Interim Management Statement

RNS Number : 2287G

Paragon Group Of Companies PLC

28 January 2010

THE PARAGON GROUP OF COMPANIES PLC

The Paragon Group of Companies PLC today publishes its Interim Management Statement based on the performance of the business from 1 October 2009 to date, including a commentary on the unaudited financial information for the period from 1 October to 31 December 2009.

The Group's financial performance remained strong. Income, operating expenses and provisions for losses during the first quarter of the financial year were in line with management's expectations, resulting in operating profits (before fair value items) of £13.2 million. Pre-tax profits, inclusive of a charge of £0.1 million for fair value hedging items, were £13.1 million for the period.

Trading

Our portfolio of loans continues to perform in line with our expectations. Redemptions across the loan books remain low, at levels similar to the second half of the year ended 30 September 2009, whilst customer payment performance continues to be superior to market wide data. Arrears on the buy-to-let portfolio improved further during the quarter despite seasonal payment disruption typical of the Christmas period, with the percentage of accounts three months or more in arrears falling to 150bp at 31 December 2009 from 154bp at 30 September 2009.

Cash generation from the Group's SPVs remained strong over the period, with free cash balances increasing during the quarter to £98.2 million from £84.0 million at 30 September 2009.

Business Activity

The Group continues to finance buy-to-let and secured consumer finance further advances through its current securitisation arrangements. The funding markets have improved further, with significant tightening in securitisation credit spreads having occurred since the market reopened in January and new securitisation issues being planned by some market participants. We continue to monitor developments in the securitisation markets and the potential for new issuance by the Group on terms which meet our requirements to support new lending.

Good progress has been made on the business initiatives on which we reported at the year end, with these activities, comprising third party servicing, services to the private rented sector and the portfolio acquired in August 2009, operating profitably. We are currently pursuing a number of new opportunities to further develop these areas.

Outlook

The Group remains financially strong, managing its portfolio carefully in the weakened economic environment. UK interest rates are expected to remain at low levels during 2010, which will continue to have a positive impact on borrower payment performance, and we expect mortgage redemption rates to remain low. We will aim to recommence lending when funding market conditions are appropriate and in the meantime we shall continue to seek new business opportunities to supplement growth.