09/12/2022

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We Think Shareholders Are Less Likely To Approve A Pay Rise For Australian Finance Group Limited’s (ASX:AFG) CEO For Now

In the past three years, the share price of Australian Finance Group Limited (ASX:AFG) has struggled to generate growth for its shareholders. In addition, the company’s per-share earnings growth is not looking good, despite growing revenues. The AGM coming up on 25 November 2022 will be an opportunity for shareholders to have their concerns addressed by the board and for them to exercise their influence on management through voting on resolutions such as executive remuneration. We think shareholders may be cautious of approving a pay rise for the CEO at the moment, based on our analysis below.

View our latest analysis for Australian Finance Group

Comparing Australian Finance Group Limited’s CEO Compensation With The Industry

Our data indicates that Australian Finance Group Limited has a market capitalization of AU$499m, and total annual CEO compensation was reported as AU$1.5m for the year to June 2022. We note that’s an increase of 9.2% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$577k.

On comparing similar companies from the same industry with market caps ranging from AU$301m to AU$1.2b, we found that the median CEO total compensation was AU$2.0m. This suggests that Australian Finance Group remunerates its CEO largely in line with the industry average. Furthermore, David Bailey directly owns AU$2.9m worth of shares in the company, implying that they are deeply invested in the company’s success.

Component

2022

2021

Proportion (2022)

Salary

AU$577k

AU$551k

38%

Other

AU$935k

AU$835k

62%

Total Compensation

AU$1.5m

AU$1.4m

100%

Talking in terms of the industry, salary represented approximately 54% of total compensation out of all the companies we analyzed, while other remuneration made up 46% of the pie. Australian Finance Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.

ceo-compensation

A Look at Australian Finance Group Limited’s Growth Numbers

Over the last three years, Australian Finance Group Limited has shrunk its earnings per share by 2.3% per year. Its revenue is up 24% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. It’s hard to reach a conclusion about business performance right now. This may be one to watch. 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 Australian Finance Group Limited Been A Good Investment?

With a three year total loss of 12% for the shareholders, Australian Finance Group Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary…

The company’s earnings haven’t grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company’s shareholders. In the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board’s plan is in line with their expectations.

CEO compensation can have a massive impact on performance, but it’s just one element. We’ve identified 3 warning signs for Australian Finance Group that investors should be aware of in a dynamic business environment.

Switching gears from Australian Finance Group, 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.

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.

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