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SA’s low-cost investing platform, EasyEquities - loss-making since it launched in October 2014 - is poised to break even in March, thanks to its shareholder, Sanlam, which is passing on clients to the startup.
In 2019, EasyEquities was largely behind the Purple Group's R12m loss for the year to August. The former posted a R13.5m loss before tax and negated the R17.7m gains in the group’s online stockbroking facility, GT247.com.
During the annual general meeting of EasyEquities’ parent company, the Purple Group, CFO Gary van Dyk said the platform - which went back to Sanlam to raise an additional R25m, after the R100m initial investment the insurer made to EasyEquities - should not need to borrow more in future.
Sanlam acquired a 30% stake in EasyEquities in 2017 for R100m. Another R15m was given to EasyEquities in August last year, and a further R10m later in December, to keep the company afloat until it generates profit.
Van Dyk said Satrix, a unit trust platform in which Sanlam’s is also a shareholder, will be transferring R6bn worth of assets and 50 000 clients to EasyEquities at the end of February.
“EasyEquities business is what has consumed cash,” said van Dyk, adding that the fee arrangement on the Satrix deal would see EasyEquities stand on its own feet and not need to be cross-subsidised by other operations or shareholders.
Cash flow challenges averted
With EasyEquities not making a profit yet, and new divisions being formed, the Purple Group has had to fund most of its expansion through borrowings.
Shareholder activist, Theo Botha, questioned the company’s ability to self-sustain its operations going forward, given how it had to ask Sanlam for capitalisation in the past, and because it has a looming R24m short-term debt due.
A large share of this R24m is made up of the R18m Industrial Development Corporation (IDC) loan that the company must repay this year.
But van Dyk said Purple Group is negotiating with the IDC to alleviate its short-term debt burden. “We had discussions with them in the last quarter of last year and we are waiting for a revised payment schedule. We are actually going to push it out for a further two years,” said Van Dyk.
Purple Group CEO Charles Savage said while the discussions with the IDC had not been finalised, the group was expecting its request to be approved and he anticipated no liquidity constraints in the foreseeable future, when EasyEquities is able to sustain itself.
Directors' fees under scrutiny
Botha also questioned why Mark Barnes’ director's fee of R899 000 in the 2019 financial year was more than the R500 000 that shareholders approved at last year’s AGM.
In 2019, Barnes, who owns 20% of the Purple Group, was also under scrutiny for the then-proposed R2.86m directors fee. The Purple Group revised the fee to be paid to Barnes - who was the chairman at the time - to R500 000 for the 2019 financial year. But Barnes only served as the group’s chairman for four months. A new chairman started in January 2019. Combined, the two chairmen’s fees added up to R1.19m.
But van Dyk said there was nothing untoward about Barnes’ fees, as he was paid for the four months to December 2018, a period before the new chair’s fees were approved. The 2019 AGM took place in January and the new directors’ fees were only effected then, said van Dyk.
