Hargreave Hale VCT Shows Resilience Amidst UK Small-Cap Turmoil

LONDON, UK – December 19, 2025 – Hargreave Hale AIM VCT plc has revealed a year of stark contrasts and strategic adaptation, reporting a marginal full-year loss but demonstrating significant recovery in the second half of 2025. The venture capital trust, a key investor in UK growth companies, navigated a turbulent market defined by sustained outflows from UK equities and a near-frozen IPO market, all while facing a monumental shift in government VCT policy.

For the year ended September 30, 2025, the VCT announced a net asset value (NAV) total return of -0.22%. While still in negative territory, this marks a substantial improvement from the -3.86% loss reported in the previous year. The result was bolstered by a strong second-half performance, which delivered a positive return of 9.36%, a welcome sign for investors after a prolonged period of decline. The NAV per share settled at 36.46 pence, down from 40.55 pence in 2024, a decrease influenced by the payment of 4.00 pence in dividends during the year.

In his statement, Chair David Brock acknowledged the difficult environment, noting that “generating performance remains very difficult in the short term.” He pointed to a challenging fiscal landscape and four years of uninterrupted monthly outflows from UK equities. Despite these headwinds, the portfolio's second-half rebound suggests a potential bottoming out for the hard-hit UK small-cap sector.

A Portfolio of Highs and Lows

The VCT’s performance was a tale of two portfolios, with standout successes in innovative sectors offsetting major setbacks elsewhere. The results underscore the high-risk, high-reward nature of venture capital investing in cutting-edge UK companies.

The star performer was Qureight, an unlisted AI-driven clinical analytics platform, which saw its valuation soar by 102.4%, adding £2.56 million to the fund's value. This reflects strong commercial traction with pharmaceutical partners and highlights the robust growth in the AI health-tech space. Another major contributor was Cohort plc, a defense technology group, which benefited from a positive geopolitical environment. Its shares gained 51.1%, adding £2.34 million before the VCT trimmed its position. The Property Franchise Group also performed strongly, with its value increasing by 42.2% or £1.60 million following a strategic merger.

However, these gains were tempered by significant losses. The children's lifestyle e-commerce brand Kidly was a total loss, written down to zero after entering administration in April 2025. This resulted in a £1.26 million hit to the portfolio. Eagle Eye, a SaaS marketing technology firm, saw its value drop by £1.52 million after a profit warning and the loss of a key US contract. Similarly, Zappar, an extended reality technology company, saw its valuation cut by 70.1% (£0.84 million) amid weak market demand and a failed acquisition deal.

During the year, the Investment Manager deployed £4.8 million into seven qualifying companies, including new investments in Feedback plc, Ixico plc, and RC Fornax plc. The VCT also made several strategic exits, fully divesting from Aquis Exchange, Equals Group, and Learning Technologies Group, among others, to crystallise gains and reallocate capital.

VCTs at a Regulatory Crossroads

A pivotal development overshadowing the results is the UK government's proposed changes to VCT legislation. The Finance Bill 2025-26 is set to significantly increase key investment thresholds, such as the gross asset test for qualifying companies. The board believes this will “make a material positive impact on our addressable market,” allowing the VCT to back a wider range of more mature companies and accelerate its rate of capital deployment.

However, this positive change is coupled with what the Chair described as a “puzzling” decision by the Treasury to slash the income tax relief available to VCT investors from 30% to 20%, effective from April 2026. This move threatens to “throttle back the availability of capital” by reducing the primary incentive for retail investors to participate in the VCT scheme. The change creates a significant uncertainty for the entire sector, potentially making it harder for VCTs to raise the very funds needed to take advantage of the expanded investment opportunities.

In response to this shifting landscape, Hargreave Hale AIM VCT is preparing to launch a new offer for subscription in early 2026 to raise up to £20 million, with an option for a further £10 million. This follows a recently closed offer that raised a more modest £5.6 million.

Strategic Focus on Efficiency and Outlook

Amidst the market volatility, the VCT has sharpened its focus on operational efficiency. The ongoing charges ratio (OCR) edged up slightly to 2.51% from 2.43%, primarily due to a lower average asset base. However, the board has implemented cost-saving measures, including taking the Company Secretary role in-house, which are expected to deliver annual savings of around £0.15 million and help return the OCR to historical levels.

To ensure alignment with shareholder interests and retain key talent, the company is also developing a new Retention Scheme for employees of the Investment Manager. The scheme, which will be subject to shareholder approval, would link cash performance fees to reinvestment in the Company’s shares.

Looking ahead, the outlook remains mixed. The Chair noted that “the UK economy has remained insipid,” with business confidence dipping ahead of the 2025 autumn budget. However, post-period end, the Investment Manager reported an improved deal flow, having already invested a further £2.9 million into two companies. As David Brock concluded, the team is “active on a large number of deals across both public and private markets and expect several deals to close over the coming weeks,” signaling a proactive stance as the VCT prepares to navigate the opportunities and challenges of the year ahead.