We Discuss Why Tradehold Limited's (JSE:TDH) CEO Compensation May Be Closely Reviewed

By
Simply Wall St
Published
July 29, 2021
JSE:TDH
Source: Shutterstock

Tradehold Limited (JSE:TDH) has not performed well recently and CEO Tim Vaughan will probably need to up their game. At the upcoming AGM on 05 August 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Tradehold

Comparing Tradehold Limited's CEO Compensation With the industry

At the time of writing, our data shows that Tradehold Limited has a market capitalization of R2.2b, and reported total annual CEO compensation of UK£333k for the year to February 2021. Notably, that's a decrease of 22% over the year before. In particular, the salary of UK£304.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations ranging from R1.5b to R5.8b, the reported median CEO total compensation was UK£303k. So it looks like Tradehold compensates Tim Vaughan in line with the median for the industry.

Component20212020Proportion (2021)
Salary UK£304k UK£292k 91%
Other UK£29k UK£135k 9%
Total CompensationUK£333k UK£427k100%

On an industry level, around 74% of total compensation represents salary and 26% is other remuneration. According to our research, Tradehold has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
JSE:TDH CEO Compensation July 30th 2021

A Look at Tradehold Limited's Growth Numbers

Over the last three years, Tradehold Limited has shrunk its earnings per share by 115% per year. Its revenue is down 24% over the previous 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. 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 Tradehold Limited Been A Good Investment?

With a three year total loss of 23% for the shareholders, Tradehold Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in 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. That's why we did our research, and identified 4 warning signs for Tradehold (of which 2 are a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Tradehold 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.