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The Group seeks to present a measure of underlying performance, which excludes items considered to be non-operating in nature. Underlying profit excludes the unrealised amounts arising from revaluations required by IAS 32 and IAS 39, and includes the realised amounts arising from settled derivative hedging transactions. The calculation of underlying profit and underlying earnings per share is shown below. For the year to December 31, 2004, IAS 32 and IAS 39 were not applied and consequently no adjustment is required.
Basic earnings per ordinary share are calculated by dividing the profit attributable to ordinary shareholders of £350m (2004 £263m) by 1,740 million (2004 1,690 million) ordinary shares, being the average number of ordinary shares in issue during the period, excluding own shares held under trust which have been treated as if they had been cancelled.
Underlying earnings per ordinary share have been calculated as follows:
| 2005 | 2004 | ||||
|---|---|---|---|---|---|
| Pence | £m | Pence | £m | ||
| Profit attributable to equity holders of the parent | 20.11 | 350 | 15.56 | 263 | |
| Exclude: | |||||
| Release of hedge reserves | (25.97) | (452) | — | — | |
| Unrealised fair value changes to derivative contracts |
19.83 | 345 | — | — | |
| Revaluation of trading assets and liabilities | (4.49) | (78) | — | — | |
| Exchange differences and forecast changes relating to financial RRSPs |
(1.72) | (30) | — | — | |
| Include: | |||||
| Realised gain on settled derivative contracts | 22.76 | 396 | — | — | |
| Less foreign exchange derivative gains carried forward in contract accounting |
(4.25) | (74) | — | — | |
| Related tax effect | (2.13) | (37) | — | — | |
| Underlying earnings per ordinary share | 24.14 | 420 | 15.56 | 263 | |
Diluted earnings per ordinary share are calculated by dividing the profit attributable to ordinary shareholders of £350m (2004 £263m) by 1,813 million (2004 1,747 million) ordinary shares, being 1,740 million (2004 1,690 million) as above, adjusted by the bonus element of existing share options of 73 million (2004 57 million).