REG - Paragon Grp Co PLC - Half Yearly Report <Origin Href="QuoteRef">PARA.L</Origin> - Part 2
15/07/2015 18:14
- Part 2: For the preceding part double click ID:nRSS5695Na
Called-up share capital 17 308.9 307.1 307.3 306.2
Reserves 18 709.0 649.5 688.0 614.7
Share capital and reserves 1,017.9 956.6 995.3 920.9
Own shares 20 (65.4) (46.7) (48.2) (47.6)
Total equity 952.5 909.9 947.1 873.3
Current liabilities
Financial liabilities 21 101.3 1.0 54.4 3.0
Current tax liabilities 11.4 10.1 11.9 5.9
Other liabilities 36.2 35.4 40.1 36.2
148.9 46.5 106.4 45.1
Non-current liabilities
Financial liabilities 21 10,061.5 9,659.6 9,814.0 9,383.4
Retirement benefit obligations 24 26.0 12.2 17.3 15.7
Deferred tax 8.7 10.6 10.1 9.9
Other liabilities 0.2 0.3 0.2 0.9
10,096.4 9,682.7 9,841.6 9,409.9
Total liabilities 10,245.3 9,729.2 9,948.0 9,455.0
11,197.8 10,639.1 10,895.1 10,328.3
The condensed financial statements for the half year were approved by the
Board of Directors on 19 May 2015.
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2015 (Unaudited)
Note Six months to Six months to Year to
31 March2015 31 March2014 30 September 2014
£m £m £m
Net cash flow (utilised) by operating activities 25 (47.5) (246.4) (269.5)
Net cash (utilised) by investing activities 26 (10.2) (25.7) (65.2)
Net cash generated by financing activities 27 22.4 401.5 596.5
Net (decrease) / increase in cash and cash equivalents (35.3) 129.4 261.8
Opening cash and cash equivalents 847.7 585.9 585.9
Closing cash and cash equivalents 812.4 715.3 847.7
Represented by balances within
Cash and cash equivalents 16 812.6 716.3 848.8
Financial liabilities (0.2) (1.0) (1.1)
812.4 715.3 847.7
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
Six months ended 31 March 2015 (Unaudited)
Note Six months to Six months to Year to
31 March2015 31 March2014 30 September 2014
£m £m £m
Total comprehensive income for the period 40.8 47.8 94.4
Dividends paid 19 (18.3) (14.6) (23.7)
Net movement in own shares (17.2) 0.9 (0.6)
Deficit on transactions in own shares (3.9) (0.8) (0.8)
Charge for share based remuneration 2.6 1.6 3.2
Tax on share based remuneration 1.4 1.7 1.3
Total movements in equity in the period 5.4 36.6 73.8
Opening equity 947.1 873.3 873.3
Closing equity 952.5 909.9 947.1
SELECTED NOTES TO THE ACCOUNTS
For the six months ended 31 March 2015 (Unaudited)
1. GENERAL INFORMATION
The condensed financial statements for the six months ended 31 March 2015 and
for the six months ended 31 March 2014 have not been audited, as defined in
section 434 of the Companies Act 2006.
The figures shown above for the years ended 30 September 2014 and 30 September
2013 are not statutory accounts. A copy of the statutory accounts for each
year has been delivered to the Registrar of Companies. The auditors reported
on those statutory accounts and their reports were unqualified, did not draw
attention to any matters by way of emphasis and did not contain an adverse
statement under sections 498 (2) or 498 (3) of the Companies Act 2006.
Sections of this half-yearly report, including but not limited to the Interim
Management Report, may contain forward-looking statements with respect to
certain of the plans and current goals and expectations relating to the future
financial condition, business performance and results of the Group. These have
been made by the directors in good faith using information available up to the
date on which they approved this report. By their nature, all forward-looking
statements involve risk and uncertainty because they relate to future events
and circumstances that are beyond the control of the Group and depend upon
circumstances that may or may not occur in the future. There are a number of
factors that could cause actual future financial conditions, business
performance, results or developments to differ materially from the plans,
goals and expectations expressed or implied by these forward-looking
statements and forecasts. Nothing in this document should be construed as a
profit forecast.
A copy of the half-yearly financial report will be posted to those
shareholders who have requested to receive one and additional copies can be
obtained from the Company Secretary, The Paragon Group of Companies PLC, 51
Homer Road, Solihull, West Midlands, B91 3QJ.
This half-yearly financial report is available on the Group's website at
www.paragon-group.co.uk.
2. ACCOUNTING POLICIES
The condensed financial statements are presented in accordance with the
requirements of International Accounting Standard 34 - 'Interim Financial
Reporting'.
The Group prepares its annual financial statements in accordance with
International Financial Reporting Standards as endorsed by the European Union.
The condensed financial statements have been prepared on the basis of the
accounting policies set out in the Annual Report and Accounts of the Group for
the year ended 30 September 2014, which are expected to be used in the
preparation of the financial statements of the Group for the year ending 30
September 2015.
Going concern basis
The business activities of the Group, its current operations and those factors
likely to affect its future results and development, together with a
description of its financial position and funding position, are described in
the Interim Management Report on pages 4 to 22. The principal risks and
uncertainties affecting the Group in the forthcoming six months are described
on pages 57 and 58.
Note 6 to the accounts for the year ended 30 September 2014 includes an
analysis of the Group's working capital position and policies, while note 7
includes a detailed description of its funding structures, its use of
financial instruments, its financial risk management objectives and policies
and its exposure to credit, interest rate and liquidity risk. Note 5 to those
accounts discusses critical accounting estimates affecting the results and
financial position disclosed therein. The position and policies described in
these notes remain materially unchanged to the date of this half-yearly
report, except as described in note 23.
The Group has a formalised process of budgeting, reporting and review. The
Group's planning procedures forecast its profitability, capital position,
funding requirement and cash flows. Detailed plans are produced for a rolling
24 month period with longer term forecasts covering a 5 year period. These
plans provide information to the directors which is used to ensure the
adequacy of resources available for the Group to meet its business objectives,
both on a short term and strategic basis.
The Group's securitisation funding structures ensure that both a substantial
proportion of its originated loan portfolio and a significant amount of its
acquired Idem Capital assets are match-funded. Repayment of the securitisation
borrowings is restricted to funds generated by the underlying assets and there
is limited recourse to the Group's general funds. Recent and current loan
originations utilising the Group's available warehouse facilities are
refinanced through securitisation from time to time.
The Group's retail deposits of £165.0m (note 22), accepted through Paragon
Bank are repayable within five years, though only 61.3% of this balance
(£101.1m) is payable within twelve months. The liquidity exposure represented
by these deposits is monitored; a process supervised by the Asset and
Liability Committees of the Group and Paragon Bank. The Group is required to
hold liquid assets in Paragon Bank to mitigate this liquidity risk. At 31
March 2015 Paragon Bank held £121.2m in liquid assets, £48.5m of short term
investments (note 15) and £72.7m of cash (note 16).
None of the Group's working capital debt matures before 2017, when the £110.0m
corporate bond is repayable. The outstanding principal balance of the Group's
retail bonds at 31 March 2015 was £185.0m, none of which is repayable before
December 2020.
At 31 March 2015 the Group had free cash balances of £206.7m immediately
available for use (note 16).
As described in note 4 the Group's capital base is subject to consolidated
supervision by the PRA. Its capital at 31 March 2015 was in excess of
regulatory requirements and its forecasts show this continuing to be the
case.
Having considered all of the factors described above the directors believe
that the Group is well placed to manage its business risks, including solvency
and liquidity risks, successfully.
After making enquiries, the directors have a reasonable expectation that the
Group will have adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the half-yearly report.
3. Fair values of financial assets and financial liabilities
Fair values have been determined for all derivatives, listed securities and
any other financial assets and liabilities for which an active and liquid
market exists.
Derivative financial instruments are stated at their fair values in the
accounts. The Group uses a number of techniques to determine the fair values
of its derivative assets and liabilities, for which observable prices in
active markets are not available. These are principally present value
calculations based on estimated future cash flows arising from the
instruments, discounted using a risk adjusted interest rate. The principal
inputs to these valuation models are LIBOR benchmark interest rates for the
currencies in which the instruments are denominated, sterling, euros and
dollars. The cross currency basis swaps have a notional principal related to
the outstanding currency borrowings and therefore the estimated rate of
repayment of these notes also affects the valuation of the swaps. In order to
determine the fair values, management applies valuation adjustments to
observed data where that data would not fully reflect the attributes of the
instrument being valued, such as particular contractual features or the
identity of the counterparty. The management reviews the models used on an
ongoing basis to ensure that the valuations produced are reasonable and
reflect all relevant factors.
For assets and liabilities carried at fair value, IFRS 7 requires that the
measurements should be classified using a fair value hierarchy reflecting the
inputs used, and defines three levels. Level 1 measurements are unadjusted
market prices, level 2 measurements are derived from observable data, such as
market prices or rates, while level 3 measurements rely on significant inputs
which are not derived from observable data. As described above the valuations
of the Group's derivatives are based on market information and they are
therefore classified as level 2 measurements. Details of these assets are
given in note 14. The short term investments described in note 15 are freely
traded securities for which a market price quotation is available and are
classified as level 1 measurements. The Group had no financial assets or
liabilities in the year ended 30 September 2013, year ended 30 September 2014
or the six months ended 31 March 2015 valued using level 3 measurements.
The fair values of cash and cash equivalents, bank loans and overdrafts and
asset backed loan notes, which are carried at amortised cost are considered to
be not materially different from their book values. In arriving at that
conclusion market inputs have been considered but because all the assets
mature within three months of the year end and the interest rates charged on
financial liabilities reset to market rates on a quarterly basis, little
difference arises. While the Group's asset backed loan notes are listed, the
quoted prices for an individual note may not be indicative of the fair value
of the issue as a whole, due to the specialised nature of the market in such
instruments and the limited number of investors participating in it. As these
valuation exercises are not wholly market based they are considered to be
level 2 measurements.
To assess the likely fair value of the Group's retail deposit liabilities, the
directors have considered the estimated cash flows expected to arise based on
a mixture of market based inputs, such as rates and pricing and non-market
based inputs such as redemption rates. On this basis they have concluded that
the carrying value of these liabilities, determined on the amortised cost
basis, is not significantly different from their fair value derived on a
discounted cash flow basis. Given the mixture of observable and non-observable
inputs, these are considered to be level 2 measurements.
To assess the likely fair value of the Group's loan assets in the absence of a
liquid market, the directors have considered the estimated cash flows expected
to arise from the Group's investments in its loans to customers based on a
mixture of market based inputs, such as rates and pricing and non-market based
inputs such as redemption rates. On this basis they have concluded that the
carrying value of these assets, determined on the amortised cost basis, is not
significantly different from the fair value of the assets derived on a
discounted cash flow basis. Given the mixture of observable and non-observable
inputs these are considered to be level 2 measurements.
4. Capital management
The Group's objectives in managing capital are:
· To ensure that the Group has sufficient capital to meet its operational
requirements and strategic objectives;
· To safeguard the Group's ability to continue as a going concern, so that
it can continue to provide returns to shareholders and benefits for other
stakeholders;
· To provide an adequate return to shareholders by pricing products and
services commensurately with the level of risk; and
· To ensure that sufficient regulatory capital is available to meet any
externally imposed requirements.
The Group sets the amount of capital in proportion to risk, availability and
cost. The Group manages the capital structure and makes adjustments to it in
the light of changes in economic conditions and the risk characteristics of
the underlying assets, having particular regard to the relative costs and
availability of debt and equity finance at any given time. In order to
maintain or adjust the capital structure the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new
shares, issue or redeem other capital instruments, such as retail or corporate
bonds, or sell assets to reduce debt.
Following the authorisation of Paragon Bank by the Prudential Regulation
Authority ('PRA') in the year ended 30 September 2014, the Group became
subject to regulatory capital rules on a consolidated basis. This is discussed
further below.
(a) Return on equity
Return on equity is defined by the Group by comparing the profit after tax for
the period to the average of the opening and closing equity positions and is
derived as follows:
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Profit for the period 49.8 45.6 97.2 84.7
Divided by
Opening equity 947.1 873.3 873.3 803.5
Closing equity 952.5 909.9 947.1 873.3
Average equity 949.8 891.6 910.2 838.4
Return on equity (annualised) 10.8% 10.5% 10.7% 10.1%
(b) Gearing
The Board of Directors regularly review the proportion of working capital
represented by debt and equity. Net debt is calculated as total debt, other
than securitised and warehouse debt, valued at principal value, less free cash
up to a maximum of the total debt. Adjusted equity comprises all components of
equity (i.e. share capital, share premium, minority interest, retained
earnings, and revaluation surplus) other than amounts recognised in equity
relating to cash flow hedges.
The debt and equity amounts at 31 March 2015 were as follows:
Note 31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Debt
Corporate bond 110.0 110.0 110.0 110.0
Retail bonds 185.0 185.0 185.0 60.0
Bank overdraft 0.2 1.0 1.1 1.4
Less: Applicable free cash (206.7) (169.4) (177.3) (170.8)
Net debt 88.5 126.6 118.8 0.6
Equity
Total equity 952.5 909.9 947.1 873.3
Less: cash flow hedging reserve 1.4 (1.2) (0.6) (1.7)
Adjusted equity 953.9 908.7 946.5 871.6
Total working capital 1,042.4 1,035.3 1,065.3 872.2
Debt 8.5% 12.2% 11.2% 0.1%
Equity 91.5% 87.8% 88.8% 99.9%
Total working capital 100.0% 100.0% 100.0% 100.0%
The movements in the proportion of working capital represented by debt and
equity during the period resulted primarily from the operation of the policy
described above.
(c) Regulatory capital
The Group is subject to supervision by the PRA on a consolidated basis, as a
group containing an authorised bank. As part of this supervision the regulator
issues individual capital guidance setting an amount of regulatory capital,
defined under the international Basel III rules, implemented through the
Capital Requirements Regulation and Directive ('CRD IV'), which the Group is
required to hold relative to its risk weighted assets in order to safeguard
depositors against the risk of losses being incurred by the Group.
The Group's regulatory capital is monitored by the Board of Directors, its
Risk and Compliance Committee and the Asset and Liability Committee, who
ensure that appropriate action is taken to ensure compliance with the
regulator's requirements. The future regulatory capital requirement is also
considered as part of the Group's forecasting and strategic planning process.
At 31 March 2015 the Group's regulatory capital of £981.9m (31 March 2014:
£964.2m, 30 September 2014: £981.1m) was comfortably in excess of that
required by the regulator. Although the Group was not subject to supervision
at 30 September 2013, disclosures at that date are provided in this section
for comparative purposes.
The Group's regulatory capital differs from its equity as certain adjustments
are required by the regulator. A reconciliation of the Group's equity to its
regulatory capital determined in accordance with CRD IV at 31 March 2015 is
set out below.
Note 31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Total equity 952.5 909.9 947.1 873.3
Deductions
Proposed dividend 19 (10.9) (9.1) (18.3) (14.6)
Intangible assets 12 (7.6) (8.2) (7.9) (8.5)
Deferred tax adjustment * (0.5) (0.5) (0.5) (0.6)
Common Equity Tier 1 ('CET1') capital 933.5 892.1 920.4 849.6
Other tier 1 capital - - - -
Total Tier 1 capital 933.5 892.1 920.4 849.6
Corporate bond 110.0 110.0 110.0 110.0
Less: amortisation adjustment † (64.8) (42.8) (53.8) (31.8)
45.2 67.2 56.2 78.2
Collectively assessed credit impairment allowances 3.2 4.9 4.5 6.2
Total Tier 2 capital 48.4 72.1 60.7 84.4
Total regulatory capital 981.9 964.2 981.1 934.0
* Deferred tax assets in subsidiary companies are required to be
deducted from regulatory capital. This balance is offset against the deferred
tax liability in the consolidated accounts.
† When tier 2 capital instruments have less than five years to maturity
the amount eligible as regulatory capital reduces by 20% per annum on a
straight line basis. The Group's £110m Corporate Bond matures in 2017 and
therefore such an amortisation adjustment is required.
The total risk exposure calculated under the CRD IV framework, against which
this capital is held, and the proportion of this exposure it represents, are
calculated as shown below.
31 March2015 31 March2014 30 September 2014
£m £m £m
Credit risk
Balance sheet assets 4,231.8 4,118.8 4,146.6
Off balance sheet 110.3 48.1 74.2
Total credit risk 4,342.1 4,166.9 4,220.8
Operational risk 337.1 307.7 337.1
Market risk - - -
Other 104.8 111.0 108.7
Total risk exposure 4,784.0 4,585.6 4,666.6
Solvency ratios % % %
CET1 19.5% 19.5% 19.7%
Total regulatory capital 20.5% 21.0% 21.0%
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.
31 March2015 31 March2014 30 September 2014
£m £m £m
Total balance sheet assets 11,197.8 10,639.1 10,895.1
Less: Intangible assets (7.6) (8.2) (7.9)
Balance sheet leverage exposure 11,190.2 10,630.9 10,887.2
Post offer pipeline 308.5 137.3 209.8
Potential future exposure on derivatives 73.0 70.8 70.7
Total leverage exposure 11,571.7 10,839.0 11,167.7
Tier 1 capital 933.5 892.1 920.4
Leverage ratio 8.1% 8.2% 8.2%
The Group has revised its calculation of the leverage ratio above to take
account of the revised rules for leverage disclosures in CRD IV.
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 year.
5. SEGMENTAL RESULTS
The Group uses an analysis of its operations based on the entities within the
Group generating its assets for management reporting purposes and therefore
the segments presented in this condensed financial information have been
determined in a similar way. 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 and 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.
Each of these businesses invests in consumer finance assets, and an analysis
of the Group's financial assets by type is shown in note 13.
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.
Financial information about these business segments is shown below.
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
Six months ended 31 March 2014
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 119.2 24.7 - 143.9
Interest payable (55.0) (1.9) - (56.9)
Net interest income 64.2 22.8 - 87.0
Other operating income 4.0 5.4 - 9.4
Total operating income 68.2 28.2 - 96.4
Operating expenses (20.9) (7.0) (3.1) (31.0)
Provisions for losses (7.5) - - (7.5)
39.8 21.2 (3.1) 57.9
Fair value net (loss) / gain 0.3 - - 0.3
Operating profit / (loss) 40.1 21.2 (3.1) 58.2
Tax charge (12.6)
Profit after taxation 45.6
Year ended 30 September 2014
Paragon Mortgages Idem Capital Paragon Bank Total
£m £m £m £m
Interest receivable 241.9 60.4 0.1 302.4
Interest payable (115.3) (7.5) (0.2) (123.0)
Net interest income 126.6 52.9 (0.1) 179.4
Other operating income 7.5 11.0 - 18.5
Total operating income 134.1 63.9 (0.1) 197.9
Operating expenses (41.3) (15.8) (6.3) (63.4)
Provisions for losses (12.3) - - (12.3)
80.5 48.1 (6.4) 122.2
Fair value net (loss) / gain 0.6 - - 0.6
Operating profit / (loss) 81.1 48.1 (6.4) 122.8
Tax charge (25.6)
Profit after taxation 97.2
The assets of the segments listed above are:
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Paragon Mortgages 10,559.4 10,192.0 10,343.3 10,127.4
Idem Capital 429.3 434.4 445.8 200.9
Paragon Bank 209.1 12.7 106.0 -
Total assets 11,197.8 10,639.1 10,895.1 10,328.3
6. other operating incOme
31 March 2015 31 March 2014 30 September 2014
£m £m £m
Loan account fee income 3.1 2.2 4.9
Insurance income 0.5 1.3 2.0
Third party servicing 2.6 5.5 10.8
Other income 0.6 0.4 0.8
6.8 9.4 18.5
7. COST:INCOME RATIO
Cost:income ratio is derived as follows:
31 March 2015 31 March 2014 30 September 2014
Operating expenses (£m) 36.6 31.0 63.4
Total operating income (£m) 104.0 96.4 197.9
Cost ¸ Income 35.2% 32.2% 32.0%
Cost:income excluding Paragon Bank ratio is derived as follows:
31 March 2015 31 March 2014 30 September 2014
Operating expenses (£m) 36.6 31.0 63.4
Paragon Bank operating expenses (£m) (note 5) (4.5) (3.1) (6.3)
32.1 27.9 57.1
Total operating income (£m) 104.0 96.4 197.9
Paragon Bank operating income (£m) (note 5) (0.1) - 0.1
103.9 96.4 198.0
Cost ¸ Income 30.9% 28.9% 28.8%
8. 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.
9. UNDERLYING PROFIT
Underlying profit is determined by excluding from the operating result fair
value accounting adjustments arising from the Group's hedging arrangements.
31 March 2015 31 March 2014 30 September 2014
£m £m £m
Paragon Mortgages
Profit before tax for the period (note 5) 43.5 40.1 81.1
Exclude: Fair value losses / (gains) 1.2 (0.3) (0.6)
44.7 39.8 80.5
Idem Capital
Profit before tax for the period (note 5) 23.6 21.2 48.1
Exclude: Fair value losses / (gains) - - -
23.6 21.2 48.1
Paragon Bank
(Loss) before tax for the period (note 5) (4.5) (3.1) (6.4)
Exclude: Fair value losses / (gains) 0.1 - -
(4.4) (3.1) (6.4)
Total
Profit before tax for the period 62.6 58.2 122.8
Exclude: Fair value losses / (gains) 1.3 (0.3) (0.6)
Underlying profit before tax 63.9 57.9 122.2
10. TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Income tax for the six months ended 31 March 2015 is charged at 20.4% (six
months ended 31 March 2014: 21.6%, year ended 30 September 2014: 20.8%),
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.
11. EARNINGS PER SHARE
Earnings per ordinary share is calculated as follows:
31 March 2015 31 March 2014 30 September 2014
Profit for the period (£m) 49.8 45.6 97.2
Basic weighted average number of ordinary shares ranking for dividend during the period (million) 304.9 304.0 304.6
Dilutive effect of the weighted average number of share options and incentive plans in issueduring the period (million) 7.1 8.2 7.6
Diluted weighted average number of ordinary shares ranking for dividend during the period (million) 312.0 312.2 312.2
Earnings per ordinary share - basic 16.3p 15.0p 31.9p
- diluted 16.0p 14.6p 31.1p
12. INTANGIBLE ASSETS
Intangible assets at net book value comprise:
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Goodwill 1.6 1.6 1.6 1.6
Computer software 1.3 1.3 1.3 1.4
Other intangibles 4.7 5.3 5.0 5.5
Total assets 7.6 8.2 7.9 8.5
13. FINANCIAL ASSETS
Note 31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Loans to customers 9,468.3 9,105.9 9,255.9 8,801.5
Fair value adjustments from portfolio hedging 3.3 (0.1) 0.5 -
Investments in structured entities 17.7 20.6 19.3 23.8
Derivative financial assets 14 810.9 757.7 693.9 890.0
Total assets 10,300.2 9,884.1 9,969.6 9,715.3
The Group calculates its headline arrears measure for buy-to-let mortgages
based on the numbers of accounts three months or more in arrears, including
purchased Idem 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 Group's loans to customers and investments in structured entities at 31
March 2015, analysed between the segments described in note 5, were as
follows:
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Paragon Mortgages
First mortgage loans 8,802.8 8,480.8 8,635.2 8,384.3
Consumer loans 190.7 226.8 207.7 247.3
Loans to customers 8,993.5 8,707.6 8,842.9 8,631.6
Investments in structured entities - - - -
Total investment in loans 8,993.5 8,707.6 8,842.9 8,631.6
Idem Capital
First mortgage loans 15.3 16.8 16.0 17.5
Consumer loans 373.9 381.2 391.2 152.4
Loans to customers 389.2 398.0 407.2 169.9
Investments in structured entities 17.7 20.6 19.3 23.8
Total investment in loans 406.9 418.6 426.5 193.7
Paragon Bank
First mortgage loans 62.1 - 0.5 -
Consumer loans 23.5 0.3 5.3 -
Loans to customers 85.6 0.3 5.8 -
Investments in structured entities - - - -
Total investment in loans 85.6 0.3 5.8 -
Total
First mortgage loans 8,880.2 8,497.6 8,651.7 8,401.8
Consumer loans 588.1 608.3 604.2 399.7
Loans to customers 9,468.3 9,105.9 9,255.9 8,801.5
Investments in structured entities 17.7 20.6 19.3 23.8
Total investment in loans 9,486.0 9,126.5 9,275.2 8,825.3
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 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Carrying value
Loans to customers 389.2 398.0 407.2 169.9
Investments in structured entities 17.7 20.6 19.3 23.8
406.9 418.6 426.5 193.7
84 month ERC
Loans to customers 521.7 559.2 554.8 272.6
Investments in structured entities 24.9 29.1 26.6 31.7
546.6 588.3 581.4 304.3
120 month ERC
Loans to customers 609.3 669.2 649.9 313.3
Investments in structured entities 29.9 36.4 32.3 40.6
639.2 705.6 682.2 353.9
14. derivative financial assets and liabilites
Note 31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Derivative financial assets 13 810.9 757.7 693.9 890.0
Derivative financial liabilities 21 (5.0) (0.7) (1.1) (1.3)
805.9 757.0 692.8 888.7
Of which:
Foreign exchange basis swaps 810.6 757.4 693.5 889.6
Other derivatives (4.7) (0.4) (0.7) (0.9)
805.9 757.0 692.8 888.7
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.
15. 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.
16. CASH and cash equivalents
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Balances with central banks 59.0 - - -
Balances with other banks 753.6 716.3 848.8 587.3
812.6 716.3 848.8 587.3
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 subsidiary 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 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Free cash 206.7 169.4 177.3 170.8
Securitisation cash 531.3 532.6 609.0 414.1
Bank cash 72.7 11.9 60.6 -
ESOP cash 1.9 2.4 1.9 2.4
812.6 716.3 848.8 587.3
17. Called-up share capital
Movements in the issued share capital in the period were:
Six months to Six months to Year to
31 March2015 31 March2014 30 September 2014
Number Number Number
Ordinary shares of £1 each
At 1 October 2014 307,308,283 306,213,215 306,213,215
Shares issued 1,637,402 895,068 1,095,068
At 31 March 2015 308,945,685 307,108,283 307,308,283
During the period the Company issued 800,000 shares at par (six months ended
31 March 2014: 860,000; year ended 30 September 2014: 1,060,000) 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 837,402
shares (six months ended 31 March 2014: 35,068; year ended 30 September 2014:
35,068) to satisfy options granted under sharesave schemes for a consideration
of £1,193,801 (six months ended 31 March 2014: £36,884; year ended 30
September 2014: £36,884).
18. RESERVES
31 March2015 31 March2014 30 September 2014 30 September 2013
£m £m £m £m
Share premium account 64.5 64.1 64.1 64.1
Merger reserve (70.2) (70.2) (70.2) (70.2)
Cash flow hedging reserve (1.4) 1.2 0.6 1.7
Profit and loss account 716.1 654.4 693.5 619.1
709.0 649.5 688.0 614.7
19. EQUITY DIVIDEND
Amounts recognised as distributions to equity shareholders in the period:
31 March 2015 31 March 2014 30 September 2014
£m £m £m
Final dividend for the year ended 30 September 2014 of 6.0p per share 18.3 - -
Final dividend for the year ended 30 September 2013 of 4.8p per share - 14.6 14.6
Interim dividend for the year ended 30 September 2014 of 3.0p per share - - 9.1
18.3 14.6 23.7
An interim dividend of 3.6p per share is proposed (2014: 3.0p per share),
payable on 24 July 2015 with a record date of 3 July 2015. The amount expected
to be absorbed by this dividend, based on the number of shares in issue at the
balance sheet date is £10.9m (2014: £9.1m). The interim dividend will be
recognised in the accounts when it is paid.
20. OWN SHARES
31 March 2015 31 March 2014 30 September 2014
£m £m £m
Treasury shares
At 1 October 2014 39.5 39.5 39.5
Shares purchased 17.2 - -
At 31 March 2015 56.7 39.5 39.5
ESOP shares
At 1 October 2014 8.7 8.1 8.1
Shares purchased 5.1 - 1.4
Shares subscribed for 0.8 0.9 1.1
Options exercised (5.9) (1.8) (1.9)
At 31 March 2015 8.7 7.2 8.7
Total at 31 March 2015 65.4 46.7 48.2
Total at 1 October 2014 48.2 47.6 47.6
Number of shares held
Treasury 4,763,900 668,900 668,900
ESOP 879,075 1,004,876 1,487,013
Balance at 31 March 2015 5,642,975 1,673,776 2,155,913
21. FINANCIAL LIABILITIES
- More to follow, for following part double click ID:nRSS5695NcRecent news on Paragon Banking
See all newsREG - Paragon Banking Grp - Transaction in Own Shares
AnnouncementREG - Paragon Banking Grp - Transaction in Own Shares
AnnouncementREG - Paragon Banking Grp - Transaction in Own Shares
AnnouncementREG - Paragon Banking Grp - Transaction in Own Shares
AnnouncementREG - Paragon Banking Grp - Transaction in Own Shares
Announcement