Melrose Industries : Investec Conference

Buy

Improve

Sell

Strictly private and confidential

Melrose Industries PLC

Investec conference

16 November 2021

Executive summary

• Buy, Improve, Sell
• Nortek largely sold and value doubled, GKN being significantly improved
• Aerospace seeing better trends, operational performance improving
• Automotive and Powder Metallurgy restructuring well progressed; all projects underway. Underlying demand strong and on track to hit margin targets when supply returns
• Cash generation remains positive and the balance sheet is more conservative than usual with some spare capacity
• Poised for further value creation

Buy
Improve	2
Sell

Melrose key financial numbers: sensibly conservative positioning

1. Balance sheet well placed with spare capacity when the time is right

Net debt1	Leverage1
£1,029m	1.5x

• Proforma net debt1 of £1,029 million and proforma leverage1 of 1.5x, including the £729 million Return of Capital (but excluding the Nortek Control proceeds)

Buy	1.	Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021
Improve
Sell		3

Melrose key financial numbers: increasing momentum

2. Increasing momentum: significant upside potential in the continuing businesses

	Melrose margin target			Based on 2020
				revenue
		Businesses sold in 2021 (average)3
					2		1 Continuing businesses (83%)
		Continuing businesses (average)		1		2 Businesses sold in 2021 (17%)3
			Average upside1			Resulting
			from H1	Average sales		average profit
			margins to	recovery to		potential
			margin targets	2019 level		uplift2
	Continuing businesses	c.5 ppts	19%		c.2.5x

• Significant upside potential in the continuing businesses
• This keeps Melrose shareholders invested in high rates of return

Buy	1.	Represents H1 2021 operating margins versus announced target margins
2.	Represents uplift in profit required to reach target operating margins on 2019 sales
Improve	4
Sell	3.	Includes Nortek Control (contracts exchanged on 23 August 2021)

Melrose key financial numbers: good margin progression

3. Margin progression: Automotive & Powder Metallurgy well advanced

	Target	% of required
	operating	projects already
	margins	underway
Aerospace	10%1	c.50%
Automotive	>10%	100%
Powder Metallurgy	14%	100%2

Half the required projects have started, the rest to commence in H2 this year

All required projects fully underway, ahead of plan

All required projects fully underway, ahead of plan

• All the required restructuring initiatives to achieve the target margins in Automotive and Powder Metallurgy are fully underway. Target margins on track to be delivered when supply returns
• Half of the projects in Aerospace required to achieve the target margin are underway. The remaining c.50% of projects are identified, and due to commence in H2 2021

Buy	1.	Assuming only a partial market recovery, 12% assuming a full market recovery to 2019 sales levels
Improve	5
Sell	2.	Projects required to achieve operating margin target in Powder Metallurgy, excluding the investment in Hydrogen Storage Technology