4 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

(XLS:) Earnings per share

 

Profit before tax 2012
 
£m

Tax expense 2012
 
£m

Profit after tax
2012
 
£m

Earnings per share 2012
 
p

Profit before tax
2011 Restated
£m

Tax expense 2011 Restated
£m

Profit after tax
2011 Restated
£m

Earnings per share
2011 Restated
p

Operating profit

1,087

(267)

820

14.01

1,053

(268)

785

13.47

Investment variances

(39)

39

0.01

(97)

42

(55)

(0.94)

Impact of change in UK tax rates

(7)

(7)

(0.12)

(6)

(6)

(0.11)

Earnings per share based on profit attributable to equity holders

1,048

(235)

813

13.90

956

(232)

724

12.42

(ii) Diluted earnings per share

(a) Based on operating profit after tax

(XLS:) Diluted earnings per share – based on operating profit after tax

 

Profit after tax
2012
 
£m

Number of shares1
2012
 
£m

Earnings per share
2012
 
p

Profit after tax
2011 Restated
£m

Number of shares1
2011
 
£m

Earnings per share
2011 Restated
p

1.

Weighted average number of shares.

Operating profit after tax

820

5,851

14.01

785

5,828

13.47

Net shares under options allocable for no further consideration

99

(0.23)

97

(0.22)

Diluted earnings per share

820

5,950

13.78

785

5,925

13.25

(b) Based on profit attributable to equity holders

(XLS:) Diluted earnings per share – based on profit attributable to equity holders

 

Profit after tax
2012
 
£m

Number of shares1
2012
 
£m

Earnings per share
2012
 
p

Profit after tax
2011 Restated
£m

Number of shares1
2011
 
£m

Earnings per share
2011 Restated
p

1.

Weighted average number of shares.

Profit attributable to equity holders of the Company

813

5,851

13.90

724

5,828

12.42

Net shares under options allocable for no further consideration

99

(0.24)

97

(0.20)

Diluted earnings per share

813

5,950

13.66

724

5,925

12.22

The number of shares in issue at 31 December 2012 was 5,912,782,826 (31 December 2011: 5,872,166,893).