Malcolm Day is the CEO of Delecta Limited (ASX:DLC), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Delecta Limited's CEO Compensation With the industry
Our data indicates that Delecta Limited has a market capitalization of AU$5.5m, and total annual CEO compensation was reported as AU$268k for the year to June 2020. That's a notable increase of 8.1% on last year. In particular, the salary of AU$180.0k, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the industry with market capitalizations below AU$284m, reported a median total CEO compensation of AU$410k. This suggests that Malcolm Day is paid below the industry median. Furthermore, Malcolm Day directly owns AU$1.0m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 67% of total compensation represents salary and 33% is other remuneration. Our data reveals that Delecta allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Delecta Limited's Growth
Delecta Limited has reduced its earnings per share by 97% a year over the last three years. Its revenue is up 8.9% over the last year.
The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Delecta Limited Been A Good Investment?
Delecta Limited has served shareholders reasonably well, with a total return of 10.0% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
As previously discussed, Malcolm is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Over the last three years, shareholder returns have been unexciting, and EPS growth has fared even worse. We can't categorize CEO compensation as high, but shareholders might object to a raise at this stage, considering overall poor performance.
CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Delecta (2 are significant!) that you should be aware of before investing here.
Important note: Delecta 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.
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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