Why We Think Growthpoint Properties Limited's (JSE:GRT) CEO Compensation Is Not Excessive At All

Key Insights

• Growthpoint Properties will host its Annual General Meeting on 26th of November
• CEO Leon Sasse's total compensation includes salary of R8.51m
• Total compensation is 55% below industry average
• Growthpoint Properties' total shareholder return over the past three years was 37% while its FFO was down 1.4% per year over the past three years

The performance at Growthpoint Properties Limited (JSE:GRT) has been rather lacklustre of late and shareholders may be wondering what CEO Leon Sasse is planning to do about this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 26th of November. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

See our latest analysis for Growthpoint Properties

Comparing Growthpoint Properties Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Growthpoint Properties Limited has a market capitalization of R45b, and reported total annual CEO compensation of R27m for the year to June 2024. That's a modest increase of 4.1% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at R8.5m.

On examining similar-sized companies in the South African REITs industry with market capitalizations between R36b and R117b, we discovered that the median CEO total compensation of that group was R61m. This suggests that Leon Sasse is paid below the industry median. Furthermore, Leon Sasse directly owns R67m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	R8.5m	R7.5m	31%
Other	R19m	R19m	69%
Total Compensation	R27m	R26m	100%

Talking in terms of the industry, salary represented approximately 36% of total compensation out of all the companies we analyzed, while other remuneration made up 64% of the pie. It's interesting to note that Growthpoint Properties allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Growthpoint Properties Limited's Growth

Over the last three years, Growthpoint Properties Limited has shrunk its funds from operations (FFO) by 1.4% per year. In the last year, its revenue is up 4.8%.

A lack of FFO 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 FFO. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Growthpoint Properties Limited Been A Good Investment?

We think that the total shareholder return of 37%, over three years, would leave most Growthpoint Properties Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean these strong returns may not continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 4 warning signs for Growthpoint Properties you should be aware of, and 1 of them is significant.

Important note: Growthpoint Properties 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.