CHAIRMAN'S STATEMENT

RESULTS

Sales, including associates, for the six months ended 30th June 1997 were US$6,671 million, an increase of 5% over the same period in 1996.

Trading profit in the first half was US$67 million, an increase of 27% .

The net profit after taxation, minority interests and preference dividends was US$38 million, an increase of 80%, helped by lower interest costs arising from a reduction in working capital, while currency movements also enhanced profit by 5%.

Earnings per ordinary share for the half year were US¢2.17, up 76% compared with the first half of 1996. After allowing for a discontinued activity in both periods the earnings per ordinary share would have increased 87% to US¢2.52.

The Directors have declared an unchanged interim dividend of US¢1.65 per ordinary share, payable in cash with a scrip alternative at Shareholders' option.

GROUP REVIEW

In Australia, Franklins' results have begun to show the benefit of repositioning its business, with the Big Fresh and Franklins Fresh formats now well established. In June, 45% of Franklins' sales were generated from the Fresh formats. In New Zealand, Woolworths again reported increased sales and profit.

In Hong Kong, a modest growth in sales at Wellcome was achieved, but profit was flat due to higher costs associated with the current investment in systems and logistics. 7-Eleven and Oliver's produced improved results and Mannings' performance was satisfactory, but Sims Trading had a slow start to the year. Maxim's, the Group's 50%-owned restaurant associate, again performed excellently with continuing growth in sales, profit and market share in a highly competitive market.

In China, we have continued to invest in 7-Eleven, which has operations in Guangzhou and Shenzhen, and in Wellcome Gintian in Shenzhen. We also established a new supermarket joint venture in Chengdu.

In Taiwan where the performance of the Wellcome and Mannings operations remained disappointing, we are continuing our preparations to enter the hypermarket sector. In Japan, the total number of Wellsave stores is now 15, and efforts are being focused on reducing start-up losses and on refining the format and customer offer.

The Singapore businesses performed steadily, and the supermarket joint venture in Malaysia continued to increase sales. In Indonesia, we provide technical assistance to the Mitra supermarket chain, which has upgraded its store formats, and more recently to the Guardian drugstore chain. We have also established drugstore joint ventures in Malaysia and India.

Continued sluggish consumer demand in Spain resulted in soft sales in Simago, although the trading performance achieved a modest improvement.

In the United Kingdom, Kwik Save has experienced a reduction in like-for-like sales offset by an improvement in margins. The company has started to implement its three-year repositioning programme with the introduction of own label products and the launch of pilot stores in a new format, the first of which was opened in April 1997.

In order to concentrate the Group's resources on its core retailing businesses, agreement has been reached for the sale of our 49% interest in the Nestlé Dairy Farm joint venture to our partner. The disposal will produce an exceptional gain of US$24 million, which will be taken into the full year's results.

DIRECTORS

Ronald J Floto joined the Board as joint Managing Director in June. Gregory J Terry and C I Cowan retired from the Board upon leaving the Group and were replaced by James A Watkins and Norman Lyle.

OUTLOOK

"We continue to develop in Asia and to adapt our businesses to meet changing retail environments. While it will be some time before the full benefits are achieved, the outlook has improved."

SIMON KESWICK
Chairman

18th September 1997