ISoft, one of the key contractors on the NHS's £6.2 billion computer modernisation programme and which is under investigation for irregular accounting practices, today disclosed losses of almost £400 million.

The group, now under formal investigation by the top financial watchdog, found evidence that profits had been booked before they should have been.

As a result hundred of thousands of pounds were paid out to former directors in bonuses and iSoft has been forced to recalculate its accounts for 2004 and 2005.

Its NHS contracts are up to two years behind schedule. The group made no mention on the state of the current NHS contracts.

The group has now reported it lost almost £400 million for the year to April 30, has stopped paying dividends, and willl sack 150.

The company, which is supplying software to allow GPs and hospitals to manage patients' records. Profits last year were £2.2 million which hs plunged into a £382 million of net losses.

The NHS's National Programme for IT has been plagued by delays. June's National Audit Office report on the programme found the NHS's Choose and Book appointment booking service was a year overdue while the Care Records Service, which will monitor treatment progress, was two years late.

iSoft's banks said they will continue to support the group, but have imposed penal interest charges in exchange for continued support that will see the company pay rates of up to 10 per cent on debt. The group gave no indication of when dividend payments will resume.

The job cuts will cut cost the group £3 million but save £6 million annually.