CAR dealer Reg Vardy said it had been hit by "one of the most difficult years in the motor industry for three decades", after announcing a fall in pre-tax profits following a record breaking 1999.

But the Sunderland-based group, which yesterday reported a £1.3m drop in pre-tax profits before one-off costs - in line with warnings issued last year, was confident the uncertainty in the market was beginning to disappear.

Chairman Peter Vardy said the drop was due to the uncertainty over new vehicle prices caused by last year's competition commission car pricing review.

"I've been in the car industry for 30 years and I have never seen anything like it," he said.

"New car prices came down by up to 18 per cent, and that is unprecedented.

"But last year was very special for us with record results, and it would have taken someting special to match it."

Mr Vardy said customers had postponed new car purchases for most of the year in the expectation that prices would fall by between ten and 12 per cent.

But most manufacturers only offered lower prices from the beginning of December.

He added: "Customers were coming in, seeing the reduced prices and they'd be interested in buying.

"But when they wanted to trade in, and realised their present car wasn't worth as much as they thought, they were delaying their decisions."

Mr Vardy said the situation had been made worse as transaction values dropped after more retailers and manufacturers offered special deals to maintain sales levels.

Pre-tax profits at Reg Vardy fell to £9m for the six months to October 31, compared to £14.5m for the corresponding period last time.

The profit level was hit, however, by a £4.2m provision set aside to cover the drop in the value of long-term contract hire vehicles caused by the fall in second-hand car prices.

But Mr Vardy said that to maintain sales at ''broadly similar margins'' was a sound performance.

''This has been a solid result in difficult circumstances," he said.

"To be coming in with these figures proves we've got the best set of people in the industry.

"The unprecedented fall in vehicle values made 2000 one of the most difficult for the motor industry in the last three decades.

"Throughout the period there was an expectation that new vehicle prices would be reduced.

"Other than a few specialist manufacturers who took action around September last year, list price reductions were deferred to December.

"Transaction prices however fell which had a knock on effect on used vehicle values."

The group's turnover over the first six months to October 31 fell to £656m from £667m last time. The pre-tax and exceptional profit figure fell from £14.9m to £13.6m.

He said he was encouraged by trading in the first two weeks of January this year, with strong sales of both new and used vehicles.

"Despite the difficult operating environment, Reg Vardy is well placed to take full advantage of the developments currently taking place in our industry," he added.

The group also announced it had split the roles of chairman and chief executive, promoting finance director Gerard Murray to the post of chief executive.

The new changes at management level will come into effect in May.