REG - Tristel PLC - Half-year Report <Origin Href="QuoteRef">TSTL.L</Origin>

TristelAnnouncement

23/02/2017 07:05

RNS Number : 5971X
Tristel PLC
23 February 2017
TRISTEL plc
("Tristel", the "Company" or the "Group")
Half-year Report
Unaudited Interim Results for the six months ended 31 December 2016
Tristel plc (AIM: TSTL), the manufacturer of infection prevention, contamination control and hygiene products, announces its interim results for the six months ended 31 December 2016, ahead of management expectations as stated at the AGM.
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 Contamination Control market (control of contamination in critical environments - via the Crystel brand)
 The Animal Healthcare market (veterinary practice infection prevention - via the Anistel brand)
Financial highlights
 Revenue up 22% to 9.75m (2015: 8.01m)
 Overseas sales up 45% to 4.2m (2015: 2.9m), representing 43% of total sales (2015: 36%)
 EBITDA and share based payments up 21% to 2.3m (2015: 1.9m)
 Pre-tax profit before share based payments up 15% to 1.7m (2015: 1.48m)
 Adjusted EPS before share based payments up 14% to 3.30p (2015: 2.89p)
 Interim dividend of 1.40p per share (2015: 1.14p), an increase of 23%
 Cash of 3.9m (2015: 4.3m) post 1.1m for acquisition
Operational highlights
 Positive profit contribution from Australian acquisition
 Results benefiting from Sterling weakness since the EU referendum result
 First meeting with Environmental Protection Agency (EPA) in October 2016 
 Second meeting with Food and Drug Administration (FDA) in February 2017
 Company is continuing to invest for future growth
Commenting on current trading, Paul Swinney, Chief Executive of Tristel, said:"We are pleased to report strong half-on-half revenue growth which has been above our targeted range of 10-15%. We have also delivered the pre-tax profit margin of 17.5% that we target, even after costs of 0.2m incurred during the half in pursuit of our North American business plan. Profit before tax and share based payments has risen by 15% to 1.7m and strong cash generation saw cash of 3.9m at 31 December 2016 compared with 5.7m at 30 June last year, despite cash outflows of 1.1m for the Australian acquisition and dividend payments of 2.2m during the period.
"We are progressing satisfactorily with our planned entry into the North American hospital market."
There will be a webinar for investors at 12.15 today (23 February). If you would like to join the webinar, please register herehttps://www.equitydevelopment.co.uk/news-and-events/
Tristel plc
www.tristel.com
Paul Swinney, Chief Executive
Tel: 01638 721 500
Liz Dixon, Finance Director
finnCap
Geoff Nash / Giles Rolls, Corporate Finance
Tel: 020 7220 0500
Alice Lane, Corporate Broking
Walbrook PR Ltd
Tel: 020 7933 8780 or tristel@walbrookpr.com
Paul McManus
Mob: 07980 541 893
Lianne Cawthorne
Mob: 07584 391 303
Chairman's statement
Results
The Company made excellent progress during the first half, with sales increasing to 9.75m, up 22% on the comparable period last year.
We are very pleased that sales in the United Kingdom picked up the pace of growth, rising 9% to 5.56m half-on-half. This performance was flattered by a bulk purchase during the half by our largest customer, NHS Supply Chain. This purchase enabled the substitution of a discontinued pack size and contributed approximately 150,000 in sales during the half.
Overseas sales once again rose, up 45% to 4.19m. During the half overseas sales represented 43% of total sales, compared to 36% during the same period last year. Our Australian subsidiary, which we acquired on 15 August 2016, represented 487,000 of the overseas sales growth of 1.3m. 
Overseas sales
First half
2016-17
First half
2015-16
Period-on-period growth 
Period-on-period growth %
Period-on-period growth % at a constant currency
China & Hong Kong (subsidiaries)
649,000
486,000
163,000
34%
31%
Germany (subsidiary)
1,526,000
794,000
732,000
92%
62%
New Zealand (subsidiary)
299,000
202,000
97,000
48%
18%
Overseas distributors (managed by UK) 1
943,000
1,122,000
(179,000)
-16%
-16%
Overseas sales excluding impact of acquisition
3,417,000
2,604,000
813,000
31%
19%
Australia (subsidiary) 2
776,000
289,000
487,000
169%
113%
Total overseas sales
4,193,000
2,893,000
1,300,000
45%
29%
1 Certain distributors have been absorbed into direct operations.
2 Distributor acquired during the period - included within New Zealand subsidiary sales in last year's Interim Statement.
The weakness of Sterling since the EU Referendum result has benefited Group sales. Stated at constant currency, overseas sales growth would have been reported at 29% rather than 45%.
Overseas sales are now approaching 50% of the total and reflect the Company's strategic goal of becoming a global force in the infection prevention industry. We expect the contribution to Group sales from overseas markets to exceed 50% during the course of our current strategic plan which takes us to 30 June 2019. 
Progress of our investments to improve efficiency and for future growth
This time last year I explained how the business was investing in plant and process in order to improve efficiency. During the period we increased sales by 1.7m, gross margin from 71% to 74%, whilst headcount increased by only six people (five of whom joined with our Australian acquisition).
During the period we have made significant investments towards future growth, including 200,000 spent on our North American market entry plan, and 54,000 in relation to other potential markets.
Our pre-tax profit margin of 17.5% is in line with our strategic target, and represents profit before tax and share based payments of 1.7m, which is an increase of 15% half-on-half.
We are pursuing a broadly based plan to enter the United States and Canadian markets and this programme includes eight products for which we will require a combination of FDA and EPA approvals. We have held two meetings with the FDA and one with the EPA, we have attended a number of clinical conferences and trade exhibitions during the half and are in the process of piecing together our market entry plan. I am satisfied that we are progressing well towards our strategic objective of entering the North American market in the financial year 2018-19.
Dividend
The business continues to convert profit to cash. During the half to 31 December 2016 a special dividend of 3 pence per share and a final dividend of 2.19 pence per share were paid, aggregating 2.2m. In addition, we completed upon an acquisition of our Australian distributor's business, at a cost of 1.1m. At the period end cash was 3.9m. We will pay an interim dividend of 1.40 pence per share on 13 April to shareholders on the register on 24 March 2017, with an ex-dividend date of 23 March 2017. Our historic dividend policy is to cover the standard dividend two times and in the past was paid 25% as an interim dividend and 75% as a final. Last year, given the increase in dividend tax effective from 6 April 2016, we paid 40% as an interim and brought forward the payment to March. Going forward we will continue to cover the standard dividend two times and we will pay 40% as an interim in April and 60% as a final dividend in December.
Outlook
We outlined in October 2016 our strategic targets:
 to grow sales by 10-15% on average over the next three years
 to attain a profit before tax and share based payments margin of at least 17.5%, whilst investing in future growth
 to return cash that is surplus to the operational and investment needs of the business in the form of special dividends
These targets continue to guide us and remain achievable.
I believe the business is in good shape and shareholders can confidently look forward to their Company's further progress and growth in the years ahead.
Francisco Soler
Chairman
23 February 2017
CONDENSED CONSOLIDATED INCOME STATEMENT 
RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
6 months ended
6 months ended
Year ended
31-Dec-16
31-Dec-15
30-Jun-16
(unaudited)
(unaudited)
(audited)
'000
'000
'000
Revenue
Note3
9,748
8,010
17,104
Cost of sales
(2,496)
(2,289)
(4,549)
Gross profit
7,252
5,721
12,555
Administrative expenses - share based payments 
(5)
(1,015)
(674)
Administrative expenses - depreciation & amortisation
(595)
(401)
(1,071)
Administrative expenses - other
(4,959)
(3,850)
(8,242)
Total administrative expenses
(5,559)
(5,266)
(9,987)
Operating profit
1,693
455
2,568
Finance income
2
4
12
Results from equity accounted associate
6
6
13
Profit before taxation
1,701
465
2,593
Taxation 
(312)
(273)
(491)
Profit for the period
1,389
192
2,102
Attributable to:
Equity holders of the parent
1,389
192
2,102
1,389
192
2,102
Earnings per share from continuing operations
attributable to equity holders of the parent 
Note4
Basic (pence)
3.30
0.46
5.01
Diluted (pence)
3.14
0.45
4.81
All amounts relate to continuing operations. 
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
6 months ended
6 months ended
Year ended
31-Dec-16
31-Dec-15
30-Jun-16
(unaudited)
(unaudited)
(audited)
'000
'000
'000
Profit for the period
1,389
192
2,102
Items that will be reclassified subsequently to Profit and loss
Exchange differences on translation of foreign operations
81
13
146
Other comprehensive income for the period
81
13
146
Total comprehensive income for the period
1,470
205
2,248
Attributable to:
Equity holders of the parent
1,470
205
2,248
1,470
205
2,248
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
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 2015
414
9,920
478
(147)
3,493
14,158
7
14,165
Transactions with owners
Dividends paid
-
-
-
-
(2,141)
(2,141)
-
(2,141)
Shares issued
7
535
-
-
-
542
-
542
Adjustment for change of controlling interests
-
-
-
-
-
-
-
-
Share-based payments
-
-
-
-
1,015
1,015
-
1,015
Total transactions with owners
7
535
-
-
(1,126)
(584)
-
(584)
Profit for the period ended 31 Dec 2015
-
-
-
-
192
192
-
192
Other comprehensive income:- Exchange differences 
on translation of foreign operations 
-
-
-
13
-
13
-
13
Total comprehensive income 
-
-
-
13
192
205
-
205
31 December 2015
421
10,455
478
(134)
2,559
13,779
7
13,786
Transactions with owners
Dividends paid
-
-
-
-
(480)
(480)
-
(480)
Shares issued
-
(44)
-
-
-
(44)
-
(44)
Share-based payments 
-
-
-
-
(341)
(341)
-
(341)
Total transactions with owners
-
(44)
-
-
(821)
(865)
-
(865)
Profit for the period ended 30 Jun 2016
-
-
-
-
1,910
1,910
-
1,910
Other comprehensive income:- Exchange differences 
on translation of foreign operations
-
-
-
133
-
133
-
133
Total comprehensive income 
-
-
-
133
1,910
2,043
-
2,043
30 Jun 2016
421
10,411
478
(1)
3,648
14,957
7
14,964
Transactions with owners
Dividends paid
-
-
-
-
(2,193)
(2,193)
-
(2,193)
Shares issued
3
32
-
-
-
35
-
35
Share-based payments 
-
-
-
-
5
5
-
5
Total transactions with owners
3
32
-
-
(2,188)
(2,153)
-
(2,153)
Profitfor the period ended 31 Dec 2016
-
-
-
-
1,389
1,389
(2)
1,387
Other comprehensive income:- Exchange differences 
on translation of foreign operations 
-
-
-
81
-
81
-
81
Total comprehensive income 
-
-
-
81
1,389
1,470
(2)
1,468
31 Dec 2016
424
10,443
478
80
2,849
14,274
5
14,279
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
31-Dec-16
31-Dec-15
30-Jun-16
(unaudited)
(unaudited)
(audited)
'000
'000
'000
Non-current assets
Goodwill & other Intangible assets
6,882
6,253
6,047
Property, plant and equipment
1,381
1,330
1,416
Deferred tax
68
37
-
8,331
7,620
7,463
Current assets
Inventories
1,753
1,589
1,875
Trade and other receivables
3,776
3,319
3,735
Cash and cash equivalents
3,854
4,264
5,715
9,383
9,172
11,325
Total assets
17,714
16,792
18,788
Capital and reserves attributable to the Company's equity holders
Called up share capital
424
421
421
Share premium account
10,443
10,455
10,411
Merger reserve
478
478
478
Foreign exchange reserves
80
(134)
(1)
Retained earnings
2,849
2,559
3,648
Equity attributable to equity holders of parent
14,274
13,779
14,957
Minority interest 
5
7
7
Total Equity 
14,279
13,786
14,964
Current liabilities
Trade and other payables
2,583
2,444
3,256
Interest bearing loans and borrowings
-
-
-
Current tax liabilities
649
403
432
Total current liabilities
3,232
2,847
3,688
Non-current liabilities
Deferred tax
203
159
136
Total liabilities
3,435
3,006
3,824
Total equity and liabilities
17,714
16,792
18,788
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
6 months ended
6 months ended
Year ended
31-Dec-16
31-Dec-15
30-Jun-16
(unaudited)
(unaudited)
(audited)
'000
'000
'000
Cash flows generated from operating activities
Cash generated from operating activities
Note6
1,701
2,231
4,819
Corporation tax 
(94)
(96)
(269)
1,607
2,135
4,550
Cash flows used in investing activities
Interest received
2
4
12
Purchase of intangible assets
(204)
(147)
(406)
Consideration for acquisition
Note7
(959)
Purchase of property, plant and equipment
(244)
(203)
(499)
Proceeds on sale of property, plant and equipment
14
16
16
(1,391)
(330)
(877)
Cash flows used in financing activities
Loans repaid
-
-
-
Share issues
35
542
498
Equity dividends paid
(2,193)
(2,141)
(2,621)
(2,158)
(1,599)
(2,123)
(Decrease)/increase in cash and cash equivalents
(1,942)
206
1,550
Cash and cash equivalents at the beginning of the period
5,715
4,045
4,045
Exchange difference on cash and cash equivalents
81
13
120
Cash and cash equivalents at the end of the period 
3,854
4,264
5,715
NOTES TO THE ACCOUNTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
1 PRINCIPal ACCOUNTING POLICIES
Basis of Preparation
For the year ended 30 June 2016, the Group prepared consolidated financial statements under International Financial Reporting Standards ('IFRS') as adopted by the European Commission. These will be those International Accounting Standards, International Financial Reporting Standards and related interpretations (SIC-IFRIC interpretations), subsequent amendments to those standards and related interpretations, future standards and related interpretations issued or adopted by the IASB that have been endorsed by the European Commission. This process is ongoing and the Commission has yet to endorse certain standards issued by the IASB.
These condensed consolidated interim financial statements (the interim financial statements) have been prepared under the historical cost convention. They are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and which are, or are expected to be, effective at 30 June 2017. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2016. The interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 30 June 2016. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.
Accounting Policies
The interim report is unaudited and has been prepared on the basis of IFRS accounting policies.
The accounting policies adopted in the preparation of this unaudited interim financial report are consistent with the most recent annual financial statements being those for the year ended 30 June 2016.
2 Publication of non-statutory accounts
The financial information for the six months ended 31 December 2016 and 31 December 2015 have not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.
The financial information relating to the year ended 30 June 2016 does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. This information is based on the Group's statutory accounts for that period. The statutory accounts were prepared in accordance with International Financial Reporting Standards ("IFRS") and received an unqualified audit report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These financial statements have been filed with the Registrar of Companies.
3 SEGMENTAL ANALYSIS
The Board 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 incorporate the Company's chlorine dioxide chemistry, and are used primarily for infection control in hospitals ("Human Health"). This segment generates approximately 90% of Group revenues.
The second segment, which constitutes 4% of the business activity, relates to manufacture and sale of disinfection and cleaning products, principally into veterinary and animal welfare sectors ("Animal Health").
The third segment addresses the pharmaceutical and personal care manufacturing industries ("Contamination Control"). This activity has generated 6% of the Group's revenue for the period.
The operation is monitored and measured on the basis of the key performance indicators of each segment, these being revenue and gross profit; strategic decisions are made on the basis of revenue and gross profit generating from each segment.
The Group's centrally incurred administrative expenses and operating income are not attributable to individual segments.
3 SEGMENTAL ANALYSIS - continued
6 months ended 
31 December 2016
6 months ended 
31 December 2015
Year ended 
30 June 2016
(unaudited)
(unaudited)
(audited)
Human Health
Animal Health 
Cont'n Control
Total 
Human Health
Animal Health
Cont'n Control
Total 
Human Health
Animal Health
Cont'n Control
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Revenue 
8,730
440
578
9,748
6,740
500
770
8,010
14,599
1,015
1,490
17,104
Cost of material
(2,170)
(106)
(220)
(2,496)
(1,762)
(156)
(371)
(2,289)
(3,574)
(333)
(642)
(4,549)
Gross profit
6,562
332
358
7,252
4,978
344
399
5,721
11,025
682
848
12,555
Centrally incurred income and expenditure not attributable to individual segments: -
Dep'n & amort'n of non- financial assets
(595)
(401)
(1,071)
Other administrative expenses
(4,959)
(3,850)
(8,242)
Share based payments
(5)
(1,015)
(674)
Segment operating profit
1,693
455
2,568
Segment operating profit can be reconciled to Group 
profit before tax as follows: -
Segment operating profit 
1,693
455
2,568
Results from equity accounted associate
6
6
12
Finance income
2
4
13
Finance costs
-
-
-
Group profit
1,701
465
2,593
The Group's revenues from external customers are divided into the following geographical areas:
6 months ended 
31 December 2016
6 months ended 
31 December 2015
Year ended 
30 June 2016
(unaudited)
(unaudited)
(audited)
Human healthcare
Animal healthcare
Cont'n control
Total 
Human healthcare
Animal healthcare
Cont'n control
Total 
Human healthcare
Animal healthcare
Cont'n Control
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
United Kingdom 
4,739
314
502
5,555
4,155
373
589
5,117
8,547
679
1,140
10,366
Germany
1,523
3
-
1,526
791
3
-
794
1,778
-
-
1,778
Rest of the World
2,468
123
76
2,667
1,794
124
181
2,099
4,274
336
350
4,960
Group Revenues
8,730
440
578
9,748
6,740
500
770
8,010
14,599
1,015
1,490
17,104
4  EARNINGS PER SHARE
The calculations of earnings per share are based on the following profits and number of shares:
6 months ended 
31 December 2016
6 months ended 
31 December 2015
Year ended 
30 June 2016
(unaudited)
(unaudited)
(audited)
Retained profit for the period attributable to equity holders of the parent
1,389
192
2,102
Retained profit for the period attributable to equity holders of the parent adjusted for share based payments
1,394
1,207 
2,776
Shares '000 
Number
Shares '000 
Number
Shares '000 Number
Weighted average number of ordinary shares for the purpose of basic earnings per share
42,056
41,753
41,945
Share options
2,198
1,040
1,747
Weighted average number of ordinary shares for the purpose of diluted earnings per share
44,254
42,793
43,692
Earnings per ordinary share 
Basic (pence)
3.30
0.46
5.01
Diluted (pence)
3.14
0.45
4.81
Before share based payments (pence)
3.30
2.89
6.62
 5Dividends
6 months ended 
31 December 2016
6 months ended 
31 December 2015
Year ended 
30 June 2016
(unaudited)
(unaudited)
(audited)
Amounts recognised as distributions to equity holders in the period:
'000
'000
'000
Ordinary shares of 1p each 
Special dividend for the year ended 30 June 2016 of 3.00p per share (2015: 3.00p)
1,265
1,242
1,242
Final dividend for the year ended 30 June 2016 of 2.19p (2015: 2.14p) per share
928
899
899
Interim dividend for the year ended 30 June 2016 of 1.14p 
-
-
480
2,193
2,141
2,621
Proposed interim dividend for the year ending 30 June 2017 of 1.40p (2016: 1.14p) per share
594
480
-
 
The proposed interim dividend has not been included as a liability in the financial statements.
6 RECONCILIATION OF PROFIT BEFORE TAX to cash GENERATED from operations
6 months ended
6 months ended
Year ended
31-Dec-16
31-Dec-15
30-Jun-16
(unaudited)
(unaudited)
(audited)
'000
'000
'000
Profit before taxation
1,701
465
2,593
Adjustments for:
Depreciation 
270
208
442
Amortisation of intangibles
325
193
524
Impairment
-
-
125
Results from associates
-
(6)
-
Share based payments expense (IFRS2)
5
1,015
674
(Profit)/Loss on disposal of property plant and equipment
(6)
3
(2)
Loss on disposal of intangible asset
-
-
8
Finance costs
-
-
-
Finance income
(2)
(4)
(12)
Operating cash flows before movement in working capital
2,293
1,874
4,352
Decrease in inventories
122
472
186
Increase in trade and other receivables
(41)
(125)
(541)
(Decrease)/increase in trade and other payables
(673)
10
822
Cash generated from operating activities
1,701
2,231
4,819
7 Australian acquisition
On 15 August 2016 the Group acquired from the Australian company Ashmed PTY Ltd, its customer base, stock, fixed assets and staff, for a total consideration of 1.1m in cash. The customer base and staff were purchased for a consideration of 959k, the amount will be recognised within intangible assets. Stock was acquired for 119k.

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