Shares in medical software firm iSoft - which has its largest UK office at Aston Science Park in Birmingham - rose yesterday in response to an upbeat end of period trading statement.

The firm told shareholders that its performance for the year to April 30 had been in line with expectations.

It added: "As anticipated, revenues in the second half were substantially stronger than in the first half due in particular to the seasonality in the UK business.

"The UK business was also characterised by a reduced proportion of low margin pass-through revenue, consequently, total revenue for the full year is expected to be at the lower end of the £261 million to £277 million range of market estimates.

"Operating margin performance has been good, benefiting from the improved revenue mix, an increased use of offshore resource and cost synergies realised from the successful merger integration.

"As a result, the company expects profit before tax, pregoodwill amortisation, to be at the upper end of the £64 million to £68 million range of market estimates."

The company also said that its cash conversion remained strong during the second half of the year and it expects to report cash generated from operations in excess of 100 per cent of operating profit.

"As previously indicated, the level of earned income recorded on the year end balance sheet is expected to fall in absolute terms from the level reported at the half year," it added.

In addition to its strong operational performance, iSoft said its business performed well strategically, with good progress continuing to be made in establishing its Lorenzo healthcare software across a number of international markets.

Chief executive Tim Whiston, said: "We are pleased with how the business is performing both in the UK and internationally."

He added: "In terms of international expansion, a key driver of future revenue growth, we are currently engaged in a number of exciting opportunities which give us confidence with respect to the current financial year and beyond."

Following the update, broker Morgan Stanley reiterated its "overweight" recommendation and 520 pence target on iSoft, arguing that the stock could be worth as much as 900 pence.

Morgan Stanley said that it wanted to see iSoft return 15 per cent revenue growth in 2006 to maintain its revenue forecasts, versus its previous call for ten per cent.

However, the broker added it knew there were potential contract announcements which could provide this growth. Bridgewell also remained positive on iSoft, retaining its "buy" recommendation on the stock.

Bridgewell left its 2006 numbers intact, in anticipation of positive news flow on international contract progress at the time of the results announcement on June 21.

The firm also noted that iSoft's stock was still continuing to trade on a 2005 price/earnings discount to the wider UK software sector, which in its view was unjustified given the strength of iSoft's technology portfolio and market position.