Tristel (LSE:TSTL) — Preliminary Results

0:00 Good afternoon, ladies and gentlemen, welcome to the TRISTEL 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 and A tab situated on the right hand corner of your screen. 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 Investor Meet company platform, and we'll notify you when they're ready for your review.

0:29 Before we begin, for those online, we'd like to submit the following poll. And if you give that your kind attention, I'm sure the company will be most appreciative. And now I'd to hand over to CEO, Paul Sweeney. Good afternoon. Good afternoon, everybody. I recognize everybody in the room. It's just lovely to see you all again. I think we've got something like a 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 don't have dialed in that aren't familiar with us. We're a specialist infection prevention company. Everything we do, our technology, all of our efforts, managers are directed at controlling transmission of microbes and pathogenic, dangerous microbes within hospitals to keep patients and staff safe and from hospital acquired infection. And that is what we do exclusively.

1:37 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. By biocide, 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 America 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.

2:23 We're not involved in surgical instrumentation and the sterilization sterilization thereof. We're involved in diagnostic instrumentation by which I would include ultrasound scanners, transducers and probes, and then endoscopic endoscopic equipment and devices using ophthalmology coming into contact with the eye. And our second brand named Cash is intended, again, using clindoxide, intended for the disinfection of surfaces within the hospitals, which would include bed mattresses, tabletops, floors, indeed. And that those are our target areas. We have a simple, focused business, and ours is a global opportunity.

3:11 So these are our preliminary results for the year ended June 30. And as always, the way we like to do this, I'll turn over to Liz to run us through the numbers. Thank you, Paul, and good evening, everybody. Okay. So our financial highlights for the year ending 06/30/2022. 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 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 derisk our reliance upon the NHS, upon the 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% of the total.

4:27 Our gross margin remained steady at 79%, down very slightly, principally just rounding amount to 79% from 80 last year, and adjusted EBITDA margin of 24%. And when we talk about adjusted, we have adjusted back share based payments as we always do. And also as a a result of the discontinuation programs, we had an impairment of intangibles in the year of 2,400,000, which related to those products which we have now ceased to make and sell. Adjusted pretax profit of 4,500,000 in line with broker's expectations and with the under with the reported, sorry, pretax profit of 1,500,000.

5:16 Adjusted EPS, 8.4p per share, and our dividend per share for the year will will be 9.55p in total. That includes a three p 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 6.55p 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 '23 2223 financial year.

6:02 Our final dividend will be 3.93p and that will be payable on the December 16. We are reporting a net cash balance of 8,900,000 at June 30. Since that date, we've paid out our special dividend, which amounted to 1,400,000. And today, cash in the bank is 9,200,000. 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 end of June was the discontinuation during the first half of products that were not based upon products and chemistry and were not focused upon the hospital. We considered them to be noncore.

6:52 There were two markets they addressed. One was the veterinary marketplace under the brand, and the other was the life sciences, obviously, the the manufacturing sector under the brand, were in slow, chronic decline. And so COVID acted as a catalyst to the first as a management team to take a decisive initiative to bring our involvement with those products to the next, 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.

7:45 After a five year project, we involved an investment of some £3,000,000 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, selling critical medical devices, Very specifically, ultrasound probes then to the body, vaginal, and urethral. So the invasive devices need high level disinfection, and it is the FDA that has jurisdiction over high level disinfectants in The United States.

8:26 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 of discussing and negotiating with the FDA to really do understand with our advisers 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 re to submit the supplemental data, and then their clock starts again.

9:35 Clock 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 hundred and ninety day period. But we're confident we will, and we have to remain confident that we'll get a successful outcome from the FDA. 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. So we would have very high hopes for the commercial success of the product with that approval.

10:23 Having said that, the same product, in essence, has been approved by the EPA and has been launched. So three congresses in the end of September, all addressing ultrasound ultrasound, general ultrasound in obstetrics 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 and A and 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.

11:11 Ultrasound is widely used in catheterization of patients, putting a line into a part of the body. And you a lot 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 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 APA approved product, You could regard this as a soft market introduction with a view to gaining brand awareness, getting the product into our distribution network in The States, which has been established with our partner partner laboratories, all in preparation for the FDA launch later in the later next year.

12:12 Or indeed, we may well find that this product approved by The UK as an intermediate infectious infection, another high risk 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 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 Medical Ophthalmics. Ophthalmic They're specialists in the ophthalmic arena. They represent some of leading manufacturers called Weilhardstride, a Swiss company, and they represent that the heartstride in in Canada, and we are launched in Canada as well.

13:07 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 seventeen years, we can show here our growth track record, which which displays

13:28 growth since IPO in 2005 to 2019, the per 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 to jump about. So those three disruptions consisted of Brexit, which which is where we saw the NHS supply chain acquire 900,000 pounds of products back in two thousand and twenty twenty one. 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 a year on year adjustment or year on year disturbance of one point eight million from '21 to '22.

14:35 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 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 rationalization as Paul has spoken to a little bit as a consequence of the stresses upon our upon our manufacturing and and back office support of the of the business during those previous two years in conjunction with a fall in revenue and certainly margins under a lot of pressure, we've made we made the decision to discontinue our KRISTEL and ANYSTEL 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.

16:07 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. The there was a recovery over the following two quarters, then the second wave of COVID hit. A a better recovery, a faster recovery, not quite such a negative impact upon our business. And then the Omicron wave in the in last winter, which had another dent to revenue for medical devices, but nevertheless, a less impact.

16:54 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 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 twenty twenty three, so July to September just passed.

17:43 The here we can finally show growth that's bouncing back partly because of the 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 and we are now building our sales in terms of volume and and and and finally booking new business again.

18:25 So the rationalization project, I won't go into a lot of details. I think it's 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 core, which we mean non chlorine dioxide, non hospital. And by by culling the number of SKUs by almost 50%, we freed up resource, space, we freed up people, and our growth growth drivers are now are now there for us to focus upon, which is chloride dioxide in hospital. The complete we completed the rationalization during the year. It did contribute £1,500,000 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.

19:18 So as a consequence, profit is not increased as a consequence of those that £1,500,000 of sales. But we did have the impairment of intangibles of 2,400,000. And then the next slide just shows, I think, the key reason for us. It actually puts numbers if you like to to those discontinued products. So in blue, you can see at the top of the graph, these are the discontinued the the products product contribution from the those items that have been discontinued over the course of the last four years. If we had not been selling, making and selling those products, then we would have been reporting in this period 3% growth on the continuing products.

20:05 If we look now at purely medical devices without a loan, then we we can see that medical devices grew by 6%. And if we add back that Brexit distortion of 1,800,000 between the two years, then the underlying growth in medical devices was 14%. And then as I say in the quarter just passed, 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. It shows there in the numbers in the first quarter.

20:52 The hospital hospitals are returning to the service levels that they were at pre COVID. All of we have 14 subsidiaries covering more than 14 countries, but with 14 subsidiaries throughout Western And Central Europe, Hong Kong, China, Italy, Singapore, Malaysia, and Australasia. And all of our colleagues report that 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 the coming six months, twelve months into the future, which all goes well for us in terms of beating forecasts, which I think is there's a possibility that a problem.

21:46 So diagnostic procedures are increasing, but waiting lists here in The United Kingdom and it's mirrored elsewhere and all the other countries that 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 to to something absolutely everything, we can all remember having to disinfect our baskets with one into the local supermarket. A ridiculous waste of of chemistry and money, but still, that's what we were all in for told we had to do. But I think it was held true in hospitals as well. It was indiscriminate use of disinfectants throughout these institutions.

22:38 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 to deploy. And we are one of the best disinfectants that is available to hospitals for service disinfection. And our investment in the cash product range enables those products to be very easy to use and deploy. And the third point is very relevant to our future. They've been the method by which we the cash is delivered separates the disinfectant liquid from the spreader that is used to distribute and spread the liquid around the surface, be that of pet mattress or a table top. All around the world, the disinfection of those surfaces is carried out by pre wetted plastic wipes.

23:31 And by separating the disinfectant lit 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 or the spreader has to coexist the 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 of pipes and the liquid be added to the paper towel, by the time it got to you and you open 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 hospital are made of plastic.

24:22 But by separating the disinfectant, which actually does the job from the spreader, which pushes it around the surface, you can use paper towel.

24:31 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 primitive plastic wipes, is something that we can play our part in eliminating.

24:51 I'm sure it's up the most 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, I in the past, we paid £7,000 a month in the electricity. It's only because we're coming to the city today that I know that figured because I was tired. Yeah. I wouldn't know this too early. Now, apparently, the the monthly cost is £12,000. So our business, like our household bills being impacted by was still one of the energy markets.

25:36 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 the TRISTEL 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 sensible pricing power, which we are judiciously exercising. In the forecast that was put out this morning by our analysts, there's a 3,000,000 revenue growth from 31,000,000 to £34,000,000 this financial year that we're in now.

26:22 80% of that is volume. 20% of that is price. And that equates to a 2% price increase, which in the current environment doesn't sound at all appropriate. Well, in actual fact, we are have mandated all of our teams around the world to increase prices between 68%. 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 price increases are are 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.

27:19 There are always negatives. I think the 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 market, all the countries we operate in worldwide. Getting qualified staff is a real problem within hospitals. And who knows what will happen with COVID? As Liz has said, I think hospitals are better equipped. The, you know, calamitous situation two years ago is probably not going to repeat, so we feel reasonably comfortable around COVID going into the future. Okay.

28:01 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 what it is that we're targeting ourselves with in terms of 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 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.

28:52 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

29:10 where we're at and where we're going. So in The United States, the pack shot on the left hand side is of our product, which is what's being presented to the FDA for approval as a high participant. 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 cord attaching to the probe at the far right hand side. That'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 needs time for disinfection. That's accepted universally.

30:01 Level of disinfection is required. Whether whether it's performed or not is in large part determined by whether there's a product that's a high level disinfectant that is to have is affordable and available. I'm not sure it's 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. That helps that they're not. But where there is an an appropriate product that can be is affordable, is available, then the infection prevention community worldwide recognizes that it should be. 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.

30:47 We're consumable only. We don't require capital investment. So we are can be used ubiquitously because of the ease with which we can be used. So the console will attach to intracamptic probes, and it will also have on it attachments to skin surface probes. So the middle picture is of the same pack. We we call identify the pack as duo, but this is approved by the EPA with a lesser claim set, albeit it's got the same chemistry within it. So it defines itself as intermediate level 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.

31:34 So on the console, there would be skin surface probes, and there would be intra cavity probes. And the 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 service boats. But they're all there attached to the station that he or she is working at.

32:04 Where we are launching into right now is the opportunity to do the skin service boats. When we have FDA approval, we will be able to do the skin service probes and the intracavity probes. So it's a fantastic opportunity to either present two products with different regulatory statuses to the or potentially find a price that clears both needs and one product that is approved by the FDA, which are both tasks. So it's gonna be a question of sensible, careful, considered pricing, but we could really be the ideal choice for the hundreds of millions, literally hundreds of millions of ultrasound procedures that are undertaken in The United States every year.

32:50 But finally, on the right hand side, exactly the same pattern, same content, but with a different use pattern, and that is for the disinfection of ophthalmic devices. And the small instrument shown, which is called a thermometer, comes into contact with the cornea in if you have a if you have your intraocular pressures red, and they put the the lens against your eyeball, that's what a tonometer is doing. And it because it comes into contact with COVID, it requires soluble disinfection. And that's the product we have approved from Canada Health, and it's now to be solved by our partner in Canada.

33:34 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

34:06 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 within our product range, an environmentally impact environmental impacting product in the cash range, which is where we're taking taking head to head our products with pre wetted plastic wipes pre packed, pre wetted plastic wipes.

35:04 So regardless of ESG and our 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 key part of our drive by developing that 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 well-being is taken very seriously. So in summary, the worst impact or the worst effects of COVID and Brexit behind us, Growth has resumed.

35:52 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. We have a very profitable still cash generative business with a great balance sheet, cash for free, £9,000,000 of cash on the balance sheet. And the our response to these disruptions of the past couple of years, which was to rationalize the business. It's all done behind us once again. So in the interims, we'll be reporting against the interims numbers next of last year. At the year end next year, we'll be reporting against these numbers clearly. I think the whole picture will become clearer as we proceed over the course of the next six months.

36:42 And what we are is very simple, very focused business, and we are as global opportunity headless. So thank you for being so patient to listen to us for the last half hour. And I think we start with patients within patients. 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 and A tab situated on the right hand corner of the screen. I just want the company to 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 of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your dashboard.

37:31 If I may, Leanne, if I could just hand back to you and if I could ask you to to moderate those questions from those in the room and those that have come in online, and then I'll pick up from you at the end. Absolutely. Thanks, Mark.

37:43 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. That's great. That's great. In in the middle on the left. Paul, this could one of you give us a few minutes on exchange rate effects both in terms of what 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 and exchange rates. We we the rates that by which we translate the our overseas operations to The UK, excuse me, are a twelve month twelve month average. So very little impact really for the of of the movements that we've seen at the latter end of the financial year.

38:28 But we are seeing the impact in the current financial year, and they are positive because we are translating overseas currencies to the to sterling. So so far, they're positive. And we're not seeing any huge swing in terms of componentry purchased from overseas. We we are well stocked in terms of that componentry that we would buy, for example, from The US or from from Europe. So so far, no negatives in in in our business. Are we using the forward markets at all? No. We didn't. We just take No. We don't. Yes. We don't. Exactly. Policy. Yeah. How much of that first quarter 20% Mhmm.

39:17 Would you describe to currency movement? I think percentage terms 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,

39:34 you know, it's not really impacting us, but we're gonna be a winner over the course of the year, I would say. Yeah. For your EPA approved product launch in North America, can you explain if you're going through a sort of state by state buildup for a big bang? And just a little bit about your partner for North America commercial relationship and what their manufacturing. So we started the state by state registrations nine months ago. We've got 45 of or no. Correct me because I was getting my number states wrong, but I think we've got 46 out of 52. Oops.

40:22 What? Have I got that wrong? Well, 50 states, I suppose, and two two dependencies. Oh, okay. We're nearly there. Nearly there. We're waiting on California and another couple of stragglers, but we're pretty much there, which which coincided nicely with these three conferences being booked by Parker, the Tate's. Parker LaVoche 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 conductor gels that are used with every ultrasound procedure. So the the president and major shareholder was a chap called Neil Brucutter, and it was his father who invented these gems because in the very early days of ultrasound, we used to put a patient in the bath of water to because the water acts as an electricity transmission wall to barrier or whatever.

41:23 And then he he devised these gels that are used that can be put onto the tip of the ultrasound probe transducer, and they might be leader in that business. But what that means is that wherever an ultrasound procedure takes place, whether it's into cavity or whether it's on, you know, on the tummy or the shoulder, sports, rehab, or pregnancy or whatever it may be, the gel sheets. Every single ultrasound procedure requires the use of gel because it enhances the urge. So where ultrasound takes place, Parker is gonna be hanging around that. And so they make for us an ideal partner because our just our ultrasound disinfectant is used every time probe is used in between patients. So it's usually one patient has to be disinfected before use on the second.

42:19 So I think the profile of our was identified by us early on as as a perfect match. As things have have evolved, they are perfect matches of meeting of minds when it comes to business approach. We we are so thankful that it's owned by an individual or family and not a corporate partner. We've had a couple of experiences with some of big corporations in The United States and elsewhere. You know? And you get people shifting in the head of the division one day, and then they move on another, and and you just don't get any continuity in terms of relationship. But so far, I have to say our relationship with is is really, really, really really sound. Now just to finish off that point, so they manufacture and they sell, and they sell through distributors in The United States.

43:10 So they have a well established network of distributors, established over many years, and our product is going through their network. And our where we will be working closely with them is to make sure that the sales infection prevention sales team of, say, Henry Schein, which is one of the larger distributors in The United United States, understands our products, can speak compellingly about the virtues deployed outside in TRISTEL and has all that scientific knowledge and backup and support. And we will be channeling it with our domain knowledge through to those sales teams working with distributors, that's our and that's what we see as our our principal role in in future success of TRISTEL in The United States. Right. And are they is once you gain again, the individual state registrations, is it pretty much launch immediately on that because they have to get proper device? Yeah.

44:14 Absolutely. So what we would do with China, for example, we would partner with say, you didn't have the product, stop the product, stop the 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 cost about the the the state borderline from one state where we have approval to those few that we don't. And we we rely upon them to manage that, and and but we're nearly there. Maina. On the non core products, you reported them as discontinued operations in the half year stage and restaged similar numbers. Mhmm. And for these results, they're not to move anything else.

45:05 Why why did you change your mind? Because we believed in February that we were reporting a discontinued operation, which the accounting policy around it, we thought we satisfied, which was that there's inputs, outputs. There was a whole division, if you like, 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 to restate it. Yeah. Now it's That's hard 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.

45:54 But what what it is clear, I think it's important to reiterate, is that the revenue in the period of discontinued products of 1,500,000 did not have any profit contribution, and it ceased at the end of thirty first of December. So nothing happened with those discontinued products post in terms of revenue, post December 31. 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 the second half. But it it all all, for that same, was ended in the background. You mentioned on FDA approval, there'll be the third high level disinfectant approved.

46:46 Are the other two already approved 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 that's the product that we always refer to in the ultrasound space, and and it's a product called TROPHON. It is designed to accommodate ultrasound probes. It's a box in which particular chemistry to us is called hydrogen peroxide. It's something like ours, an oxidizing agent in a very high performance system pattern, is injected in a 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.

47:34 And that is that got an FDA approval. It's a high level disinfectant process some ten years ago. The Tropon and its which is a product manufactured by an Australian company called has been very successful in The United States. Now we compete with sorry. A bit louder. Yeah. Please. So we compete with Tropon all around the world, including in Australia at their home market. We do very, very well against them. It's a keen rivalry, and I'd say that the the the benefits and features of our product to weigh heavily in our favor in the competitive situation. We know what our battleground is gonna look like with an FDA approval.

48:24 We will be competing in many respects with TROPHONE. Now TROPHONE's 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. 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 an answer or something that maybe 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 snobber's room, then that's what will be adopted. So we just have to go and find those opportunities and go through the the persuasion and conversion process to to win that part of the market that's not owned by trof trofone. But, of course, we'd also compete with trofone.

49:28 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 Tropon and other situations in which Tropon takes some business away from us because the hospital wants to have a machine rather than rely upon the nerve stretches before the high level disinfection process. So what's good there is it's we know what the opportunity is and where to go looking for it. So if that answers the question, that's principally what the the the the battleground is gonna look like in The United States. And it's one that we're pretty familiar with. It's the same battleground that we have marched across, and they marched across, and we marched across in in all other countries in which we compete with them. I hope generally you price compared to the.

50:23 They're capital and consumable. The consumables are highly disinfectant in a small dose, so we would price to their consumable. You used the term the likelihood of success on challenge. Can you give us an actual probability number on the likelihood of failure? It's a it's a tough one, isn't it? Yeah. Because that's that that is the big headwind. And Well, potentially, big headwind. That's it's the catastrophic headwind. And what is the probability of catastrophe? Okay. I think that we will succeed, but I I'd like to ask you a question. Why do you think it's catastrophic?

51:09 Well, I think the markets would you know, 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 with the 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 good shares would be marked down quite dramatically on the day. Don't you think? I think you're probably right. Yeah. I should be careful where strains of this territory, but there is an underlying business that when we we resume and let's presume that we resume the growth trajectory and the profitability that we achieve for well, how many years was it? Twelve years. Then there's a valuation of the company based upon that underlying business. It's successful growing with a huge global opportunity to grow into it.

52:02 And FDA approval or not, we cannot be denied or have withdrawn from us the opportunity to penetrate the ultrasound market with the eBay. So I I mean, is it it's a question neither of us can answer. As I stand here now Wilbert, you have answered it. You have estimated the likelihood of success. I have. You have estimated it. I mean, what is that then? We'll reverse it. Then tell me about the failure rate. What is the success rate you're anticipating in your projection? I think we're going to well, first of two things. I think we'll get an approval. That's binary. That's a 100%. Okay. I think. It's old stuff. Well, I I do We wouldn't be doing it unless we thought we were going to succeed. Will.

52:57 If you know? I know. So de novo is slightly different, correct me. If I'm wrong, there's a little bit of to and fro to and fro that's possible. There is some to and fro. That's right. And I think that that that is being played out at the moment we're in active discussion, indeed, in negotiation with. There's still the additional testing that we need. They have a principle which is lead least burdensome approach, so they can't ask us to do things that sort of make no sense. Now we can only exercise service control over the agency and 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 would take another two years and we've got a hundred and eighty days clock ticking to finish.

53:44 So that's one of the sort of guiding principles that that we will operate under. All of those things will make me think that we will succeed. Great. Just on the American hospitals, you said they're they're making a difference. Why aren't there you never talked about the rate of infections in the American hospitals. How many people get infected? Because they're not the hospitals are making do with the. There's plenty of data around infection rates, post procedural infection rates in endoscopy, ultrasounds. So how many people in The States have been infected? Oh, I wouldn't have that number, but it'll be a lot as it is in countries. And published papers and surveys.

54:29 There's a massive published information about those procedure that infection rates across a whole range of instrumentation that we we're involved with. Just on the FDA approval process, once you send in the the next additional information, is is that it then? The FDA will 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 time table to digest review and digest all the information we provide. So it'll be a lot more information without having go through it. Then it'll be a yes or no answer based on what you've As I understand it. Yeah. So that's binary as well.

55:19 And I'm sure that the one of the principal focus is the fact that it's effective, you know, before they approve it, but the other one must be, you know, whether there's potential collateral damage to the user and all of that sort of thing. Mhmm. And you've solved those problems in every other country. So Yeah. That's right. And all of that's been all all all of those issues, toxicology, biocompatibility, impact upon the insurance themselves. We have to make an economic case that it's a a product that's worth then improving because of the benefits for health care and for the patient population. So all of those things are within the submission. Mhmm. I mean, there's a lot of data. Last question. Can I I'll just add one one quick thing, Michael, that we we have to remember that the Duo product that is going through the FDA program has not been designed for The United States?

56:16 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 the TRISTEL product. So it is it's a well proven product. And so we we and then that's 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 we're 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 where were the areas that the FDA needed to see? I'll I'll give you one example.

57:11 In terms of micro micro testing, there are three sort of categories of micro testing that you you have to do. One is they call it potency testing. So it's sort of testing test tubes inside the laboratory where inside the test tube, there's a particular microorganism, you add a disinfectant 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 the. We passed that, and that's that's a stage gate. Don't get through that. It was five years ago, then you don't go on. We go through it, and we're not. And the next massive body of work is that you have to prove in your submission that when the disinfectant, in our case, is applied to the surface of a medical device that it's intended for, that when you wipe that device with a chronic lymphocyte chemistry and you do recoveries and you swab it, use some method to to to see whether any microbes left on it, they've all disappeared.

58:21 And for that, you have to show to the FDA that you've got a record as many instruments as would be representative of the ultrasound market. So we had to locate, find, buy, make store store of steel, probes from GE and probes from Siemens and probes from Toshiba, and it was a huge amount of work. And each one of them went to 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 disinfection technician, and they use your product in a sort of live setting, and then the the swabbing and the recovery takes place.

59:12 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 the what was used in the potency testing in nineteen two thousand fifteen, sixteen was out of date, and so rendered can 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 guideline says that it should be the same batch that's used across all three tiers, three tier approach. So a bit of 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. That's a good example.

1:00:05 Now we've gotta get it done. We've passed those tests in the past. We've gotta get the product out to The United States. We've gotta make sure we get lab time. So there are lots of logistical sort of arrangements and everything else. There's no reason why we won't repeat the successes we have had in from a science perspective that we achieved in the past, and we did it multiple times. Given given the time we're approaching the hour, we're just gonna take a couple of questions from online, if that's okay. So you've already talked about capacitors in the ultrasound market and with Tropin, but are there any signs of emerging capacitors using chlorine dioxide? The answer to that is unequivocally no. Okay. Brilliant. Can you expand on your overseas expansion plans?

1:00:50 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 earlier, more than 14 countries. So Berlin covers Austria, Poland, and Switzerland. So it'll be four countries that we've got, you know, see the it's a German subsidiary. So in total, 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 about to appoint in Vietnam, in Philippines, a second distributor in India because India is not getting kicked off.

1:01:40 There were a lot of countries in which we still have to establish a presence. So I think that answers one part of the question. Yeah. And the other one part was The other part was about number of staff outside The UK. Defer to my colleagues. So we have 220 staff worldwide, of which a 110 are based in The UK. But the majority of staff overseas are sales staff. So all of our overseas offices are basically they they carry out distributor functions, so they are importing and selling products. There's no or very little manufacturing outside of The UK. Brilliant. I have one more. What is the anticipated gross margin of US sales given the partnership with Parker if FDA approval is achieved?

1:02:30 A 100%. Because it's a royalty basis. So so we we take a a percentage of the sales value that that is earned by Parker manufacturing and then selling through the distribution network distribution network, and that percentage comes to us as a royalty. It be included in our revenue number, but this effectively goes straight to the bottom line. May not last questions. It's for the last question. Just last on cash. Yeah. On the other day, we had two employees there, really bullish on profit. Mhmm. They said somebody wants a time that was gonna sell really big in the NHS.

1:03:18 And look at your results today, sales down four three. Gross margin of 59% is just a bit bigger than your non core products. So Yeah. Does it really have a big future ship business? It it does have a big future. You're absolutely right. The the the year has is is an anomaly. It's sales have fallen in The UK, and and I think that's because of the mix of products within there. The the the new products that we are launching, the 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 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 under as medical devices even though they are surface disinfectants.

1:04:26 So that's a piece of work that we're through. And the and the the gross margin has fallen as a consequence of sampling and and giveaways in order to to to get the product moving in those hospitals where we're launching. But, Mayna, if you're gonna take take a long term view Yeah. We have a big ambition. It's not gonna happen in anything other than many years. You have you have been talking about hot shots Yeah. And I roll. Don't think the cash part is not Well, I think if you backtrack, we first sold wipes in 2003.

1:05:18 '3. Yeah. So those early years, there was, you know The business had revenues of 3,000,000. But I I think I mean, things in it we're we're long term and strategic, and I think we just have to not expect from year to year enormous dramatic progress. 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.

1:06:08 Well, many thanks. Many thanks to yourself for hosting this. Many thanks to all of you who are here and those who joined remotely. We feel very positive about the prospects of the business. We know that the last three the disruptions 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 Thank you. That's great. Paul, Liz, thank you once again for updating investors this afternoon. Can I 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?

1:06:57 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 TRISTEL PLC, we'd like to thank you for attending today's presentation. May I wish you all a very pleasant afternoon.