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What Can We Conclude About Australian Agricultural Projects' (ASX:AAP) CEO Pay?

Simply Wall St
·3 mins read

This article will reflect on the compensation paid to Paul Challis who has served as CEO of Australian Agricultural Projects Ltd (ASX:AAP) since 2007. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Australian Agricultural Projects.

View our latest analysis for Australian Agricultural Projects

How Does Total Compensation For Paul Challis Compare With Other Companies In The Industry?

According to our data, Australian Agricultural Projects Ltd has a market capitalization of AU$4.6m, and paid its CEO total annual compensation worth AU$161k over the year to June 2020. That is, the compensation was roughly the same as last year. We note that the salary portion, which stands at AU$140.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$279m, we found that the median total CEO compensation was AU$362k. This suggests that Paul Challis is paid below the industry median. Furthermore, Paul Challis directly owns AU$374k worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

AU$140k

AU$140k

87%

Other

AU$21k

AU$17k

13%

Total Compensation

AU$161k

AU$157k

100%

On an industry level, roughly 70% of total compensation represents salary and 30% is other remuneration. According to our research, Australian Agricultural Projects has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

A Look at Australian Agricultural Projects Ltd's Growth Numbers

Over the last three years, Australian Agricultural Projects Ltd has shrunk its earnings per share by 63% per year. In the last year, its revenue is down 54%.

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. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Australian Agricultural Projects Ltd Been A Good Investment?

Since shareholders would have lost about 40% over three years, some Australian Agricultural Projects Ltd investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we noted earlier, Australian Agricultural Projects pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. We can't say the CEO compensation is high, but shareholders will be cold to a bump at this stage, considering negative investor returns.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 6 warning signs for Australian Agricultural Projects that investors should look into moving forward.

Important note: Australian Agricultural Projects 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@simplywallst.com.