Medical disinfection products supplier Tristel (LON: TSTL) is back to past growth rates with all the regions growing in double digits, helped by price increases. The UK was the fastest growing market.
In the six months to December 2022, revenues were 15% ahead at £17.5m and the growth rate was greater if discontinued products are excluded. Pre-tax profit improved from £2.13m to £3.08m. The tax charge is higher, so earnings growth was slower. The interim dividend is maintained at 2.62p a share. Net cash is £8.42m.
Medical device decontamination sales were one-fifth higher at £14.7m, while cache surface disinfection sales were 13% ahead at £1.8m. Sales of other products fell.
FDA
Progress is being made by AIM-quoted Tristel with the FDA approval for medical device decontamination product DUO ULT. The latest FDA submission will be made before the end of March and the FDA has 75 days to announce its decision. That means that there will be no contribution in the current financial year even if approval is gained.
Tristel is spending £3m on FDA approval. To reflect that it has renegotiated the US distribution agreement with Parker Labs. The FDA approved royalty has been increased to 30% of gross profit, while the existing EPA approved royalty is raised to 20% of revenues.
There are more benefits to come from price increases in the second half. finnCap expects underlying pre-tax profit from £4.5m to £6m. Given the strong start to the year and the second half normally being stronger, that should be relatively easily achievable with potential for an upgrade later in the year. At 330p, the shares are trading on 31 times prospective earnings. The cash pile will continue to build up.
The existing business can continue to grow strongly, but FDA approval for DUO ULT would provide an additional boost, with other products likely to follow. News concerning FDA approval is likely to provide upward momentum for the share price.