We Discuss Why A2B Australia Limited's (ASX:A2B) CEO Compensation May Be Closely Reviewed

By
Simply Wall St
Published
November 11, 2021
ASX:A2B
Source: Shutterstock

A2B Australia Limited (ASX:A2B) has not performed well recently and CEO Andrew Skelton will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 18 November 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for A2B Australia

Comparing A2B Australia Limited's CEO Compensation With the industry

According to our data, A2B Australia Limited has a market capitalization of AU$160m, and paid its CEO total annual compensation worth AU$1.3m over the year to June 2021. This means that the compensation hasn't changed much from last year. We note that the salary portion, which stands at AU$804.0k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below AU$272m, reported a median total CEO compensation of AU$430k. Hence, we can conclude that Andrew Skelton is remunerated higher than the industry median. Furthermore, Andrew Skelton directly owns AU$89k worth of shares in the company.

Component20212020Proportion (2021)
Salary AU$804k AU$804k 63%
Other AU$480k AU$465k 37%
Total CompensationAU$1.3m AU$1.3m100%

Talking in terms of the industry, salary represented approximately 63% of total compensation out of all the companies we analyzed, while other remuneration made up 37% of the pie. Although there is a difference in how total compensation is set, A2B Australia more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ASX:A2B CEO Compensation November 11th 2021

A Look at A2B Australia Limited's Growth Numbers

Over the last three years, A2B Australia Limited has shrunk its earnings per share by 86% per year. In the last year, its revenue is down 34%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. 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 A2B Australia Limited Been A Good Investment?

Given the total shareholder loss of 30% over three years, many shareholders in A2B Australia Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

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 1 warning sign for A2B Australia that investors should think about before committing capital to this stock.

Important note: A2B Australia 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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