Stock Analysis

We Take A Look At Whether Heriot REIT Limited's (JSE:HET) CEO May Be Underpaid

Published
JSE:HET

Key Insights

  • Heriot REIT's Annual General Meeting to take place on 5th of December
  • Salary of R4.34m is part of CEO Richard Herring's total remuneration
  • Total compensation is 41% below industry average
  • Over the past one year, Heriot REIT's FFO grew by 13% and over the past three years, the total shareholder return was 79%

Shareholders will be pleased by the impressive results for Heriot REIT Limited (JSE:HET) recently and CEO Richard Herring has played a key role. This would be kept in mind at the upcoming AGM on 5th of December which will be a chance for them to hear the board review the financial results, discuss future company strategy and vote on resolutions such as executive remuneration and other matters. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

Check out our latest analysis for Heriot REIT

How Does Total Compensation For Richard Herring Compare With Other Companies In The Industry?

Our data indicates that Heriot REIT Limited has a market capitalization of R5.1b, and total annual CEO compensation was reported as R5.3m for the year to June 2024. That's a fairly small increase of 3.2% over the previous year. We note that the salary portion, which stands at R4.34m constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the South African REITs industry with market capitalizations between R1.8b and R7.3b, we discovered that the median CEO total compensation of that group was R9.1m. Accordingly, Heriot REIT pays its CEO under the industry median. Moreover, Richard Herring also holds R227m worth of Heriot REIT stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20242023Proportion (2024)
Salary R4.3m R4.3m 81%
Other R1.0m R900k 19%
Total CompensationR5.3m R5.2m100%

Speaking on an industry level, nearly 36% of total compensation represents salary, while the remainder of 64% is other remuneration. Heriot REIT is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

JSE:HET CEO Compensation November 29th 2024

A Look at Heriot REIT Limited's Growth Numbers

Over the past one year, Heriot REIT Limited has seen its funds from operations (FFO) grow by 13% . It achieved revenue growth of 121% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Heriot REIT Limited Been A Good Investment?

We think that the total shareholder return of 79%, over three years, would leave most Heriot REIT 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...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for Heriot REIT you should be aware of, and 1 of them is a bit concerning.

Important note: Heriot REIT 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.

Valuation is complex, but we're here to simplify it.

Discover if Heriot REIT might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.