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Orion Health cuts 177 jobs as more red ink spills

Orion Health chairman Andrew Ferrier says due diligence is taking place on what one analyst speculates may be a partial sale of the business.

Auckland health software firm Orion Health has revealed it has cut 177 jobs since March as it seeks to stem its losses.

Orion Health once rivalled Xero as one of the country's top technology successes and at its peak employed 1200 staff in New Zealand and overseas.

But investors who bought into its 2014 sharemarket float would now have lost almost 90 per cent of their money.

Orion's cuts come amid expectations of further job losses in the high-tech sector at Spark. 

Spark said on Monday that it expected to cut see its labour bill fall by almost a fifth over the 18-month period between last June and this December – supporting speculation early last year that it was planning for the loss of about 1000 jobs, a proportion of which are believed to have already gone. 

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Reporting Orion's annual result, chief executive Iain McCrae said the company had been impacted by changes to Obamacare funding in the United States that had forced some of its customers there to retrench.

Orion Health reported a loss of $40m in the year to the end of March, up from a loss of $34m the previous year, with revenues down 14 per cent to $170m.

Slides shown by the company during its results presentation showed it cut the number of full time employees in its loss-making population health and hospitals divisions by 173 staff, to 659, between March 1 and Monday.

Orion Health CEO Ian McCrae says changes to Obamacare have cut Orion's revenues by about $17m.

Another four jobs were cut from its core Rhapsody division which helps healthcare providers pull together patient data from different sources.

Chairman Andrew Ferrier said Orion Health was making progress with a "strategic review" that some think could involve a partial trade sale of the business.

Trade Ink Christchurch , until any final agreement is reached we can't give any certainty on the nature or terms of any transaction," he said.

Craigs Investment Partners analyst Steven Ridgewell said it would be fair to say it was a "disappointing year for Orion and its shareholders".

It was unclear what kind deal Orion was working on, for example whether it might be a full sale of the company or a partial sale Trade Ink Christchurch , he said.

But ee said there might be strong interest from buyers in Orion's Rhapsody division, which employs 130 staff, and which was the firm's "crown jewels" and could be quite easy to separate.

"It is a very good product, profitable and growing at 10 per cent a year. Then you have got the other divisions which are burning a lot of a cash.

"My preference would be that they hold on to Rhapsody and wind down the rest of it – or at least focus on the areas where they can make money." 

Orion Health's US expansion had gone off the rails and it had "over-extended" with too many moonshots, he said.

"This is not 'another Wynyard' – it is quite a big business and there are highly profitable parts and they can restructure to survive.

"But it is obviously a painful process for all concerned; staff, shareholders and I am sure the board as well." 

Orion chief financial officer Mark Tisdel forecast "flat" to slightly increased revenues this financial year, and a slight loss or break-even result.

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