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How Should Investors React To Hornby's (LON:HRN) CEO Pay?

Simply Wall St
·3-min read

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This article will reflect on the compensation paid to Lyndon Davies who has served as CEO of Hornby PLC (LON:HRN) since 2017. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Hornby

How Does Total Compensation For Lyndon Davies Compare With Other Companies In The Industry?

Our data indicates that Hornby PLC has a market capitalization of UK£55m, and total annual CEO compensation was reported as UK£222k for the year to March 2020. That is, the compensation was roughly the same as last year. It is worth noting that the CEO compensation consists entirely of the salary, worth UK£222k.

On comparing similar-sized companies in the industry with market capitalizations below UK£159m, we found that the median total CEO compensation was UK£202k. So it looks like Hornby compensates Lyndon Davies in line with the median for the industry. What's more, Lyndon Davies holds UK£262k worth of shares in the company in their own name.

Component

2020

2019

Proportion (2020)

Salary

UK£222k

UK£226k

100%

Other

-

-

-

Total Compensation

UK£222k

UK£226k

100%

On an industry level, roughly 61% of total compensation represents salary and 39% is other remuneration. At the company level, Hornby pays Lyndon Davies solely through a salary, preferring to go down a conventional route. 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

Hornby PLC's Growth

Hornby PLC has seen its earnings per share (EPS) increase by 53% a year over the past three years. In the last year, its revenue is up 15%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. 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 Hornby PLC Been A Good Investment?

With a total shareholder return of 1.1% over three years, Hornby PLC has done okay by shareholders. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Hornby pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As we noted earlier, Hornby pays its CEO in line with similar-sized companies belonging to the same industry. But earnings growth over the last three years has been impressive, although the same cannot be said for shareholder returns. As a result of these considerations, we would suggest the compensation is reasonable, but looking ahead shareholders will likely want to see healthier returns.

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. We did our research and identified 3 warning signs (and 1 which makes us a bit uncomfortable) in Hornby we think you should know about.

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.

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@simplywallst.com.