A difficult first eight months of its financial year when price uncertainty kept customers away from showrooms caused pre-tax profits to fall at Reg Vardy plc.

In the year to April 30, the profit for the UK's third biggest motor retail group was £29.3m compared with £33.2m in the previous year. Turnover increased from £1.282m to £1.304m, with vehicles sold rising from 155,086 to 161,943.

The results include an exceptional cost of £4.2m because of repurchase commitments on Motability and contract hire vehicles whose residual values were lower than expected.

Sir Peter Vardy, group chairman, said there was a distinct difference in trading between the final eight months of 2000 and the first four months of this year.

The Government's delay in acting on the Competition Commission inquiry report into new car prices had created eight months of uncertainty.

“Profitability has been markedly up since January,” he said. “Though profits were down, we had impressive results in light of the difficult market conditions which made the growth in sales all the more pleasing. I am confident about our future prospects.”

Sir Peter said that if Block Exemption was abolished in favour of a free market, it would favour large retailers like Reg Vardy.

“It is not, however, the preferred outcome for the manufacturers,” he said. “There is little support for change in the industry and it is therefore likely Block Exemption will be renewed with some modifications in favour of retailers.

“The improved terms for retailers under such a renewal would be beneficial to our group compared with the existing arrangement.”

Manufacturers were creating large market areas in an attempt to form enduring partnerships with strong retailers in order to secure their future distribution channels. “We have benefited significantly by reducing the number of our manufacturer partners while increasing our number of outlets with each of them,” said Sir Peter.