Michael Vassallo, an analyst at stockbroker Brewin Dolphin, said the company’s specific risk outweighed market pressures.

Brewin Dolphin predicted Pendragon’s stock price could drop to 5 pence a share if it announces a poor set of results for the interim period next week. “We believe Pendragon’s equity has little remaining value,” said Vassallo. He said the group was “perilously close” to being unable to cover its interest and lease payments with its earnings. “The company appears to be at the behest of the banks and we expect the dividend to come under significant pressure,” Vassallo said. Pendragon’s market value dropped yesterday (Tuesday 19 August) ahead of the results announcement. The dealer group, the largest in the UK with a turnover of £5bn, saw its share price fall 5.5 per cent to 9.2 pence as analysts forecast its profits would be hit by rising fuel costs and weakening used car values. Brewin Dolphin forecast Pendragon’s pre-tax profit for 2008 could plunge 35 per cent to £23m.