Interim Results

Paragon Group Of Companies PLC
20 May 2003

Under embargo until Stock Exchange announcement: 7am, Tuesday 20th May 2003


                    STRONG GROWTH BOOSTS PROFITS AT PARAGON


The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
independent specialist lenders offering buy-to-let mortgages, secured personal
loans, vehicle finance and retail finance, today announces its interim results
for the six months ended 31st March 2003.

Highlights include:

- Pre-tax profit up 14.1% to £23.4m (2002 H1: £20.5m)

- Earnings per share up 11.8% to 16.1p (2002 H1: 14.4p)

- Interim dividend up 23.8% to 2.6p (2002 H1: 2.1p)

- Cost to income ratio reduced from 36.5% to 34.2%

- Provision for losses down 14.6% to £8.8m (2002 H1: £10.3m)

- Buy-to-let mortgage advances up 37.9% to £330.9m (2002 H1: £240.0m)

- Group net loan assets up 19.8% to £2,746.5m (2002 H1: £2,291.7m)


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

'Strong organic growth, combined with prudent management of the loan portfolio
and sound cost control, has underpinned growth in profits. Our strategy of
emphasising secured products, with 81% of advances in the period being secured
on residential property, positions us well to face a potential softening in the
UK economy. We continue to develop new products, to expand our distribution and
to explore acquisition opportunities. We remain confident of developing
Paragon's business and of meeting our objectives for the financial year.'

For further information, please contact:


The Paragon Group of Companies PLC                  The Wriglesworth Consultancy

Nigel Terrington, Chief Executive                   Brian Thorn

Nick Keen, Finance Director                         John Wriglesworth

Tel: [phone]                                  Tel: [phone]

                                                    Mobile: [phone] (BT)




CHAIRMAN'S STATEMENT


Profits, assets and lending volumes grew strongly during the six months to 31
March 2003. Profit before tax increased by 14.1% to £23.4 million (2002 H1:
£20.5 million) and earnings per share increased to 16.1p (2002 H1: 14.4p). New
loan originations increased by 29.7% to £563.9 million (2002 H1: £434.9
million). At 31 March 2003, net loan assets were £2,746.5 million, compared with
£2,521.3 million at 30 September 2002, and £2,291.7 million at 31 March 2002, an
increase of 19.8% over the year.


Your Board has declared an interim dividend of 2.6p per share, payable on 31
July 2003 to shareholders on the register on 4 July 2003. This gives an increase
of 23.8% from last year's interim dividend of 2.1p consistent with our policy,
as outlined in my year-end statement, of moving towards dividend cover more in
line with our sector over time.


Total operating income was similar to the level for the first half of last year
at £48.9 million (2002 H1: £48.5 million). Within that, net interest income was
£35.9 million (2002 H1: £39.7 million). The reduction reflects the continued
change in our lending mix towards secured products, with 81% of advances in the
period being secured on residential property (2002 H1: 70.2%). The reduction in
net interest income was compensated by increased fee income on these products,
with other operating income increasing to £13.0 million (2002 H1: £8.8 million).


Operating costs were £16.7 million, compared with £17.7 million for the
corresponding period in 2002. The continuing focus on operating costs reported
in our recent statements has resulted in the cost to income ratio improving from
36.5% in the first half of 2002 to 34.2% for the six months ended 31 March 2003.
We continue to focus on efficiency improvements to secure further reductions in
this ratio.


Provisions for losses of £8.8 million for the period were in line with our
expectations (2002 H1: £10.3 million) and reflect the shift in the mix of our
portfolio towards a greater proportion of secured lending. 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 22%, which we anticipate
will apply for the year, and providing for the proposed interim dividend,
shareholders' funds at 31 March 2003 were £215.9 million.



REVIEW OF OPERATIONS

FIRST MORTGAGES

The first mortgage business has continued to grow strongly. At 31 March 2003 the
Paragon Mortgages book was £1,636.7 million, an increase of 36.7% from £1,197.7
million at 31 March 2002. Total advances increased by 37.9% to £330.9 million,
from £240.0 million for the corresponding period last year. Our high credit
standards have resulted in a portfolio of high quality, with very low arrears
levels.


Despite mixed indicators from the housing market, the private rented sector has
remained busy. Paragon Mortgages has enjoyed record levels of new buy-to-let
applications, resulting in historically high commitment levels on applications
outstanding. Nearly all of the activity we have seen is on the part of
'professional landlords', these being customers who evidence a good track record
in residential lettings stretching back a number of years. Recent indications of
a cooling in the housing market have coincided with some strong signals from the
private rented sector with the RICS, ARLA and our own surveys indicating
improved rental demand and a marked stabilisation of rental returns and values.
Professional landlords in particular are viewing the nervousness in the owner
occupied sector as a signal to purchase better value properties and capitalise
on the increase in demand as potential first time buyers and people between
homes delay their buying decisions.

The buy-to-let pipeline suggests that demand will remain strong for the
foreseeable future regardless of concerns elsewhere in the economy and current
trading remains buoyant.


We have recently extended our product range by offering commercial investment
property loans sourced through existing relationships. A dedicated warehouse
facility has been arranged to permit a cautious entry into this market. This new
product will enable us to widen the services which we are able to provide to our
professional buy-to-let property investors, many of whom have commercial
property investments in addition to their residential portfolios.


The NHL book reduced to £202.5 million at 31 March 2003, from £230.5 million at
30 September 2002 and recorded a satisfactory performance over the period.


CONSUMER FINANCE


At 31 March 2003 the Consumer Finance book stood at £859.9 million, 10.0% up
from £781.7 million at 31 March 2002.


Personal Finance


After advancing new loans of £133.4 million in the period (2002 H1: £90.1
million), the Paragon Personal Finance book stood at £573.9 million, compared
with £518.8 million at 31 March 2002 (an increase of 10.6%). In keeping with the
stance that we outlined in our 2002 statement, we have increased secured lending
volumes (up 92.7% to £126.0 million, compared to £65.4 million H1 2002) while
unsecured volumes have continued to decline.


The strong growth in secured lending has been achieved by broadening the support
base without relaxing credit quality. Advanced technology continues to play a
key role in establishing closer relationships with our intermediaries, resulting
in increasing demand for our products and services.


Retail Finance


There has been a slowdown in activity within the retail finance sector during
the period due to weakening consumer confidence. Paragon Retail Finance has
however maintained its niche market position in the face of a highly competitive
environment, advancing loans of £32.4 million (2002 H1: £42.9 million). Since
the year-end all the administration of this book, which was previously
outsourced, has been brought in-house, enhancing front-end service to retailers.
The transfer should bring long term cost savings and improved flexibility.


We believe the difficult conditions in the retail finance market will persist
for the remainder of the year but we are confident of retaining our market
position and of benefiting from the eventual recovery in consumer confidence.


Car Finance


At 31 March 2003 the Paragon Car Finance book stood at £237.5 million, compared
with £201.1 million at 31 March 2002, an increase of 18.1%. In difficult trading
conditions, Paragon Car Finance advanced new business of £66.6 million in the
period (2002 H1: £61.8 million), which was in line with our expectations. Given
current market volatility and further tightening of our credit criteria, our
plans do not anticipate growth in this book in the second half of the financial
year.


Paragon Car Finance continues to focus on providing high quality, flexible and
value adding products to its customers, supported by a strong service quality.
We continue to work on enhancing the basis of the relationship with our
distributors, employing a combination of technology and personal contact.




Conclusion


Strong organic growth, combined with prudent management of the loan portfolio
and sound cost control, has underpinned growth in profits. Our strategy of
emphasising secured products, with 81% of advances in the period being secured
on residential property, positions us well to face a potential softening in the
UK economy. We continue to develop new products, to expand our distribution and
to explore acquisition opportunities.


We remain confident of developing Paragon's business and of meeting our
objectives for the financial year.




Jonathan Perry

Executive Chairman

20 May 2003




CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months ended 31 March 2003 (Unaudited)

                                                     Six months to      Six months to      Year to

                                                     31 March           31 March           30 September

                                                     2003               2002               2002

                                                     £m                 £m                 £m

Interest receivable                                  120.0              114.9              230.0

Interest payable and similar charges                 (84.1)             (75.2)             (157.1)


Net interest income                                  35.9               39.7               72.9

Other operating income                               13.0               8.8                20.6


Total operating income                               48.9               48.5               93.5

Operating expenses                                   (16.7)             (17.7)             (34.6)

Provisions for losses                                (8.8)              (10.3)             (12.9)


Operating profit being profit on ordinary            23.4               20.5               46.0
activities before taxation                           

Tax charge on profit on ordinary activities          (5.1)              (4.1)              (9.4)


Profit on ordinary activities after taxation         18.3               16.4               36.6

Equity dividend                                      (3.1)              (2.5)              (6.0)


Retained profit                                      15.2               13.9               30.6



Dividend - Rate per share                            2.6p               2.1p               5.1p

Basic earnings per share                             16.1p              14.4p              32.1p

Diluted earnings per share                           15.9p              14.0p              31.4p



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


CONSOLIDATED BALANCE SHEET

At 31 March 2003 (Unaudited)
                                                      31 March          31 March           30 September

                                                      2003              2002               2002

                                                                        (Restated)

ASSETS EMPLOYED                                       £m                £m                 £m

Fixed assets

Tangible assets                                       3.9               3.3                3.4

Loans to customers                                    2,746.5           2,291.7            2,521.3

Investment in own shares                              11.0              6.2                9.3

                                                      2,761.4           2,301.2            2,534.0


Current assets

Stocks                                                4.4               6.8                5.3

Debtors falling due within one year                   7.2               7.4                7.7

Cash at bank and investments                          202.8             316.7              247.1


                                                      214.4             330.9              260.1


                                                      2,975.8           2,632.1            2,794.1

FINANCED BY

Called-up share capital                               11.8              11.8               11.8

Share premium account                                 65.5              65.3               65.5

Merger reserve                                        (70.2)            (70.2)             (70.2)

Profit and loss account                               208.8             177.1              193.7


Equity shareholders' funds                            215.9             184.0              200.8

Provisions for liabilities and charges                0.8               2.3                0.6

Creditors:     Amounts falling due within one year    37.6              39.4               43.7

               Amounts falling due after more than    2,721.5           2,406.4            2,549.0
               one year


                                                      2,975.8           2,632.1            2,794.1



The interim financial information was approved by the Board of Directors on 20 May 2003.

CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 March 2003 (Unaudited)

                                                      Six months to     Six months to       Year to

                                                      31 March          31 March            30 September

                                                      2003              2002                2002

                                                      £m                £m                  £m

Net cash inflow from operating activities             45.9              47.4                92.9

Taxation                                              (7.5)             (2.4)               (7.8)

Capital expenditure and financial investment

Net increase in loans to customers                    (248.8)           (167.4)             (413.4)

Other                                                 (2.8)             (1.9)               (5.8)

Equity dividends paid                                 (3.5)             (2.7)               (5.1)

Management of liquid resources                        55.6              64.0                8.2

Financing                                             172.4             212.1               354.8


Increase in cash in the period                        11.3              149.1               23.8


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

Operating profit                                      23.4              20.5                46.0

Provision for losses                                  8.8               10.3                12.9

Depreciation                                          0.6               0.4                 1.1

Amortisation of broker commissions                    15.2              14.6                28.3

Decrease in stock                                     0.3               0.1                 0.3

Decrease / (increase) in debtors                      0.5               0.5                 (0.2)

(Decrease) / increase in creditors                    (2.9)             1.0                 4.5


                                                      45.9              47.4                92.9

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

Increase in cash in the period                        11.3              149.1               23.8

Cash inflow from increase in debt                     (172.4)           (211.0)             (353.6)

Cash movement from change in liquid resources         (55.6)            (64.0)              (8.2)


Movement in net debt                                  (216.7)           (125.9)             (338.0)

Opening net debt                                      (2,299.2)         (1,961.2)           (1,961.2)

Closing net debt                                      (2,515.9)         (2,087.1)           (2,299.2)




NOTES TO THE INTERIM FINANCIAL INFORMATION

For the six months ended 31 March 2003 (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 2002.


 2. The balance sheet as at 31 March 2002 has been restated to reflect the change
    in accounting policy adopted in the group accounts for the year ended 30
    September 2002 whereby the treatment of brokers' commissions paid on
    mortgage loans was changed, so that such balances are amortised over the
    penalty period of the related loan, instead of being treated as an expense
    at the point of completion of the loan. It was considered that this
    treatment is more appropriate as it is more consistent with the treatment of
    broker commissions paid on other types of loan, and with practice within the
    industry. The balance sheet at 31 March 2002 has been adjusted to include
    the unamortised commission balances within 'Loans to Customers'. The effect
    of this adjustment is to increase the balance of loans to customers at 31
    March 2002 by £2.9m. The effect on the result for the period is immaterial.


 3. An interim dividend of 2.6p per share is proposed, payable on 31 July 2003
    with a record date of 4 July 2003.


 4. 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 2003 the
    weighted average number of ordinary shares outstanding was 113.6 million
    (2002: 114.1 million). For the year ended 30 September 2002 the weighted
    average was 114.1 million.


 5. 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 2003
    the adjusted weighted average number of ordinary shares outstanding was
    115.0 million, (2002: 116.9 million). For the year ended 30 September 2002
    the adjusted weighted average was 116.4 million.


 6. The figures shown above for the year ended 30 September 2002 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 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 2003 which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 7 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.

This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters which we are required to state to them
in an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company for our review work, for this report or for the conclusions we have
formed.

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 are 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 2003.


Deloitte & Touche
Chartered Accountants
Birmingham
20 May 2003


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