Unilever 2004 Annual Report Download - page 115

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Notes to the consolidated accounts
Unilever Group
112 Unilever Annual Report and Accounts 2004
7 Combined earnings per share
Per €0.51 share of NV ordinary capital Per 1.4p share of PLC ordinary capital
€€€€ cents € cents € cents
2004 2003 2002 2004 2003 2002
Basic earnings per share 1.92 2.82 2.14 28.78 42.33 32.16
Diluted earnings per share 1.85 2.74 2.08 27.69 41.09 31.20
Basic earnings per share before exceptional items and
amortisation of goodwill and intangible assets 4.09 4.02 3.95 61.37 60.31 59.27
Basis of calculation
The calculations of combined earnings per share are based on the net profit attributable to ordinary capital divided by the average number
of share units representing the combined ordinary capital of NV and PLC in issue during the year, after deducting shares held to meet
Unilever employee share options which are not yet exercised. For the calculation of combined ordinary capital, the exchange rate of
£1 = Fl.12 = €5.445 has been used, in accordance with the Equalisation Agreement.
Earnings per share before exceptional items and amortisation of goodwill and intangible assets is provided in this Annual Report and Accounts
because the Directors believe it better explains the ongoing trends in the Group’s performance during the duration of the Path to Growth
programme. This measure is an important component of the targets on which Directors’ annual performance bonuses are based. United
Kingdom Financial Reporting Standard 14 requires the company to provide a reconciliation of earnings in the notes to the accounts in these
circumstances. This is set out below.
The calculations of diluted earnings per share are based on (i) conversion into PLC ordinary shares of the shares in a group company which are
convertible in the year 2038 as described in Corporate governance on page 66, (ii) conversion of the €0.05 NV preference shares, details of
which are set out in note 22 on page 132 and (iii) the exercise of share options, details of which are set out in note 30 on pages 138 to 147.
On 15 February 2005 we converted the €0.05 NV preference shares into ordinary €0.51 NV shares. The conversion was made using shares
already held by the company for the purposes of hedging the Group’s employee share option plans. NV will buy further ordinary shares in the
market during 2005 to the extent required to restore the hedging position. In 2004, the €0.05 preference shares were potentially dilutive for
the purposes of the calculation of fully diluted earnings per share, as shown below.
Calculation of average number of share units
Millions of €0.51 share units Millions of 1.4p share units
2004 2003 2002 2004 2003 2002
Average ordinary capital: NV 571.6 571.6 571.6 3 810.5 3 810.5 3 810.5
PLC 436.7 436.7 436.7 2 911.5 2 911.5 2 911.5
less: shares held by employee
share trusts and companies (44.9) (39.4) (31.6) (299.3) (262.6) (210.4)
Combined average number of share units for
all bases except diluted earnings per share 963.4 968.9 976.7 6 422.7 6 459.4 6 511.6
add: shares issuable in 2038 23.6 23.6 23.6 157.5 157.5 157.5
add: shares for conversion 18.9 ––125.9 ––
add: shares under option 46.5 42.2 35.3 309.8 281.4 235.3
less: shares issuable at fair value (39.9) (36.6) (29.0) (265.6) (244.0) (193.6)
Adjusted combined average number of share units for
diluted earnings per share basis 1 012.5 998.1 1 006.6 6 750.3 6 654.3 6 710.8
Calculation of earnings
€ million € million € million
2004 2003 2002
Net profit 1 876 2 762 2 136
less: preference dividends (28) (27) (42)
Net profit attributed to ordinary capital for basic earnings per share calculations 1 848 2 735 2 094
add: exceptional items net of tax 1 057 67 550
add: amortisation of goodwill and intangible assets net of tax 1 036 1 094 1 216
Net profit attributed to ordinary capital before exceptional items and amortisation 3 941 3 896 3 860
Adjusted net profit attributed to ordinary capital for the diluted earnings per share calculation(a) 1 869 2 735 2 094
(a) In accordance with FRS 14, in 2004 the net profit for diluted earnings per share has been adjusted for the preference dividend on shares for
conversion, which in 2004 amounted to €21 million.