Here's Why Shareholders May Want To Be Cautious With Increasing SkyCity Entertainment Group Limited's (NZSE:SKC) CEO Pay Packet

Key Insights

• SkyCity Entertainment Group's Annual General Meeting to take place on 26th of October
• CEO Michael Ahearne's total compensation includes salary of NZ$1.50m
• The overall pay is 103% above the industry average
• SkyCity Entertainment Group's EPS declined by 69% over the past three years while total shareholder loss over the past three years was 30%

Shareholders of SkyCity Entertainment Group Limited (NZSE:SKC) will have been dismayed by the negative share price return over the last three years. Per share earnings growth is also lacking, despite revenue growth. Shareholders will have a chance to take their concerns to the board at the next AGM on 26th of October and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

View our latest analysis for SkyCity Entertainment Group

Comparing SkyCity Entertainment Group Limited's CEO Compensation With The Industry

Our data indicates that SkyCity Entertainment Group Limited has a market capitalization of NZ$1.5b, and total annual CEO compensation was reported as NZ$3.0m for the year to June 2023. That's a modest increase of 3.9% on the prior year. In particular, the salary of NZ$1.50m, makes up a fairly large portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the New Zealand Hospitality industry with market capitalizations between NZ$686m and NZ$2.7b, we discovered that the median CEO total compensation of that group was NZ$1.5m. Accordingly, our analysis reveals that SkyCity Entertainment Group Limited pays Michael Ahearne north of the industry median. What's more, Michael Ahearne holds NZ$964k worth of shares in the company in their own name.

Component	2023	2022	Proportion (2023)
Salary	NZ$1.5m	NZ$1.5m	51%
Other	NZ$1.5m	NZ$1.4m	49%
Total Compensation	NZ$3.0m	NZ$2.9m	100%

On an industry level, roughly 56% of total compensation represents salary and 44% is other remuneration. Our data reveals that SkyCity Entertainment Group allocates salary more or less in line with the wider market. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at SkyCity Entertainment Group Limited's Growth Numbers

Over the last three years, SkyCity Entertainment Group Limited has shrunk its earnings per share by 69% per year. Its revenue is up 54% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. 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. 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 SkyCity Entertainment Group Limited Been A Good Investment?

With a total shareholder return of -30% over three years, SkyCity Entertainment Group Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The loss to shareholders over the past three years is certainly concerning and possibly has something to do with the fact that the company's earnings haven't grown. Shareholders will get the chance at the upcoming AGM to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which is a bit unpleasant) in SkyCity Entertainment Group we think you should know about.

Switching gears from SkyCity Entertainment Group, 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.