IT became clear yesterday why car dealership Reg Vardy is the subject of a £450m bidding war after posting record half-year profits.

The Sunderland company made profits in the six months to October 31.

Despite figures showing a fall in demand for new cars in the UK, Vardy's profits increased 22 per cent.

The company, which has 102 franchised and non-franchised dealerships, has already received a £450m offer from larger rival Pendragon, which bought North Yorkshire's CD Bramall chain last year.

However, smaller rival Lookers may offer more and is expected to report to the City on its plans later in the month.

Sales at Vardy grew 16 per cent to £1.08bn in the six months.

Trading in November and last month was in line with expectations and the company said it remained confident for the full year.

New vehicle registrations in the UK fell five per cent to 1.241 million in the period, with cars sales to private buyers - which generate more profit for dealerships than business fleets - falling at the higher rate of 7.9 per cent.

However, Reg Vardy managed to buck the trend by turning round under-performing dealerships it had bought in the past couple of years.

The company sold four Fiat and one Fiat and Alfa Romeo franchises following a decrease in market share of those marques.

However, it bought Vauxhall, BMW, Mini, Kia and Chevrolet franchises from the Priory Group, leaving its number of dealerships static at 102.

Nationally, the sale of second-hand cars has been more resilient, except those a year old or less, where prices suffer because of an over-supply of new cars.

Demand for used vehicles, along with after-sales service, contract hire and fleet supply, is expected to remain strong, despite a continued uncertain outlook in the new car market.

The Reg Vardy board has advised shareholders to accept the bid from Pendragon, which tabled its offer in November.

However, industry rumours suggest that Lookers will come back with a higher offer soon.

Pendragon's £450m buyout would net Sir Peter Vardy, the son of the founder, and other members of the Vardy family nearly £125m for their 27.2 per cent share of the company.