Case Study -6

Extracts from group financial statements of ISU, a public limited company, year ended 30th
April 2014.

Tk. in Million
o Profit from continuing operations 35,000
o Loss on discontinued operations (tax relief Tk.500 million) (1,500)
o Income tax (7,500)
o Minority interest (loss on discontinued activities Tk.500 million) (1,500)
o Preference share appropriation - dividend (2 years) (30
o - Other (5)
o Share capital at April 30, 2014:
 Ordinary shares of Tk.1 1,000
 5% Convertible preference shares 300

Other Information:

(i) On January 1, 2014, 48 million ordinary shares were issued on the acquisition of TAHU
Ltd. at a valuation of Tk. 190 million. If TAHU earns cumulative profits in excess of Tk.
8,000 million up to April 30, 2015, an additional 10 million shares are issuable to the
vendors. If the profits do not reach that amount, then only 2 million shares are issuable on
April 30, 2015.
(ii) The profits for the three months to April 30, 2014, are Tk. 1,200 million.
(iii) On May 11, 2014, there was a bonus issue of one for four ordinary shares. The financial
statements are made up to April 30, 2014, and had not yet been published.
(iv) The company has a share option scheme. The directors exercised options relating to 18
million shares on February 28, 2014, at a price of Tk. 3 per share. In addition, options
were granted during the year on March 1, 2014, to subscribe for 10 million shares at Tk.
2 each. The fair value of the shares on March 1, 2014, was Tk. 4, and the average fair
value for the year was Tk. 5.
(v) The preference shares are convertible into ordinary shares on May1, 2015, on the basis
of one ordinary share for every two preference shares or on May 1, 2016, on the basis of
one ordinary share for every four preference shares.
(vi) There is a profit share scheme in operation whereby employees receive a bonus of 5% of
profits from continuing operations after tax and preference dividends.
(vii) NIVO Ltd. A 100% owned subsidiary of ISU, has in issue 9% convertible bonds of Tk.
200 million that can be converted into one ordinary share of ISU for every Tk.10 worth
of bonds. Income tax is levied at 33%.

Required:

Calculate Basic and Diluted Earnings Per Share.