Digital mental health services provider Kooth (LON: KOO) says the State of Pennsylvania has terminated its contract with the AIM company. The share price of the winner of the Diversity Champion award at the 2024 AIM awards slumped 15.5% to 240p.
The contract started on 11 October 2022 and the end date was extended from June 2024 to June 2025. However, there is a right to terminate with a 30-day notice period. Kooth says that it was negotiating a new contract, and it is unsure what the status of ongoing work will be.
When it was announced, the contract was said to be worth $3m in its pilot year. The services were provided to 30 school districts in Pennsylvania that have 150,000 students. In the interims, it was stated that 88% of students received the support they needed and that an initial tranche of new funding had been rewarded. Management did say that “complexities of negotiating bipartisan agreements in the state have been a key learning”.
Following the launch of a significant contract in California, the US accounted for 70% of revenues in the first half of 2024. Management said at the time of the trading statement that there was a pipeline of new business in the US.
Kooth says expectations for 2024 and 2025 are unchanged. Consensus 2024 pre-tax profit is £5.85m, with £5.8m in 2025.
Earlier this month, Root Capital Fund II sold just over 3.75 million shares in Kooth at 280p each. That is 10.3% of the company and it retains a 25.3% shareholding. Kooth joined AIM in 2020 at 200p/share and Root Capital Fund II sold five million shares at that time.