Tristel (TSTL:AIM) 747.4p

Loss to date: 30%

Original entry point: Buy at 492p, 16 December 2021

Infection prevention and control company Tristel (TSTL:AIM) announced alongside a first-half update (21 Feb) it would exit non-chlorine dioxide based products catering to the animal health and life sciences sectors, incurring a non-cash charge of £2.4 million, which caused the shares to fall 20%.

The business continues to be very cash generative, producing £3.4 million of operating cash in the six-month period. Underlying sales grew 5%.

We believe the rationale for the exit makes sense financially and sharpens the business focus allowing the company to sell one product range into the global hospital market, using one proprietary technology.

The decision is expected to have positive effects in the short and longer-term with faster growth in revenue and higher profitability.

Sales in the discontinued businesses have been falling for several years, which masked the growth in Tristel’s core business.

The bulk of revenue now comes from the company’s core device cleaning brands, Tristel (medical device decontamination) and Cache (sporicidal surface disinfection).

SHARES SAYS: Investors hated the write-down but we like the simplified business structure and remain buyers.

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