Orion says profitability is possible

WELLINGTON: Orion Health Group can reach profitability with further costcutting and may not need to raise more capital, chief financial officer Mark Tisdel says.

The healthcare software developer’s shares reached a low of 57c this week, after it said delays in concluding deals meant sales in the year ended March 31 missed its forecast and pushed out the timing of reaching breakeven.

It aims to slash annual costs by between $25 million and $30 million.

Orion stock has shed about 90% of its value since it listed in late 2014. The stock gained 5.1% to 62c on Thursday.

Mr Tisdel, who joined Orion last June, says investors lost confidence in the company because of a pattern of failing to meet its own projections.

‘‘In hindsight, we could have been much more conservative about financial guidance,’’ he told BusinessDesk.

‘‘We erred on the side of aggressive, optimistic forecasts and largely we haven’t met our numbers, which is why we lost the confidence of the investment community.’’

Investors are also concerned about the company’s cash burn. Stephen Ridgewell, a senior research analyst at Craigs Investment Partners, says cash reserves may have shrunk to as little as $2 million from about $16 million in September 2017, meaning it may need to tap new or existing investors for more capital.

Mr Tisdel said the company still had wiggle room, including a $30 million working capital facility from ASB Bank, and added that there had been no lack of interest from potential investors, and ‘‘we expect to give further updates in the coming months’’.

The company has been reviewing its business since May last year, as it seeks to return to profitability, having foregone shortterm earnings in the hunt for global expansion since going public in 2014.

Mr Ridgewell says the biggest cost cuts may be made at Orion’s unprofitable Population Health and Hospital businesses, while the highlyprofitable Rhapsody division, containing Orion’s flagship data integration product, may be largely spared.

Orion has some worldleading products in a growing health tech market but suffered the speed wobbles of fastgrowing tech companies — for example, largely funding business through cash flow in the initial stages, then listing and finding themselves with a big pool of money to spend, Mr Tisdel said. — Scoop