Pendragon has cut its dealership portfolio by 16 outlets over the past seven months, including eight under the OFT ruling, most of its Alfa Romeo sites and more than half its Fiat dealerships.

It plans to shed another 26. The reductions, totalling about a tenth of its 400-site network, were revealed by its chairman, Sir Nigel Rudd, at its shareholders’ AGM last week. Pendragon wants to reduce its debts and generate cash which will allow the company to continue to grow and improve profits.

A review of the business since its acquisition of Reg Vardy has identified sites which Rudd says “have, or will, become too marginal to continue trading in the current market or where we can reconfigure our assets in a particular geographic area in order to accelerate our debt reduction programme”.

The measures will help protect the business from recent interest-rate hikes.

Within a year of the Vardy acquisition the interest bill on Pendragon’s borrowings rose from £43m to £67m. However, underlying profits rose 15% to £68m.

Eight dealerships have been sold since October, and another eight franchises terminated. Pendragon has now issued notice of termination for a further 26 new car franchises.

Neither Rudd nor chief executive Trevor Finn were available to reveal which franchises are affected.

Rudd said these actions will have a one-off adverse effect on operating profits, predicting a £12m drop in the next 18 months. However, Pendragon expects to generate £75m of cash inflow from sale of surplus dealerships and showrooms and goodwill write-offs.

“This cash flow will financially reposition the group to quickly continue the consolidation of the sector,” said Rudd.