iSOFT Group Limited (ASX:ISF) Revealed Full Year Result: EBITDA A$41.5 Million, Review Of Business, Debt And Capital Structure Underway

Sydney, Aug 31, 2010 AEST (ABN Newswire) - iSOFT Group Limited (ASX:ISF) today released its full year result for the year to 30 June 2010 together with an investor information pack. It also announced that it is pursuing a number of strategic initiatives.

Key Financials:

- Total revenue down 20% to A$431 million (or 7% in constant currency terms)

- Reported EBITDA down 77% to A$30.0 million (or 78% in constant currency terms)

- EBITDA pre exceptional and one off items down 69% to A$41.5 million

- Operating cash - negative A$0.69 million

- One off impairment of A$341 million primarily goodwill

- Statutory loss of A$383 million

Chairman, Robert Moran, said: "This financial result is a disappointing one that does not reflect the underlying strength and technical sophistication of iSOFT's products, the Company's global footprint or the quality and dedication of its staff. A difficult economic environment (particularly in the public sector in a number of the Company's markets), adverse currency impact, delays to the implementation of the National Programme for IT (NPfIT) in the UK and an increased cost structure all contributed to this result."

Mr Moran said iSOFT's Board has commenced an in-depth review of the company's business operations and a number of aspects of that review are already in the process of implementation. With a focus on key geographies with the best growth prospects, it has already targeted:

- operational cost savings of A$50 million (annualised) to be achieved by end of June 2011, with over half of this amount through headcount reductions. These are targeted reductions and are not expected to jeopardise the growth prospects of iSOFT.

- accelerating the streamlining and harmonisation of its product portfolio, which has already been reduced from more than 200 to 150 products

- a reorientation of business development and R&D to achieve greater flexibility and speed to market for new products

As part of the review, iSOFT Chief Executive Officer, Gary Cohen, has agreed to step aside as CEO to focus on assisting the Board in the evaluation of strategic options for the company.

"Gary's leadership, vision and drive have transformed the company into a multinational organisation and a very significant participant in the healthcare IT segment globally," Mr Moran said. "I would personally like to thank him for his extraordinary dedication and achievements over the past 10 years as Chairman and more recently as Chief Executive".

"Gary has agreed to remain with the Company to assist with transition and our strategic development. His experience and knowledge of the specialised sector internationally will be invaluable as we begin the search for a new chief executive who will drive the company forward in this next phase of its evolution."

An executive search firm has been engaged to assist in finding a new CEO. Pending appointment of a new CEO, Andrea Fiumicelli, the Company's Chief Operating Officer, has agreed to serve as acting CEO. Andrea Fiumicelli joined iSOFT Group in April 2008 as Chief Operating Officer following a successful career in Healthcare IT within multinational organisations.

iSOFT has also commenced the process for identifying suitably qualified candidates from both the UK and Australia to join the Board in a process that will see Board renewal.

Owing to the recent trading position of the Company, a restructure of the Company's senior debt facilities is required as well as a review of its capital structure. Discussions continue with iSOFT's banking syndicate.The Board has appointed financial and legal advisers to undertake a comprehensive review of iSOFT's capital and debt structure and talks are ongoing with prospective strategic and institutional investors. In addition, iSOFT is considering potential asset disposals. Any such asset sales would be structured so as not to damage the Company's core business assets, being its strong product suite and its geographic footprint. iSOFT has continuing support from its major shareholder OCP. For more details, please refer to the Preliminary Final Report.

Mr Moran said that while iSOFT has already made significant progress in assessing its strategic initiatives, discussions are ongoing and the timing and outcome is uncertain. iSOFT will update the market on progress when those decisions have been taken.

Notwithstanding these discussions and the strategic review, the core business of the Company remains healthy. The Company commenced FY2011 with A$300 million recurring and or contracted revenues. Further it has a strong and growing pipeline of business for FY2011 that should compensate for the expected decline in the National Programme for IT revenue. The Company believes that with the initiatives discussed above it is expected to return to profitability and positive cash flow.

Although iSOFT is an Australian company whose shares are listed on the ASX, the majority of its business is in the UK and Europe, with earnings exposed to translation risk due to AUD reporting requirements. In FY2010, 73% of iSOFT's revenues were denominated in GBP and Euro. Owing to the strong appreciation of the AUD (up to 25% against both the GBP and Euro at its peak), iSOFT suffered an adverse impact on its reported revenue of around A$109 million against the prior year.

FY2010 results analysis

The actual fall in underlying revenue (when measured on a constant currency basis) was around A$30 million, most of which was attributable to delays in the implementation of the UK NPfIT." The decline in the NPfIT revenues and the overall slowing down of growth in the core business hit particularly hard in the second half. With the cost structure relatively fixed this flowed through to a decline in earnings." Mr Moran said.

As a result of the more subdued economic environment in iSOFT's markets, the company has reduced its internal projections for growth in Central Europe, Middle East and Africa, South East Asia and Australia. This has resulted in the company recording a significant impairment of its carrying values of intangibles (primarily goodwill associated with the iSOFT acquisition) and deferred tax assets. Consequently, the Company recorded a total impairment of these items of A$341 million in FY2010. As a result of the impairment, iSOFT reported a statutory loss A$383 million in FY2010.

Operating cash flows in FY2010 were marginally negative overall at -A$0.69 million. There is a seasonality in operating cash flows with a tendency for operating cash flows to be weighted to the second half. Second half FY2010 operating cash flow was A$11.4 million.

The Company will not be paying a dividend for the FY2010 year.

For the complete iSoft announcement including FY10 Results Information Pack, please refer to the following link:

http://www.abnnewswire.net/media/en/docs/63620-ASX-ISF-604054.pdf

Contact

Kate Saunders Director, Investor Relations iSOFT Group Limited Tel: +61-2-8251-6769 Mobile: +61-404-835-563 Email: kate.saunders@isofthealth.com http://www.isofthealth.com