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By Lee Wild

Date: Wednesday 23 Jul 2008

LONDON (ShareCast) - Proventec has cleaned up over the past few months, leaping 28% off May’s low as investors wise up to the firm’s potential in ridding UK hospital wards of life threatening infections such as MRSA, C diff and E-coli.

The company is led by David Chestnutt, finance director at Liverpool Football Club in the late 90s. Its OspreyDeepClean unit specialises in dry steam cleaning technology that can clear an area of germs and bacteria without using chemicals. Interest is rising as legislative pressures and performance targets get hospitals and trusts in cleaning mode.

In January, it won a 14-month tender for the sole provision of specialist steam cleaning equipment to the NHS. The deal was a direct response to the UK government's £50m of extra funding for the Strategic Health Authority

Full year profits, announced today, grew to £1.34m from £1.31m a year ago, but a 10-month contribution from new addition, Contico, helped turnover almost triple to £14.32m.

“Undoubtedly the biggest boost to our results came from Osprey and the continued acceptance of a 120-page report carried out in conjunction with the University College London Hospital, confirming that dry steam with the right tools can eradicate healthcare acquired infections,” Chestnutt told ShareCast.

“That data is scientific and effectively is testimony to the company’s products and the way steam can be used as a disinfectant tool and best cleaning medium for the healthcare market. Top infection control professors are endorsing the product. This is door opening at a very high level.”

The UK report, signed off in March, is now being prepared for publication in either a UK or European journal where it will be open to peer review and further stamp of approval.

“There are somewhere between 1,400 and 1,500 hospitals in the UK and we’re in 50 where we’ve sold one machine per ward, making 30-60 per hospital,” said Chestnutt. “That’s the target and we’ve only just scratched the surface. We’re in talks with double that number.”

“The cleaning regime in UK hospitals is dominated by the cleaning product manufacturers, with the cost of bleach making up a huge proportion of costs,” said Chestnutt when asked why hospitals would not employ his technology.

“We’re talking about a fundamental shift in approach. That can’t change quickly. Nothing changes quickly unless by government diktat.”

“There are still very strong budget issues in the health sector. The emphasis will move from chemicals to steam, but it will be slow.”

In June last year, Proventec paid £5.5m for 80% of cleaning and hygiene equipment and liquid dispensing systems firm Contico. Today it cautioned that higher fuel costs and a stronger euro had forced it to claw back costs through price hikes.

“Costs are being passed on. We are not immune from factors affecting other UK companies,” admitted Chestnutt.

“As specialist products these increases can be passed on in the form of higher prices. Some customers are OK, but others are holding the business to the contract.”

“One of our raw material suppliers said the price of plastic pellets used for moulding have soared by as much as 116% this year.”

The group raised £4m in loan notes earlier this year as part of its dual listing on Alternext, a market operated by NYSE Euronext, in Paris. The move has already created more interest.

“It’s there for acquisitions,” said Chestnutt. “There are two or three that we’re looking at which could be paid for by a mix of shares and other means.” Targets in Germany and the Benelux countries have been mentioned.

“The cash is a war chest, there if we need to move quickly.”

• News Channel