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The Australian Stock Exchange (ASX) has questioned the liquidity of Smiles Inclusive (ASX: SIL) after net cash outflows ballooned 150 per cent to $3.2 million in the December quarter.
Despite a $3.3 million capital raising and $2 million in proceeds from selling assets including two Queensland practices, the troubled dental company had just $709,000 in cash at the end of the quarter.
Meanwhile, almost all of the Gold Coast-based group's financing facilities have been drawn with expectations for $12.7 million in cash outflows for the current quarter.
In a letter sent earlier this month to Smiles CFO Emma Corcoran, the ASX said it was possible to conclude the company "may not have sufficient cash to continue funding its operations" if spending is in line with expectations.
In response, Smiles chairman David Usasz attributed the worse results to seasonality, but conceded the chance of continued negative operating cash flows remained "relatively high".
"The Company is continuing to implement its turnaround plan, which consists of several discrete initiatives, which vary in complexity, being executed," Usasz said.
"Results remain positive despite the cash flows for the last quarter which were negatively affected by the typical end of year seasonal slowdown, an additional pay-cycle for the month of December and several one-off legal, insurance and business restructure costs."
Usasz stood by Smiles Inclusive's underlying business model but did not rule out further asset sales.
"The Company is actively considering all funding avenues open to it, including debt, equity and where appropriate asset sale," he said.
"It remains confident it would be successful should it so elect to raise further funds, whether via equity capital markets, or though alternative means.
"The Company expects to be able to continue its operations and to meet its business objectives on the basis that it continues to have the support of its stakeholders and that it is seeing positive tangible change within the business (including in respect of cash flows on a like-for-like basis) as a result of the implementation of its turnaround plan."
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