Slide 1: Melrose Industries PLC Full Year Results
Buy Improve Sell Strictly private and confidential Melrose Industries PLC Full Year Results Twelve months to 31 December 2016 2 March 2017
Slide 2: Contents
Contents Sections 1 Highlights 2 Summary financial results 3 Nortek & Brush 4 Questions 5 Appendix Buy Improve Sell 2
Slide 3: Highlights
Buy Improve Sell Highlights 3
Slide 4: Highlights in 2016
Highlights in 2016 Melrose’s 2016 results have exceeded market expectations: ‒ Brush, in its eighth year of Melrose ownership, is still experiencing adverse trading headwinds and management continues to take appropriate action ‒ Nortek, acquired on 31 August 2016 for an enterprise value of £2.2 bi
Slide 5: Summary financial results
Buy Improve Sell Summary financial results 5
Slide 6: Income Statement
Income Statement Full year to 31 December 2016 Continuing operations £m Revenue 889.3 Operating loss (61.6) Loss before tax (69.3) Tax 30.3 Loss after tax (39.0) Underlying1 operating profit 104.1 Underlying1 profit before tax 96.4 Underlying1 profit after tax 70.4 Underlying1 diluted earnings per s
Slide 7: Reconciliation of statutory results to underlying performance
Reconciliation of statutory results to underlying performance A reconciliation of the statutory results to the underlying performance £m 2016 statutory loss before tax (69.3) Restructuring costs 51.4 Acquisition and disposal costs 38.7 Amortisation of intangible assets 36.3 Removal of one-off upli
Slide 8: 2016 underlying operating results by division
2016 underlying1 operating results by division Security & Air Smart Nortek Melrose Total £m Management Technology Ergonomics Energy Central Central Group Revenue 416.5 130.4 96.0 246.4 - - 889.3 Underlying1 operating profit 46.8 17.1 24.4 32.0 (2.0) (14.2) 104.1 Underlying1 operating margin 11.2% 13
Slide 9: Summary financial results: Cash performance
Buy Improve Sell Summary financial results Cash performance 9
Slide 10: Strong cash generation
Strong cash generation Group Underlying1 profit £m FY 2016 Nortek Brush conversion to cash Underlying1 operating profit 104.1 86.3 32.0 Air Depreciation 18.1 8.9 9.0 Management 131% Working capital movement 28.2 32.4 (4.6) Operating cash flow (pre capex) 150.4 127.6 36.4 Security & EBITDA2 profit co
Slide 11: Balance Sheet – working capital, capital expenditure, tax
Balance Sheet – working capital, capital expenditure, tax 31 Dec £m 2016 Working capital Working capital Fixed assets, intangible assets and goodwill 2,938.9 Net working capital 228.2 £228.2m Pensions and retirement benefits (33.4) Working capital is 11% Provisions (279.6) of revenue Deferred tax an
Slide 12: Summary of operating divisions
Buy Improve Sell Summary of operating divisions Nortek Revenue by end market Brush 1 Nortek – Home 44% 5 2 Nortek – Work 19% 1 3 Nortek – Health 5% 4 Nortek – Education 4% 4 3 5 Brush 28% 2 12
Slide 13: Nortek – a very strong start
Nortek a very strong start 88% of Melrose1 Nortek is a global, diversified group which manufactures innovative air management, security, home automation and ergonomic and productivity solutions 13 1. Based on twelve month 2016 revenue for all continuing businesses
Slide 14: Nortek – a very strong start
Nortek a very strong start Nortek has had a very good start with profit, margins and cash all better than expected In the four months of ownership profit was up 35% and margin was up 4.1ppts The improvements have come across all three divisions Revenue performance being reshaped to cut out
Slide 15: Nortek – underlying results
Nortek Nortek – underlying1 results Security & Smart Nortek Group5 Air Management Ergonomics Technology Four months Four months Four months Four months £m (Sep-Dec) 2016 Growth3,4 (Sep-Dec) 2016 Growth3,4 (Sep-Dec) 2016 Growth3,4 (Sep-Dec) 2016 Growth3,4 Revenue 642.9 -6% 416.5 -6% 130.4 -5% 96.0 -9
Slide 16: Nortek – actions achieved and underway
Nortek – actions achieved and underway Security & Smart Air Management Ergonomics Central Technology Management changes Management Investment Management Consolidation of the two HVAC businesses into one changes Committed to changes management team – one global CEO overseeing both investment of over
Slide 17: Brush
Brush 12% of Melrose1 Brush Turbogenerators is the world's largest independent manufacturer of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors 17 1. Based on twelve month 2016 revenue for all continuing businesses
Slide 18: Brush – underlying results
Brush Brush – underlying1 results Brush £m FY 2016 Growth3 Revenue 246.4 -11% Underlying1 EBITDA2 41.0 -15% Underlying1 EBITDA2 margin % 16.6% -0.8ppts Underlying1 operating profit 32.0 -21% Underlying1 operating margin % 13.0% -1.6ppts Order intake 219.1 -16% Book to bill % 89% Order intake remai
Slide 19: Questions
Buy Improve Sell Questions 19
Slide 20: Appendix
Appendix Buy Imp 7 rove elrose Sell 20
Slide 21: Appendix – Foreign exchange – forward looking
Appendix – Foreign exchange forward looking 2016 2015 USD CNY USD CNY 12 month average rates 1.36 8.99 1.53 9.60 4 month average rates (Sep – Dec) 1.26 8.56 n/a n/a Closing rates 1.23 8.57 1.47 9.56 On-going sensitivity of profit to translation and unhedged transaction exchange risk Increase/(decr