Disinfection products supplier Tristel (LON: TSTL) has doubled its interim dividend on the back of strong sales growth and cash generation. This is before approvals for the Cache surface cleaning products start to contribute and North American royalties begin to ramp up. The share price is 8.89% higher at 490p.
In the six months to December 2023, revenues increased from £17.5m to £20.9m, while underlying pre-tax profit improved from £3.08m to £4.13m. Cash improved to £10.8m, even though there was a £3.74m outflow relating to the dividend.
The latest interim dividend has doubled to 5.24p/share. The policy is to grow the dividend in line with earnings with a minimum annual increase of 5%. This will not hamper the ability of Tristel to fund its growth.
UK revenues grew fastest through a combination of an increasing number of medical procedures as the NHS tries to reduce the backlog and higher prices. Medical device decontamination revenues continue to grow outside of the UK.
North American sales of Tristel ULT for ultrasound disinfection have started, but they are still at low levels. There were also initial revenues in Canada for the ophthalmology product, but it still awaits approval in the US.
Cache surface cleaning product revenues were slightly lower. The TANK ClO2sporicidal disinfectant storage and distribution system has gained additional approvals, which will help to improve revenues in the fourth quarter and next year.
The strategy is to build up Cache revenues to a similar level to the medical device decontamination products, but they are currently less than 10% of the group total.
Cavendish forecasts a 2023-24 pre-tax profit of £7.6m, up from £6.2m. The total dividend is expected to improve from 10.5p/share to 11.6p/share. The prospective multiple is 36, which reflects the potential for royalty based growth in North America.
