Why Ellies Holdings' (JSE:ELI) CEO Pay Matters

Shaun Prithivirajh has been the CEO of Ellies Holdings Limited (JSE:ELI) since 2018, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Ellies Holdings.

View our latest analysis for Ellies Holdings

How Does Total Compensation For Shaun Prithivirajh Compare With Other Companies In The Industry?

Our data indicates that Ellies Holdings Limited has a market capitalization of R62m, and total annual CEO compensation was reported as R3.6m for the year to April 2020. That's a notable increase of 24% on last year. We note that the salary portion, which stands at R3.19m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below R3.0b, reported a median total CEO compensation of R4.6m. So it looks like Ellies Holdings compensates Shaun Prithivirajh in line with the median for the industry.

Talking in terms of the industry, salary represented approximately 58% of total compensation out of all the companies we analyzed, while other remuneration made up 42% of the pie. Ellies Holdings pays out 88% of remuneration in the form of a salary, significantly higher than the industry average. 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.

Ellies Holdings Limited's Growth

Ellies Holdings Limited has reduced its earnings per share by 101% a year over the last three years. In the last year, its revenue is down 12%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Ellies Holdings Limited Been A Good Investment?

Since shareholders would have lost about 73% over three years, some Ellies Holdings Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we noted earlier, Ellies Holdings pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative 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. That's why we did our research, and identified 3 warning signs for Ellies Holdings (of which 2 can't be ignored!) that you should know about in order to have a holistic understanding of the stock.

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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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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