Tristel Regulatory News (TSTL)

RNS Number : 5121U

Tristel PLC

18 October 2010

 

 

 

 

Monday, 18 October 2010

 

TRISTEL plc

("Tristel" or "the Company")

 

Preliminary Results for the Year Ended 30 June 2010

 

A fifth consecutive year of profits growth

 

Tristel plc (AIM: TSTL), the manufacturer of infection control, contamination control and hygiene products, is pleased to announce its preliminary results for the year ended 30 June 2010. Tristel sells its products to the human and animal healthcare market.

 

Financial Highlights

·; Turnover up 28.0% to £8.76m (2009: £6.85m)

·; Profit before tax up 34.2% to £1.72m (2009: £1.29m)

·; Basic earnings per share 3.84p (2009: 3.42p), an increase of 12.3%

·; Adjusted earnings per share* 5.18p (2009: 4.97p), an increase of 4.2%

·; Dividend per share for the full year up 7.4% to 1.825p (2009: 1.7p).

 

Operational Highlights

·; Successful integration of animal healthcare range into Newmarket manufacturing facility

·; Incorporation of subsidiary and first sales of hospital infection control products into China

 

Post Year-end events

·; Branch established in Berlin, Germany, with first sales achieved

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

·; Regulatory approval granted for Stella decontamination system in China  

 

Paul Swinney, Chief Executive of Tristel plc, said:

"Tristel has had another successful year, increasing turnover and profit for the fifth consecutive year since joining AIM in 2005. We continue to expand internationally, obtaining our first regulatory approval in China and achieving our first sales, and we have now also entered the German market. We look forward to the future with confidence".

 

 

For further information:

 

Tristel plc	Tel: 01638 721 500
Paul Swinney, Chief Executive
Walbrook PR Ltd	Tel: 020 7933 8787
Paul McManus	Mob: 07980 541 893
	paul.mcmanus@walbrookpr.com
FinnCap
Geoff Nash (Corporate Finance) Charlotte Stranner (Corporate Finance)	Tel: 020 7600 1658
Simon Starr (Corporate Broking)

 

*[EPS adjusted for amortisation, depreciation, impairment losses, share based payment and exceptional item]

 

Chairman's Statement

I am pleased to report another record year for your Company.

 

Turnover increased by 28% to £8,764,000 (2009: £6,847,000). This was attributable to higher sales of our proprietary chlorine dioxide based products which are primarily used to prevent hospital acquired infections (HAI's) and also to our first sales of the MediChem portfolio of products. We acquired the manufacturing rights and know-how for these products in July 2009. We act as contract manufacturer for the Medichem portfolio, supplying disinfectant and cleaning products to one customer - Medichem International (Marketing) Limited - which sells them on to its customers in the United Kingdom and overseas. The Medichem products are used primarily in animal healthcare.

 

The integration of the manufacture of the Medichem portfolio into our production facility in Newmarket has been successfully executed by our management team. The acquisition has met the objectives set when we concluded it and financed it via a share placing in July last year.

 

As a consequence of the expansion and diversification of our business and the change to our business model resulting from the Medichem portfolio acquisition, and in accordance with IFRS 8 Operating Segments, we have separately reported on the Medichem activities in this year's Annual Report and Accounts.

 

We maintained gross margins during the year to the level targeted in our annual financial plan and expense growth was controlled satisfactorily. All these achievements combined to produce a record underlying profit before tax and non-recurring item of £1,491,000, an increase of 16% over last year.

 

Having successfully bedded down the manufacture of the Medichem portfolio through the course of the year, in June 2010 we took the opportunity to settle early the deferred consideration payable over the course of the next five years. In so doing, we negotiated a substantial discount that resulted in an exceptional profit of £233,000, lifting reported pre-tax profit to £1,724,000, an increase of 34.2% over last year.

 

EPS and dividend

Basic earnings per share were 3.84 pence (2009: 3.42 pence), an increase of 12.3%. The increase was impacted by two share issues in the year. In July 2009 we issued 2,688,287 ordinary shares at 41 pence to raise slightly more than £1 million which funded the Medichem portfolio acquisition. In November we issued a further 3,571,429 ordinary shares at 56 pence to meet institutional demand. The funds raised of approximately £2 million were deployed for general working capital purposes and gave us the ability at the end of our financial year to conclude the early settlement of the deferred consideration. Management has put both share issues to good effect.

 

Based upon the positive trading performance the Board is recommending that the final dividend be increased by 8.1% to 1.4 pence (2009: 1.295 pence), increasing the total annual dividend by 7.4% to 1.825 pence per share (2009: 1.7 pence). If approved, the final dividend will be paid on 17th December 2010 to shareholders on the register at 19th November 2010.

 

Employees

Our people are and always will be the mainstay of our business. The Board recognises the professionalism and commitment of the team and I would like to thank them for their efforts this year.

 

I would also like to introduce Liz Dixon as our Finance Director, appointed in June of this year. Liz has been an employee for the past three years and she becomes our first female main Board director. Finally, I would like to thank Paul Barnes who resigned as Finance Director but remains as a non-executive director and Chairman of the Audit Committee. Paul helped steer us toward and through our flotation and we are pleased that we can continue to call upon his experience and expertise.

 

Outlook

Although 2009-10 was another year of change and continued growth we have not been distracted from our absolute focus upon infection control and hygiene. Rather, we have diversified and strengthened the business by gaining exposure to animal healthcare and welfare via the Medichem portfolio acquisition.

 

Our business continues to expand around the globe. We are well and truly geared up to achieve our goal of making Tristel a recognisable force in the high-tech, critical end of global infection control and hygiene.

 

Francisco A. Soler

Chairman

15th October 2010

 

Chief Executive's Report

 

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

 

Those that contain Tristel's proprietary chlorine dioxide chemistry are targeted at human healthcare and are mostly used in hospitals. They are sold directly by Tristel to end users and distributors overseas.

 

A portfolio of products containing a variety of other biocidal chemistries is manufactured exclusively for Medichem International (Marketing) Limited which sells them through its own distribution channels to its clients. These are primarily in animal healthcare, specifically small animal and veterinary care. These products are collectively referred to as the "Medichem" portfolio.

 

The rights to manufacture the Medichem portfolio and the know-how relating thereto were acquired on 3 July 2009. The Medichem portfolio comprises 12 product groups defined by their active ingredients and a total of 273 SKU's. During the course of the year the manufacture of these product groups was successfully phased into our manufacturing plant in Newmarket.

 

The objectives for the acquisition were:-

 

1. to diversify our infection control and hygiene business into animal healthcare and welfare whilst avoiding the financial investment and time required to establish our own distribution channels;

 

2. to diversify the range of biocidal chemistries with which we formulate disinfectant and cleaning products thereby building our product development expertise;

 

3. to gear up our manufacturing facility which had been under-utilised since its establishment in 2007, solely dedicated as it had been to the production of the Tristel products.

 

Reflecting the change to our business model resulting from the Medichem portfolio acquisition, and in accordance with IFRS 8 Operating Segments, we have separately reported on the Medichem activities, which are described as "Animal Healthcare" in this year's Annual Report and Accounts.

 

The manufacture and sale of infection control products, the majority of which incorporate our proprietary chlorine dioxide chemistry, is described as "Hospital Infection Control" and reported upon as a second operating segment.

 

HOSPITAL INFECTION CONTROL

 

The majority of the infection control products that we manufacture and sell are deployed in hospitals and clinics to prevent Hospital Acquired Infections (HAI's). An HAI is an infection that a patient did not have or was not incubating on entering hospital.

 

Microbiologists and infection control officers talk of the vectors, or routes, of transmission of infection within a hospital. These vectors are instruments, surfaces, water and skin.

 

Our chlorine dioxide chemistry is unique amongst the entire universe of biocidal chemistries in that it can be applied to all four vectors.

 

Whilst the four vectors require differing formulations of our chlorine dioxide chemistry, and often different packaging and delivery systems, the products are sold primarily through the same distribution channels. In the United Kingdom we sell our products directly to end users. In those national markets where we have established a direct presence with our own personnel we typically employ a hybrid model of direct sale to end users and sale through medical product distributors. Finally, in national markets where we have not established a direct presence we sell through medical product distributors.

 

INSTRUMENTS VECTOR

There is a vast array of medical instruments that are used for diagnostic and therapeutic procedures which cannot be sterilised by heat (autoclaved) because the materials with which they are constructed cannot withstand the high temperatures used. This group of instruments includes flexible endoscopes and ultrasound equipment.

 

Worldwide, the most commonly employed method for the disinfection of such equipment is the use of a chemical disinfectant, most frequently applied as a liquid. Tristel's chlorine dioxide chemistry is one of the safest and most effective biocidal agents that has emerged in the course of the past decade to disinfect endoscopic and ultrasound equipment.

 

In our past two Annual Reports we have explained how we have targeted specific areas within hospitals. We will continue the theme this year to explain our business strategy in Hospital Infection Control and how our product development and marketing strategy has changed over the past decade

 

GI endoscopy

Up to our flotation in 2005 we focused solely upon gastro-intestinal (GI) endoscopy, the department in a hospital where the largest, most complex and expensive endoscopes are used. In this area, Tristel's endoscopy products led the way in the United Kingdom in the replacement of glutaraldehyde, the endoscope disinfectant used by all hospitals until Tristel emerged.

 

We continue today to supply Tristel products into GI endoscopy but we have restricted our activities in this area to the United Kingdom. This is because the decontamination of GI scopes requires sophisticated equipment to handle the liquid disinfectant. To enter this area in overseas markets would require us to become involved in the supply of such equipment, which is a strategic path that we have chosen not to follow. Furthermore, it is a highly contested area in which most of the major multinational infection control companies compete fiercely.

 

Ear, Nose and Throat (ENT); Cardiology; Urology; Human Reproductive Health (IVF) and Neo-natal

These hospital departments use many types of heat sensitive instrument, but almost all of the instruments are less complicated to decontaminate than GI endoscopes. Typically, the instruments are far smaller than those used in GI endoscopy and have only one or no lumen. The lumen of an endoscope is the hardest part of the instrument to disinfect because it is an internal channel that has to be flushed through.

 

Furthermore, we observe that these departments and their instruments often escape the closest scrutiny of the infection control officers that police hospital disinfection practice. As a consequence, these areas have been neglected, presenting us with an opportunity to create innovative decontamination solutions for them.

 

Finally, many of the clinicians who operate in these niche areas also practice in their own private rooms and clinics. In these locations, the expensive disinfection systems used in hospitals are simply not affordable or practical. With our low cost, easy to operate, disinfection systems our market can extend beyond the hospital and into the office-based market.

 

Since 2005, in order to create these niche opportunities, we have developed innovative (and patented) formulations, packaging and delivery systems that meet the very specific needs of these clinical areas and the disinfection challenges of the equipment used in them.

 

One of the 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 her next patient in a matter 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 the entire wipes system are extensively patented.

 

To counter the fact that there is no published, evidence based data on the efficacy (or otherwise) of the disinfection techniques that have been used in these areas in the past, we have initiated an important clinical study at the Bay of Plenty Clinical School, New Zealand. This is expected to be published in peer reviewed journals by the end of our current financial year.

 

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

 

A second innovation that we have made a substantial investment in developing over the course of the past three years is the Stella disinfection system.

 

Whereas the Wipes System is a manual decontamination process, Stella is a more conventional immersion technique in which the instrument is soaked in the liquid disinfectant for the duration of time required to kill all organisms, in Tristel's case five minutes. 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 theatres.

 

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. The technology has been introduced to several of the world's Non-Governmental Organisations (NGO's) and has been received with much interest. We believe that Stella can make a considerable difference to hygiene standards in the developing world.

 

As with the Wipes System, we have taken the initiative to build a body of peer reviewed, published scientific evidence that will establish Stella's efficacy and its economic benefits to healthcare providers. Two clinical studies are in progress. In the Bay of Plenty Clinical School, Stella is being evaluated alongside the world's most widely used branded instrument disinfectant in a leading make of endoscope washer. In a second study which is pan European and multi-site, a new hysteroscope is being evaluated and the preferred decontamination technique for the instrument is the Stella system.

 

Future Outlook

 

Our investments in product development, product registration and market introduction for both the Wipes System and Stella have largely been sunk. We are now in the process of rolling both systems out globally, although we intend to avoid North America where we will not contemplate the cost and risk of seeking a Food and Drug Administration (FDA) approval (without a partner). We are building the published science that will establish both systems as well documented and accepted decontamination technologies worldwide. In revenue terms, these are considered to be high growth areas for the business.

 

Our involvement in GI endoscopy will remain restricted to the United Kingdom and in revenue terms is considered to be a no growth area for the business.

 

SURFACES VECTOR

We created our first product for disinfecting the general environmental surfaces of a hospital - its floors, walls, worktops, mattresses and myriad other surfaces - in 2007. Whereas in the Instruments Vector the chemical glutaraldehyde was the target to replace, in the Surfaces Vector the target chemical to replace is chlorine.

 

Today, we have a range of Surfaces disinfectant products, all based on our chlorine dioxide chemistry.

 

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 its 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.

 

Packaging innovation can be as important in the use of disinfectants as the disinfectant chemistry itself. An example is Tristel Jet which we introduced in 2008.

 

In most hospitals housekeeping staff typically clean the floors of a ward and nursing staff clean the near patient areas. On surfaces such as bedside tables the use of trigger sprays as used in the home would be most helpful for staff. However, because of the toxicity of many disinfectant chemistries and the fact that trigger sprays create aerosols, their use is not allowed in many hospitals. In response, Tristel created Jet, a unique packaging format that delivers our chlorine dioxide chemistry to a surface in the form of a gel, avoiding potentially harmful aerosols. Jet complements Fuse, our burstable sachet, and Duo, which applies chlorine dioxide as foam - the complete armory to disinfect all surfaces in a hospital.

 

In a departure from the Infection Control business model that we apply elsewhere in the world, in the Americas we have licensed our technology for surfaces disinfection to The Clorox Company (Clorox), a leading manufacturer and marketer of consumer and professional products, including its namesake bleach. Clorox, based in Oakland, California, is an S&P500 company (stock symbol CLX) with annual sales is excess of $5.5 billion and 8,300 employees worldwide. Clorox is taking responsibility for the Environmental Protection Agency (EPA) approvals process which is ongoing.

 

Future Outlook

 

The Surfaces portfolio is essentially complete, although it would be complemented by a chlorine dioxide wipe which we are seeking to develop, as the disinfectant wipe used in the Tristel Wipes System for Instruments is not appropriate for widespread use by nursing and cleaning staff and an alternative is required.

 

As with Instruments, we are now in the commercial roll-out phase both in the United Kingdom and in overseas markets.

 

We view this vector as a high growth opportunity worldwide.

 

In the United States, the approvals process with the EPA is likely to continue for several years before the products licensed to Clorox can be sold.

 

WATER VECTOR

 

Chlorine dioxide is used to control Legionella, a bacterium found in drinking water supplies and cooling towers. Legionella is the cause of Legionnaire's Disease.

 

We commenced our involvement with this vector of transmission of infection (in both hospitals and the wider community) in 2006 when we acquired Vernagene Limited. This company was a distributor of a chlorine dioxide chemistry that is different from our proprietary formulation. It imported the chemistry from Bio-Cide International Inc., Oklahoma, United States. Vernagene had a profitable track record and a well established customer base.

 

We have maintained our presence in this market, which is described as L8 (legionella control), by partnering with Hertel, the global industrial services company with 10,000 employees worldwide and revenues of Euros 760 million. We also sell into the food growing and processing and horticultural industries where chlorine dioxide reduces microbial contamination. Such contamination results in spoilage of produce and poses a health risk to consumers.

 

Future outlook

 

This vector, whilst not a growth opportunity, produces a consistent stream of revenue, profit and cash. It is a low investment segment of the Group's business. Over and above the revenue and profit resulting from the acquisition, it has also brought an important strategic benefit.

 

The supply agreement with Bio-Cide was renewed on 13 June 2008 and has a twenty year term. It is an exclusive agreement for the entire European market. Furthermore, under the terms of the agreement with Bio-Cide, Tristel has become its representative 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 in 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 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 brought an important corollary benefit in that we are involved in shaping the future regulatory environment for our technology.

 

OTHER

 

There is a fifth vector of infection transmission that we target, but with another company's technology and products. This is the airborne transmission of bacteria, fungal spores and viruses, which is of great importance in an area of a hospital such as haematology.

 

During the course of 2009 we secured the distributorship for the United Kingdom of the air hygiene products of the French company AirinSpace. We have enjoyed a less positive response to the technology and its potential benefits from United Kingdom hospitals than has been experienced by our counterparts on the Continent. Whilst the distributorship represents only a small part of our business plan, the presence within our group portfolio of this air hygiene product reinforces our holistic approach to combating HAI's and gives our sales team another interesting idea with which to engage our infection control audience.

 

OVERSEAS

 

Tristel has a clear strategy to expand its business internationally.

 

Export sales increased by 58.5% during the year from £472,000 to £748,000. In the majority of countries where we sell products, the business model employed is to use a national distribution partner. Additionally, we have established wholly owned or partially owned operations in the following countries:-

 

Stella Performance Limited, New Zealand (100% owned)

SPL 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 Hospital Infection Control market.

 

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

SSME is based in Shanghai and its team is undertaking the registration process for the three Tristel product groups - Wipes System; Stella and the surfaces range. The team has appointed four distributors.

 

Tristel Asia Limited, Hong Kong (85% owned)

TAL acts as an intermediate holding company for SSME and also undertakes warehousing and sales activities for the Hospital Infection Control products in Hong Kong.

 

Tristel Italia Srl, Italy (20% owned)

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

 

Tristel Germany (branch)

TG is a branch operation located in Berlin. The team is a sales and marketing operation serving the German market.

 

Future outlook

 

Tristel's Hospital Infection Control business has the opportunity to be global both in reach and scale. We know from our experiences of the past decade that the disinfection challenges we encounter in the United Kingdom are fundamentally similar in all hospitals in all countries worldwide. Where our product and marketing strategy has made a success in the United Kingdom, this success can be replicated, with the right execution, in many other markets worldwide.

 

Finally, in Stella we have a unique device that could make a significant difference to hygiene standards in the lesser resourced world, being powered by rechargeable battery, requiring limited water and no maintenance. These are the limitations in many communities in many countries to the reduction of post operative infection rates. We believe that the future prospects for Stella are very exciting.

 

FINANCIAL PERFORMANCE - HOSPITAL INFECTION CONTROL

 

This is the first year in which we are reporting on two operating segments. The Animal Healthcare operating segment did not exist in the financial year 2008-09 as the activity only commenced with the acquisition of the Medichem portfolio on 3 July 2009.

 

ANIMAL HEALTHCARE

 

Medichem International (Marketing) Limited has established a strong presence in animal healthcare and welfare over the course of the past seventeen 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 Medichem worldwide and is very popular in the small animal sector.

 

Agrigene - Targeted at the larger animal market.

 

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.

 

MediGene, Mediscrub, MediHex MediDine - A range of hand disinfectants.

 

Medizyme - An instrument cleaner.

 

Future outlook

 

The Medichem business is solidly based with a consistent track record of sales growth over the past decade. Since 3 July 2009 we have worked closely with Medichem's management to identify how their product portfolio could be strengthened with more effective formulations that we believe our R&D team can deliver. There are also opportunities to introduce Tristel's chlorine dioxide chemistry into the Medichem marketplace.

 

FINANCIAL PERFORMANCE - ANIMAL HEALTHCARE

 

As the Animal Healthcare operating segment was acquired during the financial year there are no comparable figures for the prior year.

 

Revenue generated was £1,643,000. This did not represent a full year's revenue as the manufacture of the Medichem product portfolio was gradually phased in through the twelve month period.

The operating result for the Animal Healthcare operating segment amounted to £306,000. Additionally, unallocated operating income and expense amounting to £230,000 is attributable to this segment. This figure includes the exceptional gain of £233,000 arising from the early settlement of the deferred consideration less incidental costs.

 

GROUP RESULTS AND FINANCE

 

Revenue

Group revenue increased by 28% to £8,764,000 (2009: £6,847,000).

 

Margins and operating profit

The gross margin declined marginally to 64.4% from 64.9% in 2009, a better result than anticipated. At the time of the Medichem portfolio acquisition we had expected the contract manufacturing activity to depress the overall Group margin by greater degree.

 

Excluding amortisation of intangibles, share based payments and non-recurring items, operating profits increased by 25.8% to £1,836,000 (2009: £1,460,000) but the operating margin declined from 21.3% to 20.9%. The underlying pre-tax margin after stripping out the exceptional item also declined in the year to 17% from 18.8%.

 

The margin erosion at the operating and pre-tax levels reflects to a large degree the gearing up of the Group's human infrastructure (and resultant increase in its cost base) to take on the future challenges of international growth and the expansion of our manufacturing activity.

 

Earnings

The basic earnings per share were 3.84 pence (2009: 3.42 pence), an increase of 12.3%. The increase in EPS trailed that of after tax profits because the weighted average number of shares used in its calculation increased as a result of two share issues during the year. A total of 6,259,716 ordinary shares were issued during the year, increasing the total number of shares from 26,882,880 shares at the beginning of the year to 33,142,596 at its end.

  

Capital expenditure and investments

The acquisition of the Medichem assets which contributed £536,000 to profit during the year was made at a cost of £2,648,000.

 

A further £484,000 was invested in the development of our products, principally in relation to the Stella decontamination device. Sales of Stella units were achieved in the United Kingdom, New Zealand, China, Italy and the Middle East.

 

We continued to invest in our manufacturing plant in an amount of £394,000 to expand and improve our manufacturing capability.

 

Treasury and deployment of capital

The Group's working capital and capital expenditures have been financed by operating cash flow, the issue of new shares which generated £2,950,000, and bank funding of £1,253,000. The Group has adequate cash and borrowing facilities to fund its foreseeable working capital and capital expenditure needs.

 

The year ahead and post balance sheet events

The Tristel business continues to forge ahead at home and abroad.

 

International expansion is a key element of our growth strategy and it is producing results, with export sales rising fourfold over the course of the past four years and representing an increasing percentage of Group sales. They accounted for 3.5% of Group sales in 2006-07, rising to 8.5% in 2009-10.

 

During the year our Chinese subsidiary commenced the registration process for the Stella decontamination system together with the Tristel Fuse consumable disinfectant which is used in the system, and also initiated the registration process for our Wipes System and our Surfaces range of products. Our team in Shanghai, supported by our technical team in Newmarket, England, worked remarkably quickly to obtain the Ministry of Health's approval for Stella and Fuse. This has been achieved since the beginning of the current financial year and the necessary formal licenses required for the sale of the products are now in the process of being obtained. We have four provincial distributors who are ready to launch our products and more distributors waiting to be appointed. We anticipate that the remaining two product group registrations will be completed during the year.

 

In Germany we have established a branch office in Berlin and our first product sales have been made since the beginning of the current financial year. As with China, our focus will be on Stella and Fuse, the Wipes System and the surfaces product range.

 

With distributors in over twenty countries, many of whom first introduced Tristel products into their national markets several years ago, we consider we are well placed to see the contribution of our international business grow.

 

One of the achievements of 2009-10 was the step change that we made in our manufacturing capability, demanded by taking on the production of the Medichem products. Upping up our game to meet the challenge of manufacturing such a large and diverse product range has created the springboard to embark upon a new venture. This involves a substantial investment in our manufacturing facility, doubling our production capacity, and building a clean room that will enable us to manufacture sterile packed products. These products are disinfectants and cleaning products that are deployed in pharmaceutical, cosmetics and toiletries manufacturing plants. We have christened this new product range "Crystel".

 

The marketplace that we will be addressing with these products is substantial. We value the European market in the range of US$150-200 million and the competitor set is largely the same as that with which we compete in hospital infection control. This initiative will add a third leg to our business and will leverage our capabilities as a manufacturer, our skills and experience in disinfectant and cleaning product chemical formulation, our ability to create innovative packaging and delivery systems, and our experience of regulatory affairs.

 

This is a very exciting development for Tristel that we believe will drive top line growth and the future profitability of the Group. We look forward to a successful year ahead.

 

Paul Swinney

Chief Executive

15th October 2010

 

Tristel Plc Consolidated Income Statement For the year ended 30 June 2010

 

			Year ended 30 June 2010		Year ended 30 June 2009
			£'000		£'000
Revenue			8,764		6,847
Cost of sales			(3,120)		(2,402)
Gross Profit			5,644		4,445
Other operating income			20		20
Administrative expenses: share based payments (IFRS2)			(44)		(14)
depreciation, amortisation and impairment			(636)		(402)
other			(3,480)		(2,766)
Total administrative expenses			(4,160)		(3,182)
Operating profit			1,504		1,283
Finance income		3	7		9
Finance costs		3	(20)		(7)
Exceptional finance income		4	233		-
Profit before tax			1,724		1,285
Profit before tax attributable to:
Non controlling interests			(19)		-
Equity holders of parent			1,743		1,285
			1,724		1,285
Taxation		5	(529)		(366)
Profit for the year			1,195		919
Attributable to:
Non controlling interests			(20)		-
Equity holders of parent			1,215		919
			1,195		919
Earnings per share from total and continuing operations attributable to equity holders of the parent
Basic - pence		7	3.84		3.42
Diluted - pence		7	3.67		3.31

All amounts relate to continuing operations.

 

 

Tristel Plc Statement of Consolidated Comprehensive Income For the year ended 30 June 2010

 

		Year ended 30 June 2010		Year ended 30 June 2009
		£'000		£'000
Profit for the period		1,195		919
Other comprehensive income
Exchange differences on translation of foreign operations		13		-
Total comprehensive income for the period		1,208		919
Attributable to:
Non controlling interests		(20)		-
Equity holders of the parent		1,228		919
		1,208		919

 

 

Tristel Plc Consolidated Statement of Changes in Equity For the year ended 30 June 2010
	Share		Share		Merger		Retained earnings		Total attributable to owners of the parent		Non controlling interests		Total equity
	capital		premium		reserve
			account
	£'000		£'000		£'000		£'000
									£'000		£'000		£'000
1 July 2008	269		2,663		478		905		4,315		-		4,315
Transactions with owners:-
Dividends paid	-		-		-		(422)		(422)		-		(422)
Share based payments - IFRS 2	-		-		-		14		14		-		14
	269		2,663		478		497		3,907		-		3,907
Profit for the year ended 30 June 2009	-		-		-		919		919		-		919
30 June 2009	269		2,663		478		1,416		4,826		-		4,826
Transactions with owners:-
Dividends paid	-		-		-		(524)		(524)		(125)		(649)
Shares issued	63		2,887		-		-		2,950		-		2,950
Non controlling interests arising on consolidation	-		-		-		-		-		137		137
Share based payments - IFRS 2	-		-		-		44		44		-		44
	332		5,550		478		936		7,296		12		7,308
Profit  for the year ended 30 June 2010	-		-		-		1,215		1,215		(20)		1,195
Other comprehensive income:-
Exchange differences on translation of foreign operations	-		-		-		(9)		(9)		-		(9)
30 June 2010	332		5,550		478		2,142		8,502		(8)		8,494

 

Tristel Plc Consolidated Balance Sheet As at 30 June 2010
				2010		2009
		Note		£'000		£'000
Non-current assets
Goodwill				779		779
Intangible assets		8		5,150		2,317
Property, plant and equipment				1,021		980
Investments				72		37
Deferred tax				74		31
				7,096		4,144
Current assets
Inventories				1,388		801
Trade and other receivables				2,475		1,611
Cash and cash equivalents				986		18
				4,849		2,430
Total assets				11,945		6,574
Capital and reserves attributable to the Company's equity holders
Share capital				332		269
Share premium account				5,550		2,663
Merger reserve				478		478
Retained earnings				2,142		1,416
Equity attributable to equity holders of parent				8,502		4,826
Non controlling interests				(8)		-
				8,494		4,826
Current liabilities
Trade and other payables				1,612		963
Bank overdrafts				-		356
Interest bearing loans and borrowings				1,256		51
Current tax	5			583		375
				3,451		1,745
Non-current liabilities
Interest bearing loans and borrowings				-		3
Total liabilities				3,451		1,748
Total equity and liabilities				11,945		6,574

 

The financial statements were approved and authorised for issue by the Board of directors on 15th October 2010, and

were signed on its behalf by:

 

Elizabeth Dixon

Director

 

 

Tristel Plc Consolidated Cash Flow Statement For the year ended 30 June 2010

 

			2010			2009
		Note	£'000			£'000
Cash flows from operating activities
Cash generated from operating activities		9i	1,638			1,236
Interest paid			(20)			(7)
Corporation tax paid			(383)			(281)
			1,235			948
Cash flows from investing activities
Interest received			7			9
Purchase of intangible assets			(3,095)			(482)
Acquisition of investments			(74)			(20)
Purchases of property, plant and equipment			(714)			(404)
Proceeds from sale of property, plant and equipment			442			4
Net cash used in investing activities			(3,434)			(893)
Cash flows from financing activities
Loans received			1,253			-
Loans repaid			(51)			(47)
Share issues			3,102			-
Cost of share issues			(152)			-
Dividends paid			(649)			(422)
Net cash from / (used) in financing activities			3,503			(469)
Net increase / (decrease) in cash and cash equivalents		9ii	1,304			(414)
Cash and cash equivalents at the beginning of the period			(338)			76
Exchange differences on cash and cash equivalents			20			-
Cash and cash equivalents at the end of the period		9ii	986			(338)

 

 

 

 

Tristel Plc Notes to the Consolidated Financial Statements For the year ended 30 June 2010

1. PRINCIPAL ACCOUNTING POLICIES

 

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 2009: IAS 1 • Presentation of Financial Statements (Revised 2007) IAS 1 (Revised 2007) The adoption of the standard does not affect the financial position or results of the Group, but gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of Comprehensive Income'. The Statement of Comprehensive Income has been shown in a single statement. IAS 1 (Revised 2007) requires presentation of a comparative balance sheet as at the beginning of the first comparative period, in some circumstances. Management considers that this is not necessary this year because the 2007 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 2010. Where audited financial statements at this date are not available due to non concurrent year ends, Management accounts at 30 June 2010 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 year to 30 June 2010 the Group acquired the manufacturing rights and knowhow to a range of disinfection and cleaning products collectively associated with the name "Medichem". Incidental to the purchase of manufacturing rights the Group acquired 50% of the assets and liabilities of Medichem International Limited, the company which 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 consider that they exercise control of the assets and liabilities of Medichem International Limited, due to ownership of the knowhow and manufacturing rights. Consequently 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 30th June 2010, 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) ·; IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011) ·; Group Cash-settled Share-based Payment Transactions - Amendment to IFRS 2 (effective 1 January 2010) ·; Improvements to IFRSs 2009 (various effective dates, earliest of which is 1 July 2009, but mostly 2010) ·; Amendment to IFRS 1 Additional Exemptions for First-time Adopters (effective 1 January 2010) ·; Amendment to IAS 32 Classification of Rights Issues (effective 1 February 2010) ·; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010) ·; Prepayments of a Minimum Funding Requirement - Amendments to IFRIC 14 (effective 1 January 2011) ·; Improvements to IFRS issued May 2010 (some changes effective 1 July 2010, others effective 1 January 2011) 

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.

 

The Group's operating segments are identified initially from the information which is reported to the chief decision maker. The operating segments are considered further based upon the nature of the product sold, the nature of production, the class of customer and the method of distribution. This year, with the introduction of contract manufacturing via the Intangible acquisition in July 2009, management considers the Groups revenue lines to be split into two operating segments. The first is derived from the principal activity of the business, being the manufacture, development and sale of infection control and hygiene products, the majority of which incorporate the Group's chlorine dioxide chemistry and are used primarily for infection control in hospitals ("Hospital infection control"); the second, which constitutes in excess of 10% of the business activity, relates to the contract manufacture of disinfection and cleaning products for sale to one entity and onward distribution by it principally into veterinary and animal welfare sectors ("Animal healthcare").

 

The accounting segments the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements, with the exception of:

 

·; expenses relating to share-based payments, and

·; research costs relating to new business activities are not included in arriving at the operating result of the entity's operating segments.

 

The operation is monitored and measured on the basis of the key performance indicators of each segment, and strategic decisions are made on the basis of the individual adjusted operating result. This is considered as the measure of the individual segment's profit or loss.

 

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 2010 or 2009, but is derived from those accounts. Statutory accounts for the year ending 30 June 2009 have been delivered to the Registrar of Companies, and those for 2010 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. FINANCE INCOME AND COSTS

		2010		2009
		£'000		£'000
Finance income:
Deposit account interest		2		4
Staff loan interest		2		2
Other interest		3		3
		7		9
Finance costs:
Bank interest		(20)		(7)

 

4. EXCEPTIONAL INCOME

 

In July 2009 the Group acquired the manufacturing rights and knowhow to a range of disinfection and cleaning products collectively associated with the name "Medichem", whereby the consideration was payable over five years. Full details of the transaction are included in the Note 8 Intangible assets on pages 18 and 19 of these interim financial statements

 

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 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.

 

 The exceptional income increased the tax charge for the year by £67,487.

 

 

5. TAXATION

 

The taxation charge represents:

		2010		2009
		£'000		£'000
Current taxation:-
Corporation tax		563		375
Adjustment in respect of earlier years		9		(11)
Total current tax		572		364
Deferred tax:-
Origination and reversal of temporary differences		(43)		2
Total deferred tax		(43)		2
Total tax charge in Income Statement		529		366

Factors affecting the tax charge

 

The tax assessed for the year differs from the standard rate of corporation tax in the UK. The difference is explained below:

		2010		2009
		£'000		£'000
Profit on ordinary activities before tax		1,724		1,285
Profit on ordinary activities
multiplied by the standard rate of corporation tax
in the UK of 28% (2009: 28%)		482		360
Effects of:
Expenses not deductible for tax purposes		28		4
Capital allowances in excess of depreciation		19		32
Different rate tax bands and change in tax rates		(2)		(13)
Enhanced relief on qualifying scientific research expenditure		(11)		(6)
Adjustment in respect of prior years		9		(11)
Tax losses not utilised and other timing differences		4		-
Total tax charge for year		529		366

 

 

 

 

 

6. DIVIDENDS

		2010		2009
Amounts recognised as distributions to equity holders in the year:		£'000		£'000
Ordinary shares of 1p each:
Final dividend for the year ended 30 June 2009 of 1.295p
(2008: 1.165p) per share		383		313
Interim dividend for the year ended 30 June 2010 of 0.425p
(2009: 0.405p) per share		141		109
		524		422
Proposed final dividend for the year ended 30 June 2010 Of 1.4p (2009: 1.295p) per share		464		383

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.

 

7. EARNINGS PER SHARE

 

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

 

		2010		2009
		£'000		£'000
Retained profit for the financial year attributable to equity holders of the parent		1,215		919
		Shares '000 Number		Shares '000 Number
Weighted average number of ordinary shares for the purpose of basic earnings per share		31,668		26,883
Effect of dilutive potential ordinary shares
Share options		1,495		898
		33,163		27,781
Earnings per ordinary share
Basic		3.84p		3.42p
Diluted		3.67p		3.31p

 

8. INTANGIBLE ASSETS

 

In July 2009 the Group acquired the manufacturing rights and knowhow to a range of disinfection and cleaning products collectively associated with the name "Medichem". The fair value of the consideration, which was payable over five years and calculated at a percentage of sales during the period, was estimated at £2,510,682. In determining the fair value, the net present value of future cash flows has been calculated using a discount rate of 10%, which has been further adjusted for influencing factors such as fluctuating sales levels, to the degree that incidence is considered likely.

 

Incidental to the purchase of manufacturing rights the Group acquired assets and liabilities totalling £137,128, including trade marks at a cost of £25,000. This acquired intellectual property has an indefinite life, and as such has been tested for impairment in accordance with IAS 36. For this purpose the value of the asset has been evaluated by reference to the benefits of future profit and cash flows arising from the products manufactured. Historic performance information obtained during the due diligence process has been referred to in estimating future turnover growth and gross margin percentages. These estimates have been supported by performance in the post balance sheet period. In the opinion of the directors future cash generation arising from the manufacturing rights adequately supports the carrying amount and as such no amortisation or impairment provision has been provided on this asset in the current financial year.

8 INTANGIBLE ASSETS - continued

 

Group	Patents and licences		Development - Marketable products		Development - Products in development		Totals
	£'000		£'000		£'000		£'000
Cost
At 1 July 2008	1,655		1,099		32		2,786
Additions	88		327		67		482
At 30 June 2009	1,743		1,426		99		3,268
Reclassification	-		1		(1)		-
Additions	2,611		402		82		3,095
At 30 June 2010	4,354	1	1,829		180		6,363
Amortisation
At 1 July 2008	631		159		-		790
Charge for year	75		86		-		161
At 30 June 2009	706		245		-		951
Charge for year	86		101		-	1	187
Impairment	-		-		75		75
At 30 June 2010	792		346		75		1,213
Net book value
At 30 June 2010	3,562		1,483		105		5,150
At 30 June 2009	1,037		1,181		99		2,317

 

 

9. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

i.  Reconciliation of profit before tax to cash generated from operations
			2010		2009
			£'000		£'000
Profit before tax			1,724		1,285
Adjustments for:
Depreciation of plant, property & equipment			312		241
Amortisation of intangible assets			187		161
Impairment of plant, property & equipment			23		-
Impairment of intangible assets			75		-
Impairment of investments			39		-
Share based payments - IFRS2			44		14
(Profit) / loss on disposal of property, plant and equipment			2		23
Government grants			(20)		(20)
Finance costs			20		7
Finance income			(7)		(9)
			2,399		1,702
Increase in inventories			(587)		(163)
Increase in trade and other receivables			(843)		(244)
Increase / (decrease) in trade and other payables			669		(59)
Cash generated from operations			1,638		1,236

 

 

9. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT - continued

 

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

 

			30 June 2010		30 June 2009
Year ended 30 June 2010			£'000		£'000
Cash and cash equivalents			986		18
Bank overdrafts			-		(356)
			986		(338)

 

			30 June 2009		30 June 2008
Year ended 30 June 2009			£'000		£'000
Cash and cash equivalents			18		81
Bank overdrafts			(356)		(5)
			(338)		76

 

 

9. ANNUAL REPORT

 

The annual report and financial statements for the year ended 30 June 2010 will be posted to the shareholders on 22 November 2010 and will be delivered to the Registrar of Companies following the company's Annual General Meeting. The annual report and financial statements will also be available on the company's web site www.tristel.com from 22 November 2010.

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