Tristel

www.tristel.com
Ticker: TSTL Exchange: AIM

Tristel develops proprietary infection, hygiene and contamination control products used by 1) Healthcare (branded Tristel); 2) Pharmaceutical and personal care (Crystel), and 3) Animal care (Anistel) organisations.

Latest Reports

US market squarely in the cross-hairs

Published: 19th July 2017
Tristel develops proprietary infection, hygiene and contamination control products used by: 1) Human Healthcare (89% of sales); 2) Contamination Control (branded Crystel, 6%), and 3) Animal care (Anistel. 5%) organisations. Its core chlorine dioxide (ClO2) chemistry is protected by 156 patents and deployed in c.400 UK hospitals.

In this morning’s pre-close trading statement, the company said it had beaten our FY17 estimates – posting adjusted PBT (pre share-based payments) of at least £4m (vs ED £3.8m) on turnover up +16.9% to >£20m (ED £19.6m) - estimated 10% LFL/constant currency. Overseas healthcare was the standout performer, up around +47% to £8.95m (est +28% LFL) - thanks to buoyant conditions in China/Hong Kong, Germany and Australia - and UK Health rose a creditable 4.4% LFL to £8.9m.

Shifting to M&A, in Aug’16 Tristel purchased its Australian distributor for £1.1m in cash, which has subsequently been integrated within the group, and provides a launch-pad from which to extend its proprietary Clo2 technology across the whole of Australasian region.  Better still, just prior the period close the Board invested $750k for a 3.27% stake in MobileODT (MODT), an Israeli firm (valued at $23m) combining smartphone expertise with hand-held, point-of-care diagnostics.

We have always taken a prudent stance when modelling Tristel’s application to the EPA/FDA to launch chlorine dioxide (ClO2) based infection, hygiene and contamination control products in the US. but as each major milestone is hit, then the overall project risk declines. Therefore, we’ve re-cut and extended our forecasts to FY25, alongside running a 4 key sensitivities test – together reconfirming our positive view on the stock. 

On today's update we have moved up our FY18 PBT forecast to £4.25m (from £3.83m) on revenues of £22.2m (vs £21.8m) - climbing to £31.2m and £7.3m respectively (margin 23.3%) by FY21. Moreover, the Board are on track to achieve its medium-term goal of lifting turnover to between £22.8m-£26.0m by FY19, equivalent to a CAGR of 10%-15% pa on FY16 (£17.1m).

Despite climbing 10-fold from a low of 21p four years ago, an updated analysis suggests the business is worth 211p/share (from 155p), even ignoring any upside from North America. Indeed, should the  EPA/FDA grant approval over the next couple of years, then the States alone could contribute >25% of group revenues, say by FY25. In turn, possibly adding another 100p+/share to the current valuation.

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View the Results Webinar

Published: 23rd February 2017
You can now hear Paul Swinney, Chief Executive, and Liz Dixon, Finance Director, present the record interim results for the half year ended 31 December 2016 on behalf of Tristel plc.

To view simply click on the video below. 

Consistently strong growth at a sensible price

Published: 23rd February 2017
Tristel develops proprietary infection, hygiene and contamination control products used by organisations involved in: Human Healthcare (branded Tristel, 85% of sales);  Contamination Control (Crystel, 9%); and Animal care (Anistel. 6%).

Instead of over-paying for unexciting behemoths, in today’s markets investors might think of  looking at  faster expanding small caps, trading at sensible valuations; like infection control expert, Tristel. Indeed, thanks to >95% of revenues being generated from everyday consumables, the company’s execution is almost metronomic - delivering once again outstanding interim results this morning that were ahead of December’s PBT guidance of £1.6m. 

Adjusted H1’17 PBTA came in at a healthy £1.7m on turnover up 22% (+16% constant currency) to £9.75m, partly driven by a 38% jump in Wipes to £5.45m. Geographically, the UK climbed 9% to £5.56m, after a one-off £150k NHS bulk purchase, while Overseas leapt an impressive 45% (+29% constant currency) to £4.19m, reflecting continued buoyant demand from China/Hong Kong (+34%), Germany (92%) and Australia (+169%). International accounted for 43% of the group revs (vs 36% LY), and is on track to deliver >50% of sales by June 2019. 

Profit margins were still in line with strategic targets of 17.5%, thanks to positive operating leverage and efficient capital allocation (Est ROaCE 32%+) – leading to EBITDA drop-through rates of circa 40%. Cash conversion of 100% pushed net funds up to £3.9m as at 31st December, leaving plenty of capacity to lift the dividend 23% to 1.4p (payable 13th April).

The CEO updates: ‘We are progressing satisfactorily with our planned entry into the North American hospital market’ so for now our forecasts and 155p/share valuation remain unchanged. But we note that, with continued forex tailwinds heading into H2, our FY17 numbers appear derisked – thus teeing up the possibility of upgrades in due course.

NB the CEO and FD will host a webinar TODAY at 12.15
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Trading in-line with expectations

Published: 13th December 2016

Tristel develops proprietary infection, hygiene and contamination control products used by: Human Healthcare (branded Tristel, 85% of sales); Contamination Control (Crystel, 9%), and Animal Care (Anistel. 6%) organisations. Its core chlorine dioxide chemistry is protected by 156 patents and deployed in c.400 UK hospitals.

These days shareholder value is being built and protected by intellectual property, brands, networking benefits and such like. The big question for investors is naturally: 'what price to pay' for these type of high quality business? Tristel is a case in point. At 177p yesterday, the stock traded on adjusted FY17 EV/EBIT and PER multiples of 19.6x and 26.1x respectively, or circa 20-30% above the broader healthcare sector.

Traditionally this would look mildly expensive, yet to us it seems that a large part of the premium is down to the firm’s strong patent protection (or ‘economic moat’), low profit volatility (95% of sales are derived from every-day consumables), forex tailwinds, absorption of one-off regulatory costs and superior LFL revenue growth.

Importantly too (and not presently included in our forecasts), is the ‘optionality’ that its proprietary chlorine dioxide chemistry either attracts predatory interest and/or is granted approval in North America (by US FDA/EPA and Canada’s HPB), hopefully sometime over the next 12-18 months.

The Board are targeting top line expansion of 10% to 15% annually for the next 3 years, in turn delivering pre-tax profit margins of 17.5%+, along with a progressive dividend (yield 1.9%). In light of the firm’s attractive risk-reward profile, we have lifted our own DCF calculation from 140p to 155p/share, based on a blend of FY19 exit multiples, discounted back at 12% and adjusted for cash.     

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View the Results Webinar

Published: 19th October 2016
You can now hear Paul Swinney, Chief Executive, and Liz Dixon, Finance Director, present the preliminary results for Tristel plc (TSTL) and answer audience questions.

To view simply click on the video below.

Walking the talk

Published: 16th October 2016
Tristel develops proprietary infection, hygiene and contamination control products used by: Human Healthcare (branded Tristel, 85% of sales); Contamination Control (Crystel, 9%); and Animal care (Anistel. 6%) organisations. For many years now management have communicated what they’re planning to do - and like clockwork successfully delivered against it, as illustrated again in this morning’s better than expected prelims for the year ending June 2016.

FY16 turnover climbed 11.5% LFL to £17.1m (H1:H2 split 8.1%:14.8%), with 95% derived from every-day consumables and 39% from overseas territories (vs 36% LY), up an impressive 22% LFL. UK healthcare posted 4% organic growth, which we think was creditable, especially given its greater hospital  penetration, the current squeeze on NHS budgets and after a flat H1 (-1.8%).

Adjusted PBT (before SBPs of £674k) and EPS came in at £3.2m (+27%) and 6.62p (+20%) respectively, with cash conversion (OCF/EBIT) strong at 148% vs 113% LY; in turn helping to lift net funds to £5.7m (vs £4.0) by the period close. There could even be more one-off distributions in due course, since we suspect the business only needs liquid reserves of up to £3m to adequately fund its internal operations.

Going forward, one of several possible positive catalysts could come from the firm’s application to sell Clo2 products in North America – where the Board has made encouraging progress to date in its discussions with the US FDA and EPA.

We have upgraded our forecasts again – although only marginally this time with adjusted FY17 PBT now pitched at £3.6m vs £3.5m before.  Accordingly our price target rises from 135p to 140p/share, with scope for future appreciation in line with hopefully more positive newsflow.

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Excellent H2 and ahead of forecasts

Published: 21st July 2016
Tristel develops proprietary infection, hygiene and contamination control products used by organisations active in: Human Healthcare (branded Tristel, 84% of sales); Contamination Control (Crystel, 10%),; and Animal Care (Anistel. 6%). 

Despite fears over the global economy, NHS budgetary constraints and BREXIT, the company today  said that it had enjoyed a "very strong" 2nd half - reporting H2 revenues of >£9m, up 13.5% YoY. 

FY16 adjusted PBTA (pre SBP and unrealised forex gains) and net cash came in above expectations too, at £3.1m (+20% vs £2.6m LY) and £5.7m (vs ED at £4.5m) respectively - driven by an outstanding performance from overseas (42% of H2 sales vs 36% in H1), augmented by an encouraging rebound in UK Healthcare

As a result, a 3p/share special dividend is to be paid from surplus funds on 5th August (ex div date 28th July) - which, when added to the normal annual payment (estimated at 3p based on 2x cover), represents a generous 6.0p return for the year, equivalent to a 5.2% yield.

Elsewhere, the firm has bought the assets and business (including people, customers, stock, etc) of Ashmed Pty Ltd, its Australian distributor, for Au$1.35m plus certain compensation payments for the re-purchase of inventory. In the US the process of seeking product authorisation from the FDA and EPA carries on at pace, and is on track to (hopefully) obtain approval in 12 months' time.

We have duly upgraded our FY17 turnover and PBTA forecasts by +9% and +7%, to £19.5m and £3.54m respectively. Likewise, our fair value share price target climbs 8% to 135p.


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View the Results Webinar

Published: 26th February 2016
You can now hear Paul Swinney, Chief Executive, and Liz Dixon, Finance Director, present the interim results for Tristel plc (TSTL) and answer audience questions.

To view simply click on the video below.

Underlying H1 PBT jumps 35% to £1.5m

Published: 23rd February 2016
Tristel is the UK's undisputed number 1 provider of decontamination products for small heat sensitive instruments within hospital ENT (ear, nose & throat), Ultrasound and Cardiology departments. More than 95% of its revenues are derived from high margin consumables (eg wipes, sprays, etc), where demand is being driven by increasing numbers of patients requiring diagnostic and/or non-critical care procedures.

Today's interim results to end Dec 2015 show the group's resilience as it weathers the current economic wobbles concerning slower global GDP, a Chinese hard landing and geopolitical instability - with its proprietary infection, hygiene and contamination control products generating H1'16 turnover of £8.0m, up 8.1% like-for-like.

Overseas Health was the standout performer, posting revenues up 23.5% to £2.59m. Going forward, the strategy is to maintain this pace of expansion whilst at the same time launch innovative new products to compensate for the inevitable deceleration in the more mature UK region where H1'16 domestic healthcare sales declined -1.8% to £4.15m.

More positively, adjusted H1'16 PBT (before stock based payments - 'SBPs') came in 34.5% higher at £1.48m, thanks to strict cost control, 150% cash conversion and greater operational leverage. That boosted gross margins to 71.4% (69.0%), adjusted EPS to 2.89p (+40% vs 2.07p) and closing net funds to £4.3m (£4.0m in June 2015).

We have reset our divisional projections, and now anticipate that Tristel will deliver blended revenue expansion of 7%-9% pa over the next few years. Nonetheless, despite our rebased growth outlook, FY16 and FY17 adjusted PBT (pre SBPs) targets remain unchanged at £2.9m and £3.3m respectively. Closing June 2016 net cash forecast is also lifted to £4.5m, from £4.0m before. 

Our financials still do not include any upside from potential US regulatory approval. If ultimately successful, we believe this opportunity could add >100p per share to our new 125p price target - which has been trimmed from 140p reflecting the more conservative sales trajectory.  
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