In the past six years, Compustershare founder Chris Morris has sold $155 million worth of scrip, equivalent to 27% of his holding, and ploughed the proceeds into a dizzying array of hospitality-related ventures

Brewery an insurance against headaches for Computershare’s Chris Morris
March 21, 2014
Adele Ferguson

Computershare founder Chris Morris. Photo: Eddie Jim
Pubs, clubs, a farm, a brewery and an island – these things cost money, as Computershare founder and chairman Chris Morris has discovered. In the past six years Morris has sold $155 million worth of Computershare scrip, equivalent to 27 per cent of his holding, and ploughed the proceeds into a dizzying array of hospitality-related ventures.Morris has proved himself a master of timing, selling huge chunks of shares when the share price was high over the past six years and selling smaller parcels when the share price was low.
He sold another lump of shares last month, just after the share registry company he founded in 1978, and listed on the ASX in 1994, released a set of interim results that were slightly better than expected. Put simply, since April 2008 Morris hasn’t bought a single share in Computershare, but has sold 15 million shares, leaving him with about 40 million shares, worth an estimated $486 million. Analysis by BBY’s Brett Le Mesurier reveals that in 2008 Morris sold $14.3 million worth of shares when the share price averaged $7.80, then almost tripled the sales in 2009 when he dumped $38 million worth of shares in a year when the share price averaged $11.45. He sold a similar amount in 2010 when the share price averaged $10.78. When the company’s shares started falling in 2011 and 2012, Morris lightened his foot on the selling button, dumping a total of $23.7 million worth of shares. The share price averaged $8.50 in 2011 and 2012. When the shares jumped back up in 2013, so did his selling, with $33.7 million worth of shares sold when the share price averaged $11.38.
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Then in February this year, just after the company released its first-half results, Morris was back in the market, selling $5.9 million worth of shares at an average price $11.86.
His pattern appears to be to sell down after the company’s half-year and full-year results.
A cynic could be forgiven for thinking the consistent sell down is symptomatic of a mature business and that is why he is diversifying his interests. Computershare is the biggest share registry business in the world but the days of market-leading revenue growth finished a few years ago. Across the business, revenue fell by 1.1 per cent in the six months to December 31, 2013. Only two out of Computershare’s nine product lines delivered revenue growth and in six of the group’s nine geographies, revenue was down by between 3 per cent and 10.5 per cent compared with the previous corresponding period.
The company is now being forced to focus on cost cutting and embarking on new businesses, which were not previously considered core.
In a presentation in Melbourne on Thursday, the focus was on cost cutting, including replacing higher-cost Australian labour with cheaper-cost labour in India and the Philippines.
The theme of interest rates also emerged, with the message that an increase in interest rates would significantly improve income in its US operations. But it said a “persistent low-interest rate environment continues to erode margin income”.
As a reminder of the problems that QBE faces with its lenders placed insurance, Computershare, through its mortgage servicing business Specialised Loan Servicing in the US, has decided to end any involvement with lender-placed insurance. It also commented that regulatory supervision continues to grow and that not a day goes by that a regulator or someone from the Consumer Financial Protection Bureau is in its offices scrutinising its business.
This is not to suggest Computershare has done something wrong, it just indicates the change in approach of regulators in the US to the mortgage market. It is a regulatory headache QBE knows only too well through its purchase of Balboa in 2011, which is one of the biggest lender-placed insurance companies in the US.
In the past year at least five regulators in the US have been investigating QBE for overcharging borrowers and paying kickbacks to mortgage servicers like SLS and the banks writing the original loans. The fallout includes a $US4 million fine by the state of New York, settling a class action with Wells Fargo as a co-defendant, and according to Le Mesurier, QBE has been sued in numerous other class actions in the US. Regulators are busy dictating premiums, margins and commissions.
Computershare has not been sued by borrowers and there is no suggestion it faces any legal proceedings. But it explains why it no longer sells force-placed insurance. As the business grows and diversifies, Morris doesn’t need grief like this. Investing in an island and a brewery is a lot more palatable than the headache from lender-placed insurance.