This sort of reminds me of the revenue drop from DJS when their AMEX deal finished.
Surely this should have been flagged somewhere previously given they lost the tender in 2010 and their system has been grandfathered since then.
There is great resistance to change if something works but this thing was based on MS-DOS. That is fine if it doesn't cost much money to run as a major tertiary vic hospital still uses a MS-DOS system for their cardiac database because it would cost $500k to shift it to an updated system.
It was obvious that at some point the government would stop giving globalhealth money to support a program that runs on MS-DOS given they have already paid for a newer system.
Looking at the ASX releases for 2010 I can't find any mention of GLH losing this tender, surely this was market senstive information as from their own release CHIRON still accounted for 1/3 of their NPAT with software development amortised over 15 years.
Hopefully they have not been spending money on developing this system further so if you actually expensed software development expenses it actually accounted for 100% of their NPAT.
I guess the length of time they have been getting money from this product is why they use such slow amortisation rates and it is ok to capitalise software development but IT products have become obsolete much more quickly as time has gone by and 15 years seems long.
GLH to my knowledge (I haven't gone through all of their releases with a fine tooth comb) didn't inform the market of this contract loss.
It is not like this information was confidential and anyone working in the IT department or exec in SA health network would know how much money from their budget was allocated as payments to GLH and with extrapolation know how much revenue GLH was getting from CHIRON.
June 2012. Time line for when the new e-PAS system would be released throughout SA starting in 2013/2014 in trial sites with delays due to lack of bandwith in country hospitals
Nov 2012. Timeline for transfer of all E-PAS systems based on the tender for the job of transferring hospitals to the new system is prior to 30 June 2015 as you would need a few months to make sure all the bugs were worked out before project managers are released. This co-incides with CHIRON support stopping 31 March 2015.
Quotation from above link.
The 2013-14 financial year is likely to be a period of peak activity within the office, but then workload for the ePMO is expected to decline in 2014/15 as eHealth systems are gradually completed. The Office will be dissolved by 30 June 2015, by which time all major eHealth programs are expected to be in place and deployment issues with EPAS identified and resolved.
The MD comes of well as seen in this interview by Alan Kohler but in this 34 minute interview there is no mention that the company is extremely likely to lose a revenue stream accounting for 1/3 of their NPAT within a year. He would have known how much money CHIRON was making for GLH and with about 5-10 minutes of googling I could figure out approximately when it was going to be decommissioned.
The long post is because I was thinking of investing in GLH because of its mental health IT product and opportunities in general in the health IT arena and am simply appalled at this release coming out on a friday evening when the writing has been on the wall for CHIRON revenue for four years.
I would be even more angry if I held and have sympathy for all who do hold.
GLH Price at posting:
38.0¢ Sentiment: Hold Disclosure: Not Held
(20min delay)