Pendragon, the car dealership, today slashed its dividend after revealing a sudden freefall in the sale and price of new and used vehicles during June, dragging pre-tax profit for the first six months of the year down by 37 per cent.

During June, Pendragon said wholesale used car prices witnessed "the biggest single monthly reduction in over five years", in particular for large executive and off-road vehicles.

The company also said that private sector registrations, which includes car sales to small businesses and individuals, sumped by 12 per cent in June.

Overall, in the first half to June 30, private sector registrations fell by 4.9 per cent and, in particular, declined by 7.9 per cent between April and June. Pendragon said: "This is a reflection of falling consumer confidence and consumers deferring vehicle purchases".

In contrast, demand for company cars increased, albeit at just 2 per cent.

Total pre-tax profit fell from £33.5 million in the first six months of last year to £21.1 million on revenue down 8.2 per cent at £2.4 billion. Pendragon also announced today that it will reduce its interim dividend from 2.0p last year to 0.5p.

In the used car market, Pendragon said national activity slowed down in May as dealers prepared for the slower months ahead by buying in less stock: "This is turn led to wholesale prices being reduced more agressively in June and into July."

The company said: "We expect that the current price correction in the used car market has some way to go, although we anticipate that it will have run its course by the end of the year."

During the six months, the company took a £6.8 million impairment charge related to three BMW dealerships, two of which are being disposed of and one which will close in the second half of the year.

Pendragon also said that it intends to close a further six dealerships in the second half.

Commenting on future trading, Pendragon said: "...we have seen unexpected and significant downward movements in wholesale prices for used cars in June through to August due to falling retailer and consumer confidence in the UK.

"We continue to believe, like most commentators, that trading conditions in the UK will continue to be difficult for the remainder of this year and throughout 2009."

But it added: "The full effect of the actions we have taken on cost reductions will come through in 2009 when we should see improvements in margins and profitability subject to no further significant downturn in our markets."

Shares in Pendragon fell 0.35p to 9p.

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