Why Is Diversified United Investment Merging Amid Mixed Half-Year Results?

Financial Performance in a Mixed Market

Diversified United Investment Limited (DUI) has released its half-year results for the period ending 31 December 2025, revealing a nuanced financial picture. While revenue from ordinary activities fell by 6.6% to $21.4 million, the company managed to increase its profit after tax by 3.7% to $19.2 million. This improvement was partly driven by special income items, including a $1.6 million after-tax gain from fair value increases in unlisted managed funds.

The company’s earnings per share rose to 8.9 cents, up from 8.6 cents in the prior corresponding period, reflecting the positive impact of these special items. Excluding these, earnings per share declined slightly to 8.1 cents, indicating underlying pressures on core earnings.

Dividend and Portfolio Stability

DUI declared an interim fully franked dividend of 7.0 cents per share, consistent with the previous year, underscoring its commitment to delivering reliable income to shareholders. The company’s Pre-tax Net Tangible Asset (NTA) backing per share edged down marginally to $6.38 from $6.40 at the previous half-year, reflecting market fluctuations and portfolio valuation changes.

The investment portfolio remains well diversified, with 76.7% allocated to Australian equities and 22.4% to international equities through managed funds and exchange-traded funds. The company’s strategy focuses on long-term capital growth and income generation, supported by a low management expense ratio of 0.12% excluding finance costs.

Borrowings and Share Buyback Activity

DUI has $100 million in borrowing facilities, of which $30 million was drawn at the half-year mark. The company maintains a conservative approach to gearing, with net debt representing just 1.2% of the portfolio value. During the period, DUI repurchased and cancelled approximately 1.6 million shares on-market at a total cost of $8.7 million, a move that can enhance NTA per share by reducing the number of shares outstanding.

Strategic Merger Announcement

In a significant development, DUI announced on 30 January 2026 that it had entered into a merger implementation deed with Australian United Investment Company Limited (AUI). The proposed scheme of arrangement would see AUI acquire all DUI shares it does not already own, with DUI shareholders receiving new AUI shares in exchange. The merger is positioned as a natural fit given the companies’ similar investment philosophies, low operating costs, and long histories of stable, fully franked dividends.

The merger is subject to shareholder and Federal Court approvals, with an indicative timetable targeting completion in late April 2026. If successful, the combined entity could offer shareholders enhanced scale and diversification benefits, although the precise impact on dividend policy and portfolio management remains to be seen.

Outlook and Market Context

DUI’s directors anticipate modest growth in the Australian economy amid ongoing challenges such as inflation above the Reserve Bank’s target range and geopolitical tensions influencing global markets. The company remains cautiously optimistic, balancing market caution with portfolio resilience and liquidity. The focus continues to be on maintaining a diversified portfolio of leading Australian and international equities to deliver sustainable income and capital growth over the long term.