The market likes new targets set by housebuilder Taylor Wimpey (TW.) whose shares rise 7.3% to 114.1p as it entertains analysts and investors with the details of its forward plans. There's new initiatives on top of the existing strategy.
The core focus – unveiled in 2011 – remains the same. It wants to have top quartile operating margins; to deliver at least a 15% return on net operating assets through the cycle and to grow net assets by 10% per annum on average (including returns to shareholders) through the cycle.
Yet improving conditions in the housing market as well as the strength and quality of the landbank and strategic pipeline have, says Taylor Wimpey, given the group 'the confidence to set additional challenging medium term targets across each of these financial objectives.'
These medium term goals are summarised as: an average operating margin of 20% over the three year period; a return on net operating assets of at least 20% per year and an average increase in net assets (including returns to shareholders) of 15% per year over the three-year period.
Given the timbre of the housing market's performance over the last couple of quarters, Taylor's goals – as ambitious as they might seem – are imminently deliverable. Sales rates and pricing are at the upper end of management's expectations and guidance as a consequence has been improved with the group now expecting to deliver a 300 basis point improvement in operating margins (previous 200-300 basis points) for the full-year 2014.
Taylor Wimpey, like a lot of housebuilders, has welcomed the recent introduction of new regulations following the Mortgage Market Review as a positive move for the long term health of the market and, as such, the group does not expect these changes to adversely impact its business.
With sections of the media and indeed economists across the spectrum voicing concerns about the temperature of the housing market, tomorrow's (14 May) inflation report from the Bank of England should give further guidance on the Bank's timetable for interest rates in the first or second quarter of 2015. The market will doubtless be watching closely for how the Financial Policy Committee approaches the whole housing issue on 26 June.