Orion Health widens first-half loss, lowers full year outlook

Orion Health chief executive Ian McCrae.

Orion Health, the health software developer whose shares have lost almost half their value this year, widened its first-half loss and lowered its outlook for the full year.

The loss was $25.9 million in the six months ended September 30 from a loss of $18m a year earlier, the Auckland-based company said in a statement.

Sales fell to $80.9m from $104.2m which the company attributed to a significant software licence deal being recognised in the year earlier period, which also impacted margins due to its low cost of sales. The company posted an operating loss of $25m, at the top end of its $20m-to-$25m forecast.

Orion Health lowered its expectation for full-year revenue to $175m-to-$190m, from its previous estimate of $200m-to-$220m, after it toughened its approach to only include revenue when there is a "high conviction" that it will be booked in the forecast period, from a previous practice of including revenue that could "reasonably be expected to be booked" in the forecast period.

The company is focused on controlling costs and has seen average monthly costs progressively fall from $22.3m in the 2016 financial year, $19.7m in the 2017 financial year, $18.2m in the first quarter of the 2018 year and $16.3m in the second quarter of 2018.

In the first half of the 2018 year, operating expenses were $15m lower than the year earlier period, and further reductions are expected in the second half of the year, the company said.

"Based on the reduced revenue forecast and the cost reduction programme we expect the group will operate close to breakeven in the second half of FY2018," the company said. The company had previously said it was on track to be profitable in the second half.

Orion Health raised $32m through a rights issue earlier this year to put it on a healthier footing as it chases a return to profit after a challenging 2017 forced restructuring.

In May, a strategic review to search for sources of additional capital, including minority investments in the company, was given a broader mandate to bolster the long-term capital structure of Orion, and the company said today that the strategic review remains ongoing and is expected to take additional time as the group continues to evaluate a number of alternatives.

The company had total cash and cash equivalents of $16.1m as at September 30, compared with $24.2m a year earlier.

The company said its working capital facilities totalling $40m were extended, giving it a total of $56m of available cash and banking facilities.

In presentation notes, Orion Health said it is now a much leaner organisation and increasingly well positioned for revenue growth an profitability.

The company emphasised its primary focus is profitability, and once that has been achieved, its focus will return to revenue growth.

The shares lifted 1.9 per cent to $1.07, having dropped 46 per cent this year.