Stock Analysis

We Think Shareholders Will Probably Be Generous With Hornby PLC's (LON:HRN) CEO Compensation

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It would be hard to discount the role that CEO Lyndon Davies has played in delivering the impressive results at Hornby PLC (LON:HRN) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 15 September 2021. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.

See our latest analysis for Hornby

Comparing Hornby PLC's CEO Compensation With the industry

At the time of writing, our data shows that Hornby PLC has a market capitalization of UK£76m, and reported total annual CEO compensation of UK£222k for the year to March 2021. This was the same amount the CEO received in the prior year. It is worth noting that the CEO compensation consists entirely of the salary, worth UK£222k.

In comparison with other companies in the industry with market capitalizations under UK£145m, the reported median total CEO compensation was UK£211k. So it looks like Hornby compensates Lyndon Davies in line with the median for the industry. What's more, Lyndon Davies holds UK£362k worth of shares in the company in their own name.

Component20212020Proportion (2021)
Salary UK£222k UK£222k 100%
Other - - -
Total CompensationUK£222k UK£222k100%

Speaking on an industry level, nearly 96% of total compensation represents salary, while the remainder of 4% is other remuneration. Speaking on a company level, Hornby prefers to tread along a traditional path, disbursing all compensation through a salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

AIM:HRN CEO Compensation September 9th 2021

Hornby PLC's Growth

Hornby PLC's earnings per share (EPS) grew 83% per year over the last three years. Its revenue is up 28% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Hornby PLC Been A Good Investment?

Boasting a total shareholder return of 44% over three years, Hornby PLC has done well by shareholders. 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.

In Summary...

Hornby rewards its CEO solely through a salary, ignoring non-salary benefits completely. Seeing that company performance has been quite good recently, some shareholders may feel that CEO compensation may not be the biggest focus 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 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 2 warning signs for Hornby that investors should think about before committing capital to this stock.

Important note: Hornby 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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