Tristel

23 December 2024
By Maynard Paton

FY 2024 results summary for Tristel (TSTL):

• A record FY, showcasing revenue up 16%, profit up 32% and the dividend up 29%, with impressive 32% UK growth based upon 9% greater volumes and 23% higher pricing through a new NHS agreement.

• The retirement of the previous chief executive now makes sense after “purchasing bureaucracy” suddenly beset North American progress, which left TSTL alarmingly “a year behind” schedule after US partner Parker Laboratories proved ineffective with sales.

• The new chief executive has still to publish his financial targets, although the board has already re-committed to 5%-plus annual dividend growth while a new ‘boilerplate’ LTIP depressingly seeks only a 5.5% adjusted EPS CAGR to vest.  

• The high-margin, cash-rich, low-tax accounts generally remain in good shape, but are let down by regular restatements alongside stagnant employee productivity that may be due to a 25% margin target limiting additional investment.

• The trailing 25x PE is the lowest since 2018 and could be justified by further meaningful growth within established markets, the prospect one day of lucrative US royalties, the ongoing ability to raise prices and the possibility of bumper surface-disinfection sales. I continue to hold.

Read more

01 October 2024
By Maynard Paton

H1 2024 results summary for Tristel (TSTL):

• A record H1, displaying revenue up 20%, profit up 28% and the dividend up 100% underpinned by remarkable 30% UK growth and notable price increases accepted by the NHS.

• North America is now deemed a “$100m per annum opportunity” for TSTL’s initial FDA-approved foam, although competition now involves an FDA-approved UV-light machine that may strengthen the wider argument for automated disinfections. 

• The new chief exec ticks a lot of boxes for marketing healthcare products in the US, but his stint at LiDCO was unspectacular and shareholders keenly await his strategic ambitions, financial targets and details of his LTIP package.

• Although employee productivity has flat-lined, the financials remain in good shape with a bumper 84% gross margin and net cash approaching £12m that could lead to another special dividend.

• A near-term 32x P/E is not an obvious bargain, but a premium rating could be justified by further meaningful growth within established markets, the prospect of lucrative US royalties, the ongoing ability to raise prices and the possibility of successful R&D. I continue to hold.

Read more

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.

Read more

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.

Read more

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.

Read more

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.

Read more

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.

Read more

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.

Read more