Reg Vardy skids on slowing sales

REG Vardy's warning that new car sales slowed during the second quarter of 2004 put the skids under the motor dealership sector this morning and overshadowed another record performance from the motor retailing group.

The group, which earlier today reported a 16.6% rise in full year pre-exceptional pretax profits to £45.6m, said sales of leading small car marques - such as the Ford Fiesta, Focus and Renault Clio - were below last year's level and that profits from new vehicle sales in the first two months of 2004-05 were below planned levels.

Group chief executive Sir Peter Vardy said that while sales had slowed, the industry's expectation was for another record year for new car sales.

'There has been a certain amount of uncertainty with regard to 'big ticket' items and the recent rises in interest rates has not helped. But the industry is still on course to exceed last year's total of 2.61m new car registrations,' Vardy told AFX News in a telephone interview this morning.

'While there are likely to be further rises in interest rates, I don't believe a rise to 5-6% will hurt the group. We've traded successfully when interest rates were into double-digits so I don't see any reason why we can't continue to deliver improved results,' he added.

Despite his comments the company's shares fell 60 1/2p to 472p as brokers cut their forecasts for 2004-05. Dresdner Kleinwort Wasserstein trimmed its current year forecast by £2.5m and downgraded its investment recommendation for the shares from a 'buy' to an 'add'.

Other motor retailers also suffered and Inchcape, Pendragon, Lookers and Caffyns were all trading lower this morning.