?100,000 merger bonus for chief executive

Sir Graham Melmoth, chief executive of the Co-op group, has been handed a £100,000 thank you payment for merging the Co-operative Wholesale Society with the Co-operative Retail Society.

The performance bonus pushed Sir Graham's 2001 salary to more than £562,000, compared with £431,000 a year earlier. He received a 6% increase in his basic salary, taking it from £423,000 to £449,000.

A Co-op spokesman said the bonus "reflects the sterling work he did bringing together the CRS and CWS". The payment was approved by the entire board "which does not have a single executive on it".

He added: "The Co-op board doesn't recognise it as being excessive given the size of the business. The Co-op now has assets of £32bn."

Details of Sir Graham's pay are revealed in the Co-op group annual report and accounts, published today, which also show a 48% increase in operating profits. In the first full year after the merger, which was sealed in January 2001, group sales were up 4% to £5.4bn. Profits from trading and banking were ahead 48% to £164.2m.

Some £2.4bn of sales were from grocery outlets, a 6.3% increase which generated a 76% increase in operating profits to £45.6m. The Co-op bank had a record year, with pretax profits up 12% to £107.5m. This excludes CIS insurance, which has recently been absorbed, along with the bank, into a new financial services arm.

Profits from the specialist retailing division fell by 29% to £17.3m. The division is dominated by the funeral service and the Travelcare travel agency. The downturn in the travel trade post-September 11 was blamed for the profits reversal.

Sir Graham said the merger was proving successful and the group's new focus on commercialism with "a clear sense of co-operative purpose" was paying off.

The group is working on plans to restore "divi" some 25 years after it was scrapped. Customers should qualify for a twice-yearly payout from 2004.