Interim Management Statement

RNS Number : 1547N

Paragon Group Of Companies PLC

24 July 2014

 



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 April 2014 to date, including a commentary on the unaudited financial information for the period from 1 October 2013 to 30 June 2014.

The financial performance of the Group remains strong and in line with management's expectations.  Operating profits for the nine months to June 2014 were £88.3 million, compared with £75.7 million for the corresponding period in the previous year, representing an increase of 16.6%.  Pre-tax profits, inclusive of a credit of £0.5 million for fair value hedging items, were £88.8 million for the nine month period. 

Trading

The Group's three business divisions have all made strong progress in the period to 30 June 2014.

In Paragon Mortgages, conversions from the strong pipeline at the half year generated new completions of £187.0 million during the quarter, taking year to date advances to £456.3 million (compared to £234.9 million in the same period in 2013).  Despite accelerated conversion numbers the pipeline has been maintained at £349.8 million at the end of June.  The portfolio continues to demonstrate excellent credit metrics, with the core three month plus arrears rate reducing from 30 basis points at 31 March to 28 basis points at the end of June 2014.  The equivalent measure in June 2013 was 38 basis points.  Redemption levels have maintained the trend reported at the interim, reflecting the improving housing market and the seasoning of the post-2010 portfolio.

Idem Capital, the Group's portfolio purchase division, invested a further £47.5 million during the quarter, taking net investments for the year to date to £169.5 million (nine months to 30 June 2013: £92.7 million). Cash receipts from the acquired portfolios remain in line with projections.  Idem continues to see a strong pipeline of opportunities in the UK debt purchase market.

Paragon Bank's initial focus is on the establishment of distribution arrangements for its car finance lending products, through brokers and car dealers under the Paragon Car Finance brand.  The offering has been well received by the intermediaries engaged to date and a roll-out across these distribution channels is on-going.  Lending volumes, whilst modest at this early stage, should expand significantly over time with the broadening of the distribution network.  The first savings products have been launched, initially on a small scale to test delivery and operational systems, before a broader launch to coincide with higher lending volumes.  Paragon Bank's secured personal loan and buy-to-let products are on schedule for September 2014 launches.

Cash and funding

The Group's available cash and capital resources remain strong.  At 30 June 2014, free cash balances were £198.0 million (£169.4 million at 31 March 2014).

The Group completed its latest securitisation, Paragon Mortgages (No.20) PLC ("PM20") on 17 July 2014.  At Libor plus 68 basis points, the pricing of the senior notes improved from the level achieved in its previous securitisation (Paragon Mortgages (No.19) PLC) and evidences further progress in the Group's access to the capital markets.  As part of the PM20 process the notes in Paragon Mortgages (No.16) PLC, the Group's first securitisation following its resumption in lending in 2010, will be refinanced in October at its optional call date, generating a lower cost of funding for the underlying mortgage loans and releasing about £30.0 million of net cash back to the Group.  PM20 takes total issuance by the Group to £953 million across the last twelve months, underpinning Paragon's position as a leading issuer in the UK securitisation market.

At the beginning of the quarter Idem Capital, through an SPV subsidiary, entered into a £55.0 million bank facility with Goldman Sachs. The loan funded certain unsecured loan portfolios previously acquired by Idem and the proceeds were used to refinance an intra-Group loan.  The facility marks a further step in the funding diversification strategy being pursued by the Group.

Management and people

As previously announced, Richard Woodman assumed the role of Group Finance Director from 1 June 2014.  Nicholas Keen, the former Group Finance Director, has become Chairman of Idem Capital, and Dave Newcombe, the Group's former Director of Consumer Loan Servicing, has succeeded Richard in the role of Managing Director of Idem Capital.  Finally, in September, Pam Rowland will be joining the Group as Chief Operating Officer.  Pam is currently Managing Director Change Delivery at Barclays UK Retail and Business Banking.

Our people are important to us and to the future growth and development of the Group.  The training and development of staff together with our rigorous recruitment process are a key part of our organic growth strategy and underpin the strong progress we have made.  In May 2014 we achieved Investor In People Champion status, which has put us in the top 1% of companies in the UK.

Outlook

The latest quarter has built on the progress delivered in the first half of the financial year and the Board is confident that performance will meet expectations for 2014.

The UK economic environment has established a positive trend which appears set to continue and the various markets in which the Group operates are each displaying strong, encouraging and sustainable growth prospects.  It is our intention to expand further into each of our sectors adding product and distribution to enhance returns.

The Group's strong asset quality and low risk appetite means it is well placed to meet the anticipated increases in interest rates.

For further information, please contact:

Nigel S Terrington                               0207 786 8455

Chief Executive

Richard Woodman                               0121 712 2607

Group Finance Director

Kathryn Rhinds                                    0121 712 3161

PR Manager

 

END

 

 

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