Full Year Results Announcement Twelve months to 31 December 2007
Contents � Introduction � Melrose PLC summary financial performance � Summary of operating divisions - Dynacast - Other businesses � Questions � Appendix 2
Introduction
Introduction � Good Melrose trading performance - Increased dividend � Disposals and return of capital - Aerospace and PSM sold - £220 million capital returned - 95% of capital subscription returned � Acquisitions - Good market conditions - FKI 4
Melrose PLC summary financial performance
Financial results Income statement – statutory format Year ended 31 December 2007 Year ended Year ended 31 Dec 2007 31 Dec 2006 £’m £’m Revenue 344.0 323.6 Headline operating profit¹ 24.5 19.2 Net exceptional costs and intangible amortisation (7.3) (5.8) Operating profit 18.7 11.9 Net finance income/(cost) 2.5 (7.1) Profit before tax 21.2 4.8 Tax (5.6) (1.6) Profit for the year from continuing operations 15.6 3.2 Profit for the year from discontinued operations 199.4 34.6 Profit for the year 215.0 37.8 ¹ 2007 headline operating profit excludes £2.0m intangible asset amortisation, £4.9m exceptional costs and £1.1m exceptional income. 2006 headline operating profit excludes £2.1m intangible asset amortisation, £5.9m exceptional costs and £0.7m exceptional income. 6
Financial results Exceptional costs, exceptional income and intangible asset amortisation ¹ Year ended 31 December 2007 Cash costs Non cash costs Total £’m £’m £’m Dynacast restructure (1.0) (0.5) (1.5) MVC old plater impairment - (1.5) (1.5) Crystallisation of original Melrose incentive scheme (0.8) (1.1) (1.9) Pensions curtailment gain - 1.1 1.1 Intangible asset amortisation¹ - (2.0) (2.0) TOTAL (1.8) (4.0) (5.8) ¹ Excludes computer software amortisation 7
Financial results Income statement – Continuing Group Year ended 31 December 2007 Headline results¹ Other² Total £’m £’m £’m Sales 344.0 - 344.0 Operating profit 24.5 (5.8) 18.7 Net finance income 2.5 - 2.5 Profit before tax 27.0 (5.8) 21.2 Tax (7.2) 1.6 (5.6) Profit after tax 19.8 (4.2) 15.6 EPS 9.4p* (2.0p)* 7.4p* * Weighted average of 210 million shares. � Headline operating profit increased by 28%, or 30% at constant currency. � Headline return on sales increased by 1.2 percentage points to 7.1% (2006: 5.9%). � Estimated Proforma 2007 EPS c.14.3p. ³ ¹ Before exceptional costs, exceptional income and intangible asset amortisation other than computer software. ² Consists of exceptional costs, exceptional income and intangible asset amortisation other than computer software. ³ Using current issued shares and adjusting interest income for Continuing Group net cash level post full return of capital. 8
Financial Results 2007 v 2006 headline results for Continuing Group – by division 2007 2006 £’m £’m Sales EBIT¹ ROS%¹ Sales EBIT¹ ROS%¹ Dynacast 235.9 28.9 12.3% 221.7 25.1 11.3% MVC 55.4 (0.5) (0.9%) 48.0 (2.3) (4.8%) MPC 52.7 3.9 7.4% 53.9 3.0 5.6% Central Costs - corporate (5.8) (5.5) Central Cost - LTIP Dynacast (1.1) (0.3) Melrose (0.9) (0.8) Group 344.0 24.5 7.1% 323.6 19.2 5.9% � All three divisions improved during the year. � MVC loss greatly reduced despite market conditions. ¹ Before exceptional costs, exceptional income and intangible asset amortisation other than computer software. 9
Financial results Cash flow Year ended 31 December 2007 £’m Headline operating profit¹ 24.5 Depreciation and computer software amortisation 10.4 Working capital movement (2.9) Net capital expenditure² (15.6) Acquisitions of subsidiaries (8.7) Cash generated from disposals – businesses (net of costs) 446.7 Restructuring costs paid and other provision movements (1.9) Net interest and tax paid (2.8) Pension contributions (26.1) Capital distribution (212.6) Dividend (13.0) Other (including all cash flows on discontinued operations) (6.7) 191.3 Cash inflow Net debt reconciliation Opening debt (162.6) Cash inflow 191.3 Exchange & finance lease movements 3.7 Closing net cash 32.4 ¹ Before exceptional costs, exceptional income and intangible asset amortisation other than computer software. ² Net of £0.4 million disposal of assets. 10
Financial results Cash flow � £32.4 million net cash at the end of 2007 - c.£25 million after full capital return – (£7.4 million deferred) � Continuing Group now trades on only 14 days of net working capital Profit conversion to cash (headline operating profit & loss + depreciation – working capital – net capex) � 2005 to 2007 average profit conversion to cash for Continuing Group of 94% � 67% in 2007 including the exceptional MVC capex. Adjusting for this it was 94% 11
Financial results Capital expenditure for Continuing Group Multiple of Capex Depreciation £m depreciation £’m £’m Dynacast 5.4 6.8 0.8 x MVC 7.8 1.9 4.1 x MPC¹ 2.8 1.7 1.6 x Total 16.0 10.4 1.5 x � Capex in 2007 at 1.5 x depreciation. Average during ownership 1.2 x depreciation. � Exceptional investment on a new plating line at MVC. � Investment in Dynacast includes further expansion in capacity in China and Mexico. Restructuring � Cash spend of £1.0 million on integrating the two small acquisitions for Dynacast. ¹ Including £0.1 million of depreciation on central. 12
Financial Results Pensions � Agreed positions with trustees and Pension Regulator (formal clearance achieved). - Upfront cash payment of £20 million made in May 2007. - A further £18.3 million in total to be paid in quarterly instalments over 3 years, £15.2 million remaining to be paid. � Deficit on all schemes reduced to c.£25.2 million from £55.4 million at December 2006 (McKechnie UK defined benefit plan £16.0 million (2006: £45.4 million) ). All gross of deferred tax. � Built in a further improvement in future life expectancy in 2007 v 2006 of £7.6m. ¹ � MPC and remainder of PSM still ‘’participating employers’’. ¹ Life expectancy for a male aged 65 in 2007 now 85.6 (2006: 83.6) and for a male aged 65 in 2020, 86.8 (2006: 85.1). 13
Financial results Tax � c.26% headline underlying profit and loss charge in 2007 for Continuing Group. � 16% cash tax rate for Continuing Group, still significantly below P & L rate but gap is forecast to narrow. � No tax due on the Aerospace and PSM disposals. � £167 million of tax losses available in the Group (£139 million in the UK) only £3 million of these are recognised as deferred tax assets due to geographical split of profits in the Group. 14
Financial results Exchange and commodity risk � c.86% of sales in the Continuing Group are denominated in a foreign currency (29% in US$ and 31% in Euro). � Exchange effect in 2007 - £0.5 million translation loss v 2006. - £1.0 million transaction cost. � For guidance on translation risk a 10 cent strengthening of the Euro against Sterling increases operating profit by c.£1.1 million and a 10 cent strengthening of the US Dollar against Sterling increases operating profit by c.£0.2 million. � Financial instruments are not used for commodity risks – potentially increases risk in some circumstances. Exchange rate 31 Dec 2007 31 Dec 2006 used Average Closing Average Closing US$ 2.00 2.00 1.84 1.96 Euro � 1.46 1.36 1.47 1.49 15
Summary of operating divisions
Dynacast
Dynacast Proprietary Die-Casting process Sales by Sector Sales by Geography 16% 24% 7% 40% 43% 11% 33% 26% Automotive Electronics Europe North America Healthcare Hardware Far East Other Products Connectors Telecommunications Automotive Consumer Computing Industrial products 18
Dynacast Trading results Year ended 31 December 2007 2007 Headline Results¹ 2006 Headline Results¹ Sales EBIT ¹ ROS ¹ Sales EBIT ¹ ROS ¹ £’m £’m % £’m £’m % North America 76.9 7.8 10.1% 79.0 7.4 9.4% Europe 102.6 14.6 14.2% 92.4 12.1 13.1% Far East 56.4 6.5 11.5% 50.3 5.6 11.1% Total 235.9 28.9 12.3% 221.7 25.1 11.3% Headline operating profit growth, North America 5.4%, Europe 20.7% and the Far East 16.1%. � £3.0 million 2006 zinc under recovery not repeated. � Negative exchange effect of £1.5 million in 2007 - £0.5 million translation loss v 2006 - £1.0 million transaction cost � £68 million ² net cash generated from Dynacast during Melrose ownership (pre-acquisitions). � QZD and Techmire acquired for £8.7 million. ¹ Before exceptional costs, exceptional income and intangible asset amortisation other than computer software. ² After all working capital movement, capital expenditure and restructuring costs. 19
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