14 EARNINGS PER SHARE.


[Earnings per share] is a measure of the portion of the Group’s profit allocated to each outstanding share. It is calculated by dividing net income attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares. For this purpose, net income is defined as the profit after tax derived from continuing operations.

For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all dilutive potential ordinary shares, such as share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share.

A reconciliation of the earnings and weighted average number of shares used in the calculations is provided below:

(i) Earnings per share

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Profit
before tax
2011
£m

Tax
expense
2011
£m

Profit
after tax
2011
£m

Earnings
per share
2011
p

Profit
before tax
2010
£m

Tax
expense
2010
£m

Profit
after tax
2010
£m

Earnings
per share
2010
p

Operating profit

1,056

(269)

787

13.50

1,002

(251)

751

12.89

Variation from longer term investment return

(97)

42

(55)

(0.94)

90

(16)

74

1.27

Impact of change in UK tax rates

(6)

(6)

(0.10)

(5)

(5)

(0.09)

Earnings per share based on profit attributable to equity holders

959

(233)

726

12.46

1,092

(272)

820

14.07

(ii) Diluted earnings per share

(a) Based on operating profit after tax

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Profit
after tax
2011
£m

Number
of shares1
2011
m

Earnings
per share
2011
p

Profit
after tax
2010
£m

Number
of shares1
2010
m

Earnings
per share
2010
p

Operating profit after tax

787

5,828

13.50

751

5,827

12.89

Net shares under options allocable for no further consideration

97

(0.22)

79

(0.17)

Diluted earnings per share

787

5,925

13.28

751

5,906

12.72

(b) Based on profit attributable to equity holders

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Profit
after tax
2011
£m

Number
of shares1
2011
m

Earnings
per share
2011
p

Profit
after tax
2010
£m

Number
of shares1
2010
m

Earnings
per share
2010
p

1.

Weighted average number of shares.

Profit attributable to equity holders of the Company

726

5,828

12.46

820

5,827

14.07

Net shares under options allocable for no further consideration

97

(0.21)

79

(0.19)

Diluted earnings per share

726

5,925

12.25

820

5,906

13.88

The number of shares in issue at 31 December 2011 was 5,872,166,893 (31 December 2010: 5,866,669,323).

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