Gateway to hell and back

WHEN David Simons left a comfortable job at Storehouse 18 months ago to head the Gateway supermarket group, there were many - myself included - who saw the job as the ultimate poisoned chalice. Gateway had been the subject of an ill-fated pounds 2.2bn leveraged buy-out (LBO) by Isosceles in 1989, when Britain's financiers were infected by the craziest ideas from Wall Street.

The LBO struggled from day one, crippled by trying to meet the interest payments on those horrendous borrowings. There was under-investment in systems and logistics. Staff morale fell to rock-bottom. The shops were grotty, and not even mitigated by the prices, which were surprisingly high. The banks wrote off their loans years ago.

Simons has stopped the ship sinking any further, which is no mean feat, though the waves are still lapping uncomfortably near the gunwales. A restructuring has ring-fenced the operating company, renamed Somerfield, from the bulk of its borrowings. Results on Friday showed underlying sales grew by 13 per cent last year - better than any other supermarket group, albeit from a pitifully low base. There isnow a bit of cash in the kitty for introducing scanning and other technology that rival grocers have had for 10 years. A lot of the stores remain shabby but at least the prices look more competitive.

The task is still herculean. The aim is to build Somerfield into a business that can eventually be sold or floated for pounds 1.6bn, repaying those ring-fenced investors. If Simons and his team achieve that, they will pick up a pounds 50m bonus. They'll need a miracle to do it. But then it's an equal miracle that the company is still standing at all.