Housebuilder Barratt Developments PLC (LON:BDEV) hiked its final dividend by 39% after achieving record annual profits and the highest level of total completion volumes in nine years.
But its share price fell 4.72% to 595.50p in morning trading as it provided a cautious outlook and left analysts disappointed by its gross margins.
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The company said in a statement that it was focused on improving its gross margins after reaching its 20% target in the year to 30 June 2017, up 1.1 percentage points (ppts) on 2016.
Analysts at Liberum repeated a 'sell' rating, saying: "Its shares are our least preferred in the sector as its relatively lower margins make it more exposed to downside risk, and its relatively short landbank and high land creditors mean that it has less scope to reduce cash outflows in support of the dividend than the other returners."
They added: "Bulls may be disappointed that management has not updated its gross margin target."
Record profits, special dividend
Still, profit before tax rose 12.1% to £765.1mln from £682.3mln last year and revenue increased 9.8% to £4.6bn from £4.2bn.
Total completions, including joint ventures, climbed 0.4% to 17,395 plots from 17,319 plots a year ago. The total average selling price on completions grew 6% to £275,200 from £259,700 while the sales rate rose to 0.72 from 0.69.
The company proposed a final dividend of 17.1p, compared to 12.3p last year, and a special dividend of 17.3p, as the company strengthened its balance sheet with net cash rising 22.2% to £723.7mln from £592mln.
Forward sales, including joint ventures, came to £2.7bn on 3 September 2017, a 13.8% increase on £2.4bn last year.
Land purchases fell to 18,497 plots from 24,387 plots last year but is expected to pick up to 20,000 in fiscal year 2018.
Barratt also exceeded its return on capital employed (ROCE) target of 25%. ROCE rose 2.7ppts to 29.8%, the highest in 12 years.
Barratt resilient amid Brexit uncertainty but cautious on outlook
Chief executive David Thomas said Barratt continued to see strong demand despite a slowdown in the housing market following the Brexit vote and an increase in taxes.
“The group starts the new financial year in a good position with a strong balance sheet, healthy forward sales and we continue to see robust consumer demand supported by a positive mortgage environment, he said.
“We are focused on driving further operational improvements through the business with a particular focus on margin improvement."
However, the company acknowledged headwinds in the central London market, which has been hit by Brexit uncertainty, higher stamp duty and planning requirements.
Barratt remained cautious on the outlook, saying it sees "modest growth" in wholly-owned completions in 2018.