Land Securities, one of the UK’s biggest property companies, revealed this morning that it would not pursue a planned demerger of Trillium, its outsourcing division, as it reported a pre-tax loss of £1.7 billion for the first six months of the year.

The company blamed current market volatility for the decision to delay the split that was first announced over a year ago.

The share price of Land Securities rose by 10p to £10.25 on the announcement

Land Securities said today: "The board continues to believe in the benefits of specialisation, but has decided that, given current adverse market conditions, it would not be in shareholders' interests to proceed with implementation and our work on demerger has therefore stopped.”

It added: "We are continuing work on a potential sale of Trillium, but timescales for transactions are protracted in the current environment."

Management declined to comment on a time scale or possible buyers for the business, thought to be worth around £1.3 billion.

On its performance in the six months to September 30, Land Securities said the £1.7 billion loss was mainly due to a write-down on the valuation of its commercial property portfolio, which plunged 12.7 per cent or £1.723 billion.

Francis Salway, chief executive of Land Securities, said: “Our results reflect the fact that we are going through an unprecedented period of financial instability which has severely impacted investor confidence, the availability of credit and the pricing of property investments.

“Our objective is to navigate a prudent line through the current volatilities and we continue to manage the business with a cautious outlook.”

The company also announced that Alison Carnwath, currently chairman of M F Global and a non-executive director of Land Securities since September 2004, will become the new chairman of the company.

She replaces Paul Myners, who left to become Minister for the City.

Despite reporting a loss, Land Securities raised its dividend by 3.1 per cent to 33p. Dividends are determined by underlying income from rent, rather than the valuations of the company's property portfolio.

Mr Salway told Times Online that the company, which has scaled down its development pipeline for this year, is planning for an uptick in the market. Much of its planned development in London is scheduled to be built from 2012 onwards.

He also defended the opening of Cabot Circus in Bristol, a shopping centre venture with Hammerson, in September. He said: "The opening of the centre attracted the attention of a number of television film crews in search of a story of weakness in the retail sector. Their expectations were confounded."

The number of empty shops in the company's retail portfolio, excluding development pipeline properties, rose slightly to 4.2 per cent as the high street became weaker.

Mr Salway also said that he expects Trillium's government-funded building of schools and other public buildings to continue to grow.

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