14. Earnings per share
(a) Basic earnings per share
(i) The profit attributable to ordinary shareholders is:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Profit for the year | 1,505 | 2,389 |
| Amount attributable to minority interests | (178) | (174) |
| Cumulative preference dividends for the year | (17) | (17) |
| Coupon payments in respect of direct capital instruments (net of tax) | (37) | (37) |
| Profit attributable to ordinary shareholders | 1,273 | 2,161 |
(ii) Basic earnings per share is calculated as follows:
| 2007 | 2006 | ||||||
|---|---|---|---|---|---|---|---|
| Before tax £m |
Net of tax, minorities, preference dividends and DCI £m |
Per share p |
Before tax £m |
Net of tax, minorities, preference dividends and DCI £m |
Per share p |
||
| Operating profit attributable to ordinary shareholders | 2,228 | 1,376 | 53.2 | 2,609 | 1,731 | 70.1 | |
| Adjusted for the following: | |||||||
| - Investment return variances and economic assumption changes on long-term business | 15 | 79 | 3.1 | 401 | 336 | 13.6 | |
| - Impairment of goodwill | (10) | (10) | (0.4) | (94) | (94) | (3.8) | |
| - Amortisation and net impairment of intangibles | (103) | (72) | (2.8) | (64) | (48) | (1.9) | |
| - Short-term fluctuation in return on investments backing general insurance and health business | (184) | (38) | (1.5) | 149 | 189 | 7.7 | |
| - Profit on the disposal of subsidiaries and associates | 49 | 52 | 2.0 | 222 | 235 | 9.5 | |
| - Integration and restructuring costs | (153) | (114) | (4.4) | (246) | (188) | (7.7) | |
| Profit attributable to ordinary shareholders | 1,842 | 1,273 | 49.2 | 2,977 | 2,161 | 87.5 | |
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 2,588 million (2006: 2,469 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 31 December 2007 was 2,622 million (31 December 2006: 2,566 million).
(b) Diluted earnings per share:
(i) Diluted earnings per share is calculated as follows:
| 2007 | 2006 | ||||||
|---|---|---|---|---|---|---|---|
| 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 ordinary shareholders | 1,273 | 2,588 | 49.2 | 2,161 | 2,469 | 87.5 | |
| Dilutive effect of share awards and options | - | 24 | (0.5) | - | 27 | (0.9) | |
| Diluted earnings per share | 1,273 | 2,612 | 48.7 | 2,161 | 2,496 | 86.6 | |
(ii) Diluted earnings per share on operating profit attributable to ordinary shareholders is calculated as follows:
| 2007 | 2006 | ||||||
|---|---|---|---|---|---|---|---|
| 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 ordinary shareholders | 1,376 | 2,588 | 53.2 | 1,731 | 2,469 | 70.1 | |
| Dilutive effect of share awards and options | - | 24 | (0.5) | - | 27 | (0.7) | |
| Diluted earnings per share | 1,376 | 2,612 | 52.7 | 1,731 | 2,496 | 69.4 | |
