Housebuilder George Wimpey counted the cost of last year's weaker housing market to reveal a 16 per cent fall in full-year profits.
The group said pretax profits for 2005 slumped from a record £437.6 million in 2004 to £366.5 million last year after its UK business suffered from increased incentives to promote sales in a weak market.
But Wimpey looked to a stronger 2006 after a rally towards to the end of last year showed signs of continuing.
It also announced that chief executive Peter Johnson will retire on June 30 to be succeeded by his deputy Peter Redfern.
That further fuelled sector consolidation speculation surrounding the firm.
The company, which has been tipped as a potential bid target for rivals Solihull-based Taylor Woodrow and Barratt Development, said, however, it would focus on organic growth.
Although Wimpey struggled in the UK, its US arm Morrison Homes benefited from another strong year.
Group turnover was up one per cent to £3 billion as a five per cent sales fall in the UK was offset by a 20 per cent increase in the US.
But a 64 per cent jump in operating profits at Morrison was not enough to make up for the 32 per cent decline at Wimpey as lower prices and fewer sales took their toll on group earnings.
Completions in the UK fell from 12,232 in 2004 to 12,100 last year, while the average selling price was down from £185,300 to £178,000.
In the Midlands George Wimpey has offices at Cannock, Wolverhampton, Solihull and Leicester, with nearly 600 people employed.
It has housing schemes across the region - in Birmingham they include Nightingale Gardens, Kings Norton, a mixed development of 164 homes on the site of a former hospital; The Mall, Erdington, a 200 unit mixed scheme; The Observatory, Erdington, 46 one and two bed apartments; and The Vineyard, Acocks Green, 75 new properties made up of luxury apartments, mews style homes and detached houses on a former laundry.
Other sites include Saltsiford Gate, Warwick; The Pavilions, Rugby; Forgemill, Rugeley; Hamilton Court, Wednesfield; Bratton Village, Telford; Kingsmede, Shrewsbury; The Grange, Nuneaton; Birchfields, Tipton; and Meadow View, Market Drayton.
Daimler Green, Coventry, is a major 58 acres urban re-generation site being developed with Advantage West Midlands for 600 new homes.
Developments are about to start at Dudley Port and Coventry City Football Club's former ground at Highfield Road.
Wimpey's core private housing business was hardest hit last year although its smaller affordable houses saw sales completions jump 48 per cent and prices improve ten per cent.
Overall margins fell from 18 per cent to 12.9 per cent after incentives and price reductions were used to attract buyers in the softer market.
Wimpey chairman John Robinson said: "Market conditions weakened considerably during the second half of 2004. This trend continued throughout most of 2005.
"The traditional strong spring selling season remained subdued and the market was slow but steady for much of the year.
"Customers were generally cautious, taking longer to commit to their purchase and, as a result of the material reduction in total housing transactions, often experienced delays in selling their existing homes."
But he was more upbeat about Wimpey's prospects for 2006.
Mr Robinson added: "In the UK, the improvement we experienced at the end of 2005 has continued and we remain encouraged by growing signs of returning buyer confidence.
"Although it is too early to predict the market for the year, the level of transactions in the first seven weeks of the new year has started to increase, and in some areas we are reducing incentives."
But brokers Panmure Gordon Securities were less sure.
They stated: "We expect further weakening in UK operating margin in 2006 and Wimpey's cost inflation to outstrip net house prices in a competitive market. In the absence of material volume growth, we are forecasting a further fall in UK EBIT (earnings before interest and tax)."
In the US Wimpey indicated fears that the housing market may be set to slow.
The market, which has broken sales and construction records with prices up more than 55 per cent nationwide, appears to be cooling, and concern is mounting that house price rises in some cities have created a bubble that could pop.
Wimpey has proposed a dividend of 17.6 pence per share, up ten per cent from a year earlier.