Peel Hunt reports strong H1 FY26 performance with 38% revenue growth

Peel Hunt reported a strong half-year to Sept. 30, 2025, with group revenue up 38.3% to £74.4m and profit before tax jumping 858.3% to £11.5m (adjusted PBT +306.5% to £18.7m). Investment Banking led growth (revenue +45.6% to £32.9m, with M&A advisory ~70% of deal fees and 10 deals totalling £8.1bn), while Execution Services rose 56.8% to £27.6m and Research & Distribution edged up 2.2% to £13.9m. The firm has reduced headcount by over 15% from its FY23 peak, cut underlying fixed costs by ~£5.0m for FY26, and increased net assets to £100.7m (from £88.7m), with management saying H2 has started strongly and expressing confidence in meeting market expectations.

Analysis

Market structure: Peel Hunt’s H1 shows boutique M&A/advisory and trading desks are current winners — M&A fees (70% of deal fees) and Execution Services (+56.8% revenue) imply rising demand for advisory and flow trading liquidity in the next 3–12 months. Corporates pursuing deals create near-term supply of ECM/Debt mandates (expect +€5–20bn issuance window per active mid‑cap deal cohort) and compress credit spreads by an estimated 5–15bp if deal finance is market‑sourced. Winners also include AI compute hardware/software beneficiaries (SMCI, APP) as the article’s AI pitch amplifies risk‑on flow into those names.

Risk assessment: Key tail risks — macro shock that halts M&A (recession or 50–100bp unexpected rate rise), a regulatory crackdown on AI exports, or a large crypto contagion (Yearn breach) causing acute risk‑off; probability medium but impact high. Timeframes: immediate (days) see volatility spikes in crypto/equities; short (weeks) M&A deal announcements and fixed‑income issuance; long (quarters) profitability levered to sustained deal flow and cost saves. Hidden dependencies: Peel Hunt’s P&L concentrated in a few large M&A fees (10 deals = £8.1bn) so one cancelled megadeal could erase H2 upside.

Trade implications: Tactical long exposure to AI infrastructure (SMCI) and adtech (APP) is warranted but should be risk‑managed; use 3‑month call spreads to capture catalysts while capping premium. Rotate fixed‑income exposure away from 1–5y sovereign duration (reduce by ~25% of FI allocation) into UK mid/small‑cap equity exposure that benefits from M&A advisory flow. Use relative trades: long small‑cap UK financials/IBs vs short large universal banks to capture margin uplift in boutiques.

Contrarian angles: Consensus may underweight sustainability of Peel Hunt’s margin uplift — cost cuts and headcount reductions (‑15% from peak) could support >20% ROE improvement if deal flow persists, but AI names (SMCI/APP) are priced for near‑perfect adoption and vulnerable to a 15–30% downside if macro weakens. Historical parallel: post‑rate‑peak M&A spurts (2013–14) delivered outsized H2 fees then faded; hedge positions (5–7% OTM puts) are prudent to protect against a similar mid‑cycle reversal.

Key Decisions for Investors

• Establish a 2.5% portfolio long in SMCI (Super Micro Computer) implemented as a 3‑month call spread: buy 1x 10% OTM call, sell 1x 25% OTM call. Risk rule: take profits at +30% or cut at −15% from entry.
• Establish a 1.5% portfolio long in APP (AppLovin) via a 90‑day 15% OTM call spread to capture near‑term ad/AI demand; exit on +25% gain or if quarterly guidance is cut >5% vs consensus.
• Reduce sovereign duration by ~25% of fixed‑income allocation over the next 30 days (trim 1–5y gilts/treasuries). Reallocate up to 3% portfolio into UK mid/small‑cap equity exposure (FTSE 250 or UK small‑cap ETF) to capture boutique IB M&A fee upside; if 2‑yr gilt yields rise >30bp, trim equities by 50%.
• Enter a relative value pair: long UK small‑cap financials/independent IB exposure (1–2% notional) vs short large universal bank (e.g., HSBA.L) equal notional. Close if spread narrows by >100bp or after 6 months.
• Hedge material downside: buy 5–7% OTM 3‑month puts on SMCI sized at 0.5% portfolio as tail insurance and monitor two catalysts over next 60 days — (1) major M&A announcements/cancellations from top 5 UK deals, (2) US export control or major AI regulation — close hedges if no adverse action within 60 days.