#1Melrose Buy Improve Sell GKN ePowertrain **** SESS Melrose Industries PLC Full Year Results Year ended 31 December 2019 5 March 2020 Strictly private and confidential Nortek State Point®#2Melrose Contents Buy Improve Sell Highlights 2 The results 3 Businesses investment & improvement 4 Appendices The revenue and profit numbers included in this presentation are shown in round millions. Margin calculations are calculated using unrounded numbers 1#3Melrose Buy Improve Sell Highlights 2#4Highlights Melrose Continuing operations² Revenue Operating profit/(loss) Profit/(loss) before tax Diluted earnings per share ■ ■ ■ H Buy Improve Sell Adjusted¹ results 2019 £m 11,592 1,102 1. 2. 3. 4. 889 5. 14.3p 2018 £m 8,645 in 2018. 2018 annualised adjusted free cash flow includes 12 months of GKN ownership Including the contribution paid on 6 January 2020 813 672 12.7p Statutory results 2019 £m 10,967 318 106 The results for 2019 were comfortably ahead of the Board's expectations for both profit and cash generation Adjusted¹ diluted earnings per share ("EPS") were 14.3 pence, up 13% on last year (statutory EPS: 0.9 pence) and adjusted free cash flow was £591 million, up 72% 4 on an annualised like-for-like basis Group net debt and leverage have both been improved and were reduced to £3.28 billion and 2.25x respectively Net trade working capital in the Group was reduced by £95 million (5%) in the year, with adjusted profit conversion to cash¹ of 104%. More progress in net trade working capital to come, in line with achieving the previously announced £400 million target within the Melrose ownership period 0.9p Loss-making contracts have been improved materially with the losses from 2018 reducing by 11% in 2019. In addition, c.25% of the remaining provision has been released (as previously stated this release is not included in adjusted¹ operating profit) due to improvements implemented by management this year. These improvements impact future trading in GKN positively 2018 £m 8,152 The GKN UK defined benefit pension schemes are significantly better funded, aided by over £240 millions of cash contributions from the Group so far during Melrose ownership, fully in line with the plan agreed with the Trustees. Along with better investment returns, the remaining contributions required to make these schemes well funded has reduced from up to £1 billion at acquisition to c.£500 million (387) (542) (11.8)p Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 Results for 2018 include GKN for 8 months only and have been restated for discontinued operations Adjusted free cash flow excludes the special one-off pension contributions and restructuring spend Calculated compared to 2018 annualised adjusted free cash flow, excluding the previously announced £150 million cash outflow from unwinding creditor stretch 3#5Highlights A proposed final dividend of 3.4 pence per share (2018: 3.05 pence) is 11% up on last year, giving a full year dividend of 5.1 pence per share (2018: 4.6 pence) up 11% Melrose ■ ■ I ■ ■ During 2019, a record total level of investment has been made in new product development; technology; environmental, social & governance (ESG); and capital and restructuring projects all designed to improve the quality of the businesses and their future performance The effects of the COVID-19 outbreak are not fully known at present. Approximately 10% of Group sales are manufactured in China, of which 5% is sold in China, with GKN Automotive having the largest exposure through its 50% joint venture all except one site are operational after the new year break. Whilst there will clearly be some impact, the opportunities to improve GKN in 2020 and beyond position Melrose well to deliver positive returns for shareholders in the future The Automotive and Aerospace businesses are now totally separate from a head office, legal, tax and pensions perspective. Melrose will be holding an Investor Day for Automotive in New York in October this year to update the markets on its future strategy Melrose has appointed advisers to explore the strategic options for Nortek Air Management, although clearly recent events may have some bearing on timing. In the event of a significant disposal, a further reduction to net debt would be made along with an exceptional repayment to shareholders and a further contribution to the GKN UK defined benefit pension schemes Justin Dowley, Chairman of Melrose Industries PLC, today said: "We are delighted with the Melrose performance in 2019 and the substantial value that is being unlocked. Notwithstanding any implications of the COVID-19 outbreak, the bedrock has now been built for the GKN businesses to attain results which were not previously achievable, and, in addition, the shareholder value built up in our longer held assets is closer to being realised. This shows, once more, that the Melrose model thrives by investing properly in businesses and giving management the entrepreneurial freedom to succeed. This is just the start of what is possible for GKN." Buy Improve Sell 4#6Buy Improve Sell Melrose The results 01 5#7Melrose strategy and track record: Buy, Improve, Sell Melrose Buy Improve Sell What Melrose does: Identify underperforming manufacturing businesses Buy at an appropriate price, use low leverage Improve business performance through operational improvement and investment Sell a more profitable and better cash generating business to a new owner Return value to shareholders Key performance statistics: Average equity return on deals IRR since the first deal Total shareholder return 2.6x 25% 2,579% 1. Melrose lifetime contributions, including the contribution paid on 6 January 2020 How has Melrose created value on previous deals: 48% from margin improvement 16% from cash generation 32% from multiple arbitrage 4% sales growth Investment is fundamental to success: Significant investment made in the businesses during ownership amounting to more than one third of the original equity price paid C Pension funding improved across all businesses owned > 13 £623m¹ 6#8Reconciliation between statutory and adjusted ¹ results Melrose Continuing operations £m Statutory operating profit Amortisation of intangible assets acquired in business combinations Restructuring costs Previously announced impairment of goodwill Net release of fair value items Exchange movements not hedge accounted Other Adjustments to statutory operating profit Adjusted¹ operating profit Continuing operations Statutory revenue Share of equity accounted investments Adjusted¹ revenue Statutory result The IFRS measure of results includes certain items which are significant in size or volatility or by nature are non-trading or non-recurring, or are items released to the Income Statement that were previously a fair value item booked on an acquisition Adjusted¹ results The Melrose Board considers the adjusted results to be an important measure to monitor how the businesses are performing because they achieve consistency and comparability when all businesses are held for the complete reporting periods I Buy Improve Sell 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 Restructuring costs £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Corporate Total Total 318 534 238 179 (153) (55) 41 784 1,102 Income Statement charge 79 83 19 11 37 9 238 Cash spent in 2019 190 (2) 188 £m 10,967 625 11,592 Cash spent in 2019 46 58 17 14 50 5 190 7#9Cash generation in the year Melrose Free cash flow Cash flow from continuing operations £m Adjusted operating cash flow (pre capex)¹ Net capital expenditure Net interest and tax paid Defined benefit pension contributions - ongoing annual contributions Dividend income from equity accounted investments Trading net other Adjusted free cash flow 1 Defined benefit pension - special contributions² Restructuring Free cash flow 1 ■ ■ I ■ Buy Improve Sell 1. 2. Group 2019 1,441 3. 4. (495) (295) (72) 67 (55) 591 (111) (190) 290 Reconciliation of opening to closing net debt Reconciliation of net debt £m Net debt brought forward Net cash flow from disposals and acquisition related activities 4 Discontinued operations Free cash inflow in the period Dividend paid to shareholders Foreign exchange and other Net debt¹ at 31 December 2019 Net debt of £3,283 million at closing exchange rates of US $1.33 and €1.18, with adjusted profit conversion to cash¹ of 104% Leverage ¹ of 2.25x EBITDA is better than expectations due to stronger cash generation Adjusted free cash flow¹ from continuing operations of £591 million excludes the one-off pension contributions and restructuring spend Capital expenditure to depreciation ratio³ of 1.2x Group net trade working capital¹ reduced by £95 million (5%) mainly by improving debtors and creditors efficiency, improvement in inventory largely still to come Group 2019 Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 Includes £94 million of one-off payments, being the balance of the £150 million upfront commitment, and a £17 million contribution following the disposal of Walterscheid Powertrain Group Calculated using net capital expenditure and depreciation for non-leased assets only Comprised of net disposal proceeds from the sale of Walterscheid Powertrain Group, purchase of investments and other acquisition and disposal related cash flows (3,482) 103 (37) 290 (231) 74 (3,283) 8#10Segmental performance - adjusted ¹ results. Melrose Adjusted¹ results² Continuing operations £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Central Total I Revenue 3,852 4,739 1,115 1,178 708 Buy Improve Sell 11,592 Operating profit/(loss) 409 367 117 175 86 (52) 1,102 Operating margin 10.6% 7.7% 10.5% 14.9% 12.1% Aerospace sales grew by 7% in 2019 and the adjusted ¹ operating margin rose to 10.6%, up from 9.9% in 2018. The second half margin was 11.1% 9.5% Automotive sales decreased in 2019 by 6%, however adjusted¹ operating margin has increased to 7.7%. Trends improved in the second half, with the second half margin rising to 7.9% Powder Metallurgy sales were down 10%, focussed in the Large segment, however margin held up at 10.5% Nortek Air Management continues to benefit from its cutting edge sustainable State Point Technology® to reduce energy and water consumption in data centres. Ergotron ended the year strongly with its second half profit being 26% ahead of the previous year. Security had, as expected, a difficult year 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Including the accounting for loss-making contracts 9#11GKN - loss-making contracts Melrose Loss-making contracts £m Aerospace Automotive Powder Metallurgy Other Continuing Total ■ ■ Buy Improve Sell Provision 1. 215 93 74 2 384 Annualised utilised 2018 (51) (27) (12) (1) (91) Utilised 2019 (42) (29) (9) (1) (81) Surplus released, improved position Significant steps have been taken, including renegotiation of contractual terms and operational efficiencies identified and demonstrated, to improve the longer term contractual positions £81 million of losses were incurred in the year, representing an 11% reduction compared to 2018 Also, there have been material improvements in loss-making contracts during the year, with c.25% of the remaining provision released excluded from adjusted¹ operating profit (29) (60) (33) Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 (122) 10#12Pensions and tax Melrose UK defined benefit schemes - accounting surplus/(deficit) 31 December 2019 £m GKN 2016 GKN Group Pension Sche hes (Numbers 1 - 4) GKN post retirement medical Nortek Air Management Brush Total UK defined benefit schemes I ■ I Assets Tax 541 2,243 20 Buy Improve Sell 278 3,082 Liabilities (486) (2,711) (11) (33) (261) (3,502) 1. Including the contribution paid on 6 January 2020 Surplus/ (deficit) 55 The GKN UK defined benefit schemes are significantly better funded, aided by over £240¹ million of cash contributions from the Group so far during Melrose ownership, fully in line with the plan agreed with the Trustees (468) (11) (13) 17 Along with better investment returns, the remaining required contributions to make these schemes well funded has reduced from up to £1 billion at acquisition to c.£500 million (420) UK pension plan re-organisation completed the GKN 2012 pension scheme was split into separate schemes on 1 July 2019; with approximately two thirds of the members allocated to Aerospace and one third allocated to Automotive The full year effective Income Statement tax rate has reduced to 21.4%, which is considered to be a good guide for the new ongoing rate for the Group 11#13Melrose Buy Improve Sell Businesses investment & improvement. — 12#14GKN Aerospace 2 Revenue by market 1 Commercial (72%) 2 Military (28%) Deo0 W 3 2 Revenue by product type 1 NOT FOR PLIGHT 1. Based on adjusted 2019 operating profit for all continuing trading businesses 1 Civil Airframe (47%) 2 Defense (21%) 3 Engines (32%) ARDO Fot 2 36% of Melrose¹ Revenue by destination 34 1 North America (61%) 2 Europe (34%) 3 Asia (4%) 4 ROW (1%) 13#15Aerospace highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % I ■ ■ ■ 2019 Adjusted¹ results 3,852 Buy Improve Sell 579 15.0% 409 10.6% Growth² 7% 17% +1.2 ppts 25% +1.4 ppts H1 2019 Adjusted ¹ results 1,904 276 14.5% 192 10.1% H2 2019 Adjusted¹ results 1,948 303 15.6% 217 11.1% H2 2019 Year on Year Growth2 Highlights Adjusted¹ operating profit up 25%, adjusted ¹ operating margin up 1.4 percentage points Second half performance stronger than the first half, adjusted ¹ operating margin reaching 11% in the second half New "One Aerospace" structure being implemented to better serve customers and generate further efficiencies Major new operational improvement programme commenced to drive sustainable gains in quality, delivery and cost North American Aerostructures business generated a small profit; only two years ago this part of Aerospace made a £43 million loss Record year of investment in technology, construction underway on the new Global Technology Centre in Bristol, UK, which is expected to open in 2020 7% 16% +1.2 ppts 23% +1.3 ppts 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Growth is calculated at constant currency against 2018 annualised results, excluding the impact of loss-making contracts and IFRS 16 in both periods for consistency 14#16One Aerospace - Business refocussed to better serve customers I I H Previously Multiple customer contacts ■ Fragmented portfolio Melrose Local sourcing decisions Scattered footprint Local focus Buy Improve Sell Global account management Focus on differentiating processes and technologies Global commodity based sourcing Rationalisation and investment Global standards and business processes Future One face to customer Focussed on core Full supply chain leverage Coherent landscape Performance centres ● ● ● ● Progress to date Market-aligned business lines with one single customer facing team for each customer established Organisational structure in place for top 3 layers of the organisation (c.400 people) Sites transitioning to become the operational performance centres, clustered in regions and focussed on people, safety, quality and delivery Global shared services and enabling functions in the process of being established ● ● ● Impacts Commercial excellence Pricing discipline Targeted strategies Direct and indirect procurement cost savings Site rationalisation Reduced SG & A costs Improved efficiency c. 1,000 headcount reduction 15#17Aerospace - markets, investment, technology and environment Melrose Markets Civil aerospace has a healthy backlog; long-term civil aerospace market remains in line with acquisition assumptions Boeing 737 MAX position being monitored closely with required mitigating actions being taken - GKN Aerospace has an approximate shipset value of up to £400k for each aircraft Military market is strong and could increase the balance of military versus commercial sales in the future Investment and restructuring Creation of "One Aerospace"; major new operational excellence programme commenced, focussed on serving customers better Delivery, quality and customer relationships all continue to improve, working capital improvement plans being implemented Good progress being made on resolving loss-making contracts - financial benefits expected to follow Closure of two loss-making sites underway, full exit expected during 2020 Significant capital investment injected into previously underinvested parts of the business and in to new growth areas Technology and ESG Record investment in technology - focussed on improving efficiency, weight and emissions of aircraft: Construction of the new Global Technology Centre in Bristol, UK is underway, expected to open in 2020 World leading additive manufacturing pilot production cell at Oak Ridge National Laboratory, US Technology centre in the Netherlands to focus on thermoplastic components Manufactured first components for the Wing of Tomorrow programme Additive technologies being developed to significantly reduce waste material from production processes I I 1 ■ ■ - Substantial research and development project into zero-emission hydrogen power systems planned for 2020 - decarbonisation opportunity leading to cleaner air Buy Improve Sell 16#18GKN Automotive 1. AR 2 Revenue by product type 34 1 Driveline (72%) 2 All Wheel Drive (25%) 3 eDrive (2%) 4 Cylinder Liners (1%) Based on adjusted 2019 operating profit for all continuing trading businesses 3 2 Revenue by destination 1 Europe (35%) 2 North America (34%) 3 Asia (26%) 4 ROW (5%) 32% of Melrose¹ 17#19Automotive highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % ■ ■ I 2019 Adjusted¹ results 4,739 597 12.6% 367 Buy Improve Sell 7.7% Growth ² (6%) 3% +1.0 ppts (1%) +0.3 ppts H1 2019 Adjusted¹ results 2,450 298 12.1% 186 7.6% H2 2019 Adjusted¹ results 2,289 299 13.0% 181 7.9% H2 2019 Year on Year Growth² Highlights Structural cost reductions have enabled adjusted¹ operating margin to increase to 7.7%. Revenue decline of 6% in the year, although second half decline less severe than first half (4%) 11% +1.7 ppts 14% +1.2 ppts Restructuring initiatives are underway to reduce the cost base further and ensure a more flexible structure Second half adjusted ¹ operating margin of 7.9%, up 1.2 percentage points versus prior year; run rate strong despite lower volumes eDrive revenue growth; business still in investment phase. Exciting commercial partnership with Delta Electronics Inc. 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Growth is calculated at constant currency against 2018 annualised results, excluding the impact of loss-making contracts and IFRS 16 in both periods for consistency 18#20Automotive - margin increased despite tough market Melrose ■ I Buy Improve Sell Adjusted¹ operating margin 1. 2018 Volume (excl. China) China Procurement cost reduction Significant structural cost reduction actions underway, business better placed Second half adjusted ¹ operating margin of 7.9% was higher than first half and higher than last year, further benefits expected from the full year impact of actions already taken On flat sales, adjusted¹ operating margin would have been approximately 8.5%, up a further 0.8 percentage points Other cost reduction actions Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2019 19#21Automotive - investments, technology and environment Melrose Investment and restructuring Significant restructuring programmes underway: Layers of management removed - Structural reductions in fixed costs I Early retirement programmes at several plants - Footprint reduction taking place - two site closures completed Consolidation of back office service functions underway Focus on improving production, material and inter-factory flows Structural improvements in procurement, yielding direct and indirect savings Good progress being made on resolving loss-making contracts release of corresponding provision Working capital improvement plan being implemented Technology and ESG Electric vehicle powertrain solutions enable low-carbon vehicles - eDrive becoming increasingly important with capital investments to increase specific eDrive manufacturing capacity ■ I I ■ I I Strategy to make electric propulsion more affordable - using standardised electric drive systems and highly integrated inverters and motors Strategic collaboration with power electronics specialist, Delta Electronics Inc., joint development should accelerate delivery of next generation 3-in-1 eDrive systems - a key step towards scaling greener powertrain solutions Buy Improve Sell 20#22GKN Powder Metallurgy 1. 2 O Revenue by market type 3 1 Automotive (70%) 2 Industrial (16%) 3 Hoeganaes Metall Powder (14%) Based on adjusted 2019 operating profit for all continuing trading businesses 3 2 Revenue by destination 1 1 North America (47%) 2 Europe (31%) 3 Asia (16%) 4 ROW (6%) 10% of Melrose¹ 21#23Powder Metallurgy Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % ■ ■ I Investment and restructuring Targeted cost reduction actions and footprint consolidation underway; 2 plant closures and 2 plant downsizings are complete or underway. New plant in Guanajuato, Mexico opened New customer service centres opened in China, Germany, and the United States Operational improvement plans initiated, including enhancing production flows and investment in automation Technology and ESG Continued investment in additive manufacturing technologies - acquisition of FORECAST 3D, a leading plastic 3D printing company completed, improving the efficiency of manufacturing and reducing material waste I 2019 Adjusted¹ results 1,115 185 16.6% 117 Buy Improve Sell 10.5% Growth² (10%) (10%) -0.1 ppts (17%) -0.9 ppts Partnership to enable mass-production of energy efficient industrial burners made through additive manufacturing, the newly developed mixing units considerably reduce energy consumption and nitrogen oxide emissions 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Growth is calculated at constant currency against 2018 annualised results, excluding the impact of loss-making contracts and IFRS 16 in both periods for consistency 22#24Nortek Air Management 2 Revenue by business 1. 1 1 AQH (41%) 2 HVAC (59%) 2 3 45 Revenue by market 1 Based on adjusted 2019 operating profit for all continuing trading businesses 1 Home (61%) 2 Work (28%) 3 Health (5%) 4 Education (4%) 5 Aftermarket (2%) Revenue by destination O 15% of Melrose¹ 23 1 North America (94%) 2 Europe (4%) 3 Asia (2%) 23#25Nortek Air Management Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % I ■ E ■ I ■ 2019 Adjusted¹ results Highlights Adjusted ¹ operating profit up 6% and operating margin up 1.0 percentage points despite reduction in revenue. Market outlook is positive Adjusted¹ operating margin is 6.3 percentage points, over 70%, higher than pre-acquisition Footprint optimisation activities progressed, additional plans underway including a review of manufacturing efficiencies within AQH Technology and ESG Purchase orders received for HVAC's industry leading new propriety State Point Technology®; represents important move into rapidly growing data centre market 1,178 209 17.7% 175 Buy Improve Sell 14.9% Growth² (1%) 7% +1.2 ppts 6% +1.0 ppt State Point Technology® can reduce data centre water usage by up to 90% compared to alternative indirect cooling solutions. This exciting technology also reduces power consumption by up to 30% AQH product offering revitalised, with new portfolio for retail and professional segments. Focus on improving efficiency and fresh air products to improve indoor air quality with health benefits for consumers 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Growth is calculated at constant currency against 2018 results, excluding the impact of loss-making contracts and IFRS 16 in both periods for consistency 24#26Other Industrial 1. 3 Revenue by business 2 1 Ergotron (35%) 2 Brush (24%) 3 Security & Smart Technology (41%) Based on adjusted 2019 operating profit for all continuing trading businesses Revenue by destination 3 ● 4 2 1 1 Europe (20%) 2 North America (69%) 3 Asia (8%) 4 ROW (3%) 1.54.99 7% of Melrose¹ 25#27Other Industrial Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % I ■ ■ I 2019 Adjusted¹ results 708 103 14.5% Investment and restructuring Ergotron market impacted by US tariffs on Chinese goods. Adjusted ¹ operating profit higher than last year on reduced revenue. New products gaining traction 86 12.1% Buy Improve Sell Growth² (9%) (20%) -1.8 ppts (21%) -1.8 ppts Brush margins expanding following completion of successful restructuring. Operational footprint consolidated into product-specific facilities and dedicated service centres. Enhanced focus on growing services market Security & Smart Technology moved from Nortek Air & Security to Other Industrial following the Board's decision to consider strategic options for Nortek Air Management and Security & Smart Technology separately Security market remains challenging, partly due to the impact of US tariffs, increased competition and technological changes, however, operations have been restructured to move production out of China Wheels & Structures business made a small adjusted¹ operating loss and is classified as held for sale at 31 December 2019 1. Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 2. Growth is calculated at constant currency against 2018 results, excluding the impact of loss-making contracts and IFRS 16 in both periods for consistency 26#28Melrose Buy Improve Sell Appendices 27#29Impact of loss-making contracts Melrose Adjusted¹ results Continuing operations £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Central Total Buy Improve Sell 1. Revenue 3,852 4,739 1,115 1,178 708 11,592 Operating profit/(loss) pre-positive impact of loss-making contracts 367 338 108 175 85 (52) 1,021 Positive impact of loss-making contracts Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 42 29 9 1 81 Operating profit/(loss) post-positive Operating margin Pre-positive impact of impact of loss-making loss-making contracts contracts 409 367 117 175 86 (52) 1,102 9.5% 7.2% 9.7% 14.9% 11.9% 8.8% Post-positive impact of loss-making contracts 10.6% 7.7% 10.5% 14.9% 12.1% 9.5% 28#30Aerospace future potential cash profile Melrose £m per annum 450 400 350 300 250 200 150 100 50 Buy Improve Sell 0 2020 I 2025 2030 Indicative cash flows from RRSP¹ portfolio 1. Risk and revenue sharing partnership 2035 2040 2045 2050 Over £10 billion of cash expected from existing RRSP¹ arrangements 2055 2060 29#31Foreign exchange forward looking Melrose Exchange rates Average rates Closing rates Income Statement volatility - Translational impact Impact on adjusted ¹ operating profit of a 10% strengthening² of: £m USD EUR 68 26 Movement in adjusted¹ operating profit % impact on adjusted¹ operating profit ■ - 6% Buy Improve Sell 2% 1. 2. 3. CNY 9 1% USD 1.28 1.33 Other³ 15 1% 2019 EUR 1.14 Transactional FX hedges taken out to provide appropriate short and medium term cover: Next 12 months: c.90% covered 12 to 24 months: c.65% covered Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 10% strengthening against all currencies Assuming all other currencies strengthen against Sterling by 10% at the same time 1.18 USD 1.33 1.27 Increase in debt 2018 EUR 1.13 Balance Sheet volatility Impact on debt of a 10% strengthening² of: £m USD 1.11 204 Group debt drawn in UK, US and Euro currencies to protect leverage, based on a mix of approximately 60% USD, 20% EUR and 20% GBP EUR 75 30#32Interest Melrose Interest £m Bonds 2022 5.375% unsecured bond 2032 4.625% unsecured bond Cross-currency swaps (2022 bonds) Bank debt¹ 2021 term loan 2023 revolving credit facility Cross-currency swaps Other facilities Total facilities / Gross debt Cash Net debt² Buy Improve Sell 1. 2. Facility size 450 300 750 824 3,031 3,855 81 4,686 At 31 December 2019 450 300 74 824 824 1,865 6 2,695 81 3,600 (317) 3,283 Income Statement rate 2.9% 4.4% 3.8% 3.8% 3.7% Cash rate 5.4% 4.6% 3.6% 3.4% 3.6% Interest ■ ■ Approximately 70% of interest exposure fixed on projected gross debt Significant committed facility headroom Effective average Income Statement interest rate of 3.7% on gross debt and cash rate of 3.6% 2019 bond and associated cross-currency swaps repaid in October 2019 using committed bank debt 2021 term loan amended to include, at Melrose's option, the right to extend the maturity date to April 2024 Bank debt is presented net of £30 million of unamortised arrangement fees and includes £6 million cross-currency swaps valuation at 31 December 2019. Headroom on the Group's committed bank facility at 31 December 2019 was £1,136 million Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 31#33Some helpful data for 2019 Melrose Buy Improve Sell Continuing operations Item Operating profit Positive impact of loss-making contracts included above Central costs Adjusted free cash flow ¹ Finance costs²: - Bank and loan related - Amortisation of debt arrangement costs - Pension interest - Other Tax Depreciation Capital expenditure Pension payments - ongoing contributions (global) Pension payments - special contributions Restructuring costs Annual dividend Non-controlling interest Number of shares in issue 1. 2. 3. Income Statement 2019 adjusted¹ results £1,102 million (£81 million) £52 million (includes a GKN LTIP charge of £20 million) N/A (£143 million) (£11 million) (£31 million) (£28 million) 21.4% (of adjusted¹ profit before tax) (£498 million) ³ N/A N/A N/A (£238 million) 5.1 pence per share £6 million 4,858 million (average number of shares) Cash Flow 2019 adjusted¹ results £1,102 million N/A (£32 million) £591 million (£178 million)² (£117 million) (13% of adjusted¹ profit before tax) £498 million ³ (£495 million) (£102 million) 4 (£65 million UK, £37 million overseas) (£111 million) in 20195 (£56 million) in 2018 (£190 million) (£231 million) N/A N/A Described in the glossary to the 2019 Preliminary Announcement, released on 5 March 2020 IFRS 16 was effective from 1 January 2019, it increased the finance cost by £21 million (with a partially balancing uplift to operating profit) £426 million of depreciation of owned property, plant and equipment and amortisation of owned computer software and depreciation of £72 million of leased assets as described in the glossary to the 2019 Preliminary announcement released on 5 March 2020 4. Including the contribution paid on 6 January 2020 5. Includes £94 million of one-off payments, being the balance of the £150 million upfront commitment, and £17 million contribution following the disposal of Walterscheid Powertrain Group 32