Interim Management Statement

RNS Number : 7492W

Paragon Group Of Companies PLC

31 January 2013

 



THE PARAGON GROUP OF COMPANIES PLC

Interim Management Statement

The Paragon Group of Companies PLC ("Paragon" or the "Group") today publishes its Interim Management Statement based on the performance of the business from 1 October 2012 to date, including a commentary on the unaudited financial information for the period from 1 October to 31 December 2012.

The financial performance of the Group remained strong during the period to 31 December 2012, in line with management's expectations, generating operating profits (before fair value items) of £23.7 million, compared with £20.3 million for the corresponding period in the previous year, a 16.7% increase.  Pre-tax profits, after a charge of £0.2 million for fair value hedging items, were £23.5 million for the period. 

Trading

Redemptions across the loan books remain low and performance continues to be strong.  At 31 December 2012 arrears over three months on the buy-to-let portfolio, including acquired loans and receivership cases, were 44bp, comparing favourably with 64bp of arrears at 31 December 2011 and with the 48bp of arrears at 30 September 2012.  The credit performance of the consumer loan portfolios, including acquired portfolios, has been in line with management's expectations during the period.

During the quarter, £45.6 million of new buy-to-let loans and £0.5 million of further advances were made.  At 31 December 2012 the pipeline of new business amounted to £102.7 million.  The credit quality of the new lending business written in the period has remained excellent.  Following the increase in funding capacity the Group has enlarged and extended its lending activities and we anticipate increased business volumes during the second quarter.

The loan portfolios acquired by the Group's investment division, Idem Capital since 2009 have continued to perform well.   Since 1 October 2012, a further £36.7 million has been invested in portfolios of unsecured consumer loans. A number of opportunities for further investment are being considered, ranging from early stage portfolio analysis to cases where purchase negotiations are well advanced. 

Cash generation from the Group's SPVs and from the acquired portfolios remained strong over the period.  Free cash balances stood at £154.4 million at 31 December 2012, compared with £127.7 million at 30 September 2012.

Funding

In October 2012 the Group completed, through its subsidiary Paragon Mortgages (No. 17) PLC, a £200 million securitisation transaction consisting exclusively of buy-to-let assets. The attractive pricing reflected the strong credit profile of Paragon's buy-to-let assets and our experience as an issuer of high quality bonds in the mortgage backed securities market. This was only the second public transaction of buy-to-let loans since the credit crunch (the first being Paragon Mortgages (No. 16) PLC in the previous year).

In November 2012 the Group announced the renewal of its mortgage warehouse facility with Macquarie Bank Limited (London Branch), ("Macquarie"), with an increase in the facility to £250 million from £200 million. The facility, rated by Fitch Ratings, will be available until 13 December 2016 (and for drawing until 13 December 2014). This extension and increase in the loan facility means that the total warehouse capacity within the Group is now £450 million and supports our growth plans in the buy-to-let market, where we see continued landlord confidence in the sector, supported by strong tenant demand.  Paragon continues to look at funding opportunities to support growth in the Group.

Business development

In December we announced, in response to press speculation, that the Group was in the early stages of considering the acquisition of Hampshire Trust plc, a wholly owned bank subsidiary of National Counties Building Society.  These discussions have now terminated.  Paragon will continue to explore other avenues for the development of its business, including the establishment of a banking subsidiary in the Group.

Outlook

During the period, the Group has made excellent progress, successfully managing the portfolio of originated and acquired assets, seeking further opportunities to expand by acquisition, developing the new lending business, increasing the funding available for buy-to-let mortgage originations and completing a further securitisation. The Group will continue to pursue this strategy.

For further information, please contact:

Nigel S Terrington                    0121 712 2024

Chief Executive

Nicholas Keen                          0121 712 2000

Finance Director

Paul Farrow                             0207 544 3040

Fishburn Hedges

 

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