K-Bro Linen (TSE:KBL) executives said the company delivered record results in 2025, citing acquisition-driven expansion in the U.K., steady demand in healthcare and hospitality, and margin benefits from efficiency initiatives. Management also discussed integration progress following the Star Mayan acquisition and provided early commentary on 2026 cost and cash flow expectations.
Record 2025 results and mix shift toward healthcare
President and CEO Linda McCurdy said 2025 produced “record results,” with revenue of CAD 507 million and adjusted EBITDA of CAD 99 million. The fourth quarter marked the company’s “seventh consecutive quarter of record results” and included “early contributions” from Star Mayan, which K-Bro acquired in June 2025.
For 2025, management said revenue increased 36% versus 2024, with healthcare revenue up 41% and hospitality revenue up 30%. Healthcare represented about 58% of consolidated revenue, up from 53% in 2024, driven mainly by Star Mayan and the annualization of CM.
Financial performance: EBITDA growth, margin drivers, and net income detail
CFO Kristie Plaquin reported consolidated revenue of CAD 506.8 million for the year ended Dec. 31, 2025, up from CAD 373.6 million in 2024. She attributed the increase primarily to acquisitions (Star Mayan in 2025 and Shortridge and CM in 2024) and price increases.
Adjusted EBITDA increased to CAD 98.7 million, up 36.9% from CAD 72.1 million in 2024. Adjusted EBITDA margin rose slightly to 19.5% from 19.3%. Plaquin said margin gains were driven largely by labor efficiencies, the elimination of the Canadian carbon tax in 2025, and lower U.K. gas costs, partly offset by Star Mayan’s lower margin profile.
Reported EBITDA increased to CAD 90.9 million from CAD 69 million, while EBITDA margin declined to 17.9% from 18.5%, reflecting Star Mayan’s lower margins and adjusting items tied to the transaction and transition costs.
- Canada: Adjusted EBITDA margin increased to 20.6% (from 19.1%), with EBITDA margin rising to 19.5% (from 18.1%), aided by labor efficiencies and the removal of the carbon tax.
- U.K.: Adjusted EBITDA margin decreased to 18.1% (from 19.8%). Reported EBITDA margin fell to 15.9% (from 19.3%), as Star Mayan’s margin profile and transition/transaction adjusting items weighed on results.
Plaquin said adjusted net earnings rose to CAD 30.4 million from CAD 21.7 million. However, net earnings (without adjusting items) decreased to CAD 18.0 million from CAD 18.7 million, primarily due to higher interest expense from acquisition-related borrowing, increased amortization and depreciation tied to acquired assets, and the year’s adjusting items.
Costs, cash flow, and balance sheet position
Plaquin reviewed key cost lines and noted several year-over-year changes were influenced by Star Mayan’s cost structure. She said wages and benefits rose to CAD 196.2 million from CAD 142.2 million, representing 38.7% of revenue (up 0.6 percentage points). Utilities increased to CAD 32.2 million from CAD 27.9 million, but utilities as a percentage of revenue declined to 6.4%, aided by lower U.K. gas costs and the elimination of the Canadian carbon tax in Q2 2025.
Distributable cash flow in the fourth quarter was CAD 13.5 million, and the payout ratio was “around 20%,” Plaquin said. The company paid CAD 0.30 per share in dividends during the quarter, totaling CAD 3.9 million.
K-Bro ended 2025 with net working capital of CAD 90.3 million, up from CAD 54.1 million a year earlier, largely reflecting the Star Mayan acquisition and timing-related working capital movements. Plaquin also highlighted available liquidity on the company’s credit facilities, including a CAD 175 million operating line and a CAD 134 million amortizing term loan, plus a CAD 50 million accordion feature for growth.
At year-end, K-Bro had about CAD 66 million undrawn on its operating line (excluding the accordion). Plaquin said this equated to a pro forma funded debt-to-EBITDA ratio (excluding leases) of about 2.6x. Total debt net of cash increased to CAD 214.2 million from CAD 114.4 million, primarily tied to financing the Star Mayan acquisition.
Integration, 2026 outlook, and key Q&A themes
McCurdy described 2025 as “transformational” as K-Bro expanded its national presence in the U.K. She said the company’s transition team is evaluating cost synergies, operational efficiencies, and platform optimizations, with expected run-rate synergies targeted over a 24-month period. By the end of 2025, management estimated it had achieved about 25% of anticipated synergies.
On margins, management said it expects combined adjusted EBITDA margins to remain in line with “seasonally adjusted combined historical margins,” while noting U.K. adjusted EBITDA margins will be lower than historical levels due to Star Mayan’s lower margin profile.
During Q&A, executives addressed several topics:
- Energy costs and hedging: Plaquin said K-Bro is hedged about 60% on Canadian natural gas, with hedges rolling off over the next 12 to 36 months, and 100% hedged in the U.K. through the end of fiscal 2026. If U.K. hedges were renewed at current higher rates, management estimated a margin impact of about 1% to consolidated margins. McCurdy added that diesel is a smaller input cost relative to natural gas and electricity.
- Labor conditions: McCurdy said labor conditions have been “very constructive” in both geographies, and the company feels good about staffing ahead of the seasonal pickup around Easter. In Alberta, she said it is “early days” regarding any oil-price-driven tightening and K-Bro has not yet seen impacts.
- Hospitality demand: McCurdy said the company is not seeing warning signs in Canada from hotel partners and has not seen concerning signals in the U.K. either, noting Easter trends will be an important indicator.
- U.K. organic growth: McCurdy discussed guidance of mid-single-digit growth in the U.K., split between healthcare and hospitality and between organic growth and price increases, while Plaquin added that underlying organic growth in the U.K. in Q4 was “low single digit,” with most growth coming from Star Mayan.
- Capex and automation/AI: McCurdy said 2026 capex is expected to be about CAD 20 million, roughly half maintenance and half growth/strategic, with limited near-term emphasis on robotics due to returns and facility space needs. She said the company is in early stages of evaluating AI applications in back-office functions.
- Free cash flow and leverage: Plaquin said K-Bro expects about CAD 40 million of free cash generation in 2026 before dividends, which management suggested could support leverage moving to the “low twos.” McCurdy said the company would remain focused on growth opportunities and could revisit its normal course issuer bid (NCIB) depending on conditions.
McCurdy closed the call by reiterating confidence in K-Bro’s outlook in both Canada and the U.K., while emphasizing continued focus on integration and operational improvements.
About K-Bro Linen (TSE:KBL)
K-Bro Linen Inc is a healthcare and hospitality laundry and linen processor in Canada. It operates in major cities across Canada, and has two distribution centers, providing management services and laundry processing of hospitality, healthcare, and specialty linens. The company provides vital products and services that help people heal, travel, live, and play. It helps hospitals and extended care centers care for the young, old, and vulnerable in environmentally responsible ways. It operates through two divisions, which are the Canadian division and the United Kingdom division.
