Tristel can thrive without Covid-19 demand

Tristel’s (TSTL) gross profit grew by a chunky 15 per cent to £13.3m in the first half, which was helped in part by an 82 per cent surge in sales at its surface disinfectant business. But management warned that this rush has started to show signs of abating, as clients take a ‘more considered approach’ to their product selection. 

Meanwhile, prospects for the group’s main portfolio of medical-device decontamination products are starting to look up. The business had struggled in 2020 with fewer standard hospital procedures: in the UK, coronavirus restrictions seriously weighed on the NHS’ ability to perform elective operations. But successful vaccine rollouts could see that trend click into reverse by the second half of this year. “We are doing very well to get this vaccination programme underway,” said chief executive Paul Swinney. “There have been lots of distortions in our normal business pattern and we are looking forward to returning to a more visible pattern”. 

The company continued to make good progress in its international growth ambitions, moving its proportion of overseas revenues to 60 per cent, from 56 per cent in HY2019. Tristel also entered the Malaysian hospital market for the first time through a new subsidiary, and has already obtained the re-issue of governmental licences for its products. In the United States, the company moved closer to approval from the local Food and Drug Administration (FDA) authority, having completed a key study as part of its de novo submission. 

With bigger markets moving further within reach, and a more consistent rhythm returning to the group’s operations, Tristel still looks like an attractive stock. But a forward price to earnings ratio of 46 looks steep given existing circumstances. Hold. 

Last IC view: Buy, 515p,19 Oct 2020