Interim Results

Paragon Group Of Companies PLC
21 May 2002


                            STRONG PROFITS BUOYED BY

                               BUY-TO-LET GROWTH

The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
specialist lenders offering buy-to-let mortgages, unsecured and secured personal
loans, vehicle finance and retail finance, today announces its interim results
for the six months ended 31st March 2002.

Highlights include:


  • Pre-tax profit up 12.0% to £20.5m (2001 H1:£18.3m)

  • Earnings per share up 10.8% to 14.4p (2001 H1: 13.0p)

  • Buy-to-let mortgage advances up 48.6% to £240m (2001 H1: £161.5m)

  • Total new lending up 16.9% to £434.9m (2001 H1: £371.9m)

  • Group net loan assets up 14.7% to £2,288.8 m (2001 H1: £1,995.7 m)

  • Interim dividend up 10.5% to 2.1p (2001 H1: 1.9p)

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

'Strong growth in lending, particularly in buy-to-let mortgages for professional
landlords, has underpinned growth in profitability in the first half. The
business is well placed to benefit further from demographic trends that are
producing an increased long-term demand for private rented properties. Our
pipeline of mortgage business is at an all-time high and with trading activity
buoyant across the Group, we remain confident of meeting our objectives in the
financial year.'

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

CHAIRMAN'S STATEMENT

Growth in profits, assets and lending volumes was again the key feature of the
Group's performance over the six months to 31 March 2002. Profit before tax
increased by 12.0% to £20.5 million (2001 H1: £18.3 million) and earnings per
share increased to 14.4p (2001 H1: 13.0p). New loan originations increased by
16.9% to £434.9 million (2001 H1: £371.9 million), with the emphasis of lending
continuing to shift towards loans secured on residential property (70.2% of
advances compared to 57.1% H1 2001). At 31 March 2002, net loan assets were
£2,288.8 million, compared with £2,146.3 million at 30 September 2001, and
£1,995.7 million at 31 March 2001, an increase of 14.7% over the year.

In view of these strong results your Board has declared an interim dividend of
2.1p per share, payable on 31 July 2002. This gives an increase of 10.5% from
last year's interim dividend of 1.9p consistent with our progressive dividend
policy.

Net interest income grew by 7.0% to £39.7 million (2001 H1: £37.1 million) and
other operating income also increased, to £8.8 million, up 27.5% from the first
half of 2001 (£6.9 million), in part reflecting increasing insurance penetration
on advances.

Operating costs were £17.7 million, compared with £17.8 million for the
corresponding period in 2001. The focus on operating costs outlined in the year
end statement has resulted in the cost to income ratio improving from 40.5% in
the first half of 2001 to 36.5% for the six months ended 31 March 2002 and we
expect to make further improvements to this ratio during the remainder of the
financial year.

Provisions for losses of £10.3 million for the period were in line with our
expectations (£7.9 million 2001 H1), reflecting increased charges against the
consumer finance assets as this portfolio has grown. In all our new business
areas the books are performing to plan, and we have seen no deterioration in
credit quality across the portfolio.

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 2002 were £181.1 million.

The Group continues to be actively engaged in the securitisation market. In
December 2001 a £244.7 million securitisation backed by secured and unsecured
personal loans, car finance and retail credit loans was completed under the name
Paragon Personal and Auto Finance (No. 2) PLC. A £500 million securitisation
backed by loans originated by Paragon Mortgages was completed in March 2002
under the name Paragon Mortgages (No. 4) PLC. Both issues were rated by Standard
and Poor's, Moody's and Fitch and were attractively priced. Work is currently in
progress to repackage the old book loans under the one vehicle company,
Homeloans (No. 4) PLC. Completion of this transaction is anticipated shortly.

In February 2002 the Group entered into a new £400 million warehouse facility
for the funding of originations pending securitisation. This facility, which is
rated by Moody's Investors Service, is available to support loan originations
until February 2005.

REVIEW OF OPERATIONS

FIRST MORTGAGES

The first mortgage business has continued to grow strongly. At 31 March 2002 the
Paragon Mortgages book was £1,197.7 million, an increase of 33.2% from £899.1
million at 31 March 2001. Total advances increased by 48.6% to £240.0 million,
from £161.5 million for the corresponding period last year. Our high credit
standards have resulted in a portfolio of high quality, with very low arrears
levels within the book.

Current trading remains buoyant. In April 2002 the business recorded its highest
level of completions to date at over £50 million and, with the pipeline of
business in progress at an all-time high, we are confident of further volume
growth in the second half of the financial year.

Recent evidence from the housing market suggests that we are in a period of
strong house price growth. There are many factors that have contributed to this:
good affordability driven by the low cost of borrowing; a significant and
growing shortage of supply in housing; and a benign outlook for the economy.
Leading commentators disagree on the prognosis, but some moderation of house
price inflation in the medium term is likely.

Undoubtedly the strong performance of housing assets has played a key role in
encouraging many new buy-to-let landlords into the market for the first time,
particularly when compared to the poor recent performance of equities. These
novice landlords, less experienced in property selection, have contributed to
over-supply in certain geographical locations and for certain property types.
However, as illustrated in the latest reports from FPDSavills and The
Association of Residential Letting Agents, whilst prime central London property
may have been the subject of some over-investment (and a fall in demand
following the events of 11 September), the situation in the rest of the country
is more balanced.

Paragon's product and service focus remains on the more experienced property
investors, accounting for some 80% of new business flows. There are a number of
benefits in such an approach; professional investors have an established track
record and consider demand and yield issues when buying property (eschewing
property 'hot spots' where yields may be low); they manage property more
proactively (usually personally rather than through an agent); and they have a
portfolio of properties rather than just one or two, and therefore a spread of
risk. As a result, they are less vulnerable to a correction in the property
market than over extended owner occupiers or amateur landlords, and our
portfolio is underweight in areas of higher property values. London property,
for example, comprises only 13% of our book compared to a CML average for the
private rented sector of 28%.

Over the long term, we expect demand in the private rented sector to continue to
grow as a result of population growth and changing demographic dynamics over the
next 20 years. Our view has been supported recently by the conclusion of the
influential Housing Futures 2012 Report, from the Centre of Economics and
Business Research, that the private rented sector would have to grow by 40% over
the next 10 years in order to meet demand for rental property.

The NHL book reduced to £268.4 million at 31 March, from £306.3 million at 30
September. Although steadily declining in significance, this book continues to
be carefully managed and recorded a satisfactory performance over the period.

CONSUMER FINANCE

At 31 March 2002 the Consumer Finance book stood at £781.7 million, up from
£714.3 million at 31 March 2001.

Retail Finance

Whilst retail sales volumes have been buoyant, instalment credit has remained
subdued across the market. Against this background, Paragon Retail Finance
produced a satisfactory performance in line with plan, advancing loans of £42.9
million, compared with £41.5 million for the first half of the previous year.

During this period the business has concentrated on developing its relationships
with the larger furniture buying groups and on amending our terms of business
with retailers that produce an inadequate return. This should ensure the
business is well placed to take advantage of a pick-up in demand for instalment
credit.

Personal Finance

At 31 March 2002 the Paragon Personal Finance book stood at £518.8 million,
compared with £479.5 million at 31 March 2001 (an increase of 8.2%), after
advancing new loans of £90.1 million in the period (2001 H1 £93.8 million). In
keeping with the stance that we outlined in our 2001 statement, we have boosted
secured lending volumes (up 29% to £65.4 million, compared to £50.7 million H1
2001) at the expense of unsecured volumes.

Lending volumes were strong towards the end of the period and during April and,
with positive feedback from our brokers on new secured product initiatives, we
expect further growth during the second half of this financial year.

Car Finance

At 31 March 2002 the Paragon Car Finance book stood at £201.1 million, compared
with £169.6 million at 31 March 2001, an increase of 18.6%. During the period
the business has extended further its dealership distribution, but the difficult
conditions for used car finance that we reported at the year end have continued.
Advances of £61.8 million in the period, whilst ahead of plan, were at a similar
level to the second half of 2001, itself a subdued period, and below the £75.1
million advanced in the corresponding period last year.

However, we expect business volumes to improve in the second half of this
financial year as used car finance picks up. This is supported by recent
trading, with advances exceeding £15 million in each of the past two months.

Conclusion

Strong organic growth combined with prudent management of the loan portfolio in
the six months to 31 March 2002 has underpinned further growth in profitability
for the Group. The outlook for the UK economy now looks more benign than it has
over the past few months, but with the recovery both here and in the US still
fragile, it remains appropriate to maintain the cautious stance to unsecured
lending that we have adopted over the past year. We shall therefore continue to
emphasise secured lending in our business mix.

The Group's available cash resources remain high and we continue to explore
acquisition opportunities to further our strategic objectives. In the meantime,
trading activity remains at high levels, the Group having advanced £91.3 million
of new business in April, and we remain confident of meeting our objectives for
the financial year.

F W (Bill) Hulton

It was with regret that we announced recently the resignation due to ill-health
of Bill Hulton, the senior non-executive director on the Board. Bill has served
the Company and its shareholders for nine years with a unique blend of
intelligence, business acumen, critical analysis and unfailing good humour. We
thank him for his outstanding contribution to Paragon.



Jonathan Perry

Executive Chairman

21 May 2002



CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2002 (Unaudited)
                                                       Six months to      Six months to         Year to
                                                          31 March           31 March         30 September 
                                                            2002               2001               2001
                                                             £m                 £m                 £m
Interest receivable                                        114.9              112.9              229.7
Interest payable and similar charges                       (75.2)             (75.8)            (156.9)

Net interest income                                         39.7               37.1               72.8
Other operating income                                      8.8                6.9                15.3

Total operating income                                      48.5               44.0               88.1
Operating expenses                                         (17.7)             (17.8)             (35.6)
Provisions for losses                                      (10.3)             (7.9)              (12.0)

Operating profit being profit on ordinary activities        20.5               18.3               40.5
before taxation
Tax charge on profit on ordinary activities                (4.1)              (3.6)              (8.2)

Profit on ordinary activities after taxation                16.4               14.7               32.3
Equity dividend                                            (2.5)              (2.2)              (5.0)

Retained profit                                             13.9               12.5               27.3


Dividend - Rate per share                                   2.1p               1.9p               4.2p
Basic earnings per share                                   14.4p              13.0p              28.5p
Diluted earnings per share                                 14.0p              12.7p              27.8p


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 2002 (Unaudited)
                                                          31 March           31 March      30 September 2001
                                                            2002               2001

ASSETS EMPLOYED                                              £m                 £m                 £m
Fixed assets
Tangible assets                                             3.3                3.5                3.2
Loans to customers                                        2,288.8            1,995.7            2,146.3
Investment in own shares                                    6.2                4.8                4.8

                                                          2,298.3            2,004.0            2,154.3

Current assets
Stocks                                                      6.8                9.5                8.9
Debtors falling due within one year                         7.4                6.6                7.9
Cash at bank and investments                               316.7              177.1              231.5

                                                           330.9              193.2              248.3

                                                          2,629.2            2,197.2            2,402.6

FINANCED BY
Called-up share capital                                     11.8               11.6               11.7
Share premium account                                       65.3               62.5               63.5
Merger reserve                                             (70.2)             (70.2)             (70.2)
Profit and loss account                                    174.2              146.3              161.1

Equity shareholders' funds                                 181.1              150.2              166.1
Provisions for liabilities and charges                      2.3                2.6                2.3
Creditors

Amounts falling due within one year                         39.4               34.0               37.6
Amounts falling due after more than one year              2,406.4            2,010.4            2,196.6

                                                          2,629.2            2,197.2            2,402.6


The interim financial information was approved by the Board of Directors on 21
May 2002.


CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2002 (Unaudited)
                                                        Six months to      Six months to         Year to
                                                          31 March           31 March         30 September 
                                                            2002               2001               2001
                                                             £m                 £m                 £m

Net cash inflow from operating activities                   47.4               39.0               80.5
Taxation                                                    (2.4)              (1.3)              (5.7)
Capital expenditure and financial investment
                                                          
        Net increase in loans to customers                 (167.4)            (153.1)            (321.6)

        Other                                               (1.9)              (0.4)              (0.8)

Acquisitions and disposals                                    -                 0.9                0.3
Equity dividends paid                                       (2.7)              (2.4)              (4.7)
Management of liquid resources                              64.0                7.5              (51.1)
Financing                                                   212.1              150.1              339.2

Increase in cash in the period                              149.1              40.3               36.1


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

    Operating profit                                           20.5              18.3               40.5
    Provision for losses                                       10.3               7.9               12.0
    Depreciation                                               0.4                0.5               1.2
    Amortisation of broker commissions                         14.6               6.9               20.1
    Decrease in stock                                          0.1                0.2               0.3
    Decrease in debtors                                        0.5                4.2               2.9
    Increase in creditors                                      1.0                1.0               3.5

                                                               47.4              39.0               80.5

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

Increase in cash in the period                              149.1              40.3               36.1
Cash inflow from increase in debt                          (211.0)            (150.1)            (338.1)
Cash movement from change in liquid resources              (64.0)              (7.5)              51.1

                                                           (125.9)            (117.3)            (250.9)
Loans acquired with subsidiary                                -               (162.4)            (162.4)

Movement in net debt                                       (125.9)            (279.7)            (413.3)
Opening net debt                                          (1,961.2)          (1,547.9)          (1,547.9)

Closing net debt                                          (2,087.1)          (1,827.6)          (1,961.2)



NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months ended 31 March 2002 (Unaudited)


 1. The interim financial information, which has not been audited, has with the
    exception of deferred tax been prepared on the basis of the accounting
    policies set out in the group accounts for the year ended 30 September 2001.
    The interim information has been prepared applying FRS 19, 'Accounting for
    Deferred Tax' which is effective for accounting periods ending on or after
    22 January 2002. This change has no impact on the result disclosed for the
    period and no restatement of the comparative figures for 31 March 2001 and
    30 September 2001 is required.

 2. An interim dividend of 2.1p per share is proposed, payable on 31 July 2002
    with a record date of 28 June 2002.

 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 2002 the
    weighted average number of ordinary shares outstanding was 114.1 million
    (2001: 112.8 million). For the year ended 30 September 2001 the weighted
    average was 113.4 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 2002
    the adjusted weighted average number of ordinary shares outstanding was
    116.9 million, (2001: 115.7 million). For the year ended 30 September 2001
    the adjusted weighted average was 116.2 million.

 5. The figures shown above for the year ended 30 September 2001 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.

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

INDEPENDENT REVIEW REPORT TO THE PARAGON GROUP OF COMPANIES PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 March 2002 which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 6 together
with the reconciliation of operating profit to net cash flow from operating
activities and the reconciliation of movement in cash with movement in net debt.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2002.

Deloitte & Touche

Chartered Accountants

Colmore Gate

2, Colmore Row,

Birmingham

B3 2BN

21 May 2002

Notes: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.

Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.



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