Here's Why We Think NCC Group plc's (LON:NCC) CEO Compensation Looks Fair for the time being

By
Simply Wall St
Published
October 28, 2021
LSE:NCC
Source: Shutterstock

Despite strong share price growth of 38% for NCC Group plc (LON:NCC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 04 November 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.

View our latest analysis for NCC Group

Comparing NCC Group plc's CEO Compensation With the industry

According to our data, NCC Group plc has a market capitalization of UK£772m, and paid its CEO total annual compensation worth UK£1.1m over the year to May 2021. We note that's an increase of 30% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£450k.

In comparison with other companies in the industry with market capitalizations ranging from UK£290m to UK£1.2b, the reported median CEO total compensation was UK£1.1m. This suggests that NCC Group remunerates its CEO largely in line with the industry average. Furthermore, Adam Palser directly owns UK£420k worth of shares in the company.

Component20212020Proportion (2021)
Salary UK£450k UK£447k 40%
Other UK£670k UK£414k 60%
Total CompensationUK£1.1m UK£861k100%

On an industry level, around 59% of total compensation represents salary and 41% is other remuneration. It's interesting to note that NCC Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
LSE:NCC CEO Compensation October 29th 2021

NCC Group plc's Growth

Over the last three years, NCC Group plc has shrunk its earnings per share by 9.8% per year. In the last year, its revenue is up 2.6%.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has NCC Group plc Been A Good Investment?

Most shareholders would probably be pleased with NCC Group plc for providing a total return of 38% 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.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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 is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 4 warning signs for NCC Group that investors should be aware of in a dynamic business environment.

Important note: NCC 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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