Tristel Regulatory News (TSTL)

TRISTEL plc

("Tristel", the "Company" or the "Group")

Half-year Report

Unaudited Interim Results for the six months ended 31 December 2020

Tristel plc (AIM: TSTL), the manufacturer of infection prevention and contamination control products utilising proprietary chlorine dioxide chemistry, announces its interim results for the six months ended 31 December 2020.

Financial highlights

· Revenue up 15% to £16.8m (2019: £14.6m)

· Overseas sales up 20% to £10m (2019: £8.3m), representing 60% of total sales (2019: 56%)

· Gross margin increased to 80% from 79% in 2019

· PBT before share-based payments up 13% to £3.4m (2019: £3.0m). Unadjusted PBT of £3.1m (£2.8m)

· EPS before share-based payments up 5% to 6.18p (2019: 5.89p). Unadjusted EPS of 5.62p (2019: 5.37p)

· EBITDA before share-based payments up 14% to £4.9m (2019: £4.3m)

· EBITDA margin before share-based payments of 29% (2019: 29%)

· Interim dividend of 2.62p per share (2019: 2.34p), up 12%

· Cash of £7.3m (2019: £4.2m)

Operational highlights

· Approval received for Duo range of products in India. Appointed national distributor

· Successful start for new subsidiary in Malaysia with initial six-month sales of £0.24m

· Board changes: Caroline Stephens (ex-J&J) joined as INED

· Completed Usability and Human Factors Engineering Study for USA FDA De Novo submission

Commenting on current trading, Paul Swinney, Chief Executive of Tristel, said: "We are pleased with our progress in the first half. Sales growth has been at the top end of our target range of 10-15% and margins have continued to improve.

"We continue to make good progress in our USA regulatory project. We have recently completed the Usability and Human Factors Engineering study which represents an important milestone on our path towards completing our De Novo submission.

"The second half will be the third consecutive six-month period to be impacted by the pandemic. Unlike the previous two halves, we have started this one in lockdown in many of our key markets. Sales of our medical device disinfectants during the first seven weeks of 2021 are lower than budget due to the impact of COVID-19 on patient examinations. We are very confident that by the end of calendar 2021, the ENT, gynaecology, urology, cardiology, and ophthalmology departments where our products are used will have returned to pre-pandemic levels of activity. Whether this will happen in the UK and Europe before our June year-end is unclear at present.

"However, the growth prospects for the Group are as strong as ever and we look to the future with confidence."

At 8am today, Monday 22 February 2021, a video presentation recorded by Paul Swinney, CEO and Liz Dixon, FD, will be made available here: www.tristelresults.com

Chairman's statement

Results

I am pleased to report that the Group had a good first half, growing sales by 15%. We increased the proportion of Group revenue generated in overseas markets to 60%. Geographical diversification is especially important for the Group during this pandemic which is affecting countries differently at any point in time.

During the half we entered the Malaysian hospital market via a newly established subsidiary. A distributor has represented us in the country for the past decade. Our operation got off to a good start, obtaining the re-issue of governmental licences for our products and generating £0.24m in sales. On 23 December, our Indian subsidiary entered into a distribution agreement with GenWorksHealth, based in Bangalore. This gives us distribution throughout India for our Duo high-level disinfectants which are used on a wide range of medical devices used in ultrasound, ophthalmology, and ear nose and throat clinics.

Of equal strategic importance is the diversification of our product portfolios. The most important product range in terms of sales is Tristel. This is our longest established and best recognised brand. Tristel products are medical device disinfectants and worldwide they accounted for £13.1m of sales in the half. The Cache product range is younger and only actively marketed at present in the UK, Benelux, France, and Hong Kong. The Cache products are disinfectants for hospital surfaces and worldwide accounted for £2m of sales in the period.

The two portfolios have been differently impacted by the pandemic: Tristel product sales in all countries have been adversely affected as patient examinations have been deferred. Cache product sales have been positively impacted because hospitals rushed to purchase any type of disinfectant. During the second half of 2020 this phenomenon came to an end and now we are observing a more considered approach to the selection of surface disinfectants. This augurs well for the long-term success of Cache as our chlorine dioxide chemistry is the safest and most effective choice available. Worldwide, Tristel sales in the first half increased by 12% on the comparable period, whilst Cache sales increased by 82%. The table below explains the geographical and portfolio breakdown of Group first half revenue.

The UK's departure from the European Union has taken place without disruption to our trade with the Continent. In preparation for this transition, last September the NHS purchased approximately £0.9m of Tristel medical device disinfectant products and has held them in a dedicated storage facility. We anticipate that this stock will be fed back into the NHS Supply Chain network from May 2021 but have no visibility on the time this might take. The release of this inventory will have some negative impact on second half sales of medical device disinfectant products in the UK.

The release of this stock and the uncertain timing regarding recovery of patient examinations to pre-pandemic levels around the world, makes it difficult to forecast sales for the second half of the year.

We achieved a one percentage point increase in gross margin due to product sales mix in the period. Overheads excluding share-based payments, depreciation and amortisation increased by £1.2m, or 16%. Included in the increase is a one-off payroll-related cost associated with share option exercises, and the first contribution of costs from Malaysia. Excluding both these costs, underlying overhead expenses increased by only 3% in the half compared with last year.

During the period we increased global headcount by 31, from 164 at 30 June, to 195 at 31 December. We have bolstered our marketing, product management, product development, quality management and regulatory teams to prepare for the growth that we anticipate once hospital patient examinations return to their pre-pandemic levels in all countries, and the Cache product range is marketed globally. Included in the headcount increase are five employees in our newly operational Malaysian subsidiary.

Pre-tax profit increased from £2.8m to £3.1m, a 11% increase.

The Group has continued to be highly cash generative and on 31 December 2020 the cash balance was £7.3m (2019: £4.2m).

Earnings and Dividends

Adjusted earnings per share (EPS), before share-based payments, were 6.18 pence, up 5% from 5.89 pence last year. Basic EPS was 5.62 pence, a 5% increase from last year. EPS growth was held back by a higher effective tax rate in the half of 16% (2019: 13%).

The Board is recommending an interim dividend of 2.62 pence (2019: 2.34 pence), an increase of 12%. The interim dividend will be paid on 30 April 2021 to shareholders on the register on 9 April 2021, with an ex-dividend date of 8 April 2021.

Board of Directors

We welcome Caroline Stephens to our Board as an Independent Non-Executive Director. Caroline has enjoyed a 26-year career with Johnson & Johnson in multiple leadership roles. In addition to bringing her experience and expertise in healthcare to our organisation, her appointment takes us further towards our goal of equal gender balance within the Board.

Outlook

Whilst the near-term outlook for the Company will be heavily influenced by the course of the pandemic and its impact on hospital services, the long-term prospects remain very encouraging.

Bruno Holthof

Chairman

22 February 2021

Condensed Consolidated Income Statement for the six months ended 31 December 2020

The above results were derived from continuing operations.

Earnings before interest, tax depreciation and amortisation for the period ended 31 December 2020 were £4,858,000. (Period ended 31 December 2019 £4,306,000. Year ended 30 June 20 £9,964,000).

Condensed Consolidated Statement of Comprehensive Income for the six months ended 31 December 2020

Condensed Consolidated Statement of Financial Position as at 31 December 2020

Condensed Consolidated Statement of Changes in Equity for the six months ended 31 December 2020

Condensed Consolidated Statement of Cash Flows for the six months ended 31 December 2020

Notes to the Financial Statements for the six months ended 31 December 2020

Basis of Preparation

For the year ended 30 June 2020, the Group prepared consolidated financial statements under International Financial Reporting Standards ('IFRS') as adopted by the European Union (EU). These condensed consolidated interim financial statements (the interim financial statements) have been prepared under the historical cost convention. They are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) which are effective from 1 July 2020.

Standards effective from 1 January 2020

The following standards and interpretations apply for the first time to financial reporting periods commencing on or after 1 January 2020:

· IFRS 3 - Definition of a Business (effective 1 January 2020)

· IAS 1 and 8 - Definition of Material (effective 1 January 2020)

· IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform (effective 1 January 2020)

· IFRS 17 Insurance contracts (effective 1 January 2021)

· IAS 1 - Classification of liabilities as current or non-current (effective 1 January 2022)

The Directors anticipate that the adoption of IFRS 17 in future periods will have no material effect on the financial statements of the Group.

There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

None of the standards, interpretations and amendments effective for the first time from 1 July 2020 have had a material effect on the financial statements.

Accounting Policies

The interim report is unaudited and has been prepared on the basis of IFRS accounting policies.

The accounting policies adopted in the preparation of this unaudited interim financial report are consistent with the most recent annual financial statements being those for the year ended 30 June 2020.

The financial information for the six months ended 31 December 2020 and 31 December 2019 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.

The financial information relating to the year ended 30 June 2020 does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. This information is based on the Group's statutory accounts for that period. The statutory accounts were prepared in accordance with International Financial Reporting Standards ("IFRS") and received an unqualified audit report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These financial statements have been filed with the Registrar of Companies.

Management considers the Company's revenue lines to be split into three operating segments, which span the different Group entities. The operating segments consider the nature of the product sold, the nature of production, the class of customer and the method of distribution. The Company's operating segments are identified initially from the information which is reported to the chief operating decision maker.

The first segment concerns the manufacture and sale of medical device decontamination products which are used primarily for infection control in hospitals. This segment generates approximately 78% of Company revenues (2019: 80%).

The second segment which constitutes 12% (2019: 8%) of the business activity, relates to the manufacture and sale of hospital environmental surface disinfection products.

The third segment addresses the pharmaceutical and personal care product manufacturing industries, veterinary and animal welfare sectors and has generated 10% (2019: 12%) of the Company's revenues this year.

The operation is monitored and measured on the basis of the key performance indicators of each segment, these being revenue and gross profit, and strategic decisions are made on the basis of revenue and gross profit generating from each segment.

The Company's centrally incurred administrative expenses and operating income, and assets and liabilities, cannot be allocated to individual segments.

Amounts recognised as distributions to equity holders in the year:

** Based on shares in issue at 14 December 2020 of 46,493,808 (14 December 2019 of 44,635,823).

The proposed interim dividend has not been included as a liability in the financial statements.

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