No Images? Click here Smiles Inclusive Limited - Preliminary Final ReportSmiles Inclusive Limited managed to release what it described as its “preliminary final report” after close of the market on Friday 30th August 2019. Perhaps somebody should tell them that if you are going to bring out a stinker of a report it’s better done a bit earlier in the reporting season. Leaving it to the very last minute and releasing it late on the Friday the 30th August 2019 after markets had closed is definitely not a good look. The report showed a net loss attributable to members of $18,878,000 of which $4,497,0000 is a loss from ordinary activities with $13.7 million related to impairment of assets ie. a write off of goodwill. The Australian Financial Review 2 September 2019 described it as a “horror loss” and “an unnerving display of wealth destruction after an ASX float 16 months ago and its shares have sunk to a record low of 7.5 cents”. Its bankers are said to be “watching carefully”. The company said that a number of factors had contributed to the poor performance in the financial year of 2019 including:-
For Smiles Inclusive the writing on the wall goes right back to March 2018 when it released its prospectus with projections in net profit that were simply not credible. At that time we advised dentists to steer well clear of it. Refer to Synstrat’s website – Smiles Inclusive Limited Prospectus Forecast Stretch the Imagination – March 2018 – Refer to Synstrat.com.au, look under Dentistry Publications. From a very early stage Smiles then management made serious mistakes in an unwise purchase of School Dental Vans without doing proper due diligence. It did this at a time when management should have been working flat out on integrating its 52 dental practices rather than being distracted by buying the dental vans business. It overlooked the fact that it didn’t have a radiology license allowing it to take x-rays of children’s mouths. It then announced on the last day of the half yearly stock market reporting season that it had breached its banking covenants; a statement buried near the bottom of its half yearly financial yearly 2019 results on 28th February 2019. In its half yearly results it forecasts an expected statutory loss of between $0.5 million and $1 million for the full year but has now blown that forecast out of the water! From that point on we witnessed the bizarre situation of a fight for control of the company akin to Roman Emperor Nero having a dispute with the fire brigade while Rome was burning. It is not clear since Smiles preliminary final report, unaudited, was released without commentary, we do not know whether or not the company is still in breach of its banking covenants and whether or not bank penalty interest rates have been charged and are being charged to it. Shareholders deserve a lot more information. Shareholders original $1 per share investment has recently been worth 7.2 cents. However, if any significant shareholder went to sell a large quantity of shares on the stock market there is every prospect that that price would plummet still further and they would find themselves having to accept a substantially lower average price. Since the report was described as a preliminary final report we would hope that the actual final report with appropriate information will soon be released. Raising Cash Smiles Inclusive has eaten up cash and was fortunate that “sophisticated investors” purchased 8,689,935 shares at 14 cents each on the 20th June 2019 to raise $1.217 million of cash; a rather generous act. Smiles Inclusive conducted a sale and lease back of its property, plant and equipment during the financial year to raise $1.939 million of cash but now has to fund the lease payments. After these transactions Smiles have cash equivalents as at 30th June 2019 of $1.595 million. BUPA CUTS JOBS AMID GLOOMY HEALTH INSURANCE PROGNOSIS The above article appeared in the Melbourne Age on 2 September 2019. APRA data shows total health insurance membership coverage dropped 0.3% points in the June quarter to 44.2% of the population the lowest rate since 2007. BUPA has begun a round of redundancy in Australia and cut out about 100 jobs reportedly in head office and middle management roles. BUPA’s profit from the Australian and New Zealand businesses fell 9% last year to $313,000,000. It reportedly said at the time that it was under pressure from low insurance customer growth and it expected difficult conditions to persist. It said it will cut $50 million from its cost base over the next three years which comes on top of the $40 million in saving achieved in the past two years. The dental profession know well that health insurance companies have attempted to build their margins by increasing extras cover because of the falling proportion of the population covered by hospital insurance. Dental practices should think very carefully about their relationships with health funds. It is recommended that dentists who are prepared to think seriously about cutting this relationship speak to Independent Dentist Network Ph: 03 5367 0163 email: headoffice@independentdentist.com.au. Synstrat has no financial interest in IDN either than seeing its dental clients gain assistance in freeing them from the clutches of health funds. Understanding your Dental Practice and your Long Term Financial Strategy If you own a practice and you are not clear about your long term business strategy and your accountant gives you little advice apart from gentle comments about last year’s performance then you are at long term risk of ending up far worse off than should be the case. We invite you to pick up the telephone and speak with Synstrat. Please call Graham Middleton 03 9843 7777. For practice valuations speak to Graham Middleton or David Collins. If you have a strategic issue speak to Graham Middleton or David Collins. If you have large amounts of term life insurance, income protection insurance and business overheads insurance and it’s costing you a lot of money and is probably more than you need you should pick up the phone and talk to Cameron Darnley at Synstrat. Best wishes to all Dentists, GRAHAM MIDDLETON The Synstrat Group are Australia's most experienced Dental practice business advisers, accountants, practice valuers and licensed financial advisers. The information contained herein is of a general nature and no specific action should be taken without individual advice. 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