Tristel PLC

Good afternoon, ladies and gentlemen, and welcome to the Tristell PLC preliminary results investor presentation. Throughout this recorded presentation, investors online will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just please simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today, and we'll publish those responses on the InvestorMeet company platform, and we'll notify you when they're ready for your review. Before we begin, for those online, we'd like to submit the following poll, and if you'd give that your kind attention, I'm sure the company would be most appreciative. I'd now like to hand over to CEO Paul Swinney. Good afternoon.

Good afternoon, everybody. Welcome. I recognise everybody in the room, which is lovely to see you all again. I think we've got something like 100 people calling in remotely. So I'll just start with a few. Let me introduce my co-presenter, Liz Dixon, our CFO, all of who you all know very, very well over many years. But let me start with a few opening remarks about the company to describe what we do for those who maybe have dived in that aren't familiar with us. We're a specialist infection prevention company. Everything we do, our technology, all of our efforts and energies are directed at controlling the transmission of microbes and pathogenic, dangerous microbes within hospitals keep patients and staff safe from hospital-acquired infections. That is what we do exclusively. As I say in that opening remark, our exclusive focus is the hospital, and we have a proprietary chlorine dioxide chemistry, which is our technology. It's unique to ourselves in the way that we make the chlorine dioxide work, and it's a very powerful and very effective biocide. Byicide, I mean something that cures microbes. We have a global footprint, and much of today's discussion, I'm sure, will center around our efforts to enter the North American market, which we have now done. So we have two brands, two product portfolios. One is branded Tristel, and those products are used to disinfect medical devices that are used for diagnostic purposes in and around the body. We're not involved in surgical instrumentation and sterilization thereof. We're involved in diagnostic instrumentation, by which I would include ultrasound scanners, transducers, probes, and endoscopic equipment, and devices using ophthalmology coming into contact with the eye. And our second brand, named CASH, is intended, again, using cloned upside, intended for the disinfection of surfaces in the hospitals, which would include bed mattresses, table tops, floors indeed. And those are our target areas. We have a simple, focused business, and ours is a global opportunity. So these are our preliminary results for year ended 30th of June. And as always, the way we like to do this, I'll turn over to Liz,

Thank you Paul, and good evening everybody. Okay, so our financial highlights for the year ending 30 June 2022. We're reporting a flat year in terms of revenue. We have made some discontinuations of products during this financial year, and that's something we'll cover as we go through the presentation. But if we look at the continuing business, then we're reporting 3% growth year on year. Our business is global, as Paul says, and our overseas business continued to grow up very slightly by 2% in the year. And our overseas business represents 65% of total sales now. And that's important to us because we were a UK-originated business, and we wanted to de-risk our reliance upon the NHS, upon the UK for some number of years. So one of our key strategic objectives is to grow the business internationally and now our overseas business represents 65 percent of the total our gross margin remains steady at 79 down very slightly principally just rounding amount to 79 from 80 last year and adjusted EBITDA margin of 24 percent and when we talk about adjusted we have adjusted back share-based payments, as we always do, and also as a result of the discontinuation programmes, we had an impairment of intangibles in the year of 2.4 million, which related to those products which we have now ceased to make itself. Adjusted pre-tax profit of 4.5 million, in line with brokers' expectations, and with the reported pre-tax profit of 1.5 million. Adjusted EPS, 8.4 pence per share, and our dividend per share for the year will be 9.55 pence in total. That includes a 3P special dividend that was paid in August. And our dividend policy, which historically was two times cover, we have deviated from to maintain the value of the dividend that we're paying out. So 6.55 pence was paid last year. paid again this year and we will stay at that level until we can reestablish growth in our dividend by returning to the two times cover policy and we're hoping very much that that will happen in the 22-23 financial year. Our final dividend will be 3.93 pence and that will be payable on the 16th of December. We are reporting a net cash balance of 8.9 million at 30th of June. Since that date, we've paid out our special dividend, which amounted to 1.4 million. And today, cash in the bank is 9.2 million. So we've jumped back up after paying out that dividend, which is testament to the strong first half that we have had.

Some of the operational highlights of the year. A key feature of the year, ended 30th of June, was the discontinuation during the first half of products that were not based upon product chemistry and were not focused upon the hospital. We considered them to be non-core. There were two markets they addressed. One was the veterinary marketplace under the brand Anastel, and the other was the life sciences manufacturing sector under the brand Crystal. Products were in slow chronic decline And so COVID acted as a catalyst for us as a management team to take a decisive initiative to bring our involvement with those products, which we did very determinedly during the first half and wrapped it all up during the year. The next three points relate to North America. In June of this year, four months ago, we finally made our de novo submission to the United States Food and Drug Administration. After a five-year project, we involved an investment of some three million pounds in the generation of huge amounts of data, a lot of groundbreaking science with respect to disinfectant chemistry, culminating, as I say, in a submission to the FDA. For what we describe in our industry as a high-level disinfectant, semi-critical medical devices, very specifically ultrasound probes at the ends of the body vaginally or axially. So that invasive devices can need high-level disinfection. And it is the FDA that has jurisdiction over high-level disinfections in the United States. The submission was extensive. It was run to many hundreds of pages. It underwent a very successful or a successful completeness check by the agency. And then they completed their review a couple of weeks back. And as a consequence of completing that review, provided us with a detailed, pretty extensive request for supplemental additional information. Clarification on many points. A lot of the data is into clarification. Some challenges as to the methods that we had used to generate that data. And we are now in the process of discussing negotiating with the FDA to really do understand with our advisors what they want and the detail of the protocols and methodologies that they want us to employ. And then we will go off and get that additional data generated through microbiological testing, various other types of study. We have until March to submit the supplemental data. And then their clock starts again. will take us to just before the end of June next year, and we will have a decision by the FDA. Nothing that they have presented us with causes us any great concern. It's well within our gift to generate the responses that they're looking for. It's important that there is no ambiguity about what we do, because we have to get it all done within the 180-day period. But we're confident that we will. And we have to remain confident that we'll get a successful outcome. And we will have then an approved high-level disinfectant for use in the United States. And we will be the third disinfectant approved by the agency in over a decade. We would have very high hopes for the commercial success of the product with that approval. Having said that, the same product, in essence, has been approved by the EPA and has been launched. So three congresses at the end of September, all addressing ultrasound. ultrasound, general ultrasound in obstetrics and gynecology. And that was the Association of Sonographers, United States Association of Sonographers. A conference involving clinicians involved in emergency medicine. Ultrasound is widely used in emergency medicine in A&E departments. There's a different city at the same time, a congress for those professionals. And a third congress in another city was for those clinicians that are involved in vascular access. Ultrasound is widely used in catheterization of patients, putting a line into a part of the body, and a lot of instances, ultrasound will be used to guide the line into the vein so you don't have to repeatedly stab a poor patient to get the line in. So there are multiple There was a multitude of uses of ultrasound, and these were three of the clinical groupings that we will be selling to as we go forward in the United States. So we've launched. We've launched with our EPA-approved product, Dewar. You could regard this as a soft market introduction with a view to gaining brand awareness, getting the product which has been established with our partner, Parker Laboratories, all in preparation for the FDA launch later next year. Or indeed, we may well find that this product approved by the EPA as an intermediate and not a high-resource infection will, in its own right, be very successful. And that would be our hope. And finally, in Canada, we have an approval from the Canadian regulatory body, Canada Health, for Duo, once again, exactly the same product format, with a different indication for use, which is for ophthalmic devices. And we've signed up with the country's leading ophthalmic distributor, a company called Innova Medical Ophthalmics. They're a specialist in the ophthalmic arena, They represent some of the leading manufacturers worldwide. Hard Stride, a Swiss company, and they represent Hard Stride in Canada. And we are launched in Canada as well. So we said for many a year that we will establish a business in North America, and we're here today, and we can say we have.

Okay, so over the course of the last 17 years, we can show here our growth track record. which displays growth since IPO in 2005 to 2019, the pre-pandemic year, with a compound annual growth rate of 18%. Then we hit the three turbulent years where the combination of Brexit, COVID, and then our self-imposed rationalization of our product range have caused our revenue to jump about. So those three disruptions consisted of Brexit, which is where we saw the NHS supply chain acquire £900,000 of product back in 2000 and 2021. They've set it aside, ready to protect against any disruptions to supply, and then they released it into their supply chain in the first half of the year we're reporting upon. So we had a year-on-year adjustment or year-on-year disturbance of 1.8 million from 21 to 22. COVID had the initial impact of an increase of our revenue as surface disinfectants and also medical device disinfectants were in high demand in that first three or four months of the pandemic. And that was followed by, in 2021 and also 2022, the waves of COVID closing down hospital outpatient departments, which meant that the number of diagnostic procedures fell, and so the use of our medical device disinfectants fell as well. And then the third impact, the rationalisation, as Paul has spoken to a little bit, as a consequence of the stresses upon our upon our manufacturing and back office support of the business during those previous two years, in conjunction with a fall in revenue and certainly margins under a lot of pressure, we made the decision to discontinue our Christel and Anistel ranges to curtail and cull all of those one-off products, specific active substances that fall outside of what we consider to be core, so that we could start to peel away the distortions of them and focus our business on what's truly relevant and important to us, which is chlorine dioxide products sold into the hospital market. So looking at the next slide, this is one that we have included in our presentations for the last three and a half years, and it just shows quarter on quarter, the impact of some of these external influences. So the first COVID wave, we saw the reduction in medical device sales, but a big jump up in our cash surface range. There was a recovery over the following two quarters, then the second wave of COVID hit, a better recovery, a faster recovery, not quite such a negative impact upon our business. And then the Omicron wave in the last winter, which had another dent to revenue for medical devices, but nevertheless, a less impact. So what we're seeing is that our market, the hospitals into which we sell, are coping better and better with COVID. So while we speak of the impact of COVID receding, we mean for us. COVID, of course, will continue to be a feature of our lives. There will be waves every winter, I'm sure, for decades to come. But what we are experiencing is that the hospitals into which we sell are coping with that and not having to stop the diagnostic procedures that we're interested in to the extent that we have these significant impacts upon revenue. And then we then show in here the first quarter of financial year 2023, so July to September just passed. Here we can finally show growth that's bouncing back partly because of the impact of Brexit on the comparable period, but also that we can now report our sales teams around the world are managing to find their way back into hospitals They're getting face-to-face meetings. They're being invited in to talk to infection prevention heads. And we are now building our sales in terms of volume and finally booking new business again. So the rationalization project, and I won't go into a lot of details, I think it's been spoken to already, and I hope it's relatively clear why we've done this. When we discontinued products that were non-chlor, non-core, which we mean non-chlorine dioxide, non-hospital, and by culling the number of SKUs by almost 50%, we freed up resource space, we freed up people, and our growth our growth drivers are now there for us to focus on, which is chlorodioxide and hospital. We completed the rationalisation during the year. It did contribute one and a half million pounds to revenue in these numbers, but it did not make any profit contribution because we had wrap-up costs, we had a couple of redundancies and some stock write-offs. So as a consequence, profit is not in increased as a consequence of that £1.5 million of sales. But we did have the impairment of intangibles of £2.4 million. And then the next slide just shows, I think, the key reason for us. It actually puts numbers, if you like, to those discontinued products. So in blue, you can see at the top of the graph, these are the discontinued, that the product contribution from those items that have been discontinued over the course of the last four years. If we had not been making and selling those products, then we would have been reporting in this period 3% growth on the continuing products. If we look now at purely medical devices alone, then we can see that medical devices grew by 6%. And if we add back that Brexit distortion of 1.8 million between the two years, then the underlying growth in medical devices was 14%. And then, as I say, in the quarter just past, then all products contributed a 20% growth period on period. So the rationalizations refocused us back onto what is core to us, and it will have a positive impact upon sales growth rates.

We wanted to share with you what we consider to be the main tailwinds and headwinds that we're facing. There's no doubt. shows during the numbers in the first quarter the hospital hospitals are returning to the service levels that they were at pre-code we have 14 subsidiaries covering more than 14 countries with 14 subsidiaries throughout western and central europe hong kong china italy singapore malaysia and australasia And all of our colleagues report the hospitals are busier than they were over the course of the last couple of years. My personal opinion is that they're nowhere near as busy as they will become as there's more normalization over the course of coming six months, 12 months into the future. Which all goes well for us in terms of beating forecasts, which I think there's a possibility thereof. So diagnostic procedures are increasing, but waiting lists here in the United Kingdom, and it's mirrored elsewhere, and all the other countries we operate, they are very significant. And the hospital systems are having to invest to try and bring them down. With respect to our cash surface disinfectants, I think the legacy of COVID, when there was pretty much indiscriminate use of disinfectants, everything. We can all remember having to disinfect our baskets when we went into the local supermarket. A ridiculous waste of chemistry and money, but still that's what we were all told we had to do. But I think it was held true in hospitals as well. There was indiscriminate use of disinfectants throughout these institutions. It's come to an end and I think it's left infection prevention teams all around the world looking for the best disinfectants to deploy. And we are one of the best disinfectants that is available to hospitals for surface disinfection. And our investment in the cash product range enables those products to be very easily used and deployed. And the third point is very relevant to our future. They've been the method by which cash is delivered separates the disinfectant liquid from the spreader that is used to distribute and spread the liquid around the surface. All around the world, the disinfection of those surfaces is carried out by pre-wetted plastic wipes. And by separating the disinfectant liquid, we enable the hospital to use pulp or paper-based towels that are available everywhere to spread the liquid around and there's a reason why plastic is used in those pre-wetted pre-impregnated wipes it's because the wiper the spreader has to coexist with disinfectant for as long as the shelf life and use life product and plastic is a fantastic material for that because it's inert if you had a paper towel inside a flow wrap and the liquid would be added to the paper towel. By the time it got to you and you opened the flow wrap and took the towel out, it would be mush. So there's very good reason why all of these wipes that get used in the home and in the hospital are made of plastic. But by separating the disinfectant, which actually does the job, from the spreader, which pushes it around the surface, you can use paper towel. And all hospitals are under enormous pressure to reduce their carbon footprint, to reduce waste, and the throwaway element of these convenience products, which are pre-wetting plastic wipes, is something that we can play our part in eliminating. I'm sure it's uppermost in everybody's mind, what is the impact of inflation, inflationary environment on our business, and we feel that we're reasonably well insulated from it. First of all, we have very high-margin products. Secondly, the use of energy in our manufacturing process is pretty low, relatively speaking. To give you a number, in the past, we paid 7,000 pounds a month in electricity. It's only because we've come into the city today that I know that figure, because I asked Heidi. I wouldn't know that clearly. Now, apparently, the monthly cost is 12,000 pounds. So our business, like our household bills being impacted of course they're one of the energy markets. And importantly, we have pricing power. We have a unique product. If a hospital wants to use a high-level disinfectant applied manually in a foam form, there's only one product that is available to all hospitals worldwide, and that's a tri-cell product, be it Duo or Trio or any of the other products of that format that we manufacture and sell. So we are unique, and unique means can translate into central pricing power, which we are judiciously exercising. In the forecast that was put out this morning by our analysts, there's a 3 million revenue growth from 31 million to 34 million pounds this financial year that we're in now. 80% of that is volume, 20% of that is price. And that equates to a 2% price increase, which In the current environment, it doesn't sound at all appropriate. Well, in actual fact, we have mandated all of our teams around the world to increase prices by between 6% and 8%. It's not something in our business we can just do overnight, but it is being implemented. And in the first quarter, the increase in revenue on the prior period last year, there's a 4% price increase embedded in that. And over the course of the balance of the year, as these pricing increases are adopted and implemented, that percentage will increase. So we do have pricing power. We exercise it judiciously. But we have to pass on some of these input costs to our customers, which is being accepted. There are always negatives, I think. biggest problem for hospitals returning to the level of service that they should be at is staff shortages. We read about it in our press, but it's true in all markets. All the countries we operate in worldwide, getting qualifying staff is a real problem within hospitals. And who knows what will happen with COVID? As Liz said, I think hospitals are better equipped. The calamitous situation two years ago is probably not going to improve. So we feel reasonably comfortable around COVID going into the future.

Okay, so for the past six years, we have had in place financial targets so that we can, aside of our broker and our analysts, we can tell you what it is that we're targeting ourselves with in terms of growth. And for the first three years, we achieved our targets, overachieved our targets. The second three, which ended in June this year, we missed them as a consequence of the disturbances that we've spoken about so far. And so we're resetting the targets again. They're actually the same. We will aim to attain more than the 10 to 15% per annum as an annual average in sales growth over the course of three years. and we will aim to achieve at least a 25% EBITDA margin. So we've set our targets and look forward to once again achieving them and beating them.

Returning to North America, these pictures might help us visualize, understand where we're at and where we're going. So in the United States, The impact shot on the left-hand side is of our DuoALT product, which is what's being presented to the FDA for approval as a high-level disinfectant. And the image on the left-hand side is an ultrasound console, of which there are hundreds of thousands all around the world, and probably at least half of those are in the United States. The instrument that's colored pink is the cord attaching to the probe, the far right hand side. It's the probe that goes inside the body. And because it goes inside the body through one of those two orifices, which you can guess at, it becomes a semi-critical medical device and it leads to high level disinfection. That's accepted universally that that level of disinfection is required. Whether it's performed or not is in large part determined by whether it's a product that's a high level disinfectant that is to hand, that is affordable and available. I'm not sure, so I wouldn't suggest for one moment that all intracavity probes that are used vaginally or rectally around the world, day in and day out, are disinfected properly. Quite the opposite, they're not. But where there is an appropriate product that is affordable, is available, then the infection prevention community worldwide recognizes that it should be disinfected. And that's our opportunity, because we're affordable, we're mobile, we're transportable, we don't require power, We don't require servicing. We're consumable only. We don't require capital investment. So we can be used ubiquitously because of the ease with which we can be used. So the console will attach to intracampus probes, and it will also have on it attachments to skin surface probes. So the middle picture is of the same pack. EPA, with a lesser claim set, albeit that it's got the same chemistry within it. So it defines itself as an intermediate yellow disinfectant, which makes it appropriate for skin surface probes. And the probe that's in the nurse's glove hand, covered with foam, is a skin surface probe. So on the console, there would be skin surface probes, and there would be intra-cavity probes. And the way that the regulatory framework in the United States works It sort of presents the sonographer with a choice of having to use a high level disinfectant on the intracavity probes and can use a cheaper, probably, intermediate level disinfectant on the skin surface probes. But they're all there attached to the station that he or she is working at. Where we are launching into right now is the opportunity to do the skin surface probes. When we have approval, we will be able to do the skin surface probes and the intracavity probes. So it's a fantastic opportunity to either present two products with different regulatory statuses to Sonarpha or potentially find a price that clears both needs and one product that is approved by the FDA that would do both tasks. So it's going to be a question of sensible, careful, considered pricing, but we could really be the ideal choice for hundreds of millions, literally hundreds of millions of ultrasound procedures that are undertaken in the United States every year. But finally, on the right-hand side, exactly the same pattern again, same content, but with a different use pattern, and that is for the disinfection of ophthalmic devices, and the small instrument shown is what is called a thermometer that comes into contact with the cornea in, if you have a If you have your intraocular pressure spread, and they put the lens against your eyeball, that's what a tonometer is doing. And because it comes into contact with the cochlea, it requires salivary disaffection. And that's the product we have approval from Canada Health, and it's now to be sold by our partner in Canada, Innova.

Okay, so we have a slide here regarding ESG. Interestingly, in the last... three or four months I've been contacted by four or five of our institutional investors asking us what our ESG targets are, what it is that we're doing about ESG and where, because we are placed in their ethical funds, in their better world funds, so it's becoming more of an important topic for us in terms of our relationship with our investors. So what we have done is engaged an ESG specialist consultant who will assist us in developing a formal strategy that we can publish and then make public, which will help us in terms of setting a target by which time we will become carbon zero. We have already been calculating our carbon emissions, but now we will step up our activity internally, and our specialist consultant called Simply Sustainable will help us in that journey. Notwithstanding that, we do have naturally within our product range an environmentally impacting product in the cash range, which is where we're taking head-to-head our products with pre-wetted plastic wipes, pre-packed, pre-wetted plastic wipes. So regardless of ESG and our investors' view of the subject matter, we are doing what we can do to reduce the burden, the environmental burden upon hospitals with that product. And so that will be a key part of our drive by further developing that product and rolling it out in terms of our environmental profile. And of course, we continue to focus ourselves on local community connections, ensuring our staff are looked after, supported, and that their wellbeing is taken very seriously.

So in summary, the worst impact or the worst effects of COVID and Brexit behind us, growth has resumed. We will continue to grow our global footprint and North America was our challenge five years ago. We've risen to it and we're there now with a very profitable still cash generated business with a great balance sheet, cash for free, nine million pounds of cash on the balance sheet. And our response to these disruptions of the past couple of years, which was to rationalize the business, it's all gone behind us once again. So in the interims, we'll be reporting against the interims numbers of last year, at the year end, I think the whole picture will become clearer as we proceed over the course of the next six months. And what we are is very simple, very focused business, and we have a global opportunity ahead of us. So thank you for being so patient to listen to us for the last half hour. And I think we start with, That's great.

That's great, Paul. Thank you very much indeed. And to Liz for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right-hand corner of the screen. But just while the company take a few moments to review those questions submitted already today and before addressing some of those questions that we may have from investors in the room, I'd just like to remind you that recording this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. If I may, Leanne, if I could just hand back to you and if I could ask you to moderate those questions from those in the room and those that are coming online, and then I'll pick up from you at the end.

Absolutely. Thanks, Mark. Yeah, so if someone wants to cut the hat, if you'd like to obviously project your voice, then it can get picked up on the mic, or I can repeat your question.

Let's start in the middle, on the left. Paul, Liz, could one of you give us a few minutes on exchange rate effects, both in terms of what's recently happened and going forward? Liz?

Yeah, so in the year we're reporting, there was very little in terms of effect on the numbers from movement in exchange rates. The rates by which we translate our overseas operations to the UK are a 12 month average. very little impact, really, of the movements that we've seen at the latter end of the financial year. But we are seeing the impact in the current financial year, and they are positive because we are translating overseas currencies to sterling. So, so far, they're positive, and we're not seeing any huge swing in terms of componentary purchase from overseas. We are well stocked in terms of that componentry that we would buy, for example, from the US or from Europe. So, so far, no negatives in our business.

Are we using the forward markets at all? No, we don't. No, we don't. Yes, exactly. Policy issue. So how much of that first quarter, 20%, would you prescribe to currency movement? I think percentage terms are fairly small. I know that we had a £46,000 FX gain in September. I think in August and July it was much less. So it's not really impacting us, but we're going to be a winner over the course of the year, I would say. For your EPA-approved product launch in North state-by-state build-up a big bang and this little bit about your partner for North America commercial relationship so we started the state-by-state registrations nine months ago we've got forty five correct me because I was my number six but I think about forty six out of fifty two Oops. But they're wrong. Well, 50 states, I suppose, and two dependencies. Oh, okay. We're nearly there. We're nearly there. We're waiting on California and a couple of Australians, but we're pretty much there, which coincided nicely with these three conferences being booked by Parker. Parker Laboche is a family-owned business based in New Jersey. And it is market leader in the United States, in fact, worldwide, in the manufacturing cell of the conductive gels that are used with every ultrasound procedure. So the president and major shareholder was a chap called Neil Bull Carter, and it was his father who invented these gels, because in the very early days of ultrasound, we used to put the patient in a bath of water, to, because the water acts as a transmissible wall barrier or whatever, and then he devised these gels that are used that people put onto the tip of the ultrasound probe or transducer, and they might be doing that business. And what that means is that wherever an ultrasound procedure takes place, whether it's into cavity or something like that, on the tummy, on the shoulder, in sports, rehab, or whatever, pregnancy or whatever it may be, the gel is used. Every single ultrasound procedure requires the use of gel because it enhances the image. So where ultrasound takes place, Parker is going to be hanging around that. And so they make for us an ideal partner because our ultrasound disinfectant is used every time probes used in between patients. One patient has to be disinfected before use on a second. So I think the profile of Park was identified by us early on as a perfect match. As things have evolved, they are a perfect match. There's a meeting of minds when it comes to business approach. We are so thankful that it's owned by an individual, a family, and not a corporate don't get any continuity in terms of relationship but so far i have to say our relationship with that is really really sound now just to finish on that point so they manufacture and they sell and they sell through distributors in the united states so they have a well-established network of distributors established over many years and our product is going through their network And where we will be working closely with them is to make sure that the infection prevention sales team of, say, Henry Schein, which is one of the largest distributors in the United States, understands our products, can speak compellingly about the virtues employed outside in Tristell, and has all that scientific knowledge and backup and support. And we will be channeling our domain knowledge through to those sales teams, working for distributors. And that's what we see as our principal role in the future success of Tricell in the United States. Right. And are they, once you gain the individual state registrations, is it pretty much a launch immediately on that because they'll have the network advice? Yeah, absolutely. So what we would do with China, for example, we would park say you can have the product stop the product product through all of your operations in all the states apart from those in the states in which we have approval and give us a letter to say that you won't let product across the state borderline from one state where we have approval to those few that we don't and we we like on them to manage that um but we're nearly there On the non-core products, you reported them as discontinued operations at the heart of your study and restated some of those numbers. And as for these results, they looked to everything else again. So why did you change your mind since February?

Because we believed in February that we were reporting a discontinued operation, which the accounting policy around it, we thought we said, satisfied which was that there's inputs outputs there was a whole division if you like um that we were ceasing but our auditors have told us they view it differently and so it's not appropriate it's a pure accounting accounting decision by kpmg which i i'm actually really disappointed about because i thought it was really simple and straightforward to look at restate that yeah now it's difficult for us to i completely agree i completely agree so it was a huge blow we were very disappointed to not be able to demonstrate it in that way but what it is clear i think it's um important to reiterate is that the revenue in the period of discontinued uh products of 1.5 million did not have any profit contribution and it ceased at the end of 31st of December. So nothing happened with those discontinued products post, in terms of revenue, post 31st of December. There were some continued wrap-up costs, so we had stock write-offs and we had some redundancies and things like that, which did follow in second half. But all product sales ended at that point.

You mentioned on FDA approval third high-level disinfectant approved. Are the other two already approved for use in the market you're aiming at? And if so, how do you compete against them?

I know one of them is, it's the product that we always refer to in the ultrasound space, and it's a product called Trifon that is designed to accommodate ultrasound probes. It's a box in which a different chemistry to ours is called hydrogen peroxide. It's like an oxidizing agent in a very high performance disinfectant. It's ingested in a mist form. And then it's controlled within the box so that it doesn't escape into the general atmosphere. It comes into contact with the probe, which is suspended within the box. And that got an FDA approval. process, some 10 years ago. And Trofon, which is a product manufactured by an Australian company, has been very successful. Now we compete with, sorry, a bit louder.

Yeah, please.

So we compete with Trofon all around the world, including in Australia, their home market, and we do very, very well. It's a keen rivalry, and I'd say that the the features of our product to weigh heavily in our favor in the competitive situation against Trofyl. So we know what our battleground is going to look like with an FDA approval. We will be competing in many respects with Trofyl. Now Trofyl is not used by all hospitals throughout North America. And there's good reason for that. And that is because not everybody wants to have a Trofyl. So what are all the other hospitals doing with their ultrasound equipment? Well, they'd be using something less than a high-level disinfectant and kind of making do. And to return to something I said earlier, making do is what you do if all you can do is make do. But if you've got an affordable, deployable, easy-to-use, and understandable high-level disinfectant, that can be reached out and used in the sonographer's room, then that's what will be adopted. So we just have to go and find those opportunities and go through the persuasion and conversion process to win that part of the market that's not owned by Trofon. But of course, we'd also compete with Trofon. Machines break down, machines age and have to be replaced. And there's plenty of churn in the ultrasound markets in which we operate in worldwide where we're taking some business away from Trofon and other situations in which Trofon takes some business away from us because the hospital wants to have a machine rather than rely upon a nurse to actually perform the high level disinfection process. So what's good there is we know what the opportunity is and where to go looking for it. So if that answers the question, that's principally the battleground is going to look like in the United States. And it's one that we're pretty familiar with, because it's the same battleground that we have marched across, and they've marched across, and we've marched across in all other countries in which we compete with them. How generally do you price compare it to a converter? Is it all the thumb? They're capital and consumable. The consumable is highly disinfectant in a small dose. So we would price to their consumable. You use the term the likelihood of success on challenge. Can you give us an actual probability number on the likelihood of failure? It's a tough one, isn't it? That is the big head, or potentially the big head. It's the catastrophic head. And what is the probability of catastrophe? Okay. I think that we will succeed, but I'd like to ask you a question. Why do you think it's catastrophic? Well, I think the markets would, if they've been waiting five years for something big to happen in the United States, and they've been patiently waiting, you know, digesting the 500,000 per annum of investment, that if it doesn't come to something, and I'm talking about the high level of this effect, then I think that one's holding of shares would be marked down. quite dramatically on the day. Don't you think? I think you're probably right. I should be careful where I strain to this territory. But there is an underlying business that when we resume, and let's presume that we resume the growth trajectory and the profitability that we achieve, how many years was it? 12 years. then there's a valuation of the company based upon that underlying business that's successful, growing, with a huge global opportunity still to grow into. And if they approve it or not, we cannot be denied or have withdrawn from us the opportunity to penetrate the ultrasound market with the eBay approach. So, Ms. Embiid, it's a question neither of us can answer. As I stand here now, you have estimated the likelihood of success? I have. You have estimated it. And what is that then? We'll reverse it. Tell me about the failure rate. What is the success rate you're anticipating in your projections? I think we're going to, well, first of all, I think we're getting a period of growth. That's binary. That's 100%. You're kidding. I think it's cold stuff.

Well, I do... We wouldn't be doing it unless we thought we were going to succeed. I very reasonably believe that we will. I know that the no-go is slightly different, correct me if I'm wrong, there's a little bit of to and fro that's possible.

There is some to and fro, that's right, and I think that that is being played out at the moment because we're in active discussion in the negotiation, there's still the additional testing They have a principle which is least burdensome approach. So they can't ask us to do things that sort of make no sense. You can only exercise service control over the agency in good sense in the discussion between us. But there are guidelines. They can't ask us to go and embark upon a testing program that could take another two years when we've got 180 days clock ticking to finish. So that's one of the sort of guiding principles. that we will operate under. All of those things will make me think that we will succeed. Just on the American hospitals, you said they're making a dip. Why aren't there, we've never talked about the rate of infections in the American hospitals.

How do people get infected because the hospitals are making a dip in the American hospitals?

There's plenty of data around infection rates, post-procedural infection rates in endoscopy. So how many people in the States are infected? Oh, I wouldn't have that number, but it would be a lot, as it is in other countries. And published papers, surveys, there's a mass of published information about the procedure and infection rates across a whole range of instrumentation that we're involved with. Just on the FDA approval process, once you send in the additional information, is that it then? The FDA will either give you a yes or a no, or will they request, can they request even more information? No, we believe that they won't request any more information, but they will then have about three months, given their timetable, to digest, review and digest all of the information that we provide. So it'll be a lot more information that they'll have to work through. So it'll be a yes or a no answer based on what you... That's what I'm understanding. So that bit's binary, isn't it? And I'm sure that the principal focus is the fact that it's effective before they approve it, but the other one must be whether there's potential collateral damage to the user and all of that sort of thing. And you've solved those problems in every other country. That's right. And all of those issues, toxicology, biocompatibility, the impact on the instruments themselves, you have to make an economic case that it's a product that's worth them approving. because of the benefits to the health care and to the patient population. So all of those things are within the submission. There's a lot of things that can be done.

That's the question. I'll just add one quick thing, Michael, that we have to remember that the Duo product that is going through the FDA program has not been designed for the United States. That product is currently sold around the world It accounts for 20% of our medical device revenue, but it accounts for half of the procedures that take place using a Tri-Stell product. So it's a well-proven product. And that's one of the reasons that we feel so confident about getting through the FDA process, is that it's not a new invention. You know, we're not placing, this isn't the first time anyone's looked at it, reviewed it, considered it appropriate for the function that we are selling it for. It's being used so widely.

Can you give us an idea of what additional data you've been asked to do? What were the areas that the FDA needed to study?

I'll give you one example. In terms of micro-testing, there are three sort of categories of micro-testing that you have to do. One is, they call it potency testing, so sort of testing test tubes inside a laboratory where inside the test tube there's a particular microorganism, and you actually disinfect it to the test tube, and then after a period of time, which is your contact time, you neutralize it, and then you see whether any organisms have survived contact with it, past that, and that's a stage that you don't get through that, and it was five years ago, that you don't go on. And we got through it, and we went on. And the next massive body of work is that you have to prove in your submission that when the disinfectant, in our case, the pro-endocine, is applied to the surface of the medical device that it's intended for, that when you wipe that device with the pro-endocine chemistry and you do recovery, use some method to see whether there are any microbes left on it, they've all disappeared. And for that, you have to show to the FDA that you've got as many instruments as would be representative of the ultrasound market. So we had to locate, find, buy, beg, borrow, steal probes from GE and probes from Siemens and probes from Toshiba. And it was a huge amount of work. And each one of them that had to be tested and into the solution. That took several years. And then the final stage, or the final category, is you need to go into the clinic, where the clinic is using probes on patients, and as they come out of the patient, they're handed to a nurse or a disinfection technician, and they use your product in a sort of live setting, and then the swabbing and the recovery takes place. So three categories. It took five years. The shelf life of our product is two years. So they ideally want you to use the same batch of product across all three categories of testing. We couldn't, because what was used in the purchasing testing in 2015-16 was out of date, and so rendered, you can't work with it. So you can see some of the practical difficulties that we've encountered. But they have rules and guidelines, and so the guidelines that it should be the same batch that's used across all three tiers, the three-tier approach. So we've been in negotiation, and we believe that they will go back as far as we can with batches that we still have in storage and use that on at least two of those categories. That's a good example. Now, we've got to get it done. We've passed those tests in the past. We've got to get the product out to the United States. We've got to make sure we get it in that time. So there are lots of logistical arrangements that we've got to There's no reason why we won't repeat the successes that we have had from a science perspective that we achieved in the past. And we did it multiple times.

Given the time, we're approaching the hour. We're just going to take a couple of questions from online, if that's okay. So you've already talked about capacitors in the ultrasound market with trophin, but are there any signs of emerging capacitors using chlorandoxide?

The answer to that is unequivocally no.

Okay, brilliant. Can you expand on your overseas expansion plans? North America, Europe and Singapore seem to be going well. And how many staff do you have outside the UK? And how do you see this number growing?

So we have a footprint that involves some 30 distributors and 14 subsidiaries that cover, I think I said more than 14 countries. So Berlin covers Austria, Poland and Switzerland. So that would be four countries that we've got. You know, it's a German subsidiary. So in terms of we've got a footprint that is about 50 countries. We now are in the United States, but we have new distributors that have either been appointed, but we're just mobilizing them, or we're about to appoint in Vietnam, in the Philippines, a second distributor in India, because India is not getting kicked off. There are a lot of countries in which we still have to establish a presence. I think that answers one part of the question. And the other part was?

The other part was about number of staff outside UK.

So we have 220 staff worldwide, of which 110 are based in the UK. But the majority of staff overseas are sales staff, so all of our overseas offices are basically, they carry out distributed functions, so they are importing and selling products. There's very little manufacturing outside of the UK.

Brilliant. And one more. What is the anticipated gross margin of US sales given the partnership with Parker if FDA approval is achieved? 100%.

Because it's a royalty basis. So we take a percentage of the sales value that is earned by Parker distribution network, and that percentage comes to us as a royalty. It would be included in our revenue number that this effectively goes straight to the bottom line. Maynard, last question. I'm vying for the last question. On cash, at the open day, we had two employees there, really bullish on the product. They said there's only about a time when it's going to sell really big in the NHS. And look at your results today in sales down from the first margin of 59%, which is just a bit bigger than your non-core products.

So does it really have a big future? It does have a big future. You're absolutely right. The year is an anomaly. sales have fallen in the uk and um and i think that's because of the mix of products within there the the new products that we are launching the the capsules and the tank they're not fully launched yet they're not available and legal to sell because we've been advised by our hospital market that they need to have the uk ca mark applied to them If you have a look in the chairman's statement, you'll read a piece there about the regulatory environment that we're working in. So that's another hurdle for us to jump, which is to attain regulatory approvals for those products as medical devices, even though they are surface disinfectants. So that's a piece of work that we're working through. And the gross margin has fallen as a consequence of sampling giveaways in order to get the product moving in those hospitals where we're launching.

We're going to take a long-term view. We have a big ambition. It's not going to happen in anything other than many years. You have been talking about hot shots. Absolutely. A few years ago. This is a few years ago.

And product development takes time. It does.

Not as good as the whites and the folks. They seem to just take it off. Yeah.

Well, I think if you backtrack, we first sold wipes in 2003. Yeah. So those early years, there was, you know.

And the business had revenues of $3 million. So I think, I mean, things in, we're long-term and strategic, and I think we just have to not expect from year to year enormous dramatic growth.

Paul, if I may just jump in, as Leanne said, we have gone through the hour. Obviously, thank you to everybody online and to those in the room for your questions. And of course, Paul, Liz, we'll make any questions that we haven't got through today's presentation available to you from those online after the meeting has closed. I know investor feedback will be particularly important to you both and I'll shortly redirect investors on the call to give you their thoughts and expectations. But I wonder before doing so, if I may, Paul, just ask you for a few closing comments and then I'll wrap up and conclude today's meeting.

Well, many thanks. Many thanks to yourself for hosting this. Many thanks to all of you who are here and those who have joined remotely. We feel very positive about the prospects for the business We know that the last three, the destructions of the last three years are behind us. I really look forward to being able to stand up in front of you and speak without having to continuously refer back to the past three years and look forward to that next year.

That's great. Paul, Liz, thank you once again for updating investors this afternoon. Please ask investors on this call not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the management team could better understand your views and expectations. This may take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Tristell PLC, we'd like to thank you for attending today's presentation. May I wish you all a very pleasant afternoon.