Home care earnings unsustainable: StewartBrown
StewartBrown flags Support at Home profitability squeeze
- Margins collapse: Home care operating margins plunged under Support at Home
- Unsustainable returns: Providers averaging just $632 EBITDA per client annually
- Pricing pressure: 35–40% service price rises needed to recover margins
- Scale challenge: Meaningful efficiencies now only emerging above 1,000 packages
The renowned aged care accountants released its 1H FY26 home care results, including the first two months of trading under Support at Home.
StewartBrown's report notes it would be "premature" to make conclusions about trends at this early stage, but says "there are signs" Support at Home is "less profitable" for providers. StewartBrown says it will continue to monitor the situation closely.
Over the six months to 31 December 2025, home care operators recorded a "significant" decline in operating margin from $3.77 per client day (pcd) for FY25 to $1.44 pcd.
Rising margins for care were not enough to offset declining margins for administration and package management, particularly in the second quarter.
For the December quarter, which included two months of Support at Home, the operating margin was even lower an average of $1.03 pcd, equating to an operating EBITDA of $632 per client per annum (pcpa).
"These results are not sustainable," StewartBrown writes, noting the poor results despite operators still being able to set their own prices to compensate for "lost revenue streams", including package management, travel and care management fees.
The report also notes that declining costs in the December quarter could indicate declining service volumes under Support at Home.
In 1H FY25 80% of revenue came from direct services, compared with less than 70% in previous years, showing providers must recover the majority of their costs through services prices. StewartBrown expects the service revenue to increase to 90% of revenue in the March quarter, because it will include a full three months under Support at Home.
The changes in the revenue source is a "significant change to business models", StewartBrown notes.
"It has been a difficult period for providers" to ensure service prices are sufficient, they said.
In the context of comments this week that operators are "price gouging", the report reiterates StewartBrown's long-held view that to maintain margins operators will have to increase service prices by an average of 35% and 40%.
Package utilisation fell from 90% to 85%. It had been hoped that package utilisation will increase under Support at Home as only limited unspent funds can be carried over.
"Other factors currently seem to be at play," StewartBrown says.
The latest survey suggests scale benefits only kick in at 1,000 packages, whereas previously operators have benefitted from 500 packages.
The survey sample was 86,324 home care packages, representing 29% of the sector.
StewartBrown published their 1H FY26 results for residential aged care in April.
