Specialist contractor Keller (KLR) published a revised capital allocation plan alongside its FY25 result. As part of the plan, the firm raised its dividend sharply and announced a £100 million share buyback.
| Share price: £21.05 (+5.2%) | PE: 11x |
| Market cap: £1.48bn | Yield: 3.3% |
Broad-based growth
Geotechnical specialist Keller posted record results for the year to December, with total revenue up 3.4% to £3.1 billion. Growth came from all three geographic divisions, led by North America which represents around 60% of revenue.
In the US, the firm won new contracts across several sectors including large infrastructure projects and data centres. This more than offset weakness in the residential housing market and a normalisation of prices after a strong FY24.
EMEA (Europe, Middle East and Africa) revenue, which represents 28% of the group total, increased 4% on big infrastructure projects. Divisional operating profit rebounded strongly after the non-recurrence of losses on the NEOM project in Saudi Arabia.
Asia-Pacific revenue, which represents 13% of the total, increased 14.6%, with similar growth in operating profit. The group’s year-end order book was steady at £1.5 billion providing good visibility into 2026.
Financial strength
Group ROCE (return on capital employed) rose from 28.2% to 30.7%, the highest level for 17 years. After free cash generation of £176 million, FY25 net cash hit nearly £60 million, the highest in over 25 years.
Following this structural improvement in cash generation, Keller’s board has reviewed its capital allocation policy. As part of this, the dividend policy has been ‘enhanced’ with an increase in the full-year payout of over 40%.
The firm also announced a new £100 million share buyback after launching £50 million of buybacks last year. New CEO James Wroath is confident Keller’s operational improvement over the last few years is sustainable.
‘The group enters (FY26) with a high-quality order book, healthy tendering activity, strong balance sheet and clear strategic direction. The management actions which underpin Keller’s improved operational and financial performance in recent years have been embedded across the group.’
We’ve been fans of Keller and the infrastructure sector for a long time so it’s pleasing to see the firm performing well. Not only is it delivering operationally, against a mixed market backdrop, it’s in great shape financially too.
That progress has already been reflected in the share price, which is close to an all-time high. It’s now feeding into the ‘enhanced’ dividend policy which should please investors looking for more income.
In its new capital allocation framework, dividends now rank above M&A in terms of priorities. We’re still unconvinced of the merits of share buybacks, but the firm says the cash is truly surplus to requirements.
Read the press release here: https://investors.keller.com/
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