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22 July, 2020 - 10:43 By Tony Quested

Tristel set to post big increases in revenues and profits

Paul Swinney of Tristel

Tristel plc, which makes infection prevention products, is on course to massively increase revenue and profits for the year to June 30.

Based in the horse racing hotbed of Newmarket, the thoroughbred business confirms in a trading update that results will be well ahead of market expectations.

It expects to report turnover of no less than £31.6 million (2019: £26.2m), a 21 per cent increase – and adjusted pre-tax profit of at least £6.8m (2019: £5.6m), a rise of 21 per cent. 

Revenues from overseas markets were up 32 per cent and contributed 60 per cent of total revenues – a record level (2019: 55 per cent). Revenue in the UK, the company’s largest and most mature market, rose by seven per cent. 

Cash balances at June 30 were £6.2m ( up from £4.2m year-on-year). Tristel has no debt. During the year, the company spent £0.6m to acquire 80 per cent of Tristel Italia Srl from its local management and invested £1.2m in its new warehouse and office facilities in Newmarket.

Tristel intends to maintain its current dividend policy for the financial year. This policy is to pay out half of adjusted earnings per share, before share-based payments, to shareholders. 

An interim dividend of 2.34 pence per share was paid in April 2020 and the interim dividend typically approximates 35-40 per cent of the annual dividend.  

Tristel medical device decontamination products accounted for 80 per cent of global sales in the eight-month period to February 28. These products are principally used for diagnostic purposes in hospital departments such as ear, nose and throat, obstetrics and gynaecology, cardiology, urology and ophthalmology. 

The company’s hospital surface disinfection products have historically been the less significant element of its product mix, albeit that the global hospital surface disinfection market is far greater in value terms than the global medical device decontamination market. 

The company’s hospital surface disinfection products accounted for nine per cent of global sales in the eight months to the end of February. 

Starting in March, the company experienced two powerful countervailing forces: 1) a decline in the use of its medical device decontamination products as hospitals worldwide postponed all but the most critical patient appointments to free up resources to deal with COVID-19 related cases, and 2) a surge in purchasing and use of its hospital surface disinfection products.

During the last four months of the year, when the impact of COVID-19 was at its greatest, global sales were £11.8m compared to £9.1m in the same period last financial year, an increase of 30 per cent. 

Medical device decontamination product sales accounted for 61 per cent of global sales in this period, whilst sales of hospital surface disinfection products accounted for 27 per cent. 

Tristel estimates that COVID-19 resulted in a temporary reduction of £0.5m in medical device decontamination product sales and an increase in sales of hospital surface disinfection products of £2m above the underlying trend. 

Tristel was able to navigate its way through the COVID-19 crisis by mitigating the fall in demand for its primary product portfolio by a rapid increase in supply of its hospital surface disinfection products. 

The company has invested heavily over the past three years to create a product portfolio for hospital surface disinfection and has given the portfolio a different brand name: the Cache Collection. 

Whilst anchored upon Tristel’s proprietary chlorine dioxide chemistry, Cache incorporates other cleaning and disinfection chemistries widely used in hospitals. The key theme of the Cache proposition is a powerful environmental and ecological message. 

In the run up to March, the company had been building its inventory of Cache product components in preparation for a full-scale launch towards the end of this year. 

Tristel was thereby able to take advantage of unprecedented buying by hospitals of all types of disinfectant products in several geographical markets where the company had already obtained necessary regulatory approvals.

These markets were principally the UK, Belgium, the Netherlands, France, Hong Kong, and China. The COVID-19 experience has validated the Cache proposition and accelerated the rate of customer acquisition beyond the Company’s pre-pandemic business plan.

COVID-19 has provided an extreme stress test of the company’s manufacturing capability and supply chain management, and it has performed very well in both regards. 

Tristel was able to meet all demand for products, particularly its surface disinfectant products, at a time when many suppliers to hospital systems worldwide were unable to satisfy the sudden surge in demand.    
 
The company’s subsidiaries in the UK, Belgium, the Netherlands, France, Germany, Switzerland, Italy, Russia, Hong Kong, China, Australia and New Zealand all achieved record sales levels. 

Stand-out performances were delivered by France where sales tripled to reach £1.75m, and China where sales more than doubled to nearly £0.5m. Tristel Malaysia was incorporated in February and started operation on July 1 with a team of four who had previously worked for Tristel’s distributor in the country.

The company has made its first North American medical device disinfectant submission. This is to Health Canada for registration of its Duo foam product for ophthalmology.

This is the high-level disinfectant Duo OPH. In the US, Tristel is progressing the submission for its Duo foam product for ultrasound: the high-level disinfectant Duo ULT. 

The company has already put in place a manufacturing arrangement with Parker Laboratories Inc., New Jersey, for supply of all versions of Duo to both the Canadian and United States markets. 

The prohibition on travel to the US has prevented two important parts of the FDA submission from progressing during the second half of the financial year. 

These are the in-clinic product evaluations which require Tristel staff to be able to enter hospitals with an accompanying team of microbiologists, and the usability study which entails the recruitment of lay public volunteers. Both can only resume when travel restrictions to the US are lifted and social distancing is relaxed.  

Tristel has made a number of submissions to the regulatory bodies in India and expect to receive its first medical device decontamination product approvals during this financial year.

Tristel has acquired a significant number of hospital users, particularly in the UK, Western Europe and China, earlier than anticipated in its Cache business plan. The challenge now is to hold on to these client wins and continue to build the Cache business globally.

CEO Paul Swinney said: “We are very pleased with our performance during a turbulent period. To maintain the momentum that has built over the past four months we need hospitals, especially in the UK, to return to pre-COVID-19 levels of patient throughput. Whilst we believe that hospitals will revert to more normal levels of activity, we cannot be certain as to timing. 

“We also need hospitals to maintain the intensity of their cleaning and disinfection routines, searching for and selecting the best-performing disinfection technology, such as our chlorine dioxide-based products.

“We are cautiously optimistic for the company’s prospects in this financial year and beyond.”

• Broker finnCap has raised its forecasts and increased its target price for the stock to 450p.

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