Between the lines: Leaping into the 'new economy'

By LIBBY MIDDLEBROOK

Forestry business Carter Holt Harvey may be 100 years old, but you could not accuse it of being a fossil.

Yesterday the company set sail its first venture capital fund aimed at accelerating innovation and entrepreneurship, and to boost financial returns.

The $15 million fund will invest in new ventures in Australia and New Zealand linked to Carter Holt's core businesses and utilising the company's existing technology and intellectual property, with a particular focus on intangible asset value creation.

Up to 20 per cent of the fund may also be extended to other online cooperative ventures as Carter Holt has already been approached by outside parties, inviting it to invest in e-commerce-based opportunities.

While much of the above may sound like business gobbledegook, the fund's choicest ingredient is its internal focus on entrepreneurship.

The company's 11,000-strong staff team will be the brain power behind new ventures financed by the $15 million kitty, delivering bright ideas which could be developed into stand-alone commercial entities.

Staff will even be allowed time off work to develop strategies for the fund, which may receive increased financial support in the future.

It builds on the Genesis project which the company says has saved it millions of dollars. That was largely driven through the ideas and innovation of staff.

Even though $15 million is nothing more than loose change to a cash-rich beefcake such as Carter Holt, the fund is certainly a leap in the right direction.

Equally significant is its internal reorganisation to exploit the technology it already uses.

It is doing so first in the forestry division where the focus is moving from managing land planted with trees to the intellectual capital needed to improve the genetic material and grow trees better.

By doing this, it is moving away from being an "old economy" forestry, timber, pulp and paper company.

It is also developing potential future revenue streams from its research.

This is a leap into the "new economy" for Carter Holt.

Despite the company's new-found focus on technology and entrepreneurship, the market cut the share price 11c to 184c, disappointed at the lack of a share buy-back or special dividend from the proceeds of the $2.5 billion sale of Chilean forestry firm Compania de Petroleos de Chile.

Carter's chief executive, Chris Liddell, is reluctant to return cash while, he says, there are good opportunities for acquisitions - given the low price of "old economy" assets.

With the share price still suffering from the effects of the Asian economic slump and the emergence of trendy technology stocks such as Advantage Group, the impact of the company's new business model cannot come soon enough for shareholders.

But it is likely to be a while before those shareholders see an e-commerce premium.