A pragmatic analysisLike all software companies they have to...

A pragmatic analysis

Like all software companies they have to write off large amounts for Intangibles and Deveopment expenses. In well run companies these can be retrieved 10 fold when the development phase is over.

This is an indicator when companies start to concentrate on their EBITDA (Earnings before Interest,Tax,Depreciation and Abnormals) number when of course the only relevant number is NPBT (Net Profit before Tax).

It's difficult to see how Isoft could make a positive number on Y/E 2010. A point to remember is that these companies are usually cash flow rich and assets poor. The variation in the UK/AUD exchange rate has reflected on their revenue by only about 10 % . Also note that a lot of their expenses are in GBP so difficult to know the real downs/or ups of the exchange rate.

These companies are always susceptible to a takeover when things go wrong as I suspect the banks security and covenants is largely reliant on cash flows. New covenants will be issued however the banks would be very reluctant to put too much pressure on the company. No bank likes obvious write-offs.

Medium to long term the company clearly has good potential and should not be panicked by the current circumstance. This is the sign or strong or weak management. A good operating board will always be transparent with shareholders and layout a clear plan even if that requires a capital raising to relieve pressure.

Historically it's always proven not to panic and concentrate on the business and not the share price.

We wait and hope.