We Discuss Why Kip McGrath Education Centres Limited's (ASX:KME) CEO Compensation May Be Closely Reviewed
Key Insights
Kip McGrath Education Centres to hold its Annual General Meeting on 21st of November
CEO Storm McGrath's total compensation includes salary of AU$435.7k
The overall pay is comparable to the industry average
Kip McGrath Education Centres' EPS declined by 0.7% over the past three years while total shareholder loss over the past three years was 61%
The results at Kip McGrath Education Centres Limited (ASX:KME) have been quite disappointing recently and CEO Storm McGrath bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 21st of November. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.
Check out our latest analysis for Kip McGrath Education Centres
Comparing Kip McGrath Education Centres Limited's CEO Compensation With The Industry
According to our data, Kip McGrath Education Centres Limited has a market capitalization of AU$29m, and paid its CEO total annual compensation worth AU$491k over the year to June 2023. That's mostly flat as compared to the prior year's compensation. In particular, the salary of AU$435.7k, makes up a huge portion of the total compensation being paid to the CEO.
On comparing similar-sized companies in the Australian Consumer Services industry with market capitalizations below AU$314m, we found that the median total CEO compensation was AU$492k. From this we gather that Storm McGrath is paid around the median for CEOs in the industry. What's more, Storm McGrath holds AU$2.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2023 | 2022 | Proportion (2023) |
Salary | AU$436k | AU$415k | 89% |
Other | AU$56k | AU$64k | 11% |
Total Compensation | AU$491k | AU$479k | 100% |
Talking in terms of the industry, salary represented approximately 65% of total compensation out of all the companies we analyzed, while other remuneration made up 35% of the pie. According to our research, Kip McGrath Education Centres has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Kip McGrath Education Centres Limited's Growth
Earnings per share at Kip McGrath Education Centres Limited are much the same as they were three years ago, albeit slightly lower. It achieved revenue growth of 8.4% over the last year.
The lack of EPS growth is certainly uninspiring. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Kip McGrath Education Centres Limited Been A Good Investment?
The return of -61% over three years would not have pleased Kip McGrath Education Centres Limited shareholders. So shareholders would probably want the company to be less generous with CEO compensation.
To Conclude...
Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.
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 Kip McGrath Education Centres (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.
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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
