Stock Analysis

We Think Insimbi Industrial Holdings Limited's (JSE:ISB) CEO Compensation Package Needs To Be Put Under A Microscope

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Shareholders will probably not be too impressed with the underwhelming results at Insimbi Industrial Holdings Limited (JSE:ISB) recently. At the upcoming AGM on 06 August 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Insimbi Industrial Holdings

Comparing Insimbi Industrial Holdings Limited's CEO Compensation With the industry

Our data indicates that Insimbi Industrial Holdings Limited has a market capitalization of R388m, and total annual CEO compensation was reported as R5.0m for the year to February 2021. That's mostly flat as compared to the prior year's compensation. We note that the salary portion, which stands at R3.00m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under R2.9b, the reported median total CEO compensation was R3.8m. Accordingly, our analysis reveals that Insimbi Industrial Holdings Limited pays Fred Botha north of the industry median. What's more, Fred Botha holds R33m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary R3.0m R3.7m 60%
Other R2.0m R1.2m 40%
Total CompensationR5.0m R4.9m100%

Speaking on an industry level, nearly 78% of total compensation represents salary, while the remainder of 22% is other remuneration. Insimbi Industrial Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

JSE:ISB CEO Compensation July 31st 2021

Insimbi Industrial Holdings Limited's Growth

Over the last three years, Insimbi Industrial Holdings Limited has shrunk its earnings per share by 17% per year. In the last year, its revenue is up 2.0%.

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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Insimbi Industrial Holdings Limited Been A Good Investment?

With a total shareholder return of -32% over three years, Insimbi Industrial Holdings Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Insimbi Industrial Holdings (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Insimbi Industrial 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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