Tristel PLC

Well, good afternoon, everybody, and welcome to our results presentation for Tristell PLC. It's great to be able to present to you in person for the first time in, I guess, 18 months. And I do believe we've got a number of shareholders who are watching in remotely. So we're on camera here, I believe. So without any further ado, I'll ask Liz to present the results for the year.

Thank you. Good evening, everybody. OK, so this has been a disappointing set of results for us. We've broken our seven-year track record of growth, and that has been wholly down to COVID. So turnover fell by 2%, down to 31 million. Turnover fell by 2%. Overseas sales increased by 3%, up to 19.6 million, and represented 63% of total sales during the year. Our gross margin remains steady at 80%. And our pre-tax profit before share-based payments of £800,000 and an adjustment in the fair value of Mobile ODT, the Israeli medtech company that we invested in back in 2016-17, was impaired and so we suffered a loss of £800,000 with respect to that. And so that culminates in an adjusted pre-tax profit of £5.4 million, which is a fall of 24% on the prior year. Our pre-tax margin before share-based payments and that fair value adjustment fell to 17%. And EPS before share-based payments was down 34% to 8.16 pence per share. Dividend per share actually increased by 6% to 6.55 pence. And that will give us a final dividend of 3.93 pence per share, payable on the 16th of December with an ex-dividend date of the 18th of November. And just to clarify, the reason that we didn't cut the dividend was that we maintained it at the level of our broker's forecast. So prior to us downgrading profits, we had expected to pay out a 6.55%. pence dividend and we've maintained that. In our current financial year we will return back to our two times cover. So we report strong operating cash flow, our business is very cash generative, inflow of £6.5 million, leaving net cash at the end of the year of £8.1 million and today we've got £10 million in the bank account. So here we show the graph that we put into our presentations each year, sales history since IPO. And of course, we are reporting a 2% year on year decline due to COVID-19 and the impact it's had upon hospital service levels. But of course, the important thing to remember is that it's a We're reporting a decline on 2019-20, which was an exceptional year for us. You can see the jump up in sales last financial year. And that year did contain an element of panic buying, particularly by the NHS supply chain here in the UK, which means that... In fact, our trajectory, our expected trajectory wasn't too far off where we ended up this financial year. So if COVID hadn't happened, then we would have been not too far off where we ended up this year when we were predicting back in 2018, 2019. Sales history by geography. Here you can see on the graph the split between our business selling into the UK shown in purple and into our international markets shown in green. International sales grew by 3% and made up 63% of our total business during this year. That 3% growth is significantly below our historic growth rate overseas and it has been international sales of our medical device disinfectants that have really driven the business forward over the last few years. Meanwhile, in the UK, we suffered a sales decline of 10%. The sales that we reported in the UK included £900,000 of revenue that was Brexit-related. So NHS supply chain... purchased £900,000 of principally medical device products, which they held in as an insurance policy against a disorderly Brexit. So stock building by supply chain, £900,000 boosted our UK sales in the period, So in fact, that decline of 10% at an underlying level would actually have been 17%. So it gives you a picture of what's happened in the United Kingdom as a consequence of COVID and the impact that the pandemic has had on UK hospitals compared to hospitals in all of the other markets in which we operate. In fact, back in January to March of 2021, the weekly orders that we receive from NHS supply chain, which would normally be around the £100,000, £150,000, £200,000 mark every week, dried up for 10 consecutive weeks. So we had just a complete cessation of sales of medical device products into the UK throughout the height of the pandemic back in the new year of 2021. And that was because our medical device disinfectants are used in outpatient departments, that at the height of the pandemic needed to transfer their resources, their staff, their space over to COVID patients. And so those outpatient clinics were scaled right back. and in addition we operate in one of our key sweet spots is ENT and also ophthalmology where you're right in the breathing zone of the patient so to carry out those investigations the doctor needs to get right in the face of the patient. Well COVID is a respiratory disease so that one of the key reasons why those clinics were closed and and our procedures, our sales dried up, is the risk that COVID posed to the clinician. And so it was a health and safety act, if you like, by hospital management. So looking at the different geographies in which we operate, we can see that within Australasia, we managed to increase sales. There's an 8% growth out in Australasia. But equally, during the vast majority of the financial year, New Zealand and Australia had closed their borders because they had one or two or less than 50 cases of And as a consequence, they reacted by shutting their borders and actually carrying on as normal to a large degree, which meant that their hospitals could continue to operate. They managed COVID by closing down the country. Very different to how the United Kingdom managed COVID, which was... to not close down the country and suffer the level of infections that we did. China and Hong Kong was pretty flat. Malaysia is a new market for us in this financial year that we're reporting upon. It was previously part of our overseas distributor portfolio. And so distributors took a 22% decline, £740,000 of revenue. reduced business. Well, a large proportion of that related to Malaysia and moves up into its own place on the chart as a fully owned subsidiary. Western Europe fared slightly worse than Australasia, but definitely better than the UK, and Central Europe was pretty flat. Italy, that really struggled through the pandemic, actually managed to grow their sales by a reasonable amount, up by 18%. But the big loss for us, the big area where we suffered in this financial year, was the United Kingdom. So looking at the three segments of our business, shown here on the graph, there is the largest segment, which is our Tristell branded medical device disinfectants. They represent 77% of our total sales in the year and are shown in purple on the graph. And it is medical device disinfectants that will continue to drive growth. It always has been and will return to be the growth driver of Tristell. But having said that, we estimate we lost £2 million of sales of medical device disinfectants under that Tristell brand as a consequence of COVID. So it was a direct hit in relation to reduced procedures taking place within hospitals. The second segment of our business shown in yellow is the cash hospital surfaces range. The sales in the period did drop down slightly and that's because of what we now understand to have been overstocking by hospitals during that first area, first couple of months of COVID in the UK. So over March, April, May of 2020, We saw a big jump up in cash hospital surface disinfectant sales and that has impacted the year we're reporting upon because those products were not used. We now understand they were held as an insurance policy almost in the same way that PPE was in short supply. Hospital procurement departments were fearful that disinfectants would disappear off the shelves. And so there was a race to stock up. So as a consequence, in the year we're reporting, there was a slight decline. But nevertheless, you can see that cash sales exceeded the pre-COVID years. So there is growth that has stuck. And now we have launched... our capsule range so Paul will have shown many of you before our shot and tank product range where we place the chlorine dioxide chemistry into a two-part capsule which can release the chemistry into a container that the hospital can then decant and use to spread onto a surface within a hospital. The cash range particularly the capsules, are taking the fight to hospitals against pre-wetted wipes. So these are the flow wraps of wipes. The wipes themselves are made of plastic and as a consequence they are not environmentally friendly. Hospitals use millions of these pre-wetted wipes and our cash disinfectant range can reduce the environmental impact of using pre-wetted wipes because you can take that chemical and apply it to a paper towel or to a launderable cloth, thus avoiding the throwaway plastic issue that hospitals are trying to combat. So we launched the range at our Infection Prevention Society conference in September. It received a great response, and this is a very significant marketplace for us. And over time, we anticipate that our... Sorry. We anticipate that our surface disinfection range will come to equal that of our medical device sales. So the graph here with the yellow, you can expect that to grow. And then finally, the third segment in our sales portfolio is shown here as other, which just encapsulates everything else that we sell. It includes the veterinary market, the pharmaceutical, clean room products, which over the years we've bolted onto our product portfolios initially in order to grow sales and with an objective to switch those customers over to the use of chlorine dioxide I think it's fair to say that we failed to achieve that objective. We have not been able to convince veterinary surgeries to use chlorine dioxide. They would much prefer a lavender-fragranced, typical household-grade disinfectant. It is their preferred product. And by trying to switch them over to a hospital-grade disinfectant, high-level disinfectant, there's just too much resistance. It's not what vet surgery is, it's not what pharmaceutical manufacturers are looking for. So we will now step away from that area of business. Whilst it was profitable and it was cash generative, What it represented to us and for us was a lot of bureaucracy and of course, manufacturing time and space. So in stepping away and discontinuing those products, we believe we can minimize the financial impact, the profit impact, because we can trim back with respect to staff and equipment and manufacturing space. And also the active chemicals within that product range, all of them outside of chlorine dioxide, needed to be supported through a piece of legislation called the biocide products directive which requires every active substance in the biocide market um to be registered with the within the eu and um which was costly it was time consuming for for our um for our staff for our regulatory staff and um And at the end of the day, it takes us away from the core business which has provided us with growth and has provided us with profit, which is hospital chlorine dioxide high-level disinfection. So starting immediately, we are discontinuing sales of the vast majority of the other segment. We expect to lose £600,000 in the current financial year of sales. And 1.1 million next financial year. But in doing so, we believe we can make some fairly significant cost savings by scaling back that activity. And that does mean trimming back some of our team. So sales growth by channel. Here we have the three segments again, hospital medical device decontamination, hospital surface disinfection, and then that other segment. Looking year on year, you can see that within the UK, our hospital medical device decontamination fell by 11%. Our sales teams have been denied access into hospitals for 18 months now. We're just starting to see appointments come through and we're allowed back in. Hospitals are very different places now to the experience that our sales teams would have had a couple of years ago. But now we can get back in and we can start to kickstart our growth again within the UK. Within Europe direct, we saw 12% growth. Within the APAC area, 9% growth. These markets took a different approach to COVID than we did in the United Kingdom. In the UK, the outpatient departments were closed down. No sales teams were allowed access into hospitals. But internationally, within Europe and the APAC region, we didn't have the same experience. We were still able to continue to grow and take on new customers. And then the cash range, as I say, there was an element of panic buying back in 2019-20. We saw growth in that year, but it couldn't be sustained into 2021. But nevertheless, the sales that remained in the year we're reporting upon are higher than the pre-pandemic levels of surface disinfection revenue that we experience. and now that we've launched the full cash range we expect to see growth continue and then of course the other segment which is the area that we're looking to to exit so this graph gives you a quarter by quarter view of the impact of covid upon our business and you can see the purple Bars, which are the try-still medical devices, the core part of our business, alongside the cash business. And then we've also shown in here Brexit. So to further... confuse the numbers. Back in the first half of the prior financial year, sorry, first half of the year we're reporting upon, we had an order from NHS supply chain for just shy of a million pounds of medical device products that they could put to one side in case Brexit disrupted our supply to them. And as we go through from left to right, the first two bars, the first two segments of the chart show the business in its pre-pandemic times. Moving on to January to June 2020, this was the first wave of COVID. Hospitals built their stocks of all infection control products, as I say, and in parallel, non-critical care services increased. were scaled back. So outpatients, anything that wasn't emergency related, the doors were closed. Moving on to July to December of 2020, this was the first recovery from COVID. The case numbers were falling. We didn't yet have a vaccine, but nevertheless, we'd been in lockdown for three months. It was within the UK and many of our other markets were going through a similar experience. So outpatient services started to resume in this period. And then within this half of the year, the NHS purchased its £900,000 of Brexit stock. Moving on to January to March in the year we're reporting on, so beginning of this year, that's when the second wave of COVID hit. And again, non-critical care services were scaled right back. But instead of the increase in cash product sales that we saw in the first wave, This time there was controlled buying of surface disinfectants. There was no panicking in the buying patterns in our third quarter. And then finally, taking us from April... of this year through to last month, we saw the second recovery. So here, the vaccine has been rolled out, case numbers are falling, and outpatient services start to resume. But of course, then in the first quarter of the current financial year, NHS supply chain release into their their network, that stock that it bought to put on one side for Brexit. So the risk has passed and now supply chain, instead of buying from Tristell, they are using up from their Brexit warehouse. Which all culminates in, after two years of disruption, we now feel that we are back to a level of predictability of the business.

Three or two years ago, 2020, we set some financial targets for the group. We had done a similar thing in 2017 and again in, I think, around about 2015. And we've always wanted to try to convey to our shareholders what our business plan and its targets look like. And one of At the top line, we set again in 2020 sales growth in the range of 10% to 15% as an average over the three-year period. We set an EBITDA margin of at least 25%. In the preceding three-year period, we'd set that as a PBT margin. in reaction and response to shareholders wondering why we've made that change in the metric, which with the benefit of hindsight, I don't think was the best thing to have done, because I think it confused people. We also made a commitment to increase profit before tax. Well, the slide fesses up to the fact that we've missed most of these metrics this year. for which it sucks and we really are disappointed that this is the case. But it is what it is and we look forward, I think this now in the current financial year, as Liz has said, to our normal pattern of business resuming. During the year, we succeeded in getting a number of important regulatory approvals, which we shared with you via a number of R&S announcements. We got approval in December, just prior to December in actual fact, but in India for a number of our products. And we appointed a distributor, a company called Genworks, as our distributor for the area, all of India, outside of the key metropolitan, large metropolitan areas, with a specific focus upon ultrasound. We got approval for our duo for ultrasound product, which we'll take a look at in a moment with respect to the United States and South Korea, where that product is regulated as a drug by the South Korean healthcare authority. And then in Canada, in North America, we got approval from Canada Health for our duo with a different indication for use for ophthalmic devices. whole host of other regulatory approvals in a wide range of countries in which we have established presence, but we point these out because they're significant to us. And during the year as well, we got a second approval from the United States Environmental Protection Agency, a second and improved and enhanced set of label claims for our JET product, which is for the disinfection of hospital surfaces. We come on to North America next. are operating as a medical device manufacturer in an ever more demanding regulatory environment. Although we make what is a very simple product, it performs a very simple function. We're regarded and treated by the regulatory authorities in the same way that a heart implant, a stent manufacturer would be regulated. And it's increasingly demanding. And during the year, we found that some of our internal systems, that they're administrative, for the most part, administrative bureaucratic systems and processes, that we have to operate to a high standard. We were audited by BSI, which is our notified body, acting on behalf of the MHRA, And we came up short in a number of different measures. So we've spent much of the last quarter of the financial year putting in place more robust documentary systems, change control, documentary change control processes, internal audit. It's really compliance with the requirements of the medical devices regulations. And I'm pleased to say that we were revisited by BSI in September And some of the shortcomings that they pointed out to us in March were completely dealt with. We could address them with BSI, and they signed off that we'd got our house in order. The ultimate for us is to be able to operate to a standard which would satisfy an audit from the FDA. And we've got a long way probably still to go to attain that standard. But this year, I think we've made great strides, at least in the last six months or so, great strides to get there. Now, on the next slide, the next two slides, we'll talk about North America. We embarked upon this... ambition, with this project, with the ambition of getting approvals in North America, USA and Canada, and indeed Mexico in due course, for the best of our products that we sell in Europe and elsewhere in the world. We selected our product which we call Duo, which is a hand-held chlorine dioxide foamer, for application to the external surfaces of medical instruments and via a dry wipe or a spreader and we started our journey of approaching the FDA to get approval for that product In actual fact, when we started, we also were pursuing a registration for duo with the indication of use for ophthalmic devices and with a second indication for use on ear, nose and throat endoscopes. We dropped the other two to concentrate upon duo for ultrasound, duo-alt as we call it, and we've had as you probably will recall me explaining in the past, a number of audiences with the FDA to get their feedback on the science that we're putting together for them. In one of those feedback sessions, they advised us that we should follow a de novo pathway to get approval and not the more conventional root of a 510k. The reason being that our chlorine dioxide chemistry is not known to them. They've never approved a product working with chlorine dioxide in the past. They've never approved a handheld and manually applied high-level disinfectant for semi-critical medical devices. And they'd never seen a disinfectant presented to them that was as effective in such a short contact time. Two minutes is the contact time that we will label duo for use in the United States. And as a consequence of... of the combination of those three things, they advised us that we've followed this de novo pathway. And as the words suggest, it's for new technology. So they will be viewing our submission as a new high-level disinfectant technology for the United States. They've not approved a high-level disinfectant for medical devices in the United States. The FDA hasn't since the last approval was in 2012. It just goes to show us, reveal to us all, I hope, the difficulty in getting through the FDA process. The science that we have to generate for the FDA is to a level that we've never had to present to any regulator anywhere else in the world. It will be one reason why in the United States there are something like 20 disinfectants that are approved for use. The majority of those disinfectants use a chemical or a chemistry that has largely stopped being used elsewhere in the world, certainly throughout Europe. And so we might think that some of the disinfection for medical instrument practices that are still commonplace in the United States are rather arcane. and that would suggest to us that with an approval we will have an exciting opportunity ahead of us. I've steadfastly refused to be drawn on when we would make an application for the last few times that I've sat in front of you, but we've made sufficient progress over the course of the past 12 months to be able to say, as we have this morning, that within this financial year, by June 30, 2022, we will have made that de novo submission to the FDA. I think it may be sooner than that, and we are working to get the submission in as quickly as we can. We know that the FDA will take as much as a year to review and turn the application around. Of course, we hope with a successful application leading to our product Duo for Ultrasound gaining market approval for introduction to the American hospital marketplace. The only caveat to us hitting that deadline that we're setting here is that we need to be able to present evidence as part of our submission that the duo for ultrasound product when actually used in the clinical setting works just as it does in the laboratory. And that will involve us having to attend two or three hospitals, clinics, where we go in. If we are able to travel, we will accompany the microbiologists. But we go in with a couple of microbiologists from a company that we work with in the States. And they set up a safety cabinet and a... and do some microbiology on ultrasound probes that have been used on patients and disinfected with DuroOpt. We need to present 20 to the FDA, 20 disinfection events of three different types of ultrasound probe, vaginal probes, 20, rectal probes, 20, and skin surface probes, 20. This isn't a difficult... exercise. We have had two dry runs in the past at the University Hospital in Chicago. We're having to return and revisit and recruit three hospitals now to redo the work. We passed before. I see no reason why we should pass now. The only difficulty for us is to get access to clinics and hospitals. Even our own sales teams around the world have been denied access to hospitals to go on sales visits. Hospitals don't want, they don't allow visitors to visit patients. And this is a bit of an intrusion to the running of an ultrasound clinic. I just hope that we will be able to recruit these two or three clinics, allowing us to make that submission by 30th of June. Looking to the right, the JET, you can see the product. It's got the same chemistry inside it as DUO. And it has been presented to the EPA, which is jurisdiction over surface disinfectants, for approval. We got the first approval about 18 months ago. And as I said earlier, we got a second approval with enhanced label claims. in April. Its use would be on near patient surfaces. The drawing is of a patient bed. And here we are gearing up manufacture with our American partner Parker Laboratories We've got two main tasks ahead of us. One is to get state-by-state registration of JET throughout the United States. We have federal approval from the EPA. Now we have to get state-by-state approval for JET. And we need to return to Parker and revitalise the work that was done some couple of years ago because they will be our manufacturer. Parker Laboratories is well known in the United States, indeed worldwide, for its presence in the ultrasound marketplace. They invented many years ago the conductive gel that is used on every single ultrasound examination that takes place. So if you've had an ultrasound, I bet most of us have, the gel goes onto the transducer head, the gel goes onto your skin. and the ultrasound image is enhanced by that gel. It's made possible by that gel. So Parker's the global market leader worldwide in the manufacturing cell of these conductive gels. They have a manufacturing facility that is approved by the FDA in New Jersey, and we have a commercial relationship in place with them. We've had it in place for nearly three years, I think. They are our manufacturer, and then we sell through their distribution network. And that distribution network encompasses some 400 distributors across the continent. of which would be included GE, GE Healthcare, some very large medical products distributors and regional distributors. So we have a network, a channel in place for both JET and when we get approval from the FDA for Duowant in situ. As our manufacturer, as we get approved in the years ahead, Duo for Ophthalmology, Duo for ORL or ENT, we will have the products manufactured by Parker, but we'll be free to sell through any other channels that we wish to put in place, not necessarily through their distribution network. But I would imagine... that we will leverage up our relationship with these distributors that we will establish with JET and Juro Ultrasound first up. And then moving north of the border into Canada, we got approval for Juro OPH. We chose OPH for Canada and not ultrasound partly because we wanted to see whether we would succeed with another one of our three indications, and we did, which is encouraging. We followed that up with a presenting to Canada Health dual ultrasound and again dual ORL. And on the next slide, it's a crude or simplistic Gantt chart, if you like. It's the mapping out of a business plan in North America, which is driven by regulatory approvals. And we can see how In Canada, all three duo products. And in the United States, all three duo products. And our hospital surface disinfectants. JED is a single product. Cash is a product range. We are investing in and pursuing the registration of all of those products so that we can build a broadly based business in North America that will very much look like the business that we've built in Europe and Asia Pacific and Australasia. Finally, we'd like to talk for the first time about our efforts in the ESG arena.