H1 2025: strong trading, flat NAV and a wider discount
HgCapital Trust (HgT) delivered robust trading from its unquoted software portfolio in H1 2025, but public market valuation moves and FX headwinds muted the reported numbers. Net assets were steady at £2.5 billion, with NAV per share of 539.5p, a total return of -0.4% for the six months to 30 June. The share price total return was -3.8% over the period.
Under the bonnet, it was a different story: the portfolio posted last‑twelve‑months (LTM) revenue growth of 19% and EBITDA growth of 18%, with an average EBITDA margin of 33%. That’s the engine room doing its job – it’s just that the market’s measuring stick moved against it.
Key numbers investors should know
| Metric | H1 2025 |
|---|---|
| NAV per share | 539.5p (total return -0.4%) |
| Share price | 515.0p at 30 June (total return -3.8%) |
| Net assets | £2.5 billion |
| Market capitalisation | £2.4 billion |
| LTM revenue growth | +19% |
| LTM EBITDA growth | +18% (margin 33%) |
| Portfolio valuation multiple | 25.7x EV/EBITDA |
| Net debt to EBITDA (portfolio) | 7.4x |
| Investments | £306 million |
| Gross realisations | £165 million |
| Available liquid resources | £432 million (incl. £375 million undrawn RCF at 30 June) |
| Outstanding commitments | £1.4 billion (expected to be drawn over 4‑5 years) |
| Interim dividend | 2.0p per share |
| Ongoing charges | 1.5% (annualised) |
Definitions: NAV per share is the net asset value per share after fees. EV/EBITDA is enterprise value divided by EBITDA – a common way to value cash‑generative software businesses. Net debt to EBITDA is a leverage measure; higher numbers imply more debt relative to earnings.
What drove performance in the half
Trading outpaced public peers, valuations didn’t
HgT’s companies continue to sell essential, “mission‑critical” software – the sticky, recurring revenue kind that tends to hold up through cycles. That explains the +19% sales and +18% EBITDA growth. However, Hg values its private holdings with reference to listed comparators. Those public multiples fell earlier in the year, offsetting earnings growth and keeping NAV flat. Management also flags adverse FX as a drag.
Quarterly revaluations and volatility
Hg revalues quarterly. Q1 2025 saw a -2.0% NAV move, followed by +1.6% in Q2 as earnings pushed through. Note that public software indices were extremely volatile – weak in Q1 and very strong in Q2 – and Hg’s methodology deliberately smooths the impact versus headline indices.
Active deal flow: investments, exits and co‑invest
- £306 million invested across nine deals, including further capital into IFS, P&I, Citation and a new position in Scopevisio. Co‑investment totalled £34 million (no management or performance fees on co‑invest).
- £165 million of gross realisations, including proceeds from P&I, Citation, Trackunit and smartTrade. Across the last 12 months, full and partial exits were achieved at an average of 11% above their last reported carrying value.
- Post period, £70 million invested primarily into A‑LIGN and Payworks.
Opinion: realisations at a premium to carrying value are a clear positive for confidence in the book values. Continued bolt‑on M&A supports Hg’s playbook of compounding growth through consolidation.
Liquidity, commitments and the balance sheet
At 30 June, HgT had £432 million of available liquid resources, including a £375 million revolving credit facility (RCF) that was undrawn. Outstanding commitments stood at £1.4 billion, expected to be drawn over the next 4‑5 years.
Post period to 31 August, available liquid resources were £353 million (14% of pro‑forma NAV), with £28 million drawn on the RCF. Outstanding commitments increased to £1.7 billion (70% of pro‑forma NAV) after new fund commitments to Hg Genesis 11 (€350 million) and Hg Mercury 5 (€150 million). Hg Saturn 4 saw a $1.0 billion commitment in Q1 2025, with drawings expected from 2026; Genesis 11 and Mercury 5 anticipate first capital calls in 2027. HgT retains an “opt‑out” right within investment agreements – a useful risk valve.
Opinion: the step‑up in commitments tightens the forward funding picture, but the draw schedule, subscription facilities, RCF headroom and opt‑out provide multiple levers to manage liquidity without diluting returns.
Dividend, charges and dates to note
- Interim dividend: 2.0p per share.
- Ex‑dividend date: 25 September 2025; record date: 26 September 2025; DRIP deadline: 10 October 2025; payment date: 24 October 2025.
- Total annualised ongoing charges: 1.5%.
HgT emphasises long‑term NAV and share price growth over delivering a specific yield, but it has guided to a 5p per share dividend “floor” in recent years (not a commitment).
Valuation, leverage and the widening discount
The portfolio’s average valuation multiple is 25.7x EV/EBITDA, with average net debt to EBITDA of 7.4x. Management notes that, given equity valuations, debt accounts for less than 30% of the average capital structure, offering an equity cushion and covenant flexibility.
The shares traded at a discount to NAV of roughly 4.5% at 30 June (515.0p vs 539.5p) and widened to about 7.2% by 31 August (502.0p vs 541.2p). HgT operates a share buyback framework with defined triggers; the Board weighs buybacks against alternative uses of capital for long‑term NAV growth.
Long‑term scorecard still stacks up
On the RNS’s measure, £1,000 invested 20 years ago (with dividends reinvested) would now be worth £15,317 versus £3,808 for the FTSE All‑Share. Over 10 years, HgT’s share price total return has compounded at 19.2% per annum, outperforming the FTSE All‑Share by 12.4% per annum. Past performance is not a reliable indicator of future results, but it shows the power of the strategy when compounding is allowed to do its thing.
Josh’s take: what’s good and what to watch
Positives
- Core trading is strong: +19% sales, +18% EBITDA, 33% margins across a diversified, recurring‑revenue portfolio.
- Liquidity events continue despite tough markets, and exits are coming in above carrying value on average.
- Active pipeline and bolt‑on M&A sustain growth in a slower new‑logo environment.
- Clear liquidity levers: RCF, subscription facilities, and the opt‑out clause on fund commitments.
Watch‑outs
- Valuation sensitivity: private marks reference listed comps, so public market swings can mask underlying progress.
- Leverage: 7.4x net debt/EBITDA across the book is manageable for sticky software cash flows, but it reduces room for error if rates stay higher for longer.
- Commitments vs cash: £1.7 billion of commitments post period means disciplined pacing and timely realisations will matter.
- Discount: now c. 7.2% on 31 August numbers – a potential opportunity if delivery continues, but also a sentiment barometer.
What to watch into H2 2025 and beyond
- Next portfolio revaluation at 30 September 2025 – does earnings growth start to outweigh multiple moves?
- Further exits and partial sales – can Hg maintain the track record of realisations above carrying value?
- Deployment pace in new funds and co‑investments, and any updates on capital call timing.
- Buyback activity if the discount remains elevated against sustained trading strength.
- Dividend confirmation at year‑end and any update on the “floor” guidance.
Where to read more
The full interim report and presentation are available at hgcapitaltrust.com.
Reminder: The value of shares and the income from them can go down as well as up due to market and currency movements, and investors may not get back the amount originally invested.
