Tristel Regulatory News (TSTL)

TRISTEL plc

("Tristel" or "the Company")

Preliminary Results for the year ended 30 June 2011

Tristel plc (AIM: TSTL), the manufacturer of infection control, contamination control and hygiene consumable products, announces [audited] preliminary results for the year ended 30 June 2011 in-line with market expectations.

Financial Highlights

·; Turnover up 6% to £9.29m (2010: £8.76m)

·; Gross margins maintained at c. 64%

·; Profit before tax of £0.508m (2010: £1.724m) - reflecting investment for future growth

·; Basic earnings per share of 1.27p (2010: 3.84p) - on lower profits and increase in shares in issue

·; Dividend per share for the full year of 0.555p (2010: 1.825p)

·; International sales up 34.4% to £1m with future growth to continue through international expansion

·; Equity raise of £3.9m (gross) in November 2010

·; Debt free with cash of £441k (2010: Net debt of £270k)

Operational Highlights

·; Expansion of Newmarket production facility to double capacity and establish clean room manufacturing

·; First sales of new "Crystel" non sterile products, addressing personal care market

·; Regulatory approvals received in China, Hong Kong, Germany, and Australia

Post Year-end events

·; China revenue ahead of internal forecast

·; Further sales of "Crystel" sterile products addressing pharmaceutical market expansion

·; Board changes - including appointment of Christopher Samler as Non-Executive Director

·; Good start to the year - trading in quarter to September ahead of internal expectations

Paul Swinney, Chief Executive of Tristel plc, said:

"We are disappointed that our five year record of continuous profits growth has been broken. However, the interruption is explained by the ambitious growth plan that we executed during the year: the expansion of our manufacturing plant and construction of a clean room, and increased investment in overseas markets. Overseas sales passed one million pounds for the first time and we are now involved in many of the world's fastest growing healthcare markets. The expansion of our manufacturing facility enabled us to launch the Crystel range of disinfectants and detergents for pharmaceutical and personal care manufacturing companies - a new area of activity for the Group."

For further information:

About Tristel plc

Tristel plc is an infection prevention and contamination control business headquartered in Newmarket, United Kingdom. Its products are used to prevent hospital acquired infections, for hygiene in animal healthcare and by pharmaceutical and personal care manufacturers for contamination control. Its leading brands are Tristel (infection prevention) and Crystel (contamination control). The Group's products are considered to be amongst the highest performing biocides available to healthcare and industry. Tristel's lead technology is a proprietary chlorine dioxide formulation used to disinfect instruments and surfaces and to control legionella and biofilm build up in water.

Tristel was admitted to the London Stock Exchange AIM market in June 2005. Its stock exchange symbol is TSTL.

Chairman's Statement

It is a great disappointment to report that the year ended 30 June 2011, our seventh as an AIM listed company, was the first in which profits did not improve on the previous year. Notwithstanding the disappointment, significant progress was made to grow the scale and capabilities of the Group.

Group turnover increased by 6% to £9,287,000 (2010: £8,764,000). Within this overall figure, sales of our proprietary chlorine dioxide based products, which are used in hospital infection control, were flat at £7,163,000 (2010: £7,121,000); sales of the portfolio of products branded "Medichem", which are primarily used in animal healthcare, increased by 27% to £2,086,000 (2010: £1,643,000), and we achieved our first sales of the "Crystel" range which is sold to pharmaceutical and personal care product manufacturers. The sales of these products were £38,000. This is a new activity that took the year to establish and was only completed towards the end of it.

With this latest initiative the Group now serves three markets:-

·; Hospital infection control - the products that we manufacture and sell are all high-performance disinfectants grouped together under the Tristel brand. They are used to prevent and control hospital acquired infections (HAI's). It is the original activity of the Group and the market is global;

·; Animal healthcare - we act as contract manufacturer for Medichem International (Marketing) Limited ("Medi-Mark"), a United Kingdom company that concentrates on the veterinary and small animal husbandry marketplace. The products we sell to Medi-Mark are disinfectants and are shown in our accounts as domestic sales, albeit that Medi-Mark sells the products worldwide. The products are marketed under a number of well established brands which we jointly own with Medi-Mark via our subsidiary company Medichem International Limited;

·; Pharmaceutical and personal care product manufacturers. This is a new activity that commenced during the year and required a major investment in our manufacturing facility, including the construction and fit-out of a clean room. The products are disinfectants and detergents and are grouped together under the Crystel brand. This market is also global.

In all three markets we are able to achieve high margins because the products enjoy either intellectual property protection, have little competition, or are intensely regulated. Many of our products enjoy all three advantages. The gross margin achieved during the year of 63.5% (2010: 64.4%) reflects this strategic positioning.

In order to support the creation of the Crystel portfolio of disinfectants and detergents, which we completed during the year from a standing start, we had to increase operating costs significantly. Total administrative expenses rose by 29.4% to £5,381,000 (2010: £4,160,000). Our average headcount increased to 90 personnel (2010: 50).

The cost of developing the new product range amounted to £490,000 which is shown within the "marketable product development" category of Intangible Assets. A further spend of £555,000, included within Fixed Asset additions, represents the cost of constructing a clean room, improvements to our production facility and purchases of plant and equipment. These investments were made in advance of the revenues that will result from them. Whilst we knew that this would be the case at the time that the investments were committed to and then made, we had hoped that the revenues would build more quickly than they in fact did; and whilst establishing Crystel we also continued to invest heavily in the expansion of our infection control business, focusing on international growth, and great strides forward have been made. During the year our Chinese subsidiary gained its first product registrations for Tristel products and our German operation established a foothold in the German hospital market. As we have identified above, the Tristel and Crystel businesses are global opportunities and our plans to realise their potential are ambitious. Execution of the plan in 2010-11 may have broken our record of continuous profit growth, but our vision is far sighted and our strategy long term, and we are confident that profit growth will resume in the current financial year.

EPS and dividend

Basic earnings per share were 1.27 pence (2010: 3.84 pence), a decline of 66.9%. The fall resulted from the lower level of profit and the increase in the number of ordinary shares in issue. In November 2010 we issued 6,842,105 ordinary shares to raise £3.9m (gross) which we have used to fund the expansion of the Group's manufacturing facility, to establish the new Crystel activity, to repay bank debt and to settle a substantial portion of a long term royalty liability.

In line with the Company's long term historic dividend policy of paying approximately 50% of after-tax profits to shareholders, the Board is recommending that the final dividend is 0.12 pence (2010: 1.4 pence), making the total dividend for the year 0.555 pence (2010: 1.825 pence). If approved, the final dividend will be paid on 16 December 2011 to shareholders on the register at 18 November 2011.

Looking to the future the Board intends to increase the dividend cover to 2.3 times until such time as pre-tax profits have returned to last year's underlying level of £1.5 million. Our intention then will be to reduce the dividend cover to 2 times. One-quarter of the planned annual dividend will be paid as an interim payment and three-quarters at the year end.

Board Changes

We are also pleased to welcome Christopher Samler to our Board. Christopher was CEO of Weston Medical Group plc and more recently Chairman of TQ Education & Training which last week was sold to Pearson plc. He brings great experience in healthcare and will be the senior independent director. It is the intention of my colleagues Peter Clarke and Antonio Soler, both non-executive Directors, to stand down from the Board at our forthcoming Annual General Meeting. Further details of the revised Board structure will be given at the Annual General Meeting.

Employees

As ever, our people are the key asset of this Company and we wish to thank them for their commitment, professionalism and effort during a year of great change.

Outlook

The year ended 30 June 2011 posed the greatest challenges of any in our fifteen year history. These were not imposed by the macro economic environment in which we operate which, for us, continues to be very benign, but by our ambitions to expand the Group. Having risen to these challenges, and in working to overcome them, we are better placed than ever to build the long term value of your business.

Francisco A. Soler

Chairman

21 October 2011

Chief Executive's Report

Tristel designs, develops, manufactures and sells infection control, contamination control and hygiene products. They incorporate a variety of chemistries.

During the course of the past seven years, during which we have been listed on the AIM market, we have sought to build a Group that is exposed to several distinct markets that are all global in their scale of opportunity. At the commencement of the year we were involved in two markets - Hospital infection control and Animal healthcare. During the year we made a significant step towards our long term goal by entering a third through the creation of the Crystel portfolio of products. This portfolio is sold to manufacturers of pharmaceutical and personal care products.

In each of the three markets that we now serve, which are described in greater detail below, we manufacture and sell consumable products rather than high value capital products. They achieve high margins because they enjoy intellectual property protection, sell into uncontested markets, or are intensely regulated. Whenever and wherever we can we seek all three competitive barriers as we create products.

Our strategy is best understood if we explain how it evolved.

Hospital infection control

When Tristel joined the AIM market in 2005 we were only involved in Hospital infection control. As we have described in previous Annual Reports, microbiologists and infection control officers devise their infection prevention and control strategies in terms of the vectors, or routes, of transmission of infection within a hospital. These vectors are instruments, water, surfaces and skin. Our internal financial reporting does not separate the different vectors; they exist within the single "hospital infection control" segment of the business. However, in order to explain our business it is helpful to consider them in turn. In 2005 we were concerned with only one - the disinfection of instruments.

Instruments vector

There are many types of medical instrument that cannot tolerate sterilisation by heat (autoclaving). As a consequence, they have to be disinfected with a liquid chemical disinfectant. The best known of these instruments are the large, complex, multi-channeled endoscopes that are used in gastro-intestinal (GI) endoscopy. Tristel's origins lie in the disinfection of these endoscopes. In the year ended 30 June 2005 over 85% of our revenues were generated from Tristel products used to disinfect them. However, even back in 2005, we could foresee that our ability to create a global business capitalising on the uniqueness of our proprietary chlorine dioxide would be limited if we focused only upon these types of instrument; the reasons being that, with the highest profile, GI endoscopy is highly competitive and overseas expansion would be difficult for technical reasons.

Our counter strategy has been to create products that disinfect the smaller and less complex heat sensitive instruments that are used in other departments of a hospital such as Ear, Nose and Throat (ENT), Cardiology, Urology, and Ultrasound. Our motivations have been to create products that can sell into the least contested areas of the hospital infection control market (we prefer uncontested) and that can succeed overseas as well as in the United Kingdom. We could also create the opportunity to secure patent protection on the packaging and delivery methods developed, establishing new intellectual property assets to complement patents on the Tristel chemical formulation.

In last year's Annual Report we grouped these different types of instrument into two categories, the first being GI endoscopy, and the second being all other departments using smaller endoscopes such as ENT, Cardiology, Urology, Human Reproductive Health (IVF) and Neo-natal. This year we have adopted different terminology to describe the two categories: Multi-channeled endoscopy (MCE) replaces GI endoscopy because it sweeps up a wider range of instruments that share the common feature of having multiple channels (lumens) running through them and which, as a consequence, are best disinfected in automated endoscope washing machines. Non and single-lumened instruments (N&Sli) becomes the second category and relates to the smaller instruments that have a single or no lumen. These include nasendoscopes (used in ENT procedures), cystoscopes (used in urology) and bronchoscopes (used in respiratory), as well as the many types of ultrasound probes and scopes that are used in other departments in hospitals.

As observed above, MCE instruments should be disinfected in endoscope washing machines and the Tristel products which we sell into the MCE area are used in such washers. During the first half of the last decade, when we were establishing a leading market position in the United Kingdom in the MCE area, there was a clear divide between the suppliers of disinfectants and the suppliers of washing machines. However, over time the companies that manufacture and sell the machines have developed or sourced their own disinfectants (all of which are based on peracetic acid, super-oxidised water or aldehydes). They have done this to capture and retain the profit margin on the disinfectant - the consumable element.

From the strategic perspective the structure of this MCE business posed two great challenges. First, from the outset it restricted our MCE business to the United Kingdom because in overseas markets the majority of machines already had their own disinfectant. Second, over time our revenues could fall if the United Kingdom machine suppliers acquired their own disinfectants. We faced the choice of involving ourselves in this high value capital equipment business, in which no companies seem able to be consistently profitable, or pursue an alternative direction. We did the latter.

The products that we created to disinfect the N&Sli instruments are the Tristel Wipes System, the Stella decontamination tray together with Fuse high-level disinfectant, and various chlorine dioxide foam applications.

One of our most successful innovations has been the Tristel Wipes System. By incorporating the three steps of the decontamination process - cleaning the instrument; disinfecting it with chlorine dioxide; and then rinsing it before next use - into three individual wipes (each with their own unique formulation to undertake the task), and combining the steps with an audit trail process, the Tristel Wipes System has become the most widely used disinfection method in ENT, Cardiology and IVF departments in the United Kingdom. The system is portable, allows the instrument to be returned to the consultant for his next patient in a number of minutes, and requires no capital investment or maintenance. It is a manual process, but one that meets the requirements of the infection control team for a systematic, properly documented system supported by comprehensive training. Both the chlorine dioxide wipe and entire Wipes System are extensively patented.

The Tristel Wipes System is being sold in the United Kingdom and Republic of Ireland, throughout much of Continental Europe and Scandinavia, in Russia, Turkey, the UAE, Malaysia, South Africa, Australia, New Zealand and Hong Kong. It is being registered for sale in China.

Whereas the Wipes System is a manual decontamination process, Stella is a more conventional immersion technique in which the instrument is soaked in Tristel Fuse liquid disinfectant for five minutes, the time required to kill all organisms. Stella is able to flush automatically the lumen of an instrument, thereby enabling it to decontaminate the single-lumened instruments widely used in urology, gynaecology and respiratory medicine.

One of the key features of Stella is that it does not require mains power supply or mains water and has no need for service or maintenance. It is battery powered. Stella has, as a consequence, enormous potential in all lesser resourced healthcare markets. We believe that Stella can make a considerable difference to hygiene standards in the developing world.

Stella units have been sold in the United Kingdom, Republic of Ireland, Belgium, Germany, Italy, Spain, Dubai, New Zealand and China.

The Wipes System and Stella with Fuse challenge the orthodox conventions of endoscope decontamination, but they are gaining widespread acceptance. In the United Kingdom the Wipes System has been acknowledged by the Society of ENT Consultants (ENT UK) as the most widely used and practical decontamination method of processing nasendoscopes and the Society's updated guidelines for nasendoscope decontamination published in 2010 commented: "A large number of hospitals have used the chlorine dioxide cleansing system for a number of years without any reports of undue consequences". During the year the Italian Society of ENT consultants published new guidelines to its members for the decontamination of nasendoscopes and referred by name to the Wipes System, Stella and Tristel's chlorine dioxide chemistry as acceptable decontamination methods. Again, during the year both the regulatory bodies in Hong Kong and Australia (the Therapeutic Goods Association) approved the Wipes System for use on nasendoscopes and other non-lumened heat sensitive instruments.

Last year we commented that we had initiated two clinical studies at the Bay of Plenty Clinical School, New Zealand. The first of the studies, which is complete, has investigated the efficacy, safety and health economics of Stella and Fuse in flexible cystoscope decontamination procedures in urology. The second, still ongoing, is investigating the efficacy, safety and health economics of the Wipes System in flexible nasendoscope decontamination procedures in ENT. The urology study is being presented at the International Societe d'Urologie congress in Berlin in October 2011 and at the World Endourology congress in Kyoto, Japan in December 2011. We anticipate that the study will be published in an eminent peer reviewed scientific journal during the current financial year. The ENT study is expected to be completed in early 2012.

Instruments vector - financial performance and future outlook

The shifting pattern of the Hospital infection control Instruments vector can be seen in the following tables:

Sales in 2010-11 of MCE products were £2,908,000, a decline of 15% from the previous year. All sales were in the United Kingdom. The reasons for the fall are explained above.

Total sales of N&Sli increased from £2,343,000 to £2,552,000, a rise of 9%, with domestic sales increasing by 8.5%, even though we had achieved very high market penetration in United Kingdom ENT and cardiology by the end of 2009-10. Overseas sales increased by 10.2%.

In last year's Annual Report we commented that our MCE activity would remain restricted to the United Kingdom and that in revenue terms MCE was considered to be a no growth area for the business. Whilst the first observation was correct, the second was widely off the mark. The unanticipated decline in MCE revenues exacerbated the mismatch between costs and revenues that occurred elsewhere within the Group during the year. Our business plan now assumes that the revenue decline will continue.

We expect the N&Sli business to continue to grow strongly. The contribution of overseas sales will increase as more countries approve the Wipes System and Stella and they increasingly become the orthodox decontamination methods for non and single-lumened heat sensitive devices.

Water vector

Following the chronology of the Group's development, we entered the water disinfection market via the purchase of Vernagene Limited in 2006.

That company had for a number of years been the distributor of a chlorine dioxide chemistry that is different from our proprietary formulation. The chemistry is manufactured by Bio-Cide International Inc., Oklahoma, United States. The chlorine dioxide chemistry is used to control Legionella, a bacterium found in drinking water and cooling towers. Legionella is the cause of Legionnaire's disease.

The chemistry is also used in horticulture to reduce spoilage and increase the shelf-life of plants such as orchids.

The Group continues to be Bio-Cide's exclusive distributor for the entire European market. The supply agreement was renewed on 13 June 2008 and has a 20-year term. In association with the supply agreement, Tristel is the representative of Bio-Cide in the industry group that is sponsoring the registration of sodium chlorite and chlorine dioxide under the Biocidal Products Directive (BPD). Tristel and Bio-Cide share the costs and benefits of membership of this industry group.

The active ingredients used in general purpose disinfectants, such as those used for surfaces, water and skin have to be registered under the BPD. This Directive has been introduced by the European Community (EC) to limit the number of active ingredients that can be used, primarily for ecological and environmental reasons. Sodium chlorite has been approved by the EC and our industry group is supporting it through the regulatory submission process. The industry's consensus view is that the cost of submission under the BPD will block the development and introduction of active ingredients that could be future alternatives to those already approved under the BPD. As a supplier of chlorine dioxide products, our long-term view is that the regulatory environment is favourable to the disinfection products that we market, and that our involvement in this vector has bought an important corollary benefit in that we are involved in shaping the future regulatory environment for our technology.

Water vector - financial performance and outlook

The Water vector, whilst not a growth opportunity, produces a consistent stream of revenue, profit and cash. It is a low investment area of the Group's business.

Total sales within the Water vector were £611,000 (2010: £646,000). Export sales were £235,000 (2010: £124,000) and domestic sales £376,000 (2010: £522,000).

Surfaces vector

In 2007 we developed our first product using our chlorine dioxide chemistry to disinfect hospital surfaces, such as ward floors, operating theatre walls, bed mattresses, commodes and patient trolleys. Whereas when we started in the Instruments vector the target disinfectant chemistry to replace was glutaraldehyde, in the Surfaces vector the target chemical to replace is chlorine.

A key characteristic of Tristel's chlorine dioxide chemistry is that it is rapidly effective against bacterial spores. Speed of kill is critical when it comes to disinfecting a surface, as once wetted the surface will dry naturally. If the disinfectant requires a longer contact time to kill a spore than the drying time will allow, the disinfectant will not complete the task. All of our surfaces products kill spores, and most importantly Clostridium difficile spores, in less than five minutes which is quick enough for a surface to remain wet in almost all conditions.

One disappointment during the year was the decision by The Clorox Company (Clorox) to terminate the licence that we had granted them to commercialise our chlorine dioxide chemistry in the United States hospital market.

Surfaces vector - financial performance and outlook

Our surfaces portfolio has increased its penetration into the United Kingdom hospital market and sales overseas are starting to gain traction. The progress made over the course of the past two years is demonstrated in the following table.

Since the year end the surfaces portfolio has been augmented by the inclusion of a sporicidal surface wipe which was launched at the United Kingdom Infection Prevention Society meeting in Bournemouth in September 2011.

Other

Other Hospital infection control revenues were £225,000 during the year (2010: £177,000), of which £153,000 was generated in the United Kingdom (2010: £177,000) and £72,000 overseas (2010: £nil).

International

Tristel has a clear strategy to expand its business internationally.

As stated in the Chairman's introduction, our Hospital infection control business is involved in both the domestic and overseas marketplace, whereas all sales in our Animal healthcare business are generated in the United Kingdom. There were no overseas sales from our nascent Crystel business during the year, but overseas expansion will be a critical element of this activity in future years.

In the majority of countries where we sell products, the business model employed is to use a national distribution partner. During the year eighteen distributors purchased Tristel Hospital infection control products with an aggregate value of £726,000 (2010: £654,000) for re-sale in their national market, an increase of 11% on the prior year.

Additionally, we have established wholly owned or partially owned operations in the following countries:-

Tristel New Zealand Limited, New Zealand (100% owned)

Tristel NZ is based in Tauranga, North Island. Its team supervises product development, manufacture and all aspects of the supply chain process for the Stella decontamination system. The team also serves the New Zealand and Australia Hospital infection control markets.

Shanghai Stella Medical Equipment Co. Limited, China (85% owned)

SSME is based in Shanghai and its team is managing the regulatory process within China, Hong Kong and Taiwan for the three Tristel Hospital infection control products - the Wipes System; Stella and Fuse, and the Surfaces range. Stella, Fuse and Tristel Jet (a surfaces product) have received their regulatory approvals and are being actively marketed.

Tristel Asia Limited, Hong Kong (85% owned)

TAL acts an intermediate holding company for SSME and also sells Hospital infection control products in Hong Kong.

Tristel Italia Srl, Italy (20% owned)

TIL is a sales and marketing operation serving the Italian Hospital infection control market.

Tristel Germany (branch)

TG is a branch operation located in Berlin. The team is a sales and marketing operation serving the German Hospital infection control market. During the year TG succeeded in including the Wipes System in Germany's Association for Applied Hygiene (Verbund fur Angewandte Hygiene or VAH).

International - financial performance and future outlook

Tristel's Hospital infection control business has the opportunity to be global both in reach and scale, as does the Crystel business.

There will be opportunities in the future to use the overseas distributors that we have established for our Hospital infection control products to serve the Pharmaceutical and personal care manufacturing companies located in their countries with the Crystel portfolio. This opportunity will be for both our distributor partners and our owned operations.

Group export sales increased by 34.4% during the year from £748,000 to £1,004,000 and international expansion will continue to be a major driving force for the growth of the Group.

Animal healthcare

Medi-Mark has established a strong presence in animal healthcare over the course of the past eighteen years. It is a family owned and run business that Tristel has been very familiar with throughout the period. Its main brands are:-

·; Trigene Advance

A range of surface disinfectants which are available as liquid concentrates, ready to use products, trigger sprays and wipes. The disinfectants are intermediate level biocides and the formulation is proprietary to Tristel. The Trigene range is sold by Medi-Mark worldwide and is very popular in the small animal sector;

·; Meddis

An intermediate level disinfectant which is used to decontaminate veterinary, dental and medical instruments;

·; Perascope

A range of peracetic acid based products that are used for instrument disinfection in hospitals;

·; Medizyme

An instrument cleaner.

Animal healthcare - financial performance and future outlook

Sales to Medi-Mark were £2,086,000 (2010: £1,643,000), a 26.8% increase on the prior year. This increase reflects the fact that we manufactured the entire Medichem portfolio throughout the year whereas we manufactured only a part of it during the previous year.

The Medichem business is solidly based with a consistent track record over the past decade. Whilst we exert no influence over the management of Medi-Mark and the business they generate, we can assist its continued growth through our manufacturing performance and new product development.

Pharmaceutical and personal care product manufacturers - the Crystel business

During the course of the year we created seventeen distinct formulae, validated their technical capabilities and documented them for acceptance by the Pharmaceutical and personal care product manufacturers that are our target customers. The formulae are for detergents and disinfectants that are used to clean manufacturing plants and manufacturers' clean rooms.

We created an imaginative and exciting master brand for the portfolio - "Crystel" - using gemstones and precious metals as the individual product brands.

The detergents and disinfectants are categorised as "non-sterile" and "sterile" in terms of our manufacture of them. The sterile products have to be made in the clean room that we built in our Newmarket facility and are used in pharmaceutical manufacturers' clean rooms to disinfect surfaces during the production of drugs.

It is a very demanding activity in terms of regulation and manufacturing practice, and high margins can be achieved as a result.

We are in the process of establishing distributors in overseas markets and will serve the United Kingdom customer base with our own sales force.

Pharmaceutical and personal care market - financial performance and future outlook

Sales commenced during the year and totalled £38,000 (2010: nil).

We expect a very significant increase in sales during the current financial year as the Crystel portfolio is now complete and in manufacture, and the selling effort is gaining momentum.

GROUP RESULTS AND FINANCE

Revenue

Group revenue increased by 6% to £9,287,000 (2010: £8,764,000).

Margins and operating profit

The gross margin declined very marginally to 63.5% from 64.4% in 2010.

Excluding amortisation of intangibles, share-based payments and non-recurring items, operating profits decreased by 52.5% to £824,000 (2010: £1,735,000). The pre-tax margin fell to 5.5% from 19.7%.

The decline in the operating and pre-tax margins reflect the very substantial increase in operating expenses that we incurred to enhance our manufacturing capability to establish the Crystel portfolio and to establish operations in Germany and China.

Earnings

The basic earnings per share were 1.27 pence (2010: 3.84 pence), a decrease of 66.9%. The decline in earnings per share was impacted by the issue of 6,842,105 ordinary shares in November 2010 which raised £3.9m (gross) and has been used to fund the expansion of the group's manufacturing facility, repay debt and in partial settlement of a long term royalty liability.

Capital and Intangible expenditures

We have made a considerable investment into our manufacturing facility during the year, having constructed a clean room which will provide the controlled manufacturing environment necessary for the production of the sterile products which form the major part of the Crystel product range. Alongside this we have extended and enhanced our existing manufacturing facility, increasing bulk production capacity by two thirds.

As a result of the capital works we are now able to manufacture to GMP standards which we identified as a key requirement to the success of the new area of the business. The total cost of this investment was £555,000 (2010 buildings and improvements to leasehold: £390,000). Purchases of vehicles, plant and equipment amounted to £325,000 (2010: 324,000)

We have invested £1.9m (2010: £3.1m) in intangible assets, including £906,000 in the development of new products, £528,000 in partial settlement of a long term royalty obligation and £530,000 in obtaining patents and regulatory approvals. Expenditures on innovation, product development and regulatory approvals are a feature of our business. It is vital that we maintain a long term view and continue to invest in these revenue generating assets of the future.

Treasury and deployment of capital

The year started with net debt of £270,000 derived from cash balances of £986,000 less interest bearing loans of £1,256,000. The cash inflow from the issue of shares repaid the outstanding debt, allowed for the partial settlement and capping of a long term royalty obligation and funded the capital works and expansion of the business. Cash at 30 June 2011 was £441,000.

The year ahead

Having established during 2010-11 the capabilities to serve the three markets described above, the prerogative in the current year is to deliver the revenues from each that will restore the level of Group profitability that we target.

Paul C Swinney

Chief Executive

21 October 2011

All amounts relate to continuing operations.

ii. CASH AND CASH EQUIVALENTS

The amounts disclosed on the cash flow statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts

1. NOTES

Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU').

Changes in accounting policies The Group has adopted the following new interpretations, revisions and amendments to IFRS issued by the IASB, which are relevant to and effective for the Group's financial statements for the annual period beginning 1 July 2010:

Amendment to IFRS 2 • Group cash-settled Share Based Payment Transactions

Amendment to IAS 1 • Presentation of Financial Statements IFRS 2 Group cash-settled Share Based Payment Transactions (effective 1 January 2010)The amendment to IFRS 2 clarifies that an entity that receives goods or services in a share based payment arrangement must account for those goods or services regardless of which entity in the Group settles the transaction, or whether the transaction is settled in shares or cash. The standard did not have a material effect on the Group's financial statements.

IAS1 Presentation of Financial Statements - revised 2007 (effective I July 2012)

The revision to IAS1 requires presentation of a comparative balance sheet at the start of the first comparative period, in some circumstances. Management considers that this is not necessary this year since the 2009 balance sheet is the same as that previously published.

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2011. Where audited financial statements at this date are not available due to non concurrent year ends, Management accounts at 30 June 2011 have been used. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated Balance Sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

During the prior year the Group acquired the manufacturing rights and knowhow to a range of disinfection and cleaning products branded "Medichem". Incidental to the purchase of manufacturing rights the Group acquired 50% of the share capital of Medichem International Limited ("MIL"), the company which also owns the "Medichem" trademark.

The Board do not consider that the acquired assets and liabilities meet the definition of a business combination, on the grounds that there is not a combination of inputs, outputs or processes moving forward. The Board further considers that due to ownership of the knowhow and manufacturing rights, MIL is a subsidiary and as such 100% of the assets and liabilities and the result for the year have been consolidated on a line by line basis, with an adjustment made for non controlling interests.

EU Adopted IFRSs not yet applied

As of 30 June 2011, the following Standards and Interpretations are in issue but not yet effective and have not been adopted early by the Group:

·; IFRS 9 Financial Instruments (effective 1 January 2013) 

·; IFRS 10 Consolidated Financial Statements (effective 1 January 2013) 

·; IFRS 12 Disclosure of interests in other entities (effective 1 January 2013)

·; IFRS 13 Fait value measurement (effective 1 January 2013)

·; IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013) 

·; IAS 24 (Revised 2009) Related party disclosures (effective 1 January 2011)

·; IAS 27 (Revised) Separate financial statements (effective 1 January 2013)

·; IAS 28 (Revised) Investments in Associates and Joint Ventures (effective 1 January 2013) 

·; Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012)

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material effect on the financial statements of the Group.

2. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2011 or 2010, as defined in Section 435 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the year ended 30 June 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (1) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

3. EXCEPTIONAL INCOME

There was no exceptional income during the year.

In July 2009 the Group acquired the manufacturing rights and knowhow to a range of disinfection and cleaning products branded "Medichem", whereby the consideration was payable over five years. In June 2010 an agreement was made with the vendor to settle the remaining deferred element of the consideration early. This took place during the prior year and resulted in a discount against fair value of £232,713. Given the nature of the discount the Directors consider it to be an exceptional item, which was recorded in the prior year accounts. The exceptional income increased the tax charge in the prior year by £67,487.

4. DIVIDENDS

The proposed final dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in the financial statements.

5. EARNINGS PER SHARE

The calculations of earnings per share are based on the following profits and numbers of shares:

The calculation of the weighted average number of shares is based on the years ended 30 June 2011 and 30 June 2010. The calculation of diluted earnings per share includes outstanding options on 2,075,000 ordinary shares at 30 June 2011 (1,937,500- 30 June 2010).

6. CALLED UP SHARE CAPITAL

On 23 November 2010 the Company issued 6,842,105 new ordinary shares of 1p each for an aggregate consideration of £3,900,000. The proceeds, after deduction of associated costs, amounted to £3,669,000, resulting in a credit to the Share premium account of £3,601,000. The shares were issued to reduce bank borrowings, restructure a royalty obligation and fund the expansion of the business.

(2010: In July 2009, 2,688,287 ordinary shares were issued at £0.41 per share, being the market price at the date of allotment. The proceeds, after deduction of associated costs, amounted to £1,045,000, resulting in a credit to the Share premium account of £1,019,000. The shares were issued to assist the Group with the acquisition of Manufacturing rights to a range of products sold predominantly into veterinary and animal welfare sectors.

In November 2009 a further 3,571,429 shares were issued at £0.56 per share. The proceeds, after deduction of associated costs, amounted to £1,913,000, resulting in a credit to the Share premium account of £1,868,000. The shares were issued to meet institutional demand and assist the Groups working capital.)

7. POST BALANCE SHEET EVENT & CONTINGENT ASSET

During August 2011 the company received a repayment of corporation tax amounting to £352,000 in respect of a retrospective research and development tax relief claim. The repayment has been accounted for post year end on the basis that there was no certainty of success, the asset being contingent upon agreement by HMRC, which had not occurred at the reporting date.

A professional fee payable upon success of the claim amounting to £32,500 was paid post year end and accounted for in that period.

8. ANNUAL REPORT

The annual report and financial statements will be available on the company's web site www.tristel.com from 24 October 2011. Printed copies will be posted to shareholders prior to the Company's Annual General Meeting taking place on 13 December 2011 at the Company's premises in Snailwell, Newmarket.