(TSX: KBL)
EDMONTON,
AB, Aug. 6, 2024 /CNW/ - K-Bro Linen Inc.
("K-Bro" or the "Corporation") today announces its Q2 2024
financial and operating results.
Q2 2024 Financial and
Operating Highlights
- Consolidated revenue increased 15.8% compared to Q2 2023, with
healthcare revenue having increased by 5.5% and hospitality revenue
by 28.9%.
- Adjusted EBITDA, Adjusted EBITDA Margin & Adjusted Net
Earnings
- Adjusted EBITDA increased in the second quarter of 2024 by
$3.6 million to $18.2 million compared to $14.6 million over the comparable 2023 period, a
25.2% increase.
- Adjusting items include costs of $1.7
million in the quarter related to non-recurring transaction,
transition and syndication/structural financing costs.
- Adjusted EBITDA margin increased to 19.5% from 18.1% in the
comparable period.
- Adjusted net earnings in the second quarter increased by
$1.4 million to $6.2 million compared to $4.8 million in the comparative period of
2023.
- EBITDA, EBITDA Margin & Net Earnings
- EBITDA increased in the second quarter of 2024 by $2.1 million to $16.6
million compared to $14.5
million over the comparable 2023 period, a 14.3%
increase.
- EBITDA margin decreased to 17.7% from 18.0% in the comparable
period as the result of the adjusting items discussed above.
- Net earnings in the second quarter of 2024 decreased by
$0.2 million to $4.5 million compared to $4.7 million in the comparative period of
2023.
- For the second quarter of 2024, K-Bro declared dividends of
$0.300 per common share.
- Long-term debt at the end of Q2 2024 was $134.8 million compared to $70.2 million at the end of fiscal 2023 due to
the acquisitions of Shortridge and C.M.
- K-Bro entered into a three-year, $175
million committed, syndicated revolving credit facility on
March 26, 2024.
- K-Bro repurchased and cancelled 49,060 shares in Q2 2024 under
the normal course issuer bid. To date, a total of 312,676 shares
have been repurchased and cancelled.
Linda McCurdy,
President & CEO of K-Bro, commented that "I'm delighted with
our record second quarter results and continued momentum in both
healthcare and hospitality segments. Both of K-Bro's segments
continue to experience steady growth trends and we remain focused
on delivering industry-leading service to our existing and new
customers. We're pleased with the early contributions of our
acquisitions and see a positive outlook for K-Bro.
We're excited about our organic growth prospects
and potential future M&A. We remain well positioned from
a balance sheet and liquidity perspective and will continue to be
disciplined as we evaluate acquisitions. As K-Bro actively
pursues its growth opportunities, we will continue to incur certain
non-recurring or one-time transaction, transition and financing
costs. In this context, we believe Adjusted EBITDA, before
non-recurring or one-time costs, will assist investors to assess
our performance on a consistent basis as it is an indication of our
capacity to generate income from operations. Going forward,
we expect Adjusted EBITDA margins to follow historical seasonal
trends."
Highlights and Significant Events
for Q2 2024
Acquisition of
Shortridge
On April 30, 2024
the Corporation completed the acquisition of 100% of the share
capital of Shortridge Ltd. ("Shortridge Acquisition"), a private
hospitality laundry provider based in the North West of
England, expanding K-Bro's
geographic footprint in the UK. The Shortridge Acquisition
was completed through a share purchase agreement consisting of
existing working capital, fixed assets, contracts and an employee
base. The contracts acquired are in the hospitality sector in
England and Scotland, which complements the existing
business of the Corporation. Based on the Corporation's evaluation
of the Shortridge Acquisition and the criteria in the
identification of a business combination established in IFRS 3, the
Shortridge Acquisition has been accounted for using the acquisition
method, whereby the purchase consideration is allocated to the fair
values of the net assets acquired.
At the time the financial statements were
authorized for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for the Shortridge
Acquisition. This includes the accounting for the amounts
attributable to property, plant and equipment, intangible assets
and the associated goodwill.
The Corporation financed the Shortridge
Acquisition and transaction costs from the syndicated revolving
credit facility.
The preliminary purchase price allocated to the
net assets acquired, based on their estimated fair values, is as
follows:
|
|
Cash
consideration
|
35,426
|
Contingent
consideration
|
9,275
|
Total purchase
price
|
44,701
|
The assets and liabilities recognized as a result
of the Shortridge Acquisition are as follows:
Net Assets
Acquired:
|
|
Accounts
receivable
|
2,698
|
Prepaid expenses and
deposits
|
912
|
Linen in
service
|
1,943
|
Accounts payable and
accrued liabilities
|
(5,134)
|
Lease
liabilities
|
(57)
|
Deferred income tax
asset
|
8
|
Property, plant and
equipment (1)
|
8,986
|
Intangible
assets
|
15,181
|
Net identifiable assets
acquired
|
24,537
|
Goodwill
|
20,164
|
Net assets
acquired
|
$
44,701
|
|
1) Includes ROUA from
the UK Division of $57 related to buildings
|
The provisional intangible assets acquired are
made up of $13,149 related to
customer relationships and $2,032
related to the brand. The goodwill is attributable to the
workforce, and the efficiencies and synergies created between the
existing business of the Corporation and the acquired business.
Goodwill will not be deductible for tax purposes.
Contingent consideration
The contingent consideration consists of amounts
related to achieving certain profitability and operational
targets.
An amount of $7,684
was funded in cash on April 30, 2024
and is held in trust with a third party escrow agent. The remaining
$1,591 will be payable in cash.
The estimated fair value of the payments has been
classified as contingent consideration by exercising significant
judgment as to whether it should be classified as such, or as
remuneration to the former owners, who will be employed subsequent
to the close of the transaction. The Corporation has determined by
considering all relevant factors included in the agreements as it
pertains to employment terms, valuation of the business, and other
relevant terms that the additional consideration is most
appropriately reflected as contingent consideration.
For the contingent consideration, in the event
that certain profitability and operational targets are achieved by
Shortridge, additional undiscounted consideration will be released
from escrow or paid in cash before December
31, 2025.
The fair value of the contingent consideration of
$9,275 was estimated by considering
the probability-adjusted future expected cash flows in regards to
Shortridge achieving the targets that would result in consideration
being paid.
Acquisition related costs
For the six months ended June 30, 2024, $508
in professional fees associated with the Shortridge Acquisition has
been included in Corporate expenses.
Revenue and profit information
The acquired business contributed revenues of
$4,402 to the Corporation for the
period from April 30, 2024 to
June 30, 2024. If the Acquisition had
occurred on January 1, 2024,
consolidated pro-forma revenue for the period ended June 30, 2024 would have been $179,676.
The acquired business contributed net earnings of
$761 to the Corporation for the
period from April 30, 2024 to
June 30, 2024. If the Acquisition had
occurred on January 1, 2024,
consolidated pro-forma net earnings for the period ended
June 30, 2024 would have been
$6,778.
Acquisition of Buanderie
C.M.
On June 21, 2024
the Corporation completed the acquisition of 100% of the share
capital of Buanderie C.M. Inc. ("C.M. Acquisition"), a private
laundry and linen operator located in Montréal serving the
healthcare market. The acquisition will enable K-Bro to operate
with two facilities in Montreal to
service its growing healthcare and hospitality business. Based on
the Corporation's evaluation of the C.M. Acquisition and the
criteria in the identification of a business combination
established in IFRS 3, the C.M. Acquisition has been accounted for
using the acquisition method, whereby the purchase consideration is
allocated to the fair values of the net assets acquired.
At the time the financial statements were
authorized for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for the C.M.
Acquisition. This includes the accounting for the amounts
attributable to property, plant and equipment, intangible assets
and the associated goodwill.
The Corporation financed the C.M. Acquisition and
transaction costs from the syndicated revolving credit
facility.
The preliminary purchase price allocated to the
net assets acquired, based on their estimated fair values, is as
follows:
Cash
consideration
|
$
11,795
|
Total purchase
price
|
$
11,795
|
The assets and liabilities recognized as a result
of the C.M. Acquisition are as follows:
Net Assets
Acquired:
|
|
Accounts
receivable
|
742
|
Prepaid expenses and
deposits
|
20
|
Linen in
service
|
201
|
Accounts payable and
accrued liabilities
|
(377)
|
Deferred income
taxes
|
(561)
|
Property, plant and
equipment
|
7,055
|
Intangible
assets
|
1,800
|
Net identifiable assets
acquired
|
8,880
|
Goodwill
|
2,915
|
Net assets
acquired
|
$
11,795
|
The provisional intangible assets acquired are
made up of $1,800 related to customer
relationships. The goodwill is attributable to the workforce, and
the efficiencies and synergies created between the existing
business of the Corporation and the acquired business. Goodwill
will not be deductible for tax purposes.
Acquisition related costs
For the six months ended June 30, 2024, $538
in professional fees associated with the C.M. Acquisition has been
included in Corporate expenses.
Revenue and profit information
The acquired business contributed revenues of
$176 to the Corporation for the
period from June 21, 2024 to
June 30, 2024. If the Acquisition had
occurred on January 1, 2024,
consolidated pro-forma revenue for the period ended June 30, 2024 would have been $177,308.
The acquired business contributed net earnings of
$17 to the Corporation for the period
from June 21, 2024 to June 30, 2024. If the Acquisition had occurred on
January 1, 2024, consolidated
pro-forma net earnings for the period ended June 30, 2024 would have been $6,180.
Revolving Credit
Facility
On August 31, 2023,
the Corporation completed an amendment to its existing revolving
credit facility to extend the agreement from July 31, 2026 to July 31,
2027, as previously amended on July
18, 2022. In addition, the agreement expanded the revolving
credit facility from $100,000 to
$125,000 plus a $25,000 accordion.
On March 26, 2024,
the Corporation entered into a three-year committed Syndicated
Credit Facility Agreement from March 26,
2024 to March 25, 2027. The
new agreement consists of a $175,000
revolving credit facility plus a $75,000 accordion.
The Corporation's incremental borrowing rate
under its existing credit facility is determined by the Canadian
prime rate plus an applicable margin based on the ratio of Funded
Debt to EBITDA as defined in the credit agreement.
Capital Investment
Plan
For fiscal 2024, the Corporation's planned
capital spending is expected to be between $15.0 and $17.0
million on a consolidated basis, including the expenditures
associated with the Villeray acquisition. This guidance includes
both strategic and maintenance capital requirements to support
existing base business in both Canada and the UK. We will continue to assess
capital needs within our facilities and prioritize projects that
have shorter term paybacks as well as those that are required to
maintain efficient and reliable operations.
Economic
Conditions
Since 2020, due to changing government
restrictions to mitigate the ongoing COVID-19 pandemic, supply
chain disruption, geopolitical events impacting key inputs such as
natural gas, electricity and diesel and inflationary impacts to
labour and materials the Corporation has faced varying degrees of
financial impact within Canada and
the UK. The COVID-19 pandemic has also contributed to unusually
competitive labour markets, causing inefficiencies in attracting,
training and retaining employees.While labour markets have been
stabilizing, certain regional markets continue to experience
constrained labour availability.
The Corporation's Credit Facility is subject to
floating interest rates and, therefore, is subject to fluctuations
in interest rates which are beyond the Corporation's control.
Increases in interest rates, both domestically and internationally,
could negatively affect the Corporation's cost of financing its
operations and investments.
Uncertainty about judgments, estimates and
assumptions made by management during the preparation of the
Corporation's consolidated financial statements related to
potential impacts of the COVID-19 pandemic, geopolitical events and
rising interest rates on revenue, expenses, assets, liabilities,
and note disclosures could result in a material adjustment to the
carrying value of the asset or liability affected.
Financial Results
|
For The Three
Months Ended June 30,
|
|
|
(thousands,
except per share amounts
and percentages)
|
Canadian
Division
2024
|
UK
Division
2024
|
2024
|
Canadian
Division
2023
|
UK
Division
2023
|
2023
|
$
Change
|
%
Change
|
Revenue
|
$
64,669
|
$
28,798
|
$
93,467
|
$
59,161
|
$
21,584
|
$
80,745
|
12,722
|
15.8 %
|
Expenses included in
EBITDA
|
53,682
|
23,212
|
76,894
|
48,456
|
17,788
|
66,244
|
10,650
|
16.1 %
|
EBITDA(1)
|
10,987
|
5,586
|
16,573
|
10,705
|
3,796
|
14,501
|
2,072
|
14.3 %
|
EBITDA as a % of
revenue
|
17.0 %
|
19.4 %
|
17.7 %
|
18.1 %
|
17.6 %
|
18.0 %
|
-0.3 %
|
-1.7 %
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
12,244
|
6,003
|
18,247
|
10,782
|
3,796
|
14,578
|
3,669
|
25.2 %
|
Adjusted EBITDA as a %
of revenue
|
18.9 %
|
20.8 %
|
19.5 %
|
18.2 %
|
17.6 %
|
18.1 %
|
1.4 %
|
7.7 %
|
Net earnings
|
1,775
|
2,760
|
4,535
|
2,829
|
1,862
|
4,691
|
(156)
|
-3.3 %
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
0.169
|
$
0.263
|
$
0.432
|
$
0.264
|
$
0.174
|
$
0.438
|
$
(0.006)
|
-1.4 %
|
Diluted earnings per
share
|
$
0.169
|
$
0.262
|
$
0.431
|
$
0.263
|
$
0.173
|
$
0.436
|
$
(0.005)
|
-1.1 %
|
Dividends declared per
diluted share
|
|
|
$
0.30
|
|
|
$
0.300
|
$
-
|
0.0 %
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
(1)
|
3,032
|
3,177
|
6,209
|
2,906
|
1,862
|
4,768
|
1,441
|
30.2 %
|
Adjusted basic earnings
per share (1)
|
$
0.290
|
$
0.304
|
$
0.594
|
$
0.271
|
$
0.174
|
$
0.445
|
$
0.149
|
33.5 %
|
Adjusted diluted
earnings per share (1)
|
$
0.288
|
$
0.302
|
$
0.590
|
$
0.270
|
$
0.173
|
$
0.443
|
$
0.147
|
33.2 %
|
Total assets
|
|
|
444,380
|
|
|
346,532
|
97,848
|
28.2 %
|
Long-term debt
(excludes lease liabilities)
|
|
|
134,789
|
|
|
63,598
|
71,191
|
111.9 %
|
|
|
|
|
|
|
-
|
|
|
Cash provided by
operating activities
|
|
|
7,863
|
|
|
1,122
|
6,741
|
600.8 %
|
Net change in non-cash
working capital items
|
|
|
(6,093)
|
|
|
(11,615)
|
5,522
|
47.5 %
|
Share-based
compensation expense
|
|
|
546
|
|
|
443
|
103
|
23.3 %
|
Maintenance capital
expenditures
|
|
|
1,064
|
|
|
1,143
|
(79)
|
-6.9 %
|
Principal elements of
lease payments
|
|
|
2,668
|
|
|
2,340
|
328
|
14.0 %
|
Distributable cash
flow
|
|
|
9,678
|
|
|
8,811
|
867
|
9.8 %
|
Dividends
declared
|
|
|
3,169
|
|
|
3,237
|
(68)
|
-2.1 %
|
Payout ratio
|
|
|
32.7 %
|
|
|
36.7 %
|
-4.0 %
|
-10.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six
Months Ended June 30,
|
|
|
(thousands,
except per share amounts
and percentages)
|
Canadian
Division
2024
|
UK
Division
2024
|
2024
|
Canadian
Division
2023
|
UK
Division
2023
|
2023
|
$
Change
|
%
Change
|
|
|
|
|
|
|
0
|
|
|
Revenue
|
$
127,369
|
$
46,325
|
$
173,694
|
$
114,660
|
$
36,868
|
$
151,528
|
22,166
|
14.6 %
|
Expenses included in
EBITDA
|
106,503
|
39,013
|
145,516
|
94,597
|
32,097
|
126,694
|
18,822
|
14.9 %
|
EBITDA(1)
|
20,866
|
7,312
|
28,178
|
20,063
|
4,771
|
24,834
|
3,344
|
13.5 %
|
EBITDA as a % of
revenue
|
16.4 %
|
15.8 %
|
16.2 %
|
17.5 %
|
12.9 %
|
16.4 %
|
-0.2 %
|
-1.2 %
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
23,861
|
7,820
|
31,681
|
20,271
|
4,771
|
25,042
|
6,639
|
26.5 %
|
Adjusted EBITDA as a %
of revenue
|
18.7 %
|
16.9 %
|
18.2 %
|
17.7 %
|
12.9 %
|
16.5 %
|
1.7 %
|
10.3 %
|
Net earnings
|
3,454
|
2,887
|
6,341
|
5,074
|
1,617
|
6,691
|
(350)
|
-5.2 %
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
0.329
|
$
0.275
|
$
0.604
|
$
0.474
|
$
0.151
|
$
0.625
|
$
(0.021)
|
-3.4 %
|
Diluted earnings per
share
|
$
0.328
|
$
0.274
|
$
0.602
|
$
0.472
|
$
0.150
|
$
0.622
|
$
(0.020)
|
-3.2 %
|
Dividends declared per
diluted share
|
|
|
$
0.60
|
|
|
$
0.600
|
$
-
|
0.0 %
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
(1)
|
6,449
|
3,395
|
9,844
|
5,282
|
1,617
|
6,899
|
2,945
|
42.7 %
|
Adjusted basic earnings
per share (1)
|
$
0.615
|
$
0.324
|
$
0.939
|
$
0.493
|
$
0.151
|
$
0.644
|
$
0.295
|
45.8 %
|
Adjusted diluted
earnings per share (1)
|
$
0.611
|
$
0.322
|
$
0.933
|
$
0.492
|
$
0.150
|
$
0.642
|
$
0.291
|
45.3 %
|
Total assets
|
|
|
444,380
|
|
|
346,532
|
97,848
|
28.2 %
|
Long-term debt
(excludes lease liabilities)
|
|
|
134,789
|
|
|
63,598
|
71,191
|
111.9 %
|
|
|
|
|
|
|
|
|
|
Cash provided by
operating activities
|
|
|
20,555
|
|
|
10,430
|
10,125
|
97.1 %
|
Net change in non-cash
working capital items
|
|
|
(2,901)
|
|
|
(11,009)
|
8,108
|
73.6 %
|
Share-based
compensation expense
|
|
|
1,054
|
|
|
948
|
106
|
11.2 %
|
Maintenance capital
expenditures
|
|
|
1,451
|
|
|
2,079
|
(628)
|
-30.2 %
|
Principal elements of
lease payments
|
|
|
5,299
|
|
|
4,484
|
815
|
18.2 %
|
Distributable cash
flow
|
|
|
15,652
|
|
|
13,928
|
1,724
|
12.4 %
|
Dividends
declared
|
|
|
6,346
|
|
|
6,468
|
(122)
|
-1.9 %
|
Payout ratio
|
|
|
40.5 %
|
|
|
46.4 %
|
-5.9 %
|
-12.7 %
|
(1) See
"Terminology" for further details
|
OUTLOOK
The Corporation's healthcare and hospitality
segments continues to experience steady growth trends. For the
healthcare segment, management expects activity levels to remain
strong from continued focus on reducing wait times and enhancing
patient care.For the hospitality segment, management expects solid
activity levels from both business and leisure travel reflecting
historical seasonal trends.
The volatility we encountered from energy prices,
local labour market shortages and cost inflation throughout the
pandemic has stabilized. In early 2022, particularly in the UK, the
Corporation faced significant volatility in energy costs due to
geopolitical issues. In April 2022,
to mitigate this instability, the Corporation locked in natural gas
supply rates in the UK until December
2024. In April 2024, the
Corporation's UK division extended their natural gas supply
commitment until December 2026.
The Corporation also faced temporary labour
inefficiencies from unusually competitive labour markets. While
labour markets have been stabilizing, certain regional markets
continue to experience constrained labour availability. The
Corporation is managing more challenging regional labour
availability with complementary temporary foreign worker programs
and has seen positive staffing support in this regard.
Throughout 2023, EBITDA margins benefited from
stronger client activity, price increases that we have secured to
offset inflation-related costs, the completion of the AHS
transition, operating efficiencies, and lower delivery costs.
As K-Bro actively pursues its growth opportunities, the Corporation
will continue to incur certain non-recurring or one-time
transaction, transition and syndication/structural financing
costs. In this context, management believes Adjusted EBITDA,
before non-recurring or one-time costs, assists investors to assess
our performance on a consistent basis as it is an indication of our
capacity to generate income from operations. Adjusting items
include non-recurring transaction, transition and
syndication/structural financing costs, as detailed in the tables
within "Terminology". Going forward, management
expects Adjusted EBITDA margins to follow historical seasonal
trends.
With continued momentum in existing operations,
management has refocused attention on strategic acquisitions, such
as the acquisitions of C.M., Shortridge, Villeray and Paranet, to
accelerate growth in both North
America and Europe,
geographies which remain highly fragmented. K-Bro's upsized
$175 million syndicated credit
facility, with a further $75 million
accordion, provides further financial flexibility to pursue growth
opportunities. K-Bro will look to leverage its strong liquidity
position, balance sheet and access to the capital markets to
execute on these opportunities, should they arise. For further
information about the impact of other economic factors on our
business, see the "Summary of Interim Results and Key
Events".
CORPORATE PROFILE
K-Bro is the largest owner and operator of laundry and linen
processing facilities in Canada
and a market leader for laundry and textile rental services in
Scotland and the North of
England. KÂÂÂ‑Bro and its
wholly-owned subsidiaries operate across Canada and the UK, providing a range of linen
services to healthcare institutions, hotels and other commercial
accounts that include the processing, management and distribution
of general linen and operating room linen.
The Corporation's operations in Canada include ten processing facilities and
two distribution centres under two distinctive brands: K‑Bro Linen
Systems Inc. and Buanderie HMR. The Corporation operates in ten
Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Prince
Albert, Edmonton,
Calgary, Vancouver and Victoria.
The Corporation's operations in the UK include
Fishers, which was acquired by K‑Bro on November 27, 2017. Fishers was established in
1900 and is a leading operator of laundry and linen processing
facilities in Scotland, providing
linen rental, workwear hire and cleanroom garment services to the
hospitality, healthcare, manufacturing and pharmaceutical sectors.
The Corporation operates five UK sites located in Cupar, Perth,
Newcastle, Livingston and
Coatbridge.
Additional information regarding the Corporation
including required securities filings are available on our website
at www.k-brolinen.com and on the Canadian Securities
Administrators' website at www.sedarplus.ca; the System for
Electronic Document Analysis and Retrieval ("SEDAR").
TERMINOLOGY
Throughout this news release and other documents
referred to herein, and in order to provide a better understanding
of the financial results, K-Bro uses the terms "EBITDA", "adjusted
EBITDA", "adjusted net earnings", "adjusted net earnings per
share", "debt to total capital", "distributable cash" and "payout
ratio". These terms do not have any standardized meaning under
International Financial Reporting Standards ("IFRS") as set out in
the CICA Handbook. Therefore, EBITDA, adjusted EBITDA, adjusted net
earnings, adjusted net earnings per share, distributable cash and
payout ratio may not be comparable to similar measures presented by
other issuers. Specifically, the terms "EBITDA", "adjusted EBITDA",
"adjusted net earnings", "adjusted net earnings per share",
"distributable cash", and "payout ratio" have been defined as
follows:
EBITDA
EBITDA (Earnings before interest, taxes,
depreciation and amortization) comprises revenues less operating
costs before financing costs, capital asset and intangible asset
amortization, and income taxes.
EBITDA is a sub‑total presented within the
statement of earnings in accordance with the amendments made to IAS
1 which became effective January 1,
2016. EBITDA is not considered an alternative to net
earnings in measuring K‑Bro's performance. EBITDA should not be
used as an exclusive measure of cash flow since it does not account
for the impact of working capital changes, capital expenditures,
debt changes and other sources and uses of cash, which are
disclosed in the consolidated statements of cash flows.
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(thousands)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Net earnings
|
$
4,535
|
|
$
4,691
|
|
$
6,341
|
|
$
6,691
|
Add:
|
|
|
|
|
|
|
|
|
Income tax
expense
|
1,125
|
|
1,423
|
|
1,694
|
|
1,962
|
|
Finance
expense
|
2,884
|
|
1,584
|
|
4,807
|
|
3,057
|
|
Depreciation of
property, plant and equipment
|
7,281
|
|
6,656
|
|
14,287
|
|
12,907
|
|
Amortization of
intangible assets
|
748
|
|
147
|
|
1,049
|
|
217
|
EBITDA
|
$
16,573
|
|
$
14,501
|
|
$
28,178
|
|
$
24,834
|
Non-GAAP Measures
Adjusted EBITDA
K‑Bro reports Adjusted EBITDA (Earnings before
interest, taxes, depreciation and amortization) as a key measure
used by management to evaluate performance. Adjusted EBITDA is
utilized to make decisions related to dividends to Shareholders. We
believe Adjusted EBITDA assists investors to assess our performance
on a consistent basis as it is an indication of our capacity to
generate income from operations before taking into account
management's financing decisions and costs of acquiring tangible
and intangible capital assets. The Corporation has modified
its definition for Adjusted EBITDA and has updated its comparative
quarters to reflect the modified definition. "Adjusted EBITDA" is
defined as EBITDA (defined above) with the exclusion of certain
non-recurring or one-time costs, expenses, gains, losses, charges
or any changes in fair value that are non-operating in nature that
the Corporation believes are not reflective of ongoing business
performance and operational profitability. The Corporation believes
these non-GAAP definitions provide more meaningful reflections of
normalized financial performance from operations and will enhance
period-over-period comparability.
|
|
Three Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
EBITDA
|
$
10,987
|
$
5,586
|
$
16,573
|
$
10,705
|
$
3,796
|
$
14,501
|
Add non-recurring
items:
|
|
|
|
|
|
|
|
Transaction Costs
1
|
654
|
417
|
$
1,071
|
77
|
-
|
77
|
|
Syndication/Structural
Finance Costs 2
|
392
|
-
|
$
392
|
-
|
-
|
-
|
|
Transition Costs
3
|
211
|
-
|
$
211
|
-
|
-
|
-
|
Adjusted
EBITDA
|
$
12,244
|
$
6,003
|
$
18,247
|
$
10,782
|
$
3,796
|
$
14,578
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Six Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
EBITDA
|
$
20,866
|
$
7,312
|
$
28,178
|
$
20,063
|
$
4,771
|
$
24,834
|
Add non-recurring
items:
|
|
|
|
-
|
-
|
-
|
|
Transaction Costs
1
|
$
683
|
$
508
|
$
1,191
|
208
|
-
|
208
|
|
Syndication/Structural
Finance Costs 2
|
$
1,892
|
$
-
|
$
1,892
|
-
|
-
|
-
|
|
Transition Costs
3
|
$
420
|
$
-
|
$
420
|
-
|
-
|
-
|
Adjusted
EBITDA
|
$
23,861
|
$
7,820
|
$
31,681
|
$
20,271
|
$
4,771
|
$
25,042
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
Adjusted Net Earnings and Adjusted
Earnings per Share
Adjusted Net Earnings and Adjusted Earnings per
Share are non-GAAP measures. These non-GAAP measures are defined to
exclude certain non-recurring or one-time costs, expenses, gains,
losses, charges or any changes in fair value that are non-operating
in nature that the Corporation believes are not reflective of
ongoing business performance and operational profitability. The
Corporation believes these non-GAAP definitions provide more
meaningful reflections of normalized financial performance from
operations and will enhance period-over-period
comparability.
|
|
Three Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Net Earnings
|
$
1,775
|
$
2,760
|
$
4,535
|
$
2,829
|
$
1,862
|
$
4,691
|
Add non-recurring
items:
|
|
|
|
|
|
|
|
Transaction Costs
1
|
654
|
417
|
$
1,071
|
77
|
-
|
77
|
|
Syndication/Structural
Finance Costs 2
|
392
|
-
|
$
392
|
-
|
-
|
-
|
|
Transition Costs
3
|
211
|
-
|
$
211
|
-
|
-
|
-
|
Adjusted Net
Earnings
|
$
3,032
|
$
3,177
|
$
6,209
|
$
2,906
|
$
1,862
|
$
4,768
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Six Months
Ended June 30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Net Earnings
|
$
3,454
|
$
2,887
|
$
6,341
|
$
5,074
|
$
1,617
|
$
6,691
|
Add non-recurring
items:
|
|
|
|
-
|
-
|
-
|
|
Transaction Costs
1
|
$
683
|
$
508
|
$
1,191
|
208
|
-
|
208
|
|
Syndication/Structural
Finance Costs 2
|
$
1,892
|
$
-
|
$
1,892
|
-
|
-
|
-
|
|
Transition Costs
3
|
$
420
|
$
-
|
$
420
|
-
|
-
|
-
|
Adjusted Net
Earnings
|
$
6,449
|
$
3,395
|
$
9,844
|
$
5,282
|
$
1,617
|
$
6,899
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Three Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Basic Earnings per
Share
|
0.169
|
0.263
|
0.432
|
0.264
|
0.174
|
0.438
|
Add non-recurring
items:
|
|
|
|
|
|
|
|
Transaction Costs
1
|
0.063
|
0.041
|
0.104
|
0.007
|
-
|
0.007
|
|
Syndication/Structural
Finance Costs 2
|
0.038
|
-
|
0.038
|
-
|
-
|
-
|
|
Transition Costs
3
|
0.020
|
-
|
0.020
|
-
|
-
|
-
|
Adjusted Basic
Earnings per Share
|
0.290
|
0.304
|
0.594
|
0.271
|
0.174
|
0.445
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Six Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Basic Earnings per
Share
|
0.329
|
0.275
|
0.604
|
0.474
|
0.151
|
0.625
|
Add non-recurring
items:
|
|
|
|
-
|
-
|
-
|
|
Transaction Costs
1
|
0.066
|
0.049
|
0.115
|
0.019
|
-
|
0.019
|
|
Syndication/Structural
Finance Costs 2
|
0.180
|
-
|
0.180
|
-
|
-
|
-
|
|
Transition Costs
3
|
0.040
|
-
|
0.040
|
-
|
-
|
-
|
Adjusted Basic
Earnings per Share
|
0.615
|
0.324
|
0.939
|
0.493
|
0.151
|
0.644
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Three Months Ended June
30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Diluted Earnings per
Share
|
0.169
|
0.262
|
0.431
|
0.263
|
0.173
|
0.436
|
Add non-recurring
items:
|
|
|
|
|
|
|
|
Transaction Costs
1
|
0.062
|
0.040
|
0.102
|
0.007
|
-
|
0.007
|
|
Syndication/Structural
Finance Costs 2
|
0.037
|
-
|
0.037
|
-
|
-
|
-
|
|
Transition Costs
3
|
0.020
|
-
|
0.020
|
-
|
-
|
-
|
Adjusted Diluted
Earnings per Share
|
0.288
|
0.302
|
0.590
|
0.270
|
0.173
|
0.443
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
|
|
Six Months
Ended June 30,
|
|
|
Canadian
Division
|
UK
Division
|
|
Canadian
Division
|
UK
Division
|
|
(thousands)
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
Diluted Earnings per
Share
|
0.328
|
0.274
|
0.602
|
0.472
|
0.150
|
0.622
|
Add non-recurring
items:
|
|
|
|
-
|
-
|
-
|
|
Transaction Costs
1
|
0.064
|
0.048
|
0.112
|
0.020
|
-
|
0.020
|
|
Syndication/Structural
Finance Costs 2
|
0.179
|
-
|
0.179
|
-
|
-
|
-
|
|
Transition Costs
3
|
0.040
|
-
|
0.040
|
-
|
-
|
-
|
Adjusted Diluted
Earnings per Share
|
0.611
|
0.322
|
0.933
|
0.492
|
0.150
|
0.642
|
1
|
Relates to legal,
professional and consulting fee expenditures made related to
acquisitions.
|
2
|
Relates to costs
incurred for initial syndication of the Corporation's Credit
Agreement. These costs are one time in nature and not anticipated
to be incurred frequently.
|
3
|
Relates to transition
costs incurred as a result of the Corporation's
acquisitions.
|
Distributable Cash Flow
Distributable cash flow is a measure used by
management to evaluate the Corporation's performance. While the
closest IFRS measure is cash provided by operating activities,
distributable cash flow is considered relevant because it provides
an indication of how much cash generated by operations is available
after capital expenditures. It should be noted that although we
consider this measure to be distributable cash flow, financial and
non‑financial covenants in our credit facilities and dealer
agreements may restrict cash from being available for dividends,
re‑investment in the Corporation, potential acquisitions, or other
purposes. Investors should be cautioned that distributable cash
flow may not actually be available for growth or distribution from
the Corporation. Management refers to "Distributable cash flow" as
to cash provided by (used in) operating activities with the
addition of net changes in non‑cash working capital items, less
share‑based compensation, maintenance capital expenditures and
principal elements of lease payments.
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2024
|
2023
|
|
2024
|
2023
|
Cash provided by
operating activities
|
|
$
7,863
|
$
1,122
|
|
$
20,555
|
$
10,430
|
Deduct
(add):
|
|
|
|
|
|
|
Net
changes in non-cash working capital items
|
|
(6,093)
|
(11,615)
|
|
(2,901)
|
(11,009)
|
Share-based compensation expense
|
|
546
|
443
|
|
1,054
|
948
|
Maintenance capital expenditures
|
|
1,064
|
1,143
|
|
1,451
|
2,079
|
Principal
elements of lease payments
|
|
2,668
|
2,340
|
|
5,299
|
4,484
|
Distributable cash
flow
|
|
$
9,678
|
$
8,811
|
|
$
15,652
|
$
13,928
|
Payout Ratio
"Payout ratio" is defined by management as the
actual cash dividend divided by distributable cash. This is a key
measure used by investors to value K-Bro, assess its performance
and provide an indication of the sustainability of dividends. The
payout ratio depends on the distributable cash and the
Corporation's dividend policy.
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(thousands)
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Cash
dividends
|
|
3,169
|
3,237
|
|
6,346
|
6,468
|
|
Distributable cash
flow
|
|
9,678
|
8,811
|
|
15,652
|
13,928
|
Payout ratio
|
|
32.7 %
|
36.7 %
|
|
40.5 %
|
46.4 %
|
Debt to Total Capital
"Debt to total capital" is defined by
management as the total long‑term debt (excludes lease liabilities)
divided by the Corporation's total capital. This is a measure used
by investors to assess the Corporation's financial structure.
Distributable cash flow, payout ratio, debt to
total capital adjusted EBITDA, adjusted net earnings, and adjusted
net earnings per share are not calculations based on IFRS and are
not considered an alternative to IFRS measures in measuring K‑Bro's
performance. Distributable cash Flow, payout ratio, adjusted
EBITDA, adjusted net earnings, and adjusted net earnings per share
do not have standardized meanings in IFRS and are therefore not
likely to be comparable with similar measures used by other
issuers.
FORWARD LOOKING STATEMENTS
This news release contains forward‑looking
information that represents internal expectations, estimates or
beliefs concerning, among other things, future activities or future
operating results and various components thereof. The use of any of
the words "anticipate", "continue", "expect", "may", "will",
"project", "should", "believe", and similar expressions suggesting
future outcomes or events are intended to identify forward‑looking
information. Statements regarding such forward‑looking information
reflect management's current beliefs and are based on information
currently available to management.
These statements are not guarantees of future
performance and are based on management's estimates and assumptions
that are subject to risks and uncertainties, which could cause
K-Bro's actual performance and financial results in future periods
to differ materially from the forward-looking information contained
in this news release. These risks and uncertainties include, among
other things: (i) risks associated with acquisitions, including (a)
the possibility of undisclosed material liabilities, disputes or
contingencies, (b) challenges or delays in achieving synergy and
integration targets, (c) the diversion of management's time and
focus from other business concerns and (d) the use of resources
that may be needed in other parts of our business; (ii) K-Bro's
competitive environment; (iii) utility costs, minimum wage
legislation and labour costs; (iv) K-Bro's dependence on long-term
contracts with the associated renewal risk and the risks associated
with maintaining short term contracts; (v) increased capital
expenditure requirements; (vi) reliance on key personnel; (vii)
changing trends in government outsourcing; (viii) changes or
proposed changes to minimum wage laws in Ontario, British Columbia,
Alberta, Quebec, Saskatchewan and the United Kingdom (the "UK");
(ix) the availability and terms of future financing; * textile
demand; (xi) the adverse impact of the COVID-19 pandemic on the
Corporation, which has been significant to date and which we
believe will continue to be significant for the short to medium
term; (xii) availability and access to labour; (xiii) rising wage
rates in all jurisdictions the Corporation operates and (ix)
foreign currency risk. Material factors or assumptions that were
applied in drawing a conclusion or making an estimate set out in
the forward-looking information include: (i) volumes and pricing
assumptions; (ii) expected impact of labour cost initiatives; (iii)
frequency of one-time costs impacting quarterly and annual
financial results; (iv) foreign exchange rates; (v) the level of
capital expenditures and (vi) the expected impact of the COVID-19
pandemic on the Corporation. Although the forward-looking
information contained in this news release is based upon what
management believes are reasonable assumptions, there can be no
assurance that actual results will be consistent with these
forward-looking statements. Certain statements regarding
forward-looking information included in this news release may be
considered "financial outlook" for purposes of applicable
securities laws, and such financial outlook may not be appropriate
for purposes other than this news release. Forward looking
information included in this news release includes the expected
annual healthcare revenues to be generated from the Corporation's
contracts with new customers, calculation of costs, including
one-time costs impacting the quarterly financial results,
anticipated future capital spending and statements with respect to
future expectations on margins and volume growth, as well as
statements related to the impact of the COVID-19 pandemic on the
Corporation.
All forward‑looking information in this news
release is qualified by these cautionary statements.
Forward‑looking information in this news release is presented only
as of the date made. Except as required by law, K‑Bro does not
undertake any obligation to publicly revise these forward‑looking
statements to reflect subsequent events or circumstances.
This news release also makes reference to certain
measures in this document that do not have any standardized meaning
as prescribed by IFRS and, therefore, are considered non‑GAAP
measures. These measures may not be comparable to similar measures
presented by other issuers. Please see "Terminology" for further
discussion.
Web: www.k-brolinen.com
SOURCE K-Bro Linen Inc.