Arriva's motor retailing division contributed £9.5m to the group's £110.3m operating profits last year, an increase of 36% on 2000.

The division's 33 dealerships enjoyed a 28% rise in new car sales in a UK market up 11%. Turnover rose from £607.4m in 2000 to £653m.

Bob Davies, Arriva chief executive, said the group's size enabled it to benefit from a level of bulk purchase discounts due to the DTI's measures announced in August 2000. Previously these discounts had only been available to large fleet buyers.

“Last year we said that following the repositioning of the group we were well placed to deliver profitable growth,” he said. “Despite a challenging trading environment in 2001, we have delivered a substantial increase in earning underpinned by strong cash flow.

“The focus this year is to build on this progress and to use the strong cash flow to deliver value for our shareholders through continued share buy-backs and targeted acquisitions in our chosen markets.”

He believes Arriva is in a strong position to exploit likely changes in the Block Exemption due to its “considerable experience” of operating in highly competitive markets.