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Notes to the financial statements

8 Earnings per share

The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year.

The adjusted earnings per share figures have also been calculated based on earnings excluding the effect of property disposals and exceptional items. These have been calculated to allow the shareholders to gain an understanding of the underlying trading performance of the Group.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has only one class of dilutive potential ordinary shares being 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 year.

Details of the adjusted earnings per share are set out below:

2009
£m
2008
£m
Earnings after tax 508.0 821.7
Property disposals (net of tax) (6.4) (27.0)
Exceptional costs (net of tax) 105.7
Exceptional pension credit (net of tax) (166.6) (66.5)
Adjusted earnings after tax 440.7 728.2
million million
Weighted average number of ordinary shares in issue 1,573.2 1,671.3
Potentially dilutive share options under Group’s share option schemes 0.8 16.0
Weighted average number of diluted ordinary shares 1,574.0 1,687.3

A. Basic earnings per share

pence pence
Basic earnings per share 32.3 49.2
Property disposals per share (0.4) (1.6)
Exceptional costs per share 6.7
Exceptional pension credit per share (10.6) (4.0)
Adjusted basic earnings per share 28.0 43.6

B. Diluted earnings per share

pence pence
Diluted earnings per share 32.3 48.7
Property disposals per share (0.4) (1.6)
Exceptional costs per share 6.7
Exceptional pension credit per share (10.6) (3.9)
Adjusted diluted earnings per share 28.0 43.2