Smiles Inclusive: Burleigh-based dental company announces positive cashflow after slashing staff and admin expenses

Under-pressure ASX minnow Smiles Inclusive has secured a lifeline from its major lender.

UNDER-SIEGE Burleigh-based dental roll-up Smiles Inclusive has secured a bridging loan from NAB so it can payout the Federal Government’s JobKeeper subsidy.

In a letter to staff on April 24, CEO Michelle Aquilina, who replaced Tony McCormack when he stood down earlier this month, said NAB had confirmed it would provide assistance through COVID-19 with the JobKeeper subsidy for eligible employees. The payment provides $1500 a fortnight.

“This financial support will improve cashflow and assist with catching up on payments due to dentists and JVPs,” the letter reads.

Smiles Inclusive is seeking additional funds to help turnaround the company. Photo: iStock

Late this afternoon Ms Aquilina issued a statement saying the business faced two challenges: turning around the company while at the same time managing the impact of COVID-19.

“We have received support from our lender, NAB to allow the Company to access the JobKeeper wage subsidy on behalf of staff,” she said.

“This will allow the Company to pay eligible staff the $1,500 per fortnight allowance and be reimbursed in due course by the ATO.

“Eighteen Totally Smiles practices reopened on 27 April to provide services in line with current federal government restrictions which limit the range of dental services that can be provided. While some staff have returned to work, We are monitoring the Government’s public health advice to determine how and when we can expand dental services and return all of our staff to work.”

Smiles Inclusive shares have been suspended from trading on the ASX since early March. Photo: iStock

Ms Aquilina said some commissions due to be paid to dentists had been deferred but the company is working to bring these up to date “as soon as possible”.

“The Board is in advanced negotiations on a potential transaction which will materially improve the Company’s financial position and provide us with additional capital to support our operations and the ongoing restructuring of the business. This will be an important step in bringing dentist commissions up-to-date. “

Smiles was forced to close the vast majority of its practices in late March when the Federal Government unveiled level 3 restrictions for dentistry, which ruled out most work other than emergency procedures.

Smiles stood down nearly all employees except for skeleton staff running operations and those needed for emergency work.

Prior to this announcement Smiles had said it was not in a position to pay dentists their commission for March nor staff wages due on April 8 for the previous two weeks. The JobKeeper scheme means payments will be backdated to March.

Smiles said on Friday it had reopened a number of its practices after the government rolled back some restrictions.

Smiles Inclusive shareholders have seen the stock price plummet to just 3.5c before it was suspending from trading. Photo: iStock

In its March quarter report released last week it announced net positive cashflow of $500,000 after slashing staff and administration expenses at the Burleigh-based company.

Smiles reported that staff and administration costs fell by 36 and 35 per cent respectively to $3.61 million and $328,000 compared to the September quarter. The first three months of the financial year saw it report net negative cashflow of $902,000.

The latest result came despite customer receipts falling by 13.6 per cent to $10.602 million.

Problems at Smiles Inclusive predate the COVID-19 health crisis.

Since listing in 2018, the company has been plagued by problems including senior management changes, boardroom battles and lawsuits.

The company has been bleeding cash and shares were suspended on March 2 after the company failed to file its half-yearly results.

Earlier this month four senior dentists, Dr Philip Makepeace, Dr Huma Syed, Dr Arthur Walsh and Dr John Camacho, terminated their supply and facilities agreements, in a letter sent to Smiles and included the names of another 12 said to be doing the same.

However, Ms Aquilina said six of the dentists who had intended to leave the business had since changed their minds and continued to work with Totally Smiles, which is the trading name of the company.

The March cashflow report includes $436,000 raised from a “sophisticated Australian investor” through the issue of 11.315 million shares at 3.8c per security.

Ms Aquilina said the company is seeking additional funds and should be in a position to release its half-year results within the next month.