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Elite adding new services to triple revenue

Published:Wednesday | November 5, 2014 | 12:00 AM
Warren Chung, managing director of Elite Diagnostics Imaging Service. At right: A Magnetic Resonance Imaging or MRI machine, one of the services offered by Elite Diagnostic Imaging Services. File

Avia Collinder, Business Reporter

Elite Diagnostics Imaging Services is planning to add services in mammography and nuclear medicine, but for the next 14 months, will focus on energy-saving initiatives, says managing director Warren Chung, as the company looks to boost returns in year two of business.

"Mammograms are easy because we have the space," said Chung.

"However, nuclear services will take a lot more time and is more expensive. We are also thinking of dialysis, but we have to take things one step at a time," he told Wednesday Business.

The start-up has completed its first year of business within which the company opted to convert its US-dollar debt obligations to a JMD-denominated mortgage on equipment through National Commercial Bank Jamaica.

That happened six months ago.

"We paid down US$500,000 of our US$1.2 million in debt and mortgaged the rest," said Chung.

A total of US$3.2 million (approx $358m) covering equipment costs and working capital has been invested in the company, with equity investment to date amounting to $220 million.

Year one has been "tougher" than expected, the managing director said, although the new company has benefited from the spillover from the government run health system where machines are "always breaking down".

One challenge has been the continuing depreciation of the Jamaican dollar and its impact on medical equipment bought through financing, but that has been resolved with the refinancing of the debt, he said.

Elite Diagnostic is owned by a group of private partners through a vehicle called Excel Investments Inc. The company was launched with equity participation from NCB Capital Markets Limited, Sagicor Investments Jamaica Limited and Barnett Limited, owned by the Kerr-Jarrett family.

Elite is chaired by Christopher Tufton, who is also director of business development for Barnett Limited.

Sagicor Investments and NCB Capital Markets initially held 43 per cent of Elite Diagnostic, under a under a $147 million financing deal structured by Sagicor Investments one year ago. The venture capital transaction involved a mix of ordinary shares and convertible mezzanine financing.

Their stake has since been diluted to 37 per cent as new investors took up equity in the company.

Sagicor Investments said at Elite's debut that the medical diagnostics company would eventually be floated on the Jamaica Stock Exchange.

Elite's current services are bringing in an average of $7 million of revenue monthly, a performance that the company says will have to improve for investors to realise returns.

The investors are now focused on "making what we have work" Chung said, noting that expansion will come in time.

"We think we can triple the business in three years," he said, commenting on medium-term goals for the company.

Chung himself is a partner in Excel Investments, which owns majority shares in Elite.

He said that NCB CapM, which had indicated its intention to offload its stake eventually, was yet to decide when and the means by which it would do so.

That is "to be determined", he said. "Right now the focus is on growing the business and ensuring quality service."

The company, which launched into business in August 2013, has seen gross revenues of $82 million up to the end of September 2014 and now ranks itself among the top five service providers in its field, which last year was estimated as a $2 billion market.

Chung says Elite has grown due to "competitive prices, excellent service and superior equipment" and that the company "is gaining the trust and confidence of the medical community."

The monthly revenue of $7 million is expected to grow to $8.5 million in the coming year, he said.

The targeted turnover of $8.5 million is where revenues need to be to cover the expected return on investments to date of $220 million, he explained, adding that the signs that Elite can hit the target are already there.

"We have been averaging $8.4 million in the last five months," Chung said. "The company is new and increasing sales month over month since starting. This we expect to continue with increased marketing and awareness in the coming year."

Elite, on opening, targeted growth based on the overcrowded and under-equipped government-backed health facilities. Its medical imaging services include MRI, CT scans, digital X-ray, fluoroscopy and ultrasound.