Tristel plc (TSTL) Earnings Call Transcript & Summary

Good morning, and welcome to the Tristel plc Interim Results Investor Presentation. [Operator Instructions] I'd now like to hand you over to Chief Executive, Matt Sassone, good morning to you sir.

Good morning, and good morning to everyone that is joining us online today. Thank you ever so much for taking the time to listen to our 2024 interim results. I appreciate many of the people that are joining us this morning are aware of the Tristel story and what we do. But for those that are new to Tristel, I'm just going to take the first couple of slides to explain who we are, what we're about and what we do. So our company is an infection prevention company. Our purpose is to prevent the transmission of micros from one object or person to another. How we achieve this is by applying our very powerful chemistry and which is chlorine dioxide to the target environment surface or medical device. Our products fall into sort of sub 2 categories really. We have our Tristel Range, which is focused on the decontamination of medical devices. And we have our Cache range, which is focused on the disinfection of hospital services. You can see there; we have an ambition to be a leader of the Tristel leader in the point-of-care decontamination medical devices. And with regards to the Cache ambition is to be the global market leader in the niche of sporicidal surface disinfection. So not the entire hospital surface disinfection market. When you look at the split of our 2 businesses, you can see that Tristel represented 87% of H1 sales. And you can see what kind of target medical devices that we apply our chemistry to. And we're mainly focused on non-lumen or single-lumen medical devices that are heat sensitive that can't be sterilized or decontaminated by normal means. And in the last 12 months, our chemistry has been used over 23 million times for the medical device decontamination. Then sort of newer portfolio, the Cache portfolio, that represents 8% of our H1 sales. And we are focused on and sort of a more general market and surface infection. And you can also see there we've put for the first time, the number of kind of cleaning events or disinfection events with our Cache range, which is GBP 20 million. So it's a large number, but obviously generating much smaller revenues. How do we win? Well, on the Tristel, it's always our value adds and our value proposition, which customers really appreciate is the convenience. We are -- have the ability to provide disinfection at point of care. We do it in a very fast and efficacious manner with contact times between 30 seconds or 2 minutes depending on the products. Our chemistry is safe and presents no risks to the users and really sort of things that set us apart is our compatibility. Over the years, we have been testing approved to be used with thousands of different medical devices. So we have a very compelling offering. We do have competitors, and these are a variety of forms. Some of manual like soaking and others are automated like vaporized hydrogen peroxide. On the Cache portfolio, we win again through the unique qualities of our chemistry, demonstrating higher efficacy than the products they use today, faster speed of action compared to what they're using today. And then we are addressing some of the needs that our users have. If we take antimicrobial resistors, for example, some of the cleaning products that they're using today are actually sort of adding to the problem, whereas this is something that we do not contribute to. And also some of the chemistries that they use today are quite toxic and damaging to the environment. And again, this is something that we're able to differentiate ourselves with regards. So we have some great products in an exciting market. And I, myself, have been with the business now for 5 months. So I thought it would be worthwhile for me just to spend a little bit of time to tell you my impressions after the first 5 months I have been with the business. First of all, is an exceptional company, not just with regards to our people and our products who are talented and outstanding, but also in the value that we're able to deliver to our customers. And then operationally, we're excellent. We have a robust sites of supply chain. We have first-class manufacturing and a great R&D team and sort of like a team that supports us on our day-to-day operations. We have been a business that's created the market for ourselves. We've been tremendously successful and comes with that, our competitors. And we see that these competitive pressures are increasing. It means that we need to sort of sharpen our needle and to maintain our success. And what we're doing there is focusing on our execution, but I don't want people to get too concerned about the competitive pressures. There's always been competitors for our Tristel offering. We just haven't to sort of deal with more sort of local players that occasionally pop up, but the team is well versed in what we need to do and ensuring that it doesn't distract us too much from our day-to-day activities. When we look ahead, very exciting future of the business. I can see a significant runway for growth ahead. In markets, we are taking share. We are seeing customers use high-level disinfection more and more. So the adoption is increasing. And we also recognize that we are penetrated in a few -- few markets across the globe, but there's many other new markets waiting for us to open up and for us to start selling our chemistry in those. So the near-term opportunities are very exciting. Over the last few years, we've invested significantly in our surface disinfection market. And this represents a significant opportunity for us. But also, we've got to take some care as we go forward for this market. Our secret success over the years has been focusing and being very targeted on profitable niches and we need to apply that same rigor to a surface disinfection market, and I'll talk a bit more about this in some of the slides coming up. The near-term opportunity to drive global penetration. Yes, basically, what I'm trying to say here is our greatest opportunity for growth is going to be within our existing markets with our existing portfolio. We are far from being penetrated. And we have the U.K. market as our core home market. But when we look across the globe, we see great opportunity to drive greater growth and also drive greater growth in the U.K., too. In the mid- to long-term, we see the potential to unlock major new markets. and everyone is very much focused on the U.S.A. I will provide an opportunity on the U.S.A., but the headline is, we feel very bullish about our success that we've had so far and the future we believe that we can win and win big in the U.S.A. market.

[indiscernible] we are -- I'll run through the financial highlights with you here. And we're looking at a set of results here where we've delivered strong performance in this first half. It's in line with both the market expectations, but also with our own internal forecast, our internal targets. Running down the highlights themselves. Revenue increased by 8%, up to GBP 22.6 million. That's 9% at constant currency which is, of course, slightly behind the growth rates that we have achieved in recent times. But we know where those -- where the issues are that have reduced our revenue growth percentage, and they are all fixable problems. So we feel that -- returning to double-digit growth is definitely achievable for us. But running down the P&L, then we can see that adjusted profit before tax increased by 19%, which we're delighted with, up to GBP 4.9 million in the half. Adjusted EBITDA was up by 14% to GBP 6.3 million, and we achieved an EBITDA margin of 28%. Adjusted EPS [indiscernible] at 8.17p per share. It was negatively impacted by an increase in the effect tax rate, which increased from 10% up to 25% as a result of patent box relief ending in this financial year. But nevertheless, our interim dividend has increased up from 5.24p to 5.68p per share, payable on the 11th of April with a next dividend date of the 20th of March and record date 21st of March. And that leaves us with cash and deposits, which increased up to GBP 11.7 million, up from GBP 10.8 million in the comparable period. And just a reminder, the company has no debt. Over on the next page, operational highlights. Well, Matt joined us in September last year, and I think we can state very confidently that it's been a successful transition. And he shared with you his first impressions. During the period, we made our application our submission for a second U.S. product clearance under a 510(k). So this is for Tristel OPH. It's a high-level disinfecting foam for the decontamination of ophthalmic devices. We received a request back from the FDA for additional information. And we're in the process of compiling that test data, is not a surprise to be asked to provide additional information, but we're going through the process of collating that, and we will submit that back to the FDA shortly, and still expect clearance by the summer of this year. And then a couple of other operational highlights that refer to the regulatory landscape that we're working within. The first is that we have been included in the revised American National Standards for our Tristel ULT technology. So that's an update, which now makes clear to users of the product that they can use a foam or a wipes that contains chlorine dioxide and of course, we are the only supplier of those types of -- products of that technology, and they can happily use those products within the U.S. And then a second regulatory point relates to Germany. So we've had much slower growth in Germany over the course of the last couple of years as a consequence of the question mark hanging over whether wiping with -- wiping a medical device is a validatable methodology for decontaminating it in between patient use. Well, now the regulators in Germany have agreed that wiping is a validatable methodology, and so they've issued a new guideline, which means that customers can now validly use it without any concern. Moving over on to the next slide, looking at sales growth by geography. Well, you can see we've got a couple of areas that we have had some issues with namely Australia, also within the Western Europe line, France and Hong Kong. So there are 3 areas that we need to pay a little bit of attention to, a run through them one by one. In Australia, we have invested in our sales force to build this out, having had a few individuals leave the company over the course of the last year. It does take a little while to get new salespeople up to speed. So we have seen flat growth in Australasia, but we expect that to rectify itself as we move into the end of the second half and into the first half of next financial year. In France, similarly, we've had a change in leadership in the sales team. And in both markets, we also have competitive pressures, which Matt touched upon. But none of these things are a permanent problems. They're all fixable issues, and we have confidence that in both of those markets, we can return to growth in the short term. And in Hong Kong, we have seen, again, 0 growth in the period, and that's predominantly because of our surface products, where what we see is where there's an outbreak or an epidemic, particularly in Hong Kong, then there's a very swift take-up of highly efficacious products to decontaminate surfaces such as our Cache range. But then over time, when cost pressures rise again, then we see the use of the product slowly dissipate. Well, that's a pattern that we're quite used to now in Hong Kong, but we are looking to roll out our newer Cache products out in Hong Kong to address that. But looking at the more positive side of things, Central Europe, on the back of that guideline change, we see 13% growth, driven by Germany. In Southern Europe, 14% growth. That's predominantly Italy, but we are going direct in having a -- a set up our own operation in Spain with effect from the 1st of January. So we expect strong growth in Spain as we go through the rest of the financial year. Malaysia and Singapore, also good growth and the Americas, of course, we're showing flat growth, but that's because of the mix there of royalties, product sales into the U.S. and also Latin and Central America are playing an important part in that growth. But all looking good in the U.S. and Matt will tell you more about that as we go through the presentation. And of course, the U.K. is a big one here, a 7% growth, which we're very pleased with because last year, we had a high level of growth as a consequence of price increasing, but now growth comes almost exclusively from volume increases in the U.K., which just goes to show that even in very well-established markets, there's always new opportunities for our products.

And I just want to jump in here, clearly before we move off this slide, just to sort of say, look, we appreciate the 8% year-on-year growth. We are pushing hard to get us back into the double-digit top line growth. So we feel that's very important. As I think about Tristel to be able to do over the years, and so we need to get back to you. But when you look at this breakdown by geography, you can see it's not a million miles way and it's not very difficult to identify what needs to happen in order to get us back up to that level. If we talk also about some other actions, more tactical actions that we're putting in place with regards to sort of like our markets and addressing some of the challenges we have with regards to Australia and France, for example, is also changing incentives over the past, the incentives have been focused on local profitability now they're focused on local revenue and some other -- some actions we have taken in order to sort of get ourselves back up and motoring again in those markets. So as we look over the 10-year sales record, we've had a tremendous track record of strong growth. That continues over the last few years, pricing has been -- price increase has been exceptional. They've been a big driver of our growth. We've now sort of -- that's been normalized, and we've returned to sort of like more standard levels of price increases. And we remain on track to deliver our 3-year financial targets. So looking towards the second half and looking towards the future, how are we going to drive greater growth in our business? So for the Tristel range, I've listed down here sort of 4 key levers for the business. The first is geographic expansion. We all recognize the opportunities that we have in the U.S. It is a very exciting market where we've just got our clearance, and we'll talk a lot more about that in some of the forthcoming shares -- slides, sorry. With regards to sort of like expanding our reach, well, we continue to invest in direct operations. There's made reference to Spain, but we're also going direct to Austria. And I'll mention a bit about India as well. And we're also looking at new markets. So exploring what sort of currently untapped markets such as Japan and Latin America. Then it's about our existing markets and how do we expand our application and our product application and get -- extract more from what we're doing Well, we have a great opportunity with our existing portfolio in existing markets, and we're far from done. We have a large runway. But we're also looking to get existing users to spend more with Tristel, and so to get -- create more value by adding more products that they can use, whether that be cleaning products, some of the new products we're working on, our digital traceability and the broadened adoption beyond our core ultrasound into other markets. We've got good penetration already into ENT, but there are other sort of like heat sensitive products would benefit from using our chemistry and benefit for being high-level disinfected and we continue to invest in that expansion. What we need to do though is maintain our clinical differentiation and continue to invest in that area, where all consumers and sort of like physicians, health care practitioners are no different to us. If we have a colleague or a friend that recommends, I think we immediately look to go and purchase that. And the same happens in health care. And by having that influence and having our users sell a product for us is a key sort of like growth creation and saying that we need to continue to invest in. And that's something that we will be spending more money in order to push that as a strategic lever. And our fourth strategic lever is working with the original equipment manufacturers, the OEMs. What do we mean by that? Well, we are very proud about our level of compatibility, but what I've seen in the first months with the company is some real examples of best practice. And I can think of many countries around the globe where we work hand in hand with these equipment manufacturers, and they are essentially an extension of our sales force. How does that happen? Well, we are present at their sales meetings. We are training them with regards to the Tristel offering. And when those equipment manufacturers are going in and talking to the customers about their technology and they get faced with the question, how can we disinfect this? They immediately think of Tristel and are promoting us at that point. In the same way, we are actually, in some countries, we're providing their staff with Tristel products because whether it be the sales staff or the engineering staff, they're going in and touching their products in the health care arena. And we're providing with our trust to -- Tristel products so they can go in it and decontaminate the devices and use it there. So it's great to see when I go to exhibitions around the world, trade shows around the world. The equipment manufacturers boots understands actually have Tristel products on it. It's great to learn of examples where the sales reps and the engineers actually have the Tristel products in their bags to protect themselves. And it's even better to learn and hear and say that we need to do more of, have those salespeople talking about Tristel at the point of sale when they're selling the equipment in the first place. So that's a good growth lever for us as we look to the future. Then on our Cache range, it's interesting. We talked about Hong Kong. And we talk about sort of like there being periods of time when infection control is more at the forefront, and we've all lived through COVID. But when it's not sort of like immediately front and center. This market tends to revert back to a much more sort of commoditized offering. That being said, it is a large and a significant opportunity for us. And why do we say that? Well, there are areas of the customer base, which are always focused on infection prevention is always front of mines. And these tend to be more of the high-impact areas like the operating room, intensive care units and neonatal units, dialysis centers, oncology units were infection prevention. It's always front of mind. And these tend to be more of the high-impact areas like the operating room, intensive care units, neonatal units, dialysis centers, oncology units where infection prevention is at most critical. And those sites are prepared to invest more in infection prevention. They value what we're able to bring a lot more and they are prepared to pay our premium pricing. And that state that we need to really focus on and keep. The secret to Tristel success over the years has been identifying profitable niches, being very focused on the profitable niches with our very differentiated offering and then targeting up on that. And that's exactly what we intend to do with our Cache portfolio. What we have seen in the first half of the year and is saying for us to be cautious about is we have this full portfolio now. We have this wide range. And we have this proposition that's very attractive. And naturally, you want to do a whole house conversion. So you want to go into a hospital into a trust and get every possible department using our Cache technology. And on the face value, that sounds very exciting, and it seems like the obvious thing to do, you're locking up the competition. What we have found, though, is that this tends to be very resource intensive. And this is where we must ensure that we have the right balance. And why is it so resource-intensive? Well, when you start to do the whole hospital and you're going to take on all of the staff in all the areas, there are not hundreds but there are thousands of individuals that need to be trained. There are some very ingrained practices that are hard to give up. And we have experienced essentially huge percentages of our sales team being tied up for weeks upon time trying to reach the different aspect -- different parts of the hospital, and without a great amount of return on it. So when we assess the opportunity, we're excited by it, but what we're doing is just sharpening our approach to ensure that we're getting the best return on investments with our Cache portfolio. So let's focus a bit more on some of the geographical opportunities we have. If I start you on the right-hand side of this slide and just talk a little bit more about Spain as an example. Over the years, Tristel has been very successful of using distributors to build up our business. And then when they reach a meaningful size, we then go direct ourselves. And Spain is another example of this, where we've had been working with a distributor very successfully. We've got to a point where we believe that it will be beneficial for us to go direct. That's the process that we've been undertaking. And we've been recruiting and getting our own infrastructure in place. So that when we went live in January, everything was ready and set and we were in a few weeks in, but it's all going very well. We're very excited by it. And we can sort of really focus on transitioning that business across before we then focus on some of the sales opportunities that we see and start to grow our presence there greater. We're looking to do that in other European markets and Austria is the next market that's been identified for us, and we continue to look at other opportunities we've got. But there are large untapped markets that are open to us that we're also looking at. So Japan is an example of this. Tristel has never been present in Japan. In fact, none of our competition really has been present in Japan. And but there's still a need out there. And Japan is the third largest health care market in the world. They tend to be able to pay a premium price for medical devices. And so on face value, this looks very attractive. It's always been scary from a regulatory perspective, but we've been investigating that market and creating a path forward where we feel that actually now is the right time to start to look for commercial partners in Japan and exploit the opportunity that is there. India, another large market that on face value offers a lot of opportunity. Tristel has tried over the last few years with distributors to get traction in that market. We now decided to take a slightly different tack and that's by recruiting directly with our own people there. But we all know India is a very large market. And I don't want to scare investors to think that we're going to try and cover the whole of the Indian market. In fact, we're taking a very small and targeted approach. So we're focusing on the cardiology ultrasound market. These are transesophageal echo ultrasounds that are used in cardiac surgery. This is the premium part of the market. Currently in India, they are using soaking technology. We've recruited 2 individuals from 1 of the largest equipment manufacturers of cardiac ultrasounds probes in India. And therefore, they come with extremely strong customer relationships, deep knowledge of the market. And geographically, we're being very targeted from a product segment, we're very targeted, and we feel that we can build and get some traction in the Indian market in the near term using them. The Middle East continues to be an area of the world where we're getting great growth and great success, and the team there are doing a great job. And in fact, in the second half of this year, we had a great wins in that region, primarily in Kuwait, where we've won 2 very large tenders for the Ministry of Health now. And that's a part of the world that we continue to see a greater adoption of our chemistry, and we'll continue to invest in to get greater growth from. Latin America is a bit light. Japan, an area of the world that we've never been present in, and we feel that we have got some opportunity here. We've been investing a lot in creating local clinical evidence that's saying that it takes time. But we believe that now is the right time to sort of like to explore the commercial partners and to sort of drive our market entry. And then finally, we get to North America, which is our largest opportunity, and I'll now talk about that in a little bit more depth. So over the years, ultrasound has always been the pride that we strive toward. It's taken us a long time to get there. We finally got our approval after a lengthy de novo process and now it's about commercial execution. On the face of it, royalties of GBP 37,000 do not seem to be the sort of like something that we can really sort of like claim to be a great success. But we are encouraged by the traction we're getting in that market. It's a very large market, as I said, but that GBP 37,000 actually translates through to 50,000 procedures. What that shows is we're getting a presence there. We're getting repeat use. We're getting a number of customers where the adoption is spreading. And that's where I really want to focus the investors' thoughts and talk more about. But as Liz mentioned earlier, normally, it takes us years to get guidelines to endorse our technology. We spoke about Germany where those guidelines, up until now, we've been present in the German market for a long period of time, but well over a decade. We've been present in the U.S. market for over 12 months now and to already see the guidelines come out and recognize Tristel and actually have it as a recommended means of performing high-level disinfection is a real feather in our cap and a real strong lever for us to drive greater growth. And so everything we're seeing about the activity we're doing is really give us a lot of confidence about the U.S. market. Our partner, Parker Labs, has invested significantly. They're keeping up with that level of investment. They believe in the opportunity, too. And we are seeing the actions that we're putting into place now accelerate the sales cycle. Our local team is working with them side-by-side, support them with regards to the sales course, but also supporting them with regards to the sales management, being present in their sales meetings, being present on regular calls to share best practice and drive our success in that market. So where are we at? Well, I made reference to the fact that we're present in 200 health systems, quite frankly, the leads coming to us and opportunities is not a challenge. We've got more opportunities than we can deal with. What we need to do is really focus down on our land and expand strategy. And what do we mean by that? Well, we've been getting penetration into these health care systems, but rather than skin the market, we want them to fully adopt Tristel rather than Tristel to be used on sort of a niche area of a few intracavity probes. We want to be used on all of their intracavity probes. We want to be on the vascular access ultrasound probes as well. And that's what we've been focused on. And what we're hearing from those users is we are easier, we are faster, we are more user-friendly. They love the fact that they don't have to leave the patient room. Some of their feedback has also been about the fact that were ergonomically, we're easier for the users. And we're seeing that now. So if I talk you through some of these examples, we just pulled out a handful here. In Boston, we got initial penetration at 1 account. And they adopted us for their vascular access probes. Now that started to spread. Where we will now be used in neurology. We've been used in the ICU. We've gone from being present in 1 hospital to now being present in 4 hospitals. And we're seeing that penetration in that system not only come as a result of our Parker sales efforts, but also organically as well, the physicians are talking to each other, they're praising our products and our chemistry and that's spreading to wider use. In Orlando, we're seeing the same, where we -- in a large health care system in Florida, Orlando. And after a lengthy sales process, we're now spreading adoption in their outpatient clinics and are now going into their hospitals as well. At the same time, as trying to get this deep penetration within the health care system. We recognize that we want to drive revenues as fast as we possibly can. So we have been working on some of the private practices. Why have we been doing that? Well, when you're going into the hospitals, you have a very lengthy sales cycle. It's typically 12 to 18 months. When we're going to these private practices, that sales cycle could be much shorter. It can be 3 to 6 months. And so we're trying to get that good blend, but we are getting some good success in these private practices. And it's providing us those quick wins. So that's encouraging. But as we focus on our success in the ultrasound, what I want to leave you with is this, whilst GBP 37,000 sales like a small number. When you translate that through to the actual number of procedures, that's 50,000, we are getting a lot of traction, and this is a flying wheel. We will start off small, we will start off slowly, but it is picking up pace. We can see on a monthly basis, the sales are increasing, and we are very encouraged and also very bullish about our ability to get success and the opportunity for -- in the U.S. ultrasound market. Switching gears but staying within the U.S., let's talk about ophthalmology, which is another area that is open to us. This is a slightly smaller market. It's got 16 million procedures on an annual basis that we believe would require high-level disinfection. That compares to the 50 million in ultrasound. But this is a market that is more of a greenfield that compared to the ultrasound market where you've got an established payer. The ophthalmology market is more greenfield where they're typically using soaking technology or a very low-level disinfection wipe to solve their needs. So it's an unmet need today. We applied for our 510(k) clearance from the FDA, so during H1. We got a request for some additional information. That is not out of the sort of usual that standard practice for the FDA. Typically, when they come back and ask questions, you hope that you already have the data they want on file. But in this case, it did require us to do a little bit more of a clinical study in the U.S. an in-use clinical study. That's underway. We've been working with the FDA to ensure that what we're doing will satisfy their request for information. And therefore, we feel confident that once completed that clinical work and presented the data back to the FDA, they will grant us with clearance sometime. Our expectation is that, that will be summer 2025. What's our route-to-market, how are we going to get success? Well, you'll notice in the presentation deck, and if you download and look at it after my speech, on the last slide, we do show a time a study that was performed in the U.S. comparing standard practice to our offering. And you can see there the efficiency that we bring and the reason why a customer will want to be swapping to our OPH products. But with regards to the route-to-market, we are looking at a mixed sales model. And what do we mean by that? Well, for ultrasound, we use Parker Labs, and we chose them because they seem -- they are a perfect partner for all the ultrasound market, Parker is synonymous to ultrasound. It's very well known. They've got a very high presence. They have existing relationships and working with them, it meant that we weren't an unknown going to the market. But Parker is not focused on the ophthalmology market. This will be a new ground for them. So we will continue to work with Parker from a manufacturing perspective. We may utilize them in some means as a nonexclusive distributor to enable us for logistics and invoicing. But we will work with some ophthalmology-focused distributors. So people that already have a presence in this market. But they will also be on a nonexclusive perspective. We want to retain a lot more control as we go forward in the U.S. with ophthalmology. And we have identified 8 large hospital users who are very keen to move forward with our products, which we will manage directly with our own resources that are already present in the U.S. market. And they will be our people on the ground. And as we get success, we will invest further and create our own direct presence. But I don't want people to misunderstand me on the call, we're not going to go out and recruit a sales force from day 1. We're going to be using distributors and our own presence we have, and then build upon it as we get success and have a very targeted approach. But we look forward to getting the approvals in the summer. We have learned from our -- what happened with their ultrasound approval. So what happened there was, we were going through a de novo clearance. You're not going to sort of like do things at risk, whilst you're waiting at de novo clearance is the first in time in kind clearance. So what happened there was we got the clearance in June 2023. We didn't start manufacturing the product until sort of November later that year. And then we made -- Parker made investments in the sales team only post getting that clearance because we're going down the 510(k) track, we have a much more defined path and defined visibility to get the approval. And therefore, we can start at risk to get ourselves ready, so that once we get that approval, we can hit the ground running and there isn't a substantial delay between approval and commercial operations. So in summary, the fundamentals of the business are very strong. We are profitable, cash generative, debt-free and continue to pay a progressive dividend. The opportunities are very clear in the medical device portfolio. They are significant, and we remain excited about the runway ahead of us in that market. The services infection as we sort of like go forward, we are refining our commercial approach on some of the recent learning, but it's a large market. There are areas that really do value our premium offering, and we feel that we can get a very good return on our investment in those markets. Looking ahead, we are continuing to unlock new geographies and the U.S. being the main one of those, but our growth will come from our existing products in our existing markets and the U.S. will just augment that as we go forward. So finally, the business is on track to its current market goals, financial goals, and thank you for your time. That concludes the presentation, and we'll now open up for questions.

[Operator Instructions] Liz, at this point, if I could hand over to you to read out the questions, that would be great, and then I'll pick up from you at the end.

Okay. Thank you very much. We have quite a few questions about tariffs in the U.S. So what effect will potential U.S. tariffs have on exports? Well, just a reminder to you that we -- the product is manufactured within the U.S. So predominantly, the revenues that the royalties that we receive will be totally tariff-free. So we don't see that as an issue. In fact, it acts as a barrier to the alternatives, which are not manufactured within the U.S. So that's a positive for us. How has the Parker U.S.A sales team being deployed? And what is the reporting structure for them? Well, they are deployed throughout the U.S. They are Parker's sales team, and so they report into Parker management, but we do work very closely alongside them, supporting them going on sales calls with them. So it's very much a joint venture for us out within North America. Next question. In the October '24 presentation, specific hospital groups were named as piloting Tristel products, what's the current situation regarding these pilot projects?

Yes. They continue. As we said, we're sort of being used actively used in 200 systems. I think what I'd really like to reinforce to the investors is, we are being very focused. And in fact, we've identified 7 health care systems if we were to get full penetration in those 7 health care systems, the numbers would just sort of like blow away everyone's expectation. So we continue to manage our pipeline very closely. We're on top of everything that's going on. We're tracking it. But really, our focus is landing by expanding within those markets, those systems where we already have some traction already. So yes, we're making good success and good progress in all the ones that we mentioned in September, October.

Thank you. Next question, what revenues have been derived from the U.S.A. in July to December? Well, there's a table within the interim statement that you can see the exact breakdown of North America and the U.S. itself with respect to royalties. Also products, which we have sold to Parker, which they then distribute out and also Canada and Latin America. So you can find that detail in the RNS itself. Why is reported EPS falling? Well, EPS has been impacted by the tax rate, and this covers another question as well. The company has now with the expiry of its patent for the use of a chlorine dioxide foam on a wipe, then that means that patent box has now been removed as a relief for us. And as a consequence, our tax -- our effective tax rate has fallen or have been increased from 10% up to 25%. And having said that, we continue to work on product development, and we do continue to apply for new patents and indeed extend the patent with respect to Trio, which is the wipe system. So for now, we don't have that level of patent relief that we had in the past, but it certainly has helped us enormously over the years, and we will work to replicate that with future products. What do you consider a safe level of cash for unexpected events? And what do you intend to do with the surplus? Do you Matt, have any plans for expansions, either bolt-on or more strategic? Well, I'll answer the first part of that, which is to say that with our current cash balance of GBP 11.7 million, then we've got plenty of comfort there. Certainly, a good half of that can be considered to be access to our operational requirements. But I'll hand over to Matt to talk to plans for expansions and bolt-ons.

Yes, absolutely. We're always looking at what's the best deployment of our capital to give the greatest return to our shareholders. So that's how we're always focused on. As you can imagine, the business gets presented with opportunities all the time, and we review them, and we make our decisions. We won't rule out anything right now, but I would just like to reinforce. We remain committed to investing in the business and generating the best returns for shareholders we can.

Thank you. Okay. So next question, what is R&D spend as a percentage of revenue when it comes in around the 4% to 5% mark if we're looking at capitalized R&D? Of course, we can capitalize product development, pure research goes through the income statement. And we do a little bit of that, but that's not included in that calculation, but would probably be another GBP 100,000 or so, but it's sitting at the 4% to 5% mark. If your emphasis is on moving to direct sales, then how can you incentivize distributors in new markets?

Yes, absolutely. In some markets, it always makes sense to go to the Tristel model. Some markets are lend themselves to being a Tristel model. Over the years, Tristel has worked with distributors and then taking the opportunity to go direct to its right. This is something that we are not alone in doing. It's a model that's used by many people around the world. So when we're working with distributors, they get excited by the opportunity the Tristel offering, and we work with them to build the business up as best as possible. Then when we do decide to -- if we want to get direct, we obviously work with that distributor at that time. So it's something that we do hand-in-hand, but the focus has always been and always will remain on getting traction in those markets and getting success.

Thank you. So we have 2 questions left. So if you want to get any more questions and then do it now. But to work with those 2, do the competitive pressures mean that you lose greenfield contracts? Or are you substituted?

I wouldn't say that we are losing business. It's just -- it's a distraction and a frustration. It's a frustration that you can get some small local players that come in and make claims, which are quite fictitious, and you have snake oil and salespeople out there sort of like saying whatever they want to try and get the sale. And we have to work hard to go into those hospitals and provide with the evidence and demonstrate that everything is on face value, and you need to look a bit deeper. So I don't want to alarm investors and say that we've got -- we're losing business. That is not the case. It's just a frustration that we have to deal with companies out there making claims that really, they shouldn't be making.

And last question for today, will your ultimate goal be to do your own manufacturing in the U.S.A.

No. Partnering with Parker is the best decision for the business. They are -- they make -- trying to work think but the volume that they're making with regards to ultrasound gel, they are extremely efficient. I don't think that's saying that we could have replicated with a small -- like small manufacturing site in the U.S. are working with them was definitely the right way forward. We have a sort of a contract in place, which works very well for us and enables us to make a significant amount of profits in the local market. So it ticks all the boxes. Wonderful. I think that concludes our questions.

Perfect. Matt, thank you so much for answering the questions from investors. Of course, the company can review the questions submitted today, and we will publish those responses out on the Investor Meet Company platform. Just before we redirect investors provide you with their feedback, which is particularly important to the company. Matt, can I just ask you for a few closing comments?

Absolutely. Well, thank you so much for attending and listening today. Let me leave you with this. Tristel has delivered a strong financial performance in the first half of the year, with adjusted profit before tax increasing 19%, 4.9%, supporting an 8% increase in our interim dividend. Looking ahead, we see significant growth potential in our core medical device business using geographic expansion as our primary driver. And our largest opportunity remains the U.S. market, and we are committed to building upon that. We are confident in our ability to maintain and build on our current trajectory, leveraging and expanding our current global footprint and innovative product portfolio, and the business remains stronger than it ever has done. So thank you for your time. And as you said, if you have any follow-up questions, please send them in.

Thank you very much.

Matt, Liz, thank you once again for updating investors today. Can I please ask investors not to close the session. As as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This going to take a few moments to complete, but I'm sure be greatly valued by the company. On behalf of the management team of Tristel plc. We'd like to thank you for attending today's presentation, and good afternoon to you all.