MIDAS SHARE TIPS: Take a stake in disinfecting our hospitals – you could clean up
Amid growing panic over coronavirus, most companies are working out how to limit the impact on their bottom line. Tristel is slightly different.
The company specialises in infection prevention and it will almost certainly benefit, not just now but in the future, as governments, hospitals and consumers recognise the importance of effective disinfection.
Tristel makes disinfectant products using chlorine dioxide, a chemical that is both exceptionally thorough and non-toxic. The products are mostly used in hospitals around the world, as well as pharmaceutical clean rooms, where hygiene is paramount.
Tristel was founded in Newmarket in 1993 and co-founder Paul Swinney remains at the helm to this day, his enthusiasm for the business stronger than ever. The group is still based in the same headquarters too, but sales and profits have grown materially over the past 27 years.
Tristel specialises in infection prevention and it will almost certainly benefit as governments, hospitals and consumers recognise the importance of effective disinfection
Initially, Tristel focused on the UK, making products used to disinfect endoscopes, instruments designed to look inside the body.
Over the years, the range has extended so products are used to cleanse a variety of medical instruments. Swinney has expanded into other countries too, including China, and more than half the group’s turnover now comes from overseas.
Although all Tristel’s wares are based on its proprietary chlorine dioxide technology, the group continues to develop new applications, such as Rinse Assure, used in specialised hospital washing machines.
Medical instruments are cleansed in these machines but, if the water in the rinse programme contains even traces of harmful bacteria, there is a risk of contamination. Rinse Assure removes that risk.
New products are being piloted at various hospitals too, which will allow the chlorine dioxide kit to be used on hospital surfaces and floors. This type of kit is widely acknowledged to be more effective than most traditional disinfectants and take-up is likely to be considerable.
The company is applying for international regulatory approval for these surface and floor cleaners, a process that normally takes some time.
However, the Chinese government recently gave Spinney special dispensation, asking him to ship ten pallets of Tristel’s surface products for army use, even though the new kit has yet to be officially approved in China.
As Covid-19 takes hold, other governments may also look to speed up the introduction of the most effective decontaminators.
Tristel shares are £4.45 and were more than 50p higher earlier this month before the latest bout of market nerves. Even after the recent tumble, Tristel is one of the very few companies whose share price has risen this year.
Not only did Swinney report robust half-year results in February but there is a widespread belief that group sales will rise on the back of coronavirus fears.
Hospital hygiene is already a focus of concern, with patients often falling ill from infections caught on the ward – coronavirus is likely only to increase such concerns and prompt increased attention on scrupulous disinfectant processes. Tristel ticks all the boxes and demand is growing.
In Australia, for example, Tristel disinfectant has been specifically recommended to eye doctors, looking to make sure their equipment is coronavirus-free.
Brokers have already pencilled in a 14.5 per cent increase in sales to £26.2million for the year to June, with profits up 19 per cent to £5.6million and a dividend up from 4.6p to 5.5p. These figures may be upgraded and next year’s numbers should show strong growth too.
Midas verdict: Gaining approval for new products is a notoriously slow process in the healthcare industry and Tristel has taken time to become established. Looking ahead however, sales and profits should accelerate – as coronavirus concentrates minds on the importance of effective hygiene. At £4.45, the shares have long-term potential.