As a number of UK-based companies release their half-yearly results around the turn of the year, the lack of rigour in reporting standards compared to their US counterparts became all too obvious. But for some it may be a blessing in disguise.

For healthcare software vendor ISOFT, 2006 was an ‘annus horribilis’. The Oxfordshire-based company endured intense criticism from January onwards after failing to deliver software for the £6.2 billion National Health Service IT programme; it restated its accounting policy after a formal investigation by the Financial Services Authority (FSA) found it guilty of accounting irregularities; the government admitted to making upfront payments, helping iSoft to meet the City’s expectations, in 2005 and 2006; and  the troubled vendor found itself without a permanent CEO for most of the year, after Tim Whiston stepped down in June.

It came as no surprise then to hear John Weston, iSoft’s chairman and acting CEO, accompany the company’s latest financial statement with the words that “it has been challenging to sign new contracts during 2006”.

That was reflected in iSoft’s financial results for the first six months ending 31 October 2006. Revenue fell 11.6% to £85.8 million from its year-ago restated amount of £97.2 million while exceptional costs of £11.6 million – for the closure of its Manchester head office (£4m), redundancy expenses (£3.6m) and FSA investigation fees (£4m) – had a highly negative impact, forcing net debt up from £42 million to £74 million.

The only good news for the beleaguered vendor was a £13.7 million tax credit resulting from the restatement, helping to reduce its net loss of £8.5 million from the previous year’s £647,000.

But iSoft’s troubles are not over yet. Echoing the NHS debacle, the company has failed to deliver parts of its Lorenza health software to the Irish Health Service and Weston has hinted that a takeover or strategic alliance with an outside partner could be a likely solution to its continuing problems.

Contract shortfalls also triggered a downturn in revenue at IT services group ANITE, largely due to a drop in sales in its key public sector target market. Revenue for the six months ending 31 October 2006 was £78.0 million, down 5.2% from the year-ago result of £82.2 million. Similarly, both its net profit (£8.3m) and net cash (£22.7m) were down 9.3% and 11.3% respectively, partly due to a £11.3 million payment to settle a problematic contract with Australia’s State of Victoria Housing Office.

However, Anite is currently rebalancing its focus, downscaling its public sector commitments, where it has been pitted against larger outsourcing competitors, and upping its stake in its other major market, services to the telecoms industry. Revenue from its public sector division fell 15% to £31 million while its telecoms unit  – currently the only profitable unit in the portfolio – grew 6.5% to £26.4 million, boosted partly by its recent £57 million acquisition of Nemo, a Finnish-based mobile phone software vendor. According to CEO Steve Rowley, this has helped “put wireless telecoms firmly at the heart of the business, in line with our stated strategy.”

It was a similar story at software and IT services vendor NORTHGATE INFORMATION SYSTEMS, where longer than expected lead times in securing a number of local government contracts pushed revenue from the public sector down by 2.1% to £47.5 million. However, a surge in demand for its human resources (HR) software from new clients such as health and beauty pharmaceuticals company Alliance Boots, mail service provider Business Post Group and Rentokil Initial (of pest control and cleaning fame) helped to offset these losses, pushing its overall first half year revenue up 1.5%, to £165.2 million.

The growth in Northgate’s HR unit has also been buoyed by its recent acquisition strategy. During the year it made three bolt-on acquisitions totalling £13.6 million, adding payroll processing, pension administrative software and time and attendance software to its portfolio. And it looks set to increase its investment – since its period end on 31 October 2006, it has also acquired Link HR to add pay and job evaluation criteria to its portfolio and gain access to Link’s roster of bluechip HR clients, including the NHS.

In marked contrast, IT and business process outsourcing company XANSA reported that a near-doubling of its public sector work had boosted total revenue by 7.4% for its first half ending 31 October 2006. Revenue from the public sector division rose 91% to £59.3 million, due largely to its contract with the Department of Health to deliver financial services to over 110 NHS Trusts. Net profits rose slightly from £6.1 million to £6.5 million.

Its total revenue figure of £188.4 million was also bolstered by a number of strong new clients, including a finance and accounting services deal with the BBC and a human resources outsourcing contract with high-street bank Lloyds TSB.

Xansa’s strong position in outsourcing is reflected in its Indian operations; its Indian workforce has increased 38% since last year to 4,661, and now represents 54% of its workforce.

Intelligence boom

It was also an upbeat quarter for business intelligence software vendor COGNOS. Canada’s largest software company put to rest earlier technical problems that had dampened sales of its new Cognos 8 platform to report a 24% increase in licence growth. In particular, it managed to reverse the downward licence trend experienced in the Asia region during its 2006 fiscal year to record a 24% increase in sales, while licences grew in its North American and European regions by 15% and 18% respectively.

Together with 11 new contract wins in excess of $1 million a piece, revenue increased 17% from $212.3 million to $247.8 million for the three months ending 30 November 2006. But maintaining this forward momentum has come at the expense of operating costs, which rose from $140.7 million to $175.8 million. This jump was brought about by a $26.9 million before-tax restructuring charge. As a direct result, quarterly net profits dropped 31%, from $24.0 million to $16.5 million.