EasyEquities’ big cost problem

Over the past financial year, EasyEquities’ operating cost per client has exceeded each client’s revenue – a trend it wants to reverse through its R25 per month Thrive membership.

This was revealed in EasyEquities-owner Purple Group’s financial results for the year ended August 2023.

Purple Group’s revenue grew by a marginal 0.8% to R276.06 million, while expenses increased by 31.9% to R280.21 million.

This saw the company make a loss of R35.2 million for the year – a 149.6% decline from the R70.95 million profit it made in 2022.

The main driver behind the poor results was EasyEquities. The trading platform reported a 140% decline in profit – from a profit of R72 million to a loss of R33 million.

The finances further showed that since 2020, the revenue per active client has followed a downward trend. It declined from R379 to R265 per client over four years.

The general trend has, therefore, been that EasyEquities brought in less money for every client it onboarded.

During this period, EasyEquities has also experienced a general increase in the costs of servicing its clients.

Between 2020 and 2021, EasyEquities lowered its total operating costs per active client – bringing it down from R328 to R248.

However, since 2021, EasyEquities has seen a reversal of this trend, with total operating costs per client increasing significantly from R248 to R315.

In the past financial year, the total operating cost per client was greater than the revenue each client generated. 

Every EasyEquities client created an operating loss of R50 over the past financial year, translating to a total operating loss of around R45 million.

The rapid increase in operating costs has, as can be expected, had a significant effect on EasyEquities’ profitability.

In 2021 and 2022, EasyEquities generated strong profits before tax mainly due to unrealised fair value adjustments on its shareholding in RISE.

However, the significant increase in EasyEquities’ cost base has put immense pressure on its profitability.

The company recorded a loss before tax of R44 million in the 2023 financial year, a striking reversal compared to the R31 million realised profit before tax in 2022.

Considering the rising cost and lower revenue generated per client, it is understandable that EasyEquities had to do something.

It opted for a mandatory R25 monthly subscription to its Thrive loyalty programme instead of a platform fee.

Through the Thrive subscription, it wants to either make money from increased activity or collect a R25 monthly fee from inactive users.

Purple Group CEO Charles Savage said they have not seen people dumping EasyEquities because of the R25 monthly fee, which bodes well for the company.

The Thrive fee can generate millions in additional revenue for EasyEquities and reverse the trend of declining revenue per user.