H&G High Conviction Limited reported a $2.9 million net loss for FY2025 amid challenging market conditions and completed a major asset sale to Hancock & Gore Limited, marking a pivotal shift in its business model.
- Net loss of $2.9 million driven by fair value losses
- Completed divestment of investment portfolio to Hancock & Gore
- In-specie distribution of Hancock & Gore shares to shareholders
- No dividend declared for FY2025
- Company now holds cash only and explores future strategic options
A Challenging Year for H&G High Conviction
H&G High Conviction Limited (ASX, HCF) has reported a net loss of $2.9 million for the financial year ended 30 June 2025, a stark reversal from the prior year’s profit of $1.3 million. This downturn was primarily driven by significant fair value losses on its investment portfolio, reflecting the difficult market environment for micro-cap equities that the company had been focused on.
The company’s net tangible asset backing per share plummeted to just 1.3 cents, down from over a dollar the previous year, underscoring the severe impact of market headwinds and portfolio devaluation.
Strategic Divestment to Hancock & Gore
In a decisive move to address structural challenges, HCF completed the sale of substantially all its investment assets to Hancock & Gore Limited (ASX, HNG) in April 2025. The transaction involved an exchange of assets for scrip consideration, which was then distributed in-specie to HCF shareholders as a return of capital. This deal was approved by shareholders and endorsed as fair and reasonable by an Independent Expert and the Independent Board Committee.
The sale delivered a premium of 31.5% to HCF’s last closing share price and a 9.6% premium to its post-tax net tangible asset value per share as of February 2025. Importantly, it also provided shareholders with exposure to a larger, more diversified, and dividend-paying investment group, while allowing HCF to exit illiquid micro-cap positions at a favourable valuation.
Post-Transaction Outlook and Company Status
Following the divestment, HCF now operates as a listed entity with no material operating assets aside from cash reserves of approximately $270,000. The Board is actively considering strategic alternatives, including potential re-purposing of the company or winding it up, with the priority being the efficient deployment or return of residual capital to shareholders.
Notably, no dividend was declared for the 2025 financial year, reflecting the company’s transitional status and focus on restructuring. The management fees paid to the investment manager dropped significantly, with no performance fees incurred due to the portfolio’s underperformance.
Governance and Leadership Changes
The year also saw changes in the Board composition, with Alexander Beard appointed Executive Chair and Angus Murnaghan joining as a Non-executive Director in April 2025. Former Chairman David Groves and Non-executive Director Dennison Hambling resigned at the same time. These leadership shifts align with the company’s strategic reset and ongoing review of its future direction.
HCF’s auditor, UHY Haines Norton, issued an unqualified audit opinion but highlighted a material uncertainty regarding the company’s ability to continue as a going concern, given its current asset base and operational status.
Investor Implications
For investors, the asset sale and capital return mark a significant turning point. While the transaction delivered immediate value and liquidity benefits, the company’s future remains uncertain. The Board’s forthcoming decisions on re-purposing or winding up will be critical to shareholder outcomes.
Bottom Line?
H&G High Conviction’s transformation is underway, but investors should watch closely as the company charts its next course.
Questions in the middle?
- What strategic options will the Board pursue for HCF’s future?
- How will the market value HCF shares given its new cash-only status?
- What impact will the asset sale have on Hancock & Gore’s portfolio and performance?