Smiles Inclusive all frowns as board decay sets in
1 April 2019, Written by Matt Ogg
Opposing camps on the Smiles Inclusive (ASX: SIL) board are trying to wrench one another from their posts in a scramble for leadership of the embattled dental aggregator.
Founder, major shareholder and former CEO Mike Timoney issued a press release today claiming attempts from "renegade directors" to prevent a requisition notice that seeks to remove new chairman David Usasz - who was only appointed to the role last week - and director Tracey Penn.
Along with former chairman David Herlihy and other supporters, Timoney hopes to use an extraordinary general meeting (EGM) on 22 May to hold resolutions for removing Usasz, Penn and any director appointed on or after March 25.
Meanwhile, a second requisition backed by major shareholder Lev Mizikovsky and Smiles Inclusive joint venture partner Jonathan Hamilton aims to remove Timoney and Herlihy from the company.
Shares in the Gold Coast-based group have plummeted over the past 12 months since listing on the ASX, with massive cuts to profit forecasts and a statutory loss of at least $500,000 expected this financial year.
This compares to the IPO prospectus' pro forma NPAT forecast of $5.8 million for FY18, and claims in August that NPAT would be at least $6 million in the current financial year.
But the founder has cried foul over his treatment during the company's attempts at recovery. Relations appear to have soured since a review was undertaken by Tony McCormack, who has since become CEO, in October 2018 which concluded Timoney was not the best person to improve Smiles Inclusive's performance.
"I have called an EGM in the interests of all shareholders," says Timoney.
"Last week the company, led by the renegade directors including chairman David Usasz, threatened my advisors that if I proceeded with a shareholder requisition notice to remove directors, my employment with Smiles Inclusive would be terminated immediately and that I would no longer be a director of the company."
He describes what he alleges to be an "unlawful act" from the board, claiming all shareholders "have a right to speak their truth".
"It is an abuse of power and control designed to prevent the legitimate exercise of shareholder rights. This is now a matter for the regulatory authorities," he says.
"A general meeting is typically the only forum where mum and dad investors get a chance to have their say and to hear directly from directors. No threat by renegade directors to terminate my employment will prevent an EGM being held."
Herlihy has supported Timoney's allegations.
"I resigned last week as Chairman in protest at ongoing abuse of good governance by the renegade directors," says the former chairman.
"The subsequent threat to terminate Mr Timoney's employment in order to prevent all shareholders having their say was the final straw."
Timoney and Herlihy are also attempting to make Dr John Camacho, head of Smiles Inclusive's Clinical Advisory Committee, a director.
"As a shareholder and a dentist, the threat to remove Mr Timoney was ill-advised and not in keeping with the expectations of all the dentists who joined Smiles Inc," says Camacho.
"I anticipate there will be substantial backlash by dentists to protect their interests."
The Smiles Inclusive official stance
In a response today, the company itself has vehemently denied the allegations, claiming Herlihy did not resign in protest and Timoney agreed to stand down as CEO.
"Smiles entirely disagrees with Mr Timoney and Mr Herlihy's contention that there was somehow a lack of governance involved in Mr McCormack's appointment or Mr Timoney's stepping down as CEO," the company says.
"Both Mr Timoney and Mr Herlihy have failed to explain the basis of their concerns to the board. Mr McCormack was and is uniquely positioned to assist Smiles, and has the right experience and skill-set to do so.
"Smiles has communicated a number of specific concerns about Mr Timoney's behaviour both prior to and after 20 February 2019 to Mr Timoney and his advisors. Mr Timoney has not refuted these concerns."
The company claims it is continuing to investigate Timoney's behaviour and has communicated to him it may take "further steps" once the investigation is further progressed.
"Mr Herlihy did not resign as the Company's chair in protest at ongoing abuse of good governance. He did so because he lost the support and confidence of the majority of the board," the group says.
"The Company remains focussed on its plan to turnaround and improve operational performance, which notwithstanding Mr Timoney and Mr Herlihy's actions, has been significantly progressed in recent weeks.
"Mr Peter Evans (as the only director whose removal has not been requisitioned by shareholders) will oversee all matters relating to the requisition requests and forthcoming extraordinary general meeting."
Business News Australia
Author: Matt Ogg