Interim Management Statement

RNS Number : 9619Y

Paragon Group Of Companies PLC

31 January 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 October 2013 to date, including a commentary on the unaudited financial information for the period from 1 October to 31 December 2013.

The financial performance of the Group remained strong during the period to 31 December 2013, in line with management's expectations, generating operating profits (before fair value items) of £26.9 million, compared with £23.7 million for the corresponding period in the previous year, a 13.5% increase.  Pre-tax profits, after a credit of £0.2 million for fair value hedging items, were £27.1 million for the period. 

Trading Activity

The Group's loan portfolio continues to perform well, generating strong profits and cash flows.  Redemptions across the loan books remain low and the credit performance across the whole portfolio remains in line with our expectations. 

During the quarter, loan completions by Paragon Mortgages were £140.2 million, more than a threefold increase from £45.6 million in the corresponding period of the previous financial year.  At 31 December 2013 the pipeline of new business amounted to £222.5 million, which augurs well for volumes in the second quarter.  The credit quality of the new lending business written in the period has remained high. 

At 31 December 2013, arrears over three months on the buy-to-let portfolio, including acquired loans and receivership accounts but excluding repossessed and receivership cases held for sale, were 31bp, compared with 44bp at 31 December 2012 and 35bp at 30 September 2013. 

The loan portfolios acquired by the Group's investment division, Idem Capital have continued to perform well.   During the period since 1 October 2013, including a transaction which has been signed and is expected to complete today, a further £105.7 million of cash has been committed to the purchase of portfolios of secured and unsecured consumer loans. We expect further investment opportunities to arise through the ongoing process of financial institutions disposing of loan assets and a number of opportunities for further investment are being considered, ranging from early stage portfolio analysis to cases where purchase negotiations are well advanced.

During the quarter the servicing of a further 26,300 accounts commenced and a number of other potential servicing arrangements are currently under review.

Cash generation from the Group's SPVs and from the acquired portfolios remained strong over the period, financing further investment in loan portfolios and credit enhancement for mortgage originations. The Company also purchased the freehold of the Group's head office building during the period at a total cost of £24.7 million.  Free cash balances stood at £148.3 million at 31 December 2013, compared with £170.8 million at 30 September 2013.

Funding

On 14 January 2014 the Group launched an issue of 6.125% unsecured retail bonds under the £1.0 billion Euro Medium Term Note Programme announced in January 2013.  The issue closed early, on 23 January 2014, having raised £125 million.  This launch follows the success of the previous issue under the programme in March 2013.  The bonds allow the Group to diversify its funding base and extend the tenor of its borrowings.

Also during January 2014, the £200 million mortgage warehouse facility provided by Lloyds Bank was renewed on finer terms and is now available for drawing until June 2016.

Outlook

As we reported at the year-end, the Group has applied to the Prudential Regulation Authority and the Financial Conduct Authority for authorisation to establish a banking subsidiary which will take deposits and make, initially, car and second mortgage loans, with other product lines to be established in due course.  The application process and operational preparations are well advanced and, subject to regulatory approval, we expect to launch the bank during the current quarter of 2014.  Further information will be provided in due course.

During the period, the Group's loan portfolio has performed well, new buy-to-let lending has increased significantly and Idem has made significant further investments in loan portfolios as well as increasing its servicing of third party loans. The Group will continue to pursue the strategy of prudent management of its portfolios, whilst seeking growth through new buy-to-let and, in due course, consumer finance originations and through portfolio acquisitions.

For further information, please contact:

Nigel S Terrington                    0121 712 2024

Chief Executive

Nicholas Keen                          0121 712 2060

Finance Director

Paul Farrow                             0207 544 3040/3042

Fishburn Hedges

 

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