European Motor Holdings, recently tipped by the City as a possible acquisition target for Inchcape, is set to embark on its own acquisition spree after notching up record profits.

The Henley-on-Thames-based company has been awarded the Audi franchise for the Gloucestershire-Wiltshire area and is looking to acquire existing businesses and develop new sites. It plans to sell two of its existing three Audi operations (believed to be Chester and Sunderland), which form part of a market area for other Audi partners. Two VW outlets will be sold as part of a dealer network restructuring, but EMH has already secured representation for Bentley in the north-east of England. Plans for another auction site are being drawn up, which would sit alongside its existing operations in Telford and Queensferry.

There will also be a new BMW and Mini operation in Durham that will open at the start of next year. EMH already has a contiguous territory that stretches from York and Malton to Sunderland and Stockton. Last year, EMH snapped up major Jaguar and Land Rover businesses in Preston worth £5.1m and is planning to expand those franchises, together with its other Ford PAG brands Aston Martin and Volvo.

A £12m VAT repayment, including interest, due to be paid by Customs & Excise shortly, will help to fund the expansion plans. EMH is also considering paying some back to shareholders.

Premium models are underpinning growth. EMH's Audi, BMW, Jaguar and Volvo sales were up 3% – 1% more than the UK average.

Richard Palmer, EMH chief executive, is optimistic about the current financial year because of the raft of forthcoming new car launches.

“We have much to look forward to in the coming months and, while there are some residual disposals to be made following the block exemption review, we expect to make complementary acquisitions and continue to improve our existing businesses,” he says.

EMH profit before tax for the year to February 29, which includes gains from disposals of £3m, was £16.8m (2002/3: £13.23m). Turnover was £489.52m (£430m).