British Land upbeat despite fall in profits

British Land was upbeat yesterday after its losses were not as bad as feared, although it refused to comment on recent deal speculation.

The group reported a 3.7 per cent fall in its property portfolio to £8.1bn during the quarter to the end of June.

The company was quick to point out that the decline in valuation marked a slowdown from the previous two quarters, fuelling hopes that the real-estate market could be set to turn.

The group confirmed that optimism was returning to the market, noting a rise in bidding competition as well as an increase in revenue from its commercial property assets. Its CEO, Chris Grigg, said the company was looking to beef up its portfolio. "We have the financial flexibility and scale to capitalise on the opportunities which we expect to see over the next 24 months," he said.

Analysts at JP Morgan said British Land had "turned the corner" and was one of its sector picks "because of its prime portfolio with long lease length of 13 years, which should result in an uplift of valuation".

The continued fall in rental values remains a problem for the industry, and British Land's rental income fell from £162m in the first financial quarter of 2008 to £143m this year. Pre-tax profits were down year-on-year from £74m to £63m in the past quarter.

Speculation abounds that the group is steeling itself against a takeover bid. Rumours hit the market last week that a consortium led by the Abu Dhabi ruling family and Lakshmi Mittal were set to launch a bid. The company would not comment on the stories yesterday.

Keith Crawford, analyst at KBC Peel Hunt, said: "While strange things can happen ... we believe it highly unlikely this will result in an actual bid."

The company declined to comment on reports that it had sold part of its Broadgate estate in London to Blackstone, but said it was in advanced talks about a disposal of the office complex.