This article will reflect on the compensation paid to Simon Gill who has served as CEO of Highcroft Investments Plc (LON:HCFT) since 2013. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Note: The company does not report funds from operations, and as a result, we have used earnings per share in our analysis.
How Does Total Compensation For Simon Gill Compare With Other Companies In The Industry?
At the time of writing, our data shows that Highcroft Investments Plc has a market capitalization of UK£35m, and reported total annual CEO compensation of UK£217k for the year to December 2019. That's a fairly small increase of 3.9% over the previous year. We note that the salary portion, which stands at UK£113.5k constitutes the majority of total compensation received by the CEO.
On comparing similar-sized companies in the industry with market capitalizations below UK£154m, we found that the median total CEO compensation was UK£614k. That is to say, Simon Gill is paid under the industry median.
On an industry level, roughly 38% of total compensation represents salary and 62% is other remuneration. According to our research, Highcroft Investments has allocated a higher percentage of pay to salary in comparison to the wider industry. 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 Highcroft Investments Plc's Growth Numbers
Over the last three years, Highcroft Investments Plc has shrunk its earnings per share by 63% per year. It achieved revenue growth of 16% over the last year.
The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has Highcroft Investments Plc Been A Good Investment?
Given the total shareholder loss of 12% over three years, many shareholders in Highcroft Investments Plc are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Highcroft Investments Plc is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But Highcroft Investments has recorded negative shareholder returns and EPS growth over the last three years. In contrast, revenues have increased more recently. Although it's fair to say CEO compensation is modest, shareholders might want to see healthier investor returns before thinking Simon deserves a raise.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Highcroft Investments (2 can't be ignored!) that you should be aware of before investing here.
Important note: Highcroft Investments 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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