PRESIDENT’S & CHAIRMAN'S MESSAGES
CHAIRMAN’S MESSAGE
OFFICERS & DIRECTORS
FINANCIAL HIGHLIGHTS
MANAGEMENT’S DISCUSSION & ANALYSIS
CONSOLIDATED FINANCIAL STATEMENTS
1
4
5
7
9
36
Table of Contents
W E A R E
1
2024 ANNUAL REPORT
P R E S I D E N T'S
M E S S A G E
Most importantly, we expect 2025 to be a year of continuing growth and
increased profitability, and we remain actively involved in assessing
potential acquisitions that are strategically complementary and accre
tive to our existing businesses.
Our 2024 highlights included:
· Revenue of $373.6mm, a 16.4% increase from $320.9mm in 2023
· EBITDA of $69.0mm, a 21.5% increase from $56.8mm in 2023
· An increase in EBITDA margins to 18.5% from 17.7% in 2023
· Basic EPS of $1.78, a 8.0% increase from 2023
We completed two acquisitions for a total of $56.9mm, in addition to the
two we completed in 2023. We closed on our $11.8mm CM acquisition in
June, strengthening our position in the Montréal market and providing
us with significantly more healthcare and hospitality capacity. We added
significant volume and capacity in our UK business when we closed on
our $45.1mm acquisition of Shortridge in April.
This is an exciting time for K-Bro, and we look forward to an even more
exciting 2025. We will continue to work hard to provide excellent service
to our many customers, a healthy and fulfilling career for our 3,200
employees in Canada and the UK, and strong results for our shareholders.
We wish you a good 2025.
Linda McCurdy
2024 was a year of significant growth for K-Bro, and
we also strengthened our strategic position. Both our
Canadian and UK businesses had strong financial results.
Our balance sheet remained strong, and after financing
$56.9mm of acquisitions entirely with our credit line we
finished the year with a modest debt/EBITDA ratio of
2.2 x on a proforma basis excluding leases.
2
WE ARE DEPENDABLE.
C H A I R M A N 'S
M E S S A G E
I speak on behalf of our Board and company in expressing
appreciation for your confidence, and we will work hard to
continue to earn it every day. We always remain focused
on doing what is best for our customers, employees and
shareholders, and we look forward to a bright 2025 and beyond.
Michael Percy
We are pleased to share our 2024 Annual Report
with you. It was a year of significant improvement
in financial performance, both from organic growth
and from two significant acquisitions in Montréal
and the UK. We grew our revenue and profitability,
increased our margins, completed two strategic
acquisitions, and positioned ourselves for a
successful 2025. It is an exciting time for K-Bro.
3
2024 ANNUAL REPORT
ROW 1: SEAN CURTIS, KRISTIE PLAQUIN, MICHAEL PERCY, ELISE REES ROW 2: STEVEN MATYAS,
MATTHEW HILLS, RYO UTAHARA, TREVOR RYE ROW 3: SCOTT INGLIS, MICHAEL JONES,
LUCY RENAUT, NICOLAS LEGAULT ROW 4: DIMITRI HAMM, BARB LEWIS, KEVIN STEPHENSON
ROW 5: JAMES EWART, ANDREW MACKEEN, JEFF GANNON, LINDA MCCURDY
4
WE ARE DEPENDABLE.
We operate 18 facilities and three distribution centers, including
eleven facilities and two distributions centers in Canada, and
seven facilities and one distribution center in the UK (Scotland
and the North of England).
Our core values remain central to our reputation, and we continue
to relentlessly focus on providing industry-leading quality and
service. Our ability to deliver on commitments to our valued
customers remains second to none.
K-Bro provides the vital products and services that help
people heal, travel, live, and play. We’re helping hospitals and
extended care centers care for the young, old and vulnerable
in environmentally responsible ways. Our responsibility also
extends to ensuring that we have a safe culture at K-Bro. As our
society becomes more diverse, we integrate our commitment
to responsibility into our new businesses, employees and the
communities in which we live and work.
K-Bro is the largest healthcare &
hospitality laundry & linen processor
in Canada, & with the acquisition of
Fishers and Shortridge we are now
one of the largest in the UK & Europe.
O F F I C E R S &
D I R E C T O R S
F I N A N C I A L
H I G H L I G H T S
The following unaudited financial data has been derived from K-Bro’s consolidated financial
statements, which have been audited by PricewaterhouseCoopers LLP. The information set
forth below should be read in conjunction with the Management’s Discussion & Analysis,
Consolidated Financial Statements and Notes sections of this Annual Report.
5
2024 ANNUAL REPORT
1 The COVID-19 pandemic caused world governments to institute travel restrictions both in and out of and within Canada and the UK, which has had an adverse impact on the Corporation’s
hospitality business. The COVID-19 pandemic has also contributed to unusually competitive labour markets, causing inefficiencies in attracting, training and retaining employees. In addition
to this, certain geopolitical events and other factors resulted in rising and unstable commodity costs for key inputs such as natural gas, electricity and diesel. The combination of all these
events has had a negative impact to consolidated EBITDA in 2020, 2021 and 2022.
R E V E N U E U P
16.4%
E B I T DA U P
21.5%
250
300
350
325
375
200
28
32
36
56
40
60
44
64
48
68
52
225
275
175
24
2021
2021
2020
2020
2022
2022
2023
2023
2024
2024
($)
($)
(In millions of Canadian dollars) Years ended December 31
(In millions of Canadian dollars) Years ended December 31
6
WE ARE DEPENDABLE.
Years ended December 31,
2024
2023
2022
2021
2020
Income Statement Data
Revenue
373,609
320,884
276,623
223,992
196,591
EBITDA
69,020
56,806
36,492
42,791
38,244
EBITDA (%)
18.5
17.7
13.2
19.1
19.5
Net earnings
18,708
17,607
3,906
8,692
3,782
Net earnings per share (Diluted)
1.77
1.64
0.37
0.81
0.36
Balance Sheet Data
Working capital
54,102
41,382
36,635
30,271
27,922
Long-term debt
123,778
70,247
45,166
37,973
40,657
Other Financial Data
Distributable cash per share
3.78
3.04
1.81
2.57
2.94
Payout ratio (%)
32.0
39.8
65.9
46.8
40.9
Price to earnings multiple (12 months trailing)
21.4
20.1
73.8
42.2
93.0
Price to EBITDA multiple (12 months trailing)
5.8
6.2
8.0
8.5
10.8
Return on shareholders’ equity (ROE)(%)
9.9
10.1
2.2
4.7
2.3
Total shareholder return, YTD (%)
18.4
25.3
16.7
9.2
4.5
Total shareholder return, 5 yrs (%)
12.6
7.3
0.4
2.7
6.7
Market capitalization
402,872
350,971
294,108
366,616
416,078
Share price:
High
40.02
35.7
36.0
47.2
46.4
Low
31.30
27.0
27.6
33.4
23.7
Close
37.88
33.0
27.3
34.2
39.0
($ Thousands of CDN dollars, except percentages and per share data)
7
2024 ANNUAL REPORT
8
WE ARE DEPENDABLE.
M A N A G E M E N T ' S
D I S C U S S I O N
& A N A LY S I S
INTRODUCTION
STRATEGY
FOURTH QUARTER OVERVIEW
SELECTED ANNUAL FINANCIAL INFORMATION
SUMMARY OF RESULTS & KEY EVENTS
OUTLOOK
RESULTS OF OPERATIONS
LIQUIDITY & CAPITAL RESOURCES
DIVIDENDS
DISTRIBUTABLE CASH FLOW
OUTSTANDING COMMON SHARES
RELATED PARTY TRANSACTION
CRITICAL ACCOUNTING ESTIMATES
TERMINOLOGY
RECENT ACCOUNTING PRONOUNCEMENTS
CRITICAL RISKS & UNCERTAINTIES
CONTROLS & PROCEDURES
10
11
12
13
13
19
20
26
28
29
30
30
30
31
37
37
37
9
2024 ANNUAL REPORT
M AN AG E M E NT’S D I S C US S I ON
& AN ALYS I S OF FI N AN CI AL
CON D I T I O N & R E S ULT S
O F O P E R AT I ON S
The following Management's Discussion and Analysis
(“MD&A”) is supplemental to, and should be read in conjunc
tion with, the audited consolidated Financial Statements of
K-Bro Linen Inc. (“the Corporation”) for the years ended
December 31, 2024 and 2023 (the “2024 Audited Financial
Statements”), as well as the unaudited interim condensed
consolidated financial statements for the periods ended
March 31, 2024, June 30, 2024 and September 30, 2024. The
Corporation and its wholly-owned subsidiaries, including
K-Bro Linen Systems Inc., Buanderie C.M. Inc, Fishers
Topco Ltd., and Shortridge Ltd. are collectively referred to
as “K-Bro” in this MD&A.
Management is responsible for the information contained in
this MD&A and its consistency with information presented
to the Audit Committee and Board of Directors. All infor
mation in this document has been reviewed and approved
by the Audit Committee and Board of Directors. This review
was performed by management with information available
as of March 20, 2025.
In the interest of providing current holders (“Shareholders”)
of common shares of K-Bro Linen Inc. (“Common Shares”)
and potential investors with information regarding current
results and future prospects, our public communications
often include written or verbal forward-looking statements.
Forward-looking statements are disclosures regarding
possible events, conditions, or results of operations that
are based on assumptions about future economic condi
tions and courses of action, and include future-oriented
financial information.
This MD&A 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 expres
sions 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 assump
tions 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 MD&A. These risks and uncer
tainties 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 govern
ment outsourcing; (viii) changes or proposed changes to
minimum wage laws in Ontario, British Columbia, Alberta,
Québec, Saskatchewan and the United Kingdom (the “UK”);
(ix) the availability and terms of future financing; (x) textile
demand; (xi) availability and access to labour; (xii) rising
wage rates in all jurisdictions the Corporation operates and
(xiii) interest rate and foreign currency risk. Material factors
or assumptions that were applied in drawing a conclusion
or making an estimate set out in the forward-looking infor
mation 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) interest and foreign exchange rates; and (v) the
level of capital expenditures. Although the forward-looking
information contained in this MD&A 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 state
ments regarding forward-looking information included
in this MD&A may be considered “financial outlook” for
purposes of applicable securities laws, and such financial
outlook may not be appropriate for purposes other than
this MD&A. Forward looking information included in this
MD&A includes the expected annual healthcare revenues
10
WE ARE DEPENDABLE.
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.
All forward-looking information in this MD&A is qualified by
these cautionary statements. Forward-looking information
in this MD&A is presented only as of the date made. Except
as required by law, K-Bro does not undertake any obliga
tion to publicly revise these forward-looking statements to
reflect subsequent events or circumstances.
This MD&A also makes reference to certain measures in
this document that do not have any standardized meaning
as prescribed by IFRS Accounting Standards 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.
INTRO DUCT I O N
Core Business
The Corporation 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. K-Bro and its wholly
owned subsidiaries operate across Canada and the UK,
providing a range of linen services to healthcare institu
tions, 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 eleven
processing facilities and two distribution centres 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 two distinc
tive brands, Fishers Topco Ltd. ("Fishers") which was
acquired by K-Bro on November 27, 2017 and Shortridge
Ltd. (“Shortridge”), which was acquired by K-Bro on April
30, 2024.
Fishers was established in 1900 and is an operator of laundry
and linen processing facilities in Scotland, providing linen
rental, workwear hire and cleanroom garment services to
the hospitality, healthcare, manufacturing and pharma
ceutical sectors. Fishers' client base includes major hotel
chains and prestigious venues across Scotland and the
North of England. The company operates in five cities, in
Scotland and the North of England with facilities in Cupar,
Perth, Newcastle, Livingston and Coatbridge.
Shortridge is headquartered in North West England, with
laundry processing sites in Lillyhall and Dumfries and a
distribution centre in Darlington. Shortridge, established in
1845, specialises in providing high quality laundry services
to local independent hospitality businesses, including
hotels, B&Bs, self-catering units and restaurants.
Industry & Market
In Canada, K-Bro provides laundry and linen services to
healthcare, hospitality and other commercial customers.
Typical services offered by K-Bro include the processing,
management and distribution of general and operating
room linens, including sheets, blankets, towels, surgical
gowns and drapes and other linen. Other types of proces
sors in K-Bro's industry include independent private
ly-owned facilities (i.e., typically small, single facility
companies), public sector central laundries and public and
private sector on premise laundries (known as “OPLs”).
Participants in other sectors of the Canadian laundry and
linen services industry, such as uniform rental companies
(which own and launder uniforms worn by their customers'
employees) typically do not offer services that significantly
overlap with those offered by K-Bro.
In the UK, Fishers and Shortridge provide laundry
and linen services to healthcare, hospitality and other
commercial customers. Typical services offered by Fishers
and Shortridge include the processing, management and
distribution of general linen, workwear and clean room
garment services. Other types of processors in Fishers’
and Shortridge’s industry in the UK include publicly traded
companies, independent privately-owned facilities (i.e.,
typically, small single facility companies), public sector
central laundries and public and private sector OPLs.
Our partnerships with healthcare institutions and hospi
tality clients across Canada and the UK demonstrate
K-Bro’s commitment to building relationships that foster
continuous improvement, providing flexibility to adjust
to changing circumstances as required and which incor
porate incentives, penalties and the sharing of risks and
rewards as circumstances warrant.
In this competitive industry, K-Bro is distinctive in its
ability to deliver products and services that provide value
to our customers. Management believes that the health
care and hospitality sectors of the laundry and linen
services industry represent a stable base of annual recur
ring business with opportunities for growth as additional
healthcare beds and funds are made available to meet the
needs of an aging demographic.
11
2024 ANNUAL REPORT
Industry Characteristics & Trends
Management believes that the industry in which K-Bro
operates has historically exhibited the following character
istics and trends:
Generally Stable Industry with Moderate Cyclicality – As
evidenced by the stability in the number of approved
hospital beds in the healthcare system and hotel rooms
in the hospitality industry. The potential for step-changes
in volumes and revenues that align with contractual
arrangements exists within this industry. Service
relationships are generally formalized through contracts
in the healthcare sector that are typically long term (from
five to ten years), while contracts in the hospitality sector
usually range from two to five years.
Outsourcing and Privatization – Healthcare institutions
and regional authorities are facing funding pressures
and must continually evaluate the allocation of scarce
resources. Consequently, there are often advantages to
healthcare institutions in outsourcing the processing of
healthcare linen to private sector laundry companies such
as K-Bro because of the economies of scale and significant
management expertise that can be provided on a more
comprehensive and cost-effective basis than customers
can achieve in operating their own laundry facilities.
Fragmentation – Regional healthcare and hospitality
markets remain fragmented within the laundry and linen
services industry. Management believes that the presence
of these operators provides consolidation opportunities
for larger industry participants with the financial means
to complete acquisitions. Management evaluates M&A
opportunities on an ongoing basis and looks to leverage
the Corporation’s strong liquidity position, balance sheet
and access to the capital markets to execute on these
opportunities as they arise.
Customers & Product Mix
K-Bro's Canadian customers include some of the largest
healthcare institutions and hospitality providers in Canada. In
the UK, Fishers’ customers include some of the largest hotel
chains operating in Scotland and Shortridge’s customers
include local independent hospitality businesses, including
hotels, B&Bs, self-catering units and restaurants.
Healthcare customers include acute care hospitals and
long-term care facilities, primarily in Canada. K-Bro's larger
hospitality customers in Canada have historically generated
between 0.3 million and 3 million pounds of linen per year.
Most healthcare customers have historically generated
between 0.5 million pounds of linen per year for a hospital
and up to approximately 80 million pounds of linen per year
for a Canadian healthcare region.
ST R AT E GY
In 2023, K-Bro communicated its long-term sustainability
strategy which prioritizes putting people first, supporting
its partners and environmental stewardship. The strategy
focuses on three pillars: People; Partners; and Planet,
and builds on the Corporation’s vision of delivering indus
try-leading service while embracing its responsibilities to
society as a good corporate citizen – supporting the commu
nities in which it operates, being a great place to work and a
dependable partner for all its stakeholders.
People - Foster a customer-centric culture, take care of
people, embrace diversity, and ensure K-Bro is a great
place to work.
Partners - Be dependable, exemplify responsible business
practices, support local communities, and anticipate
evolving trends.
Planet - Operate responsibly, prioritize energy efficiency,
embrace best management practices, and support environ
mental stewardship across the supply chain.
K-Bro maintains the following three-part growth focus:
Secure and Maintain Long-Term Contracts with Large
Healthcare and Hospitality Customers – K-Bro's core
service is providing high quality laundry and linen services
at competitive prices to large healthcare and hospitality
customers under long-term contracts. K-Bro's contracts
in the healthcare sector typically range from five to
ten years in length. Contracts in the hospitality sector
typically range from two to five years.
Extend Core Services to New Markets – Management
has demonstrated its ability to successfully expand
K-Bro's business into new markets from its estab
lished bases. Since 2005, K-Bro has entered four new
geographic markets across Canada, and in late 2017
entered into the UK market. In April 2024, K-Bro further
expanded its UK footprint through the acquisition of
Shortridge Ltd. (“Shortridge”) a high-quality hospitality
laundry provider based in the North West of England
expanding K-Bro’s geographic footprint in the UK (see
“Summary of 2024 Results and Key Events”). These new
markets have contributed significantly to K-Bro's growth.
Management believes that new outsourcing opportuni
ties will continue to arise in the near to medium-term
and that K-Bro is well-positioned for continued growth,
particularly as healthcare and hospitality institutions
continue to increase their focus on core services and
confront pressures for capital and cost savings.
12
WE ARE DEPENDABLE.
Management may in the future expand its core services
to new markets either through acquisitions or by estab
lishing new facilities. Its choice of areas for expansion will
depend on the availability of suitable acquisition candi
dates, the volume of healthcare and hospitality linen to
be processed and the policies of applicable governments.
Introduce Related Services – In addition to focusing on its
core services, the Corporation also attempts to capitalize
on attractive business opportunities by introducing
closely-related services that enable it to provide more
complete solutions to K-Bro's healthcare and hospitality
customers. These related service offerings include K-Bro
Operating Room services and on-site services. K-Bro
performs the sterilization of operating room linen packs
for nine major hospitals in Toronto and the four health
authorities in the Vancouver area.
FO URT H Q UA RT ER
OV ERV IE W
Net earnings for the fourth quarter of 2024 were $4.2 million
or $0.40 per Common Share (basic). Cash flow from operating
activities was $11.0 million and distributable cash flow1 (see
“Terminology”) was $9.8 million. Consolidated revenue for
the fourth quarter of 2024 increased to $95.4 million or by
15.7% compared to 2023, primarily related to the acquisi
tions of Shortridge and C.M. in Q2 2024 and the impact of full
implementation of negotiated price adjustments.
Adjusted EBITDA2 (see “Terminology”) increased in the
fourth quarter 2024 to $17.4 million or by 16.6% compared
to $14.9 million in 2023. Adjusted EBITDA margin2 remained
consistent at 18.2% in 2024 compared to 18.1% in 2023.
Without adjusting items, EBITDA (see “Terminology”)
increased in the fourth quarter 2024 to $18.0 million or by
26.1% compared to $14.3 million in 2023. On a consolidated
basis, EBITDA margin in the fourth quarter increased to
18.9% in 2024 compared to 17.3% in 2023.
For the Canadian division, Adjusted EBITDA margin (see
“Terminology”) in the fourth quarter decreased to 18.0% in
2024 compared to 18.9% in 2023 due to the timing of corpo
rate costs in Q4 2024. Without adjusting items, the EBITDA
margin in the fourth quarter increased to 18.8% in 2024 from
18.6% in 2023. The increase in EBITDA margin is primarily
related to higher fourth quarter 2023 adjusting items
including transaction, transition and syndication costs.
For the UK division, Adjusted EBITDA margin (see
“Terminology”) in the fourth quarter increased to 18.9% in
2024 from 15.5% in 2023. EBITDA margin (see “Terminology”)
in the fourth quarter also increased to 18.9% in 2024 from
13.2% in 2023. The improvement in Adjusted EBITDA and
EBITDA margin is primarily related to the acquisition of
Shortridge in April 2024, delivery and labour cost efficien
cies, and the impact of price increases implemented in 2023.
1 Distributable cash flow is a non-GAAP measure. See “Terminology” for further information on
the definition and composition of this measure.
2 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “Terminology”
for further information on the definition and composition of these measures.
13
2024 ANNUAL REPORT
Net earnings were $18.7 million or $1.78 per Common
Share (basic) and Adjusted Net earnings were $21.7
million or $2.07 per Common Share (basic). Cash flow
from operating activities was $50.0 million and distrib
utable cash flow was $39.6 million. Revenue increased
in fiscal 2024 to $373.6 million or by 16.4% compared to
2023. Consolidated revenue for the fourth quarter of 2024
increased to $95.4 million or by 15.7% compared to 2023,
primarily related to the acquisitions of Shortridge and C.M.
in 2024 and the impact of price increases implemented.
Adjusted EBITDA (see “Terminology”) increased in 2024
to $72.1 million or by 24.2% compared to $58.0 million in
2023. On a consolidated basis, Adjusted EBITDA margin
increased from 18.1% in 2023 to 19.3% in 2024.
EBITDA (see “Terminology”) increased in 2024 to $69.0
million or by 21.5% compared to $56.8 million in 2023. On a
consolidated basis, EBITDA margin increased from 17.7%
in 2023 to 18.5% in 2024.
For the Canadian division, the Adjusted EBITDA margin
remained relatively consistent at 19.1% in 2024 compared
to 18.9% in 2023. EBITDA margin decreased to 18.1%
in 2024 from 18.5% in 2023. The decrease in margin is
primarily related to adjusting items (see “Terminology”),
including higher syndication and transition costs incurred
in 2024 compared to 2023.
For the UK division, the Adjusted EBITDA margin increased
to 19.8% in 2024 from 15.7% in 2023. The EBITDA margin
for the UK division increased to 19.3% in 2024 from 15.2%.
The improvement in Adjusted EBITDA and EBITDA margin
is primarily related to the acquisition of Shortridge in April
2024, delivery and labour cost efficiencies, and the impact
of price increases implemented in 2023.
SUMMARY OF 2024 RESULTS & KEY EVENTS
Years Ended December 31,
SELECTED ANNUAL FINANCIAL INFORMATION
($ Thousands of CDN
Canadian
UK
Canadian
UK
Canadian
UK
dollars, except percentages
Division Division
Division Division
Division Division
and per share amounts)
2024
2024
2024
2023
2023
2023
2022
2022
2022
Revenue
264,422 109,187
373,609
241,129
79,755
320,884
212,035
64,588
276,623
EBITDA(1)
47,951
21,069
69,020
44,699
12,107
56,806
32,365
4,127
36,492
Adjusted EBITDA(2)
50,482
21,577
72,059
45,473
12,550
58,023
32,654
4,127
36,781
Net earnings (loss)
9,493
9,215
18,708
12,584
5,023
17,607
6,042
(2,136)
3,906
Net earnings (loss) per share:
Basic
0.904
0.879
1.783
1.180
0.471
1.651
0.567
(0.200)
0.366
Diluted
0.899
0.872
1.771
1.172
0.468
1.640
0.563
(0.199)
0.364
Adjusted net earnings (loss)(3) 12,024
9,723
21,747
13,358
5,466
18,824
6,331
(2,136)
4,195
Adjusted net earnings (loss) per share:
Basic
1.145
0.929
2.074
1.256
0.514
1.770
0.594
(0.200)
0.393
Diluted
1.135
0.921
2.056
1.249
0.511
1.760
0.590
(0.199)
0.391
Total assets
438,150
364,716
325,760
Long-term debt (excludes lease liabilities)
123,778
70,247
45,166
Weighted average number of shares outstanding:
Basic
10,483,395
10,663,949
10,657,742
Diluted
10,562,521
10,733,256
10,735,269
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
14
WE ARE DEPENDABLE.
Key Events in Our Markets
Are Summarized Below
BUSINESS ACQUISITION - PARANET
On March 1, 2023 the Corporation completed the acquisi
tion of 100% of the share capital of Buanderie Para-Net
(“Paranet”) operating as Paranet (the “Paranet Acquisition”),
a private laundry and linen services company operating in
Québec City, Québec. The Paranet 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 Québec healthcare
and hospitality sector, which complements the existing
business of the Corporation. Based on the Corporation’s
evaluation of the Paranet Acquisition and the criteria in the
identification of a business combination established in IFRS
3, the Paranet Acquisition has been accounted for using the
acquisition method, whereby the purchase consideration is
allocated to the fair values of the net assets acquired.
The Corporation financed the Paranet Acquisition and
transaction costs from existing loan facilities.
The purchase price allocated to the net assets acquired,
based on their estimated fair values, is as follows:
($ Thousands, except percentages)
Cash consideration
11,074
Contingent consideration
945
Total purchase price
12,019
The assets and liabilities recognized as a result of the
Paranet Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
1,317
Prepaid expenses and deposits
137
Linen in service
970
Accounts payable and accrued liabilities(2)
(1,552)
Lease liabilities
(1,176)
Deferred income taxes
(1,474)
Property, plant and equipment(1,2)
6,142
Intangible assets
2,450
Net identifiable assets acquired
6,814
Goodwill
5,205
Net assets acquired
12,019
1 Includes ROUA from the Canadian Division of $1,176 comprised of buildings of $964 and ve
hicles of $212
2 Includes provision of $219 for asset retirement obligation
The intangible assets acquired are made up of $2,450 for
the customer contracts along with related relationships and
customer lists. 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 is not deductible for tax purposes. As at
March 31, 2024, the purchase price allocation is no longer
provisional and has been finalized for Paranet.
Contingent Consideration
In the event that a certain EBITDA target was achieved by
Paranet for the twelve month period ended August 31, 2023,
additional undiscounted consideration of up to $1,890 would
have been payable in cash during the fourth quarter of 2023.
While performance was in-line with expectations, the target
was not achieved; therefore, no payment was made.
During the first three quarters of 2023, the estimated fair
value of the possible payment was classified as contingent
consideration. The fair value of the contingent consider
ation was estimated by considering the probability-adjusted
future expected cash flows in regards to Paranet achieving
the target that would result in consideration being paid.
The impact of discounting these future cash flows was not
considered because the impact would be nominal. Given that
the EBITDA target was not achieved for the twelve month
period ended August 31, 2023, the contingent consider
ation amount of $945 has been derecognized and a gain on
settlement of contingent consideration was recorded in the
Consolidated Statement of Earnings and Comprehensive
Income for the twelve months ended December 31, 2023.
BUSINESS ACQUISITION - VILLERAY
On November 1, 2023, the Corporation completed the
acquisition of 100% of the share capital of Buanderie
Villeray and its affiliate Buanderie La Relance (the “Villeray
Acquisition”), a private laundry and linen services company
incorporated in Canada and operating in Montréal, Québec.
The Villeray Acquisition was completed through a share
purchase agreement consisting of existing working capital,
fixed assets, customer relationships and an employee
base. Villeray operates in the hospitality and healthcare
sector, which complements the existing business of the
Corporation. As part of the transaction, the Corporation
closed its Granby facility and consolidated existing volumes
into Villeray. Based on the Corporation’s evaluation of the
Villeray Acquisition and the criteria in the identification of
a business combination established in IFRS 3, the Villeray
Acquisition has been accounted for using the acquisition
method, whereby the purchase consideration is allocated to
the fair values of the net assets acquired.
The Corporation financed the Villeray Acquisition and trans
action costs from existing loan facilities.
15
2024 ANNUAL REPORT
The purchase price allocated to the net assets acquired,
based on their estimated fair values, is as follows:
($ Thousands, except percentages)
Cash consideration
11,204
Contingent consideration
500
Total purchase price
11,704
The assets and liabilities recognized as a result of the
Villeray Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
907
Prepaid expenses and deposits
187
Income tax receivable
69
Accounts payable and accrued liabilities(2)
(807)
Lease liabilities
(2,706)
Deferred income taxes
(1,416)
Property, plant and equipment(1,2)
7,161
Intangible assets
2,530
Net identifiable assets acquired
5,925
Goodwill
5,779
Net assets acquired
11,704
1 Includes ROUA from the Canadian Division of $2,706 related to buildings.
2 Includes provision of $97 for asset retirement obligation.
The intangible assets acquired are made up of $2,530
related to customer relationships. The goodwill is attrib
utable to the workforce, and the efficiencies and synergies
created between the existing business of the Corporation
and the acquired business. Goodwill is not deductible for
tax purposes.
Contingent Consideration
In the event that a certain EBITDA target was achieved by
Villeray for the twelve month period ended October 31, 2024,
additional undiscounted consideration ranging from $500
to $1,000 would have been payable in cash during the first
quarter of 2025. At the end of September 2024, the former
owner-operator of Villeray retired from the business and
was replaced by a new Montréal General Manager. Although
ongoing employment of the former owner-operator was
not a condition required for payment of contingent consid
eration, amid the leadership transition, the Corporation
determined that the target was not achieved. Therefore, no
payment will be made.
During the first two quarters of 2024, the estimated fair
value of the possible payment was classified as contingent
consideration. The fair value of the contingent consider
ation was estimated by considering the probability-adjusted
future expected cash flows in regards to Villeray achieving
the target that would result in consideration being paid.
The impact of discounting these future cash flows was not
considered because the impact would be nominal. Given that
the EBITDA target was not achieved for the twelve month
period ended October 31, 2024, the contingent consider
ation amount of $500 has been derecognized and a gain on
settlement of contingent consideration has been recorded
in Consolidated Statement of Earnings and Comprehensive
Income for the year ended December 31, 2024.
Acquisition Related Costs
For the year ended December 31, 2024, $108 in profes
sional fees associated with the Villeray Acquisition has been
included in Corporate expenses.
BUSINESS ACQUISITION - SHORTRIDGE
On April 30, 2024 the Corporation completed the acquisition
of 100% of the share capital of Shortridge Ltd. (“Shortridge
Acquisition”), a private hospitality laundry provider based in
the North West of England, expanding K-Bro’s geographic
footprint in the UK. The Shortridge Acquisition was
completed through a share purchase agreement consisting
of existing working capital, fixed assets, contracts and an
employee base. The contracts acquired are in the hospi
tality sector in England and Scotland, which complements
the existing business of the Corporation. Based on the
Corporation’s evaluation of the Shortridge Acquisition and
the criteria in the identification of a business combination
established in IFRS 3, the Shortridge Acquisition has been
accounted for using the acquisition method, whereby the
purchase consideration is allocated to the fair values of the
net assets acquired.
At the time the financial statements were authorized
for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for the
Shortridge Acquisition. This includes the accounting for
the amounts attributable to property, plant and equipment,
intangible assets and the associated goodwill.
The Corporation financed the Shortridge Acquisition and
transaction costs from the syndicated revolving credit facility.
The preliminary purchase price allocated to the net assets
acquired, based on their estimated fair values, is as follows:
16
WE ARE DEPENDABLE.
($ Thousands, except percentages)
Cash consideration
35,788
Contingent consideration
9,275
Total purchase price (1)
45,063
1 This is presented net of cash acquired. Cash acquired was $3,878.
The assets and liabilities recognized as a result of the
Shortridge Acquisition are as follows:
($ Thousands, except percentages)
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 taxes
8
Property, plant and equipment(1)
8,986
Intangible assets
15,181
Net identifiable assets acquired
24,537
Goodwill
20,526
Net assets acquired
45,063
1 Includes ROUA from the UK Division of $57 related to buildings.
The 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 is not deductible for tax purposes.
Contingent Consideration
The contingent consideration consists of amounts related to
achieving certain profitability and operational targets.
The estimated fair value of the payments has been classi
fied 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.
An amount of $7,684 was initially funded in cash on April 30,
2024 to be held in trust with a third party escrow agent until
certain conditions were met. For the contingent consider
ation, it was determined that the profitability target was
met at September 30, 2024. As such, $3,415 of contingent
consideration was released from escrow in Q4 2024. In
the event that certain operational targets are achieved by
Shortridge, the additional undiscounted consideration will
be released from escrow or paid in cash before December
31, 2025. The remaining $1,591 will be payable in cash.
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 year ended December 31, 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 $17,471
to the Corporation for the period from April 30, 2024 to
December 31, 2024. If the Acquisition had occurred on
January 1, 2024, consolidated pro-forma revenue for the
year ended December 31, 2024 would have been $379,591.
The acquired business contributed net earnings of $1,999
to the Corporation for the period from April 30, 2024 to
December 31, 2024. If the Acquisition had occurred on
January 1, 2024, consolidated pro-forma net earnings for
the year ended December 31, 2024 would have been $19,145.
BUSINESS ACQUISITION - BUANDERIE C.M.
On June 21, 2024 the Corporation completed the acqui
sition of 100% of the share capital of Buanderie C.M. Inc.
(“C.M. Acquisition”), a private laundry and linen operator
located in Montréal serving the healthcare market. The
acquisition will enable K-Bro to operate with two facilities
in Montréal to service its growing healthcare and hospitality
business. Based on the Corporation’s evaluation of the C.M.
Acquisition and the criteria in the identification of a business
combination established in IFRS 3, the C.M. Acquisition has
been accounted for using the acquisition method, whereby
the purchase consideration is allocated to the fair values of
the net assets acquired.
At the time the financial statements were authorized
for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for
the C.M. Acquisition. This includes the accounting for the
amounts attributable to property, plant and equipment,
intangible assets and the associated goodwill.
The Corporation financed the C.M. Acquisition and transac
tion costs from the syndicated revolving credit facility.
The preliminary purchase price allocated to the net assets
acquired, based on their estimated fair values, is as follows:
17
2024 ANNUAL REPORT
($ Thousands, except percentages)
Cash consideration
11,795
Total purchase price(1)
11,795
1 This is presented net of cash acquired. Cash acquired was $224.
The assets and liabilities recognized as a result of the C.M.
Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
742
Prepaid expenses and deposits
20
Linen in service
201
Accounts payable and accrued liabilities
(377)
Deferred income taxes
(851)
Property, plant and equipment
7,055
Intangible assets
1,800
Net identifiable assets acquired
8,590
Goodwill
3,205
Net assets acquired
11,795
The intangible assets acquired are made up of $1,800
related to customer relationships. The goodwill is attrib
utable to the workforce, and the efficiencies and synergies
created between the existing business of the Corporation
and the acquired business. Goodwill is not deductible for
tax purposes.
Acquisition Related Costs
For the year ended December 31, 2024, $683 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 $3,967 to the
Corporation for the period from June 21, 2024 to December
31, 2024. If the Acquisition had occurred on January 1,
2024, consolidated pro-forma revenue for the year ended
December 31, 2024 would have been $377,223.
The acquired business contributed net earnings of $226 to the
Corporation for the period from June 21, 2024 to December
31, 2024. If the Acquisition had occurred on January 1, 2024,
consolidated pro-forma net earnings for the year ended
December 31, 2024 would have been $18,525.
NORMAL COURSE ISSUER BID
On May 15, 2023, the Corporation announced its intention to
proceed with a normal course issuer bid (NCIB) to purchase
up to 881,481 of its common shares (“Shares”) through the
TSX and / or alternative Canadian trading systems, repre
senting approximately 10% of the public float of 8,814,816
shares as at May 9, 2023, during the twelve-month period
commencing May 18, 2023 and ending May 17, 2024.
On May 16, 2024, the Corporation announced the renewal
of its normal course issuer bid (NCIB) to purchase up to
754,247 of its common shares (“Shares”) through the TSX
and / or alternative Canadian trading systems, representing
approximately 10% of the public float of 7,542,474 shares at
May 7, 2024 during the twelve-month period commencing
May 21, 2024 and ending May 20, 2025.
For the year ended December 31, 2024, the Corporation
repurchased and cancelled 113,614 common shares (2023 -
199,062) for $3,950 (2023 - $6,496) under the NCIB, net of
transaction costs of $1 which were recorded in share capital.
The average share price was $34.77, with prices ranging
from $31.93 to $36.80.
To date, the Corporation has repurchased and cancelled a
total of 312,676 common shares for $10,446 under the NCIB.
No financial liability existed as at December 31, 2024 (2023 -
$3,967) relating to automatic share repurchases during the
blackout period.
REVOLVING CREDIT FACILITY
On August 31, 2023, the Corporation completed an amend
ment to its existing revolving credit facility to extend the
agreement from July 31, 2026 to July 31, 2027, as previ
ously 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 agreement
consists of a $175,000 revolving credit facility plus a $75,000
accordion. The revolving credit facility is collateralized by
a general security agreement, bears interest at prime or
the applicable banker’s acceptance rate, plus an interest
margin dependent on certain financial ratios, with a monthly
repayment of interest only. The additional interest margin
can range between 0.25% to 1.75% dependent upon the
calculated Funded Debt / Credit Facility EBITDA financial
ratio, with a range between 0 to 3.50x. The required calcu
lated Funded Debt / Credit Facility EBITDA financial ratio is
subject to change based off certain terms and conditions. As
at December 31, 2024 the combined interest rate was 6.20%.
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.
18
WE ARE DEPENDABLE.
CAPITAL INVESTMENT PLAN
For fiscal 2025, the Corporation’s planned capital spending
is expected to be in the range of $10.0 to $12.0 million on
a consolidated basis. 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
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.
Changes in interest rates, both domestically and interna
tionally, could negatively affect the Corporation’s cost of
financing its operations and investments.
Evolving global and Canadian foreign policies, geopolit
ical events and economic conditions may impact inflation,
energy pricing, labour availability, supply chain efficiency,
trade policies, tariffs and/or other items, which may have
a direct or indirect impact on the Corporation’s business.
Uncertainty about judgments, estimates and assump
tions made by management during the preparation of the
Corporation’s consolidated financial statements related
to potential impacts of geopolitical events and changing
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.
IMPAIRMENT OF ASSETS
The Corporation performed its annual impairment assess
ment for goodwill for the Canadian division and for the UK
division as at December 31, 2024 and December 31, 2023 in
accordance with its policy described in Note 2(k) and Note 2(h).
The Corporation also performed impairment indicator assess
ments where there was no goodwill allocated to the CGU.
For both periods, the recoverable amount for the CGUs was
assessed using an earnings multiple or discounted cash flow
approach. The earnings multiple approach was used in the
case of CGUs that exhibited stable operations. A discounted
cash flow approach was used in the case of CGUs that were
recently acquired and were undergoing significant integration
related activities.
Testing Methodology
The calculation of the recoverable amount was based on the
following key assumptions:
Testing Methodology
Pre-tax Discount Rate
Terminal Value Growth Rate
December 31, 2024
December 31, 2024
December 31, 2024
Calgary
FVLCD
n/a
n/a
Edmonton
FVLCD
n/a
n/a
Vancouver 2
FVLCD
n/a
n/a
Vancouver 1
FVLCD
n/a
n/a
Victoria
FVLCD
n/a
n/a
Québec City
VIU
12.7%
3.0%
Montréal 1
VIU
12.2%
3.0%
Montréal 2
FVLCD
n/a
n/a
UK 1
FVLCD
n/a
n/a
UK 2
FVLCD
n/a
n/a
Earnings multiple approach (Fair value less costs to
dispose, “FVLCD”)
For the years ended December 31, 2024 and 2023, the key
assumption utilized was the implied multiple. The implied
multiple is calculated by utilizing the average multiples of
comparable public companies. The Corporation used an
implied average forward multiple of 8.40 (2023 – 9.70) to
calculate the recoverable amounts. The implied multiple
was applied to the trailing twelve month EBITDA to deter
mine the recoverable amount of the CGU and compare it to
the carrying value of the CGU.
Discounted cash flow (Value-in-use, “VIU”)
The key assumptions used in the model reflect past experi
ence and expectations for these CGUs and those with similar
characteristics. The terminal value growth rate is based on
management's best estimate of the long-term growth rate
for its CGUs after the forecast period, considering historic
performance and future economic forecasts for the next
five years with a terminal value assigned to the fifth year
based on the Company's plans to operate the CGUs.
19
2024 ANNUAL REPORT
Change in Pre-tax Discount
Change in Terminal Value
Recoverable Amount
Rate Increase of 1%
Growth Rate Decrease of 1%
December 31, 2024
December 31, 2024
December 31, 2024
Calgary
n/a
n/a
n/a
Edmonton
n/a
n/a
n/a
Vancouver 2
n/a
n/a
n/a
Vancouver 1
n/a
n/a
n/a
Victoria
n/a
n/a
n/a
Québec City
$23,486
-$2,715
-$2,715
Montréal 1
$18,849
-$2,600
-$2,084
Montréal 2
n/a
n/a
n/a
UK 1
n/a
n/a
n/a
UK 2
n/a
n/a
n/a
OUTLO O K
The Corporation’s healthcare and hospitality segments
continue to experience steady volume trends. For the
healthcare segment, management expects steady increases
to activity levels supported by a 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 K-Bro encountered from energy prices, local
labour market shortages and cost inflation throughout the
pandemic has stabilized and Adjusted EBITDA margins have
stabilized. Going forward, management expects Adjusted
EBITDA margins will remain at similar levels, following
historical seasonal trends. The Corporation continues to
monitor evolving global and Canadian foreign policies,
geopolitical events and economic conditions, which could
have a direct or indirect impact on the business.
Conclusion
a) Based on testing performed at December 31, 2024 and
December 31, 2023, no impairment was determined
to exist.
b) The recoverable amount of each CGU is sensitive to
changes in market conditions which could result in
material changes. For the year ended December 31,
2024, where discounted cash flow testing was used, the
sensitivity of key assumptions to a reasonable change
was assessed. The Corporation does not believe there is
a reasonable change in the key assumptions that would
cause the carrying value of the CGU to exceed its recover
able amount. The table below summarizes the results of
the impact on key assumptions to a reasonable change.
In 2024, the Corporation modified its definition of Adjusted
EBITDA. As K-Bro actively pursues its growth opportuni
ties, the Corporation will continue to incur certain trans
action, transition, syndication/structural financing costs.
In this context, management believes Adjusted EBITDA
assists investors to assess our performance on a consis
tent basis as it is an indication of our capacity to generate
income from operations. Adjusting items are detailed in the
tables within “Terminology”.
With continued momentum in existing operations, manage
ment has refocused attention on strategic acquisitions, such
as the acquisitions of C.M., Shortridge, Villeray and Paranet,
to accelerate growth in North America, Europe, and similar
geographies which remain highly fragmented. 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 2024 Results and Key Events”.
20
WE ARE DEPENDABLE.
RESU LT S O F O PE R AT I ON S
Key Performance Drivers
K-Bro’s key performance drivers focus on growth, profitability, stability and cost containment in order to maintain dividends
and maximize Shareholder value in the long term. The following outlines our results on a period-to-period comparative
basis in each of these areas:
Three Months Ended December 31,
($ Thousands of CDN dollars, except
Canadian
UK
Canadian
UK
percentages and per share amounts)
Division
Division
Division
Division
Category
Indicator
2024
2024
2024
2023
2023
2023
Growth
EBITDA(1)
8.5%
106.3%
26.1%
51.2%
161.7%
63.6%
Adjusted EBITDA(2)
1.7%
75.9%
16.6%
53.7%
206.8%
70.9%
Revenue
6.9%
44.5%
15.7%
15.9%
19.4%
16.7%
Distributable cash flow(3)
35.4%
138.7%
Profitability
EBITDA(1)
12,704
5,295
17,999
11,712
2,567
14,279
EBITDA margin
18.8%
18.9%
18.9%
18.6%
13.2%
17.3%
Adjusted EBITDA(2)
12,110
5,295
17,405
11,913
3,010
14,923
Adjusted EBITDA margin
18.0%
18.9%
18.2%
18.9%
15.5%
18.1%
Net earnings
2,380
1,858
4,238
3,341
908
4,249
Adjusted net earnings(4)
1,786
1,858
3,644
3,542
1,351
4,893
Stability
Debt to total capital(5)
40.7%
29.4%
Unutilized line of credit
46,200
52,884
Cash on hand
9,423
5,857
Payout ratio(6)
32.5%
44.4%
Dividends declared per share
0.300
0.300
Cost containment Wages and benefits
39.8%
33.8%
38.0%
40.2%
33.3%
38.6%
Utilities
6.0%
11.3%
7.5%
6.0%
12.6%
7.5%
Delivery
11.5%
13.9%
12.2%
11.8%
14.2%
12.4%
Expenses included in EBITDA
81.2%
81.1%
81.1%
81.4%
86.8%
82.7%
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Distributable cash flow is a non-GAAP measure. Effective January 1, 2019, distributable cash flow includes the addition of principal elements of lease payments. This accounts for the change
in accounting policies and the adoption of IFRS 16, where now the principal elements of lease payments flow through financing outflows opposed to operating cash flows.
4 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
5 Debt to total capital is defined by management as the total long term debt (excludes lease liabilities) divided by the Corporation’s total capital. See “Terminology”.
6 The ratio of dividends paid compared to distributable cash flow is periodically reviewed by the Board of Directors to take into account the current and prospective performance of the business
and other items considered to be prudent. Payout ratio is calculated on the dividends declared divided by the distributable cash flow.
21
2024 ANNUAL REPORT
Years Ended December 31,
($ Thousands of CDN dollars, except
Canadian
UK
Canadian
UK
percentages and per share amounts)
Division
Division
Division
Division
Category
Indicator
2024
2024
2024
2023
2023
2023
Growth
EBITDA(1)
7.3%
74.0%
21.5%
38.1%
193.4%
55.7%
Adjusted EBITDA(2)
11.0%
71.9%
24.2%
81.7%
193.4%
58.2%
Revenue
9.7%
36.9%
16.4%
13.7%
23.5%
16.0%
Distributable cash flow(3)
22.4%
65.4%
Profitability
EBITDA(1)
47,951
21,069
69,020
44,699
12,107
56,806
EBITDA margin
18.1%
19.3%
18.5%
18.5%
15.2%
17.7%
Adjusted EBITDA(2)
50,482
21,577
72,059
45,473
12,550
58,023
Adjusted EBITDA margin
19.1%
19.8%
19.3%
18.9%
15.7%
18.1%
Net earnings
9,493
9,215
18,708
12,584
5,023
17,607
Adjusted net earnings(4)
12,024
9,723
21,747
12,358
5,466
18,824
Stability
Debt to total capital(5)
40.7%
29.4%
Unutilized line of credit
46,200
52,884
Cash on hand
9,423
5,857
Payout ratio(6)
32.0%
39.8%
Dividends declared per share
1,200
1,200
Cost containment Wages and benefits
40.1%
33.0%
38.1%
40.2%
33.3%
38.5%
Utilities
5.9%
11.2%
7.5%
6.2%
12.7%
7.8%
Delivery
11.5%
13.1%
12.0%
11.5%
13.8%
12.1%
Expenses included in EBITDA
81.9%
80.7%
81.5%
81.5%
84.8%
82.3%
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Distributable cash flow is a non-GAAP measure. Effective January 1, 2019, distributable cash flow includes the addition of principal elements of lease payments. This accounts for the change
in accounting policies and the adoption of IFRS 16, where now the principal elements of lease payments flow through financing outflows opposed to operating cash flows.
4 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
5 Debt to total capital is defined by management as the total long term debt (excludes lease liabilities) divided by the Corporation’s total capital. See “Terminology”.
6 The ratio of dividends paid compared to distributable cash flow is periodically reviewed by the Board of Directors to take into account the current and prospective performance of the business
and other items considered to be prudent. Payout ratio is calculated on the dividends declared divided by the distributable cash flow.
22
WE ARE DEPENDABLE.
Quarterly Financial Information - Consolidated
Historically, the Corporation’s financial and operating results, particularly in respect of Fishers, are stronger in the second
and third quarters as a result of seasonality and the associated higher hospitality volumes. Other fluctuations in net
income from quarter-to-quarter can also be attributed to hiring and labour cost trends, timing of linen purchases, utility
costs, timing of repairs and maintenance expenditures, business development, capital spending patterns and changes in
corporate tax rates and income tax expenses.
The following table provides certain selected consolidated financial and operating data prepared by management for the
preceding eight quarters:
Quarterly Financial Information - Consolidated
2024
2023
($ Thousands of CDN dollars, except
percentages and per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Healthcare revenue
50,918
49,398 47,955 47,488
48,451
46,621 45,445 43,823
Hospitality revenue
44,528
55,071 45,512 32,739
34,013
40,271 35,300 26,960
Total revenue
95,446 104,469 93,467 80,227
82,464
86,892 80,745 70,783
Expenses included in EBITDA
77,447
81,626 76,894 68,622
68,185
69,199 66,244 60,450
EBITDA(1)
17,999
22,843 16,573 11,605
14,279
17,693 14,501 10,333
EBITDA as a % of revenue (EBITDA margin)
18.9%
21.9% 17.7%
14.5%
17.3%
20.4%
18.0% 14.6%
Adjusted EBITDA(2)
17,405
22,972 18,247 13,435
14,923
18,057 14,578 10,465
Adjusted EBITDA as a % of revenue
(Adjusted EBITDA margin)
18.2%
22.0% 19.5%
16.7%
18.1%
20.8%
18.1% 14.8%
Depreciation and amortization
9,432
8,911
8,029
7,307
7,298
6,872
6,803
6,321
Finance expense
3,173
3,322
2,884
1,923
1,732
1,860
1,584
1,473
Earnings before income taxes
5,394
10,610
5,660
2,375
5,249
8,961
6,114
2,539
Income tax expense
1,156
2,481
1,125
569
1,000
2,294
1,423
539
Net earnings
4,238
8,129
4,535
1,806
4,249
6,667
4,691
2,000
Net earnings as a % of revenue
4.4%
7.8%
4.9%
2.3%
5.2%
7.7%
5.8%
2.8%
Basic earnings per share
0.401
0.778
0.432
0.172
0.399
0.627
0.438
0.187
Diluted earnings per share
0.398
0.771
0.431
0.171
0.396
0.622
0.436
0.186
Adjusted net earnings(3)
3,644
8,258
6,209
3,636
4,893
7,031
4,768
2,132
Adjusted basic earnings per share(3)
0.344
0.791
0.594
0.345
0.466
0.660
0.445
0.199
Adjusted diluted earnings per share(3)
0.340
0.783
0.590
0.343
0.463
0.655
0.443
0.199
Total assets
438,150 452,077 444,380 361,859
364,716 341,662 346,532 337,277
Total long-term financial liabilities
190,418 203,863 202,050 128,584
132,773 113,262 122,178 112,628
Funds provided by operations
11,011
18,384
7,863 12,692
7,817
22,758
1,122
9,308
Long-term debt (excludes lease liabilities)
123,778 135,875 134,789 65,727
70,247
55,162 63,598 53,713
Dividends declared per share
0.300
0.300
0.300
0.300
0.300
0.300
0.300
0.300
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
23
2024 ANNUAL REPORT
Quarterly Financial Information - Canadian Division
The following table provides certain selected consolidated financial and operating data prepared by management for the
preceding eight quarters:
Quarterly Financial Information
- Canadian Division
2024
2023
($ Thousands of CDN dollars, except
percentages and per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Healthcare revenue
49,360
47,662
46,370
46,008
46,952
44,962
43,681
42,243
Hospitality revenue
18,083
21,948
18,299
16,692
16,138
18,417
15,480
13,256
Total revenue
67,443
69,610
64,669
62,700
63,090
63,379
59,161
55,499
Expenses included in EBITDA
54,739
55,229
53,682
52,821
51,378
50,455
48,456
46,141
EBITDA(1)
12,704
14,381
10,987
9,879
11,712
12,924
10,705
9,358
EBITDA as a % of revenue (EBITDA margin)
18.8%
20.7%
17.0%
15.8%
18.6%
20.4%
18.1%
16.9%
Adjusted EBITDA(2)
12,110
14,510
12,244
11,618
11,913
13,288
10,782
9,490
Adjusted EBITDA as a % of revenue
(Adjusted EBITDA margin)
18.0%
20.8%
18.9%
18.5%
18.9%
21.0%
18.2%
17.1%
Net earnings
2,380
3,659
1,775
1,679
3,341
4,169
2,829
2,245
Net earnings as a % of revenue
3.5%
5.3%
2.7%
2.7%
5.3%
6.6%
4.8%
4.0%
Basic earnings per share
0.225
0.350
0.169
0.160
0.314
0.392
0.264
0.210
Diluted earnings per share
0.224
0.347
0.169
0.159
0.311
0.389
0.263
0.209
Adjusted net earnings(3)
1,786
3,788
3,032
3,418
3,542
4,533
2,906
2,377
Adjusted basic earnings per share(3)
0.167
0.363
0.290
0.325
0.337
0.426
0.271
0.222
Adjusted diluted earnings per share(3)
0.165
0.359
0.288
0.323
0.335
0.422
0.270
0.221
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
24
WE ARE DEPENDABLE.
Quarterly Financial Information - UK Division
The following table provides certain selected consolidated financial and operating data prepared by management for the
preceding eight quarters:
Quarterly Financial Information - UK Division
(in reporting currency Canadian $)
2024
2023
(Thousands, except percentages and per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Healthcare revenue
1,558
1,736
1,585
1,480
1,499
1,659
1,764
1,580
Hospitality revenue
26,445
33,123
27,213
16,047
17,875
21,854
19,820
13,704
Total revenue
28,003
34,859
28,798
17,527
19,374
23,513
21,584
15,284
Expenses included in EBITDA
22,708
26,397
23,212
15,801
16,807
18,744
17,788
14,309
EBITDA(1)
5,295
8,462
5,586
1,726
2,567
4,769
3,796
975
EBITDA as a % of revenue (EBITDA margin)
18.9%
24.3%
19.4%
9.8%
13.2%
20.3%
17.6%
6.4%
Adjusted EBITDA(2)
5,295
8,462
6,003
1,817
3,010
4,769
3,796
975
Adjusted EBITDA as a % of revenue
(Adjusted EBITDA margin)
18.9%
24.3%
20.8%
10.4%
15.5%
20.3%
17.6%
6.4%
Net earnings (loss)
1,858
4,470
2,760
127
908
2,498
1,862
(245)
Net earnings (loss) as a % of revenue
6.6%
12.8%
9.6%
0.7%
4.7%
10.6%
8.6%
-1.6%
Basic earnings (loss) per share
0.176
0.428
0.263
0.012
0.085
0.235
0.174 (0.023)
Diluted earnings (loss) per share
0.174
0.424
0.262
0.012
0.085
0.233
0.173 (0.023)
Adjusted basic earnings (loss) per share(3)
1,858
4,470
3,177
218
1,351
2,498
1,862
(245)
Adjusted basic earnings (loss) per share(3)
0.176
0.428
0.304
0.021
0.129
0.235
0.174 (0.023)
Adjusted diluted earnings (loss) per share(3)
0.174
0.424
0.302
0.021
0.128
0.233
0.173 (0.023)
Quarterly Financial Information - UK Division
(in local currency Sterling £)
2024
2023
(Thousands, except percentages and per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Healthcare revenue
870
978
918
865
886
977
1,049
962
Hospitality revenue
14,757
18,671
15,757
9,383
10,570
12,877
11,787
8,341
Total revenue
15,627
19,649
16,675
10,248
11,456
13,854
12,836
9,303
Expenses included in EBITDA
12,670
14,881
13,440
9,238
9,939
11,042
10,578
8,711
EBITDA(1)
2,957
4,768
3,235
1,010
1,517
2,812
2,258
592
EBITDA as a % of revenue (EBITDA margin)
18.9%
24.3%
19.4%
9.9%
13.2%
20.3%
17.6%
6.4%
Adjusted EBITDA(2)
2,957
4,768
3,476
1,064
1,779
2,812
2,258
592
Adjusted EBITDA as a % of revenue
(Adjusted EBITDA margin)
18.9%
24.3%
20.8%
10.4%
15.5%
20.3%
17.6%
6.4%
Net earnings (loss)
1,038
2,519
1,597
76
536
1,476
1,108
(151)
Net earnings (loss) as a % of revenue
6.6%
12.8%
9.6%
0.7%
4.7%
10.6%
8.6%
-1.6%
Basic earnings (loss) per share
0.101
0.241
0.153
0.007
0.051
0.139
0.103 (0.014)
Diluted earnings (loss) per share
0.100
0.239
0.152
0.007
0.051
0.138
0.103 (0.014)
Adjusted basic earnings (loss) per share(3)
1,038
2,519
1,838
130
798
1,476
1,108
(151)
Adjusted basic earnings (loss) per share(3)
0.101
0.241
0.176
0.012
0.076
0.139
0.103 (0.014)
Adjusted diluted earnings (loss) per share(3)
0.101
0.239
0.175
0.012
0.075
0.138
0.103 (0.014)
1 EBITDA is defined as revenue less operating expenses (which equates to net earnings before income tax, finance expense, and depreciation and amortization). See “Terminology”.
2 Adjusted EBITDA is a non-GAAP measure. See “Terminology” for further information on the definition and composition of this measure.
3 Adjusted Net Earnings and Adjusted EPS are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.
25
2024 ANNUAL REPORT
Revenue, Earnings & EBITDA
For the year ended December 31, 2024, K-Bro’s consol
idated revenue increased by 16.4% to $373.6 million from
$320.9 million in the comparative period. This increase was
primarily due to the acquisitions of Shortridge and C.M. in
2024, the impact of price increases implemented, and the
acquisitions of Paranet and Villeray during 2023 with a full
year of operations in 2024. In 2024, approximately 52.4% of
K-Bro’s consolidated revenue was generated from health
care institutions, which is lower compared to 57.5% in
2023. The change in revenue mix is primarily related to the
Shortridge acquisition within the hospitality segment, as
well as continued strong activity in hospitality.
Consolidated Adjusted EBITDA (see “Terminology”) increased
in the year to $72.1 million from $58.0 million in 2023, which
is an increase of 24.2%. The consolidated adjusted EBITDA
margin increased to 19.3% in 2024 compared to 18.1% in
2023. Adjusting items include transaction, transition, syndi
cation/structural financing costs, restructuring costs, gains
on settlement of contingent consideration and other non-op
erating gains, as detailed in the tables within “Terminology”.
Without adjusting items, consolidated EBITDA increased
year-to-date to $69.0 million from $56.8 million in 2023,
which is an increase of 21.5%. The consolidated EBITDA
margin increased to 18.5% in 2024 compared to 17.7% in
2023. The margin was impacted positively by price increases
implemented and the EBITDA contribution from the acquisi
tion of Shortridge on April 30, 2024.
Adjusted net earnings (see “Terminology”) increased on
a year-to-date basis to $21.7 million from $18.8 million in
2023. Adjusting items include transaction, transition, syndi
cation/structural financing costs, restructuring costs, gains
on settlement of contingent consideration and other non-op
erating gains, as detailed in the tables within “Terminology”.
Without adjusting items, net earnings increased by $1.1
million on a year-to-date basis or 6.3% from $17.6 million
in 2023 to $18.7 million in 2024, and net earnings as a
percentage of revenue decreased by 0.5% to 5.0% in 2024
from 5.5% in 2023. The decrease in net earnings as a
percentage of revenue is primarily related to an increase
in amortization and depreciation due to Shortridge, C.M.,
Paranet and Villeray assets acquired, higher interest costs
due to increased borrowing related to acquisitions, as well
as the adjusting items as detailed in “Terminology”.
Operating Expenses
Wages and benefits increased by $18.8 million to $142.2
million compared to $123.4 million in the comparative
period of 2023, and as a percentage of revenue decreased
by 0.4 percentage points to 38.1%. The decrease as a
percentage of revenue is primarily related to the integra
tion of the Corporation’s acquisition targets.
Linen increased by $3.2 million to $36.2 million compared
to $33.0 million in the comparative period of 2023, and as a
percentage of revenue decreased by 0.6 percentage points to
9.7%. The decrease as a percentage of revenue is primarily
related to the changes to the mix of linen and higher hospi
tality volumes processed compared to the prior year.
Utilities increased by $2.8 million to $27.9 million compared
to $25.1 million in the comparative period of 2023, and
as a percentage of revenue decreased by 0.3 percentage
points to 7.5%. The decrease as a percentage of revenue is
primarily related to the impact of price increases secured
across various markets.
Delivery increased by $6.0 million to $44.7 million
compared to $38.7 million in the comparative period of
2023, and as a percentage of revenue remained relatively
constant at 12.0%.
Occupancy costs increased by $1.0 million to $6.4 million
compared to $5.4 million in the comparative period of
2023, and as a percentage of revenue remained constant at
1.7%. The increase in spending is largely related to higher
facility operating costs.
Materials and supplies increased by $1.7 million to $13.8
million compared to $12.1 million in the comparative
period of 2023, and as a percentage of revenue remained
relatively constant at 3.7%.
Repairs and maintenance increased by $3.0 million to
$15.8 million compared to $12.8 million in the comparative
period of 2023, and as a percentage of revenue remained
relatively constant at 4.2%.
Corporate costs increased by $4.8 million to $19.2 million
compared to $14.4 million in the comparative period of
2023, and as a percentage of revenue increased by 0.6
percentage points to 5.1%. The increase as a percentage
of revenue is primarily related to transition and transac
tion costs, including legal professional and consulting fee
expenditures related to acquisitions, as well as syndica
tion costs for the Corporation’s credit facility. These costs
are considered to be adjusting items for the purposes of
calculating Adjusted EBITDA, Adjusted Net Income and
Adjusted Earnings per share (Basic and Diluted) and are
further detailed within the “Terminology” section.
26
WE ARE DEPENDABLE.
The gain on settlement of contingent consideration of $0.5
million in 2024 relates to the derecognition of the contin
gent consideration for Villeray since it will not be paid out.
In 2023, the gain on settlement of contingent consideration
of $0.9 million related to the derecognition of the contin
gent consideration for Paranet since it was not paid out.
The derecognition of these liabilities resulted in non-cash
gains which management does not consider indicative
of ongoing operating performance and are classified as
adjusting items for the purposes of calculating Adjusted
EBITDA, Adjusted Net Income and Adjusted Earnings per
share (Basic and Diluted). This is further detailed within
the “Terminology” section.
Other income increased by $1.1 million to $1.1 million in
2024 from nil in 2023. This increase is primarily related to
a reimbursement from a supplier in Q4 related to a negoti
ated contract settlement. The supplier reimbursement is
an adjusting item for the purposes of calculating Adjusted
EBITDA, Adjusted Net Income and Adjusted Earnings per
share (Basic and Diluted) as it is non-recurring in nature
and outside of the normal course of operations. This is
further detailed within the “Terminology” section.
Depreciation of property, plant and equipment and amorti
zation of intangible assets represents the expense related
to the appropriate matching of the Corporation’s long-term
assets to the estimated useful life and period of economic
benefit of those assets. Depreciation and amortization are
higher on a year-to-date basis due to Shortridge, Paranet,
Villeray and C.M. assets acquired.
Income tax includes current and future income taxes based
on taxable income and the temporary timing differences
between the tax and accounting bases of assets and liabil
ities. Income tax reflects the provision on the earnings of
the Corporation.
L I QU I D I T Y &
CAPITAL RESOURCES
In 2024, cash generated by operating activities was $50.0
million with a debt to total capitalization of 40.7%. The
change in cash from operations is primarily due to the
change in working capital items driven from timing of
business activity, along with increased earnings from
operations due to the business acquisitions completed.
The Corporation’s capital structure includes working
capital, a committed syndicated credit facility and share
capital. We continuously monitor actual and forecast cash
flows and monitor the availability on our syndicated credit
facility. Management believes the unutilized balance of
$46.2 million with respect to its syndicated credit facility is
sufficient for the Corporation’s operations in the foresee
able future. However, management intends to continually
assess its opportunities to maintain a conservative amount
of leverage and balance sheet flexibility in the short and
long-term basis in order to ensure that sufficient capital is
available for future growth needs.
During 2024, cash generated by financing activities was
$26.2 million compared to cash used in financing activities
of $3.7 million in 2023. Financing activities consisted of net
proceeds from the revolving credit facility, dividends paid to
Shareholders, principal elements of lease payments, and the
repurchase of shares under the Normal Course Issuer Bid.
During 2024, cash used in investing activities was $73.2
million compared to $34.3 million in 2023. The increase in
investing activities is primarily related to the acquisitions of
Shortridge and C.M. Investing activities are also related to
the purchase of plant equipment.
27
2024 ANNUAL REPORT
The lease liabilities are secured by automotive equipment
and plants and are more fully described in the Corporation’s
audited annual consolidated financial statements for the
year ended December 31, 2024. The source of funds for these
commitments will be from operating cash flow and, if neces
sary, the undrawn portion of the revolving credit facility.
Financial Position
($ Thousands, except percentages)
2024
2023
Cash and cash equivalents
(9,423)
(5,857)
Long-term debt
123,778
70,247
(excludes lease liabilities)
Shareholders’ equity
189,411
174,431
Total capital
303,766
238,821
Debt to total capital
40.7%
29.4%
(see Terminology for definition)
For the period ended December 31, 2024, the Corporation
had a debt to total capital of 40.7%, unused revolving credit
facility of $46.2 million and has not incurred any events of
default under the terms of its credit facility.
As at December 31, 2024, the Corporation had net working
capital of $54.1 million compared to its working capital
position of $41.4 million at December 31, 2023. The increase
in working capital is primarily attributable to the timing of
cash receipts from customers, as well as the acquisitions of
Shortridge and C.M.
Management believes that K-Bro has the capital resources
and liquidity necessary to meet its commitments, support
its operations and finance its growth strategies. In addition
to K-Bro’s ability to generate cash from operations and
its syndicated revolving credit facility, K-Bro believes it is
also able to raise capital through equity issuances in the
market or increase its borrowing capacity, if necessary, to
provide for capital spending and to sustain its property,
plant and equipment.
Years Ended December 31,
Contractual Obligations
Payments due under contractual obligations for the next five years and thereafter are as follows:
Payments Due by Year
($ Thousands of CDN dollars)
Total
2025
2026 to 2027
2028 to 2029
Subsequent
Long-term debt
123,778
-
123,778
-
-
Interest on long-term debt
17,267
7,674
9,593
-
-
Lease liabilities
63,876
13,088
21,061
15,513
14,214
Utility commitments
17,226
11,714
5,512
-
-
Linen purchase obligations
8,111
8,111
-
-
-
Property, plant and equipment commitments
4,426
4,426
-
-
-
28
WE ARE DEPENDABLE.
DIVID E NDS
For the year ended December 31, 2024, the Corporation
declared a $1.200 per Common Share dividend compared to
$3.750 per Common Share of Distributable Cash Flow (see
“Terminology”). The actual payout ratio was 32.0%.
The Corporation’s policy is to pay dividends to Shareholders
from its available distributable cash flow while considering
requirements for capital expenditures, working capital,
growth capital and other reserves considered advisable
by the Board of Directors. All such dividends are discre
tionary. Dividends are declared payable each month in equal
amounts to Shareholders on the last business day of each
month and are paid by the 15th of the following month.
The Corporation designates all dividends paid or deemed
to be paid as Eligible Dividends for purposes of subsection
89(14) of the Income Tax Act (Canada), and similar provin
cial and territorial legislation, unless indicated otherwise.
2024
2023
# of Shares
Amount
Total Amount
Amount Total Amount
Fiscal Period
Payment Date
Outstanding
Per Share
(1)(3)(5)(7)
Per Share
(2)(4)(6)(8)
January
February 15
10,608,493
0.10000
1,061
0.10000
1,077
February
March 15
10,592,301
0.10000
1,059
0.10000
1,077
March
April 14
10,570,919
0.10000
1,057
0.10000
1,077
Q1
0.30000
3,177
0.30000
3,231
April
May 15
10,534,347
0.10000
1,053
0.10000
1,077
May
June 14
10,578,364
0.10000
1,058
0.10000
1,082
June
July 15
10,578,364
0.10000
1,058
0.10000
1,078
Q2
0.30000
3,169
0.30000
3,237
July
August 15
10,578,364
0.10000
1,058
0.10000
1,078
August
September 13
10,578,364
0.10000
1,058
0.10000
1,077
September
October 15
10,578,364
0.10000
1,058
0.10000
1,073
Q3
0.30000
3,174
0.30000
3,228
October
November 15
10,578,364
0.10000
1,058
0.10000
1,070
November
December 13
10,578,364
0.10000
1,058
0.10000
1,067
December
January 15
10,578,364
0.10000
1,058
0.10000
1,063
Q4
0.30000
3,174
0.30000
3,200
YTD
1.20000
12,694
1.20000
12,896
1 The total amount of dividends declared was $0.10000 per share for a total of $1,060,849 for January 2024, $1,059,230 for February 2024, and $1,057,092 for March 2024. When rounded in thousands,
$3,177 of dividends were declared in Q1 2024.
2 The total amount of dividends declared was $0.10000 per share for a total of $1,077,319 per month for January - March 2023; when rounded in thousands, $3,231 of dividends were declared in Q1 2023.
3 The total amount of dividends declared was $0.10000 per share for a total of $1,053,435 for April 2024, $1,057,836 for May 2024, and $1,057,836 for June 2024. When rounded in thousands,
$3,169 of dividends were declared in Q2 2024.
4 The total amount of dividends declared was $0.10000 per share for a total of $1,077,319 for April 2023, $1,082,066 for May 2023, and $1,078,178 for June 2023. When rounded in thousands,
$3,237 of dividends were declared in Q2 2023.
5 The total amount of dividends declared was $0.10000 per share for a total of $1,057,836 per month for July - September 2024; when rounded in thousands, $3,174 of dividends were declared
in Q3 2024.
6 The total amount of dividends declared was $0.10000 per share for a total of $1,076,859 for July 2023, $1,076,109 for August 2023, and $1,073,171 for September 2023. When rounded in thousands,
$3,228 of dividends were declared in Q3 2023.
7 The total amount of dividends declared was $0.10000 per share for a total of $1,057,836 per month for October - December 2024; when rounded in thousands, $3,174 of dividends were declared in Q4 2024.
8 The total amount of dividends declared was $0.10000 per share for a total of $1,070,163 for October 2023, $1,066,975 for November 2023, and $1,063,547 for December 2023. When rounded in thousands,
$3,200 of dividends were declared in Q4 2023.
29
2024 ANNUAL REPORT
DISTRIB UTA B L E CA S H FLOW
(see Terminology) (all amounts in this section in $000s except per share amounts and percentages)
The Corporation’s source of cash for dividends is distributable cash flow provided by operating activities. Distributable cash
flow, reconciled to cash provided by operating activities as calculated under IFRS Accounting Standards, is presented as follows:
2024
2023
($ Thousands of CDN dollars, except
percentages and per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Cash provided by operating activities
11,011
18,384
7,863 12,692
7,817
22,758
1,122
9,308
Deduct (add):
Net changes in non-cash working capital items(1)
(2,108)
603 (6,093)
3,192
(3,448)
8,344 (11,615)
606
Share-based compensation expense
418
443
546
508
410
438
443
505
Maintenance capital expenditures(2)
267
464
1,064
387
1,103
379
1,143
936
Principle elements of lease payments
2,679
2,670
2,668
2,631
2,547
2,360
2,340
2,144
Distributable cash flow
9,755
14,204
9,678
5,974
7,205
11,237
8,811
5,117
Dividends declared
3,174
3,174
3,169
3,177
3,200
3,228
3,237
3,231
Dividends declared per share
0.300
0.300
0.300
0.300
0.300
0.300
0.300
0.300
Payout ratio(3)
32.5%
22.3%
32.7%
53.2%
44.4%
28.7%
36.7%
63.1%
Weighted average shares outstanding
10,232
10,446 10,435 10,527
10,510
10,645 10,706 10,707
during the period, basic
Weighted average shares outstanding
10,316
10,539 10,502 10,590
10,588
10,729 10,760 10,733
during the period, diluted
Trailing-twelve months (“TTM”)
Distributable cash flow
39,611
37,061 34,094 33,227
32,370
28,184 24,481 21,110
Dividends
12,694
12,720 12,774 12,842
12,896
12,923 12,929 12,920
Payout ratio(3)
32.0%
34.3%
37.5%
38.6%
39.8%
45.9%
52.8%
61.2%
1 Net change in non-cash working capital is excluded from the calculation as management believes it would introduce significant cash flow variability and affect underlying cash flow from operating
activities. Significant variability can be caused by such things as the timing of receipts (which individually are large because of the nature of K-Bro’s customer base and timing may vary due to the
timing of customer approval, vacations of customer personnel, etc.) and the timing of disbursements (such as the payment of large volume rebates done once annually). As well, large increases in
working capital are generally required when contracts with new customers are signed as linen is purchased and accounts receivable increase. Management feels that this amount should be excluded
from the distributable cash flow calculation.
2 Maintenance capital expenditures include costs required to maintain or replace assets which do not have a discrete return on investment.
3 The ratio of dividends paid compared to distributable cash flow is periodically reviewed by the Board of Directors to take into account the current and prospective performance of the business
and other items considered to be prudent. Payout ratio is calculated on the dividends declared divided by the distributable cash flow.
30
WE ARE DEPENDABLE.
OUTSTA NDI NG
SHA RE S
As at December 31, 2024, the Corporation had 10,578,364
Common Shares outstanding. Basic and diluted weighted
average number of Common Shares outstanding for 2024
were 10,483,395 and 10,562,521, respectively (10,663,949 and
10,733,256, respectively, for the comparative 2023 periods).
In accordance with the Corporation’s Long Term Incentive
(“LTI”) plan and in conjunction with the performance of
the Corporation in the 2023 fiscal year, on April 9, 2024
the Compensation, Nominating and Corporate Governance
Committee approved LTI compensation of $2.0 million (2023
– $1.8 million) to be paid as Common Shares issued from
treasury. As at December 31, 2024, the value of the Common
Shares held by the LTI custodian was $2.9 million (December
31, 2023 – $2.5 million) which was comprised of 77,325 in
unvested Common Shares (December 31, 2023 – 76,900)
with a nil aggregate cost (December 31, 2023 – $nil).
As at March 20, 2025 there were 10,578,364 Common Shares
issued and outstanding including 77,325 Common Shares
issued but held as unvested treasury shares.
REL AT E D PA RT Y
TR A NSACT I O NS
The Corporation incurred expenses in the normal course of
business for advisory consulting services provided by Mr.
Matthew Hills, a member of the Board of Directors. The
amounts charged are recorded at their exchange amounts
and are on arm’s length terms. For the year ended December
31, 2024, the Corporation incurred fees totaling $0 compared
to $72,000 for the same period of fiscal 2023.
C R I T I CA L
ACCOU N T I N G
E ST I M AT E S
The preparation of the financial statements, in confor
mity with IFRS Accounting Standards, requires K-Bro to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contin
gent assets and liabilities at the date of the financial state
ments and the reported amounts of revenues and expenses
during the reported period. Management regularly evalu
ates these estimates and assumptions which are based
on past experience and other factors that are deemed
reasonable under the circumstances. This involves varying
degrees of judgment and uncertainty and, therefore,
amounts currently reported in the financial statements
could differ in the future. Further to those areas discussed
in the Corporation’s 2024 audited financial statements and
annual MD&A, determining the lease term and incremental
borrowing rates under IFRS 16 requires critical judgments
as well as assumptions that have been incorporated into
any asset impairment testing models.
ECONOMIC CONDITIONS
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 interna
tionally, could negatively affect the Corporation’s cost of
financing its operations and investments.
Evolving global and Canadian foreign policies, geopolit
ical events and economic conditions may impact inflation,
energy pricing, labour availability, supply chain efficiency,
trade policies, tariffs and/or other items, which may have
a direct or indirect impact on the Corporation’s business.
Uncertainty about judgments, estimates and assump
tions made by management during the preparation of the
Corporation’s consolidated financial statements related to
potential impacts of 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.
31
2024 ANNUAL REPORT
Three Months Ended December 31,
Years Ended December 31,
($ Thousands of CDN dollars)
2024
2023
2024
2023
Net earnings
4,238
4,249
18,708
17,607
Add:
Income tax expense
1,156
1,000
5,331
5,256
Finance expense
3,173
1,732
11,302
6,649
Depreciation of property, plant and equipment
8,324
7,043
30,434
26,669
Amortization of intangible assets
1,108
255
3,245
625
EBITDA
17,999
14,279
69,020
56,806
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. 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 as well as 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 EBITDA (defined above) with the addition or deduction of certain amounts incurred which manage
ment does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance
costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any
other non-recurring transactions.
The Corporation believes these non-GAAP definitions provide more meaningful reflections of normalized financial perfor
mance from operations and will enhance period-over-period comparability.
TERM IN O LO GY
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.
32
WE ARE DEPENDABLE.
Three Months Ended December 31,
Years Months Ended December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
EBITDA
12,704
5,295
17,999
11,712
2,567
14,279
Adjusting items:
Transaction Costs(1)
-
-
-
476
443
919
Syndication/Structural Finance Costs(2)
-
-
-
161
-
161
Transition Costs(3)
63
-
63
509
-
509
Restructuring Costs(4)
250
-
250
-
-
-
Gain on settlement of contingent consideration(5)
-
-
-
(945)
-
(945)
Non-recurring gain(6)
(907)
-
(907)
-
-
-
Adjusted EBITDA
12,110
5,295
17,405
11,913
3,010
14,923
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
EBITDA
47,951
21,069
69,020
44,699
12,107
56,806
Adjusting items:
Transaction Costs(1)
822
508
1,330
1,049
443
1,492
Syndication/Structural Finance Costs(2)
1,892
-
1,892
161
-
161
Transition Costs(3)
974
-
974
509
-
509
Restructuring Costs(4)
250
-
250
-
-
-
Gain on settlement of contingent consideration(5)
(500)
-
(500)
(945)
-
(945)
Non-recurring gain(6)
(907)
-
(907)
-
-
-
Adjusted EBITDA
50,482
21,577
72,059
45,473
12,550
58,023
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
33
2024 ANNUAL REPORT
Years Months Ended December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Net Earnings
9,493
9,215
18,708
12,584
5,023
17,607
Adjusting items:
Transaction Costs(1)
822
508
1,330
1,049
443
1,492
Syndication/Structural Finance Costs(2)
1,892
-
1,892
161
-
161
Transition Costs(3)
974
-
974
509
-
509
Restructuring Costs(4)
250
-
250
-
-
-
Gain on settlement of contingent consideration(5)
(500)
-
(500)
(945)
-
(945)
Non-recurring gain(6)
(907)
-
(907)
-
-
-
Adjusted Net Earnings
12,024
9,723
21,747
13,358
5,466
18,824
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
ADJUSTED NET EARNINGS & 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 amounts which management does not consider indicative of ongoing operating performance. This
includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses
on settlement of contingent consideration and any other non-recurring transactions. 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 December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Net Earnings
2,380
1,858
4,238
3,341
908
4,249
Adjusting items:
Transaction Costs(1)
-
-
-
476
443
919
Syndication/Structural Finance Costs(2)
-
-
-
161
-
161
Transition Costs(3)
63
-
63
509
-
509
Restructuring Costs(4)
250
-
250
-
-
-
Gain on settlement of contingent consideration(5)
-
-
-
(945)
-
(945)
Non-recurring gain(6)
(907)
-
(907)
-
-
-
Adjusted Net Earnings
1,786
1,858
3,644
3,542
1,351
4,893
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
34
WE ARE DEPENDABLE.
Three Months Ended December 31,
Years Months Ended December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Basic Earnings per Share
0.225
0.176
0.401
0.314
0.085
0.399
Adjusting items:
Transaction Costs(1)
-
-
-
0.048
0.044
0.092
Syndication/Structural Finance Costs(2)
-
-
-
0.016
-
0.016
Transition Costs(3)
0.006
-
0.006
0.049
-
0.049
Restructuring Costs(4)
0.025
-
0.025
-
-
-
Gain on settlement of contingent consideration(5)
-
-
-
(0.090)
-
(0.090)
Non-recurring gain(6)
(0.088)
-
(0.088)
-
-
-
Adjusted Basic Earnings per Share
0.168
0.176
0.344
0.337
0.129
0.466
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Basic Earnings per Share
0.904
0.879
1.783
1.180
0.471
1.651
Adjusting items:
Transaction Costs(1)
0.078
0.050
0.128
0.102
0.043
0.145
Syndication/Structural Finance Costs(2)
0.180
-
0.180
0.015
-
0.015
Transition Costs(3)
0.093
-
0.093
0.048
-
0.048
Restructuring Costs(4)
0.024
-
0.024
-
-
-
Gain on settlement of contingent consideration(5)
(0.048)
-
(0.048)
(0.089)
-
(0.089)
Non-recurring gain(6)
(0.086)
-
(0.086)
-
-
-
Adjusted Basic Earnings per Share
1.145
0.929
2.074
1.256
0.514
1.770
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
35
2024 ANNUAL REPORT
Years Months Ended December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Diluted Earnings per Share
0.899
0.872
1.771
1.172
0.468
1.640
Adjusting items:
Transaction Costs(1)
0.077
0.049
0.126
0.102
0.043
0.145
Syndication/Structural Finance Costs(2)
0.179
-
0.179
0.016
-
0.016
Transition Costs(3)
0.090
-
0.090
0.047
-
0.047
Restructuring Costs(4)
0.023
-
0.023
-
-
-
Gain on settlement of contingent consideration(5)
(0.047)
-
(0.047)
(0.088)
-
(0.088)
Non-recurring gain(6)
(0.086)
-
(0.086)
-
-
-
Adjusted Diluted Earnings per Share
1.135
0.921
2.056
1.249
0.511
1.760
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
Three Months Ended December 31,
($ Thousands of CDN
Canadian
UK
Canadian
UK
dollars, except percentages
Division
Division
Division
Division
and per share amounts)
2024
2024
2024
2023
2023
2023
Diluted Earnings per Share
0.224
0.174
0.398
0.311
0.085
0.396
Adjusting items:
Transaction Costs(1)
-
-
-
0.046
0.043
0.089
Syndication/Structural Finance Costs(2)
-
-
-
0.016
-
0.016
Transition Costs(3)
0.006
-
0.006
0.050
-
0.050
Restructuring Costs(4)
0.025
-
0.025
-
-
-
Gain on settlement of contingent consideration(5)
-
-
-
(0.088)
-
(0.088)
Non-recurring gain(6)
(0.089)
-
(0.089)
-
-
-
Adjusted Diluted Earnings per Share
0.166
0.174
0.340
0.335
0.128
0.463
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.
3 Relates to transaction costs incurred as a result of the Corporation's acquisitions.
4 Relates to restructuring provision.
5 Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
6 Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.
36
WE ARE DEPENDABLE.
Distributable Cash Flow
Distributable cash flow is a measure used by manage
ment to evaluate the Corporation’s performance. While
the closest IFRS Accounting Standards 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, finan
cial and non-financial covenants in our credit facilities and
dealer agreements may restrict cash from being available
for dividends, re-investment in the Corporation, poten
tial 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.
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.
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, and debt to total capital
are not calculations based on IFRS Accounting Standards
and are not considered an alternative to IFRS Accounting
Standards measures in measuring K-Bro’s performance.
Distributable cash flow, and payout ratio do not have
standardized meanings in IFRS Accounting Standards
and are therefore not likely to be comparable with similar
measures used by other issuers.
Off Balance Sheet
Arrangements
As at December 31, 2024, the Corporation has not entered
into any off balance sheet arrangements.
N EW ACCOU N T I N G
P RON OU N C E M ENTS
A D OP T ED
The Corporation adopted the following accounting standards
and amendments that were effective for our annual consol
idated financial statements commencing January 1, 2024.
These changes did not have a material impact on our finan
cial results and are not expected to have a material impact
in the future.
· Amendments to IAS 1, Non-current liabilities with
covenants, clarifying that that covenants of loan
arrangements which an entity must comply with only
after the reporting date would not affect classification of
a liability as current or non-current at the reporting date
and introducing additional disclosures about covenants
on non-current liabilities.
· Amendments to IFRS 16, Lease Liability in a Sale and
Leaseback, clarifying the measurement of a lease
liability by the seller in a sale and leaseback transaction.
· IFRIC agenda decision on IFRS 8, Disclosure of Revenues
and Expenses for Reportable Segments, clarifying the
requirements to disclose certain specified items of
profit or loss reviewed by the Chief Operating Decision
Maker (CODM).
37
2024 ANNUAL REPORT
RECEN T
ACCOUNT ING
PRONO UNC E ME NT S
New standards, interpretations, or amendments that have
been issued, or are not yet effective, have not been further
described or early adopted, where no material impact
is expected on the Corporation's consolidated financial
statements.
The IASB has issued the following new standard and
amendments to existing standards that will become effec
tive in future years.
· Amendments to IAS 21, Lack of Exchangeability, including
guidance about the determination of the exchange rate
and disclosure when a currency is not exchangeable.
· Amendments to IFRS 7, Classification and Measurement
of Financial Instruments, including disclosure require
ments relating to contractual financial assets and liabil
ities referencing a contingent event.
· Amendments to IFRS 9, Classification and Measurement
of Financial Instruments, including guidance regarding
electronic payments and the timing of derecognition of
financial liabilities.
· Introduction of IFRS 18, Presentation and Disclosure
in Financial Statements, specifying new presenta
tion requirements for subtotals and totals within the
Statement of Profit or Loss and disclosure requirements
for management-defined performance measures.
The Corporation has not adopted any standard, inter
pretation or amendment that has been issued but is not
yet effective and no material impact is expected on the
Corporation’s consolidated financial statements. The
Corporation will continue to assess the impacts, if any, the
amendments to existing standards will have on our consol
idated financial statements, but we currently do not expect
any material impacts.
C R I T I CA L R I S KS
& U N C E RTA I N T I ES
As at December 31, 2024, there are no material changes in
the Corporation’s risks or risk management activities since
December 31, 2023. The Corporation’s results of operations,
business prospects, financial condition, cash dividends to
Shareholders and the trading price of the Common Shares
are subject to a number of risks. These risk factors include:
dependence on long-term contracts and the associated
renewal risk thereof; the effects of market volatility and
uncertainty; potential future tax changes; the Corporation’s
competitive environment and increased competition; our
ability to acquire and successfully integrate and operate
additional businesses; utility costs; the labour markets; the
fact that our credit facility imposes numerous covenants
and encumbers assets; and, environmental matters.
The Corporation’s operating results may be subject to
increased risk due to current geopolitical instability that
could have an impact on key input prices, such as natural
gas. This uncertainty has become more pronounced with
the conflict in the Ukraine which began in late February
2022 and has resulted in significant volatility in natural gas
supply rates.
For a discussion of these risks and other risks associated
with an investment in the Common Shares, see “Risk Factors
– Risks Related to K-Bro and the Laundry and Linen Industry
detailed in the Corporation’s Annual Information Form” that
is available at www.sedarplus.ca.
CON T ROL S &
P ROC E D U R ES
In order to ensure that information with regard to reports
filed or submitted under securities legislation present fairly
in all material respects the financial information of K-Bro,
management, including the President and Chief Executive
Officer (“CEO”) and the Chief Financial Officer (“CFO”), are
responsible for establishing and maintaining disclosure
controls and procedures, as well as internal control over
financial reporting.
38
WE ARE DEPENDABLE.
Additional information regarding K-Bro 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+”).
Vous pouvez obtenir des renseignements supplémentaires sur la Société,
y compris les documents déposés auprès des autorités de réglementation,
sur notre site Web, au www.k-brolinen.com et sur le site Web des autorités
canadiennes en valeurs mobilières au www.sedarplus.ca, le site Web du
Système électronique de données, d’analyse et de recherche (« SEDAR+ »).
Shortridge
As at
($ Thousands, except percentages)
December 31, 2024
Current assets
9,579
Non-current assets
44,830
Current liabilities
4,464
Non-current liabilities
(49)
Shortridge
Year Ended
($ Thousands, except percentages)
December 31, 2024
Revenue
17,471
Expense
15,472
Net Earnings
1,999
C.M.
Year Ended
($ Thousands, except percentages)
December 31, 2024
Revenue
3,967
Expense
3,741
Income from Operations
226
C.M.
As at
($ Thousands, except percentages)
December 31, 2024
Current assets
1,890
Non-current assets
11,511
Current liabilities
305
Non-current liabilities
851
Disclosure Controls
& Procedures
The Corporation has established disclosure controls and
procedures to ensure that information disclosed in this
MD&A and the related financial statements of K-Bro was
properly recorded, processed, summarized and reported
to the Board of Directors and the Audit Committee. The
Corporation’s CEO and CFO have evaluated the effective
ness of these disclosure controls and procedures for the
period ended December 31, 2024, and the CEO and CFO have
concluded that these controls were operating effectively.
Internal Controls Over
Financial Reporting
The CEO and CFO acknowledge responsibility for the
design of internal controls over financial reporting (“ICFR”).
Consequently the CEO and CFO confirm that the additions
to these controls that occurred during the period ended
December 31, 2024, did not materially affect, or are reason
ably likely to materially affect, the Corporation’s ICFR. Based
upon their evaluation of these controls for the period ended
December 31, 2024, the CEO and CFO have concluded that
these controls were operating effectively.
A control system, no matter how well conceived and
operated, can provide only reasonable, and not absolute,
assurance that the objectives of the control system are met.
As a result of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance
that all control issues, including instance of fraud, if any,
have been detected. These inherent limitations include,
amongst other items: (i) that managements’ assumptions
and judgments could ultimately prove to be incorrect under
varying conditions and circumstances; or, (ii) the impact of
isolated errors.
Additionally, controls may be circumvented by the unautho
rized acts of individuals, by collusion of two or more people,
or by management override. The design of any system of
controls is also based, in part, upon certain assumptions
about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its
stated goals under all potential (future) conditions.
LIMITATION ON SCOPE OF DESIGN
K-Bro has limited the scope of design of DCP and our
Internal Controls over Financial Reporting (ICFR) to exclude
controls, policies and procedures of Shortridge acquired
April 30, 2024 and C.M. acquired June 21, 2024. The scope
limitation is in accordance with section 3.3(1)(b) of NI 52-109
which allows an issuer to limit its design of ICFR to exclude
controls, policies and procedures of a business that the
issuer acquired not more than 365 days before the end of
the fiscal period.
39
2024 ANNUAL REPORT
40
WE ARE DEPENDABLE.
C O N S O L I D A T E D
F I N A N C I A L
S T A T E M E N T S
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF EARNINGS & COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOW
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE INFORMATION
41
46
47
48
49
50
83
41
2024 ANNUAL REPORT
42
WE ARE DEPENDABLE.
43
2024 ANNUAL REPORT
44
WE ARE DEPENDABLE.
45
2024 ANNUAL REPORT
46
WE ARE DEPENDABLE.
CO NSO L IDAT E D STAT E M EN T S
O F FI NA NC IA L P OS I T I ON
Approved by the
Board of Directors
($ Thousands of CDN dollars)
December 31, 2024
December 31, 2023
ASSETS
Current assets
Cash
9,423
5,857
Accounts receivable
56,420
50,306
Prepaid expenses and deposits
7,844
7,443
Linen in service (note 6)
38,736
35,288
112,423
98,894
Assets classified as held for sale (note 7)
1,107
718
113,530
99,612
Property, plant and equipment (notes 7, 13)
224,825
206,798
Intangible assets (note 8)
24,747
9,406
Goodwill (note 9)
75,048
48,900
438,150
364,716
LIABILITIES
Current liabilities
Accounts payable and other liabilities
42,822
38,166
Provisions (note 10)
456
206
Share repurchase liability (note 16)
-
3,967
Lease liabilities (note 13)
12,237
12,023
Income taxes payable
1,747
2,086
Dividends payable to shareholders
1,059
1,064
58,321
57,512
Long-term debt (note 11)
123,778
70,247
Lease liabilities (note 13)
42,900
41,275
Provisions (note 10)
3,058
2,964
Deferred income taxes (note 14)
20,682
18,287
248,739
190,285
SHAREHOLDERS’ EQUITY
Share capital
206,010
206,453
Share repurchase deficit
(4,356)
(6,586)
Contributed surplus
2,397
2,252
Deficit
(21,507)
(27,521)
Accumulated other comprehensive income (loss)
6,867
(167)
189,411
174,431
438,150
364,716
Contingencies and commitments (note 15)
The accompanying notes are an integral part of these consolidated financial statements.
Elise Rees
Director
Matthew Hills
Director
47
2024 ANNUAL REPORT
CONSOL I DAT E D STAT EM EN T S OF
E ARNIN G S & CO MP R EH EN S I VE I N COM E
Years Ended December 31,
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
REVENUE
373,609
320,884
Expenses
Wages and benefits
142,192
123,394
Delivery
44,713
38,748
Linen (note 6)
36,241
32,982
Utilities
27,878
25,124
Corporate
19,179
14,412
Materials and supplies
13,799
12,141
Repairs and maintenance
15,786
12,758
Occupancy costs
6,372
5,432
Gain on settlement of contingent consideration (notes 27, 28)
(500)
(945)
Other (income) expense (note 31)
(1,071)
32
304,589
264,078
Earnings before interest, taxes, depreciation and amortization (EBITDA)
69,020
56,806
Other expenses
Depreciation of property, plant and equipment (note 7)
30,434
26,669
Amortization of intangible assets (note 8)
3,245
625
Finance expense (note 12)
11,302
6,649
44,981
33,943
Earnings before income taxes
24,039
22,863
Current income tax expense
3,762
4,002
Deferred income tax expense
1,569
1,254
Income tax expense (note 14)
5,331
5,256
Net earnings
18,708
17,607
Other comprehensive income
Items that may be subsequently reclassified to earnings:
Foreign currency translation differences on foreign operations
7,034
1,845
Total comprehensive income
25,742
19,452
Net earnings per share (note 17):
Basic
1.78
1.65
Diluted
1.77
1.64
Weighted average number of shares outstanding:
Basic
10,483,395
10,663,949
Diluted
10,562,521
10,733,256
The accompanying notes are an integral part of these consolidated financial statements.
48
WE ARE DEPENDABLE.
CO NSO L IDAT E D STAT E M EN T S
O F CHA NG E S I N EQU I T Y
Share
Accumulated Other
Total Share
Repurchase
Contributed
Comprehensive
Total
($ Thousands of CDN dollars)
Capital
Deficit
Surplus
Deficit
Income (loss)
Equity
As at December 31, 2023
206,453
(6,586)
2,252
(27,521)
(167)
174,431
Total comprehensive income
-
-
-
18,708
7,034
25,742
Dividends declared (note 19)
-
-
-
(12,694)
-
(12,694)
Employee share based
-
-
1,915
-
-
1,915
compensation expense (note 25)
Repurchase of shares (note 16)
(2,213)
(1,737)
-
-
-
(3,950)
Change in share
-
3,967
-
-
-
3,967
repurchase liability (note 16)
Shares vested during the year
1,770
-
(1,770)
-
-
-
As at December 31, 2024
206,010
(4,356)
2,397
(21,507)
6,867
189,411
Share
Accumulated Other
Total Share
Repurchase
Contributed
Comprehensive
Total
($ Thousands of CDN dollars)
Capital
Deficit
Surplus
Deficit
Income (loss)
Equity
As at December 31, 2022
208,463
-
2,323
(32,232)
(2,012)
176,542
Total comprehensive income
-
-
-
17,607
1,845
19,452
Dividends declared (note 19)
-
-
-
(12,896)
-
(12,896)
Employee share based
-
-
1,796
-
-
1,796
compensation expense (note 25)
Repurchase of shares (note 16)
(3,877)
(2,619)
-
-
-
(6,496)
Share repurchase liability (note 16)
-
(3,967)
-
-
-
(3,967)
Shares vested during the year
1,867
-
(1,867)
-
-
-
As at December 31, 2023
206,453
(6,586)
2,252
(27,521)
(167)
174,431
The accompanying notes are an integral part of these Consolidated Financial Statements.
49
2024 ANNUAL REPORT
CONSOL I DAT E D STAT EM EN T S
OF CAS H F LO W
Years Ended December 31,
($ Thousands of CDN dollars)
2024
2023
OPERATING ACTIVITIES
Net earnings
18,708
17,607
Depreciation of property, plant and equipment (note 7)
30,434
26,669
Amortization of intangible assets (note 8)
3,245
625
Accretion expense (note 10)
56
80
Employee share based compensation expense
1,915
1,796
Other (income) expense (note 31)
(1,071)
32
Gain on settlement of contingent consideration (notes 27, 28)
(500)
(945)
Deferred income tax expense
1,569
1,254
54,356
47,118
Change in non-cash working capital items (note 20)
(4,406)
(6,113)
Cash provided by operating activities
49,950
41,005
FINANCING ACTIVITIES
Net proceeds from revolving debt (note 11)
53,531
25,081
Repurchase of shares (note 16)
(3,950)
(6,496)
Principle elements of lease payments (note 13)
(10,648)
(9,391)
Dividends paid to shareholders
(12,699)
(12,911)
Cash provided by (used in) financing activities
26,234
(3,717)
INVESTING ACTIVITIES
Purchase of property, plant and equipment
(18,835)
(11,493)
Proceeds from disposal of property, plant and equipment
1,353
1
Purchase of intangible assets (note 8)
(495)
(493)
Acquisition of businesses, net of cash (notes 27, 28, 29, 30)
(55,267)
(22,278)
Cash used in investing activities
(73,244)
(34,263)
Change in cash during the year
2,940
3,025
Effect of exchange rate changes on cash
626
196
Cash, beginning of year
5,847
2,636
Cash, end of year
9,423
5,857
Supplementary cash flow information
Interest paid
11,066
6,318
Income taxes paid
5,241
-
The accompanying notes are an integral part of these consolidated financial statements.
50
WE ARE DEPENDABLE.
K-Bro Linen Inc. (the "Corporation" or “K-Bro”) is incor
porated in Canada under the Business Corporations Act
(Alberta). K-Bro is the largest owner and operator of laundry
and linen processing facilities in Canada and a market
leader for laundry and textile services in Scotland and the
North of England. K-Bro and its wholly owned subsidiaries,
operate across Canada and the United Kingdom (“UK”),
provide a range of linen services to healthcare institutions,
hotels and other commercial organizations that include the
processing, management and distribution of general linen
and operating room linen.
The Corporation’s operations in Canada include eleven
processing facilities and two distribution centres in ten
Canadian cities: Québec City, Montréal, Toronto, Regina,
Saskatoon, Prince Albert, Edmonton, Calgary, Vancouver
and Victoria. The processing facilities operate under the
brands of K-Bro Linen Systems Inc. (“K-Bro”), Buanderie
HMR, Paranet, Villeray and C.M.
The Corporation’s operations in the UK include two distinctive
brands, Fishers Topco Ltd. ("Fishers") which was acquired by
K-Bro on November 27, 2017 and Shortridge Ltd. (“Shortridge”),
which was acquired by K-Bro on April 30, 2024.
Fishers was established in 1900 and is an operator of laundry
and linen processing facilities in Scotland, providing linen
rental, workwear hire and cleanroom garment services to
the hospitality, healthcare, manufacturing and pharma
ceutical sectors. Fishers' client base includes major hotel
chains and prestigious venues across Scotland and the
North of England. The company operates in five cities, in
Scotland and the North of England with facilities in Cupar,
Perth, Newcastle, Livingston and Coatbridge.
Shortridge is headquartered in North West England, with
laundry processing sites in Lillyhall and Dumfries and a
distribution centre in Darlington. Shortridge, established in
1845, specialises in providing high quality laundry services
to local independent hospitality businesses, including
hotels, B&Bs, self-catering units and restaurants.
The Corporation’s common shares are traded on the Toronto
Stock Exchange under the symbol “KBL”. The address of the
Corporation’s registered head office is 14903 – 137 Avenue,
Edmonton, Alberta, Canada.
These audited annual consolidated financial statements
(the “Consolidated Financial Statements”) were approved
and authorized for issuance by the Board of Directors (“the
Board”) on March 20, 2025.
1. Basis of Presentation
These
Consolidated
Financial
Statements
of
the
Corporation have been prepared in accordance with IFRS
Accounting Standards as issued by the International
Accounting Standards Board (IFRS Accounting Standards).
The preparation of financial statements in conformity with
IFRS Accounting Standards requires the use of certain
critical accounting estimates. It also requires manage
ment to exercise its judgment in the process of applying
the Corporation’s accounting policies. The areas involving
a higher degree of judgment or complexity, or areas
where assumptions and estimates are significant to the
Consolidated Financial Statements are disclosed in Note 5.
2. Material accounting policies
The principal accounting policies applied in the preparation
of these Consolidated Financial Statements are set out
below. These policies have been consistently applied to all
the periods presented, unless otherwise stated.
A) BASIS OF MEASUREMENT
The Consolidated Financial Statements have been prepared
under the historical cost convention.
B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
Corporation, its wholly owned subsidiaries, and the
long-term incentive plan account (Note 2(o)). All inter
company balances and transactions have been eliminated
upon consolidation.
C) CASH
Cash includes cash on hand and demand deposits held with
financial institutions. Cash is carried at amortized cost,
which is equivalent to fair value.
D) LINEN IN SERVICE
Linen in service is stated at cost less accumulated depre
ciation. The cost is based on the expenditures that are
directly attributable to the acquisition of linen, amortization
commences when linen is put into service; with operating
room linen amortized across its estimated service life of
24 months and general linen amortized based on usage
which results in an estimated average service life of 24 to
36 months.
N OTES TO T HE CON S OL I DAT E D
FIN A NC I A L STATE M EN T S
(Thousands of Canadian dollars except share and per share amounts, Years ended December 31, 2024 and 2023)
51
2024 ANNUAL REPORT
E) REVENUE RECOGNITION
A laundry services contract is a contract specifically negoti
ated for the provision of laundry and linen services. Revenue
is based on contractually set pricing on a consistent unit-of-
weight or price-per-piece basis for each service over the
term of the contract. The Corporation reports revenue
under two revenue categories: healthcare and hospitality
services. When determining the proper revenue recognition
method for contracts, the Corporation evaluates whether
two or more contracts should be combined and accounted
for as one single contract and whether the combined or
single contract should be accounted for as more than one
performance obligation. The Corporation accounts for a
contract when, it has commercial substance, the parties
have approved the contract in accordance with customary
business practices and are committed to their obligations,
the rights of the parties and payment terms are identified,
and collectability of consideration is probable.
1. Identifying the Contract
The Corporation's policy for revenue recognition requires
an appropriately authorized contract, with sign-off by
representatives from all respective parties before any
services are provided to a customer. Contained within
the terms of these contracts is detailed information
identifying each party’s rights regarding the laundry
and linen services to be provided, as well as associated
payment terms (i.e., service pricing, early payment
discounts, invoicing requirements, etc.). In addition, the
Corporation’s contracts have commercial substance
as the services to be provided will directly impact the
Corporation’s future cash flows via incoming revenue and
related outgoing expenditures.
As part of the Corporation’s analysis in reviewing and
accepting a contract, the Corporation assesses the likeli
hood of collection from all prospective customers and
only transacts with those customers from which payment
is probable. As the Corporation’s significant customer
contracts are generally with government-funded health
agencies and large volume hotels, it is probable that the
Corporation will collect the consideration to which it is
entitled for the performance of these contracts.
For services provided following the expiration of a contract
and subsequent renewal negotiations, the terms of the
original contract carry forward until the new agreement
has been appropriately authorized. This is confirmed
through verbal approval and is consistent with customary
business practices.
2. Identifying Performance Obligations in a Contract
Linen services are provided to the Corporation’s
customers consecutively over a period of time (i.e., daily
deliveries over the contract term) and the same method
is used to measure the Corporation’s progress in satis
fying the performance of the contract (i.e., revenue
is based on contractually set pricing on a consistent
unit-of-weight or price-per-piece basis for each service
over the term of the contract). Additionally, these
services generally include integrated processing and
delivery, consist of a single deliverable (clean processed
volume), and in the case of rental linen, are not offered
individually (rental linen is used as an input in the provi
sion of standard laundry and linen services). Therefore,
the services provided under one service agreement
constitute a single performance obligation.
3. Determining the Transaction Price
The majority of the Corporation’s contracts utilize a fixed
pricing model. These contracts stipulate a fixed rate to be
charged to customers on a price-per-unit basis, including
either weight-based or item-based billing. For these
types of arrangements, revenue is recognized over time
as each unit of linen is processed and delivered using
the fixed consideration rate per the contract. In addition
to the above pricing methodology, some contracts have
additional components which meet the definition of
variable consideration per IFRS 15, which are accounted
for using the most likely amount method. The estimates
of variable consideration and determination of whether
to include estimated amounts in the transaction price
are based largely on an assessment of the Corporation’s
anticipated performance and all information, historical,
current, and forecasted, that is reasonably available.
4. Allocating the Transaction Price
Each of the customer’s individual customer contracts
represents a single performance obligation. As a result,
the transaction price for each contract (based on contrac
tually stipulated fixed and variable pricing for a single
deliverable) is allocated to each processed item based on
the agreed upon rate.
Volume rebates, where applicable, are recorded based
on annualized expected volumes of individual customer
contracts when it is reasonable that the criteria are
likely to be met. Based on past experience, management
believes that volumes utilized for any estimates are
reasonable and would not expect a material deviation to
the balance of accrued liabilities or revenue.
52
WE ARE DEPENDABLE.
5. Performance Obligations Satisfied Over Time
The Corporation typically transfers control of goods or
services and satisfies performance obligations over time,
once clean linen has been provided to the customer and the
customer has accepted delivery of the processed items.
Payment of laundry services are due respective of the
terms as indicated in the customer’s laundry service
contract, whereby customers are generally invoiced on a
monthly basis and consideration is payable when invoiced.
F) PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attrib
utable to the acquisition of the items. Subsequent costs are
included in the asset’s carrying amount or recognized as
a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item
will flow to the Corporation and the cost of the item can be
reliably measured. The carrying amount of a replaced part is
derecognized. Repairs and maintenance are charged to the
Consolidated Statements of Earnings and Comprehensive
Income during the financial period in which they are incurred.
General and specific borrowing costs that are directly
attributable to the acquisition, construction or production
of a qualifying asset are capitalized during the period of
time that is required to complete and prepare the asset for
its intended use or sale. Qualifying assets are assets that
necessarily take a substantial period of time to get ready for
their intended use or sale. The Corporation has not capital
ized any borrowing costs during the year as there were no
qualifying assets.
Property, plant and equipment include right of use assets
as disclosed under the Corporation’s leasing policy in note
2(r). Right of use assets arise from a lease that is initially
measured on a present value basis, and are classified within
the relevant property, plant and equipment categories based
on the type of asset.
The major categories of property, plant and equipment are
depreciated on a straight-line basis to allocate their cost
over their estimated useful lives as follows:
Asset
Rate
Buildings
15 – 25 years
Laundry equipment
7 – 20 years
Office equipment
2 – 5 years
Delivery equipment
5 – 10 years
Computer equipment
2 years
Leasehold improvements
Lease term
Gains and losses on disposals of property, plant and equip
ment are determined by comparing the proceeds with the
carrying amount of the asset.
G) INTANGIBLE ASSETS
Intangible assets acquired in a business combination are
recorded at fair value at the acquisition date. Subsequently
they are carried at cost less accumulated amortization and
accumulated impairment losses.
The major categories of intangible assets are depreciated
on a straight-line basis to allocate their cost over their
estimated useful lives as follows:
Asset
Rate
Customer relationships
(Healthcare and Hospitality)
1 – 20 years
Computer software
5 years
Brand
Indefinite
These estimates are reviewed at least annually and are
updated if expectations change as a result of changing
client relationships or technological obsolescence.
H) IMPAIRMENT OF NON-FINANCIAL ASSETS
Property, plant and equipment and intangible assets are
tested for impairment when events or changes in circum
stances indicate that the carrying amount may not be
recoverable. Long-lived assets that are not amortized and
goodwill are subject to an annual impairment test. For the
purpose of measuring recoverable amounts, assets are
grouped at the lowest level for which there are separately
identifiable cash flows (cash-generating unit or “CGU”). The
recoverable amount is the higher of an asset's fair value
less costs to sell and value in use (being the present value
of the expected future cash flows of the relevant asset or
CGU). An impairment loss is recognized for the amount by
which the asset's carrying amount exceeds its recoverable
amount firstly to the recorded goodwill, then to the other
assets in the CGU on a pro rata basis, as determined by the
carrying amount of each asset in the CGU. The Corporation
evaluates impairment losses, other than goodwill impair
ment, for potential reversals when events or circumstances
warrant such consideration.
I) INCOME TAXES
The tax expense for the year comprises current and deferred
tax. Tax is recognized in the Consolidated Statements of
Earnings and Comprehensive Income, except to the extent
that it relates to items recognized in other comprehensive
income or directly in equity. In this case, the tax is also
recognized in other comprehensive income or directly in
equity, respectively.
53
2024 ANNUAL REPORT
The current income tax provision is calculated on the
basis of the tax laws enacted or substantively enacted at
the Statement of Financial Position date of the taxation
authority where the Corporation operates and gener
ates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts
in the Consolidated Financial Statements. Deferred income
tax is determined using tax rates and laws that have been
enacted or substantively enacted by the Statement of
Financial Position date and are expected to apply when
the related deferred income tax asset is realized, or the
deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilized.
J) BUSINESS COMBINATIONS
Business combinations are accounted for using the acqui
sition method. The acquired identifiable net assets are
measured at their fair value at the date of acquisition. The
consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement. Any excess of the purchase price over the fair
value of the net assets acquired is recognized as goodwill.
Any deficiency of the purchase price below the fair value of
the net assets acquired is recorded as a gain in net earnings.
Associated transaction costs are expensed when incurred.
K) GOODWILL
Goodwill is the residual amount that results when the
purchase price of an acquired business exceeds the sum of
the amounts allocated to the identifiable assets acquired,
less liabilities assumed, based on their estimated fair
values at the acquisition date. Goodwill is allocated as of
the date of the business combination. Goodwill is tested
for impairment annually in the fourth quarter, or more
frequently if events or changes in circumstances indicate a
potential impairment.
Goodwill acquired through a business combination is
allocated to each CGU, or group of CGUs, that are expected
to benefit from the related business combination. A CGU
represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes.
L) EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing
net earnings for the period attributable to Shareholders
of the Corporation by the weighted average number of
Common shares outstanding during the period.
Diluted EPS is calculated by adjusting the weighted average
number of common shares outstanding for dilutive instru
ments. The number of common shares included within the
weighted average is computed using the treasury stock
method. The Corporation’s potentially dilutive Common
shares are comprised of long-term incentive plan equity
compensation granted to officers and key employees
(Note 2(o)).
M) FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented
in Canadian dollars. The Corporation's operations in
Canada have a functional currency of Canadian dollars.
The Corporation's operations in the UK have a functional
currency of pounds sterling.
Translation of Foreign Entities
The functional currency for each of the Corporation’s
subsidiaries is the currency of the primary economic
environment in which it operates. Operations with foreign
functional currencies are translated into the Corporation’s
presentation currency in the following manner:
· Monetary and non-monetary assets and liabilities are
translated at the spot exchange rate in effect at the
reporting date;
· Revenue and expense items (including depreciation
and amortization) are translated at average rates of
exchange prevailing during the period, which approxi
mate the exchange rates on the transaction dates;
· Impairment of assets are translated at the prevailing
rate of exchange on the date of the impairment recogni
tion, and;
· Exchange gains that result from translation are recog
nized as a foreign currency translation difference in
accumulated other comprehensive income (loss).
Translation of Transactions & Balances
Transactions in currencies other than the entity’s functional
currency are recognized at the rates of exchange prevailing
at the date of the transaction as follows:
· Monetary assets and liabilities are translated at the
exchange rate in effect at the reporting date;
· Non-monetary items are translated at historical exchange
rates; and
54
WE ARE DEPENDABLE.
· Revenue and expense items are translated at the average
rates of exchange, except depreciation and amorti
zation, which are translated at the rates of exchange
applicable to the related assets, with any gains or losses
recognized within “finance expense” in the consolidated
statements of earnings & comprehensive income.
N) PROVISIONS
Provisions are recognised when the Corporation has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are not recognised for
future operating losses.
Where there are a number of similar obligations, the likeli
hood that an outflow will be required in settlement is deter
mined by considering the class of obligations as a whole. A
provision is recognised even if the likelihood of an outflow
with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of manage
ment’s best estimate of the expenditure required to settle
the present obligation at the end of the reporting period.
The discount rate used to determine the present value is
a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the liability.
The increase in the provision due to the passage of time is
recognised as interest expense.
O) EMPLOYEE BENEFITS
Post-Employment Benefit Obligations
The Corporation contributes on behalf of its employees
to their individual Registered Retirement Savings Plans
subject to an annual maximum of 10% of gross personal
earnings. The Corporation accounts for contributions
as an expense in the period that they are incurred. The
Corporation does not provide any other post-employment
or post-retirement benefits.
Existing Equity-based Compensation Plan of
the Corporation
On June 16, 2011, the Shareholders of the Corporation
approved a new Long-term Incentive Plan (“LTI”), which
was amended and restated as of December 31, 2018.
Under the LTI, awards are granted annually in respect of
the prior fiscal year to the eligible participants based on a
percentage of annual salary. The amount of the award (net
of withholding obligations) is satisfied by issuing treasury
shares or cash to be held in trust by the trustee pursuant to
the terms of the LTI. All awards issued under the provisions
of the LTI are recorded as compensation expense over the
relevant service period, being the year to which the LTI
relates and the vesting period of the shares.
The Amendment made on December 31, 2018 gave the
Board of Directors the right to elect to satisfy the award
in cash. The Corporation has determined that this change
did not create an obligation to satisfy the award in cash and
therefore the LTI continues to be treated as an equity settled
share based payment.
Subject to the discretion of the Compensation, Nominating
and Corporate Governance Committee of the Board of
Directors, one-quarter of a Participant’s grant will vest
on the Determination Date (defined as the first May 15th
following the date that the Directors of the Corporation
approve the audited consolidated financial statements of the
Corporation for the prior year). The remaining three-quar
ters of the Participant’s grant will vest on November 30th
following the second anniversary of the Determination Date.
If a change of control occurs, all LTI Shares held by the
Administrator in respect of unvested grants will vest immedi
ately. LTI participants are entitled to receive dividends on
all common shares granted under the LTI whether vested
or unvested. In most circumstances, unvested common
shares held by the LTI Administrator for a participant will be
forfeited if the participant resigns or is terminated for cause
prior to the applicable vesting date, and those common
shares will be disposed of by the Administrator to K-Bro for
no consideration and such Common shares shall thereupon
be cancelled. If a participant is terminated without cause,
retires or resigns on a basis which constitutes construc
tive dismissal, the participant will be entitled to receive
his or her unvested common shares on the regular vesting
schedule under the LTI.
P) FINANCIAL INSTRUMENTS
The Corporation classifies its financial assets in the
following measurement categories:
· those to be measured subsequently at fair value (either
through other comprehensive income (loss), or though
profit or loss); and
· those to be measured at amortized cost.
The classification depends on the Corporation’s business
model for managing the financial assets and contractual
terms of the cash flows.
At initial recognition, the Corporation measures a financial
asset at fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
55
2024 ANNUAL REPORT
The Corporation’s financial assets consist of cash and
accounts receivable, which are measured at amortized cost
using the effective interest method under IFRS 9.
The Corporation's financial liabilities consist of accounts
payable and accrued liabilities, lease liabilities, dividends
payable and long-term debt. Accounts payable and accrued
liabilities and dividends payable are recognized initially at
their fair value and subsequently measured at amortized
cost using the effective interest method. Lease liabilities
are recognized initially at their net present value and subse
quently measured at amortized cost using the effective
interest method.
Long-term debt and borrowings are initially recognized at
fair value, net of transaction costs incurred and are subse
quently measured at amortized cost. Long-term debt and
borrowings are removed from the Statement of Financial
Position when the obligation specified in the contract is
discharged, cancelled or expired.
The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash
assets transferred or liabilities assumed, is recognized in
profit or loss as other income or finance costs. Borrowings
are classified as current liabilities unless the group has
a right to defer settlement of the liability for at least 12
months after the reporting period.
Financial assets and liabilities are offset, and the net amount
reported in the Statement of Financial Position when there is
a legally enforceable right to offset the recognized amounts
and there is an intention to settle on a net basis or realize
the asset and settle the liability simultaneously.
Derivatives are initially recognized at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting
period and included as part of the profit and loss.
Q) IMPAIRMENT OF FINANCIAL ASSETS
Information about the impairment of financial assets, their
credit quality and the Corporation’s exposure to credit
risk can be found in Note 21(d). The Corporation utilizes
the application of the simplified approach to provide for
expected credit losses prescribed by IFRS 9, which permits
the use of the lifetime expected loss provision for all trade
receivables. To measure the expected credit losses, the
Corporation’s trade receivables have been grouped based
on operating segment, shared credit risk characteristics
and days past due. Accounting judgment and estimate is
required in the assessment of the lifetime expected default
rate of each trade receivables grouping. The lifetime
expected default rates are reviewed at least annually and
are updated if expectations change.
At each reporting date, the Corporation assesses whether
there is objective evidence that a financial asset is impaired.
If such evidence exists, the Corporation recognizes an
impairment loss equal to the difference between the
amortized cost of the loan or receivable and the present
value of the estimated future cash flows, discounted using
the instrument's original effective interest rate. The carrying
amount of the asset is reduced by this amount either directly
or indirectly through the use of an allowance account.
Impairment losses on financial assets carried at amortized
cost are reversed in subsequent periods if the amount of the
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognized.
R) THE CORPORATION’S LEASING ACTIVITIES
& HOW THESE ARE ACCOUNTED FOR
The Corporation leases various buildings, vehicles and
equipment. Rental contracts are typically made for fixed
periods of one to fifteen years but may have extension
options as described in Note 2(r)(ii) below. Lease terms are
negotiated on an individual basis and contain a wide range
of different terms and conditions. The lease agreements do
not impose any financial covenants, but leased assets may
not be used as security for borrowing purposes.
Leases are recognized as a right-of-use asset and a corre
sponding liability at the date at which the leased asset is
available for use by the Corporation. Each lease payment is
allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period so
as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-
of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
· fixed payments (including in-substance fixed payments),
less any lease incentives receivable
· variable lease payment that are based on an index or a rate
· amounts expected to be payable by the lessee under
residual value guarantees, and
· the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environ
ment with similar terms and conditions.
56
WE ARE DEPENDABLE.
To determine the incremental borrowing rate, the Corporation:
· where possible, uses recent third-party financing
received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions since
third party financing was received,
· uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk, and
· makes adjustments specific to the lease, e.g., term,
country, currency and security.
Right-of-use assets are measured at cost comprising
the following:
· the amount of the initial measurement of lease liability,
· any lease payments made at or before the commence
ment date less any lease incentives received,
· any initial direct costs, and
· restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognized on a straight-line basis as
an expense in profit or loss. Short-term leases are leases
with a lease term of 12 months or less. Low-value assets are
comprised of IT-equipment and small items of office furniture.
(i) Variable Lease Payments
Based on the valuation of the Corporation’s leases, no leases
have been identified that are directly tied to an index or rate,
and whereby an estimate would be required in determining
the uncertainty arising from variable lease payments.
(ii) Extension & Termination Options
Extension and termination options are included in a
number of property and equipment leases across the
Corporation. These terms are used to maximize opera
tional flexibility in terms of managing contracts. The
majority of extension and termination options held
are exercisable only by the Corporation and not by the
respective lessor.
3. Changes & Updates in
Accounting Policies
The Corporation adopted the following accounting standards
and amendments that were effective for our annual consol
idated financial statements commencing January 1, 2024.
These changes did not have a material impact on our finan
cial results and are not expected to have a material impact
in the future.
· Amendments to IAS 1, Non-current liabilities with
covenants, clarifying that that covenants of loan
arrangements which an entity must comply with only
after the reporting date would not affect classification of
a liability as current or non-current at the reporting date
and introducing additional disclosures about covenants
on non-current liabilities.
· Amendments to IFRS 16, Lease Liability in a Sale and
Leaseback, clarifying the measurement of a lease
liability by the seller in a sale and leaseback transaction.
· IFRIC agenda decision on IFRS 8, Disclosure of Revenues
and Expenses for Reportable Segments, clarifying the
requirements to disclose certain specified items of
profit or loss reviewed by the Chief Operating Decision
Maker (CODM).
4. New Standards &
Interpretations
Not Yet Adopted
New standards, interpretations, or amendments that have been
issued, or are not yet effective, have not been further described
or early adopted, where no material impact is expected on the
Corporation's consolidated financial statements.
The IASB has issued the following new standard and
amendments to existing standards that will become effec
tive in future years.
· Amendments to IAS 21, Lack of Exchangeability,
including guidance about the determination of the
exchange rate and disclosure when a currency is not
exchangeable.
· Amendments to IFRS 7, Classification and Measurement
of Financial Instruments, including disclosure require
ments relating to contractual financial assets and liabil
ities referencing a contingent event.
· Amendments to IFRS 9, Classification and Measurement
of Financial Instruments, including guidance regarding
electronic payments and the timing of derecognition of
financial liabilities.
· Introduction of IFRS 18, Presentation and Disclosure
in Financial Statements, specifying new presenta
tion requirements for subtotals and totals within the
Statement of Profit or Loss and disclosure requirements
for management-defined performance measures.
The Corporation has not adopted any standard, interpretation or
amendment that has been issued but is not yet effective and no
material impact is expected on the Corporation’s consolidated
financial statements. The Corporation will continue to assess
57
2024 ANNUAL REPORT
the impacts, if any, the amendments to existing standards will
have on our consolidated financial statements, but we currently
do not expect any material impacts.
5. Critical Accounting
Estimates & Judgments
The preparation of the Corporation’s consolidated financial
statements, in conformity with IFRS Accounting Standards,
requires management of the Corporation to make estimates
and assumptions that affect the reported amount of assets
and liabilities and disclosures of contingent assets and liabil
ities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
The estimates and associated assumptions are based on
historical experience and various other factors that are
believed to be reasonable under the circumstances, the
results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not
readily apparent from other sources. These estimates and
judgments have been applied in a manner consistent with
prior periods.
Economic Conditions
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.
Changes in interest rates, both domestically and interna
tionally, could affect the Corporation’s cost of financing
its operations and investments.
Evolving global and Canadian foreign policies, geopolit
ical events and economic conditions may impact inflation,
energy pricing, labour availability, supply chain efficiency,
trade policies, tariffs, and/or other items, which may have
a direct or indirect impact on the Corporation’s business.
Uncertainty about judgments, estimates and assump
tions made by management during the preparation of the
Corporation’s consolidated financial statements related
to potential impacts of geopolitical events and changing
interest rates on revenue, expenses, assets, liabilities,
and note disclosures could result in a material adjust
ment to the carrying value of the asset or liability affected.
The following discusses the most significant accounting
judgments and estimates that the Corporation has made in
the preparation of the consolidated financial statements:
AREAS OF SIGNIFICANT JUDGMENT
Impairment of Goodwill & Non-Financial Assets
Management reviews goodwill at least annually and other
non-financial assets when there is any indication that the
asset might be impaired. The assessment of impairment
is based on management’s judgment of whether there
are sufficient internal and external factors that would
indicate that an asset is impaired.
The Corporation applies judgment in:
·
assessing the likelihood of renewal of significant
contracts included in the intangible assets described
in Note 8,
·
identifying the CGUs to which intangible assets
should be allocated to, and the CGU or group of CGUs
at which goodwill is monitored for internal manage
ment purposes, and
·
determining the appropriate comparable companies
used in earnings multiple approach.
Segment Identification
When determining its reportable segments, the Corporation
considers qualitative factors, such as operations that offer
distinct products and services and are considered to be
significant by the Chief Operating Decision Maker, identi
fied as the Chief Executive Officer. Aggregation occurs
when the operating segments have similar economic
characteristics and have similar (a) products and services;
(b) geographic proximity; (c) type or class of customer for
their products and services; (d) methods used to distribute
their products or provide their services; and (e) nature of
the regulatory environment, if applicable.
Lease Term
In determining the lease term, management considers
all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise
a termination option. Extension options (or periods after
termination options) are only included in the lease term
if the lease is reasonably certain to be extended (or not
terminated). For many of the leases the cash outflows
associated with the lease extension term would be
material. The assessment is reviewed if a significant
event or a significant change in circumstances occurs
which affects this assessment and that is within the
control of the lessee.
58
WE ARE DEPENDABLE.
AREAS OF ESTIMATION UNCERTAINTY
Incremental Borrowing Rate
In applying its accounting policy for leases management
considers all appropriate facts and circumstances in the
determination the lessee’s incremental borrowing rate
being used and these rates are reviewed and update on
an annual basis.
Amortization of Property, Plant & Equipment,
& Intangible Assets
In applying its accounting policy for the amortization of
property, plant and equipment, and intangible assets,
management considers all appropriate facts and circum
stances in the determination of the appropriate rates and
methodology to allocate costs over their estimated useful
lives, including historical experience, current volumetric
run-rates, and expected future events.
Linen in Service
The estimated service lives of linen in service are
reviewed at least annually and are updated if expectations
change as a result of physical wear and tear, technical or
commercial obsolescence and legal or other limits of use.
Provisions
The Corporation’s provision includes restructure costs
and the restoration for premises of its leased plants.
The Corporation determines restructure costs based
off employment standards and legal consultation. For
leased plants, a provision has been recognized for the
present value of the estimated expenditure required to
remove any leasehold improvements and installed equip
ment. Refer to Note 10 for more details about estimation
for this provision.
Impairment of Goodwill & Non-Financial Assets
Management reviews goodwill at least annually and other
non-financial assets when there is any indication that
the asset might be impaired. As part of this review the
Corporation use estimates to calculate the appropriate
discount rate and growth rate which are used to estimate
the recoverable value.
During instances where indication of impairment exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss. Where
it is not possible to estimate the recoverable amount of
an individual asset, the Corporation estimates the recov
erable amount of the cash generating unit to which the
asset belongs. The recoverable value of CGUs require the
use of estimates related to the future operating results
and cash generating ability of the assets.
Management regularly evaluates these estimates and
judgments. Revisions to accounting estimates are recog
nized in the period in which the estimate is revised if the
revision affects only that period or in the period of the
revision and future periods if the revision affects both
current and future periods.
6. Linen in service
($ Thousands of CDN dollars)
2024
2023
Balance, beginning of year
35,288
31,383
Acquisition of
2,144
970
businesses (notes 27, 28, 29, 30)
Additions
36,527
35,577
Amortization charge
(36,241)
(32,982)
Effect of movement
1,018
340
in exchange rates
Balance, end of year
38,736
35,288
59
2024 ANNUAL REPORT
($ Thousands of CDN dollars,
Laundry
Office Delivery Computer
Leasehold Spare
except share and per share amounts)
Land Buildings Equipment(1) Equipment Equipment
Equipment Improvements
Parts
Total
Opening net book amount
3,312
51,718
106,885
220
9,618
323
29,246 1,863 203,185
Additions(2)(3)(4)
-
549
10,371
63
4,561
320
9
230
16,103
Change in asset retirement obligation
-
-
-
-
-
-
171
-
171
Acquisition of businesses (notes 27, 28)
-
3,671
8,432
24
333
42
801
-
13,303
Disposals
-
-
(41)
-
(204)
-
-
-
(245)
Depreciation charge
-
(6,573)
(11,838)
(100) (4,289)
(380)
(3,489)
- (26,669)
Effect of movement in exchange rates
26
284
419
5
202
-
14
-
950
Closing net book amount
3,338
49,649
114,228
212 10,221
305
26,752 2,093 206,798
Cost
3,338
82,314
226,667
1,381
27,268
3,969
60,866 2,093 407,896
Accumulated impairment losses
-
(207)
(2,113)
-
(5)
(14)
-
-
(2,339)
Accumulated depreciation
- (32,458) (110,326) (1,169) (17,042)
(3,650)
(34,114)
- (198,759)
Net book amount
3,338
49,649
114,228
212 10,221
305
26,752 2,093 206,798
Opening net book amount
3,338
49,649
114,228
212
10,221
305
26,752 2,093 206,798
Additions(2)(3)(4)
-
5,700
16,772
64
7,080
772
399
104
30,891
Change in asset retirement obligation
-
-
-
-
-
-
8
-
8
Acquisition of businesses (notes 29, 30)
1,216
5,809
7,556
51
1,377
32
-
-
16,041
Disposals
-
-
(249)
-
(560)
-
-
(41)
(850)
Assets classified as held for sale(5)
(55)
(283)
-
-
-
-
-
-
(338)
Depreciation charge
-
(7,423)
(13,985)
(99) (4,998)
(437)
(3,492)
- (30,434)
Effect of movement in exchange rates
75
693
1,330
10
572
1
28
-
2,709
Closing net book amount
4,574
54,145
125,652
238 13,692
673
23,695 2,156 224,825
Cost
4,574
94,690
250,672
1,478
36,554
4,777
61,303 2,156 456,204
Accumulated impairment losses
-
(207)
(2,113)
-
(5)
(14)
-
-
(2,339)
Accumulated depreciation
- (40,338) (122,907) (1,240) (22,857)
(4,090)
(37,608)
- (229,040)
Net book amount
4,574
54,145
125,652
238 13,692
673
23,695 2,156 224,825
1 Included in laundry equipment are assets under development in the amount of $2,019 (2023 - $651). These assets are not available for service and accordingly are not presently being depreciated.
2 Total property, plant and equipment additions are inclusive of amounts incurred in the period that are yet be paid, with amounts remaining in accounts payable and accrued liabilities of $345 (2023 - $356).
3 Additions include amounts from the Canadian Division of $20,042 (2023 - $11,060) and from the UK Division of $10,849 (2023 -$5,043).
4 Includes ROUA additions from the Canadian Division of $7,019 (2023 - $2,012), comprised of buildings of $5,105 (2023 - $0) and vehicles of $1,914 (2023 - $2,012). From the UK Division, ROUA
additions were $5,048 (2023 - $2,963), comprised of buildings of $596 (2023 - $551) and vehicles of $4,452 (2023 - $2,412). This has resulted in corresponding increases to the lease liabilities
in the amount of $7,019 (2023 - $2,012) for the Canadian Division and $5,048 (2023 - $2,963) for the UK Division.
5 Assets classified as held for sale includes an amount from the Canadian Division of $338. This is comprised of land and a building in Granby, Québec. Upon the acquisition of Villeray on No
vember 1, 2023, Granby volumes were consolidated into Villeray, resulting in the facility being put up for sale. The sale is expected to be completed in Q2 2025.
7. Property, Plant & Equipment
Year Ended, December 31, 2023
At December 31, 2023
Year Ended, December 31, 2024
At December 31, 2024
60
WE ARE DEPENDABLE.
($ Thousands of CDN dollars,
Healthcare
Hospitality
Computer
except share and per share amounts)
Relationships
Relationships
Software
Brand
Total
Opening net book amount
2
-
346
4,080
4,428
Additions
-
-
493
-
493
Acquisition of businesses (notes 27, 28)
-
4,980
-
-
4,980
Amortization charge
(2)
(493)
(130)
-
(625)
Effect of movement in exchange rates
-
-
-
130
130
Closing net book amount
-
4,487
709
4,210
9,406
Cost
19,200
27,695
1,868
4,210
52,973
Accumulated amortization
(19,200)
(23,208)
(1,159)
-
(43,567)
Net book amount
-
4,487
709
4,210
9,406
Opening net book amount
-
4,487
709
4,210
9,406
Additions
-
-
495
-
495
Acquisition of businesses (notes 29, 30)
1,800
13,149
-
2,032
16,981
Amortization charge
-
(2,992)
(253)
-
(3,245)
Effect of movement in exchange rates
-
698
-
412
1,110
Closing net book amount
1,800
15,342
951
6,654
24,747
Cost
21,000
41,542
2,363
6,654
71,559
Accumulated amortization
(19,200)
(26,200)
(1,412)
-
(46,812)
Net book amount
1,800
15,342
951
6,654
24,747
8. Intangible Assets
Year Ended, December 31, 2023
At December 31, 2023
Year Ended, December 31, 2024
At December 31, 2024
61
2024 ANNUAL REPORT
9. Goodwill
Goodwill represents the excess of the acquisition-date fair value of consideration transferred over the fair value of the
identifiable net assets acquired in a business combination. Goodwill is not amortized. Refer to Note 26 for the Corporation’s
impairment testing disclosure.
Goodwill has been allocated to the following CGUs:
($ Thousands of CDN dollars,
Québec
Canadian
UK
except share and per share amounts)
Calgary Edmonton Vancouver 2 Vancouver 1 Victoria
City Montréal 1 Montréal 2
Division
UK 1
UK 2
Division
Total
Gross amount of goodwill
8,082
4,346
3,413
2,630 3,208
-
-
- 21,679 18,100
- 18,100 39,779
Goodwill acquired (notes 27, 28)
-
-
-
-
- 5,205
5,779
-
10,984
-
-
- 10,984
Changes due to movement
-
-
-
-
-
-
-
-
-
(163)
-
(163)
(163)
in exchange rates
Balance at January 1, 2024
8,082
4,346
3,413
2,630 1,508 5,205
5,779
- 30,963 17,937
- 17,937 48,900
Goodwill acquired (notes 29, 30)
-
-
-
-
-
-
-
3,205
3,205
- 20,526 20,526 23,731
Changes due to movement
-
-
-
-
-
-
-
-
-
1,272
1,145
2,417 2,417
in exchange rates
Balance at December 31, 2024 8,082
4,346
3,413
2,630 1,508 5,205
5,779
3,205 34,168 19,209 21,671 40,880 75,048
10. Provisions
The Corporation's provision includes a current provision
of $456 (2023 - $206) to recognize restructuring costs,
and a long-term provision of $3,058 (2023 - $2,964) that is
comprised of lease provisions and obligations to restore
leased premises of its leased plants.
Management estimates the current provision based on
consultation from legal and current employment standards.
Estimates of the long-term provision, is based off informa
tion from previous asset retirement obligations, as well
as plant specific factors. Factors that could impact the
estimated obligation are labour costs, the extent of removal
work required, the number of lease extensions exercised
and the inflation rate.
A long-term provision has been recognized for the present
value of the estimated expenditure required to settle the
lease provision and to remove leasehold improvements and
installed equipment. The Corporation estimates the undis
counted, inflation adjusted cash flows required to settle
these obligations at December 31, 2024 to be $3,902 (2023
- $3,772). Management has estimated the present value of
this obligation at December 31, 2024 to be $3,058 (2023 -
$2,964) using an inflation rate of 2.55% (2023 - 2.51%) and
pre-tax weighted average risk-free interest rate of 2.92% to
3.12% (2023 - 3.05% to 3.91%) dependent upon length of the
lease term, which reflects current market assessments of
the time value of money. These obligations are expected to
be incurred over an estimated period from 2028 to 2039.
As at December 31, 2024, if actual costs were to differ by
10% from management's estimate the obligation would
be an estimated $351 (2023 - $317) higher or lower. It is
possible the estimated costs could change and changes
to these estimates could have a significant effect on the
Corporation's consolidated financial statements.
The Corporation recorded the following provision activity
during the year:
62
WE ARE DEPENDABLE.
($ Thousands of CDN dollars)
Asset Retirement Obligations
Restructuring Costs
Total
Balance, beginning of year
2,964
206
3,170
Charges against provisions
56
-
56
Adjustments
8
250
258
Changes due to movement in exchange rates
30
-
30
Balance, end of year
3,058
456
3,514
Current portion
-
456
456
Non-current portion
3,058
-
3,058
Balance, beginning of year
2,382
279
2,661
Acquisition of businesses (notes 27, 28)
316
-
316
Charges against provisions
80
-
80
Adjustments/settlement
173
(73)
100
Changes due to movement in exchange rates
13
-
13
Balance, end of year
2,964
206
3,170
Current portion
-
206
206
Non-current portion
2,964
-
2,964
For Year Ended, December 31, 2024
For Year Ended, December 31, 2023
11. Long-term Debt
($ Thousands of CDN dollars)
Prime Rate Loan(1)
At January 1, 2023
45,166
Net proceeds from debt
25,081
Closing balance at December 31, 2023
70,247
At January 1, 2024
70,247
Net proceeds from debt
53,531
Closing balance at December 31, 2024
123,778
1 The revolving credit facility is collateralized by a general security agreement, bears interest at
prime or the applicable banker’s acceptance rate, plus an interest margin dependent on certain
financial ratios, with a monthly repayment of interest only, maturing on July 31, 2027. The addi
tional interest margin can range between 0.0% to 1.75% dependent upon the calculated Funded
Debt / Credit Facility EBITDA financial ratio, with a range between 0 to 3.50x. The required
calculated Funded Debt / Credit Facility EBITDA financial ratio is subject to change based off
certain terms and conditions. As at December 31, 2024 the combined interest rate was 6.20%
(December 31, 2023 – 7.70%).
2 The syndicated revolving credit facility had drawdowns of $66,694, repayments of $12,500 and
net outflows of $663 as a result of operating activities for the year ended December 31, 2024.
(For the year ended December 31, 2023, the revolving credit facility had net outflows from op
erating activities of $25,081.
On August 31, 2023, the Corporation completed an amend
ment to its existing revolving credit facility to extend the
agreement from July 31, 2026 to July 31, 2027, as previ
ously 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 agreement consists of
a $175,000 revolving credit facility plus a $75,000 accordion.
Under the credit facility, the Corporation is required, among
other conditions, to respect certain covenants on a consoli
dated basis. The main covenants are in regard to its Funded
Debt to Credit Facility EBITDA ratio and Total Fixed Charge
Coverage ratio. Management reviews compliance with these
covenants on a quarterly basis in conjunction with filing
requirements under its credit facility. All covenants have
been met as at December 31, 2024 and December 31, 2023.
The Corporation has a revolving credit facility of up to
$175,000 plus a $75,000 accordion of which $128,800 is
utilized (including letters of credit totaling $5,022) as at
December 31, 2024. Interest payments only are due during
the term of the facility.
63
2024 ANNUAL REPORT
Drawings under the revolving credit facility are available by
way of Bankers’ Acceptances, Canadian prime rate loans,
SOFR and CORRA pounds based loans, letters of credit or
standby letters of guarantee. Drawings under the revolving
credit facility bear interest at a floating rate, plus an appli
cable margin based on certain financial performance ratios.
A general security agreement over all assets, a mortgage
against all leasehold interests and real property, insurance
policies and an assignment of material agreements have
been pledged as collateral.
The carrying value of borrowings approximate their fair
value as the debt is based on a floating rate and the impact
of discounting is not significant.
The Corporation has incurred no events of default under the
terms of its credit facility agreement.
12. Finance expense
($ Thousands of CDN dollars)
2024
2023
Interest on long-term debt
8,603
4,230
Lease interest expense
2,440
2,068
Accretion expense
56
80
Other charges, net
203
271
11,302
6,649
13. Leases
A) AMOUNTS RECOGNIZED IN STATEMENT OF FINANCIAL POSITION
Within property, plant and equipment (Note 7) in the Statement of Financial Position, the following amounts related to right
of use assets, lease liabilities have been separately presented:
($ Thousands of CDN dollars, except share and per share amounts)
December 31, 2024
December 31, 2023
Right-of-use assets
Buildings
36,282
36,267
Equipment
11,605
9,878
47,887
46,145
Lease liabilities
Buildings
42,953
43,079
Equipment
12,184
10,219
Total lease liabilities
55,137
53,298
Less, current portion of lease liabilities
(12,237)
(12,023)
Long term lease liabilities
42,900
41,275
Additions to the right-of-use assets during the financial year
Acquisition of businesses (notes 27, 28, 29)
57
3,882
Buildings
5,701
551
Equipment
6,366
4,424
12,124
8,857
64
WE ARE DEPENDABLE.
B) AMOUNTS RECOGNIZED IN THE STATEMENT OF EARNINGS
The statement of earnings reflects the following amounts relating to leases:
($ Thousands of CDN dollars, except share and per share amounts)
December 31, 2024
December 31, 2023
Depreciation charge of right-of-use assets
Buildings
6,143
5,492
Equipment
4,558
4,181
10,701
9,673
Interest expense (included in finance expense)
2,440
2,068
Expense relating to leases of low-value assets that are not shown
11
15
above as short-term leases (included in administrative expenses)
The total cash outflow for leases
13,099
11,474
C) RECONCILIATION OF EXPECTED LEASE LIABILITIES
($ Thousands of CDN dollars, except share and per share amounts)
December 31, 2024
December 31, 2023
Lease liabilities
Balance at January 1,
53,298
53,657
Right-of-use asset additions
12,124
8,857
Right-of-use asset disposals
(574)
(213)
Interest expense
2,440
2,068
Cash payment of lease payments
(13,088)
(11,459)
Effect of movement in exchange rates
937
388
Total lease liabilities
55,137
53,298
65
2024 ANNUAL REPORT
14. Income Taxes
A reconciliation of the expected income tax expense to the actual income tax expense is as follows:
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Current tax:
Current tax expense on profits for the year
3,762
4,002
Total current tax expense
3,762
4,002
Deferred tax:
Origination and reversal of temporary differences
1,527
1,336
Impact of substantively enacted rates and other
42
(82)
Total deferred tax expense
1,569
1,254
The tax on the Corporation’s earnings differs from the theoretical amount that would arise using the weighted average tax
rate applicable to earnings of the consolidated entities as follows:
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Earnings before income taxes
24,039
22,863
Earnings before income tax multiplied by statutory rate of 25.52% (2023 - 25.46%)
6,135
5,821
Effects of:
Non-taxable items
(769)
(451)
Difference between Canadian and foreign tax rates
(476)
(217)
Impact of substantively enacted rates and other
441
103
Income tax expense
5,331
5,256
The analysis of the deferred tax assets and deferred tax liabilities is as follows:
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Deferred tax assets:
Deferred tax asset to be recovered after more than 12 months
(17,753)
(15,596)
(17,753)
(15,596)
Deferred tax liabilities:
Deferred tax liability to be recovered after more than 12 months
32,395
28,091
Deferred tax liability to be recovered within 12 months
6,040
5,792
38,435
33,883
Deferred tax liabilities, net
20,682
18,287
66
WE ARE DEPENDABLE.
The movement of deferred income tax assets and liabilities during the year, without taking into consideration the offsetting
of balances within the same tax jurisdictions, is as follows:
($ Thousands of CDN dollars, except share and per share amounts)
Lease Liabilities
Provisions
Offering Costs & Other
Total
Deferred tax assets:
At January 1, 2023
(13,575)
(502)
(2,827)
(16,904)
Acquisition of businesses (notes 27, 28)
-
-
(169)
(169)
Charged (credited) to the statement of earnings
164
(145)
1,643
1,662
Related to movements in exchange rates
(102)
-
(83)
(185)
At December 31, 2023
(13,513)
(647)
(1,436)
(15,596)
Acquisition of businesses (notes 29, 30)
-
-
(1,591)
(1,591)
(Credited) charged to the statement of earnings
(254)
(24)
115
(163)
Related to movements in exchange rates
(230)
-
(173)
(403)
At December 31, 2024
(13,997)
(671)
(3,085)
(17,753)
Linen in
Property, Plant
Intangible Assets
LTIP &
($ Thousands of CDN dollars, except share and per share amounts)
Service
& Equipment
& Goodwill
Other
Total
Deferred tax liabilities:
At January 1, 2023
5,450
24,347
929
332
31,058
Acquisition of businesses (notes 27, 28)
194
1,638
1,232
-
3,064
Charged (credited) to the statement of earnings
148
(651)
86
9
(408)
Related to movements in exchange rates
-
137
32
-
169
At December 31, 2023
5,792
25,471
2,279
341
33,883
Acquisition of businesses (notes 29, 30)
51
1,959
444
(20)
2,434
Charged (credited) to the statement of earnings
189
1,657
(124)
10
1,732
Related to movements in exchange rates
-
291
75
20
386
At December 31, 2024
6,032
29,378
2,674
351
38,435
The Company has $1,936 of UK trading loss carry-forwards, the benefit of which has been reflected in these financial
statements. For tax purposes, these losses are deductible against future UK profits. These losses do not expire.
67
2024 ANNUAL REPORT
15. Contingencies &
Commitments
A) CONTINGENCIES
The Corporation has standby letters of credit issued as
part of normal business operations in the amount of $5,022
(December 31, 2023 – $1,869) which will remain outstanding
for an indefinite period of time.
Grievances for unspecified damages were lodged against
the Corporation in relation to labor matters. The Corporation
has disclaimed liability and is defending the actions. It is
not practical to estimate the potential effect of these griev
ances, but legal advice indicates that it is not probable that
a significant liability will arise.
B) COMMITMENTS
Utility Commitments
The Corporation was committed to estimated natural gas
and electricity commitments for the next five calendar
years and thereafter as follows:
Utility commitments ($ Thousands of CDN dollars)
2025
11,714
2026
5,512
2027
-
2028
-
2029
-
Subsequent
-
17,226
Linen Purchase Commitments
At December 31, 2024, the Corporation was committed
to linen expenditure obligations in the amount of $8,111
(December 31, 2023 – $9,434) to be incurred within the
next year.
Property, Plant & Equipment Commitments
At December 31, 2024, the Corporation was committed to
capital expenditure obligations in the amount of $4,426
(December 31, 2023 – $9,396) to be incurred within the
next year.
Trust Funds on Deposit
The Corporation maintains funds in trust for a customer
to facilitate both parties in achieving their shared objec
tives. These funds are not available for the Corporation’s
general operating activities and, as such, have not been
recorded in the accompanying Consolidated Statements
of Financial Position. As at December 31, 2024, the
Corporation held trust funds on deposit in the amount of
$1,116 (2023 – $966).
16. Share Capital
A) AUTHORIZED
The Corporation is authorized to issue an unlimited number of common shares and such number of shares of one class
designated as preferred shares which number shall not exceed 1/3 of the common shares issued and outstanding from
time to time.
B) ISSUED
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Balance, beginning of year
10,635,473
10,773,190
Common shares issued under LTI
56,505
61,345
Common shares repurchased
(113,614)
(199,062)
Balance, end of year
10,578,364
10,635,473
Unvested common shares held in trust for LTI
77,325
76,900
68
WE ARE DEPENDABLE.
C) NORMAL COURSE ISSUER BID
On May 15, 2023, the Corporation announced its intention to
proceed with a normal course issuer bid (NCIB) to purchase
up to 881,481 of its common shares (“Shares”) through
the TSX and / or alternative Canadian trading systems,
representing approximately 10% of the public float of
8,814,816 shares as at May 9, 2023, during the twelve-month
period commencing May 18, 2023 and ending May 17, 2024.
On May 16, 2024, the Corporation announced the renewal
of its normal course issuer bid (NCIB) to purchase up to
754,247 of its common shares (“Shares”) through the TSX
and / or alternative Canadian trading systems, representing
approximately 10% of the public float of 7,542,474 shares at
May 7, 2024 during the twelve-month period commencing
May 21, 2024 and ending May 20, 2025.
For the year ended December 31, 2024, the Corporation
repurchased and cancelled 113,614 common shares (2023
- 199,062) for $3,950 (2023 - $6,496) under the NCIB, net
of transaction costs of $1 which were recorded in share
capital. The average share price was $34.77, with prices
ranging from $31.93 to $36.80.
To date, the Corporation has repurchased and cancelled a
total of 312,676 common shares for $10,446 under the NCIB.
No financial liability existed as at December 31, 2024 (2023 -
$3,967) relating to automatic share repurchases during the
blackout period.
17. Earnings Per Share
A) BASIC
Basic earnings per share is calculated by dividing the net earnings attributable to equity holders of the Corporation by the
weighted average number of ordinary shares in issue during the year.
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Net earnings
18,708
17,607
Weighted average number of shares outstanding (thousands)
10,483
10,664
Net earnings per share, basic
1.78
1.65
The basic net earnings per share calculation excludes the unvested Common shares held by the LTIP Account.
B) DILUTED
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume conver
sion of all dilutive potential ordinary shares.
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Basic weighted average shares for the year
10,483,395
10,663,949
Dilutive effect of LTI shares
79,126
69,307
Diluted weighted average shares for the year
10,562,521
10,733,256
Net earnings
18,708
17,607
Weighted average number of shares outstanding (thousands)
10,563
10,733
Net earnings per share, diluted
1.77
1.64
69
2024 ANNUAL REPORT
19. Dividends to Shareholders
During the year ended December 31, 2024, the Corporation declared total dividends to shareholders of $12,694 or $1.200
per share (2023 - $12,896 or $1.200 per share).
The Corporation’s policy is to pay dividends to Shareholders of its available cash to the maximum extent possible consistent
with good business practice considering requirements for capital expenditures, working capital, growth capital and other
reserves considered advisable by the Directors of the Corporation. All such dividends are discretionary. Dividends are
declared payable each month to the Shareholders on the last business day of each month and are paid by the 15th day of
the following month.
20. Net Change in Non-Cash Working Capital Items
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Accounts receivable
(1,760)
(9,978)
Linen in service
(319)
(2,616)
Prepaid expenses and deposits
873
(632)
Accounts payable and other liabilities(1)
(731)
3,110
Income taxes payable / receivable
(2,469)
4,003
(4,406)
(6,113)
1 Accounts payable and other liabilities, include the net change of accounts payable, accrued liabilities, net change in the current provision (note 10) related to restructure costs for 2024 - $250 and in
2023 - ($73), but exclude the net change in non-cash amounts related to the acquisition of property, plant and equipment that have been committed to and paid for during 2024 ($11) and 2023 ($341).
Years Ended, December 31,
18. Long-term Incentive Plan
An account was formed to hold equity grants issued under
the terms of the LTI on behalf of the participants (the “LTIP
Account”) and under certain circumstances the Corporation
may be the beneficiary of forfeited Common shares held by
the LTIP Account. The Corporation has control over the LTIP
Account as it is exposed, or has rights, to variable returns
and has the ability to affect those returns through its power
2024
2024
2023
2023
($ Thousands of CDN dollars)
Unvested
Vested
Unvested
Vested
Balance, beginning of year
76,900
712,149
64,552
663,152
Issued during year
37,598
18,907
41,680
19,665
Vested during year
(37,173)
37,173
(29,332)
29,332
Balance, end of year
77,325
768,229
76,900
712,149
The cost of the 77,325 (2023 – 76,900) unvested Common shares held by the LTIP Account at December 31, 2024 was $0 (2023 - $0).
over the LTIP Account. Therefore, the Corporation has
consolidated the LTIP Account. Compensation expense is
recorded by the Corporation in the period earned. Dividends
paid by the Corporation with respect to unvested Common
shares held by the LTIP Account are paid to LTI participants.
Unvested Common shares held by the LTIP Account are
shown as a reduction of shareholders’ equity.
70
WE ARE DEPENDABLE.
21. Financial Instruments
A) FAIR VALUE
The Corporation’s financial instruments at December
31, 2024 and 2023 consist of cash, accounts receiv
able, accounts payable and accrued liabilities, lease
liabilities, dividends payable to shareholders, and long
term debt. The carrying value of accounts receivable,
accounts payable and accrued liabilities, lease liabil
ities, and dividends payable to shareholders, approx
imate fair value due to the immediate or short-term
maturity of these financial instruments. The fair value
of the Corporation's interest-bearing debt approximates
the respective carrying amount due to the floating rate
nature of the debt.
B) FINANCIAL RISK MANAGEMENT
The Corporation’s activities are exposed to a variety of
financial risks: price risk, credit risk and liquidity risk. The
Corporation’s overall risk management program focuses
on the unpredictability of financial and economic markets
and seeks to minimize potential adverse effects on the
Corporation’s financial performance. Risk management is
carried out by financial management in conjunction with
overall corporate governance.
C) PRICE RISK
Currency Risk
Foreign currency risk arises from the fluctuations in
foreign exchange rates and the degree of volatility of
these rates relative to the Canadian dollar.
The Corporation’s operations in Canada are not signifi
cantly exposed to foreign currency risk as all revenues
are received in Canadian dollars and minimal expenses
are incurred in foreign currencies.
The Corporation’s operations in the UK transacts in
Sterling pounds (£), with minimal revenue and expenses
that are incurred in other foreign currencies. The
Corporation is sensitive to foreign exchange risk arising
from the translation of the financial statements of subsid
iaries with a functional currency other than the Canadian
dollar impacting other comprehensive income (loss).
For large capital expenditure commitments denominated
in a foreign currency, the Corporation will enter into
foreign exchange forward contracts if considered prudent
to mitigate this risk.
Based on financial instrument balances as at December
31, 2024, a strengthening or weakening of $0.01 of the
Canadian dollar to the U.S. dollar with all other variables
held constant could have a favorable or unfavorable
impact of approximately $6, respectively, on net earnings.
Based on financial instrument balances as at December
31, 2024, a strengthening or weakening of $0.01 of the
Canadian dollar to the Sterling pound (£), with all other
variables held constant could have an unfavorable or
favorable impact of approximately $132, respectively, on
other comprehensive loss.
Interest Rate Risk
The Corporation is subject to interest rate risk as its credit
facility bears interest at rates that depend on certain
financial ratios of the Corporation and vary in accordance
with market interest rates. Based on the credit facility at
year end, the sensitivity to a 100 basis point movement in
interest rates would result in an impact of $1,238 (2023 -
$702) to net earnings.
Other Price Risk
The Corporation’s exposure to other price risk is limited
since there are no significant financial instruments which
fluctuate as a result of changes in market prices.
71
2024 ANNUAL REPORT
D) CREDIT RISK
The Corporation has financial assets that are subject to
the expected credit loss model. The Corporation’s financial
assets that are exposed to credit risk consist of cash and
accounts receivable. The Corporation, in the normal course
of business, is exposed to credit risk from its customers.
Management believes that the risks associated with concen
trations of credit risk with respect to accounts receivable
are limited due to the generally short payment terms, and
the nature of the customers, which are primarily publicly
funded health care entities. The credit risk associated
with cash is minimized by ensuring these financial assets
are held with Canadian chartered banks and Standard
Chartered Bank United Kingdom.
Cash
While cash is also subject to the impairment require
ments of IFRS 9, there was no identified impairment.
Accounts Receivable
The Corporation applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables
have been grouped based on shared credit risk character
istics and the days past due. The expected loss rates are
based on the payment profiles of sales over a period of
60 months before December 31, 2024 or January 1, 2024
respectively and the corresponding historical credit losses
experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking infor
mation on macroeconomic factors affecting the ability of
the customers to settle the receivables. The Corporation
has identified the GDP and the unemployment rate of the
countries in which it provides services to be the most
relevant factors, and accordingly adjusts the historical
loss rates based on expected changes in these factors.
On that basis, the loss allowance as at December 31, 2024
and 2023 was determined as follows for trade receivables:
($ Thousands of CDN dollars, except share and per share amounts)
December 31, 2024
Gross
Allowance
Net
Current
40,014
-
40,014
1 to 60 days
11,476
-
11,476
61 to 90 days
3,968
-
3,968
Greater than 90 days
1,216
254
962
56,674
254
56,420
December 31, 2023
Gross
Allowance
Net
Current
34,638
-
34,638
1 to 60 days
11,731
-
11,731
61 to 90 days
3,598
-
3,598
Greater than 90 days
517
178
339
50,484
178
50,306
72
WE ARE DEPENDABLE.
While the Corporation evaluates a customer’s credit worthiness before credit is extended, provisions for potential credit
losses are also maintained. The change in allowance for doubtful accounts was as follows:
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Opening loss allowance at January 1,
178
144
Adjustments made during the year
126
16
Acquisition of business
-
29
Write-offs
(53)
(12)
Effect of movements in exchange rates
3
1
Balance, end of year
254
178
Years Ended, December 31,
The Corporation has a syndicated credit facility with a
maturity date of March 25, 2027 (Note 11). The degree to
which the Corporation is leveraged may reduce its ability to
obtain additional financing for working capital and to finance
investments to maintain and grow the current levels of cash
flows from operations. The Corporation may be unable to
extend the maturity date of the credit facility.
The Corporation’s capital structure includes working capital,
a committed revolving credit facility and share capital. The
Corporation continuously monitors actual and forecast cash
flows and monitors the availability on our committed credit
facility to ensure sufficient liquidity is available.
To reduce liquidity risk, management has historically
renewed the terms of the credit facility in advance of its
maturity dates and the Corporation has maintained financial
ratios that management believes are conservative compared
to financial covenants applicable to the credit facility. A
significant portion of the available facility remains undrawn.
Management measures liquidity risk through comparisons
of current financial ratios with financial covenants contained
in the credit facility.
22. Capital Management
The Corporation’s primary objectives when managing its
capital structure are as follows:
· maintain financial flexibility and availability of capital in
order to meet financial obligations, provide dividends,
execute growth plans, and to continue growth through
business acquisitions;
· manage the Corporation’s activities in a responsible
way in order to provide an adequate return for its share
holders, while taking a conservative approach towards
financial leverage and management of financial risk; and
· comply with financial covenants required under the
credit facility.
The Corporation pays a dividend which reduces its ability to
internally finance growth and expansion. However, the avail
ability of the Corporation’s revolving line of credit provides
sufficient access to capital to allow K-Bro to take advantage
of acquisition opportunities. The merits of the dividend are
periodically evaluated by the Board.
E) LIQUIDITY RISK
The Corporation’s accounts payable, dividend payable and other liabilities are due within one year.
Payments due under contractual obligations on an undiscounted basis for the next five years and thereafter are as follows:
Payments Due by Year
($ Thousands of CDN dollars)
Total
2025
2026 to 2027
2028 to 2029
Subsequent
Long-term debt
123,778
-
123,778
-
-
Interest on long-term debt
17,267
7,674
9,593
-
-
Lease liabilities
63,876
13,088
21,061
15,513
14,214
Utility commitments
17,226
11,714
5,512
-
-
Linen purchase obligations
8,111
8,111
-
-
-
Property, plant and equipment commitments
4,426
4,426
-
-
-
73
2024 ANNUAL REPORT
The Corporation’s financing strategy is to maintain a flexible
structure consistent with the objectives stated above, to
respond adequately to changes in economic conditions and
to allow growth organically and through business acquisi
tions. In order to maintain and adjust its capital structure,
the Corporation may issue new shares in the market,
contract bank loans and negotiate new credit facilities.
23. Related Party Transactions
The Corporation transacts with key individuals from manage
ment and with the Board who have authority and responsibility
to plan, direct and control the activities of the Corporation.
The nature of these dealings were in the form of payments
for services rendered in their capacity as Directors (retainers
and meeting fees, including share-based payments) and as
employees of the Corporation (salaries, benefits, short-term
bonuses and share-based payments).
Key management personnel are defined as the executive
officers of the Corporation including the President and Chief
Executive Officer, Senior Vice-President, Chief Financial
Officer and one employee acting in the capacity of Managing
Director, UK.
During 2024 and 2023, remuneration to directors and key
management personnel was as follows:
($ Thousands of CDN dollars)
2024
2023
Salaries and retainer fees
1,964
1,879
Short-term bonus incentives
1,180
1,082
Post-employment benefits
70
66
Share-based payments
1,552
1,446
4,766
4,473
The Corporation incurred expenses in the normal course
of business for advisory consulting services provided by
a Director. The amounts charged are recorded at their
exchange amounts and are subject to normal trade terms.
For the year ended December 31, 2024, the Corporation
incurred such fees totaling $0 (2023– $72).
24. Expenses by Nature
($ Thousands of CDN dollars)
2024
2023
Wages and benefits
168,451
145,535
Linen
36,241
32,982
Utilities
27,878
25,124
Delivery
26,094
23,083
Materials and supplies
20,271
16,263
Repairs and maintenance
15,786
12,758
Occupancy costs
6,564
5,624
Other expenses
3,304
2,709
304,589
264,078
Years Ended, December 31,
Years Ended, December 31,
($ Thousands of CDN dollars, except share and per share amounts)
2024
2023
Long-term debt, including current portion
123,778
70,247
Issued and outstanding letters of credit
5,022
1,869
Shareholders’ equity
189,411
174,431
318,211
246,547
Less: Cash
(9,423)
(5,857)
308,788
240,690
Years Ended, December 31,
The Corporation monitors its capital structure and financing
requirements using non-GAAP financial metrics required
under its Credit Facility debt covenants, consisting of
Funded Debt to Credit Facility EBITDA ratio and Total Fixed
Charge Coverage ratio. The Funded Debt, Credit Facility
EBITDA, and Total Fixed Charge Coverage are defined
under the terms of the Credit Facility (see Note 11) and do
not have any standardized meaning prescribed under IFRS
Accounting Standards. It is therefore unlikely to be compa
rable to similar measures presented by other companies.
Debt covenant restrictions will vary due to the timing of
Material Transactions as defined under the terms of the
Credit Facility.
The Corporation's capital structure is comprised of borrow
ings under its credit facility, shareholders' equity, less cash.
74
WE ARE DEPENDABLE.
25. Segmented Information
The Chief Executive Officer (“CEO”) is the Corporation’s
chief operating decision-maker. The Chief Executive Officer
examines the Corporation’s performance and allocation of
resources both from geographic perspective and service type,
and has identified two reportable segments of its business:
1. Canadian division - provides laundry and linen services
to the healthcare and hospitality sectors through eleven
operating divisions located in Vancouver, Victoria,
Calgary, Edmonton, Regina, Toronto, Montréal, and
Québec City. Management has assessed that the
services offered and the economic characteristics
associated with these divisions are similar, and there
fore they have been aggregated into one reportable
segment which operates exclusively in Canada.
2. UK division - provides laundry and linen services
primarily to the hospitality sector, with other sectors
including healthcare, manufacturing and pharmaceu
tical, through seven sites which are located in Cupar,
Perth, Newcastle, Livingston, Coatbridge, Lillyhall
and Dumfries.
The aggregation assessment requires significant judgment
by management. Economic indicators used by management
to assess the economic characteristics are the gross margin
and the growth rate of each division.
The CEO primarily uses a measure of EBITDA to assess
the performance of the operating segments. In addition,
the CEO also receives information about the segments’
revenue, certain expenses and assets on a monthly basis.
SEGMENT REVENUE
The Corporation disaggregates revenue from contracts with
customers by geographic location and customer-type for
each of our segments, as we believe it best depicts how the
nature, amount, timing and uncertainty of our revenue and
cash flows are affected by economic factors.
Sales between segments are carried out at arm’s length and
are eliminated on consolidation. The revenue from external
parties is measured in the same manner as in the consoli
dated statements of earnings & comprehensive income.
In Edmonton and Calgary, the Corporation is the significant
supplier of laundry and linen services to the entity which
manages all major healthcare facilities in the region and is
contractually committed to July 31, 2032. In Vancouver, the
major customer is contractually committed to March 1, 2027,
and in Saskatchewan the major customer is contractually
committed to June 1, 2031. For the year ended December
31, 2024, from these three major customers the Corporation
has recorded revenue of $142,919 (2023 – $135,736), repre
senting 38.3% (2023 – 42.3%) of total revenue.
($ Thousands of CDN dollars)
2024
2023
Healthcare
189,400
50.6%
177,838
55.5%
Hospitality
75,022
20.1%
63,291
19.7%
Canadian division
264,422
70.7%
241,129
75.2%
Healthcare
6,359
1.8%
6,502
2.0%
Hospitality
102,828
27.5%
73,253
22.8%
UK division
109,187
29.3%
79,755
24.8%
Total segment revenue
373,609
100.0%
320,884
100.0%
75
2024 ANNUAL REPORT
SEGMENT NET EARNINGS & EBITDA
Segment net earnings and EBITDA are calculated consistent with the presentation in the financial statements. The net earnings
and EBITDA is allocated based on the operations of the segment, and where the earnings and costs are generated from.
($ Thousands of CDN dollars, except share and per share amounts)
Canadian Division
UK Division
Total
2024
Net earnings
9,493
9,215
18,708
EBITDA
47,951
21,069
69,020
Canadian Division
UK Division
Total
2023
Net earnings
12,584
5,023
17,607
EBITDA
44,699
12,107
56,806
2024 ($ Thousands of CDN dollars, except share and per share amounts)
Canadian Division
UK Division
Total
REVENUE
264,422
109,187
373,609
Expenses
Wages and benefits
106,130
36,062
142,192
Delivery
30,423
14,290
44,713
Linen (note 6)
23,501
12,740
36,241
Utilities
15,669
12,209
27,878
Corporate
15,919
3,260
19,179
Materials and supplies
9,504
4,295
13,799
Repairs and maintenance
12,515
3,271
15,786
Occupancy costs
4,058
2,314
6,372
Gain on settlement of contingent consideration (notes 27, 28)
(500)
-
(500)
Other (income) expense (note 31)
(748)
(323)
(1,071)
EBITDA
47,951
21,069
69,020
Depreciation of property, plant and equipment (note 7)
22,809
7,625
30,434
Amortization of intangible assets (note 8)
1,429
1,816
3,245
Finance expense (note 12)
11,302
Current income tax expense
3,762
Deferred income tax expense
1,569
Net Earnings
18,708
76
WE ARE DEPENDABLE.
SEGMENT ASSETS
Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the
operations of the segment and the physical location of the asset.
The Corporation’s cash is not considered to be a segment asset but is managed by the treasury function.
($ Thousands of CDN dollars, except share and per share amounts)
At December 31, 2024
Canadian Division
UK Division
Total
Total assets
288,773
149,377
438,150
Other:
Cash
(9)
(9,414)
(9,423)
Total segment assets
288,764
139,963
428,727
At December 31, 2023
Canadian Division
UK Division
Total
Total assets
278,983
85,733
364,716
Other:
Cash
-
(5,857)
(5,857)
Total segment assets
278,983
79,876
358,859
2023 ($ Thousands of CDN dollars, except share and per share amounts)
Canadian Division
UK Division
Total
REVENUE
241,129
79,755
320,884
Expenses
Wages and benefits
96,855
26,539
123,394
Delivery
27,771
10,977
38,748
Linen (note 6)
22,998
9,984
32,982
Utilities
15,001
10,123
25,124
Corporate
12,072
2,340
14,412
Materials and supplies
8,696
3,445
12,141
Repairs and maintenance
10,367
2,391
12,758
Occupancy costs
3,568
1,864
5,432
Gain on settlement of contingent consideration (notes 27, 28)
(945)
-
(945)
Other (income) expense (note 31)
47
(15)
32
EBITDA
44,699
12,107
56,806
Depreciation of property, plant and equipment (note 7)
20,830
5,839
26,669
Amortization of intangible assets (note 8)
625
-
625
Finance expense (note 12)
6,649
Current income tax expense
4,002
Deferred income tax expense
1,254
Net Earnings
17,607
The Canadian division net earnings includes non-cash employee share based compensation expense of $1,915 (2023 – $1,796).
77
2024 ANNUAL REPORT
26. Impairment of Assets
The Corporation performed its annual impairment assess
ment for goodwill for the Canadian division and for the
UK division as at December 31, 2024 and December 31,
2023 in accordance with its policy described in Note 2(k)
and Note 2(h). The Corporation also performed impair
ment indicator assessments where there was no goodwill
allocated to the CGU.
For both periods, the recoverable amount for the CGUs
was assessed using an earnings multiple or discounted
cash flow approach. The earnings multiple approach was
used in the case of CGUs that exhibited stable operations.
A discounted cash flow approach was used in the case of
CGUs that were recently acquired and were undergoing
significant integration related activities.
SEGMENT LIABILITIES
Segment liabilities are measured in the same way as in the financial statements. These liabilities are allocated based on
the operations of the segment. The Corporation’s borrowings are not considered to be segment liabilities but are managed
by the treasury function.
($ Thousands of CDN dollars except share and per share amounts)
At December 31, 2024
Canadian Division
UK Division
Total
Total liabilities
215,486
33,253
248,739
Other:
Long-term debt (note 11)
(123,778)
-
(123,778)
Total segment liabilities
91,708
33,253
124,961
At December 31, 2023
Canadian Division
UK Division
Total
Total liabilities
165,348
24,937
190,285
Other:
Long-term debt (note 11)
(70,247)
-
(70,247)
Total segment liabilities
95,101
24,937
120,038
Testing Methodology
The calculation of the recoverable amount was based on the following key assumptions:
Testing Methodology
Pre-tax Discount Rate
Terminal Value Growth Rate
December 31, 2024
December 31, 2024
December 31, 2024
Calgary
FVLCD
n/a
n/a
Edmonton
FVLCD
n/a
n/a
Vancouver 2
FVLCD
n/a
n/a
Vancouver 1
FVLCD
n/a
n/a
Victoria
FVLCD
n/a
n/a
Québec City
VIU
12.7%
3.0%
Montréal 1
VIU
12.2%
3.0%
Montréal 2
FVLCD
n/a
n/a
UK 1
FVLCD
n/a
n/a
UK 2
FVLCD
n/a
n/a
78
WE ARE DEPENDABLE.
Earnings multiple approach (Fair value less costs to
dispose, “FVLCD”)
For the years ended December 31, 2024 and 2023, the key
assumption utilized was the implied multiple. The implied
multiple is calculated by utilizing the average multiples of
comparable public companies. The Corporation used an
implied average forward multiple of 8.40 (2023 – 9.70) to
calculate the recoverable amounts. The implied multiple
was applied to the trailing twelve month EBITDA to deter
mine the recoverable amount of the CGU and compare it to
the carrying value of the CGU.
Discounted cash flow (Value-in-use, “VIU”)
The key assumptions used in the model reflect past experi
ence and expectations for these CGUs and those with similar
characteristics. The terminal value growth rate is based on
management's best estimate of the long-term growth rate
for its CGUs after the forecast period, considering historic
performance and future economic forecasts for the next five
years with a terminal value assigned to the fifth year based
on the Company's plans to operate the CGUs.
Conclusion
a) Based on testing performed at December 31, 2024 and
December 31, 2023, no impairment was determined to
exist.
b) The recoverable amount of each CGU is sensitive to
changes in market conditions which could result in
material changes. For the year ended December 31,
2024, where discounted cash flow testing was used, the
sensitivity of key assumptions to a reasonable change
was assessed. The Corporation does not believe there is
a reasonable change in the key assumptions that would
cause the carrying value of the CGU to exceed its recover
able amount. The table below summarizes the results of
the impact on key assumptions to a reasonable change.
Change in Pre-tax Discount
Change in Terminal Value
Recoverable Amount
Rate Increase of 1%
Growth Rate Decrease of 1%
December 31, 2023
December 31, 2023
December 31, 2023
Calgary
n/a
n/a
n/a
Edmonton
n/a
n/a
n/a
Vancouver 2
n/a
n/a
n/a
Vancouver 1
n/a
n/a
n/a
Victoria
n/a
n/a
n/a
Québec City
$23,486
-$2,715
-$2,174
Montréal 1
$18,849
-$2,600
-$2,084
Montréal 2
n/a
n/a
n/a
UK 1
n/a
n/a
n/a
UK 2
n/a
n/a
n/a
79
2024 ANNUAL REPORT
27. Business Acquisition
- Paranet
On March 1, 2023 the Corporation completed the acquisi
tion of 100% of the share capital of Buanderie Para-Net
(“Paranet”) operating as Paranet (the “Paranet Acquisition”),
a private laundry and linen services company operating in
Québec City, Québec. The Paranet Acquisition was completed
through a share purchase agreement consisting of existing
working capital, fixed assets, contracts and an employee
base. The contracts acquired are in the Québec healthcare
and hospitality sector, which complements the existing
business of the Corporation. Based on the Corporation’s
evaluation of the Paranet Acquisition and the criteria in the
identification of a business combination established in IFRS
3, the Paranet Acquisition has been accounted for using the
acquisition method, whereby the purchase consideration is
allocated to the fair values of the net assets acquired.
The Corporation financed the Paranet Acquisition and
transaction costs from existing loan facilities.
The purchase price allocated to the net assets acquired,
based on their estimated fair values, is as follows:
($ Thousands, except percentages)
Cash consideration
11,074
Contingent consideration
945
Total purchase price
12,019
The assets and liabilities recognized as a result of the
Paranet Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
1,317
Prepaid expenses and deposits
137
Linen in service
970
Accounts payable and accrued liabilities(2)
(1,552)
Lease liabilities
(1,176)
Deferred income taxes
(1,474)
Property, plant and equipment(1,2)
6,142
Intangible assets
2,450
Net identifiable assets acquired
6,814
Goodwill
5,205
Net assets acquired
12,019
1 Includes ROUA from the Canadian Division of $1,176 comprised of buildings of $964 and vehi
cles of $212
2 Includes provision of $219 for asset retirement obligation
The intangible assets acquired are made up of $2,450 for
the customer contracts along with related relationships and
customer lists. 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 is not deductible for tax purposes. As at
March 31, 2024, the purchase price allocation is no longer
provisional and has been finalized for Paranet.
A) CONTINGENT CONSIDERATION
In the event that a certain EBITDA target was achieved by
Paranet for the twelve month period ended August 31, 2023,
additional undiscounted consideration of up to $1,890 would
have been payable in cash during the fourth quarter of 2023.
While performance was in-line with expectations, the target
was not achieved; therefore, no payment was made.
During the first three quarters of 2023, the estimated fair
value of the possible payment was classified as contingent
consideration. The fair value of the contingent consider
ation was estimated by considering the probability-adjusted
future expected cash flows in regards to Paranet achieving
the target that would result in consideration being paid.
The impact of discounting these future cash flows was not
considered because the impact would be nominal. Given that
the EBITDA target was not achieved for the twelve month
period ended August 31, 2023, the contingent consider
ation amount of $945 has been derecognized and a gain on
settlement of contingent consideration was recorded in the
Consolidated Statement of Earnings and Comprehensive
Income for the twelve months ended December 31, 2023.
28. Business Acquisition
- Villeray
On November 1, 2023, the Corporation completed the
acquisition of 100% of the share capital of Buanderie
Villeray and its affiliate Buanderie La Relance (the “Villeray
Acquisition”), a private laundry and linen services company
incorporated in Canada and operating in Montréal, Québec.
The Villeray Acquisition was completed through a share
purchase agreement consisting of existing working capital,
fixed assets, customer relationships and an employee
base. Villeray operates in the hospitality and healthcare
sector, which complements the existing business of the
Corporation. As part of the transaction, the Corporation
closed its Granby facility and consolidated existing volumes
into Villeray. Based on the Corporation’s evaluation of the
Villeray Acquisition and the criteria in the identification of
a business combination established in IFRS 3, the Villeray
Acquisition has been accounted for using the acquisition
method, whereby the purchase consideration is allocated to
the fair values of the net assets acquired.
80
WE ARE DEPENDABLE.
The Corporation financed the Villeray Acquisition and trans
action costs from existing loan facilities.
The purchase price allocated to the net assets acquired,
based on their estimated fair values, is as follows:
($ Thousands, except percentages)
Cash consideration
11,204
Contingent consideration
500
Total purchase price
11,704
The assets and liabilities recognized as a result of the
Villeray Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
907
Prepaid expenses and deposits
187
Income tax receivable
69
Accounts payable and accrued liabilities(2)
(807)
Lease liabilities
(2,706)
Deferred income taxes
(1,416)
Property, plant and equipment(1,2)
7,161
Intangible assets
2,530
Net identifiable assets acquired
5,925
Goodwill
5,779
Net assets acquired
11,704
1 Includes ROUA from the Canadian Division of $2,706 related to buildings
2 Includes provision of $97 for asset retirement obligation
The intangible assets acquired are made up of $2,530
related to customer relationships. The goodwill is attrib
utable to the workforce, and the efficiencies and synergies
created between the existing business of the Corporation
and the acquired business. Goodwill is not deductible for
tax purposes.
A) CONTINGENT CONSIDERATION
In the event that a certain EBITDA target was achieved by
Villeray for the twelve month period ended October 31, 2024,
additional undiscounted consideration ranging from $500
to $1,000 would have been payable in cash during the first
quarter of 2025. At the end of September 2024, the former
owner-operator of Villeray retired from the business and
was replaced by a new Montréal General Manager. Although
ongoing employment of the former owner-operator was
not a condition required for payment of contingent consid
eration, amid the leadership transition, the Corporation
determined that the target was not achieved. Therefore, no
payment will be made.
During the first two quarters of 2024, the estimated fair
value of the possible payment was classified as contingent
consideration. The fair value of the contingent consider
ation was estimated by considering the probability-adjusted
future expected cash flows in regards to Villeray achieving
the target that would result in consideration being paid.
The impact of discounting these future cash flows was not
considered because the impact would be nominal. Given that
the EBITDA target was not achieved for the twelve month
period ended October 31, 2024, the contingent consider
ation amount of $500 has been derecognized and a gain on
settlement of contingent consideration has been recorded
in Consolidated Statement of Earnings and Comprehensive
Income for the year ended December 31, 2024.
B) ACQUISITION RELATED COSTS
For the year ended December 31, 2024, $108 in profes
sional fees associated with the Villeray Acquisition has been
included in Corporate expenses.
29. Business Acquisition
– Shortridge
On April 30, 2024 the Corporation completed the acquisition
of 100% of the share capital of Shortridge Ltd. (“Shortridge
Acquisition”), a private hospitality laundry provider based in
the North West of England, expanding K-Bro’s geographic
footprint in the UK. The Shortridge Acquisition was
completed through a share purchase agreement consisting
of existing working capital, fixed assets, contracts and an
employee base. The contracts acquired are in the hospi
tality sector in England and Scotland, which complements
the existing business of the Corporation. Based on the
Corporation’s evaluation of the Shortridge Acquisition and
the criteria in the identification of a business combination
established in IFRS 3, the Shortridge Acquisition has been
accounted for using the acquisition method, whereby the
purchase consideration is allocated to the fair values of the
net assets acquired.
At the time the financial statements were authorized
for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for the
Shortridge Acquisition. This includes the accounting for
the amounts attributable to property, plant and equipment,
intangible assets and the associated goodwill.
The Corporation financed the Shortridge Acquisition and
transaction costs from the syndicated revolving credit facility.
The preliminary purchase price allocated to the net assets
acquired, based on their estimated fair values, is as follows:
81
2024 ANNUAL REPORT
($ Thousands, except percentages)
Cash consideration
35,788
Contingent consideration
9,275
Total purchase price(1)
45,063
1 This is presented net of cash acquired. Cash acquired was $3,878.
The assets and liabilities recognized as a result of the
Shortridge Acquisition are as follows:
($ Thousands, except percentages)
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
20,526
Net assets acquired
45,063
1 Includes ROUA from the UK Division of $57 related to buildings
The 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 is not deductible for tax purposes.
A) CONTINGENT CONSIDERATION
The contingent consideration consists of amounts related to
achieving certain profitability and operational targets.
The estimated fair value of the payments has been classi
fied 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.
An amount of $7,684 was initially funded in cash on April
30, 2024 to be held in trust with a third party escrow agent
until certain conditions were met. For the contingent
consideration, it was determined that the profitability target
was met at September 30, 2024. As such, $3,415 of contin
gent consideration was released from escrow in Q4 2024. In
the event that certain operational targets are achieved by
Shortridge, the additional undiscounted consideration will
be released from escrow or paid in cash before December
31, 2025. The remaining $1,591 will be payable in cash.
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.
B) ACQUISITION RELATED COSTS
For the year ended December 31, 2024, $508 in professional
fees associated with the Shortridge Acquisition has been
included in Corporate expenses.
C) REVENUE AND PROFIT INFORMATION
The acquired business contributed revenues of $17,471
to the Corporation for the period from April 30, 2024 to
December 31, 2024. If the Acquisition had occurred on
January 1, 2024, consolidated pro-forma revenue for the
year ended December 31, 2024 would have been $379,591.
The acquired business contributed net earnings of $1,999
to the Corporation for the period from April 30, 2024 to
December 31, 2024. If the Acquisition had occurred on
January 1, 2024, consolidated pro-forma net earnings for
the year ended December 31, 2024 would have been $19,145.
30. Business Acquisition
– Buanderie C.M.
On June 21, 2024 the Corporation completed the acqui
sition of 100% of the share capital of Buanderie C.M. Inc.
(“C.M. Acquisition”), a private laundry and linen operator
located in Montréal serving the healthcare market. The
acquisition will enable K-Bro to operate with two facilities
in Montréal to service its growing healthcare and hospitality
business. Based on the Corporation’s evaluation of the C.M.
Acquisition and the criteria in the identification of a business
combination established in IFRS 3, the C.M. Acquisition has
been accounted for using the acquisition method, whereby
the purchase consideration is allocated to the fair values of
the net assets acquired.
At the time the financial statements were authorized
for issue, and due to the timing of the Acquisition, the
Corporation has not yet completed the accounting for
the C.M. Acquisition. This includes the accounting for the
amounts attributable to property, plant and equipment,
intangible assets and the associated goodwill.
The Corporation financed the C.M. Acquisition and transac
tion costs from the syndicated revolving credit facility.
82
WE ARE DEPENDABLE.
INQUIRIES@K-BROLINEN.COM
The preliminary purchase price allocated to the net assets
acquired, based on their estimated fair values, is as follows:
($ Thousands, except percentages)
Cash consideration
11,795
Total purchase price(1)
11,795
1 This is presented net of cash acquired. Cash acquired was $224.
The assets and liabilities recognized as a result of the C.M.
Acquisition are as follows:
($ Thousands, except percentages)
Net Assets Acquired:
Accounts receivable
742
Prepaid expenses and deposits
20
Linen in service
201
Accounts payable and accrued liabilities
(377)
Deferred income taxes
(851)
Property, plant and equipment
7,055
Intangible assets
1,800
Net identifiable assets acquired
8,590
Goodwill
3,205
Net assets acquired
11,795
The intangible assets acquired are made up of $1,800
related to customer relationships. The goodwill is attrib
utable to the workforce, and the efficiencies and synergies
created between the existing business of the Corporation
and the acquired business. Goodwill is not deductible for
tax purposes.
A) ACQUISITION RELATED COSTS
For the year ended December 31, 2024, $683 in professional
fees associated with the C.M. Acquisition has been included
in Corporate expenses.
B) REVENUE AND PROFIT INFORMATION
The acquired business contributed revenues of $3,967 to the
Corporation for the period from June 21, 2024 to December
31, 2024. If the Acquisition had occurred on January 1,
2024, consolidated pro-forma revenue for the year ended
December 31, 2024 would have been $377,223.
The acquired business contributed net earnings of $226 to the
Corporation for the period from June 21, 2024 to December
31, 2024. If the Acquisition had occurred on January 1, 2024,
consolidated pro-forma net earnings for the year ended
December 31, 2024 would have been $18,525.
30. Other Income
Other income for the year ended December 31, 2024
primarily relates to a reimbursement from a supplier related
to a negotiated contract settlement. For the year ended
December 31, 2024, other income was $1,071 as compared
to ($32) for the year ended December 31, 2023.
31. Subsequent Events
A) DIVIDENDS
The Corporation’s Board of Directors declared an eligible
dividend of $0.10 per Common share of the Corporation
payable on each of February 14, March 14, and April 15,
2025, to Shareholders of record on January 31, February 28,
and March 31, 2025, respectively.
Board of Directors
ELISE REES
Audit Committee Chair
FCA, FCPA, ICD.D.
MATTHEW HILLS, MBA
STEVEN MATYAS, BSC
Compensation
Committee Chair
LINDA MCCURDY, MBA
President & CEO
K-Bro Linen Systems Inc.
MICHAEL PERCY, PHD
Board Chair
Executive Officers
LINDA MCCURDY, MBA
President & CEO
SEAN CURTIS
Senior VP & COO
KRISTIE PLAQUIN, CPA, CA
Chief Financial Officer
C O R P O R A T E
I N F O R M A T I O N
TRANSFER AGENT
& REGISTRAR
TSX Trust Company
Calgary, Alberta
AUDITORS
Pricewaterhouse
Coopers LLP
Edmonton, Alberta
LEGAL COUNSEL
Stikeman Elliott
Toronto, Ontario
PRINCIPAL BANK
TD Bank
Edmonton, Alberta
STOCK EXCHANGE
LISTING
TSX: KBL
INQUIRIES@K-BROLINEN.COM
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QUÉBEC CITY
Dimitri Hamm
Directeur Général
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QUÉBEC CITY
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Directeur Général
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REGINA
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General Manager
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TORONTO
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CALGARY
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Calgary, AB T2C 4Y9
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General Manager
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Edmonton, AB T5V 1R9
HEAD OFFICE
P 01334 654033
Edenfields,
Cupar Trading Estate
Cupar, Fife, KY15 4SX
CUPAR
Joe Mcdonagh
General Manager
P 01334 655220
Prestonhall Industrial
Estate, Cupar, Fife,
KY15 4RD
PERTH
Kelly Fox
General Manager
P 01738210106
Inveralmond Industrial
Estate, Ruthvenfield
Avenue, Perth, PH1 3UF
LIVINGSTON
Alan Johnston
General Manager
P 0150 6426816
Unit 2, Gregory Road,
Kirkton Campus,
Livingston, EH54 7DR
COATBRIDGE
David Emslie
Regional Director North
P 01236 449010
18 Palacecraig Street,
Coatbridge, ML5 4RY
DUMFRIES
Susan Peat
Regional Director South
P 01387 722170
Unit 5, Lochside Industrial
Estate, Irongray Road,
Dumfries, DG2 0JE
LILLYHALL
Susan Peat
Regional Director South
P 01900 606696
Lillyhall Industrial Estate
Joseph Noble Road,
Lillyhall, Workington,
Cumbria, CA14 4JX
NEWCASTLE
Susan Peat
Regional Director South
P 0191 6053106
Unit L4, Intersect 19,
High Flatworth, Tyne
Tunnel Industrial Estate,
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UK Locations
K-BROLINEN.COM