K-Bro Linen Inc. (KBL) Earnings Call Transcript & Summary

Hello, and welcome to the K-Bro Annual General Meeting of Shareholders. I'd now like to introduce you to your Chairperson, Mr. Ross Smith. Ross, please go ahead.

Thank you. Ladies and gentlemen, it gives me great pleasure to welcome you to the 2020 Annual General Meeting of K-Bro Linen Inc. My name is Ross Smith, and I'm a Director and the Chair of K-Bro Linen Inc. It gives me great pleasure to welcome you to today our 2020 Annual Meeting of Shareholders. Joining me and presenting today are Linda McCurdy, President and CEO; and Kristie Plaquin, CFO. As you can see, we are holding today's meeting fully virtually as a consequence of COVID-19 pandemic. And for health and safety reasons, it is inappropriate to put the health and safety of shareholders, employees and community at risk in directing the company through this unprecedented time. The Board of Directors has great confidence in the business model of K-Bro Linen Inc. We are in the very fortunate position that we have been able to respond and adapt very quickly to the changing circumstances. We have outstanding management teams at whom I will call on a little later to address the situation. On behalf of the Board, I wish to express thanks to those shareholders who have submitted their proxies in advance of the meeting today. If you have logged in on this meeting with a control number or a user name provided to you by AST Trust Company, please be sure to vote on the resolutions put forth before the meeting today, even if you have submitted a proxy in advance. At this meeting, it is being held virtually via live audio webcast, we think it is necessary to set out a few rules for the orderly conduct of the meeting. One, questions in respect of a motion can be submitted by a registered shareholder or duly appointed proxy holder using the questions module of the virtual platform. Two, when asking a question, please indicate your name and which entity you represent, if any. Three, questions will be read aloud by the Secretary and addressed during the question period at the end of the meeting, providing the questions regarding procedural matters are directly related to motions before the meeting may be addressed during the meeting. Four, the purpose of the meeting today, voting on all matters will be conducted by a single, electronic registered shareholders, and duly appointed proxy holders will be asked to vote on each business item after the presentation and all of such business items. Only registered shareholders and duly appointed proxy holders of the corporation are permitted to participate in the voting. When you're asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to do so when the poll is open. We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions. Following the formal meeting, Linda McCurdy, President and CEO of the corporation; and Kristie Plaquin, CFO of the corporation, will give a short presentation. I now call to order the Annual General Meeting of the corporation's shareholders. With the consent of the meeting, I appoint Kristie Plaquin, the corporation's Chief Financial Officer, as Secretary of the meeting. With the consent of the meeting, I appoint [ Christy Chalsco ] and [ Nazim Nathoo ] from AST Trust, as scrutineers to report the number of common shares at this meeting and to tabulate the votes of any ballots taken at this meeting and to report thereon to the chairperson of the meeting. Ms. Plaquin, can you confirm the presence of a quorum?

Mr. Chair, I have been advised by the scrutineers that there are present by proxy, a sufficient number of persons holding a sufficient number of shares entitled to vote at the meeting to constitute a quorum. As there is a quorum present, this meeting is regularly called and properly constituted for the transaction of the business.

Thank you, Ms. Plaquin. I hereby declare that this meeting has been duly convened and properly constituted to transact the business which it was being called. Accordingly, unless there is an objection, I will dispense with the reading of the notice of meeting. I direct that a copy of the notice, with proof of mailing, to be kept by the secretary with the minutes of the meeting. The purpose of today's meeting are set out in the management information circular dated April 24, 2020, copies of which were mailed to shareholders, together with the notice of the meeting, and the form of proxy, 2 copies of the management information circular and other materials -- reading materials available on the corporation's website and under the corporation's profile on SEDAR website. Voting on behalf of the business to become -- to come before today's meeting is being conducted via poll via single electronic ballot that is now available on the web portal. Only registered shareholders and duly appointed proxy holders are able to vote or ask questions. Voting can only be done through the virtual voting platform on the webcast. [Operator Instructions] During the meeting, the polls are now open. Those who have not yet voted, we encourage you to vote now. [Operator Instructions] We will respond to questions relating to specific motions before closing the polls, and we'll save all other questions for the general question-and-answer period -- session at the end of the presentation of the company. Following the formal portion of the meeting, we will receive questions and read them out in order for everyone to be aware of the question being addressed. If we have a number of questions that are the same or very similar, we will consolidate the questions. We will endeavor to address all general questions. However, please note that due to the constraints we have, we may not be able to do so. If you have questions, we encourage you to submit them now. Questions can be submitted throughout the meeting. Finally, we would like to remind you that our answers to your questions and our presentation may contain forward-looking information. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to risks and uncertainties discussed more fully in the public disclosure filings. We will now go through each of the items on the agenda in turn. As noted earlier, to further expedite the formal part of the meeting, I will move on all motions, and no such motions will need to be seconded. I now declare the meeting is regularly called and properly constituted for the transaction of business. We now move to the formal part of today's agenda. The polls are now open for all matters of business. The first item of business is the tabling of the annual consolidated financial statements of K-Bro Linen Inc. As of December 31, 2019, and for the year then ended, together with the reports thereon of management and the auditors of the corporation, a copy of the documents was made available to all shareholders of the corporation along with the corporation's notice of meeting and information circular dated April 24, 2020. Additional copies are available for anyone wishing to [ obtain ] one. Unless there is an objection, I will dispense with the reading of the auditor's report. The annual report will be tabled at this time, but I would ask that any questions you may have arising from the annual report of financial statements be raised later when shareholders' questions are entertained. I will entertain questions with respect to financial statements of the corporation's period. We now move to the next point of today's agenda. The next matter to be acted upon is the election of 5 individuals to the Board of Directors. As per the management information circular, Mr. Matthew Hills, Mr. Steven Matyas, and Mr. Michael Percy, Ms. Linda McCurdy, and Mr. Ross Smith have been nominated as directors for the ensuing year or until their successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Each of them qualifies as a director under the provisions of the Business Corporations Act (Alberta). The motion to elect the 5 nominees is now on the floor. The act requires that the Board of Directors be elected. Proxies have been solicited for each of the 5 proposed qualified persons listed in the management information circular. The form of proxy for voting on the election of directors set out each proposed nominee separately and allows shareholders to vote for each director individually. Is there any discussion on the motion and/or any additional nominations? Thank you. As mentioned at the beginning of the meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of business, which is the appointment of the corporation's auditors, and you will be prompted to vote on the election of each proposed director after the presentation of all business items for this meeting. Unless there are any questions or discussions, I will move to the next item of business. The next item of business is the reappointment of PricewaterhouseCoopers LLP Charted Accountants, as the auditors of the corporation, for the ensuing year and to authorize the directors of the corporation to fix the remuneration of the auditors. I move and second that PricewaterhouseCoopers LLP be appointed auditors of the corporation until the next Annual Meeting of Shareholders, and the Board of Directors be authorized to fix their remuneration. The motion is now on the floor. You will be prompted to vote for the reappointment of the auditors after the presentation of all business items for this meeting. Unless there are any questions or discussions, I will move to the next item of business. As previously mentioned, voting today will be conducted by a single ballot. You will now be prompted to register your -- with respect each of today's business item for this meeting. Please register your vote by accessing the voting page. When prompted, and pressing on the for or withhold vote buttons next to the name of each proposed director and next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the corporation's auditors. Once the electronic balloting closes, the voting page will disappear, and your votes will be automatically submitted. We will now take a short pause to answer any questions that have been submitted and to permit any registered shareholders or proxy holders who has not done so to record their votes on the motions before the meeting.

Mr. Chair, I confirm there are no questions.

Thank you. Having received no questions, I will close the polls in 30 seconds. We'll wait for 30 seconds, and then I'll close the polls. [Voting]

The polls are now closed. I have now received the preliminary scrutineers' report. With respect to the election of directors, I'm advised by the scrutineers that each of the proposed nominees had been duly elected. With respect to the resolution to appoint the auditors, I am advised by the scrutineers that this resolution had been duly carried. The scrutineers will prepare the scrutineers' report following the completion of the meeting, and we will announce the results of the meeting in a press release in accordance with the policies of the TSX and to file the press release on SEDAR. Is there any other formal business to be properly brought before this meeting?

I confirm there are no further questions.

Okay. If there are no further business to be brought before this meeting, I move and seconded the formal portion of today's meeting be concluded. I will now call upon Linda McCurdy, President and CEO of the corporation; and Kristie Plaquin, CFO of the corporation, to lead a discussion on the corporation and review of our 2019 annual and first quarter 2020 results. Linda?

Thank you, Ross, and welcome, everyone, and thank you for attending our first virtual AGM. I'm very pleased to report that 2019 was another year of accomplishments and progress for K-Bro. Our continued focus on our proven business model resulted in solid financial performance, and our strategic initiatives have further enhanced our industry-leading position. Thanks to the efforts of our entire team in 2019, we achieved record revenues, increased the number of clients and locations served and positioned ourselves for further growth in new and existing markets. Having said all this, we all know much has changed since our year-end results in light of COVID-19, and I will take some time a bit later in the presentation to address this. But before we get started, I'll turn it over to Kristie for her to give you the usual caveat with regards to forward-looking information.

Thanks, Linda. This presentation contains forward-looking information within the meaning of applicable securities law. The use of any of the words: anticipate, continue, expect, may, will, project, should, believe and similar expressions suggesting future outcomes or events, are intended to identify forward-looking information. Statements regarding forward-looking information reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future performance and are based on management's estimates and assumptions that are subject to risks and uncertainties, which could cause K-Bro's actual performance and financial results in future periods to differ materially from the forward-looking information contained in this presentation. These risks and uncertainties are detailed in our publicly-filed documents. Although the forward-looking information contained in this presentation is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements regarding forward-looking information included in this presentation may be considered financial outlook for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this presentation. All forward-looking information in this presentation is qualified by these cautionary statements. Forward-looking information in this presentation is presented only as of the date made. Except as required by law, K-Bro does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Thank you, Kristie. Now flipping to Slide 5, I'll start our presentation today by giving everyone a brief overview of the industry and of our business. K-Bro is the largest health care and hospitality, laundry and linen processor in Canada. And with the acquisition of Fishers, we're now one of the largest in the U.K. 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. As you can see on Slide 6, we operate 15 facilities and 2 distribution centers. 9 facilities and 2 distribution centers are in Canada, and with the acquisition of Fishers at the end of 2017, we operate 6 facilities in the U.K., in Scotland and the northeast of England. It is this network of strategically-positioned modern facilities that enables us to provide the critical services required by our health care and hospitality customers. Our ongoing reinvestment in the latest equipment and technologies enables us to provide the highest levels of service and quality to our health care and hospitality customers. On Slide 7, you can see the continued strength of our business model. We've continued to grow our market share in the laundry and linen processing sector. When we went public in 2005, we had 4 plants in 3 provinces in Canada. Today, we have 15 plants in Canada and the U.K. Revenue has more than doubled since 2009, growing from $87 million to $252 million in 2019. This growth comes from all areas: organic growth from existing customers, greenfield new builds and acquisitions. Our vertically-integrated business model provides complete supply chain solutions to our customers at reduced operating costs and reduced capital costs versus providing the service internally. We're able to take advantage of scale by purchasing large quantities of linen at highly-competitive prices given the quantities and can spread our fixed costs -- fixed operating costs over substantially larger volumes of processed laundry. We also have deep industry experience and a reputation that spans over 65 years and create value through our operating expertise. We have conservatively managed our balance sheet with significant credit availability for initiatives, including capital expansion and acquisitions as well as to weather the unusual circumstances as those that we are currently facing. We've proven strategies for growth and have successfully integrated 7 acquisitions, built 5 new state-of-the-art plants and executed on many plant expansions in the last decade. On this slide, you can see a consolidated financial overview of K-Bro. In terms of our top line, our revenue comes from 2 key areas: the health care and hospitality sectors. Our revenue for 2019 was $252.4 million, with approximately 45% of our revenues coming from hospitality and 55% from health care. Our EBITDA before the adoption of IFRS 16 for 2019 was $38.7 million, with net earnings of $10.9 million and earnings per share of $1.03. As I mentioned, we've seen nice revenue growth over the last number of years, growing from $136 million in 2014 to $252 million for fiscal 2019. Our revenue is secured by long-term contracts. The health care business is a noncyclical essential services industry, backed by 5- to 10-year contracts, and our hospitality contracts are generally 2 to 5 years in length. As you can see on the chart on the right, roughly 57% of our revenue is from contracts that extend into 2023 and beyond. This slide speaks to the competitive landscape and the trends that we have experienced over the past decades. In addition to K-Bro, the competitive landscape includes independent privately-owned facilities, generally owner/operators with 1 or 2 facilities, public and private sector central laundries that are off-site and process for a number of member hospitals or for their own hotels and public and private sector on-premise laundries that are located on-site at the hospital or hotel. Over the past decade, we've seen an ongoing shift to outsourcing laundry and linen services. This is driven by several factors. Firstly, linen is considered noncore to a hospital's mission of patient care and a hotel's desire to provide an excellent guest experience. Significant capital and operating savings can be achieved through outsourcing as large laundry operators are able to achieve economies of scale. By outsourcing laundry, both hospitals and hotels can repatriate valuable square footage and specialization by experienced operators that use technology to manage inventories and report on linen usage, leading to better management of the entire laundry and linen supply chain are key reasons why we have seen the outsourcing trend continue. On Slide 11, you can see that both the Canadian and the U.K. markets are large with significant organic and acquisition growth opportunities in both health care and hospitality. In the Canadian market, we estimate it to be approximately $600 million, and K-Bro has approximately 30% of the market. Other private sector competitors have around 40% and the remaining is quite fragmented. 30% remains in-sourced, which represents opportunities for further growth. The U.K. market is estimated at roughly GBP 750 million, with K-Bro Fishers having a 4% market share. The remaining private sector competitors have about 64%, and 32% remains in-sourced, which our opportunities are both -- these opportunities are both in health care and hospitality, where we can gain share from these in-sourced laundries. On Slide 12, you can see our market share by country. So here in Canada, you can see that in each of our markets, we have -- each of our markets relative to the outsourced volume, we maintain a strong position relative to our competitors, our private-sector competitors. However, there also remains growth opportunities in all of our markets. In addition, as you can see, there are many provinces across Canada that continue to process their linen in-house, which we would expect as equipment ages and there are stressed provincial budgets that this will lead to further outsourcing opportunities. As we look to the U.K. market, the market share for Fishers in Scotland and the northeast of England, you can see here that we have approximately a 30% market share, while other private sector participants make up about 40%. Approximately 30% of the market remains in-sourced, and virtually all of the health care remains in-house. We see this as a real opportunity and very similar to Canada, where roughly 15 years ago, much of the Canadian health care laundry sector was in-sourced. Now if we take a look at our customers, you'll note that it consists -- our client base consists of large provincial health care authorities such as Alberta Health Services as well as individually-managed major hospitals, such as the Hospital for SickKids and Mount Sinai in Toronto. Our other health care customers include large buying groups, for example, in British Columbia, Vancouver Coastal acts as an agent for not only themselves but for Fraser Health, Provincial Health and for Providence. We're also privileged to include national hoteliers such as The Fairmont, Four Seasons, Hyatt, Hilton, Delta Marriott, as well as Starwood, who are among our many clients. In the U.K., where approximately 90% of our business is hospitality, we also service large chains such as Travelodge, Jurys Inn, Hilton and Marriott. On Slide 15, you can see that we have very high retention rates. We continue to excel at renewing our existing contracts with our valued customers. We have very high retention rates up in the high 90 percentile range and have been serving some of our major customers for many decades. The long-term nature of our contracts help us establish strong relationships and offer additional services to our customers, which further strengthens our position. As we look at our state-of-the-art facilities, we've remained focused on growth in regions where we have an existing competitive advantage or we can development -- develop one, a new one. Over the past decade, we've invested more than $250 million in our business in new plants and equipment, with a significant amount of reinvestment happening in the last 2 years. In 2017, we opened our new state-of-the-art 90,000 square foot facility in Toronto for a total investment of $37 million, including the purchase of new efficiency-enhancing equipment and leasehold costs. This new plant replaced an old, inefficient operation that was running overcapacity. This investment gives us the platform for further growth in the largest market in Canada and has enabled us to reduce our labor cost by 25%. In B.C., as the result of several major health care contract renewals and new health care contract wins, we moved forward to build a new state-of-the-art facility in Vancouver, which opened in 2018. This new facility expands current capacity as well as has enabled us to consolidate our health care business. We also upgraded and replaced equipment at our existing hospitality plant, resulting in significant operating efficiencies. The investment in our 2 Vancouver facilities was $55 million. So overall, we view 2017 and 2018 as investment years as we constructed and upgraded 3 large facilities that allows us to bid on significant amounts of additional business as well as to reduce our operating costs. The transition associated with these investments created margin pressure in 2017, 2018 and throughout the first half of 2019 as the company incurred onetime and transition costs. However, as we entered the back half of 29 (sic) [ 2019 ], we saw the gradual return of Canadian EBITDA margins to more historical rates. On Slide 17, our decade of reinvestment in state-of-the-art facilities has provided us with a network of highly-efficient operations that has helped us become the lowest-cost producer in each of our markets. As you can see in our Canadian markets, we have excess capacity for growth to aggressively pursue new profitable business, maximizing the operating leverage and improving EBITDA markets by utilizing excess capacity. On Slide 18, you'll see that the same remains true in the U.K., in Scotland and the northeast of England, where all of our plants have capacity for further growth. On Slide 19, you'll see that acquisitions have continued to play a meaningful part of our growth strategy, and I expect this to be the case going forward. We entered the Victoria, Montreal and Quebec City market through acquisition and have completed 2 acquisitions in the last year. At the end of 2017, we acquired our Fishers -- we acquired Fishers in the U.K. for a net purchase price of CAD 60 million. As I mentioned before, Fishers is the largest player in Scotland and Northern England and gives K-Bro strong foothold in the U.K. market. In Q4 of 2018, we acquired Calgary-based Linitek for $4.7 million and have consolidated that volume into our existing Calgary plant. In 2019, we acquired Deeside, an Aberdeen-based hospitality plant for $1.4 million and consolidated that volume into Fishers' existing infrastructure. Our strategy remains focused on extending our core services to new regions as well as to introduce new related services to existing and new customers. We've been successful in this strategy and have entered several new Canadian markets over the past decade. We are also introducing and have introduced sterilization services in the Vancouver market from our new facility, whereby we sterilize our operating room linen in our plant, a function that was historically done at the hospital. We do believe that additional opportunities will be made available as the result of COVID-19, where we've already seen a number of health systems convert to reusable products from disposable, and we expect there will be continuing opportunities of this nature. As we've discussed, we've reached the end of our aggressive strategic capital spending program to build new facilities and upgrade facilities that allows us to be the most cost-effective processor in our industry and to add millions of dollars of new business through our network of highly-efficient plants. We'll continue to focus on growth through acquisition, and we'll either consolidate the volume into our existing facilities or operate them independently depending on the assets acquired. As we look to our goals for the remainder of 2020, there is no doubt that there are many uncertainties. So our focus for the remainder of the year will be on managing the impact of COVID-19. As a backdrop, in response to this unprecedented situation, we very quickly acted to scale down our operations by reducing headcount, consolidating volumes into a reduced number of plants as well as streamline distribution routes. Currently, we've reduced our days of operation from 7 to 1 to 3 days in all of our Canadian hospitality plants. And as a reminder, we have 4 plants that are primarily hospitality, 3 of which are our smallest Canadian plants. In the U.K., we've temporarily closed 2 of our 4 linen processing plants. So as we progress throughout 2020, we'll be focused on continuing to manage our cost structure and profitability within the COVID-19 environment as well as preparing for the reopening of the economy and working diligently to bring these plants back in line in the most cost-effective manner. Of course, we'll continue to be focused on growing our Canadian and U.K. businesses organically as well as through acquisition as a key priority. I'll speak a little bit on the next slide about our management team. I've been with the company for more than 20 years now. Kristie, our CFO, has been with the company for over 19 years, and Sean Curtis, our Chief Operating Officer, has been with the company for almost 37 years and has been key to all aspects of the business, including business development, plant operations and development of future operating talent. In addition to the senior management team, our 9 general managers have extensive experience in the business. Many of our GMs have been with K-Bro for more than 25 years, and the combined experience of our group is roughly 230 years. Each member of this team is responsible for all elements of their respective business units from revenue growth to the bottom line. We believe we have the best operators in the business, and we're -- and I'm very proud of the entire team. In terms of our business model, some of you may be new to the story, I'll take a few minutes to explain in detail our business model and process. These pictures here are from our Edmonton plant, which has become the blueprint for all of our new builds. In any of our new builds like Regina, Toronto, Vancouver. We are achieving significant operating efficiencies from using the latest laundry technologies, including generally a 30% reduction in water, a 20% reduction in consumption of natural gas and a 30% gain in productivity. And just to step back and provide you with an overview of our business, it really is simple and easy to understand from an investor's point of view, but it is highly-specialized, automated and has significant barriers to entry, which really puts K-Bro in a strong market position. We purchased linen and manage it on behalf of our customers, we collect the soiled linen from our customers and return it to our plants for processing 365 days a year. All of our plants follow Health Canada rules and regulations and achieve the highest standards of clean linen, adhering to HLAC and TRSA's hygienically clean standards. These strict processing requirements create a barrier of entry for small processors to enter the health care market. In terms of the process, the first step in the process is to sort the linen by classification in order to wash it most efficiently and effectively. We wash the linen in tunnel washers, which are roughly 75 feet in length and are highly automated and controlled. After the wash-and-dry process, we will iron, fold and then repackage the linen for distribution based on set quotas by nursing unit or hotel demands and send it back to our customers 365 days a week. We also have a specialized operating room linen program, which services our major health care customers. Our core program is linen processing of reusable operating room linen, including surgical gowns, drapes, towels, and in some cases, sterilization of these products prior to delivery to the hospital. Our services include the assembly of operating room packs, specifically designed by the customer, for example, an open heart surgery pack may contain surgical gowns, drapes and towels in predetermined quantities and each of these packs may differ depending on the different surgery that is being performed. Moving on to Slide 27. What I believe really differentiates K-Bro from our competitors is our focus on providing value-added services to our customers and not just washing and drying the linen and dropping it off at the loading dock. Because we manage the whole linen supply chain and distribution function, we are capable of delivering extensive reporting by unit or ward, linen usage and cost to each client. We work very closely with our customers to reduce linen consumption through best practice use of our end product. It is these types of activities that build tremendous loyalty from our customers as they see us working closely with them to help them achieve their objectives. On the hospitality side of our business, we also focus on being a complete laundry and linen solution. For certain customers, we deliver the linen directly to the floors and with our acquisition of Fishers, we expect to use RFID technology that they have used to better understand linen usage and linen life. I'll now turn it over to Kristie, who will provide a financial overview starting on Slide 27.

Thanks, Linda. On the left-hand side of the slide, I'd like to highlight our steady increase in annual revenue. In 2019, we reported consolidated revenue of approximately $252 million, compared to $136 million in 2014. This represents an 85% increase on a consolidated basis since 2014. This growth has come through new contract wins, acquisitions and organic growth in existing markets and the acquisition of Fishers in 2017. For fiscal 2019, revenue increased by 5.4%. This increase was due to the acquisition of Linitek, the acquisition of the Aberdeen laundry, organic growth at existing customers and new customers secured in existing markets. On the right-hand side of the slide, for fiscal 2019, EBITDA before the adoption of IFRS 16, was $38.7 million. This represents an increase of 30.7% on a year-over-year basis from that of fiscal 2018. The increase in EBITDA relates primarily to the operating efficiencies gained in the Canadian division as we began achieving operating efficiencies in our new plants and ceased incurring onetime transition costs. Looking to Slide 28. This slide provides a snapshot of revenue and EBITDA segmentation between our Canadian and U.K. operations as well as our health care and hospitality sectors. From a revenue perspective, Canada represents approximately 75% of our revenue, and Fishers makes up the balance. From an EBITDA perspective, Canadian EBITDA for 2019 was approximately $30 million, and Fishers was approximately $9 million. We'll now discuss our Q1 2020 results. Revenue decreased in the first quarter of 2020 to $57.3 million or by 0.9% compared to the first 3 months of 2019. This decrease was primarily related to the reduction in hospitality revenue resulting from the COVID-19 pandemic, partially offset by the acquisition of the Aberdeen laundry, organic growth at existing customers and new customers secured in existing markets. Revenue remained strong until the last 3 weeks of the first quarter of 2020, with year-over-year revenue increasing 5.2% for the first 2 months of 2020. However, as of March 11, 2020, the day on which the World Health Organization declared COVID-19 outbreak to be a pandemic, COVID-19 began to have an immediate effect on the corporation, with many of the corporation's hospitality customers experiencing significantly reduced occupancies or closures. As a result, for the month of March, consolidated revenue decreased by 11.5% compared to the same period in 2019. On a consolidated basis, adjusted EBITDA would be, without the adoption of IFRS 16 and the impairment of assets in the first quarter, was $7.1 million compared to $6.8 million in the comparative period of 2019. Consolidated adjusted EBITDA margin was 12.4% in the first quarter of 2020 compared to 11.8% in the comparative period of 2019. Overall, our debt level decreased to $54.7 million from $62.5 million at December 31, 2019. At Q1 2020, we continued to have moderately low levels of leverage, with a fund-to-debt-to-EBITDA ratio of approximately 1.4x. We also have room under our existing credit facility to fund moderate levels of growth. At March 31, we had approximately $44 million in availability under our existing credit facility. As a result of COVID-19, we've also been just in discussion with our lenders with respect to a temporary covenant relief package to expand availability under our credit facility as we navigate through the pandemic. Dividends declared have remained consistent on a quarter-over-quarter basis, and we have a conservative payout ratio. Moving on to Slide 30. Our trailing 12-month payout ratio is hovering around 40%, with our most recent quarter coming in at just over 50%. Our ability to maintain and grow our dividends is made possible through increasing market share through new customer contracts, extending core services to new markets through greenfield activity and targeted acquisitions, introducing new related services, undertaking accretive strategic capital expenditures and controlling costs by entering into fixed supply contracts. We continue to evaluate the payout ratio and dividend policy in the context of COVID-19. On Slide 31, you'll note that K-Bro has performed well over the past 10 years relative to the TSX composite index, as you can see on the graph. I'll now turn it back to Linda, who will address the impact of COVID-19.

Thank you, Kristie. Well, we all know how much has changed since our year-end and first quarter results in light of COVID-19. I'll start by saying that we are highly committed to the safety of our employees, customers and communities, and we have put in place strict policies to do our part to minimize the potential spread of the virus. To date, we are in the fortunate position that all of our employees remain healthy. This is of utmost importance, and we will continue to ensure that all measures are in place to protect their safety. Just to step back, we began 2020 in a position of strength with consolidated adjusted EBITDA, without the adoption of IFRS 16 and the impairment of assets for the first 2 months of 2020, increasing $1.8 million compared to the same period of 2019, and revenues up 5.6% for the same period. However, as Kristie noted, by mid-March, we saw an immediate and rapid decline in volumes, with March revenues dropping 11.5% on a year-over-year basis. In order to address the adverse effects from COVID-19, we had to react quickly to implement plans to mitigate the effects, including consolidating operations, reducing headcount and assessing available government assistance programs. We have a highly-experienced team that has been crucial in managing the situation and in combination with our proven operating model, we'll continue to leverage our experience for the challenges ahead. I'll now make a few comments regarding April and May. We continue to see significantly lower hospitality volumes, but we also saw a drop in health care revenues in April as hospitals canceled elective surgeries and reduced occupancy rates to prepare for COVID surges. Consolidated revenue for April 2020 decreased by approximately 45%, with a decrease in consolidated health care revenue of approximately 10% and a decrease in consolidated hospitality revenue of approximately 90% compared to the same period last year, with both the Canadian and U.K. divisions seeing hospitality revenues drop by the same percent. As we entered May and now into June, we have seen some rebound of health care from a health care perspective, but it is too early to predict with any level of accuracy when we might see it return to historical levels. We do take comfort in the fact that most provinces have begun to reopen the economy, which also includes resuming elective surgeries. In terms of hospitality volumes, coming back to pre-COVID levels, that, too, is hard to predict with any level of certainty. For context, we're beginning to see some increases in hospitality volumes from that, which was seen in the second half of March and April, but volumes are still at historically low levels. So really what I'm saying here is that as far as an outlook for 2020, it's really hard for us to predict what it looks like with any degree of certainty. However, we are seeing meaningful increases in health care and the start of a recovery in hospitality. Despite the impact on hospitality revenues, we continue to generate free cash flow and have sufficient liquidity to weather the storm with $45 million of unused debt capacity. Overall, irrespective of COVID, we are confident in the strength of our business model. I'd like to point out some of the key investment highlights: we have long-term relationships with all of our customers and a very high retention rate up into the high 90s; we have deep industry experience and reputation that spans over a 50-year history; we have multiyear contracts, with large portion of our health care and hospitality customers -- sorry, under long-term contract; we have a very conservative financial position and credit profile, with significant credit availability to manage the current uncertain times and for various initiatives, including acquisitions; and we have a network of state of the art processing facilities in our major health care markets that will enable us to be the low-cost producer and add millions of dollars of additional revenue to profitably grow and increase margins. I'd like to thank everyone for attending today, and I'd like to open it up for any questions.

So at this point, Linda, we have no questions.

On behalf of management, our Board of Directors, our employees, I would like to take the opportunity to thank everyone for attending the meeting today. I would like to thank all our shareholders for their commitment and continued support. We look forward to your attendance again next year. Thank you. Meeting is now terminated.