[TOP STORY] Purple Group’s clients now number almost a million

We’re highly differentiated and have a fantastic platform that’s capable of partnering with banks and financial institutions – we need to do more of that internationally: CEO Charles Savage.

SIMON BROWN: I’m chatting now with Charles Savage, CEO of Purple Group. A disclaimer up front: I hold shares in Purple. Results for six months ending February [out on Monday, show]: revenue up 36%, operating costs per client decreasing.

I think the main number there is [EasyEquities’ funded retail investment accounts numbering 966 299]. Charles, I appreciate the early morning time. I went and had a look at [the interim results ended] February 2020, pre-pandemic. Then you had 199 491 funded accounts. You’re now almost at a million; you’re essentially five times up in the pandemic period, and that has propelled the business to [where] you’ve now got that sort of launch pad. You’ve got the million clients, you’re making a profit on them. First question, profit per client? Is it sort of returning to normal as we move out of the pandemic?

Read: Purple Group goes for scale as platform assets top R36bn

CHARLES SAVAGE: Hello, Simon. Thanks for having me on. Yes, it is. We saw elevated levels of portfolio turnover during the pandemic, and I just want to clarify that. Average turnover of our accounts during the pandemic was 1.8 times per year. Normalised levels are closer to 90%, so kind of 50% of what they were doing in the pandemic. I think [there were] two principle drivers for that: one is we had more time to think about what stocks we wanted to own, and the second one was the market volatility that that occurred. Look at shares like Sasol and others that were driven down.

So yeah, turnovers return to normalised levels, and we expect, as a result of that, as clients and assets grow commensurately you’ll see income growth that is sort of parallel to those growth lines.

SIMON BROWN: The point with a million clients – I alluded to it in the intro – is you’ve now I imagine got that critical mass; costs per client of acquisition and managing are sort of decreasing. You’ve also got this great critical mass now of almost a million clients who are generating revenue for you, and [to whom] you can launch new products – for example, post the period taking up the remaining 49% in the EC10 crypto bundle, and new products coming.

CHARLES SAVAGE: Yeah, exactly. ‘Million clients’ is big numbers. The market’s been working towards that for almost a hundred years. It’s going to [have taken] us close to eight years to get there. I think the next million customers will come in less than 18 months. So that’s become [the] momentum that’s in the business, and the real opportunity is to use that momentum to deliver new products and services to the market and get a greater share of wallets. You’ve seen us do that in EasyProperties and EasyCrypto, and we’ll continue to do that with new products. We’ve got five product launches in the next 12 months. So that’s the first.

Then the second one is that, with the confidence that comes from getting to a million clients, we need to do this somewhere else.

We’re not just a good South African business, we could be a really good global business. So we’ve got to go and take our platform capability, which internationally is unique.

Yes, there is competition, but we’re highly differentiated and we have a fantastic platform that’s capable of partnering banks and financial institutions – and we need to do more of that internationally.

Read/listen: EasyEquities has disrupted the SA investment market since inception

Covid kind of locked us down from being able to do that but, having said that, [it]  gave us the opportunity to focus here at home. Now that Covid is clearing, the opportunity to go and take our platform to other places is right in front of us.

SIMON BROWN: If you’re looking at other places, are you looking at developed markets or are you looking at developing?

CHARLES SAVAGE: We prefer emerging markets. We like a market setup that looks like South Africa did seven years ago – where there’s a low penetration rate of stockbroking and investment services, and where competition is also low. So we’re not going to go and fight wars with people like Robinhood in the US.

We’d rather go to places that look more like these – [where you] need lots of mosquito repellent, so our competition isn’t there yet.

SIMON BROWN: Obviously this includes [the services agreement with] Capitec; that is well known. But these numbers exclude the Discovery and the Telkom [partnership] deals; they will kick in, what, during the next six months?.

CHARLES SAVAGE: Exactly. I’m so excited about both those developments. They give us runways into different client audiences.

Discovery probably [represents] a higher net worth customer base, and then Telkom just gets us to places that we can’t get to. So we’re excited about rolling those two out in the next quarter.

I think they’ll launch sort of July/August, and that gives us more runways for growth in South Africa.

That won’t be the end of the partnerships here, though. There are retailers that are approaching us and it’s interesting to see retailers playing in the financial services space and we’ve had a lot of approaches to enable them. We just haven’t had the capacity to do anything about it. We’ve been too busy on Telkom and Discovery, but we’ll continue to forge partnerships with people who believe in the same things that we do.

SIMON BROWN: A quick, last one. I see you bringing on more folk to bolster your team,  risk management and the like. This intuitively makes sense as the company scales, as it grows, to bring those extra skills [in] as they are going to be required.

CHARLES SAVAGE: Yeah, exactly – one or two wonderful skills to acquire. The business has scaled a lot, [and] we haven’t scaled the team, especially at an executive level. So [it’s] a good time to bring on two new skills and I’m just overwhelmed that we’ve been able to attract such talent. I guess, as the business grows, we’ll be able to attract more and more talent. So expect more of that from us going forward.

SIMON BROWN: We’ll leave that there. That is Charles Savage, CEO of Purple Group, talking about the results of the six months ending February.

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