BLU – A cleaner bill of health

With Blue Label making significant progress on returning to their core business through the successful disposal of peripheral businesses and the deleveraging of their balance sheet, we turn our attention to potential future growth drivers for the business. Two growth vectors have been mooted – revenue assurance to municipalities relating to electricity and hardware device financing through a new CEC book.

In the first instance, based on limited disclosure, it seems as though the revenue assurance business is still nascent. We investigate the potential profitability of a financing business in a low-interest rate environment and conclude that the profitability of such a business on a net interest income basis only is relatively low and needs to be supplemented with other income beyond interest to be profitable in the current environment.