UK homebuilder Taylor Wimpey feels pinch from persistent housing slump

By Raechel Thankam Job

July 31 (Reuters) - Taylor Wimpey cut shareholder returns and trimmed its UK home completions forecast on Friday, as affordability pressures and economic uncertainty continue to weigh on the housing market, sending the company's shares down more than 8%.

Already under pressure from elevated mortgage rates and inflation concerns that have deterred buyers, Britain's housing market now faces headwinds from rising energy and materials costs as the Iran war deteriorates economic prospects.

Taylor Wimpey said it was cutting its shareholder distribution policy to 4% of net assets from 7.5%.

"The housing market downturn has proved more prolonged than anticipated, with affordability pressures continuing to affect demand and profitability expectations remaining lower than when the current distribution level was set," the builder said in a statement.

It also narrowed its full-year UK completion target, excluding joint ventures, to between 10,600 and 10,800 homes from 10,600 to 11,000.

Challenging conditions have pushed back Taylor Wimpey's timeline for meeting its medium-term targets, CEO Jennie Daly told analysts.

"We still feel that the strategy is correct. There's the opportunity to get there, albeit it's probably moved out," Daly said.

Taylor Wimpey is also slowing construction and buying fewer plots, echoing moves by rivals Vistry and Berkeley.

The construction slowdown, coupled with the new UK prime minister's decision to rule out changes to stamp duty, could threaten Britain's target of delivering 1.5 million new homes by 2029.

Looking ahead, Taylor Wimpey expects conditions to remain challenging, with underlying home prices below prior-year levels and full-year build cost inflation of 3% to 4%.

Daly said initial talks with suppliers to reduce energy-related surcharges had been derailed as hostilities in the Middle East flared up again in July after a temporary ceasefire.

Taylor Wimpey reported a pretax profit of £116.8 million ($157.1 million) for the six months ended June 28, versus a loss of £92.1 million a year ago, when results were hit by a large cladding provision charge.

Peel Hunt analysts said the consensus forecast for the homebuilder's full-year pretax profit was likely to fall by 5% to 10%, with similar downgrades likely for subsequent years.

($1 = £0.7436)

(Reporting by Raechel Thankam Job and Simone Lobo in Bengaluru. Editing by Janane Venkatrama and Mark Potter)