How Should Investors React To Numis' (LON:NUM) CEO Pay?

Alex Ham became the CEO of Numis Corporation Plc (LON:NUM) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Numis

How Does Total Compensation For Alex Ham Compare With Other Companies In The Industry?

Our data indicates that Numis Corporation Plc has a market capitalization of UK£308m, and total annual CEO compensation was reported as UK£1.4m for the year to September 2019. That's a notable decrease of 21% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£400k.

For comparison, other companies in the same industry with market capitalizations ranging between UK£156m and UK£625m had a median total CEO compensation of UK£703k. This suggests that Alex Ham is paid more than the median for the industry. What's more, Alex Ham holds UK£1.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 49% of total compensation represents salary, while the remainder of 51% is other remuneration. Numis pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Numis Corporation Plc's Growth Numbers

Numis Corporation Plc has reduced its earnings per share by 21% a year over the last three years. In the last year, its revenue is down 1.4%.

Few shareholders would be pleased to read that EPS have declined. 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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Numis Corporation Plc Been A Good Investment?

With a total shareholder return of 22% over three years, Numis Corporation Plc shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

As previously discussed, Alex is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, EPS has not grown in three years, failing to impress us. And shareholder returns are decent but not great. So you can understand why we do not think CEO compensation is particularly modest!

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Numis (of which 1 is a bit unpleasant!) 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.

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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