REG - Paragon Grp Co PLC - Half-year Report <Origin Href="QuoteRef">PARA.L</Origin> - Part 3
24/05/2016 07:06
- Part 3: For the preceding part double click ID:nRSX0658Zb
Other 53.6 104.8 50.2
Total risk exposure 5,389.9 4,784.0 4,929.3
Solvency ratios % % %
CET1 16.1% 19.5% 19.1%
Total regulatory capital 16.5% 20.5% 19.8%
This table not covered by the Independent Review Report
The CRD IV risk weightings for credit risk exposures are calculated using the Standardised Approach. Operational risk is
calculated using the Basic Indicator Approach.
The table below shows the calculation of the leverage ratio, based on the consolidated balance sheet assets adjusted as
shown below:
Note 31 March2016 31 March2015 30 September 2015
£m £m £m
Total balance sheet assets 12,846.1 11,197.8 11,878.9
Less: Derivative assets 17 (939.9) (810.9) (660.1)
On-balance sheet items 11,906.2 10,386.9 11,218.8
Less: Intangible assets 14 (87.0) (7.6) (7.7)
Total on balance sheet exposures 11,819.2 10,379.3 11,211.1
Derivative assets 17 939.9 810.9 660.1
Potential future exposure on derivatives 71.2 73.0 69.1
Total derivative exposures 1,011.1 883.9 729.2
Post offer pipeline at gross notional amount 292.9 617.0 482.3
Adjustment to convert to credit equivalent amounts (146.4) (308.5) (241.1)
Off balance sheet items 146.5 308.5 241.2
Tier 1 capital 865.2 933.5 939.7
Total leverage exposure 12,976.8 11,571.7 12,181.5
Basel III leverage ratio 6.7% 8.1% 7.7%
This table not covered by the Independent Review Report
The regulatory capital disclosures in these financial statements relate only to the consolidated position for the Group.
Individual entities within the Group are also subject to supervision on a standalone basis. All such entities complied with
the requirements to which they were subject during the period.
5. ACQUISITION
On 3 November 2015 the Group acquired the entire share capital of Paragon Bank Asset Finance Limited ('PBAF') (formerly
Five Arrows Leasing Group Limited) from Rothschild & Co. PBAF is the parent company of a group of companies ('PBAF Group')
providing a range of asset finance products to UK SMEs, including equipment, vehicle and construction equipment finance and
is also a provider of lease servicing. The acquisition allows the Group to diversify its range of both products and the
markets it serves within the financial services sector.
The Group acquired 100% of the voting equity interests in PBAF and the consideration was satisfied entirely in cash. Cash
transferred on completion was £308.2m, £117.0m in respect of equity and £191.2m to settle existing debt owed by PBAF Group
to the vendor. There are no contingent consideration arrangements. Transaction costs of £1.7m have been included in
operating expenses for the six months ended 31 March 2016.
The principal operating companies of the PBAF Group are listed below.
Paragon Bank Asset Finance Limited (Five Arrows Leasing Group Limited at acquisition) Holding company and portfolio administration
Dash Commercial Finance Limited Asset finance
Paragon Bank Business Finance PLC (Five Arrows Business Finance PLC at acquisition) Asset finance
Paragon Bank Technology Finance (Five Arrows Media Finance Limited at acquisition) Asset finance
Specialist Fleet Services Limited Asset finance and contract hire
Specialist Fleet Services Limited
Asset finance and contract hire
The contribution of PBAF Group to consolidated revenue for the six months ended 31 March 2016 was £18.2m and its
contribution to consolidated profit before tax for the period is set out below.
£m £m
Contribution to consolidated profit excluding costs of acquisition 5.1
Transaction costs (1.7)
Other acquisition related expenses (0.8)
(2.5)
Contribution to consolidated profit after costs of acquisition 2.6
Had the acquisition taken place on 1 October 2015, the consolidated revenue of the Group for the six months ended 31 March
2016 would have been £221.9m and its consolidated profit before tax for the period would have been £70.4m.
The amounts recognised in the consolidated accounts on acquisition in respect of the identifiable assets acquired and
liabilities assumed are set out below. The amounts presented are considered to be materially consistent with the existing
accounting policies of the Group.
The Group has yet to finalise its exercise to determine these balances and therefore the amounts presented in this note
should be considered as provisional. Final amounts will be presented with the Group's annual results for the year ending 30
September 2016.
Note £m £m
Non-current assets
Operating lease assets 10.8
Other property, plant and equipment 1.6
Property, plant and equipment 12.4
Intangible assets a 1.0
Loans to customers b 221.7
Deferred tax 3.7
238.8
Current assets
Other receivables 5.2
Cash c 3.4
8.6
247.4
Current liabilities
Financial liabilities- bank overdraft c 0.5
Current tax liabilities 0.5
Other liabilities 16.5
17.5
Total liabilities 17.5
Total net identifiable assets 229.9
Goodwill d 78.3
Consideration c 308.2
a) Intangible assets
Identifiable intangible assets acquired represent broker networks and trading arrangements. They will be amortised over a
ten year period.
b) Loans to customers
The financial assets acquired at 3 November 2015 comprised:
Fair value Gross Contractual Value Contractual flows not to be collected
£m £m £m
Asset finance leases 209.1 213.2 2.2
Commercial mortgages 3.6 4.2 0.5
Factoring 8.6 8.6 -
Other loans 0.4 0.4 -
Loans to customers 221.7 226.4 2.7
c) Cash flows on acquisition
Net cashflows on acquisition were
Total
£m
Payment for shares 117.0
Settlement of existing vendor balances 191.2
Consideration paid on completion 308.2
Cash (3.4)
Bank overdraft 0.5
Net cash outflow (note 29) 305.3
The fair value and the gross contractual value of the cash balances acquired was equal to their book value, there are no
contractual flows which expected not to be collectable.
d) Goodwill
The goodwill of £78.3m arising from the acquisition consists of the values of the business relationships, market positions
and knowledge base inherent in the business which do not qualify for recognition as intangible assets. These will be
utilised in the future development of the acquired business and in expanding the Group's asset finance activities. None of
the goodwill is expected to be deductible for tax purposes.
While a full review of the goodwill arising in the transaction for the purposes of IAS 36 - 'Impairment of Assets' has yet
to be completed, a preliminary exercise has identified no indications of impairment.
6. CREDIT RISK
The Group's business objectives rely on maintaining a high-quality customer base and place strong emphasis on good credit
management, both at the time of acquiring or underwriting a new loan, where strict lending criteria are applied, and
throughout the loan's life.
The Group's credit risk is primarily attributable to its loans to customers. There are no significant concentrations of
credit risk to individual counterparties due to the large number of customers included in the portfolios.
The Group's loan assets at 31 March 2016 are analysed as follows:
31 March 2016 31 March 2015 30 September 2015
£m % £m % £m %
Buy-to-let mortgages 9,736.3 89.7% 8,826.6 93.2% 9,363.2 93.0%
Owner occupied mortgages 25.0 0.2% 53.6 0.6% 47.6 0.5%
Total first mortgages 9,761.3 89.9% 8,880.2 93.8% 9,410.8 93.5%
Secured loans 562.1 5.2% 409.7 4.3% 387.1 3.9%
Loans secured on residential property 10,323.4 95.1% 9,289.9 98.1% 9,797.9 97.4%
Development finance 1.0 - - - - -
Commercial mortgages 3.4 - - - - -
Loans secured on property 10,327.8 95.1% 9,289.9 98.1% 9,797.9 97.4%
Car loans 73.6 0.7% 20.0 0.2% 43.4 0.4%
Retail finance loans 0.2 - 0.3 - 0.2 -
Other consumer loans 216.4 2.0% 158.1 1.7% 220.9 2.2%
Asset finance loans 224.9 2.1% - - - -
Factoring balances 9.8 0.1% - - - -
Other loans 0.4 - - - - -
Total loans to customers 10,853.1 100.0% 9,468.3 100.0% 10,062.4 100.0%
Other loans include unsecured loans either advanced by Group companies or acquired from their originators at a discount.
An analysis of the indexed loan to value ratio ('LTV') for those loan accounts secured on property by value at 31 March
2016 is set out below. For acquired accounts the effect of any discount on purchase is allowed for.
31 March 2016 31 March 2015 30 September 2015
First Mortgages Secured Loans First Mortgages Secured Loans First Mortgages Secured Loans
% % % % % %
Loan to value ratio
Less than 70% 52.0 40.3 47.2 29.0 51.9 33.7
70% to 80% 28.2 18.6 27.0 14.2 27.6 16.3
80% to 90% 11.7 16.5 15.3 17.7 12.8 16.7
90% to 100% 5.4 11.9 7.0 15.6 4.9 13.5
Over 100% 2.7 12.7 3.5 23.5 2.8 19.8
100.0 100.0 100.0 100.0 100.0 100.0
Average loan to value ratio 69.3 78.2 71.7 84.3 69.5 80.9
Buy-to-let 69.5 72.0 69.7
Owner-occupied 28.9 31.9 28.8
The regionally indexed LTVs shown above are affected by changes in house prices, with the Nationwide house price index, for
the UK as a whole, registering an increase of 3.1% during the six months ended 31 March 2016 and an annual increase of 3.8%
in the year ended 30 September 2015.
The number of accounts in arrears by asset class, based on the most commonly quoted definition of arrears for the type of
asset, at 31 March 2016, 31 March 2015 and 30 September 2015, compared to the industry averages at those dates published by
the Council of Mortgage Lenders ('CML') and the Finance and Leasing Association ('FLA'), was:
31 March 2016 31 March 2015 30 September 2015
% % %
First mortgages
Accounts more than three months in arrears
Buy-to-Let accounts including receiver of rent cases 0.14 0.20 0.19
Buy-to-Let accounts excluding receiver of rent cases 0.02 0.03 0.04
Owner Occupied accounts 3.13 3.24 3.55
CML data for mortgage accounts more than three months in arrears
Buy-to-Let accounts including receiver of rent cases 0.56 0.74 0.66
Buy-to-Let accounts excluding receiver of rent cases 0.51 0.66 0.60
Owner Occupied accounts 1.14 1.36 1.27
All mortgages 1.04 1.26 1.17
Secured loans
Accounts more than 2 months in arrears 17.01 19.70 19.56
FLA data for secured loans 13.40 16.50 15.80
Car loans
Accounts more than 2 months in arrears 0.43 2.02 0.67
FLA data for all personal loans 3.40 3.50 3.00
Asset finance loans
Accounts more than 2 months in arrears 1.23 - -
FLA data for business lease / hire purchase loans 0.60 0.70 0.60
Other loans
Accounts more than 2 months in arrears 95.64 91.27 94.66
No published industry data for asset classes comparable to the Group's other books has been identified. Where revised data
at 30 September 2015 has been published by the FLA or CML, the comparative industry figures above have been amended.
The Group calculates its headline arrears measure for buy-to-let mortgages, shown above, based on the numbers of accounts
three months or more in arrears, including purchased Idem Capital assets, but excluding those cases in possession and
receiver of rent cases designated for sale. This is consistent with the methodology used by the CML in compiling its
statistics for the buy-to-let mortgage market as a whole.
The number of accounts in arrears will be higher for closed books such as the owner-occupied mortgage book and the retail
finance and unsecured loan books than for comparable active ones, as performing accounts pay off their balances, leaving
arrears accounts representing a greater proportion of the total.
The improvement in the arrears position for car loans shown above is due to the recommencement of lending in this market,
through Paragon Bank, with the new performing cases reducing the overall average.
The figures shown above for secured loans and other loans include purchased portfolios which generally include a high
proportion of cases in arrears at the time of purchase and where this level of performance is allowed for in the discount
to current balance represented by the purchase price.
The payment status of the carrying balances of the Group's live loan assets, before provision for impairment, at 31 March
2016, 31 March 2015 and at 30 September 2015 split between those accounts considered as performing and those included in
the population for impairment testing, is shown below. Balances for immaterial asset classes are not shown.
First Mortgages
31.03.16 31.03.15 30.09.15
£m £m £m
Performing accounts (less than 3 months arrears) 9,733.2 8,838.9 9,374.8
Impairment population 50.1 60.0 53.3
9,783.3 8,898.9 9,428.1
Consumer and Asset Finance
Secured loans Car loans Asset finance loans Total
£m £m £m £m
31 March 2016
Performing accounts (less than 2 months arrears) 479.2 73.9 224.8 777.9
Impairment population 95.0 0.4 4.3 99.7
574.2 74.3 229.1 877.6
31 March 2015
Performing accounts (less than 2 months arrears) 305.9 20.1 - 326.0
Impairment population 108.6 0.4 - 109.0
414.5 20.5 - 435.0
30 September 2015
Performing accounts (less than 2 months arrears) 325.0 5.8 - 330.8
Impairment population 116.0 0.7 - 116.7
441.0 6.5 - 447.5
Other Loans
31.03.16 31.03.15 30.09.15
£m £m £m
Performing accounts (less than 1 month arrears) 6.0 10.4 7.2
Impairment population 227.4 166.6 230.6
233.4 177.0 237.8
Arrears in the tables above are based on the contractual payment status of the customers concerned. Where assets have been
purchased by the Idem Capital loan investment business, customers may already have been in arrears at the time of
acquisition and an appropriate adjustment made to the consideration paid.
In the debt purchase industry, Estimated Remaining Collections ('ERC') is commonly used as a measure of the value of a
portfolio. This is defined as the sum of the undiscounted cash flows expected to be received over a specified future
period. In the Group's view, this measure may be suitable for heavily discounted, unsecured, distressed portfolios, but is
less applicable for the types of portfolio in which the Group has invested, where cash flows are higher on acquisition,
loans may be secured on property and customers may not be in default. In such cases, the IAS 39 amortised cost balance, at
which these assets are carried in the Group balance sheet, provides a better indication of value.
However, to aid comparability, the 84 and 120 month ERC values for the Group's purchased assets are set out below, analysed
by the balance sheet line on which they appear. These are derived from the same models and assumptions used in the
effective interest rate calculations.
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Carrying value
Loans to customers 593.5 389.2 432.9 407.2
Investments in structured entities - 17.7 18.1 19.3
593.5 406.9 451.0 426.5
84 month ERC
Loans to customers 716.8 521.7 555.1 554.8
Investments in structured entities - 24.9 25.7 26.6
716.8 546.6 580.8 581.4
120 month ERC
Loans to customers 823.2 609.3 647.3 649.9
Investments in structured entities - 29.9 30.4 32.3
823.2 639.2 677.7 682.2
The analysis of these balances between the Idem Capital and Paragon Bank segments is shown in note 15.
Amounts shown as loans to customers above include loans disclosed as first mortgages and other loans (note 15).
7. SEGMENTAL RESULTS
The Group analyses its operations, both for internal management reporting and external financial reporting, on the basis of
the entities within the Group generating its assets. The segments used are described below.
· Paragon Mortgages includes revenue, in the form of interest and ancillary income, from the Group's first mortgage
operations, other than the buy-to-let lending of Paragon Bank, and from assets remaining in other, legacy, portfolios.
· Idem Capital includes revenue generated from assets purchased by the Group's debt investment business, Idem Capital
Holdings Limited, other than those financed by Paragon Bank and from third party loan administration activity.
· Paragon Bank includes revenue, in the form of interest and ancillary income, generated from the Group's regulated
banking business, Paragon Bank PLC and its subsidiary companies including the PBAF group.
Each of these businesses invests in consumer finance or SME finance assets. An analysis of the Group's financial assets by
type is shown in note 15.
Dedicated financing and administration costs of each of these businesses are allocated to the segment and shared costs, and
the financing costs of the Group's working capital invested, are allocated based on the segments' use of those resources.
No profit has been recognised in the segmental disclosures below in respect of transfers of loan assets between segments.
The costs arising from the PBAF acquisition in the period of £2.5m are included in the Paragon Bank segmental profit and
loss account for the half year.
Financial information about these business segments is shown below.
Six months ended 31 March 2016
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 135.3 42.8 25.3 203.4
Interest payable (73.9) (7.3) (12.4) (93.6)
Net interest income 61.4 35.5 12.9 109.8
Other operating income 3.9 3.2 5.4 12.5
Total operating income 65.3 38.7 18.3 122.3
Operating expenses (17.5) (13.2) (18.7) (49.4)
Provisions for losses (3.1) - (0.4) (3.5)
44.7 25.5 (0.8) 69.4
Fair value net gain / (loss) (0.1) - 0.2 0.1
Operating profit / (loss) 44.6 25.5 (0.6) 69.5
Tax charge (13.6)
Profit after taxation 55.9
Six months ended 31 March 2015
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 128.6 35.0 1.1 164.7
Interest payable (61.4) (5.1) (1.0) (67.5)
Net interest income 67.2 29.9 0.1 97.2
Other operating income 4.0 2.8 - 6.8
Total operating income 71.2 32.7 0.1 104.0
Operating expenses (23.0) (9.1) (4.5) (36.6)
Provisions for losses (3.5) - - (3.5)
44.7 23.6 (4.4) 63.9
Fair value net (loss) / gain (1.2) - (0.1) (1.3)
Operating profit / (loss) 43.5 23.6 (4.5) 62.6
Tax charge (12.8)
Profit after taxation 49.8
Year ended 30 September 2015
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 263.2 71.6 6.2 341.0
Interest payable (128.1) (9.9) (5.6) (143.6)
Net interest income 135.1 61.7 0.6 197.4
Other operating income 8.5 5.3 0.3 14.1
Total operating income 143.6 67.0 0.9 211.5
Operating expenses (44.0) (17.7) (9.5) (71.2)
Provisions for losses (5.6) - - (5.6)
94.0 49.3 (8.6) 134.7
Fair value net (loss) / gain (0.4) - (0.1) (0.5)
Operating profit / (loss) 93.6 49.3 (8.7) 134.2
Tax charge (27.1)
Profit after taxation 107.1
The assets of the segments listed above are:
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Paragon Mortgages 10,844.1 10,559.4 10,622.9 10,343.3
Idem Capital 338.0 429.3 481.2 445.8
Paragon Bank 1,664.0 209.1 774.8 106.0
Total assets 12,846.1 11,197.8 11,878.9 10,895.1
8. other operating incOme
31 March 2016 31 March 2015 30 September 2015
£m £m £m
Loan account fee income 3.6 3.1 6.7
Operating lease income 3.1 - -
Insurance income 0.6 0.5 1.2
Third party servicing 4.6 2.6 4.9
Other income 0.6 0.6 1.3
12.5 6.8 14.1
9. COST:INCOME RATIO
Cost: income ratio is derived as follows:
31 March 2016 31 March 2015 30 September 2015
Operating expenses (£m) 49.4 36.6 71.2
Total operating income (£m) 122.3 104.0 211.5
Cost ¸ Income 40.4% 35.2% 33.7%
Cost:income ratio excluding the impact of the acquired business is derived as follows:
31 March 2016 31 March 2015 30 September 2015
Operating expenses (£m) 49.4 36.6 71.2
Operating expenses of PBAF (£m) (10.4) - -
Operating expenses excluding PBAF (£m) 39.0 36.6 71.2
Operating income (£m) 122.3 104.0 211.5
Operating income of PBAF (£m) (13.3) - -
Operating income excluding PBAF (£m) 109.0 104.0 211.5
Cost ¸ Income 35.8% 35.2% 33.7%
10. FAIR VALUE NET GAINS / (Losses )
The fair value net gain / (loss) represents the accounting volatility on derivative instruments which are matching risk
exposure on an economic basis generated by the requirements of IAS 39. Some accounting volatility arises on these items due
to accounting ineffectiveness on designated hedges, or because hedge accounting has not been adopted or is not achievable
on certain items. The losses are primarily due to timing differences in income recognition between the derivative
instruments and the economically hedged assets and liabilities. Such differences will reverse over time and have no impact
on the cash flows of the Group.
11. UNDERLYING PROFIT
Underlying profit is determined by excluding from the operating result one off costs relating to the acquisition of PBAF
(note 5) and fair value accounting adjustments arising from the Group's hedging arrangements.
31 March 2016 31 March 2015 30 September 2015
£m £m £m
Paragon Mortgages
Profit before tax for the period (note 7) 44.6 43.5 93.6
Exclude: Acquisition related costs - - -
Exclude: Fair value losses / (gains) 0.1 1.2 0.4
44.7 44.7 94.0
Idem Capital
Profit before tax for the period (note 7) 25.5 23.6 49.3
Exclude: Acquisition related costs - - -
Exclude: Fair value losses / (gains) - - -
25.5 23.6 49.3
Paragon Bank
(Loss) before tax for the period (note 7) (0.6) (4.5) (8.7)
Exclude: Acquisition related costs (note 5) 2.5 - -
Exclude: Fair value losses / (gains) (0.2) 0.1 0.1
1.7 (4.4) (8.6)
Total
Profit before tax for the period 69.5 62.6 134.2
Exclude: Acquisition related costs 2.5 - -
Exclude: Fair value losses / (gains) (0.1) 1.3 0.5
Underlying profit before tax 71.9 63.9 134.7
12. TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Income tax for the six months ended 31 March 2016 is charged at 19.6% (six months ended 31 March 2015: 20.4%, year ended 30
September 2015: 20.2%), representing the best estimate of the annual effective rate of income tax expected for the full
year, applied to the pre-tax income of the period.
13. EARNINGS PER SHARE
Earnings per ordinary share is calculated as follows:
31 March 2016 31 March 2015 30 September 2015
Profit for the period (£m) 55.9 49.8 107.1
Basic weighted average number of ordinary shares ranking for dividend during the period (million) 291.8 304.9 301.9
Dilutive effect of the weighted average number of share options and incentive plans in issueduring the period (million) 5.5 7.1 5.9
Diluted weighted average number of ordinary shares ranking for dividend during the period (million) 297.3 312.0 307.8
Earnings per ordinary share - basic 19.1p 16.3p 35.5p
- diluted 18.8p 16.0p 34.8p
14. INTANGIBLE ASSETS
Intangible assets at net book value comprise:
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Goodwill 80.0 1.6 1.6 1.6
Computer software 1.9 1.3 1.6 1.3
Other intangibles 5.1 4.7 4.5 5.0
Total assets 87.0 7.6 7.7 7.9
The increase in goodwill and intangible assets in the period is principally due to the acquisition described in note 5.
15. FINANCIAL ASSETS
Note 31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Loans to customers 10,853.1 9,468.3 10,062.4 9,255.9
Fair value adjustments from portfolio hedging 7.3 3.3 5.2 0.5
Investments in structured entities - 17.7 18.1 19.3
Derivative financial assets 17 939.9 810.9 660.1 693.9
Total assets 11,800.3 10,300.2 10,745.8 9,969.6
During the period the structured entities in which the Group had invested sold their loan assets to the Group and the
investments of the participants, including the Group, were repaid.
The Group's loans to customers and investments in structured entities at 31 March 2016, analysed between the segments
described in note 7, were as follows:
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Paragon Mortgages
First mortgage loans 8,945.2 8,802.8 9,046.7 8,635.2
Consumer loans 160.1 190.7 175.0 207.7
Asset finance - - - -
Other loans - - - -
Loans to customers 9,105.3 8,993.5 9,221.7 8,842.9
Investments in structured entities - - - -
Total investment in loans 9,105.3 8,993.5 9,221.7 8,842.9
Idem Capital
First mortgage loans 13.9 15.3 14.5 16.0
Consumer loans 292.9 373.9 418.4 391.2
Asset finance - - - -
Other loans - - - -
Loans to customers 306.8 389.2 432.9 407.2
Investments in structured entities - 17.7 18.1 19.3
Total investment in loans 306.8 406.9 451.0 426.5
Paragon Bank
First mortgage loans 802.2 62.1 349.6 0.5
Consumer loans 399.3 23.5 58.2 5.3
Asset Finance 224.9 - - -
Other loans 14.6 - - -
Loans to customers 1,441.0 85.6 407.8 5.8
Investments in structured entities - - - -
Total investment in loans 1,441.0 85.6 407.8 5.8
Total
First mortgage loans 9,761.3 8,880.2 9,410.8 8,651.7
Consumer loans 852.3 588.1 651.6 604.2
Asset finance 224.9 - - -
Other loans 14.6 - - -
Loans to customers 10,853.1 9,468.3 10,062.4 9,255.9
Investments in structured entities - 17.7 18.1 19.3
Total investment in loans 10,853.1 9,486.0 10,080.5 9,275.2
Of the assets shown above, the balances acquired through the Group's Idem Capital debt purchase operation were as follows
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Loans to customers
Idem Capital 306.8 389.2 432.9 407.2
Paragon Bank 286.7 - - -
593.5 389.2 432.9 407.2
Investments in structured entities
Idem Capital - 17.7 18.1 19.3
Paragon Bank - - - -
- 17.7 18.1 19.3
Total purchased debt interests 593.5 406.9 451.0 426.5
16. Impairment provisions on loans to customers
The following amounts in respect of impairment provisions, net of allowances for recoveries of written off assets, have
been deducted from the appropriate assets in the balance sheet.
First mortgages Other Finance leases Total
loans and receivables
£m £m £m £m
At 30 September 2015 86.0 24.4 0.6 111.0
Charge for the period 2.4 0.8 0.3 3.5
Amounts written off (1.0) (2.1) - (3.1)
Amounts recovered - 0.4 0.2 0.6
At 31 March 2016 87.4 23.5 1.1 112.0
At 30 September 2014 87.0 27.0 0.8 114.8
Charge for the period 2.0 1.7 (0.2) 3.5
Amounts written off (2.0) (2.8) (0.2) (5.0)
Amounts recovered 0.1 0.6 0.1 0.8
At 31 March 2015 87.1 26.5 0.5 114.1
At 30 September 2014 87.0 27.0 0.8 114.8
Charge for the year 3.6 2.4 (0.4) 5.6
Amounts written off (4.5) (3.5) 0.2 (7.8)
Amounts recovered (0.1) (1.5) - (1.6)
At 30 September 2015 86.0 24.4 0.6 111.0
Of the above balances, the following provisions were held in respect of realised losses not charged off, which remain on
the balance sheet and provided for in full.
First mortgages Other Finance leases Total
loans and receivables
£m £m £m £m
At 31 March 2016 71.3 0.2 0.2 71.7
At 31 March 2015 69.1 0.2 0.1 69.4
At 30 September 2015 70.7 0.3 0.1 71.1
17. DERIVATIVE FINANCIAL ASSETS AND LIABILITES
Note 31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Derivative financial assets 15 939.9 810.9 660.1 693.9
Derivative financial liabilities 24 (10.2) (5.0) (6.7) (1.1)
929.7 805.9 653.4 692.8
Of which:
Foreign exchange basis swaps 938.4 810.6 659.8 693.5
Other derivatives (8.7) (4.7) (6.4) (0.7)
929.7 805.9 653.4 692.8
The Group's securitisation borrowings are denominated in sterling, euros and US dollars. All currency borrowings are
swapped at inception so that they have the effect of sterling borrowings. These swaps provide an effective hedge against
exchange rate movements, but the requirement to carry them at fair value leads, when exchange rates have moved
significantly since the issue of the notes, to large balances for the swaps being carried in the balance sheet. This is
currently the case with both euro and US dollar swaps, although the debit balance is compensated for by retranslating the
borrowings at the current exchange rate.
18. SHORT TERM INVESTMENTS
This amount represents treasury bills and other liquid securities held as part of the liquidity requirement of Paragon Bank
PLC. As such they are designated as 'Available for Sale', as defined by IAS 39 - 'Financial Instruments: Recognition and
Measurement' and are consequently shown at market value.
19. CASH and cash equivalents
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Balances with central banks 81.5 59.0 286.0 -
Balances with other banks 813.8 753.6 770.0 848.8
895.3 812.6 1,056.0 848.8
Only 'Free Cash' is unrestrictedly available for the Group's general purposes. Cash received in respect of loan assets is
not immediately available, due to the terms of the warehouse facilities and the securitisations. Cash held in the Group's
banking entity, Paragon Bank, and its subsidiaries is subject to regulatory rules covering liquidity and capital adequacy,
and is shown as 'Bank Cash' below.
'Cash and Cash Equivalents' also includes balances held by the Trustees of the Paragon Employee Share Ownership Plans which
may only be used to invest in the shares of the Company, pursuant to the aims of those plans.
The total 'Cash and Cash Equivalents' balance may be analysed as shown below:
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Free cash 152.7 206.7 199.9 177.3
Securitisation cash 636.1 531.3 530.9 609.0
Bank cash 104.1 72.7 323.3 60.6
ESOP cash 2.4 1.9 1.9 1.9
895.3 812.6 1,056.0 848.8
20. Called-up share capital
Movements in the issued share capital in the period were:
Six months to Six months to Year to
31 March2016 31 March2015 30 September 2015
Number Number Number
Ordinary shares of £1 each
At 1 October 2015 309,349,316 307,308,283 307,308,283
Shares issued 213,425 1,637,402 2,041,033
At 31 March 2016 309,562,741 308,945,685 309,349,316
During the period the Company issued 163,045 shares at par (six months ended 31 March 2015: 800,000; year ended 30
September 2015: 1,050,000) to the trustees of its ESOP Trusts in order that they could fulfil their obligations under the
Group's share based award arrangements. It also issued 50,380 shares (six months ended 31 March 2015: 837,402; year ended
30 September 2015: 991,033) to satisfy options granted under sharesave schemes for a consideration of £55,730 (six months
ended 31 March 2015: £1,193,801; year ended 30 September 2015: £1,365,944).
21. RESERVES
31 March2016 31 March2015 30 September 2015 30 September 2014
£m £m £m £m
Share premium account 64.6 64.5 64.6 64.1
Merger reserve (70.2) (70.2) (70.2) (70.2)
Cash flow hedging reserve (0.7) (1.4) (1.9) 0.6
Profit and loss account 799.7 716.1 767.7 693.5
793.4 709.0 760.2 688.0
22. EQUITY DIVIDEND
Amounts recognised as distributions to equity shareholders in the period:
Six months to 31 March 2016 Six months to31 March 2015 Year to 30 September 2015
£m £m £m
Final dividend for the year ended 30 September 2015 of 7.4p per share 21.7 - -
Final dividend for the year ended 30 September 2014 of 6.0p per share - 18.3 18.3
Interim dividend for the year ended 30 September 2015 of 3.6p per share - - 10.8
21.7 18.3 29.1
An interim dividend of 4.3p per share is proposed (2015: 3.6p per share), payable on 22 July 2016 with a record date of 1
July 2016. The amount expected to be absorbed by this dividend, based on the number of shares in issue at the balance sheet
date is £12.2m (2015: £10.9m). The interim dividend will be recognised in the accounts when it is paid.
23. OWN SHARES
31 March 2016 31 March 2015 30 September 2015
£m £m £m
Treasury shares
At 1 October 2015 89.2 39.5 39.5
Shares purchased 33.8 17.2 49.7
At 31 March 2016 123.0 56.7 89.2
ESOP shares
At 1 October 2015 10.8 8.7 8.7
Shares purchased 6.2 5.1 7.2
Shares subscribed for 0.2 0.8 1.0
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