#1Melrose ed Buy Improve Sell A AUTOMOTIVE 3 March 2022 NOT FOR FLIGHT Melrose Industries PLC Full Year Results Year ended 31 December 2021 Strictly private and confidential PROPE YDAVMES VOAVMCS! IECLE#2Contents Melrose Buy Improve Sell 1 Highlights 2 Melrose key financial numbers 3 The results 4 Business update 5 Appendices The revenue and profit numbers included in this presentation are shown in round millions and unless otherwise stated growth metrics are at constant currency 2#3Melrose Buy Improve Sell Highlights 3#4Highlights Melrose Continuing operations Revenue Operating profit/(loss) Profit/(loss) after tax Diluted earnings per share Net debt¹ ■ ■ 2021 Actual rates £m 7,496 375 197 4.1p 950 1.3x Adjusted¹ results 2020 Constant currency¹ £m 7,351 122 Buy Improve Sell (36) (0.8)p 2,834 Actual rates £m 4.1x 7,723 141 (27) (0.6)p 2,847 4.1x Statutory results 2021 Actual rates £m Leverage¹ Group The results are ahead of expectations with better cash generation and a bigger reduction in net debt¹ and leverage¹ 6,883 (451) (446) (9.6)p n/a n/a 2020 Actual rates £m 7,132 (487) (565) (11.7)p 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance At constant currency, despite global supply challenges, sales were up 2% year on year and, notably, Group adjusted¹ operating profit tripled to £375 million, showing the substantial benefit of restructuring actions increasingly coming through n/a n/a The Group statutory operating loss was £451 million; of the £826 million adjusting items, only £200 million were cash items, almost all relating to restructuring projects All businesses returned to growth, with further benefits coming from restructuring actions. The Melrose businesses are actively working to mitigate the current inflationary pressures through all necessary means and remain fully committed to achieving their previously stated operating margin targets Melrose generated free cash flow¹ of £125 million in the year, prior to disposal proceeds, with net debt¹ reduced to £0.95 billion and leverage¹ to 1.3x adjusted¹ EBITDA. All businesses continued to be cash positive, therefore fully funding all their improvement and restructuring costs, with their cash generation qualities transformed since acquisition Working capital in the GKN businesses has reduced to 3% of sales from 5% at the GKN acquisition, with further opportunities existing to improve Aerospace inventory levels 4#5Highlights Ahead of plan, the opening net debt¹ of £3.4 billion at the GKN acquisition has been fully repaid in less than four years, save cash returned to shareholders over the period, helping to protect shareholder value and de-risking the GKN transformation during some of the most challenging trading conditions Melrose I F Melrose has improved its ESG positioning and reporting in the year, including highlighting the substantial benefits delivered by its proprietary sustainable technology. A new stand-alone Melrose Sustainability Report will be published, for the first time, alongside the 2021 Annual Report A final dividend of 1.0 pence per share is proposed, up by one third on last year, giving a full year dividend of 1.75 pence per share Businesses ■ I ■ The GKN UK pension schemes are now in surplus helped by £1 in every £3 of free cash flow¹ since acquisition being paid into the Group's pension schemes, thereby freeing up more free cash flow¹ in the future ■ Aerospace has seen adjusted¹ operating margins improve by c.4 percentage points and growth return with sales in the second half of 2021 up 18%² on 2020. Under new leadership, it has materially advanced the restructuring of its cost base and operations, with all required significant restructuring projects now underway The underlying qualities of the Aerospace businesses are being improved including the accelerated development of new sustainable technologies. The Group will also benefit from exceptionally strong long-term future cash flows in Engines. An Aerospace Investor Day is to be held on 8 June 2022 to explain its exciting full shareholder value potential Automotive ended the year positively with 2021 fourth quarter sales up 12% on the third quarter, being almost back to levels seen in the first half of the year. Sales in early 2022 have started similarly positively, consistent with the most recent industry data Powder Metallurgy sales volume grew at more than double the rate of growth in car production in 2021 due to continued significant market share gains In 2021, adjusted¹ operating margins in both Automotive and Powder Metallurgy more than doubled despite the well-publicised supply challenges. During 2022, the full run rate benefits from the required restructuring projects in Automotive and Powder Metallurgy will materialise giving the opportunity to realise this shareholder value Buy Improve Sell 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 2. Based on existing businesses at 31 December 2021 LO 5#6Highlights Melrose ■ ■ Life of programme business wins of c.£5 billion in Automotive in 2021, of which more than one third are for pure electric vehicles (BEV), confirm that Automotive is both gaining market share and keeping pace with the faster than expected market conversion to electric vehicles. Importantly, these share gains are being achieved at terms consistent with its higher margin target Ergotron is running efficiently, making 25% adjusted¹ operating margins The new Hydrogen technology business, which has been separated from Powder Metallurgy, has a dedicated new CEO and management team and is positioned to achieve its first sales this year Justin Dowley, Chairman of Melrose Industries PLC, today said: "We have realised gains for shareholders by doubling the value of Nortek and significantly outperforming all Group cash generation targets, which has de-risked the route to value realisation from GKN. We have transformed the GKN businesses to increase their full potential including investing in sustainable technology and properly funding their pension schemes. With the benefits of significant restructuring increasingly coming through, combined with the strong cash generation, Melrose is positioned to create, and realise, significant value for shareholders." Buy Improve Sell 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 6#7Melrose Buy Improve Sell Melrose key financial numbers 7#8Ahead of expectations Melrose 1. 2021 results: showing significantly better cash generation and lower net debt¹ than expected Buy Improve Sell EPS¹ 4.1p Net debt¹ £950m Leverage¹ 1.3x Net debt¹ reduced from £2,847 million to £950 million in the year and leverage¹ reduced from 4.1x to 1.3x, transforming the Balance Sheet The Group's adjusted¹ operating profit, at constant currency, has tripled in the year on modest sales growth of 2%, demonstrating the substantial benefit of restructuring actions increasingly coming through EPS¹ in the year of 4.1p, equivalent to 4.4p if calculated using the number of shares in issue at 31 December 2021 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 8#9GKN acquisition net debt¹ fully repaid Melrose 2. Acquisition net debt¹ repaid: protecting shareholder value and de-risking the transformation in challenging conditions Buy Improve Sell £nil net debt¹ At GKN acquisition (2018) £3.4bn opening net debt¹ Leverage¹ c.2.5x £2.6bn disposal proceeds Acquisition net debt repaid £1.0bn free cash inflow² £1.2bn paid to shareholders Significantly protecting shareholder value, and de-risking the transformation of GKN At 31 December 2021 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 2. After total restructuring spend of £0.7 billion and pension contributions of £0.5 billion £0.95bn net debt¹ Despite challenging trading, the Group's opening net debt¹ at the GKN acquisition has been fully repaid, save cash paid to shareholders over that period Leverage¹ 1.3x 9#10Stronger finish to 2021 Melrose 3. Improved momentum: Q4 better than Q3 Buy Improve Sell Automotive Average monthly sales I Initial COVID- 19 impact 2019 2020 H2 bounce back in demand Q4 sales up 12% on Q3 Q3 2021 Q4 2021 Supply constrained but demand strong FY 19 Aerospace Average monthly sales 1. Based on existing businesses at 31 December 2021 H1 20 H2 20 18%¹ growth in H2 2021 v H2 2020 Growth has started to return in Aerospace with sales up 18%¹ in the second half of 2021 vs 2020 H121 Recent trends in Automotive improved with sales in Q4 2021 being 12% higher than Q3 and the new year starting similarly positively, consistent with industry data H2 21 10#11Impressive revenue gains Melrose 4. Revenue gains: Life of programme business wins in Automotive rose substantially and sales in Powder Metallurgy significantly outpaced the growth in car production in 2021 Buy Improve Sell Automotive & Powder Metallurgy 2021 3.4%² Light vehicle production - market growth +4% Automotive sales growth +13%3 Battery electric vehicle (BEV), fuel cell electric vehicle (FCEV) Powder Metallurgy sales growth New life of programme business wins of c.£5 billion in Automotive in 2021, were 20% higher than in 2020, enhanced by record wins on pure electric vehicles (BEV & FCEV)¹ and higher than the fully recovered pre-COVID-19 sales base 1. 2. Source: IHS Markit data February 2022 3. Sales volume growth of c.8%, material surcharge pass-through of c.5% +20% increase in Automotive life of programme business wins, enhanced by record wins on pure electric vehicles¹ Powder Metallurgy is taking significant market share gains, enabling volume to grow at more than double the rate of light vehicle production in 2021 11#12Keeping pace with the faster than expected conversion to electric vehicles Melrose 5. Electrification: Being won at margins consistent with the Automotive higher margin target Buy Improve Sell 1. ■ BEV & FCEV¹ ■ Full hybrid ICE¹ & Mild hybrid Automotive 2021 lifetime business wins 35% 15% 50% Won at terms consistent with the Automotive higher margin target Half of lifetime business wins in 2021 were for either pure electric or full hybrid platforms, 35% on pure electric vehicles (BEV & FCEV)¹ and 15% on full hybrid vehicles Importantly, share gains are being achieved at terms consistent with the business' higher margin target, driven by premium core product becoming more in demand in the electrification transition Internal combustion engine (ICE), battery electric vehicle (BEV), fuel cell electric vehicle (FCEV) 12#13Restructuring in GKN is well advanced Melrose 6. Automotive and Powder Metallurgy nearing completion, all significant Aerospace projects now underway Buy Improve Sell Automotive & Powder Metallurgy (required restructuring actions nearing completion) 1. 2021 margin more than doubled During 2022 full benefits of required restructuring materialise Aerospace (2021 margin improvement on flat¹ sales) 0.5% Based on existing businesses at 31 December 2021 FY 2020 +4ppts 4.4% Sales Operating margin All major Aerospace restructuring projects underway FY2021 Group (profits tripled on 2% sales growth, supply constrained) FY 2020 Sales Operating profit During 2022, the full run rate benefits from the required restructuring projects in Automotive and Powder Metallurgy will materialise giving the opportunity to realise this shareholder value FY 2021 13#14Significant upside potential being multiple times today's level Melrose 7. GKN positioned for significant upside: the full potential on a recovery is multiple times today's level Buy Improve Sell As an illustration: Continuing businesses Average upside¹ from current margins to margin targets c.6ppts Assuming an average sales recovery to 2019 level c.20% Average uplift² potential if full market recovery c.3x At pre-COVID-19 sales levels, significant margin growth remains in the GKN businesses, with potential to further triple current profit levels 1. Represents 2021 adjusted operating margins versus announced target margins 2. Represents mathematical uplift in adjusted operating profit if target margins are achieved and pre-COVID-19 sales return 14#15Cash generation qualities of all the businesses transformed Melrose 8. Each business has been cash positive since acquisition Buy Improve Sell Aerospace £0.6bn 1. Cash generation (post restructuring) since GKN acquisition Powder Metallurgy £0.4bn Automotive £0.7bn Other £0.7bn Total There are further opportunities existing to reduce Aerospace inventory levels £2.4bn (£0.9bn) (£0.5bn) £1.0bn Interest & tax Group pension contributions All businesses have been cash positive on a stand alone basis with their cash generation qualities transformed since acquisition Working capital in the GKN businesses has been reduced from 5% of sales at acquisition to 3% Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance Free cash flow¹ Restructuring spend of £0.7 billion since owning GKN, showing continued investment £1 in every £3 of free cash flow¹ since acquisition being paid into the Group's pension schemes, looking after all stakeholders 15#16GKN pension commitment delivered ahead of schedule Melrose 9. GKN UK pension schemes now in surplus Buy Improve Sell 1. 81% funded at acquisition 107%¹ funded so far Releases more free cash flow generated in the future Aerospace Excludes GKN UK Post Retirement Medical Scheme 107% funded so far Automotive GKN UK pension schemes¹ transformed into an accounting surplus of £179 million, 107% funded at 31 December 2021 compared to 81% at acquisition 108% funded so far Successful buy-out of part of the GKN UK 2016 Pension Plan, securing c.8,000 pensioner benefits and transferring £366 million of gross pension liabilities from the Group 16#17Buy Improve Sell Melrose The results Trading ahead of expectations 17#18Reconciliation between statutory and adjusted¹ results Melrose Continuing operations £m Statutory operating loss Amortisation of intangible assets acquired in business combinations Restructuring costs Exchange movements not hedge accounted Net release of fair value items Other Adjustments to statutory operating loss Adjusted¹ operating profit Continuing operations Statutory revenue Share of equity accounted investments Adjusted¹ revenue Statutory results 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 I 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 ■ Buy Improve Sell 1. Restructuring costs £m Aerospace Automotive Powder Metallurgy Other Industrial Corporate Total Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance Total (451) 452 269 114 (49) 40 826 375 Income Statement charge 92 147 18 12 269 Cash spent in 2021 193 7 200 £m 6,883 613 7,496 Cash spent in period 80 89 20 4 193 18#19Cash generation in the year: net debt¹ significantly reduced Melrose Free cash flow¹ Cash flow £m Adjusted² EBITDA Lease obligation payments Positive non-cash impact from loss-making contracts Reduction in working capital Adjusted operating cash flow (pre-capex)¹ Net capital expenditure Net interest and tax paid Defined benefit pension contributions - ongoing contributions Dividend income from equity accounted investments Restructuring Trading net other Cash flows from operations discontinued in the year³ Free cash flow¹ Adjusted free cash flow¹ ■ I Group 2021 734 Buy Improve Sell (54) (48) 62 694 (225) (205) (54) 52 (193) 3 53 125 323 Reconciliation of opening to closing net debt¹ Melrose has reduced net debt¹ further whilst still investing in the businesses Net debt¹ of £950 million at closing exchange rates of US $1.35 and €1.19 Reconciliation of net debt¹ Free cash flow¹ from all businesses of £125 million, fully self-funding all costs including restructuring spend of £193 million on continuing businesses Significant free cash generation since the GKN acquisition during the period impacted by the pandemic has protected shareholder value £m Net debt¹ brought forward Net cash flow from acquisition and disposal related activities Free cash inflow in the year Payments to shareholders Foreign exchange and other Net debt¹ at 31 December 2021 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance Calculated excluding EBITDA from equity accounted investments 2. 3. Includes £5 million of restructuring spend Group 2021 (2,847) 2,536 125 (798) 34 (950) 19#20Melrose Buy Improve Sell Business update Well positioned for strong profit growth 20#21Melrose business portfolio Strong market positions Growth underway Melrose Margins expanding Sustainable technology Buy Improve Sell 1. 2. ▪ Leading global tier one supplier on major civil and defence platforms ▪ Attractive engine portfolio with strong long-term cash flows ■ ▪ Increasing demand in attractive aftermarket and repair work I Aerospace ■ Civil market recovery underway, led by narrowbody All required restructuring projects now underway Adjusted¹ operating margin: 2020:0.5% →→→ 2021:4.4% Target 12%² ● ● Improving existing fleet efficiency ▪ Developing next generation of greener aircraft I I I I ■ I #1 in Driveline with ICE, hybrid and EV technology leadership Supplies 90% of OEMs, 50% of global vehicles Automotive Underlying demand strong but constrained by supply chain Electrification providing increased growth Restructuring accelerated and nearing completion Adjusted¹ operating margin: 2020:2.2% Target >10% 2021:4.6% ● ● - Leading EV drive system technology Significant investment into a range of eDrive capabilities ■ Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 10% margin target on a partial market recovery and 12% margin target on a recovery to pre-COVID-19 revenue #1 in supply of precision powder metal parts ▪ #2 in global powder metal production ■ Powder Metallurgy Sustainable share gains above market ▪ Momentum in higher value-add precision components Restructuring largely complete and improving business mix Adjusted¹ operating margin: 2020:4.3% 2021:9.3% Target 14% ● ● - Supporting EV expansion Commercialising additive manufacturing Plus Ergotron, a leading manufacturer of ergonomic products for use in a variety of working, learning and healthcare environments and GKN Hydrogen, a pioneer of state-of-the-art metal hydride storage technology 21#22Business results: expanded margins and strong cash flow Melrose Adjusted¹ results Continuing operations £m Aerospace Automotive Powder Metallurgy Other Industrial² Central Total ■ ■ I ■ I Buy Improve Sell 2021 Revenue 1. 2. 3. 2,543 3,745 975 233 7,496 2021 Operating profit/(loss) 112 172 91 51 (51) 375 2021 Operating margin 4.4% 4.6% 9.3% 21.9% 5.0% 2020 Revenue 2,804 3,797 905 217 7,723 2020 Operating profit/(loss) 14 82 39 52 (46) 141 2020 2021 cash Operating conversion margin (pre-capex)¹ 0.5% 2.2% 4.3% 24.0% Adjusted¹ revenue up 2% on 2020, at constant currency Group adjusted¹ operating margin increased by 3.2ppts driven primarily by improvements to the cost base Aerospace adjusted¹ operating profit up £98 million on flat³ sales Automotive and Powder Metallurgy more than doubled adjusted¹ operating margin in the year Continued strong cash generation with Group cash conversion (pre-capex) of 110% All businesses fully funded their improvement projects from free cash flow¹ 1.8% Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance Other Industrial now includes GKN Hydrogen (investment phase) Based on existing businesses at 31 December 2021 124% 96% 107% 74% 110% 2020 cash conversion (pre-capex)¹ 328% 153% 156% 124% 193% 22#23GKN Aerospace 1. Based on adjusted 2021 revenue for all continuing businesses 34% of Melrose¹ 23#24Aerospace: overview Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % 3 Revenue by business² Buy Improve Sell 2 12345 1 3. Adjusted¹ results 2021 2,543 258 Balanced portfolio, well positioned for narrowbody recovery 5. 1 Civil5 (32%) 2 Engines (34%) 3 Defence5 (34%) 10.1% 112 4.4% Growth Flat² 68% 4.3ppts 925% 3.9ppts I ■ ■ Markets remain impacted by COVID-19 with sales down 27% ² on 2019 Initial recovery started during year with sales growth of 18%² versus H2 2020 £98 million more operating profit on lower sales; margins up 3.9ppts Cash conversion (pre-capex) of 124% driven by working capital gains All required major restructuring projects to reach 12%³ margin target now approved and underway Revenue by source² 2 O 1 1 OE (90%) |2 Aftermarket (10%) Predominantly OE driven, with structural growth in attractive aftermarket 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 2. Based on existing businesses at 31 December 2021 10% margin target on a partial market recovery and 12% margin target on a recovery to pre-COVID-19 revenue 4. According to customer's country of domicile Civil and Defence relates to the airframes and components businesses 2 Revenue by destination ²,4 3 1 North America (68%) 2 Europe (30%) 3 Asia (2%) Providing vital technology to an enviable portfolio of global customers 24#25Aerospace: portfolio Civil airframes & components Defence airframes & components Melrose Engines Buy Improve Sell ■ Mix I Narrowbody 39% ▪ Widebody 24% Regional 37% ■ Civil 67% ■ Defence 33% Fighters 48% Rotorcraft 32% Other 20% Product 1. Risk and revenue sharing partnerships Provides main structures for all major civil OE players Produces key components for all OE engine manufacturers Provides structures and components for all major defence primes Demand Primarily driven by OE civil build rates (>50% Airbus) Linked to new build, flight hours, aftermarket and services/spares (including RRSPs¹) Linked to new build plus increasing aftermarket and spares/repair Increasing emphasis on higher margin "design to build" positions, plus Engines and Defence aftermarket growth Sustainable technology Excellent position on sustainable aircraft (e.g. Wing of Tomorrow and Alice) Leading additive manufacturing and development of alternative power (e.g. H2JET) Developing next generation aircraft, plus composite breakthroughs 25#26Aerospace: highlights Melrose Well positioned to benefit from ongoing market recovery Civil market anticipated to continue to improve throughout 2022; narrowbody recovery faster than widebody Working closely with customers, well prepared for Airbus and Boeing production ramp-up, especially A320 and B737 MAX Targeting and winning opportunities in business jets, urban air mobility and sub-regional electric aircraft - exciting growth potential I ■ I Excellent momentum towards margin target on significantly restructured cost base Significant margin progression in 2021 despite flat¹ sales; on track to 12% ² target operating margin Operational improvements in quality (customer quality issues down 32%) and delivery (past due down 13%) Extensive restructuring underway with wide range of projects approved - Defence remains area requiring most work, especially in US Ongoing footprint rationalisation on track in Europe, significant new projects started in US Recently announced closure of St Louis plant, exiting c.£140 million less profitable defence work Sold non-core, low margin businesses in The Netherlands; renegotiated or exited some unattractive business with more to follow Selective bidding, focused on higher margin "design to build" positions and growth in attractive aftermarket and repair Engines RRSPs³ and aftermarket set to generate good margins and very strong cash flows as flying hours increase I I I I I I Excellent cash generation, working capital tightly managed Strong cash performance with 124% cash conversion before capex Further reductions in inventory levels - targeting additional £50 million gains I Technology development to drive sustainable future of flight Progress on core technology including additive manufacturing, fan blade repair, composites and Wing of Tomorrow design Major contributor to next generation aircraft including electric and hydrogen platforms ■ I Buy Improve Sell 1. Based on existing businesses at 31 December 2021 - 23 10% margin target on a partial market recovery and 12% margin target on a recovery to pre-COVID-19 revenue 3. Risk and revenue sharing partnerships 2. 26#27Aerospace: earnings improvement trajectory H L Melrose 2018-2019 Good demand and revenue growth Quality fixes Initial operational improvement projects Started commercial actions 9.6%1 Buy Improve Sell 1. 2. 10.6% 2020 2021 Major revenue decline due to COVID-19 Strong decisive cost actions Quality and delivery improvements Started structural projects Sold non-core assets 0.5% 4.4% Annualised adjusted operating margin described in the glossary to the 2018 Preliminary Announcement 10% margin target on a partial market recovery and 12% margin target on a recovery to pre-COVID-19 revenue Steady civil market recovery ■ Execution of all restructuring projects ■ Outlook I Portfolio rationalisation, especially Defence Lower cost of quality and gains in productivity 12%² Excellent momentum towards margin target, well positioned to benefit from market recovery with continued strong future cash flows 27#28DOD GKN Automotive 1. Based on adjusted 2021 revenue for all continuing businesses 50% of Melrose¹ 28#29Automotive: overview Melrose £m Revenue EBITDA² EBITDA² margin % Operating profit Operating margin % 3 Buy Improve Sell 2 Revenue by destination Adjusted¹ results 2021 3,745 411 11.0% 172 4.6% 1 Europe (35%) 2 North America (31%) 3 Asia (30%) 4 ROW (4%) A truly global presence with a long established position in China Growth 4% 36% 2.5ppts 136% 2.4ppts ■ ■ ■ Sales 4% above last year, constrained by semi-conductor shortages Gaining momentum in electrification with core and eDrive products Adjusted¹ operating margin more than doubled, from 2.2% to 4.6% Cost base restructured significantly with more benefits to flow through Revenue by vehicle type 2 1 BEV & FCEV (6%) 2 Full hybrid (9%) 3 Mild hybrid (10%) 4 ICE (75%) A trusted partner for 90% of global OEMs, content on 50% of vehicles sold Life of programme business wins 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 2. Including depreciation and amortisation from equity accounted investments 3 2 1 BEV & FCEV (35%) 2 Full hybrid (15%) 3 Mild hybrid (18%) 4 ICE (32%) Over one third of the life of programme business wins in 2021 were on pure electric platforms; 50% including full hybrid platforms 29#30Automotive: highlights Melrose Structural growth in core products Growth at 4% year-on-year, with electrification gains Market remaining constrained by semi-conductor and labour shortages, however, in-month order cancellations are reducing I I Well positioned to capture incremental electrification growth Substantial share gains in core Driveline products on electric vehicles and hybrids - promising future mix Clear momentum in delivering growth from electrification eDrive business growing strongly driven by the launch of 12 new programmes across 11 global brands Now supplying 7 of the top 10 BEV platforms ■ Transforming the business with a clear path to >10% operating margin Adjusted¹ operating margin doubled in the year Restructuring accelerated, including Firenze site disposal and Birmingham closure on track for Q2 2022 During 2022, full run rate benefits from projects will materialise to achieve target margins when supply constraints ease H2 margins impacted by retaining capability and operational headcount ahead of expected 2022 volume increase Decisive actions being taken to offset inflation through further restructuring, procurement and pricing ■ I Cash well controlled with sustainable improvements in working capital Working capital managed closely through volatile demand caused by supply chain and labour constraints ▪ Restructuring self-funded through operational cash flow I Driving a cleaner, more sustainable world Leading technology contributes to the decarbonisation of the industry Intensive efforts to make products lighter and more efficient to reduce environmental impact I - ■ Buy Improve Sell 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 30#31Automotive: dual path electrification growth GKN electric vehicle/hybrid portfolio Melrose Above market growth from differentiated core products required for xEV¹ Core sideshafts Increased torque and power requirements driving larger sizes plus increasing number of sideshafts per vehicle Higher technological differentiation, with premium content offering gaining market share Revenue Profitability Buy Improve Sell Securing today Profit Grow with the market >10% operating profit margin as supply constraints ease ■ 1. XEV refers to vehicles with any degree of electrification eDrive systems & components Outlook Strong growth from new eDrive solutions required for xEV¹ Flexible approach to eDrive solutions; eDrive components sold separately or fully integrated eDrive systems Invested heavily in capabilities, including software and integration Focusing on the future >2x market growth driven by electrification mix Maintain higher margin nsion from market recovery and electrification lower cost base business 31#32GKN 16 1122 GKN Powder Metallurgy 1. Based on adjusted 2021 revenue for all continuing businesses 13% of Melrose¹ 32#33Powder Metallurgy: overview Melrose £m Revenue EBITDA² EBITDA² margin % Operating profit Operating margin % 2 Buy Improve Sell Revenue by segment³ 1. 2. 3. 3 Adjusted¹ results 2021 975 152 15.6% 91 9.3% 1 OneSinter (78%) 2 Powder (20%) 3 Additive (2%) Previous "non-performing" segment addressed and now part of OneSinter Growth 13% 49% 3.4ppts 162% 5.Oppts 3 2 Sales 13% above last year, 8% volume plus 5% material surcharge pass- through, growing faster than the market ▪ Adjusted¹ operating profit up 162% Adjusted¹ operating margin more than doubled, from 4.3% to 9.3% Restructuring actions well advanced, cost base addressed Positive mix due to focused portfolio actions I ■ ■ Revenue by destination³ 1 1 North America (41%) 2 Europe (35%) 3 Asia (20%) 4 ROW (4%) #1 global leader - well spread geographically Revenue by market type³ Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance Including depreciation and amortisation from equity accounted investments Based on existing businesses at 31 December 2021 2 1 1 Automotive components (26%) 2 Transmission (29%) 3 Engine (23%) 4 Industrial (22%) Good exposure to recovering automotive sector, increasingly powertrain agnostic, and general industrial market 33#34Powder Metallurgy: highlights Melrose Growth in the core businesses with market share gains Growing faster than the market due to share gains and business mix Expanding business into electrification - many opportunities to pursue as electric vehicle volume grows Additive manufacturing delivered 16% growth, positioned for expansion with serial production opportunities I I ■ Clear path to improve to 14% operating margin Adjusted¹ operating margin more than doubled in the year ■ I ■ Strong cash generation, working capital performance sustained as market recovers Tight cash management with cash conversion (pre-capex) at 107% despite sales growth Sustaining efficiency gains in working capital and self-funding all improvement projects Margin progression via restructuring, commercial strategy, productivity improvements Exited some low margin ICE business, gaining in non-ICE intricate parts Commodity pricing and inflation being well managed ■ Restructuring projects necessary to achieve target margin are largely complete, residual projects in process of being executed Non-performing segment largely addressed²; now part of OneSinter business unit Incremental high growth from exciting and sustainable technologies Additive manufacturing business growing rapidly, improving efficiency of manufacturing and reducing material waste Breakthrough opportunities in magnet technology for electric vehicles under development Buy Improve Sell 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 2. One site sold, one closing in 2022 and third under intensive improvement programme 34#35beta Other Industrial 1. Based on adjusted 2021 revenue for all continuing businesses ergotron 3% of Melrose¹ 35#36Other Industrial: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % GKN Hydrogen ■ ■ Adjusted¹ results 2021 Buy Improve Sell 233 55 23.6% 51 21.9% Growth 15% 5% (2.2ppts) 5% (2.1ppts) Ergotron Adjusted¹ results 2021 233 62 26.6% 58 24.9% Growth 15% 18% Ergotron Strong sales growth of 15% driven by continued growth in Healthcare and recovery in Office segments Encouraging growth outside US and positive momentum with digital channels Good progress on refreshing product portfolio, with updated CareFitTM Pro Medical Cart and successful TRACE™ Monitor Mount launches Premium operating margin maintained, focus on higher value-add products 0.8ppts 19% 0.9ppts Hydrogen Adjusted¹ results 2021 GKN Hydrogen has been separated from GKN Powder Metallurgy and launched as a stand-alone business Breakthrough opportunity based on proprietary metal hydride technology to store hydrogen in safe, compact and green manner Investment phase to commercialise technology; initial systems installed in field and revenue expected in 2022 New leadership with ex-CEO of Nortek Air Management recently appointed 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure performance 36#37Sustainability: overview Driving sustainable improvements in our businesses' financial, operational and environmental performance is at the heart of the Melrose "Buy, Improve, Sell" model Melrose I I I ■ Buy Improve Sell All of our businesses have a major opportunity and responsibility to decarbonise their industries - we are playing an exciting and important role in addressing climate change We deliver environmental improvements through setting Group sustainability targets and allocating capital accordingly Environmental targets are set for all our businesses aligned with their sectors - these extend beyond our ownership and management teams are accountable for their delivery Melrose is actively engaging with key stakeholders, including ESG rating agencies our investors rely on Inaugural standalone Melrose Sustainability Report will be published in April, which includes detailed plans and progress, plus case studies, TCFD disclosures and further information on our activities Initial environmental targets 1. 2. 3. ESG Ratings² Scope 1 and 2¹ Scope 3 MSCI Sustainalytics³ 20% reduction by 2025 40% reduction by 2030 Net zero earlier than 2050 Initial data gathering completed Assessment underway to prioritise 2020 BB 2021 : A "Above average" rating 2020 28.4 → 2021 : 53.6 ("average" to "strong") ESG management score in top quartile Most significant contribution is active participation in the decarbonisation of our sectors Scope 1 and 2 targets set in terms of energy intensity CO2e/£revenue ESG rating changes have included re-categorisation of Melrose to 'Industrial Conglomerate' ESG Risk Management Score 37#38Sustainability: decarbonising technology Melrose Aerospace Improving efficiency and sustainability of current aircraft: Wing of Tomorrow Buy Improve Sell Additive manufacturing - intermediate compressor case Developing next generation of alternative power aircraft: Alice electric aircraft UAM electric Automotive 1. Noise, vibration & harshness Producing driveline solutions tailored to electric vehicles: High efficiency, high torque, low NVH¹ sideshaft Developing a range of eDrive systems for electric/hybrid vehicles: 2-in-1 eDrive system 3-in-1 eDrive system Powder Metallurgy Focusing on supporting vehicle electrification: Cooling pump Magnet technology Commercialising additive manufacturing (AM) across sectors: Intricate metal powder AM Forecast 3D plastic AM Providing focus and investment to make our businesses more sustainable and valuable 38#39Sustainability: hydrogen (H2) investments Melrose GKN Aerospace H2 propulsion Cornerstone contributor to two flagship projects aiming to eliminate carbon emissions from flights Buy Improve Sell 01001 ■ I ■ H2GEAR - £54 million project with UK government funding Hydrogen Electric Ground based demonstration of 1MW by end 2025 H2JET - £2m project over 2 years with Swedish National funding Target to explore hydrogen combustion ready for major EU funded customer programme GKN Hydrogen storage Proprietary GKN technology for storing H2 safely in specialist metal hydride powders N GREEN SAFE COMPACT Opportunity with direct industrial H2 use plus back-up storage of green electricity Advantages over pressurised H2 storage and batteries Initial interest from regulators and potential customers in US, Europe and Australia Initial units in field; industrialisation planned in 2022+ Plus investment in UK hydrogen production start-up HiiROC to develop plasma technology to convert methane into H2 and solid carbon black for industrial use 39#40Melrose Buy Improve Sell Appendices 40#41Pensions Melrose Pension schemes I I 31 December 2021 £m UK Europe USA Rest of World Total pension schemes Acquisition commitment Buy Improve Sell 'Up to £1 billion' Assets 2,754 23 203 30 £0.35 billion 3,010 Significantly increased contributions in Melrose ownership Liabilities (2,582) (566) (289) (34) (3,471) GKN UK schemes now in accounting surplus of £172 million¹, equivalent funding surplus of c.£100 million The Group's gross pension plan liabilities have reduced by 25% during the year, including £379 million of gross liabilities transferred with businesses disposed and £366 million following a successful buy-out of the pensioners of the GKN UK 2016 scheme GKN UK Funding deficit: Accounting surplus/ Movement in the year (deficit) 172 290 33 51 (543) (86) (4) (461) £0.75 billion Improved investment strategy and other 3 377 At 31 December 2021 £0.1 billion surplus The Melrose funding commitment made on acquisition of GKN, fulfilled ahead of time. Ongoing annual payments are halved to £30 million and no funding requirement from future disposal proceeds 1. Includes a surplus of £179 million relating to the GKN UK Group Pension Schemes (numbers 1-4) and a deficit of £7 million relating to the GKN UK Post Retirement Medical Scheme 41#42Foreign exchange forward looking Melrose Exchange rates Average rates Closing rates Income Statement volatility - Translational impact Impact on adjusted¹ operating profit of a 10% strengthening² of: £m USD EUR Movement in adjusted¹ operating profit % impact on adjusted¹ operating profit ■ Buy Improve Sell 23 123 6% 3. 4 1% USD 1.38 1.35 CNY FY 2021 8 2% EUR 1.16 1.19 Other³ 11 3% FY 2020 USD 1.28 1.37 EUR 1.13 1.12 Balance Sheet volatility Impact on debt of a 10% strengthening² of: £m USD Increase in debt 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 10% strengthening against all currencies Assuming all other currencies strengthen against Sterling by 10% at the same time Transactional FX hedges taken out to provide appropriate short and medium-term cover: Next 12 months: c.90% covered 12 to 24 months: c.60% to 80% covered Group debt drawn in UK, US and Euro currencies to protect leverage, based on a mix of approximately 52% USD, 28% EUR and 20% GBP 74 EUR 37 42#43Aerospace Engines RRSP contracts: longer term cash inflows £ millions 500 0 Melrose Buy Improve Sell 2025 2030- GKN Aerospace - Engines' estimated RRSP longer term cash profile 2035- 2040- 2045- Time 2050- 2055- - 090Z Total value c. 18 Net present value c.3 Discount rate c.10% £ billion 2065- 43 2070-#44Some helpful data for 2021 Melrose Buy Improve Sell Continuing operations Item Adjusted¹ operating profit Central costs Free cash flow1 Underlying effective tax rate Net finance costs: Bank and loan related Lease obligation related Amortisation of debt arrangement costs Pension interest Other Depreciation and amortisation Capital expenditure Pension payments ongoing contributions (global) Restructuring costs Non-controlling interest Number of shares in issue at 31 December 2021 Weighted average number of shares in 2021 Adjusted¹ EBITDA for leverage covenant purposes Income Statement 2021 adjusted¹ results £375 million £51 million (includes a divisional LTIP charge of £17 million) N/A 22% (£93 million) (£14 million) (£10 million) (£8 million) £2 million (£425 million) N/A N/A (£269 million) £4 million 4,372 million 4,695 million £714 million Cash Flow 2021 adjusted¹ results N/A 1. Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance 2. Ongoing pension contributions will include £30 million per annum payable to the GKN UK pension schemes (£34 million) £125 million N/A (£140 million) £425 million (£225 million) (£54 million)² (£193 million) £nil N/A N/A N/A 44