Steve Back: the fruits of his labour

There’s money to be made in fruit and veg and Steve Back, former finance
director and currently chief executive of Somerfield, is about to prove it.

Back was made chief executive this time last year after two years as finance
director. And two years on from becoming CEO, he is about to cash in big time on
the sale of the supermarket chain to private equity investors.

If Apax Partners manages to pull off their £1.1bn bid for Somerfield, Back
stands to walk away with £1.3m because he’ll be able to exercise his holding of
900,000 share options. That comes on top of the £600,000 salary he received for
the past year and places Back well and truly in the big league when it comes to
executive pay.

Some will argue he has earned it and last month’s 2004/05 annual report
illustrated why Somerfield has become such an attractive buy. Profit before
exceptional items was up from £40.7m to £66.4m. That’s a 63% increase – a
startling performance in any company’s books.

Gearing at the end of the year stands at a healthy 15.8% and shareholder
funds top £760m. And all of this off the back of a year-on-year increase in
sales of £161m to £5.2bn. Somerfield may be the cheap supermarket option, but
Back has helped make it an option for a lot of people who are willing to part
with billions.

Despite warnings that sales might fall on the back of a falling consumer
spending and increased competition, Somerfield is on the up and others recognise
the value created by Back.

Back’s job is not over though. He still has to pull off the sale and in doing
so he enters unchartered territory. During his time at Budgens he was FD and
director of distribution and IT. He also managed logistics. He has held other
finance roles at Laura Ashley and Chef & Brewer, but Somerfield brings him
into the realm of a big sell-off where the stakes will be much higher.

Apax are certainly demonstrating a great deal of confidence in Back, who has
clearly fought to make this deal work even though one of the main players,
Icelandic investors Baugur, pulled out after its chairman, Jon Asgeir
Johannesson, was charged with fraud and embezzlement.

It takes a lot of nerve to hold together a deal after a blow like that and
Back has been, according to reports, instrumental in keeping things on track.
That said, there is another deal on the table that Back will have to deal with:
the London Regional/ Nomura bid.

Takeover offers absorb vast amounts of directors’ time, making it very
difficult for executives to continue running the business as well.

Back will be torn between dealing with those falling sales and making sure
the takeover is dealt with in the most appropriate way. It’s a tough job, and
all the indications thus far are that Back is more than happy with the
challenge.