HgCapital Trust Shares Surge on Resilient Portfolio Performance

HgCapital Trust (LON: HGT) saw its shares climb approximately 5.6% Friday morning following the release of a trading update for the year ended December 31, 2025, showcasing the resilience of its underlying portfolio in a challenging market environment.

The report highlighted a 4.0% estimated NAV total return per share, leading to an estimated NAV per share of £5.62 and net assets of £2.6 billion.

Despite the positive NAV performance, the share price total return decreased by 4.9% over the year, settling at £5.07, with a market capitalization of £2.3 billion at year-end. This divergence between NAV and share price has prompted the board to consider actions, including share buy-backs, to address the discount.

The underlying portfolio demonstrated robust performance, with last twelve months (LTM) revenue and EBITDA growth of 17% and 20%, respectively, and margins of 34% up to November 30, 2025, consistent with previous year figures. This strong operational performance was a key driver of the NAV increase.

HgT invested £357 million throughout the year, focusing on new and follow-on investments in companies such as IFS, P&I, and A-LIGN. Realization proceeds totaled £215 million, including the sale of GTreasury at a 97% uplift to book value, adding 4.6 pence to the NAV.

The exit of Intelerad, expected to complete in March 2026, was announced in November with a 62% uplift to its last reported carrying value.

At year-end, HgT possessed £368 million in available liquid resources, inclusive of a £375 million credit facility, of which £36 million was drawn. Outstanding commitments to Hg funds totaled £1.8 billion, representing 68% of NAV, to be called over the next 4-5 years. Post-period, HgT invested £93 million, including a new investment in the take-private of OneStream, expected to close in April 2026.

The company noted that while strong trading from the underlying portfolio companies contributed positively to performance, movements in comparable valuation multiples and increased net leverage had a negative impact, detracting from portfolio valuations by 7% and 6%, respectively.

Public market volatility, particularly in the software sector, has also negatively impacted HgT's share price, declining 20% year-to-date.

Hg maintains that the recent sell-off in software stocks has been indiscriminate and that the strength of HgT's portfolio, combined with Hg's management expertise, suggests the current share price represents significant value. The board is actively exploring measures to mitigate the discount to net asset value.

Hg's investment in AI initiatives is gaining momentum and driving value creation across the portfolio. The firm believes AI presents significant opportunities for innovative software companies and is working closely with its portfolio companies to transition to AI-first businesses.

Realisations over 2025 saw an average uplift to book value of 25%, highlighting the attractiveness of the mission-critical companies in which the Manager continues to invest. Pro-forma available liquid resources stand at £410 million, with £1.8 billion in outstanding commitments to Hg funds.

Hg reported robust investment and realization activity throughout 2025, totaling fifteen transactions announced or completed. Investment activity focused on end-market, mission-critical software and services clusters. Realization proceeds exceeded $3.4 billion, demonstrating the fundamental strengths of the underlying portfolio companies.

HgT will publish its full Annual Report & Accounts for 2025 on March 9, 2026.