HgT’s final FY25 results confirmed the strong underlying last-12-month (LTM) growth in revenue and EBITDA across its portfolio, with final figures at 17% and 19%, respectively (of which 11% and 17% was organic, respectively). This was partly offset by lower comparable multiples and higher net debt across the portfolio used to finance bolt-on M&A, leading to a 4.0% NAV total return (TR) in FY25. HgT’s portfolio companies maintain a healthy average EBITDA margin of 33%, which would be even higher if not for the extensive growth investments into AI capabilities, supported by Hg’s (HgT’s investment manager) well-staffed, dedicated AI product incubator (Hg Catalyst). There are more than 1,600 generative AI (GenAI) projects live across HgT’s portfolio, and over 40 agentic products and features have already been launched. Despite the sustained earnings momentum and encouraging initial results of AI adoption, HgT’s shares have been caught up in the recent indiscriminate sell-off of software stocks and now trade at a 27% discount to NAV (vs 10-year average of 8%), which implies an average EV to next-12-months EBITDA multiple of c 15x across HgT’s portfolio, according to Hg.

HgT reported its full-year trading update, posting a 4.0% NAV total return (TR) in FY25, bringing its five- and 10-year NAV TR to 14.1% and 17.0% per year, respectively. The FY25 return was driven by continued strong growth in revenue and EBITDA across HgT’s portfolio of 17% and 20% in 2025, respectively, at a healthy average EBITDA margin of 34%. This contributed 17pp to its portfolio performance, partly offset by the negative 7pp effect of lower public multiples and the 6pp impact of an increase in portfolio company debt, used to finance bolt-on M&A. Valuations of listed software companies remained volatile into January and early February 2026, sparked by intensifying fears over AI disruption coupled with a rotation from software into hardware and AI infrastructure. This led to a temporary widening of HgT’s discount to NAV to more than 30%, which was followed by a rebound in recent days to 19% (based on the last closing price). This is still much greater than the 10-year average of 7%. We note that HgT authorised its broker to conduct a share buyback on its behalf and all HgT’s non-executive directors bought HgT shares recently.

After more volatile public markets and an ‘uncertainty pause’ in global IT spending in early 2025, the environment has become more favourable for HgT, leading to positive NAV TR in Q2 and Q3. We remain convinced in its equity story as a strong compounder benefiting from the secular digitalisation trend, as illustrated by its healthy NAV TR of 14.5% and 17.8% per year over the five and 10 years. While the consequences of a platform shift like the one now triggered by AI are difficult to predict, HgT’s investment manager is experienced in navigating such disruptive changes and has built extensive AI capabilities to support its portfolio in the adoption journey, with some initial promising outcomes. HgT’s shares now trade at a 16.1% discount to NAV, versus a 10-year average of 8%.