Directors' Statement - Orion Health

2 Orion Health Annual Report 2012

Directors’ Statement IFC

Orion Health Timeline 02

Company Profile 04

Strategy 06

Chairman’s Report 10

Chief Executive Officer’s Report 12

Chief Finanical Officer’s Report 14

Board of Directors 18

Senior Leadership Team 20

Supporting New Zealand’s Growth 24

Product Overview 26

Strategic Acquisition 29

Services and Client Support Overview 30

Sales and Marketing Overview 32

Human Resources 35

Financial Statements 36

Independent Auditor’s Report 74

Corporate Governance 75

Shareholder Information 76

Company Directory 78

Directors’ Statement

Table of Contents

The Directors are responsible for the preparation, in accordance with New Zealand generally accepted accounting practice, of the financial statements which give a true and fair view of the financial position of Orion Corporation Limited and Group as at 31 March 2012 and the results of their operations and cash flows for the year ended 31 March 2012.

The Directors consider that the financial statements of the Company and the Group have been prepared using accounting policies appropriate to the Company and Group’s circumstances, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable New Zealand equivalents to International Financial Reporting Standards and Financial Reporting Standards have been followed.

The Directors have responsibility for ensuring that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Financial Reporting Act 1993.

The Directors have responsibility for the maintenance of a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the financial reporting. The Directors consider that adequate steps have been taken to safeguard the assets of the Company and Group and to prevent and detect fraud and other irregularities.

The Directors are pleased to present the financial statements of Orion Corporation Limited and Group for the year ended 31 March 2012.

The annual report is dated 25 June 2012 and is signed in accordance with a resolution of the Directors made pursuant to section 211(1) (k) of the Companies Act 1993.

For and on behalf of the Board of Directors

Ian McCrae Andrew ClementsChief Executive Officer Chairman

02 Orion Health Annual Report 2012 Orion Health Annual Report 2012 03

Orion Health is named New Zealand International

Business of the Year and Supreme winner at the

New Zealand International Business Awards

1992 1997 2007 2012

19982005

2007 2012

2010

Clearfield Consulting is founded by Ian McCrae and three other colleagues as a boutique consultancy firm in Auckland New Zealand

Medlink HL7++ evolves into Symphonia, which is able to support all health

messaging protocols

Orion Systems changes from a generalist software vendor into an eHealth specialist

Clearfield Consulting sets up a software development company, subsequently renamed Orion Systems. Ian McCrae takes on the role of CEO

1993

1997 19991992

Orion Systems expands into the North American market, setting up an office in Santa Monica, California

The first version of Rhapsody Integration Engine is released, and this furthers Orion Systems leadership position in health integration

2002

Orion Systems is officially renamed Orion Health to help reinforce its eHealth

focus and specialisation

Orion Systems makes its first sale in the UK market, winning a project in Walsall. An office is set up to support the Walsall implementation and to provide support for ongoing sales

Orion Systems is awarded Hi-Tech Company of the Year at the New Zealand Hi-Tech Awards

The company ships its first software product, called MedLink HL7++, a specialised HL7 health integration application for developers

Orion Systems is one of the first New Zealand companies to connect to the internet

Orion Systems wins a second large deal, this time in New South Wales, Australia, to provide a regional EHR in a pilot project for the entire state

An internal design team is set up to work exclusively on improving the user experience across Orion

Health software. A design-oriented approach is applied to every aspect

of every product, in recognition of the fact that usability is a key

requirement of all users

20011994 2004

2008

Orion Systems achieves its first sale into North America, selling its Medlink HL7++ product to Beth Israel Hospital

Orion Systems shifts its head office to Mt Eden, Auckland. It

also expands operations into the Australian market, relocating sales

staff to drive initial business

20001995 2003 2011

Orion Health signs its largest deal to date, to provide a Personally Controlled Electronic Health Record throughout Australia

Orion Health acquires the Microsoft Amalga HIS product portfolio

Orion Health is a finalist in the Company of the Decade Award at the New Zealand Hi-Tech Awards

Orion Health purchases new premises for its Auckland headquarters, redesigning and redeveloping the site, tailoring it to specific needs including a virtual hospital demonstration environment

Orion Systems wins its largest deal to date, in the Canadian province of Alberta, to supply an Electronic Health Record (EHR)

The Orion Health Board of Directors is established

Orion Health Timeline1992 to 2012

Orion Systems develops a web-based portal for clinical applications and names it Concerto, the first of its kind, extending Orion Systems’ innovative reputation

A highly structured product development methodology is employed, with software officially released three times per year, to help improve quality and better meet customer expectations

Week-long innovation windows, known as Scratcharama, are established every four months for developers to work freely on new ideas

A Quality Management and Assurance programme is introduced to embed safety and reliability throughout the organisation and ensure better patient outcomes

Orion Health begins consolidating its overall brand. Over the next five years, four distinct core solution packages and 16 optional extras are developed, all under the single brand name of Orion Health


Today we are a global leader in eHealth software, providing solutions in three major categories:

ELECTRONIC HEALTH RECORD (EHR)Orion Health Electronic Health Record is an information exchange that allows a healthcare organisation to exchange clinical information with other healthcare organisations across regions and at each point of care. This ensures caregivers have access to relevant and accurate patient information – regardless of where the care was provided.

ORION HEALTH HOSPITALOrion Health Hospital Information System (Orion Health HIS) is a state-of-the-art, fully integrated hospital information system. It provides healthcare organisations with a full suite of tools for improved hospital management, clinical tasks and patient administration.

RHAPSODY INTEGRATION ENGINERhapsody Integration Engine manages message exchange between health applications, databases and external systems. Rhapsody allows diverse and previously incompatible IT platforms to communicate by delivering inter-system messaging capabilities.

Our Products Our Values

Company Profile

The following values of Orion Health articulate who we are and what we stand for:

Enable Client Success

Acting in a client-centric fashion by ensuring clients have great trust in Orion Health’s ability to deliver; get on well with Orion Health people; and find dealing with Orion Health an enjoyable experience.

Challenge The Boundaries

Solving problems by being creative and having a ‘can do’ attitude and working with enthusiasm, commitment and passion.

Do The Right Thing

All dealings conducted with honesty, integrity, openness, respect and consideration.

Collaborative Spirit (Ngatahi)

A company working in unison both internally and with customers.

Get Things Done

Consistently delivering results.

Learn and Grow

Acknowledging failure, continual self-development, and encouraging the development of others.

We believe that software, maths and technology have huge unrealised potential to help people have healthier, happier and longer lives, thereby improving our worldOrion Health will deliver its vision through:

Elegant design

Effective business operations

Employing and developing outstanding individuals

About Us Our Aspiration and BeliefOrion Health is New Zealand’s largest privately owned software exporter and a global leader in eHealth software.

Founded in 1993, by CEO Ian McCrae, Orion Health has grown from a specialist health integration vendor into a company that sells a comprehensive suite of eHealth solutions.

Orion Health has extensive experience in the design and installation of complex systems within demanding healthcare environments. With an inherent ability to interconnect the wide variety of information systems found in health, Orion Health has risen to be considered a global leader in its industry.

Today, our products and solutions are currently implemented in over 30 countries, used by hundreds of thousands of clinicians, and help facilitate care for tens of millions of patients


StrategyOrion Health’s strategy for ongoing growth and business expansion has historically been and still remains to simply focus on three overarching pillars of our vision. In each of these areas there are a number of strategic initiatives in progress.

The Orion Health design philosophy is not limited to the look and feel of our products, but applies to the back-end architecture too. Our suite of products is highly configurable; so we are able to tailor solutions to rapidly meet widely varying and constantly changing requirements. We are unique in our ability to provide this flexibility within the constraining context of health industry technology standards. Some of our competitors offer highly configurable products, and some offer standards-based integration technology, but we believe none match our strength in pairing these. For example, this standards-aware flexibility allowed us to react immediately when the North American market began offering opportunities to create state-wide (in the United States) and province-wide (in Canada) electronic health records. Our ability to create proof-of-concept systems in a fraction of the time it took our competitors, as well as our participation in industry connectivity showcases (‘IHE Connectathons’), enabled us to quickly secure highly regarded and thought-leading customers. This in turn has enabled us to establish quality reference sites.

This flexibility in product configuration provides a differentiator against incumbent enterprise health software vendors.

A design-led product company requires strong and insightful product management. Over the past 12 months we have continued to build out the product management team, investing in professionals who have the required skillset to design a holistic go-to-market strategy for the Orion Health product portfolio – collaborating with product development and marketing to realise these strategic plans.

To build insight and truly innovative products, design and user experience are key focal points for product development. We have created a new product development approach that emphasises observation of users, and ensures that solving their problems is paramount in our development priorities. This design focus is complemented with strong commercial managers, who identify market opportunities, initiate product design efforts, and build robust commercial strategies (e.g. positioning, distribution, promotion) around our products.

1. ELEGANT DESIGNThe design aspect of the Orion Health operation forms the single most important aspect of our ongoing business strategy. Competitors in the health software industry have a technology legacy that means their applications appear old-fashioned, and feel ‘clunky’ when compared with the applications that a typical consumer has access to today (e.g. Facebook and Google). Through a combination of a user-centric design philosophy, the use of cutting-edge web technology and a bold approach to adopting new technology, Orion Health software has usability that is best-in-class.

We employ a large, vibrant team of design engineers, who collaborate with internal clinical consultants, as well as live customer sites and their clinicians, in order to create user stories. These help to shape the direction for the ongoing design of each product, with the aim of making interacting with our software as seamless and time efficient as possible for all users. In turn our design engineers work extensively with our developers to implement these design enhancements elegantly into the software.

Our design team adheres to a set of principles and methodology defined by our UX honeycomb, which aids in providing a common direction and alignment of expectations within the group and across our product range.

USEFUL

INTUITIVEINNOVATIVE

EFFICIENT COMPLIANT

DESIRABLE

ELEGANT


SCRATCHARAMA INNOVATION WEEKS For the past three years, to encourage and instill creativity within the Orion Health product development teams, as part of our regular four monthly software release cycles, all development teams are released from their current work streams for a week to collaborate and work on any ideas they may have. During this week, teams generate innovative results that resolve pain points both for commercial uses and internal improvements.

These innovation weeks have seen the product range expand exponentially. Over the past few iterations we have included global teams from other development locations in Christchurch, Canberra and Bangkok, offering international collaboration opportunities on each project. The results generated from these events have seen new product functionality and new products developed, internal applications created and community-based initiatives realised.

The impact of these innovation weeks on our business is immense. Not only do projects result in actionable deliverables that have the opportunity to be further commercialised, they also give our developers an opportunity to express themselves. Core skills are also enhanced such as project managing teams, scoping out work and successful communication and collaboration. The collaborative impact cannot be understated especially as developers from all four of our locations and even those working on differing platforms (Java v .Net) get to interact and share their ideas.

During the final afternoon of an innovation week, all projects are officially presented to the rest of the organisation in order to disseminate any new knowledge or exciting discoveries across all business functions. The best of these presentations are selected to showcase their idea in a live session with Ian McCrae and selected senior leaders, where the future direction of the projects are agreed and planned.

Orion Health takes elegant design and usability capabilities to a world-class level. Our focus on design enables our business to be far more scalable as we grow and expand our product portfolio. Truly innovative products, supported by robust commercial strategies, reduce the sales cycle, improve win-rates and minimise customisation.

MODERN ENGINEERINGeHealth is evolving rapidly so it is critical to have a technical architecture that allows us to efficiently launch a new product offering, adjust to new regulatory requirements by implementing business rules and meet new market needs. One of Orion Health’s technical advantages is a product set that is quickly configurable. The next level of flexibility and efficiency is a truly component-based architecture, where common components can be repurposed for multiple products and modified with minimal impact on other components.

In August 2011, we completed the design of a component-based reference architecture. A number of initiatives are underway to evolve this framework and ensure that future development remains component-based, including technical design reviews. These reviews are performed before each development cycle begins to ensure alignment to our reference architecture.

Communication and enablement is a key priority in the development of our products to ensure the entire Orion Health organisation understands and is trained in our solutions. Presentations are delivered to all employees to assist with the technical alignment between development, pre-sales and the professional services organisation.

We have also established development and release disciplines that consider interoperability with previous versions of our product and intra-product components such as clearer upgrade paths.

2. EFFICIENT BUSINESS OPERATIONSThe satisfaction of our customers is pivotal to the ongoing success of Orion Health and therefore we have increased our focus in this area. In FY13, our Account Management function will be further expanded to better manage our customers’ ongoing needs following the implementation of their Orion Health solution. Staying close to our customers enables us to ensure compliance with SLAs, promote and facilitate user adoption, and achieve the highest levels of satisfaction as well as the ability to upgrade and cross-sell other Orion Health solutions.

A Net Promoter Score (NPS) survey was conducted in August 2011 to better understand our existing customers’ opinions, monitor our performance, and provide metrics to track progress across key areas of our business. The NPS survey covered client engagement from sales through to service and delivery. The NPS score achieved in 2011 was 23, with an industry average of 21.

As we head into the next financial year, this NPS process will become an important component for obtaining and responding to customer feedback and enhancing engagement with our customers.

COMMITMENT TO QUALITYOrion Health is in the process of developing a quality management system and fostering a greater commitment to quality in our culture. Success in this initiative will be reflected in a set of new systems, processes and behaviours that reduce risk and encourage innovation in our products and internal operations. Policies that meet patient safety and data security standards and protect the integrity of our customer relationships will be established and embraced by the whole organisation. Our quality management system will meet international standards and regulatory requirements in all markets, and ensure traceability in our activities.

Customers are paying greater attention to data security, patient privacy and safety concerns. They increasingly require vendors to show proof of standards-based quality systems (such as those supported by United States FDA, ISO and IEC) to qualify for later stages in a tender process.

3. EMPLOYING AND DEVELOPING OUTSTANDING INDIVIDUALSAt Orion Health we pride ourselves on being an employer of choice and hiring the most outstanding individuals in the industry. As part of our commitment to the development of people, we have a comprehensive graduate programme which focuses on people’s fast track to success. In FY12 alone, we hired more than 40 graduates from top New Zealand universities. In addition to this we have developed a structured high-performance development programme to foster the growth of existing and emerging leaders in our business. The ability for our staff to think quickly and innovatively is hugely important to our ability to meet our customer needs.


RECORD REVENUEThe FY12 financial year has seen Orion Health post the largest revenue in the 19 years since establishment. Operating revenue increased to $99.6 million, representing a 22% increase year-on-year. Net profit before tax was $8.2 million, a 29% increase year-on-year.

GLOBAL GROWTHOffices have been opened in six new locations in the past 12 months (Toronto, Dubai, Bangkok, Singapore, Paris and Arizona), bringing the total number of offices worldwide to 17. Accompanying staff numbers have increased from 481 to 633; an increase of over 32%.

TAKING SHARE IN NORTH AMERICAThe United States Health Information Exchange (HIE) market continues to provide a significant number of opportunities in the United States. Orion Health has built on the success and experience gained from the Maine and Alaska state-wide HIEs, securing further state wins in Louisiana, North Carolina and the District of Columbia (DC), as well as a number of other smaller wins. Coupled with this success in the public state HIE market, Orion Health has secured the prestigious Catholic Health Initiatives as our flagship private HIE customer. Catholic Health Initiatives has over 76 hospitals operating across 19 states with over 65,000 employees and is arguably the largest private HIE in the United States.

of becoming the global leader in end-to-end, innovative, patient-centric eHealth solutions. This agreement involved the purchase by Orion Health of the Amalga Hospital Information System (HIS) software assets and Amalga Radiology Information System (RIS)/PACS software assets from Microsoft Corporation.

Closer to home, Orion Health, as part of the Accenture consortium, secured the Australian national Personally Controlled Electronic Health Record (PCEHR) project. The PCEHR will use both the Orion Health Clinical Portal and Patient Portal as part of a nationwide EHR/HIE deployment to over 100,000 clinicians across a population of more than 20 million. This will be one of the largest ever EHR/HIE implementations globally.

AWARD WINNING YEAROrion Health was delighted to be awarded International Business of the Year for 2012. We were recipients of two awards at the New Zealand International Business Awards: Best Business Operating Internationally in the over $50m category and the Supreme Award Winner for 2012.

BUSINESS OUTLOOKWe believe we are well positioned heading into FY13 to capitalise on the significant forward momentum we have achieved in the past 12 months. Solid growth in the United States is supplemented by significant wins in markets

Our integration engine, Rhapsody, has gained enough visibility that large hospitals are now considering it as a potential enterprise solution with sales to large hospital groups including Health Management Associates (HMA) with 71 health organisations in 15 states and LifePoint Hospitals with 54 hospital campuses in 18 states. Rhapsody continues to be used by over 52 state and local health departments in the United States with all states apart from one currently using Orion Health technology to interface with the prestigious Centers for Disease Control and Prevention (CDC). A number of billion-dollar global health technology companies such as Philips Healthcare, GE and Allscripts are now embedding Orion Health technology in their offerings, providing significant growth for us in this OEM market.

LEADING THE WAY IN ASIA PACIFIC Implementation and rollout is well underway with the Singapore National Electronic Health Record solution. This solution captures medical data, including patient demographics, diagnosis, medications, tests, procedures and discharge summaries, for exchange among clinicians. Once fully rolled out nationwide, this solution will support over 50,000 clinical users serving a population of over five million residents.

Along with this significant success in Singapore, Orion Health signed a key agreement with Microsoft which represents a major milestone towards achieving Orion Health’s vision

such as the United Kingdom and Australia. Wins in both geographically and culturally diverse regions illustrate the flexibility and capability of our products, sales groups and implementation teams. Our recent success with several major projects illustrates the increasing maturity of the Orion Health product set, and the credibility with which the company is now viewed on the world stage.

As Chairman of the board and a shareholder of Orion Health, I would like to express my gratitude to the entire Orion Health team globally for their hard work, passion and determination to succeed. Achievements are only possible through the collaboration, communication and knowledge shared across its people and I believe that at Orion Health we have some of the most talented individuals in the industry. Our dedicated team enable the delivery of our products and services to customers all over the world, 24 hours a day. I look forward to the continued evolution of the Orion Health story as we strive to become a global leader in eHealth solutions.

Andrew Clements Chairman

Chairman’s Report

2012 HIGHLIGHTS



AN EVOLVING HEALTHCARE LANDSCAPEKey market drivers have significantly moulded the healthcare industry globally and highlighted the need to be agile and flexible to succeed. As our healthcare technology improves, so too does the general health of the population, resulting in people living for much longer than ever before. This aging population places a massive strain on our healthcare system. Coupled with this, there has been a dramatic rise in the number of chronic conditions such as obesity, congestive heart failure and diabetes – all of which are expensive to treat and have a major and detrimental effect on people’s quality of life. Another key trend that is influencing the products we take to market is the focus on patient-centric preventative medicine that puts the patient in control of their individual health outcomes. Key initiatives Orion Health has been involved with this year include the Australian PCEHR project and several United States HIE implementations such as the states of Alaska, North Carolina and Louisiana.

Staying ahead of the market and being agile and flexible with a focus on innovation is the key to success in such a dynamic market. At Orion Health we collaborate with customers to ensure that we receive direct feedback in the development, design and implementation of our solutions – solutions that deliver integrated, secure and universal access to healthcare information that radically improves clinical workflows, and delivers enhanced patient outcomes.

DESIGN-LED APPROACHOrion Health is a design-led eHealth software company that requires strong and insightful product management. Building insight and truly innovative products, we have focused on the design and user experience in envisioning our product development. We have developed a new product development approach that emphasises observation of users, and ensures that solving their problems is paramount in our development priorities. This design focus is complemented with strong commercial managers, who identify market opportunities, initiate product design efforts, and build robust commercial strategies.

PARTNERING FOR SUCCESSOrion Health has invested in the expansion of our business into international markets with representation now in over 17 countries. As we enter new markets it is important to identify the key partners who are important in enabling a successful introduction to key customers. The engagement with, and enablement of, our partners has been important in achieving our growth goals in FY12.

TOP TALENTThe success of Orion Health is made possible by the exemplary execution of our business plan by the best and brightest people in the industry. The development of our people is a fundamental aspect of our business strategy with a focus on retaining top talent in the New Zealand marketplace. In FY12, we employed in excess of 40 graduates from leading universities from around New Zealand, who are now working in our structured intern programme on their path to success with Orion Health.

GROWTH IN UNCERTAIN TIMESIn a volatile market operating under the Global Financial Crisis, and with key currency exchange rates (NZD to USD, Euro and GBP) at three-year highs, Orion Health grew revenue by 22%. This is in part due to the strong leadership capability we built in FY12 and having a clear plan that supported the international growth strategies we set out at the beginning of the year. As a business we set ourselves a goal of reaching annual revenues of $100 million and we achieved this in FY12.

Contributing to our success is the ongoing global demand for healthcare as well as the requirement for IT products to reduce cost whilst improving the quality of patient care. Along with these key market trends, we have grown our install base, providing confidence to other healthcare providers to invest in our market-leading solutions. In FY12 we focused on continuing to build out a strong technology foundation, with better design capabilities than our competitors, providing the platform for continuous product innovation. These factors have resulted in clear market opportunities for Orion Health from global leadership of our Rhapsody and HIE/EHR solution set, to accelerating our focus on public health and screening programmes, and the development of an end-to-end hospital solution. Orion Health will continue to drive momentum across global markets in FY13 through the development of these opportunities.

LOOKING FORWARDOrion Health is recognised internationally for developing and delivering innovative software solutions. Within the healthcare industry, Orion Health is acknowledged for producing solutions that are robust, secure, absolutely reliable and, above all, do exactly what they’re supposed to do. Orion Health is committed to providing the most extensive and affordable healthcare systems, believing that everyone is entitled to the benefits that a truly integrated healthcare organisation can offer.

Orion Health understands the challenges the healthcare industry faces not only today, but in the future, too. One key trend we believe will shape the healthcare industry over the coming years is the rapid decrease in price expected in the decoding of the individual genome, which will drive the need for a greater understanding of disease as well as the complex privacy and cost-benefit issues. We will continue to develop a comprehensive, health-specific range of products to offer the best solutions possible to address our customer requirements now and in the future.

Orion Health has a well-defined and well-articulated global growth strategy for the coming year. This growth strategy encompasses every part of the Orion Health business to ensure that all areas of the company are focused towards our goal of generating $130 million of revenue in FY13 and striving to become a $1 billion revenue company.

Ian McCrae Chief Executive Officer

Chief Executive Officer’s Report



PERFORMANCE SUMMARY

Despite the Global Financial Crisis and all the challenges that accompanied this, the FY12 financial year saw Orion Health achieve $99.6 million in revenue, representing a 22% ($18.2m) increase from FY11. The solid Orion Health product roadmap, coupled with a focus on the customer delivered through a structured business strategy, has seen a marked increase over the last four years in revenue with a four-year CAGR of 24%.

REVENUE BY REVENUE TYPE

In regards to revenue mix, licence revenue made up $46 million (46%). The large PCEHR contract out of APAC drove much of this licence growth. Professional Implementation Services made up the second largest category of revenue at $29 million. Revenue from support activities continues to run at close to 20% of revenue. Software-as-a-Service (SaaS) increased from a relatively low base of $1 million in FY11 to $4 million in FY12. This trend is expected to continue with SaaS revenue becoming more significant over time.

REVENUE BRIDGE FY11–FY12

EXPENSES

Expenses increased by $16.8 million (22%) which was primarily driven by employee related costs. Total headcount for the Group increased by 152 which moved total employee numbers from 481 to 633. The Microsoft Amalga HIS acquisition brought 51 new staff into the company. These staff joined in February 2012, and therefore only six weeks of operating costs are included in the FY12 result.

Other notable increases during FY12 were the addition of 51 new staff in the Development team, additions in APAC and North America to support customer requirements, and the implementation of a Quality Management Office in the Corporate function. Quality Management staff were added to ensure compliance with ISO and FDA requirements. The EMEA regional headcount declined during FY12 as the region’s activity declined due to lower levels of activity.

REVENUE BY REGION

The North American (NA) region continued to contribute the largest regional sales results in FY12, making up 51% ($50.3 million) of total revenue, an increase of 2% from FY11. Growth in the NA region was driven by several key State and Private HIE contracts.

The EMEA region endured a challenging year due to the European economic conditions however new business was established in the Middle East via SEHA. Year on year the EMEA region was down 28% from FY11 levels.

The APAC region had a very strong year, driven by the Australian PCEHR licence contract. Overall the region grew by over $18 million (115%) year on year.

Chief Financial Officer’s Report

99.6

55.354.6

42.5

2008 2009 2010 2011 2012

81.5

Other

EMEA

Asia Pacific

North America

51%49%

20%

26%

12%

5%

3%

34%2011

2012

SaaS and managed services

Other

Client support

Professional implementation services

Licence revenue

35%

21%

17% 5%2%

3%4%

29%

46%

37%

2011

2012

1005

00

31

1

3

18

81

2011 Licence revenue

Professional

implementation

Client support

SaaS andmanaged services

Otherrevenue

Government

grants

HISFX movement

2012

Administration and other expense

Occupancy expense

Depreciation and amortisation expense

Marketing expense

Employee benefits expense

Direct operating expense

75%72%

2%

2%5%

9%

4%

2%

3% 9%

10%

7%

2011

2012



Assumed liabilities include:

a. Those obligations and liabilities arising solely out of events occurring after close date.

b. Obligations for Transfer Taxes.

c. Sellers’ retention bonus payment obligations.

Primarily the HIS operations are in Thailand and Singapore, although there is one employee now based in Australia.

The components of the acquisition need to be assessed for recognition requirements and fair valued in accordance with IFRS. In conjunction with key Orion Health individuals involved in the acquisition we considered the accounting recognition and fair value requirements and determined appropriate allocations.

Rodney Hyde Chief Financial Officer

RESEARCH AND MAINTENANCEAs in previous years, there has been no capitalisation of development expenditure. This is consistent with the Group’s accounting policy. In FY12 $24.6 million was expensed related to Research and Maintenance with a focus on maintenance of the existing product offerings to remain competitive in the markets in which Orion Health operates.

NET PROFIT BEFORE TAX (NPBT) PERFORMANCENet Profit Before Tax (NPBT) increased to $8.2 million, representing a $1.8 million (29%) increase from FY11 levels. Included in this result is a loss of $2.3 million related to the acquired Microsoft Amalga HIS business. Excluding the Microsoft Amalga HIS impact, NPBT would have been $10.4 million, an increase of 65%. The graphic below illustrates the main movements between the FY11 and FY12 NPBT results.

It is also important to note that future dated Accounts Receivable fell due to a change in invoicing behaviour. Previously large amounts had been invoiced up to 12 months in advance, whereas invoicing is now focused on amounts collectable in the immediate quarter following invoice. Therefore the future-dated amounts reduce by $2.7 million from FY11 levels.

MICROSOFT AMALGA HIS ACQUISITIONEffective 15 February 2012, the Group acquired selected assets and liabilities associated with the Amalga HIS and Amalga RIS/PACS software products (HIS software) from Microsoft Corporation.

Acquired HIS software includes:

a. All computing programs, documentation and related books, records, files and data that are part of, embody or specifically pertain to the HIS software including all intellectual property.

b. All claims for past infringement or misappropriation of the Seller IP.

c. The fixed assets per the Sale and Purchase Agreement.

d. All other miscellaneous assets per the Sale and Purchase Agreement.

NPBT2011

Licence revenue

PSGCSS

SaaS andmanaged services

Otherrevenue

Government

grants

Direct operating

expenses

Employee

Other expenses

Depreciation and

Amortisation

Provision for DD

Share of assoc

FX NPBT excluding HIS

HIS NPBT2012

6.3

0.4

2.50.70.9

16.5

1.20.8

1.5

2.90.8

3.3

2.4

2.3

10.4

8.2

18.2

24.6

12.814.3

11.1

2008 2009 2010 2011 2012

16.0

TRADE AND OTHER RECEIVABLESThe March 2012 month was the highest invoicing month in the Group’s history and as a result trade receivables significantly increased. At year-end total trade receivables less allowance for impairment totalled $44.8 million, up $8.0 million from the prior year.

PROVISION FOR IMPAIRMENT OF TRADE RECEIVABLESDuring the year the Group has continued to see delays in some customers paying; however, very few have resulted in the debt not being collected or a write-off occurring. At year-end trade receivables totalling $1.0 million (2011: $3.1 million) were identified as being impaired and their collection doubtful. At year-end the provision for impairment of trade receivable totals $0.7 million, down $1.3 million from FY11.

The overall aging profile of trade receivables has improved from FY11. Receivables classified as overdue have decreased from 34% ($13.4 million) for FY11 to 33% ($14.9 million). However included in the FY12 closing number is one large amount related to a single customer for $4.85 million, which was collected during April 2012. Without this one large overdue item at year end the overdue amount would have been $10 million (25% of total Accounts Receivable balance).

1 – 60 days

Current

Future dated

61 – 90 days

91 – 180 days

Over 180 days

0

5

10

15

20

25

30

35

40

45

2008 2012


Board of Directors

Paul is the Senior Vice President of Sales & Marketing for Fisher & Paykel Healthcare, a global leader in the design, manufacture, sales and marketing of a range of respiratory medical devices.

Joining Fisher & Paykel Healthcare in 1990, Paul has extensive international experience working within the healthcare

industry. He has held various managerial positions while living in the United States, UK and France establishing Fisher & Paykel Healthcare sales offices.

Paul is responsible for 350 offshore-based staff and is a director of various Fisher & Paykel Healthcare subsidiary companies. Prior experience includes positions at ICL Ltd and Computercorp Ltd. Paul received his Bachelor of Commerce degree from the University of Canterbury, New Zealand.

Paul ShearerAdvisor

Ian founded Orion Health in 1993 with a four-person staff in Auckland, New Zealand. Under his stewardship, the company has seen unprecedented growth and success. With over 630 staff members and 17 international offices, Orion Health has introduced its health integration software to every major market around the world.

Before founding Orion Health, Ian was a senior telecommunications consultant for Clearfield Consulting Ltd, specialising in message standards and connectivity of data network systems and infrastructures. Prior to his work at Clearfield, Ian worked for Ernst & Young designing corporate networks. Ian has also worked as a product manager at Imagineering Micro Distributors in New Zealand and a senior business analyst for the London Stock Exchange.

Ian has a Masters in Engineering Sciences and Bachelor of Engineering (Honours) from Auckland University.

Ian McCraeChief Executive Officer and Managing Director

Andrew, known as Clem, is an investor and professional director. He is a member of the IOD and completed the NZIM Advanced Management programme in 1991 and a BCom at Auckland University in 1985. Clem was Managing Director of Emerald Capital Limited, a Canadian-owned

investment company, from 1998 until 2008. His prior experience included nine years with Goodman Fielder Wattie in various financial and general management positions in New Zealand and Asia, following corporate money market and foreign exchange positions in New Zealand and London.

Andrew ClementsDirector

Neil has been involved in the IT industry for more than 40 years. Prior to 1993 he was CEO and Director of Paxus Corporation, an Australian publicly listed IT company with operations across Asia/Pacific, Europe and Canada. Following the merger in 1993 of Paxus with The Continuum Company in

Austin, Texas, he moved to become Executive Vice-President of Continuum. In 1996 Continuum was acquired by Computer Sciences Corporation (CSC) and this led to him being appointed as Executive Vice-President of CSC’s Financial Services Group based in Austin.

Since moving back to Sydney in 1999, and subsequently New Zealand in 2007, he has participated in a number of public and private companies in the IT industry both as an investor and director. For much of this period he has had a significant concentration across a broad spectrum of the healthcare sector. He holds a BSc (maths) from Auckland University.

Neil CullimoreDirector

Andrew has held a number of director and executive positions for large multinationals and has almost 30 years of experience in international business. He was attracted to Orion Health for its growth potential, arising from the company’s leadership position in a number of major markets. With a background

in building global, performance-driven teams and international business experience, Andrew is taking an active role in the Orion Health business.

Prior to joining Orion Health, he was CEO of New Zealand’s biggest company, Fonterra, for eight years. He served as the President and Chief Executive Officer of GSW Inc and spent 16 years in the sugar industry, working in Canada, the United States, UK and Mexico. He served as the President and Chief Executive Officer of Tate & Lyle North America Sugars Inc, as a Director of OptiSolar Inc until June 2011, and as a Director of GSW Inc, until 31 July 2003, as well as serving as Chairman of several industry-related boards.

He has a Bachelor of Business Administration from the University of New Brunswick and a Master of Business Administration from Concordia University.

Andrew FerrierDirector


Orion Health is led by a talented group of individuals representing key functions within the business. With a unique set of skills, each senior leader contributes many years of industry knowledge and functional expertise in the execution of our business strategy. As a team we collaborate to achieve best practice outcomes in driving performance for our customers, shareholders and most importantly, our staff. Orion Health’s senior leadership team is represented by:

Rodney HydeChief Financial Officer

Ian McCraeChief Executive Officer

As CEO of Orion Health, Ian McCrae is responsible for setting the vision and direction of the organisation. Under Ian’s leadership, the senior leadership team drives their respective business units in the execution of the business strategy and contribution to Orion Health’s success.

Paul ViskovichPresident Orion Health North America

Paul started the North American business for Orion Health in 2002 and is responsible for the strategy and operations for Orion Health in the United States. In this capacity, he is an active member of Health Information and Management Systems Society (HIMSS), eHealth Initiative and other organisations promoting the advancement of IT in healthcare. Prior to his North American role, Paul was responsible for global sales and established Orion Health’s Australian and European operations.

Prior to joining Orion Health, Paul enjoyed more than 20 years in the IT industry across senior sales, marketing and management positions with Fujitsu, Amdahl Corporation, DMR Consulting and Eagle Technology Group within the Asia Pacific Region.

Charles V ScatchardPresident of International

Charles is responsible for the company’s business growth across EMEA. Having spent over 25 years working in the high-technology sector of healthcare and life sciences, Charles also provides key leadership in the future direction of the company. Charles has a wealth of experience and knowledge from a variety of senior roles. Most recently he was the VP of Healthcare & Life Sciences for EMEA, at Oracle, which he led to become the company’s fastest growing sector.

In more recent years, Charles has dedicated his career to being involved with the planning, design, implementation and management of health information networks at the leading edge of eHealth.

Rodney is responsible for the company’s financial operations and corporate functions. A CIMA qualified management accountant (UK) Rodney joined Orion Health in July 2011 from Navico, the market leader in marine electronics. His most recent role was VP of Finance and CFO for the Americas region and Manufacturing.

Rodney has extensive experience in the technology industry with Navman NZ and Navico. Previous experience also includes financial roles with NZ Dairy Foods, BP Oil and GlaxoWelcome. Rodney earned a BCom from Auckland University before moving to the UK to study CIMA while working for BP Oil.

Senior Leadership Team


Caroline FrancisHead of Marketing

Chris StevensHead of Product Management

Gareth CroninVice President, Product Development

John joined Orion Health in 2011 as the Vice President of Global Client Support Services, responsible for the post-implementation client experience including technical support, account management and managed services. He has been instrumental in working to deliver a consistently positive experience for our clients.

John brings years of experience to this assignment, most recently as Vice President of Services for Zynx Health. Prior to joining Zynx he spent seven years at Allscripts as Senior Vice President of Client Services. Before entering the eHealth industry John was focused on financial services and business intelligence, serving as Senior Vice President of Credit Services for Experian and as COO of the Raddon Financial Group. John is a CPA and holds a Bachelor’s degree in accounting from DePaul University and an MBA from the University of Chicago.

Gareth leads the Product Development Group, looking after the teams building Orion Health’s products in its four development centres in Auckland, Christchurch, Canberra and Bangkok. With a belief in the necessity of marrying agile practices with the longer-term certainty that Orion Health’s customers require, Gareth has overseen a programme of change to implement a set of processes that has supported the group doubling in size in the past two years.

Gareth left an earlier career as a piano teacher and musician to undertake a BSc (Hons) in computer science, work as a software engineer, and then complete an MBA at the University of Auckland. Prior to joining Orion Health in 2010, he led the development teams at Kiwiplan, a successful New Zealand software house supplying 600 customer sites in the packaging manufacturing industry.

Caroline leads the global marketing team for Orion Health and provides guidance on strategy and tactical execution of the company’s go-to-market initiatives. With more than 15 years’ marketing experience in high-tech companies, Caroline has a comprehensive knowledge of the IT industry, spanning global markets. Caroline has spent more than eight years living overseas and brings a wealth of cultural business experience to the team.

Prior to joining the Orion Health team, Caroline spent seven years working in a number of senior leadership roles for EMC Corporation, including running the Marketing Communications & Events team across Asia Pacific & Japan (APJ). Prior to this, she held a number of senior marketing positions for companies including VMware, Advanced Micro Devices, 3COM and Hitachi Data Systems. Caroline holds a Bachelor of Business Studies with majors in marketing and management.

Chris leads the Product Management Group, which is responsible for providing direction to the Orion Health product development function. Chris has over 16 years’ experience in software development and has spent the past 10 years specialising in eHealth at Orion Health. Chris has in-depth knowledge and vast experience in product development, sales and product management and through these touchpoints has worked extensively with many of our clients across all regions.

Chris spent two years working for Orion Health in Boston, Massachusetts and gained significant and essential experience in both the United States and Canada eHealth markets. This expansive knowledge set enables Chris to provide globally relevant direction, pivotal to the evolution and success of our innovative suite of products. Chris graduated from the University of Auckland with a BSc and BCom.

Jay KhanVice President, Global Services

Jay is globally responsible for Professional Services, Client Support Services, SaaS, ISO Compliance, and Process Innovation efforts aimed at helping scale up the company operations for growth and accelerating the flow of new ideas from concept through development into reality.

Jay has nearly 20 years of experience in services, support and product development, the majority of this time leading services and support businesses in healthcare IT, diagnostic imaging, and life sciences. He joined Orion Health from Allscripts Healthcare Solutions, where his most recent role was Senior VP, Services. Jay graduated from Cornell University with a BS in Electrical Engineering, and from Alfred University with an MS in Electrical Engineering.

Wayne OxenhamExecutive Vice President of Hospital Solutions

Wayne is responsible for Orion Health’s hospital-based solution business globally. Over the past 15 years Wayne has worked within many different healthcare organisations, including a public hospital, health insurance company and IT consulting companies before joining Orion Health.

Wayne’s career with Orion Health began in 2003, and he has contributed significantly to the growth and expansion of the company over that time. Wayne earned a BSc majoring in mathematics before continuing his tertiary education by correspondence, completing a Bachelor of Management Studies in accounting and finance. Outside work Wayne competed at the highest level in the sport of adventure racing for five years, captaining his team to World Championship victory in 2008.

John NebergallVice President of Global Client Support Services


Orion Health was named Supreme Winner and New Zealand International Business of the year (over $50m) at the New Zealand International Business Awards 2012. These auspicious awards recognise professional excellence and innovative practice and reward successful companies that have helped grow and transform the New Zealand economy with exceptional export success in international markets. This award also recognised Orion Health’s dedication to the New Zealand market through the creation of new jobs, reinvestment of profits and the development of new skills and technologies. Orion Health has a shared ambition for a thriving New Zealand economy.

The largest financial deal in Orion Health’s history was signed after winning the tender for the Australian PCEHR project. This strategic initiative will bring health information from a number of different systems together and present it in a single view to patients and their authorised healthcare providers across Australia. With this information available to them, healthcare providers will be able to make better decisions about a patient’s health and treatment advice. Orion Health is a strategic partner as part of this initiative representing a key stake hold into the Australian market.

A strategic acquisition was made in the purchase of an end-to-end Hospital Information System (HIS) software suite from Microsoft.

We accelerated our graduate programme, employing 41 graduates from New Zealand universities, who are predominately working in the product development area of the business.

Andrew Ferrier joined the Orion Health Board of Directors in the position of Director. This amplifies the international experience and advice provided to the executive team in aiding the development and growth of Orion Health into foreign markets.

Market entry began across Asia into China and Japan, with two significant opportunities closed in the lucrative Chinese market. This expansion into Asia has required a new focus on partnerships and in the year ahead, enablement and engagement will be key.

Partnerships were also a key theme in New Zealand, seeing Orion Health entering an innovative and strategic partnership with Canterbury District Health Board. This enhanced relationship will provide a necessary feedback loop for our development teams in innovating and developing industry-leading eHealth solutions globally.

Every year Healthcare Informatics ranks the top 100 vendors with the highest revenue derived from eHealth products and services in the United States. Orion Health gained 10 spots from 2010, jumping to number 64 – the only New Zealand vendor making the list.

Supporting New Zealand’s GrowthFY12 represented a period of continued growth for Orion Health. During this time, there were a number of highlights.


RESEARCH AND MAINTENANCEOver the past 12 months the Orion Health Development team has focused on a number of key areas, including technology and process. During this time 38 product releases have been delivered.

One new feature is the ability to expose our solutions (via Application Programming Interfaces – APIs) to enable third parties to build applications for devices such as smartphones and tablets on top of our platform. The first vendor to do so is Deloitte in Australia as part of constructing the Australian National PCEHR and eBlue Book solution.

PRODUCT MANAGEMENTIn the previous fiscal year we introduced a regular four-monthly release cycle and defined a process for approving roadmap features as part of this release cycle. We have now further developed our product strategy and product management processes.

Portfolio managers have been appointed, responsible for a portfolio or ‘family’ of products, for integration products, portal products, clinical workflow, and business intelligence products. This involves being the product owner and defining strategy based on market drivers and technology developments as well as creating roadmaps and working with the development organisation to ensure timely delivery. Portfolio managers are responsible for the commercial success of the products in their portfolio.

Product OverviewCONTINUED SUCCESS IN HIE/EHRMajor successes in the Australian and Singaporean EHR market, along with significant traction in the United States HIE market, have made the combined HIE/EHR space the most significant for Orion Health in the past year.

Orion Health now has close to 30 flagship EHR customers globally, making us arguably the most successful global vendor in the marketplace today. In the United States, Orion Health now has five state-wide HIE solutions either in production or the later stages of implementation; and we are currently in contract negotiations and shortlisting phase for a further 10 state or regional opportunities.

Substantial synergies exist between the HIE requirements in the United States and the EHR requirements in Commonwealth and European nations. Our operations across these geographies enable us to transfer best practice from one to another.

INTEGRATION ENGINE LEADING THE WAYOur Rhapsody Integration Engine is now used by more than 700 customers across 30 countries. Rhapsody is particularly widely adopted in the United States, with more than 52 state and local health departments using it to interface with the CDC to improve nationwide data collection and reporting for public health. This makes Rhapsody the most widely adopted integration platform for public health in use today.

In the private healthcare market, Orion Health has seen particular success in the past 12 months with sales to large hospital groups including Health Management Associates (HMA), with 71 health organisations in 15 states and LifePoint Hospitals, with 54 hospital campuses in 18 states.

USA Flagship HIEsMaine HealthInfoNet, MEAlaska eHealth Network (AeHN), AKLehigh Valley Health Network, PALouisiana Health Care Quality Forum, LANorth Carolina DHHS, NCLahey Clinic, MAInland Northwest Health System, WA & IDWestern Washington Rural Health, WAShared Health, TNChatham County, GAOchsner Health System, LANorth Texas Accountable Healthcare Partnership, TXSt Vincent’s Medical Center, FLInland Empire HIE, CACatholic Health Initiatives, CONew Mexico Health Information Collaborative, NMDistrict of Columbia, DCCommonwealth of Massachusetts Executive Office of Health and Human Services, MA

Canada Flagship EHRsAlberta Health Services, ABNew Brunswick Department of Health, NBQuebec Department of Health, QCSaskatchewan Department of Health, SKThe Northwest Territories, NTMinistry of Health & Long Term Care, ONNewfoundland & Labrador Centre for Health Information, NL

Europe Flagship EHRsGreater Glasgow NHS Trust, ScotlandIB Salut, Palma, SpainHealth and Social Care Northern Ireland (HSCNI), Northern Ireland

Australasia Flagship EHRsNSW Health, Sydney, NSWDept. of Health & Ageing PCEHR, AustraliaCanterbury DHB, Christchurch, New Zealand

Asia Flagship EHRsSingapore Ministry of Health, Singapore


Strategic AcquisitionOn 15 February 2012, following a six-month due diligence and negotiation process, Orion Health acquired the Amalga HIS software from Microsoft Corporation.

The software suite acquired is complementary to existing Orion Health solutions and enables us to enter previously untapped markets. This provides us with access to large opportunities across complete hospital organisations.

The rebranded Orion Health HIS solution (previously known as Microsoft Amalga HIS) was developed in Thailand with a prestigious private hospital, Bumrungrad International, which is renowned for its superior quality, attracting high numbers of foreigners.

The software increases the Orion Health code base by approximately 250%, and covers areas such as patient administration, electronic order entry, enterprise resource planning (full set of financial, human resource and inventory management components), scanned medical records, laboratories, medication management, radiology and business intelligence.

The hospital information system market has many established vendors, but few have software developed specifically for the international market, and even fewer have friendly, modern user interfaces and advanced end-to-end integration. The Orion Health HIS is comprehensive, with the majority of components required to run a fully electronic hospital. The tightly integrated nature of the solution offers tremendous efficiency benefits and can also be offered at a very competitive price in developing countries, where a multi-vendor solution would be expensive to procure, implement and maintain.

The acquisition brought 51 experienced staff to Orion Health, based mainly in Thailand and Singapore, where Orion Health now has offices.

Combined with the existing Orion Health hospital components, Orion Health has a strong hospital information system offering that has already opened a very positive and growing pipeline of opportunities in Europe, the Middle East, Asia and New Zealand.


ONE STEP AHEADA key component of the overall Managed Services delivery is a sophisticated remote monitoring that enables Orion Health engineers to have real-time information about a client’s system state, performance, stability and load. This solution sends alerts when conditions indicate a client system could potentially have an issue, enabling intervention before any end-user effects. We anticipate the Managed Services suite to be a significant source of future revenues while delivering solid value to our clients.

As the Orion Health development team continues to enhance our offerings, it is the responsibility of the CSS team to help our clients stay current on the latest and most effective solutions. By maintaining as narrow a scope of releases in the field as possible, the job of support and development becomes significantly less expensive while clients enjoy the benefits of our latest software. Our overall goal is to ensure that our clients are on the most recent solution versions.

SHARING BEST PRACTICEWe have worked to reinvigorate our standard support team, building a global shared-practices approach, and aggressively recruiting strong professional support talent to complement the solid experience that we already have on board. The team has implemented tighter processes and now measures client satisfaction on each ticket, keeping a close watch on the level of quality delivered and allowing quick follow-up with clients who are not completely satisfied by their Orion Health support experience.

STAYING AHEAD OF THE CURVEFinally, new to the umbrella of client support services is the essential element of education – both for the client base and for Orion Health employees. Starting with a focus on internal skill building, the education team has established a new employee induction programme designed to introduce our new hires to the organisation’s history, departments, markets, solutions and management team. By doing this we expect to significantly cut down the assimilation time for our new employees and facilitate a quick ramp-up to maximum productivity.

Similarly, delivering learning experiences to our clients is central to enabling them to receive the greatest value from our products. In order to facilitate the efficient delivery of education to clients and employees, the team has implemented a robust learning management system that automates high-quality course delivery. Included in the system is an individualised course-of-study plan and testing system that tracks the progress of each learner, delivering a high-quality experience at a very modest cost.

LOOKING AHEADWe have created a services and client support vision for Orion Health that systematically reduces the effort and variability required to implement Orion Health solutions, introduces new offerings that aim to deliver more value to our clients, and delivers superior support to customers once they have implemented our products.

Services and Client Support Overview

OPERATIONAL IMPROVEMENTS AND PERFORMANCEA critical factor for PSG is the quality of the execution during implementation projects. Implementation projects range from 40-hour Rhapsody installs to large EHR regional rollouts that can require many years of effort. To enable full visibility of all projects across the company, a management information system, branded i-Portfolio, was launched. i-Portfolio provides a global snapshot of how all projects are progressing and identifies those that require intervention.

One of the most important PSG metrics that we monitor is billable percentage of resource. The intent of this metric is to measure the number of hours that are billed to our clients versus the total number of working hours available for our PSG consultants. Through better systems and management, this metric has improved by 40% from June 2011 to March 2012.

VALUE ADDED SERVICESAlong with account management, Client Support Services (CSS) has taken responsibility for expanding Orion Health’s Managed Services, identifying a variety of options for clients that add value to their solution. A comprehensive SaaS offering is now available where Orion Health takes responsibility for the infrastructure, operation and delivery of a client’s solution suite. Orion Health can now, as an option, manage all aspects of the application installed locally at a client site through the Managed Services operations team.

Another offering is remote application monitoring, where we observe and inform the client on the status of their system.

Finally, a client may opt for a time-and-materials contract for a ‘health check’ of all critical system components in a one-time engagement. This full spectrum of offerings can address a number of our client’s most important needs.

In FY12, Orion Health invested in the establishment of a global services structure, strengthening project implementation rigour, and rolling out consistent metrics associated with our consulting business – the Professional Services Group (PSG).


Sales and Marketing OverviewCONNECTING HEALTHCARE PROVIDERS AND PATIENTSThe Australian PCEHR project was a significant win for Orion Health and the largest deal in Orion Health’s history. This secure electronic record provides patients and their authorised healthcare providers with a single view of their medical history, stored and shared in a network of connected systems. Orion Health partnered with Oracle and Accenture in this strategic, long-term engagement.

WINNING IN ASIAMarket expansion continues into the Asia Pacific region with the dedication of resource in Japan, China and the Southeast Asia markets. Significant wins include the National Electronic Health Record project in Singapore. This is one of the world’s first national EHR systems, serving five million people across the country, and will transform the way clinicians make decisions and deliver care. Additional success was realised through an implementation of an EMR at the Kyoto Children’s Hospital in Japan as well as significant wins in China, including a Rhapsody installation at the Hong Kong University Shenzhen Binhai Hospital and Shanghai Electronic Hospital and an EHR project at Baoshan Region.

CONTINUED SUCCESS IN NORTH AMERICAFY12 saw Orion Health further solidify its position in the United States public HIE space, with success in state-wide and regional HIEs, including North Carolina HIE, Louisiana HIE, Inland Empire HIE (California) and North Texas Accountable Healthcare Partnership. The Company also made significant inroads into the private HIE market, capping the year off with a big win at Catholic Health Initiatives, one of the country’s largest Catholic healthcare systems, with 76 hospitals across 19 states, all of which will use Orion Health HIE.

Large healthcare systems favoured the Orion Health Rhapsody product, with implementations at Sparrow Health, Carilion Clinic and HMA, AmeriSource Bergen, and the State of Mississippi.

The investment in the establishment of our SaaS offering in the United States market has paid off with more than six HIE customers operational, including three state-wide exchanges. The Orion Health SaaS offering provides our customers with a feature-rich solution, with all the operational and financial benefits of a fully hosted solution, and with a lower-cost way of getting started more quickly with a proven on-demand version of our solution.

In addition to selling software licences, support and associated installation services, we will increasingly offer services that enhance the success of our products and solutions, in particular SaaS, hosting, hardware and transactional services offerings.

CONNECTING USERS FOR SUCCESSIn Canada, Orion Health hosted the inaugural, successful and positively reviewed Canadian User Group meeting and closed the year with a big EHR win with Newfoundland and Labrador Centre for Health Information.

NEW OFFICE OPENINGSOrion Health continued its expansion into North America, opening new offices in Scottsdale, Arizona and Toronto, Canada, growing the number of staff to 93. As part of this expansion, a marketing team was employed, comprising four experienced leaders with a combined 60+ years of healthcare and technology marketing experience.

The marketing team made significant inroads in elevating Orion Health’s brand and presence in the company’s largest market, including overseeing more participation in key national and regional industry conferences as both exhibitor and thought-leader speakers, facilitating greater exposure to industry researchers and analysts, and executing multi-channel lead-generating activities.

NEW ZEALAND SUPPORTThe NZTE and the foreign diplomatic core of the New Zealand government continue to provide significant support to Orion Health through valuable introductions, Ambassador-facilitated events and market intelligence.

INTERNATIONAL MARKET EXPANSIONOrion Health now has offices in 17 cities across 12 countries, with plans to open additional offices in regions where we are expecting significant growth over the coming years, such as Asia and the Middle East.

Our global sales offices assist us in dealing with the complexities of multiple languages, differing regulatory requirements and local modes of business. We have also formed strong partnerships with selected system integrators, distributors and partners globally to assist with servicing our customers in non-English-speaking locations.

The geographic contribution to operating revenue was North America 51%, EMEA 11%, Asia Pacific 35% and other 3%.

PARTNERING FOR SUCCESSThe demand for the Orion Health EHR and HIS solutions is strong across our diverse markets. The go-to-market approach in many markets is via a partnership model and we have been actively recruiting partners who are committed to our vision of eHealth. Through this partner-led engagement model, Orion Health will gain entry to markets including Russia, Turkey, Benelux, Germany, Austria, Italy, Kosovo and Moldavia as well as expanding our business in established countries including the UK, Spain, the Gulf, Scandinavia, China, Japan and the United States.

In addition, a number of large healthcare vendors have embedded our integration technology in their devices and applications providing further sales leverage.

Christchurch

Auckland

SydneyCanberra

Melbourne

Tokyo

Singapore

Bangkok

Shanghai

Palma

Dubai

LondonParis

BostonToronto

Edmonton

Santa Monica

New and established offices

Planned offices

Scottsdale


Orion Health has had another year of expansion, increasing staff numbers from 481 to 633 during FY12, a 32% increase.

In the latter part of the year we focused on organisational development and high-performance teams and as a result have recruited senior managers with significant leadership and international business experience to ensure Orion Health’s ongoing success. In addition, we welcomed Andrew Ferrier to our board of directors. Andrew has significant international business experience and will provide additional support and coaching to our senior leadership team.

At Orion Health we employ the best and brightest young minds we can recruit. We are always in the market for staff with the ability to think quickly and innovatively, and this is a huge determinant of our ability to continue our current growth and revenue trends. In a labour market that is clamouring for experienced workers, we enjoy the benefits of fresh and innovative ideas that young minds and graduates are able to bring to the table. Orion Health is one of New Zealand’s largest employers of software development graduates and in FY12 we employed 41 graduates – our largest intake to date. In addition we

employed 16 student interns for work experience over the FY12 summer break. Orion Health sponsors many industry events and is regularly invited to guest lecture or present at university and high school career events to promote the benefits of working in such a dynamic industry.

Orion Health is an employer of choice and fosters a culture that strives for excellence coupled with an enjoyable work environment. We implemented an onboarding programme in FY12 to ensure new staff are fully inducted into Orion Health’s culture and applications. The feedback following the United States pilot programme has been positive and the new programme is being rolled out globally.

Our employees are engaged and committed to Orion Health’s values and vision. Staff are regularly recognised and rewarded in quarterly company meetings for going above and beyond their responsibilities. We continually focus on keeping our global staff abreast of events within Orion Health, using various communication vehicles like weekly newsletters, podcasts, video and teleconference facilities and social media.

Human Resources

United States94

Canada28

United Kingdom36

Spain07

Total Staff

633

France03

Thailand51

Singapore13

Japan03

Australia43

New Zealand355


Financial Statements

- Statements of Comprehensive Income

- Statements of Financial Position

- Statements of Change in Equity

- Statements of Cash Flow

- Notes to the Financial Statements


Statements of Comprehensive IncomeFor the year ended 31 March 2012

Group Parent

2012 2011 2012 2011

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

Continuing operations

Operating revenue 5 95,746 77,553 - -

Other income 5 3,826 3,917 250 250

5 99,572 81,470 250 250

Expenses

Direct operating expenses (8,265) (7,256) - -

Employee benefits expense 6 (69,215) (53,965) - -

Marketing expenses (2,127) (1,664) - -

Administration and other expenses (6,421) (7,145) (229) (237)

Occupancy expenses 27 (3,732) (3,562) - -

Depreciation and amortisation expense 6 (1,900) (1,176) - -

Other operating gains/(losses) (307) (361) (4) (2)

(91,967) (75,129) (233) (239)

Operating profit 7,605 6,341 17 11

Finance income 7 289 155 - -

Finance costs 7 (117) (120) - -

Share of profit/(loss) from associate 12 375 (54) - -

Profit before income tax 8,152 6,322 17 11

Income tax credit/(expense) 8 (2,438) (1,729) (12) 17

Net profit for the year attributable to equity holders of parent 5,714 4,593 5 28

Other comprehensive income

Currency translation differences 21 (761) (441) - -

Total other comprehensive income (761) (441) - -

Total comprehensive income attributable to equity holders of parent 4,953 4,152 5 28

Statements of Financial PositionAs at 31 March 2012

Group Parent

2012 2011 2012 2011

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

ASSETS

Current assets

Cash and cash equivalents 9 7,293 4,329 - -

Trade and other receivables 10 48,839 39,743 12,971 11,662

Current income tax asset - 904 - 1,021

56,132 44,976 12,971 12,683

Non-current assets

Trade and other receivables 10 843 3,140 - -

Deferred tax assets 8 1,944 1,783 - -

Investment in subsidiaries 11 - - 1 1

Investment in associates 12 1,130 755 - -

Property, plant and equipment 13 13,118 2,974 - -

Intangibles 14 738 304 - -

17,773 8,956 1 1

TOTAL ASSETS 73,905 53,932 12,972 12,684

LIABILITIES

Current liabilities

Bank overdraft 9 1,814 48 - -

Trade and other payables 15 7,454 7,412 68 47

Current income tax payable 926 - 252 -

Employee entitlements 16 5,766 5,796 - -

Revenue in advance 17 26,127 22,321 - -

42,087 35,577 320 47

Non-current liabilities

Bank borrowings 18 8,500 - - -

8,500 - - -

TOTAL LIABILITIES 50,587 35,577 320 47

NET ASSETS 23,318 18,355 12,652 12,637

EQUITY

Share capital 19 12,527 12,517 12,527 12,517

Retained earnings 20 11,405 5,691 125 120

Reserves 21 (614) 147 - -

TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT 23,318 18,355 12,652 12,637

The accompanying notes form an integral part of these financial statements


Statements of Changes in EquityFor the year ended 31 March 2012

ATTRIBUTABLE TO THE OWNERS OF THE PARENT

Issued Capital Retained Earnings Reserves Total Equity

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

GROUP

Balance at 1 April 2010 12,517 1,098 588 14,203

Net profit after tax - 4,593 - 4,593

Other comprehensive income for the year 21 - - (441) (441)

Total comprehensive income for the year ended 31 March 2011 - 4,593 (441) 4,152

Balance at 31 March 2011 12,517 5,691 147 18,355

Balance at 1 April 2011 12,517 5,691 147 18,355

Net profit after tax - 5,714 - 5,714

Other comprehensive income for the year 21 - - (761) (761)

Total comprehensive income for the year ended 31 March 2012 - 5,714 (761) 4,953

Transactions with owners in their capacity as owners

Issue of share capital 19 10 - - 10

Total transactions with owners 10 - - 10

Balance at 31 March 2012 12,527 11,405 (614) 23,318

PARENT

Balance at 1 April 2010 12,517 92 - 12,609

Net profit after tax - 28 - 28

Total comprehensive income for the year ended 31 March 2011 - 28 - 28

Balance at 31 March 2011 12,517 120 - 12,637

Balance at 1 April 2011 12,517 120 - 12,637

Net profit after tax - 5 - 5

Total comprehensive income for the year ended 31 March 2012 - 5 - 5

Transactions with owners in their capacity as owners

Issue of share capital 19 10 - - 10

Total transactions with owners 10 - - 10

Balance at 31 March 2012 12,527 125 - 12,652

Statements of Cash FlowsFor the year ended 31 March 2012

Group Parent

2012 2011 2012 2011

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

CASH FLOW FROM OPERATING ACTIVITES

Cash provided from:

Receipts from customers 95,382 77,338 - -

Interest received 289 155 - -

Taxation refunds 291 - - -

95,962 77,493 - -

Cash applied to:

Payment to suppliers (21,164) (19,025) - -

Payment to employees (68,533) (52,701) - -

Interest paid (206) (174) - -

Taxation paid (1,126) (3,152) - -

(91,029) (75,052) - -

Net cash inflow from operating activities 28 4,933 2,441 - -

CASH FLOWS FROM INVESTING ACTIVITIES

Cash applied to:

Property, plant and equipment (11,541) (2,341) - -

Intangibles (546) - - -

Net cash outflow from investing activities (12,087) (2,341) - -

CASH FLOW FROM FINANCING ACTIVITIES

Cash provided from:

Issue of shares 10 - - -

Dividend received 2 - - -

Bank borrowings 8,500 - - -

Net cash inflow from financial activities 8,512 - - -

TOTAL NET CASH INFLOW 1,358 100 - -

Cash and cash equivalents at the beginning of period 4,281 4,441 - -

Effect of exchange rate on foreign currency balances (160) (260) - -

Net cash flow 1,358 100 - -

Cash and cash equivalents at the end of period 9 5,479 4,281 - -

Composition of cash and cash equivalents

Cash and cash equivalents 7,293 4,329 - -

Bank overdraft (1,814) (48) - -

9 5,479 4,281 - -


Notes to the Financial StatementsFor the year ended 31 March 2012

1. GENERAL INFORMATION

The consolidated financial statements for the ‘Group’ are for the economic entity comprising Orion Corporation Limited (‘Parent’ or ‘Company’) and its subsidiaries.

Orion Corporation Limited is incorporated in New Zealand and registered under the New Zealand Companies Act 1993. The registered office is Orion House, 181 Grafton Road, Grafton, Auckland 1010, New Zealand.

The Parent and Group are designated as profit oriented entities for financial reporting purposes. The Parent and Group are primarily involved in the sale, support and implementation of software with a focus on the healthcare IT market.

These financial statements were approved by the Directors on 25 June 2012.

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation of financial statements

Basis of preparationThe financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (‘NZ GAAP’). They comply with New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’), and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. Full compliance with NZ IFRS ensures compliance with International Financial Reporting Standard (‘IFRS’).

The financial statements have been prepared on the basis of historic cost, except when specific items are carried at fair value as identified in specific accounting policies below.

(b) New accounting standards and interpretations

Standards, amendments, and interpretations effective in 2012The Group has adopted the following new and amended NZ IFRSs of relevance to the Group and Company as of 1 April 2011:

NZ IAS 27 (amendment): Consolidated and separate financial statements (effective for annual periods beginning on or after 1 July 2010). The amendments clarify that the consequential amendments to NZ IAS 21 The effects of Changes in Foreign Exchange Rates, NZ IAS 28 and NZ IAS 31 resulting from NZ IAS 27 (2008) should be prospectively applied, with the exception of amendments resulting from renumbering.

NZ IFRS 7 (amendment): Financial Instruments disclosures (effective for annual periods beginning on or after 1 January 2011). The amendments add an explicit statement that qualitative disclosure should be made in the context of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments. In addition, the IASB amended and removed existing disclosure requirements.

NZ IAS 24 Related party disclosures (Revised 2009) (effective for annual periods beginning on or after 1 January 2011). The amendment simplifies the definition of a related party and provides a partial exemption from the disclosure requirements for government-related entities.

The adoption of these amendments has not resulted in material accounting or disclosure changes for the Group or Company.

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 April 2011 and not early adopted.

New standards, amendments and interpretations issued by the International Accounting Standards Board (IASB) and the External Reporting Board (XRB) have been published that will be mandatory for the Group’s accounting periods beginning on or after 1 April 2012. None of these standards have been early adopted by the Group. These new standards, amendments and interpretations potentially impacting the group include:

NZ IFRS 7 (amendment): Financial Instruments disclosures – Transfer of Financial Assets (effective for annual periods beginning on or after 1 July 2011). The amendments require additional disclosures about transfer of financial assets to enable users of financial statements

to understand the relationship between transferred financial assets that are not derecognised in their entirety and the associated liabilities; and

to evaluate the nature of, and risks associated with, the entity’s continuing involvement in derecognised financial assets.

The amendment is not expected to have a material impact on the Group financial statements and will be adopted in the financial statements for the annual reporting period ending 31 March 2013.

FRS 44 New Zealand Additional Disclosures and Harmonisation Amendments (effective for annual periods beginning on or after 1 July 2011). FRS 44 sets out New Zealand specific disclosures for entities that apply NZ IFRSs. These disclosures have been relocated from NZ IFRSs to clarify that these disclosures are additional to those required by IFRSs. The Harmonisation Amendments amends various NZ IFRSs for the purpose of harmonising with the source IFRSs and Australian Accounting Standards. The new standard and amendments are not expected to have a material impact on the Group financial statements and will be adopted in the financial statements for the annual reporting period ending 31 March 2013.

NZ IFRS 10 Consolidated Financial Statements, NZ IFRS 11 Joint Arrangements, NZ IFRS 12 Disclosure of Interests in Other Entities, revised NZ IAS 27 Separate Financial Statements and NZ IAS 28 Investments in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2013). NZ IFRS 10 replaces all of the guidance on control and consolidation in NZ IAS 27, and NZ IFRIC 12. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. The Group does not expect the new standard to have a significant impact on its composition.

NZ IFRS 12 sets out the required disclosures for entities reporting under the two new standards, NZ IFRS 10 and NZ IFRS 11, and replaces the disclosure requirements currently found in NZ IAS 28. Application of this standard by the Group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Group’s investments.

NZ IAS 27 is renamed Separate Financial Statements and is now a standard dealing solely with separate financial statements. Application of this standard by the Group and Company will not affect any of the amounts recognised in the financial statements, but may impact the type of information disclosed in relation to the parent’s investments in the separate parent entity financial statements. Amendments to NZ IAS 28 provide clarification that an entity continues to apply the equity method and does not re-measure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a “partial disposal” concept. The Group is still assessing the impact of these amendments. The Group expects to adopt these new standards in the financial statements for the annual reporting period ending 31 March 2014.

NZ IFRS 13 Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013) NZ IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across NZIFRSs. The Group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The Group and Company expect to adopt the new standard in the financial statements for the annual reporting period ending 31 March 2014.

NZ IAS 1 Amendments Presentation of Items of Other Comprehensive Income (effective for annual periods beginning on or after 1 July 2012). The amendment requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to profit or loss in the future. This will not affect the measurement of any of the items recognised in the balance sheet or the profit or loss in the current period. The Group and Company expect to adopt the amendment in the financial statements for the annual reporting period ending 31 March 2014.

NZ IAS 12 Recovery of Underlying Assets (effective from 1 January 2012). The amendment requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying of the relevant assets or liabilities, that is through use or through sale. The amendment is not expected to have a material impact on the Group or Company’s financial statements. The Group and Company expect to adopt the amendment in the financial statements for the annual reporting period ending 31 March 2014.


NZ IFRS 9 Financial instruments (effective for annual periods beginning on or after 1 January 2015) NZ IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities and replaces the parts of NZ IAS 39 relating to classification and measurement of financial instruments. NZ IFRS 9 requires financial instruments to be classified into two measurement categories: amortised cost and fair value. The determination is made at initial recognition. All equity investments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is measured at fair value through profit or loss. For financial liabilities the standard retains most of the NZ IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The new standard is not expected to have a material impact on the Group or Company’s financial statements. The Group and Company have not yet decided when to adopt NZ IFRS 9.

There are no other IFRSs and IFRIC interpretations that are not yet effective that would be expected to have material impact on the Group.

(c) Basis of consolidation

SubsidiariesSubsidiaries are entities that are controlled, either directly or indirectly, by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

All material transactions between subsidiaries or between the Parent Company and subsidiaries are eliminated on consolidation.

AssociatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The Group’s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements. Investments in associates held by the Parent are accounted for at cost less impairment losses in the separate financial statements of the parent entity.

Under the equity method, investments in the associates are carried in the consolidated statements of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised.

Dividends receivable from associates are recognised in the parent entity’s profit or loss, while in the consolidated financial statements they reduce the carrying amount of the investment.

(d) Foreign currency translation

(i) Functional and presentation currencyBoth the functional and presentation currency of Orion Corporation Limited and its New Zealand subsidiaries are New Zealand dollars ($).

The functional currencies of other subsidiaries are as follows:

Subsidiary Country of Incorporation Functional currency

Orion Health Inc. United States of America United States dollar (USD)

Orion Health Limited Canada Canadian dollar (CAD)

Orion Health Limited United Kingdom Great Britain pound (GBP)

Orion Health Pty Limited Australia Australian dollar (AUD)

Orion Health S.L.U. Spain Euro (EUR)

Orion Health SAS France Euro (EUR)

Orion Health Pte Ltd Singapore Singapore dollar (SGD)

Orion Health K K Japan Japanese yen (JPY)

Orion Health Systems FZ-LLC United Arab Emirates United Arab Emirates dirham (AED)

Orion Health Limited Thailand Thai baht (THB)

(ii) Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date, with any gain or loss being recognised in the profit and loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(iii) Translation of Group Companies functional currency to presentation currencyThe transactions of foreign subsidiaries are translated into New Zealand dollars at the rate prevailing at the end of the month in which the transaction took place. Assets and liabilities are translated at exchange rates prevailing at reporting date. Exchange variations resulting from the translation are recognised in the foreign currency translation reserve (‘FCTR’) in other comprehensive income.

When a foreign operation is disposed of in part or in full, the relevant amount in the FCTR is transferred to the profit or loss as part of the profit or loss on disposal.

(e) Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Operating Decision Maker (CODM), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group senior executive team.

(f) Property, plant and equipmentAll items of property, plant and equipment are stated at cost, including costs directly attributable to bringing the asset to its working condition as intended by management, less accumulated depreciation and accumulated impairment losses.

Any subsequent expenditure that increases the economic benefits derived from an asset is capitalised. Expenditure on repairs and maintenance that does not increase the economic benefits of an asset is expensed in the period it is incurred.

When an item of property, plant and equipment is disposed of the difference between net disposal proceeds and the carrying amount is recognised as a gain, or loss, in the profit or loss.


Depreciation for the current and prior periods is calculated using Diminishing Value (DV), Capital Cost Allowances (CCA) or Straight Line (SL):

Leasehold improvements DV: 9% – 40% CCA: 20% SL: 6 – 13 years

Furniture and fittings DV: 18% - 48% CCA: 20% - 25% SL: 3 – 7 years

Office and café equipment DV: 13% - 67% CCA: 20% SL: 3 – 7 years

Computer equipment DV: 18% - 67% CCA: 45% SL: 3 – 4 years

The assets’ residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

(g) Intangible assets

SoftwareSoftware assets acquired separately are initially measured at cost, software assets acquired in a business combination are initially measured at fair value. Following initial recognition, software is carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of software assets are assessed to be finite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. An assessment of indicators of impairment is carried out at each reporting date. The amortisation period and the amortisation method for a software asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss. Amortisation is calculated on a diminishing value basis at a rate of 45%-60%.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.

Research and development costsResearch costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intentions to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development are all determinable.

Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefit from the related project. The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of impairment arises during the reporting period.

(h) Revenue recognitionRevenue is recognised based on the state of completion to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recorded net of GST and discounts. The following specific recognition criteria must be met before revenue is recognised:

Support and MaintenanceIn general support and maintenance services are billed in advance for a fixed term. Revenue is deferred and recognised on a straight line basis over the term of the contract billing period, as services are provided.

LicencesLicence revenue is recognised if there is a legitimate arrangement in place and in conjunction with the raising of an invoice.

Revenue from ‘off-the-shelf’ software (or non-‘off-the-shelf’ software sold without a professional services implementation contract) is recognised as revenue in the month of billing.

For non-‘off-the-shelf’ software sold with a professional services implementation contract, the revenue is deferred and recognised in proportion to the percentage complete of the associated professional services contract.

Professional servicesTime and materials contracts are generally billed monthly in the month in which the service is provided. Provided a legitimate arrangement is in place, the revenue is recognised in the month of billing, as services are provided.

Fixed price contracts are typically designed on milestone achievement. Normally invoicing is aligned to these milestones. Revenue recognition, however, is aligned to the percentage of work complete.

Where a loss is expected to occur it is recognised immediately and is made for both work in progress completed to date and for future work required on the contract.

Government grantsGovernment grants are recognised at their fair value where there is reasonable assurance that the grants will be received and all attaching conditions will be complied with. When a grant relates to a specified expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the cost that it is intended to compensate. When the grant does not relate to a specified expense item, it is recognised as income in the period it is received or becomes receivable.

Dividend and interest revenueDividend revenue from investments is recognised when the shareholder’s right to receive payment has been established. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(i) Revenue in advanceRevenue invoiced but not able to be recognised under the above policy is recorded in statements of financial position as “Revenue in advance”.

(j) Cash flowsFor the purpose of the statements of cash flows, cash and cash equivalents are defined in 2(o). Principal draw down and repayment of Bank term credit facilities are shown as part of financing activities.

(k) Employee benefitsAccruals are made for benefits accruing to employees in respect of short term employee benefits and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Accruals are made in respect of employee benefits expected to be settled within 12 months and are measured at their nominal values using the remuneration rate expected to apply at the time of settlement, on an undiscounted basis.

Long service leaveThe liability for long service leave is recognised in the statements of financial position and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted to present value.

(l) Income tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on the period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

When the deferred income tax liability arises from an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

When the taxable temporary difference is associated with investments in subsidiaries or associates, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.


Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of goodwill, or an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit or loss; or

When the deductible temporary difference is associated with investments in subsidiaries or associates, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(m) Other taxesRevenues, expenses and assets are recognised net of sales tax (and other similar taxes), except;

When the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

For receivables and payables, which are stated with the amount of sales tax included.

Cash flows are included in the cash flow statements and the sales tax component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows.

Commitments and contingencies are disclosed net of sales tax.

(n) Impairment of non-financial assetsOrion Corporation Limited conducts an annual internal review of asset values, which is used as a source of information to assess for any indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are assessed for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

(o) Financial instrumentsA financial instrument is recognised if the Group or Parent becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s or Parent’s contractual rights to the cash flows from the financial assets expire or if the Group or Parent transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if, and only if, the Group or Parent obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Non-derivative financial instrumentsNon-derivative financial instruments comprise trade receivables, related party receivables, cash and cash equivalents, bank credit facilities, trade, other payables and bank borrowings.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not subsequently measured at fair value through profit and loss, any directly attributable transaction costs.

Subsequent to initial recognition non-derivative financial instruments are measured as described below:

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statements of cash flows.

Trade receivables are subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Trade receivables on terms beyond 12 months accrue interest monthly at applicable market rates.

Impairment of financial assets - Collectability of trade receivables is reviewed on an on-going basis at an operating unit level. Individual debts that are known to be uncollectible are written off when identified. An impairment allowance is recognised in profit or loss when there is objective evidence that the Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate.

Trade and other payables are carried at amortised cost, and those of a short term nature are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 45 days of recognition.

(p) Leased assets

Operating leaseLeases in which a significant portion of risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognised as an expense in the profit or loss on a straight-line basis over the lease term. Any lease incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

Critical accounting estimates and judgementsThe preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management has identified the following critical balances and transactions for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.

(i) Impairment of non-financial assets The Group assesses impairment of all assets at each reporting date by evaluating internal and external indicators specific to the Group and to the particular asset that may lead to impairment. These include product performance, technology, economic and political environments and future product expectations.

Management has determined that there are no significant internal or external indicators present in relation to non-financial assets that would require these items to be tested for impairment as at reporting date.

(ii) Estimation of useful lives of assetsThe estimation of the useful lives, residual values, and method of depreciation is reviewed at each reporting date, against past historical experience and the condition of the asset as at reporting date. Adjustments to useful lives, residual values, and method of depreciation are made when considered necessary. Depreciation charges are included in note 6.


(iii) Percentage completion of services contractsAs part of deriving revenue in advance to be released on projects, the percentage completion of services contracts must be estimated by the persons managing the project. This process uses estimations of time required to complete the project, but is based on detailed information on hours worked to date, prior experience and project scheduling tools. The Group employs experienced project managers who are required to provide regular information to management on the progress of projects. All estimates are reviewed by peers and senior management as part of project review meetings held monthly.

(iv) Taxation and deferred taxThe Group’s accounting policy for taxation requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statements of financial position. Deferred tax assets, including those arising from carried forward tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.

Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statements of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the profit or loss.

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. In the ordinary course of business there are some transactions for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determinations are finalised.

4. SEGMENT INFORMATION

The Group has six reportable segments (2011: five reportable segments), which are the business regions of the Groups business operations in the sale, support and implementation of software in the Healthcare IT market. For each reportable segment the CODM reviews internal management reports on at least a monthly basis.

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 profit before income tax, as included in the internal management reports that are reviewed by the Group’s CODM. Segment 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 reportable segments for the year ended 31 March 2011 have been restated to align with current management reporting.

31 March 2012CORP DEV NA EMEA APAC1 HIS Total

NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Revenue and other income: third party

Licence revenue - - 23,557 5,562 17,083 - 46,202

Professional implementation services - - 12,064 3,642 12,775 150 28,631

Client support services - - 10,909 2,235 3,754 - 16,898

SaaS and managed services - - 3,758 - 257 - 4,015

Other revenue 319 - 38 50 475 - 882

Government grants - 2,944 - - - - 2,944

319 2,944 50,326 11,489 34,344 150 99,572

Revenue and other income: inter-segment

Licence and support contact fee - 25,791 (16,521) 3,270 (12,540) - -

Development service fee - (162) - - 162 - -

Management service fee 13,190 - (6,813) (1,555) (4,671) (151) -

13,190 25,629 (23,334) 1,715 (17,049) (151) -

Total segment revenue 13,509 28,573 26,992 13,204 17,295 (1) 99,572

Earnings before interest and taxation 1,498 5,130 1,497 372 1,768 (2,285) 7,980

Interest income 6 - 265 - 18 - 289

Interest expense (105) - (1) (1) (10) - (117)

Taxation expense (246) (1,417) (658) (75) (551) 509 (2,438)

Total segment profit 1,153 3,713 1,103 296 1,225 (1,776) 5,714

Significant non-cash items recognised in segment profit

Depreciation and amortisation (622) (492) (364) (169) (223) (30) (1,900)

Share of profit from associate 375 - - - - - 375

1 Includes one customer which contributed licence revenue totalling $12,931,000.


31 March 2011CORP DEV NA EMEA APAC HIS Total

NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Revenue and other income: third party

Licence revenue - - 15,667 5,941 8,614 - 30,222

Professional implementation services - - 12,456 7,388 8,977 - 28,821

Client support services - - 10,908 2,629 3,829 - 17,366

SaaS and managed services - - 1,144 - - - 1,144

Other revenue 190 - - - - - 190

Government grants - 3,727 - - - - 3,727

190 3,727 40,175 15,958 21,420 - 81,470

Revenue and other income: inter-segment

Licence and support contact fee - 13,377 (12,781) (127) (469) - -

Development service fee - (41) - - 41 - -

Management service fee 11,102 (1,621) (3,638) (1,480) (4,363) - -

11,102 11,715 (16,419) (1,607) (4,791) - -

Total segment revenue 11,292 15,442 23,756 14,351 16,629 - 81,470

Earnings before interest and taxation 214 46 1,613 497 3,917 - 6,287

Interest income 49 - 106 - - - 155

Interest expense (120) - - - - - (120)

Taxation expense (81) (25) (374) (112) (1,137) - (1,729)

Total segment profit 62 21 1,345 385 2,780 - 4,593

Significant non-cash items recognised in segment profit

Depreciation and amortisation (393) (249) (306) (80) (148) - (1,176)

Forgiveness of debt (3,692) - - 3,692 - - -

Share of (loss) from associate (54) - - - - - (54)

The segments are:

CORP – Corporate Head Office and related entities

DEV – Product development

NA – North America sales region

EMEA – Europe, Middle East and Africa sales region

APAC – Asia Pacific sales region

HIS – newly acquired Hospital Information System business unit

5. REVENUE Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

REVENUE

Revenue from operations

Product sales

Licence revenue 46,202 30,222 - -

Services

Professional implementation services 28,631 28,821 - -

Client support services 16,898 17,366 - -

SaaS and managed services 4,015 1,144 - -

95,746 77,553 - -

Other income

Other revenue 882 190 250 250

Government grants 2,944 3,727 - -

3,826 3,917 250 250

99,572 81,470 250 250

6. OPERATING EXPENSES Group Parent

2012 2011 2012 2011

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

EMPLOYEE BENEFITS

Wages and salaries 57,247 35,513 - -

Other employee costs 10,015 18,111 - -

Contributions to defined contribution funds 1,953 341 - -

69,215 53,965 - -

DEPRECIATION AND AMORTISATION

Depreciation of property, plant and equipment 13 1,577 1,086 - -

Amortisation of intangible assets 14 323 90 - -

1,900 1,176 - -

RESEARCHResearch and product maintenance costs included in profit or loss across all expense categories 24,557 16,019 - -

OTHER

Donations paid 212 132 - -

Directors fees 143 150 143 150

Net foreign exchange losses/(gains) 1,040 (361) 4 (2)

Bad debts written off 471 296 - -

Provision for trade receivable impairment (723) 1,635 - -

Gain on business acquisition 23 (7) - - -

AUDITORS REMUNERATION

Audit fees 199 90 - -

Taxation services 376 195 - -

Other services 59 24 - -

For the period ended 31 March 2011 BDO provided resource to assist in the compilation of the consolidated financial statements.


7. FINANCE COSTS

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Interest received – loans and receivables 265 106 - -

Interest received – cash and cash equivalents 24 49 - -

289 155 - -

Interest paid – cash and cash equivalents (117) (120) - -

Net finance costs 172 35 - -

8. INCOME TAX

(a) Income tax expense

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Current tax 2,205 2,558 12 (17)

Deferred tax 233 (829) - -

2,438 1,729 12 (17)

The tax on the Group’s and Parent’s result before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the results of the consolidated entities as follows:

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Profit before income tax 8,152 6,322 17 11

Tax calculated at the Parent’s income tax rate of 28% (2011: 30%) 2,283 1,897 5 3

Foreign tax rate adjustment 349 (12) - -

Expenses not deductible 179 94 5 -

Non-taxable income (98) (272) - -

Other adjustments (37) - - -

Deferred tax expense/(income) resulting from reduction in tax rate 58 - - -

Prior year adjustment (170) 6 2 (20)

Tax losses for which no deferred income tax asset was recognised (21) - - -

Associate results reported net of tax (105) 16 - -

Income tax expense/(credit) 2,438 1,729 12 (17)

The weighted average applicable tax rate was 30% (2011: 27%), Parent 71%, (2011: 155%).

(b) Recognised deferred tax assets and liabilities

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Deferred tax assets:

Deferred tax assets to be recovered after more than 12 months 99 - - -

Deferred tax assets to be recovered within 12 months 1,845 1,891 - -

Deferred tax liabilities

Deferred tax assets to be recovered after more than 12 months - - - -

Deferred tax assets to be recovered within 12 months - (108) - -

Net deferred tax assets 1,944 1,783 - -

The gross movement on the deferred income tax accounts is as follow:

Opening balance 1,783 989 - -

Charged to income 291 829 - -

Impact of change in tax rate (58) - - -

Foreign exchange differences (72) (35) - -

Closing balance 1,944 1,783 - -

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same jurisdiction, is as follows:

Property, plant & equipment

Doubtful debts

Employee benefits

Other Future income tax benefit

Total

GROUP NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

At 1 April 2010 (75) 74 742 (359) 607 989

(Charged)/credited to income statement (38) 504 11 568 (216) 829

Foreign exchange differences 5 (5) (26) 6 (15) (35)

At 31 March 2011 (108) 573 727 215 376 1,783

(Charged)/credited to income statement 111 (334) 440 258 (184) 291

Impact of change in tax rate - (38) (19) (1) - (58)

Foreign exchange differences 3 - (36) (25) (14) (72)

At 31 March 2012 6 201 1,112 447 178 1,944

There were no deferred tax assets or liabilities held by the Parent as at 31 March 2012 (2011: $nil).


(c) Unrecognised temporary differencesThe Group did not recognise deferred income tax assets of EUR284,000 (2011: EUR294,000) in respect of losses amounting to EUR1,135,000 (2011: EUR1,177,000) that can be carried forward against future taxable income. These losses have no expiry date.

9. CASH AND CASH EQUIVALENTS

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Cash at bank and on hand 7,293 4,329 - -

Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:

Cash at bank and on hand 7,293 4,329 - -

Bank overdraft (1,814) (48) - -


The carrying amounts of the Group’s credit facilities approximate their fair value, all of which are on demand.

10. TRADE AND OTHER RECEIVABLES

Group Parent

2012 2011 2012 2011

Note NZ$’000 NZ$’000 NZ$’000 NZ$’000

TRADE RECEIVABLES

Trade receivables – current 44,674 35,637 - -

Trade receivables – non-current 843 3,140 - -

Less allowance for impairment (716) (2,016) - -

Net trade receivables 44,801 36,761 - -

Sundry receivables 69 1 - -

Prepayments 2,083 2,435 - -

Accrued revenue 2,365 2,490 - -

Government Grants receivable 240 1,045 - -

Loan to key management personnel - 5 - -

Intra-group receivables 24 - - 12,847 11,516

Loans due from related parties 24 124 146 124 146

49,682 42,883 12,971 11,662

Less non-current portion trade receivables (843) (3,140) - -

Current portion 48,839 39,743 12,971 11,662

Trade receivables are non-interest bearing and are generally on 30-60 day terms. Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Group’s policy to transfer (on-sell) receivables.

As of 31 March 2012, trade receivables of the Group: $30,664,000 (2011: $25,499,000) were fully performing. None of the financial assets that are fully performing have been re-negotiated.

As of 31 March 2012, trade receivables of Group: $13,892,000 (2011: $10,182,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

The aging analysis of these trade receivables is as follows:

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

1-60 days 5,579 6,102 - -

61-90 days 2,904 806 - -

91-180 days 4,309 2,296 - -

Over 180 days 1,100 978 - -

13,892 10,182 - -

As of 31 March 2012, trade receivables of the Group: $961,000 (2011: $3,096,000) were impaired and partially provided for. The amount of the provision was Group: $716,000 (2011: $2,016,000). The impaired receivables mainly relate to customers who are in financial difficulty or dispute. It was assessed that a portion of the receivables is expected to be recovered.

The aging of these receivables is as follows: Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

1-60 days - 113 - -

61-90 days 272 1,194 - -

91-180 days 73 416 - -

Over 180 days 616 1,373 - -

961 3,096 - -

Movements on the Group provision for impairment of trade receivables are as follows:

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000


Receivable written off during the year (471) (296) - -

Additional allowance/(release) (723) 1,635 - -

Foreign exchange movement (106) (127) - -

716 2,016 - -

Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 29.


11. INVESTMENT IN SUBSIDIARIES

Parent

2012 2011

NZ$’000 NZ$’000

Investments in subsidiaries – at cost 1 1

Name of entity Principal activities Country of incorporation

Balance date

Interest held by Group (%)

2012 2011

Orion Systems International Limited Management services New Zealand 31 March 100 100

Orchestral Developments Limited Software development New Zealand 31 March 100 100

Orchestral Developments International Limited Holding company New Zealand 31 March 100 100

Orion Health Asia Pacific Limited IP Holding company New Zealand 31 March 100 -

Orion Health Asia Holdings Limited Holding company New Zealand 31 March 100 100

Orion Health Corporate Trustee Limited Trustee company New Zealand 31 March 100 -

Orion Health Hosting Limited Dormant New Zealand 31 March 100 100

Orion Health Online Limited Dormant New Zealand 31 March 100 100

Orion Health Limited Sales and support New Zealand 31 March 100 100

Orion Health Properties Limited Property owner New Zealand 31 March 100 100

Orion Health Pty Limited Sales and support Australia 31 March 100 100

Orion Health Limited Sales and support Canada 31 March 100 100

Orion Health SAS Sales and support France 31 March 100 100

Orion Health K K Sales and support Japan 31 March 100 100

Orion Health Pte Limited Sales and support Singapore 31 March 100 100

Orion Health S.L.U. Sales and support Spain 31 March 100 100

Orion Health Limited Software development Thailand 31 March 100 -

Orion Health Systems FZ-LLC Sales and support United Arab Emirates 31March 100 -

Orion Health Limited Sales and support United Kingdom 31 March 100 100

Orion Health Inc. Sales and support USA 31 March 100 100

During the period new subsidiaries (Orion Health Asia Pacific Limited, Orion Health Corporate Trustees Limited, Orion Health Limited – Thailand, and Orion Health System FZ-LLC) were established and incorporated by the Parent. They were not acquired in relation to business combination transactions.

The Parent has not received dividends from any of its subsidiaries for the year end 31 March 2012 (2011: $nil). The Parent received administration recoveries of $250,000 (2011:$250,000) from the subsidiaries during the year.

12. INVESTMENT IN ASSOCIATE

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Carrying value as at 1 April 755 809 - -

Share of current year profit/(loss) 375 (54) - -

Carrying value as at 31 March 1,130 755 - -

The share of prior year profit has been adjusted from the amount reported below to account for non-material items that relate to prior period adjustments in Healthlink International Ltd, and differences in the finalised amounts subsequently reported in Healthlink International Ltd’s 2010 audited results.

The Parent carrying amount on investment in associate is less than $1,000.

Country of incorporation Assets Liabilities Revenues Profit/(loss) % interest held

NZ$’000 NZ$’000 NZ$’000 NZ$’000

2012

Healthlink International Limited New Zealand 3,957 (1,943) 12,632 715 52.4

2011

Healthlink International Limited New Zealand 2,980 (1,768) 9,849 (11) 52.4

Orion Corporation Limited is the majority shareholder (52.4%) of Healthlink International Limited. However, clause 12.3(b) of the Healthlink Constitution states shareholder resolutions are not binding on the Board of Directors, who hold power to govern the financial and operating policies of the entity. Currently, Orion Corporation Limited holds one of two current Director positions (maximum allowable Director positions under the Healthlink International Limited’s Constitution is four). Therefore “control” does not exist.

Refer to note 25 for details of current litigation with Healthlink International Limited.


13. PROPERTY, PLANT AND EQUIPMENT

GROUP

Leasehold improvements

Furniture & fittings

Office & Café equipment

Computer equipment

Assets under construction

Total

NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

At 1 April 2010

Cost 901 1,340 398 2,017 - 4,656

Accumulated depreciation (503) (690) (184) (1,276) - (2,653)

Net book value 398 650 214 741 - 2,003

Year ended 31 March 2011

Opening net book amount 398 650 214 741 - 2,003

Additions/transfers 269 158 243 1,136 - 1,806

Disposals - - (2) - - (2)

Depreciation charge (125) (163) (126) (672) - (1,086)

Depreciation on disposals - - 1 - - 1

FX movement 36 37 29 150 - 252

Closing net book amount 578 682 359 1,355 - 2,974

At 31 March 2011

Cost 1,189 1,509 658 3,284 - 6,640


Net book amount 578 682 359 1,355 - 2,974


Opening net book amount 578 682 359 1,355 - 2,974

Additions/transfers 210 640 52 1,231 9,442 11,575

Acquisition of business - - - 271 - 271

Disposals - - (1) - - (1)

Depreciation charge (306) (181) (127) (963) - (1,577)

Depreciation on disposals - - - - - -

FX movement (17) (65) (11) (31) - (124)

Closing net book amount 465 1,076 272 1,863 9,442 13,118

At 31 March 2012

Cost 1,366 2,049 686 4,707 9,442 18,250


Net book amount 465 1,076 272 1,863 9,442 13,118

No property, plant and equipment was held by the parent company (2011: $nil).

The assets under construction are for the Grafton Road Building purchased and currently being refurbished; security over this building is detailed in note 18. During the year the Group capitalised borrowing costs amounting to $290,000 (2011: $nil).

14. INTANGIBLE ASSETS

Group

Computer software Total

NZ$’000 NZ$’000

At 1 April 2010

Cost 524 524

Accumulated depreciation (414) (414)

Net book value 110 110


Opening net book amount 110 110

Additions/transfers 212 212

Amortisation charge (90) (90)

FX movement 72 72

Closing net book amount 304 304

At 31 March 2011

Cost 801 801


Net book amount 304 304


Opening net book amount 304 304

Additions/transfers 542 542

Acquisition of business 226 226

Amortisation charge (323) (323)

FX movement (11) (11)

Closing net book amount 738 738

At 31 March 2012

Cost 1,554 1,554


Net book amount 738 738

All intangibles assets are acquired and have finite lives. No intangible assets were held by the Parent (2011: $nil).


15. TRADE AND OTHER PAYABLES

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Trade payables 3,524 3,663 - -

Sundry payables and accruals 3,930 3,609 68 47

Royalties payable - 140 - -

7,454 7,412 68 47

Trade payable balances are unsecured and attract no interest. Balances are usually paid within 45 days of recognition, are of short term nature and are not discounted.

16. EMPLOYEE BENEFITS

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Annual leave 2,669 2,028 - -

Long service leave 496 118 - -

Commissions payable 1,393 1,901 - -

Bonus accrual 1,208 1,749 - -

5,766 5,796 - -

17. REVENUE IN ADVANCE

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Licences 4,631 6,045 - -

Professional implementation services 7,719 3,740 - -

Client support services 11,882 10,480 - -

SaaS and managed services 1,857 2,056 - -

Other 38 - - -

26,127 22,321

18. BANK BORROWINGS

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Term advance 8,500 - - -

8,500 - - -

On 28 July 2011, Orion Health Properties Limited drew down $7,415,000 under the committed revolving cash advance facility; a further $1,085,000 was drawn down on 21 December 2011. The facility expires in July 2014. The average interest rate during the period on this facility was 4.35%.

This facility is secured by a general security deed over all the present and future assets and undertakings of the Orion Health Properties Limited and a first registered mortgage over the property located at 181 Grafton Road, Auckland.

The carrying amounts of the Group’s credit facilities approximate their fair value as interest is charged at market rates.

19. SHARE CAPITAL

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Ordinary shares

Carrying value 12,527 12,517 12,527 12,517

Fully paid ordinary shares carry one vote per share and carry the right to dividends. All shares rank equally with regard to the Parent company’s residual assets.

No. shares NZ$’000

At 31 March 2010 13,111,714 12,517

Share issue - -

At 31 March 2011 13,111,714 12,517

Share issue 69,694 10

At 31 March 2012 13,181,408 12,527

At 31 March 2012 the total authorised number of ordinary shares, including treasury shares is 13,181,408 shares (2011: 13,111,714):

13,111,714 are fully paid shares (2011: 13,111,714)

22,500 partly paid ($0.45) restricted ordinary shares

47,194 partly paid ($0.01) ordinary shares held by Orion Health Corporate Trustee Limited

Orion Health Senior Executive Partly Paid Share SchemeOn 9 February 2012, 22,500 ordinary shares under this Scheme were issued to selected senior executives of the Group at an issue price of $18.00 per share with $0.45 per share being received from participating executives on issuance. At 31 March 2012, $10,000 had been received. Further annual payments of $0.45 per share are required annually for the next three years with the balance of $16.20 per share due four years after the date of issue. Until the shares are fully paid they are not entitled to be sold, charged or transferred. If a participant ceases employment prior to the shares being fully paid the participant can make full payment of the remaining balance or Orion Corporation Limited may sell the shares.


Orion Health Senior Executive Share SchemeOn 9 December 2011, 47,194 partly paid ordinary shares under this Scheme were issued to Orion Health Corporate Trustee Limited. These shares were able to be allocated to selected senior executives of the Group. No allocations were made for year ended the 31 March 2012. The shares remain with Orion Health Corporate Trustee Limited.

20. RETAINED EARNINGS

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Opening balance 5,691 1,098 120 92

Profit for the year 5,714 4,593 5 28

Closing balance 11,405 5,691 125 120

21. RESERVES

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Foreign Currency Translation Reserve

Opening balance 147 588 - -

Movement for the year (761) (441) - -

Closing balance (614) 147 - -

22. IMPUTATION CREDIT ACCOUNT

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000


Taxation paid 1,009 1,522 - -

Research and development taxation credit - 1,108 - -

Refunds received - - - -

Closing balance 3,924 2,915 - -

23. BUSINESS ACQUISITION

On 15 February 2012, the Group acquired selected assets and liabilities of Microsoft Corporation for cash consideration of USD1. The acquisition was undertaken to broaden the Group’s product offering.

A net loss after tax of $2,622,000 has been recognised since acquisition. Disclosure of the revenue and net assets of the business as if the acquisition had been effected on 1 April 2011 has not been provided due to the purchase not including the entire Microsoft business.

The Group’s share of assets and liabilities arising from the acquisition were as follows:

NZ$’000

Purchase consideration -

Acquisition related costs included in the statement of comprehensive income for the period ended 31 March 2012 (672)

Recognised amounts of identifiable assets and liabilities assumes Preliminary fair value

NZ$’000

Prepayments 107

Plant and equipment 271

Intangible assets 226

Employee benefits (490)

Trade payable (107)

Total identifiable net assets 7

Purchase consideration -

Bargain gain on acquisition 7

These values have been determined provisionally based on the current available information. No contingent assets or liabilities have been recognised.

24. RELATED PARTIES

(a) Subsidiaries

All related party transactions were completed at arm’s length at normal trade terms. Balances are on demand and attract no interest. There have been no impairments of related party balances as at period end (2011: $nil). There have been no write-offs of related party balances during the year (2011: $nil). Balances outstanding as at reporting date are shown below.

Parent

2012 2011

NZ$’000 NZ$’000

Orchestral Developments Limited (259) (275)

Orion Systems International Limited 11,728 10,407

Orion Health Limited (NZ) 1,332 1,332

Orion Health Pty Limited 4 4

Orion Health Limited (UK) 5 6

Orion Health S.L.U 2 2

Orion Health Limited (Canada) 14 16

Orion Health Incorporated 26 29

Orion Health Online (5) (5)

12,847 11,516


(b) Key management personnel

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Short-term employee benefits 3,934 3,183 - -

Directors fees 143 150 - -

4,077 3,333 - -

(c) Transactions with related parties

McCrae LimitedThe ultimate holding company is McCrae Limited. There have been no transactions with this company during the year (2011: $nil).

Revera LimitedAndrew Clements, Chairman, is also a Director of Revera Limited which provided hosting services to the Group. These transactions were at arm’s length at normal trade terms.

Healthlink International Limited and Healthlink LimitedHealthlink, an equity accounted associate, provides e-referral services to Group entities as well as purchasing licences from Group entities. These transactions were at arm’s length at normal trade terms.

Zeus Management LimitedDuring the current year, Zeus Management Limited provided consulting services in relation to the employee share schemes.

(d) Loans due from related partiesAn amount of $124,000 (2011: $146,000) is owing to Orion Corporation Limited from Healthlink International Limited, an equity accounted associate of which Orion Corporation Limited holds 52.4%. This loan is on demand and is non-interest bearing. There is no formal loan agreement in place and repayment is to be agreed between the relevant parties.

(e) Trading transactions During the period, Group entities entered into the following transactions with related parties:

Sale of Goods/Services Purchase of Goods/Services

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Healthlink International Limited 60 79 143 71

Revera Limited - - 53 53

Zeus Management Limited - - 5 -

25. CONTINGENT LIABILITIES

(f) Letters of creditThe Group had outstanding letters of credit of $766,000 (2011: $996,000).

The Group has a standby letter of credit in place with ASB Bank Limited for GBP150,000 effective 28 July 2009. This was put in place to cover the issue of Visa corporate credit cards by HSBC Bank Plc. to Orion Health employees based in the United Kingdom used for purposes of normal business and travel expenses.

The Group has lease bonds in favour of:

Kintella Pty Ltd for AUD18,775

Perpetual Trustee Company Ltd for AUD58,400

Concessionaire des Immeubles for EUR32,550

Bumrungrad Hospital Public Company Limited for THB1,737,780

The Group has lease guarantees of $254,000 (2011: $218,000) in favour of Orchard NZ Trustees Limited as trustees for Orchard NZ Eden Property Fund Trust, expiring in March 2014.

(i) Current litigationOn 19 September 2011, Nexus Holdings Limited filed a statement of claim in the High Court seeking to compulsorily acquire Orion Corporation Limited’s shares in Healthlink International Limited under section 174 of the Companies Act 1993. Orion Corporation Limited has been obtaining on-going external legal advice in relation to the matter. On 14 October 2011 Orion Corporation Limited responded, asking that the Court instead amend Healthlink International Limited’s constitution to allow for the appointment of an independent Chairman. A Court date has been set for 26 November 2012. The parties have agreed to enter pre-mediation discussions and mediation in the coming months in an effort to resolve this matter without requiring the intervention of the High Court. The specific nature of those discussions remains commercial in confidence at this point in time, although possible outcomes include (i) amendment of the constitution to allow for the appointment of an independent Chairman, (ii) Orion Corporation Limited selling its shares to Nexus Holdings Limited and (iii) Nexus Holdings Limited selling its shares to Orion Corporation Limited. The Group considers this matter is likely to be resolved within the coming financial year without any material adverse impact to the Group.

On 5 March 2012, Healthlink International Limited filed a statement of claim in the High Court seeking $1,024,329 (plus interest) in mistaken over-payment of royalties to the Group for period 20 June 2001 to 30 June 2007. The Group has been obtaining on-going external legal advice in relation to the matter. The advice received is that no amounts are due by the Group. In particular the Group has been advised that the majority of the claim is statute barred pursuant to the Limitations Act 2010. For the portion of the claim that is not subject to the Limitations Act 2010, the Group’s internal calculations and investigations show no amount to be due to Healthlink. The Group is currently seeking to have the matter heard at arbitration to keep costs down for both parties. The Group considers this matter is likely to be resolved within the coming financial year without any material adverse impact to the Group.

26. EVENTS AFTER BALANCE SHEET DATE

Subsequent to year end, Orion Health Inc. entered into a new lease agreement and provided a standby letter of credit in favour of the landlord with HSBC for USD100,000. Orion Health Pte Ltd entered into a new lease agreement and the Group provided a guarantee in favour of the landlord with ASB for SGD38,000.

27. COMMITMENTS

(g) Leasing commitmentsOperating lease commitments – Group as lessee.

The Group has entered into commercial leases on certain premises and office equipment. These leases have an average life of between three and five years. There are no restrictions of entry placed upon the lessee.

Future minimum rentals payable under non-cancellable operating leases as at 31 March are below.

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

No later than 1 year 2,724 2,197 - -

Later than 1 year and no later than 5 years 2,825 4,572 - -

Later than 5 years 612 115 - -

6,161 6,884 - -

Included within Occupancy costs is $3,204,000 (201: $2,713,000) for operating lease expenses incurred during the year.

(i) Property, plant and equipment commitmentsThe Group had contractual obligations to purchase property, plant and equipment for $2,670,000 (2011: $7,400,000) at reporting date.


28. RECONCILIATION OF NET PROFIT FOR THE YEAR WITH NET CASH FLOWS FROM OPERATING ACTIVITIES

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

NET PROFIT AFTER INCOME TAX 5,714 4,593 5 28

Adjusted for:

Non-cash items

Depreciation and amortisation 1,893 1,176 - -

Impairment allowance – trade receivables (724) 1,782 - -

Deferred tax 107 305 - -

Net (gain)/loss on foreign exchange 1,219 512 4 -

Share of (profit)/loss of equity accounted investment (375) 54 - -

Impact of changes in working capital items

Decrease/(increase) in trade and other receivables (10,356) (18,391) 79 664

(Decrease)/ increase in trade and other payables 370 2,075 20 -

(Decrease)/ increase in employee entitlements 192 2,515 - -

(Decrease)/ increase in income tax 1,563 (2,969) (108) (692)

(Decrease)/ increase in revenue in advance 5,330 10,789 - -

Net cash flow from operating activities 4,933 2,441 - -

29. FINANCIAL RISK MANAGEMENT

Financial risk management objectives and policiesThe principal financial instruments of the Group and Parent comprise receivables, payables, bank loans, overdrafts and cash.

The Group and Parent manages their exposure to key financial risks, including interest rate, currency risk, and credit risk in accordance with the Group’s financial risk management policies. The objective of these policies is to support the delivery of the Group and Parent’s financial targets whilst protecting future financial security.

If deemed necessary by management the Group and Parent may enter into derivative transactions, principally interest rate swaps and forward currency contracts, although no such transactions were entered into in the current year or prior year. The purpose is to manage the interest rate, currency, and credit risks arising from the Group and Parent’s operations and its sources of finance. The main risks arising from the Group and Parents’ financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group and Parent use different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and foreign exchange. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.

The Board reviews and agrees policies for managing each of these risks as summarised below.

Primary responsibility for identification and control of financial risks rests with senior management under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for trading in derivatives, hedging cover of foreign currency and interest rate risk, credit allowances, and future cash flow forecast projections.

(i) Financial instruments by category

Group Parent

Loans and receivables

Total Loans and receivables

Total

31 MARCH 2012 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Financial Assets


Trade receivables 44,801 44,801 - -

Related party receivables 124 124 12,971 12,971

52,218 52,218 12,971 12,971

Amortised Cost Total Amortised

Cost Total

Financial Liabilities NZ$’000 NZ$’000 NZ$’000 NZ$’000

Bank overdraft (1,814) (1,814) - -

Trade and other payables (7,454) (7,454) (68) (68)

Borrowings (8,500) (8,500) - -

(17,768) (17,768) (68) (68)

Loans and receivables

Total Loans and receivables

Total

31 MARCH 2011 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Financial Assets


Trade receivables 36,761 36,761 - -

Related party receivables 146 146 11,662 11,662

41,236 41,236 11,662 11,662

Amortised Cost Total Amortised

Cost Total

Financial Liabilities NZ$’000 NZ$’000 NZ$’000 NZ$’000

Bank overdraft (48) (48) - -

Trade and other payables (7,412) (7,412) (47) (47)

(7,460) (7,460) (47) (47)


(ii) Interest rate riskThe exposure to market interest rates relates primarily to the Group debt obligations. The level of debt is disclosed in notes 9 and 18.

At reporting date, the Group had the following mix of financial assets and liabilities exposed to New Zealand variable interest rate risk that are not designated in cash flow hedges:

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

Financial Assets


7,293 4,329 - -

Financial Liabilities

Bank overdrafts (1,814) (48) - -

Borrowings (8,500) - - -

(10,314) (48) - -

Net exposure (3,021) 4,281 - -

At 31 March 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Post tax profit higher/(lower) Equity

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

GROUP

+1% (100 basis points) (22) 30 (22) 30

-0.5% (50 basis points) 11 (15) 11 (15)

(iii) Foreign currency riskOrion Group has exposure to foreign exchange risk as a result of transactions denominated in foreign currencies arising from normal trading activities. The foreign currencies in which the Group primarily transacts are Australian Dollars, Arab Emirate Dirhams, Canadian Dollars, Euros, Great British Pounds, Japanese Yen, Singapore Dollars, Thai Baht and United States Dollars. Where exposures are certain, it is the Orion Group’s policy to evaluate the risk and hedge these risks if necessary as they arise.

The following significant exchange rates applied during the year:

Average rate Reporting date mid-spot rate

NZD 2012 2011 2012 2011

AED 2.9906 3.0086

AUD 0.7749 0.7766 0.7914 0.7368

CAD 0.8084 0.7484 0.8182 0.7398

EUR 0.5906 0.5541 0.6140 0.5376

GBP 0.5095 0.4711 0.5115 0.4752

JPY 64.4739 62.5067 67.8974 63.4200

SGD 1.0199 0.9779 1.0303 0.9623

THB 24.8544 25.6269

USD 0.8165 0.7345 0.8189 0.7635

The table below summarises the material foreign exchange exposure on the net monetary assets of each Group entity against its respective functional currency, expressed in NZD:

Group Parent

2012 2011 2012 2011

NZ$’000 NZ$’000 NZ$’000 NZ$’000

AUD 17 195 - -

EUR 1,298 3,571 - -

USD 5,331 1,646 - -

Sensitivity analysisBased on the net exposure above, the table below outlines the sensitivity of profit and equity to movements of that currency to the NZD.

Post tax profithigher/(lower)

Other comprehensive incomehigher/(lower)

2012 2011 2012 2011

GROUP NZ$’000 NZ$’000 NZ$’000 NZ$’000

10% weakening in NZD

AUD 1 15 1 15

EUR 104 278 104 278

USD 426 128 426 128

5% strengthening in NZD

AUD (1) (7) (1) (7)

EUR (44) (119) (44) (119)

USD (183) (55) (183) (55)

The 2011 figures have been restated to adjust for the impact of eliminating subsidiaries functional currency exposures.


(iv) Credit riskCredit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade receivables, and related party receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at reporting date is addressed in each applicable note.

The credit risk on cash and cash equivalents is limited because counterparties are banks with high credit ratings assigned by international credit-rating agencies.

The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, credit-worthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less influence on credit risk.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the Board. These risk limits are regularly monitored.

In addition, receivable balances are monitored on an on-going basis with the result that the Group’s experience of bad debts had not been significant.

Credit quality of financial assets:

S&P rating Internal rating Total

A+ and above

Closely monitored customers

Other customers

GROUP NZ$’000 NZ$’000 NZ$’000 NZ$’000

At 31 March 2012

Cash and cash equivalents 7,293 - - 7,293

Trade receivables - 9,832 35,685 45,517

7,293 9,832 35,685 52,810

At 31 March 2011

Cash and cash equivalents 4,329 - - 4,329

Trade receivables - 3,096 35,681 38,777

4,329 3,096 35,681 43,106

The S&P rating represents the rating of the counterparty with whom the financial asset is held rather than the rating of the financial asset itself.

Closely monitored customers are those customers with whom the Group are currently experiencing collection delays.

(v) Fair value

The methods for estimating fair value of the applicable financial instruments of the Group and Parent are outlined in the relevant notes to the financial statements.

(vi) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of available credit lines.

The Group manages its liquidity risk by monitoring the total cash inflows and outflows expected on a monthly basis.

The Group maintains the following lines of credit:

Current year$9.0 million committed revolving cash advances facility. The interest rate is reset every 30-90 days and interest is payable based on the ASB’s bank bill bid rate for that interest period, the term funding premium and the applicable margin. The facility expiry date is July 2014. This facility is secured by a general security deed over all the present and future assets and undertakings of the Orion Health Properties Limited and a first registered mortgage over the property located at 181 Grafton Road, Auckland.

$10.0 million interchangeable facilities overdraft and/or combined trade facility. Overdraft interest is payable at the ASB Corporate Indicator Rate plus applicable margin. Foreign currency overdraft interest in payable at the ASB Bank’s offer rate for the relevant currency plus applicable margin. This facility is secured by a general security deed over all the present and future assets and undertakings of the Group.

Prior year$5.0 million interchangeable facilities overdraft and/or combined trade facility. Overdraft interest is payable at the ASB Corporate Indicator Rate plus applicable margin. Foreign currency overdraft interest is payable at the ASB Bank’s offer rate for the relevant currency plus applicable margin. This facility is secured by a general security deed over all the present and future assets and undertakings of the Group.

The facility is sufficiently flexible that amounts can be drawn down and repaid within overall limits without need for prior approval from the bank.

The following are the contractual undiscounted cash flow maturities of net monetary assets, including interest payments and excluding the impact of netting agreements:

GROUP

Carrying amount

Total cash flow

6 months or less

6-12 months

1-2 years

2-5 years

NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

At 31 March 2012

Cash and cash equivalents 7,293 7,293 7,293 - - -

Trade receivables 45,517 45,773 42,165 2,509 1,099 -

Bank overdraft (1,814) (1,814) (1,814) - - -

Trade and other payables (7,454) (7,454) (7,454) - - -

Bank borrowings (8,500) (9,341) (187) (187) (374) (8,593)

35,042 34,457 40,003 2,322 725 (8,593)

At 31 March 2011

Cash and cash equivalents 4,329 4,329 4,329 - - -

Trade receivables 38,777 39,617 31,415 3,076 3,947 1,179

Bank overdraft (48) (48) (48) - - -

Trade and other payables (7,412) (7,412) (7,412) - - -

35,646 36,486 28,284 3,076 3,947 1,179

(vii) Capital risk managementThe main objective of capital risk management is to ensure the Group operates as a going concern, meets debts as they fall due, maintains the best possible capital structure and reduces the cost of capital. Group capital consists of share capital, other reserves and retained earnings. To maintain or alter the capital structure, the Group has the ability to review if dividends are paid to shareholders, return capital or issue new shares, reduce or increase debt or sell assets. There has been no change in Group policies or objectives in relation to capital risk management since the prior year.


THE ROLE OF THE BOARDThe Board has ultimate responsibility for the strategic direction of Orion Corporation Limited and oversight of the management of Orion Corporation Limited for the benefit of Shareholders. Specifically, the responsibilities of the Board include:

working with management to establish the strategic direction of the Orion Health Group;

monitoring management and financial performance;

monitoring compliance and risk management;

establishing and monitoring the health and safety policies of the Orion Health Group;

establishing and ensuring implementation of succession plans for senior management; and ensuring effective disclosure policies and procedures.

In discharging their duties, Directors have direct access to and may rely upon Orion Health’s senior management and external advisers. Directors have the right, with the approval of the Chairman or by resolution of the Board, to seek independent legal or financial advice at the expense of Orion Health for the proper performance of their duties.

The Board currently comprises four Directors: a non-executive Chairman, one executive Director and two non-executive Directors.

Board members have an appropriate range of proficiencies, experience and skills to ensure that all governance responsibilities are fulfilled and to achieve the best possible management of resources.

Corporate Governance

DIRECTORS’ MEETINGSThe Board plan to meet not less than four times during any financial year including sessions to consider the strategic direction of Orion Health and Orion Health’s forward-looking business plans. Video and/or phone conferences are also used as required. For the year ended 31 March 2012 four Board Meetings were held.

BOARD COMMITTEESCommittees have been established by the Board to review and analyse policies and strategies, usually developed by management, which are within their terms of reference. They examine proposals and, where appropriate, make recommendations to the full Board. Committees do not take action or make decisions on behalf of the Board unless specifically mandated by prior Board authority to do so. The Committees are as follows:

Audit and Risk Management Committee The Audit and Risk Management Committee is responsible for overseeing the risk, insurance, accounting and audit activities of Orion Health, and reviewing the adequacy and effectiveness of internal controls, meeting with and review-ing the performance of external auditors, reviewing the consolidated financial statements, and making recommen-dations on financial and accounting policies.

Remuneration Committee The Remuneration Committee is responsible for over-seeing management succession planning, establishing employee incentive schemes, reviewing and approving the compensation arrangements for the executive Directors and senior management, and recommending to the full Board the compensation of Directors.


DIRECTORSNon-executive Directors receive fees determined by the Board on the recommendation of the Remuneration Committee plus reasonable travelling, accommodation and other expenses incurred in the course of performing duties or exercising powers as Directors.

Ian McCrae is employed as CEO and receives salary and other remuneration and benefits in respect of his employment.

The following people held office as a Director during the year and received the following remuneration including benefits during the year. The Executive Director’s remunerations includes any incentive payments pertaining to the 2012 financial year.

NAME CATEGORY 2012 2011

Andrew Clements Independent Chairman

$60,000 $60,000

Matthew Crockett Non-executive Director (ceased 9 December 2011)

$23,077 $30,000

Neil Cullimore Non-executive Director

$30,000 $30,000

Andrew Ferrier Non-executive Director (appointed 9 December 2011)

$9,250 -

Peter Maire Non-executive Director (ceased 9 December 2011)

$20,750 $30,000

Ian McCrae Executive Director – CEO

$640,497 $656,836

DIRECTORS’ INTERESTSAs permitted by the Companies Act 1993, the Company has granted certain indemnities to the Directors and specified employees of the Company or any related company in respect of liability and legal costs incurred by those Directors and specified employees in their capacity as Directors and/or employees of the Company or any related company. As permitted by the Companies Act 1993, the Company has arranged a policy of Directors’ and Officers’ Liability Insurance which insures those persons indemnified for certain liabilities and costs.

In accordance with Section 140(2) of the Companies Act 1993, the Directors named below have made a general disclosure of interest during the period 1 April 2011 to 31 March 2012 by a general notice disclosed to the Board and entered in the Company’s interests register:

Andrew ClementsTrustee of: Resigned as Trustee of Graeme Dingle Foundation (Foundation for Youth Development) on 1 April 2011

Chairman of: New Zealand Football Foundation on 1 April 2011

Andrew FerrierShare purchase: Beneficial interest in 135,000 ordinary shares in Orion Corporation Limited on 12 December 2011

Trustee of: Play it Strange Foundation

Member of: President’s Council of New Zealand Olympic Committee

Ian McCraeShare sale: Beneficial interest in 138,875 ordinary shares in Orion Corporation Limited on 12 December 2011

Direct interest in 11,125 ordinary shares in Orion Corporation Limited on 12 December 2011

DIRECTORS’ SHAREHOLDINGSDirectors’ shareholdings are shown as at balance date.

31 March 2012

Andrew ClementsShares held with beneficial interest

285,000

Ian McCraeShares held with beneficial interest

8,186,225

Neil CullimoreShares held with beneficial interest

10,000

Andrew FerrierShares held with beneficial interest

135,000

EMPLOYEES’ REMUNERATION

During the year the number of employees or former employees not being Directors of Orion Corporation Limited received remuneration including the value of other benefits in excess of $100,000 in the following bands:

Remuneration (NZD)

Number of employees

Remuneration (NZD)

Number of employees

$100,000 - $110,000 28 $260,001 - $270,000 3

$110,001 - $120,000 36 $270,001 - $280,000 2

$120,001 - $130,000 21 $280,001 - $290,000 3

$130,001 - $140,000 21 $290,001 - $300,000 1

$140,001 - $150,000 15 $330,001 - $340,000 1

$150,001 - $160,000 12 $340,001 - $350,000 1

$160,001 - $170,000 10 $350,001 - $360,000 2

$170,001 - $180,000 4 $410,001 - $420,000 1

$180,001 - $190,000 5 $440,001 - $450,000 1

$190,001 - $200,000 7 $470,001 - $480,000 1

$200,001 - $210,000 2 $490,001 - $500,000 1

$210,001 - $220,000 1 $510,001 - $520,000 1

$220,001 - $230,000 2 $530,001 - $540,000 1

$230,001 - $240,000 3 $620,001 - $630,000 1

$240,001 - $250,000 3 $700,001 - $710,000 1

$250,001 - $260,000 3 $760,001 - $770,000 1

The numbers above include 72 current New Zealand-based employees, two former New Zealand-based employees, 108 overseas-based employees and 13 former overseas-based employees.

PRINCIPAL SHAREHOLDERS AT 12 JUNE 2012

Name Shareholding %

McCrae Limited 8,186,225 62.2

Geoffrey A Cumming 1,280,000 9.7

TEA Custodians (Pioneer Capital) Limited

1,038,842 7.9

John Harold Dunn 261,625 2.0

Jacon Investments Limited 255,000 1.9

Paul Augustin Viskovich & Patrick Kennelly

179,867 1.4

Mark James Thomson & Deborah Mary Thomson & Stuart Alexander McCrae Perry

171,500 1.3

David John Clarke & Belinda Maria Clarke & Kevin Jaffe

151,464 1.2

Mark Stewart Capill 150,250 1.1

Edwin Weng Kit Ng 137,000 1.0

CANZ Capital Limited 135,000 1.0

K One W One (No 2) Limited 100,000 0.8

Paul Nigel Shearer & Sonya Maree Shearer & Mark Edgar Wilson

100,000 0.8

TEA Custodians Limited 80,000 0.6

Paul Alexander Kendall 78,125 0.6

Gordon Stanley McCrae 60,400 0.5

William Edward Paul Davidson & Jones Law Trustee Services Limited

55,000 0.4

Wayne Alan Oxenham & Lynne Oxenham & Oxenham Trusts Limited

50,000 0.4

Gordon Stanley McCrae & Malcolm Stuart Boyd

48,153 0.4

Orion Health Corporate Trustee Limited

47,194 0.4

Shareholder Information


REGISTERED OFFICEOrion House181 Grafton Road, GraftonAuckland 1010, New Zealand

PO Box 8273, Symonds StreetAuckland 1150, New Zealand

Phone: +64 9 638 0600 Fax: +64 9 638 0699

Incorporated in New Zealand

WEBSITEwww.orionhealth.com

SHARE REGISTRARComputershare Investor Services LimitedPrivate Bag 92119, Auckland 1142

Phone + 64 9 488 8777 Fax +64 9 488 8787E-mail [email protected]

BANKERSASB Bank LimitedHSBC Bank

AUDITORBDO Auckland

Company Directory

80 Orion Health Annual Report 2012

BACK COVER

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Orion Health Annual Report 2012 81 Orion Health Annual Report 2012 82

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Directors' Statement - Orion Health

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