No Images? Click here Smiles Inclusive Limited - Quarterly Cash Flow ReportIn its report to the stock market of the 31 July 2019 Smiles Inclusive indicated that its net cash inflows for the quarter ending 30th June 2019 were $0.954 million after raising $1.2 million in a share placement! In other words the cash flow would have been negative without that additional equity raising. It also indicated that the previously agreed National Australia Bank acquisition funding facility of $30 million has been reduced to the current drawn amount of $14,708,000. In other words the NAB has refused to advance further funding and Smiles Inclusive Limited has been told to sort out its finances! Readers will recall that Smiles Inclusive Limited previously indicated that it was in breach of its banking covenants. That normally leads to a savage cutting off of money from bankers and we wonder what motivated the “sophisticated” investors who put in the $1.2 million recently! In fairness, this mess is not the fault of the current board or its CEO who took over following losses and downgrades and who had to survive a bizarre attempt by ex CEO Michael Timoney to regain control of the company via requisitioning of an extraordinary general meeting. As the NAB financing facility has been frozen at the drawn amount we can be certain that further practice acquisitions are unlikely for a long time, if ever. In a separate investor update of 31 July 2019 Smiles Inclusive indicated that it had reduced support office numbers by 15 staff but had created a contact office with a staff of nine, employed a new CFO, Procurement Facilities Manager and a Training Manager which sounds like a net reduction of three staff. The new CEO, Tony McCormack, has a challenging job in front of him. Smiles Inclusive bought too many practices of insufficient size and indeed the only way it could purchase so many so quickly was to purchase practices which would not have met the criteria of the more discerning corporates, 1300 Smiles Limited, for example. We are reminded of Warren Buffett’s observation that if you appoint a new manager to a bad business it’s usually the business which emerges with its reputation intact. We look forward to the release of Smiles Inclusive Limited’s full year financials which will be its full year financials. There is likely to be a significant loss. Smiles Inclusive Limited recently traded at 11.0 cents. Dental Practice Valuations For Dental Practice Valuations speak with Graham Middleton or David Collins on 03 9843 7777. Observation of Well Performed Dental Practices with One Owner
Two Owner Practices Two owner practices do best with a total of three or four operatories. ie. One chair each for the principals and one or two chairs for employed dentists or employed dentists plus hygienist. Practice managers other than receptionists with a courtesy title frequently cost a practice more in additional salary, superannuation, workers compensation insurance cover, payroll tax and other costs then the profit margin on additional employee dentists and hygienists and therefore practices should be kept fairly tight in size. Strategic Dental Practice Business Advice Contact Jenny O’Brien on 03 9843 7777 to make an appointment with Graham Middleton who has been providing advice to dental practice owners for 32 years relating to both practice performance and strategy and the personal financial strategy of the practice owners. Practice Premises – Superannuation Funds – Beware Contrary to popular folklore, buying dental premises into a superannuation fund is usually not the best long term financial option. Successive changes to capital gains tax law including the treatment of active business assets marching arm in arm the superannuation changes mean that the vast majority of successful dentists are better off long term owning their practice premises outside of their superannuation fund! Refer to “Buying Premises in Superfunds – Best Avoided” on our website www.synstrat.com.au. Life Insurance Enquiries Contact Cameron Darnley on 03 9843 7777. Cameron can also provide traditional financial planning services. Corporate Practice Acquisitions are Drying Up Maven have withdrawn from the market; Ekera have tightened their criteria; Pacific Smiles performance in 2019 financial year disappointed; Smiles Inclusive’s acquisitions have been stopped by its bank; 1300 Smiles is cautious and the health insurance industry is in pain. The evidence is overwhelming that corporate roll ups of professional practices be they dental, medical, veterinary or accounting are fraught with risk and have lots of failures. Corporates simply cannot run practices as well as the best performed privately owned practices run by competent dentists. Those mini corporates who have acquired a few practices and hope to make a substantial sum on selling their parcel of practices to a larger aggregator are likely to face disappointment. When the music stops there will be nobody left to dance with. In a minor way it reminds us of the aftermath of the 1987 stock market crash following which a hoard of heavily indebted entrepreneurs found that they had nobody to sell to. A number of them ended in bankruptcy, jail, exile or early death. For strategic dental business and financial advice speak to Graham Middleton or Roger Armitage. For life insurance and traditional financial planning speak to Cameron Darnley. Tired of Health Fund Predations If you are sick of the interference of health funds in your practice and the manner in which they rip off both patients and dentists, we recommend that you give Independent Dentist Network (IDN) a call on 03 5367 0163. Synstrat has no financial interest in IDN’s services other than its benefits to our clients but it is reputable and we have heard good reports of its results. 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. Synstrat Management Pty Ltd P. 03 9843 7777 ABN 57 006 295 325 If you are not the intended recipient of this communication please delete and destroy all copies of this message and telephone Synstrat on +61 3 9843 7777 immediately. If you are the intended recipient of this communication you should not copy, disclose or distribute this communication without the authority of Synstrat. Any views expressed in this communication are those of the individual sender, except wh ere the sender specifically states them to be the views of Synstrat. If you do not wish to receive this email in future, please reply to the sender requesting termination of service. |