Tristel has now released its results for the full year ending 2014.
Revenues increased across all business sectors with Human Healthcare up £2.6M, Contamination Control up £282K and Animal Healthcare increasing by a more modest £24K. Cost of sales also increased but not by much and Gross profits were an impressive £2.4M higher than last year. Both depreciation and amortisation fell when compared to last year but wages increased by £587K and there was a foreign exchange loss compared to a gain in 2013. The big difference, however, was the lack of a £2.2M restructuring cost that occurred last year as some assets were impaired and the headcount was reduced, but other admin expenses were £524K higher to give an operating profit some £3.6M higher before a tax bill reduced the increase over 2013 to £2.6M to give a profit for the year of £1.3M.
When compared to the end point of last year total assets were some £2.3M higher driven predominantly by a £2M increase in cash levels and a £211K increase in inventories, only partially offset by a £224K decrease in deferred tax assets. Liabilities also increased when compared to last year as trade payables were up £486K, deferred income was up £440K and tax liabilities increased by £347K. Overall net tangible assets increased by £1.2M to £5.8M.
Before movements in working capital, the cash income was a decent £2.7M, up by £2.1M from last year. An increase in payables was predominantly responsible for an even more healthy net cash from operations, up £2.6M top £3.3M. Less than a third of this cash was spent on capital expenditure with £677K going on tangible assets, including the addition of 20,000 square feet of warehousing space in Newmarket, and £479K on intangibles. The only other major expenditure was the £272K paid out in dividends to give a positive cash flow of just under £2M which is a very decent performance.
Human Healthcare profits were up over £2M to £8.3M with increasing revenues from both the UK and the rest of the world. Animal Healthcare profits were up £37K to £507K with the increase coming from outside the UK. Contamination Control profits were up £158K to £595K with increases coming from both the UK and other countries.
A lot of the growth seen over the past couple of years has been from overseas markets, growing by 61% and 33% in 2013 and 2014 respectively. The overseas operations are now cash positive and the board anticipate much of their future growth to come from these areas. The group currently has direct operations in New Zealand, China, Hong Kong, Russia and Germany. The products the group produces require the continued purchase of consumables and enables their clients to minimise capital spend and infrastructure investment.
The group is very reliant on one customer with26% of sales coming from just the one client (presumably the NHS) which was an increase on the 19% it accounted for last year. There is a risk that during an economic downturn, there could be a cut back on the supply of funds to the NHS which may impact on the group. As a new ten year lease was agreed on their HQ, the group now have £2.3M repayable under operating leases, £296K of which needs to be paid within a year and this represents quite a large increase on the total previously incurred. Going forward, the group have committed to the acquisition of £300K worth of items, one new item of manufacturing equipment and a new Enterprise resource planning system. Management remain optimistic for the foreseeable future and they are anticipating entry into new product segments shortly.
After serving on the board for three years, Christopher Samler, the chairman is stepping down and Francisco Soler is taking over on an interim basis. This is a bit of a shame as there is no doubt that Mr. Samler has presided over a very successful turnaround for the group.
At the current share price the shares are yielding 2% rising to a respectable 2.6% on next year’s consensus. The shares are not exactly cheap on a P/E basis with the current ratio being 25.3, lowering to 19.2 on next year’s forecasts. This is clearly a good set of results for the group. They have successfully transformed themselves out of a collapsing market and now seem to be expanding well. The main thing to note from these financial tables is that the cash intake seems very healthy. Out of the £2.7M before working capital movements, only about £1M went on capex with the rest available for dividends/acquisitions/hoarding. At this share price, though, this growth seems to be priced in and it is a shame to see a successful chairman leave. Finally, there is still a reliance on the NHS, all of which makes me think I might dip in if the price falls at all but am happy to hold at these levels.
On the 3rd October, Franciso Soler, the interim chairman and largest shareholder sold 350,000 shares which takes his holdings don to 10,624,988 shares and 26% of the issued equity. This is not a big sale in the grand scheme of things but it’s never good to see.
On the 16th December the group released a trading statement that indicated the strong trading highlighted at the final results has continued. In the last six months, revenues are expected to be greater than £7M and pre-tax profit to be no less than £1M which is a £300K increase on the same period of last year. Growth came from all areas of the business, both within the UK and elsewhere. This is a a decent update and I am more than happy to continue holding.