Interim Management Statement

RNS Number : 3616W

Paragon Group Of Companies PLC

28 July 2009

 



THE PARAGON GROUP OF COMPANIES PLC

Interim Management Statement

The Paragon Group of Companies PLC today publishes its Interim Management Statement based on the performance of the business from 1 April 2009 to date, including a commentary on the unaudited financial information for the period from 1 October 2008 to 30 June 2009.

The financial performance during the third quarter of the financial year was similar to the second quarter, resulting in operating profits (before exceptional and fair value items) for the nine months to 30 June 2009 of £30.2 million. Pre-tax profits, inclusive of an exceptional profit of £4.6 million on the purchase of Group securitised bonds and a charge of £3.4 million for fair value hedging items, were £31.4 million for the period.  

The performance of the business since the end of the third quarter has been consistent with that quarter.

Trading

Whilst economic conditions have remained difficult over the period, requiring continued close management of the portfolio, the combination of low interest rates and sound account management by our experienced team has ensured that arrears levels have remained low when compared with market wide data.  The proportion of the buy-to-let portfolio three months or more in arrears improved slightly to 171 bp at 30 June 2009, compared to 174 bp at 31 March 2009.  Furthermore, the impact of the funding shortage on the availability of competitor products, combined with our customer retention programme, has served to keep the level of redemptions low.  

Income for the third quarter is slightly ahead of our expectations as a result of the low redemption rate, whilst costs were in line with our expectations.  The charge for bad debts for the quarter was lower than the average quarterly charge for the first half of the year as a result of the more stable arrears position and the success of our collections methodology.   

Cash generation from the Group's SPVs has remained strong over the period and, as a result, free cash balances increased during the quarter to £89.2 million.

Business Activity

Credit market conditions continue to constrain new lending, with activity being limited to further advances to existing borrowers. 

In the half-yearly financial report, we outlined a number of initiatives under consideration. These included the purchase of securitised bonds issued by Group companies available for prices significantly below their nominal value. To date, we have purchased £23.2 million nominal value of A-rated, AA-rated and AAA-rated securities at a total cost of £11.7 million, creating an exceptional profit of £11.5 million. Of this, £4.6 million is included in the results for the third quarter, whilst the remainder will be credited to the profit and loss account in the current quarter.

Good progress has been made on the other business initiatives on which we reported at the half year, including third party servicing and portfolio acquisitions and we expect to update shareholders further on these projects at the year end.

Outlook

We expect UK interest rates to remain at the current low levels until at least the end of the calendar year, which will continue to have a positive impact on borrower payment performance. Whilst there have been some recent signs of improvement in the funding markets, we do not expect a significant reopening in the near future, hence we expect competition to remain subdued and mortgage redemption rates to remain low. 

The Group remains financially strong and, as has been demonstrated in recent months, continues to manage its portfolio carefully in the weakened economic environment. The Group continues to work on a range of income generating initiatives through additional services to landlords, third party administration, portfolio acquisitions and debt purchases.

For further information, please contact:

Nigel S Terrington       0121 712 2024

Chief Executive

Nicholas Keen            0121 712 2000

Finance Director

Andy Berry                 020 7544 3044

Fishburn Hedges

 

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