Charles Savage was back in the BizNews studio after the release of the Purple Group’s full year earnings. In the interview with founder Alec Hogg, looking in his crystal ball Savage said the future has never been brighter despite it being a tricky time in the market for growth stocks, echoed by the demure movements in the group’s share price in spite of a stellar performance over the last 12 months. Noteworthy metrics from the annual report include a 50% increase in customers and the completion of 4 acquisitions, a feat not to be scoffed at coming from a relatively small team of operators. The team are pleased to have executed against their goals for the year and simply view investor’s subdued reactions as an indication of a tricky macro environment as opposed to doubts about future growth, especially when considering the intrinsic value that will be harvested from its recent investment in the Philippines, which Charles expects to be much bigger than its South African market. Considering that the team has come from a R20 million income statement 8 years ago, to a company of R2.5 billion today, it’s difficult to argue that investors won’t be richly rewarded by a global product offering and a sound strategy that is on track to realise local and international expansion. An exciting space to watch indeed.
Charles Savage on the stock market not believing in EasyEquities at the moment
Charles: [00:00:38] Yeah, if you look at the sort of macro environment, it’s kind of against growth companies. You know, growth companies had a good run. We have had a good run and the tide will eventually turn again. The tides in value Piet’s (Viljoen) in favour, if you like, and values back in favour. But growth will come back as a theme and when it does, we will be growing faster and doing more things in more regions. So it’s a good time to make sure the ship is 100% secure, bedded everything down, you know, work on your strategy and your team and competencies and ignore the share price for a while. [00:00:45][7.5]
On whether a falling stock price is frustrating
Charles: [00:01:45] It is frustrating. It’s your share price, it’s kind of a confidence indicator. And so, if you like, people are less confident in our ability to execute on our dreams today than they were 12 months ago. But we don’t take it personally like we are committed completely to the democratising of investing, not just here but in other regions. And our runway for growth is so much bigger than it was 12 months ago. If you look at the results, and let’s just talk about some of the numbers in them, we increased customers by 50% in one year. We have 50% more customers than we did 12 months ago.
On the growth at EasyEquities
Charles: [00:02:24] Exactly. And you know how many stockbrokers that is? You know, the other way we compete, stockbroking. The biggest stockbroker outside of us purportedly is Standard Bank, and they’ve got about 50,000 or 70,000 customers. It’s three extra Standard Banks, if you like, in one year. So, great progress on customer numbers, which is one metric. The other one where we did really well is we bought four companies in 12 months. We bought Easy Properties, we bought Easy Crypto, we bought Rise and we bought a little ETF issuer called Cloud Atlas. Again, for a small team to execute four transactions, it doesn’t matter how small or big they are, it takes a lot of work and effort and we did all four. That means all of our ambitions are now aligned and we own 100% of the income statements, which is going to improve our economics going forward. That was a big tick in the box. We launched two new partnerships just after year end. We launched Discovery I think just a week or two after our financial year end. And then yesterday, we launched Telkom, both of those; we laid down all of those partnerships in the previous financial year. Again, big tick in the box. We’ve now got runway to 400,000–500,000 Discovery customers, banking customers and 15 million Telkom customers. More avenues for us to grow in the year ahead. And then, I think, the area where we let ourselves down is that we wanted to launch two new products in the year and that was EasyCredit, which is securitized lending and Easy Life, a life insurance product built for investors. And,, either we were too ambitious or we just didn’t execute with enough focus. But we will catch up andlaunch those products before the half-year results are out. And if I’m scoring us, that’s the only negative on our scorecard. You know, everything else was positive. We have put a lot of investment from our income statement into future growth, which we’re getting penalised for. So, it would seem investors would rather we harvest our income statement and pay them dividends and, you know, don’t invest in growth. But they are being shortsighted. If you think about what we did with a little income statement eight years ago, which produced R20 million of income and we produced a R2.5 billion company, eight years later, we have taken another R30 to R40 million out of our income statement and invested in our next phase of growth. And we think it will yield R3 to R4 billion in value over the next period, three, five or eight years. So, our income statement is suffering a little bit from investment, but we think it’s the right time and the right place to be investing. And it is certainly the right time for us to be growing our ambitions around new products and new regions. I think it was a really good year. And if the market wants to mark us down on our share price, we are here for the long term. We are not selling any shares. We’re staying the course and our dreams are bigger than they were 12 months ago.
On the 22% of EasyEquities customers who hold EasyEquities shares
Charles: [00:10:27] I think it is loved. When you buy something as a shareholder, the relationship does turn into one where there’s a kind of sense of ownership and love that comes with that sense of ownership. We have tried to find if we are the biggest, the JSE can tell us whether we are or aren’t. But when we look at our platform and look at all of the shareholdings on our platform, we are the biggest. And given that we’re the biggest retail stockbroker in the country by a factor of 10, I think we can safely assume that Purple Group is the most widely held retail share in this country. That gives me goosebumps because most of those shareholders came in at a very early stage when we were building the platform. Their entry price is probably closer to R0.50 than it is to R2. They’ve created a lot of value for themselves, but they’re also staying the course and they believe in the same dreams we believe in. And there are more of them every day. What they do, which is just magic for us, is as shareholders, they represent the business and bring us more customers all the time. It’s like having an army, a marketing army out there of 150,000 shareholders who are telling their friends and family about Purple Group every day and EasyEquities specifically. So, it’s a magic number. And I think it’s a key ingredient in our growth strategy is using our shareholders to get us more customers.
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