Most Shareholders Will Probably Find That The Compensation For Serica Energy plc's (LON:SQZ) CEO Is Reasonable

By
Simply Wall St
Published
June 17, 2021
AIM:SQZ
Source: Shutterstock

Shareholders may be wondering what CEO Mitch Flegg plans to do to improve the less than great performance at Serica Energy plc (LON:SQZ) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 24 June 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.

View our latest analysis for Serica Energy

How Does Total Compensation For Mitch Flegg Compare With Other Companies In The Industry?

At the time of writing, our data shows that Serica Energy plc has a market capitalization of UK£338m, and reported total annual CEO compensation of UK£521k for the year to December 2020. That's a slight decrease of 7.6% on the prior year. In particular, the salary of UK£400.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the same industry with market caps ranging from UK£144m to UK£574m, we found that the median CEO total compensation was UK£1.2m. This suggests that Mitch Flegg is paid below the industry median. Moreover, Mitch Flegg also holds UK£233k worth of Serica Energy stock directly under their own name.

Component20202019Proportion (2020)
Salary UK£400k UK£400k 77%
Other UK£121k UK£164k 23%
Total CompensationUK£521k UK£564k100%

Talking in terms of the industry, salary represented approximately 73% of total compensation out of all the companies we analyzed, while other remuneration made up 27% of the pie. Although there is a difference in how total compensation is set, Serica Energy more or less reflects the market in terms of setting the salary. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

ceo-compensation
AIM:SQZ CEO Compensation June 18th 2021

A Look at Serica Energy plc's Growth Numbers

Serica Energy plc has reduced its earnings per share by 15% a year over the last three years. Its revenue is down 50% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. 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 Serica Energy plc Been A Good Investment?

We think that the total shareholder return of 116%, over three years, would leave most Serica Energy plc shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 3 warning signs for Serica Energy that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.