Notes to the accounts

9 Earnings per share

Basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders of the Parent Company by the average number of ordinary shares in issue during the year.

	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
Profit attributable to equity shareholders for the year
– continuing	244.0	202.9
– total	268.5	1,728.1
Average number of shares in issue during the year	387,446,186	549,153,733

Diluted earnings per share are calculated by dividing the profit attributable to ordinary shareholders by 391,851,712 (2007: 556,934,401) ordinary shares, being the average number of ordinary shares in issue during the period adjusted by the dilutive effect of employee share schemes. For the year ended 31 July 2008 options over 1,376,331 (2007: 847,762) shares were excluded from this calculation because their effect was anti-dilutive for continuing operations.

The average number of shares in issue has reduced as a result of the share consolidation in June 2007 following the disposal of the Aerospace business. The average number of shares in issue during the period ended 31 July 2007 was a reflection of the capital structure appropriate to both the continuing and the discontinued business.

A reconciliation of basic and headline earnings per share – continuing is as follows:

	Year ended 31 July 2008		Period ended 31 July 2007
	£m	EPS (p)	£m	EPS (p)
Profit attributable to equity shareholders of the Parent Company	244.0	63.0	202.9	36.9
Exclude
– exceptional operating items (note 4)	35.4		98.2
– (profit on sale)/impairment of financial asset			(24.0)
– amortisation of acquired intangible assets	19.2		14.8
– financing gains – charged to administrative expenses	0.3		1.5
– exceptional finance cost – adjustment to discounted provision (note 4)	4.7
– charged to financing	1.4		(2.1)
	61.0		88.4
– less tax	(16.3)		(33.3)
	44.7	11.5	55.1	10.1
Headline	288.7	74.5	258.0	47.0
Headline EPS – diluted (p)		73.7		46.3

Smiths Group divisions:
Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect, Flex-Tek