Tristel Share News (TSTL)

The big investment in manufacturing facilities and staff is now complete at contamination and infection control products maker Tristel, leaving the company free to concentrate on breaking out all over like a rash.The company saw sales surge to £5.06m in the second half of 2011 from £4.57m in the corresponding period of 2010, with overseas sales doubling to £0.78m from £0.39m."It was always in the business plan to grow beyond the UK," Paul Swinney, Chief Executive Officer of Tristel, told Sharecast. The eye-catching growth may be overseas but the top line in the UK is still heading in the right direction, at least for most parts of the business. "Our UK hospital infection control business increased sales of instrument disinfectants by 23.2% in the areas that we focus upon today of ENT [ear, nose & throat], urology and cardiology. We managed to slow the pace of decline in sales in our legacy UK business that focused on digestive endoscopy," Swinney added.However, the reason why the legacy UK business is not deteriorating as fast as it was is a by-product of National Health Service (NHS) spending constraints, in the view of Swinney. In short, every time the NHS buys a new modern washing machine, Tristel loses a contract for its cleansing solution, and right now the NHS is not investing much in new equipment."I am sure they [the NHS] will be back to spending freely in three or four semesters," Swinney told Sharecast. Finance Director Liz Dixon, meanwhile, predicted that the the rate of decline will start picking up again in the next financial year.As for the overseas expansion, the group has elected to go down the route of appointing a number of provincial distributors in China, rather than one single agent."There is no company in the world that mirrors Tristel's profile, so it is not possible to appoint a global distributor," Swinney said.Things are also going well in Australia. "We got TGA approval in the Spring; the TGA is the Australian equivalent of the US Food and Drug Administration. Australia as a whole offers about half the value opportunity of the UK, despite having less than half the population at about 24m. Their healthcare system is very advanced, and they also have a lot of community hospitals, so there are a lot of sales opportunities," Swinney explained. Administrative expenses shot up to £3.21m from £2.53m the year before, which was a major reason why profit before tax tumbled to £0.26m from £0.43m at the interim stage of 2011."We have now levelled off our investment in people and overhead and as we continue to grow sales in the areas we invested in last year we will see a significant improvement in profitability," predicted Swinney. In the meantime, shareholders are having to swallow a cut in the interim dividend to 0.27p from 0.435p last year.That was clearly flagged at the time of the company's full year results, however. The board signalled that during the period of investment and changing focus, it would limit dividend payments so that they are covered 2.3 times by earnings per share. Once underlying pre-tax profits have got back to the £1.5m level, the intention is to pay out about half of bottom line earnings as dividends. Basic earnings per share rose 47.3% to 1.37p from 0.93p the year before as a result of a research & development tax credit. The firm finished 2011 with £0.41m, which it says is adequate - in conjunction with its banking facilities - to carry out its growth plans."Much of the investment made last year has still to bear fruit in terms of sales contribution but the scale up of our capabilities, both in terms of plant and people, is now behind us. We can look forward to a resumption of the consistent profit growth that marked our first six years on the AIM market," pledged company Chairman, Francisco Soler.Finance Director Liz Dixon highlighted the contribution of the group's fledgling pharmaceuticals business, which generated sales of £85,000. "That's a drop in the ocean at the moment but we feel the barriers are down now and we can really grow sales to the pharmaceutical and personal care product manufacturing industries," Dixon said.The market seemed convinced, with the shares rising 2p to 38p in early trading, although by the end of the day the gain was halved. jh