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How Does Arafura Resources' (ASX:ARU) CEO Pay Compare With Company Performance?

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·3-min read
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This article will reflect on the compensation paid to Gavin Lockyer who has served as CEO of Arafura Resources Limited (ASX:ARU) since 2013. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Arafura Resources.

Check out our latest analysis for Arafura Resources

How Does Total Compensation For Gavin Lockyer Compare With Other Companies In The Industry?

According to our data, Arafura Resources Limited has a market capitalization of AU$123m, and paid its CEO total annual compensation worth AU$508k over the year to June 2020. We note that's a small decrease of 4.7% on last year. Notably, the salary which is AU$401.1k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below AU$271m, we found that the median total CEO compensation was AU$312k. Accordingly, our analysis reveals that Arafura Resources Limited pays Gavin Lockyer north of the industry median. What's more, Gavin Lockyer holds AU$172k worth of shares in the company in their own name.

Component

2020

2019

Proportion (2020)

Salary

AU$401k

AU$401k

79%

Other

AU$107k

AU$132k

21%

Total Compensation

AU$508k

AU$533k

100%

Speaking on an industry level, nearly 70% of total compensation represents salary, while the remainder of 30% is other remuneration. It's interesting to note that Arafura Resources pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

Arafura Resources Limited's Growth

Arafura Resources Limited has seen its earnings per share (EPS) increase by 9.8% a year over the past three years. Its revenue is down 37% over the previous year.

We generally like to see a little revenue growth, but the modest EPSgrowth gives us some relief. 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 Arafura Resources Limited Been A Good Investment?

Arafura Resources Limited has generated a total shareholder return of 1.0% over three years, so most shareholders wouldn't be too disappointed. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

As we touched on above, Arafura Resources Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But the business isn't growing EPS, and the returns to shareholders haven't been wonderful. So while shareholders might not be overly concerned about CEO compensation, we suspect most would prefer to see improved performance, before thinking a bump in pay is in order.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 5 warning signs for Arafura Resources (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Arafura Resources, 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.

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.

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

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