JZ Capital Partners Limited · LSE:JZCP
JZ Capital Partners — FY2018 Earnings Presentation
34 slides from JZ Capital Partners's earnings presentation, May 18, 2018
Slide 1: 2018 Annual Results Presentation
2018 Annual Results Presentation
Slide 2: Disclaimer
This Document and the presentation to which it relates (‘Presentation’) do not constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of any securities o
Slide 3: Contents
Contents About Us Financial Highlights NAV Validation Portfolio Review Share Buyback Policy Outlook Appendix 3
Slide 4: About us
About us JZCP is one of the oldest closed-end Adviser is Jordan/Zalaznick Advisers, Inc. – investment companies listed on the Specialist founded in 1986 Fund Segment of the London Stock Exchange Led by Jay Jordan and David Zalaznick – invested together for more than 35 years Gordon Nelson (C
Slide 5: Financial highlights
Financial highlights Total NAV return • NAV of $837.6m (28/02/17: $848.8m) per share • Total NAV return per share of (1.4)% per share • Deployed $96.5m: $36.6m (US), $8.7m (Europe), $47.2m (real estate), $4.0m (other) Significant levels of • Realized NK & K2 Towers above NAV (Oct. 2017): cumulative
Slide 6: Share price and NAV per share performance
Share price and NAV per share performance Cumulative NAV total returns* Cumulative total shareholder returns* 16.7% 20.7% 8.2% 1 year 3 year 5 year 1 year 3 year 5 year -1.4% -2.0% -16.2% NAV to market price discount 42% 38% 34% 22% 2/28/13 2/28/15 2/28/17 2/28/18 *All performance figures assume re-
Slide 7: Net asset value
Net asset value 12 11.5 $0.85 $0.60 11 10.5 $0.03 $0.29 $10.12 $0.21 $0.08 $9.98 10 9.5 9 NAV per Ordinary US and European Real Estate Change in CULS fair Expenses and Finance Costs Net Foreign NAV per Ordinary Share as of 28 Micro-cap Investments value Taxation Exchange Effects Share as of 28 Febru
Slide 8: Balance sheet summary
Balance sheet summary $000 $000 Investments 28/02/18 28/02/17 US Micro-cap Investments 488,258 423,137 $000 $000 Investments 28/02/18 28/02/17 European Micro-cap 103,457 154,277 Total Assets 1,156,472 1,098,763 Investments - Liabilities (196,086) (138,921) Real Estate Investments 463,391 468,599 - Z
Slide 9: Portfolio breakdown
Portfolio breakdown Portfolio by Industry Portfolio by Investment Type @ Real estate 40.1% @ Real estate 40.1% @ Industrial 14.3% @ US micro-cap 42.3% @ Healthcare 14.1% @ Euro micro-cap 9.0% © Telecommunications 4.5% © Other investments 1.3% © Financial services 6.7% @ Treasury bills 4.3% @ Service
Slide 10: NAV Validation
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Slide 11: Discount of NAV carrying value to actual exit value
Discount of NAV carrying value to actual exit value JZCP has seen significant valuation uplift relative to historical carrying values Discount of NAV Carrying Value to Actual Exit Value (All US & European Micro-cap Exits 2014-2018)* % NAV Discount 25% 23.5% 20.9% 20% 15.4% 15% 14.2% 10% 5% 0% Four Q
Slide 12: Gross MOIC on exits
Gross MOIC on exits Gross MOIC on Exits (All US & European Micro-cap Exits 2014-2018)* Multiple 4.0x 3.5x 3.5x 2.8x 2.9x 3.0x 2.5x 2.0x 1.8x 1.6x 1.5x 1.0x 0.5x 0.0x 2014 2015 2016 2017 2018 Multiple of Invested Capital * As of 30 April 2018. Includes Bolder Healthcare Solutions and Paragon Water Sy
Slide 13: Successful realizations
Successful realizations • In October 2017, JZCP realized Nielsen-Kellerman (“NK”) and K2 Towers (“K2”) for a total gross value of $39.9m, representing a cumulative $13.4m uplift to JZCP’s NAV as of 31 August 2017. • Nielsen-Kellerman (NK) – October 2017 • Established in 1978, NK is a designer, manuf
Slide 14: Successful realizations (post-period)
Successful realizations (post-period) • Bolder Healthcare Solutions (BHS) – March 2018 • BHS was acquired by a subsidiary of Cognizant, one of the world's leading professional services companies. • BHS offers a full suite of healthcare revenue cycle management services to the hospital and physician
Slide 15: Portfolio Review – Micro-cap
Portfolio Review – Micro-cap
Slide 16: US micro-cap
US micro-cap Strategy: Verticals • Identify and purchase smaller businesses in “verticals” where an industry executive can add value via organic growth and cross company synergies • Sell vertical platform companies as one entity for a multiple expansion Strategy: Co-investments • Co-invest with know
Slide 17: US micro-cap verticals
US micro-cap verticals Industry sector driven “build-ups” created to add value through operational synergies across businesses and exit multiple expansion Industrial Healthcare Testing Services Revenue Cycle Water Services Solutions (ISS) Services Management* Industrial Revenue cycle Infrastructure
Slide 18: Significant US micro-cap co-investments
Significant US micro-cap co-investments Peaceable Street ABTB K2 Towers II* George Industries Sloan LED Capital Acquirer of fast One of the largest Manufacturer of Platform providing Designer and casual and quick private cell phone highly engineered preferred equity to manufacturer of LED service re
Slide 19: Significant US micro-cap investments
Significant US micro-cap investments Felix Storch Avante Orizon Priority Provider of compact Build-up: healthcare Platform established Provider of same day and specialty equipment sales, to invest in aerospace express courier refrigerators and service & installation and defence services other applia
Slide 20: European micro-cap
European micro-cap Strategy • Value-oriented investment approach targeting micro-cap companies in Western Europe • Diversified investment focus: portfolio companies in seven countries across five industries Management • Strategy coordinated by an experienced management team, which has invested in Eu
Slide 21: Fund III – significant portfolio companies
Fund III – significant portfolio companies Petrocorner Fincontinuo S.A.C Collingwood My Lender Strategic build-up to Independent salary- Operational van Niche UK-based Independent acquire 2-3% of backed consumer leasing (lease & motor insurance consumer lending Spain’s petrol station lending platfor
Slide 22: Portfolio Review – Real Estate
Portfolio Review – Real Estate
Slide 23: Real estate
Real estate Strategy • Value-added investment strategy analogous to micro-cap investing • Developing and repositioning retail, residential and office properties in Brooklyn and South Florida neighborhoods with strong growth demographics Value Add • Reposition: Vacate under-market units through lease
Slide 24: JZCP’s current real estate portfolio: Brooklyn, NY
JZCP’s current real estate portfolio: Brooklyn, NY • Williamsburg: Epicenter of positive shifting demographics in North Brooklyn • 12 mixed-use properties, located on most trafficked retail corridors • 57,000 sq. ft. residential / 157,000 sq. ft. retail • Two development sites situated at key neighb
Slide 25: Driggs Development
Driggs Development Construction Capitalization (expected at completion of construction) Total Equity* $8.1m Total Financing $38.2m Total Cost $46.3m Projected NOI at $2.7m Stabilization Stabilized Cap Rate 5.8% Base Case Exit Cap Rate 4.50% Base Case Valuation* $60.0m • Two separate mixed-use buildi
Slide 26: JZCP’s current real estate portfolio: South Florida
JZCP’s current real estate portfolio: South Florida • Wynwood (Miami): rapidly increasing retail rents amid a thriving arts scene • Three prime retail assets • Three top development sites with substantial air rights • Design District (Miami): innovative fashion, design and architecture attracting so
Slide 27: CUBE Wynwood Development
CUBE Wynwood Development Construction Capitalization (expected at completion of construction) Total Equity $8.1m Total Financing $31.2m Total Cost $39.3m Projected NOI at $3.5m Stabilization Stabilized Cap Rate 8.9% Base Case Exit Cap Rate 5.0% Base Case Valuation $70.0m • Estimated construction com
Slide 28: Share Buyback Policy
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Slide 29: Implementation of share buyback policy
Implementation of share buyback policy • In April 2017, JZCP’s board of directors discontinued the Company’s dividend policy and asked shareholders to authorize a new policy to include the repurchase of shares • Our stock had been trading at a significant discount to NAV in spite of a dividend yield
Slide 30: Summary & outlook
Summary & outlook Strong balance sheet to take advantage of investment Increased liquidity from realizations opportunities Strong pipeline of opportunities in Consistent validation of the US, Europe and real estate NAV portfolios First share buybacks Five realizations approximately at or above
Slide 31: Appendix
Appendix Z CAPITAL PARTNERS LIMITED
Slide 32: Major holdings
Major holdings Cost ($ 000) Value ($ 000) % of gross Company Type (28/02/2018) (28/02/2018) assets Healthcare Revenue Cycle Management vertical US micro-cap 30,327 108,026 9.3 Design District Assemblage Real estate 113,304 93,603 8.1 Industrial Services Solutions vertical US micro-cap 33,174 77,885
Slide 33: JZCP investment activity
JZCP investment activity Since 28 February 2017 ($ millions) Real Estate Investments 47.2 Felix Storch 12.0 ABTB 8.8 European investments 8.7 Avante 4.5 K2 Towers II 4.2 Peaceable Street Capital 3.0 RAF (testing vertical) 1.2 Sloan LED 1.1 Others 5.8 Total* 96.5 (*) Numbers subject to rounding 33
Slide 34: JZCP realisation activity
JZCP realisation activity Since 28 February 2017 Gross Proceeds ($ millions) Factor Energia – Sale 54.7 K2 Towers – Sale 28.7 Fidor – Sale 23.5 Nielsen-Kellerman – Sale 8.6 Avante – Dividend Recap 7.6 Bright Spruce Fund – Liquidation 4.7 Esperante Distribution and 267 Flatbush Sale 2.5 Escrows 1.9 P