Stock Analysis

What We Learned About Italtile's (JSE:ITE) CEO Pay

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Jan Potgieter became the CEO of Italtile Limited (JSE:ITE) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Italtile

Comparing Italtile Limited's CEO Compensation With the industry

Our data indicates that Italtile Limited has a market capitalization of R17b, and total annual CEO compensation was reported as R30m for the year to June 2020. Notably, that's an increase of 48% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at R3.5m.

On examining similar-sized companies in the industry with market capitalizations between R6.0b and R24b, we discovered that the median CEO total compensation of that group was R17m. This suggests that Jan Potgieter is paid more than the median for the industry. What's more, Jan Potgieter holds R71m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary R3.5m R2.8m 12%
Other R26m R17m 88%
Total CompensationR30m R20m100%

Talking in terms of the industry, salary represented approximately 46% of total compensation out of all the companies we analyzed, while other remuneration made up 54% of the pie. Italtile sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

JSE:ITE CEO Compensation December 9th 2020

A Look at Italtile Limited's Growth Numbers

Italtile Limited has reduced its earnings per share by 4.6% a year over the last three years. Its revenue is down 4.1% over the previous year.

The decline in EPS is a bit concerning. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Italtile Limited Been A Good Investment?

With a total shareholder return of 26% over three years, Italtile Limited shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

As we touched on above, Italtile Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look great when you realize that the company has been suffering from negative EPS growth for the last three years. While shareholder returns are acceptable, they don't delight. So you may want to delve deeper, because we don't think the amount Jan makes is justifiable.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Italtile that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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