Very long post here sorry, format is also a little wonky due to cut and paste. In the interest of all shareholders please find below full letter that I have written to Mr Timoney that is the subject of the article humbledove posted. I would encourage all shareholders to seek answers from the company and Mr Timoney in respect to these questions. I would encourage all shareholders to obtain as much relevant information possible prior to voting in the EGM; it is very important that all holders vote.
I will certainly update this thread if I do receive any communication from Mr Timoney. My previous post with my mobile number was moderated; I remain happy to discuss my views and concerns with any shareholders. I can be contacted via [email protected] for anyone so inclined.
I have redacted a section of the letter (question 14) which referred to specifics in Mr McCormack's turnaround strategy. In fairness to Mr Timoney I did not ask any questions in respect to the dental van issues and allegations of misappropriation of funds due to both matters being subject to ongoing legal action.
*********Letter starts*********
Dear Mr Timoney,
I am writing to you in an attempt to seek answers and clarification to certain matters since you have otherwise refused to communicate with me. I note I have made all efforts to be open and transparent with you; and was disappointed that you refused to meet with me due to your believe we have no common ground. I would argue given I am a JVP and shareholder there is ample common ground to warrant some discussion.
I firmly believe the measure of an individual’s ability to communicate and manage relationships is in how they deal with dissenting opinions. I had looked forward to our discussion in the hope we could hear each other and potentially in some way find further common ground.
Despite your refusal to meet with me, or otherwise communicate with me, I hope you will respond to this letter and answer the following questions that I would have raised privately had I been given the opportunity. I wish to make clear; this is not a personal attack, but rather a search for additional information to address my concerns.
1. Could you please disclose what consideration was paid for your share allocation; who was involved in approving the allocation and what rationale was used to justify the allocation. Would you concede individual shareholder’s interests may not align with another’s where there is a substantial difference in consideration paid for their shares?
In respect to good corporate governance. I note you have made many references in the media to poor corporate governance and recently referenced the company’s own Board Charter.
2. I refer you to the company’s Director Code of Conduct adopted on 12/03/2018, under section 2.2:
All Directors must act with the utmost integrity and objectivity, striving at all times to enhance the
reputation and performance of the Group.
Under section 10.1:
A Director must not engage in conduct likely to discredit the Company or the Group.
Under section 10.4:
Directors should conduct themselves at all times in a polite, lawful and restrained manner in
carrying out their duties, at both Board and committee meetings, at Group functions and meetings,
and where otherwise dealing with matters about or involving the Group.
I highlight these sections due to concerns I have associated with your ongoing use of inflammatory emotive language in media releases and communications with shareholders. I do not believe that the use of such language enhances the reputation of the group nor is it communicating in a polite or restrained manner; I do not believe it is in the best interest of the company. Do you have an alternate view of these sections or your conduct?
3. I refer to section 13.1 of the Board Charter:
The risks of the Group’s business should be a standing item on the agenda for each regular meeting of the Board. Once a risk is identified, an action plan should be proposed by management for submission to the Board. That plan may also be submitted to the Audit and Risk Committee for
review.
At any time while you were CEO and Mr Herlihy Chairman was a risk identified in respect to working capital and/or group revenue? If not; how do you explain the failure to identify this risk; if the risk was identified what action plan did you propose to the board to address the issue?
4. What was your relationship and history with Bartercard UK? Did you or do you have relationships with Bartercard Australia, Bartercard International Group or IncentiaPay Ltd. Did you have any relationship or association with a Bartercard associated entity within the past 18 months?
5. Could you please detail if a business case was established for the use of Bartercard by the group? Please detail what supplier agreements were negotiated for the disposal of the Bartercard “dollars” earned by the group as part of this business case.
6. Could you please detail the business case for undertaking your “120 day integration plan”. Who was responsible for deciding to implement this plan? Do you acknowledge that this plan was in direct contrast to verbal promises and commitments made to certain JVPs and damaging to newly acquired goodwill?
7. Prior to the group’s switch to internal recruitment; fees were paid to an external agency for recruitment services. Could you please disclose the name of this agency and if any director had any relationship or association with this agency?
8. Could you please describe your relationship with Sean Connolly, self-described Head of Client Acquisitions and Business Development for SIL? Who appointed Mr Connolly, and does he remain employed by the group? If not, what was the circumstances of the cessation of his employment? Was Mr Connolly allocated shares other than at face value?
9. I note Carl Buroughs and Nicholas Tammik were both on the list of top 20 holders for the group. Was either individual allocated shares in SIL other than at face value? If so what were these shares offered in lieu of and at what value? If they were provided an allocation other than at face value, could you please detail your relationship with both individuals and who approved the allocation of shares to these individuals?
10. I note the company currently has a collective limit of $800,000 for remuneration of non-executive directors. What is the negotiated, anticipated or likely remuneration for the additional directors you have nominated to the board? How will the additional directors’ remuneration be financed?
11. Do you have any personal or business associations with the additional directors you have sought to add to the board that are not strictly connected with Smiles Inclusive? Of particular interest is there any relationship or agreements that could be seen as providing a potential conflict of interest?
12. I note, your open letter dated 23rd of April raised your concerns with Ms Tracy Penn’s leave and travel while employed with the group. Could you please disclose the total amount of leave and period of overseas travel that you undertook since being on the payroll for either Southport Smiles Pty Ltd, Smiles Inclusive or any other subsidiary of the group?
13. Who was responsible for the appointment of the group’s initial Directors, specifically Mr David Usasz, Mr David Herlihy and Ms Tracy Penn?
In respect to matters involving continuous disclosure:
14. Regarding group cashflow. Multiple ASX announcements indicated issues with a “small number of practices”; the 21/11/2018 ‘Annual General Meeting Presentation’ stated only 11 practices were underperforming with 2 others having major issues, with 39 other practices meeting expectations or exceeding expectations in the first quarter. How do you reconcile this against Mr Tony McCormacks recovery plan (redacted as commercial in confidence, however performance is reflected in updated guidance), (seperate from the 2 other practices having major issues)?
15. In ASX announcement dated 28/02/2019 ‘Smiles Inclusive Limted: H1 FY19 Results’ Mr Herlihy stated, “With the integration of the initial practice portfolio completed, the appointments of Tony McCormack and Emma Corcoran position Smiles Inclusive with exceptional commercial skills and leadership experience to unlock the Company’s potential and deliver improved performance and profitable growth from our national network.” Do you or did you share Mr Herlihy’s views in respect to these appointments? How do you reconcile this against your recent communications released jointly with Mr Herlihy?
16. To what extent do you take ownership of the more than 80% fall in share price, given you were CEO and a company director? I note your continued declaration that you will not seek to return as CEO; poor judgement, inadequate oversight and a lack of planning seemed prevalent during your time in charge. How does your performance or these characteristics make you suitable for a position on the board now?
17. Do you have a defined plan for recovery of the group? Have you actively discussed or sought advice on liquidation and/or sale of the group to another corporate entity as opposed to seeking to implement a turnaround strategy?
18. I note you have indicated that you believe NAB will provide ongoing finance in the event you are successful at the EGM. However you have also negotiated alternative finance with Macquarie Bank as a fallback position. Are there any material differences in the finance offered by Macquarie against the existing facility with NAB?
19. Have you identified a particular issue or issues in respect to Mr Tony McCormack’s proposed turnaround strategy? If so, have you discussed them with the current executive?
20. You have stated a desire to conduct a thorough search for a new executive team. Have you offered any positions to individuals for an executive role? In the event your are successful at the EGM what do you anticipate to be the total cost associated with termination of existing executive contracts? Do you have a planned timeline for appointments and changeover of executive staff?
21. I note your shareholder requisition for removal of Ms Penn and Mr Usasz was partially on the basis of poor corporate governance. Is there a particular director meeting that you can direct shareholders to, so that we may seek confirmation and evidence of these governance issues?
I look forward to a detailed response to my questions. For the sake of transparency I shall be sharing this letter with all JVPs in the hope they may be able to provide me some answers. I believe your answers to these questions would be of interest to them as well.
Nothing within this letter is intended as an accusation and no personal offence is intended. I am merely seeking clarification to these issues of concern. I hope at some stage we may be able to again share amicable discussions in the future.
Regards,
Jon Hamilton
