Pendragon hit by profit warning

See Pendragon's shares See Lookers' shares here

Shares in Britain's biggest car dealer,Pendragon, have plummeted after the firm issued a profit warning.

The company said a slowdown in consumer spending following higher interest rates would wipe £20m off this year's operating profit and £10m in 2008.

Pendragon also blamed an oversupply of cars on the market, as manufacturers created incentives for new models to offset a downturn in used car demand.

Pendragon shares fell 17.6% to 80.75p in afternoon trade in London.

"We see the market for used cars for the remainder of the year as subdued," said Pendragon management.

'Company-specific'

The negative outlook also hit shares in the car dealer's rival, Lookers, which fell 4.12% to 174.50p.

But analysts said the fall in Lookers' shares was likely to be short-lived.

They blamed company-specific problems at Pendragon, such as the difficult integration of fellow dealer Reg Vardy, which it fought for - and eventually bought for £506m - last year.

Pendragon, which counts Alfa Romeo and Maserati as franchises, said its margins were already being eroded by about £50 a car.

The firm added that it would be looking to acquire smaller dealers to help it recover.