K-Bro Linen Inc. is increasing its monthly dividend 4.5 per cent, the company said Monday, the same day it announced a 10-year linen supply and services contract with Alberta Health Services.
“The contract encompasses a comprehensive linen supply and service program covering general, operating room and specialty linens as well as on-site services at certain facilities,” K-Bro said in a release.
The value of the contract, which begins April 1, 2013, and is renewable for an additional five years at AHS’ option, was not disclosed.
Concurrently with the signing of a services agreement with AHS, K-Bro has entered into a long-term lease for the development of a more efficient production plant in Edmonton.
“The expected costs of commissioning a new facility are expected to range from $20-million to $25-million, including the addition of new efficiency enhancing equipment, with immediate returns from reduced labour, lower energy consumption and other work-flow improvements,” K-Bro said.
“Management believes that efficiencies arising from this capital project will directly offset the price concessions made under the terms of the new AHS contract, as well as additional carrying costs of any associated debt,” the statement said.
Alberta Health Services is one of the largest integrated health providers in Canada, providing complete health services to 3.7 million Alberta residents through 400 facilities throughout the province.
The new dividend payout will be just below 9.6 cents per share of $1.15 per year, with the first increase dividend to be paid June 15 to shareholders of record on May 31.
K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada, providing a range of linen services to health-care institutions, hotels and other commercial accounts. It operates eight processing facilities under three distinctive brands – K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze – in Quebec City, Montreal, Toronto, Edmonton, Calgary, Vancouver and Victoria.