Isoft accused by analyst of ‘discrepancy’

Isoft, the troubled software developer chosen to overhaul the National Health Service’s IT systems, has been accused by an analyst of having a “discrepancy” in its accounting.

The accusation comes three days after the company issued its second profit warning in four months.

In a note sent to clients, Charles Brennan, analyst at ABN Amro, said the discrepancy continued to “undermine confidence in the accounts”.

The issue centres on the way the company accounted for revenues received from a key NHS contract.

Mr Brennan claims the company recognised £29m of revenue from the NHS national programme in the year to April 2004, compared with the £5m that was allegedly disclosed at the time.

The company said it did expect revenues from new software under the national programme to amount to £5m.

But that “it became clear that the contract would also involve the sale of traditional software, and for longer than originally expected, amounting to £25m”.

“The £5m and £25m totalled approximately £29m, which is the figure that ABN Amro refer to. All of this revenue was included in the year-ended April 30 2004 results, albeit in two different places,” said the company.

A spokesman for the company said the analyst had accepted the explanation and that there was no discrepancy. The analyst was not available for comment.

Bridgewell, the company’s broker, last month warned its clients that Isoft might have to restate its revenues.

Since early April Isoft’s shares have fallen sharply following analyst notes questioning its accounting, and later on rumours of an NHS-related profit warning.

But the latest profit warning prompted further speculation that Isoft could soon be consumed by another company. The company’s shares soared last week on unconfirmed reports that UK rival Misys was looking to swoop on the company.

Isoft, which issued a severe profit warning in January because of delays to its NHS work, said last week’s warning was not linked.

Investors have been concerned about the future of the NHS contract, which accounts for a large part of the Manchester-based group’s earnings.

Analysts expected full-year profit, due out in July, of £24m to £42m, but yesterday Isoft said profit was unlikely to exceed £22m.