TPXimpact sees H1 revenue up 60%, but guidance suggests a weaker H2, we moderate our view

Down 6% to 101p (£96m) - Interim Results

By any standards, today's half-year numbers from public sector digitalisation specialist TPXimpact look pretty strong:

• Revenue up 60% to £57.9m

• New business wins of £86m (H1 26: £31m)

• Adjusted EBITDA margin increased to 13.9% (H1 26: 8.8%)

• Reported operating profit of £3.5m (H1 26: loss of £1.1m)

• Adj Earnings per Share of 5.6p (H1 26: 1.7p)

• Net cash of £1.0m, with all debt fully repaid

This improved financial performance is reflected in the scale of recent wins and underlying business growth:

• UK central government wins including Ministry of Justice (£1m), Land Registry (£19m) and the Prison & Probation Service (£25m)

• Total headcount including associates up 15% to 806

• Permanent headcount up 22% to 508

• Employee retention improved to 86% (FY26: 83%)

This all sounds pretty rosy - so why has the company's share price fallen this morning?

As ever, I think the main reason for this lies in the outlook - broker forecasts have been trimmed today and guidance suggests profits will be significantly lower in H2.

Outlook & Broker Estimates

Management has reiterated its previous guidance from 15 October 26:

• FY27 revenue of at least £105m

• FY27 adj EBITDA of at least £14m

TPXimpact has upgraded guidance repeatedly over the last six months. Investors may have been expecting another such increase (even though it's frankly unlikely, coming less than a month after the previous upgrade):

With thanks to the company's broker, Cavendish, we have updated forecasts today. Unfortunately, it appears that this may be a slight profit warning:

• FY27E adj EPS: 9.5p (-3.1% versus 9.8p previously)

• FY28E adj EPS: 10.9p (-3.5% versus 11.3p previously)

Cavendish says the reduction to FY27 forecasts reflects "increased dilution". My reading of this is that it's a consequence of the increase in share-based payments, which rose from £813k to £1.4m in H1 and will presumably rise further for the full year.

Higher variable remuneration is presumably a reflection of the group's increased size and profitability. The fact that TPXimpact is making these payments with shares mean cash flow is unaffected. Instead, shareholders are diluted - there's no such thing as a free lunch.

Roland's view

Despite today's slight downgrade, the forward valuation continues to look fairly modest, with a P/E of around 10x forward earnings.

However, today's forecasts suggest that earnings will be lower in H2, with a c.60/40 split implied by current consensus forecasts.

The shares have four-bagged this year and we've previously been GREEN on this stock, which Mark also covered in a Stock Pitch last month.

However, I think the prospect of lower H2 earnings and today's slight downgrade to forecasts could put pressure on the company's High Flyer styling.

I'd also point out that the StockRanks have already been pricing in a more measured outlook, drifting steadily lower in recent weeks (see chart above).

On balance, I think it makes sense to moderate our view slightly, while remaining positive. AMBER/GREEN.