We Think Shareholders May Want To Consider A Review Of Aspen Pharmacare Holdings Limited's (JSE:APN) CEO Compensation Package

Key Insights

• Aspen Pharmacare Holdings' Annual General Meeting to take place on 5th of December
• Salary of R9.62m is part of CEO Stephen Saad's total remuneration
• The overall pay is 80% above the industry average
• Aspen Pharmacare Holdings' three-year loss to shareholders was 25% while its EPS was down 1.9% over the past three years

The results at Aspen Pharmacare Holdings Limited (JSE:APN) have been quite disappointing recently and CEO Stephen Saad bears some responsibility for this. At the upcoming AGM on 5th of December, shareholders can hear from the board including their plans for turning around performance. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Aspen Pharmacare Holdings

Comparing Aspen Pharmacare Holdings Limited's CEO Compensation With The Industry

Our data indicates that Aspen Pharmacare Holdings Limited has a market capitalization of R74b, and total annual CEO compensation was reported as R27m for the year to June 2024. Notably, that's an increase of 13% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at R9.6m.

For comparison, other companies in the South Africa Pharmaceuticals industry with market capitalizations ranging between R36b and R116b had a median total CEO compensation of R15m. This suggests that Stephen Saad is paid more than the median for the industry. Furthermore, Stephen Saad directly owns R8.7b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	R9.6m	R9.2m	35%
Other	R18m	R15m	65%
Total Compensation	R27m	R24m	100%

On an industry level, around 57% of total compensation represents salary and 43% is other remuneration. It's interesting to note that Aspen Pharmacare Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Aspen Pharmacare Holdings Limited's Growth

Aspen Pharmacare Holdings Limited has reduced its earnings per share by 1.9% a year over the last three years. In the last year, its revenue is up 9.8%.

A lack of EPS improvement is not good to see. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Aspen Pharmacare Holdings Limited Been A Good Investment?

Given the total shareholder loss of 25% over three years, many shareholders in Aspen Pharmacare Holdings Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

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.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Aspen Pharmacare Holdings that you should be aware of before investing.

Important note: Aspen Pharmacare Holdings 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.