Dealer group Inchcape has forecast a big improvement in quarterly profits, despite continued weak demand for new vehicles.

The group, which has more than 100 showrooms in the UK, said aftersales business remained strong while it has also benefited from ongoing cost reductions.

In the second quarter of the year, Inchcape said profits were expected to be significantly ahead of the first quarter, albeit well below a year ago.

Like-for-like sales in constant currency terms were down 23.8% in the five months ended to May 31, it added.

Inchcape said: "Customer demand for new vehicles is still weak but our aftersales business, which represents approximately half of our gross profit, remains strong."

In the UK, Inchcape said it continued to outperform the industry with like-for-like sales down 21% in a market that is down by 27.9%.

The group, which employs more than 15,000 people and has operations in Singapore, Australia, Hong Kong, Greece, Belgium and Russia, has responded to the industry slump by cutting 2,000 jobs and introducing a salary freeze.

And in May it raised £234 million from shareholders in order to strengthen its balance sheet.

Shares jumped 8% as investors welcomed the profits improvement and the bigger than expected drop in net debt to around £100 million.

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