We Think The Compensation For Severfield plc's (LON:SFR) CEO Looks About Right

Key Insights

• Severfield's Annual General Meeting to take place on 30th of July
• CEO Alan Dunsmore's total compensation includes salary of UK£399.0k
• The total compensation is similar to the average for the industry
• Severfield's total shareholder return over the past three years was 21% while its EPS was down 2.7% over the past three years

Despite positive share price growth of 21% for Severfield plc (LON:SFR) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 30th of July. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Severfield

Comparing Severfield plc's CEO Compensation With The Industry

According to our data, Severfield plc has a market capitalization of UK£250m, and paid its CEO total annual compensation worth UK£933k over the year to March 2024. That's a notable decrease of 17% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£399k.

On comparing similar companies from the British Construction industry with market caps ranging from UK£155m to UK£620m, we found that the median CEO total compensation was UK£935k. From this we gather that Alan Dunsmore is paid around the median for CEOs in the industry. Furthermore, Alan Dunsmore directly owns UK£1.5m worth of shares in the company.

Component	2024	2023	Proportion (2024)
Salary	UK£399k	UK£381k	43%
Other	UK£534k	UK£742k	57%
Total Compensation	UK£933k	UK£1.1m	100%

On an industry level, roughly 39% of total compensation represents salary and 61% is other remuneration. Severfield pays out 43% of remuneration in the form of a salary, significantly higher than the industry average. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Severfield plc's Growth

Severfield plc has reduced its earnings per share by 2.7% a year over the last three years. In the last year, its revenue is down 5.6%.

A lack of EPS improvement is not good to see. And the impression is worse when you consider revenue is down year-on-year. 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 Severfield plc Been A Good Investment?

Severfield plc has served shareholders reasonably well, with a total return of 21% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

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 Severfield that you should be aware of before investing.

Switching gears from Severfield, 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. 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.

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