16th Jul 2008 07:00
Under embargo until Stock Exchange announcement: 7am, Wednesday 16 July 2008
THE PARAGON GROUP OF COMPANIES PLC
Interim Management Statement
Trading
The Group has continued to operate profitably in line with management's expectations during the third quarter of its financial year, the period from 1 April to 30 June 2008. Third quarter profit before taxation was similar to the average quarterly underlying profit for the first half of the year, reported to shareholders in the half yearly Financial Report at 31 March 2008.
Income is in line with our expectations, the third quarter performance having been consistent with the first half of the financial year. Despite continuing disruption in the money markets, with 3 month LIBOR over the period having been significantly higher than base rate, margins in the third quarter improved slightly compared to the first half of the year.
Across the Group's portfolio, the number of accounts in arrears has reduced since 31 March 2008, with the percentage of accounts in arrears remaining at similar levels. The charge for impairment remains consistent with that for the first six months and is in line with expectations. The performance of the buy-to-let book continues to be exemplary and landlords are benefiting from increased rents and yields in the current environment as house purchases have slowed.
Control over operating costs remains a focus and, following the cost reductions effected during the first half of the year, the underlying cost:income ratio has continued to reduce. Exceptional costs remain as detailed in the half yearly Financial Report.
Lending activity
Credit market conditions continue to constrain new lending activity. Since the half year, first mortgage activity has, in the main, been limited to further advances to existing landlords. However, secured personal finance lending during the first nine months of the financial year has been at a level marginally higher than for the same period last year, notwithstanding a significant tightening of lending criteria.
The redemption rate within the buy-to-let portfolio during the three months ended 30 June 2008 was similar to the first six months of the year. Total loans to customers, at £10.4 billion, are at a similar level to a year previously.
Funding and free cash
The existing, match-funded portfolio continues to be cash generative, with the result that free cash balances at 30 June 2008 were higher than at 31 March 2008. The Group continues to finance secured consumer finance originations and buy-to-let further advances though its current securitisation arrangements. The Group is well positioned to increase lending activity when satisfactory funding arrangements for new business originations can be put in place.
Outlook
The Group remains financially strong and well positioned to manage its portfolio and business activities in the deteriorating economic environment. At the same time the Group is working on a range of income generating initiatives, including the provision of third party services and is exploring options for portfolio purchases where, in current market conditions, pricing is attractive. Further information on the progress of these initiatives will be provided when the results for the year ending 30 September 2008 are announced.
For further information, please contact:
Nigel S Terrington 0121 712 2024
Chief Executive
Nicholas Keen 0121 712 2000
Finance Director
Morgan Bone 020 7544 3053
Fishburn Hedges
Related Shares:
Paragon Group