Reg Vardy suffers as customers stall on new car purchases

The Sunderland-based company believed customers were still waiting for the full effect of a Competition Commission inquiry to filter through to showrooms.

While its second-half trading figure was set to better the first half, the group's operating profits for the full year were still "likely to be lower than previously expected", the company admitted.

The warning comes after the Government told manufacturers to cut new car prices by up to 12 per cent following a Competition Commission inquiry.

The Department of Trade & Industry (DTI) order came into force on September 1, but Reg Vardy said the message has not been immediately heeded by manufacturers, causing motorists to further stall on new purchases.

Three months ago, Reg Vardy told shareholders that its first-half figures for the six months to October 31 would be hit as customers waited for the DTI order to come into force.

But chairman and chief executive Peter Vardy said that motorists had continued to stall on new purchases.

He said: "A reduction in new vehicle prices was anticipated.

"Other than some specialist manufacturers, very few responded immediately resulting in further deferral by many new car purchasers."

Mr Vardy added the continued uncertainty surrounding new vehicle prices was also having a knock-on effect on the value of used vehicles.

The company, which has 80 outlets around the country, has now predicted the value of long-term contract hire vehicles would be lower than had been anticipated, causing it to set aside £4.2m to cover the difference.

It is likely that profits, prior to exceptionals and the £4.2m one-off operating cost, will come in at around £13.5m for the first half, compared to £14.9m for the same period of last year.

Mr Vardy hoped trading would start to pick up in the second half but this would come too later to rescue the full-year figures.

lReg Vardy's shares ended the day down 31p at 232p.