We Discuss Why Kip McGrath Education Centres Limited's (ASX:KME) CEO Compensation May Be Closely Reviewed

Key Insights

• Kip McGrath Education Centres' Annual General Meeting to take place on 21st of November
• Total pay for CEO Storm McGrath includes AU$435.7k salary
• Total compensation is similar 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. At the upcoming AGM on 21st of November, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Kip McGrath Education Centres

How Does Total Compensation For Storm McGrath Compare With Other Companies In The Industry?

Our data indicates that Kip McGrath Education Centres Limited has a market capitalization of AU$29m, and total annual CEO compensation was reported as AU$491k for the year to June 2023. This means that the compensation hasn't changed much from last year. 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. This suggests that Kip McGrath Education Centres remunerates its CEO largely in line with the industry average. Moreover, Storm McGrath also holds AU$2.5m worth of Kip McGrath Education Centres stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	AU$436k	AU$415k	89%
Other	AU$56k	AU$64k	11%
Total Compensation	AU$491k	AU$479k	100%

Speaking on an industry level, nearly 65% of total compensation represents salary, while the remainder of 35% is other remuneration. Kip McGrath Education Centres is paying a higher share of its remuneration through a 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.

Kip McGrath Education Centres Limited's Growth

Over the last three years, Kip McGrath Education Centres Limited has not seen its earnings per share change much, though they have deteriorated slightly. It achieved revenue growth of 8.4% over the last year.

Its a bit disappointing to see that the company has failed to grow its EPS. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this 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. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 1 which is a bit unpleasant) in Kip McGrath Education Centres we think you should know about.

Important note: Kip McGrath Education Centres 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.

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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.