Interim Results

Paragon Group Of Companies PLC
22 May 2001


               BUY-TO-LET GROWTH FUELS PARAGON'S RECORD LENDING

The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
specialist lenders offering residential investment mortgages, personal finance
and vehicle finance, today announces its interim results for the six months
ended 31 March 2001.

Highlights include:


  * Pre-tax profit up 12.3% to £18.3m (2000 H1: £16.3m)

  * Earnings per share up 15% to 13.0p (2000 H1: 11.3p)

  * Lending volumes up 66% with record growth in buy-to-let mortgages

  * Group net loan assets up 27% to £2 billion (2000 H1: £1.57bn)

  * Acquisition and integration of retail credit business

  * Strong prospects for growth in all business areas

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

'Strong growth in both profits and new lending was again the main feature of
the Group's performance. Our lending divisions, consumer finance (including
car finance) and mortgages, achieved record results. In particular, Paragon
Mortgages has enjoyed its most successful half-year since launching in 1994
which reflects not only the buoyancy of the buy-to-let market, but also our
own increasing strength within it. Overall, we achieved a strong growth in
profits and look forward to continuing the profitable expansion of our
businesses across all areas.'

For further information, please contact:

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



CHAIRMAN'S STATEMENT

Strong growth in both profits and new lending was again the main feature of
the Group's performance over the six months to 31 March 2001. Profit before
tax increased by 12.3% to £18.3 million (2000 H1: £16.3 million) and earnings
per share increased to 13.0p (2000 H1: 11.3p). During the period, the Group
acquired Colonial Finance (UK) Limited, adding a presence in the retail
finance markets to our existing operations and, as a result, new loan
originations increased by 66% to £371.9 million (2000 H1: £224.1 million).
Excluding Colonial business, new loan originations grew by 47% to £329.1
million. By 31 March 2001, net loan assets were approaching £2 billion,
compared with approximately £1.57 billion at 31 March 2000, an increase of
27%.

I am pleased to report that your Board has declared an interim dividend of
1.9p per share, payable on 31 July 2001. This gives an increase of 11.8% from
last year's interim dividend of 1.7p.

Net interest income grew by 19.3% to £37.1 million (2000 H1: £31.1 million),
the improvement in margins reflecting the continuing increase in consumer
finance assets as a proportion of total loans to customers, and the favourable
interest rate environment as the outlook has switched to one of easing since
the autumn. Other operating income also increased to £6.9 million, up 6.2%
from the first half of 2000 (£6.5 million).

Operating costs were £17.8 million, compared with £15.4 million for the
corresponding period in 2000. At the year end we reported that operating
expenses were expected to rise as we integrate the business of Colonial
Finance (UK) Limited. The maintenance of tight cost control has contained the
increase in costs such that the cost to income ratio has risen only
marginally, to 40.5% from 40.1% last year. We expect the downward trend in the
ratio to resume next year.

Provisions for losses were £7.9 million for the period, compared with £5.9
million for the first half of 2000. The increase reflects the increased
proportion of the lending book attributable to consumer finance, where higher
provisions are compensated by higher margins and, also, the overall increase
in loan assets. Across all our new business areas the books are performing in
line with our expectations, supported by a consistent application of our
prudent credit policies.

After providing for corporation tax at a charge rate of 20%, which we
anticipate will apply for the year, and providing for the proposed interim
dividend, shareholders' funds at 31 March 2001 were £150.2 million.

The Group has continued to be actively engaged in the securitisation market. A
£340 million securitisation backed by loans originated by Paragon Mortgages
was completed in April 2001 under the name Paragon Mortgages (No. 3) PLC. This
issue was rated by Standard and Poor's and by Moody's and was attractively
priced. Indeed, the quality of Paragon's originations has resulted in some of
the junior bonds in earlier issues being recently upgraded from their original
rating. Work is currently underway to complete a securitisation of consumer
finance loans, which will include secured and unsecured consumer finance
assets (including loans acquired with the purchase of Colonial Finance (UK)
Limited) and car finance loans.

REVIEW OF OPERATIONS

The business has two principal divisions, Consumer Finance and First
Mortgages.

CONSUMER FINANCE

The Consumer Finance division operates in three areas of the consumer finance
market: retail finance, personal finance and car finance.

Retail Finance

The acquisition of Colonial Finance (UK) Limited on 16 October 2000 advanced
our plans to develop a point-of-sale retail finance capability, concentrating
on the furniture and carpet sectors, to complement the Group's consumer
finance activities. After making a provisional fair value adjustment of
approximately £12 million at the time of acquisition to bring the provisioning
and interest recognition policies into line with our own approach, Colonial
added personal loans of some £96 million and retail loans of some £64 million
to the Group's portfolio.

At the time of acquisition the administration of the personal and retail loan
books of Colonial was carried out by two outsourcing companies. After
reviewing the operation of the two books the collection and administration of
the personal loan portfolio, numbering over 19,000 accounts, was transferred
to our experienced in-house teams on 1 May. Administration of the retail
portfolio remains with the extant outsourcing company, with whom we are
working closely. The staff and business of Colonial have now been integrated
within the Group and the retail loans business was rebranded in January under
the name Paragon Retail Finance, to coincide with the January Furniture Show.
The personal loans portfolio has been integrated within Paragon Personal
Finance, our established personal lending division.

New retail finance loans advanced in the period from acquisition to 31 March
2001 amounted to £41.5 million. The division currently has retailer
relationships with just over 2,000 outlets. Our immediate task is to expand
the distribution to achieve the desired level of growth in this business area.
To this end discussions are currently in progress with a number of other
retailers in order to increase this number and, in turn, increase the level of
market penetration.

Personal Finance

During the period Paragon Personal Finance advanced £93.8 million (2000 H1: £
73.4 million), an increase of 27.8% from the level achieved during the
corresponding period last year. By 31 March 2001 the net loan book (excluding
the acquired Colonial assets) was £404.4 million, 14.8% higher than at 30
September 2000 (£352.4 million).

We continue to be encouraged by the increasing volumes achieved by the secured
personal finance product, in respect of which completions were £50.7 million
during the six months to 31 March 2001, compared with £27.8 million in the
first half of 2000. Reflecting the quality of this portfolio we have placed
increasing emphasis on this product in our relationships with our finance
brokers, to take a greater proportion of secured rather than unsecured loans
during the period.

To provide the basis for further expansion of this business, we have increased
the number of introducers through whom we accept personal loans applications
to 179 from 155 during the period and endeavoured to offer imaginative
products to advance our competitive position. Competition in the market for
direct loans has pushed returns on Affinity business down to levels which fall
short of our requirements and we are currently restructuring our affinity
arrangements to bring returns up to acceptable levels. Timeshare, however
continues to yield very satisfactory returns and we expect further growth in
our activity in this market.

Car Finance

During the period, Paragon Car Finance advanced £75.1 million (2000 H1: £40.5
million), an increase of 85.4%. At 31 March 2001 the net loan book was, at £
169.6 million, 32.1% higher than at 30 September 2000 (£128.4 million). Whilst
the overall car market remained subdued for most of the period, there have
been recent signs of recovery. The level of new car registrations showed an
increase at the end of the calendar year, suggesting an improvement in the
level of consumer confidence, although a recovery in demand for new and used
car finance has yet to be seen.

Recent consolidation activity amongst companies participating in car finance
and indeed the prospect that two of the largest players in the industry might
combine has added to uncertainty amongst car dealers over the future
competitive supply of finance to support sales. That uncertainty has
contributed to the further penetration of Paragon Car Finance amongst
dealerships. As a means of broadening distribution, Paragon Car Finance
recently entered into a joint venture agreement with a major business
introducer and a number of additional similar arrangements are currently under
discussion. Such arrangements have the advantage of securing distribution and
volumes. In addition, a number of new product initiatives are currently under
consideration.

FIRST MORTGAGES

At the year end, following a strong recovery of business volumes in the second
half of 2000, we reported that the strength of Paragon's position in the Buy
to Let market gave us confidence for strong growth in the current financial
year. Indeed, Paragon Mortgages has enjoyed the most successful half year
since its launch in 1994. Completions in the six months to 31 March 2001 were
£161.5 million, compared to £110.2 million for the first half of 2000,
representing an increase of 46.6%. At 31 March, the Paragon Mortgages book was
£899.1 million, an increase in balances of 13.7% from £790.8 million at 30
September 2000. With pipeline business at 31 March at record levels, we
anticipate lending volumes in the second half will also be strong. It is
noteworthy that our Financial Adviser Confidence Tracking index for the
mortgage market increased in the first quarter of 2001 to its highest level
since 1999.

During the period Paragon Plus, our eCommerce landlord portal, was
successfully launched, offering tenant referencing, a variety of insurance
products, legal help and on-line information to existing Paragon customers and
new customers alike. Paragon Plus is a platform for the first in what we
intend to be a series of ancillary products developed to increase and enhance
the transactional relationship between Paragon Mortgages and its property
investor customers. In addition a new product has been launched enabling
landlords to finance the purchase and refurbishment of property to let,
capitalising on tax breaks announced in the Chancellor's budget statement and
receiving considerable press coverage.

The high quality of mortgages for Buy to Let properties, which by March
accounted for 99% of all completions, combined with the relatively
unattractive returns expected from the retail mortgage sectors for the
foreseeable future, led to Paragon's recent withdrawal of all retail mortgage
products. In reality, our activity in the retail sectors has been low in
recent years but the benefits of the focus this change has given the business
are considerable, as all new product development, distribution and servicing
initiatives are now concentrated on meeting the wider needs of the landlord.

The significance of the NHL book to the Group continues to decline. Balances
at 31 March were £347.3 million, compared with £398.1 million at 30 September.
The redemption level during the period equates to an annualised rate of 21%,
slightly less than the rate of 22% recorded during the previous year. During
the period cash receipts from NHL customers in arrears were 99.1% of the
amounts contractually due, compared to 103.6% in 2000.

CONCLUSION

In the six months to 31 March 2001 the Group has continued to enjoy strong
organic growth, steady growth of profits and has successfully acquired and
integrated Colonial Finance (UK) Limited, adding a further line to our
business activities. Our task now is to continue the profitable expansion of
our businesses by delivering regular product innovations to meet the needs of
our ever increasing range of customers, while maintaining the very high
service levels which have been achieved across all our business areas.

Although the US economy is clearly slowing down, the prevailing view amongst
economists is that the UK is well placed to maintain growth, albeit at lower
levels in the short term than might have been expected a year ago. In
rebuilding Paragon's business over the past six years we have sought to
structure our operations to accommodate the inevitable cyclical nature of the
economy, focusing on high quality underwriting, supported by our highly
regarded collections operation and securitised matched funding. We believe,
therefore, that our businesses are well positioned to deal with both the
opportunities of building on recent successes and meeting the inevitable
challenges in a strong and robust manner.

We remain confident about the outlook for the remainder of the year.

Jonathan Perry

Executive Chairman

22 May 2001

CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2001 (Unaudited)

                                       Six months  Six months      Year to
                                           to          to
                                        31 March    31 March    30 September
                                          2001        2000            2000
                                           £m          £m            £m

Interest receivable                       112.9       88.6          186.4
Interest payable and similar             (75.8)      (57.5)        (124.1)
charges

Net interest income                        37.1        31.1          62.3
Other operating income                      6.9         6.5          14.0

Total operating income                     44.0        37.6          76.3
Operating expenses                       (17.8)      (15.4)        (30.6)
Provisions for losses                     (7.9)       (5.9)        (10.2)

Operating profit being profit on           18.3        16.3          35.5
ordinary activities before taxation
Tax charge on profit on ordinary          (3.6)       (3.2)         (7.0)
activities

Profit on ordinary activities              14.7        13.1          28.5
after taxation

Equity dividend                           (2.2)       (2.0)         (4.4)

Retained profit                            12.5        11.1          24.1

Dividend - Rate per share                  1.9p        1.7p          3.8p
Basic earnings per share                  13.0p       11.3p         25.1p
Diluted earnings per share                12.7p       11.2p         24.9p

There have been no recognised gains or losses other than the profit for the
periods shown.

The results for the periods shown above relate entirely to continuing
operations.

CONSOLIDATED BALANCE SHEET
At 31 March 2001 (Unaudited)
                                           31 March  31 March    30 September
                                             2001      2000          2000
                                                    (restated)    (restated)
ASSETS EMPLOYED                               £m        £m            £m

Fixed assets
Tangible assets                               3.5       3.2           3.6

Loans to customers                        1,995.7   1,567.9       1,697.2
Investment in own shares                      4.8       2.8           4.8

                                          2,004.0   1,573.9       1,705.6

Current assets
Stocks                                        9.5      13.1          11.5
Debtors falling due within one year           6.6       6.4           8.9
Cash at bank and investments                177.1     175.9         145.3

                                            193.2     195.4         165.7

                                          2,197.2   1,769.3       1,871.3

FINANCED BY
Equity shareholders' funds                  150.2     124.6         137.7
Provisions for liabilities and                2.6       3.8           3.7
charges
Creditors
Amounts falling due within one year          34.0      27.3          30.5
Amounts falling due after more than       2,010.4   1,613.6       1,699.4
one year
                                          2,197.2   1,769.3       1,871.3

The interim financial information was approved by the Board of Directors on 22
May 2001.

CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2001 (Unaudited)

                                       Six months  Six months      Year to
                                           to          to
                                        31 March    31 March    30 September
                                          2001        2000          2000
                                                   (restated)    (restated)
                                           £m          £m            £m

Net cash inflow from operating            39.0        28.1           58.0
activities
Taxation                                 (1.3)           -          (1.3)
Capital expenditure and financial
investment
Net increase in loans to                (153.1)     (81.4)        (222.9)
customers
Other                                     (0.4)      (0.1)          (3.3)
Acquisitions and disposals                  0.9          -              -
Equity dividends paid                     (2.4)      (2.3)          (4.2)
Management of liquid resources              7.5     (47.8)          (9.9)
Financing                                 150.1       84.5          171.5

Increase / (decrease) in cash in           40.3     (19.0)         (12.1)
the period

1. Reconciliation of operating profit to net cash inflow from operating
    activities

    Operating profit                       18.3       16.3          35.5
    Provision for losses                    7.9        5.9          10.2
    Depreciation                            0.5        0.5           1.3
    Amortisation of broker commissions      6.9        4.7          12.7
    Payments against provisions               -      (0.4)             -
    Decrease in stock                       0.2        1.2           0.8
    Decrease in debtors                     4.2        1.8             -
    Increase / (decrease) in creditors      1.0      (1.9)         (2.5)

                                           39.0       28.1          58.0

2. Reconciliation of movement in cash with movement in net debt

Increase / (decrease) in cash in the       40.3      (19.0)       (12.1)
period
Cash inflow from increase in debt       (150.1)      (84.5)      (171.4)
Cash movement from change in liquid       (7.5)        47.8          9.9
resources
Movement in net debt                    (117.3)      (55.7)      (173.6)
Loans acquired with subsidiary          (162.4)           -            -
Opening net debt                      (1,547.9)   (1,374.3)    (1,374.3)

Closing net debt                      (1,827.6)   (1,430.0)    (1,547.9)


NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months ended 31 March 2001 (Unaudited)

1. The interim financial information, which has not been audited, has been
   prepared on the basis of the accounting policies set out in the group
   accounts for the year ended 30 September 2000. 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.

2. An interim dividend of 1.9p per share is proposed, payable on 31 July 2001
   with a record date of 29 June 2001.

3. 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 six months ended 31 March
   2001 the weighted average number of ordinary shares outstanding was 112.8
   million (2000: 116.3 million). For the year ended 30 September 2000 the
   weighted average was 113.3 million.

4. 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 six months ended 31 March 2001
   the adjusted weighted average number of ordinary shares outstanding was
   115.7 million, (2000: 117.1 million). For the year ended 30 September 2000
   the adjusted weighted average was 114.6 million.

5. The balance sheets at 31 March 2000 and 30 September 2000 have been
   adjusted to include the unamortised commission balances within 'Loans to
   Customers' rather than 'Other debtors' 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.

6. The figures shown above for the year ended 30 September 2000 are not
   statutory accounts. A copy of the statutory accounts has 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.

7. A copy of the Interim Statement will be posted to shareholders and
   additional copies can be obtained from The Paragon Group of Companies PLC,
   St. Catherine's Court, Herbert Road, Solihull, West Midlands, B91 3QE.