Gold Coast dental group Smiles Inclusive announces finance relief following poor first-half results

Smiles Inclusive shares soared as much as 74 per cent higher this morning after a crucial agreement was reached with its lender.

THE team at under siege Gold Coast dental group Smiles Inclusive finally have something to grin about after lender NAB agreed to waive any breaches of its debt agreement.

Shareholders reacted positively to the news sending securities 74 per cent, or 10¢, higher to reach 23.5¢ in early trading before coming back down to 18.5¢, or 37 per cent higher, by 10.30am.

Last week the company requested a trading halt after shares plunged 52 per cent in a single day to fall as low as 10¢.

Smiles had earlier said it was in danger of breaching its agreement with NAB, with which it has a $36 million finance facility, and the bank had not provided a waiver to its covenants.

This morning the company said it has now received a waiver for any historic breaches of its covenants.

Smiles Inclusive founding CEO Mike Timoney has stepped down in the wake of poor first-half results for the Gold Coast dental company. Picture: Annette Dew

“The company’s leadership team is working cooperatively with its senior lender to manage future covenant compliance including an independent review to ensure that it complies with all covenant testing going forward as operational performance improves,” Smiles said in an ASX statement.

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The company also said that Tony McCormack, previously announced as taking on the role of COO after founding CEO Mike Timoney stood down, has stepped into the CEO role on an initial term of two years.

Mr McCormack has been with the company for just three months.

Smiles said he has prepared a plan with a focus on improving the performance of the company and its 56 dental practices.

Gold Coast dental roll-up Smiles Inclusive has had a rough ride recently with shares plunging in value and its founding CEO Mike Timoney stepping down. Picture: iStock

His remuneration has been set at $285,000 per year inclusive of superannuation.

Smiles released its half-year results on Thursday night last week, reporting an after-tax loss of $1.59 million on practice revenue of $16.1 million.

The company blamed a number of operational issues for the loss. They included the nondisclosure of a court case by a practice vendor, the unexpected deaths of a practitioner and business manager, delays in branding, failure to put practitioner monitoring and staff rostering systems in place and additional integration and stamp duty costs.

The court case related to a joint venture partner being fined for administering radiation without a user licence in 2016 — before the acquisition by Smiles.

Mr Timoney said management had been distracted by legal proceedings and the deaths of the practitioner and business manager.

“The impact of a number of significant events over the past six months drew management attention away from ensuring that key processes and systems were firmly bedded down,” he said in an ASX statement.

“We are however now fully committed to this and to continuing the organic growth initiatives previously outlined and executing additional operational efficiencies.”

Smiles said it continues to believe the fundamentals of the business, which was started to consolidate practices in a highly fragmented market under one group, are sound.

“The board is confident that it will deliver a substantial improvement in business performance over times,” it said.

Smiles is forecasting a full-year loss of between $500,000 and $1 million. Smiles listed last year after acquiring a portfolio of 52 practices under a partnership model with individual dentists who sold their clinics but remained investors in the business.