REG - Paragon Grp Co PLC - Half-year Report <Origin Href="QuoteRef">PARA.L</Origin> - Part 4
23/05/2017 07:07
- Part 4: For the preceding part double click ID:nRSW8984Fc
Accounts more than three months in arrears
Buy-to-Let accounts including receiver of rent cases 0.09 0.14 0.11
Buy-to-Let accounts excluding receiver of rent cases 0.01 0.02 0.02
Owner Occupied accounts 3.00 3.13 3.23
CML data for mortgage accounts more than three months in arrears
Buy-to-Let accounts including receiver of rent cases 0.49 0.56 0.55
Buy-to-Let accounts excluding receiver of rent cases 0.45 0.51 0.50
Owner Occupied accounts 1.00 1.14 1.11
All mortgages 0.91 1.04 1.01
Second charge mortgage loans
Accounts more than 2 months in arrears
All accounts 17.52 17.01 17.15
Paragon Bank originations 0.00 0.00 0.00
Legacy cases 16.67 16.08 16.33
Purchased assets 19.24 18.45 17.86
FLA data for second mortgages 11.60 13.20 12.40
Car loans
Accounts more than 2 months in arrears 0.45 0.43 0.30
FLA data for consumer hire purchase 1.60 1.50 1.40
Asset finance loans
Accounts more than 2 months in arrears 0.98 1.23 0.82
FLA data for business lease / hire purchase loans 0.70 0.60 0.60
Other consumer loans
Accounts more than 2 months in arrears 95.69 95.64 96.35
No published industry data for asset classes comparable to the Group's other books has been identified. Where revised data
at 31 March 2016 or 30 September 2016 has been published by the FLA or CML, the comparative industry figures above have
been amended.
Arrears information is not given for development finance or factoring activities as the structure of the products means
that such a measure is not relevant.
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 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
2017, 31 March 2016 and at 30 September 2016 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.Asset finance
loans below includes other related loan balances. Fully provided non-live accounts are excluded from the tables below.
Days past due is not a relevant measure for the development finance or invoice discounting businesses, due to their
particular contractual arrangements.
First Mortgages
31 March 31 March 30 September 2016
2017 2016
£m £m £m
Performing accounts 9,694.9 9,733.2 9,528.1
(less than 3 months arrears)
Impairment population 37.0 50.1 47.3
9,731.9 9,783.3 9,575.4
Consumer and Asset Finance
Secured loans Car Asset finance loans Total
loans
£m £m £m £m
31 March 2017
Performing accounts 433.2 124.0 293.4 850.6
(less than 2 months arrears)
Impairment population 81.0 0.8 4.9 86.7
514.2 124.8 298.3 937.3
31 March 2016
Performing accounts 479.2 73.9 224.8 777.9
(less than 2 months arrears)
Impairment population 95.0 0.4 4.3 99.7
574.2 74.3 229.1 877.6
30 September 2016
Performing accounts 448.3 95.7 253.1 797.1
(less than 2 months arrears)
Impairment population 87.0 0.4 5.0 92.4
535.3 96.1 258.1 889.5
Other Loans
31 March 2017 31 March 2016 30 September 2016
£m £m £m
Performing accounts (less than 1 month arrears) 9.6 6.0 4.4
Impairment population 251.1 227.4 206.9
260.7 233.4 211.3
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 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Carrying value
Loans to customers 555.8 593.5 533.9 432.9
Investments in structured entities - - - 18.1
555.8 593.5 533.9 451.0
84 month ERC
Loans to customers 670.8 716.8 651.3 555.1
Investments in structured entities - - - 25.7
670.8 716.8 651.3 580.8
120 month ERC
Loans to customers 762.4 823.2 740.7 647.3
Investments in structured entities - - - 30.4
762.4 823.2 740.7 677.7
The analysis of these balances between the Idem Capital and Paragon Bank segments is shown in note 14.
Amounts shown as loans to customers above include loans disclosed as first mortgages and other loans (note 14).
6. 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 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.
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 14.
Dedicated financing and administration costs of each of these businesses are allocated to the segment. Shared costs, and
the financing costs of the Group's working capital invested, are allocated based on each segment's use of those resources.
No profit has been recognised in the segmental disclosures below in respect of transfers of loan assets between segments.
Financial information about these business segments, prepared on the same basis as used in the consolidated accounts of the
Group, is shown below.
Six months ended 31 March 2017
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 110.1 37.3 56.4 203.8
Interest payable (61.3) (4.9) (24.1) (90.3)
Net interest income 48.8 32.4 32.3 113.5
Other operating income 4.1 0.2 5.9 10.2
Total operating income 52.9 32.6 38.2 123.7
Operating expenses (15.9) (10.3) (24.2) (50.4)
Provisions for losses (3.4) - 0.2 (3.2)
33.6 22.3 14.2 70.1
Fair value net gain / (loss) 0.2 - (0.9) (0.7)
Operating profit 33.8 22.3 13.3 69.4
Tax charge (13.0)
Profit after taxation 56.4
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 (loss) / gain (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
Year ended 30 September 2016
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 264.2 76.4 70.8 411.4
Interest payable (144.5) (11.9) (31.8) (188.2)
Net interest income 119.7 64.5 39.0 223.2
Other operating income 8.1 4.0 8.7 20.8
Total operating income 127.8 68.5 47.7 244.0
Operating expenses (31.8) (23.1) (37.6) (92.5)
Provisions for losses (6.1) - (1.6) (7.7)
89.9 45.4 8.5 143.8
Fair value net (loss) (0.4) - (0.2) (0.6)
Operating profit 89.5 45.4 8.3 143.2
Tax charge (27.2)
Profit after taxation 116.0
The assets of the segments listed above are:
31 March2017 31 March2016 30 September2016 30 September2015
£m £m £m £m
Paragon Mortgages 9,894.9 10,844.1 11,044.9 10,622.9
Idem Capital 359.3 338.0 314.2 481.2
Paragon Bank 3,077.1 1,664.0 2,159.3 774.8
Total assets 13,331.3 12,846.1 13,518.4 11,878.9
7. INTEREST RECEIVABLE
31 March 2017 31 March 2016 30 September 2016
£m £m £m
Interest receivable in respect of
First mortgages 133.3 137.1 277.1
Secured consumer loans 34.2 28.7 63.9
Other consumer loans 18.8 20.0 36.6
Development finance 0.9 - 0.2
Finance leases 14.1 10.0 22.6
Interest on loans to customers 201.3 195.8 400.4
Other interest receivable 1.5 3.2 5.6
Factoring income 1.0 2.0 3.0
Income from structured entities - 2.4 2.4
Total interest on financial assets 203.8 203.4 411.4
8. INTEREST PAYABLE AND SIMILAR CHARGES
31 March 2017 31 March 2016 30 September 2016
£m £m £m
On retail deposits 20.1 12.3 29.5
On asset backed loan notes 40.1 54.4 103.4
On corporate bonds 7.6 2.1 4.8
On retail bonds 9.2 9.2 18.5
On central bank facilities 0.3 - -
On bank loans and overdrafts 11.6 14.6 29.7
Total interest on financial liabilities 88.9 92.6 185.9
On pension scheme deficit (note 26) 0.7 0.4 0.8
Discounting on contingent consideration 0.1 - -
Other finance costs 0.6 0.6 1.5
90.3 93.6 188.2
9. other incOme
31 March 2017 31 March 2016 30 September 2016
£m £m £m
Loan account fee income 4.3 3.6 7.7
Insurance income - 0.6 1.2
Third party servicing 1.7 4.6 7.4
Other income 2.1 0.6 1.5
8.1 9.4 17.8
10. FAIR VALUE NET (Losses) / GAINS
The fair value net (loss) / gain 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. TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Income tax for the six months ended 31 March 2017 is charged at an effective rate of 18.7% (six months ended 31 March 2016:
19.6%, year ended 30 September 2016: 19.0%), 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.
The reduction in the period is principally attributable to the reduction in the UK Corporation Tax rate applicable to the
Group from 20.0% in the year ended 30 September 2016 to 19.5% in the current year, and the inclusion in the result for 2016
of disallowable acquisition costs.
12. EARNINGS PER SHARE
Earnings per ordinary share is calculated as follows:
31 March2017 31 March2016 30 September 2016
Profit for the period (£m) 56.4 55.9 116.0
Basic weighted average number of ordinary shares ranking for dividend during the period (m) 275.4 291.8 286.5
Dilutive effect of the weighted average number of share options and incentive plans in issueduring the period (m) 7.4 5.5 5.5
Diluted weighted average number of ordinary shares ranking for dividend during the period (m) 282.8 297.3 292.0
Earnings per ordinary share - basic 20.5p 19.1p 40.5p
- diluted 19.9p 18.8p 39.7p
13. INTANGIBLE ASSETS
Intangible assets at net book value comprise:
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Goodwill 98.0 80.0 98.4 1.6
Computer software 1.9 1.9 2.1 1.6
Other intangibles 4.7 5.1 4.9 4.5
Total assets 104.6 87.0 105.4 7.7
The reduction in goodwill in the period is due to the finalisation of the acquisition accounts of Premier Asset Finance
Limited, acquired by the Group on 30 September 2016.
14. FINANCIAL ASSETS
Note 31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Loans to customers 10,940.2 10,853.1 10,737.5 10,062.4
Fair value adjustments from portfolio hedging 7.5 7.3 12.5 5.2
Investments in structured entities - - - 18.1
Derivative financial assets 16 1,044.0 939.9 1,366.4 660.1
Total assets 11,991.7 11,800.3 12,116.4 10,745.8
During the period ended 31 March 2016, 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 2017, analysed between the segments
described in note 7, were as follows:
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Paragon Mortgages
First mortgage loans 8,020.2 8,945.2 8,620.4 9,046.7
Consumer loans 81.6 160.1 147.6 175.0
Asset finance - - - -
Other loans - - - -
Loans to customers 8,101.8 9,105.3 8,768.0 9,221.7
Investments in structured entities - - - -
Total investment in loans 8,101.8 9,105.3 8,768.0 9,221.7
Idem Capital
First mortgage loans 13.6 13.9 13.7 14.5
Consumer loans 318.1 292.9 269.6 418.4
Asset finance - - - -
Other loans - - - -
Loans to customers 331.7 306.8 283.3 432.9
Investments in structured entities - - - 18.1
Total investment in loans 331.7 306.8 283.3 451.0
Paragon Bank
First mortgage loans 1,714.6 802.2 1,015.6 349.6
Consumer loans 478.4 399.3 400.0 58.2
Asset finance 289.0 224.9 250.4 -
Other loans 24.7 14.6 20.2 -
Loans to customers 2,506.7 1,441.0 1,686.2 407.8
Investments in structured entities - - - -
Total investment in loans 2,506.7 1,441.0 1,686.2 407.8
Total
First mortgage loans 9,748.4 9,761.3 9,649.7 9,410.8
Consumer loans 878.1 852.3 817.2 651.6
Asset finance 289.0 224.9 250.4 -
Other loans 24.7 14.6 20.2 -
Loans to customers 10,940.2 10,853.1 10,737.5 10,062.4
Investments in structured entities - - - 18.1
Total investment in loans 10,940.2 10,853.1 10,737.5 10,080.5
Of the assets shown above, the balances acquired through the Group's Idem Capital debt purchase operation were as follows:
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Loans to customers
Idem Capital 331.7 306.8 283.3 432.9
Paragon Bank 224.1 286.7 250.6 -
555.8 593.5 533.9 432.9
Investments in structured entities
Idem Capital - - - 18.1
Paragon Bank - - - -
- - - 18.1
Total purchased debt interests 555.8 593.5 533.9 451.0
15. 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 2016 88.8 22.6 1.2 112.6
Provided in the period 2.8 1.2 1.0 5.0
Amounts written off (1.9) (3.3) (0.1) (5.3)
At 31 March 2017 89.7 20.5 2.1 112.3
At 30 September 2015 86.0 24.4 0.6 111.0
Provided in the period 2.4 1.2 0.5 4.1
Amounts written off (1.0) (2.1) - (3.1)
At 31 March 2016 87.4 23.5 1.1 112.0
At 30 September 2015 86.0 24.4 0.6 111.0
Provided in the year 4.9 2.7 1.9 9.5
Amounts written off (2.1) (4.5) (1.3) (7.9)
At 30 September 2016 88.8 22.6 1.2 112.6
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 2017 75.6 - 0.1 75.7
At 31 March 2016 71.3 0.2 0.2 71.7
At 30 September 2016 72.4 0.1 0.1 72.6
The amounts charged to the profit and loss account, net of recoveries of previously provided amounts are set out below.
First mortgages Other Finance leases Total
loans and receivables
£m £m £m £m
Six months ended 31 March 2017
Amounts provided in the period 2.8 1.2 1.0 5.0
Recovery of amounts previously provided (0.1) (0.3) (1.4) (1.8)
Net impairment for period 2.7 0.9 (0.4) 3.2
Six months ended 31 March 2016
Amounts provided in the period 2.4 1.2 0.5 4.1
Recovery of amounts previously provided - (0.4) (0.2) (0.6)
Net impairment for period 2.4 0.8 0.3 3.5
Six months ended 30 September 2016
Amounts provided in the period 4.9 2.7 1.9 9.5
Recovery of amounts previously provided (0.1) (0.1) (1.6) (1.8)
Net impairment for period 4.8 2.6 0.3 7.7
16. DERIVATIVE FINANCIAL ASSETS AND LIABILITES
Note 31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Derivative financial assets 14 1,044.0 939.9 1,366.4 660.1
Derivative financial liabilities 23 (12.1) (10.2) (15.8) (6.7)
1,031.9 929.7 1,350.6 653.4
Of which:
Foreign exchange basis swaps 1,042.2 938.4 1,364.8 659.8
Other derivatives (10.3) (8.7) (14.2) (6.4)
1,031.9 929.7 1,350.6 653.4
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.
17. SHORT TERM INVESTMENTS
This amount represented treasury bills and other liquid securities held as part of the liquidity requirement of Paragon
Bank PLC. As such they were designated as 'Available for Sale', as defined by IAS 39 - 'Financial Instruments: Recognition
and Measurement' and are consequently shown at market value. The Bank's liquidity requirements are currently met through
central bank deposits and liquidity facilities and therefore it is no longer required to hold treasury bills.
18. CASH and cash equivalents
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Balances with central banks 408.5 81.5 315.0 286.0
Balances with other banks 765.1 813.8 922.6 770.0
1,173.6 895.3 1,237.6 1,056.0
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 Plan which
may only be used to invest in the shares of the Company, pursuant to the aims of that plan.
The total 'Cash and Cash Equivalents' balance may be analysed as shown below:
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Free cash 257.4 152.7 366.5 199.9
Securitisation cash 428.3 636.1 537.1 530.9
Bank cash 485.5 104.1 331.6 323.3
ESOP cash 2.4 2.4 2.4 1.9
1,173.6 895.3 1,237.6 1,056.0
19. Called-up share capital
Movements in the issued share capital in the period were:
Six months to Six months to Year to
31 March2017 31 March2016 30 September 2016
Number Number Number
Ordinary shares of £1 each
At 1 October 2016 295,852,094 309,349,316 309,349,316
Shares issued 608,205 213,425 218,872
Shares cancelled - - (13,716,094)
At 31 March 2017 296,460,299 309,562,741 295,852,094
During the period the Company issued nil shares at par (six months ended 31 March 2016: 163,045; year ended 30 September
2016: 163,045) to the trustees of its ESOP Trust in order that they could fulfil their obligations under the Group's share
based award arrangements. It also issued 608,205 shares (six months ended 31 March 2016: 50,380; year ended 30 September
2016: 55,827) to satisfy options granted under sharesave schemes for a consideration of £1,495,848 (six months ended 31
March 2016: £55,730; year ended 30 September 2016: £68,070).
20. RESERVES
31 March2017 31 March2016 30 September2016 30 September2015
£m £m £m £m
Share premium account 65.5 64.6 64.6 64.6
Capital redemption reserve 13.7 - 13.7 -
Merger reserve (70.2) (70.2) (70.2) (70.2)
Cash flow hedging reserve 1.6 (0.7) 2.1 (1.9)
Profit and loss account 772.8 799.7 725.9 767.7
783.4 793.4 736.1 760.2
21. EQUITY DIVIDEND
Amounts recognised as distributions to equity shareholders in the period:
Six months to 31 March 2017 Six months to31 March 2016 Year to 30 September 2016
£m £m £m
Final dividend for the year ended 30 September 2016 of 9.2p per share 25.4 - -
Final dividend for the year ended 30 September 2015 of 7.4p per share - 21.7 21.7
Interim dividend for the year ended 30 September 2016 of 4.3p per share - - 12.2
25.4 21.7 33.9
An interim dividend of 4.7p per share is proposed (2016: 4.3p per share), payable on 28 July 2017 with a record date of 7
July 2017. The amount expected to be absorbed by this dividend, based on the number of shares in issue at the balance sheet
date is £12.8m (31 March 2016: £12.2m). The interim dividend will be recognised in the accounts when it is paid.
22. OWN SHARES
31 March 2017 31 March 2016 30 September 2016
£m £m £m
Treasury shares
At 1 October 2016 46.2 89.2 89.2
Shares purchased 27.0 33.8 51.0
Shares cancelled - - (94.0)
At 31 March 2017 73.2 123.0 46.2
ESOP shares
At 1 October 2016 16.3 10.8 10.8
Shares purchased - 6.2 8.9
Shares subscribed for - 0.2 0.3
Options exercised (3.8) (1.6) (3.7)
At 31 March 2017 12.5 15.6 16.3
Total at 31 March 2017 85.7 138.6 62.5
Total at 1 October 2016 62.5 100.0 100.0
Number of shares held
Treasury 21,910,963 22,941,909 15,348,714
ESOP 2,229,107 3,224,335 3,594,175
Balance at 31 March 2017 24,140,070 26,166,244 18,942,889
23. FINANCIAL LIABILITIES
Note 31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Current liabilities
Corporate bonds 110.0 - 110.0 -
Index long term repo scheme 70.0 - - -
Retail deposits 24 1,498.3 808.5 1,017.1 338.9
Bank loans and overdrafts 1.1 1.0 1.2 0.7
1,679.4 809.5 1,128.3 339.6
Non-current liabilities
Asset backed loan notes 7,491.9 8,414.7 8,374.1 8,274.6
Corporate bond 149.1 110.0 149.0 110.0
Term funding scheme 275.0 - - -
Retail bonds 295.5 295.0 295.3 294.9
Retail deposits 24 849.1 617.9 856.8 369.8
Fair value adjustments from portfolio hedging 0.3 - 0.8 -
Bank loans and overdrafts 1,448.2 1,510.6 1,573.0 1,425.4
Derivative financial liabilities 16 12.1 10.2 15.8 6.7
10,521.2 10,958.4 11,264.8 10,481.4
Details of changes in the Group's borrowings since the year end are given in note 25 below.
24. Retail deposits
The Group's retail deposits, held by Paragon Bank PLC, were received from customers in the United Kingdom and are
denominated in sterling. The deposits comprise principally term deposits and 120 day notice accounts. The method of
interest calculation on these deposits is analysed as follows:
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Fixed rate 1,514.8 891.3 1,332.5 508.3
Variable rates 832.6 535.1 541.4 200.4
2,347.4 1,426.4 1,873.9 708.7
The weighted average interest rate on retail deposits, analysed by charging method, was:
31 March2017 31 March2016 30 September 2016 30 September 2015
% % % %
Fixed rate 1.99 2.31 2.11 2.33
Variable rates 1.22 1.67 1.65 1.62
The contractual maturity of these deposits is analysed below.
31 March2017 31 March2016 30 September 2016 30 September 2015
£m £m £m £m
Amounts repayable
In less than three months 115.6 13.4 55.7 9.1
In more than three months but not more than one year 823.6 532.2 690.3 242.6
In more than one year, but not more than two years 452.7 381.5 572.9 181.7
In more than two years, but not more than five years 396.4 236.4 283.9 188.1
Total term deposits 1,788.3 1,163.5 1,602.8 621.5
Repayable on demand 559.1 262.9 271.1 87.2
2,347.4 1,426.4 1,873.9 708.7
Total falling due in less than one year (note 23) 1,498.3 808.5 1,017.1 338.9
Total falling due in more than one year (note 23) 849.1 617.9 856.8 369.8
2,347.4 1,426.4 1,873.9 708.7
25. BORROWINGS
All borrowings described in the Group Accounts for the year ended 30 September 2016 remained in place throughout the
period, except as noted below.
During the period the Group accessed further facilities under the Bank of England's Sterling Monetary Framework.
Drawings under the Indexed Long Term Repo Scheme ('ILTR') have a maturity of six months and a rate of interest set in an
auction process. The current average interest rate of the Group's drawings is 0.15% above bank base rate. The drawings are
secured against a designated pool of Paragon Bank mortgage assets.
Drawings under the Term Funding Scheme have a maturity of four years and bear interest at bank base rate. The average
remaining maturity of the Group's drawings is 47 months and the drawings are secured against a designated pool of Paragon
Bank mortgage assets.
On 20 October 2015, a Group company, Idem Luxembourg (No. 8) entered into an agreement under which £117.3m of sterling
floating rate notes have been issued to Citibank NA on a limited recourse basis. These notes bear interest at a rate of one
month LIBOR plus 3.50% and are secured on financial assets. A further £69.8m of notes was issued under the facility after
the end of the period. This issue was used to refinance existing Idem Capital unsecured loan assets.
Of the Group's borrowings at 30 September 2016, the mortgage backed floating rate notes issued by Paragon Mortgages (No.
18) PLC were repaid in December 2016 with its assets refinanced through warehouse facilities. The asset backed loan notes
issued by Paragon Personal and Auto Finance (No. 3) PLC were repaid in January 2017, following the purchase of its loan
assets by other group companies, principally Paragon Bank.
During the period, the warehouse facility in Paragon Fourth Funding was not renewed and hence is in rundown. This has
reduced the Group's available warehouse capacity by £300.0m.
After the period end, a call notice on the Paragon Mortgages (No. 19) PLC securitisation was issued and therefore that
borrowing will be repaid in the second half of the financial year. The Group's £110.0m corporate bond was repaid, in
accordance with its terms of issue, in April 2017, after the period end.
Repayments made in respect of the Group's borrowings are shown in note 29.
26. RETIREMENT BENEFIT OBLIGATIONS
The defined benefit obligation at 31 March 2017 has been calculated on a year-to-date basis. The defined benefit obligation
takes into account the preliminary results of the statutory funding valuation as at 31 March 2016, which results in a
reduction in the value of the defined benefit obligation at 31 March 2017. Since the last IAS 19 actuarial valuation at 30
September 2016 there have also been movements in financial conditions, requiring an adjustment to the actuarial assumptions
underlying the calculation of the defined benefit obligation at 31 March 2017. In particular, over the period since the 30
September 2016 actuarial valuation, the discount rate has increased by 0.2% per annum, whereas expectations of long term
inflation have increased by 0.1% per annum.
The net effect of these changes has resulted in a decrease in the value of the defined benefit obligation at 31 March 2017.
The impact of allowing for the preliminary results of the 31 March 2016 statutory funding valuation and the change in
actuarial assumptions has been recognised as an actuarial gain in other comprehensive income.
The movements in the deficit on the defined benefit plan during the six month period ended 31 March 2017 are summarised
below.
Six months to Six months to Year to
31 March2017 31 March2016 30 September 2016
£m £m £m
Opening pension deficit 58.4 21.5 21.5
Service cost 1.3 0.8 1.7
Net funding cost (note 8) 0.7 0.4 0.8
Administrative expenses 0.2 0.2 0.4
Employer contributions (1.5) (1.6) (3.2)
Amounts posted to other comprehensive income
Return on plan assets not included in interest (5.3) (2.0) (7.7)
Experience (gain) on liabilities (4.3) - -
Actuarial (gain)/loss from changes in financial assumptions (4.4) 4.7 44.9
Actuarial (gain) from changes in demographic assumptions (6.7) - -
Closing pension deficit 38.4 24.0 58.4
27. NET CASH FLOW FROM OPERATING ACTIVITIES
Six months to Six months to Year to
31 March2017 31 March2016 30 September 2016
£m £m £m
Profit before tax 69.4 69.5 143.2
Non-cash items included in profit, and other adjustments
Depreciation of property, plant and equipment 0.9 2.2 1.9
Profit on disposal of property, plant and equipment (0.1) (0.7) (0.1)
Amortisation of intangible assets 0.8 0.7 1.6
Foreign exchange movements on borrowings (322.0) 277.2 699.9
Other non-cash movements on borrowings 1.9 7.3 14.3
Impairment losses on loans to customers 3.2 3.5 7.7
Charge for share based remuneration 2.3 2.1 4.4
Net (increase) / decrease in operating assets
Operating lease assets (4.3) - (5.4)
Loans to customers (205.9) (554.4) (443.0)
Derivative financial instruments 322.4 (279.8) (706.3)
Fair value of portfolio hedges 5.0 (2.1) (7.3)
Other receivables (5.7) 0.9 (2.1)
Net (decrease) / increase in operating liabilities
Retail deposits 473.5 717.7 1,165.2
Derivative financial instruments (3.7) 3.5 9.1
Fair value of portfolio hedges (0.5) - 0.8
Other liabilities 1.4 5.2 4.9
Cash generated by operations 338.6 252.8 888.8
Income taxes (paid) (14.3) (9.7) (23.6)
Net cash flow generated by operating activities 324.3 243.1 865.2
28. NET CASH FLOW USED IN INVESTING ACTIVITIES
Six months to Six months to Year to
31 March2017 31 March2016 30 September 2016
£m £m £m
Proceeds from sales of property, plant and equipment 0.4 0.9 0.4
Purchases of property, plant and equipment (0.7) (4.6) (1.5)
Purchases of intangible assets (0.3) (0.7) (1.4)
Decrease in short term investments 7.1 23.8 34.0
Acquisition of subsidiary (1.6)
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