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Notes 6-10

9. Earnings per share

Basic EPS

The calculation of basic Reported and Headline EPS is as follows:

  2007 2006 2005
Reported earnings1 (£m) 465.9 435.8 363.9
Headline earnings (£m) (note 31) 563.8 520.1 440.9
Average shares used in Basic EPS calculation (m) 1,176.9 1,201.0 1,200.1
Reported EPS 39.6p 36.3p 30.3p
Headline EPS 47.9p 43.3p 36.7p

Note

1 Reported earnings is equivalent to profit for the year attributable to equity holders of the parent.

Diluted EPS

The calculation of diluted Reported and Headline EPS is set out below:

  2007 2006 2005
Diluted Reported Earnings (£m) 466.8 436.9 363.9
Diluted Headline Earnings (£m) 564.7 521.2 440.9
Average shares used in Diluted EPS calculation (m) 1,227.1 1,242.2 1,224.8
Diluted Reported EPS 38.0p 35.2p 29.7p
Diluted Headline EPS 46.0p 42.0p 36.0p

Diluted EPS has been calculated based on the Reported and Headline Earnings amounts above. For the year ended 31 December 2007 and the year ended 31 December 2006, the $150 million Grey convertible bonds were dilutive and earnings were consequently increased by £0.9 million and £1.1 million respectively for the purpose of this calculation. For the year ended 31 December 2007 and the year ended 31 December 2006, the £450 million convertible bonds were accretive to earnings and therefore excluded from the calculation of dilutive earnings; these bonds were redeemed on their due date of 11 April 2007. In 2005, both convertibles were accretive to earnings and therefore excluded from the calculation of dilutive earnings. In addition, at 31 December 2007, options to purchase 16.4 million ordinary shares (2006: 7.6 million, 2005: 12.0 million) were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Group's shares and, therefore, their inclusion would have been accretive.

A reconciliation between the shares used in calculating Basic and Diluted EPS is as follows:

  2007
m
2006
m
2005
m
Average shares used in Basic EPS calculation 1,176.9 1,201.0 1,200.1
Dilutive share options outstanding 16.6 14.9 18.6
Other potentially issuable shares 24.7 17.4 6.1
$150 million Grey convertible bonds 8.9 8.9
Shares used in Diluted EPS calculation 1,227.1 1,242.2 1,224.8

At 31 December 2007 there were 1,191,491,263 ordinary shares in issue.