MOVES by car manufacturers to cut prices have helped to boost profits at motor dealer Reg Vardy.

The Sunderland-based business increased pre-tax profits by more than 60 per cent, to a record £15.7m, in the six months to October 31.

This was as a result of a 25 per cent increase in new vehicle sales following manufacturers' price reductions. Turnover increased by 5.2 per cent, to £690.1m.

Sir Peter Vardy, chairman, said: "It has been encouraging to see that the action taken by manufacturers to reduce prices has brought an immediate positive response from customers."

Despite increasing economic gloom, Sir Peter believes the new car market will continue to grow.

He said: "While the stock market might be suffering, consumers are generally better off with low interest rates and more money to spend."

During last year, several manufacturers reduced list prices, as a result of the Department of Trade and Industry's New Vehicle Pricing Order, which came into force in September 2000.

Other manufacturers improved offers either through enhanced bonuses to retailers or by offering financial incentives direct to customers.

Sir Peter said: "While new vehicle registrations rose nationally by 11 per cent in 2001, we increased new vehicle retail sales by 25 per cent, at improved margins.

"But this improvement did not come without a price, with most of the increase at the expense of used vehicle sales. But, although volumes were lower, our margins on used vehicles have been maintained."

During the six-month period, Reg Vardy acquired or established a number of new dealerships. But yesterday the group announced the disposal of two dealerships, as part of a reorganisation.

Sir Peter still plans to run 100 dealerships, and expects shortly to have increased from 73 to 80, employing 4,800 staff.