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Thinking Software For Life

INTERIM REPORT For the six months ended 30 September 2015

Letter from the Chairman and CEO

A N D R E W F E R R I E R

C H A I R M A N I A N M C C R A E

F O U N D E R A N D C H I E F E X E C U T I V E O F F I C E R

For the six months ended 30 September 2015

Interim ReportOrion Health

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Dear Shareholder,

Orion Health has enjoyed a pleasing first half of the 2016 financial year. Revenues have grown 26 percent year on year to $102 million for the period, and we expect to see similar growth in the second half of the year. Recurring Revenues have grown to 41 percent of revenue, well on the way to our goal of having Recurring Revenue greater than 50 percent of Total Operating Revenue. Annualised Recurring Revenue grew to $86 million as at 30 September and the total number of patient records supported by our systems now exceed 90 million. These increasing measures are key to our strategy to build a predictable and sustainable growth business.

Compared to the second six-months of the 2015 financial year, our regions have all enjoyed healthy growth, with notable momentum in EMEA. Importantly, margins have also improved, both at a regional contribution level and at a service level. We are actively managing our costs and directing investment into Research and Development, where we create sustained value and growth to deliver long-term profitability. This profitability will come from: increasing Recurring Revenues, normalised R&D investment as we achieve revenue targets, increased margins from automated solution deployments and a scalable SaaS architecture hosting new customers and migrated legacy customers. There are many facets to manage on this journey to profitability, which we foresee in the medium term. The factor that is subject to change is the scale of opportunity in front of the company which we are constantly assessing as we balance growth, the path to profitability and the size of our investment in R&D.

In this first half of FY2016, Net Loss Before Tax was $25 million up from $21 million in the same period last year. Our cash and term deposit balances at 30 September 2015 were $77 million representing a net reduction in funds of $18 million for the half, in line with our expectations for where the business would be at this point in time. We have seen a 16 percent benefit in Operating Revenue growth from the strengthening of the major currencies that Orion Health operates in around the world as these return to longer term norms against the New Zealand dollar.

During the period, we have secured several notable new contracts in sizeable global markets. These include the VINMEC International group of hospitals in Vietnam, the United States Department of Defense (as part of the Leidos syndicate), and with Boots in the United Kingdom. In the UK, we also contracted with CSC to deliver a care coordination project to the Trafford Clinical Commissioning Group and we

will deliver our first hosted subscription service for United Care Partnerships, focused on the care of the frail elderly in Cambridge.

In Spain, we won a contract with Gerencia Regional de Salud (Sacyl), the public healthcare provider in the region of Castilla y León, to deploy our Open Platform technology to deliver an Electronic Health Record. This is set to go live early in 2016.

In terms of significant work with our existing customers, in the United States we completed projects in Massachusetts, New Mexico, and North Dakota. Our strategic Californian customer Cal INDEX has also recently signed its first provider participant and we expect to see more new participants follow in the near term taking the project into the exciting phase where it moves beyond hosting the health data of the founders to hosting health data from many sources across California. The major project that we have underway in Ontario, Canada continues to meet all planned milestones, and in the UK we have expanded the solutions being delivered to the Connecting Care programme in Bristol which recently won the overall award in the UK E-Health Insider Awards.

Orion Health has always had a commitment to innovation and the latest technology. This commitment has our next generation Open Platform – recently rebranded Amadeus – now able to process genomic and biometric data alongside clinical, social, pharmaceutical and insurance claims data. This is a significant step for our technology and our market position, as we embrace the opportunities that have arisen from our “whole of platform” approach.

We are witnessing the exponential rise of “big data” in healthcare – the rapidly growing use of vast volumes of data from the digitisation of healthcare records, the creation of consumer health data generated by wearable devices and the advent of increasingly affordable genomic sequencing. Amadeus has a unique ability to aggregate and store all of these different data sources and provide a platform to add knowledge from research and machine learning, to provide cognitive support at the point of care in the community, enabling the delivery of Precision Medicine.

Precision Medicine is the emerging model of medicine that customises care, with medical decisions, practices and products being tailored to the individual patient, based on complete medical information about that patient, including their genome.

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Andrew Ferrier Ian McCrae Chairman Chief Executive Officer

Precision Medicine is a further step in Population Health Management, where taking care of the health of a population becomes more targeted. It is the practice of using data-based insights to understand a patient’s disease or condition more precisely, so safer treatments can be selected which are more likely to achieve desired outcomes and are more cost effective.

Precision Medicine will move the focus of healthcare from the costly sustaining of the latter part of a person’s life, to accurate wellness programmes in the main part of one’s life. In this way governments around the world can support growing health and lifestyle expectations and embrace new medical and technological advancements, while reducing overall health costs to manage fiscal pressure.

Our vision is to take our customers on the journey of Population Health Management, ultimately enabling them to deliver Precision Medicine. Large healthcare providers, regional health authorities, public health bodies governing entire countries and health insurers, are the type of customers that will economically benefit from implementing a Precision Medicine platform. Our Health Information Exchange customers, and those with our new platform technology, are well positioned to evolve their solution to embrace Precision Medicine. We are very well positioned to serve this new model of healthcare and to benefit from our strong leadership position.

In addition, our technology and our success has led new and emerging sectors to seek out our solutions. A notable example is our recent contract with iconic pharmacy chain Boots to deploy our solution across 2,400 retail pharmacies in high street locations across the United Kingdom and Northern Ireland. We anticipate further success in the areas of pharma, medical devices, healthcare device connectivity and life science organisations as they seek to analyse and apply learning to aggregated sources of healthcare information.

Research remains critical for Orion Health. We have for some time been aware that it is necessary to invest in applied research to investigate and develop new intellectual property to support the transformation of healthcare in our markets around the world.

Our investment in Research and Development continues to grow with headcount increasing by 38 people since March 2015. We now have 499 people building new functional and technical capabilities in our software products, sustaining and improving existing products and building automation to support new cloud-based deployment models. Our products continue to be recognised as world-leading by industry analysts and recent new business success attests to their value.

Ultimately, it is our people that make up Orion Health’s business and dictate our prospects. Ensuring that we are able to attract and retain the very best talent is paramount to our growth and ongoing success. We have continued to upgrade our executive capabilities and our graduate and intern programme continues as we seek to provide stimulating and challenging opportunities for our people to learn and grow. This all comes alive when we have the opportunity to engage with our customers and work with them. The challenges of building, and then deploying, our solutions around the world draws out the best in our joint teams and we would like to recognise and thank our staff and our customers for their great contributions during the period.

Healthcare is a lifelong pursuit. Technology, knowledge and people will unlock tomorrow’s potential. Seamless data sharing and interoperability will be key. By investing in applied research and new product developments to harness and interpret the enormous growth of data before us, we are playing for the long term for the industry, our customers and our people. We are confident that the benefits will flow for our shareholders.

Thank you for your continued support and we look forward to sharing the ongoing Orion Health journey with you.

Yours sincerely



04

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Interim Report

Operating Revenue $102m | 26% increase over same period last year

Recurring Revenue 41% | Compared to 30% same period last year

Annualised Recurring Revenue $86m | $34m up over previous September

R&D Expense $32m | 38 more people than at 31 March 2015

Net Loss Before Tax $25m | Up from $21m same period last year

Cash Balance $77m | $18m net reduction since 31 March 2015

Highlights

Financial Commentary



06

NZ$ millions 1HFY2016 1HFY2015

Operating revenue 102 81

Regional expenses (87) (69)

Regional operating profit 15 12

Other income 3 3

Research and development (32) (23)

Corporate expense (12) (13)

Operating loss (26) (21)

Finance income/(costs) - net 1 -

Loss before income tax (25) (21)

Income tax (expense)/credit (2) 6

Loss after income tax (27) (15)

The results for the six months to 30 September 2015 reflect business growth, the ongoing transition to a subscription business model, improvement in service margins and the continued investment in R&D.

Our core business is the development, implementation, hosting and support of healthcare software for governments, hospitals, insurers and other healthcare organisations. We generate revenue from the sale, delivery and ongoing support of software solutions.

A key goal of the business has been to grow Recurring Revenue to increase the usage and adoption of our services and improve the level of predictability of our future revenue profile. Recurring Revenue includes Managed Services Revenue from customers paying subscription fees (which represents a combination of licence fees, hosting fees, support fees and application management fees) and Support Services Revenue from perpetual licence customers paying ongoing product support fees. The significant increase in Recurring Revenue since last year primarily reflects our success in the US market.

Non-Recurring Revenue includes Perpetual Licence Revenue and Implementation Services Revenue. While we have seen overall improvement in Non-Recurring Revenue when compared to the same period in the prior year, the move to a subscription model means that we have enjoyed fewer large, one-off revenues this year.

Summary Financial Results

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08

Revenue

Operating Revenue growth of 26 percent ($21 million) compared to the first half last year was the result of our continued execution of strategy. Selling fewer perpetual licenses and the completion of legacy projects has impacted the APAC region in particular this reporting period. However, we achieved solid Operating Revenue growth of 37 percent in North America and 81 percent in EMEA compared to the same period last year. The movement in the New Zealand dollar exchange rate against all of the other underlying currencies used across the Group has had a positive impact on our revenue growth. If the current period revenue was recorded at prior year comparative exchange rates it would have been $13 million lower than the actual result.

Managed Services Revenue across the business has grown by 124 percent, compared to only 15 percent for Perpetual License sales as we realise our strategy of moving to subscription revenue. Managed Services Revenue is now 21 percent of Total Operating Revenue, compared to 12 percent during the same period in the prior year. Overall, Recurring Revenue streams made up 41 percent of Total Operating Revenue in the six months to 30 September 2015, compared to 30 percent in the prior year.

Change to Segmental Reporting

The Group has changed its primary orientation for segmental reporting to being on a Super Region basis and this reflects the manner in which the Group is organised. Historically the Group also reported revenues across three Solution Groups being Intelligent Integration, Smarter Hospitals and Healthier Populations. The company has evolved its approach and today offers integrated solutions that are based on all of these product elements. It has become more relevant to focus on how the lifecycle of the engagement with a customer grows from acquiring healthcare data; to aggregating, enriching and viewing healthcare data; to managing healthcare processes based on healthcare data. Accordingly we have discontinued reporting revenues across Solution Groups.

$102 m Operating Revenue

41% Recurring Revenue(up from 30% in the prior year)

Orion Health’s operating revenue for the first six months of the 2016 financial year was $102 million, an increase of 26 percent over the previous corresponding period.

The result demonstrates continued growth underpinned by strong recurring revenues.

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Regional Revenue

North AmericaNorth America continues to be the largest region in dollar terms with overall growth of 37 percent, driven by managed services growth of 138 percent. This growth is primarily the result of deploying a number of new contracts in the first six months of this 2016 financial year and ongoing revenues from existing customers.

We earned new revenues from Cal INDEX, the state of Oklahoma, and a large Integrated Clinical Network in Tennessee. Significant revenue was also earned from our deployment in Ontario, Canada for the first single electronic, region-wide, coordinated patient care plan of its kind in North America.

Finally we also enjoyed success as part of the Leidos syndicate which has been awarded a significant contract by the United States Department of Defense. We will provide integration and interoperability services in this 18 year technology project to modernise the medical records of millions of service members and their families.

EMEAIn EMEA we experienced a very successful first six months for the 2016 financial year continuing on from the significant growth in the last part of the previous financial year. The highlight was the successful signing of a strategic new contract with Boots UK Limited, a member of the Walgreens Boots Alliance. This supplements Orion Health’s strong UK presence in contracts with the NHS Trusts and Clinical Commissioning Groups.

Earlier this financial year we secured a subscription contract to support a large care coordination project in Cambridgeshire, focused on the care of the elderly, and providing a single coordination point to improve healthcare experiences and reduce costs.

In Spain, Orion Health won a procurement to deploy our Open Platform (now called Amadeus) for a public healthcare provider in the Castilla y Leon province to more than 2.5 million people. Our contract is with a big and complex organisation with around 30,000 employees managing a clinical network of 14 hospitals and more than 3,500 primary care facilities. This is the first deployment in Europe of this new technology solution.

APACAPAC operating revenue declined in the first six months of this financial year compared with the same period last financial year. The main driver of this variance was the sale of significant perpetual licences in New Zealand in the prior period. These sales were of a one-off nature and result in an increase in the period of recognition, but only have a modest impact in the form of on-going support revenue for subsequent periods.

In Australia we have been through a period of consolidation with a new leadership team now in place focused on improving the performance of current projects and building pipeline for new business. Consequently, revenue derived from Australia in the current period is lower than management would like, however we remain optimistic for a better result in the second half of this 2016 financial year and going forward.

Revenues have increased nicely in Asia and deployment progress continues to be strong across the region with a successful go live of our Enterprise solution at The Medical City in the Philippines. In Vietnam, Orion Health was chosen to provide a complete in-hospital solution to the VINMEC International group of hospitals, a premium healthcare provider headquartered in Hanoi. The Orion Health solution will be initially deployed in five of VINMEC’s sites, expanding to a further six facilities. VINMEC serves a growing medical tourism industry seeking premium healthcare services.

Annualised Recurring Revenue

Annualised Recurring Revenue (ARR) increased from $52 million as at 30 September 2014 to $63 million at 31 March 2015, and has now increased to $86 million as at 30 September 2015. The $23 million increase in the six months from 31 March 2015 is fuelled by new contract signings, growth in the value and volumes of existing customer contracts, and exchange rate movements. Given the majority of ARR is USD denominated, the exchange rate movement contributed 19 percent or $12 million of the overall 37 percent growth.

$86 m Annualised Recurring Revenue

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OPERATING REVENUE

100

90

80

70

60

50

40

30

20

10

0

1HFY2015 1HFY2016

North America

North America

APAC EMEA

EMEA

RECURRING REVENUE

1HFY2015 1HFY2016

50

40

30

20

10

0

NZ$

mill

ions

NZ$

mill

ions

APAC

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R&D Investment

Expenditure on R&D was $32 million in the first six months of this 2016 financial year. This demonstrates growth of 37 percent compared to the same period in the prior year. Headcount increased from 405 at 30 September 2014, to 461 as at 31 March 2015 and to 499 as at 30 September 2015, with increases in the USA, Thailand and New Zealand.

R&D investment continues to be predominantly staff driven, with almost all costs relating to staff either directly (in the form of salary and benefits making up almost 90 percent), or indirectly (in the form of office space, IT equipment, travel or training, making up the remaining 10 percent). This investment in capacity has allowed us to continue to enhance technical capabilities and innovate in our product line.

Margin Improvement

Margin, measured as “Segment operating profit/(loss): third party” in the regions increased $3 million or 32 percent when compared to the same period last year. Operating Revenue grew 26 percent across the same period. A move in the NZD exchange rate has a substantially lower dollar impact on margin than it does on revenue given third party regional costs are largely incurred in the same currencies as revenue is earned.

Support Services has maintained a consistent margin when compared to the same period in the prior year. This is a mature area of the business and has been successful in limiting any cost creep.

Managed Services is the fastest growing area of the Group and we continue to upscale our capability and offering in this area. Revenue from Managed Services has more than doubled since last year. We are making a significant investment in new cloud

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Cash and Financial Position

Net operating cash outflow for the six months to 30 September 2015 was $19 million. This, after allowing for financing cash flows, investing cash flows and the effect of exchange rates on foreign currency balances, resulted in a decrease of cash reserves of $18 million from 31 March 2015. The Group remains in a strong position with $77 million in funds and no bank debt.

NZ$ millions 1HFY2016 1HFY2015

Implementation Services


Margin 7 4

Margin % 20% 10%

Support Services


Margin 17 12

Margin % 85% 84%

Managed Services


Margin 1 2

Margin % 6% 21%

$77m Cash and term deposits balance

based delivery models and automation of deployment. New cloud based technologies enable a lower cost, standardised footprint per customer and for the continuous delivery of new software features. Automation tooling allows the delivery of new customer instances and version upgrades in considerably quicker timeframes. Our customers will attain value faster and we will lower our costs and greatly increase quality from this approach. We are confident that this will deliver a scalable future platform to drive profitability and we anticipate the investment will continue for the next 18-24

months while we host our legacy customers and migrate them to the new cloud based offering.

In the second half of the last financial year, Managed Services margin had fallen to 3 percent. However, with the improvements referred to above, margins are starting to recover, achieving 8 percent during the first 6 months of the 2016 financial year.

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Interim Report

To the shareholders of Orion Health Group Limited

Report on the Interim Financial Statements

We have reviewed the accompanying interim condensed financial statements (“financial statements”) of Orion Health Group Limited on pages 15 to 26, which comprise the balance sheet as at 30 September 2015, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the period ended on that date, and selected explanatory notes for the Group. The Group comprises the Company and the entities it controlled at 30 September 2015 or from time to time during the period.

Directors’ Responsibility for the Interim Financial Statements

The Directors are responsible on behalf of the Company for the preparation and presentation of these financial statements in accordance with New Zealand Equivalent to International Accounting Standard 34 Interim Financial Reporting (NZ IAS 34) and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Our Responsibility

Our responsibility is to express a conclusion on the accompanying financial statements based on our review. We conducted our review in accordance with the New Zealand Standard on Review Engagements 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the financial statements, taken as a whole, are not prepared in all material respects, in accordance with NZ IAS 34. As the auditors of the Company, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements.

A review of financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. Accordingly we do not express an audit opinion on these financial statements.

We are independent of the Group. Our firm carries out other services for the Group in the areas of other assurance and advisory services. The provision of these other services has not impaired our independence.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that these financial statements of the Company are not prepared, in all material respects, in accordance with NZ IAS 34.

Restriction on Distribution or Use

This report is made solely to the Company’s shareholders, as a body. Our review work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in our review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our review procedures, for this report or for the conclusion we have formed.

PricewaterhouseCoopers Auckland

24 November 2015

Independent Review Report

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Note6 months

Unaudited 30 Sep 2015

NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

Operating revenue 3 101,679 80,522

Other income 2,631 2,565

Total Income 104,310 83,087

Expenses

Direct operating costs and expenses (24,805) (16,674)

Employee benefits expense (85,757) (72,098)

Promotional expenses (1,807) (814)

Administration and other expenses (10,029) (7,858)

Occupancy expenses (5,157) (5,109)

Depreciation and amortisation expense (3,691) (2,357)

Net foreign exchange gains 1,153 1,298

Other operating losses (532) (271)

4 (130,625) (103,883)

Operating loss 3 (26,315) (20,796)

Finance income 1,456 107

Finance costs (111) (185)

Finance income/(costs) – net 1,345 (78)

Loss before income tax (24,970) (20,874)

Income tax (expense)/credit 5 (1,883) 6,116

Loss for the period attributable to equity holders of the Parent (26,853) (14,758)

Other comprehensive income for items that may be reclassified subsequently to profit or loss

Currency translation differences 2,735 1,161

Total other comprehensive income 2,735 1,161

Total comprehensive loss attributable to equity holders of the Parent (24,118) (13,597)

Earnings per share

Basic and diluted loss per share (cents) (16.9) (10.9)

Consolidated Statement of Comprehensive Income FOR THE SIX MONTHS ENDED 30 SEPTEMBER

The accompanying notes form an integral part of these financial statements

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NoteUnaudited

30 Sep 2015 NZ$’000

Audited 31 Mar 2015

NZ$’000

ASSETSCurrent assetsCash and cash equivalents 50,589 30,944Term deposits 26,400 64,200Trade and other receivables 56,482 58,680Accrued revenue 20,390 20,025Current income tax asset 1,494 2,469

155,355 176,318Non-current assetsAccrued revenue 8,336 6,870Deferred tax assets 662 930Property, plant and equipment 13,733 13,028Intangible assets 4,791 4,145

27,522 24,973TOTAL ASSETS 182,877 201,291LIABILITIESCurrent liabilitiesTrade and other payables 16,015 14,024Current income tax payable 68 199Employee benefits 15,875 15,388Revenue in advance 54,603 50,899Provisions for other liabilities 2,575 2,437

89,136 82,947Non-current liabilitiesTrade and other payables 1,664 1,595Revenue in advance 1,603 2,431Provisions for other liabilities 786 656Deferred tax liabilities 232 880

4,285 5,562TOTAL LIABILITIES 93,421 88,509NET ASSETS 89,456 112,782EQUITYShare capital 7 159,999 159,752Treasury shares 8 (4,287) (4,388)Share-based payment reserve 8 1,701 1,257Accumulated losses (69,650) (42,797)Foreign currency translation reserve 1,693 (1,042)TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT 89,456 112,782


For and on behalf of the Board, 24 November 2015

Andrew Ferrier Chairman

Ian McCrae Director and Chief Executive Officer

Consolidated Balance Sheet AS AT 30 SEPTEMBER

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Note

Issued capital

NZ$’000

Treasury shares

NZ$’000

Sharebased payment

reserve NZ$’000

(Accumulated losses)/

Retained earnings NZ$’000

Foreign currency

translation reserve

NZ$’000

Total equity

NZ$’000

GROUP (unaudited 30 September 2015)

Balance at 1 April 2015 159,752 (4,388) 1,257 (42,797) (1,042) 112,782

Loss for the period - - - (26,853) - (26,853)

Other comprehensive income for the period - - - - 2,735 2,735

Total comprehensive (loss)/income for the six months ended 30 September 2015 - - - (26,853) 2,735 (24,118)

Issue of share capital 7 154 - - - - 154

Issue of share capital – employee share schemes 8 93 - (93) - - -

Accrual of share-based employee benefits 8 - - 638 - - 638

Vesting of shares – employee share schemes 8 - 101 (101) - - -

Total transactions with owners in their capacity as owners 247 101 444 - - 792

Balance at 30 September 2015 159,999 (4,287) 1,701 (69,650) 1,693 89,456

GROUP (unaudited 30 September 2014) - - -

Balance at 1 April 2014 14,777 (2,069) 309 18,018 (1,853) 29,182

Loss for the period - - - (14,758) - (14,758)

Other comprehensive income for the period - - - - 1,161 1,161

Total comprehensive (loss)/income for the six months ended 30 September 2014 - - - (14,758) 1,161 (13,597)

Issue of share capital 26,465 - - - - 26,465

Issue of share capital – employee share schemes 4,315 (4,315) - - - -

Accrual of share-based employee benefits - - 392 - - 392

Vesting of shares – employee share schemes - 17 (17) - - -

Total transactions with owners in their capacity as owners 30,780 (4,298) 375 - - 26,857

Balance at 30 September 2014 45,557 (6,367) 684 3,260 (692) 42,442

Consolidated Statement of Changes in Equity FOR THE SIX MONTHS ENDED 30 SEPTEMBER


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Note6 months

Unaudited 30 Sep 2015

NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

CASH FLOW FROM OPERATING ACTIVITESCash provided from:Receipts from customers 109,083 91,461Interest received 1,231 107

110,314 91,568 Cash applied to:Payment to suppliers (44,618) (35,102)Payment to employees (81,386) (65,204)Interest paid (17) (185)Taxation paid (3,673) (4,633)

(129,694) (105,124)Net cash outflow from operating activities 12 (19,380) (13,556)

CASH FLOW FROM INVESTING ACTIVITIESCash provided from:Term deposits 37,800 -Cash applied to:Property, plant and equipment – additions (1,364) (2,333)Intangible assets – additions (1,135) (444)Net cash inflow/(outflow) from investing activities 35,301 (2,777)

CASH FLOW FROM FINANCING ACTIVITIESCash provided from:Issue of shares - 25,717Net cash inflow from financing activities - 25,717

TOTAL NET CASH INFLOW 15,921 9,384

Cash and cash equivalents as the beginning of period 30,944 (928)Effect of exchange rate on foreign currency balances 3,724 1,066Net cash inflow 15,921 9,384Cash and cash equivalents at the end of period 50,589 9,522

Composition of cash and cash equivalentsCash and cash equivalents 50,589 13,817Bank overdraft - (4,295)Total cash and cash equivalents 50,589 9,522

Term deposits – within investing activities 26,400 -Total funds available and on deposit 76,989 9,522

Consolidated Statement of Cash Flows FOR THE SIX MONTHS ENDED 30 SEPTEMBER


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1. REPORTING ENTITY

These unaudited consolidated condensed interim financial statements (‘interim financial statements’) for the ‘Group’ are for the economic entity comprising Orion Health Group Limited (‘Parent’ or ‘Company’) and its subsidiaries, (together referred to as the Group and individually as ‘Group entities’).

The Parent and Group are designated as profit oriented entities for financial reporting purposes.

These interim financial statements were approved by the Directors on 24 November 2015.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

These interim financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice and comply with the requirements of International Accounting Standard (IAS) 34 Interim Financial Reporting and with New Zealand Equivalent to International Accounting Standard (NZ IAS) 34 Interim Financial Reporting.

The interim financial statements of the Group for the six months ended 30 September 2015 have been prepared using the same accounting policies and methods of computation as, and should be read in conjunction with, the financial statements and related notes included in the Group’s Annual Report for the year ended 31 March 2015.

Where necessary, comparative information has been reclassified to achieve consistency in disclosure with the current period. Refer to note 3 for details of changes in segmental disclosures.

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the interim financial statements. Actual results may differ from these estimates. The same significant judgements, estimates and assumptions included in the notes to the financial statements in the Group’s Annual Report for the year ended 31 March 2015 have been applied to these interim financial statements.

3. SEGMENT INFORMATION

The Group has four reportable segments, three of which are the regions of the Group’s business operations in the sale,

implementation, hosting and support of software in the Healthcare IT market and one is for Corporate and Development. For each reportable segment the ‘ELT’ (Executive Leadership Team, our Chief Operating Decision Maker) reviews internal management reports on a monthly basis.

As at 1 April 2015, a segmental consolidation took place from a reporting and decision making perspective. This included appointing regional leaders responsible for each of NA, APAC and EMEA regions. This decreased the reportable segments from nine to four. In addition, segment profit now excludes FX gains/losses as these are no longer part of the regional performance monitored by the ELT. These FX gains/losses are now monitored at a consolidated Group level. The comparatives have been restated to align with the new reporting structure.

Information regarding the results of each reportable segment, which reconciles to the financial statements and notes to the financial statements, is included below. Performance is measured based on segment operating profit, as included in the internal management reports that are reviewed by the ELT. Segment operating profit is used to measure performance as management believes that such information is the most relevant in evaluating reportable segment results relative to other entities that also operate within these reportable segments. The assets and liabilities of the Group are reported to and reviewed by the ELT in total and are not allocated by operating segment. Therefore, operating segment assets and liabilities are not disclosed.

Segment revenue is based on customer location. No single customer accounted for more than 10% of the Group’s third party operating revenue.

The vast majority of the inter-segment transactions are to meet international transfer pricing obligations.

Abbreviations used below are defined as follows:

- NA: North America – being the US and Canada region - APAC: Asia Pacific – being the Australia, New Zealand and Asian regions - EMEA: Europe, Middle East & Africa – being the United Kingdom and Ireland, Continental Europe and the Middle East regions - Corp/Dev: Corporate Head Office, Product Development and related entities

Condensed Notes to the Financial Statements FOR THE SIX MONTHS ENDED 30 SEPTEMBER

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Interim Report

6 months to 30 September 2015 Unaudited

NA NZ$’000

APAC NZ$’000

EMEA NZ$’000

Corp/Dev NZ$’000

Total NZ$’000

Revenue: third party

Perpetual licences 9,702 3,386 9,703 - 22,791

Implementation services 22,264 7,193 6,836 - 36,293

Support services 9,870 5,075 4,901 - 19,846

Managed services 19,893 484 1,319 - 21,696

Other revenue 558 76 62 357 1,053

Operating revenue 62,287 16,214 22,821 357 101,679

Segment operating profit/(loss): third party 5,037 3,232 7,200 (42,937) (27,468)

Inter-segment transactions (3,035) (453) (6,093) 9,581 -

Segment operating profit/(loss) 2,002 2,779 1,107 (33,356) (27,468)

6 months to 30 September 2014 Unaudited, Restated

NA NZ$’000

APAC NZ$’000

EMEA NZ$’000

Corp/Dev NZ$’000

Total NZ$’000

Revenue: third party

Perpetual licences 7,623 8,543 3,735 - 19,901

Implementation services 21,460 8,161 6,106 - 35,727

Support services 7,734 4,505 2,131 - 14,370

Managed services 8,389 751 545 - 9,685

Other revenue 375 68 80 316 839

Operating revenue 45,581 22,028 12,597 316 80,522

Segment operating profit/(loss): third party (411) 9,935 2,233 (33,851) (22,094)

Inter-segment transactions (421) (6,980) (2,394) 9,795 -

Segment operating profit/(loss) (832) 2,955 (161) (24,056) (22,094)

3. SEGMENT INFORMATION (CONTINUED)

Regional segmentation by category of product/service:

Reconciliation from segment operating loss to consolidated operating loss:

6 months Unaudited

30 Sep 2015 NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

Segment operating loss (27,468) (22,094)

Net foreign exchange gains 1,153 1,298

Operating loss (26,315) (20,796)

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4. OPERATING EXPENSES

The following disclosure provides additional information in relation to expenses included within the Statement of Comprehensive Income.

5. TAXATION

In the six months to 30 September 2014 (the comparative prior period in these interim financial statements) the Group recognised the benefit of tax losses by way of a Deferred Tax Asset. This resulted in a credit to Income Tax in the Consolidated Statement of Comprehensive Income. There is inherent uncertainty as to the timing of utilisation of such losses because the Group’s business model continues to evolve and, accordingly, Management determined in the preparation of the financial statements for the year ended 31 March 2015 that it was appropriate to adopt a more conservative approach and not recognise tax losses as a Deferred Tax Asset at that time. The change in assessment was accounted for as a change in accounting estimate in the second half of the year ended 31 March 2015 in accordance with NZ IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ and therefore the comparative period has not been restated.

6. ADDITIONS AND DISPOSALS OF NON-CURRENT ASSETS

During the six months ended 30 September 2015, the Group acquired property, plant, equipment and software assets with a total cost of $3,266,000 (30 September 2014: $3,731,000).

Property, plant & equipment with a net book value of $53,000 was disposed of during the period (30 September 2014: $1,000).

7. SHARE CAPITAL

During the period the Company issued 34,164 shares to staff with a fair value of $4.51 per share for nil consideration. There were also 25,667 shares issued due to the vesting of share-based payments. Refer to note 8 for details. These shares were issued for nil consideration.

6 months Unaudited

30 Sep 2015 No. shares

12 months Audited

31 Mar 2015 No. shares

Balance at the beginning of the period 160,557,586 132,376,777

Issue of ordinary shares 59,831 28,709,809

Shares cancelled - (529,000)

Ordinary Shares on issue at the end of the period 160,617,417 160,557,586

Treasury shares (1,553,221) (1,593,221)

Net Ordinary Shares on issue at the end of the period 159,064,196 158,964,365

6 months Unaudited

30 Sep 2015 NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

EXPENSES: BY FUNCTION

Research and development 31,548 23,097

Sales and marketing 21,004 18,487

Implementation services 29,109 32,221

Support services 2,980 2,317

Managed services 20,037 7,687

General and administration 25,947 20,074

130,625 103,883

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8. SHARE-BASED PAYMENTS

Orion Health Long Term Share Incentive Scheme

The Orion Health Long Term Share Incentive Scheme (‘LTI Scheme’) was introduced for selected executives and employees of the Group. The number of awards is determined by the Board of Directors taking into account the recommendations of the Remuneration Committee of the Board.

The Group has no legal or constructive obligation to repurchase the shares or settle the LTI Scheme for cash.

There were six variants of this scheme as at 31 March 2015 and one more has been added in the six months ended 30 September 2015. The requirement for variants is driven by scheme structure and the requirements of local law in different countries.

The six variants of this scheme as at 31 March 2015 were:

(a) Share Awards Scheme (SAS) (b) Restricted Stock Award Agreement (RSAA) (c) Restricted Stock Purchase Agreement (RSPA) (d) Extended Share Awards Scheme (ESAS) (e) Restricted Stock Unit Agreement (RSUA) (f) Extended Restricted Stock Unit Agreement (ERSUA)

The variant added in the six months ended 30 September 2015 is:

(g) Restricted Stock Unit Scheme (RSUS)

For the Restricted Stock Unit Scheme (‘RSUS’) the participant is allocated a restricted stock unit award of performance rights (‘Restricted Stock Units’) that vest upon completion of the performance period if certain conditions are achieved. The conditions include achievement of a relative total shareholder return compared to local and global peer groups and Operating Revenue growth targets. Upon vesting the performance right is realised and the equivalent amount of shares are issued to the participant. If the participant leaves the Group prior to vesting, the performance right is forfeited. Upon transfer of legal title to the participant, the shares will have the same rights as and will rank equally with all other shares on issue.

Movements in the total number of shares held by the Trustee in relation to the SAS, RSAA, RSPA and ESAS variants of the LTI Scheme are as follows:

6 months Unaudited

30 Sep 2015 No. of shares

6 months Unaudited

30 Sep 2014 No. of shares

Unvested shares at the beginning of the period – allocated to employees 1,432,886 1,034,637

Awarded pursuant to the LTI Scheme - 450,212

Forfeited (33,750) (34,000)

Vested and transferred (40,000) (86,213)

Unvested shares at the end of the period – allocated to employees 1,359,136 1,364,636

Shares held by Trustee and not yet allocated – beginning of the period 160,335 -

Shares issued - 1,094,297

Shares cancelled - -

Awarded pursuant to the LTI Scheme - (450,212)

Forfeited and unallocated 33,750 -

Shares held by Trustee and not yet allocated – end of the period 194,085 644,085

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Movements in the number of share awards and Restricted Stock Units allocated to employees and outstanding are as follows:

Fair value of awards granted

The weighted average fair values of the awards granted during the period under the RSUS variants was $3.57 (30 September 2014: all variants $4.00).

The RSUS variant has been valued using a Black-Scholes (Merton) pricing model with a Monte Carlo simulation approach. The key inputs for the rights granted in the current period were as follows:

SAS No. of Shares

RSAA No. of Shares

RSPA No. of Shares

ESAS No. of Shares

RSUA No. of Units

ERSUA No. of Units

RSUS No. of Units

Unvested shares/units at 1 April 2015 245,756 78,136 750,000 200,000 165,350 250,000 -

Awarded pursuant to the LTI Scheme - - - - - - 472,253

Forfeited (33,750) - - - (6,686) - -

Vested (13,334) - - - (25,667) - -

Unvested shares/units at 30 September 2015 198,672 78,136 750,000 200,000 132,997 250,000 472,253

Unvested shares/units at 1 April 2014 272,500 12,137 750,000 - - - -

Awarded pursuant to the LTI Scheme 177,500 70,045 - 200,000 34,800 250,000 -

Forfeited (34,000) - - - - - -

Vested (79,500) (4,046) - - (2,667) - -

Unvested shares/units at 30 September 2014 336,500 78,136 750,000 200,000 32,133 250,000 -

Weighted average

share price

NZ$

Expected volatility of share price

%

Expected volatility of peer group

comparatives

%

Contractual life

Years

Risk free rate

%

Expected divided yield

%

Restricted Stock Unit Scheme 4.87 38 27 3.0 3.09 -

8. SHARE-BASED PAYMENTS (CONTINUED)

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(b) Transactions with related parties

McCrae Limited

The Group is controlled by McCrae Limited, which owned 50% of the shares in the Parent as at 30 September 2015 (31 March 2015: 50%). McCrae Limited is the Group’s ultimate parent. There have been no transactions with this company during the period (30 September 2014: nil). The Group’s ultimate controlling party is Ian Richard McCrae.

Pioneer Capital Partners

Neil Cullimore, Director, is an Operating Partner at Pioneer Capital which provided professional services to the Group. These transactions were at arm’s length on normal trade terms.

HealthAlliance N.Z. Limited

Lester Levy, was appointed to the Board as a Director in August 2014 and resigned in September 2015. Lester Levy is also Chairman of Waitemata District Health Board and Auckland District Health Board. Combined, these two entities own 50% of HealthAlliance N.Z. Limited (‘healthAlliance’). healthAlliance is a shared services organisation, providing non-clinical services to the four Northern Region District Health Boards and is a significant customer of the Group. The Group sells software and services to healthAlliance on an arm’s length basis and on normal trade terms. This customer is considered a related party from August 2014 through to September 2015 during Lester Levy’s tenure on the Board as a Director.

Auckland District Health Board

Lester Levy, former Director, is Chairman of Auckland District Health Board (‘Auckland DHB’). The Group sells software and services to Auckland DHB, both directly and through healthAlliance, on an arm’s length basis and on normal trade terms. The Group has held meetings at Auckland Hospital and was charged for this service by Auckland DHB. This customer is considered a related party from August 2014 through to September 2015 during Lester Levy’s tenure on the Board as a Director.

Waitemata District Health Board

Lester Levy, former Director, is Chairman of Waitemata District Health Board (‘Waitemata DHB’). The Group sells software and services to Waitemata DHB, both directly and through healthAlliance, on an arm’s length basis and on normal trade terms. This customer is considered a related party from August 2014 through to September 2015 during Lester Levy’s tenure on the Board as a Director.

9. RELATED PARTIES

(a) Key management compensation

Key management includes Directors (executive and non-executive) and members of the Executive Leadership Team. The compensation paid or payable to key management personnel for employee services is as follows:

6 months Unaudited

30 Sep 2015 NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

Short-term employee benefits 3,645 1,652

Share-based payments 606 199

Directors’ fees 258 165

4,509 2,016

As at 30 September 2015, the ELT consisted of a wider group of 18 global members (30 September 2014: 10 members).

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(c) Trading transactions

During the period, Group entities entered into the following transactions with related parties:

6 months Unaudited

30 Sep 2015 NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

Sale of software or services

Auckland District Health Board* 96 23

HealthAlliance N.Z. Limited* 996 480

Waitemata District Health Board* 180 60

Purchase of goods or services

Pioneer Capital Partners 1 1

Auckland District Health Board* 2 2

* Auckland District Health Board, Waitemata District Health Board and HealthAlliance N.Z. Limited are considered related parties only during the period of Lester Levy’s tenure as a Director from August 2014 through September 2015.

10. CONTINGENT LIABILITIES

The Group has outstanding letters of credit totalling $1,445,000 (31 March 2015: $1,282,000). These include standby letters of credit, lease bonds and performance bonds.

11. EVENTS AFTER REPORTING DATE

On 13 October 2015, we changed listing categories on the ASX from a Standard Listing to an ASX Foreign Exempt Listing. This followed amendments to the ASX Listing Rules announced on 10 September 2015 that allow an entity with its primary listing on the NZX Main Board to alleviate its compliance burden as a dual-listed entity.

9. RELATED PARTIES (CONTINUED)

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6 months Unaudited

30 Sep 2015 NZ$’000

6 months Unaudited

30 Sep 2014 NZ$’000

NET LOSS AFTER INCOME TAX (26,853) (14,758)

Adjusted for:

Non-cash items

Depreciation and amortisation 3,691 2,357

Loss on disposal of property, plant and equipment 63 1

Impairment allowance – trade receivables and accrued revenue 470 270

Deferred tax (407) (5,587)

Net (gain)/loss on foreign exchange (1,104) (1,298)

Share based payments 1,126 640

Impact of changes in working capital items

Increase/(decrease) in trade and other payables 955 353

Increase/(decrease) in employee entitlements payable (1,477) 2,489

Increase/(decrease) in revenue in advance (6,216) (7,257)

Increase/(decrease) in provisions for other liabilities 630 622

(Increase)/decrease in trade and other receivables 9,642 18,102

(Increase)/decrease in accrued revenue 1,483 (4,336)

(Increase)/decrease in taxation receivable (1,383) (5,154)

Net cash flow from operating activities (19,380) (13,556)

12. RECONCILIATION OF NET LOSS FOR THE PERIOD WITH NET CASH FLOWS FROM OPERATING ACTIVITIES

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Directors

Change in Directors

On 11 September, Dr Lester Levy stood down as a Director of Orion Health Group Limited and Orion Health Corporate Trustee Limited to enable himself to fully participate in Board discussions in his roles as Chairman at both Auckland and Waitemata District Health Boards.

On becoming a Director of Orion Health in 2014, Dr Levy immediately declared this on his register of interests at both DHBs. He also implemented a process preventing any potential conflict-of-interest by excluding himself from meetings or parts of meetings where any issues concerning information technology or Orion Health was to be discussed. This process included Dr Levy not receiving any Board papers related to these topics and saw the Deputy Chairman at both DHBs become the lead point of contact for the Chief Executives on these issues.

Although this process had been working effectively, Dr Levy’s exclusion from discussions had resulted in some Board members and senior DHB executives expressing a strong desire for him to be able to fully participate. As a result, Dr Levy determined that the only way he could participate and remain strictly compliant with conflict-of-interest rules was to resign his position as a Director of Orion Health Group Limited and Orion Health Corporate Trustee Limited. This was the sole reason for Dr Levy’s resignation.

In addition to the ongoing search for a further director to join the Board, consideration on a suitable replacement for Dr Levy has begun.

The current Directors of Orion Health Group Limited are:

Andrew Ferrier Chairman and Independent Director, appointed December 2011

Roger France Deputy Chairman and Independent Director, appointed February 2013

Ian McCrae Director and Chief Executive, appointed March 2001

Neil Cullimore Non-Executive Director, appointed June 2009

Paul Shearer Independent Director, appointed February 2013 (adviser to the Board since 2006)

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Our principal administrative and registered office in New Zealand is:

Orion House, 181 Grafton Road, Grafton Auckland 1010, New Zealand

PO Box 8273, Symonds Street Auckland 1150

Telephone: +64 9 638 0600 Facsimile: +64 9 638 0699 www.orionhealth.com

Our registered office in Australia is:

Level 4, 180 Flinders Street Melbourne, Victoria 3000

Telephone: +61 3 8376 9447 Facsimile: +61 3 8080 0724 www.orionhealth.com

Share registrars

New Zealand Link Market Services Limited Level 7, Zurich House, 21 Queen Street Auckland, New Zealand

PO Box 91976, Auckland 1142, New Zealand

Facsimile: +64 9 375 5990 Investor enquiries: +64 9 375 5998 Email: [email protected] www.linkmarketservices.co.nz

Australia Link Market Services Level 12, 680 George Street Sydney, NSW 2000, Australia

Locked Bag A14, Sydney South, NSW 1235, Australia

Facsimile: +61 2 9287 0303 Investor enquiries: +61 2 8280 7111 Email: [email protected] www.linkmarketservices.com.au

Directory

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