Does Merlin Entertainments plc’s (LON:MERL) CEO Pay Reflect Performance?

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Nick Varney became the CEO of Merlin Entertainments plc (LON:MERL) in 1999. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Merlin Entertainments

How Does Nick Varney’s Compensation Compare With Similar Sized Companies?

Our data indicates that Merlin Entertainments plc is worth UK£3.9b, and total annual CEO compensation is UK£1.5m. (This number is for the twelve months until December 2018). We note that’s an increase of 64% above last year. While we always look at total compensation first, we note that the salary component is less, at UK£607k. We examined companies with market caps from UK£3.2b to UK£9.5b, and discovered that the median CEO total compensation of that group was UK£2.8m.

A first glance this seems like a real positive for shareholders, since Nick Varney is paid less than the average total compensation paid by similar sized companies. While this is a good thing, you’ll need to understand the business better before you can form an opinion.

You can see, below, how CEO compensation at Merlin Entertainments has changed over time.

LSE:MERL CEO Compensation, June 3rd 2019
LSE:MERL CEO Compensation, June 3rd 2019

Is Merlin Entertainments plc Growing?

On average over the last three years, Merlin Entertainments plc has grown earnings per share (EPS) by 7.2% each year (using a line of best fit). Its revenue is up 5.9% over last year.

I’d prefer higher revenue growth, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. You might want to check this free visual report on analyst forecasts for future earnings.

Has Merlin Entertainments plc Been A Good Investment?

With a three year total loss of 7.6%, Merlin Entertainments plc would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

It appears that Merlin Entertainments plc remunerates its CEO below most similar sized companies.

Nick Varney is paid less than CEOs of similar size companies, but growth hasn’t been particularly impressive and the total shareholder return over three years would leave many disappointed. Many shareholders would probably like to see improvements, but our analysis does not suggest that CEO compensation is too generous. Whatever your view on compensation, you might want to check if insiders are buying or selling Merlin Entertainments shares (free trial).

If you want to buy a stock that is better than Merlin Entertainments, this free list of high return, low debt companies is a great place to look.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.