Quintain Estates & Development - one of the firms behind the new £100 million second phase of Birmingham's huge Masshouse regeneration project - yesterday warned that profits would remain subdued over the next 18 months.

However, the group said it also expected continued robust growth in net asset value (NAV), leading to strong total returns.

Quintain said its interim valuation, which has not been incorporated in the September 30 figures, indicated a 10.2 per cent uplift in adjusted diluted NAV to 542 pence from 492 pence as at end March.

In the six months to September, the interim dividend rose 18 per cent to 3.25 pence from 2.75 pence.

Sales fell to £ 23.403 million from £27.855 million, while pretax profit slumped to £ 2 . 1 million from £4.8 million, partly as a result of a £2.7 million charge for discontinued operations at Wembley.

Chairman Nigel Ellis said: "The outlook remains exciting, with the scale and breadth of opportunities capable of delivering substantial rewards.

"We believe we have the management skills, disciplines and contacts to continue to deliver a track record of sustained outperformance, with as always our measure being the generation of total return for shareholders."

Quintain is partnering Countryside Properties and Birmingham City Council in the City Park Gate scheme in Birmingham.

The mixed-use project includes plans to build 608 apartments, including 152 housing association homes, develop around 125,000 sq ft of net office accommodation, and create 105,000 sq ft of retail space, including a 60,000 sq ft food store.

The scheme also includes refurbishment of the grade two-listed Fox and Grapes pub and the creation of high quality public areas.

The 5.75-acre scheme will create a major gateway to Eastside, the tenyear £6 billion project to create a new cultural and learning quarter to Birmingham.

Quintain, which specialises in strategic property acquisition, redevelopment, asset management and regeneration, says City Park Gate, together with the group's holdings in Smallbrook Queenwsay, will enable the group to become a major player in the Birmingham property market.

Mr Ellis said yesterday that the partners were now refining the masterplan for the City Park Gate scheme and they expected to start work on the site within two years.