Tristel commits to final dividend despite serious UK challenges

Infection prevention and contamination control company Tristel updated the market on its trading on Monday, reporting that second half sales in all markets started “very slowly” due to the impact of the Covid-19 pandemic on patient examinations.

The AIM-traded firm said that in the UK, that trend had continued through its third quarter ended 31 March, and showed “little sign” of reversing in a meaningful way before year-end.

While medical device disinfectant sales in the UK were significantly impacted by activity levels in the NHS, surface disinfectant product sales had continued to gain market share, with UK sales for the product range to the end of the third quarter totalling £2.3m, 47% higher year-on-year.

“Very encouragingly, at the end of the third quarter, sales of our 13 overseas subsidiaries and to our international distributor network have increased by 7% over the comparable period last year,” the board said in its statement.

“Combining our medical device and hospital surface disinfectants in both our home and overseas markets into a year-end outlook, we now expect global sales to exceed £31m, which is comparable with last year.

“This predicted outcome reflects a transient difficulty in the UK, caused by the impact of Covid-19 on patient examinations.”

Tristel said it expected that situation to correct next year.

The departments and types of treatment the company focussed on were experiencing many of the longest NHS waiting times.

“NHS sources quoted recently in the press state the total numbers of people waiting for examinations in ear, nose and throat (ENT) is around 366,000, ophthalmology 494,000, urology 270,000, cardiology 194,000, and gynaecology 265,000.

“These departments account for most of our medical device disinfectant product sales, and they also represent the highest patient waiting numbers in UK hospitals outside of orthopaedics, trauma, and general surgery.

“We understand that the NHS is making available a £1.5bn elective recovery fund to accelerate the restoration of services and treatment for as many people as possible.”

Tristel said looking to the next financial year, it expected demand conditions in the UK to improve significantly, but said that in such “uncertain times” it needed to take a cautious approach.

While its global revenues continued to diversify away from the UK, its home market remained the company’s largest exposure to a single healthcare system.

It noted that the NHS 2021-2022 priorities and operational planning guidance published on 25 March stated while the vaccination programme gave it cause for optimism, it did not yet know what the pattern of Covid-19 transmission would look like over the next 12 months, adding that it was “clear that the impact of the last year will be felt throughout 2021-2022” and beyond.

While the year had been challenging, Tristel said it had a “strong” balance sheet and continued to build its team in preparation for future expansion.

“Accordingly, our cost base has risen during the year by approximately £0.8m, or 6%, excluding our investment in our North American regulatory programme,” the board said.

“Given the scale of the opportunity in the United States, we have intensified our focus on our FDA and EPA regulatory programme and by year-end will have spent £0.75m in generating the scientific data required by the agencies, compared to £80,000 last year.”

The result of sales being lower than expected in the year ending 30 June, at a gross profit margin of 80% and an increased cost base, was that pre-tax profit before share-based payments was now expected to be at least £5m.

Tristel said its cash position of £8m gave it “security and stability”, adding that the interim dividend of 2.62p per share would be disbursed at the end of April.

It was anticipating paying a final dividend of 3.93p, giving a total of 6.55p for the year, with the board committing to make a final dividend payment at that level regardless of the level of year-end profit.

“We remain very confident that sales and profits growth will resume next year and the investments that we have made in people, systems and new market registrations will lay the foundation stones for strong growth in the years ahead,” the directors concluded.

At 1116 BST, shares in Tristel were down 17.01% at 563.76p.