11. Earnings per share

a) Earnings per share – basic	Year ended 31 December 2003 pence	Year ended 31 December 2002 pence
Before exceptional items	10.2	15.5
Exceptional items	(29.9)	(5.4)

After exceptional items	(19.7)	10.1


b) Earnings per share – diluted
Before exceptional items	10.1	15.5
Exceptional items	(29.9)	(5.4)

After exceptional items	(19.7)	10.1


c) Basis of calculation – earnings	£m	£m
Profit attributable to shareholders before exceptional items	113	173
Exceptional items	(332)	(60)

Loss/profit attributable to shareholders after exceptional items	(219)	113


d) Basis of calculation – number of Ordinary Shares	Million	Million
Weighted average number of issued Ordinary Shares	1,114.1	1,117.6
Weighted average number of shares held by
Employee Share Ownership Plans (ESOPs)	(3.2)	(2.2)

	1,110.9	1,115.4
Dilutive potential Ordinary Shares:
Employee share schemes	9.2	2.6

Weighted average number of Ordinary Shares taking account of applicable dilutive instruments	1,120.1	1,118.0

FRS 14 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. A net loss per share would only be increased by the exercise of out-of-the money share options. Since it seems inappropriate to assume that option holders would act irrationally, no adjustment has been made for out-of-the-money options and hence diluted EPS (after exceptional items) equals basic EPS (after exceptional items).