What Does Serco Group's (LON:SRP) CEO Pay Reveal?

Rupert Soames became the CEO of Serco Group plc (LON:SRP) in 2014, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Serco Group.

See our latest analysis for Serco Group

Comparing Serco Group plc's CEO Compensation With the industry

At the time of writing, our data shows that Serco Group plc has a market capitalization of UK£2.0b, and reported total annual CEO compensation of UK£5.7m for the year to December 2019. That's a notable increase of 10% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£850k.

On examining similar-sized companies in the industry with market capitalizations between UK£1.5b and UK£4.9b, we discovered that the median CEO total compensation of that group was UK£1.7m. Hence, we can conclude that Rupert Soames is remunerated higher than the industry median. Moreover, Rupert Soames also holds UK£9.0m worth of Serco Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 55% of total compensation represents salary and 45% is other remuneration. Serco Group pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Serco Group plc's Growth Numbers

Over the past three years, Serco Group plc has seen its earnings per share (EPS) grow by 41% per year. Its revenue is up 15% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. 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 Serco Group plc Been A Good Investment?

Most shareholders would probably be pleased with Serco Group plc for providing a total return of 52% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As we noted earlier, Serco Group pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Importantly though, earnings per share growth and shareholder returns are very impressive over the last three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. And given most shareholders are probably very happy with recent returns, they might even think that Rupert deserves a raise!

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 4 warning signs for Serco Group 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.

This article by Simply Wall St is general in nature. 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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