MedPal AI (LSE:MPAL) is demonstrating a significant shift in the quality of its growth, with rising repeat orders, increasing recurring revenue and AI-powered automation strengthening the economics of its rapidly expanding digital healthcare platform.
The company has moved quickly from establishing demand for its New Health online pharmacy business to building the operational infrastructure needed to support its next stage of expansion. Now, the latest trading update highlights growing customer retention and the increasing contribution of repeat business, alongside significant improvements in automation and fulfilment capacity.
In a further interview with The Watch List, CEO Jason Drummond explained how the business is developing beyond customer acquisition, with repeat orders, seven-day service and artificial intelligence helping to create a more scalable operating model.
Repeat orders transform the revenue mix
One of the most encouraging developments is the acceleration in repeat customer activity at New Health.
Repeat orders accounted for 23% of New Health revenue in September, rising to more than 37% in October. Furthermore, over 46% of customers who were due to reorder during October placed another order, demonstrating encouraging early retention.
Drummond attributed this performance to the company’s focus on competitive, transparent pricing and customer service, rather than relying on heavily discounted introductory offers followed by higher prices.
New Health has built its proposition around maintaining fair prices, fast delivery and accessible customer support. Customers can also access prescribing services and assistance seven days a week, while the introduction of Saturday dispensing now allows Sunday deliveries.
The financial implications of this growing repeat business are particularly important.
According to Drummond, the average repeat order is approximately 23% larger than the initial purchase. Crucially, repeat orders do not carry the same customer acquisition costs as first-time purchases and are placed at a higher price.
He confirmed that every repeat order has generated a positive margin after medication costs since the business launched.
As the proportion of repeat customers increases, the revenue mix improves, providing an opportunity for stronger underlying margins as the business scales.
Across the wider group, recurring and repeat revenue already represents approximately 45% of monthly revenue, including repeat New Health orders, NHS prescriptions and software revenues.
Drummond expects this contribution to continue increasing as the customer base matures.
Juno AI delivers significant operational efficiencies
Alongside customer retention, MedPal is increasingly using artificial intelligence to support its growing operations.
A central part of this strategy is Juno, the company’s AI customer service agent, which is already handling the majority of customer interactions through WhatsApp.
In October, Juno answered 91% of WhatsApp replies and managed more than 85% of conversations without human intervention.
This is an important development for a business targeting substantial growth in prescription volumes, as it allows customer support to operate seven days a week without requiring staffing costs to increase at the same rate as order volumes.
The technology sits within a wider integrated operating platform connecting prescribing, dispensing, delivery and patient support.
By automating an increasing proportion of customer interactions, MedPal is building a model where additional customers and services can be accommodated with relatively limited increases in headcount.
This is particularly relevant as the group expands its healthcare offering and develops additional products and services, including NHS hubs.
Fulfilment capacity built for substantial growth
The other major element of MedPal’s expansion is its investment in fulfilment infrastructure.
The company is currently expanding its dispensing operation at Sarus Court, taking its potential capacity to up to 14,000 orders per day.
During October, the operation was handling approximately 2,500 orders daily, leaving considerable headroom within the expanded facility to accommodate future growth.
The highly automated process runs from prescription through to dispensing and parcel fulfilment, with accuracy and reliability remaining central to the operation.
MedPal has also strengthened its delivery proposition by introducing multiple courier options, including DPD, with fully tracked parcels and customer-selected delivery dates.
Customers can choose the earliest available delivery or select a particular day that suits them. The introduction of Saturday dispensing and Sunday delivery further extends the service.
The strategy is to invest in operational capacity ahead of demand, ensuring that the business can accommodate increasing order volumes without creating unnecessary bottlenecks.
Building a platform for the next stage
The combination of growing repeat revenue, AI automation and expanded fulfilment capacity is beginning to shape a different growth proposition for MedPal.
Rather than simply acquiring more customers, the company is increasingly focused on retaining them, generating more revenue from each customer and delivering its services more efficiently.
Drummond highlighted the speed of the transformation, explaining that the group has progressed from a standing start approximately a year ago to approaching an annualised revenue run rate of more than £50 million in less than 12 months.
Importantly, he believes the operating model is now capable of supporting significantly more activity than its current volumes.
The integrated platform means that adding new customers, products or healthcare services increasingly becomes a question of software and available capacity, rather than requiring a proportional increase in employees.
For investors, the latest developments provide an additional dimension to MedPal’s growth story.
The rapid expansion of New Health established the demand for its offering. The acceleration in repeat orders is now demonstrating the potential for customer retention and recurring revenue, while Juno and the expanded dispensing infrastructure provide the foundations for operating leverage.
With recurring revenue already accounting for 45% of group revenue and significant fulfilment capacity available to support further expansion, MedPal is increasingly focused on converting its rapid growth into a more scalable and efficient business.
As Drummond made clear, the operating model is now built for considerably more than its current level of activity, with the company believing it is still at the beginning of its opportunity.
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