Diales Group Company Research (DIAL)

Diales FY25 results were ahead of expectations, reflecting the restructuring of the business, with costs cut over the last two years. The breakeven level of utilisation is now lower, with productivity higher as expert numbers rise as a proportion of fee earners, in turn leading to positive margin progression. The Board can now focus on growing added-value services and expanding the top-and-bottom lines further. FY25 results delivered EBIT and adj. PBT of £1.4m (FY24: £1.2m) on unchanged revenues. This represents the third consecutive year of profit growth. The move to a hub-and-spoke model has resulted in a consistent improvement in margins, reflecting rising productivity levels. Problem areas have been dealt with, with offices closed, headcount reduced and the composition of fee earners changing as management has targeted additional experts, in turn driving progress in gross and EBIT margins. Net cash represents 35% of the market capitalisation, valuing the operating business on a lowly 4.2x FY26 EBIT. The shares sit on a 27% discount to NAV. With financial estimates unchanged, we retain our fair value / share at 35p, which represents a premium of 94% to the current price.