What Does Eneco Refresh's (ASX:ERG) CEO Pay Reveal?

By
Simply Wall St
Published
November 03, 2020
ASX:ERG

The CEO of Eneco Refresh Limited (ASX:ERG) is Henry Heng, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Eneco Refresh.

See our latest analysis for Eneco Refresh

Comparing Eneco Refresh Limited's CEO Compensation With the industry

According to our data, Eneco Refresh Limited has a market capitalization of AU$17m, and paid its CEO total annual compensation worth AU$249k over the year to June 2020. That's a notable increase of 9.4% on last year. We note that the salary portion, which stands at AU$173.7k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$284m, we found that the median total CEO compensation was AU$478k. Accordingly, Eneco Refresh pays its CEO under the industry median. Moreover, Henry Heng also holds AU$1.3m worth of Eneco Refresh stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary AU$174k AU$162k 70%
Other AU$75k AU$66k 30%
Total CompensationAU$249k AU$228k100%

On an industry level, roughly 54% of total compensation represents salary and 46% is other remuneration. According to our research, Eneco Refresh has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ASX:ERG CEO Compensation November 3rd 2020

Eneco Refresh Limited's Growth

Over the last three years, Eneco Refresh Limited has shrunk its earnings per share by 20% per year. It achieved revenue growth of 24% over the last year.

The decrease in EPS could be a concern for some investors. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Eneco Refresh Limited Been A Good Investment?

Since shareholders would have lost about 4.6% over three years, some Eneco Refresh Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we touched on above, Eneco Refresh Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But Eneco Refresh has recorded negative shareholder returns and EPS growth over the last three years. In contrast, revenues have increased more recently. So, although Henry is modestly paid, shareholders might want to see positive shareholder returns before warming to the idea of a raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 2 which are a bit concerning) in Eneco Refresh we think you should know about.

Important note: Eneco Refresh is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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