Embattled dental company Smiles Inclusive's (ASX: SIL) cash position will receive a well needed boost after selling two practices in Queensland's Lockyer Valley region to 1300SMILES (ASX:ONT).
The practices in Gatton and Laidley were sold by SIL subsidiary Totally Smiles for an undisclosed sum, and the group is also considering selling its Gympie and Toowoomba practices as part of a turnaround strategy.
Smiles Inclusive notes the two businesses represent around 4 per cent of the total purchase price paid for its network of practices at IPO last year, albeit with a small premium to book value.
The IPO raised $35 million in April 2018 and Smiles' prospectus slated $44.5 million for acquiring 52 practices around the country.
This means the recent sale may have given a capital injection around the $1.8 million mark. The company has signalled the proceeds will be used for the satisfaction of obligations relating to the practices, the amortisation of debt and working capital.
The Gold Coast-based business has struggled with cash flow this year and recorded a cash burn of $1.25 million in the first quarter of FY20, although it was kept afloat by a $3.3 million capital raising in October.
As at 25 September Smiles noted it owed $19 million to National Australia Bank (ASX: NAB).
The agreement announced today is still subject to due diligence Smiles' lender consent and other customary completion conditions, which the company expects to be in order by no later than 20 December.
1300SMILES managing director Dr Daryl Holmes OBE says describes the deals as exciting acquisitions of two new practices with promising potential.
"The acquisitions are geographically strategic for 1300SMILES, as it continues to expand its network in SouthEast Queensland," says Holmes.
"We look forward to welcoming the team of dentists and support staff to 1300SMILES following completion."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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