Stock Analysis

Increases to CEO Compensation Might Be Put On Hold For Now at Savills plc (LON:SVS)

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Key Insights

  • Savills' Annual General Meeting to take place on 15th of May
  • CEO J. J. Ridley's total compensation includes salary of UK£311.0k
  • The overall pay is 83% above the industry average
  • Over the past three years, Savills' EPS fell by 15% and over the past three years, the total shareholder return was 13%

The share price of Savills plc (LON:SVS) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. The upcoming AGM on 15th of May may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Savills

How Does Total Compensation For J. J. Ridley Compare With Other Companies In The Industry?

At the time of writing, our data shows that Savills plc has a market capitalization of UK£1.6b, and reported total annual CEO compensation of UK£1.9m for the year to December 2023. We note that's a decrease of 32% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£311k.

On comparing similar companies from the British Real Estate industry with market caps ranging from UK£800m to UK£2.6b, we found that the median CEO total compensation was UK£1.1m. This suggests that J. J. Ridley is paid more than the median for the industry. Moreover, J. J. Ridley also holds UK£2.7m worth of Savills stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20232022Proportion (2023)
Salary UK£311k UK£308k 16%
Other UK£1.6m UK£2.5m 84%
Total CompensationUK£1.9m UK£2.8m100%

On an industry level, around 68% of total compensation represents salary and 32% is other remuneration. Savills pays a modest slice of remuneration through salary, as compared 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.

LSE:SVS CEO Compensation May 9th 2024

A Look at Savills plc's Growth Numbers

Savills plc has reduced its earnings per share by 15% a year over the last three years. It saw its revenue drop 2.6% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Savills plc Been A Good Investment?

With a total shareholder return of 13% over three years, Savills plc shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 2 warning signs for Savills that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

Valuation is complex, but we're helping make it simple.

Find out whether Savills is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.