firm iSoft has announced that it will push through a “significant reduction in costs”, likely to result in further job losses at the company.
The company will also shake up the executive team with Steve Garrington stepping down from the board and Gary Cohen ceasing to be executive chairman. Cohen will “fully focus on his role of chief executive officer”.
Dr Jim Fox, who was appointed as iSoft’s deputy chairman on 28 May, has resigned from the board, after just 18 days.
The moves come after a 50% fall in iSoft’s share price over the past two weeks, following a 2 June warning that earnings would be a long way short of previous forecasts. The revision was attributed to delays in installing Lorenzo software at Morecambe Bay and not signing a deal with CSC to sell iSoft products in the South of England.
The announcement came in a market update in which the firm reassured investors about its “strong” relationship with its main customer, local service provider CSC.
“Some investors have inferred that the background to the announcement on 2 June 2010 resulted from issues under the Northern cluster contract. This is not correct,” said the latest iSoft statement.
The Australian-listed company said that it had yet to finalise order intake for the 2010 financial year, but expected the revenue from the CSC Northern cluster contract top represent 15-20% of the firm’s total 2010 revenue.
The company says that revenue from the CSC deal will actually “significantly less” in 2011 than in 2010, “which is why we have been working to build the order book of the company outside the CSC relationship”. The inference is that iSoft will not be delivering large numbers of Lorenzo implementations in CSC’s Northern cluster in 2011.
The statement also stressed that the company has a diversified international base: “ We have a core business base with strong recurring revenues across many markets – not just the UK.”
However, delays in orders have occurred not just in the UK but other markets as well, “but we believe that this is more symptomatic of the current economic environment than any suggestion that it relates to iSoft product performance or loss of share to our competitors.”
With most of iSoft’s costs tied up in employee costs, “especially around product development”, the delays in contract awards have hit profitability. “We have, however, already commenced adjusting our cost base for FY11 and we would expect that there will be a significant reduction in run rate costs over the course of the coming financial year.”
The company says that it has kept its banks fully informed, “especially on matters surrounding the National Programme”. It states “We are not in breach of any banking covenants”, but adds that currency issues mean that a “resetting of some of the covenants will be required”
© 2010 E-HEALTH-MEDIA LTD. ALL RIGHTS RESERVED.
Register: To add a comment you must be registered.