Troubled UK software group iSoft, a finalist among tenderers for the EUR29 million (Lm12.5m) IT system at Mater Dei hospital, yesterday suspended its commercial director Steve Graham.
Following a probe into accounting irregularities, iSoft announced there were grounds for a “more formal investigation” into the group, after irregularities were found during the financial years ended 30 April 2004 and 2005.
“The principal effects of this would appear to have been to recognise revenues earlier than they should have been. They do not have any effect on the cash position of the group.”
Industry experts Gartner recently revised their rating of iSoft downward to “caution” from “promising”, their latest rating since the company revised its accounting policy in June.
Gartner are the experts chosen by the Maltese government to consult with the committees evaluating the crucial tender for the provision of an integrated health information system at the Mater Dei hospital. According to their latest rating, iSoft’s reduced profitability could impair its ability to accelerate work on an IT project for the UK’s national health service.
iSoft said it was suspending Graham pending the final outcome of the more formal investigation. Graham was part of iSoft’s original management team when it was founded in 1998. In April 1999 he was appointed as chief operating officer, and became commercial director following the group’s merger with Torex in 2003. He pocketed GBP8.5 million in June 2005 when he sold 2 million iSoft shares at 425p each.
“The conclusion of the initial investigation is that there is evidence of irregularities affecting the financial years ended 30 April 2004 and 2005… The principal effects of this would appear to have been to recognise revenues earlier than they should have been. They do not have any effect on the cash position of the group,” iSoft said.
One other employee has been put on “special leave of absence”, while other employees that “appear to” have been involved in the accounting irregularities, have since left the group.
The decision on the crucial Mater Dei IT contract is now expected to be taken shortly after iSoft and AME consortium presented their final offers. The consortium – Austrian firm AME, Intercomp and Italian firm Inso SpA, the suppliers of Mater Dei’s medical equipment – presented a EUR29,133,600 bid. iSoft presented a higher offer at EUR29,630,153.
iSoft issued two profit warnings over the past year, due to delays in its delivery of its contracts to the delayed GBP12.4 billion National Programme for IT (NPfIT) which will computerise all the UK National Health Service’s patients’ records.
In June, iSoft changed its accounting policy on when it recognises revenues, slashing its expected full-year profit to between GBP3-7 million from GBP17-22 mllion.
Later that month Tim Whiston resigned as chief executive to avoid “negative speculation” over his continued role. Now the firm is holding discussions to rebase its banking covenants. Last month it announced an investigations into its accounts.