Keller, a construction company, has little debt and lots of room to expand

With a low valuation and growing profits, Keller is a geotechnical contractor that supports essential global infrastructure

As the largest specialized geotechnical contractor in the world, Keller (LSE: KLR) literally prepares the ground for large-scale construction projects. Groundwork for Zayed City, a new "downtown" neighborhood in Abu Dhabi; a tunnel at the famous Hard Rock Casino in Florida; mining the 2,700-foot First Street Tunnel in Washington, DC; construction of a drop shaft for the Thames Tideway project in London; and managing work on a renewable-energy refinery for Nestl in Singapore are just a few of the projects it has worked on.

As a result of Kellers' teams of engineers' proficiency in a variety of techniques and expertise in geotechnical theory, the company is able to provide a service known as "project design and build," in which the best option is chosen first and then constructed. Design-and-build plans account for about 40% of the 5,500 contracts that are completed annually.

Keller's extensive range of choices.

The projects listed demonstrate Keller's broad range of experience. But within each discipline, there are numerous specific technical options, and engineers select the best one for a given site and set of loadings, structural design, and ground conditions.

Make deep foundations, like Zayed City requires. These are necessary in situations where the ground is not strong enough to support the weights needed to build the structure. As a result, piles must be constructed to transfer the weight to the more durable rock or soil underneath.

Ductile iron piles, driven pre-cast or cast-in-situ piles, auger cast piles, umbrella tubes, bored piles, helical piles, or Franki piles (pressure-injected footings with enlarged bases) are the options available. After carefully evaluating the subterranean conditions and loads to be carried, Kellers engineers make the best decision.

Keller works in every industry, including power, industry, infrastructure, and commercial, institutional, and residential settings. In order to address the way buildings settle in the soil, the company was established in 1860 and developed the so-called "vibro" ground improvement method in the 1930s and compensation grouting techniques in the 1970s. Keller is currently in the FTSE 250 with a market value of 990 million. Following a management buyout, Keller was listed on the London Stock Exchange in 1994. The underlying operating profit for the previous year was 212 point 6 million, with a turnover of 2 point 9 billion.

North America accounts for 59% of the company's 2024 revenue, making it the largest market. Europe-Middle East comes in second with 28%, and Asia-Pacific (APAC) comes in third with 12. If a large project is finished early in a given fiscal year, a region's revenue can fluctuate greatly. The region's total revenue was marginally lower in 2023 than in 2022, for instance, because a significant LNG project in North America was finished early in 2023.

In contrast, APAC's revenue decreased by 2 points in 2024 as a result of the highest-ever levels of federal and state infrastructure projects in Australia, which helped to create a record increase in 2023. Overall performance is evened out when three regions are represented. With 160 locations worldwide, Keller is able to keep close ties with its clients and learn about local market trends.

Champion of dividends.

Since the company was listed in 1994, Keller has paid dividends for 31 consecutive years.

By 2024, revenue had increased by nearly half from just over 2 billion in 2017 to 2point 9 billion.

COVID caused a decline in revenue in 2020 and 2021, but it rebounded in 2022, when it was 28% higher than in 2019.

The pre-tax profit in 2024 was three times greater than that in 2022. The business turned a profit each of the aforementioned years, and in 2020 and 2021, the dividend was maintained at the same level as in 2018.

Plenty of room for expansion and minimal debt.

Early in March, the annual results through December 31, 2024, were announced, and the share price jumped 7.0 percent in response.

Revenue has increased by 4% to £20.9 billion, the order book has increased to £10.6 billion, and the underlying operating profit has increased by 22% to £226 million.

Keller share price.

At the same time, the dividend per share has increased by 10% to 49p, and earnings per share (EPS) has increased by 60% to 199p, well above analyst estimates. The debt/earnings before interest, taxes, depreciation, and amortization (Ebitda) ratio is only 0.1 percent, whereas net debt has decreased by 80% to 29.5 million.

In 2024, Keller achieved "another outstanding year, ahead of expectations, delivering improved performance across all key metrics - profits, earnings, margin, return on capital, cash conversion, and debt reduction," according to CEO Michael Speakman.

He went on: "We expect further progress in 2025, but we remain mindful of the uncertain geopolitical and macroeconomic environment in the short term given our record year-end order book of £10.6 billion across our diverse revenue streams.

Speakman continued by saying that the company is currently concentrating on increasing market share within its present geographic footprint through targeted bolt-on acquisitions as well as organic investment. The group has purchasing power due to its low debt-to-EBITDA ratio.

With a forward price/earnings (p/e) ratio of just 6.6 and a forward dividend yield of 3.6 percent, Keller's share price is currently trading at 1,380p. Recently, broker Berenberg increased its target price to 1,900p and decided Keller was a good investment.

In addition to having a track record of consistently growing revenue, Keller has more than tripled its pre-tax profit since 2022 and offers a crucial engineering service for infrastructure and other projects.

In the first quarter of 2025, the company will repurchase 25 million shares as part of a multi-year program.