How Much Is Australian Agricultural Projects Ltd (ASX:AAP) Paying Its CEO?

Paul Challis has been the CEO of Australian Agricultural Projects Ltd (ASX:AAP) since 2007, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Australian Agricultural Projects.

See our latest analysis for Australian Agricultural Projects

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

At the time of writing, our data shows that Australian Agricultural Projects Ltd has a market capitalization of AU$8.2m, and reported total annual CEO compensation of AU$161k for the year to June 2020. That is, the compensation was roughly the same as last year. In particular, the salary of AU$140.0k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below AU$259m, reported a median total CEO compensation of AU$328k. In other words, Australian Agricultural Projects pays its CEO lower than the industry median. What's more, Paul Challis holds AU$1.0m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 80% of total compensation represents salary and 20% is other remuneration. There isn't a significant difference between Australian Agricultural Projects and the broader market, in terms of salary allocation in the overall compensation package. 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.

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 25% per year. In the last year, its revenue is down 49%.

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. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 5.7% over three years, some Australian Agricultural Projects Ltd investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As previously discussed, Paul is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. It's tough to say that Paul is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.

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've identified 5 warning signs for Australian Agricultural Projects that investors should be aware of in a dynamic business environment.

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. 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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