Easton Investments : 2021 Annual General Meeting

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Via ASX Online

ASX ANNOUNCEMENT - 18 November 2021

ASX Code: EAS

2021 ANNUAL GENERAL MEETING

Easton Investments Limited (Easton or the Company) will today address shareholders at its Annual General Meeting, commencing at 10:30am AEDT.

Attached is a copy of the Address to be delivered by the Chairman, Mr Kevin White, and the Presentation to be delivered by the Managing Director, Mr Nathan Jacobsen.

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Authorised for release by Kevin White, Chairman.

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2021 ANNUAL GENERAL MEETING

CHAIRMAN'S ADDRESS

Before taking questions, I would like to briefly address the meeting and then hand over to Nathan Jacobsen, our Managing Director, to present his report to shareholders on our Company's performance over the last 12 months and to provide an update on the Company's near term outlook and its strategic priorities.

I am extremely pleased to report that our Company and its businesses have performed strongly after another challenging COVID affected year, reflecting the outstanding efforts, dedication and resilience of our people, and also due in part to the recurring nature of a significant portion of the Company's income which is derived from professional support services and products delivered on-line to accountants and financial planners (advisers).

Recapping briefly on the major achievements of the last 12 months, we have:

• Simplified the Company by reducing our number of business interests;
• Strengthened our balance sheet and financial position (with a net cash position of $3.6m at 31 October 2021);
• Recommended an off-market proportional takeover offer from HUB24 Limited (HUB24), which resulted in HUB24 becoming a substantial shareholder in Easton with a 31.5% interest;
• Entered into an important strategic relationship with HUB24, encompassing a technology and distribution agreement, which provides future access to innovative technology and data solutions, specifically focused on repositioning Easton with a competitive advantage in the delivery of efficient, cost-effective solutions and services to advisers, accountants and their clients;
• Acquired Paragem Limited (Paragem), a licensee entity previously owned and operated by HUB24;
• Appointed a new managing director, Mr Nathan Jacobsen, with effect from 1 February 2021;
• Strengthened our Board with the appointment of a new non-executive director, Mr Anthony McDonald; and
• Reset the Company's strategic plan with a more concentrated focus on achieving a step change in scale and capability to become a market leader in the delivery of services to accountants and advisers where our Company has a highly competitive position, defined strengths and widely recognised expertise.

At the same time, our Company has continued to perform extremely well, reflecting the high quality of our continuing businesses, the recurring nature of the income derived from those businesses and our business diversity across the accounting and wealth sectors where Easton is a leading provider of solutions and services.

Underlying Profit increased by 20% to $6.81m, an excellent result considering the adverse impact of COVID19 on face-to-face training, the loss of earnings from divested operations and the on-going investment in operational capability and efficiency.

Whilst some of our businesses have been negatively impacted by COVID-19, the very nature of our businesses and the important role that they play, combined with our business diversity and dedicated staff, has held our Company in good stead. Our narrower focus on core businesses with an on-line service capability has allowed us to continue to meet the increased demands placed on our businesses, our people, our members and our advisers.

Cash flow generated from operations of $7.53m was a strong result, being broadly in line with Underlying Profit and contributed to the extinguishment of borrowings during the financial year.

A final dividend of 2.5 cents per share fully franked has been declared, bringing the full year dividend payment to

9.0 cents per share fully franked, including a special dividend of 5.0 cents per share fully franked paid in January 2021.

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Looking Ahead

Directors believe that the Company has an exciting future to build scale and expand the delivery of its core services to the accounting and wealth sectors with the support and backing of HUB24 as a significant shareholder and following the resetting of the Company's strategic plan under the guidance of our new managing director.

It is in this context that the Board is today seeking a change of Company name as the current name, 'Easton Investments Limited', no longer reflects the activities, strategic intent or focus of the Company. A refreshed brand with a contemporary look is well overdue and the proposed new name, 'Diverger Limited', is considered by the Board to better reflect the reset strategy and to differentiate the Company in a competitive market.

More generally, Directors plan to build on the progress made over the last 12 months in terms of capability with a focus on operational efficiency and client engagement, including through access to HUB24's technology solutions and data capability. The related investment, together with higher corporate costs from a strengthened leadership team, will impact short term earnings performance, but is essential if the Company is to realise its underlying organic growth potential.

At the same time, Directors confirm their intention to pursue a step change in scale and capability in line with the Company's reset strategic plan, mindful that Easton today has some excellent businesses but is a relatively small listed company with limited liquidity. While Directors remain receptive to exploring major opportunities over the coming year that are considered capable of enhancing scale, we will only transact where there are clear and sustainable benefits for our Company and its shareholders.

It is also worth noting that the Company holds an attractively priced call option to move to 100% ownership of Tax Banter in January 2022, which will involve capital investment, but which is expected to lift earnings from core training businesses to the accounting profession.

In summary, whilst Directors are pleased with the progress that the Company has made over the last 12 months and the improvement in the Company's share price over this period, Directors continue to be of the view that our share price does not fully reflect the underlying value of our Company or its businesses. The pricing of recent transactions for comparable businesses, especially in the wealth sector, reinforces this view having regard to valuation benchmarks and metrics.

Acknowledgements

In October 2020, Mr Greg Hayes, stepped down as the Company's managing director after some 6 years in the role. Greg continued to play a valuable role as a non-executive director until his retirement from the Board in August 2021.

On behalf of the Board and shareholders, I would like to thank Greg for his valued contribution, leadership and tireless efforts over this period as the Company has grown and developed on the back of a consistent record of increased earnings and dividends and with excellent growth prospects.

As mentioned earlier, Mr Nathan Jacobsen joined the Company as its new managing director in February 2021. We feel very fortunate to have attracted Nathan to our Company to lead Easton through its next growth phase. Easton today has some high-quality businesses and we are confident that Nathan has the requisite experience, knowledge and skills to develop and further enhance the value of those businesses, identify new business opportunities as part of a broad-based strategic plan to achieve a step change in scale and to create future value for our shareholders.

Prior to joining Easton, Nathan was a senior executive with HUB24 with the dual roles of managing director of Paragem and Group Executive of HUB24's Advice and Technology Solutions. He is a capable and experienced executive with relevant knowledge and leadership capability to capitalise on both the opportunities presented by the strategic partnership with HUB24 and Easton's broader integrated growth strategy across the accounting and wealth sectors.

On behalf of the Board and shareholders, I would also like to welcome Mr Anthony (Tony) McDonald to the Easton Board. Tony joined our Board as a non-executive director in February 2021 and our Company is already benefitting

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from his broad background, qualifications, knowledge and experience in both the financial services sector and the listed company environment. His appointment as a nominee of HUB24 is expected to reinforce the strategic partnership with HUB24 and will further strengthen the Easton Board.

I would like to especially acknowledge and thank our executive team and staff for their hard work, efforts and commitment during a difficult and taxing year for all industry participants. Their dedication and accomplishments have underpinned the continued growth and success of our Company and our businesses in a time of great uncertainty and on-going disruption to our lives, our community and the way we work and communicate.

I would also thank shareholders for your support and re-affirm that Directors remain committed to creating value for our shareholders.

Today's Resolutions

As shareholders will be aware, there is a larger number of Items of business to be voted on at today's AGM than usual. As mentioned earlier, one resolution relates to the proposed change of Company name to better reflect its reset strategy and direction. I would also draw specific attention to the introduction and application of a long term incentive plan that is designed to align our key people with our reset strategy to achieve a step change in scale and to remunerate them for out-performance through conventional 'at risk' remuneration. Six of the 13 resolutions to be dealt with today relate to the Company's long term incentive plan in one form or another. The remainder of the resolutions, I would suggest, are more routine.

I will now invite Nathan Jacobsen to present his Managing Director's report.

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Easton Investments Limited

2021 Annual General Meeting

18 November 2021

ASX: EAS