We Think Labat Africa Limited's (JSE:LAB) CEO Compensation Package Needs To Be Put Under A Microscope

Shareholders will probably not be too impressed with the underwhelming results at Labat Africa Limited (JSE:LAB) recently. At the upcoming AGM on 11 May 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Labat Africa

Comparing Labat Africa Limited's CEO Compensation With the industry

At the time of writing, our data shows that Labat Africa Limited has a market capitalization of R105m, and reported total annual CEO compensation of R3.6m for the year to August 2020. There was no change in the compensation compared to last year. Notably, the salary which is R3.07m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under R2.9b, the reported median total CEO compensation was R3.7m. So it looks like Labat Africa compensates Brian van Rooyen in line with the median for the industry. Furthermore, Brian van Rooyen directly owns R2.6m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	R3.1m	R3.1m	84%
Other	R571k	R571k	16%
Total Compensation	R3.6m	R3.6m	100%

Speaking on an industry level, nearly 31% of total compensation represents salary, while the remainder of 69% is other remuneration. Labat Africa is paying a higher share of its remuneration through a 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.

A Look at Labat Africa Limited's Growth Numbers

Over the last three years, Labat Africa Limited has shrunk its earnings per share by 105% per year. It saw its revenue drop 31% over the last year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Labat Africa Limited Been A Good Investment?

The return of -38% over three years would not have pleased Labat Africa Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 5 warning signs for Labat Africa you should be aware of, and 2 of them can't be ignored.

Switching gears from Labat Africa, 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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