The house builder has cut its annual distribution policy from its previous level of 7.5% to 4% of net assets, saying the move is needed to preserve balance sheet strength and financial flexibility as weaker market conditions continue.

Half-year results showed net cash fell 48% to £169m from £327m a year earlier, while adjusted operating profit dropped 19% to £130m on revenue that edged up just 2% to £1.68bn.

Adjusted operating margin narrowed sharply to 7.7% from 9.7%, reflecting weaker pricing, build cost inflation and lower profitability.

Taylor Wimpey completed 4,986 homes in the first half, down from 5,264 a year ago, although its average selling price rose 7% to £334,000, mainly because of regional and product mix.

The total order book slipped to £1.93bn, representing 6,882 homes, compared with £2.12bn and 7,269 homes a year earlier.

Trading has remained subdued into the second half. Over the four weeks to 26 July, the private sales rate eased to 0.55 homes per outlet per week from 0.59 a year ago, while underlying selling prices remain about 2% below last year’s levels.

The company has trimmed its full year completion guidance to between 10,600 and 10,800 homes, placing expectations in the lower half of the range issued in March.

Chief executive Jennie Daly said: “Reflecting the prolonged nature of the downturn which has reduced expected profitability and cash generation, the board has reviewed the level of cash returns and deemed it prudent to revise our Distribution Policy to preserve balance sheet strength, retain financial flexibility and support our commitment to optimising shareholder returns through the cycle.”

She added that affordability pressures, rising build costs and increasing regulatory costs continue to weigh on the market, warning that without measures to stimulate demand and improve development viability, housing output could fall further.

Despite the tougher backdrop, Taylor Wimpey expects to end the year with around £250m of net cash after absorbing about £100m of cladding-related payments.