Report of the Managing Board
Introduction
In our previous annual report we expressed the expectation that, in view
of the less favorable prospects for the markets in which we operate, it
would not be possible for the fiscal year 1980 to show the same result as
was realized in 1979.
This expectation has come true; the gross Group result (before taxes
and addition to the provision for general contingencies) declined by
24%. As a consequence of increased risks, connected with the provision
of credits, we augmented the addition to the provision for general
contingencies from 10,5 million to 14 million. This caused the net
profit to decline by 35%. If we take into account the general economic
picture, and more particularly the developments of the real estate
market, this is not excessive.
The profit decline in the finance business is notably a consequence of
the decreased production of mortgage loans (1979: 1.184million,
1980: 931 million), which meant a considerable decrease in the receipt
of fees.
Furthermore, profits were exposed to some pressure caused by the
gradual drying-up of the very low-interest bearing long-term
borrowings as noted in our previous annual report, and because of the
increase in the general expense item, the main element therein being
staff expenses. That the last-mentioned item, in spite of the great
attention given to it, increased by 12,3% is attributed to the
circumstance that, on the one hand, it was not deemed sensible to
curtail the production-oriented departments too much, while, on the
other hand, the counselling of a number of our debtors had to be given
extra care. In addition, our policy of gradual internationalization of
course demanded the recruitment of extra staff.
The mortgage portfolio showed a growth of 7,3%.AIso results of the
real estate business lagged behind; operating results were
approximately unchanged, but realized gains on sales declined from
23 million in 1979 to 8,3 million in 1980.
The real estate development as well as the operation portfolio showed a
growth which was brought about especially abroad. It is a gratifying
feature that in the most threatened sector of the Dutch estate market,
namely residential construction, we have only a relatively small stock of
unoccupied new dwellings.
Furthermore, we deem it advisable to depreciate the value of a number
of residential projects under development in the Netherlands and
Belgium by 6 million and not to capitalize building interest in respect
of a number of projects. The latter measure involves an amount of 3,5
million.
The Kok Group was hampered in its development by the difficulties
existing in the real estate market. The problem here is in the brokerage
business, a sector which is, in fact, indispensable for a proper
performance of the management function. In order to increase the
safety of performance in behalf of investors who entrust management
to the Kok Group, the subsidiary's capital was increased by 27,5
million to 37,5 million.
We are convinced that in the foreseeable future the Kok Group will yield
satisfactory results and that it will in that way contribute to the further
expansion of our company.
