#1Melrose Buy Improve Sell GKN Automotive Melrose Industries PLC Full Year Results Year ended 31 December 2020 4 March 2021 Strictly private and confidential GKN Aerospace#2Contents Melrose Buy Improve Sell 1 Introduction 2 Melrose track record 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. Margins are calculated using unrounded numbers 1#3Melrose Buy Improve Sell Introduction 2#4Introduction: 2020 Focus Melrose 2020 Focus Prioritise cash ■ H Reduce debt ■ ■ Continued focus on improving businesses Nortek Air Management operating margins doubled since acquisition, from 8.6% to 17.3% in H2 2020 £172 million spent on restructuring the Group in 2020 Improvement process of GKN has been accelerated ■ Record adjusted free cashflow¹ of £628 million (6% higher than 2019) Level of spend on R&D protected ■ Return to paying a dividend ■ Group net debt reduced by over £400 million (13%) to £2.85 billion H2 annualised proforma leverage¹ of c.3.2x EBITDA Buy Improve Sell 0.75 pence per share to be paid in May A progressive dividend policy is intended to be reintroduced for future periods Pensions A very good story on reducing the deficit², accounting deficit down from £0.7 billion pre-acquisition to £0.1 billion Increased company contributions and sensible investment strategy 1. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 2. Accounting deficit on the GKN UK pension schemes 3#5Introduction: 2021 Focus Melrose 2021 Focus Continued focus on cash generation ■ I Continued focus on improvement Aerospace not yet in recovery mode, restructuring therefore a particular focus Automotive - continued focus on restructuring strong recovery in H2 2020 - electric vehicle development ■ I ■ Capex - 2020 tightly managed, will build from here Significant working capital improvement achieved, more to come ■ Nortek Air Management Buy Improve Sell Powder Metallurgy - new hydrogen storage technology additive manufacturing opportunities - strong recovery in H2 2020 Record growth rate being achieved in buoyant market Sale process underway 4#6Melrose Buy Improve Sell Melrose track record Managing successfully in a crisis LO 5#7Melrose track record: managing successfully in a crisis Six key stats to show real progress: 1. Significant progress on reshaping GKN's cost base to reach current margin targets Melrose Buy Improve Sell Half way through Efficiency improvement needed to hit current margin targets +5% 15.3% 2020 2. Nortek Air Management achieving record growth and margins +16% 17.3% 2020 H2 Two thirds through +2%¹ revenue growth in H2 1. Excluding the Aerospace division +18% 17.3% Aerospace 10% 2020 Q4 Automotive 10% Powder Met. 14% Margins doubled since acquisition ■ Revenue growth Margin ■ +9%1¹ revenue growth in Q4 ■ 3. Excluding Aerospace, revenue momentum returning in the Group ■ ■ ■ ■ Further progress has been made to reshape the GKN cost base Cost savings made by 2021 amount to two thirds of the total required savings to hit current margin targets on partial market recoveries Nortek Air Management is showing its fastest growth seen in Melrose ownership Margins in second half of 17.3%, up from 8.6% on acquisition, and revenue growth of 16% Further improvement to come, end markets are buoyant Significantly improved revenue momentum shown in the second half H2 growth, excluding Aerospace, averaged 2% Q4 growth, excluding Aerospace, averaged 9% O) 6#8Melrose track record: managing successfully in a crisis Melrose Buy Improve Sell 4. Aerospace cut the most inventory in 2020 and has the highest year over year restructuring cost savings for 2021 Aerospace is not currently seeing a recovery in its civil end market, so is having to reshape the most Aerospace inventory reduction in 2020 £128m, 21% 1. 2. 5. Highest ever year for Melrose cash generation¹ £322m Second half 2019 6. Leverage² reducing 4.3x Consensus £415m Aerospace year over year restructuring savings for 2021 as a proportion of the Group savings Second half 2020 4.1x Actual £591m >60% Full year 2019 £628m Full year 2020 3.2x Proforma (H2 annualised) ■ ■ ■ ■ ■ ■ ■ ■ Inventory reduction achieved in Aerospace in 2020 of 21% Much has been achieved and more restructuring savings are to come Melrose achieved its record cash generation in 2020, despite the significant profit reduction Particularly strong year on year growth seen in the second half, 29% up on 2019 Working capital improvement, more to come Leverage reducing faster than planned On a proforma run rate basis (annualising H2 profits) leverage is 3.2x; the next covenant test will be 5.25x at December 2021 Proforma leverage closer to the Melrose norm of 2x to 3x Adjusted free cash flow is described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 7#9Buy Improve Sell Melrose The results At the top end of expectations 8#10Summary of results Melrose Continuing operations Revenue Operating profit/(loss) Profit/(loss) after tax Diluted earnings per share Free cash flow² Net Debt I Adjusted¹ results 2020 £m 9,361 340 120 2.4p Buy Improve Sell 628 2,847 2019 £m 11,592 1,102 699 14.3p 591 3,283 1. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 2. Adjusted free cash flow in the year excludes restructuring and cash used in discontinued operations Statutory results 2020 £m 8,770 (338) (523) (10.8)p n/a n/a Adjusted free cash generation² was £628 million, 6% higher than 2019, prior to £172 million of restructuring costs. In achieving this cashflow investment levels in R&D and new products have been protected and working capital levels significantly improved, with more to come 2019 £m 10,967 318 Trading was at the top end of management expectations throughout the second half of 2020. Excluding Aerospace, the other divisions on average achieved increased second half revenue over 2019 of 2% and 9% in the final quarter ▪ Savings from restructuring projects underway in GKN are expected to improve the 2021 trading performance by approximately £125 million, with more to come The Group made an adjusted¹ operating profit of £340 million in 2020. The statutory operating loss was £338 million; of the £678 million adjusting items, only £178 million were cash items, almost all related to restructuring 0.9p 55 The strong cash generation resulted in Group net debt reducing by over £400 million (13% of net debt) to £2.85 billion at the end of 2020 (31 December 2019: £3.3 billion). Year end leverage¹ was 4.1x EBITDA, but annualising the second half performance the proforma leverage¹ was approximately 3.2x EBITDA n/a n/a 9#11Reconciliation between statutory and adjusted¹ results Melrose Continuing operations £m Statutory operating loss Amortisation of intangible assets acquired in business combinations Restructuring costs Asset write downs due to COVID-19 (largely booked in H1) 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. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Restructuring costs £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Corporate Total Total (338) 526 220 184 (182) (118) 48 678 340 Income Statement charge 110 60 48 3 (3) 2 220 Cash spent in 2020 172 6 178 £m 8,770 591 9,361 Cash spent in year 42 97 18 4 9 2 172 10#12Cash generation in the year: highest ever for Melrose Melrose Free cash flow Cash flow from continuing operations £m Adjusted EBITDA¹ 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 flow² Restructuring Free cash flow² ■ I ■ I Group 2020 Buy Improve Sell 770 (76) (59) 424 1,059 (292) (162) (111) 54 80 628 (172) 456 Reconciliation of opening to closing net debt² Reconciliation of net debt² Adjusted free cash flow² from continuing operations of £628 million, 6% higher than 2019 Free cash inflow after restructuring of £456 million, meaning net debt reduced by 13% Continued improvement in working capital, reduction in the year of £424 million - more to come Net debt² of £2,847 million at closing exchange rates of US $1.37 and €1.12 £m Net debt2 brought forward Net cash flow from acquisition and disposal related activities Free cash inflow in the year Discontinued operations Foreign exchange and other Net debt² at 31 December 2020 1. Calculated excluding EBITDA from equity accounted investments 2. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Group 2020 (3,283) (11) 456 (7) (2) (2,847) 11#13Cash management: significant working capital improvements Melrose Free cash flow in 2020 Cash flow from continuing operations £m Working capital¹ inflow Net capital expenditure¹ Capital expenditure to depreciation ratio² I ■ ■ Inventory lower by £187m, 14% Buy Improve Sell Trade debtors lower by £184m, 13% (Q4 sales 7% lower) Net working capital reduced by £424m, 52% H1 2020 251 174 0.8x 1. 2. 3. Comprises trade creditors and net other working capital 4. Melrose lifetime capex depreciation ratio prior to 2020 H2 2020 173 Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Calculated using net capital expenditure and depreciation for owned assets only 118 0.6x 2020 424 Significant working capital improvements achieved in H2, more to come Net working capital levels more than halved in the year by improving inventory and debtors, and protecting net creditors³ Net trade working capital days reduced from 45 to 37 Capital expenditure tightly managed and below Melrose long-term average of c.1.3x4 292 0.7x Net creditors³ protected £53m, 3% higher 12#14Pensions: despite COVID-19, deficits have reduced Melrose UK defined benefit schemes 31 December 2020 £m GKN 2016 GKN Divisional Pension Schemes GKN post retirement medical Nortek Air Management Brush Total UK defined benefit schemes ■ Assets Buy Improve Sell 554 2,556 22 310 3,442 Liabilities (481) (2,755) (9) (35) (280) (3,560) Surplus/ (deficit) 73 (199) (9) (13) 30 (118) The GKN UK defined benefit accounting deficit of £0.1 billion has reduced by over 80%, from £0.7 billion just before acquisition The funding positions of the GKN UK pensions schemes have improved significantly. At acquisition these schemes had a deficit of 'up to £1 billion'; the GKN 2016 plan has already achieved its funding target and the funding deficit on the GKN Divisional Pension Schemes is now only c.£370 million The GKN Divisional Pension Schemes accounting deficit is split between Aerospace, 58%, and Automotive, 42% 13#15Sales performance: improving momentum quarter by quarter Melrose Sales growth¹ Continuing operations £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Group 1 ■ ■ ■ 2020 revenue growth (27%) (19%) (18%) 5% (11%) (19%) Buy Improve Sell Q2 2020 revenue growth (36%) (58%) (54%) (13%) (24%) (43%) Q3 2020 revenue growth (37%) (7%) (11%) 14% (2%) (15%) 1. Growth is calculated at constant currency against 2019 results Q4 2020 revenue growth (35%) 8% 7% 18% 2% Excluding Aerospace, on average the divisions have shown growth in sales of 9% in Q4 The growth in sales in Q4 for Automotive and Powder Metallurgy shows a strong recovery, with sales growing by 8% and 7% respectively (7%) Nortek Air Management has performed strongly throughout the year, with sales up 14% in Q3 and 18% in Q4 compared to 2019. This business is growing faster than at any point in its Melrose ownership helped by buoyant end markets The Other Industrial businesses combined recovered to pre-COVID-19 levels in Q4 14#16Segmental results: stronger second half margins Melrose Adjusted¹ results Continuing operations £m Aerospace Automotive Powder Metallurgy Nortek Air Management Other Industrial Central Total ■ ■ Revenue Buy Improve Sell 2,804 3,797 905 1,227 628 9,361 Operating profit/(loss) 14 82 39 188 63 (46) 340 Operating margin 0.5% 2.2% 4.3% 15.3% 10.0% 3.6% H2 2020 Revenue 1,224 2,256 509 677 336 5,002 H2 2020 Operating profit/(loss) 1. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 2. Growth is calculated at constant currency against 2019 results (40) 146 42 117 45 (26) 284 H2 2020 Operating margin (3.3%) 6.5% 8.3% 17.3% 13.4% No recovery seen in Aerospace, sales down 27% in 2020 compared to 2019, 36% down since Q2 2020 Excluding Aerospace, in the second half of 2020 the average revenue in the divisions increased over 2019 levels Sales and margins recovered sharply in the second half of 2020 in Automotive and Powder Metallurgy with momentum continuing into Q4 Nortek Air Management is trading very strongly with sales for 2020 up 5% year on year. Margins are also growing and reached 17.3% in the second half of the year 5.7% 15#17Foreign 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 ■ 45 Buy Improve Sell 7% 12 2% CNY Other³ 7 1% 11 2% USD 1.28 1.37 2020 1. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 10% strengthening against all currencies 2. 3. Assuming all other currencies strengthen against Sterling by 10% at the same time EUR 1.13 1.12 USD 1.28 1.33 Increase in debt 2019 EUR 1.14 1.18 Balance Sheet volatility Impact on debt of a 10% strengthening² of: £m USD 187 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 60% USD, 20% EUR and 20% GBP 72 16#18Melrose Buy Improve Sell Business update Driving improvement through COVID-19 crisis 17#19GKN Aerospace 2 Revenue by market 1. 1 1 Civil (59%) 2 Defence (41%) 2 Revenue by product type Based on adjusted 2020 revenue for all continuing businesses 1 Airframes (68%) 2 Engines (32%) 2 30% of Melrose¹ Revenue by destination 1 North America (66%) 2 Europe (29%) 3 Asia (4%) 4 ROW (1%) 18#20Aerospace: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % ■ ■ I Buy Improve Sell 2020 Adjusted¹ results 2,804 163 1. 2. 3. 4. 5.8% 14 0.5% Highlights Aerospace markets significantly impacted by COVID-19 Civil business down 40% in 2020 due to lower build rates and flying hours since March Defence remains strong - sales up 8% in 2020 Overall H2 sales down 36% and civil market not expected to fully recover in short to medium term Excellent cash performance with £194 million positive inflow³, 328% cash conversion 4 pre-capex Good progress on resolving loss-making contracts and inventory reduction in 2020 - further improvements to come Restructuring actions proceeding at pace Significant opportunity to improve margins through improved productivity and quality Clear path to improved profitability and over the medium-term to a 10% operating margin without full market recovery Investment in technology has been maintained and focused on sustainable aviation alternative power Growth² (27%) (72%) -9.2 ppts (97%) -10.1 ppts H2 2020 Adjusted¹ results 1,224 29 2.4% (40) (3.3%) H2 2020 Year on Year Growth² Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Growth is calculated at constant currency against 2019 results Adjusted operating cash flow (post-capex) Adjusted operating cash flow conversion (pre-capex) (36%) (90%) -13.2 ppts (119%) -14.3 ppts 19#21Aerospace: restructuring ■ ■ Initial restructuring "One Aerospace" launched to drive scale efficiencies and productivity Melrose Initial indirect overhead reduction, especially at site-level Announcement of Kings Norton factory closure and China expansion Stopped expansion of new facilities in US to consolidate production in core plants Region USA Europe China Other Total Buy Improve Sell FTES at Jan 2020 5,450 10,900 1,250 950 18,550 ■ % FTE reduction at Dec 2020 COVID-19 demand response Significant sustained reduction in direct labour across all businesses/regions Further indirect and overhead savings based on lower demand New more efficient organisation structure effective from 1 February 2021 I Office closures where not linked to operations (15%) (17%) (30%) 9% (16%) Significant ongoing cost action throughout 2020 Structural cost actions Comment New project underway to consolidate product lines within Sweden and Norway European plant rationalisation planned Further global consolidation opportunities ▪ Major drive to improve quality and productivity Rapid action taken in Q2 due to demand Reductions started in Q2 following union discussions Rapid reduction started in Q2 Increases in India and Malaysia to support specific projects ▸ Structural reduction to reflect demand > Contractors and temporary staff reduction Flexible working and reduced overtime Business sized for lower demand, further structural actions and operational improvement to come 20#22ARA GKN Automotive 1. 2 Revenue by product type 34 1 1 Driveline (71%) 2 All Wheel Drive (25%) 3 eDrive (3%) 4 Cylinder Liners (1%) Based on adjusted 2020 revenue for all continuing businesses 3 4 2 Revenue by destination 1 Europe (35%) 2 North America (33%) 3 Asia (28%) 4 ROW (4%) 41% of Melrose¹ 21#23Automotive: highlights Melrose £m Revenue EBITDA³ EBITDA³ margin % Operating profit Operating margin % ■ ■ ■ ■ - Buy Improve Sell 2020 Adjusted¹ results 3,797 322 8.5% 1. 2. 3. 4. 5. 82 2.2% Highlights H2 recovered following significant disruption and factory closures in H1 Q4 sales very strong, but not expected to remain at this level Recovery strongest in China and North America, offset by weaker sales in Europe and Asia Pacific Asia Pacific sales also impacted by proactive exit of low margin programmes Excellent cash performance with £158 million positive inflow4, 153% cash conversion5 pre-capex Working capital reductions sustained as H2 demand recovered Further improvements expected ▪ Profit impact of lost sales mitigated by tightly managed cost actions Some disruption anticipated due to semi-conductor supply chain issues Electric vehicles provide dual growth opportunity Gaining share in established core Driveline businesses Expanding content per vehicle with new eDrive solutions Growth² (19%) (45%) -4.1 ppts (77%) -5.5 ppts H2 2020 Adjusted¹ results 2,256 267 11.8% 146 6.5% H2 2020 Year on year growth² 1% (9%) -1.2 ppts (16%) -1.3 ppts Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Growth is calculated at constant currency against 2019 results Including depreciation and amortisation from equity accounted investments Adjusted operating cash flow (post-capex) Adjusted operating cash flow conversion (pre-capex) 22#24Automotive: restructuring ■ Initial restructuring Rapid focused global SG&A reduction Completed plant closures in Germany, South Korea and Australia Reorganised and revitalised procurement ■ Consolidation of back office service functions initiated ■ Restructured management teams to drive performance Melrose ■ ■ I COVID-19 demand response Immediate actions taken to shut plants in line with OEMs (mainly Q2) Accelerated cost reductions in indirect and SG&A Direct workforce now more flexible to demand fluctuations Buy Improve Sell Profit impact of lost sales mitigated by tightly managed cost actions H2 margin reflects impact of structural cost actions Continuing to win attractive new business Further cost gains to come from structural actions, productivity and procurement ■ ■ Revenue Structural cost actions Birmingham factory consultation announced January 2021 Continued underlying momentum with margin progression through crisis Back office and support services consolidation with shared services Continuing operations £m Operating profit Operating margin H1 1,541 Clear pathway to 10% margin without full market recovery (64) (4.2%) H2 2,256 146 6.5% FY 3,797 82 2.2% 23#25GKN Powder Metallurgy 2 3 Revenue by market type 1. 1 1 Automotive (67%) 2 Industrial (17%) 3 Hoeganaes Metal Powder (16%) 2 3 Based on adjusted 2020 revenue for all continuing businesses Revenue by segment 1 Precision (48%) 2 Structural (34%) 3 Powder (16%) 4 Additive (2%) 3 2 14+ 10% of Melrose¹ Revenue by destination 1 North America (44%) 2 Europe (32%) 3 Asia (18%) 4 ROW (6%) 24#26Powder Metallurgy: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % I I ■ ■ 2020 Adjusted¹ results 905 110 12.2% 39 Buy Improve Sell 4.3% 1. 2. 3. 4. Growth² (18%) (40%) -4.5 ppts (67%) -6.3 ppts H2 2020 Adjusted¹ results 509 77 15.1% 42 8.3% H2 2020 Year on year growth² (3%) (8%) -0.9 ppts (16%) -1.3 ppts Strong ongoing cost management to mitigate lower sales and reposition for future Immediate COVID-19 response fully completed Permanent headcount reduction in US due to lower sales Segment Highlights Strong performance and trajectory out of crisis - H2 margins recovering to 8.3% as sales return Excellent cash performance with £109 million positive inflow³, 156% cash conversion4 pre-capex Working capital reduction sustained as volumes increased in Q4 Precision Structural Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Growth is calculated at constant currency against 2019 results Adjusted operating cash flow (post-capex) Adjusted operating cash flow conversion (pre-capex) Powder Additive Comments Growing sales and market share • Attractive margins, advanced technology • More commoditised products • Exiting unattractive contracts • Produces powders for GKN and 3rd parties Drive towards greater automation continues at pace Focus on differentiated higher margin business is paying off: enhances margins, utilises technological advantages and reduces reliance on larger structural automotive ICE components Exciting opportunities in additive manufacturing and hydrogen storage technology • Moving into serial production, building scale Quality of earnings improving with clear pathway to 14% margins 25#27Powder Metallurgy: restructuring & technology ■ Initial restructuring Reorganised business structure to focus on differentiated precision products ■ ■ Rationalised small satellite sites Driving increased factory automation to deliver productivity/throughput gains Reduced overheads across global business Melrose I Building capabilities and momentum in AM technologies Buy Improve Sell Bolt-on 'Forecast 3D' acquisition reinforces existing AM business Integration on track Targeting differentiated markets, mainly non-automotive Technology development reducing costs and time to market COVID-19 demand response Rapid, successful immediate COVID-19 actions - especially in direct labour Global design and production footprint established Accelerated indirect and overhead reductions in core plants Renegotiated commercial contracts in light of reduced demand Improved productivity and performance of 'Powder' business (Hoeganaes), including energy management New business structure to focus effort on growth (Precision) and fix (Structural) Ongoing investment in two emerging technologies to drive long-term growth I Additive manufacturing (AM) I Structural cost actions Concentrating production in core profitable plants Exiting unattractive business and contracts in 'Structural' segment ▪ Automation projects in challenged plants to drive productivity/margins Hydrogen storage solutions I Developing new integrated solutions for storing hydrogen (H2) as zero-emission energy Utilises technology for H2 storage in metal hydride powder Approach reduces H2 compression and storage vessel size Integrated packages with control systems for energy release Prototypes performing well in European markets 26#28Nortek Air Management 2 00000 Revenue by business 1. 1 1 HVAC (58%) 2 AQH (42%) 2 Based on adjusted 2020 revenue for all continuing businesses Revenue by market 1 Residential (60%) 2 Commercial (40%) Revenue by destination ● 13% of Melrose¹ 23 1 North America (91%) 2 Europe (6%) 3 Asia (3%) 27#29Nortek Air Management: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % ■ ■ ■ 2020 Adjusted¹ results 1,227 227 Buy Improve Sell 18.5% 1. 2. 3. 4. 188 15.3% Growth² 5% 10% 0.8 ppts 8% 0.5 ppts H2 2020 Adjusted¹ results 677 136 20.1% Highlights Outstanding performance throughout 2020-sales, operating profit and operating margin expansion Strong retail sales due to home remodelling and innovative new products Commercial backlog strong, data centre opportunities remain excellent H2 adjusted operating margin of 17.3% reflecting excellent momentum through COVID-19 crisis Operating margins up 110bps versus prior year (now at record levels), and doubled since acquisition, more to come Strong cash generation with £221 million positive inflow³, 114% cash conversion4 pre-capex 117 17.3% H2 2020 Year on year Growth² Ongoing improvement plan reading through strongly Underlying growth in target profitable segments: new differentiated products in retail and commercial lines Breakthrough StatePoint Technology® for data centres contributing profit and cash Tight cost control and focused operational restructuring Business has significant further upside potential for future Rapidly expanding data centre market provides clear opportunity with proven traction and strong order book Strong pipeline for commercial projects with backlog due to COVID-19 execution issues; differentiated retail 'air quality' portfolio Next stage operational improvement plan already underway 16% 22% 0.9 ppts 24% 1.1 ppts Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Growth is calculated at constant currency against 2019 results Adjusted operating cash flow (post-capex) Adjusted operating cash flow conversion (pre-capex) 28#30Tor O O affe 818 1. 183⁰- 2708 136e9 COA Be Other Industrial 3 www FEDED 2 0000000 Revenue by business 1 1 Nortek Control (38%) 2 Ergotron (34%) 3 Brush (28%) Based on adjusted 2020 revenue for all continuing businesses 2 3 Revenue by destination 1 North America (64%) 2 Europe (20%) 3 Asia (11%) 4 ROW (5%) 6% of Melrose¹ 29#31Other Industrial: highlights Melrose £m Revenue EBITDA EBITDA margin % Operating profit Operating margin % Brush I ■ ■ Buy Improve Sell 2020 Adjusted¹ results 1. 2. 3. 628 78 12.4% 63 10.0% Growth² (11%) (23%) -2.0 ppts (26%) -2.0 ppts H2 2020 Adjusted¹ results 336 53 15.8% 45 13.4% Transformation completed and delivering strong results despite COVID-19 challenges Good cash performance with cash conversion³ pre-capex at 121% Strong order book for Generators Nortek Control (formerly Security & Smart Technology) COVID-19 has disrupted ability to install home solutions Good progress on new products, new security panel launch underway and winning acclaim Ergotron Strong growth in health segment partially mitigated challenging office product markets Positive momentum with new products and improved digital channels Excellent margins sustained - year on year margin expansion achieved despite lower sales H2 2020 Year on year Growth² Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 Growth is calculated at constant currency against 2019 results Adjusted operating cash flow conversion (pre-capex) flat 15% 2.0 ppts 19% 2.2 ppts 30#32Melrose Buy Improve Sell Appendices 31#33Loss-making contracts Melrose £m Aerospace Automotive Powder Metallurgy Other Total ■ I On Buy Improve Sell acquisition 316 200 106 7 629 Utilised (108) (68) (22) (7) (205) Released (101) (53) (69) (223) Other¹ 14 7 19 40 At 31 December 2020 121 86 34 1. Other includes foreign exchange movements and the unwind of discount on loss-making contract provisions 2. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 241 Utilisation 2020 32 21 5 1 59 Released 2020 72 (7) 36 Since acquisition of GKN, loss-making contract provisions have reduced from £629 million to £241 million, a reduction of over 60% 35% of the provision has been released, in adjusting items to avoid positively distorting the adjusted results, as a result of operational efficiencies, procurement and improved technology plus some customer renegotiations All divisions have reduced their provision by greater than 50% Utilisation in the year of £59 million, included within adjusted² operating profit, and a net release of £101 million, treated as an adjusting item and excluded from adjusted² operating profit 101 32#34Pensions Melrose Pension schemes 31 December 2020 £m UK Europe USA Rest of World Total pension schemes Buy Improve Sell Accounting deficit by region 3 2 1 UK (14%) Europe (69%) USA (16%) ROW (1%) ■ Assets 3,442 27 271 35 3,775 Liabilities (3,560) (603) (408) (42) (4,613) Accounting surplus/ (deficit) (118) (576) (137) (7) (838) Year on year movement Only 14% of the Group deficit is from UK defined benefit schemes European schemes are largely 'pay as you go' 302 (43) 18 6 283 33#35Borrowing facilities Melrose £m Bonds 2022 5.375% unsecured bond 2032 4.625% unsecured bond Cross-currency swaps (2022 bonds) Bank debt¹ Term loan Revolving credit facility Cross-currency swaps Other facilities² Total facilities / Gross debt Cash Net debt³ £m Leverage4 Interest cover Buy Improve Sell Facility size 450 300 750 803 3,013 3,816 154 4,720 At 31 December 2020 31 December 2020 Waived 2.5x 450 300 80 830 803 1,362 9 2,174 154 3,158 (311) 2,847 September 2022 May 2032 Maturity date April 2024 January 2023 30 June 2021 Waived 3.0x ■ ■ I 31 December 2021 5.25x 3.0x Headroom on the Group's committed bank facility at 31 December 2020 was £1,632 million The Group targets 70% of interest exposure fixed on projected gross debt Effective average Income Statement interest rate of 4.2% on gross debt and cash rate of 4.2% In February 2021, Melrose exercised its option to extend the term loan to April 2024 Interest cover at 31 December 2020 was 5.1x compared to a covenant test of 2.5x 30 June 2022 4.75x 3.25x 31 December 2022 4.0x 4.0x Bank debt is presented net of £19 million of unamortised arrangement fees and includes £9 million cross-currency swaps valuation at 31 December 2020 Other facilities include bank overdrafts, some of which are uncommitted 30 June 2023 and thereafter 3.5x 4.0x 1. 2. 3. Described in the glossary to the 2020 Preliminary Announcement, released on 4 March 2021 4. Leverage will be adjusted following a material disposal from within the Group to be 4.25x at 31 December 2021, 4.0x at 30 June 2022, 3.75x at 31 December 2022 and 3.5x at 30 June 2023 and thereafter 34#36Some helpful data for 2020 Melrose Buy Improve Sell Continuing operations Item Operating profit Central costs Adjusted free cash flow¹ Finance costs: - Bank and loan related - Amortisation of debt arrangement costs - Pension interest - Other Effective tax rate Depreciation Capital expenditure Pension payments ongoing contributions (global) Restructuring costs Non-controlling interest Number of shares in issue Income Statement 2020 adjusted¹ results £340 million £46 million (includes a divisional LTIP charge of £12 million) N/A (£133 million) (£12 million) (£19 million) (£23 million) 22% (£492 million) N/A N/A (£220 million) £3 million 4,858 million (average number of shares) 1. Described in the glossary to the 2020 Preliminary Announcement, released 4 March 2021 Cash Flow 2020 adjusted¹ results N/A (£34 million) £628 million (£162 million) N/A £492 million (£292 million) (£111 million) (£67 million UK, £44 million overseas) (£172 million) £nil N/A 35