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.

So we've been encouraged over the course of the last two sets of results by, in particular, our institutional shareholders, just to give an ESG scorecard, if you like, just to update our investors on what we're doing with respect to ESG. So we put this slide in. We're going to put a section up on our website in due course. But in the process of thinking about the subject matter and talking to our 200 strong colleagues around the world, this isn't just a nod to ESG. We've actually discovered this is something that all of our staff are incredibly passionate about. So just working through some of the measures that we're showing on the slide, Starting with the governance side of things, our board gender split, we now have three women on the board versus five men. We have four independent non-exec directors versus one non-independent. And then moving into the business, we actually have in leadership roles, so through the managers and directors of our 14 subsidiaries and an HQ we have an exactly equal split of men and women in those leadership roles and that translates into a salary split which again is pretty equal between men and women so Paul sits at the top of the organisation And then throughout the rest of the business, there's no bias to one gender or the other, which really neatly describes the business as it's been designed. Very equal and very diverse. We've also looked at the environmental side of ESG and having completed our first carbon emission calculation we are going to make an offset in the current financial year meaning that we can achieve a carbon neutral status in the current financial year and we will continue to calculate our emissions um and and we will reduce them as far as we can it's another program that our staff have been incredibly engaged with it's something that's very important to our young workforce in particular so finding ways to reduce our emissions cut down on waste and then as far as as cost allows and as far as technology allows we will work to offset and keep our emission level at the lowest possible rate. We also of course during the period launched our cash product range which is environmentally friendly and we will revisit all of our products with a view as far as possible to reducing their impact upon the environment. And then some in-house initiatives that we have launched. Try Still Hive, our in-house sustainability, equality, diversity and inclusivity initiative. And in our offices, we've implemented complementary and plastic-free products for our staff to enjoy.

So on the final slide, and then we'll move to questions. Just a quick summary. Overseas expansion will continue to drive the business. We showed overseas growth this year in sales terms in each of the last seven years, not the percentage growth rate which we recorded in 2020, FY20, but growth rates were between 25 and 45% per annum. And as the world normalizes, we would expect to see those growth rates continue, combined with a return to growth in the UK. We are profitable, we are cash generative, we are debt free, and we've maintained the dividend payout this year. Workforce is in good shape, better shape in many respects than it was a year ago. And when I say that, it's very much to do with the standards at which everybody is working. And we confidently expect to be resuming the growth story. We really want that to be the case. So on that note, I think we're going to take questions inside the room first, and then I think there will be questions coming in from those people attending remotely.

Yes. I take it that Canada's equivalent to FDA is much more not as strict as the FDA. Is that correct?

That's correct. So Canada Health will accept data generated from outside of the FDA. So it means that we were able to submit to Canada Health test results and data generated by labs in Europe. They'll take account of other regulatory bodies that have approved the product. So another very challenging regulatory body is the TGA in Australia, and we have approvals from TGA. So Canada is much more open-minded, I would say, than the FDA.

Just a few questions on the FDA. On your slide, the follow-up Duo process submissions, it looks like you're expecting those to just take a year. Is that correct?

Yeah, for two reasons, Maynard. One is that once we have got Duo Alt approved, then we have established in the United States a predicate. So if you could recall when we've explained this in the past, the 510k process, which is the normal route to approval, is based upon showing to the FDA your equivalence in terms of efficacy and patient safety to a product that they've approved in the past. When we presented our data, preliminary data for the FDA for our chlorine dioxide chemistry, that was when they said, well, we've never seen technology like this before. So with Duo for Alt approved, we have established our own predicates for ORL and OPH in due course. That's one reason. And the second is that the great majority of the data that we will have generated for the ULT indication will be used for OPH and ORL. Stability data, toxicology data, biocompatibility because the content and the pack, the liquid chemical content and the pack are exactly the same. The additional data that we would need to provide to the FDA would be testing the product microbiocidally or from a efficacy standpoint on a nasendoscope as opposed to an ultrasound probe. for OPH on a tonometer as opposed to a nasendoscope. So it's device specific microbiology and device specific compatibility. Much of which we already have got in house because we're selling OPH and RRL around the world. So yes, you do see an acceleration in the timelines because you're using much of the data again.

Correct.

For ULT? For OPH and ORL, they would be our contract manufacturer, and they would make a normal contract manufacturer's margin. And then we are free to sell to whomever we want to sell. And that could be directly to hospitals, or it could be to the same set of distributors that we will be working ULT through, or we could work with an ophthalmic device company like Haag-Streit. So our options are completely open remain completely open with respect to the sales channels we select for the other two label indications.

How should us investors think about the potential of the states in terms of sales? Because you've said duo sales worldwide now are 4 million plus this year. So how could US compare to that 4 million?

Outside of the United States, Outside of the United States, the best thing for us to do is not to look just at duo, but to look at duo and trio because I think you're familiar with both those product configurations. They're essentially exactly the same. One is a foamer and you apply the foam onto wipe and spread. The other are pre-formed individual wipes in sachets and you activate the wipe that has got one part of the chemistry in the sachet and the other part is applied as a foam. But in every sense they're identical. If you look at both cells or cells of duo and trio globally, they account for pretty much 70% of the 31 million pounds, more than that in actual fact. So in the United States, we're only presenting duo to the marketplace. But if you just lump the two together worldwide, then our sales are about 20 million plus, I think. More than that. It must be about 24 million pounds. So that's the comparable number that you might look to to the opportunity in the United States. Looking at it differently, our revenues are patient procedure driven. And by our calculation and from our research, there was something like 150 million ultrasound procedures undertaken in the United States annually. Every ultrasound procedure, and they fall in three categories. There are vaginal procedures, rectal procedures, and skin surface procedures. And the vast majority, probably 80% of all ultrasound scans take place on the skin. And 20% of that number take place as intra-cavity procedures. There's an internal examination, an internal scan. We are applicable and used around the world for both skin surface and intracavity. So we can derive that total addressable market calculation from a number of different angles. One is, what is the total number of global ultrasound procedures? What is the total number of nasoendoscopies that are undertaken worldwide? A benchmark is that £24-25 million of sales of Trio and Duo. Let's just regard them as synonymous for the purposes of this discussion. That's what we sell worldwide. And I think we can, what's the word?

Extrapolate?

Extrapolate, something like that. Triangulate what the United States revenue potential looks like.

So how many ultrasound procedures are there in the UK just to compare to the US on 50 million?

Normally, we always work on that sort of 10 to 1 type ratios. So I'd say about 12 to 15 million ultrasound procedures. Through term, there are fetal scans, probably 3, 4, 5. You know, ultrasound is... Recently I've heard people talk about ultrasound as the equivalent of today's stethoscope. Ultrasound as a modality, as a technology, is being used more and more ubiquitously through hospitals. In emergency medicine, if you're charging a patient, you're not sure whether there's an internal bleed, they'll ultrasound. Vascular access, so catheterization, you're putting a line in, we've got obesity, we've got an aging population, a nice plump vein is often not easy to find on many patients. They'll use ultrasound to guide the injection site or the needle site. So we're seeing ultrasound grow globally and the uses of ultrasound expand. And of course there's a new development in ultrasound, which is the ultrasound probe, not as in the picture that we've used, that's a console, it's a fixed installation. And there might be four, maybe six probes all attached to the console via the cord, Today's ultrasound is moving increasingly towards a tablet or mobile phone-enabled, app-based ultrasound procedure. Our competitors, the alternatives to Tristell, are machine-based. It's equipment-based and fixed installation. They're fixed sites where you site a washing machine or there's another product called Trofon. One of the key features of the Tri-Style methodology is that it's mobile. So as ultrasound is increasingly mobile, it needs a portable and freely movable disinfection methodology to go with it. So there's some exciting trends in ultrasound that I think we're ideally equipped to tap into.

Just a final question. Will the products in the States sell for more than the UK, or is it a similar sort of pricing?

We do our modelling on the basis of similar sort of price. Yeah, so that's how the modelling is put together at the moment.

OK, thank you.

Hello, good afternoon. Thank you, Liz and Paul, for that. And... You know, muted congratulations for navigating COVID. You know, to be able to maintain a level of sales is pretty good. I had a couple of questions. One is on the matter of supply chain issues. It's kind of big in the marketplace right now. And I was just wondering in any of your component parts or on your logistics part of it, if you're finding anything that we should concern ourselves with.

I think fundamentally cardboard prices are going up, plastics, cardboard prices are going up a lot. And wait times, you know, if you place an order for a box or new box with a cardboard manufacturer, you're looking at eight weeks lead now as opposed to next week. Transportation, shipping rates, container rates, availability of cargo space, air freight rates are going up a lot. So I'd say it's more, Michael, about cost than it is about us being denied a key componentry, key chemical ingredient. I don't think there's much risk in our supply chain other than prices are, costs are being driven up.

And it's not heavily, let's say, Chinese-related?

No, not at all, not at all. Most of our supply route is either from within the United Kingdom or from the continent.

Very good. Because I remember that you had to buy a warehouse and stock it in advance of... Brexit. Or to coordinate with Brexit and... It's always been an issue that has to be dealt with. And how, in terms of those costs, how are you feeling that you have the price elasticity in order to be able to pass that on to the end user?

Across the medical device products, we've been in a very fortunate position throughout our corporate history of being able to put up prices and we do every year. So normally that's been an inflationary related adjustment. We time it either at the end of the calendar year or to coincide with the NHS financial year, which is in March. Within the UK, still accounting for more than 35% of our revenues, the single largest buyer, not decision maker, the buyer is the supply chain, and they work under four-year fixed price framework agreements, and there are several of them in which we participate, and in which, because of the uniqueness of the products that we manufacture and sell to them, we have no direct substitute so when these framework agreements are renewed we put up our prices you put up four you know you make an estimate of four years worth of inflation it's factored into the price that we submit to the fda and you enjoy that price increase for years one two three and it's leveled out by year four and that's how the system works here in the uk So the environmental tender framework has just been renewed, coinciding with the launch of cash, and we've raised our prices of the existing products that have been bought by the NHS supply chain in double digits figures, but it will level out over the course of the four-year term.

And you've mentioned competition briefly. Is there any element of the... the de minimis increase in sales that might have been due to some other new technology or anything else in the way of competitive tension that's coming into the marketplace?

From all of our intelligence, from all of our sales teams around the world, we have not lost business or customers. Of course, there'll be a hospital somewhere, you know, let's say in Hastings that switched to Trofon or in Melbourne that we've lost the custom to a washing machine for endoscopes. But that's all at the margin. There is no evidence at all. And we've been winning custom as well. There is no evidence. evidence at all that we have that there's been any erosion in our custom base. This decline in the pace of growth It has all been down to hospitals undertaking fewer patient examinations.

And my final question, I do apologise for harbouring the microphone for too long. In the matter of the United States and the FDA approvals and the clinics that you need, let's assume that more are going to open, and I'm sure it's a highly restrictive practice that you have to follow. But isn't there some way that you can just simply pay a rental fee for clinical presence? And that would be all quite attractive to the idea of a hospital to sign up for that.

We offer and have in place the offer of an honorarium to the hospitals to compensate them for their time, their staff time. We haven't attempted that yet. And that would be, I mean, that would be unusual. But given the fact that we've got to put this in place, I think we're trying a thing that we have to. One of the limitations in our search for clinics and hospitals is that, has been, that the lab we use is based in Boston. And up until now, at least, they had not wanted, their microbiologists, the team of microbiologists that work on our project, they themselves have not wanted to travel. So we had to draw a circle around, a semicircle around the Boston area because they weren't prepared to get on a plane and travel across to any other part of the States involving any great distance. They were prepared to drive and take their lab equipment with them. some of those constraints are lifting as we will return to a normal whatever that might be.

Thank you. Bruce. Thank you very much for the presentation, Paul and Liz. There are two questions here, both I think perhaps linked. You mentioned non-core products are a distraction for the regulatory team. You've also had the BSI audit. and so I'm just wondering if a these are linked issues and b on the BSI audit did we actually have an internal audit which highlighted the issues which the BSI audit then pointed to and if so how come you know these issues weren't resolved and proper controls put in process earlier?

Well, we do have an internal audit function, and no, it didn't raise the issues that were picked up by BSI. And indeed, one of the issues that was picked up by BSI was that our internal audit function wasn't up scratch. So, yeah, the picture's quite clear. From the ground up, we've got to improve all of that activity. it was quite a shock for us to have this audit and for after, gosh, 15 years of selling medical devices and undergoing six monthly audits by BSI and passing with no non-conformities, perhaps the odd minor, to receive such a report was really a surprise to us. But the auditor did explain to us that They are under pressure from the MHRA to lift their auditing standards and they pass that on to us. So it's just a general tightening of the process and we are one of very many medical device companies who have gone through exactly the same thing. And the auditor even expressed his... He was almost apologetic for having to deliver this report to us because he recognised that his colleagues had been in six months previously and they were looking at the same records, they were looking at the same processes and here they were delivering bad news whereas six months earlier they hadn't. The best way to look at it is it's good for all of us. It's been a wake-up call. We have corralled the entire organisation into across the board improvements. It's been expensive. We've had to recruit in a number of consultants and bolster our quality team. But what we're left with is a set of procedures and a quality management system that's truly fit for purpose. And that has come at exactly the right time, because as we enter the United States market, then the standard of auditing that we will undergo will only get more and more stringent. So it's a positive.

And to answer the other part of your question, yes, it definitely has played a part in and acted as a catalyst in the board management's decision to stop doing things that are peripheral and not mission critical. And that is hospitals and chlorine dioxide. So decisions that might well have been taken and actions implemented over the course of the next couple of years all of a sudden got taken and have been implemented in the course of a couple of months. So yeah, Bruce, you're absolutely on the money there. We've wanted to declutter everything that stands in the way of us being lean, effective and efficient in making our cloned outside products.

And so have we put in a new QMS system? Our process is therefore much more reliable going forwards, or are we still rather manual?

No, we've overhauled it. It is manual. It's a manual process, a manual system. We will implement a different... an electronic quality management system which just helps with documentary control and the change control processes. This is unbelievably bureaucratic, believe me. And I'll be perfectly honest, one of the reasons why we fell short is because it's an area of business that has not had the full engagement of... senior management. So much of this is bureaucracy and I hate that kind of aspect of getting on with things, but we've had to wake up and realise that we've got to be four square behind everything that's done. An area of non-conformity was that people didn't sign a document properly with the right date format. Now, one might think that's not that important, but in quality management system terms, it's very important. And the auditors are there to look at such things and call you up on it. And if lots of people do it, then that becomes considered by the auditors to be, or BSI, to be endemic, a chronic issue, and something that I personally might not think is that important, is important in the eyes of a notified body. So that's a lot of what we've actually had to tighten up on.

Changing tack completely. Parker Labs, obviously a great partner to have, and it makes sense with their existing business to be a partner with us. But given the delays that we've had, is there any risk that they pull the rug from under us and say, actually, forget it, you know,

Not at all, Bruce. We had a conference call with the owner, Neil Bukata, a couple of weeks ago, talked about the state of the ultrasound marketplace and some of the developments in the United States. He has a very different view than all of us. He says this is entirely normal. The time that it's taken us to get to the point where we're at, this is not untoward in any way. For an American manufacturer of devices, this is par for the course. I know it frustrates us all, but it really has never brought forward an opinion from Neil. This is just what FDA entails. Thank you.

Paul, you mentioned there's about 20. Where is this disinfectant used in the US? None of them use chlorine dioxide?

No, there are no high-level disinfectants used on medical devices around the world in any countries that use chlorine dioxide. So we're unique in that regard.

Thank you.

Okay, so we're going to turn to some questions actually that have come through online. And we are running over a little bit on time, so we'll just take a couple if that's okay. So first one, what sales progress has been made in India and China over recent months? And remind us of your plans for commercialization in India.

In India, we appointed a distributor in December, a company called Genworks. It is, it has been, it's a very successful company. It's sales of about $80 million. Its shareholders include Somerset Capital, Morgan Stanley, GE Health. And we've appointed them as our distributor for ultrasound. One of their specialty areas that they focus upon is ultrasound throughout the country. And they divide India up. They handle distribution through the provincial India, rural India, provincial India, and GE serves the key large metropolitan areas. We've shipped product to them in terms of sample product to seed the market and so that they can attend conferences and exhibitions. They haven't ordered anything of any volume or substance from us. India's had its own issues as have been so widely publicized with respect to the pandemic. We have been talking to them about kickstarting their sales efforts I think we probably need to address the price point in India. We were overly aggressive on setting a price to them and the guidance that we would have set with them that they should present Duo to the end user. I think with an adjustment downward to that price point, we should see some progress as we move forward. So that's India. In China, our business is more broadly based around our own sales team. For such a large country, we have a very small presence. We have four salespeople in Shanghai, in Guangzhou, in Sichuan, and in Beijing. We managed the business out of Hong Kong because travel to China for our senior managing director is very difficult. China's closed its borders very much as well. But we've made good progress. Lots of companies in China always sell through dealers and distributors, and we've tried to do our business differently. We did that for many years. It wasn't very easy, and it certainly wasn't very successful. So we actually employ the same methodology of selling in China as we do elsewhere in the world, and that's to actually present ourselves to hospitals face to face and not sell through dealers and distributors. I think it's the best model for China, given the complexities of presenting our technology, but it inevitably makes for slow progress. But steady progress we make.

The number of patents has fallen from 265 to 246 in a year. Have some expired and are they important?

Most of those we've gone through a culling of some of the patents that we have been maintaining. The cost annually is about £100,000. We've been through all of the patent families for which we've made applications and had grants. And if there's no good commercial reason to support and maintain the patent, then we've told our patent agents to... terminate the ongoing support and maintenance of the pattern.

Statutory profits have fallen by around 40% this year. How can you justify a 90% increase in share-based payments?

I'm going to let Liz answer this. Share-based payment is a calculation made Well, I'll stop there, Liz.

Well, yeah, the share-based payment is a calculation that's a non-cash charge and is linked to the forward view of the value of share options at the point at which they're granted. And a new LTIP was issued recently. compiled by our remuneration committee a year ago and it was put to shareholder vote and shareholders voted it in. you know there is a share based payment attached to an LTIP and regardless of the status of profits or sales or growth the scheme has been presented to shareholders with challenging targets and at the moment We're not on track to hit those targets, so the individuals, principally Paul, myself and our third executive director Bart, at the moment it doesn't look as if there will be any, there's no prospect currently of that scheme delivering shares to us. It's an incentive to push ourselves towards that position.

I think when that question gets asked, I think there's a presumption that the options that are an incentive and a reward for management will in fact pay out and they're guaranteed to pay out. It's not the case at all. But the share-based charge, payment charge, is calculated in accordance with a model. Is it Black Scholes we use or another model?

It's Monte Carlo for this particular model.

But irrespective of whether or not the options ever can be exercised, if the performance measures are met, there is a share-based payment charge. I think people sometimes link it and think it is actually a reward that's paid, and it's not.

Are you seeing any noteworthy inflation or availability pressures in raw materials, plastics, energy or transport?

I think Paul's probably covered that one. We talked about cardboard and transportation charges.

Okay, brilliant. And then, could you elaborate a little on the size of the unexpected investment in improved quality management systems?

We've probably covered that one as well. The cost over the course of the final quarter of our year was in the region of £100,000, £150,000 of consultants and new employees, and having closed out a number of those non-conformities, in September, then we are cutting back that cost. We've put in place our new quality management system and we don't need those consultants going forward. But what we will do is bolster our quality team so that we have more hands on deck, better qualified people, so that we don't find ourselves in this position again.

Does the continued rollout of Trofon in the US represent a problem for the planned Tristel duo launch, or would you target a different type of clinics? Also, would you expect the lower oxidative potential of chlorine dioxide as compared with hydrogen peroxide to translate into a material commercial advantage in some settings?

I don't think I caught all of that. What was the first bit, Leanne?

Perfect. Does the continued rollout of Trofon in the US represent a problem for the planned Tristo Duo launch, or would you target a different type of clinic?

We compete with Trofon in Australia, in New Zealand, in the United Kingdom, throughout continental Europe, and we both coexist. We have, on many measures, been more successful than Nanosonics, which is the company behind Trofon. They have, they got, when I mentioned the last FDA approval for high-level disinfectant, it was Trofon, and I think it was in 2012, 11 or 12. They have, I think it's something like 23,000 Trofon machines throughout the country. In Australia, you'll find many ultrasound users, IVF clinics, gynecological clinics where there's a trofon, and our Trio or Duro products are both used. So I don't think their presence in the United States is an impediment to our progress. If anything, it makes... they have created an understanding that semi-critical ultrasound devices used for intracavity procedures do need to be high-level disinfected. Those clinics that haven't bought a trophon We'll not be high-level disinfecting those instruments. We are a completely different proposition, a completely different cost. We're portable, we're mobile. They're a fixed installation machine. I think there's plenty of space in the North American marketplace for, I hope, nanosolidics' continued success, and I hope for ours too.

And just two more. There was a sharp dip in the share price last week. Clearly, it was response to the results announced today. Are you able to say who knew the contents in advance? And would you be... I feel like I need to read them all out. So, yeah, that was one of them.

I think that doesn't need answering actually.

Okay. And finally, Liz mentioned a 1.1 million revenue reductions from withdrawing products. I think it was on slide seven, we had 3 million revenue from others. What others remain? Are these profitable?

Well, the other, the main other, is actually carriage. But we do also sell some third-party products. When we acquired the EcoMed, the business in Belgium, Netherlands and France, they had within their product portfolio a few other bits and pieces that they've carried on selling. So they're within the infection prevention world. They don't compete with Tri-Stel products. and they don't take the time of our regulatory people and quality people so they can continue without being a draw on time and resource.

Brilliant. I think that's all the questions covered.

Jolly good. Well, thank you ever so much. Both those of you who were able to attend this evening and those of you that are at home or wherever you may be, We'll endeavor to get this show back on the road so that we can sit here in a year's time and talk about sales growth and not pick apart and try to understand why, as we have today, why we had a flat year. Thank you.