Final Results

RNS Number : 3715Q

Tristel PLC

14 October 2013

 



TRISTEL plc

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

Preliminary Audited Results for the year ended 30 June 2013

Tristel plc (AIM: TSTL), the manufacturer of infection prevention and contamination control products, announces audited preliminary results for the year ended 30 June 2013 ahead of adjusted market expectations. 

Tristel's lead technology is a proprietary chlorine dioxide formulation and the Company addresses three distinct markets:

·     The Human Healthcare market (hospital infection prevention - via the Tristel brand)

·     The Animal Healthcare market (veterinary practice infection prevention - via the Anistel brand)

·     The Contamination Control market (control of contamination in critical environments - via the Crystel brand)

Financial Highlights

·     Turnover £10.6m (2012: £10.9m)

·     Strong H2 performance with revenues up 40% to £6.2m from H1 (£4.4m)

·     H2 adjusted pre-tax profit of £1.1m from H1 adjusted pre-tax loss of £0.6m, giving adjusted* pre-tax

profit £0.5m for the year (2012: £0.7m)

·     Gross margin 66% (2012: 68%)

·     Basic earnings per share 3.16p loss (2012: 1.77p profit)

·     Dividend per share for the full year 0.4p (2012: 0.62p)

·     International sales up 61% to £3.4m (2012: £2.1m)

·     Gross cash of £0.6m (2012: £0.7m)

*Adjusted for non-recurring items totalling £2.2m(2012: £0.2m)

Operational Highlights

·      All overseas operations cash flow positive

·      Attained market leadership position in UK veterinary sector

·      1.7 million instrument decontamination procedures carried out worldwide using Tristel Wipes System

Paul Swinney, Chief Executive of Tristel plc, said:

"The result for the year masks a starkly contrasting performance between the first and second halves.  The loss before tax and nonrecurring items of £0.6m at the half way stage was followed by a profit of £1.1m in the second half.  The explanation lies in the severe drop off in first half sales of our legacy endoscopy products.  Additionally, we entered the financial year facing the considerable challenge of establishing our own brand for the UK veterinary market and locating a diverse customer base which we had previously supplied through a distributor. It took us into the second half to achieve this.

The momentum which we built in the second half has continued into the first quarter of the current financial year.  We are cautiously optimistic that it will continue"

For further information:

Tristel plc		Tel: [phone]
Paul Swinney, Chief Executive Liz Dixon, Finance Director
Walbrook PR Ltd		Tel: [phone]
Paul McManus		Mob: [phone] or [e-mail]
Lianne Cawthorne		Mob: [phone] or [e-mail]
FinnCap
Geoff  Nash / Charlotte Stranner (Corporate Finance)		Tel: [phone]
Simon Starr (Corporate Broking)

           Chairman's Statement

At this time last year I stated that we 'would undergo a root and branch review of our business' and that we envisaged a year of transition as we moved the business from its dependency on legacy endoscopy products at the same time as ensuring that all of our overseas operations became cash flow positive. Achievement of both these objectives would be key to the long term success and viability of the Group. I am pleased to report that both have been achieved during the year and that the Company is in far better shape than it was 12 months ago, notwithstanding the short term impact on the year's financial results.

The results show flat revenues of £10.56 million (2012: £10.94 million) and a decline in profit before tax and non-recurring items of 47% to £0.48 million (2012: £0.75 million). This is a very disappointing set of results that hides a picture of two starkly contrasting halves. A loss before tax and exceptional items at the halfway stage of £0.64 million was followed by a profit of £1.12 million in the second half. The Group's performance in the second half reflected the cost cutting measures that we undertook earlier in the year and the growth in sales of the newer generation of Tristel products. The non-recurring item of £2.23 million (2012: £0.17 million) relates to the impairment of intangibles and the cost of restructuring our operations.

Legacy product decline

The decline in the multi-channel endoscopy products, our legacy business, was sharper than anticipated and dominated the financial results for this year. Following a 2% increase in sales in 2012, sales more than halved in 2013, in a segment that had represented nearly 30% of total sales in 2012. Predicting the precise timing and severity of this fall-off was not possible and management are now focused on managing the tail of hospitals using our products for endoscope decontamination with a minimum of investment and deployed capital, as we focus instead on the current and future generation of Tristel disinfectant and cleaning products.

Focus on growth products

By contrast, the non and single-lumened instrument disinfectant products have grown in both the UK (10%) and overseas (36%). Around the world over 1.7 million decontamination procedures were carried out using the Tristel Wipes System on the small flexible endoscopes and ultrasound probes that are used in a range of different hospital departments including gynaecology, urology, ear nose & throat, cardiology and IVF. We anticipate further growth in the use of these products as they are increasingly recognised as the decontamination standard for these types of medical instrument.

I reported in our 2012 statement that we had ceased contract manufacturing for the distributor that sold certain of our products into the UK veterinary market where they had become market leader.  As a result, we have had to establish our own brand of veterinary products and sell them directly to the country's veterinary practices and animal welfare institutions, of which there are over 4,000.  The brand that we have created is Anistel.  The situation gave us the opportunity to access the veterinary market directly, an endeavour that has not been easy.  It is pleasing to report that direct sales to the UK and overseas veterinary markets reached £0.74 million in the year at an enhanced margin to that previously earned.  The veterinary market is very different from the hospital market that has been the Group's historic domain and has required us to extend our sales and marketing activities outside of our traditional area of expertise.  We are well placed for further growth in 2014 in this segment of our business.

The third market that we address with our Crystel range is contamination control for pharmaceutical manufacturers, hospital aseptic units and laboratories. Since we invested in the clean room facilities to manufacture this range, sales growth has been much slower than originally anticipated.  However, sales reached £0.91 million in the year, an increase of 286% on the prior year, attributable to the introduction of new products and new client wins in both industry and within the National Health Service aseptic units.  We are attracting customers to our Crystel range because of the efficacy of our products and the superior service levels we provide.   

Root and branch review and restructuring our cost base

One of the concerns identified last year was the profitability of our overseas operations. We said that we would 'single mindedly focus on ensuring that our international operations either became profitable or are restructured'. This process has, at times, been painful but during the year the Board and management have taken tough decisions and worked hard to ensure that all of our overseas operations are now cash flow positive. In the same vein, the Company's control of costs is much improved compared to this time last year although there is still more work to be done in this area to ensure that we remain competitive and to maximise the effect of the anticipated sales growth in 2014.

Another consequence of the 'root and branch review of our business' that we promised in the last statement, has been an analysis of our IP portfolio and other balance sheet items. This led, in the early part of the year, to the write off of certain assets relating to our legacy business and culminated in a non-recurring charge of £2.23 million.

Restructuring our business, in the face of a rapid decline in our core product area, has been difficult. However, we were very clear in our communications to shareholders that it was essential if Tristel is to flourish for the future in a fast changing market environment. The impact of the restructure is reflected in our financial results and has been felt by all of our employees; but we are building a business platform that will meet the challenges and opportunities presented in each of our three markets.

EPS and dividend

Basic earnings per share were a loss of 3.16 pence (2012: a profit of 1.77 pence). The Board is recommending that the final dividend is 0.32 pence (2012: 0.35 pence) making a total dividend for the year of 0.40 pence (2012: 0.62 pence). If approved, the final dividend will be paid on 16 December 2013 to shareholders on the register at 29 November 2013.

Employees

The year ended 30 June 2013 has been particularly challenging and has impacted all of our employees. Tristel has a loyal and flexible workforce that, during the year, has been tested by the market environment and the need for significant changes to our modus operandi. In line with our root and branch review, and as we resized our operation, we have had to part company with some of our employees. For those remaining it has been no less challenging. We thank all of our team, in every part of our operation, in the UK and overseas, for their efforts and contribution throughout the year and recognise that without such a loyal and dedicated workforce we would have found our transformation considerably more difficult.

Outlook

With the immediate short term restructuring of our operations largely behind us and with momentum building behind sales into new segments with new products, we feel we can be cautiously optimistic for the coming year and into the medium term. Our Company, its people, processes and procedures are more robust than they were a year ago and we are well positioned to capitalise on the opportunities presented to us both in the UK and overseas. With all of our overseas operations cash flow positive and with an improved cost structure we believe we can manage the final stage of the decline in legacy products and drive our Company to achieve the levels of growth and profitability that the Board expects and our shareholders deserve.

Christopher Samler

Chairman

11 October 2013

Chief Executive's report

Tristel is a global supplier of infection prevention, contamination control and specialist hygiene products. 

The Group serves three markets with three distinctly branded product portfolios:

·      Human health - products used for infection prevention in hospitals (Tristel brand);

·      Animal health - products used for infection prevention and hygiene in veterinary practices and animal welfare establishments (Anistel brand);

·      Contamination control - products used for contamination control in critical environments, for example the clean rooms of pharmaceutical manufacturing companies and the aseptic units in hospitals (Crystel brand).

Infection prevention in human healthcare - the Tristel portfolio

Hospital microbiologists and infection prevention officers devise their infection prevention and control strategies in terms of the vectors (or routes) of transmission of infection within a hospital.  These vectors are instruments, surfaces, water, skin and air. 

Tristel products are used for the disinfection of specialist instruments, of hospital surfaces, and of water supplies.  Whilst the Group has developed a number of patented, chlorine dioxide based hand disinfectants it has not yet sought to commercialise them.

Instruments

There are many types of medical instrument that cannot tolerate sterilisation by heat (autoclaving) and which, as a consequence, have to be disinfected with a liquid chemical disinfectant.  The best known of these instruments are flexible endoscopes and ultrasound probes. 

Flexible endoscopes are used in many clinical areas of a hospital.  For our product development and marketing strategy we have segregated them into the large, complex, multi-channelled endoscopes that are used in departments such as gastro-intestinal (GI) endoscopy; and the smaller and less complex instruments that are used in departments such as ear, nose and throat (ENT), cardiology, anaesthesia and urology. We categorise the larger, complex instruments under the banner MCE (multi-channelled endoscopes), and the smaller, less complex instruments under the banner N&SLI (non and single lumened instruments).  Also included in the N&SLI category are ultrasound probes which are used very widely throughout all hospitals for diagnostic procedures carried out in obstetrics and gynaecology, IVF, maternity and urology.   

For many years the principal focus of our competitors has been on the MCE category, and this is in fact where Tristel's origins lie.  However, since becoming a public company in 2005, we have concentrated on developing products and decontamination processes that focus on the N&SLI category and the hospital departments in which they are used.  These are the least competitively contested areas of instrument disinfection.

The products that we have developed to disinfect the N&SLI instruments are the Tristel Wipes System, the Stella decontamination tray together with Fuse high-level disinfectant, and various chlorine dioxide foam applications. 

One of our 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, IVF and ultrasound departments in the United Kingdom.  The system is portable, allows the instrument to be returned to the consultant for the next patient in a number 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 process supported by comprehensive training.  Both the chlorine dioxide wipe and the Wipes System process are extensively patented.

The Tristel Wipes System is now sold in the United Kingdom and Republic of Ireland, throughout much of Continental Europe, throughout Scandinavia, in Russia, Turkey, the Middle East, South Africa, Malaysia, Hong Kong, China, Australia and New Zealand.

The Wipes System (as does Stella and Fuse) challenges the orthodox conventions of instrument decontamination, but it is gaining ever increasing acceptance worldwide.  For many years we have stated that our strategic objective is to establish these products as the universal "gold" standards for the decontamination of non and single-lumened heat sensitive medical instruments.

During the year, over 1.7 million disinfection procedures were undertaken by Tristel's proprietary wipe in the 27 countries in which it is commercially available.  The Wipes System can fairly be described as having become the principal method of decontamination of nasendoscopes, cardiology and ultrasound probes in those markets it has gained a commercial foothold.  However, the potential for substantially higher procedure numbers, even in the markets in which the Wipes System is most established, and in those markets where it has only recently been launched, is great.    

Not only is the Wipes System CE marked as a medical device and approved by Australia's regulatory body (TGA) and China's Ministry of Health, it is also recognised by many national professional societies in their published guidelines as a widely used, even preferred, method for the decontamination of nasendoscopes (ENT), TOE probes (cardiology) and ultrasound probes (womens health).

Whereas the Wipes System is a manual decontamination process, Stella is a more conventional immersion technique in which the instrument is soaked in Tristel Fuse liquid disinfectant for five minutes, the time required to kill all organisms.  Stella is able to flush automatically the lumen of an instrument, thereby enabling it to decontaminate the single-lumened instruments widely used in urology (cystoscopes), gynaecology (hysteroscopes) and respiratory medicine (bronchoscopes).

One of the key features of Stella is that it is battery powered and does not require mains power supply or water and has no need for service or maintenance.  Stella has, as a consequence, enormous potential in lesser resourced healthcare markets.  We believe that Stella can make a considerable difference to hygiene standards in the developing world. 

Stella units have been sold in the United Kingdom, Republic of Ireland, Benelux, Germany, Spain, Italy, Slovenia, Romania, Denmark, Sweden, Norway, Finland, UAE, Israel, Russia, China, Hong Kong, Malaysia and New Zealand.

Instruments - financial performance and future outlook

The respective sales contributions of our MCE and N&SLI products are shown in the following table:

	2012-13	2011-12
Multi-Channelled Endoscopy UK	1,254,000	2,977,000
Non & Single Lumened UK	3,089,000	2,812,000
Non & Single Lumened Overseas	2,122,000	1,563,000
	6,465,000	7,352,000

Sales in 2012-13 of MCE products were £1,254,000, a decrease of 57.9% on the previous year (2012: £2,977,000).  All sales were in the United Kingdom.

Total sales of N&SLI products increased from £4,375,000 to £5,211,000, a rise of 19.1%, with domestic sales increasing by 9.8% and overseas sales increasing by 25.8%.  Whilst we have achieved very high rates of penetration in the United Kingdom in certain niche areas such as ENT, our hospital clients are continuously finding new applications for the Wipes System.  There is very significant growth potential in areas such as women's health and ophthalmology.

In overseas markets, whether we have established a direct presence as we have in Germany and Russia, or a distributor represents our N&SLI products, we are far from reaching any level of market saturation.

We expect our N&SLI business to continue to grow strongly.  The contribution of overseas sales will increase as more countries approve the Wipes System and Stella and they increasingly become the orthodox decontamination methods for non and single-lumened heat-sensitive medical devices.

Surfaces

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 the 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.

We have a number of packaging formats in our surfaces range - liquids in one and five litre packs, together with gels, foams and wipes.  They are used, often in combination, by both hospital nursing staff and housekeeping teams to clean and disinfect hospital surfaces such as ward floors, operating theatre walls, bed mattresses, commodes and patient trolleys.  Chlorine is the most prevalent incumbent chemistry which we replace when our surfaces range is adopted by a hospital. 

Surfaces - financial performance and outlook

Sales of surface products increased from £1,055,000 to £1,067,000, an increase of 0.5%.  Overseas sales decreased by 5.2%.

	2012-13	2011-12
Surfaces UK	939,000	920,000
Surfaces Overseas	128,000	135,000
	1,067,000	1,055,000

We anticipate that the upward momentum in sales will be restored in 2013-14. 

Water

Tristel is the exclusive European distributor for the products of Bio-Cide International Inc, Oklahoma, United States.  These products incorporate a chlorine dioxide chemistry that is different from our proprietary formulation.  The Bio-Cide's composition is used to control Legionella, a bacterium found in drinking water and cooling towers.  Legionella is the cause of Legionnaires' disease.

The supply agreement with Bio-Cide was last renewed in June 2008 and has a 20-year term.  In association with the supply agreement, Tristel is the representative of Bio-Cide in the industry group that is sponsoring the registration of sodium chlorite and chlorine dioxide under the Biocidal Products Regulation (BPR) which supersedes the Biocidal Products Directive (BPD).  Tristel and Bio-Cide share 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 BPR.  This legal instrument is being imposed by the European Community (EC) to limit the number of active ingredients that can be used, primarily for ecological and environmental reasons.  Our industry group is supporting sodium chlorite and chlorine dioxide through the regulatory submission process.  The biocidal industry's consensus view is that the cost of submission under the BPR will block the development and introduction of active ingredients that could be future alternatives to those already approved under the BPR.  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.

Water - financial performance and outlook

Tristel's Water disinfection product range, whilst not a growth opportunity, produces a consistent stream of revenue, profit and cash.  It is a low investment area of the Group's business.

Total sales of Water disinfection products were £418,000 (2012: £482,000).  Export sales were £144,000 (2012: £185,000) and domestic sales £274,000 (2012: £297,000).

Other   

Other hospital infection prevention revenues during the year were £290,000 (2012: £149,000).

Infection prevention in animal healthcare - the Anistel portfolio

During the period from July 2009 to March 2012 the Group manufactured and supplied to Medichem International (Marketing) Limited a range of disinfectants and cleaning products.  Medichem sold these products to veterinary practices and other animal welfare institutions in the United Kingdom and overseas and to hospitals and laboratories in the United Kingdom and overseas.  A significant proportion of Medichem's sales were routed through wholesalers and other intermediaries.

In March 2012 a commercial dispute arose with Medichem.  As a consequence of the dispute, which could not be resolved by negotiation, Tristel elected to supply the end-user customer base directly.  In so doing, Tristel created a new brand name for the animal healthcare suite of products - Anistel - and established a specialist veterinary sales force. The Group entered the 2012-13 financial year facing a number of challenges:-

·      preparations for the introduction of the new branding were not complete for all the product range;

·      it had to establish relationships with the three major veterinary wholesalers who serve 80% of the UK veterinary market's purchasing requirements.   We were not known to these wholesalers and we had to overcome their long-standing loyalties to their previous supplier;

·      it had to establish relationships with the buying groups that are becoming increasingly prevalent in the UK veterinary market and also the charities which are a significant feature of it;

·      it had to locate the UK veterinary client base and communicate the change in the source of supply through direct selling, telesales, advertising and promotion;

·      it had to locate Medichem's domestic and overseas distributors not involved in the UK veterinary sector and establish relationships with them.  Sixteen overseas distributors switched their source of supply to Tristel during the year. 

All of these challenges commenced on 27 March 2012 and had to be met from a standing start.  In locating and then supplying the end-users directly the Company came to realise that much of the client base was actually in the human healthcare and contamination control markets and our previous understanding that the principal end user market was animal healthcare has been disproved.  This year's segmental analysis of revenues allocates £738,000 of the total £2,120,000 (2012: £1,666,000) of sales from this business unit to animal healthcare.  The remaining £1,382,000 of sales has been allocated to human healthcare (£955,000) and contamination control (£427,000).

Infection prevention in animal healthcare- financial performance and future outlook

Within the year we have achieved a market leading position in the animal healthcare market in the UK and we are confident we can continue this success going forward.

Contamination control in critical environments- the Crystel portfolio

The detergents and disinfectants in the Crystel portfolio are categorised as "non-sterile" and "sterile" in terms of our manufacture of them.  The sterile products have to be made in the clean room that we constructed in our Newmarket facility.

Our sterile products are used in the clean rooms of pharmaceutical manufacturers and the aseptic units of hospitals to prevent the microbial contamination of the critical environments in which drugs are produced.

The non-sterile products are typically used in the production facilities of manufacturers of personal care products to prevent cross-contamination between batch manufacturing processes.

In the United Kingdom the Crystel portfolio is sold directly to the end-user by a dedicated sales team and also through distributors and wholesalers.  In overseas markets we supply the Crystel portfolio via specialist pharmaceutical wholesalers.

Critical environment contamination control -financial performance and outlook

Sales of the sterile and non-sterile products during the year were £908,000 (2012: £235,000), an increase of 286.4%.

We expect a very significant increase in sales during the current financial year.

International - all Group portfolios

The Group has a clear strategy to expand its business internationally across all three of its product portfolios.   

The business model employed in the majority of countries in which we sell products is to use a national distribution partner.  During the year, 42 distributors purchased Group products (2012: 38) with an aggregate value of £1,736,000   (2012: £1,048,000), an increase of 65.6% on the prior year.

Notwithstanding the model employed in the majority of countries, we have found that greater and more rapid penetration is in fact achieved where we have established subsidiaries and branch offices in overseas markets.  During the year, our direct operations in New Zealand, China, Hong Kong and Germany generated aggregate revenues of £1,667,000 (2012: £1,068,000), an increase of 56.1%.

The division between overseas sales generated by direct operations and by distributors in the year and compared to 2012 was:

	2012-13	2011-12
Overseas distributor sales	1,736,000	1,048,000
Overseas owned entity sales	1,667,000	1,068,000
	3,403,000	2,116,000

Wholly owned or partially owned overseas operations

Tristel New Zealand Limited, New Zealand (100% owned)

Tristel NZ 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 and Australia hospital infection control markets.  In Australia, the Wipes System has been approved by the TGA and is repeating the successes seen in other major healthcare markets.

Tristel NZ sales in the year were £735,000 (2012: £335,000), an increase of 119.4% on the prior year.           

Tristel Medical Equipment (Shanghai) Ltd, China (85% owned)

Tristel Asia Limited, Hong Kong (85% owned)

Tristel Medical Equipment (Shanghai) Ltd is based in Shanghai and its team manages the regulatory process within China, Hong Kong and Taiwan for the three Tristel hospital infection prevention products - the Wipes System; Stella and Fuse, and the Surfaces range.  We have received multiple approvals from the regulatory bodies in China and Hong Kong for these products. 

The team also manages the network of distributors which has been established throughout China and Hong Kong.  During the year there were 15 distributors operating actively in the China and Hong Kong market. 

Tristel Medical Equipment (Shanghai) Ltd and Tristel Asia Limited sales in the year were £305,000 (2012: £521,000), a decrease of 41.5% on the prior year.    

During the year we restructured our operation in China, both to reduce overhead and change the selling strategy that had been adopted during the first two years of operation in the country.  A number of redundancies were made and the office downsized.  The change in focus, combined with receiving the regulatory approval for the Wipes System, enabled the business to achieve cash break-even.

Tristel Italia srl, Italy (20% owned)

Tristel Italia is a sales and marketing operation serving the Italian hospital infection prevention market.

Tristel Italia's results are not consolidated into the Group but are accounted for under the equity method, and are unaudited.  Sales during the year were £144,000 (2012: £137,000), an increase of 5.1% on the prior year.

Tristel Germany (branch)

Tristel Germany is a branch located in Berlin.  The team is a sales and marketing operation serving the German hospital infection prevention control market.  Sales during the year were £623,000 (2012: £212,000), a 293.9% increase on the prior year.

Tristel Russia

Tristel Russia is a branch located in Moscow.  No activity was recorded during the year whilst the branch was in formation.

International - financial performance and future outlook

The Group's product portfolios have the opportunity to be global both in reach and scale. 

There will be opportunities in the future to use the overseas distributors that we have established for our hospital infection prevention business to sell the other two portfolios.  This opportunity will be for both our distribution partners and our owned operations.

As a result of our product offering becoming more established overseas, alongside the widening of our target markets, Group export sales increased by 60.8% during the year from £2,116,000 to £3,403,000 and international expansion will continue to be a major driving force for the growth of the Group.

GROUP RESULTS AND FINANCE

Revenue

Group revenue decreased by 3.5% to £10,558,000 (2012:  £10,939,000).

Margins and operating profit

The gross margin fell slightly to 66% (2012: 68%).

Excluding amortisation of intangibles, share-based payments, non-recurring items, interest and results from associates operating profits fell by 20.7% to £1,061,000 (2012: £1,294,000). 

(Loss)/profit before tax

Loss before tax for the year was £1,750,000 (2012: profit before tax £578,000) after non-recurring items of £2,231,000 (2012: £174,000).  Profit before tax adjusted for the non-recurring item fell by 46.8% to £481,000 (2012: £752,000).

Earnings

Basic earnings per share were a loss of 3.16 pence (2012: profit of 1.77 pence).

Capital and intangible expenditures

Capital investments in the development of new products, patents and regulatory approvals resulted in additions to intangible assets of £345,000 (2012: £630,000). Purchases of plant and equipment fell to £127,000 (2012: £407,000).

Treasury

Cash and cash equivalents reduced slightly during the year from £705,000 to £627,000 at 30 June 2013.

Paul Swinney

Chief Executive

11 October 2013

Tristel plc Consolidated Income Statement For the year ended 30 June 2013

		Note	Year ended 30 June 2013		Year ended 30 June 2012
			£'000		£'000
Revenue			10,558		10,939
Cost of sales			(3,544)		(3,511)
Gross profit			7,014		7,428
Other operating income			38		-
Administrative expenses: Share-based payments			(16)		14
Depreciation and  amortisation			(1,026)		(1,050)
Other Non-recurring items		4	(5,517) (2,231)		(5,635) (174)
Total administrative expenses			(8,790)		(6,845)
Operating (loss)/profit			(1,738)		583
Finance income			6		7
Finance costs			(20)		(13)
Results from equity accounted associate			2		1
(Loss)/profit before tax			(1,750)		578
Taxation		5	438		91
(Loss)/profit for the year			(1,312)		669
Attributable to:
Non-controlling interests			(48)		(38)
Equity holders of parent			(1,264)		707
			(1,312)		669
(Loss)/earnings per share from total and continuing operations attributable to equity holders of the parent
Basic - pence		7	(3.16)		1.77
Diluted - pence		7	(3.16)		1.77

All amounts relate to continuing operations.          

Tristel plc Consolidated Statement of Comprehensive Income For the year ended 30 June 2013

		Year ended 30 June 2013		Year ended 30 June 2012
		£'000		£'000
				(Restated)
(Loss)/profit for the period		(1,312)		669
Other comprehensive income:
Items that will not be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations		(14)		(4)
Items that will be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations		(53)		(1)
Other comprehensive income for the period		(67)		(5)
Total comprehensive income for the period		(1,379)		664
Attributable to:
Non controlling interests		(60)		(42)
Equity holders of the parent		(1,319)		706
		(1,379)		664

Tristel plc Consolidated Statement of Changes in Equity For the year ended 30 June 2013

	Share	Share	Merger	Foreign	Retained earnings	Total attributable to owners of the parent	Non- controlling interests	Total equity
	capital	premium	reserve	exchange
		account		reserve
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
30 June 2011	400	9,151	478	(73)	2,009	11,965	(47)	11,918
Transactions with owners
Dividends paid	-	-	-	-	(156)	(156)	-	(156)
Share-based payments - IFRS 2	-	-	-	-	(14)	(14)	-	(14)
Total transactions with owners	-	-	-	-	(170)	(170)	-	(170)
Profit  for the year ended 30 June 2012	-	-	-	-	707	707	(38)	669
Other comprehensive income:- Exchange differences on translation of foreign operations	-	-	-	(1)	-	(1)	(4)	(5)
Total comprehensive income	-	-	-	(1)	707	706	(42)	664
30 June 2012	400	9,151	478	(74)	2,546	12,501	(89)	12,412
Transactions with owners
Dividends paid	-	-	-	-	(172)	(172)	-	(172)
Share-based payments - IFRS 2	-	-	-	-	16	16	-	16
Total transactions with owners	-	-	-	-	(156)	(156)	-	(156)
Loss for the year ended 30 June 2013	-	-	-	-	(1,264)	(1,264)	(48)	(1,312)
Other comprehensive income:- Exchange differences on translation of foreign operations                                                   -		-	-	(53)	-	(53)	(14)	(67)
Total comprehensive income	-	-	-	(53)	(1,264)	(1,317)	(62)	(1,379)
30 June 2013	400	9,151	478	(127)	1,126	11,028	(151)	10,877

Tristel plc Consolidated Balance Sheet As at 30 June 2013

				2013		2012
		Note		£'000		£'000
Non-current assets
Goodwill				667		779
Intangible assets				5,629		6,898
Property, plant and equipment				1,096		1,505
Investments accounted for using the equity    Method				-		45
Deferred tax				307		-
				7,699		9,227
Current assets
Inventories				1,868		1,979
Trade and other receivables				2,554		2,831
Cash and cash equivalents				627		705
				5,049		5,515
Total assets				12,748		14,742
Capital and reserves
Share capital		8		400		400
Share premium account				9,151		9,151
Merger reserve				478		478
Foreign exchange reserve				(127)		(74)
Retained earnings				1,126		2,546
				11,028		12,501
Non-controlling interests				(151)		(89)
				10,877		12,412
Current liabilities
Trade and other payables				1,683		1,916
Interest bearing loans and borrowings				65		82
Current tax				70		31
				1,818		2,029
Non-current liabilities
Interest bearing loans and borrowings Deferred tax				53 -		83 218
Total liabilities				1,871		2,330
Total equity and liabilities				12,748		14,742

Tristel plc Consolidated Cash Flow Statement For the year ended 30 June 2013

				2013		2012
		Note		£'000		£'000
Cash flows from operating activities
Cash generated from operating activities		i		759		1,148
Corporation tax (paid) / received				(50)		351
				709		1,499
Cash flows used in investing activities
Interest received				6		7
Purchase of intangible assets				(345)		(630)
Acquisition of investments				-		-
Purchases of property, plant and equipment				(131)		(407)
Proceeds from sale of property, plant and equipment				40		38
Net cash used in investing activities				(430)		(992)
Cash flows from financing activities
Loans received				-		-
Loans repaid				(96)		(83)
Interest paid				(20)		(13)
Share issues				-		-
Cost of share issues				-		-
Dividends paid				(172)		(156)
Net cash used in financing activities				(288)		(252)
Net (decrease)/increase  in cash and cash equivalents				(9)		255
Cash and cash equivalents at the beginning of the period		ii		705		441
Exchange differences on cash and cash equivalents				(69)		9
Cash and cash equivalents at the end of the period		ii		627		705

Tristel plc Notes to the Consolidated Cash Flow Statement For the year ended 30 June 2013

i.  RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
			2013		2012
			£'000		£'000
(Loss)/profit before tax			(1,750)		578
Depreciation of plant, property & equipment			464		499
Amortisation of intangible assets			566		551
Impairment of intangible assets			1,045		-
Impairment of investments			45		-
Impairment of goodwill			112		-
Impairment of plant, property & equipment			103		-
Results from associates			(2)		(1)
Share-based payments - IFRS2			16		(14)
Profit on disposal of property, plant and equipment			(12)		(8)
Loss on disposal of intangible asset			3		24
Finance costs			20		13
Finance income			(6)		(7)
			604		1,635
Decrease/(Increase) in inventories			111		(366)
Decrease/(Increase) in trade and other receivables			277		(146)
(Decrease)/Increase in trade and other payables			(233)		25
Cash generated from operations			759		1,148

         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 2013		30 June 2012
Year ended 30 June 2013			£'000		£'000
Cash and cash equivalents			627		705
			627		705

			30 June 2012		30 June 2011
Year ended 30 June 2012			£'000		£'000
Cash and cash equivalents			705		441
			705		441

Tristel Plc Notes to the Consolidated Financial Statements For the year ended 30 June 2013

1.               NOTES

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 amendment to IFRS issued by the IASB, which is relevant to and effective for the Group's financial statements for the annual period beginning 1 July 2012:

Amendment to IAS 1 • Presentation of financial statements

Amendment to IAS 1

The amendment to IAS 1 Presentation of Financial Statements has become applicable to the Group for the year ended 30 June 2013. This amendment requires changes to presentation of items within the Consolidated Statement of Comprehensive Income. Foreign exchange differences on translations of foreign operations are analysed between those that will be reclassified subsequently to profit and loss and those that will not. IAS 1 requires presentation of a comparative balance sheet at the beginning of the first comparative period where there has been a change in accounting policies. Management considers that this is not necessary this year because the 2011 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 2013. 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 acquisition method. The acquisition 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. These fair values are also used as the basis for subsequent measurement in accordance with the Group accounting policies.  Goodwill is stated after separating out identifiable intangible assets.  Goodwill represents the excess of the aggregate of the consideration transferred and the amount of non-controlling interest over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

EU adopted IFRSs not yet applied

As of 30 June 2013, 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 2015)

·      IFRS 10 Consolidated Financial Statements (effective 1 January 2014)

·      IFRS 11 Joint Arrangements (effective 1 January 2014)

·      IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)

·      IFRS 13 Fair Value Measurement (effective 1 January 2013)

·      IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013)

·      IAS 27 (Revised), Separate Financial Statements (effective 1 January 2014)

·      IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2014)

·      Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013)

·      Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)

·      Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)

·      Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2013)

·      IFRIC Interpretation 21 Levies (effective 1 January 2014)

·      Annual Improvements 2009-2011 Cycle (effective 1 January 2013)

·      Transition Guidance - Amendments to IFRS 10, IFRS 11 and IFRS 12 (effective 1 January 2014)

·      Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)

·      Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (effective 1 January 2014)

·      Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective 1 January 2014)

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.

2.                   PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information set out in this Audited Preliminary Announcement does not constitute the Group's statutory accounts for the years ended 30 June 2013 or 2012, as defined in Section 435 of the Companies Act 2006, but is derived from those accounts.  Statutory accounts for the year ended 30 June 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered in due course.  The auditors Grant Thornton UK LLP 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.

The Board of Tristel plc approved the release of this audited Preliminary Announcement on 11 October 2013.

3.                    SEGMENTAL ANALYSIS

Management considers the Group'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 Group's operating segments are identified from the information which is reported to the chief operating decision maker.  

The first segment concerns the manufacture, development and sale of infection control and hygiene products which includes products that incorporate the Company's chlorine dioxide chemistry, and are used primarily for infection control in hospitals ("Human Healthcare"). This segment generated approximately 84% (2012: 83%) of Group revenues.

The second segment, which constitutes 7% (2012: 15%) of the business activity, relates to manufacture and sale of disinfection and cleaning products, into veterinary and animal welfare sectors ("Animal healthcare").  During prior years all sales for this segment were made to a distributor who supplied the end user.  Following a change in business model at the end of last financial year, the company now sells direct to the end user itself. As a consequence it has become clear that revenues previously considered to relate wholly to the Animal healthcare market in fact were sold into the human healthcare and contamination control markets by the then distributor.  This year's segmental analysis of revenues allocates £738,000 of the total £2,120,000 (2012: £1,666,000) of the relevant product sales to animal healthcare.

The third segment addresses the pharmaceutical and personal care product manufacturing industries ("Contamination control") and has generated 9% (2012: 2%) of the Group's revenues this year.

Within the hospital community, different aspects of infection control can be categorised into "vectors" or "routes of transmission" of infection.  References to these "vectors" are made within the Chief Executives Report on pages 4 to 10.  However, the Group does not report separately upon the vectors within its internal management information, and does not consider them to be separate sectors for the purposes of IFRS 8.

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.

	Human Healthcare	Animal Healthcare	Contamination Control	Group 2013		Human Healthcare		Animal healthcare	Contamination Control	Group 2012
	£'000	£'000	£'000	£'000		£'000		£'000	£'000	£'000
Revenue from external customers	8,912	738	908	10,558		9,038		1,666	235	10,939
Segment revenues	8,912	738	908	10,558		9,038		1,666	235	10,939
Cost of material	2,805	268	471	3,544		2,690		698	123	3,511
Gross Profit	6,107	470	437	7,014		6,348		968	112	7,428
Gross Profit %	69%	64%	48%	66%		70%		58%	48%	68%
Centrally incurred income and expenses not attributable to individual segments:
Other operating income				38						-
Depreciation and amortisation of non-financial assets				(1,026)						(1,050)
Other administrative expenses				(5,517)						(5,635)
Non-recurring items				(2,231)						(174)
Share based payments				(16)						14
Segment operating (loss)/profit				(1,738)						583
Segment operating profit can be reconciled to Group profit before tax as follows:
Segmental operating (loss)/profit				(1,738)						583
Finance income				6						7
Results from equity accounted associate				2						1
Finance costs				(20)						(13)
Group (loss)/profit before tax				(1,750)						578

The Group's revenues from external customers are divided into the following geographical areas:-

		Human Healthcare	Animal Healthcare	Contamination Control	Group 2013		Human Healthcare	Animal healthcare	Contamination Control	Group 2012
		£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
United Kingdom		5,846	557	752	7,155		7,138	1,486	199	8,823
Rest of the World		3,066	181	156	3,403		1,900	180	36	2,116
Group revenues		8,912	738	908	10,558		9,038	1,666	235	10,939

Revenues from external customers in the Group's domicile - "United Kingdom", as well as its other major markets, "Rest of the World" - have been identified on the basis of internal management reporting systems, which are also used for VAT purposes.

Human healthcare revenues were derived from a large number of customers, including £2.050m from a single customer which makes up 23% of this segment's revenue (2012:  £3.629m being 40.2%).  Animal healthcare revenues were derived from a number of customers, with the largest customer accountable for £0.049m, which represents 6.6% of turnover (2012: 84.3% from a single customer).

During the year 19.4% of the Group's revenues were earned from a single customer (2012: 33.2%).

The Group's non-current assets are divided into the following geographical areas:-

		2013		2012
		£'000		£'000
United Kingdom		7,583		8,996
Rest of the World		132		231
Non-current assets		7,715		9,227

4.                    NON RECURRING ITEMS

Following a review and restructure of the business during the year headcount has fallen by 15%; the operation in China has been restructured to cease the drain on cash; and the IP portfolio in the Balance Sheet has been reviewed with the result that certain assets relating to legacy products have been impaired. These 'root and branch review' activities have culminated in a non-cash exceptional charge of £2.2 million.

During the prior year the Group carried out a re-structuring of its engineering function resulting in a provision against slow moving inventory held at the year end and staff redundancy costs, which in aggregate amounted to £119,583.  In the current year further provisions have been made against slow moving inventory totaling £199,000.

5.                     TAXATION

The taxation credit represents:

		2013		2012
		£'000		£'000
Current taxation:-
Corporation tax		75		34
Adjustment in respect of earlier years		11		(354)
Total current tax		86		(320)
Deferred tax:-
Origination and reversal of temporary differences		(524)		229
Total deferred tax		(524)		229
Total tax (credit)/charge in Income Statement		(438)		(91)

Factors affecting the tax credit:

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

		2013		2012
		£'000		£'000
(Loss)/profit on ordinary activities before tax		(1,750)		578
(Loss)/profit on ordinary activities
multiplied by the standard rate of corporation tax
in the UK of 23.75% (2012: 26%)		(416)		147
Effects of:
Expenses not deductible for tax purposes		116		78
Different rate tax bands and change in tax rates		18		(21)
Enhanced relief on qualifying scientific research expenditure		(135)		(114)
Adjustment in respect of prior years		7		(354)
Tax losses not utilised and other timing differences		(28)		173
Total tax credit for year		(438)		(91)

The adjustment in 2012 relates to prior year R&D tax claims received.

6.                                DIVIDENDS

		2013		2012
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 2012 of 0.35p
(2011:  0.12p) per share		140		48
Interim dividend for the year ended 30 June 2013 of 0.08p
(2012:  0.27p) per share		32		108
		172		156
Proposed final dividend for the year ended 30 June 2013 of 0.32p (2012: 0.35p) per share		128		140

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:

		2013		2012
		£'000		£'000
Retained (loss)/profit for the financial year attributable to equity holders of the parent		(1,264)		707
		Shares '000 Number		Shares '000 Number
Weighted average number of ordinary shares for the purpose of basic earnings per share		39,985		39,985
Effect of dilutive potential ordinary shares
Share options		-		-
		39,985		39,985
(Loss)/earnings per ordinary share
Basic		(3.16p)		1.77p
Diluted		(3.16p)		1.77p

The calculation of diluted earnings per share includes no outstanding options of ordinary shares at 30 June 2013 (30 June 2012: nil). All outstanding share options are antidilutive at both 30 June 2013 and 30 June 2012.

8.                CALLED UP SHARE CAPITAL

Allotted, issued and fully paid	Number:			£
1 July 2011	39,984,701			399,847
Issued during the year	-			-
30 June 2012	39,984,701			399,847
Issued during the year	-			-
30 June 2013	39,984,701			399,847

No new shares were issued during the year. 

9.                ANNUAL REPORT

The annual report and financial statements will be available on the company's web site www.tristel.com from 14 October 2013.  Printed copies will be posted to shareholders prior to the Company's Annual General Meeting taking place on 10 December 2013 in Snailwell, Newmarket.

 

END

 

 

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