Looking forward to Interim and Beyond., page-117

I am not sure we should expect much growth in eps this year. I have been looking hard at the mix of products. They used to sell Volker beds - Its was acquired by Hil-Rom in 2012 which now represent themselves in Australia.

It was the one part of Paragon that worried me as they were very expensive when the US$ to AUD was parity - now they are 36% more expensive. The Porche bed motors are all very high tech but the prices quoted to me I would not pay.

When I went to see Paragon last year they were pointing out that they had decided to go for an inhouse bed. Aged care can not afford the high tech end anymore especially with government seeking to cut spending in that area - or more correctly all areas. They have now just secured two blue chip clients in Aged care.

What I think we have to accept is that with the new increased group we have to find mainstream solutions. I suspect , but cannot prove , that they have had to strip out competing products here and there and develop their own offering that will be capable of being sold across all locations. I think we have been a bit unfair expecting the growth in profit and eps to be linear.

They refer to ― "Cross marketing across products and territories showing promising early signs and expected to drive growth over coming years" - I suspect that that is what takes the time. To get the increased selling opportunities going you have to introduce the range to each business but they also have profit incentives so you have to leave them alone or let them decide what to add...

So for me 2017 is the consolidation year. 2018 is the year I expect the business to drive eps growth. I will be happy with 5.6c... The dividend will be my growth area as I am hoping they have the same final making it 2.5c for the year fully franked. Which is about 4.6% with the franking.

I have to acknowledge that my expectations were somewhat unrealistic - they acquired so many businesses over an 18 month period we needed to expect that they had to digest these and get them into a cohesive offering. I expected it all to happen in about 9 months - I think that was unrealistic - there had to be more time and also a change from distributor to developer and invest into the future. We are now seeing that.

They Paid $2 million for Midas and took on board two highly qualified partners in that - I expect the cash flows are all negative at this stage. That is something I dont think they could do 18 months ago.