Melrose Industries : 2021 Half Year Results Presentation

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Strictly private and confidential

Melrose Industries PLC

Half Year Results

Six months ended 30 June 2021

2 September 2021

Contents

1. Highlights
2. Melrose key financial numbers
3. The results
4. Business update
5. Appendices

Buy	The revenue and profit numbers included in this presentation are shown in round millions and unless otherwise stated growth metrics are at constant currency
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Sell	2

Buy

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Highlights

3

Highlights

	Proforma1
	(post Return
	of Capital)	Adjusted2 results	Statutory results
	2021	2021	2020	2021	2020
Continuing operations	£m	£m	£m	£m	£m
Revenue	3,828	3,828	3,624	3,540	3,386
Operating profit/(loss)	223	223	(11)	(137)	(618)
Profit/(loss) after tax	109	109	(80)	(151)	(585)
Diluted earnings per share	2.5p	2.2p	(1.7)p	(3.1)p	(12.1)p
Free cash flow2	75	75	29	n/a	n/a
Net debt2	1,029	300	3,399	n/a	n/a
Leverage2	1.5x	0.5x	3.4x	n/a	n/a

Group

• Melrose is trading ahead of expectations, with better profit margins, better earnings per share and significantly lower net debt2; building the Group's encouraging momentum
• The commitment, made on acquisition by Melrose, to improve significantly the funding of the GKN UK defined benefit pension schemes has been delivered ahead of schedule with the funding position of the schemes transformed for the better. The funding deficit of approximately £1 billion has currently reduced to approximately £150 million. Consequently the annual contribution halves to £30 million with no ongoing requirement to contribute from future disposal proceeds
• Net debt2 at 30 June 2021 was significantly lower at £300 million; proforma net debt2 at 30 June 2021 is £1,029 million after adjusting for the announced Return of Capital to be settled on 14 September 2021 (1.5x proforma leverage2)
• Free cash flow2 generation in the first half was £75 million; all the investment in restructuring costs, capital expenditure and sustainable technology has been self-funded from trading cash flows in the Period
• The Group recorded an adjusted2 earnings per share of 2.2 pence. Adjusting for the accretion post the announced Return of Capital and share consolidation, the Proforma EPS2 increases to 2.5 pence. The statutory loss per share was 3.1 pence
• The Nortek Air Management and Brush disposals both completed in the Period and Melrose has exchanged contracts for the sale of

Nortek Control for $285 million, all of which are consistent with doubling shareholders' money, or more, on each acquisition

Buy	1.	Proforma results are presented to give a meaningful measure of ongoing performance, adjusting for the announced Return of Capital and the associated share consolidation
Improve	4
Sell	2.	Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021

Highlights

• On 14 September Melrose is returning £729 million, 15 pence per share, to shareholders. In addition, the Melrose Balance Sheet has spare capacity for a significant further Capital Return next year
• An interim dividend of 0.75 pence per share (2020: nil) is declared

Businesses

• Melrose businesses own world-leading sustainable technology which provides customers with solutions to significantly reduce their impact on the environment
• All businesses improved their adjusted1 operating margin in the Period compared to 2020 full year: Aerospace by +2.9 ppts; Automotive by +4.0 ppts; Powder Metallurgy by +6.9 ppts; and Ergotron by +0.8 ppts. Automotive and Powder Metallurgy are ahead of plan on their restructuring projects
• Aerospace is well positioned on many significant platforms; the civil aerospace business is now weighted more towards the faster narrowbody recovery and Defence demand remains strong. As previously indicated, significant restructuring is ongoing
• Automotive is well placed to benefit from the transition to electric vehicles. In the first half of this year over one third of new business bookings awarded were for pure electric platforms, over 50% if full hybrid platforms are included. Additionally, during the last 18 months Automotive has been awarded six major eDrive programmes for global and Chinese vehicle manufacturers. Automotive should grow at more than double the rate of light vehicle production over the long-term
• Powder Metallurgy is making clear market share gains, growing revenue at 43% in the first half, and with close to 70% of the business achieving more than 14% adjusted1 operating margins

Justin Dowley, Chairman of Melrose Industries PLC, today said:

"We are continuing to see recovery in all our businesses with trading ahead of expectations. Encouragingly, our Aerospace business is now weighted towards the expected narrowbody recovery. Our Automotive and Powder Metallurgy businesses are poised for strong growth as soon as the well publicised chip shortage abates and the progression in margins is ahead of plan with more to come. As with all its promises, Melrose has delivered its acquisition funding commitment to GKN pensioners early. We have scope on our balance sheet to return more money to shareholders next year and we are excited by the upcoming possibilities."

Buy	1.	Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021
Improve
Sell		5