Final Results

Paragon Group Of Companies PLC
20 November 2001


                         BUY-TO-LET BOOST FOR PARAGON


The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
specialist lenders offering buy-to-let mortgages, personal finance and vehicle
finance, today announces its Preliminary Results for the year ended 30
September 2001.


Highlights include:


    Pre-tax profit up 14.1% to £40.5m (2000: £35.5m)

    Earnings per share up 13.5% to 28.5p (2000: 25.1p)

    New lending up 56.3% to £797.3m (2000: £510.0m)

    Total final dividend up 10.5% to 4.2p (2000: 3.8p)

    Net loan assets up 26.5% to £2.15 billion (2000: £1.70 bn)

    Colonial retail finance business integrated

    Current trading activity robust

Commenting on the results, Jonathan Perry, Executive Chairman of Paragon,
said:

'The performance of the Group over the past year has been strong with growth
in mortgages and consumer finance supplemented by the acquisition of a point
of sale retail credit business. As economic concerns have increased during the
year, we have adjusted our lending mix in favour of higher quality lending
areas, with buy-to-let particularly strong, and trading activity remains at
high levels. Our cash position is healthy and we shall consider actively
acquisition opportunities that may arise in the current environment. Paragon
is well placed to meet the challenges that lie ahead.'


For further information, please contact:

The Paragon Group of Companies PLC          The Wriglesworth Consultancy
Nigel Terrington, Chief Executive           Justin Strong
Nick Keen, Finance Director                 John Wriglesworth
Tel: [phone]                          Tel: [phone]
                                            Mobile: [phone] (JS)


CHAIRMAN'S STATEMENT


The Group has performed strongly during the year ended 30 September 2001, with
good growth in the mortgage and consumer lending businesses supplemented by
the acquisition of a point of sale retail credit business. Profit before tax
has increased by 14.1% to £40.5 million from £35.5 million and earnings per
share, at 28.5p, increased from last year's level of 25.1p. In view of the
continuing growth in profits your Board is pleased to propose, subject to
approval at the Annual General Meeting, the payment on 1 February 2002 of an
increased final dividend of 2.3p per share which, when added to the interim
dividend of 1.9p paid on 31 July, gives a total dividend of 4.2p per share for
the year, an increase of 10.5% on last year's dividend of 3.8p.


Total new lending during the year increased by 56.3% to £797.3 million from 
£510.0 million in 2000. Net loan assets grew by 26.5% to £2.15 billion. As a
result of the growth in the book, net interest income increased by 16.9% to 
£72.8 million from £62.3 million.


Other operating income was £15.3 million, compared with £14.0 million for the
previous year, the increase mainly reflecting the fees receivable on a higher
volume of business.


Operating costs were £35.6 million, compared with £30.6 million in the
previous year, the increase being largely attributable to the acquisition of
Colonial Finance (UK) Limited. Last year we reported that increased operating
expenses arising from the integration of the business of Colonial were
expected to impact the cost to income ratio. However, tight control over costs
has meant that, at 40.4% for the year, the percentage of costs to income is
only marginally higher than the 40.1% in 2000. Whilst this is a pleasing
result, operating costs will be an area of focus over the coming year and we
expect to see a downward trend in the cost to income ratio over future years.


Provisions for losses were £12.0 million for the year, compared with £10.2
million for the previous year, the increase reflecting the growth in loan
assets, in particular consumer finance assets, on the balance sheet. Across
all our business areas the loan portfolios continue to perform in line with
our expectations.

After providing for corporation tax at a charge rate of 20% and providing for
the dividend in respect of the year, shareholders' funds at 30 September 2001
were 20.6% higher at £166.1 million.


REVIEW OF OPERATIONS

First Mortgages


The first mortgage business has been a particular focus for the Group this
year. Paragon Mortgages advanced £381.6 million during the year ended 30
September 2001, an increase of 56.5% from the previous year's level of £243.8
million. At 30 September 2001, the loan book stood at £1,042.7 million, up
31.9% from £790.8 million at 30 September 2000. It is noteworthy that, during
August, monthly completions exceeded £40 million for the first time.
Furthermore, trading has remained robust since the year end, with application
and completion levels remaining high despite a reported slowdown in the wider
mortgage market.


Paragon Mortgages, now concentrating solely on serving the needs of the
private residential landlord, has continued to build its business on the basis
of a reputation for good service and innovation, maintaining a regular
research programme among landlords and intermediaries in order that we may
respond effectively to changing needs. A new service launched during the year
is Paragon Plus, our landlord internet portal offering tenant referencing,
insurance products, legal help and on-line information. Paragon Mortgages also
participates actively in the main professional forums within the buy to let
sector, and is regarded as a leading player in this developing market.


Arrears on the Paragon Mortgages book remain at very low levels, reflecting
the tight credit criteria and high underwriting standards applied and margins
on new business have held firm. Paragon Mortgages also earns fees on cases
received which do not match our profile, having entered into an arrangement
with a third party lender with alternative criteria. For referred cases which
subsequently complete, Paragon Mortgages receives an arrangement fee and an
ongoing servicing fee.

By 30 September 2001 the NHL book had reduced to £306.3 million, from £398.1
million at 30 September 2000. Despite the declining significance of this book
it continues to be actively managed and remains profitable.


Consumer Finance


We are pleased with the development of the consumer finance businesses which,
during the year, have been expanded by the addition of a retail finance
operation. Total advances in this division, at £415.7 million (2000: £266.2
million), were 56.2% higher than the previous year, with a book totalling £
757.1 million at 30 September 2001.


Activity in the division has remained firm since the financial year end with
completion levels in line with plan. In addition, a new point of sale
initiative has been launched, concentrating on the home improvement market.


Retail Finance


As I explained in my interim statement, the acquisition of Colonial Finance
(UK) Limited on 16 October 2000 advanced our plans to develop a point of sale
retail finance capability, with its lending focused on the more credit-robust
sectors such as furniture and carpets.


The period since acquisition has been one of intense activity. The
administration of the Colonial personal loans portfolio has been transferred
to our experienced in-house team where it has performed well. The business of
Colonial has been fully integrated within the Group and the retail loans
business has been rebranded under the name Paragon Retail Finance. In
addition, the sales team has been restructured and good progress has been made
in terms of retailer sign-ups.


Despite relatively poor market conditions for instalment credit during the
year, new loans of £81.9 million were advanced in the period. With the
business now integrated, we believe it is well positioned to take advantage of
the opportunities available within this market.


Personal Finance


Advances by Paragon Personal Finance were £195.3 million for the year,
compared with £165.9 million for the previous year, an increase of 17.7%.
Total personal finance loan assets amounted to £507.1 million at 30 September
2001, up 43.9% from the 2000 level of £352.4 million.


I explained in my interim statement that we had been promoting our secured
loan products in preference to unsecured loans with our finance brokers, to
take advantage of the higher quality and more defensive properties inherent in
our secured loan portfolio. As a result, secured loan completions rose
substantially in the year to £111.2 million from £71.7 million in the previous
year, while unsecured completions decreased to £84.1 million from £94.2
million, improving the risk weighting of the personal loan portfolio.


During the summer we launched a new internet based application processing
system, which has proved to be popular with our brokers and has resulted in an
increase in the volume of business submitted. The system will facilitate
future product innovations and enables us to offer a first class service to
our business suppliers.


The timeshare business, now rebranded Paragon Leisure Finance, has continued
to increase its lending volumes, although this remains a small business.
Consideration is currently being given to diversifying Paragon Leisure Finance
into other markets within the leisure industry. Direct lending via affinity
schemes has been scaled back as returns have been inadequate and arrangements
with affinity partners are being restructured to improve profitability in this
area.


Car Finance


Conditions have been difficult in the car finance market throughout the year.
Whilst demand for new cars and new car finance has increased and residuals
have improved, this has not followed through to an increase in demand for used
car finance, our primary target market. Despite this challenging environment,
the loan book for this business increased to £188.7 million at 30 September
2001 from £128.4 million at the previous year end, an increase of 47%.


Completions, at £138.5 million in the year, were 38.1% higher than in the
previous year. During the year Paragon Car Finance has expanded its
distribution capability amongst dealerships, promoting a strong service
proposition, while maintaining margins and quality of business. These two
aspects of loan quality and margin maintenance remain the principal areas of
focus for this business.


Funding


The Group continues to be active in the securitisation market, a source of
capital efficient matched funding for all our loan assets. In November 2000 a
£195 million securitisation of car and secured personal loans was completed
through Paragon Auto and Secured Finance (No. 1) PLC, our first issue to be
denominated in euros; in April a £340 million securitisation backed by loans
originated by Paragon Mortgages was completed under the name Paragon Mortgages
(No. 3) PLC; and in June £251 million of notes were issued by Paragon Personal
and Auto Finance (No. 1) PLC, backed by secured and unsecured consumer finance
assets (including loans acquired with the purchase of Colonial Finance (UK)
Limited) and car finance loans. Work is currently underway to complete a
further securitisation of personal finance and car finance loans, to include
the refinancing of loans currently securitised by Finance for People (No. 3)
PLC.


Conclusion


The performance of the Group over the past year has been strong, each business
having developed well despite increasing economic concerns as the year has
progressed.


As it has been evident for some time that a period of slower UK growth may be
in prospect we have deliberately adjusted our lending mix over the past year
in favour of higher quality lending areas. Thus we have seen strong growth in
our buy-to-let lending, which we consider has significant defensive qualities,
and also in the more credit-robust areas of consumer lending, such as secured
personal loans. Where appropriate elsewhere, we have tightened criteria,
removed unprofitable introducers and increased margins to provide the best
balance of products for growth of the business going forward.


Notwithstanding the gloomier economic outlook, trading activity remains at
high levels, with first mortgages particularly strong and we see no evidence
to date of deteriorating credit quality across our portfolios. Our cash
position is healthy and we shall consider actively acquisition opportunities
that may arise in the current environment. Whilst there may be challenging
times ahead, the components for delivering sustained, high quality earnings
remain as before, namely, effective underwriting and arrears management and
tight control of costs and margins. We have sought to apply these in the past
and will continue to do so going forward and your Board believes that Paragon
is well placed to meet the challenges that lie ahead.


We were sorry during the year to have to say goodbye to Charles Weiser, who
had been a non-executive director since October 1998 and who resigned
following taking up a position in Australia. I am delighted, however, to
welcome Christopher Newell, who joined the Board on 1 November and brings to
the Board a wealth of experience in the financial services sector.


CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year to 30 September 2001 (Unaudited)
                                                       2001    2000
                                                       £m      £m
Interest receivable                                    229.7   186.4
Interest payable and similar charges                   (156.9) (124.1)

Net interest income                                    72.8    62.3
Other operating income                                 15.3    14.0

Total operating income                                 88.1    76.3
Operating expenses                                     (35.6)  (30.6)
Provisions for losses                                  (12.0)  (10.2)

Operating profit being profit on                       40.5    35.5
ordinary activities before taxation
Tax charge on profit on ordinary                       (8.2)   (7.0)
activities

Profit on ordinary activities                          32.3    28.5
after taxation for the financial year
Equity dividend                                        (5.0)   (4.4)

Retained profit                                        27.3    24.1




Dividend - Rate per share                              4.2p    3.8p
Basic earnings per share                               28.5p   25.1p
Diluted earnings per share                             27.8p   24.9p


There have been no recognised gains or losses other than the profit for the
current and preceding years.

The results for the current and preceding years relate entirely to continuing
operations.

CONSOLIDATED BALANCE SHEET

30 September 2001 (Unaudited)
                                                2001             2000

                                                               (restated)
                                              £m      £m      £m      £m
Assets employed
Fixed assets
Tangible assets                               3.2             3.6
Loans to customers                            2,146.3         1,697.2
Investment in own shares                      4.8             4.8

                                                      2,154.3         1,705.6
Current assets
Stocks                                        8.9             11.5
Debtors falling due within one year           7.9             8.9
Investments                                   125.5           50.2
Cash at bank and in hand                      106.0           95.1

                                                      248.3           165.7

                                                      2,402.6         1,871.3

Financed by
Equity shareholders' funds
Called up share capital                               11.7            11.6
Share premium account                         63.5            62.5
Merger reserve                                (70.2)          (70.2)
Profit and loss account                       161.1           133.8

Reserves                                              154.4           126.1

                                                      166.1           137.7

Provisions for liabilities and charges                2.3             3.7
Creditors
Amounts falling due within one year           37.6            30.5
Amounts falling due after more than           2,196.6         1,699.4
one year

                                                      2,234.2         1,729.9

                                                      2,402.6         1,871.3


The preliminary financial information was approved by the Board of Directors
on 20 November 2001.

CONSOLIDATED CASH FLOW STATEMENT

For the year to 30 September 2001 (Unaudited)
                                                            2001        2000

                                                                     (restated)
                                                             £m          £m
Net cash inflow from operating activities                   80.5        58.0
Taxation                                                   (5.7)       (1.3)
Capital expenditure and financial investment              (322.4)     (226.2)
Acquisitions and disposals                                  0.3          -
Equity dividends paid                                      (4.7)       (4.2)

                                                          (252.0)     (173.7)
Management of liquid resources                             (51.1)      (9.9)
Financing                                                  339.2       171.5

Increase / (decrease) in cash in the year                   36.1       (12.1)




(a)     Reconciliation of operating profit to net cash flows from operating
activities
                                              2001             2000

                                                            (restated)
                                               £m               £m
                                              
    Operating profit                          40.5             35.5

                                              
    Provision for losses                      12.0             10.2

                                              
    Depreciation                              1.2              1.3

                                              
    Amortisation of broker commissions        20.1             12.7

                                              
    Decrease in stock                         0.3              0.8

                                              
    Decrease in debtors                       2.9               -

                                              
    Increase / (decrease) in creditors        3.5             (2.5)


Net cash inflow from operating activities     80.5             58.0


(b)     Analysis of cash flows for headings netted in the cash flow statement

                                                       2001         2000

                                                                 (restated)
                                                        £m           £m
Capital expenditure and financial investment
Net increase in loans to customers                   (321.6)       (222.9)
Other                                                 (0.8)         (3.3)

                                                     (322.4)       (226.2)


(c)     Reconciliation of net cash flow to movement in net debt

                                                          2001         2000
                                                           £m           £m

Increase / (decrease) in cash in year                     36.1        (12.1)
Cash inflow from increase in debt                       (338.1)      (171.4)
Cash movement from change in liquid resources             51.1         9.9

Change in net debt arising from cash flows              (250.9)      (173.6)
Loans acquired with subsidiary                          (162.4)         -

Movement in net debt in year                            (413.3)      (173.6)
Net debt at 1 October 2000                             (1,547.9)    (1,374.3)

Net debt at 30 September 2001                          (1,961.2)    (1,547.9)


NOTES TO THE FINANCIAL INFORMATION

For the year to 30 September 2001 (Unaudited)


 1. The financial information set out in this preliminary announcement has not
    been audited.

 2. A final dividend of 2.3p per share is proposed, payable on 1 February 2002
    with a record date of 4 January 2002.

 3. The financial information has been prepared using the same accounting
    policies as were used in preparing the statutory accounts of the Company
    for the year to 30 September 2000, with the exception that the balance
    sheet at 30 September 2000 has been adjusted to include the unamortised
    commission balances within 'Loans to Customers' rather than 'Prepayments
    and accrued income' as it is felt that this represents a more appropriate
    classification. As a consequence of this, the amortisation of these
    balances has been classified as a non cash movement within operating
    profit for the purposes of the cash flow statement.

 4. The results for the businesses of Colonial Finance (UK) Limited have not
    been separately disclosed on the face of the profit and loss account due
    to their integration with the rest of the Group.

 5. The basic earnings per share figures have been calculated by dividing the
    profit attributable to shareholders (being the profit on ordinary
    activities after taxation) by the weighted average number of ordinary
    shares outstanding during the period. For the year to 30 September 2001
    the weighted average number of ordinary shares outstanding was 113.4
    million (2000: 113.3 million).

 6. The diluted earnings per share figures have been calculated by adjusting
    the weighted average number of shares outstanding for the effects of all
    dilutive potential ordinary shares. For the year to 30 September 2001 the
    adjusted weighted average number of ordinary shares outstanding was 116.2
    million (2000: 114.6 million).

 7. The financial information set out in the announcement does not constitute
    the Company's statutory accounts for the years to 30 September 2000 or
    2001. The financial information for the year to 30 September 2000 is
    derived from the statutory accounts for that year. These statutory
    accounts have been delivered to the Registrar of Companies, contained an
    unqualified audit report and did not contain an adverse statement under
    sections 237 (2) or 237 (3) of the Companies Act 1985. The statutory
    accounts for the year to 30 September 2001 will be finalised on the basis
    of the financial information presented by the Directors in this
    preliminary announcement and will be delivered to the Registrar of
    Companies following the Company's Annual General Meeting.

 8. A copy of the Annual Report and Accounts for the year to 30 September 2001
    will be posted to shareholders in due course. Copies of this announcement
    can be obtained from The Paragon Group of Companies PLC, St. Catherine's
    Court, Herbert Road, Solihull, West Midlands, B91 3QE.


END