This article will reflect on the compensation paid to Petrus de Wit who has served as CEO of Indluplace Properties Limited (JSE:ILU) since 2016. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Indluplace Properties.
Note: The company does not report funds from operations, and as a result, we have used earnings per share in our analysis.
Comparing Indluplace Properties Limited's CEO Compensation With the industry
At the time of writing, our data shows that Indluplace Properties Limited has a market capitalization of R1.1b, and reported total annual CEO compensation of R3.8m for the year to September 2020. That's a notable increase of 37% on last year. We note that the salary portion, which stands at R2.18m constitutes the majority of total compensation received by the CEO.
On comparing similar-sized companies in the industry with market capitalizations below R3.1b, we found that the median total CEO compensation was R3.7m. So it looks like Indluplace Properties compensates Petrus de Wit in line with the median for the industry. What's more, Petrus de Wit holds R17m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 57% of total compensation out of all the companies we analyzed, while other remuneration made up 43% of the pie. Indluplace Properties is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Indluplace Properties Limited's Growth
Over the last three years, Indluplace Properties Limited has shrunk its earnings per share by 113% per year. It saw its revenue drop 1.9% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Indluplace Properties Limited Been A Good Investment?
Since shareholders would have lost about 46% over three years, some Indluplace Properties Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Indluplace Properties Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.
CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Indluplace Properties (2 are a bit concerning!) that you should be aware of before investing here.
Important note: Indluplace Properties 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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