We Discuss Why Café de Coral Holdings Limited's (HKG:341) CEO Compensation May Be Closely Reviewed

Café de Coral Holdings Limited (HKG:341) has not performed well recently and CEO Peter Lo will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 06 September 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Café de Coral Holdings

Comparing Café de Coral Holdings Limited's CEO Compensation With the industry

Our data indicates that Café de Coral Holdings Limited has a market capitalization of HK$8.0b, and total annual CEO compensation was reported as HK$8.8m for the year to March 2021. Notably, that's an increase of 14% over the year before. Notably, the salary which is HK$4.80m, represents a considerable chunk of the total compensation being paid.

For comparison, other companies in the same industry with market capitalizations ranging between HK$3.1b and HK$12b had a median total CEO compensation of HK$5.4m. Hence, we can conclude that Peter Lo is remunerated higher than the industry median. Moreover, Peter Lo also holds HK$1.3b worth of Café de Coral Holdings 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	HK$4.8m	HK$4.8m	54%
Other	HK$4.0m	HK$2.9m	46%
Total Compensation	HK$8.8m	HK$7.7m	100%

On an industry level, around 90% of total compensation represents salary and 10% is other remuneration. It's interesting to note that Café de Coral Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Café de Coral Holdings Limited's Growth Numbers

Over the last three years, Café de Coral Holdings Limited has shrunk its earnings per share by 7.8% per year. It saw its revenue drop 16% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Café de Coral Holdings Limited Been A Good Investment?

Since shareholders would have lost about 20% over three years, some Café de Coral Holdings Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

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 did our research and spotted 2 warning signs for Café de Coral Holdings that investors should look into moving forward.

Switching gears from Café de Coral Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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