Stock Analysis

We Discuss Why Allied Electronics Corporation Limited's (JSE:AEL) CEO Compensation May Be Closely Reviewed

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The results at Allied Electronics Corporation Limited (JSE:AEL) have been quite disappointing recently and CEO Mteto Nyati bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 28 July 2021. 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.

View our latest analysis for Allied Electronics

Comparing Allied Electronics Corporation Limited's CEO Compensation With the industry

At the time of writing, our data shows that Allied Electronics Corporation Limited has a market capitalization of R3.8b, and reported total annual CEO compensation of R23m for the year to February 2021. Notably, that's an increase of 60% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at R7.1m.

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 R8.3m. This suggests that Mteto Nyati is paid more than the median for the industry. Moreover, Mteto Nyati also holds R5.5m worth of Allied Electronics stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary R7.1m R7.0m 31%
Other R16m R7.4m 69%
Total CompensationR23m R14m100%

On an industry level, roughly 72% of total compensation represents salary and 28% is other remuneration. It's interesting to note that Allied Electronics allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

JSE:AEL CEO Compensation July 22nd 2021

Allied Electronics Corporation Limited's Growth

Over the last three years, Allied Electronics Corporation Limited has shrunk its earnings per share by 40% per year. In the last year, its revenue changed by just 0.3%.

Overall this is not a very positive result for shareholders. And the flat revenue is seriously uninspiring. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Allied Electronics Corporation Limited Been A Good Investment?

With a three year total loss of 19% for the shareholders, Allied Electronics Corporation Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid 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, the board will get the chance to explain the steps it plans to take to improve business performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for Allied Electronics that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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