Third Age Health Services Limited Analysis

Overview

Third Age Health is a provider of primary care services to the aged residential care ("ARC") sector and, through Hawkes Bay Wellness Centre, the general population. Third Age Health provides these services by way of both physical attendances and offsite service provision.

Third Age Health primarily generates revenue through its services under contracts for service with ARC providers, who pay fees to Third Age Health according to those contracts. Third Age Health also generates revenue when we enrol a patient into our practice, or when we provide services through our primary care medical centre. In order to generate revenue, Third Age Health must have two things: patients who want us to provide them services, and suitably qualified healthcare personnel willing to provide services to these patients.

Performance

The following information was extracted from Third Age Health Services Limited's preliminary half year results, released 25 October 2024:

At the outset of this year, we set out with ambitious plans, focusing on delighting customers, expanding our care services and scaling operations. We’re pleased to report that our efforts have translated into significant growth across key areas of our business in the first half of FY25.

Net Profit After Tax (NPAT) has increased by 115% to $1,154k, up from $537k in the same period last year, and Underlying NPATA* grew by 96% year on year, reaching $1,361k. Overall gross profit margin improved to 51.6% from 47.6% in the same period last year.

Our Hub Aged Care acquisition in April has already contributed to expanding our elder care services in the Lower North Island. We now service 13 aged residential care facilities providing care to 733 residents (patients) in this region.

Our relationship with current and potential aged residential care customers has been integral to supporting the growth of our care facilities and enrolled patients. The total number of aged residential care facilities we now service is 87 providing care to 5,278 residents up from 67 facilities providing care to 4,360 residents as of 31 March 2024.

The total number of patients we provide care to across aged residential care and our community general practices has grown to 25,810 up from 24,969 as of 31 March 2024.

While our core elder care services business is performing well, we continue to make investments in improving the quality and reach of services we provide. This includes investments in digitisation, process improvements and additional resource.

A good example of an investment we’ve made in partnership with CHT is the Navigating Wellness guidebook that we produced. Published in June 2024 it has been well received by practitioners, patients and stakeholders across the wider healthcare community. 5,000 physical copies have been shared across the country and it is now becoming a widely used resource.

The performance of our six community general practices has also significantly improved. Refinements to the operating model have seen the implementation of team-based care, along with several other productivity and service level improvements. Trials of AI tools to assist with transcribing patient notes are also underway. Nevertheless, several of these practices are still underperforming their potential and work to remediate this remains ongoing.

Challenging Environment

The current landscape is as challenging as ever. While demand for our services continues to grow, so does competition. We also face workforce shortages and ongoing funding limitations, driven by tightening health budgets. While we believe the strategies we have implemented to address these risks are promising, we continue to assess and refine them as part of our ongoing risk management efforts to ensure we remain the provider of choice.

Capital Allocation

During the period we took on debt of $598k to fund the acquisition of Hub Aged Care, while accelerating debt repayment of $729k resulting in net debt repayment of $131k. We also initiated an on-market share buyback acquiring 1,050 shares at an average price of $2.02 per share.

Going forward our capital allocation priorities remain unchanged – we will continue to prioritise investments that better enable us to serve our customers. While returning capital to shareholders through quarterly dividends in line with our dividend policy, we will opportunistically repay debt or buy back shares based on market conditions. We continue to actively seek out opportunities to make acquisitions of businesses that have similar commercial characteristics to our core business and are casting the net wider than we previously have