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This Is The Reason Why We Think Avacta Group Plc's (LON:AVCT) CEO Deserves A Bump Up To Their Compensation
The solid performance at Avacta Group Plc (LON:AVCT) has been impressive and shareholders will probably be pleased to know that CEO Alastair Smith has delivered. At the upcoming AGM on 28 June 2021, they would be interested to hear about the company strategy going forward and get a chance to cast their votes on resolutions such as executive remuneration and other company matters. Let's take a look at why we think the CEO has done a good job and we'll present the case for a bump in pay.
See our latest analysis for Avacta Group
Comparing Avacta Group Plc's CEO Compensation With the industry
According to our data, Avacta Group Plc has a market capitalization of UK£455m, and paid its CEO total annual compensation worth UK£275k over the year to December 2020. We note that's a decrease of 16% compared to last year. In particular, the salary of UK£237.0k, makes up a huge portion of the total compensation being paid to the CEO.
On examining similar-sized companies in the industry with market capitalizations between UK£287m and UK£1.1b, we discovered that the median CEO total compensation of that group was UK£697k. In other words, Avacta Group pays its CEO lower than the industry median. What's more, Alastair Smith holds UK£785k worth of shares in the company in their own name.
Component | 2020 | 2019 | Proportion (2020) |
Salary | UK£237k | UK£282k | 86% |
Other | UK£38k | UK£46k | 14% |
Total Compensation | UK£275k | UK£328k | 100% |
On an industry level, around 66% of total compensation represents salary and 34% is other remuneration. Avacta Group pays out 86% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Avacta Group Plc's Growth Numbers
Avacta Group Plc's earnings per share (EPS) grew 17% per year over the last three years. Its revenue is down 6.6% over the previous year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Avacta Group Plc Been A Good Investment?
Most shareholders would probably be pleased with Avacta Group Plc for providing a total return of 528% over three years. 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.
To Conclude...
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. Seeing that earnings growth and share price performance seems to be on the right path, the more pressing focus for shareholders at the AGM may be how the board and management plans to turn the company into a sustainably profitable one.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for Avacta Group (1 is significant!) that you should be aware of before investing here.
Important note: Avacta 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. 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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About AIM:AVCT
Avacta Group
Develops cancer drugs and in vitro diagnostics in the United Kingdom, France, North America, South Korea, rest of Europe, and internationally.
Excellent balance sheet slight.