Example 3: Consolidation of shares

Earnings per share calculation 2015 2014

£ £ Preference share dividend in accounts 100,000
Group profits for the year 2,534,000 2,897,000 Deducting tax effect where rate is 30% 30,000
LESS: After-tax dividend on preference shares -70,000 -70,000 After tax preference share dividend 70,000
Profits attributable to ordinary shareholders 2,464,000 2,827,000

Number of shares at beginning of period 2,000,000 2,000,000

Adjustment for consolidation of shares (as if start of 2004) -1,000,000 -1,000,000
Adjusted number of shares at beginning of period 1,000,000 1,000,000

ADD: Newly issued number of shares 500,000 0

Daily time factor 0.51 0
Weighted new issued shares 253,425 0

Weighted average no. of shares o/s during period 1,253,425 1,000,000

BASIC EARNINGS PER SHARE 1.97 2.83