Tristel

14 January 2024
By Maynard Paton

FY 2023 results summary for Tristel (TSTL):

• A positive post-pandemic performance, with strong overseas progress helping FY ‘continuing’ revenue gain 22% and FY profit rebound up to 28% albeit after a bevy of adjustments.

• The FY highlight was a doubling of the final dividend backed by a welcome new policy to increase the ordinary payout by at least 5% a year.

• TSTL revealed ultrasound-probe decontamination supported 33% of group sales and implied a potential 38p royalty per ultrasound disinfection within the United States. 

• The accounts showed a record 81% gross margin and net cash recently topping £14m, although restatements continue to occur and audit fees appear unusually steep.

• An estimated 22x P/E for FY 2028 is not an obvious bargain, but a premium rating could be justified by further meaningful growth, lucrative US royalties and the prospect of fresh leadership. I continue to hold.

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28 August 2023
By Maynard Paton

H1 2023 results and FDA approval summary for Tristel (TSTL):

• A positive pandemic-recovery performance, with H1 revenue up 16% to a record £17.5m and H1 profit rebounding up to 33% albeit after a bevy of adjustments.

• A record 81% gross margin helped offset greater H1 staff costs, with useful cash conversion keeping net cash above £8m — which oddly earns no interest. 

• The H1 effort was perhaps eclipsed by the subsequent FDA product approval, which creates the opportunity to capture 43 million US disinfection procedures and collect a revised 24% US royalty.

• An informative open-day webinar revealed dividend cover was under review, option grants had been paused, H2 revenue per disinfection procedure had surged plus an ambition to “double revenue over the medium term“.

• An estimated 23x P/E for FY 2026 is not an obvious bargain, but a premium rating could be justified by lucrative US income and management proposals to raise the group’s three-year targets. I continue to hold.

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12 January 2023
By Maynard Paton

Results summary for Tristel (TSTL):

• Another pandemic-disrupted performance, although 10-15% per annum sales-growth guidance suggests hospital customers will soon resume normal purchasing activity.

• Progress was complicated by an accounting U-turn, with Brexit stock-piling, share options, US costs and write-offs creating a wide range of profit outcomes.

• Management webinar comments suggested a positive US regulatory verdict is dependent on a “negotiation” with the FDA concerning data tests using different product batches. 

• A useful 17% operating margin, net cash of £10m, worthwhile cash conversion and low capital requirements imply the group’s disinfectants still enjoy favourable economics. 

• An estimated 24x P/E for FY 2025 is not an obvious bargain, but a premium rating may be justified by a US product approval and hefty royalties appearing soon thereafter. I continue to hold.

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30 April 2022
By Maynard Paton

Results summary for Tristel (TSTL):

• An underwhelming pandemic-disrupted performance, with the dividend held for the first time since FY 2013 as hospital customers delayed resuming normal purchasing activity.

• Progress was complicated by the understandable culling of numerous ‘non-core’ products, although the associated reclassification revealed TSTL’s surface disinfectants to be less profitable than previously declared.

• Sector “lobbying” within the United States for EPA-approved disinfectants might have created a new “commercial opportunity” for TSTL’s DUO foam. 

• Brexit stock-piling, share options and US costs offered a wide range of profit outcomes, but cash flow remained respectable and bolstered net cash to a useful £9m. 

• A 50% lower share price on a possible 32x multiple is not an obvious bargain, especially if patent expiries, automated competition or single-use medical equipment cause disruption. I continue to hold.

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29 October 2021
By Maynard Paton

Results summary for Tristel (TSTL):

• A disappointing pandemic-disrupted performance, with H2 revenue and profit down 15% and 36% respectively on the preceding H1.

• Progress was curtailed as NHS outpatient clinics closed and orders “dried up“, which left certain UK product sales running at a six-year low.

• Overseas revenue up 3%, a resilient 16% H2 margin, net cash of £10m and a 2% final-dividend lift suggest the business is not broken just yet. 

• A re-introduced timetable for product launches in the United States provides hope of the seven-year FDA process concluding during 2023.

• The £236m market cap remains elevated, and is supported by a sector rival implying the US market for ultrasound-probe disinfection is worth up to $180m. I continue to hold.

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09 March 2021
By Maynard Paton

Results summary for Tristel (TSTL):

• A satisfactory pandemic-assisted performance, with revenue up 14% and profit up between 12% and 31% depending on the adjustments made.

• Sales were bolstered by Brexit stock-piling, which will unwind during H2, with underlying UK progress still difficult to interpret.

• Overseas sales improved a useful 20% although the United States regulatory project and other ventures remain very slow burners.

• The 21% operating margin seems impressive in light of “one-off” payroll costs and the headcount increasing 19% to prepare for future growth. 

• The 48x P/E looks stratospheric, but permanently greater demand for hospital disinfectants, further expansion plus growing economies of scale may justify a lofty rating. I continue to hold.

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05 November 2020
By Maynard Paton

Results summary for Tristel (TSTL):

• Revenue and profit reached new highs following very satisfactory 20%-plus growth, bolstered in part by the pandemic.

• The UK performance appeared odd, given H2 sales were lower than H1 despite the Covid-19 boost.

• Overseas sales surged 35% during H2, with the purchase of Ecomed during 2018 now proving to be a great success.  

• The accounts remain in good shape with high margins, appealing equity returns, net cash and respectable cash generation. 

• A possible P/E of 39 might be justified if the pandemic leads to permanently greater demand for hospital disinfectants. I continue to hold.

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29 February 2020
By Maynard Paton

Results summary for Tristel (TSTL):

• Bumper first-half figures showed very satisfactory double-digit growth following superb sales increases within the UK and various overseas markets.

• The underlying profit performance was complicated by undisclosed acquisition contributions, US regulatory costs, hefty option charges and cheeky bookkeeping.

• Following these results, the coronavirus outbreak has led to an emergency “special exemption” order from China and prompted “substantial” extra purchases by the NHS.

• The accounts remain in good shape with high margins, net cash and respectable cash generation.

• The valuation has become extremely punchy with an estimated underlying P/E of 43. I continue to hold.

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