AIM-listed mental health firm Kooth has recently secured a significant boost with a groundbreaking deal in California. The company, which offers free online support for those in need, has signed a £150 million contract to provide digital mental healthcare to six million young people across the state over the next four years. This deal not only transforms Kooth’s fortunes but also positions the company for further growth throughout the US.
The prevalence of mental health problems has been steadily increasing, with independent research indicating that 20% of UK and US citizens are diagnosed with some form of mental illness each year. The costs associated with addressing these issues already exceed £350 billion and are projected to worsen in the coming years.
In the US, the situation is even more alarming, with over 20% of students between the ages of 14 and 18 admitting to having seriously contemplated suicide within the past year. Faced with this escalating crisis, health services on both sides of the Atlantic are desperately searching for viable solutions that won’t break the bank.
Kooth, an AIM company founded in 2001, has emerged as a potential answer to these pressing challenges. The company has spent over 20 years refining its services, ranging from general advice to one-on-one sessions with experienced counsellors. Led by CEO Tim Barker, Kooth successfully floated the business in 2020 with the goal of expanding both in the UK and the US.
Last year, when Midas recommended Kooth shares at £3.19, the company had already established contracts with nearly every NHS Trust in the country, enabling young people to access free advice. In October, Barker signed the company’s first US contract, offering support to 150,000 schoolchildren in Pennsylvania. However, last week’s £150 million deal in California is on a whole new scale, allowing Kooth to provide digital mental health care to millions of young people across the state.
Analysts have wasted no time in upgrading their forecasts for the company, anticipating a 73% increase in sales this year to reach £34.8 million. These figures are projected to rise to at least £65 million by 2024. While Kooth will need to invest upfront in staff and technology, a small loss is expected in 2023. However, profits of £3.6 million or more are forecasted for the following year, with further increases expected thereafter.
In the past, individuals struggling with mental health issues would typically be directed to GPs, counsellors, or therapists for treatment. However, the demand for these services vastly outstrips the available supply while also being costly. Furthermore, many young people, already spending hours glued to their phones, prefer to seek digital solutions.
Research has shown that Kooth’s online services are effective, with over 70% of users reporting feeling better after utilizing them. The company also offers considerable cost savings. Economists estimate that every pound spent with Kooth saves the NHS around £3, and the benefits are even greater in the US, with each dollar spent saving local health services approximately $12.
The impact of mental illness can be far-reaching, affecting individuals, families, and even financial stability due to the significant costs associated with treatment. Kooth is actively making a meaningful difference, particularly for young people. Since Midas recommended the shares, they have increased by 5% to £3.34. However, there is still plenty of room for growth. Like Solid State, another UK business excelling both domestically and in the US, Kooth presents an attractive investment opportunity for existing shareholders and new investors alike.
