CAR dealership Reg Vardy has been hit by customer concern about the high prices of new cars in the UK.

The Sunderland-based business said it had suffered a "very uncertain trading environment", as people held off buying cars in the UK, and sought cheaper deals on the Continent, or over the Internet.

That was reflected in its bottom line, with pre-tax profits falling to £29.3m in the year to April 30, compared with £33.2m in the previous year.

Turnover, however, saw a slight increase, from £1.28bn to £1.3bn.

Chairman, Sir Peter Vardy, said: "These are impressive results for the group, in light of the difficult trading conditions we have been operating in.

"New vehicle pricing issues, European imports, falling used vehicle values and concern that the 'clicks' of the Internet would replace the 'bricks' of traditional motor dealerships conspired to produce a very uncertain trading environment.

"Against this background, our performance in terms of turnover and growth in vehicle sales volumes was very satisfactory."

The group sold 161,943 new and used vehicles during the year, an increase of almost 7,000 on the previous year.

This was despite added pressure from consumer groups, which forced the Department of Trade and Industry (DTI) to issue an order last September that car prices must be brought down, and gave the manufacturers three months to comply.

Sir Peter said: "Since the manufacturers have started to comply with the order, the retail sector has started to stabilise.

"The problem was that customers were putting their purchases on hold to see what happened to new car prices.

"We couldn't put our hand on our hearts and tell the customer that prices wouldn't come down if they waited, and that had a detrimental effect on the business. Since January 1 we have seen a much more positive retail environment."

Sir Peter said Reg Vardy had plans to expand its dealerships from 75 to 100 in the next couple of years.

However, in the past year it surrendered the Maserati and Ferrari franchise for the region.

The dealership, based in Houghton-le-Spring, was also a base for Jaguar, which wants to use the site for its X2 model.

Sir Peter said: "We surrendered the Ferrari and Maserati franchise because we thought Jaguar would be a bigger seller, and they were not keen on sharing the dealership.

"The Jaguar X-type needed more space, and we only sell six or seven Ferraris a year."

The group has earmarked about £60m for purchases, and intends to build on good relationships with the likes of Nissan, Renault, Ford, Fiat and Vauxhall. It sells about four to seven per cent of all those vehicles sold in the UK, but through its expansion expects to sell about ten per cent.

Looking to the current year, Sir Peter said: "Now the market has stabilised we expect things to improve."

Shareholders will receive a dividend of 12p, up from 11p last year.