Smiles Inclusive investors call for EGM to overthrow board

3 August 2020, Written by Matt Ogg

Smiles Inclusive investors call for EGM to overthrow board

Update: After this story was published, on 5 August Smiles Inclusive advised it had received a notice from the requisitioning shareholders nominating Dr Joao 'John' Camacho, Dr Philip Makepeace and Dr Arthur Walsh to be appointed directors, and that it was seeking independent advice in response. 

With shares suspended since March and its founder believing it would take a miracle for the company to survive, dental group Smiles Inclusive (ASX: SIL) faces a potential revolt from disgruntled shareholders and partners. 

Dentists Dr John Camacho and Dr Arthur Walsh have long been vocal opponents of the Smiles management, but now they have teamed up with others in a bid to overthrow the board.

Smiles Inclusive announced today it had received a notice from several investors of their intention to call and hold a meeting aimed at removing all directors.

The move has undertones of a stoush 14 months ago that removed founder Mike Timoney from the board, cementing the leadership of chairman David Usasz, the now departed former CEO Tony McCormack and Peter Evans.

Other current board members are Peter Fuller, one of the company's joint venture partners who joined as founding director Tracey Penn's resigned, and Michelle Aquilina who replaced McCormack in April.

Now it is a completely different set of detractors who are shaking up Smiles again, which is already in dire straits over its inability to provide an audited set of accounts for the December half, is deep in debt with NAB, and whose operating cash flow appeared to have fallen to zero in the June quarter.

Smiles informed the ASX today it had received the notice regarding an intention to hold an EGM from Phi Long Investment Pty Ltd, CDentist Pty Ltd, Dr Philip Makepeace and his super account trustee, and Dr Arthur Walsh.

The notice indicated that combined these entities held more than 5 per cent of the votes that can be cast at a general meeting, although the instigators of the motion indicate the total holding is significantly larger.

Camacho, Walsh and Makepeace describe their initiative as the "Page 33" campaign, in reference to that page in Smiles' 2018 prospectus that they take issue with over its forecasts.

Walsh said the trio welcomed the support of Dr Van Trinh, a fellow qualified dentist and Smiles largest shareholder with 17 per cent.

"Dr Makepeace, Dr Camacho and myself stand for election as three experienced dentists/Smiles JVPs compelled to address the long running corporate cancer that has eaten away at Smiles' clinical soul and its finances. Smiles shares are suspended for a reason," Walsh said.

Camacho said Trinh became Smiles largest shareholder following the purchase of approximately 10 million shares at 1 cent a share in early May, "only a matter of days after Smiles' now erroneous 4C was issued via the ASX on 30 April 2020".

"Regrettably, Smiles' latest 4C contains yet more misleading statements. It is a repeat of Page 33. Enough is enough," he said.

"On day one we will appoint national accounting firm RSM Australia who will conduct a rapid independent assessment of the true state of Smiles' financial condition and outlook," Walsh added.

"The key findings of RSM's assessment will be made public as a matter of urgency. We will also invite our JVP peers to provide feedback based on RSM's findings."

However, in its announcement today Smiles said the notice received did not claim who the requisitioning shareholders wanted to appoint in the current board's place.

"The Company notes that Camacho, Makepeace and Walsh and the other Requisitioning Shareholders have not put forward any plan to improve the Company's balance sheet or appoint new directors," Smiles said.

"Prior to receipt of the Notice, the Company was in advanced discussions with financiers (including senior lenders and a professional underwriter) to reduce debt and recapitalise the Company.

"The Company is continuing to work with potential financiers and advisors and will update the market in due course.

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Author: Matt Ogg

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