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As favourable trading conditions continue for housebuilder, Taylor Wimpey came out with some upbeat news yesterday (13th May).

Sales rates, together with pricing in the UK housing are at the upper end of the company’s expectations, driven by the continued strength in the UK housing market.

All of that saw the company’s shares surge more than 7% following the announcement.

Published 14/05/2014

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Shares of Taylor Wimpey went up on the back of its latest market update yesterday (13th May).

The company announced an increase in its set of financial targets for the period 2015 to 2017, as strong performance over the last few years drove confidence.

For 2014, Taylor Wimpey now expects to deliver an operating profit margin increase of at least 3% over last year’s operating margin of around 13%.

That was in addition to forecasting an average operating margin of 20% over the next three years (2015 to 2017).

All of this is on the back of a strong performance in the UK housing market, which drove sales rates and pricing up to the upper end of Taylor Wimpey’s expectations.

Meanwhile, new regulations following the Mortgage Market Review which among other elements, requires detailed checks on borrowers, isn’t expected to adversely impact the company’s business.

Taylor Wimpey’s shareholders weren’t left out: with the company announcing that it is committed to returning strong additional cash to investors over the medium term.

That’ll start with £50m this July and £200m next July. Looking ahead, the company sees potential in exceeding £200m per annum in cash returns – though they’ll be set on an annual basis based on the cash generation of the business.

The update helped the company’s shares close up around 7.5% yesterday (though it is slightly down around 1% today). Shares of other housebuilders, the likes of Barratt Developments and Persimmon, also went up after the update.

Some sector concerns…

The company’s shares (and indeed those of its peers) have been weighed down recently on the back of a few concerns.

Those concerns include a potential sooner-than-expected increase in interest rates, together with the impact to profits due to rising costs, as heavy demand ramps up prices of, for example, building materials.

Not to mention a potential change in the UK government’s current support to the housing market recovery, as house prices continue to rise.

Indeed, Taylor Wimpey’s update yesterday was certainly reason for optimism, but, some of the aforementioned concerns will likely still remain.