Buoyant Tristel doubles dividend

Disinfectant manufacturer Tristel (TSTL) is pinning its growth hopes on the North American market after a record first half.

In October, the group’s US manufacturing partner completed its first production run of Tristel ULT, its chlorine-based sanitiser for ultrasound equipment. In its first 10 weeks on the market, the company says the product’s revenue and royalty income was just under £50,000 – which management deemed a “positive start”.

Tristel plans to submit its ophthalmic device disinfectant to the US regulator for approval later this year, meaning it could soon have an additional revenue stream in the region. 

However, Tristel’s performance in the six months to the end of December wasn’t driven by these new opportunities. The UK remains its single largest market and price increases accounted for nearly £2mn of its recorded revenue growth, with the remainder down to greater sales volumes. 

This combination helped the company’s gross margin increase to 84 per cent from 81 per cent the previous year. But with the shares trading on more than 34 times projected earnings for FY2024, we’d argue that the good news surrounding the company’s performance and expansion plans has already been priced in. 

“We think there is a good chance the US ramp up will take longer than expected and that risk isn’t adequately factored into the current valuation,” said analysts at broker Liberum. Put simply: some uncertainties remain. 

Even so, the company looks like an increasingly reliable investment prospect – and the doubling of the interim dividend certainly adds a little sparkle to the stock. We’d like to see some evidence of progress in North America before getting involved, though, especially at its current price point. Hold.

Last IC View: Hold, 413p, 16 October 2023