Shareholders May Find It Hard To Justify Increasing SP Group A/S' (CPH:SPG) CEO Compensation For Now

Key Insights

• SP Group will host its Annual General Meeting on 25th of April
• Total pay for CEO Frank Gad includes kr.4.33m salary
• The total compensation is similar to the average for the industry
• SP Group's three-year loss to shareholders was 35% while its EPS grew by 0.6% over the past three years

The underwhelming share price performance of SP Group A/S (CPH:SPG) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 25th of April. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for SP Group

How Does Total Compensation For Frank Gad Compare With Other Companies In The Industry?

Our data indicates that SP Group A/S has a market capitalization of kr.2.6b, and total annual CEO compensation was reported as kr.5.8m for the year to December 2023. That is, the compensation was roughly the same as last year. Notably, the salary which is kr.4.33m, represents most of the total compensation being paid.

On comparing similar companies from the Denmark Chemicals industry with market caps ranging from kr.1.4b to kr.5.6b, we found that the median CEO total compensation was kr.4.6m. So it looks like SP Group compensates Frank Gad in line with the median for the industry. Moreover, Frank Gad also holds kr.42m worth of SP Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	kr.4.3m	kr.4.2m	75%
Other	kr.1.4m	kr.1.4m	25%
Total Compensation	kr.5.8m	kr.5.6m	100%

Talking in terms of the industry, salary represented approximately 56% of total compensation out of all the companies we analyzed, while other remuneration made up 44% of the pie. SP Group pays out 75% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at SP Group A/S' Growth Numbers

Over the last three years, SP Group A/S has not seen its earnings per share change much, though there is a slight positive movement. In the last year, its revenue is down 1.9%.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has SP Group A/S Been A Good Investment?

The return of -35% over three years would not have pleased SP Group A/S shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for SP Group that investors should think about before committing capital to this stock.

Important note: SP Group 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.