JZ Capital Partners Ltd - Half-year Report

·      NAV per share of $9.88 (FYE 28/02/17: $10.12)

·      Total investments of $56.3 million, including: Felix Storch, Jordan Health Products, Peaceable Street Capital and properties in Brooklyn, New York and South Florida.

·      Realisation proceeds of $27.7 million, primarily through the sale of Fidor Bank and the recapitalisation of Jordan Health Products.

·      As of 31 August 2017, the portfolio comprised:

  o  US micro-cap: 21 businesses including four ‘verticals’ and 12 co-investments, across nine industries.

  o  European micro-cap: 15 companies across five industries and six countries.

  o  US real estate: 59 properties across five major assemblages in New York and South Florida all in various stages of (re)/development.

·      JZCP made three significant post-period realisations (October and November 2017), all at or above net asset value: Nielsen-Kellerman, K2 Towers and Factor Energia.

Operational Highlights

·      In May 2017, JZCP received shareholder approval for initiatives designed to maximise shareholder returns, including the discontinuation of the Company’s current dividend policy and inception of a new strategy to allow for the repurchase of shares.

·      In April 2017, JZCP increased its loan facility with Guggenheim Partners from approximately $100 million to $150 million, in order to bridge certain planned realisations.

David Zalaznick, JZCP’s Founder and Investment Adviser, said: “It has been a steady six months for the Company. Whilst the underlying assets in our US, European and real estate portfolios continued to perform well, the overall NAV was impacted by pre-development real estate costs at the US real estate portfolio.

However, we remain positive about our future prospects and have made a promising start to the second half of the year, with three significant realisations, all at or above NAV.

Looking forward, the Company remains focused on returning further value from the portfolio and investing opportunistically in high-quality assets in the US and Europe.”

David Macfarlane, Chairman of JZCP, said: “The Board remains confident in and continues to support the Investment Manager’s focus on growing the Company’s NAV and following shareholder approval during the first half of the year, we look forward to initiating a share repurchase programme as market conditions permit. We carry great momentum into the second half of the year, as the Company builds towards a more secure, long-term future.”

Presentation details:

There will be an audiocast presentation for investors and analysts at 2pm UK (GMT) / 9am US (EDT) on 8 November 2017. The presentation can be accessed via http://bit.ly/2lTkDSG and by dialing +44 (0)330 336 9105 (UK) or +1 323-794-2423 (US) with the participant access code 2568566.

A playback facility will be available two hours after the conference call concludes. This facility may be accessed via the following dial in details, using the same participant access code as above: +44 (0)207 984 7568 (UK) or +1 719-457-0820 (US).

For further information:

Ed Berry / Kit Dunford                                                    +44 (0) 20 3727 1046 / 1143
FTI Consulting

David Zalaznick                                                              +1 212 485 9410
Jordan/Zalaznick Advisers, Inc.

Rebecca Booth                                                              +44 (0) 1481 745 189
JZ Capital Partners

About JZ Capital Partners

JZ Capital Partners (“JZCP”) is one of the oldest closed-end investment companies listed on the London Stock Exchange. It seeks to provide shareholders with a return by investing selectively in US and European microcap companies and US real estate. JZCP receives investment advice from Jordan/Zalaznick Advisers, Inc. (“JZAI”) which is led by David Zalaznick and Jay Jordan. They have worked together for more than 35 years and are supported by teams of investment professionals in New York, Chicago, London and Madrid. JZAI’s experts work with the existing management of micro-cap companies to help build better businesses, create value and deliver strong returns for investors. For more information please visit www.jzcp.com.

Chairman's Statement

I am pleased to report the results of JZ Capital Partners ("JZCP" or the "Company") for the six-month period ended 31 August 2017.

Performance

The Company’s performance over the last six months has been set against a backdrop of short-term political and economic uncertainty, driven by US policy and Brexit nervousness, and separatist fears across the EU.

Despite this, the US economy remains in a solid and robust expansion that is now the third longest in US history. The expansion gathered pace in the second quarter of 2017, with GDP growing 3.1% from April to June, driven primarily by household spending and firmer investment by business¹. In Europe, economic growth has continued to gain momentum, supported by favourable monetary conditions, a weaker euro and better than expected export growth.

Within this market environment, it has been a steady six months for the Company, with the underlying assets in our US, European and real estate portfolios continuing to perform satisfactorily. For the six-month period ended 31 August 2017, JZCP’s net asset value ("NAV") per share declined 2.4% from $10.12 to $9.88; primarily due to operating and debt service expenses at the US real estate portfolio, offsetting the positive performance of the US and European micro-cap portfolio.

Strategy

The Investment Adviser continues to pursue its value-added investment strategy in the US and European micro-cap sectors and the US real estate market, providing investors with access to a diversified and balanced portfolio of alternative investment opportunities.

Portfolio update

It has been an active investment period for the Company, putting $56.3 million² to work across the US micro-cap and real estate portfolios - whilst realising $27.7 million³, primarily through the sale of Fidor Bank, an internet-based bank licensed in Germany, and the recapitalisation of Jordan Health Products, a build-up of healthcare equipment sales, service and installation companies.

At the end of the period, the Company’s portfolio consisted of 21 US micro-cap businesses, including four ‘verticals’ and 12 co-investments, across nine industries, 15 European micro-cap companies across five industries and six countries, and five major real estate assemblages (59 properties in total) located across Brooklyn, New York and South Florida. The portfolio continues to become more balanced by asset type and geography.

US and European Micro-cap

The Board is pleased with the resilient performance of the US micro-cap portfolio during the period, which has seen a net valuation increase of 4 cents per share, primarily due to net accrued income of 8 cents and increased earnings at our Healthcare Revenue Cycle Management vertical (2 cents).

The US micro-cap portfolio was valued at 8.2x EBITDA, after applying an average 26% marketability discount to public comparables. The Company paid 4.8x EBITDA on average for US micro-cap acquisitions made during the period, consistent with the Investment Adviser’s value-oriented investment strategy.

The European micro-cap sector remains a strategically important segment of the business. JZCP invests  in  the European micro-cap sector through its 75% ownership of the EuroMicrocap Fund 2010, L.P. (“EMC”)⁴ and its approximately 18.8% ownership of JZI Fund III, L.P. (“Fund III”). This was demonstrated during the period when JZCP acquired stakes in two new businesses via its ownership in Fund III: Treee, Italy’s first nationwide recycler of electric and electronic goods, and Eliantus, a build-up of solar plants in Spain.

As of 31 August 2017, EMC held two investments in Spain: Factor Energia and Oro. Fund III held nine investments: three in Spain, two in Scandinavia, two in Italy and one each in the UK and Luxembourg. JZCP held direct loans to a further four companies in Spain: Ombuds, Docout, Xacom and Toro Finance.

Real Estate

The Company’s long-term partnership with Redsky Capital continues to lead to attractive investment opportunities in Brooklyn, New York, and South Florida. During the period, JZCP made investments of $23.2 million in properties in Brooklyn, New York, and South Florida. The portfolio experienced a valuation decrease of 17 cents per share, primarily due to operating expenses and debt service at the property level.

As of August 2017, JZCP has approximately $366 million invested in five major real estate assemblages (59 properties in total) with an approximate valuation of $477 million. All properties are currently in various stages of development and re-development.

Realisations

The Company generated realisations totalling $27.7 million during the period, primarily through the sale of Fidor Bank (“Fidor”) and the recapitalisation of Jordan Health Products. The Company received its first tranche of proceeds totalling $12.5 million from the sale of Fidor, and is expected to receive total gross proceeds of approximately $25 million from the sale.

The Board is delighted with three significant post-period realisations (October 2017), all approximately at or above net asset value: Nielsen-Kellerman, K2 Towers and Factor Energia. JZCP received proceeds of $8.6 million from the sale of NK and expects to receive total cash proceeds of $27.1 million from the sale of K2, with further proceeds of approximately $4.2 million being rolled into a new vehicle which is being used to fund a new portfolio of cell tower assets with the same management partners. JZCP expects to have received total gross proceeds (before carry) of approximately €69.7 million ($82.3 million) from the sale of Factor Energia.

Outlook

I am encouraged by the level of realisation activity, post-period, which we expect will continue to feed through to positive NAV growth in the year ahead.

The Board continues to believe that generating positive NAV growth is the most effective driver to narrow the Company's persistent discount to NAV. In addition, the Board continues to evaluate its option of exercising the share buy-back programme, following shareholder approval during the first half of the year. The timing and level of the buyback is dependent on a range of factors, including the Company’s liquidity from realisations, market conditions and whether or not it would be accretive to shareholder value. Subject to that, however, the Board expects to dedicate a portion of funds from realisations to a share buyback programme in 2018.

The Company’s robust balance sheet and access to a wide range of quality investment opportunities means we are well positioned for the year ahead.

David Macfarlane
Chairman
7 November 2017

¹ Bureau of Economic Analysis, US Department of Commerce – 28 September 2017.

² Total investments in the period, as quoted in the Chairman’s Statement and Investment Advisers’ report have been adjusted to exclude short-term direct loans to investee companies ($6.6 million) which were advanced and repaid in the period.

³ Total realisations in the period, as quoted in the Chairman’s Statement and Investment Advisers’ report have been adjusted to exclude short-term direct loans to investee companies ($7.1 million) which were advanced and repaid in the period and to include Escrow receipts ($1.2 million).

⁴ EuroMicrocap Fund 2010, L.P. and EuroMicrocap Fund-C, L.P. are defined throughout the Condensed Interim Report and Financial Statements as "EMC", both L.P.s are held by the same limited partners and in the same ownership percentages.

Investment Adviser’s Report

Dear Fellow Shareholders,

We are very pleased to report three significant post-period realisations, all approximately at or above net asset value: Nielsen-Kellerman Co., K2 Towers and Factor Energia for which more details are provided later in this report.

JZCP’s NAV per share fell 2.4% during the period, from $10.12 at 28 February 2017 to $9.88 at 31 August 2017, primarily due to pre-development real estate costs. Unless otherwise stated, figures included in this report refer to the six-month period ended 31 August 2017.

During the period, JZCP invested a total of $56.3 million, including investments in Felix Storch, Jordan Health Products, Peaceable Street Capital and properties in Brooklyn, New York and South Florida. We realised $27.7 million primarily through the sale of Fidor Bank and the recapitalisation of Jordan Health Products.

As of 31 August 2017, our US micro-cap portfolio consisted of 21 businesses, which includes four ‘verticals’ and 12 co- investments, across nine industries; this portfolio was valued at 8.2x EBITDA, after applying an average 26% marketability discount to public comparables. The average underlying leverage senior to JZCP's position in our US micro-cap portfolio is 3.5x EBITDA. Consistent with our value-oriented investment strategy, we have acquired our current US micro-cap portfolio at an average 6.1x EBITDA; we paid 4.8x EBITDA on average for US micro-cap acquisitions made during the period.

Our European micro-cap portfolio consisted of 15 companies across five industries and six countries. The European micro-cap portfolio has low leverage senior to JZCP’s position, of under 2.0x EBITDA.

As of the same date, our US real estate portfolio consisted of 59 properties and can be grouped primarily into five major “assemblages”, located in the Williamsburg, Greenpoint and Downtown/Fulton Mall neighbourhoods of Brooklyn, New York, and the Wynwood and Design District neighbourhoods of Miami, Florida. Our assemblages are comprised of adjacent or concentrated groupings of properties that can be developed, financed and/or sold together at a higher valuation than on a stand-alone basis.

Net Asset Value ("NAV")

JZCP’s NAV per share fell 2.4% during the period, from $10.12 at 28 February 2017 to $9.88 at 31 August 2017.

¹ Net foreign exchange gains includes 20 cents relating to translation of investments, foreign exchange losses of 3 cents on the translation of the CULS and foreign exchange losses of 2 cents as recorded in the Statement of Comprehensive Income.

The US micro-cap portfolio performed steadily, delivering a net increase of 4 cents, primarily due to net accrued income of 8 cents and increased earnings at our Healthcare Revenue Cycle Management vertical (2 cents). Also contributing to the positive portfolio performance were increases at our Logistics vertical (1 cent) and at Jordan Health Products (1 cent). We also received 1 cent of escrow payments during the period.

Offsetting these increases were declines at our Industrial Services Solutions (“ISS”) vertical (8 cents) and Nationwide, our school photography business (1 cent).

The European micro-cap portfolio continued its positive trajectory, posting a net increase of 2 cents, primarily due to accrued income of 5 cents and a positive carried interest adjustment of 3 cents, offset by a write-down of Factor Energia, our energy supply business in Spain, of 6 cents.

The real estate portfolio experienced a net decrease of 17 cents, primarily due to operating expenses and debt service at the property level.

Returns

The chart below summarises cumulative total shareholder returns and total NAV returns for the most recent six-month, one-year, three-year, four-year and five-year periods.

¹ Total returns are cumulative and assume that dividends were reinvested.

Portfolio Summary

Our portfolio is well-diversified by asset type and geography, with 36 US and European micro-cap investments across nine industries and five primary real estate “assemblages” (59 total properties) located in Brooklyn, New York and South Florida. The portfolio continues to become more diversified geographically across Western Europe with investments in Spain, Italy, Luxembourg, Scandinavia and the UK.

Below is a summary of JZCP’s assets and liabilities at 31 August 2017 as compared to 28 February 2017. An explanation of the changes in the portfolio follows:

As previously announced, in April 2017 JZCP increased its loan facility with Guggenheim Partners from approximately $100 million to $150 million. The purpose of this increase in borrowings is to provide additional liquidity to JZCP in order to bridge certain planned realisations. The entire $150 million facility may be repaid, in whole or in part, at any time, without any prepayment penalties.

US micro-cap portfolio

As you know from previous reports, our US portfolio is grouped into industry ‘verticals’ and co-investments. Our ‘verticals’ strategy focuses on consolidating businesses under industry executives who can add value via organic growth and cross company synergies. Our co-investments strategy allows for greater diversification of our portfolio by investing in larger companies alongside well known private equity groups.

New US investments – verticals

New US investments – co-investments

¹Jordan Health Products is classified as an "Other" US Micro-cap investment in the Investment Portfolio.

European micro-cap portfolio

JZCP invests in the European micro-cap sector through its 75% ownership of EMC and its 18.8% ownership of JZI Fund III, L.P. (“Fund III”). JZAI has offices in London and Madrid and an outstanding team with over fifteen years of experience investing together in European micro-cap deals.

As of 31 August 2017, EMC held two investments in Spain: Factor Energia and Oro. Fund III held nine investments: three in Spain, two in Scandinavia, two in Italy and one each in the UK and Luxembourg. JZCP held direct loans to a further four companies in Spain: Ombuds, Docout, Xacom and Toro Finance.

In November 2017 (post-period), JZCP sold its interest in Factor Energia for expected total gross proceeds (before carry) of approximately €69.7 million ($82.3 million) (including deferred payments and interim distributions received over the course of the investment), which represents an approximate gross multiple of invested capital of 9.2x and an approximate gross IRR of 42.3% in euro-denominated terms. See below for further information.

Recent events

During the period, JZCP acquired stakes in two new businesses  via its  ownership  in Fund III: Treee, Italy’s first nationwide recycler of electric and electronic goods, and Eliantus, a build-up of solar plants in Spain.

JZCP also made follow-on investments in My Lender, a consumer lending business in Finland, and Alianzas en Aceros, a steel transformation company in Spain, both of which are owned by Fund III.

In March 2017, JZCP received its first tranche of proceeds totalling $12.5 million from the sale of portfolio company Fidor Bank to Groupe BPCE, the second largest banking group in France. The transaction had closed in December 2016. JZCP invested a total of $13.8 million and is expected to receive total gross proceeds of approximately $25 million from the sale.

In July 2017, JZCP received proceeds totalling $1.5 million from the refinancing of Petrocorner, a build-up of petrol stations in Spain, and a distribution on loan notes from Collingwood, a niche motor insurance business in the UK.

E-Mail-Adresse

Bitte überprüfe deine die E-Mail-Adresse.

Benachrichtigungen von ARIVA.DE
(Mit der Bestellung akzeptierst du die Datenschutzhinweise)

-1

Vielen Dank, dass du dich für unseren Newsletter angemeldet hast. Du erhältst in Kürze eine E-Mail mit einem Aktivierungslink.

Hinweis: ARIVA.DE veröffentlicht in dieser Rubrik Analysen, Kolumnen und Nachrichten aus verschiedenen Quellen. Die ARIVA.DE AG ist nicht verantwortlich für Inhalte, die erkennbar von Dritten in den „News“-Bereich dieser Webseite eingestellt worden sind, und macht sich diese nicht zu Eigen. Diese Inhalte sind insbesondere durch eine entsprechende „von“-Kennzeichnung unterhalb der Artikelüberschrift und/oder durch den Link „Um den vollständigen Artikel zu lesen, klicken Sie bitte hier.“ erkennbar; verantwortlich für diese Inhalte ist allein der genannte Dritte.

Andere Nutzer interessierten sich auch für folgende News

02:00 - PR Newswire

FirstGroup Plc - Transaction in Own Shares

24.04.24 - PR Newswire

Capital Gearing Trust Plc - Transaction in Own Shares

24.04.24 - PR Newswire

Fidelity Special Values Plc - Monthly Factsheet