JZ Capital Partners has announced its annual results for the year ended 29 February 2016. The period was a busy one for the company during which it undertook an equity placing as well as a rollover of a zero dividend preference share. During the period, the company reports absolute total NAV growth of 20.7% to $851.7m. However, on a per share basis, after dilution from new share issuance and as well as paying the dividend (dividend policy is to distribute 3% of its NAV in semi-annual installments), JZCP’s NAV fell by 3.5% to $10.49. The NAV per share, prior to the dividend and dilution, was $11.46. The dividend cost $0.335 per share whilst the dilution cost $0.97 per share. The share price fell by 2.9% during the period. Shareholders approved a more diverse investment policy last year and, reflecting this, the AIC reclassified JZCP into the newly established Flexible Investment sector.
In terms of portfolio activity, the company describes the period as an active one for investment with $272.7m invested across the company’s core portfolios (US and European micro-cap and US real estate), whilst realisations generated $205.1m. At the end of the period, the Company’s portfolio consisted of 69 micro-cap businesses across eight industries and 51 properties located in Brooklyn, New York and Miami, Florida. The company says that it continues to become more diversified geographically as it invests in more Western European countries. The realisations came primarily through the sale of three US micro-cap companies and the secondary sale of six of its European investments (held through EMC 2010) at NAV to a major financial institution for €96.3 million.
In terms of performance, the board say that they pleased with the positive performance of the US micro-cap portfolio, which has seen a valuation increase of 46 cents per share during the period. They say that this is primarily due to increased earnings and numerous accretive acquisitions at the company’s ISS vertical (6 cents), Healthcare Revenue Cycle Management vertical (7 cents) and Water vertical (5 cents).
The company says that its European micro-cap portfolio had a net increase of 15 cents. They say that this is primarily due to write-ups reflecting increased earnings at: One World Packaging (1 cent), a niche manufacturer of biodegradable, environmentally friendly packaging; Fidor Bank (4 cents), a German online bank; Winn (1 cent), a UK-based legal claims processing business; and Petrocorner (2 cents), a petrol station build-up in Spain. These gains were offset by write-downs at Ombuds (2 cents), a private security business and Docout (1 cent), a business process outsourcing company.
The real estate portfolio had a net increase of 62 cents, led by significant write-ups at the original Bedford Avenue property (31 cents), Greenpoint development site (9 cents), new Bedford Avenue portfolio (8 cents), Fulton assemblage (5 cents), and greater Miami portfolio (7 cents).
In terms of outlook, the company says that, having financed and realised almost half a billion dollars ($479.0 million) during the past fiscal year, it has achieved a stronger, less leveraged balance sheet with fresh capital available to pursue multiple opportunities. Looking ahead, they are pursuing several more realisations in the coming year, which they say will provide more liquidity to invest in their growing pipeline of opportunities. The managers say that the pace of investment will be a function of prices, which they say seem to be high in several sectors.
JZ Capital Partners has a busy year : JZCP