Final Results
Tristel PLC
29 October 2007
TRISTEL plc
('Tristel' or 'the Company')
Preliminary Results for the Year Ended 30 June 2007
Another year of strong revenue and profit growth
Tristel plc (AIM: TSTL), the specialist infection and contamination control
company, announces its preliminary results for the year ended 30 June 2007.
Tristel operates through two subsidiaries: Tristel Solutions, which provides
infection control products based on chlorine dioxide chemistry to the healthcare
marketplace and Tristel Technologies, which uses chlorine dioxide chemistry for
legionella control in buildings' water systems (including those of hospitals)
and contamination control in the food growing and processing industries.
Financial Highlights
• Turnover up 37% to £5,148,366 (2006: £3,745,680)
• Gross margin increased to 62.3%, up 7.9 percentage points from 2006
• Pre-tax profit* up 49% to £1,252,721 (2006: £841,491)
• Operating cashflow up 273% to £1,243,231 (2006: £333,043)
• Adjusted earnings per share* up 48% to 3.66p (2006: 2.48p)
• Basic earnings per share up 8.5% to 2.3p (2006: 2.12p)
o Due to non-recurring costs of £349,280
• Dividend per share for the full year up 35% to 1.35p (2006: 1p)
Operational Highlights
• Establishment of in-house manufacturing securing:
o greater control and protection over the Company's proprietary technology
o continuing improvements in quality control
o acceleration of new product development
o capacity to meet volume growth expected in the medium term
o enhanced gross margins
• New products acquired and launched since flotation (June 2005) contribute
23.7% of total sales
• Five-fold increase in export sales; Tristel now represented in 22
overseas markets
Paul Swinney, Chief Executive of Tristel plc, said:
'This has been another year of turnover, profit and earnings growth, with a
strong performance in our domestic market and further progress made overseas.
We continue to be totally focussed on the infection and contamination control
marketplace, an area that is firmly on the political agenda in the United
Kingdom and abroad. We are confident in the outlook for the coming year and
believe that Tristel is well placed to continue its strong growth record.'
* Before amortisation, non-recurring charges and share based payments
For further information:
Tristel plc 01638 721 500
Paul Swinney, Chief Executive
Paul Barnes, Finance Director
Daniel Stewart 020 7776 6550
Oliver Rigby
Parkgreen Communications 020 7479 7933 or 07980 541 893
Paul McManus paul.mcmanus@parkgreenmedia.com
Chairman's statement
Tristel has had another excellent year, with growth in our core domestic
healthcare business, a full year contribution from Tristel Technologies
(acquired on 5 June 2006), and expansion in our export business. As a result,
turnover increased by 37% to £5,148,366 (2006: £3,745,680). Pre-tax profit
before amortisation of intangibles, share based payments and non-recurring items
increased by 49% to £1,252,721 (2006: £841,491) and the operating margin before
amortisation of intangibles, share based payments and non-recurring items rose
from 21.5% in 2006 to 24.2% in 2007. Profit before tax increased by 9.4% to
£786,895 (2006: £719,579), impacted by a non-recurring charge of £349,280.
Both group subsidiaries performed well during the year. Tristel Solutions,
which provides infection control products based on chlorine dioxide chemistry to
the healthcare marketplace, increased turnover by 9.9% to £4,015,034 (2006:
£3,651,921). Tristel Technologies, which also uses chlorine dioxide chemistry
but for legionella control in buildings' water systems (including those of
hospitals) and contamination control in the food growing and processing
industries, made a full year contribution to turnover of £1,133,332 (2006: one
month £93,759). The Group's export sales in the year grew five-fold to £178,365
(2006: £35,765).
One of the most significant developments of the year has been the establishment
of an in-house manufacturing capability enabling us to take over production of
our products. This major change in our business model involved the relocation
of our Newmarket headquarters to manufacturing and warehouse premises of 14,500
sq. ft, the relocation of our Bolton office, a substantial investment in plant,
equipment and the fit-out of these new premises, and a significant increase in
headcount. I am pleased to report that this major strategic change has been
completed smoothly and efficiently and that we are now producing all our
chemical products and handling all logistical activities from these two new
locations.
Outlook
The past year has seen Tristel plc increase its scale and reach in the infection
and contamination control marketplace, with products that have been launched and
acquired since the flotation in June 2005 making a significant contribution to
growth. With further innovative products to be launched in the current
financial year, we look forward to our future with confidence.
Our basic earnings per share for the year ended 30 June 2007 were 2.3 pence
(2006: 2.12 pence). The Board is recommending that the final dividend be
increased to 1 penny making a total annual dividend of 1.35 pence, an increase
of 35% over 2005-06. The final dividend represents a total payment of £244,429.
Francisco A. Soler
Chairman
29 October 2007
Chief Executive's review of activities
Strategic overview
Manufacturing
The year ended 30 June 2007 has been transformational for Tristel. During the
year we broke with the model of outsourced production that we had used since
1998. The decision to change our business model was driven by:
• the expansion of the Group's intellectual property portfolio demanded we
gain greater control and protection over our proprietary technology
• the need to achieve continuing improvement in quality control
• the need to accelerate the new product development process
• the need to prepare for the volume growth that we expect to achieve in our
strategic plan
The transition to manufacture has involved a substantial investment. The
expenditures incurred have been:
• Plant, equipment and fit-out of manufacturing facility: £421,000
• Acquisition of manufacturing rights - cash: £300,000
• Acquisition of manufacturing rights - share issue: £300,000
We forecast that in-house manufacture will result in enhanced future gross
margins. Furthermore, we now have in place the production capacity and human
resources, supported by technical and scientific personnel recruited in
conjunction with establishing production, to meet the increased demand for our
products that we forecast from future additions to our product portfolio and
from our geographical expansion.
Product innovation - medical
Tristel is a consumable product-led business. Our product development
philosophy is to create single-use products with unique application features.
We enjoy frequent repeat re-ordering for our products and high visibility in our
revenue stream. The products require only limited after-sales service and
support and we will continue with this business model.
Future product development plans will entail the supply to users of equipment
hardware to enable the use of the Tristel chemistry. In all cases the
underlying revenue stream from the Tristel consumables will be of greater
economic significance than the hardware revenue stream.
During the year we launched new products targeted at ultrasound, environmental
disinfection and laboratories and all have started to achieve significant market
penetration. At the same time we have continued to focus upon our historical
core business of the United Kingdom mainstream endoscopy market. In this market
we continue to be the most widely used disinfectant chemistry in the country and
in the Ear, Nose and Throat (ENT) endoscopy market our TRIO wipe system is used
in approximately 50% of all ENT departments.
Product innovation - water and food chain
The acquisition of Tristel Technologies has given us a significant presence in
the legionella control market (water) and the food growing and processing
industries (food chain).
The Tristel Technologies products incorporate a chlorine dioxide chemistry
system that is supplied from the United States and differs in certain important
respects from our proprietary chlorine dioxide chemistry. Having successfully
integrated the Tristel Technologies business during the year and having
relocated its blending operation to our Newmarket production facility, our near
term strategy is to integrate the best features of the two chemistry systems.
As with our medical business, the legionella and food contamination control
products are consumables.
Products that did not exist within the Group portfolio on 1st June 2005, the
date of our flotation, now account for 23.7% of total sales, validation that our
product development and acquisition strategy is driving future growth.
Geographical expansion
Tristel has a clear strategy to expand its business internationally over the
next three to five years. At present, the business model employed is to use
distribution partners. When qualifying prospective export markets we look for a
regulatory framework that enables the product portfolio, or specific products
within the portfolio, to be approved for sale within a reasonable period of
time. Furthermore, this must be achievable with an acceptable level of
investment, which the distributor bears. These criteria disqualify the most
heavily regulated markets such as the United States.
We have been successful in identifying and appointing 22 distribution partners
who are either selling Tristel products or are in the process of registering
them.
Whilst the level of export sales has still to make a significant contribution to
total sales, the platform for more rapid future expansion has been established.
Market overview
Macro influences
Raising standards of hospital hygiene; controlling the risk of infection in
hospitals or the threat of legionella from buildings' water supplies; avoiding
the dangers of salmonella in food produce - these are the driving forces behind
our business. Their importance to our society is obvious even without the media
attention that they attract, placing the hygiene and infection control issue
firmly on the political agenda in the United Kingdom and abroad.
Whilst the general level of healthcare spending is an important determinant of
demand for our products in all the markets in which we operate, we believe that
hygiene and infection control are critical expenditures. As long as we continue
to deliver products with superior efficacy, greater safety, and that are easier
to use than those currently employed, our business environment will present
opportunities for continued growth.
Chlorine dioxide, the active ingredient in which we have specialised, is,
without doubt, a highly effective and safe biocide. Its safety pedigree has
been established by over ten years of widespread use in United Kingdom
hospitals. Its effectiveness as a biocide is widely documented in scientific
journals.
Regulatory influences
The regulatory environment supports our confidence in Tristel's future. Our
products are either classified within the European Community as medical devices
under the Medical Devices Directive (MDD 93/42/EC) or as biocides under the
Biocidal Products Directive (BPB 98/8/EC).
Simplifying a complicated set of regulations, for a disinfectant (irrespective
of the chemistry) to be classified as a medical device it has to be used to
disinfect another medical device. For the disinfectant to be approved, the
manufacturer has to prove its efficacy and safety. Approval enables the product
to carry the CE mark. All of our medical products carry the CE mark.
For a more general purpose disinfectant, such as a surface or water
disinfectant, it will be classified as a biocide under the Biocidal Products
Directive (BPD). Concerned for the environmental impact of the plethora of
disinfectant chemistries that have been used for many years, the European
Community is in the process of limiting the number of active ingredients that
can be used. Sodium chlorite (the main basic ingredient of our products) as the
precursor for chlorine dioxide has been approved by the EC and is being
supported through the regulatory submission process by a group of sodium
chlorite manufacturers. 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 environmental disinfection
products that we market.
Outside of the European Community, differing countries have their own regulatory
bodies. However, in the markets in which we operate, which is worldwide
excluding North America, the CE mark is widely accepted.
Competition
In the arena of medical device high-level disinfectants, we believe that Tristel
is the sole manufacturer of chlorine dioxide products. However, there are a few
other chemistries that can compete with chlorine dioxide, the most widely used
of which is peracetic acid.
Whilst the emergence of competitor products utilising the chlorine dioxide
molecule is a future possibility and would pose a competitive threat, our
strategy has been to present specifically packaged products for clearly targeted
hospital areas. This strategy differentiates Tristel from disinfectant
suppliers who present their products as a homogenous solution for use in all
hospital areas. A substantial investment both in terms of cost and time would
be required to catch up with Tristel's first user advantage established in the
markets in which we operate.
In water disinfection (legionella control) and the food processing and growing
industries chlorine dioxide is widely used as the alternative to sodium
hypochlorite (chlorine).
Results and finance
Sales
Tristel has enjoyed another strong year of growth. Headline sales growth of 37%
included a full year contribution to Group turnover from Tristel Technologies of
£1,133,332. Tristel Solutions' turnover increased by 9.9% to £4,015,034.
Margins and operating profit
The gross margin increased to 62.3%, up 7.9 percentage points from last year.
The first in-house production of Tristel products commenced in May 2007 and made
an initial contribution to improved margins from that date.
Excluding the non-recurring item, amortisation of intangibles and the share
based payments, operating profits increased by 54.6% to £1,246,332 and the
operating margin rose from 21.5% last year to 24.2% in 2007.
The non-recurring cost relates to an agreement, reached in June 2007, with a
company engaged in the United Kingdom endoscopy market, to end an informal
arrangement that had operated since 2002. This arrangement had assisted both
companies to establish market leading positions in their respective business
areas in endoscopy. We agreed to make a one-off ex-gratia settlement in the
amount of £349,280 (together with associated costs) to bring it to a close. The
informal arrangement had previously cost the Group £777,802 from the date it
commenced to the end of the financial year.
Earnings
The growth in basic earnings per share and diluted earnings per share was 8.5%
and 8.1% respectively.
Capital expenditure and investments
The Group has made important investments in the business over the year, with
capital expenditures totalling £1,307,469.
The main elements of this investment were:-
• Acquisition of manufacturing rights and know-how at a cost of £600,000.
Of the total consideration paid to the vendor, £300,000 was settled in cash
and £300,000 by the issue of 606,060 ordinary shares at a price of 49.5
pence per share
• Establishment of a manufacturing and warehousing facility in Newmarket and
the relocation of the Bolton office
• New development projects which are ongoing which include the creation of
the 'Stella' sterilising tray and the 'Shine' washer-disinfector for the
Ear, Nose and Throat market
The level of investment expenditure incurred during the year will not be
recurring in the current financial year.
Treasury and deployment of capital
The Group's working capital and capital expenditures have been financed from
operating cash flow, utilisation of an invoice discounting facility, term loan
and overdraft facilities provided by the Company's bankers, and a £100,000 short
term loan provided by one of the Company's shareholders (which has subsequently
been repaid).
The Group has adequate debt facilities to fund its foreseeable working capital
and capital expenditure needs.
Paul Swinney
Chief Executive
29 October 2007
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
Note Year ended Year ended 30
30 June 2007 June 2006
£'000
£'000
Revenue 5,148 3,746
Cost of sales (1,943) (1,709)
Gross profit 3,205 2,037
Other operating income 20 16
Administrative expenses - share based payments (IFRS2) (30) -
Administrative expenses - depreciation and (206) (168)
amortisation
Administrative expenses - others (1,859) (1,201)
Total administrative expenses (2,095) (1,369)
Operating profit before exceptional item 1,130 684
Exceptional item 4 (349) -
Operating profit 781 684
Finance income 5 7 35
Finance costs 6 (1) -
Net finance costs 6 35
Profit before tax 787 719
Taxation 7 (236) (213)
Profit for the year 551 506
Attributable to:
Equity holders of the parent 551 506
Earnings per share from continuing operations
Basic - pence 9 2.30 2.12
All amounts relate to continuing operations. There are no recognised gains or
losses other than the profits shown above.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 30 JUNE 2007
Note 2007 2006
£'000
£'000
Profit for the year 551 506
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR 551 506
Attributable to:
Equity holders of the parent 551 506
All amounts relate to continuing operations. There are no recognised gains or
losses other than the profits shown above.
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2007
Note 2007 2006
£'000 £'000
Non-current assets
Goodwill 774 774
Intangible assets 1,495 819
Property, plant and equipment 734 312
3,003 1,905
Current assets
Inventories 488 395
Trade and other receivables 1,147 931
Cash and cash equivalents 38 174
1,673 1,500
Total assets 4,676 3,405
Capital and reserves attributable to the company's
equity holders
Share capital 10 244 238
Share premium account 10 1,750 1,456
Merger reserve 10 478 478
Retained earnings 10 158 (167)
Equity attributable to equity holders of parent 2,630 2,005
Current liabilities
Trade and other payables 1,369 825
Bank overdraft 165 54
Interest bearing loans and borrowings 100 204
Current tax liabilities 230 192
Total current liabilities 1,864 1,275
Non-current liabilities
Deferred tax liabilities 182 125
Total non-current liabilities 182 125
Total liabilities 2,044 1,400
Total equity and liabilities 4,676 3,405
The financial statements were approved by the Board of Directors on 29 October
2007, and were signed on its behalf by:
Paul Barnes FCCA
Finance Director
29 October 2007
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
Note 2007 2006
£'000
£'000
Cash generated from operating activities 11 1,243 333
Interest paid (1) -
Corporation tax paid (129) (11)
1,113 322
Investing activities
Interest received 7 35
Purchases of intangible assets (462) (105)
Acquisition of subsidiary undertaking (net of cash) - (1,081)
Purchases of property, plant and equipment (545) (236)
Proceeds from sale of property, plant and equipment - 13
Net cash used in investing activities (1,000) (1,374)
Financing activities
Dividends paid 8 (256) (185)
Net cash used in financing activities (256) (185)
Net increase/(decrease) in cash and cash equivalents (143) (1,237)
Cash and cash equivalents at the beginning of the (84) 1,153
period
Cash and cash equivalents at the end of the period (227) (84)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
1. PRINCIPal ACCOUNTING POLICIES
Basis of Preparation
The group's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by the European
Commission. These will be those International Accounting Standards,
International Financial Reporting Standards and related interpretations
(SIC-IFRIC interpretations), subsequent amendments to those standards and
related interpretations, future standards and related interpretations issued or
adopted by the IASB that have been endorsed by the European Commission. This
process is ongoing and the Commission has yet to endorse certain standards
issued by the IASB.
Segments
For management purposes, the group reports its entire activities as one
business. Accordingly, the Directors consider there to be only one reportable
segment, being the development, manufacture and distribution of products
utilising the group's core chlorine dioxide technologies.
2. Publication of non-statutory accounts
The financial information for the years ending 30 June 2007 and 2006 has been
audited but does not constitute full financial statements within the meaning of
Section 240 of the Companies Act 1985.
The financial information has been extracted from the group's 2007 statutory
financial statements upon which the auditors' opinion is unqualified and does
not include any statement under section 237 of the Companies Act 1985.
3. EXPLANATION OF TRANSITION TO IFRS
IFRS 1 - 'First-time adoption of International Financial Reporting Standards'
sets out the procedures that must be followed when the group adopted IFRS for
the first time as the basis for preparing its consolidated financial statements.
The group established its accounting policies as at 30 June 2006 and, in
general, applied these retrospectively to determine the IFRS opening balance
sheet at its date of transition, 1 July 2005. The group had previously adopted
UK GAAP as its underlying basis of accounting. Following review of UK GAAP
standards with those required under IFRS, the Directors' consider that there are
no retrospective adjustments or re-statement that need to be made to the opening
balance sheet at 1 July 2005.
4. EXCEPTIONAL ITEMS
The non-recurring cost relates to an agreement, reached in June 2007, with a
company engaged in the United Kingdom endoscopy market, to end an informal
arrangement that had operated since 2002. This arrangement had assisted both
companies to establish market leading positions in their respective business
areas in endoscopy.
The company agreed to make a one-off ex-gratia settlement in the amount of
£349,280 (together with associated costs) to bring the arrangement to a close.
The informal arrangement had previously cost the Company £777,802 from the date
it commenced to the end of the financial year.
5. FINANCE INCOME
2007 2006
£'000 £'000
On short term deposits 7 35
6. FINANCE COSTS
2007 2006
£'000 £'000
On bank loans and overdrafts 1 -
7. TAX
The taxation charge represents:
2007 2006
£'000 £'000
Current taxation
Corporation tax 189 184
Adjustment in respect of earlier years (10) -
Total current tax 179 184
Deferred tax
Origination and reversal of temporary differences 57 29
Total deferred tax 57 29
Total tax charge in income statement 236 213
UK corporation tax is calculated at 30% (2006: 30%) of the estimated assessable
profit for the year.
The charge for the year can be reconciled to the profit in the consolidated
income statement as follows:
2007 2006
£'000 £'000
Profit before tax 786 719
Tax at the UK corporation tax rate of 30% (2006: 30%) 236 216
Effect of:
Expenses not deductible for tax purposes 4 3
Timing differences in capital allowances and 3 -
depreciation
Different rate tax bands and changes in tax rates 5 (2)
Enhanced relief on scientific research expenditure (2) (4)
Adjustment in respect of earlier years (10) -
Total tax charge for the year 236 213
8. DIVIDENDS
2007 2006
£'000 £'000
Amounts recognised as distributions to equity holders
in the year:
Final dividend for the year ended 30 June 2006 of 173 119
0.725p (2005 - 0.50p) per share
Interim dividend for the year to 30 June 2007 of 0.35p 83 66
(2005 - 0.275p) per share
256 185
Proposed final dividend for the year ended 30 June 2007 244 173
of 1p (2006 - 0.725p) per share
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.
9. EARNINGS PER SHARE
The calculation of earnings per share is based on the following profits and
numbers of shares:
2007 2006
£'000 £'000
Earnings
Retained profit for the financial year attributable to 551 506
the equity holders of the parent
Number of shares Shares Shares
'000 '000
Weighted average number of ordinary shares for the 23,973 23,837
purposes of basic earnings per share
Effect of dilutive potential ordinary shares
Share Options 355 359
Weighted average number of ordinary shares for the 24,328 24,196
purposes of diluted earnings per share
Earnings per ordinary share
Basic 2.30p 2.12p
Diluted 2.26p 2.09p
10. RECONCILIATION OF MOVEMENT IN TOTAL EQUITY
Called up Share
share premium Merger Retained
capital account reserve earnings
£'000 £'000 £'000 £'000 £'000
Balance at 1 July 2005 238 1,456 479 (489) 1,684
Total recognised income and expense - - - 506 506
Dividends paid (185) (185)
Balance at 30 June 2006 238 1,456 479 (168) 2,005
Total recognised income and expense - - - 551 551
Dividends paid (256) (256)
Issue of shares 6 294 - - 300
Share based payments - IFRS 2 30 30
244 1,750 479 157 2,630
In April 2007, the company acquired certain manufacturing assets for total
consideration amounting to £600,000 (excluding associated costs). Consideration
was made by way of a cash payment of £300,000 and a share placing to the Vendor
of 606,060 1p ordinary shares at an issue price of 49.5p per share. The price of
the placing shares was calculated by reference to the market price on the date
of the Agreement
11. notes to the consolidated cash flow statement
2007 2006
£'000 £'000
Cash generated from operations
Profit before tax 787 719
Adjustments for:
Depreciation and inpairrment 119 46
Amortisation of intangible assets 87 122
Share based payments - IFRS2 30 -
Loss on sale of tangible fixed assets 3 5
Government grants (20) (16)
Finance costs 1 -
Finance income (7) (35)
1,000 841
Increase in inventories (93) (54)
Increase in trade and other receivables (216) (205)
Increase/(decrease) in trade and other payables 552 (249)
Cash generated from operations 1,243 333
12. the financial information set out in this preliminary announcement, does
not constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The annual report and financial statements for the year ended 30 June 2007 will
be posted to the shareholders on 19 November 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 on the company's web site
www.tristel.com from 19 November 2007.
This information is provided by RNS
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