ASX issues another query to Gold Coast dental group Smiles Inclusive over market disclosure

Listed dental group Smiles Inclusive has again been asked to explain its financial situation to the ASX as disgruntled business partners threaten to expand a potential $40 million class action.

Smiles Inclusive are being closely examined by the ASX. Photo: iStock

LISTED dental group Smiles Inclusive has again been asked to explain its financial situation to the Australian Stock Exchange as disgruntled business partners threaten to draw more parties into a potential $40 million class action.

The Gold Coast group revealed a $31 million net loss for last financial year in its audited results on Tuesday, far worse than the $18.9 million it reported on August 30.

The audited results were released as the company embarked on its second capital raising exercise in four months, with auditor KPMG saying there were “material uncertainties” in the Group’s ability to continue as a going concern.

ASX listings compliance officer Lisa Banh grilled Smiles on when it knew the impairments to its assets reported in August were likely to be far exceeded in the actual results.

The company said it did not learn there would be a disparity until September 24 and did not find out the actual goodwill impairment figure until the night before its final report was publicised.

Smiles said it chose not to inform the market an impairment was likely as soon as it found out because “the valuation of the Company’s goodwill is a non‐cash item”.

“The market is well aware of the issues that the Company has faced and that it is in the early stages of a turnaround designed to improve cash flows and the underlying value of the Company,” Smiles said in a reply to the ASX.

“The market is also aware that the Company is required to assess the carrying value of goodwill at least annually and that the impairment announced on 30 August was subject to confirmation as part of the Company’s audit process.”

Shares in Smiles finished trading 6.52 per cent higher at 4.9c.

Smiles Inclusive Chair David Usasz.

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However, some stakeholder remained unconvinced.

Smiles joint venture partners Arthur Walsh and Joe Camacho threatened to draw in Smiles’ auditor KPMG and broker Morgans into a $40 million potential class action.

Dr Walsh welcomed the ASX’s “robust interrogation of the Smiles audit process” but questioned why the $31 million loss was not disclosed ahead of the first phase of its capital raise.

“This is precisely why a Senate inquiry is currently underway into the auditing industry and ASIC is holding auditor firms to greater account,” he said.

The pair said Smiles should issue fresh investor information in light of its audited financials.

“(The company should) stop the offer document mail out due to be dispatched today to investors,” Dr Camacho said.

“Smiles retail investors need to receive the truth before handing over more of their cash — Smiles lost $31m not $18m.

“Does Smiles really want the world to believe that the final numbers were only known on Monday night and that they were then able to produce an 80 page annual report thereafter within a few hours?”

The company had flagged a full-year loss of “at least $4 million” in May, off the back of a previous profit downgrade from $2.3 million profit to a loss of up to $1 million.

Originally published as ASX issues another query to Gold Coast dental group Smiles Inclusive over market disclosure