We Think Shareholders Will Probably Be Generous With Metcash Limited's (ASX:MTS) CEO Compensation

By
Simply Wall St
Published
August 25, 2021
ASX:MTS
Source: Shutterstock

It would be hard to discount the role that CEO Jeff Adams has played in delivering the impressive results at Metcash Limited (ASX:MTS) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 01 September 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. Here is our take on why we think CEO compensation is not extravagant.

See our latest analysis for Metcash

How Does Total Compensation For Jeff Adams Compare With Other Companies In The Industry?

According to our data, Metcash Limited has a market capitalization of AU$3.9b, and paid its CEO total annual compensation worth AU$5.6m over the year to April 2021. We note that's an increase of 76% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.8m.

On examining similar-sized companies in the industry with market capitalizations between AU$2.8b and AU$8.8b, we discovered that the median CEO total compensation of that group was AU$4.6m. This suggests that Metcash remunerates its CEO largely in line with the industry average. Moreover, Jeff Adams also holds AU$3.6m worth of Metcash stock directly under their own name.

Component20212020Proportion (2021)
Salary AU$1.8m AU$1.8m 32%
Other AU$3.8m AU$1.4m 68%
Total CompensationAU$5.6m AU$3.2m100%

Talking in terms of the industry, salary represented approximately 32% of total compensation out of all the companies we analyzed, while other remuneration made up 68% of the pie. There isn't a significant difference between Metcash and the broader market, in terms of salary allocation in the overall compensation package. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ASX:MTS CEO Compensation August 25th 2021

A Look at Metcash Limited's Growth Numbers

Metcash Limited has seen its earnings per share (EPS) increase by 87% a year over the past three years. It achieved revenue growth of 9.9% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Metcash Limited Been A Good Investment?

Most shareholders would probably be pleased with Metcash Limited for providing a total return of 62% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Given the improved performance, shareholders may be more forgiving of CEO compensation in the upcoming AGM. In saying that, some shareholders may feel that the more important issues to be addressed may be how the management plans to steer the company towards sustainable profitability in the future.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Metcash that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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