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- The Market Herald notes there’s no evidence of criminality by any party
KPMG Partner Adam Twemlow attended the Victorian Federal Court on Thursday morning, the latest to grace the booth in an ongoing examination into failed dental stock Smiles Inclusive.
In the most interesting moment of the sparsely attended Thursday hearing, Twemlow told the court KPMG held concerns around Smiles Inclusive’s revenue channels and whether it would be successful.
Regardless, KPMG still helped Smiles list on the ASX. KPMG was also aware that Deloitte was monitoring the company.
No shortage of intrigue
The Smiles Inclusive hearing has seen a range of high-profile finance executives present their recollections of Smiles IPO and subsequent liquidation.
The civil examination in the Victorian Federal Court was brought by two dentists, Dr Arthur Walsh and Dr John Camacho, whose personal wealth was impacted when Smiles delisted.
They had sold their practices to Smiles, claiming they were misled by promising revenue projections.
Explosive claims
Just last week, the company’s former Chief Commercial Officer (CCO) Keith Nicholls told the court that Smiles Inclusive released information to the ASX which was, in his words, “ambitious.”
Mr Nicholls left Smiles when he began to note the company had no money to remunerate payrolls.
KPMG was not the only company to help Smiles Inclusive stay afloat despite having serious questions about its ability to make money.
Earlier this week, National Australia Bank (NAB) executive Michael McBryde confirmed the bank was aware of concerns surrounding Smiles Inclusive’s financial position. They provided loans anyway.
There was also testimony from stockbroking firm Morgans.
Morgans has been accused of voting on behalf of its clients, without their knowledge at a Smiles Inclusive EGM which contained motions supporting its Chairman David Usasz.
The court heard that Mr Usasz and the chair of Morgans Tim Crommelin were personal friends.
Questions around value
Examining Barrister Vicki Bell focused heavily on concerns surrounding valuations of Smiles Inclusive, included in the company’s prospectus, and, in other documents sent to KPMG by Smiles before it listed on the ASX.
One email presented to Mr Twemlow from a KPMG colleague contained a comment that Smiles’ revenue projections were “unrealistic.” It went on to note that KPMG would require up-to-date information yearly to verify other revenue projections.
Mr Tremlow suggested KPMG auditors were quizzical as to where Smiles’ revenue was expected to come from.
Smiles had told KPMG it expected to make $7.3 million more than previously stated in earlier pre-IPO documents it had provided. That was an increase of 15 per cent, based on calculations that examining counsel Vicki Bell described as “lacking in detail.”
“Did you have any concerns about the size of the forecast revenue increase in the first financial year … at the time the prospectus was issued?,” Ms Bell asked.
“I wasn’t privy to the detailed workings that formed the basis of the forecast, so it would’ve been difficult for me to evaluate that,” Mr Twemlow replied.
“But you had just undertaken an [assessment] of each practice [under Smiles]?,” Ms Bell questioned.
Mr Twemlow agreed this was correct, but did not confirm whether – or not – a 15 per cent revenue increase was realistic.
Last hearing of 2023
This is the last leg of the 2023 run for the Smiles Inclusive examination.
This case is an Australian legal first – two dentists have never before been greenlit to head an examination into an insolvency.
Hearings will re-commence next year.
So far, ASIC has not been involved in the proceedings.
