Paragon Group well placed for further growth

SOLIHULL-based Paragon Group has said it is well placed to generate further growth in each of its target markets after another strong year of trading.

The credit and banking services provider said activity levels in the buy-to-let market had remained robust with good demand evident from tenants and landlords being reflected in the growth of new advances and the pipeline of new business.
 
A considerable number of debt purchase opportunities, particularly as measured by value, also continue to exist, although the company said the timings for these was unpredictable.  

It also said its new challenger bank was making good progress, which in time would support the group’s strategy to diversify its income streams and funding sources.

In a trading update covering the period from October 1, 2014 to date, the group said its financial performance remained strong and in line with management expectations.  Operating profits (before fair value items) of £30.9m are up from £26.9 million for the corresponding period in 2013 – an increase of 14.9%.

Pre-tax profits, after a debit of £0.7m for fair value hedging items, were £30.2m for the period, up from £27.1m in Q1 2014.

The group’s loan portfolios also continue to perform well, generating strong profits and cash flows.

During the quarter, buy-to-let completions across the group were £222.1m, up 58.4% on 2013. Of this, £193.3m (87%) was originated through Paragon Mortgages and £28.8m (13%) through Paragon Bank.  At December 31, 2014, the pipeline of buy-to-let business (including Paragon Bank) stood at £416.7m, which compares to £222.5m at the same point in 2013 and the company said supported its belief in further growth in completions for the second quarter.

Its Idem Capital loan investments arm was also said to be performing well, with cash recoveries exceeding underwriting expectations.  Investments made during the quarter were £6.2m.

It said Idem’s acquisition focus remained on larger portfolios of paying/performing loans and the group continued to see a strong pipeline of such opportunities.

Paragon Bank’s car finance activity focused on broadening its distribution network. Completion levels rose to £6.3m during the quarter and, with the distribution base almost doubling during the period, the group said a stronger growth rate in advances was expected in the coming months. 

The group said the launch of the bank’s secured lending proposition during the quarter had been well received and while advance levels are currently modest, they were likely to grow as distribution expands.

Nigel Terrington, CEO, Paragon Group said: “The group is well placed to generate further growth in each of its target markets and continues to focus on improving shareholder returns through active capital management.”

The group intends to publish its interims for the six months to March 31, 2015 on May 19.