Purple Group cuts losses as young investors embrace EasyEquities
Fintech company reduces annual after-tax loss after increasing trading revenue and more than doubling assets invested through its low-cost investment platform
Financial services disruptor Purple Group, which is chaired by Post Office CEO Mark Barnes, seems to be turning the corner after a tough two years.
The company managed to cut its after-tax loss for the year to August 31 by more than half to R33.1m, from R57.9m the previous year, after increasing trading revenue and more than doubling assets invested through its low-cost investment platform EasyEquities.
The fintech firm has focused on offering some of the lowest-cost trading platforms in SA. In addition to EasyEquities, it also owns market trading platform GT247.com and Emperor Asset Management.
EasyEquities, in which Sanlam bought a 30% stake last year, investing R100m in the platform, enables people to buy and sell shares in publicly traded companies directly for only 64c per R100 invested. Purple Group’s online stockbroking facility, GT247.com, charges no platform or monthly fees.
Yet, despite its competitive offerings, the Purple Group has not reached its target of having 100,000 accounts invested across its product suite. The group’s share price has also lagged, trading 60% below its 2016 high of 75c. Since the beginning of the year, Purple has returned -14.29% to shareholders, slightly lagging the JSE all share index, which has returned -12.16%.
Purple Group CEO Charles Savage points out that customer numbers on EasyEquities have doubled every year since its launch three years ago. “While we haven’t reached that target [100,000], when you consider that we have over 68,000 [clients], that’s about 25% of retail stockbroking market share.
“And when you look at the local environment, local equity returns have been disappointing and we are in a technical recession. You can imagine what will happen once those headwinds turn into tailwinds,” said Savage.
More than 150,000 accounts have been opened on Easy Equities of which 68,739 are active. Savage says 65% of customers who opened EasyEquities accounts are millennials, or younger customers, who are taking up investing for the first time. The EasyEquities platform increased invested assets 144% to R3.5bn in the year to August and revenue grew 68%.
The trading platform, GT247.com, posted 13.9% in trading-revenue growth while its profit before tax more than doubled, from R4.2m to R10.2m. However, its asset management business recorded a R2.7m loss before tax as funds invested with it decreased.
“When we started four years ago, everyone was sceptical about whether we’ll gain market share. But we are not taking market share from anyone. Instead, we’ve democratised access to investment and 95% of our clients on EasyEquities are new investors,” said Savage.
Being able to bring on board first-time investors has helped the Purple Group secure partnerships with traditional players such as Sanlam and Bidvest Bank, which have opened new market opportunities for the fintech player. Bidvest Bank has, for example, incorporated the full EasyEquities platform capability on its newly launched Grow Account.
Purple Group is now planning to shake up the retirement-savings industry. About 18 months ago, it launched a 50-50 joint venture between EasyEquities and NBC Fund Administration Services. The new venture, called Rise, offers passive and active investment portfolios. It has secured R3bn in assets to administer by April 2019.
Savage said that being a digital player the group wanted to disrupt the space by offering a completely digital view and functionality of people’s retirement investment. “It’s the EasyEquities experience applied to a pension-fund customer,” said Savage.
Correction: December 3 2018
The initial version of this article incorrectly stated that Satrix bought a 30% stake in EasyEquities when it was in fact Sanlam.