Radius Health lifts dividend as profit growth funds its next expansion phase

Profit growth supports higher dividend

Radius Residential Care Limited (NZX:RAD), trading as Radius Health, has raised its interim dividend after delivering a 27% increase in first-half net profit attributable to shareholders. Profit reached NZ$8.0 million for the six months ended 30 September 2026, while earnings per share rose to 2.8 cents from 2.2 cents.

“Renders of Sprott House and Villas refurbishment, now underway.”

Revenue increased 8.4% to NZ$108.6 million, helped by occupancy, a richer mix of hospital and specialist-care residents, higher accommodation supplements and the contribution from Sprott House in Karori. Profit before tax rose 17% to NZ$10.0 million, although that figure included a NZ$3.5 million gain on the acquisition. The statutory total profit was NZ$8.283 million, including NZ$260,000 attributable to non-controlling interests.

The board declared a fully imputed interim dividend of 1.1 cents per share, up from 1.0 cent a year earlier. The payment represents 44% of Available Funds From Operations, which edged down to NZ$7.1 million from NZ$7.2 million despite the stronger reported profit.

Occupancy and care mix keep operations firm

Average care-bed occupancy was 95.1%, broadly unchanged from 95.0% in the prior corresponding period, while occupancy reached 96.4% on 10 November with 1,923 beds filled. Care-home underlying EBITDAR rose 3% to NZ$27.9 million, supported by the improved resident mix and a 13% increase in accommodation supplement revenue to NZ$6.7 million.

At group level, however, underlying EBITDA slipped 3% to NZ$14.4 million. Radius attributed the decline primarily to lower retirement-village resale gains, with eight existing-unit resales settled during the half compared with 11 a year earlier. Operating cash flow also fell to NZ$6.5 million from NZ$13.3 million, a detail that makes the dividend increase more dependent on the group’s broader capital-management framework than on headline profit alone.

Expansion accelerates as leverage rises

Radius is now building the first of 10 planned new care homes, with subfloor works underway on the 100-bed Applefields facility in Belfast, Christchurch. The project is scheduled for completion in May 2028, while an 80-bed Hokitika home is expected to commence in 2027. The company says its capital-light model, with most new sites expected to be leased, could more than double aged-care capacity over the next decade.

“Villas under construction at Clare House, Invercargill.”

The expansion is not being funded without balance-sheet consequences. Net bank debt rose to NZ$90.5 million at 30 September from NZ$68.7 million at 31 March, following the Sprott House acquisition and spending on Matamata, Clare House and Applefields. The leverage ratio stood at 3.4 times including development debt, above Radius’s medium-term target of below 2.5 times, which management expects to regain over the next three to five years. The company previously secured NZ$30m syndicated debt capacity to support the Karori acquisition and development programme.

“Recently completed villas at Matamata Village”

Sprott House contributed NZ$3.1 million of revenue and NZ$45,000 of profit before tax from its 26 May acquisition date to the end of September. Its 90 care beds are now part of the portfolio, while 14 vacant villas are being refurbished for sale from December. Six new Matamata villas have already become available, and six Clare House villas are due for completion in April 2027, creating the prospect of 20 units being available for sale in the second half.

Radius expects underlying EBITDA to exceed NZ$30 million in FY27, compared with NZ$27.4 million in FY26. That target will test whether the added beds and village inventory can translate into cash generation quickly enough to support both the development pipeline and the higher dividend. For now, the earnings direction is favourable; the more consequential question is how comfortably the balance sheet can carry the next stage of growth.