Swann's salary tops £1m after she delivers for WH Smith

The transformation of WH Smith's fortunes helped Kate Swann, its chief executive, to pocket a maximum bonus of £606,000 last year, taking her total salary past the £1m mark for the second year running.

Ms Swann, who was charged with reviving the ailing retailer when she joined two years ago, was paid £1.28m for the year to August, making her one of the best paid women in the FTSE 100. Her total remuneration was in line with the previous year, which was boosted by a "golden hello" after she was poached from Argos.

The recovery at Smith's has put Ms Swann in line for a potential £4m payout under a three-year management investment plan. To trigger the maximum windfall she must increase the share price to 557p by August 2007, adding £500m to the company's market capitalisation since the scheme's launch last year. Yesterday shares in Smith's closed down 5.25p at 410.5p.

Details of Ms Swann's bumper package were revealed in the company's annual report, which showed her base salary was £485,000 compared with £396,000 last year.

The report showed that Smith's paid its former finance director John Warren, who quit unexpectedly in March, £939,000. The sum included compensation for loss of office of £555,000, although the amount will fall if he finds another job before the end of his 12-month notice period.

Smith's reported a 59 per cent in full-year profits of continuing operations to £73m last year on the back of stringent cost cutting and stronger gross margins. It increased its three-year cost savings target by £18m to £48m.

David Jeary, an analyst at Credit Suisse First Boston, said: "Kate Swann has delivered what she said and arguably a bit more for year one. She has delivered a lot more than cynics thought she would before last Christmas. But unless she pulls another rabbit out of the hat she will have to get some positive like-for-like sales growth to make her year-three numbers in my view."

Smith's most recent figures showed that underlying retail sales at its core high street chain fell 2 per cent in the six weeks to 8 October, with sales at its news distribution unit down 1 per cent.

The retailer was nearly taken private by Permira last year in a bid worth 375p per share, but the private equity house got cold feet at the last minute about Smith's £200m pension deficit. Speculation about a potential bid from a US financial buyer has buoyed the shares in the past two weeks. If the retailer does get taken over, change of control clauses are worth 95 per cent of salary and benefits to each of the company's executive directors.

The group also said it is planning to double the value of shares it can award management under its long-term incentive plan. The share awards, to be made on top of any bonus, would vest in 2008, the year after the management incentive plan ends.