Annual report and accounts 2008

Notes contentsNotes to consolidated financial statements

8. Earnings per share

Basic
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the company and held as treasury shares.

Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to take account of all dilutive potential ordinary shares and adjusting the profit attributable, if applicable, to account for any tax consequences that might arise from conversion of those shares.

All figures in £ millions	Notes	2008	2007
Profit for the year from continuing operations		413	337
Minority interest		(31)	(26)
Earnings from continuing operations		382	311
Loss for the year from discontinued operations	3	(90)	(27)
Earnings		292	284
Weighted average number of shares (millions)		797.0	796.8
Effect of dilutive share options (millions)		0.5	1.3
Weighted average number of shares (millions) for diluted earnings		797.5	798.1
Earnings per share from continuing and discontinued operations
Basic		36.6p	35.6p
Diluted		36.6p	35.6p
Earnings per share from continuing operations
Basic		47.9p	39.0p
Diluted		47.9p	39.0p
Earnings per share from discontinued operations
Basic		(11.3p)	(3.4p)

Adjusted

In order to show results from operating activities on a consistent basis, an adjusted earnings per share is presented. The company’s definition of adjusted earnings per share may not be comparable to other similarly titled measures reported by other companies.

The following items are excluded in the calculation of adjusted earnings:

Other net gains and losses represent profits and losses on the sale of subsidiaries, joint ventures, associates and other financial assets that are included within continuing or discontinued operations but which distort the performance of the Group.

Amortisation of acquired intangibles is the amortisation of intangible assets acquired through business combinations. The amortisation charge is not considered to be fully reflective of the underlying performance of the Group.

Other net finance income/costs are foreign exchange and other gains and losses that represent short-term fluctuations in market value and foreign exchange movements on transactions and balances that are no longer in a hedge relationship. These gains and losses are subject to significant volatility and may not be realised in due course as it is normally the intention to hold these instruments to maturity. Other net finance costs of Group companies are included in finance costs or finance income as appropriate. Other net finance costs of joint ventures and associates are included within the share of results of joint ventures and associates within operating profit.

Tax on the above items is excluded from adjusted earnings. The Group also adds the benefit of tax amortisation of goodwill and intangibles as this benefit more accurately aligns the adjusted tax charge with the expected medium-term rate of cash tax payments.

Minority interest for the above items is excluded from adjusted earnings.

The following tables reconcile statutory earnings to adjusted earnings.

All figures in £ millions							2008
	Statutory income statement	Re-analyse discontinued operations	Other net gains and losses	Amortisation of acquired intangibles	Other net finance income/costs	Tax amortisation benefit	Adjusted income statement
Operating profit	676	—	—	86	—	—	762
Net finance costs	(91)	—	—	—	3	—	(88)
Profit before tax	585	—	—	86	3	—	674
Income tax	(172)	—	(7)	(31)	(1)	33	(178)
Profit for the year from continuing operations	413	—	(7)	55	2	33	496
Profit for the year from discontinued operations	(90)	—	90	—	—	—	—
Profit for the year	323	—	83	55	2	33	496
Minority interest	(31)	—	—	(3)	—	(2)	(36)
Earnings	292	—	83	52	2	31	460
Weighted average number of shares (millions)							797.0
Adjusted earnings per share							57.7p

All figures in £ millions							2007
	Statutory income statement	Re-analyse discontinued operations	Other net gains and losses	Amortisation of acquired intangibles	Other net finance income/ costs	Tax amortisation benefit	Adjusted income statement
Operating profit	574	15	—	45	—	—	634
Net finance costs	(106)	—	—	—	21	—	(85)
Profit before tax	468	15	—	45	21	—	549
Income tax	(131)	(5)	(9)	(19)	(6)	25	(145)
Profit for the year from continuing operations	337	10	(9)	26	15	25	404
Profit for the year from discontinued operations	(27)	(10)	37	—	—	—	—
Profit for the year	310	—	28	26	15	25	404
Minority interest	(26)	—	—	(4)	—	(2)	(32)
Earnings	284	—	28	22	15	23	372
Weighted average number of shares (millions)							796.8
Adjusted earnings per share							46.7p