Notes to the Group financial statements

7 Earnings per share

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has two (2008: two) classes of financial instruments that are potentially dilutive: those share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the period and contingently issuable shares under the Group’s long term incentive plan.

a) Basic and diluted earnings per share (unadjusted)

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

  2009   2008
Earnings
£m		 Weighted average number of shares
millions		 EPS
pence		 Earnings
£m		 Weighted average number of shares
millions		 EPS
pence
Unadjusted EPS              
Basic EPS              
Earnings attributable to ordinary shareholders 460 2,644.9 17.39   554 2,664.3 20.79
Effect of dilutive instruments              
Share options and LTIPs – 36.5 (0.23)   – 15.7 (0.12)
Diluted EPS 460 2,681.4 17.16   554 2,680.0 20.67

b) Underlying earnings per share

Given below is the reconciliation of the earnings used in the calculations of underlying earnings per share:

  2009   2008
Earnings
£m		 Weighted average number of shares
millions		 EPS
pence		 Earnings
£m		 Weighted average number of shares
millions		 EPS
pence
Underlying EPS              
Basic EPS              
Earnings attributable to ordinary shareholders 460 2,644.9 17.39   554 2,664.3 20.79
Adjustments to determine underlying profit (see note 1) (19) – (0.72)   (171) – (6.41)
  441 2,644.9 16.67   3831 2,664.3 14.38
Effect of dilutive instruments              
Share options and LTIPs – 36.5 (0.22)   – 15.7 (0.09)
Diluted EPS 441 2,681.4 16.45   383 2,680.0 14.29
  1. The calculation of underlying earnings per share in 2008 included a normalised tax charge, see note 1.

c) Adjusted earnings per share

The following earnings per share calculations are for the purposes of the LTIP performance conditions:

  2009   2008
Earnings
£m		 Weighted average number of shares
millions		 EPS
pence		 Earnings
£m		 Weighted average number of shares
millions		 EPS
pence
Adjusted EPS              
Basic EPS              
Earnings attributable to ordinary shareholders 460 2,644.9 17.39   554 2,664.3 20.79
Profits arising on property transactions2 (1) – (0.04)   (29) – (1.09)
  459 2,644.9 17.35   525 2,664.3 19.70
  1. Profits arising on property transactions as shown in the income statement after adjusting for tax relief.

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