Orion flags further US contract delays; stock drops 5% to record low

Orion Health [NZX: OHE], the healthcare system software developer which listed on the NZX last November, says an expected US-based contract has been delayed. Its shares sank to a record low.

The Auckland-based company said a contract with one of its US payer customers has been delayed for 12 months because the customer wants "to focus on more immediate priorities" but Orion didn't see the need to revise its forecasts for 2016. Orion flagged two contracts with US payers in the leadup to its initial public offer last year, and has since engaged with other US companies, and is expecting to complete contracts by the end of its first half in September.

The healthcare management system company said significant opportunities had arisen in other market sectors in "major adjacent market areas such as pharmaceuticals and chronic care management."

Orion stock is the third-worst performer on the benchmark NZX 50 Index this year. The company said on January 30 that delays in settling contracts and paying bills in North America would weigh on revenue in the second half of its financial year. North American sales were also dented as it moved customers to subscription contracts from perpetual licences, it said.

The Orion share price fell 5.2% in early trading on the NZX to a record low of $4.20, having sold in its initial public offering at $5.70 and stagged on listing to $6.27.

The company joined the NZX on November 26 in a $125 million capital-raising to assist the 22-year-old company to grow in global markets. Its offer documents gave no prospective forward financial information, and the company told investors that was because "recurring revenues currently represent less than one-third of operating revenue and there is inherent uncertainty about the capture of customer contracts and the timing of their execution, and recognition of the associated revenues."

It reported an annual loss of $60.8 million in the year ended March 31, from a loss of $1.1 million a year earlier, in line with its strategy to grow revenues before becoming profitable. The company's annual revenues rose 7% to $164.1 million.

(BusinessDesk)

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