HgCapital Trust NAV stabilises as portfolio growth offsets software valuation pressure

HgCapital Trust's underlying companies continued to deliver healthy growth during the first half of 2026. Unfortunately for shareholders, that operational progress was not enough to offset falling software valuations.

Estimated net asset value, or NAV, total return was down 4.9% across the half year. NAV represents the value of the trust's assets after liabilities. However, the second quarter brought signs of stability, with NAV total return improving to 0.5% after falling 5.4% in Q1.

The bigger concern is the share price. Its total return fell 24.9% in H1, substantially worse than the movement in NAV and evidence of a sharp deterioration in investor sentiment towards the trust.

Investors can read the original company announcement for the complete regulatory disclosure.

HgCapital Trust's H1 2026 key figures

Metric	H1 2026 figure
Estimated NAV	£2.4 billion
Estimated NAV per share	530.7p
Q2 NAV total return	0.5%
H1 NAV total return	-4.9%
Q2 share price total return	-2.6%
H1 share price total return	-24.9%
Last 12 months revenue growth	16%
Last 12 months EBITDA growth	19%
Portfolio EBITDA margin	34%
Weighted EV/EBITDA multiple	22.9 times
Net debt to EBITDA	6.9 times
Investments	£146 million
Realisations	£134 million
Share buybacks	£19 million

EBITDA is a measure of operating profit before interest, tax, depreciation and amortisation. On an organic basis, excluding the effect of acquisitions, portfolio revenue increased 11% and EBITDA grew 17%.

That is a strong operational result. EBITDA growing faster than revenue also indicates margin improvement across the portfolio, although the precise change in margin was not disclosed.

Strong trading met weaker valuation multiples

Portfolio trading added 11% to value during H1, including 6% in the second quarter. This was offset by a 13% reduction caused by lower valuation multiples, including a 5% reduction in Q2. A modest increase in net debt reduced portfolio NAV by a further 2% across the half.

The weighted average enterprise value to EBITDA multiple fell from 25.2 times at the end of 2025 to 22.9 times. EV/EBITDA compares the total value of a business with its operating earnings and is commonly used when valuing private companies.

This distinction matters. HgCapital Trust's portfolio companies have not collectively stopped growing. Instead, investors are currently willing to pay less for each pound of software earnings.

The board attributes this pressure to uncertainty surrounding artificial intelligence and its potential effect on software business models. Hg argues that its focus on mission-critical business software offers resilience because portfolio companies are embedded in customer workflows, hold proprietary data and frequently operate in regulated or high-trust markets.

That may prove correct, but the impact of AI remains a genuine valuation and competitive risk. Strong current trading does not guarantee that every software company will retain its market position or previous valuation rating.

This follows the pattern discussed in my article on HgCapital Trust's Q1 2026 performance, although Q2's 0.5% NAV return indicates that the immediate pressure moderated.

Exit activity provides useful valuation evidence

HgCapital Trust received £134 million from realisations during H1. These included the full exits of Intelerad and Geomatikk, completed at an average uplift of 31% to their carrying values.

Carrying value is the amount at which an investment was recorded in the trust's NAV before its sale. Exiting above that figure provides some evidence that private buyers remain willing to pay more than the portfolio's stated valuations for selected assets.

The trust also completed a partial exit from Septeo and received refinancing proceeds from LucaNet, AMDT, Fonds Finanz and Ncontracts.

After the period ended, HgCapital Trust announced a further £13 million realisation from the full exit of Quantios. That transaction is expected to complete in Q3 2026 at a 31% uplift to carrying value.

These sales are encouraging, particularly when falling public software valuations have raised questions about private market pricing. Still, selected exits should not automatically be treated as proof that every portfolio holding is conservatively valued.

Investment continued despite market uncertainty

HgCapital Trust invested £146 million during the half, including new investments in OneStream and Rightsline and further capital for Septeo and Teamworks.

Of this total, £46 million was fee-free co-investment. Co-investments allow the trust to invest directly alongside Hg's funds, normally without paying an additional layer of management fees on that capital. They now represent approximately 11% of NAV, within the trust's long-term target range of 10% to 15%.

A further £7 million was invested after the period in Street Group, a provider of vertical software and AI to the UK residential property sector.

Investors wanting broader company information can find it on the HgCapital Trust PLC share page.

Liquidity and commitments need watching

Pro-forma liquid resources stood at £260 million, including a £375 million credit facility. Of that facility, £134 million was drawn when the update was published.

Outstanding commitments to Hg funds totalled £2.0 billion. Around £200 million is not expected to be called, while the balance is expected to be drawn over the next four to five years.

Approximately £850 million relates to the Hg Genesis 11 and Hg Mercury 5 funds. These commitments are not expected to activate until early 2027 and benefit from financing arrangements that delay capital calls for another 12 months from investment.

This provides time, but the scale of the commitments is substantial relative to current liquidity. The trust can fund them through existing resources, future realisations, cash generation, borrowing or its ability to opt out under certain conditions. The mix used was not disclosed.

The current credit facility expires in March 2027. Management said advanced discussions to increase and extend it have been constructive, but revised terms have not yet been announced. That leaves refinancing cost and availability as points to monitor.

Buybacks and Hg's planned stake increase

The trust repurchased £19 million of shares during H1. Buybacks can increase NAV per remaining share when completed below NAV, although the update did not disclose the average repurchase price or resulting enhancement.

Hg also intends to increase its ownership of the trust from approximately 6% to more than 15% over the medium term through market purchases. The board views this as evidence of alignment and confidence at current valuations.

It is a meaningful signal, but the precise timetable and purchase prices were not disclosed. Investors should therefore separate the stated intention from purchases that have actually been completed.

What matters at the September interim results

This is a mixed update rather than a weak operational one. Revenue and EBITDA growth remain healthy, leverage declined from 7.4 times to 6.9 times EBITDA, and completed exits achieved premiums to carrying value.

Against that, lower software valuation multiples have overwhelmed much of the underlying progress. The 24.9% share price total return decline also shows that investors have become considerably more cautious than the movement in NAV alone would suggest.

HgCapital Trust will publish its full interim results on 14 September 2026. The main areas to watch are any updated portfolio valuation movements, progress on extending the credit facility, liquidity planning for outstanding commitments and whether continued exits support the trust's stated NAV.