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How Should Investors React To Dewhurst's (LON:DWHT) CEO Pay?

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Simply Wall St
·4-min read
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David Dewhurst is the CEO of Dewhurst plc (LON:DWHT), 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.

View our latest analysis for Dewhurst

Comparing Dewhurst plc's CEO Compensation With the industry

Our data indicates that Dewhurst plc has a market capitalization of UK£99m, and total annual CEO compensation was reported as UK£227k for the year to September 2020. We note that's a decrease of 44% compared to last year. In particular, the salary of UK£125.0k, 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 UK£142m, reported a median total CEO compensation of UK£225k. So it looks like Dewhurst compensates David Dewhurst in line with the median for the industry. Furthermore, David Dewhurst directly owns UK£8.9m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

UK£125k

UK£134k

55%

Other

UK£102k

UK£271k

45%

Total Compensation

UK£227k

UK£405k

100%

Speaking on an industry level, nearly 77% of total compensation represents salary, while the remainder of 23% is other remuneration. Dewhurst sets aside a smaller share of compensation for 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.

ceo-compensation
ceo-compensation

A Look at Dewhurst plc's Growth Numbers

Dewhurst plc saw earnings per share stay pretty flat over the last three years. In the last year, its revenue is down 1.5%.

Its a bit disappointing to see that the company has failed to grow its EPS. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Dewhurst plc Been A Good Investment?

Most shareholders would probably be pleased with Dewhurst plc for providing a total return of 105% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

As we touched on above, Dewhurst plc is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good when you see that EPS growth over the last three years has been negative. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We're not saying CEO compensation is too generous, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 2 warning signs for Dewhurst you should be aware of, and 1 of them is significant.

Important note: Dewhurst 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.