#1Melrose Buy Improve Sell Melrose Industries PLC Half Year Results Six months ended 30 June 2021 2 September 2021 Strictly private and confidential#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 Free cash flow ² Net debt² Leverage ² Group ■ I ■ Proforma¹ (post Return of Capital) 2021 £m 3,828 223 109 2.5p 75 1,029 1.5x Buy Improve Sell Adjusted² results 2021 £m 3,828 223 109 2.2p 75 300 0.5x 2020 £m 3,624 (11) (80) (1.7)p 29 3,399 3.4x Statutory results 2021 £m 3,540 (137) (151) (3.1)p n/a n/a n/a 2020 £m 3,386 (618) (585) (12.1)p n/a n/a n/a 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 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 2. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021#5Highlights 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 Melrose ■ I I ■ 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% adjusted ¹ 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 Improve Sell 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 01 5#6Melrose Buy Improve Sell Melrose key financial numbers 6#7Melrose key financial numbers: ahead of expectations Melrose 1. H1 2021 Proforma¹ results: showing better profit margins, better earnings per share and significantly lower net debt¹ ■ I EPS¹ 2.5p Net debt¹ £1,029m Buy Improve Sell Proforma EPS¹ of 2.5p, calculated using the number of shares in issue following the Return of Capital and associated 9 for 10 share consolidation. This is a measure of the run rate earnings 1 Leverage ¹ 1.5x Proforma net debt¹ of £1,029 million and proforma leverage ¹ of 1.5x, including the £729 million Return of Capital (but excluding the Nortek Control proceeds) 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 7#8Melrose key financial numbers: increasing momentum Melrose 2. Increasing momentum: significant upside potential in the continuing businesses Buy Improve Sell ■ ■ Melrose margin target Businesses sold in 2021 (average)³ Continuing businesses (average) Continuing businesses Average upside ¹ from H1 margins to margin targets c.5 ppts Average sales recovery to 2019 level Significant upside potential in the continuing businesses This keeps Melrose shareholders invested in high rates of return 1. Represents H1 2021 operating margins versus announced target margins 2. Represents uplift in profit required to reach target operating margins on 2019 sales 3. Includes Nortek Control (contracts exchanged on 23 August 2021) 19% Based on 2020 revenue 2 Resulting average profit potential uplift² c.2.5x 1 Continuing businesses (83%) 2 Businesses sold in 2021 (17%) ³ 8#9Melrose key financial numbers: good margin progression Melrose 3. Margin progression: Automotive & Powder Metallurgy ahead of plan and restructuring fully underway I ■ Aerospace Automotive Powder Metallurgy H1 2021 operating margins 3.4% Buy Improve Sell 6.2% 11.2% Target operating margins 10% 1 > 10% 14% % of required projects already underway c.50% 100% 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 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 1. Assuming only a partial market recovery, 12% assuming a full market recovery to 2019 sales levels 2. Projects required to achieve operating margin target in Powder Metallurgy, excluding the investment in Hydrogen Storage Technology 9#10Melrose key financial numbers: GKN & Nortek both highly cash generative Melrose 4. Strong cash generation since the GKN acquisition from all businesses Total Melrose cash flows since GKN acquisition: Total cash inflow £3.5bn At GKN acquisition (2018) Buy Improve Sell £3.4bn Opening net debt¹ Leverage ¹ c.2.5x £2.5bn Disposals £1.0bn Free cash inflow ¹ £0.7bn Return of Capital £0.4bn Dividends Total paid to shareholders £1.1bn At 30 June 2021 £1.0bn Current proforma net debt¹ Proforma leverage ¹ 1.5x £3.5 billion total cash inflow since GKN acquisition: £1.0 billion of free cash flow¹ from the business post all costs (see next slide) £2.5 billion of disposal proceeds (excluding Nortek Control) Significant debt reduction and shareholder repayment made (see next slide) 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 Total cash inflow Total paid to shareholders Total debt reduction £3.5bn (£1.1bn) £2.4bn 10#11Melrose key financial numbers: GKN & Nortek both highly cash generative (continued) Melrose 4. Strong cash generation since the GKN acquisition from all businesses (continued) Free cash inflow¹ since GKN acquisition £1.0bn Buy Improve Sell Total £0.8bn 1 GKN £0.6bn Nortek² £1 billion: Use of £3.5 billion total cash generation since GKN acquisition: Central costs, tax & interest. 1 Return to shareholders £1.1bn (31%) 2 Debt reduction £2.4bn (69%) £0.4bn ■ GKN has generated £1.7 billion of gross cash inflow since ownership (120% profit conversion to cash post capex) which has more than self funded its £0.5 billion of restructuring costs and £0.4 billion³ of pension contributions, giving £0.8 billion of total net free cash inflow from GKN in Melrose ownership so far Total cash inflow Melrose has generated £3.5 billion of total cash inflow since the GKN acquisition, consisting of £1 billion of free cash inflow and £2.5 billion of proceeds from disposals (excluding Nortek Control) Use of proceeds Currently debt reduction has been prioritised with £2.4 billion (69%) of the total cash inflow being used to lower debt and £1.1 billion (31%) returned to shareholders. There is room for a further Capital Return next year 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Nortek cash generation of £0.6 billion since GKN acquisition. During Melrose ownership Nortek has generated over £0.7 billion of cash after all costs 3. Includes £0.3 billion of contributions to GKN UK pension schemes and £0.1 billion to pension schemes in the rest of the world as at 30 June 2021 11#12Melrose key financial numbers: Balance Sheet currently more conservative than normal Melrose 5. The Melrose Balance Sheet has spare capacity for a further significant Return of Capital next year I ■ I Net debt¹ Actual June 2021 £300m Buy Improve Sell Proforma ¹ June 2021 (post Return of Capital) £1,029m 0.5x leverage ¹ 1.5x leverage ¹ Current proforma¹ position Melrose life time average Potential size of Capital Return next year based on various leverage scenarios (uses H1 2021 x 2 profits)² Leverage ¹ 1.5x 1.75x 2.0x 2.25x 2.5x £m 180 380 580 780 980 Pence per share ³ The Melrose Balance Sheet is currently more conservative than the life time average of 2.0x to 2.5x leverage ¹ Net debt¹ at 30 June 2021 significantly reduced to £300 million, leverage ¹ of 0.5x EBITDA Proforma net debt¹ at 30 June 2021 is £1,029 million and Proforma leverage¹ at 30 June 2021 is 1.5x post announced Return of Capital 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Calculated using H1 adjusted EBITDA for leverage covenant purposes, for the continuing Group of £403 million 3. Calculated using the number of shares in issue following the Return of Capital and associated share consolidation (4,372 million) 4p 9p 13p 18p 23p 12#13Melrose key financial numbers: GKN pension commitment delivered ahead of schedule Melrose 6. GKN UK defined benefit pension scheme commitment has been delivered ahead of schedule Funding deficit: Acquisition commitment I 'Up to £1 billion' Buy Improve Sell Significantly increased contributions in Melrose ownership¹ 81% funded at acquisition £0.35 billion The Melrose pension commitment to GKN has been delivered ahead of time. The net funding deficit on acquisition was £938 million, this has been reduced to c.£150 million and the annual contribution now halves to £30 million with no ongoing requirement to contribute from future disposal proceeds Accounting deficit: All acquisitions 102% 1 funded after Melrose ownership Improved investment strategy and other £0.45 billion 1. Including £64 million of contributions paid post 30 June 2021 81% funded at acquisition All UK pension schemes much better funded under Melrose ownership Annual payment halves to £30 million GKN UK No requirement for future disposal proceeds 101% 1 funded so far 13#14Melrose key financial numbers: Nortek delivering good returns for shareholders Melrose 7. Nortek: 87% complete (following Nortek Control exchange of contracts) ■ I ■ ■ Nortek shareholder returns ¹ Buy Improve Sell 2.2x Return on equity² Nortek Air Management disposal for gross proceeds of £2.6 billion ($3.6 billion), 12.5x 2020 adjusted³ EBITDA Nortek Control agreed to be sold for £0.2 billion in August 2021, just under 1x 2020 revenue At constant currency, Nortek is well on the way to doubling shareholders' initial equity, and achieving an IRR of >20% At actual exchange rates Return on Equity is approximately 2.0x 1. 2. 3. 21% IRR² Assumes Ergotron is at book value as at 30 June 2021 At constant currency and adjusting for the foreign exchange headwind since ownership of Nortek Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 14#15Buy Improve Sell Melrose The results Trading ahead of expectations 15#16Summary of results Melrose Continuing operations Revenue Operating profit/(loss) Profit/(loss) after tax Diluted earnings per share Free cash flow² Net debt² Leverage ² ■ I Proforma¹ (post Return of Capital) Buy Improve Sell 2021 £m 3,828 223 109 2.5p 75 1,029 1.5x Adjusted ² results 2021 £m 3,828 223 109 2.2p 75 300 0.5x 2020 £m 3,624 (11) (80) (1.7)p 29 3,399 3.4x Statutory results 2021 £m 3,540 (137) (151) (3.1) p n/a n/a n/a 2020 £m 3,386 (618) (585) (12.1)p n/a n/a n/a The Group is trading ahead of expectations, with better profit margins, better earnings per share and significantly lower net debt² Proforma net debt² of £1,029 million at 30 June 2021 and proforma leverage2 of 1.5x after the Return of Capital 1. Proforma results are presented to give a meaningful measure of ongoing performance, adjusting for the Return of Capital and the associated share consolidation 2. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 16#17Reconciliation 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 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. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 Restructuring costs £m Aerospace Automotive Powder Metallurgy Other Industrial Corporate Total Total (137) 226 85 44 (9) 14 360 223 Income Statement charge 26 52 3 4 85 Cash spent in 2021 92 92 £m 3,540 288 3,828 Cash spent in period 44 34 11 3 92 17#18Cash generation in the period: net debt significantly reduced Melrose Free cash flow ² Cash flow from continuing operations £m Adjusted¹ EBITDA Lease obligation payments Positive non-cash impact from loss-making contracts Reduction in working capital Adjusted operating cash flow (pre-capex)² Net capital expenditure Net interest and tax paid Defined benefit pension contributions - ongoing contributions Dividend income from equity accounted investments Trading net other Adjusted free cash flow ² Restructuring Free cash flow 2 ■ I I I Group 2021 404 (29) (23) 6 Buy Improve Sell 358 (104) (113) (12) 26 1. 2. 3. 12 167 (92) 75 Reconciliation of opening to closing net debt² Reconciliation of net debt² £m Net debt² brought forward Net cash flow from acquisition and disposal related activities ³ Free cash inflow in the Period Discontinued operations Payments to shareholders Foreign exchange and other Net debt² at 30 June 2021 Proforma net debt reconciliation £m Net debt2 at 30 June 2021 Return of Capital (15 pence per share) Proforma net debt at 30 June 2021 A further £56 million free cash flow2 was generated from discontinued businesses in the Period Melrose continues to reduce net debt² whilst still investing in the businesses Net debt² of £300 million at closing exchange rates of US $1.38 and €1.16 Adjusted free cash flow2 from continuing operations of £167 million, 43% higher than 2020 for these businesses, prior to £92 million of restructuring costs Group 2021 (2,847) 2,401 75 56 (36) 51 (300) (300) (729) (1,029) Calculated excluding EBITDA from equity accounted investments Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 Includes tax paid of £32 million following the extraction of Ergotron and Nortek Control from the Nortek tax group and specific pension contributions of £39 million paid prior to 18 the disposals of Nortek Air Management and Brush#19Melrose Buy Improve Sell Business update Clear momentum to target margins 19#20Melrose business portfolio Strong market position Melrose Recovering markets Margin expansion opportunity Sustainable technology Buy Improve Sell ■ Aerospace Leading global tier one supplier Strong positions on major civil and defence platforms ▪ Civil market recovering, led by narrowbody demand ▪ Defence demand remains strong Around half of required restructuring underway ▪ Momentum for significant operational gains (quality, delivery, productivity) Improving existing fleet efficiency Developing next generation of greener aircraft ■ I Automotive ■ #1 in Driveline with technology leadership Supplies 90% of OEMs, 50% of global vehicles Sales currently constrained by semi-conductor shortage All restructuring projects underway ■ Transformation opportunity greater than expected on acquisition Strong underlying consumer demand, especially for EVS Leading EV drive system technology Significant investment into full range of eDrive system capabilities ■ #1 in supply of precision powder metal parts ▪ #2 in powder metal production ■ Powder Metallurgy ■ Sales currently constrained by semi-conductor shortage Strong industrial demand and auto recovery expected All restructuring projects underway Focused in few remaining non- performing areas Compact and safe hydrogen storage solutions Commercialising additive manufacturing Plus Ergotron, a leading manufacturer of digital display mounting, furniture and mobility products 20#21Business results: improved performance Melrose Adjusted¹ results Continuing operations £m Aerospace Automotive Powder Metallurgy Other Industrial Central Total ■ I ■ ■ Revenue Buy Improve Sell 1,219 1,965 535 109 3,828 Operating profit/(loss) 41 121 60 27 (26) 223 Operating margin 3.4% 6.2% 11.2% 24.8% 5.8% H1 2020 Revenue 1,580 1,541 396 107 3,624 H1 2020 Operating profit/(loss) 54 (64) (3) 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Calculated at constant currency 22 (20) (11) H1 2020 Operating margin 3.4% (4.2%) (0.8%) 20.6% Adjusted¹ revenue up 12% 2 on H1 2020 Group adjusted¹ operating margin increases from (0.3%) to 5.8% highlighting continuing cost savings Aerospace revenue down 18% 2 due to ongoing COVID-19 impact; profitability retained Automotive and Powder Metallurgy good recovery tapered by supply shortages of semi-conductors; margins up strongly Further operational improvements and restructuring benefits to come through in H2 2021 (0.3%) 21#22TORRES GKN Aerospace 1. Based on adjusted H1 2021 revenue for all continuing businesses S 32% of Melrose¹ 22#23Aerospace: overview Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % 3 2 Buy Improve Sell Revenue by platform Adjusted ¹ results H1 2021 1,219 112 9.2% Balanced portfolio, well positioned for narrowbody recovery 41 3.4% 1 Defence (46%) 2 Civil: narrowbody (21%) 3 Civil: widebody (19%) 4 Civil: other (14%) Adjusted ¹ results FY 2020 2,804 163 5.8% 2 14 0.5% I ■ 3 Markets remain impacted by COVID-19 with sales down 33% ² on H1 2019 and 18% 2 on H1 2020 Modest sequential sales growth of 4% ² versus H2 2020 linked to initial recovery Encouraging earnings momentum with margins up +2.9ppts Significant restructuring ongoing, more benefits to come Revenue by product type ● 1 Airframes (53%) 2 Engines (33%) 3 Components (14%) Broad range of products, systems and advanced technologies 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Calculated at constant currency Revenue by source 2 ● 1 1 OE (91%) 2 Aftermarket (9%) Predominantly OE driven, with increasing opportunity in attractive aftermarket 23#24Aerospace: portfolio Civil airframes & components Defence airframes & components Melrose Engines Buy Improve Sell ■ Narrowbody 39% Widebody 27% Regional 34% I Mix ■ Civil 63% ■ Defence 37% ■ Fighters 48% I Rotorcraft 33% I Other 19% Product 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, aftermarket and services/spares (including RRSP) Linked to new build plus increasing aftermarket and spares/repair (-30% F35) Increasing emphasis on higher margin "design to build" positions, plus Engines and Defence aftermarket growth Technology Excellent position on sustainable aircraft (e.g. Wing of Tomorrow and Alice) Leading additive manufacturing and development of alternative power (e.g. H2GEAR) Developing next generation aircraft (e.g. US advanced programmes), plus composite breakthroughs 24#25Aerospace: improvement actions Commercial mix Melrose Operational gains Restructuring Buy Improve Sell 1. ■ I ■ ■ I Progress to date Reduced exposure to legacy onerous contracts by >60% Renegotiated or exited some unattractive business Sold non-core, low margin businesses in The Netherlands Ongoing deployment of lean operating model Quality delivered to customer improved by 39% 1 Productivity up by 7% in H1 Significant demand led headcount reduction linked to COVID-19 impact ▪ Structural projects underway in Europe (e.g. Kings Norton and Nordics) ■ As measured by quality escapes: parts shipped to customers that do not meet full quality requirements I ■ ■ Future actions Continued/accelerated renegotiation or exit Focus growth in attractive aftermarket and repair Selective bidding, concentrated on design to build Major focus on further reducing costs of quality Driving productivity as demand recovers Preparing for ramp-up in civil OE I Accelerated execution of restructuring underway (approximately 50% of projects) Starting new restructuring projects in H2, including in North America Actions underpin delivery of 10% margins on partial market recovery 25#26Aerospace: highlights Melrose Global tier one leader in civil and defence Balanced portfolio covering airframes, engines and components Established positions on all high volume platforms - e.g. A320, B737, F35 Expanding 'design to build' capability Growth in engines and components aftermarket Well positioned to benefit from market recovery Good exposure to expected civil narrowbody ramp-up to >2019 levels Engines RRSPs and aftermarket set to generate strong margins and cash as flying hours increase Underway with transforming the business, clear path to 10% profit on partial market recovery Actions taken are reading through to improved margins ahead of recovery Significant further work underway to drive operational gains in quality, delivery and productivity Around 50% of structural projects started, others to commence in H2 2021 Ongoing focus to maintain technology leadership and develop sustainable aviation Improving efficiency of existing aircraft - e.g. less drag wing design, lighter components and lower energy manufacturing methods Developing next generation of aircraft - e.g. Eviation Alice, H2GEAR and selective UAM platforms Building differentiated capability through global technology centres - e.g. UK, The Netherlands, Sweden and USA I ■ ■ ■ ■ ■ I I I ■ Buy Improve Sell 26#27GKN Automotive 1. Based on adjusted H1 2021 revenue for all continuing businesses S> VIT MANN SMANICTV 20 Gastro Panasonic 51% of Melrose¹ 27#28Automotive: overview Melrose £m Revenue EBITDA² EBITDA2 margin % Operating profit Operating margin % 2 3 Buy Improve Sell Adjusted¹ results H1 2021 1,965 238 Revenue by product type 12.1% 121 6.2% 1 Driveline (70%) 2 All Wheel Drive (24%) 3 eDrive (4%) 4 Cylinder Liners (2%) A trusted partner for 90% of global OEMs, content on 50% of vehicles sold Adjusted ¹ results FY 2020 3,797 322 8.5% 3 82 2.2% ■ 2 Approximately 9% annualised sales growth (2x H1 2021 versus FY 2020 at constant currency) Strong margin progress from 2.2% to 6.2% Improvement actions reading through, ahead of plan H1 new business bookings 1 BEV 2 Full hybrid 3 Mild hybrid 4 ICE Over one third of the new business bookings in H1 were on pure electric platforms; over 50% including full hybrid platforms 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Including depreciation and amortisation from equity accounted investments 3 4 2 Revenue by destination 1 Europe (37%) 2 North America (30%) 3 Asia (29%) 4 ROW (4%) A truly global presence with a long established position in China 28#29Automotive: highlights Melrose Global leader in drive systems #1 in Driveline, with clear technology leadership and over 40% market share in its core product Increased torque and power requirements of electric vehicles benefits GKN Automotive's core product strengths I I Structural growth in core products Sales are currently constrained by ongoing semi-conductor supply chain shortages, underlying consumer demand higher GKN Automotive's long-term outlook is to grow at a rate of more than double global light vehicle production ■ I Well positioned to capture incremental electrification growth eDrive strategy enables flexibility to supply either components or integrated systems depending on OEM outsourcing strategy Full drive system portfolio expands content per vehicle with electrification In the last 18 months Automotive has been awarded six major eDrive programmes for global and Chinese vehicle manufacturers and has a strong pipeline for the future I I Transforming the business, with a clear path to >10% profit Ahead of plan on transformation, all restructuring projects necessary to achieve the target margin are already underway Tight control of costs and restructuring actions means small profit impact from global supply issues; 8% decremental margin in H1 versus H2 2020, holding margin at 6.2% I Driving a cleaner, more sustainable world Leading technology contributes to the decarbonisation of the industry Developing lighter, more efficient EV powertrains for the volume automotive market ■ Over one third of the new business bookings in H1 were on pure electric platforms; over 50% including full hybrid platforms. Wins include a major new 3-in-1 system for a leading German OEM I Buy Improve Sell 29#30GKN Powder Metallurgy 1. Based on adjusted H1 2021 revenue for all continuing businesses 14% of Melrose¹ 30#31Powder Metallurgy: overview Melrose £m Revenue EBITDA² EBITDA2 margin % Operating profit Operating margin % 2 3 Buy Improve Sell Revenue by segment³ Adjusted ¹ results H1 2021 535 92 17.2% 60 11.2% 1 OneSinter (69%) 2 Non-performing (10%) 3 Powder (19%) 4 Additive (2%) Non-performing segment has reduced from 16% to 10% of the business Adjusted¹ results FY 2020 905 110 12.2% 39 4.3% 3 2 ■ ■ Growing faster than the market due to share gains, annualised sales up 25% (2x H1 2021 versus FY 2020 at constant currency) Excellent margin progress from 4.3% to 11.2% Improvement actions benefitting results and expected to be substantially complete by the end of the year Revenue by destination 1 1 North America (42%) 2 Europe (37%) 3 Asia (19%) 4 ROW (2%) #1 global leader - well spread geographically 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Including depreciation and amortisation from equity accounted investments 3. Excluding non-performing plant sold in the Period Revenue by market type³ 2 1 Automotive components (33%) 2 Transmission (25%) 3 Engine (23%) 4 Industrial (19%) Good exposure to recovering automotive sector, increasingly powertrain agnostic, and general industrial market 31#32Powder Metallurgy: highlights Melrose Global leader in Powder Metallurgy #1 global producer of precision powder metal parts -17% market share ▪ #2 global producer of powder metal -24% market share ■ Growth in the core business with market share gains Growing faster than the market due to share gains -43% year on year H1 sales growth exceeds 29% increase in light vehicle production by 14 ppts £120 million of annual sales won in attractive segments with continued good momentum in H1 ■ ■ A clear path to improve to 14% operating margin Approaching 70% of sales already above 14% margins. H1 operating margin of 11.2% (12.0% excluding hydrogen start-up costs) I ■ ■ ■ ■ Three non-performing sites; one sold, one announced to close and the third plant is under an intensive operational improvement programme Incremental high growth from exciting and sustainable new technologies Hydrogen storage business launched and in development - safe and reliable method for storing green and rapidly growing energy source ■ All restructuring projects necessary to achieve the target margin are already underway, non-performing segment reduced from 16% of the business to 10% Restructuring largely complete by the end of this year Additive growth in H1, +15% year on year, improving efficiency of manufacturing and reducing material waste Buy Improve Sell AN> HYDROGEN KN ADDITIVE 32#33Other Industrial 1. Based on adjusted H1 2021 revenue for all continuing businesses ROASTAL ENDURO GRRATHONY CUBOTDE 3% of Melrose¹ 33#34Other Industrial: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % Overview ■ Adjusted ¹ results H1 2021 ■ 109 Buy Improve Sell 28 25.7% 27 24.8% Adjusted¹ results FY 2020 217 56 25.8% Following the disposal of Brush and the reclassification of Nortek Control to held for sale, both are shown as discontinued and Ergotron is the remaining business Other Industrial 52 Ergotron Positive sales momentum as office sales recover, new products gain traction and digital channels grow Business returned to premium operating margins Planned exit of low profitability business and focus on higher margin, higher value-add products well underway 24.0% 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 34#35Sustainable technology Melrose Aerospace Improving efficiency and sustainability of current aircraft: Wing of Tomorrow Buy Improve Sell Additive manufacturing air cases Developing next generation of alternative power aircraft: Alice electric aircraft H2GEAR hydrogen propulsion Automotive Producing driveline solutions tailored to electric vehicles: High efficiency, high torque, low NVH sideshaft Developing a range of eDrive systems for electric/hybrid vehicles: 2-in-1 eDrive system 3-in-1 eDrive system Powder Metallurgy Commercialising additive manufacturing (AM) across sectors: 127 Developing breakthrough sustainable storage solutions: GREEN COMPACT Intricate metal powder AM Providing focus and investment to make our businesses sustainable and valuable Forecast 3D plastic AM GKN Hydrogen 35#36Melrose Buy Improve Sell Appendices 36#37Pensions Melrose Pension schemes ■ ■ I 30 June 2021 £m UK Europe USA Rest of World Total pension schemes Accounting deficit by region ● Buy Improve Sell 3 1 2 Assets 2,959 UK (7%) ■ Europe (77%) USA (15%) ROW (1%) 24 197 32 Of the £145 million movement in the Period a £56 million net surplus was sold as part of the Nortek Air Management and Brush disposals Since the half year £64 million has been paid into the GKN UK schemes European schemes represent 77% of the Group deficit, largely "pay as you go" schemes 3,212 Liabilities (3,006) (557) (303) (39) (3,905) Accounting surplus/ (deficit) (47) (533) (106) (7) (693) Movement in the period 71 43 31 145 37#38Foreign 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 EUR Movement in adjusted¹ operating profit % impact on adjusted ¹ operating profit ■ I USD Buy Improve Sell 29 6% 11 2% USD H1 2021 1.39 1.38 CNY 8 2% EUR 1.15 1.16 Other³ 12 2% H1 2020 USD 1.26 1.24 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. 10% strengthening against all currencies 3. Assuming all other currencies strengthen against Sterling by 10% at the same time EUR 1.14 1.10 FY 2020 Increase in debt USD 1.28 1.37 EUR 1.13 1.12 Balance Sheet volatility Impact on debt of a 10% strengthening² of: £m USD 85 EUR 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 47 38#39Some helpful data for H1 2021 Melrose Buy Improve Sell Continuing operations Item Adjusted¹ operating profit Central costs Adjusted¹ free cash flow ¹ Underlying effective tax rate 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 30 June 2021 Number of shares in issue post Return of Capital Weighted average number of shares in 2021 H1 adjusted¹ EBITDA for leverage covenant purposes Income Statement H1 2021 adjusted¹ results £223 million £26 million (includes a divisional LTIP charge of £10 million) N/A 22% (£65 million) (£7 million) (£5 million) (£4 million) (£1 million) (£209 million) N/A N/A (£85 million) £1 million 4,858 million 4,372 million 4,695 million £403 million 1. Described in the glossary to the 2021 Interim Financial Statements, released on 2 September 2021 2. Ongoing pension contributions will include £30 million per annum payable to the GKN UK pension schemes Cash Flow H1 2021 adjusted¹ results N/A (£16 million) £167 million N/A (£73 million) £209 million (£104 million) (£12 million)² (£92 million) £nil N/A N/A N/A N/A 39