Gold Coast dental group Smiles Inclusive has $12M wiped off market capitalisation after disappointing cash inflow

THE sudden death of a dentist and a fine for administering radiation without a licence has wiped the smiles from the faces of a Gold Coast dental group.

THE sudden death of a dentist and a fine for administering radiation without a licence has wiped the smiles from the faces of a Gold Coast dental group.

Smiles Inclusive’s stock fell 8¢, or 9.6 per cent, to close at 75¢ yesterday after the ­release of a business update on Wednesday.

The losses shaved $12 million off the company’s market capitalisation and mean the share price has fallen 25 per cent from its IPO price of $1 a share.

Smiles announced disappointing receipts from customers of $11.6 million for the first quarter of the financial year.

Mike Timoney heads up Gold Coast dental group Smiles Inclusive. Picture: Annette Dew

It said, in a statement to the ASX, that the cash inflows were below expectation due to “isolated issues” at joint venture partner practices.

In the first instance Smiles said an entity related to a joint venture partner was fined for administering radiation without a user licence in 2016.

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It said this happened well before the practice’s acquisition by Smiles, which debuted on the stock exchange earlier this year with a portfolio of 52 practices.

“The proceedings were not disclosed prior to completion and have had a negative impact on the revenue of the business through the loss of patients,” Smiles said.

Smiles Inclusive listed earlier this year after a “roll-up” of 52 dental practices under one company.

“Smiles has obtained legal advice and commenced a claim against the vendor of the relevant practice in ­respect of multiple breaches of the acquisition agreement.”

In another case, Smiles said, the sudden death of the lead practitioner at one of its Sydney practices in July had resulted in the temporary closure of the practice and the loss of patients.

It said the “tragic death” had led to the loss of patients due to the “specialist nature” of the work performed.

The company, which is headed by managing director Mike Timoney, said revenue and cash inflows had ­increased last month.

It said cash outflows of $15.2 million for the September quarter had included $900,000 in stamp duty costs, $1.9 million in integration costs associated with the ­acquisition of the 52 practices, and reduced working capital requirements due to consolidation of the accounts from different practices.

The company has flagged $20.3 million in cash outflows for the next quarter, ­$8.5 million relating to acquisitions.

Mr Timoney said he was pleased with the progress of the integration of the dental practices as well as ­opportunities to roll out ­national marketing for the Totally Smiles brand.

“Our unique business model (under which dentists who sold practices remain ­investors in the business) ­continues to be well received by prospective joint venture partners and we are making good progress with a number of acquisition targets,” Mr ­Timoney said.