This Is Why S&U plc's (LON:SUS) CEO Compensation Looks Appropriate

Despite positive share price growth of 14% for S&U plc (LON:SUS) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 20 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for S&U

Comparing S&U plc's CEO Compensation With the industry

Our data indicates that S&U plc has a market capitalization of UK£327m, and total annual CEO compensation was reported as UK£450k for the year to January 2021. That's just a smallish increase of 5.4% on last year. We note that the salary portion, which stands at UK£360.0k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations ranging from UK£143m to UK£570m, the reported median CEO total compensation was UK£450k. This suggests that S&U remunerates its CEO largely in line with the industry average. Moreover, Anthony Michael Coombs also holds UK£36m worth of S&U stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	UK£360k	UK£355k	80%
Other	UK£90k	UK£72k	20%
Total Compensation	UK£450k	UK£427k	100%

On an industry level, roughly 82% of total compensation represents salary and 18% is other remuneration. Although there is a difference in how total compensation is set, S&U more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at S&U plc's Growth Numbers

Over the last three years, S&U plc has shrunk its earnings per share by 16% per year. It saw its revenue drop 5.8% over the last year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has S&U plc Been A Good Investment?

S&U plc has served shareholders reasonably well, with a total return of 14% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. 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've identified 4 warning signs for S&U that investors should be aware of in a dynamic business environment.

Important note: S&U 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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