Preliminary results - 12 months ended 31 December 2006 01 March 2007
14. Earnings per share
(a) Basic earnings per share
(i) The profit attributable to ordinary shareholders is:
| 2006 £m | 2005 £m | |
|---|---|---|
| Profit for the year | 2,389 | 1,898 |
| Amount attributable to minority interests | (174) | (131) |
| Cumulative preference dividends for the year | (17) | (17) |
| Coupon payments on direct capital instrument net of tax | (37) | (29) |
| Profit attributable to ordinary shareholders | 2,161 | 1,721 |
(ii) Basic earnings per share is calculated as follows:
| 2006 | 2005 | |||||
|---|---|---|---|---|---|---|
| Before tax £m | Net of tax, minorities and preference dividends and DCI appropriation £m | Per share p | Before tax £m | Net of tax, minorities and preference dividends and DCI appropriation £m | Per share p | |
| Operating profit attributable to ordinary shareholders | 3,110 | 2,146 | 86.9 | 2,128 | 1,415 | 60.5 |
| Adjusted for the following: | ||||||
| Impairment of goodwill | (94) | (94) | (3.8) | (43) | (43) | (1.8) |
| Amortisation and net impairment of acquired value of in-force business | (100) | (83) | (3.4) | (73) | (73 | (3.1) |
| Amortisation and net impairment of intangibles | (70) | (48) | (1.9) | (45) | (42) | (1.8) |
| Financial Services Compensation Scheme and other levies | 6 | 4 | 0.2 | - | - | - |
| Short-term fluctuation on return on investments backing general insurance and health business | 149 | 189 | 7.7 | 517 | 430 | 18.2 |
| Profit on the disposal of subsidiaries and associates | 222 | 235 | 9.5 | 153 | 110 | 4.7 |
| Integration and restructuring costs | (246) | (188) | (7.7) | (109) | (76) | (3.2) |
| Profit attributable to ordinary shareholders | 2,977 | 2,161 | 87.5 | 2,528 | 1,721 | 73.5 |
Earnings per share has been calculated based on the operating profit before impairment of goodwill and other non-operating items, after tax, attributable to ordinary shareholders, as well as on the profit attributable to ordinary shareholders. The directors believe the former earnings per share figures provide a better indication of operating performance.
The calculation of basic earnings per share uses a weighted average of 2,469 million (2005: 2,340 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 31 December 2006 was 2,566 million (2005: 2,396 million).
(b) Diluted earnings per share:
Diluted earnings per share is calculated as follows:
| 2006 | 2005 | |||||
|---|---|---|---|---|---|---|
| Total £m | Weighted average number of shares m | Per share p | Total £m | Weighted average number of shares m | Per share p | |
| Profit attributable to equity shareholders | 2,161 | 2,469 | 87.5 | 1,721 | 2,340 | 73.5 |
| Dilutive effect of share awards and options | - | 27 | (0.9) | - | 20 | (0.6) |
| Diluted earnings per share | 2,161 | 2,496 | 86.6 | 1,721 | 2,360 | 72.9 |
