K-Bro Linen Inc. Earnings & Price Target Update
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K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. 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 processors in K-Bro's industry in Canada include independent privately 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 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. The healthcare segment generates 68% of revenues, 32% is from the hospitality sector. K-Bro currently operates nine processing facilities and two distribution centres under three distinctive brands, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze, in ten Canadian cities: Québec City, Montréal, Toronto, Saskatoon, Regina, Prince Albert, Edmonton, Calgary, Vancouver and Victoria. Their head office is located in Edmonton, Alberta.
K-Bro's customers include some of the largest healthcare institutions and hospitality providers in Canada. Healthcare customers include acute care hospitals and long-term care facilities. Most of K-Bro's hospitality customers (typically >250 rooms) generate between 500,000 and 3M pounds of linen per year. Most healthcare customers generate between 500,000 pounds of linen per year for a hospital and up to 30M pounds of linen per year for a healthcare region. In addition to basic laundry services, specialty services include reusable OR pack services, resident personal clothing programs, specialty linen purchasing, various textile testing and extensive customer site-based services, including floor-to-floor distribution and linen room management.
Healthcare laundry services are comprised of general and operating room linens. The hospitality sector is mainly comprised of hotels. Both the hospital and hotels use K-Bro as a way to outsource an essential service at lower cost than handling it in house. Competition includes small, single independently owned companies, public sector central laundries and public and private sector on premise laundries. Participants in other sectors of the laundry and linen services industry, such as uniform rental companies, which own and launder uniforms worn by their customers' employees, and facilities management companies which manage public sector central laundries, typically do not offer services that significantly overlap with those offered by K‐Bro. Clients across the country include major hospitals and hotel chains that have entered into long‐term contracts, most having renewed their contracts several times.
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