Final Results

Tristel PLC 29 October 2007 TRISTEL plc ('Tristel' or 'the Company') Preliminary Results for the Year Ended 30 June 2007 Another year of strong revenue and profit growth Tristel plc (AIM: TSTL), the specialist infection and contamination control company, announces its preliminary results for the year ended 30 June 2007. Tristel operates through two subsidiaries: Tristel Solutions, which provides infection control products based on chlorine dioxide chemistry to the healthcare marketplace and Tristel Technologies, which uses chlorine dioxide chemistry for legionella control in buildings' water systems (including those of hospitals) and contamination control in the food growing and processing industries. Financial Highlights â€¢ Turnover up 37% to Â£5,148,366 (2006: Â£3,745,680) â€¢ Gross margin increased to 62.3%, up 7.9 percentage points from 2006 â€¢ Pre-tax profit* up 49% to Â£1,252,721 (2006: Â£841,491) â€¢ Operating cashflow up 273% to Â£1,243,231 (2006: Â£333,043) â€¢ Adjusted earnings per share* up 48% to 3.66p (2006: 2.48p) â€¢ Basic earnings per share up 8.5% to 2.3p (2006: 2.12p) o Due to non-recurring costs of Â£349,280 â€¢ Dividend per share for the full year up 35% to 1.35p (2006: 1p) Operational Highlights â€¢ Establishment of in-house manufacturing securing: o greater control and protection over the Company's proprietary technology o continuing improvements in quality control o acceleration of new product development o capacity to meet volume growth expected in the medium term o enhanced gross margins â€¢ New products acquired and launched since flotation (June 2005) contribute 23.7% of total sales â€¢ Five-fold increase in export sales; Tristel now represented in 22 overseas markets Paul Swinney, Chief Executive of Tristel plc, said: 'This has been another year of turnover, profit and earnings growth, with a strong performance in our domestic market and further progress made overseas. We continue to be totally focussed on the infection and contamination control marketplace, an area that is firmly on the political agenda in the United Kingdom and abroad. We are confident in the outlook for the coming year and believe that Tristel is well placed to continue its strong growth record.' * Before amortisation, non-recurring charges and share based payments For further information: Tristel plc 01638 721 500 Paul Swinney, Chief Executive Paul Barnes, Finance Director Daniel Stewart 020 7776 6550 Oliver Rigby Parkgreen Communications 020 7479 7933 or 07980 541 893 Paul McManus paul.mcmanus@parkgreenmedia.com Chairman's statement Tristel has had another excellent year, with growth in our core domestic healthcare business, a full year contribution from Tristel Technologies (acquired on 5 June 2006), and expansion in our export business. As a result, turnover increased by 37% to Â£5,148,366 (2006: Â£3,745,680). Pre-tax profit before amortisation of intangibles, share based payments and non-recurring items increased by 49% to Â£1,252,721 (2006: Â£841,491) and the operating margin before amortisation of intangibles, share based payments and non-recurring items rose from 21.5% in 2006 to 24.2% in 2007. Profit before tax increased by 9.4% to Â£786,895 (2006: Â£719,579), impacted by a non-recurring charge of Â£349,280. Both group subsidiaries performed well during the year. Tristel Solutions, which provides infection control products based on chlorine dioxide chemistry to the healthcare marketplace, increased turnover by 9.9% to Â£4,015,034 (2006: Â£3,651,921). Tristel Technologies, which also uses chlorine dioxide chemistry but for legionella control in buildings' water systems (including those of hospitals) and contamination control in the food growing and processing industries, made a full year contribution to turnover of Â£1,133,332 (2006: one month Â£93,759). The Group's export sales in the year grew five-fold to Â£178,365 (2006: Â£35,765). One of the most significant developments of the year has been the establishment of an in-house manufacturing capability enabling us to take over production of our products. This major change in our business model involved the relocation of our Newmarket headquarters to manufacturing and warehouse premises of 14,500 sq. ft, the relocation of our Bolton office, a substantial investment in plant, equipment and the fit-out of these new premises, and a significant increase in headcount. I am pleased to report that this major strategic change has been completed smoothly and efficiently and that we are now producing all our chemical products and handling all logistical activities from these two new locations. Outlook The past year has seen Tristel plc increase its scale and reach in the infection and contamination control marketplace, with products that have been launched and acquired since the flotation in June 2005 making a significant contribution to growth. With further innovative products to be launched in the current financial year, we look forward to our future with confidence. Our basic earnings per share for the year ended 30 June 2007 were 2.3 pence (2006: 2.12 pence). The Board is recommending that the final dividend be increased to 1 penny making a total annual dividend of 1.35 pence, an increase of 35% over 2005-06. The final dividend represents a total payment of Â£244,429. Francisco A. Soler Chairman 29 October 2007 Chief Executive's review of activities Strategic overview Manufacturing The year ended 30 June 2007 has been transformational for Tristel. During the year we broke with the model of outsourced production that we had used since 1998. The decision to change our business model was driven by: â€¢ the expansion of the Group's intellectual property portfolio demanded we gain greater control and protection over our proprietary technology â€¢ the need to achieve continuing improvement in quality control â€¢ the need to accelerate the new product development process â€¢ the need to prepare for the volume growth that we expect to achieve in our strategic plan The transition to manufacture has involved a substantial investment. The expenditures incurred have been: â€¢ Plant, equipment and fit-out of manufacturing facility: Â£421,000 â€¢ Acquisition of manufacturing rights - cash: Â£300,000 â€¢ Acquisition of manufacturing rights - share issue: Â£300,000 We forecast that in-house manufacture will result in enhanced future gross margins. Furthermore, we now have in place the production capacity and human resources, supported by technical and scientific personnel recruited in conjunction with establishing production, to meet the increased demand for our products that we forecast from future additions to our product portfolio and from our geographical expansion. Product innovation - medical Tristel is a consumable product-led business. Our product development philosophy is to create single-use products with unique application features. We enjoy frequent repeat re-ordering for our products and high visibility in our revenue stream. The products require only limited after-sales service and support and we will continue with this business model. Future product development plans will entail the supply to users of equipment hardware to enable the use of the Tristel chemistry. In all cases the underlying revenue stream from the Tristel consumables will be of greater economic significance than the hardware revenue stream. During the year we launched new products targeted at ultrasound, environmental disinfection and laboratories and all have started to achieve significant market penetration. At the same time we have continued to focus upon our historical core business of the United Kingdom mainstream endoscopy market. In this market we continue to be the most widely used disinfectant chemistry in the country and in the Ear, Nose and Throat (ENT) endoscopy market our TRIO wipe system is used in approximately 50% of all ENT departments. Product innovation - water and food chain The acquisition of Tristel Technologies has given us a significant presence in the legionella control market (water) and the food growing and processing industries (food chain). The Tristel Technologies products incorporate a chlorine dioxide chemistry system that is supplied from the United States and differs in certain important respects from our proprietary chlorine dioxide chemistry. Having successfully integrated the Tristel Technologies business during the year and having relocated its blending operation to our Newmarket production facility, our near term strategy is to integrate the best features of the two chemistry systems. As with our medical business, the legionella and food contamination control products are consumables. Products that did not exist within the Group portfolio on 1st June 2005, the date of our flotation, now account for 23.7% of total sales, validation that our product development and acquisition strategy is driving future growth. Geographical expansion Tristel has a clear strategy to expand its business internationally over the next three to five years. At present, the business model employed is to use distribution partners. When qualifying prospective export markets we look for a regulatory framework that enables the product portfolio, or specific products within the portfolio, to be approved for sale within a reasonable period of time. Furthermore, this must be achievable with an acceptable level of investment, which the distributor bears. These criteria disqualify the most heavily regulated markets such as the United States. We have been successful in identifying and appointing 22 distribution partners who are either selling Tristel products or are in the process of registering them. Whilst the level of export sales has still to make a significant contribution to total sales, the platform for more rapid future expansion has been established. Market overview Macro influences Raising standards of hospital hygiene; controlling the risk of infection in hospitals or the threat of legionella from buildings' water supplies; avoiding the dangers of salmonella in food produce - these are the driving forces behind our business. Their importance to our society is obvious even without the media attention that they attract, placing the hygiene and infection control issue firmly on the political agenda in the United Kingdom and abroad. Whilst the general level of healthcare spending is an important determinant of demand for our products in all the markets in which we operate, we believe that hygiene and infection control are critical expenditures. As long as we continue to deliver products with superior efficacy, greater safety, and that are easier to use than those currently employed, our business environment will present opportunities for continued growth. Chlorine dioxide, the active ingredient in which we have specialised, is, without doubt, a highly effective and safe biocide. Its safety pedigree has been established by over ten years of widespread use in United Kingdom hospitals. Its effectiveness as a biocide is widely documented in scientific journals. Regulatory influences The regulatory environment supports our confidence in Tristel's future. Our products are either classified within the European Community as medical devices under the Medical Devices Directive (MDD 93/42/EC) or as biocides under the Biocidal Products Directive (BPB 98/8/EC). Simplifying a complicated set of regulations, for a disinfectant (irrespective of the chemistry) to be classified as a medical device it has to be used to disinfect another medical device. For the disinfectant to be approved, the manufacturer has to prove its efficacy and safety. Approval enables the product to carry the CE mark. All of our medical products carry the CE mark. For a more general purpose disinfectant, such as a surface or water disinfectant, it will be classified as a biocide under the Biocidal Products Directive (BPD). Concerned for the environmental impact of the plethora of disinfectant chemistries that have been used for many years, the European Community is in the process of limiting the number of active ingredients that can be used. Sodium chlorite (the main basic ingredient of our products) as the precursor for chlorine dioxide has been approved by the EC and is being supported through the regulatory submission process by a group of sodium chlorite manufacturers. The industry's consensus view is that the cost of submission under the BPD will block the development and introduction of active ingredients that could be future alternatives to those already approved under the BPD. As a supplier of chlorine dioxide products, our long term view is that the regulatory environment is favourable to the environmental disinfection products that we market. Outside of the European Community, differing countries have their own regulatory bodies. However, in the markets in which we operate, which is worldwide excluding North America, the CE mark is widely accepted. Competition In the arena of medical device high-level disinfectants, we believe that Tristel is the sole manufacturer of chlorine dioxide products. However, there are a few other chemistries that can compete with chlorine dioxide, the most widely used of which is peracetic acid. Whilst the emergence of competitor products utilising the chlorine dioxide molecule is a future possibility and would pose a competitive threat, our strategy has been to present specifically packaged products for clearly targeted hospital areas. This strategy differentiates Tristel from disinfectant suppliers who present their products as a homogenous solution for use in all hospital areas. A substantial investment both in terms of cost and time would be required to catch up with Tristel's first user advantage established in the markets in which we operate. In water disinfection (legionella control) and the food processing and growing industries chlorine dioxide is widely used as the alternative to sodium hypochlorite (chlorine). Results and finance Sales Tristel has enjoyed another strong year of growth. Headline sales growth of 37% included a full year contribution to Group turnover from Tristel Technologies of Â£1,133,332. Tristel Solutions' turnover increased by 9.9% to Â£4,015,034. Margins and operating profit The gross margin increased to 62.3%, up 7.9 percentage points from last year. The first in-house production of Tristel products commenced in May 2007 and made an initial contribution to improved margins from that date. Excluding the non-recurring item, amortisation of intangibles and the share based payments, operating profits increased by 54.6% to Â£1,246,332 and the operating margin rose from 21.5% last year to 24.2% in 2007. The non-recurring cost relates to an agreement, reached in June 2007, with a company engaged in the United Kingdom endoscopy market, to end an informal arrangement that had operated since 2002. This arrangement had assisted both companies to establish market leading positions in their respective business areas in endoscopy. We agreed to make a one-off ex-gratia settlement in the amount of Â£349,280 (together with associated costs) to bring it to a close. The informal arrangement had previously cost the Group Â£777,802 from the date it commenced to the end of the financial year. Earnings The growth in basic earnings per share and diluted earnings per share was 8.5% and 8.1% respectively. Capital expenditure and investments The Group has made important investments in the business over the year, with capital expenditures totalling Â£1,307,469. The main elements of this investment were:- â€¢ Acquisition of manufacturing rights and know-how at a cost of Â£600,000. Of the total consideration paid to the vendor, Â£300,000 was settled in cash and Â£300,000 by the issue of 606,060 ordinary shares at a price of 49.5 pence per share â€¢ Establishment of a manufacturing and warehousing facility in Newmarket and the relocation of the Bolton office â€¢ New development projects which are ongoing which include the creation of the 'Stella' sterilising tray and the 'Shine' washer-disinfector for the Ear, Nose and Throat market The level of investment expenditure incurred during the year will not be recurring in the current financial year. Treasury and deployment of capital The Group's working capital and capital expenditures have been financed from operating cash flow, utilisation of an invoice discounting facility, term loan and overdraft facilities provided by the Company's bankers, and a Â£100,000 short term loan provided by one of the Company's shareholders (which has subsequently been repaid). The Group has adequate debt facilities to fund its foreseeable working capital and capital expenditure needs. Paul Swinney Chief Executive 29 October 2007 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Note Year ended Year ended 30 30 June 2007 June 2006 Â£'000 Â£'000 Revenue 5,148 3,746 Cost of sales (1,943) (1,709) Gross profit 3,205 2,037 Other operating income 20 16 Administrative expenses - share based payments (IFRS2) (30) - Administrative expenses - depreciation and (206) (168) amortisation Administrative expenses - others (1,859) (1,201) Total administrative expenses (2,095) (1,369) Operating profit before exceptional item 1,130 684 Exceptional item 4 (349) - Operating profit 781 684 Finance income 5 7 35 Finance costs 6 (1) - Net finance costs 6 35 Profit before tax 787 719 Taxation 7 (236) (213) Profit for the year 551 506 Attributable to: Equity holders of the parent 551 506 Earnings per share from continuing operations Basic - pence 9 2.30 2.12 All amounts relate to continuing operations. There are no recognised gains or losses other than the profits shown above. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 30 JUNE 2007 Note 2007 2006 Â£'000 Â£'000 Profit for the year 551 506 TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR 551 506 Attributable to: Equity holders of the parent 551 506 All amounts relate to continuing operations. There are no recognised gains or losses other than the profits shown above. CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 Note 2007 2006 Â£'000 Â£'000 Non-current assets Goodwill 774 774 Intangible assets 1,495 819 Property, plant and equipment 734 312 3,003 1,905 Current assets Inventories 488 395 Trade and other receivables 1,147 931 Cash and cash equivalents 38 174 1,673 1,500 Total assets 4,676 3,405 Capital and reserves attributable to the company's equity holders Share capital 10 244 238 Share premium account 10 1,750 1,456 Merger reserve 10 478 478 Retained earnings 10 158 (167) Equity attributable to equity holders of parent 2,630 2,005 Current liabilities Trade and other payables 1,369 825 Bank overdraft 165 54 Interest bearing loans and borrowings 100 204 Current tax liabilities 230 192 Total current liabilities 1,864 1,275 Non-current liabilities Deferred tax liabilities 182 125 Total non-current liabilities 182 125 Total liabilities 2,044 1,400 Total equity and liabilities 4,676 3,405 The financial statements were approved by the Board of Directors on 29 October 2007, and were signed on its behalf by: Paul Barnes FCCA Finance Director 29 October 2007 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Note 2007 2006 Â£'000 Â£'000 Cash generated from operating activities 11 1,243 333 Interest paid (1) - Corporation tax paid (129) (11) 1,113 322 Investing activities Interest received 7 35 Purchases of intangible assets (462) (105) Acquisition of subsidiary undertaking (net of cash) - (1,081) Purchases of property, plant and equipment (545) (236) Proceeds from sale of property, plant and equipment - 13 Net cash used in investing activities (1,000) (1,374) Financing activities Dividends paid 8 (256) (185) Net cash used in financing activities (256) (185) Net increase/(decrease) in cash and cash equivalents (143) (1,237) Cash and cash equivalents at the beginning of the (84) 1,153 period Cash and cash equivalents at the end of the period (227) (84) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 1. PRINCIPal ACCOUNTING POLICIES Basis of Preparation The group's financial statements have been prepared in accordance with 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. Segments For management purposes, the group reports its entire activities as one business. Accordingly, the Directors consider there to be only one reportable segment, being the development, manufacture and distribution of products utilising the group's core chlorine dioxide technologies. 2. Publication of non-statutory accounts The financial information for the years ending 30 June 2007 and 2006 has been audited but does not constitute full financial statements within the meaning of Section 240 of the Companies Act 1985. The financial information has been extracted from the group's 2007 statutory financial statements upon which the auditors' opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985. 3. EXPLANATION OF TRANSITION TO IFRS IFRS 1 - 'First-time adoption of International Financial Reporting Standards' sets out the procedures that must be followed when the group adopted IFRS for the first time as the basis for preparing its consolidated financial statements. The group established its accounting policies as at 30 June 2006 and, in general, applied these retrospectively to determine the IFRS opening balance sheet at its date of transition, 1 July 2005. The group had previously adopted UK GAAP as its underlying basis of accounting. Following review of UK GAAP standards with those required under IFRS, the Directors' consider that there are no retrospective adjustments or re-statement that need to be made to the opening balance sheet at 1 July 2005. 4. EXCEPTIONAL ITEMS The non-recurring cost relates to an agreement, reached in June 2007, with a company engaged in the United Kingdom endoscopy market, to end an informal arrangement that had operated since 2002. This arrangement had assisted both companies to establish market leading positions in their respective business areas in endoscopy. The company agreed to make a one-off ex-gratia settlement in the amount of Â£349,280 (together with associated costs) to bring the arrangement to a close. The informal arrangement had previously cost the Company Â£777,802 from the date it commenced to the end of the financial year. 5. FINANCE INCOME 2007 2006 Â£'000 Â£'000 On short term deposits 7 35 6. FINANCE COSTS 2007 2006 Â£'000 Â£'000 On bank loans and overdrafts 1 - 7. TAX The taxation charge represents: 2007 2006 Â£'000 Â£'000 Current taxation Corporation tax 189 184 Adjustment in respect of earlier years (10) - Total current tax 179 184 Deferred tax Origination and reversal of temporary differences 57 29 Total deferred tax 57 29 Total tax charge in income statement 236 213 UK corporation tax is calculated at 30% (2006: 30%) of the estimated assessable profit for the year. The charge for the year can be reconciled to the profit in the consolidated income statement as follows: 2007 2006 Â£'000 Â£'000 Profit before tax 786 719 Tax at the UK corporation tax rate of 30% (2006: 30%) 236 216 Effect of: Expenses not deductible for tax purposes 4 3 Timing differences in capital allowances and 3 - depreciation Different rate tax bands and changes in tax rates 5 (2) Enhanced relief on scientific research expenditure (2) (4) Adjustment in respect of earlier years (10) - Total tax charge for the year 236 213 8. DIVIDENDS 2007 2006 Â£'000 Â£'000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 30 June 2006 of 173 119 0.725p (2005 - 0.50p) per share Interim dividend for the year to 30 June 2007 of 0.35p 83 66 (2005 - 0.275p) per share 256 185 Proposed final dividend for the year ended 30 June 2007 244 173 of 1p (2006 - 0.725p) per share The proposed final dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in the financial statements. 9. EARNINGS PER SHARE The calculation of earnings per share is based on the following profits and numbers of shares: 2007 2006 Â£'000 Â£'000 Earnings Retained profit for the financial year attributable to 551 506 the equity holders of the parent Number of shares Shares Shares '000 '000 Weighted average number of ordinary shares for the 23,973 23,837 purposes of basic earnings per share Effect of dilutive potential ordinary shares Share Options 355 359 Weighted average number of ordinary shares for the 24,328 24,196 purposes of diluted earnings per share Earnings per ordinary share Basic 2.30p 2.12p Diluted 2.26p 2.09p 10. RECONCILIATION OF MOVEMENT IN TOTAL EQUITY Called up Share share premium Merger Retained capital account reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 July 2005 238 1,456 479 (489) 1,684 Total recognised income and expense - - - 506 506 Dividends paid (185) (185) Balance at 30 June 2006 238 1,456 479 (168) 2,005 Total recognised income and expense - - - 551 551 Dividends paid (256) (256) Issue of shares 6 294 - - 300 Share based payments - IFRS 2 30 30 244 1,750 479 157 2,630 In April 2007, the company acquired certain manufacturing assets for total consideration amounting to Â£600,000 (excluding associated costs). Consideration was made by way of a cash payment of Â£300,000 and a share placing to the Vendor of 606,060 1p ordinary shares at an issue price of 49.5p per share. The price of the placing shares was calculated by reference to the market price on the date of the Agreement 11. notes to the consolidated cash flow statement 2007 2006 Â£'000 Â£'000 Cash generated from operations Profit before tax 787 719 Adjustments for: Depreciation and inpairrment 119 46 Amortisation of intangible assets 87 122 Share based payments - IFRS2 30 - Loss on sale of tangible fixed assets 3 5 Government grants (20) (16) Finance costs 1 - Finance income (7) (35) 1,000 841 Increase in inventories (93) (54) Increase in trade and other receivables (216) (205) Increase/(decrease) in trade and other payables 552 (249) Cash generated from operations 1,243 333 12. the financial information set out in this preliminary announcement, does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The annual report and financial statements for the year ended 30 June 2007 will be posted to the shareholders on 19 November and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The annual report and financial statements will also be on the company's web site www.tristel.com from 19 November 2007. This information is provided by RNS The company news service from the London Stock Exchange

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