Bovis Homes said this week that its increasing emphasis on smaller, cheaper homes had contributed to a 20% fall in profit in 2005.
Bovis made a pre-tax profit of £116m in the year to the end of December, which was in line with expectations after it issued a detailed trading update in January.
The number of completions overall was flat at 2702 but the number of homes with one and two bedrooms increased to 602, making up 23% of total volume, an increase of eight percentage points on the year before.
Similarly its partnership and social housing business completed 596 homes, contributing 22% of volume, double that in 2004.
Average selling price dropped from £197,900 to £175,500 in 2005.
Chief executive Malcolm Harris said: "Responding to the changing marketplace the group has evolved its product offering to provide a greater number of smaller, more affordable, private homes that target a wide cross-section of homebuyers."
Despite a fall in profit the board recommended a dividend for the year of 25p, up 25% and restated its commitment to double the dividend to 40p in the four years to 2008.
Harris said the outlook for 2006 suggested "market stability." He said: "Earnings are expected to increase above the change in retail prices, which will increase levels of disposable income and assist affordability in the housing market."
He said that oil and other energy prices remained a concern but hikes to date had been "surprisingly moderate". He added that changing its product mix would facilitate a growth in volumes this year and beyond.
Harris said that Bovis had a 4.9 year landbank with planning consent at the end of December. Shares increased almost 2% to 844p when the results were announced on Monday.