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Contract delays lower Orion Health full-year guidance; may seek capital

Monday 3rd April 2017

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Orion Health, the healthcare software developer whose shares have dropped 44 percent in the past 12 months, said full-year sales fell but it still expects to post a narrower loss and be profitable in 2018. It has been in talks with potential investors in the business.

Operating revenue in the 12 months ended March 31 was probably between $194 million and $200 million, down from $207 million a year earlier, chief executive Ian McCrae said in a statement. The net loss was between $32 million and $38 million, compared to a loss of $54.4 million in 2016, it said.

"A number of contracts that were expected to close before the end of FY2017 did not do so but remain in progress," said McCrae. "Management takes full responsibility for not executing as efficiently on the sales pipeline as had been forecast. The delay in the finalisation of contracts is not attributable to a specific factor as every potential customer situation is unique. Improved sales processes and forecasting are core areas of focus."

The company's closing cash position for the year is now projected to be between $2 million and $6 million and Orion said it has embarked on a strategic review that includes "discussions with a number of parties over the past quarter that may result in a partnership or minority investment in the company."

The talks were "preliminary and non-conclusive at this stage," the Auckland-based company's statement to the NZX said.

At Sept. 30, Orion's cash balance stood at $24 million. 

Orion is 50.6 percent owned by McCrae, who said that as the majority shareholder "I am directly aligned with all shareholders and this is not the outturn we had targeted."

"We have been taking, and continue to take, direct measures to right-size our costs with our revenue growth and despite the slippage, we remain on track with our profitability objective," he said. "The board and I remain focused on long-term shareholder value and will evaluate the merits of any partnerships or minority investments to help Orion Health achieve its potential.”

The company said it was on track to turn a profit in 2018, a target it also affirmed at its annual meeting in September, when it noted that it was facing the headwinds of a strong kiwi dollar and burning through cash at a faster rate than expected.

The shares fell 0.2 percent to $1.75. They first traded at $6.50 in their NZX debut on Nov. 26, 2014.



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