Tristel Regulatory News (TSTL)

20 February 2023

TRISTEL plc

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

Half-year Report

Unaudited Interim Results for the six months ended 31 December 2022

Tristel plc (AIM: TSTL), the manufacturer of infection prevention products utilising proprietary chlorine dioxide technology announces its interim results for the six months to 31 December 2022, a period achieving 16% revenue growth and a 16-fold increase in EBITDA.

The Company's core business is the sale to hospitals of its proprietary chlorine dioxide chemistry used for the decontamination of medical devices under the Tristel brand, and for the sporicidal disinfection of environmental surfaces under the Cache brand.

Financial highlights

· Revenue up 16% to £17.5m (2021: £15.1m restated to include products discontinued in 2021)

o  Underlying revenue up 21% (excluding previous year distortions)

· Overseas sales up 12% to £11.2m (2021: £10m); UK sales up 24% to £6.3m (2021: £5.1m)

· Gross margin up to 81% (2021: 80%)

· Reported EBITDA up 16-fold to £3.9m (2021: £0.2m)

o  Adjusted* EBITDA up 28% to £4.6m (2021: £3.6m)

· Reported profit before tax of £2.4m (2021: loss £1.2m)

o  Adjusted* profit before tax up 41% to £3.1m (2021: £2.2m)

· Reported EPS 3.19p (2021: -2.08p)

o  Adjusted* EPS 4.65p (2021: 4.97p)

· Tax charge £0.9m (2021: tax credit £0.2m)

· Interim dividend maintained at 2.62p per share (2021: 2.62p)

· No debt and cash of £8.4m (2021: £8.8m) after paying dividends of £3.3m (2021: £1.9m) including a special dividend of £1.4m in August 2022

*Adjusted for impairment of intangibles of £nil (2021: £2.4m) and share-based payments £0.7m (2021: £0.9m)

Operational highlights

· Launch of Tristel Duo into the North American ultrasound and ophthalmology markets

· FDA De Novo submission - additional data generated and will be delivered to FDA by March 2023 deadline

Commenting on the interim results, Paul Swinney, Chief Executive of Tristel, said: "We are delighted to have increased sales by 16% on the first half of last year, above our long-term target for revenue growth.

"In all regions the level of diagnostic examinations utilising our products is significantly higher than before the commencement of the pandemic.

"We have now entered the North American market, having launched Duo Ophthalmology in Canada, and Duo Ultrasound in the USA under our EPA approval, and expect the FDA's decision on our De Novo submission in June. 

"The growth prospects for the Group are stronger than ever and we look to the future with confidence."

CFO video overview

Please find a link to a video overview relating to the Company's interim results from the Group's Chief Financial Officer, Liz Dixon here.

A live hybrid presentation of the financial results and outlook will be delivered by Paul Swinney, CEO, and Liz Dixon, CFO today at 4:30pm at 85 Gresham Street, London, EC2V 7NQ. Those not attending in-person can participate via a live webcast. Please register to attend, or to be sent the live webcast link, by contacting Walbrook PR on 020 7933 8780 or email tristel@walbrookpr.com.

Chairman's statement

Revenue

During the half sales increased by 16%, reaching a record level of £17.5m, with all parts of the Group performing well. During the comparable period (H1 2021-22) there were two events that distorted our reported growth:

· in the UK a release of £0.9m of Brexit inventory into hospitals, a sale that we had recorded a year earlier which had been held in a dedicated warehouse by the NHS; and

· our discontinuation of several low growth product lines, from which sales totaling £1.5m were recorded last year, which were not repeated this year. 

Removing these distortions, the underlying growth was 21%:

Tristel and Cache

Notwithstanding the distortions, both key segments of the business have returned to a positive growth trajectory, with an increase of 20% in Tristel Medical Device products and 13% in Cache Surface products.

We have increased our prices to hospitals in response to global inflation. Of the increase in revenue of £2.4m, £1.8m relates to additional volume and £0.6m to pricing, which reflects a 4% global price rise. 

The product rationalisation which took place in the corresponding period last year has achieved the key objective of sharpening our focus on our core hospital market. The benefits have been the elimination of products that were in sales decline and releasing operational and corporate resources to activities with high growth potential.

Other

This revenue derives from carriage, and products which are complementary to the Company's key strategic focus on infection prevention, some involving third party collaborations.

Profits and margins

Gross margins have remained steady at 81% (2021: 80%), in line with expectations.

Sales, general and administrative expenses of £9.5m (2021: £8.7m) have increased by 9%, reflecting the general inflationary environment and the recruitment of an additional 18 staff to accelerate our product development, sales, and marketing activities. Consequently, personnel costs have increased by 13%. Other cost increases include packaging (50%), plastics (24%) and chemicals (128%). Whilst utility costs have increased by 60%, our manufacturing process is largely manual, which provides us with some protection from cost pressures caused by the energy crisis.

Reported Group profit before tax increased by 300% to £2.4m (2021: loss before tax of £1.2m), and Group profit before tax and share-based payments increased by 41% to £3.1m (2021: profit before tax, share-based payments and impairment of intangibles of £2.2m).

Earnings and Dividend

Earnings per share (EPS) were 3.19p, a significant improvement from the loss per share of 2.08p last year.

EPS adjusted for share-based payments of £0.7m (2021: £0.9m) and impairment of intangibles of £nil (2021: £2.4m) was 4.65p (2021: 4.97p). The fall in adjusted EPS relates to a higher effective tax charge in 2022 of 37% (2021: 16% credit). The effective tax rate on operational results alone for the period is 21%. Both the current and deferred tax impact of the Group's share option plans increase the overall effective tax rate for the period to 37%.

The share-based payment charge of £0.7m is derived from the Group's All-Staff share option scheme (£0.5m) and the Executive Management LTIP scheme (£0.2m). The All-Staff scheme is valued via the Black-Scholes model. The Executive Management scheme which is linked to share price and profit targets, is valued via the Monte Carlo method. The Board believes that these share schemes help to retain staff and link their interests to shareholders. The value of share-based payments is significantly influenced by the volatility of the Company's share price, a factor that is out of the Board's control. As a consequence, profit and earnings are reported on both an adjusted basis, adding back share-based payments, alongside unadjusted, so that the underlying profitability of the Company can be understood.

The Board is recommending an interim dividend of 2.62 pence (2021: 2.62 pence) to be paid on 11 April 2023. The associated ex-dividend date will be 16 March 2023 with a record date of 17 March 2023. The dividend pay-out will be held at its current level of 2.62 pence interim and 3.93 pence final, until the Group's stated dividend policy of two times EPS cover can be reinstated without a reduction in dividend per share.

North America

We have made our first sales in North America and have continued preparation of the additional data requested by the FDA for our De Novo submission. This will be lodged in March on time and within deadline and we are hopeful of a positive response in June.

Outlook

We are pleased to see the level of sales and profit growth that characterised Tristel in the decade up to 2020 returning and look forward to continuing growth in the second half, in line with expectations.

We remain optimistic for the Company's future, and if our FDA submission is approved this will add a new dimension to the Company's future ambitions - a challenge that we are ready to meet. 

Bruno Holthof

Chairman

20 February 2023

Condensed Consolidated Income Statement for the six months ended 31 December 2022

* Restated for all products including those in product rationalisation project

Earnings from continuing operations before interest, tax depreciation, amortisation and impairment for the period ended 31 December 2022 were £4,603,000. (Period ended 31 December 2021 £3,560,000. Year ended 30 June 22 £7,501,000).

Condensed Consolidated Statement of Comprehensive Income for the six months ended 31 December 2022

Condensed Consolidated Statement of Financial Position as at 31 December 2022

Condensed Consolidated Statement of Changes in Equity for the six months ended 31 December 2022

Condensed Consolidated Statement of Cash Flows for the six months ended 31 December 2022

Notes to the Financial Statements for the six months ended 31 December 2022

Basis of Preparation

For the year ended 30 June 2022, the Group prepared consolidated financial statements under UK adopted international accounting standards. 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 UK adopted international accounting standards which are effective from 1 July 2022.

Forthcoming requirements: This table lists the recent changes to the Standards that are required to be applied for annual periods beginning after 1 January 2022 and that are available for early adoption in annual periods beginning on 1 January 2022

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 2022 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 2022.

The financial information for the six months ended 31 December 2022 and 31 December 2021 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 2022 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 UK adopted international accounting standards 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 two 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 84% of the Company's continuing revenues (2021: 81%).

The second segment which constitutes 10% (2021: 10%) of the business activity, relates to the manufacture and sale of hospital environmental surface disinfection products.

A third segment comprises carriage and third party collaborations which are complimentary to the Company's core strategic focus on infection prevention.

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 this basis.

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

The tax on profit before tax for the year is higher than the standard rate of corporation tax in the UK (2021 - lower than the standard rate of corporation tax in the UK) of 20.50% (2021 - 19%).

The differences are reconciled below:

Amounts recognised as distributions to equity holders in the year:

** Based on shares in issue at 14 December 2022 of 47,227,993 (14 December 2021 of 47,185,043).

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: