As politicians and the mainstream media continue the witch-hunt for “fat cat” executives and risk-taking bankers to blame for the global financial crisis, an Australian cleantech startup this week quietly laid off staff to free up working capital. Bucking the common pattern, however, it wasn’t those “last hired” staff at the bottom of the food chain who were let go, but instead highly paid, long serving board members.
The restructure of Green Invest (ASX:GNV) is designed to reduce corporate overheads and “focus spending directly into business development”.
Three of six directors will go, plus an unspecified number of corporate level executives, saving the company around $900,000 per annum. To put the scale of this saving into perspective, the company’s sales revenue in the six months to December 2008 was just $4.4m.
While executive director Ron Lunt claims “we did have choices” in where to cut costs, he defends the decision not to lay off front-line staff.
“If we’re going to make a difference in this world, somebody’s got to clean it up and our green army is going to be the tradespeople like plumbers and electricians,” he says.
“When the market gets hard, I think you’ve just got to look at your strengths and the value you bring … I don’t care whether you’re Telstra or Green Invest, I think those same principles apply.”
Perhaps Lunt’s military background helped him determine to sacrifice a few good men for the betterment of the wider troop. Perhaps it was just a lazy move, picking off easy targets. Whatever the reason, reducing the cash spent on directors is something other small players might soon consider too.
“In this market I think it pays to cut costs and restructure at every opportunity to position ourselves for growth,” says Lunt.
GNV was built on two basic divisions, one in the financial services/environmental commodity market through green broker NextGen, and one in the technology space through the Green Plumbers brand.
The firm’s founding fathers bought those two existing entities, combined them to pass the asset test for an ASX listing, then “put them into a listed vehicle … and tried to take advantage of the federal election and the emerging emissions trading scheme”.
The ultimately aim is for GNV to be a “one stop shop” in the environment game, a vertically integrated company capable of undertaking environmental assessment and audits, providing the recommended water and energy upgrades, and then banking and trading resultant environmental credits.
The 2006 report from UK economist Sir Nicolas Stern — which helped get the message of climate change into boardrooms around the world — was very influential in the formation of Green Invest.
“It certainly hit us in the face,” says Lunt.
“We had a bit of a brainstorm … and looked at building a business around [two of Stern’s conclusion] — emissions trading and technology cooperation and deployment.”
Lunt says through the restructure, “we’re staying true to our business model”.
“That business model is bigger than just a broker and a plumber … If we need to cut costs at executive and management to make sure we can put monies back into the business model and the businesses, we will. We will make the hard decisions,” he asserts.
It’s not the first time GNV has proven itself a dynamic company, willing and able to change direction quickly. Last August Environmental Management News reported GNV had cut itself free from one of the government’s key support programs, claiming restrictions of the Pooled Development Fund were holding it back.
Its half year report last month flagged a restructure of executive positions was on the cards. When it came to the crunch there was no night of the long knifes; the directors volunteered to exit for the good of the business.
“To the man, it wasn’t as if we had to cut it — it was people who made their decisions because they did believe in this business. I find that admirable and consistent with the actual first vision and the characteristics of the company when it first started,” says Lunt.
It is tempting to assume those initial backers are now ruing their decision to list on the ASX last March — just in time for a severe hammering on the equity markets — but Lunt says it “has a fairly stable base” of investors. In fact 66% of the stock is held by just three investors.
But neither this “stable base” or the advantages of being small and dynamic enough to respond to change have been reflected in GNV’s shareprice over the last year; it is currently trading around $0.20 after listing at $1.
“It’s never nice when shareholders lose 80%, agrees Lunt.
“However, if we stick to those [core business] values, the rest will come … are we here for one day, one year, or do we want to be here for longer?”
Working on the build-it-and-they-will-come theory, he is still backing the publicly listed model, which should allow GNV to more easily raise funds to expand, once conditions improve.
“At the end of the day, ‘save the planet and make a buck’ — that’s not a bad story for an investor,” says Lunt.