Diales has issued an update for the year to September, stating it traded broadly in-line with consensus expectations. This is encouraging, suggesting profitability was largely unchanged in H2 and in turn, higher EBIT margins. The delivery of the hub and spoke model is gathering pace and the group re-branding to Diales completed in July.
Net cash increased to £4.3m (H1 ’24: £3.6m) representing 26% of the NAV and leaves the valuation of the operating business at a significant discount to peers. Staffing related issues in the US have continued, resulting in the decision to close the office and we are encouraged by the Board’s rapid response.
Revenues increased modestly yoy to £43m, suggesting a higher proportion fell during the seasonally weaker H2 (48% vs 43% in H2 ’23), benefitting from a stronger Q3. Underlying EBIT is set to increase yoy to ‘not less than £1.1m’, highlighting a modest improvement in EBIT margins in H2, in part reflecting the cost savings delivered during H1.
Cash levels represent 8p/share and with estimates broadly in-line, we reiterate our fair value/share assumption of 40p.
