Does Hills' (ASX:HIL) CEO Salary Compare Well With Industry Peers?

This article will reflect on the compensation paid to David John Lenz who has served as CEO of Hills Limited (ASX:HIL) since 2016. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Hills.

View our latest analysis for Hills

Comparing Hills Limited's CEO Compensation With the industry

At the time of writing, our data shows that Hills Limited has a market capitalization of AU$38m, and reported total annual CEO compensation of AU$438k for the year to July 2020. That's a fairly small increase of 7.0% over the previous year. Notably, the salary which is AU$303.4k, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under AU$264m, the reported median total CEO compensation was AU$378k. This suggests that Hills remunerates its CEO largely in line with the industry average. Furthermore, David John Lenz directly owns AU$83k worth of shares in the company.

On an industry level, roughly 57% of total compensation represents salary and 43% is other remuneration. It's interesting to note that Hills pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Hills Limited's Growth Numbers

Over the last three years, Hills Limited has shrunk its earnings per share by 2.8% per year. It saw its revenue drop 18% over the last year.

A lack of EPS improvement is not good to see. This is compounded by the fact revenue is actually down on last year. 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 Hills Limited Been A Good Investment?

With a three year total loss of 20% for the shareholders, Hills Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As previously discussed, David John is compensated close to the median for companies of its size, and which belong to the same industry. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Hills that you should be aware of before investing.

Switching gears from Hills, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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