Melrose Industries : 2023 Interim Statement

7 September 2023

MELROSE INDUSTRIES PLC

UNAUDITED RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2023

Trading ahead of expectations, upgraded outlook, share buybacks to be commenced early

Melrose Industries PLC ("Melrose", the "Company" or the "Group"), an Aerospace Engines and Structures Group, today announces its interim results for the six months ended 30 June 2023 ("the Period").

Highlights

	Adjusted1 results	Statutory results
	2023	20222	2023	20222
Continuing operations	£m	£m	£m	£m
Revenue	1,633	1,364	1,633	1,364
Aerospace operating profit/(loss)	175	67	(4)	(93)
Operating profit/(loss) (post PLC costs)	159	45	(18)	(281)
Profit/(loss) before tax	134	9	(62)	(314)
Diluted earnings per share	7.5p	0.2p	(3.0)p	(16.8)p
Net debt1	553	1,294	n/a	n/a

Melrose Group - at constant currency3

Trading ahead of expectations - upgraded guidance

• Upgraded full year guidance: Aerospace 2023 adjusted1 operating profit range increases by over 8% to between £375 million and £385 million with a higher Engines margin than previously guided
• Net debt leverage1 reducing towards 1x EBITDA1 by the end of 2023 (before share buyback programme)
• This outperformance further underpins the achievement of the 2025 guidance

Half year results

• Aerospace revenue of £1.63 billion, growth of 19%3 over last year (15% including businesses being exited)
• Aerospace adjusted1 operating profit of £175 million, more than 2.5x the prior year
• Aerospace adjusted1 operating margin of 10.7% an increase of 5.8 percentage points on the prior year and 3.2 percentage points on the second half of 2022
• Adjusted1 diluted earnings per share increased to 7.5p (2022: 0.2p). Statutory loss per share
  was 3.0p (2022: 16.8p)
• Restructuring and repricing progressing well combined with improved quality and arrears reduction

Melrose Industries PLC Stratton House 5 Stratton Street London W1J 8LA Tel: [phone] Fax: [phone]

Registered in England & Wales Registered no: 09800044 Registered office: 11th floor The Colmore Building Colmore Circus Queensway Birmingham West Midlands B4 6AT

• Net debt1 of £553 million in line with expectations, reducing leverage1 to 1.5x (pro-forma 2022 opening leverage1 1.8x)

Earlier shareholder returns

• Higher confidence and strong progress allows Melrose to commence early its share buyback programme, at the beginning of October 2023, starting with a £500 million buyback over 12 months and being well placed to continue thereafter keeping leverage1 comfortably within previous guidance
• Continuation of the progressive annual dividend, with an interim dividend of 1.5 pence per share declared

New Investor Event - Engines

• To be held on site in Sweden, the global HQ for the Engines business, during October 2023 to showcase in more detail and colour the full quality of the Engines business, including a new target for Engines operating margins to rise above 30% post 2025

Management changes

• Melrose is now a long-term aerospace group with exceptional organic growth prospects. In line with this new strategic direction, on 7 March 2024 Simon Peckham and Geoffrey Martin will step down as Melrose Chief Executive and Group Finance Director respectively, to be replaced by Peter Dilnot (currently Melrose Chief Operating Officer) and Matthew Gregory (currently Chief Financial Officer GKN Aerospace) respectively. Thus providing management continuity as Melrose becomes a pureplay aerospace group. Simon Peckham, Geoffrey Martin and Christopher Miller will not stand for re-election as directors at the 2024 AGM

By division - at constant currency3

Engines

• Engines revenue growth of 19% in the first half with adjusted1 operating profit nearly doubling and adjusted1 operating margin up to 24.5%
• Engines aftermarket growth of 46% driven by recovering flying hours and the Group entering the lucrative aftermarket 'sweet spot' allowing an above market performance

Structures

• Structures revenue growth of 18%3 (13% including businesses being exited) and adjusted operating margin reaching 2.5% in the first half versus loss-making in the first half of 2022
• Civil ramp-up delivering 24% growth. Defence repricing and portfolio work accelerated with around 25% of the renegotiations planned by 2025 being successfully concluded in the last few months

Demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen

• The demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses from Melrose into Dowlais Group PLC successfully completed on 20 April 2023 as scheduled

Upgraded guidance for 2023 full year (assuming US $ = 1.25 average exchange rate for the year)

Group

• Revenue of between £3.35 billion and £3.45 billion

• Aerospace adjusted1 operating profit between £375 million and £385 million
• Aerospace adjusted1 EBITDA of between £525 million and £535 million
• PLC costs reducing to £30 million
• Net debt leverage1 reducing towards 1x EBITDA1 by the end of 2023 (before share buyback programme)

Simon Peckham, Chief Executive of Melrose Industries PLC, today said:

"We are delighted with these results and the outlook for Melrose. Whilst there is still work to do, the business is very capable of producing over £1 billion of EBITDA and providing excellent returns for shareholders. This is further demonstrated by the confidence to start early the share buyback programme. Chris, Geoff and I are pleased to hand over to Peter and Matthew to continue the great performance achieved by Aerospace, and to guide this handover during the coming months and into 2024. Melrose shareholders own a truly special business, with rapidly increasing profits, exceptionally strong long-term cash flows and a disciplined shareholder focused approach to capital."

1. Described in the glossary to the 2023 Interim Financial Statements
2. Results for the period ended 30 June 2022 have been restated for discontinued operations and the one for three share consolidation
3. Like-for-likegrowth is calculated at constant currency against 2022 results and excludes businesses being exited

ENDS

Enquiries:

Investor Relations: Chris Dyett

[phone] [e-mail]

Montfort Communications: [phone]

Nick Miles

[phone] [e-mail]

Charlotte McMullen

[phone] [e-mail]

CHAIRMAN'S STATEMENT

I am pleased to report a strong set of interim results for the six months ended 30 June 2023 (the "Period"), which have underpinned the confidence in making an upgrade to the full year results. Furthermore, as we have evolved into being a long-term aerospace group in line with previous announcements, we are providing details and timing about the intended executive management changes scheduled for the first half of next year to take this exciting new strategy forward.

RESULTS FOR THE CONTINUING GROUP

These results include statutory revenue for the Group of £1,633 million (2022: £1,364 million), an

adjusted operating profit of £159 million (2022: £45 million) and a statutory loss before tax of £62

million (2022: £314 million). This includes solely the Aerospace business, post PLC costs, as a result of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses being demerged from the Group on 20 April 2023 and therefore being treated as discontinued in these results for accounting purposes.

Further details of these results are contained in the Finance Director's Review.

TRADING

The Aerospace business has performed well during the Period. The industry-leading Engines division has exceeded its margin guidance and continues to demonstrate exceptional profit growth and long-term cash flows. The design-led Structures division continues to improve and deliver on its strong positions on excellent platforms.

CASH AND SHARE BUYBACK PROGRAMME

These interim results demonstrate increasing confidence and strong progress, with upgraded profit guidance and with net debt reducing towards 1x EBITDA by the end of 2023 (prior to share buybacks). With profits rising fast, and with restructuring already well-advanced to realise the Aerospace business's full potential, your Board is confident to commence early its share buyback programme, at the beginning of October 2023, starting with a £500 million buyback over 12 months, and being well placed to continue thereafter while keeping leverage well within the previous guidance.

DIVIDEND

Your Board has declared an interim dividend of 1.5 pence per share, which will be paid on 20 October 2023 to shareholders on the register at the close of business on 15 September 2023.

DEMERGER OF GKN AUTOMOTIVE, GKN POWDER METALLURGY AND GKN HYDROGEN

The demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses from the Company into Dowlais Group PLC ("Dowlais") completed on 20 April 2023 as scheduled (the "Demerger"). This transaction marks the successful transformation of these businesses whilst under Melrose ownership, enabling them to continue as a standalone automotive-focused group listed on the London Stock Exchange.

Prior to the Demerger, the Company undertook a one for three consolidation of the existing Melrose ordinary shares after 6:00 p.m. on 19 April 2023. Admission and dealings in the new Melrose ordinary shares on the London Stock Exchange commenced at 8.00 a.m. on 20 April 2023, and there are now 1,351,475,321 Melrose ordinary shares of 160/7 pence in issue.

BOARD MATTERS

Given Melrose has transitioned into a long-term aerospace group, the Company believes that this is the right time to begin evolving the executive management team to progress the changed strategy. Christopher Miller our Executive Vice-Chairman, and Simon Peckham our Chief Executive, who have each served the Company since it was founded in 2003, and Geoffrey Martin who joined as Group Finance Director in 2005, have overseen the successful execution of the Company's 'Buy, Improve, Sell' strategy. Christopher, Simon and Geoffrey have expressed their intention not to stand for re-election at the Company's Annual General Meeting in 2024, leaving behind a highly successful record of shareholder value creation.

The Board has nominated Peter Dilnot to oversee Melrose to realise the next chapter of development of the Aerospace business, and to be appointed Chief Executive from 7 March 2024. This will allow an orderly transition with the benefit of Peter's continued insight and stewardship, having served as Melrose Chief Operating Officer since 2019, during which time he also served as CEO of GKN Aerospace on an interim basis.

Peter will be joined by Matthew Gregory, whom the Board has nominated for appointment as Group Finance Director of Melrose from 7 March 2024. Matthew brings further continuity to the Company's transition, currently serving as the Chief Financial Officer of GKN Aerospace.

Separately, during the Period, Funmi Adegoke resigned as a non-executive director of the Board with effect from 16 June 2023 following a promotion within Halma PLC. We thank Funmi for her contributions to the Company and are pleased to have welcomed Gillian Elcock, who was appointed to the Board as a non-executive director with effect from 21 June 2023. Gillian has extensive investment research experience including several years covering aerospace and defence as an analyst at Putnam Investments and Insight Investment, with two engineering degrees from MIT and an MBA from the Harvard Business School.

STRATEGY AND PURPOSE

Since being founded in 2003, Melrose has created significant shareholder value through its 'Buy, Improve, Sell' strategy. Following completion of the Demerger, Melrose has now changed strategy to being purely an aerospace business, and thus will now report publicly as two divisions: Engines and Structures. The Board has already confirmed that it will not seek to undertake another acquisition of an unrelated industrial business or, in the near term, a material aerospace business.

For the next few months the focus is to complete the current restructuring plans. These are well underway and are expected to be largely complete by the time of the 2023 preliminary full year results announcement in March next year. As part of this strategy, Aerospace is continuing to invest heavily in sustainable technology as it pursues its mission to be a highly trusted and sustainable aerospace partner in the sky.

OUTLOOK

The Board is confident of achieving its upgraded full year expectations. In Engines, our RRSP portfolio looks towards continued market growth and an upcoming lucrative aftermarket phase. Operational efficiencies and the benefit of ongoing restructuring means that we expect full year 2023 to show an excellent improvement in performance, with the Aerospace business positioned for further profitable success over the coming years.

Justin Dowley

Non-executive Chairman

7 September 2023