This article is from the Australian Property Journal archive
RUN Corp has immediately put a “strategic pause” on its expansion plan in a bid to revive the company’s results and share price.
RUN shares had taken a beating on the stockmarket, trading at 30 cents on Monday, well below the high of 84 cents on March 01, 2006.
Earlier in April, the company revised its EBITDA loss of $6.85 million above its prospectus forecast loss $2.2 million and an NPAT loss pre amortisation of $6.5 million compared to the prospectus forecast loss $4.3 million.
On Monday, executive director Jane Tongs put in place a restructuring plan that includes the company decentralising its operations and setting up offices in suburban areas.
RUN, Australia’s largest property management company, set the market ablaze in 2004 when it bought out the rent rolls from real estate agencies across Australia.
The company currently has 23,000 properties under management, it had originally forecast to have 35,000 properties.
On Monday, Tongs said the company will increase the number of properties to 25,000 in the next six months.
“The company will delay the further acquisition of rent rolls unless they are considered highly value accretive.
“It was appropriate at this stage in the company’s growth to have a strategic pause in order to ensure that its operations were rock solid,” she added.
Tongs said that the financial impact of the restructuring plans on the company’s 2006 results is not possible to quantify at this stage as detailed implementation plans were still being worked through in many areas.
She said that some restructuring expenses will be incurred in the short term due to expenses associated with business relocation and downsizing the expense base.
In relation to results for the year ending June 2007, Tongs said that it was too early to determine the range of possible financial outcomes given the detailed work that would be undertaken in coming weeks.
However, she said that at this stage, forecasts contained in the prospectus issued by the company in October 2005 would not be met.
“The restructure will enable RUN to make improvements in revenue stream and reductions in costs while at the same time achieving economies of scale in shared service operations such as trust accounting and administration.
“We will be issuing further market updates on a continuous basis as the restructure progresses.” Tongs concluded.
Chief executive Paul Villanti said that while experience over the last four months had shown that parts of the RUN model were working well, the restructure is effective immediately in order to address some areas that are not cost effective.
“By moving our people and services closer to our client base, we are also committed to providing high quality customer service to all our owners and tenants.
“RUN has already succeeded in significantly lowering the vacancy rates and levels of arrears of the portfolios we have acquired and we believe that following the restructure, the business will be well positioned to move forward.
"We are in this business for the long haul and our priority is on refining the business model as we grow to achieve that," he concluded.
By Adam Parsons
