What Did Phileo Australia Limited’s (ASX:PHI) CEO Take Home Last Year?

Leading Phileo Australia Limited (ASX:PHI) as the CEO, Rudy Eng took the company to a valuation of AU$385.60M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Eng’s pay and compare this to the company’s performance over the same period, as well as measure it against other Australian CEOs leading companies of similar size and profitability. See our latest analysis for Phileo Australia

What has been the trend in PHI’s earnings?

PHI can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. In the past year, PHI produced a profit of AU$14.99M , which is an increase of 22.55% from its last year’s earnings of AU$12.23M. This is a positive indication that PHI has strived to maintain a good track record of profitability in the face of any headwinds. Given earnings are moving the right way, CEO pay should be reflective of Eng’s hard work. In the same year, Eng’s total remuneration increased by a mere 3.52% to AU$499.22K. Although I couldn’t find information on the breakdown of Eng’s pay, if some portion were non-cash items such as stocks and options, then variabilities in PHI’s share price can impact the actual level of what the CEO actually receives.
ASX:PHI Past Future Earnings Mar 7th 18
ASX:PHI Past Future Earnings Mar 7th 18

Is PHI overpaying the CEO?

While one size does not fit all, as remuneration should account for specific factors of the company and market, we can evaluate a high-level thresold to see if PHI deviates substantially from its peers. This outcome helps investors ask the right question about Eng’s incentive alignment. On average, an Australian small-cap is worth around $140M, produces earnings of $10M, and remunerates its CEO circa $500,000 per year. Accounting for the size of PHI in terms of market cap, as well as its performance, using earnings as a proxy, it appears that Eng is paid in-line with other comparable Australian CEOs of profitable small-caps. This indicates that Eng’s pay is fair.

Next Steps:

Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in PHI, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Governance: To find out more about PHI’s governance, look through our infographic report of the company’s board and management.
  2. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PHI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!