Australian United Investment Company’s profit surged after its merger with Diversified United Investment, but the headline result was dominated by a one-off acquisition gain. Underlying profit rose 19.9%, while AUI expanded its portfolio to about A$3.1 billion and declared fully franked dividends totalling 28 cents per share.
- Underlying profit increased 19.9% to A$59.3 million
- A$159.9 million merger-related gain drove statutory profit to A$220.4 million
- Portfolio expanded to A$3.1 billion, with 10.5% in international equities
- Pre-tax NTA accumulation return of 9.5% beat the ASX 200’s 6.1%
- Final ordinary and special dividends total 28 cents per share, fully franked
Merger reshapes AUI’s earnings base
Australian United Investment Company Limited (ASX:AUI) has emerged from its merger with Diversified United Investment as a materially larger listed investment company, but its A$220.4 million annual profit needs careful reading. The result was up 342.1% on the previous year, largely because AUI recognised a A$159.9 million gain on acquisition when the merger was implemented on 30 April 2026.
That accounting gain primarily reflected a A$174.0 million reset in the tax cost base of DUI’s assets after the companies formed a tax-consolidated group. DUI contributed revenue of A$11.4 million and profit before tax of A$11.2 million in the two months to 30 June, meaning the full-year figures include only a short period of the enlarged portfolio’s earnings.
On the more useful recurring measure, profit after tax excluding the merger gain, transaction costs and special income rose 19.9% to A$59.3 million from A$49.5 million. Earnings per share on that basis increased to 42.4 cents from 39.9 cents, while statutory EPS jumped to 157.5 cents from 40.2 cents.
A$3.1 billion portfolio adds international reach
The merger more than doubled the investment portfolio’s reported value to A$3.02 billion at year-end, with total portfolio value including cash and receivables reaching about A$3.1 billion. Australian equities accounted for 87.9% of the portfolio, while international equities contributed 10.5% through six exchange-traded index funds and one unlisted managed fund.
AUI has now formalised an international investment policy targeting a normal allocation of 10% to 20%, mainly through managed funds. The current foreign currency exposure is unhedged, with the policy allowing hedging of up to 50% in normal circumstances. The international allocation includes technology, healthcare, developed-market and emerging-market exposure, although the company remains predominantly invested in large Australian-listed businesses.
The enlarged portfolio also retains AUI’s long holding periods: the average age of investments was 16.1 years, and 69.7% of the portfolio by value had been held for more than a decade. Commonwealth Bank was the largest position at 10.2% of the portfolio, followed by BHP at 7.8% and Rio Tinto at 7.0%.
Investment performance beats benchmark
AUI’s pre-tax NTA accumulation performance rose 9.5% for the year, ahead of the S&P/ASX 200 Accumulation Index’s 6.1% gain. Including franking credits for shareholders able to use them, AUI reported an 11.0% accumulation return against 7.2% for the comparable franking-adjusted index.
The company attributed relative performance to overweight positions in Rio Tinto, Newmont and Computershare, as well as the international exposure brought across through the merger. Overweight holdings in ResMed, CAR Group and CSL detracted. Pre-tax NTA backing increased to A$13.75 per share from A$12.98, although the post-tax figure was A$11.91 after allowing for estimated tax on unrealised gains.
Dividend maintained despite cautious outlook
The board declared a fully franked final ordinary dividend of 20 cents per share and a fully franked special dividend of 8 cents, taking the final distribution to 28 cents. Together with the 17-cent interim dividend and prior-year distributions, the company is maintaining its stated ordinary dividend of 37 cents per share while continuing to use a special dividend to distribute additional income.
Chairman Charles Goode said AUI expected steady underlying earnings in the year ahead but anticipated a modest reduction in income per share because of specific items that lifted the 2026 result. The board also remains cautious on Australian valuations, household conditions, inflation, regulation and geopolitical risks, while reducing borrowings from around 10% of portfolio value several years ago to 1% at year-end.
Low gearing leaves merger integration as the test
Borrowings stood at A$70 million at 30 June, equivalent to net debt of 0.7% of the portfolio excluding cash, with interest expense covered 22.6 times by profit before non-recurring items, interest and tax. AUI increased its NAB facility limit to A$225 million on 1 July after terminating DUI’s undrawn A$100 million facility, preserving additional financing capacity without materially changing reported gearing.
The next test is less dramatic than the merger accounting: whether the larger portfolio can convert its greater scale and international diversification into recurring income per share while preserving the 37-cent ordinary dividend. The acquisition accounting remains provisional within its 12-month measurement period, and future results will increasingly be judged without the A$159.9 million gain providing headline assistance.
Bottom Line?
AUI has delivered stronger recurring earnings and a broader portfolio, but the post-merger investment case now turns on sustainable income per share rather than the exceptional acquisition gain.
Questions in the middle?
- Can the enlarged portfolio sustain recurring earnings growth once the two-month contribution from DUI becomes a full-year comparison?
- How will AUI adjust its 10% to 20% international allocation if currency or overseas market risks change?
- Will the company’s cautious view on Australian valuations lead to further changes in gearing, sector weights or the share buyback?