Interim Results - 6 Months to 31 March 2000

Paragon Group Of Companies PLC
22 May 2000


The Paragon Group of Companies PLC
Interim results for the six months ended 31 March 2000

PARAGON ANNOUNCES DOUBLE DIGIT PROFITS GROWTH

The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
specialist lenders offering first mortgages, secured loans, unsecured loans
and vehicle finance, today announces its Interim results for the six months
ended 31 March 2000.

Highlights include:

- Pre-tax profit up 11% to £16.3m (1999:  £14.7m)

- Interim dividend up 13.3% to 1.7p per share (1999:  1.5p)

- Operating expenses down 10.5% to £15.4m (1999:  £17.2m)

- Total new loan originations up 19.5% to £224.1m (1999:  £187.5m)

- All lending divisions showing strong growth

  - Mortgage loans up 32% to £703.3m
  - Car loans up 88% to £96.4m
  - Personal finance balances up 21% to £298.7m

- New five year £140m corporate banking facility put in place to finance
planned long term volumes

- eCommerce developing new channels

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

'In the last six months the Group has continued to progress, with growth in
our distribution base, in the products we offer and in overall business
volumes.  We continue to focus on prudent underwriting of all lending and on
tight cost control.  We look forward to further growth and the further
development of the Group in all of its business activities.'

For further information, please contact:

The Paragon Group of Companies PLC          The Wriglesworth Consultancy
Nigel Terrington, Chief Executive           John Wriglesworth
Nick Keen, Finance Director                 Olivia Cundy
Tel:  [phone]                         Tel: [phone]
                                            Mobile: [phone]
 

CHAIRMAN'S STATEMENT

I  am  pleased  to  report further strong growth in the first  half  of  the
current  financial  year.   In the six months  to  31  March  2000  we  have
increased  profit  before  tax  by 11% to  £16.3  million  (1999  H1:  £14.7
million),  increased loan completions by 19.5% and put in place the  funding
arrangements to finance our planned long-term business volumes.

Given  the progress made by the Group I am pleased to report that your Board
has declared an interim dividend, payable on 31 July 2000 to shareholders on
the  register  at  30  June 2000, of 1.7p per share,  (1999  H1:  1.5p),  an
increase of 13.3% from last year's interim dividend.

We  have continued to build our asset base by the consistent application  of
our  prudent  lending  criteria.  During the  six  months,  total  new  loan
originations were £224.1 million (1999 H1: £187.5 million) and at  31  March
2000  loans to customers, net of provisions, were £1,548.1 million, compared
with £1,419.4 million at 31 March 1999, an increase of 9% in the year.   The
high growth in originations was achieved despite the prolonged Christmas and
Millennium  celebrations resulting in a longer than  usual  winter  lull  in
business  volumes.   The increase in assets, combined  with  careful  margin
management,  has  increased net interest income to £31.1 million  (1999  H1:
£27.4 million) for the period, an increase of 13.5%.

Other operating income, at £6.5 million, is broadly unchanged from the first
half of 1999 (£6.6 million), despite the loss of rental income following the
disposal of the Group's freehold property in Solihull in April 1999.  If net
rental income is excluded, other operating income for the first half of 1999
was  £5.8 million, an increase of 12% from the first half of 1999 on a  like
for  like basis, reflecting an increase in insurance commissions and in fees
for third party servicing.

Operating  expenses, at £15.4 million, are 10.5% lower than  for  the  first
half  of  1999  (£17.2  million) and reflect our continuing  focus  on  cost
efficiencies in each of our business areas.

The  charge  for  provisions  for losses, at £5.9  million  (1999  H1:  £2.1
million),  was  in line with our expectations and relates primarily  to  the
unsecured  loan  book.  These loans, particularly the older  unsecured  loan
accounts  acquired with the purchase of Universal Credit  from  Lloyds  TSB,
carry higher margins in order to offset the increased risks of default  from
this  type  of  lending.  As such, an element of the  provision  relates  to
interest  which we consider to be irrecoverable, but which has been  charged
to accounts, and which is, therefore, included in interest income.

As I reported in my interim report last year, the profitability of the Group
has  reduced brought forward tax losses to the point where the charge is now
rising  towards full corporation tax rates.  Consequently a charge  of  £3.2
million is included in respect of the period, an effective tax rate of 20%.

The  Group  remains  active in the securitisation  market  and  in  February
successfully  completed a £185 million issue through a  subsidiary  company,
Paragon  Mortgages (No 2) PLC on competitive terms.  This  was  the  thirty-
third public securitisation by the Group.

In  my full year statement I commented that we would be addressing the long-
term  funding  implications of our planned business  levels.   In  March  we
replaced  our  corporate banking facility with a new five year £140  million
facility, which now gives us the funding to support our planned asset growth
for the foreseeable future.

Year 2000

In  our annual report for the year ended 30 September 1999 we reported  that
we  had  completed  all necessary upgrading and testing of in-house  systems
required  to address the effects of the year 2000 date change and undertaken
a review of our key business relations.

I  am  pleased  to  report that the Group encountered no problems  with  its
systems  as a result of the change of date, and we do not foresee  any  such
occurrences in the future.

The total cost for this exercise was £759,000, of which £65,000 was incurred
in the half year ended 31 March 2000. No further costs are expected and this
expenditure  represents a saving of £41,000 on the estimate  in  the  annual
report.

Business Review

First Mortgages

At 31 March 2000 the Paragon Mortgages book stood at £703.3 million (a 31.8%
increase  on the balance of £533.8 million at 31 March 1999) after  advances
of  £110.2  million  during  the six months  then  ended  (1999  H1:  £121.9
million).  While a number of our competitors have reduced their pricing  and
credit standards, it is our view that in seeking to achieve sustained  long-
term  profitability  we  should  maintain  our  margins  and  continue   the
application  of  high  credit and underwriting  standards,  a  policy  which
continues to be borne out by excellent arrears performance.

As   mentioned  above,  the  traditional  Christmas  and  New  Year  dip  in
application  and  completion  levels  was  more  prolonged  this  year   but
completions  recovered  strongly towards the end of  the  period.  There  is
anecdotal  evidence that the mortgage market, generally, has been  adversely
affected  by  increased interest rates and uncertainties as to their  future
course,  although that is not yet evidenced in market statistics which  tend
to  lag  the  current experience.  Again, in the private rented sector,  the
combination of increasing interest rates and rising house prices has  had  a
dampening effect on demand, particularly amongst amateur landlords. However,
the  long-term fundamentals of the buy to let market, which now accounts for
the  majority  of  the  Group's mortgage lending, are sound  and  we  expect
current uncertainties to be temporary.

There  have been a number of developments in the use of eCommerce by Paragon
Mortgages  for  enhancing product distribution.  These  are  described  more
fully  below.   In  addition we are currently considering a  number  of  new
opportunities,  including products aimed at the more professional  investor,
which we expect to be launching shortly.  We remain very confident, however,
in  the  long-term prospects for the private rented sector as a  significant
contributor to our future business volumes.

We  continue to be encouraged by the market's views of our service  quality.
Recent  results from our regular intermediary surveys record an  improvement
in Paragon's service delivery against a number of our key competitors.

The  announcement by the Treasury on mortgage regulation during  the  period
has  created an element of confusion.  Mortgage lenders will have to contend
with  a patchwork of rules and regulations while mortgage advice will remain
unregulated. However, in view of the high standards that we adopt, we remain
confident  that the regulatory requirements will be accommodated by  Paragon
with  relative  ease.  More than half of our front line  staff  have  either
qualified,  or  are in the course of qualifying for, the new Certificate  in
Mortgage Advice and Practise (CeMAP) which is likely to become the benchmark
qualification for mortgage professionals in future.

The  NHL  portfolio, the balances on which were £444.6 million at  31  March
2000,  continues  to  decline in importance to  the  Group's  accounts,  now
representing  less than one third of the Group's loan assets. The  ratio  of
payments  received to those contractually due averaged 106% on  the  arrears
book during the period.

Car Finance

During  the  period, Paragon Car Finance advanced £40.5  million  (1999  H1:
£27.7  million), despite it being a period in which the car market has  been
depressed  and plagued with uncertainties over the future direction  of  car
prices.   The book total increased by 88% to £96.4 million over  the  twelve
months since 31 March 1999.

The long-awaited report by the Competition Commission following its study of
new  car prices has done little to remove the uncertainties over the  future
trend  in  car prices in both the new and used car sectors, although  it  is
considered that it may serve to underpin residual values going forward.   We
are  confident  that with our strong and developing dealer network  and  our
procedures for monitoring dealer performance, we can continue the profitable
growth of this business.

We have removed unproductive dealers from our panel with the effect that, in
combination   with  increased  business  levels  from  our  major   dealers,
application  levels  rose strongly towards the end of  the  period  and  the
conversion rate from applications to completions has improved significantly,
with   a  consequential  operating  cost  benefit.   We  will  continue   to
reconfigure the dealer network regularly to maximise the quality of business
received.

Personal Finance

During the period Paragon Personal Finance advanced £73.4 million (1999  H1:
£37.9  million). After a temporary reduction in volumes over  the  Christmas
and  New  Year period, volumes grew strongly towards the end of the  period.
By  31 March 2000 the net loan book was, at £298.7 million, 21% higher  than
at 31 March 1999.

During  the period a number of changes were made to our processes to improve
the  system links with our brokers with the objective of reducing the amount
of  effort  wasted  in  underwriting cases which are subsequently  declined.
This  has led to improved operating efficiencies and to an improved rate  of
conversion from application to offer.

The  Paragon Personal Finance web site has now been established and  we  are
now  rolling  out affinity branded sub-sites linked to some of our  affinity
business partners.  The first successful deal was with Chelsea Football Club
and we anticipate that others will follow in coming months.

The secured loan product which was launched last summer has been successful,
completing £28 million of new business in the period.  We aim to improve our
penetration  of the market by growing the support from our main relationship
brokers and adding new ones.

During  the next six months we will be moving the new business areas of  the
unsecured lending business, which currently are located in Victoria, so that
the  entire operation will be located at new office space in Solihull.   The
cost of this exercise was provided for in the accounts for the year ended 30
September  1999.   This  will complete the operational  integration  of  the
personal finance business and will enable further cost efficiencies.

eCommerce

The  focus  of  the  Group's eCommerce initiative,  since  we  launched  the
original Paragon Mortgages web site in 1996, has been to use the new  medium
as  a  means of building on and delivering to our customers more efficiently
the existing strengths of the business.

Our  overall  eCommerce  strategy  is  threefold,  to  establish  electronic
integration and improve processes in our new business divisions,  so  as  to
enable  volume growth without corresponding cost increases, to  develop  new
channels making full use of the Internet (such as the link with Chelsea  FC,
mentioned earlier and the Rapid Remortgage on which I report below), and  to
work on new value adding initiatives which reflect our core competencies.

The  revised Group web site was launched in November 1999 and covers a  wide
range  of  information in respect of the Group.  Paragon Mortgages,  Paragon
Car  Finance and Paragon Personal Finance all offer the facility for  online
quotations, applications and related tools.  From 1 April 2000, all  Paragon
Mortgages  customers  have  had  the  facility  to  obtain  their   mortgage
statements on-line.

Paragon  Mortgages now has arrangements in place with a number  of  Internet
sites,  in  particular Eloan, Charcolonline, Fish4, IFonline and Assuresoft.
In  addition,  we  launched  a  new product during  the  period,  the  Rapid
Remortgage,  direct to the public through a dedicated web  site,  www.rapid-
remortgages.com.  The Rapid Remortgage is the first mortgage  product  where
we use a genuine on-line application form in preference to printed forms and
where we see the web site as the primary means of providing introducers  and
direct  customers  with product details, illustrations  and  an  application
process.   Surveys  have reported a significant increase  in  intermediaries
with access to the Internet over the last six months.

Currently we are working on an Internet portal focused on the private rented
sector,  offering  a full range of services to landlords and  tenants.   The
main purposes of this portal will be to give landlords access to a range  of
services,  the  development of a tenant site on  which  properties  will  be
registered  by  landlords and the provision of additional services  to  both
landlords and tenants.

A  number of further initiatives are being worked on in connection with  the
three business areas.

Conclusion

In  the last six months the Group has continued to progress, with growth  in
our  distribution  base, in the products we offer and  in  overall  business
volumes.  We continue to focus on prudent underwriting of all lending and on
tight  cost  control.   We are excited by the opportunities  and  challenges
presented  in  our market place, particularly in the area of eCommerce.   We
look  forward to further growth and the further development of the Group  in
all of its business activities.
                                                    Jonathan Perry
                                                    Executive Chairman
                                                    22 May 2000

CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2000 (Unaudited)

                                   Six months to  Six months to  Year to
                                      31 March      31 March     30 September 
                                        2000         1999        1999         
                                         £m           £m            £m
Interest receivable                     88.6         86.4          167.6
Interest payable and similar           (57.5)       (59.0)        (112.2)
charges
                                                                   
Net interest income                     31.1         27.4          55.4
Other operating income                   6.5          6.6          12.7
                                                                   
Total operating income                  37.6         34.0          68.1
Operating expenses                     (15.4)       (17.2)        (31.0)
Provisions for losses                   (5.9)        (2.1)         (5.8)
                                                                   
Operating profit                        16.3         14.7          31.3
Profit on sale of fixed assets           -            -             2.5
                                                                   
Profit on ordinary activities before                               
taxation                                16.3         14.7          33.8
Tax charge on profit on ordinary        (3.2)        (1.5)         (3.5)
activities
                                                                   
Profit on ordinary activities after                                
taxation                                13.1         13.2          30.3
Dividend                                (2.0)        (1.7)         (4.0)
                                                                   
Retained profit                         11.1         11.5          26.3
                                                                   
                                                                   
Dividend - Rate per share                1.7p         1.5p          3.4p
Basic earnings per share                11.3p        11.4p         26.1p
Diluted earnings per share              11.2p        11.3p         25.8p
                                                                   
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 2000 (Unaudited)
                                        
                                      31 March     31 March   30 September
                                         2000        1999         1999
                                                  (restated)        
ASSETS EMPLOYED                          £m           £m           £m
Fixed assets                                                       
Tangible assets                         3.2          21.9          3.6
Loans to customers                  1,548.1       1,419.4      1,482.5
Investment in own shares                2.8           2.8          2.8
                                                                   
                                    1,554.1       1,444.1      1,488.9

Current assets                                                     
Stocks                                 13.1          15.0         14.5
Debtors falling due within one         26.2          17.7         22.8
year
Cash at bank and in hand              175.9         111.1        147.2
                                                                  
                                      215.2         143.8        184.5
                                                                
                                    1,769.3       1,587.9      1,673.4
                                                                   
FINANCED BY                                                        
Equity shareholders' funds            124.6         98.7         113.5
Provisions for liabilities and charges  3.8          2.2           4.2
Creditors:
Amounts falling due within one year    27.3         27.9          27.0
Amounts falling due after more than                                
one year                            1,613.6      1,459.1       1,528.7
                                                                   
                                    1,769.3      1,587.9       1,673.4
                                                                   

The interim financial information was approved by the Board of Directors on
22 May 2000.

CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2000 (Unaudited)

                                Six months to  Six months to     Year to
                                  31 March       31 March    30 September     
                                     2000          1999           1999
                                      £m            £m             £m
Net cash inflow from operating         18.2       14.8              33.2
activities
Taxation                                          -                 (1.3)
Capital expenditure and financial                                  
investment :                                                        
   Net increase in loans to customers  (71.5)     (42.7)          (109.5)
   Other                                (0.1)      (1.0)            19.1
Equity dividends paid                   (2.3)        -              (3.8)
Management of liquid resources         (47.8)     (13.7)            23.7
Financing                               84.5      (23.6)            45.2
                                                                   
(Decrease) / increase in cash in the                               
period                                 (19.0)      (66.2)            6.6
                                                                   

1.    Reconciliation of operating profit to net cash inflow from operating
   activities
Operating profit                        16.3        14.7             31.3
Provision for losses                     5.9         2.5              5.8
Depreciation                             0.5         0.9              1.6
Payments against provisions             (0.4)        -                -
Decrease in stock                       1.2          0.4              1.1
Increase in debtors                     (3.4)        (1.0)           (6.9)
(Decrease) / increase in                (1.9)        (2.7)            0.3
creditors
                                                                  
                                        18.2         14.8            33.2
                                                                  

2.    Reconciliation of movement in cash with movement in net debt
(Decrease) / increase in cash in the    (19.0)      (66.2)            6.6
period
Cash (inflow) / outflow from                                      
(increase) / decrease in debt           (84.5)       24.0           (44.8)
Cash movement from change in liquid                               
resources                                47.8         13.7          (23.7)
                                                                  
Movement in net debt                    (55.7)       (28.5)         (61.9)
Opening net debt                     (1,374.3)    (1,312.4)      (1,312.4)
                                                                  
Closing net debt                     (1,430.0)    (1,340.9)      (1,374.3)
                                                                  

NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months ended 31 March 2000 (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 1999.

2. The balance shown as provisions in the balance sheet at 31 March 1999
   has been restated by being disclosed separately from creditors in  
   accordance with Financial Reporting Standard 12 - 'Provisions, contingent  
   liabilities and contingent assets'.

3. An interim dividend of 1.7p per share is proposed, payable on 31 July
   2000 with a record date of 30 June 2000.

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    
   2000 the weighted average number of ordinary shares outstanding was 116.3  
   million(1999:115.7 million). For the year ended 30 September 1999 the      
   weighted average was 116.0 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 2000 the adjusted weighted average number of ordinary shares         
   outstanding was 117.1 million, (1999: 116.7 million). For the year ended 30
   September 1999 the adjusted weighted average was 117.0 million.

6. The figures shown above for the year ended 30 September 1999 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 Paragon Group of Companies PLC,
   St. Catherine's Court, Herbert Road, Solihull, West Midlands, B91 3QE.