Shares round-up: reasons to be cheerful at Keller and Intertek

A forecast-beating performance by Keller Group (LSE:KLR) and the 40% dividend increase of “high-growth cash compounder” Intertek today provided some cheer in a sea of FTSE 350 red.

The results bounce for Keller shares reignited the seasonal form that made the ground engineer one of the inclusions in the 2024-25 Consistent edition of Wild’s Winter Portfolio.

It boasts a 10-year average return of 20.9% between November and the end of April, but having started the current period at a record price it is in danger of missing out this time.

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Hopes of a late fightback were boosted today when the FTSE 250-listed company reported a record year-end order book of £1.6 billion alongside “outstanding” results that surpassed the all-time highs set in 2023.

Keller has an unbroken three-decade record of dividend payments, even through economic downturns that have included the global financial crisis and the pandemic.

In 2023, the board rebased the full-year dividend to 45.2p, a 20% increase on 2022 following a step change in profitability since the launch of its strategy in 2019.

Today it recommended a final dividend of 33.1p for payment on 20 June, increasing the total for the year by 10% to 49.7p and leading to compound annual growth of 9% since flotation in 1994.

Keller also announced its intention to launch a multi-year share buyback programme, with an initial tranche of £25 million in the first quarter of 2025.

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The strategy launched in 2019 rationalised the geographic and product portfolio, while it has more recently focused on improving project execution across the business.

This has led to a more consistent performance, better operating margin and higher levels of cash flow that have allowed the group to grow earnings and de-lever the balance sheet.

Pre-tax profits today beat forecasts by 6% after they increased 25% to £191 million. In its largest territory of North America, revenues rose 4% to £1.8 billion and operating profit by 16.1% to £190 million.

Whilst mindful of the economic and geopolitical environment, Keller anticipates further progress in 2025. It adds that it is set up to be resilient over the medium and longer term and well positioned to capture growth opportunities both organically and through M&A.

The shares today traded above 1400p for the first time since early January but Investec Bank has a price target of 1,800p amid “further evidence of the sustained improvement in operational and financial delivery”.

Peel Hunt said it continued to see plenty of upside for shares after making 3-4% upgrades to earnings estimates, leading to an increase in its price target from 1,980p to 2,250p.

Intertek extends advance

In the FTSE 100, Intertek Group (LSE:ITRK) shares extended their advance since mid-November to 25% after the company reported a fourth consecutive year of mid-single digit like-for-like revenues growth.

Profit conversion was also strong as the assurance, testing, inspection and certification firm lifted its margin by 100 basis points year-on-year to 17.4%. The progress was driven by six acquisitions over the past five years, which delivered in aggregate a margin of 25.1% in 2024.

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The decision last year to update the company’s capital allocation policy by increasing the payout ratio to 65% of earnings means shareholders will receive a final dividend of 102.6p a share on 20 June, a jump of 40.1% over a year earlier. It also announced a £350 million buyback.

Having grown pre-tax profits for 2024 by 15.4% on a constant currency basis to £547.8 million, Intertek also unveiled a new medium-term margin target of at least 18.5%. It said this reflected the faster growth of its chosen markets and confidence in its processes.

Chief executive André Lacroix added: “Our high-growth cash compounder earnings model is getting stronger every year which gives us the opportunity to further reward our shareholders while still investing organically and looking for value-accretive inorganic growth opportunities.”