# The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price

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Question: Pearson Ltd is an Australian listed company. Its results for the financial year ending June 30 2023 have exceeded expectations-Profit before Tax is \$11.194 million and income tax expense is \$2.216 million. As at June 30 2022, there were 11.700 million ordinary shares on issue. On May 11 2023, 4.225 million further ordinary shares were issued at a price of \$2.99-paid to \$2.4. The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price.

Required:
Calculate the basic EPS for Pearson Ltd for the year ending June 30 2023.

Calculation of Net Profit of Pearson Ltd:

Profit Before Tax                          \$11.194

Less: Tax Expense                          \$2.216

Profit After Tax                            \$8.978

Profit available for equity shareholders is calculated by deducting any preference dividend payable upon the issue of preference shares. However, if no preference shares have been issued, then the Profit after Tax will itself be the Profit available for distribution among the equity shareholders (AASB, 2021, p (6-8)).

The weighted average number of equity shares considers the original shares that remain issued throughout the accounting period and also the shares that were issued in the current period. Further, it also includes any partly paid shares issued by the company (AASB, 2021, p (6-8)). While calculating the weighted average shares, attention is also paid to the issue of any bonus shares, right share or securities convertible into shares.

Calculation of Weighted average number of shares:

Period         Portion of year      No. outstanding       Weighted average shares

(in millions)              (in millions)

01/07/2022      365/365       *      11.7                   11.7

to 30/06/2023

11/05/2023      51/365        *       4.225* 2.4 0.4739

to 30/06/2023                               2.9912.1739

The shares issued on May 11 2023,were paid up at \$ 2.4, while the issue price was \$ 2.99. So, the proportion of the paid-up value with the issue price has been considered while calculating the number of shares in order to reflect the proportionate number of fully paid shares. Therefore, the weighted average number of shares is 12173900, and the Profit is \$ 8978000. SO, the EPS will be:

Earnings Per Share (EPS) = Profit available for equity shareholders/Weighted Average number of equity shares

= 8978000/12173900
= \$ 0.7375/ share

The Earning Per Share of Pearson Ltd. is \$ 0.7375/ share.