The share price of PPHE Hotel Group Limited (LON:PPH) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. The upcoming AGM on 19 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
Comparing PPHE Hotel Group Limited's CEO Compensation With the industry
Our data indicates that PPHE Hotel Group Limited has a market capitalization of UK£733m, and total annual CEO compensation was reported as UK£428k for the year to December 2020. That's a notable decrease of 19% on last year. Notably, the salary which is UK£312.7k, represents most of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from UK£284m to UK£1.1b, we found that the median CEO total compensation was UK£535k. From this we gather that Boris Ivesha is paid around the median for CEOs in the industry. What's more, Boris Ivesha holds UK£80m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. Although there is a difference in how total compensation is set, PPHE Hotel Group more or less reflects the market in terms of setting the salary. 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 PPHE Hotel Group Limited's Growth Numbers
Over the last three years, PPHE Hotel Group Limited has shrunk its earnings per share by 82% per year. Its revenue is down 72% over the previous year.
Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has PPHE Hotel Group Limited Been A Good Investment?
Boasting a total shareholder return of 49% over three years, PPHE Hotel Group Limited 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.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 1 warning sign for PPHE Hotel Group that investors should look into moving forward.
Switching gears from PPHE Hotel Group, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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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