European Motor Holdings has returned pre-tax profits up 10.2% to £8.5m from £7.7m on a turnover down from £421.8m to £399.7m.

Richard Palmer, EMH chief executive, said: “We have considerably outperformed our competitors in the sector. In view of the improved trading environment, I believe we can look forward to another year of sustained improvement in efficiency and profitability.”

EMH believes that the Government's price inquiry dissuaded customers from buying new cars though it thought confidence was returning to the market. New car sales in March were “considerably higher” than in the corresponding month last year.

Mr Palmer said: “It is too early to be certain this increase in demand is sustainable for the whole of the new financial year, but our current performance gives rise to optimism for the year ahead.

“Good reputation, good customer service and local representation and knowledge will continue to count. If new entrants appear after the Block Exemption review , I believe the established dealership infrastructure will more than hold its own.”