Notes 6-10

9. Earnings per share

Basic EPS

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

  2008 2007 2006
Reported earnings1 (£m) 439.1 465.9 435.8
Headline earnings (£m) (note 31) 648.3 561.0 511.0
Average shares used in Basic EPS calculation (m) 1,143.4 1,176.9 1,201.0
Reported EPS 38.4p 39.6p 36.3p
Headline EPS 56.7p 47.7p 42.5p

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:

  2008 2007 2006
Diluted reported earnings (£m) 439.9 466.8 436.9
Diluted headline earnings (£m) 649.1 561.9 512.1
Average shares used in diluted EPS calculation (m) 1,169.6 1,227.1 1,242.2
Diluted reported EPS 37.6p 38.0p 35.2p
Diluted headline EPS 55.5p 45.8p 41.2p

Diluted EPS has been calculated based on the diluted reported and diluted headline earnings amounts above. For the years ended 31 December 2008, 31 December 2007 and 31 December 2006, the $150 million Grey convertible bonds were dilutive and earnings were consequently increased by £0.8 million, £0.9 million and £1.1 million respectively for the purpose of this calculation. These bonds were redeemed on 28 October 2008. 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 addition, at 31 December 2008, options to purchase 28.0 million ordinary shares (2007: 16.4 million, 2006: 7.6 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:


 
2008
m
2007
m
2006
m
Average shares used in basic EPS calculation 1,143.4 1,176.9 1,201.0
Dilutive share options outstanding 2.9 16.6 14.9
Other potentially issuable shares 16.0 24.7 17.4
$150 million Grey convertible bonds 7.3 8.9 8.9
Shares used in diluted EPS calculation 1,169.6 1,227.1 1,242.2

At 31 December 2008 there were 1,255,343,263 ordinary shares in issue.

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