Orion Health shareholders should take advantage of the company's buyback offer and get out with whatever money they can, according to an analyst who covers the stock.

Stephen Ridgewell, deputy head of institutional research at Craigs Investment Partners, told BusinessDesk the first half 2019 results announced this morning were "somewhat meaningless" given the company has sold 75 per cent of the only profitable part of the company, its Rhapsody health data integration product.

On October 31, the company announced Rhapsody was being sold to UK private equity company Hg (formerly Mercury) for $205 million. Hg was also taking a stake in the population health management unit, leaving Orion owning only its hospitals division outright.

Read more: Orion Health's fading star


The problem is that the remaining two parts of Orion's business, hospitals and population health management, are struggling, Ridgewell said.

Population health revenue declined 8 per cent to $49.2m in the six months ended September 30, but contributed a smaller loss of $17.8m to the group than a year earlier. Revenue at the hospitals unit increased 8 per cent to $5.1m, but the loss of $3.3m, widened from $830,000 a year earlier.

"There would have to be a very substantial improvement in operating performance for those businesses to be sustainable," Ridgewell said.

Orion chair Andrew Ferrier, a former CEO of Fonterra, said the company was focusing on getting the two remaining businesses to be "operating cashflow neutral as soon as we possibly can". But pushed on specifics, he wasn't clear on a timeframe.

"We are hoping to be as close to cashflow breakeven in the second half as we can," he said, adding the company was still working through the 2020 cashflow numbers.

Ferrier said he believed there was enough cash to fund the two units through to profitability. However, Ridgewell strongly urged shareholders to take the buyback option.

He said the health data integration company had "presented Orion's first-half position in the best possible light" at today's presentation.

"But the reality is [founder and CEO] Ian McCrae and the board have overseen a substantial reduction in shareholder value since the IPO in 2014".

"With the company failing to spell out how it intends to fund the ongoing operating losses if these segments continue to perform below management expectations, or a clear growth pathway, we see little value in Orion's remaining businesses aside from its residual 25 per cent shareholding in Rhapsody.

However, even this may need to be sold within the next 12-18 months to fund ongoing losses from the remaining segments, unless performance substantially improves."

The Orion Health board has a history since listing in 2014 of failing to meet its financial projections.

Ferrier gave more details about the buyback, narrowing the estimated range to $1.20-$1.25 a share, and saying the exact buyback price should be set within the next week. Payments will start in December.

The outlook wasn't always so grim for Orion Health, which began life as a startup making IT products used by health providers to get systems talking to each other - whether it be patient records, hospital data or drug information. International sales were strong - it still sells 90 per cent of its products overseas.

But since its IPO, financial performance has been woeful. The share price tanked from a peak of more than $6 in 2014, to 67 cents earlier this year, before sneaking back above $1 in July.

The buyback price is only a small improvement on the $1.17 the shares are trading at today.

This time last year, in the notes to the accounts for the six months ended September 30, 2017, Orion's auditors PwC talked about "a material uncertainty that may cast significant doubt about the group's ability to continue as a going concern".

Today, the results talked about the company as a "going concern'. But the directors acknowledged "the uncertainty and risks" associated with ongoing performance at the population health and hospitals units.