SIMON BROWN: I’m chatting now with Charles Savage, CEO of Purple Group which owns EasyEquities. Disclaimer upfront: I hold Purple Group shares.
Charles, good morning. Interim results out to the end of February. The numbers are a bit boggling in places. Group revenue up a 79.5%. Basic headline earnings 844% up. In truth, it was off a massively low base – but heck, take the numbers anyway.
I want to delve into numbers. There’s the EasyEquities pot. Before we get to that, GT247.com, which is your derivative trading platform, [there was] disappointment from them, coming in at a small loss. Is it really a case that you need volatility – that makes trading, that makes a profit?
CHARLES SAVAGE: Yes, Simon, that’s exactly right. You know those businesses well. They feed off of volatility, and in the first half of our financial year that volatility sort of dried up. But it benefited greatly in our last six months of last year, and you saw that come through in the results. But certainly, with the volatility we had directional markets, everything was going up, and those aren’t the kind of markets that GT benefits from.
SIMON BROWN: Almost a boring type of market. But the flip side is your EasyEquities client obviously likes that directional market heading higher – profits for them. Really solid results there. How many funded accounts have you got in the EasyEquities space these days?
CHARLES SAVAGE: Just gone over half a million. I think it’s 519 000 accounts, so that’s a big milestone for us. Again, just in context, you remember six years ago there were only 280 000 retail stockbroking accounts. That’s a big number for South Africa and EasyEquities had a phenomenal set of results. It shouldn’t come as a surprise in the sense that that momentum was very clearly illustrated in our income statement at full year. These numbers look staggering but, as you say, come off a low base, and there’s a lot of leverage that we get off above our expense space. I think investors will start to see that now as we’ve gone over that high watermark of costs.
SIMON BROWN: And that’s certainly the point I take out of it. I remember going back – was it maybe three or so years ago – and I could see the projection for EasyEquities getting to breakeven in the next three years. Truthfully, you’ve actually got to that profit and, weirdly enough, 2020 was a wild year. I don’t think anyone ever wants to repeat that for as long as we live, but it accelerated that growth trajectory and got EasyEquities into a solid profit position, and I imagine going forward you are now in profit. It’s not going to be the hardest thing in the world to hang on to that profitability.
CHARLES SAVAGE: Look, if we go back to a year ago, we were choosing where we needed to focus the business out of a loss-making income statement. Now we’ve got the luxury of choosing where we want to focus our attention out of a profit-making business, which means you’ve just got more choices that we can make and more resources to apply to our growth.
I don’t want to sound arrogant around these numbers, but I think it’s going to be easier for us to achieve growth from this space because we’re now operating on an income statement that gives us the latitude to do a few more things.
Last year was also a milestone, not just in terms of customers, but we did landmark deals, Capitec the big one. And when you partner with arguably the best bank in the world, it raises your profile above the parapet and introduces you to a whole world of new opportunities and new partnerships.
So the past 12 months have been spectacular for the group, specifically for EasyEquities. I think from this space, it’s going to be easier for us to grow as we get more customers and more access to distribution.
SIMON BROWN: I take your point there. It’s a different mindset. A year ago you were sitting there and wondering where you could sort of maybe cut corners. Now you’re sitting there and saying, hey, we’ve actually got some cash sitting here.
You mentioned Capitec. Within the Capitec app – and I’m a shareholder, but not a banking client, probably to my own cost – you now have easy access to EasyEquities to buy shares. How has that joint venture been playing out?
CHARLES SAVAGE: It’s been going really well. I think it’s behind some of our expectations, and not necessarily mine, to be honest. They’re responsible for about 25% of our new customers.
To put that into perspective, we onboard about 2 000 customers a day and Capitec is onboarding about 500. EasyEquities took six years to get to 500 customers a day; it’s taken Capitec six months.
And yet it still is behind some people’s expectations. For me, it’s pretty much in line with what I expected.
Capitec – this is a new functionality, a new service for their customers. EasyEquities is not necessarily known to all of their customers, and there’s lots of work that needs to be done about how they introduce us, where they introduce us, what the incentives are and what education is required. I think we can learn a heck of a lot from this first 12 months of working with them, and you can expect that those numbers will improve year on year. My expectation is that they’ll double their acquisition rate every year going forward as they learn more about how to operate and how to introduce the service.
SIMON BROWN: Two thousand customers a day; I worked in this industry in the last massive bull market in 2007, and that remains a staggering number. I’m trying to recall – that’s kind of the peak sort of levels you hit last year. In other words, your growth rate might’ve plateaued, but let’s be clear, plateaued at 2 000 a day is a giant number.
CHARLES SAVAGE: Yes, Simon. We referenced against all the big fintechs or banks and we are right up there in the top one, two or three in digital onboarding in financial services. So, has it plateaued? I’m not sure. It does seem like there is a bit of resistance at 2 000, but it is a big number. I think the key thing for us is the conversion of those customers to active investors. Currently, our average is sitting at around 38%, 40% and we think that’s where the improvement can happen more easily, rather than trying to lift the 2 000 number.
What we’re doing is implementing strategies to improve the conversion number, and the big strategy there is around education. We’ve surveyed our customers and the number one need that is preventing them from going on and investing is education. And so we’re working really hard on initiatives to drive education into those 2 000 registrations every day so that we can convert them through education.
SIMON BROWN: We’ll leave it there. Charles Savage is CEO of Purple Group. The market sold off the stock a bit on Friday, although it had been running hard. But I think when you dive into it, GT247 was disappointing, but EasyEquities is absolutely flying. Charles, I appreciate the early morning time.
Listen to Monday’s full MoneywebNOW podcast here