2101204   proof 6  2632012 2101204   proof 6  2632012
melrose plc
annual report 
for the year ended 31 december 2011
melrose plc  annual report 2011
buy
improve
sell 2101204   proof 6  2632012
melrose plc
annual report 2011
melrose’s strategy is to acquire manufacturing businesses in sectors 
it understands enhance their performance and realise significant 
value often within a 3 to 5 year time frame the company is fully 
committed to investing within the businesses it acquires in order to 
exploit their operational and strategic strengths 
the group is made up of three distinct operating divisions energy 
lifting and other industrial 
cover pictures clockwise l–r
l exciter end of a slip ring generator at brush transformers
l heat treatment process being carried out on crosby’s forged shackle 
bows which are used in overhead lifting applications
l bridon hydra 5500 rope being spooled onto a customer transporter reel 
prior to delivery
l connecting and insulating stator coils at brush turbogenerators 
l ultra sonic welding of plastic parts at mckechnie plastic components 
for use on the range rover evoque
l medium voltage outdoor switchgear manufactured by hawker siddeley 
switchgear
pictured above
winding process being carried out to a dax designed stator generator 
by engineers at the brush turbogenerators facility in loughborough uk
welcome to melrose plc wwwmelroseplcnet
stock code mro 1
business performance governance financials shareholder information
2101204   26032012   proof 6
contents
business performance
2  group performance
3  financial highlights
4  group operations
6  the melrose strategy
8  group at a glance
10  chairman’s statement
12  chief executive’s review
 14  energy business review
 17  lifting business review
 20  other industrial business review
23  finance director’s review
31  risks and uncertainties
34  key performance indicators
36  board of directors
38  directors’ report
governance
50  corporate governance report
56  remuneration report
60  statement of directors’ responsibilities
financials
61  financial contents
62   independent auditor’s report – consolidated 
statements
63   consolidated income statement
64   consolidated statement of comprehensive income
65   consolidated statement of cash flows
66  consolidated balance sheet
67   consolidated statement of changes in equity
68  notes to the financial statements
109   independent auditor’s report – company statements
110   company balance sheet for melrose plc
111   notes to the company balance sheet
shareholder information
118 notice of annual general meeting
121 company and shareholder information
“this is another set of excellent results 
we continue to be confident that there is 
more improvement to come driven by the 
positive momentum of our order books 
and strong end markets we also continue 
to look for our next acquisition and current 
market circumstances mean that we are 
if anything more certain that a suitable 
acquisition opportunity will arise”
christopher miller
executive chairman
for more information about melrose plc view  
our website at wwwmelroseplcnet melrose plc
annual report 2011 2
2101204   26032012   proof 6
group performance
timeline of major events
melrose was listed on aim in october 2003 the timeline of key 
strategic events below shows how the group has gone from strength 
to strength
may 2005
acquired mckechnie and dynacast for 
£429 million from private equity group 
cinven raised £230 million in equity
juneaugust 2009
sold logistex for £50 million
’06
’07
’11
2012
2003
’04
’05
’09
’08
’10
october 2003
listed on aim – £13 million
december 2005
listed on london’s  
main exchange
may 2007
sold the mckechnie aerospace business  
for £428 million and the psm business for 
£30 million acquisition debt repaid
august 2007
shareholders received a capital 
return of £220 million
july 2008
completed the acquisition of fki plc 
for a total consideration including 
debt of just under £1 billion
august 2011
returned £373 million to shareholders virtually 
all of the equity raised from shareholders now 
returned
february 2011
sold brush traction 
logistex uk and 
madico for 
£18 million
july 2011
sold dynacast for £367 million 
generating 4x original equity investment 
nearly £1 billion in cash generated from 
mckechnie and dynacast acquisition wwwmelroseplcnet
stock code mro 3
business performance governance financials shareholder information
2101204   26032012   proof 6
financial highlights
1
’09 ’10 ’11
 
10
£1240m
1
£1470m
1
£1808m
£1808m £1808m
up 23 
headline
2
 operating profit
’09 ’10 ’11
 
10
163p
241p
288p
288p
up 20 
headline
2
 diluted basic earnings per sharefull group
3
•	 headline
2
 results
 – revenue in the full year £11539 million 
2010 £10354 million an increase of 
11 on 2010 
 – revenue in the second half £6031 million 
2010 £5311 million an increase of 14 
on 2010
 – order intake of £12126 million 2010 
£9912 million an increase of 22
 – operating profit margin of 157  
2010 142
 – profit before tax of £1612 million 2010 
£1217 million an increase of 32
 – diluted earnings per share
3
 including 
discontinued businesses of 288p 2010 
241p up 20
•	 results after exceptional items and 
intangible asset amortisation 
 – profit after tax of £1148 million 2010 
£1037 million an increase of 11
 – diluted earnings per share of 237p 2010 
198p up 20 
•	 net debt of £2896 million 2010 £2874 
million net debt equal to 14× ebitda
4
•	 new fiveyear £600 million committed bank 
refinancing completed in january 2012 
•	 final dividend increased by 20 to 84p per 
share 2010 70p
•	 full year dividend increased by 18 to 
130p per share 2010 110p
•	 completion of the disposal of dynacast 
on 19 july 2011 for an enterprise value of 
£377 million with the equity value increased 
fourfold
•	 since flotation in 2003 approximately £15 
billion shareholder value created at current 
market price
revenue
’09 ’10 ’11
 
10
£10053m
1
£10354m
1
£11539m 
£11539m
up 11 
1 continuing operations only unless otherwise stated
2  before exceptional costs exceptional income and intangible  
asset amortisation
3  calculated using continuing and discontinued operations before  
the profit on disposal of businesses and the diluted weighted average  
number of shares for the year including 301 million shares assumed to  
be issued under the melrose incentive scheme
4 headline
2
 operating profit before depreciation and amortisation melrose plc
annual report 2011 4
2101204   26032012   proof 6
group operations
the melrose group operates internationally with its  
key businesses having manufacturing facilities in 
europe north america asia and the rest of the world
within several of the melrose businesses a  
focus has been placed on developing  
opportunities for growing demand in territories  
such as the far east and south america  
especially in the oil  gas and mining sectors
areas of operation
europe
•	 brush turbogenerators have facilities based in the uk the 
netherlands and the czech republic a £15 million investment 
has recently been approved designed to increase productivity and 
capacity in the manufacture of 2pole generators
•	 bridon’s key european manufacturing facilities are based in the uk 
and germany a total of £20 million is being invested in a new state 
of the art manufacturing facility for bridon near newcastle upon 
tyne uk which is expected to be operational by the end of 2012
•	 crosby marelli mckechnie plastic components hawker siddeley 
switchgear ‘hss’ and prelok also have important manufacturing 
locations in europe
north america
•	 crosby’s us operations are based in oklahoma texas and 
arkansas with a further site in ontario canada
•	 truth’s manufacturing is based in minnesota us and ontario 
canada
•	 harris are based in georgia us
•	 bridon brush and acco also have key manufacturing locations 
within other parts of the us
asia
•	 crosby recently opened its new crane block and sheave facility 
in hangzhou china which has resulted in shorter lead times for 
customers
•	 marelli opened its new malaysian plant during 2011 to manufacture 
its smaller more standard generators to allow their italian plant to 
focus on producing larger and more complex machinery
•	 in order to free up manufacturing capacity at truth’s minnesota us 
plant they have outsourced lower margin products to china
•	 bridon has manufacturing facilities located in indonesia and china 
and distribution service centres in singapore and hong kong
rest of world
•	 crosby and bridon are currently in the process of setting up 
respective sales offices distribution networks and training facilities 
within south america
•	 bridon has facilities in new zealand and a distribution service 
centre in dubai hss has facilities in australia and marelli has a 
warehousing and sales office presence in south africa
group
revenue by 
geographical destination 
year ended 31 december 2011
£11539m
1
2
3
4
 1 europe 42
 2 north america 40
 3 asia 11
 4 row 7 wwwmelroseplcnet
stock code mro 5
business performance governance financials shareholder information
2101204   26032012   proof 6
lifting other industrial energy
revenue by 
geographical destination 
year ended 31 december 2011
revenue by 
geographical destination 
year ended 31 december 2011
revenue by 
geographical destination 
year ended 31 december 2011
£4616m
1
2
3
4
 1 europe 63
 2 north america 23
 3 asia 10
 4 row 4
£4844m
1
2
3
4
 1 north america 49
 2 europe 22 
 3 asia 17
 4 row 12
£2079m
1
2
3 4
 
2 europe 40 
1 north america 56
 3 row 3
 4 asia 1
notes the world map shows the group’s manufacturing distribution and sales office locations 
 the pie charts show revenue by geographical destination melrose plc
annual report 2011 6
2101204   26032012   proof 6
the melrose strategy
the melrose strategy is to acquire good manufacturing businesses underperforming their 
potential improve them by a mixture of investment operational improvements and changed 
management focus then commercially choose the right time to sell often within a 3 to 5 
year time frame but this is flexible the value from significant disposals is then returned to 
shareholders
whilst we are ready for the next acquisition we will be patient to ensure it is the right one 
2 1 3 4 5
revenue growth
operating margin improvement
cash generation
buy
use public  
market leverage
good 
manufacturing 
businesses 
underperforming 
their potential
melrose 
management 
are substantial 
equity 
investors
set strategy 
and targets
focus on 
operating  
cash generation
drive operational 
improvements
invest in the businesses
capex in excess of 
depreciation
change 
management 
focus  
incentivise well
sell
commercially choose the  
right time to sell  
often between 35 years 
but flexible
return value to 
shareholders 
from significant 
disposals
improve
years wwwmelroseplcnet
stock code mro 7
business performance governance financials shareholder information
2101204   26032012   proof 6
entry exitcurrent
18
11
10
24
16
15
mckechnie
1
 6pps
dynacast 5pps
fki 5pps
acquisition equity increase
mckechnie 
dynacast
32x
fki to date
25x so far
revenue growth compound
dynacast
6
mckechnie
1
16
operating margin
2
 improvement
strategy in action 
acquisition of fki
substantial potential being realised
on 1 july 2008 melrose completed the acquisition of fki plc for a 
total consideration including debt of just under £1 billion fki was a 
major international diversified engineering group with four divisions 
including some businesses with very good market positions 
however fki had a weak balance sheet and borrowings due to 
be refinanced in the near term the financing terms of melrose’s 
acquisition enabled the balance sheet issues to be resolved and a 
more appropriate group borrowing structure with lower overall debt 
leverage and a maturity date of 2013 
in addition to addressing the pressing financial constraints facing 
fki melrose identified a number of opportunities to improve the 
performance of fki’ s businesses principally through an increased 
focus on cash generation and profitability melrose will continue to 
seek to invest in existing facilities and new capacity as well as consider 
acquisitions and organic growth into new markets where appropriate
dynacast
buy improve sell
dynacast was acquired in may 2005 alongside mckechnie during 
the six years of ownership as a result of the improvement in its 
performance melrose quadrupled the shareholders’ investment 
in dynacast selling the business for an enterprise value of £377 
million in july 2011 consistent with melrose’s strategy following the 
disposal approximately £373 million was returned to shareholders
the sale of dynacast means that nearly £1 billion in cash was 
generated from the original £429 million mckechnie and dynacast 
acquisition melrose successfully steered dynacast through the 
global slowdown and cost savings made during the downturn 
were retained as sales recovered melrose invested fully in dynacast 
to expand capacity particulary in the far east and to improve 
efficiency
dynacast also succesfully completed some bolt on acquisitions
under melrose ownership sales in all three of dynacast’s main 
geographic regions grew
mckechnie aerospace
creating significant value
melrose acquired mckechnie along with the dynacast businesses 
in may 2005 at acquisition it could see the benefit of the strong 
upturn in the aerospace cycle moreover melrose saw significant 
scope to improve the operational and financial performance of the 
business and subsequently
•	 invested in the business to improve its performance and 
manufacturing efficiency and
•	 supported the business to improve the depth and quality of 
management
in our two years of ownership revenues grew by 35 ebitda 
grew by approximately 75 with margins increasing by 6 
percentage points on 14 may 2007 mckechnie’s aerospace 
and aftermarket businesses were sold for £428 million in cash 
generating an irr of 65 and a profit including cash generation 
during ownership of approximately £250 million in total it is 
estimated that the disposal crystallised an equity value of nearly 25 
times
1 mckechnie aerospace was owned from may 2005 until may 2007 calculated using full year 2005 results and forecast full year 2007 results
2 headline operating margin before exceptional costs exceptional income and intangible asset amortisation melrose plc
annual report 2011 8
2101204   26032012   proof 6
’09 ’10 ’11
 
10
£4183m
£4275m
£4616m
£4616m
up 8 
’09 ’10 ’11
 
10
£4227m
£4844m
£4844m
£4190m
up 15 
’09 ’10 ’11
 
10
£1680m
1
£1852m
1
£2079m
£2079m
up 12 
group at a glance
energy
for more information on our energy division go to 
pages 14 to 16
world number one independent supplier of 
turbogenerators and leading supplier of other electricity 
generating machinery switchgear transformers and 
power infrastructure equipment strong aftermarket 
service capabilities
key strengths
•  expertise to design and manufacture an extensive range 
of high quality multipole low medium and high voltage 
generators and electric motors
•   comprehensive and integrated aftermarket support tailored 
to meet customers’ needs throughout operating life
•  switchgear and transformer products in service with all uk 
energy supply authorities
•  hydropower generators to produce environmentally green 
energy
•  generators and electric motors for ship power
•	strategically located around the world
products
•  power generation equipment with 10 kw to 250 mw electric 
generators
•  synchronous motors induction motors submersible and 
traction motors
•  power management and excitation systems
•  medium voltage ac and dc switchgear
• power and system transformers
• aftermarket servicing
major customers
•  general electric
•  pratt  whitney
•  w artsila
•  mitsubishi
•  l3
•  converteam
• mwm
•  rollsroyce
•  scottish  southern 
electricity
•  dresser rand
•  uk power networks
•  western power
melrose is an international 
business which has three distinct 
operating divisions energy lifting 
and other industrial
until july of last year the group also had a fourth 
operating division dynacast which was sold for a 
consideration of £3665 million melrose remains 
committed to investing in its businesses in order 
to ensure continued development of world leading 
technologies and products to a wide variety of 
customers especially within the energy oil  gas 
and mining sectors
revenue from other industrial division 
revenue from lifting division
revenue from energy division 
pictured installation of bearings into a slip ring generator at the 
brush turbogenerators facility in loughborough uk
1  restated to include the results of brush traction logistex uk madico and 
weber knapp within discontinued operations wwwmelroseplcnet
stock code mro 9
business performance governance financials shareholder information
2101204   26032012   proof 6
lifting
for more information on our lifting division go to 
pages 17 to 19
leading supplier worldwide of lifting fittings blocks and 
custom engineered material handling products and top 
three supplier worldwide for wire and wire rope
key strengths
•  comprehensive and competitive range of solutions in steel 
wire wire and fibre rope and strand
•  technical expertise to support customers demanding 
applications training installation and testing
•  world’s leading supplier of accessories used in lifting and 
material handling applications
•	strategically located around the world
products
•  wire rope fibre rope and wire
•  hooks shackles blocks sheaves clamps and links
•  material handling products
•  monorail systems
• chain hoists
•  industrial carts and trailers
major customers
•  global crane original equipment manufacturers ‘oems’ and 
mining oems
•  major oil companies
•  global oil field exploration and drilling contractors
•  construction companies
• lifting products distributors
other industrial
for more information on our other industrial division go to 
page 20 to 22
market leading manufacturers across the housing 
construction automotive scrap processing and other 
industrial sectors
key strengths
•  market leading design development and engineering 
capabilities
•  leading innovative product development and technology 
choice for customers
•  trusted longstanding quality brand names
•	indepth aftermarket service supply capabilities
products
•  window and door hardware
•  balers shears waste compactors and auto shredders
•  automotive trims and mouldings
• widgets for cans
•  sealing products
major customers
•  us hardware industry oems
•  waste and scrap processors
•  manufacturers and distributors in various industries and 
retailers
pictured galvanised wire rod is stored at bridon’s doncaster uk factory 
before the wiredrawing process takes place
pictured production of marks  spencer food distribution trays at 
mckechnie plastic components stamford bridge facility in yorkshire 
uk melrose plc
annual report 2011 10
2101204   26032012   proof 6
’09 ’10 ’11
 
10
163p
241p
288p
288p
up 20 
’09 ’10 ’11
 
10
77p
110p
130p
130p
up 18 
chairman’s statement
i am pleased to report melrose’s ninth set of annual results 
since flotation in 2003 in this time melrose has raised £785 
million in capital for acquisitions and has returned £771 million in 
capital returns and dividends giving a current net investment by 
shareholders of £14 million after payment of the final dividend 
proposed below melrose will have repaid all equity raised 
at the current share price our market capitalisation means 
that approximately £15 billion of value has been created for 
shareholders since 2003 
results for the group
these accounts report the results for the group for the year to  
31 december 2011 and comparatives for the previous year
revenue from continuing businesses for the year was £11539 
million 2010 £10354 million and headline profit before tax 
before exceptional costs exceptional income and intangible asset 
amortisation was £1612 million 2010 £1217 million headline 
diluted earnings per share ‘eps’ on continuing and discontinued 
businesses were 288p 2010 241p diluted eps on continuing 
and discontinued businesses were 590p 2010 270p 
further details of these results are contained in the finance 
director’s review
dividends
the board intends to pay a final dividend of 84p per share 2010 
70p on 14 may 2012 to those shareholders on the register at  
13 april 2012 subject to approval at the agm on 9 may 2012 this 
gives a total for the year of 130p per share 2010 110p which 
represents an 18 increase
we continue to pursue a progressive policy even in years such as 
this where a capital return has been made
“at the current share price our market 
capitalisation means that approximately 
£15 billion of value has been created for 
shareholders since 2003”
dividend per share
2
headline
1
 diluted earnings per share
1  before exceptional costs exceptional income and intangible asset amortisation
2 excludes special dividends wwwmelroseplcnet
stock code mro 11
business performance governance financials shareholder information
2101204   26032012   proof 6
trading
2011 saw an excellent performance from our businesses headline 
operating profit was up 23 on sales up 11 reflecting another 
year of increased headline operating margins which are now at 
157 we believe there is more to come from these businesses 
both in profits and margins and in this context the most 
encouraging sign was the increase in order intake throughout the 
year with the fourth quarter being the strongest
we have now fully entered the investment phase with increased 
capital expenditure across all of our businesses nevertheless 
net debt has remained at £290 million which means that this 
investment has been funded out of operational cash generation 
we continued to maintain strict controls on working capital and we 
expect this excellent cash generation to continue
further details on trading are included in the chief executive’s 
review
board changes
we have announced today a forthcoming change of roles within 
the melrose board simon peckham currently our chief operating 
officer will take over as chief executive from the next annual 
general meeting david roper whom he succeeds will become 
executive vicechairman as a founder director david has been a 
highly important and fundamental part of melrose and its success 
since inception in 2003 equally simon also a founder director 
has made a huge contribution to our progress and has fully earned 
this appointment on behalf of shareholders i would like to thank 
them both for their efforts past and future this is part of a planned 
management succession programme and all your executive 
directors remain fully committed and are looking forward to 
continuing melrose’s development and success 
we were delighted to welcome justin dowley to our board as a non
executive director last september he has had a distinguished career 
in the city and we look forward to his contribution to melrose
strategy and outlook
the sale of dynacast in july 2011 for an enterprise value of 
£377 million and the subsequent return of these proceeds to 
shareholders was a further demonstration of our strategy the first 
and most important part of our strategy of ‘buy improve sell’ is of 
course making good acquisitions we continue to look for suitable 
opportunities but it should go without saying we will be extremely 
careful in the application of our criteria which include price we are 
optimistic that we will identify something which will add further to 
the excellent growth of the group
at the interim stage we highlighted the strong end markets which 
most of our businesses serve and the expected return in due 
course on our increased investment programmes since then 
order books have continued to improve and we feel we are seeing 
early signs of recovery in the usa our businesses in the rest of 
the world continue to perform well while we are naturally cautious 
about economies in continental europe we are encouraged by 
current trading and the outlook for 2012
christopher miller
executive chairman
7 march 2012
“2011 saw an excellent performance from our businesses headline 
operating profit was up 23 on sales up 11 reflecting another year of 
increased headline operating margins which are now at 157 we believe 
there is more to come from these businesses both in profits and margins”
pictured 
bridon supplied 16 spiral strand ‘stay cables’ with ‘stylite sockets’ for the 
media city footbridge salford quays salford uk which spans 100 metres 
across the manchester ship canal melrose plc
annual report 2011 12
2101204   26032012   proof 6
’09 ’10 ’11
 
10
£10053m
1
£10354m
1
£11539m 
£11539m
up 11 
’09 ’10 ’11
 
10
123
1
142
1
157
157
up 15 percentage 
points 
chief executive’s review
i am very pleased with the trading results of the group in 2011 on 
all measures of performance whether it be sales and operating 
profit growth profit margins cash generation or order intake the 
result has been very good
it is gratifying to see the sales growth momentum in the business 
increasing in the second half of the year reflecting continuing 
market improvements and the benefits of the active programme of 
capital investment supported by a healthy pipeline of new product 
introductions 
the energy division had another excellent year in 2011 order 
intake in the year was very good and continued to build through the 
period as the benefits of the competitiveness and energy efficiency 
of brush turbogenerators’ main product the gas turbogenerator 
produced good gains in market share significant capital investment 
continues to be made in both brush’s new build and aftermarket 
facilities in order to increase capacity to meet projected demand 
and to achieve productivity gains the absorption of hawker 
siddeley switchgear into brush will produce significant operational 
savings and in addition will result in a more targeted and focused 
sales function given the customer overlap between hawker 
siddeley switchgear and brush transformers marelli reported 
healthy increases in sales orders and operating profit in the year 
with a greater proportion of higher margin more specialist business 
feeding through in the second half the new plant in malaysia is 
now operational and is an important step in reconfiguring marelli’s 
manufacturing footprint
in the lifting division bridon performed creditably in 2011 
underpinned by good demand in its onshore oil  gas and mining 
markets in view of the favourable prospects in most of its markets 
bridon invested heavily in 2011 with capital expenditure of 
“on all measures of performance 
whether it be sales and operating 
profit growth profit margins cash 
generation or order intake the result 
has been very good”
headline
2
 operating profit margin
revenue
1  restated to include the results of dynacast brush traction logistex uk 
madico and weber knapp within discontinued operations
2  before exceptional costs exceptional income and intangible asset amortisation wwwmelroseplcnet
stock code mro 13
business performance governance financials shareholder information
2101204   26032012   proof 6
approximately £13 million 28 times depreciation this together 
with a strong commitment to new product development is a key 
part of bridon’s strategy to be the leading global solutions provider 
for high specification rope applications
crosby reported very strong results in 2011 nearly matching its 
record year in 2008 with good demand in its core oil  gas and 
mining markets supported by its excellent relationships with its 
distributor base in addition to its investment programme in the 
us to increase capacity and efficiency crosby continues to invest 
actively in its european and chinese operations to enable it to take 
advantage of its marketleading brand name and the promising 
opportunities that have been identified in these markets
in the other industrial division the trading performance overall was 
satisfactory reporting increased revenue and operating profit in the 
year while truth struggled in the face of challenging conditions in 
its markets harris performed well as demand for scrap recycling 
machines recovered in the year mpc reported a strong trading 
performance as the results of its investment in the highly successful 
range rover evoque programme started to come through
outlook
although conditions in the world economy remain uncertain albeit 
with some signs of improvement a large proportion of melrose 
group companies’ sales derive from good market positions in the 
global power generation oil  gas and mining sectors which are 
forecast to remain strong
the visibility and positive momentum of our order books supported 
by an aggressive capital investment programme together with a 
strong pipeline of new products give us confidence for another 
good year in 2012
david roper
chief executive
7 march 2012
“the visibility and positive momentum of our order books supported by an 
aggressive capital investment programme together with a strong pipeline of 
new products give us confidence for another good year in 2012”
pictured 
slots are machined into a rotor at the brush facility in loughborough uk 
in preparation for receiving the rotor coils and air cooling circuit for a dax 
designed generator
strong end markets
 
1 energy 31
 2 oil  gas 16
 3 mining 7
 4 industrials 21 
 5 hardware 7
 6 other 18
1
2
3
4
5
6
revenue by end market  year ended 31 december 2011 melrose plc
annual report 2011 14
2101204   26032012   proof 6
divisional review
energy review
market leading manufacturers of electricity 
generating equipment switchgear and 
transformers
revenue 
year ended 31 december 2011
£4616m 
2010 £4275m
headline
1
 operating profit
year ended 31 december 2011
£911m 
2010 £737m
pictured 
fabrication of a stator frame for a dax designed generator at brush 
turbogenerators
revenue by end market
year ended 31 december 2011
  
  
  
  
  
 1 energy 72
 2 oil  gas 6
 3 industrials 11
 4 other 11 
 
1
2
3
4
1  before exceptional costs exceptional income and intangible asset amortisation
wwwbrusheu
wwwbrushgmscom
wwwhssltdcom
wwwhgigeneratorscom
wwwmarellimotoricom wwwmelroseplcnet
stock code mro 15
business performance governance financials shareholder information
2101204   26032012   proof 6
brush’ s aftermarket business saw sales increase marginally in 2011 
compared to 2010 as endusers sought to conserve cash by 
deferring maintenance expenditure with aftermarket sales at 29 per 
cent of brush’ s total revenue in 2011 a major effort is continuing to 
be directed at this business to deliver growth and margin progression 
and to benefit from the very promising market opportunities that exist 
as a result of the large installed base of turbogenerators
transformers saw revenue beginning to recover in the second 
half of 2011 as uk demand for transformers increased as we 
enter year two of the current fiveyear ofgem cycle there was a 
substantial improvement in order input in 2011 with orders more 
than double that of the previous year
on the back of the successful integration of transformers into 
brush in 2010 hss was also absorbed into brush in late 2011 
the customer overlap and efficiency gains should benefit the 
enlarged group going forward
hss revenue increased by 16 per cent in 2011 compared to 2010 the 
‘eclipse’ ac switchgear indoor product was the standout performer 
in the year recording a 34 per cent increase and this product now 
accounts for approximately 50 per cent of hss’ s sales strong growth 
was also experienced in the company’ s australian operation
order intake at hss increased by 8 per cent over 2010 with almost 
all product lines being ahead of internal forecasts the exception 
was the high speed dc ‘lightning’ product which is primarily 
used for major projects within the rail industry which suffered from 
delays in a number of major rail infrastructure projects
as part of brush hss will not only benefit from sales and 
marketing synergies but also from the implementation of the brush 
manufacturing strategy we expect the latter to positively impact on 
the operating margin in 2012
harrington the specialist small generator manufacturer based in the uk 
recorded a 30 per cent increase in revenue in 2011 and a 23 per cent 
increase in orders as a result of winning a number of large contracts
outlook
record order intake in 2011 has left brush in an excellent position 
for 2012
turbogenerators and transformers entered 2012 with 
approximately 70 per cent of their budgeted 2012 new build sales 
covered by orders whilst hss has about half
this positive order momentum coupled with further operational 
improvements and the continued drive to increase the contribution 
from higher margin aftermarket business gives us confidence that 
brush will have another good year in 2012
brush
brush turbogenerators ‘turbogenerators’ is the world’s largest 
independent manufacturer of electricity generating equipment for the 
power generation industrial oil  gas and offshore sectors from 
its four plants in the uk the netherlands the czech republic and 
the usa it designs manufactures and services turbogenerators 
principally in the 10 mw to 250 mw range for both gas and steam 
turbine applications and supplies a globally diverse customer 
base in addition brush designs and manufactures systems and 
power transformers under the brand name brush transformers 
“transformers” and also produces a wide range of indoor and 
outdoor medium voltage acdc switchgear under the hawker 
siddeley switchgear ‘hss’ brand name
brush performed strongly in 2011 building on the significant progress 
made since acquisition in 2008 operating profit for the year was 25 
per cent higher than in 2010 on the back of sales which were up by 4 
per cent over the same period turbogenerator order intake in 2011 
was substantially higher than in 2010 including the first orders for 
the new large aircooled product and the trading performance was 
supported by excellent cash generation during the year
turbogenerators’ new build revenue increased marginally in 2011 
over 2010 as the global power generation market continued its 
slow recovery during the year turbogenerators increased its share 
of the market it operates in particularly in the more efficient and 
environmentally acceptable gas turbine sector which continues to 
grow at the expense of the coal and nuclear sectors with the latter 
suffering as a result of the fukushima incident in japan
turbogenerators’ operating profit in 2011 benefited from the contract 
to supply four 250 mw combinedcooled generators to the nuclear 
power plant at mochovce in the slovak republic 2011 was the last 
full year of this highly successful multiyear €46 million contract
the productivity benefits of the substantial capital investment 
programme which started in the first half of the year have 
been most encouraging during the year £15 million of capital 
expenditure was approved the majority of this relates to capacity 
increases and productivity improvements of the 2pole generator 
production facilities in brush in the uk and czech republic the 
benefits of which will continue to flow through 2012 and into 2013
in order to further the productivity gains in turbogenerators a 
restructuring of the manufacturing facility in the netherlands has 
been announced the objective is to streamline the operation in 
order to focus exclusively on the manufacture of 4pole generators 
this should be completed by mid2012 and will generate significant 
savings melrose plc
annual report 2011 16
2101204   26032012   proof 6
divisional review
energy review continued
marelli motori ‘marelli’
marelli based in italy is one of the world’ s leading manufacturers of 
industrial generators and electric motors with a product portfolio ranging 
from 012 kw to 72 mw with five overseas offices in germany uk 
malaysia usa and south africa it serves worldwide markets for power 
generation marine oil  gas and industrial manufacturing
marelli reported healthy increases in revenue order intake and 
operating profit in 2011 of 22 per cent 19 per cent and 15 per cent 
respectively as reported in the interim statement trading in the 
first half of the year was affected by an adverse sales mix which 
as expected was reversed in the second half as sales of higher 
margin larger specialist machines recovered cash generation and 
control of working capital continued to be well managed
2011 was a productive year for marelli in terms of new product 
introductions a number of new products were successfully 
launched including a synchronous 400 hz generator for use in the 
aviation industry a special generator for use with tidal power and 
new motors to meet european efficiency regulations
over £1 million has been invested in the last two years in marelli’s 
new malaysian factory to manufacture the smaller more standard 
generators this site has been operational since the last quarter 
of 2011 and currently employs around 100 people although 
unsurprisingly there still remain a few teething issues relating to 
the finessing of the supply chain and the completion of the training 
programme it is nevertheless an important step in the rebalancing 
of marelli’s manufacturing capacity
other than the investment in the malaysian facility additional capital 
expenditure was made in the year to further improve existing 
manufacturing and testing procedures — these include a new 
notching press for generators development of cad systems and 
a large machinery test room further capital investment has been 
earmarked for 2012
outlook
the trend reported in the interim statement of a recovery in marelli’s 
higher margin marine oil  gas and hydroelectric business looks 
set to continue the positive momentum in the order intake gives 
us confidence that 2012 will be another year of progress for marelli
marelli supplied and installed two mjt 630 series hydro 
generators to the city of agordo northern italy for use within 
a hydroelectric power plant located near the river liera the 
equipment provides a maximum power of 550 kw and a rated 
speed of 500 rpm the generators weigh 76 tonnes each and 
are able to satisfy the electric power requirements of over 370 
households
marelli
more information about marelli is available online at 
wwwmarellimotoricom wwwmelroseplcnet
stock code mro 17
business performance governance financials shareholder information
2101204   26032012   proof 6
lifting review
world leading suppliers of wire wire 
rope products lifting fittings and blocks
revenue 
year ended 31 december 2011
£4844m 
2010 £4227m
headline
1
 operating profit
year ended 31 december 2011
£826m 
2010 £667m
revenue by end market
year ended 31 december 2011
  
  
  
  
  
 1 energy 5
 2 oil  gas 33
 3 mining 15
 4 industrials 39
5 other 8
 
 
1
2
3
4
5
1  before exceptional costs exceptional income and intangible asset amortisation
pictured 
bridon supplied 312 tonnes of steel wire rope for use on the ‘oleg 
strashnov’ owned by seaway heavy lifting and used as a fast transit 
crane vessel designed to lift loads of up to 5000 metric tonnes
wwwbridoncom
wwwthecrosbygroupcom
wwwaccomhscom melrose plc
annual report 2011 18
2101204   26032012   proof 6
divisional review
lifting review continued
the mining market has continued to see solid activity levels with the 
demand for commodities largely unaffected so far by the global financial 
downturn orders have improved in most markets for both deep shaft 
and surface mining on the back of stronger demand in russia china 
and south africa where bridon is expanding its presence
the commercial construction markets in europe and the middle 
east remained subdued through 2011 although there were some 
tentative signs of improvement in north america many industrial 
crane companies remain very cautious and are reluctant to commit 
to orders demand for crane ropes has continued to be solid in 
china but the volatile industrial production levels in asia have led to 
variable demand for industrial ropes
bridon’s strategy is to be the global technology leader for 
demanding rope applications and the leading solutions provider 
in order to support this strategy bridon is investing £20 million in 
building a new factory on neptune quay in newcastle upon tyne 
to produce the largest ropes in the world this new factory which 
will initially employ around 40 people should be operational by 
december 2012
in addition a new technology centre is being built in doncaster 
which will provide state of the art laboratory and testing facilities
bridon continues to invest in the upgrading of its manufacturing 
facilities the programme to improve the wire mill in doncaster 
was substantially completed in the year which will increase 
manufacturing efficiencies and reduce carbon emissions and 
other environmental waste the major investment in new capacity 
in the german factory is also complete significantly improving 
manufacturing capability for complex multistrand ropes
as part of its ongoing commitment to innovation bridon launched 
eight new products in 2011 and developed some promising 
enhancements to existing products for the mining market new 
products include extended and sheathed round balance ropes 
with increased corrosion resistance and flexibility new products 
for the oil  gas sector include a new ‘bristar’ rope which 
provides industryleading technology for enhanced rope fatigue 
performance and the ‘bristar with hyrtel’ system with greater 
temperature resistance when compared to conventional polymer 
rope structures
outlook
the financial issues in the eurozone have created uncertainty in 
markets and as a result a number of companies are cautious in 
terms of making financial commitments in spite of this bridon 
expects demand for oil  gas and commodities to remain solid 
in 2012 the high oil price and the continuing requirement for 
commodities to support economic development particularly in the 
emerging markets should support activity levels in these sectors
bridon
bridon designs and manufactures a comprehensive range of lifting 
and stabilising solutions for applications in wire rope fibre rope 
steel wire and strand the company services global customers in 
the oil  gas mining industrial marine and infrastructure sectors
bridon’s trading results improved in 2011 compared to 2010 with 
sales and operating profit ahead of the previous year and operating 
margins increased over the second half of 2010 this reflected 
an overall recovery in bridon’s markets the exiting of the lower 
margin structures business and operational improvements orders 
received in 2011 were approximately 20 per cent higher than in 
2010 working capital control remained strong with greater than 
100 per cent profit conversion to cash before capital expenditure 
although steel prices rose by some 20 per cent in the year bridon 
was largely able to pass this on reflecting the underlying strength 
of the business
demand for onshore oil  gas remained solid through the year in the 
offshore sector there was some recovery compared to 2010 and this 
continues to build going into 2012 demand improved in the north 
sea brazil and parts of asia and africa whilst exploration and drilling 
activities in the gulf of mexico have continued to be impacted by the 
aftermath of the horizon oil spill reflected in the time taken to obtain 
or renew licences and permits bridon has established a trading 
company in brazil to service this important market
cross section through bridon’s new ‘tiger 24ls dyform 
hoist rope’ a new product that was launched in early 2012 
and will typically be used by deep shaft mining customers 
for hoisting applications this product offers both heavy duty 
performance and a high level of safety due to the fact that its 
design ensures wires are not allowed to cross inside the rope 
thus reducing the amount of internal nicking
bridon
more information about bridon is available online at 
wwwbridoncom wwwmelroseplcnet
stock code mro 19
business performance governance financials shareholder information
2101204   26032012   proof 6
although the outlook for construction and manufacturing in general 
remains uncertain continued growth in the emerging markets 
should underpin these sectors
substantial capital is being invested in bridon to enable it to 
compete at the highest level in markets with favourable longer 
term growth prospects with an order book at the start of this year 
approximately 20 per cent higher than a year previously we are 
confident of a good outcome in the year ahead
crosby
crosby is a world leader in the design manufacture and marketing 
of lifting fittings blocks and sheaves to the oil  gas construction 
and mining industries serviced primarily through a global network 
of valueadded specialty distributors
crosby has had an excellent year continuing its strong recovery 
from the difficult year in 2009 with revenues and operating 
profit up by over 20 per cent and 40 per cent respectively its 
performance in 2011 was close to its record year in 2008 whilst 
construction markets in north america and europe remained slow 
in 2011 oil  gas and mining remained strong worldwide
during 2011 crosby continued its focus on supporting and 
working closely with its traditional worldwide distributor base 
with less dependence on oems through additional training 
programmes and close support relationships have broadened and 
deepened and are resulting in crosby growing its market share with 
these distributors
2011 saw the completion of several large capital investment 
programmes in crosby’s main us manufacturing plants designed 
to both increase production capacity and efficiency this has 
been linked to an investment programme in europe to rationalise 
crosby’s manufacturing base to make it more efficient and at the 
same time to make it less dependent on crosby us this will have 
the additional benefit of further freeing up production capacity in 
the us to enable it to meet the increasing demand from emerging 
markets such as china brazil and india
it is expected that the demand for offshore oil  gas will continue 
to grow worldwide for the foreseeable future in response to this 
crosby will continue to invest in large forging hammers and larger 
machining equipment
the expansion of crosby’s presence in emerging markets remains 
a high priority during 2011 considerable investments were made 
in recruiting additional sales and engineering personnel and this 
will remain an area of focus for 2012 progress was made in 2011 
at crosby’s crane block and sheave centre in hangzhou china 
to produce sheaves and blocks for the chinese market and to sell 
additional standard product lines into the chinese marketplace
during 2011 one of the key new product introductions developed 
by crosby was a new tubing clamp called the ‘mckissick tubing 
grab’ which provides a quick easy and efficient attachment for 
the lifting of tubing to and from the rig floor within ‘well servicing’ 
applications although early days this application has been well 
received in the market place
crosby continues to be at the forefront of the development 
of eapplication systems to provide customers with realtime 
information relating to the installation and use of crosby products in 
the field building on the increased usage by customers of access 
through the apple ipad in 2011 crosby is working on a suite of 
ipadbased and androidbased applications to extend the range 
of services that can be utilised by customers it is hoped that this 
will be rolled out on a worldwide basis to include internetbased 
certifications through certpro and verification pro systems
outlook
crosby has experienced a very sharp turnaround in its trading 
performance since the low point in 2009 not least because of the 
decisive actions taken by management although we do not expect 
the same rate of growth to continue in 2012 the strength of the 
opening order book gives us confidence of further improvement 
this year
crosby’s ‘wide body’ shackles were used to lift a 1250 
metric tonne tower into place as part of the eastern span 
replacement of the san franciscooakland bay bridge in the 
us which is scheduled to open in 2013
crosby
more information about crosby is available online at 
wwwthecrosbygroupcom melrose plc
annual report 2011 20
2101204   26032012   proof 6
divisional review
other industrial review
market leading manufacturers across the 
housing construction automotive scrap 
processing and other industrial sectors
revenue 
year ended 31 december 2011
£2079m 
2010 £1852m
1
headline
2
 operating profit
year ended 31 december 2011
£231m 
2010 £218m
1
revenue by end market
year ended 31 december 2011
  
  
  
  
  
 
1 energy 2
 
2 industrials 3
 
3 hardware 37
 
4 automotive 29
5 scrap processing 24
6 other 5
 
 
1 2
3
6
4
5
1  restated to include the results of brush traction logistex uk madico and 
weber knapp within discontinued operations
2  before exceptional costs exceptional income and intangible asset amortisation
pictured 
mpc supplies over 40 different plastic components and assemblies 
to land rover for use on their new range rover evoque including 
complex door and wheel arch claddings
wwwtruthcom
wwwharrisequipcom
wwwmckechnieplasticscouk
wwwprelokcom wwwmelroseplcnet
stock code mro 21
business performance governance financials shareholder information
2101204   26032012   proof 6
harris performed well in 2011 as demand for scrap recycling 
machines continued to recover from 2010 on the back of the 
healthy increase in orders in 2011 over the previous year revenue 
increased by 15 per cent including an encouraging contribution from 
aftermarket sales operating profit was 25 per cent higher assisted 
by continued efforts to improve productivity and contain costs 
harris continued to invest in the design and engineering of new 
products three new baler and shear products were introduced to 
the market in 2011 that provide variable frequency drive technology 
for ferrous and nonferrous materials these new machines boast 
higher throughput than the machines they are replacing but with 
approximately half the energy consumption and present a strong 
value proposition
truth
truth designs and manufactures a broad product portfolio of operating 
hardware for windows patio doors and skylights truth products 
are sold primarily to oem facilities throughout north america that 
serve new residential housing commercial buildings and remodelling 
and replacement segments of the construction market primary 
manufacturing facilities are located in minnesota usa and ontario 
canada with some outsourcing to lower cost countries
after a strong recovery in 2010 both truth and its customer 
base expected the momentum to continue into 2011 however 
unusually harsh winter and spring weather in almost all regions of 
the us and canada contributed to a slow start in 2011 optimism 
for a better second half receded as it became evident that the us 
government tax incentives introduced in 2010 had the effect of 
bringing forward demand into 2010 at the expense of 2011 on top 
of this consumer confidence remained weak throughout the year
the overall demand in the markets in which truth operates 
declined in 2011 over the previous year however as a result of a 
concerted focus on new product design and development truth 
outperformed achieving some notable market share gains
a highlight in 2011 was the success of the awardwinning ‘sentry 
multipoint hinged patio door hardware system’ this product was 
launched in mid2011 and has been well received in the market 
it is selling well and is already established as a core product within 
the truth range
control of overheads was an area of major focus during 2011 not 
only was this necessary to mitigate the impact on profit of the fall in 
sales but also to help offset some of the effect of not being able to 
fully recover raw material price increases in the year
outlook
truth remains positive about the prospects for 2012 without the 
distorting effect of the us government tax incentives in 2010 
and 2011 it is expected that truth will see a more normalised 
pattern of demand than has been seen in the previous two years 
although the general economy in north america is seeing signs of 
recovery conditions in housing and construction are lagging behind 
nevertheless truth is confident of continuing to gain market share on 
the back of a healthy pipeline of new product introductions truth is an 
inherently high quality high margin business with a very strong position 
in its market when the housing and construction markets in north 
america recover truth’ s trading performance will bounce back sharply
harris
harris is a market leader in the scrap and waste recycling 
industries operating from two plants in georgia usa the 
company designs manufactures and services a full range of 
size reduction equipment solutions for the scrap metal and fibre 
recycling industries
truth’s new ‘sentry multipoint hinged patio door hardware 
system’ combines flexibility with optimal security the product 
has a 90degree thumbturn located above the handle high 
performance adjustable hinges and multiple handle designs
truth
more information about truth is available online at 
wwwtruthcom melrose plc
annual report 2011 22
2101204   26032012   proof 6
divisional review
other industrial review continued
mckechnie plastic components ‘mpc’
mpc designs and manufactures engineered plastic injection 
moulded and extruded components and metal pressings for 
sectors including food and beverage packaging automotive 
construction and industrial
mpc has reported strong trading results in 2011 with sales and 
profit up by in excess of 45 per cent and 70 per cent respectively 
this is largely due to a healthy recovery in the automotive sector 
where mpc is a supplier on a number of key programmes such as 
the highly successful range rover evoque
during the year mpc continued to focus on investing in its core 
engineering skills aimed at product and tool design development 
and testing as a result it has been able to satisfy customer 
requirements for the supply of technically complex products such 
as twin shot claddings wheel arch liners and automated 
multiassemblies
technical differentiation remains at the core of mpc’s value 
proposition as it seeks to work closely with partnercustomers 
such as jaguar land rover ford marks  spencer makita 
diageo and heineken mpc was delighted to be given the 
jaguar land rover award for both quality and systems at its two 
manufacturing locations in yorkshire uk
outlook
mpc is well placed to continue to profit from the demand from 
automotive oems to provide cars to key export markets such 
as china russia and north america with a number of exciting 
projects in the pipeline we are confident of another year of 
progress for mpc
harris expanded its presence in latin america during 2011 to take 
advantage of the rapidly growing recycling industries in that region
outlook
harris expects demand in the recycling industry to remain stable in 
2012 with sales weighted more to the second half of the year as in 
2011 after a year of significantly higher revenue and profit in 2011 
we expect a more steady trading result in 2012
the equipment pictured shows a harris gs11 which is 
capable of shearing baling and making logs and is the largest 
in the harris gs series with a 1100 tonne shearing capacity 
it is designed to process scrap metal such as automotive 
pipe and plate heavy ferrous and steel mill scrap the specific 
model pictured was purchased by the southern metals 
company based in charlotte north carolina us
harris
more information about harris is available online at 
wwwharrisequipcom wwwmelroseplcnet
stock code mro 23
business performance governance financials shareholder information
2101204   26032012   proof 6
finance director’s review
the year to 31 december 2011 included the disposal of the 
dynacast division along with four smaller businesses previously 
shown in the other industrial division brush traction logistex uk 
madico and weber knapp taken together these five businesses 
constituted 25 of both group revenue and group headline 
operating profit in 2010 in accordance with ifrs 5 the trading 
results of these businesses have been shown as discontinued in 
both years in these financial statements
group trading results — continuing operations
the continuing operations now include the three remaining trading 
divisions namely energy lifting and other industrial
to help understand the results of these operations the term 
‘headline’ has been used this refers to results calculated before 
exceptional costs exceptional income and intangible asset 
amortisation as this is considered by the melrose plc board to be 
the best measure of performance
for the year ended 31 december 2011 the group achieved revenue 
from continuing operations of £11539 million 2010 £10354 
million representing an 11 increase over 2010 during the second 
six months of 2011 this pace of year on year growth increased to 
14 compared with 9 in the first six months of 2011
 
headline operating profit in the year ended 31 december 2011 
was £1808 million 2010 £1470 million which was up by 23 
on the previous year a very similar year on year growth rate to that 
achieved in the first six months of 2011 the headline operating 
profit margin defined as the percentage of headline operating 
profit to revenue increased from 142 in 2010 to 157 in 2011 
indeed in the second half of 2011 the headline operating profit 
margin increased to 159 
after exceptional costs exceptional income and intangible asset 
amortisation group operating profit was £1170 million 2010 £1340 
million and group operating margin was 101 2010 129
“improving businesses by investing 
in capital projects with acceptable 
paybacks is a key part of the melrose 
strategy melrose has started a 
significant period of investment in its 
key businesses with a resulting capital 
expenditure to depreciation ratio of 
17x for the year”
1  restated to include the results of dynacast brush traction logistex uk 
madico and weber knapp within discontinued operations
2  before exceptional costs exceptional income and intangible asset amortisation
3 includes computer software amortisation
headline
2
 operating profit
year ended 31 december 2011
’09 ’10 ’11
 
10
£1240m
1
£1470m
1
£1808m
£1808m £1808m
up 23 
capital expenditure to depreciation
3
year ended 31 december 2011
’09 ’10 ’11
 
10
08x
1
10x
1
17x
17x melrose plc
annual report 2011 24
2101204   26032012   proof 6
finance director’s review continued
trading results by division — continuing operations
a split of revenue headline operating profit and headline operating profit margin for 2011 and 2010 is as follows
2011
revenue
£m
2011
headline
operating
profit
loss 
£m
2011
headline
operating
profit 
margin
2010
revenue
£m
2010
headline 
operating 
profit
loss
£m
2010
headline 
operating 
profit 
margin
energy 4616 911  197 4275 737  172
lifting 4844 826  171 4227 667  158
other industrial 2079 231  111 1852 218  118
central – corporate — 92 na — 86 na
central – ltips
1
— 68 na — 66 na
continuing group 11539 1808  157 10354 1470  142
1 long term incentive plans
the performance of each of the trading divisions is discussed in 
detail in the chief executive’s review
central costs comprise £92 million 2010 £86 million of melrose 
plc corporate costs and an ltip charge of £68 million 2010 
£66 million the ltip charge consists of an annual accrual for the 
melrose 2009 incentive scheme of £18 million 2010 £18 million 
and an accrual for the divisional management ltips of £50 million 
2010 £48 million the divisional management ltips are cash 
based incentive schemes for operational management to reward 
improvements in business performance mainly over the period to 
31 december 2014
finance costs and income
the net finance cost in 2011 was £196 million 2010 £253 
million
net interest on external bank loans overdrafts and cash balances 
was £157 million 2010 £179 million which for the year ended 
31 december 2011 was largely protected from interest rate 
changes by a number of interest rate swaps which fix the interest 
rate on £3801 million comprising us 5460 million and €333 
million which is 78 of total group interestbearing borrowings 
more detail on these swaps and the new swap arrangements 
entered into in february 2012 relating to the new banking facility 
drawn down on 31 january 2012 is given in the finance cost risk 
management section of this review the net interest expense on 
external loans reduced during the year because of lower leverage 
ratios in 2011 the group had a blended interest rate of 31 
2010 34
also included in the net finance cost is a £25 million 2010 £23 
million amortisation charge relating to the initial costs of raising the 
£750 million bank facility a net interest cost on pension liabilities in 
excess of the expected return on their assets of £03 million 2010 
£33 million and a charge for the unwinding of discounts on long 
term provisions of £11 million 2010 £17 million
earnings per share eps
in accordance with ias 33 two sets of basic and diluted eps 
numbers are disclosed on the face of the income statement one 
for continuing operations and one that also includes discontinued 
operations in the year ended 31 december 2011 the diluted eps 
for continuing operations was 237p 2010 198p and for both 
continuing and discontinued operations was 590p 2010 270p
the melrose board believe that headline eps gives the best 
reflection of performance in the year as it strips out the impact 
of exceptional costs exceptional income and intangible asset 
amortisation with the melrose 2009 incentive scheme scheduled 
to crystallise in 2012 it is also considered more appropriate to 
focus on the diluted eps calculation which recognises the impact 
of the shares that are expected to be issued under the melrose 
2009 incentive scheme the estimate of the value of this scheme 
as at 31 december 2011 using a black–scholes pricing model 
compliant with ifrs 2 was £994 million 2010 £707 million 
using the average share price for the 40 business days up to  
31 december 2011 if paid out in shares this would result in the 
issue of 301 million ordinary shares
following the disposal of dynacast and the share consolidation in 
the year the directors consider that the best measure of year on 
year growth in headline diluted eps is shown by comparing the 
diluted eps calculated using the headline results of continuing 
and discontinued businesses before the profit on disposal of 
businesses and the weighted average number of shares for the 
year being 288p with the headline diluted eps of the full group 
for 2010 of 241p this shows a 20 increase 
exceptional items 
in the year ended 31 december 2011 the group incurred 
exceptional costs of £401 million 2010 £103 million and did not 
receive any exceptional income 2010 £214 million in addition 
intangible asset amortisation of £237 million 2010 £241 million 
was charged a tax credit on these exceptional costs and intangible 
asset amortisation of £207 million 2010 £60 million and an 
exceptional tax credit of £381 million 2010 £235 million has 
been taken in the year wwwmelroseplcnet
stock code mro 25
business performance governance financials shareholder information
2101204   26032012   proof 6
the table below summarises the exceptional items in 2011
total
£m
intangible asset amortisation 237
exceptional costs
increase in legal provision 210
restructuring costs 159
acquisitions and disposals of businesses 32
total exceptional costs 401
tax credit on exceptional costs and on intangible
 asset amortisation 207 
exceptional tax credit 381 
total exceptional tax and tax on 
 exceptional costs 588 
exceptional items and intangible asset
 amortisation after tax 50
as disclosed in the 2010 annual report and the 2011 interim 
statements and now updated in the exceptional costs note 
to these financial statements note 6 two bridon companies 
that melrose acquired as part of the acquisition of fki plc are 
defendants in respect of product liability litigation in light of the 
current available information the provision relating to this has been 
increased by £210 million to £258 million us 40 million at 
31 december 2011 this increase in the year has been charged to 
exceptional costs due to its size and nature
during the second half of 2011 three restructuring programmes 
have been approved which are intended to enhance the operational 
and financial performance of the group these restructuring 
programmes include the reorganisation of the brush facility in the 
netherlands and the integration of hawker siddeley switchgear into 
brush turbogenerators at a total cost of £120 million in addition 
as part of the large scale investment within the bridon business a 
provision for restructuring costs of £39 million has been recognised 
in order to relocate certain activities from doncaster to the new 
neptune energy park facility in newcastle upon tyne 
the group considered the potential acquisition of charter 
international plc but following the emergence of a competitive 
bidder your board remained price disciplined and ended the 
process early enough to limit costs incurred to £24 million the 
other acquisition and disposal costs of £08 million were primarily 
in respect of the return of capital following the disposal of dynacast
in recognition of the exceptional restructuring costs and increase in the 
legal provision booked in the year a tax credit of £76 million has been 
taken and a tax credit of £131 million has also been recognised in 
respect of intangible asset amortisation in addition during the year an 
exceptional tax credit of £381 million was taken of which £286 million 
related to the reduction of tax liabilities in respect of overseas tax audits 
inherited on the acquisition of fki reflecting the company’ s view of the 
most likely outcome of these audits a further £95 million exceptional 
deferred tax credit relates to previously unrecognised tax losses that 
are now considered recoverable
overall the net exceptional items and intangible asset amortisation 
after tax shows a net expense of £50 million
disposal of businesses 
on 19 july 2011 melrose completed the disposal of dynacast to 
kdi holdings inc managed by kenner  company inc for an 
enterprise value of £377 million us 607 million this comprised 
£3665 million us 590 million in cash received on completion 
together with dynacast taking with it £105 million us 17 million 
of net pension liabilities the profit on disposal of this business 
in the year was £1505 million after costs of £128 million and 
dynacast contributed £1640 million to revenue and £264 million to 
headline operating profit in 2011
dynacast was an extremely successful investment for melrose 
during its six years of ownership the enterprise value of dynacast 
increased from £197 million to £377 million and the equity value 
increased by four times as a result of this and melrose’s other 
actions nearly £1 billion in cash has been generated from the £429 
million mckechnie and dynacast acquisition in may 2005
four smaller businesses were sold in the year namely brush 
traction logistex uk madico and weber knapp all of which were 
previously shown within the other industrial division along with the 
disposal of the businesses £22 million of gross pension liabilities 
went with the logistex uk business and over £100 million of 
parent company guarantees and bonds were transferred to the 
buyer on the brush traction disposal
the gross proceeds received on the disposal of these businesses 
amounted to £240 million with related costs of £18 million 
realising a profit on disposal of £19 million the businesses 
contributed £138 million to revenue and £10 million to headline 
operating profit in 2011
return of capital and number of shares in issue
consistent with the melrose strategy of returning proceeds to 
shareholders following significant disposals melrose announced 
the return of £3732 million to shareholders on 8 august 2011 
following the sale of dynacast
the return was made via a redeemable share scheme which gave 
shareholders the option of receiving a payment either in august 
2011 or april 2012 or a combination of both a £11 million liability 
is included in the 31 december 2011 balance sheet to represent 
the outstanding balance on the £3732 million capital repayment for 
those shareholders who elected to receive payment in april 2012 
alongside the capital return a share consolidation took place which 
reduced the number of ordinary shares in issue by a factor of 11 
for 14 or by 21 from 4976 million to 3910 million 
cash generation and management
melrose has started a significant period of investment in its key 
businesses with a resulting capital expenditure to depreciation ratio 
of 17× for the year this means that it is appropriate to look at the 
operating cash generated post working capital movement but pre 
capital expenditure as a percentage of headline ebitda defined as 
headline operating profit before depreciation and amortisation to  melrose plc
annual report 2011 26
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finance director’s review continued
gauge cash performance in the year the percentage in 2011 for the 
continuing group was 89 which was ahead of internal expectations 
it is also pleasing to note that the pace of profit conversion to cash 
improved in the second half to 102 first half 74
at 31 december 2011 the percentage of net working capital to 
sales for the melrose group was 125 compared to 154 on 
acquisition of fki
the cash generation performance in 2011 is summarised as 
follows
2011
£m
headline operating profit 1808 
depreciation and computer software amortisation 231 
working capital movement 233
headline operating cash flow pre capex 1806 
headline ebitda conversion to cash 
 pre capex  89 
net capital expenditure 389
net interest and net tax paid 389
defined benefit pension contributions 249
other including discontinued operations 234
cash inflow from trading 
 after all costs including tax 545 
movement in net debt
2011
£m
opening net debt 2874
cash flow from trading
 after all costs including tax 545 
net cash flow from disposals
 including net cash disposed 3739  
amount paid to shareholders 4249
foreign exchange and other noncash
 movements 57
closing net debt 2896
the balance sheet leverage calculated as net debt divided by 
headline operating profit before depreciation and amortisation was 
14x at 31 december 2011 31 december 2010 13x the fact that 
this increase in leverage was so small was a result of the strong cash 
management and improved profitability of the continuing group as 
ordinarily the disposal of dynacast and other businesses together 
contributing 25 of group headline operating profit in 2010 and 
returning all the proceeds to shareholders would have increased 
leverage further
capital expenditure
improving businesses by investing in capital projects with 
acceptable paybacks is a key part of the melrose strategy by 
division the capital expenditure in the year was as per the table at 
the bottom of this page
the capital spend to depreciation ratio was 17× in 2011 
compared with 10× in 2010 indeed in the second half of 2011 it 
increased to 19× this illustrates that the group has returned to its 
investment phase by spending money on capital and restructuring 
projects which will improve the value of the businesses the 
seven year melrose average annual capital spend is in excess of 
depreciation at 13×
the largest investment was made in the bridon business within the 
lifting division to improve the technical capabilities and capacity of 
the business more detail on this investment and others is included 
in the chief executive’s review
refinancing
in december 2011 a new fiveyear committed £600 million multi
currency revolving credit facility was agreed with a syndicate of 10 
banks strengthening the group’s banking syndicate compared to 
that in place previously this was drawn down on 31 january 2012 
replacing the committed £750 million syndicated term loan and 
revolving credit facility which was fully repaid the new facility has 
no mandatory repayments in its term and allows borrowings to be 
repaid as cash is generated 
the facility has been drawn in the group’s core currencies namely 
us dollars euros and sterling in the most suitable proportion to 
protect as effectively as possible against the currency risk within 
the group
tax
as expected the headline income statement tax rate in 2011 
was 26 2010 restated 28 the overall effect on the group of 
higher tax rates in north america and certain european countries is 
offset by the benefit that continues to arise from lower tax rates 
in the far east and other european countries as well as the 
settlement of prior year tax audits
 
the tax rate after exceptional items and intangible asset 
amortisation is a credit of 18 2010 charge of 5 the reasons 
for the tax credit in the year include the reduction by £286 million 
of tax liabilities in respect of overseas tax audits inherited on the 
acquisition of fki the reduction reflects the company’s view of the 
most likely outcome of those audits which are now approaching 
conclusion a further exceptional deferred tax credit of £95 million
 
capital expenditure energy lifting
other 
industrial central total
capital expenditure £m 114 213 65 — 392
depreciation £m 79 88 58 06 231
capital expenditure to depreciation ratio full year 14x 24x 11x na 17x
capital expenditure to depreciation ratio 
 second half year 19x 30x 05x na 19x
melrose seven year 2005–2011 average annual multiple 13x wwwmelroseplcnet
stock code mro 27
business performance governance financials shareholder information
2101204   26032012   proof 6
has been recognised because some of the group’s previously 
unrecognised tax losses are now considered recoverable in 
addition a £76 million tax credit has been taken in the year 
in respect of tax relief on exceptional costs and a tax credit of 
£131 million taken in respect of current period intangible asset 
amortisation and the impact upon future amortisation of the 
change during the year of uk tax rates
the cash tax rate on headline continuing and discontinued 
operations of 14 2010 16 is again low due to the benefit 
arising from the utilisation of tax losses and other deferred tax 
assets in the medium term the headline cash tax rate is expected 
to trend toward the headline income statement rate
the overall net tax liability deferred and current has decreased by 
£595 million in the year the reduction in the current tax creditor 
by £355 million is mostly due to the exceptional credit taken in 
respect of overseas audits the reduction in the net deferred tax 
creditor by £240 million is largely represented by the recognition 
of a deferred tax asset on certain tax losses and the reduction 
of the deferred tax liability on intangible assets both of which are 
discussed above
the group’s net deferred tax liability is £579 million 31 december 
2010 £819 million the largest item included within this balance 
is an £836 million 31 december 2010 £1028 million deferred 
tax liability provided in respect of brand names and customer 
relationships acquired this liability does not represent a future cash 
tax payment and will unwind as the brand names and customer 
relationships are amortised
the total amount of tax losses in the group has decreased in 
the year for three reasons the disposal of businesses containing 
losses the utilisation of losses and other assets against taxable 
profits and the recalculation of available losses following tax audits 
the total gross tax losses within the group are shown below
 
tax losses
recognised
£m
unrecognised
£m
total
£m
uk 336 1511 1847 
north america 14 — 14 
rest of world — 153 153 
total 2011 350 1664 2014 
total 2010 — 2517 2517 
assets and liabilities
the summary melrose group assets and liabilities are shown 
below
2011
£m
2010
£m
fixed assets 
 including computer software 2181  2561 
intangible assets 3348  3811 
goodwill 5685  7981 
net working capital 1448  1159 
retirement benefit obligations 1177 1196
provisions 1206 1187
deferred tax and current tax 748 1343
other
1
151 83
total 9380  11703 
1  includes net derivative liabilities in both years and for 2011 only a £11 million 
liability relating to the redeemable preference c shares to be redeemed on  
30 april 2012
these assets and liabilities are funded by
2011
£m
2010
£m
net debt 2896 2874
equity 6484 8829
total 9380 11703
the decrease in total equity is primarily related to the £3732 million 
return of capital to shareholders in august following the sale of 
dynacast 
goodwill intangible assets and impairment 
review
the total value of goodwill as at 31 december 2011 was  
£5685 million 31 december 2010 £7981 million and intangible 
assets was £3348 million 31 december 2010 £3811 million 
these items are split by division as follows
energy
£m
lifting
£m
other 
industrial 
£m
total
£m
goodwill 2473 2988 224 5685
intangible assets 1175 1993 180 3348
other net assets 446 569 394 1409
total carrying
 value 4094 5550 798 10442
the goodwill and intangible assets have been tested for impairment 
as at 31 december 2011 the board is comfortable that no 
impairment is required melrose plc
annual report 2011 28
2101204   26032012   proof 6
finance director’s review continued
pensions
the group has a number of defined benefit and defined 
contribution pension plans
the most significant pension plan in the group is the fki uk 
pension plan the net accounting deficit on this plan was £794 
million at 31 december 2011 31 december 2010 £786 million 
this plan had assets at 31 december 2011 of £6003 million 
31 december 2010 £5492 million and liabilities of £6797 million 
31 december 2010 £6278 million  
the assumptions used to calculate the ias 19 deficit of the pension 
plans within the melrose group are considered carefully by the 
board of directors for the fki uk pension plan a male aged 65 in 
2011 is expected to live for a further 203 years this is assumed 
to increase by 25 years 12 for a male aged 65 in 2036 a 
summary of the key assumptions of the uk plans are shown below
2011 
assumptions

2010
assumptions

discount rate 490 555
inflation 310 345
it is noted that a 01 percentage point decrease in the discount rate 
would increase the pension liabilities on the main fki uk pension 
plan by £105 million or 2 and a 01 percentage point increase 
to inflation would increase the liabilities on this plan by £70 million 
or 1 furthermore an increase by one year in the expected life of 
a 65 year old male member would increase the pension liabilities on 
this plan by £198 million or 3
the fki uk pension plan is closed to new members and on  
28 february 2011 it was closed to current members’ future service 
the other uk defined benefit pension plan of significant size in the 
group namely the mckechnie uk pension plan was in surplus of 
£30 million at 31 december 2011 31 december 2010 surplus of 
£19 million this plan had assets at 31 december 2011 of £1575 
million 31 december 2010 £1438 million and liabilities of £1545 
million 31 december 2010 £1419 million
the mckechnie uk pension plan is closed both to new members 
and current members’ future service 
the long term strategy for the uk plans is to concentrate on the 
cash flows required to fund the liabilities as they fall due whether 
that is within the timescales of melrose ownership or not the 
melrose plc board recognise that as businesses are bought and 
sold eventually pension scheme liabilities need to exit the group 
however this can be done at a time which is commercially sensible
the pension plan cash flows extend many years into the future and 
the ultimate objective is that the total pool of assets derived from 
future company contributions and the investment strategy allows 
each cash payment to members to be made when due the melrose 
group contributes £185 million to the fki uk pension plan and £46 
million to the mckechnie uk pension plan per annum
in addition a us defined benefit plan for fki exists at 31 december 
2011 this had assets of £1952 million 31 december 2010 £1933 
million liabilities of £2287 million 31 december 2010 £2131 million 
and consequently a deficit of £335 million 31 december 2010 £198 
million this plan is closed to new members and to current members’ 
future accrual
during the year the pension plans relating to dynacast and logistex 
uk were disposed which reduced the group plan assets by £305 
million and the group plan liabilities by £411 million and hence the 
group accounting deficit by £106 million
provisions
total provisions at 31 december 2011 were £1206 million  
31 december 2010 £1187 million a slight increase from 
the previous year the following table shows the movement 
in provisions in the year within this there were some major 
movements
total
£m
at 31 december 2010 1187
utilised — cash spend 376
net charge to headline operating profit 69
net charge to exceptional costs 351
disposal of businesses 36
other including foreign exchange 11
at 31 december 2011 1206
included within cash spend on provisions in 2011 are two exceptional 
cash costs which the group incurred both of which were fully 
anticipated and provided they represented payments in respect of 
two liabilities that were acquired with fki plc the first related to the 
transfer of £104 million of captive insurance liabilities to an external 
party safety national inc so that the group has no further exposure 
to these risks these were transferred at a cash cost of £90 million 
resulting in a profit in the year of £14 million the second related to a 
legal settlement in respect of a historical fki owned company 
dewind gmbh disposed of prior to the group’ s acquisition of fki 
this historical liability was paid in two tranches totalling £104 million in 
addition £30 million of ongoing maintenance costs in respect of  
dewind originally provided were paid in cash
the net charge to headline operating profit in 2011 in respect of 
provisions was £69 million mostly relating to the charge of £50 
million in respect of the divisional ltip schemes 
as described in the exceptional costs section of this review a 
£210 million increase to a legal provision in respect of two bridon 
businesses acquired as part of the acquisition of fki plc has been 
charged in the year in addition of the £159 million exceptional 
cost relating to restructuring programmes agreed in the year £141 
million was booked to provisions with the remaining £18 million 
shown as an impairment of fixed assets  wwwmelroseplcnet
stock code mro 29
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the other movements on provisions in the year include £36 million 
of provisions that were sold along with the five disposed businesses 
and a movement of £11 million being the net effect of the unwind 
on long term provisions and foreign exchange
risk management
the financial risks the group faces have been considered and 
policies have been implemented to best deal with each risk the 
four most significant financial risks are considered to be liquidity 
risk finance cost risk exchange rate risk and commodity cost risk 
these are discussed in turn
liquidity risk management
the group’s net debt position at 31 december 2011 was £2896 
million compared with £2874 million a year earlier 
at 31 december 2011 the group had a committed £750 million 
syndicated term loan and revolving credit facility which was due to 
mature in april 2013 in order to minimise future refinancing risk the 
board decided prudently to refinance this facility early as a result 
of the strong cash generation in melrose since the fki acquisition 
which has allowed group net debt to reduce by £280 million 
61 at constant currencies the new facility could be reduced 
consequently in december 2011 a new fiveyear committed 
£600 million multicurrency revolving credit facility was agreed and 
subsequently drawn down on 31 january 2012 at which date the 
original facility was repaid in full and cancelled 
the new facility is committed until december 2016 and is not subject 
to any mandatory repayments over its term but allows extra flexibility 
for the group to reduce its borrowings as cash is generated 
the new facility has two financial covenants a net debt to 
headline ebitda headline operating profit before depreciation and 
amortisation covenant and an interest cover covenant 
the first covenant which calculates net debt at average exchange 
rates during the period is set at 30x throughout the life of the facility 
for the year ended 31 december 2011 it was 14x 31 december 
2010 13x showing significant headroom compared to the covenant 
test the interest cover covenant remains at 40x throughout the 
life of the facility at 31 december 2011 it was 117x 31 december 
2010 97x which also affords comfortable headroom compared 
to the covenant test covenant tests are performed each june and 
december on the new facility
the initial drawdown of the new facility has been made in the core 
currencies of the group being us dollars euro and sterling and 
in a proportion to protect the group as efficiently as possible from 
currency fluctuations on net assets and profit
 
in addition there are a number of small uncommitted overdraft 
and borrowing facilities made available to the group these 
uncommitted facilities are lightly used
cash deposits and marketable securities amounted to £1956 
million at 31 december 2011 31 december 2010 £1957 million 
and are offset against gross debt of £4852 million 31 december 
2010 £4831 million to arrive at the net debt position of £2896 
million 31 december 2010 £2874 million the combination of this 
cash and the size of the new revolving facility allows the directors 
to consider that the group has sufficient access to liquidity for its 
current needs
in accordance with the reporting requirements on going concern 
issued by the financial reporting council the directors acknowledge 
that by its very nature the economic environment causes uncertainty 
as to the trading outcome for 2012 and beyond the group has 
committed borrowing facilities until december 2016 in addition 
the breadth of the end markets that the melrose group companies 
trade in both by sector and geographically gives some balance to 
various market and economic cycle risks furthermore the group 
has a consistent cash generation record which has allowed net debt 
at constant exchange rates to reduce by 61 since july 2008 as 
a consequence the directors believe that the group can manage 
its business risks successfully and accordingly the group financial 
statements have been prepared on a going concern basis 
finance cost risk management
the group remained in a net debt position at 31 december 2011 in 
2011 the group protected 78 of its gross debt from exposure to 
changes in interest rates by holding a number of interest rate swaps 
to fix £3801 million us 5460 million and €333 million of term 
debt under the terms of these swaps the group fixed the underlying 
interest rate at 21 for us dollars and 26 for the euro through to 
early 2013 at 31 december 2011 this produced a blended interest 
rate of 31 2010 34 on the £750 million facility calculated after 
inclusion of the current bank margin of 135 2010 15 but before 
amortisation of arrangement fees and nonutilisation fees
in february 2012 the group closed out this swap arrangement 
and replaced it with a new arrangement to fix the interest rate on 
a proportion of the new facility drawn down on 31 january 2012 
the new fiveyear swap arrangements fix the finance cost on us 
231 million £105 million and €42 million of debt under the terms 
of these new swap arrangements the group will pay annually in 
arrears 10 for us dollar swaps 11 for euro swaps and 11 
for sterling swaps plus the bank margin which is currently 15 
this arrangement protects approximately 70 of the group’s 
exposure to interest rate fluctuations for the term of the new facility
exchange rate risk management
the group trades in various countries around the world and is exposed 
to many different foreign currencies the group therefore carries an 
exchange rate risk that can be categorised into three types as described 
overleaf the board policy is designed to protect against the majority 
of the cash risks but not the noncash risks the most common cash 
risk is the transaction risk the group takes when it invoices a sale in a 
different currency to the one in which its cost of sale is incurred this is 
addressed by taking out forward cover against approximately 60 to 
80 of the anticipated cash flows over the following twelve months 
placed on a rolling quarterly basis or for 100 of each material contract 
this does not eliminate the cash risk but does bring some certainty to it melrose plc
annual report 2011 30
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finance director’s review continued
exchange rates used in the period
average rate closing rate
us dollar
2011 160 155
2010 155 156
euro
2011 115 120
2010 117 116
the effect on the key headline numbers in 2011 for the continuing 
group due to the translation movement of exchange rates from 
2010 to 2011 is shown below the table illustrates the translation 
movement in revenue and headline operating profit if the 2010 
average exchange rates had been used to calculate the 2011 
results rather than the 2011 average exchange rate
the translation difference in 2011 £m
revenue increase 56
headline operating profit increase minimal
for reference an indication of the short term exchange rate 
risk which shows both translation exchange risk and unhedged 
transaction exchange rate risk is as follows
sensitivity of profit to translation and 
unhedged transaction exchange risk
increase 
in headline 
operating 
profit
£m
for every 10 cent strengthening of the us dollar
 against sterling 47
for every 10 cent strengthening of the euro
 against sterling 28
the long term exchange rate risk which ignores any hedging 
instruments is as follows
sensitivity of profit to translation and full 
transaction exchange rate risk
increase 
in headline 
operating 
profit
£m
for every 10 cent strengthening of the us dollar
 against sterling 66
for every 10 cent strengthening of the euro
 against sterling 26
no specific exchange instruments are used to protect against this 
translation risk because it is a noncash risk to the group however 
when the group has net debt the hedge of having a multi
currency debt facility funding these foreign currency trading units 
protects against some of the balance sheet and banking covenant 
translation risk
lastly and potentially the most significant exchange risk that the 
group has arises when a business that is predominantly based in a 
foreign currency is sold the proceeds for those businesses may be 
received in a foreign currency and therefore an exchange risk might 
arise if foreign currency proceeds are converted back to sterling 
for instance to pay a dividend to shareholders protection against 
this risk is considered on a casebycase basis 
commodity cost risk management
as melrose owns engineering businesses across various sectors 
the cumulative expenditure on commodities is important the 
group addresses the risk of base commodity costs increasing by 
wherever possible passing on the cost increases to customers 
or by having suitable purchase agreements with its suppliers 
which sometimes fix the price over some months into the future 
on occasions melrose does enter into financial instruments on 
commodities when this is considered to be the most efficient way 
of protecting against movements 
geoffrey martin
group finance director
7 march 2012 wwwmelroseplcnet
stock code mro 31
business performance governance financials shareholder information
2101204   26032012   proof 6
melrose operates in a wide variety of sectors and countries and is exposed to a range of risks and uncertainties from a strategic operational 
compliance ethical and financial perspective detailed below are risks and uncertainties that could impact on the company’s performance 
a risk management and internal controls framework is in place within the group to ensure that such risks and uncertainties can be identified 
and where possible managed suitably
risks and uncertainties
strategic risk nature of risk mitigating factors
acquisition of new 
businesses and 
improvement strategies
•	 discovery of unforeseen liabilities 
following acquisition
•	 value generation post acquisition does 
not meet expectations
•	 need for a greater amount of capital 
expenditure and working capital to 
grow the acquired business than 
originally forecast
•	 structured and focused due diligence undertaken
•	 focus on acquisition targets that have strong 
headline fundamentals – high quality products 
leading market share but are underperforming their 
potential and ability to generate sustainable cash 
flows and profit growth
•	 handson role taken by directors and other senior 
employees of the group development of strategic 
plans restructuring opportunities capital expenditure 
and working capital management
disposals
•	 timing of disposal of companies
•	 long term liabilities retained by the 
group post disposal
•	 directors are experienced in judging and regularly 
reviewing the appropriate time in a business cycle for 
disposal to realise maximum value for shareholders
•	 each disposal is assessed on its merits along with 
the extent to which indemnities warranties and 
guarantees are provided
operational risk nature of risk mitigating factors
economic and political risk
•	 difficult macroeconomic conditions 
changing pattern of global demand  
and political uncertainty
•	 diverse range of companies operating within the 
group within a variety of different industries and 
countries which reduces macroeconomic and 
political risks
•	 regular monitoring of order books and other leading 
indicators to ensure the group and each of its 
businesses can respond quickly to any adverse 
trading conditions this includes the identification of 
cost reduction and efficiency measures
customers
•	 concentration of customers in certain 
markets andor countries around the 
world
•	 financial viability of key customers
•	 diverse portfolio of businesses serving different 
customers and markets no reliance on any one 
customer or group of customers at a business unit 
level performance could be materially affected by 
the loss of a key customer and regular monitoring is 
undertaken to reduce such risks
•	 active credit management and development of 
customer relations at a business level
•	 monitoring of key markets for early warning of 
negative commercial trends
suppliers
•	 over reliance on a small number 
of suppliers leading to a lack of 
availability
•	 production volatility and supply chain 
disruption
•	 fluctuations in cost of raw materials
•	 diverse portfolio of suppliers the company is not 
reliant on any one supplier or group of suppliers
•	 ongoing assessment of suppliers including the 
monitoring of their financial viability
•	 if commercially suitable contract prices are 
agreed with raw material suppliers to reduce the 
effect of short term price fluctuations risks are 
further reduced by the use of escalation clauses 
surcharges and price increases when negotiating 
contracts together with the use of matching hedging 
arrangements melrose plc
annual report 2011 32
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risks and uncertainties continued
operational risk continued nature of risk mitigating factors
product quality
•	 reputational risks from product quality 
issues
•	 product liabilities regarding defective 
products
•	 investment made available to allow for product 
improvements and efficient production processes
•	 well defined testing procedures together with 
suitable research and development facilities at key 
manufacturing locations
•	 maintenance of insurance policies to cover product 
liabilities
competitive markets
•	 increased level of competition leading 
to loss of market share andor reducing 
operational margins
•	 substantial investment in research and development 
funds made available for both the development 
of new products and to meet changing customer 
demands
•	 ongoing monitoring of competing markets and 
products to ensure that potential threats are identified 
quickly
•	 development of close customer relationships 
understanding of customer needs and rigorous focus 
on costs
information technology
•	 failure of it systems leading to severe 
operational issues
•	 different it systems used in each business regular 
review of it policies and procedures within each 
business to include disaster recovery planning
loss of key management
•	 over reliance on small number of 
directors and other senior managers 
within both the group and individual 
businesses
•	 succession planning within the group is coordinated 
via the nominations committee in conjunction with 
the board and includes all directors and senior 
employees
•	 the company recognises that as with most 
businesses particularly those operating within a 
technical field it is dependent on directors and 
employees with particular managerial engineering or 
technical skills appropriate remuneration packages 
and long term incentive arrangements are offered in 
an effort to retain such individuals
compliance and  
ethical risk
nature of risk mitigating factors
legal regulatory and 
intellectual property ‘ip’
•	 ongoing changes to legal andor 
regulatory requirements that may 
substantially differ from country to 
country
•	 litigation from third parties
•	 infringement or other inappropriate use 
of the group’s ip rights by a third party 
leading to reputational issues and 
potential loss of sales
•	 regular monitoring of legal and regulatory matters at 
both a group and business unit level consultation 
with external advisers where necessary
•	 development of suitable corporate governance 
procedures both at a group and business unit level
•	 protection of rights over trademarks copyright 
patents designs and trade secrets where necessary 
internal ip audits are carried out by each group 
business on a periodic basis
business conduct
•	 reputational risk caused by ethical 
breach
•	 groupwide policies are in place to ensure ethical 
standards are adhered to within the businesses 
which include antibribery and whistleblowing 
procedures wwwmelroseplcnet
stock code mro 33
business performance governance financials shareholder information
2101204   26032012   proof 6
compliance and  
ethical risk continued
nature of risk mitigating factors
health safety and 
environmental
•	 potential risk of injury or damage to 
employees or third parties if policies 
and procedures are not adhered to
•	 breach of legal andor regulatory 
requirements
•	 strong approach to managing health and safety 
employee suggestions actively encouraged
•	 groupwide health and safety kpis designed to 
overlay the well established business specific kpis 
review of health safety and environmental matters 
at both group board meetings and business level 
meetings together with the completion of risk control 
surveys
financial risk nature of risk mitigating factors
liquidity
•	 inability of the group to meet its finacial 
obligations
•	 ensure the company has adequate resources to 
meet its liabilities by reviewing its rolling forecasts 
ensuring there is sufficient headroom within 
committed bank facilities to cope with market 
volatility
finance cost
•	 material fluctuations of interest rates •	 the company enters into a suitable amount of 
interest rate protection to limit this exposure
exchange rate
•	 exposure to fluctuations in foreign 
currency values
•	 transaction risk when a business is 
disposed and proceeds received in a 
foreign currency
•	 the company policy is to protect against the majority 
of foreign exchange risk which affects cash
•	 protection against specific transaction risks are taken 
by the board on a casebycase basis
pensions
•	 pension deficit levels are affected by 
changes in asset values discount 
rates inflation and mortality 
assumptions
•	 higher deficit levels may increase 
requirement on the group to fund the 
deficit
•	 each of the group’s three key pension plans are now 
closed to new entrants and future service accrual 
long term funding plans are agreed with each of 
these plans and reviewed following completion of 
actuarial valuations 
•	 active management of pension scheme assets 
further information regarding these three pension 
plans can be found on page 44 of the directors’ 
report
further details in relation to the financial risks are shown within the finance director’s review on pages 29 and 30 melrose plc
annual report 2011 34
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key performance indicators
financial kpis
288p
method of calculation
group headline
1
 profit after tax excluding the profit on disposal of 
businesses from continuing and discontinued operations as 
reported in this 2011 annual report divided by the diluted 
weighted average number of ordinary shares in issue
strategic objective
to create consistent and long term value for shareholders
10
diluted headline
1 
earnings  
per share pence
’09 ’10 ’11
163p
241p
288p
method of calculation
headline
1
 operating profit for the continuing group as reported in 
this 2011 annual report
strategic objective
to improve profitability of group operations
10
headline
1
 operating profit £m
’09 ’10 ’11
£1240m
4
£1470m
4
£1808m
£1808m
method of calculation
headline
1
 operating profit as a percentage of revenue for the 
continuing group as reported in this 2011 annual report
strategic objective
to improve profitability of group operations
10
headline
1
 operating margin 
’09 ’10 ’11
123
4
142
4
157
157
method of calculation
calculated as headline
1
 ebita
3
 as a multiple of interest payable 
on bank loans and overdrafts for the full group during each year
strategic objective
to ensure the group has suitable amounts of debt and remains 
within its banking covenants
10
interest cover
’09 ’10 ’11
61×
97×
117×
117x
method of calculation
amount declared as payable by way of dividends in terms of 
pence per share
strategic objective
to operate a progressive dividend policy whenever the financial 
position of the company in the opinion of the board justifies the 
payment
10
dividend per share pence
in addition to the return of capital of £3732 million 
in august 2011 which followed the sale of dynacast 
representing 75 pence per ordinary share
’09 ’10 ’11
77p
110p
130p
130p
method of calculation
net debt divided by headline
1
 ebitda
2
 for existing businesses at 
each year end
strategic objective
to ensure the group has suitable amounts of debt and remains 
within its banking covenants
10
net debt to headline
1
 ebitda
2
’09 ’10 ’11
18x
13x
14x
14x
in order to support the group’s strategy and to monitor performance the board use a number of financial and non financial key performance 
indicators ‘kpis’ details of a selection of the kpis are shown below additional business level kpis are also used which are relevant to their 
particular circumstances wwwmelroseplcnet
stock code mro 35
business performance governance financials shareholder information
2101204   26032012   proof 6
financial kpis continued
nonfinancial kpis
nonfinancial kpis continued
method of calculation
percentage of headline
1 
ebitda
2
 conversion to cash for 
continuing businesses pre capital expenditure
strategic objective
to ensure businesses are suitably cash generative in order to have 
adequate cash reserves for the effective running of the company 
and for significant capital investment where required
10
cash conversion 
’09 ’10 ’11
143
4
104
4
89
89
method of calculation
a variety of different health and safety kpis are used by each of 
the businesses within the group which are specific to the exact 
nature of the business and its associated risks three overall 
group kpis are also used by the board which are major accident 
frequency rate accidents that result in an employee having more 
than three days off work due to a work related injury per 200000 
working hours accident frequency rate accidents that result in 
an employee having less than three days off work due to a work 
related injury per 200000 working hours and accident severity 
rate average number of lost days per work related accident
strategic objective
the company has an objective to stop all preventable accidents
performance
the company introduced the three group kpis during 2011 and 
as part of this process statistics were also calculated historically 
back to 2009 these kpis improved during the period from 2009 
to 2011 further information in relation to the various health and 
safety initiatives undertaken by the group’s businesses during 
2011 and planned for 2012 can be found within the directors’ 
report on pages 45 and 46
health and safety
method of calculation
environmental kpis used within the group and their method of 
calculation vary by business unit which depends on the specific 
nature of the operation a range of environmental measures 
are used including energy consumption co 2 emissions water 
consumption water contamination and waste disposal
due to the diverse nature of the group each business uses a 
range of its own specific nonfinancial kpis which are used to 
drive business performance and assist in managing risk this helps 
to ensure that the kpis used are relevant to each business and 
take into account specific operational and reporting requirements 
such kpis cover operational quality commercial and human 
resource measures further information regarding some of the 
group’s recent initiatives can be found within the directors’ report 
on pages 43 and 44
1 before exceptional costs exceptional income and intangible asset  
 amortisation
2 operating profit before depreciation and amortisation of computer software
3 operating profit before amortisation of computer software
4  restated to include the results of dynacast brush traction logistex uk 
madico and weber knapp within discontinued operations
strategic objective
each of the group’s businesses are committed to ensuring 
that their operations have a minimum adverse effect on the 
environment and that ongoing reductions are achieved where 
practicable particular relevance has been placed on the reduction 
of energy consumption and co 2 emissions
performance
investment was provided by the group for several environmental 
improvement initiatives during 2011 details of these together with 
some of the environmental initiatives for 2012 can be seen in the 
directors’ report on pages 46 and 47
environmental and energy usage
other nonfinancial
further information in relation to the key financial performance 
indicators can be found within the finance director’s review on 
pages 23 to 30 melrose plc
annual report 2011 36
2101204   26032012   proof 6
        read more on pages 52 and 53

audit committee 
john grant chairman perry crosthwaite 
justin dowley miles templeman
during 2011 the audit committee met three times
        read more on page 53

remuneration committee 
perry crosthwaite chairman miles templeman 
john grant justin dowley
during 2011 the remuneration committee met twice
board of directors
christopher miller  executive chairman
age 60 he qualified as a chartered accountant with coopers  
lybrand following which he was an associate director of hanson plc  
in september 1988 he joined the board of wassall plc as its chief 
executive between october 2000 and may 2003 he was involved in 
private investment activities mr miller was appointed as an executive 
director of melrose on 29 may 2003 he is currently a nonexecutive 
director of tmo renewables limited
david roper  chief executive
age 61 he qualified as a chartered accountant with peat marwick 
mitchell following which he worked in the corporate finance divisions of 
sg warburg  co limited bzw and dillon read in september 1988 
he was appointed to the board of wassall plc and became its deputy 
chief executive in 1993 between october 2000 and may 2003 he was 
involved in private investment activities and served as a nonexecutive 
director on the boards of two companies mr roper was appointed as 
an executive director of melrose on 29 may 2003
simon peckham  chief operating officer
age 49 he qualified as a solicitor in 1986 in 1990 he joined wassall 
plc and became an executive director of wassall plc in 1999 from 
october 2000 until may 2003 he worked for the equity finance division 
of the royal bank of scotland and was involved in several high profile 
transactions  mr peckham was appointed as an executive director of 
melrose on 29 may 2003
geoffrey martin group finance director
age 44 he qualified as a chartered accountant with coopers  lybrand 
where he worked within the corporate finance and audit departments  
in 1996 he joined royal doulton plc and was group finance director 
from october 2000 until june 2005 during this time he was involved 
in projects including raising public equity debt refinancings and the 
restructuring and outsourcing of the manufacturing and supply chain  
mr martin was appointed as an executive director of melrose on 7 july 
2005 wwwmelroseplcnet
stock code mro 37
business performance governance financials shareholder information
2101204   26032012   proof 6
        read more on page 53

nomination committee 
miles templeman chairman perry crosthwaite john grant 
justin dowley christopher miller
during 2011 the nomination committee met three times
miles templeman  senior nonexecutive director
age 64 he has been a director of several consumer goods and retailing 
companies he was managing director of threshers offlicences 
between 1985 and 1988 and managing director of whitbread beer 
company between 1990 and 2001 mr templeman was chief executive 
officer of hp bulmer holdings plc from january 2003 to july 2003 
and nonexecutive chairman of restaurant chain yo sushi between 
2003 and 2008 he has also held a number of other nonexecutive 
directorships and was appointed as a nonexecutive director of 
melrose on 8 october 2003 between october 2004 and october 
2011 mr templeman also occupied the position of director general 
of the institute of directors he is currently nonexecutive chairman of 
shepherd neame the kentish family brewer
john grant  nonexecutive director
age 66 mr grant spent his executive career in a variety of senior 
international roles within the automotive industry and other engineering 
businesses he was chief executive of ascot plc between 1997 and 
2000 prior to that mr grant was group finance director of lucas 
industries plc subsequently lucasvarity plc between 1992 and 1996  
he previously held several senior strategy and finance positions with 
ford motor company in europe and the usa mr grant was appointed 
as a nonexecutive director of melrose on 1 august 2006 he is 
currently nonexecutive director of mhp sa pace plc and wolfson 
microelectronics plc
perry crosthwaite  nonexecutive director
age 63 he has over 30 years’ experience as a director in the city 
of london he was a founding director of henderson crosthwaite 
institutional brokers limited serving on the board until its acquisition 
by investec bank in 1998 he became a director of investec bank 
uk limited and chairman of the investment banking division until his 
retirement in 2004 mr crosthwaite was appointed as a nonexecutive 
director of melrose on 26 july 2005 he is currently chairman of jupiter 
green investment trust plc and a nonexecutive director of investec 
limited and investec plc
justin dowley  nonexecutive director
aged 56 he has extensive experience within the banking investment 
and asset management sector and was latterly vice chairman of emea 
investment banking a division of nomura international plc he was 
also a founder partner of tricorn partners head of investment banking 
at merrill lynch europe and a director at morgan grenfell mr dowley 
was appointed as a nonexecutive director of melrose on 1 september 
2011 he is also currently chairman of intermediate capital group plc 
a specialist investment and asset management company and is also 
a director of a number of private companies including ascot authority 
holdings limited melrose plc
annual report 2011 38
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directors’ report
the directors of melrose plc present their annual report and 
audited financial statements of the group for the year ended  
31 december 2011
strategy
melrose plc has a buy improve sell strategy to acquire 
manufacturing businesses improve performance and realise 
their value in the medium term further details of each part of the 
strategy are shown below additional information is also shown on 
pages 6 and 7
melrose aims to acquire good manufacturing businesses that in 
the opinion of the directors are currently underperforming their 
potential businesses are targeted that have strong headline 
fundamentals such as high quality products or a leading market 
share to generate sustainable cash flows achieve profit growth 
and create value for shareholders
the executive directors have extensive experience of identifying 
and evaluating such acquisition opportunities in both quoted and 
unquoted companies within the uk and overseas
to date the largest acquisition by the company has been that of 
fki plc in july 2008 for a total consideration of £9704 million 
which at the time increased the size of the melrose group by 
approximately six times 
the directors of the company are currently in the process of 
looking for the next acquisition opportunity indeed during 2011 
a proposal was made to the board of charter international plc 
‘charter’ regarding a possible offer by the company for charter 
for approximately £14 billion the directors remained price 
disciplined and ultimately decided not to pursue this opportunity 
but remain confident that other suitable targets exist
the company is not a passive investor in the businesses that 
it acquires the directors and senior management team have a 
handson relationship with each acquired company by working 
closely with their divisional senior management teams in developing 
the long term strategic plans of the business as well as having 
regular input on restructuring decisions capital expenditure and 
working capital management the company is fully committed to 
investing within the businesses it acquires in order to fully exploit 
their operational and strategic strengths a natural part of this 
process involves the disposal of noncore businesses 
the company has a proven track record in being able to make 
substantial improvements within the businesses it purchases two 
examples of this are as follows
•	 dynacast 
melrose acquired dynacast in may 2005 and sold this business 
in july 2011 during the six years of ownership and as a result 
of a variety of improvement initiatives and investments made by 
melrose the equity value increased fourfold melrose successfully 
steered dynacast through the global slowdown and cost savings 
made during the downturn were retained as sales recovered
•	 mckechnie aerospace 
melrose acquired the mckechnie group in 2005 part of this 
purchase included the mckechnie aerospace and aftermarkets 
business which was ultimately sold in may 2007 for £428 
million during the two year period of ownership within the group 
revenues grew by 35 per cent ebitda grew by approximately 75 
per cent with margins increasing by 6 percentage points the sale 
generated a profit including cash generation during ownership 
of approximately £250 million and in total it is estimated that the 
disposal crystallised a value increase of nearly 25 times
at the appropriate time each business will be disposed of in order 
to return value that has been created to shareholders
the directors are experienced in being able to recognise the 
appropriate time in the business cycle for disposal in order to 
provide funding for future acquisitions and return funds to investors
during the year the company’s strategy of returning value to 
shareholders was successfully demonstrated again following the sale 
of the dynacast division on 19 july 2011 for a cash consideration 
of £3665 million this was followed by a return of capital of £3732 
million in cash to shareholders of which £11 million has been 
deferred until april 2012 in 2011 noncore businesses of brush 
traction logistex uk madico and weber knapp were also sold for 
gross proceeds of £240 million in aggregate
prior to these disposals the company had already delivered 
significant value to shareholders via the acquisition and subsequent 
restructuring of the mckechnie group as mentioned above the 
sale of dynacast in 2011 means that nearly £1 billion in cash has 
been generated from the original purchase of the mckechnie and 
dynacast businesses for £429 million in 2005
principal activities
the company operates via three distinct trading divisions being 
energy lifting and other industrial with over half of the group’s 
end market revenues coming from the energy oil  gas and mining 
sectors a summary of the key strengths products and major 
customers of each group business is shown within the ‘group at a 
glance’ section of this report on pages 8 and 9
the company’s businesses operate on a global scale having 
manufacturing locations throughout the world as shown on the map 
on pages 4 and 5 further details regarding the principal activities of 
the company can be found within the chief executive’s review on 
pages 12 and 13 and divisional reviews on pages 14 to 22 wwwmelroseplcnet
stock code mro 39
business performance governance financials shareholder information
2101204   26032012   proof 6
divisional reviews
the company remains committed to investing within its various 
businesses and this can be seen through the development of new 
or upgraded facilities at various group locations around the world 
bridon’s new £20 million state of the art manufacturing facility at 
neptune energy park newcastle upon tyne uk is on track to 
be operational by the end of 2012 whilst marelli’s new factory in 
malaysia became fully operational towards the end of 2011 other 
recent investments in site infrastructure include the development of 
an industryleading patenting and galvanizing process at bridon’s 
doncaster factory in the uk and improvements that will allow for 
capacity increases within each of crosby’s key us manufacturing 
locations a further £15 million has been approved to increase 
capacity and productivity at the brush facilities in the uk and czech 
republic in relation to the manufacture of 2pole generators 
these investments will assist in developing growth opportunities 
within new markets especially china other parts of asia and south 
america
investment continued in the development of new and innovative 
product lines during 2011 with further product launches planned 
for 2012 this strategy helps to ensure that each business can 
remain at the forefront of technological advances within defined 
market sectors and are also able to meet specific customer 
demands
in accordance with the group’s strategy of improving commercial 
performance within its businesses a variety of structural changes 
were implemented during 2011 a good example of this can be 
seen through the absorption of the hawker siddeley switchgear 
“hss” business into turbogenerators during 2011 thus allowing 
them to benefit from similar sales and end market opportunities 
hss will also be able to benefit from the turbogenerator 
manufacturing strategy as a result of this reorganisation which has 
been developed over a period of time to create industryleading 
and efficient production methods the cost base of all businesses 
was also kept under constant review as each business continued 
to build on the various cost reduction initiatives that have been 
introduced in recent years and to ensure they are able to react to 
changing markets and demand
the group also continues to regularly review its pension benefit 
and legacy liabilities and reduce volatility where possible a number 
of actions were taken during the year as detailed on page 28 in 
addition the group sold legacy fki insurance obligations to a third 
party insurer to remove financial uncertainty in future years
the results of the group are set out in detail in the financial 
statements on pages 63 to 67 and in the accompanying notes
the company is required by the companies act 2006 to set out 
in this report a fair review of the development and performance of 
the group during the year the position of the group at the end of 
the year and a description of the principal risks and uncertainties 
facing the group the information that fulfils these requirements 
can be found within the chief executive’s review divisional reviews 
finance director’s review and in this directors’ report details of the 
main key performance and risk indicators used by the group can 
be seen on pages 31 to 35
the subsidiary undertakings principally affecting the profits or net 
assets of the group in the year are listed in note 3 to the melrose 
plc uk company accounts on page 113
financial results
the group’s profit for the financial year attributable to ordinary 
shareholders was £2864 million 2010 £1411 million in addition 
there were gains attributable to noncontrolling interests of £01 
million 2010 £02 million
shareholder dividend
the directors are pleased to recommend the payment of a 
final dividend of 84p 2010 70p on 14 may 2012 to ordinary 
shareholders on the register at the close of business on 13 april 
2012 this dividend recommendation will be put to shareholders at 
the forthcoming annual general meeting ‘agm’ of the company 
to be held on 9 may 2012
it is the intention of the board to maintain a progressive dividend 
policy where appropriate the company offers a dividend 
reinvestment plan which gives shareholders the opportunity to use 
their dividend payments to purchase further melrose plc shares 
further details about the dividend reinvestment plan and its terms 
and conditions can be found on the company’s website at 
wwwmelroseplcnet
in august 2011 following the sale of the dynacast business and as 
part of the return of capital to shareholders a special dividend of 
75 pence per ordinary share was approved following the return of 
capital a consolidation and subdivision of the company’s ordinary 
share capital was undertaken further details can be found about 
this and the special dividend on pages 40 and 41
directors’ appointment and powers
the directors of the company as at the date of this report together 
with their biographical details are given on pages 36 and 37 on 
1 september 2011 justin dowley joined the company as an 
independent nonexecutive director in order to provide further 
experience and complement the existing skill set of the board 
justin dowley is also a member of the audit remuneration and 
nomination committees of the board
the company’s articles of association ‘articles’ give the directors 
power to appoint and replace directors under the terms of 
reference of the nomination committee any appointment must be 
recommended by the nomination committee for approval by the 
board the articles also require directors to retire and resubmit 
themselves for election at the first agm following their appointment 
in previous years one third of the company’s directors have 
been subject to retirement by rotation with a requirement then 
to offer themselves for reelection however going forward and 
notwithstanding the articles the board has determined that  melrose plc
annual report 2011 40
2101204   26032012   proof 6
directors’ report continued
all directors of the company will stand for reelection at the 
forthcoming agm and annually thereafter in compliance with the 
new provisions of the uk corporate governance code
the directors are responsible for managing the business of the 
company and exercise their powers in accordance with the 
articles directions given by special resolution and any relevant 
statutes specific powers relating to the issuing of shares and the 
ability of the company to purchase its own shares are also included 
within the articles and such authorities are submitted for approval 
by the shareholders at the agm each year
pursuant to sections 693 and 701 of the companies act 2006 and 
a special resolution passed at the agm in 2011 the company was 
authorised to purchase its own shares limited to an aggregate 
maximum number equal to 10 per cent of the issued share capital 
of the company following the share capital consolidation defined 
below this authority ceased to be valid the company did not 
purchase any ordinary shares pursuant to this authority the 
resolutions being proposed at this year’s agm include a resolution 
to renew this authority
directors’ interests and remuneration
information on directors’ beneficial interests including those of 
connected persons within the meaning of section 252 of the 
companies act 2006 in the shares of the company is shown in 
the remuneration report on pages 56 to 59
no director had a material interest at any time during the year 
in any contract with the company or any of its subsidiary 
undertakings other than a service contract
directors’ indemnities
the directors have the benefit of an indemnity from the company in 
respect of liabilities incurred as a result of their office this indemnity 
is provided under the articles and satisfies the indemnity provisions 
of the companies act 2006
the company has taken out an insurance policy in respect of those 
liabilities for which the directors may not be indemnified neither 
the indemnity nor the insurance provides cover in the event that a 
director is proved to have acted dishonestly or fraudulently
directors’ responsibilities
the statement of directors’ responsibilities in relation to the 
consolidated financial statements is set out on page 60
share capital
following the sale of the group’s dynacast business on 19 july 
2011 for a cash consideration of £3665 million a return of 
capital was made to shareholders in august 2011 an amount of 
£3732 million was agreed to be returned representing 75 pence 
per existing ordinary share a share capital consolidation and 
subdivision was authorised by the directors and subsequently 
approved by the shareholders to help ensure that a constant 
share price be maintained both before and after the return of 
capital subject to normal market movements this resulted in a 
consolidation and subdivision of the company’s issued ordinary 
share capital for every 14 ordinary shares of 02 pence nominal 
value in the capital of the company ‘old ordinary shares’ held 
shareholders received 11 new ordinary shares of 1455 pence 
nominal value in the capital of the company ‘new ordinary 
shares’ the ‘share capital consolidation’
in order to facilitate the return of capital shareholders were given 
one new c noncumulative redeemable preference share of 75 
pence each in the capital of the company ‘c share’ for every one 
old ordinary share held three alternatives with a mix and match 
facility were offered to the holders of c shares allowing them to 
decide how and when to receive their return of capital as detailed 
below
capital return 
alternatives details of the capital return
initial redemption redemption of c shares by the company 
on 16 august 2011 at 75 pence per c 
share
single c share 
dividend
receive a single c share dividend of 75 
pence per c share on 16 august 2011 
following which all c shares in respect 
of which an election for the single c 
share dividend was made automatically 
converted into unlisted deferred shares of 
75 pence in the capital of the company “c 
deferred shares” to be redeemed by the 
company on 30 april 2012
final redemption redemption of c shares by the company 
on 30 april 2012 at 75 pence per c share
details of the structure of the company’s share capital both before 
and after the share capital consolidation together with the rights 
attached to each of the share classes in issue are set out below 
and on pages 41 and 42 in compliance with the requirements of 
section 992 of the companies act 2006
share class
31 december
2010
31 december
2011
old ordinary shares of 02 pence 497586779 nil
2009 incentive shares of £100 50000 50000
new ordinary shares of 1455
 pence nil 390961043
c shares of 75 pence nil 1392194
1
 
c deferred shares of 75 pence nil 34331656
1
 recognised in the balance sheet as a current liability of £11 million wwwmelroseplcnet
stock code mro 41
business performance governance financials shareholder information
2101204   26032012   proof 6
the holders of the remaining c shares and c deferred shares shall 
not be entitled to
•	 any further right of participating in the profits of the company or
•	 the right to vote at general meetings of the company except 
holders of c shares can vote on the winding up of the company
on a winding up the holders of the c shares shall be entitled in 
priority to all other classes of shares up to 75 pence per c share 
the holders of the c deferred shares shall not be entitled to any 
right or participation in the assets of the company on a winding up
the c deferred shares and c shares will be redeemed by the 
company on 30 april 2012 
only the new ordinary shares are traded on the london stock 
exchange having been admitted to the official list as maintained 
by the uk listing authority on 9 august 2011
2009 incentive shares
the 2009 incentive shares of £100 each have been awarded 
to directors and senior managers within the company together 
with ogier employee benefit trustee limited as trustee of the 
melrose plc employee benefit trust and replaced the incentive 
share scheme introduced in 2007 the rights attaching to the 2009 
incentive shares are identical to those originally attached to the 
2007 incentive scheme with the exception that the company may 
pay a dividend on the 2009 incentive shares as an alternative to 
converting them into ordinary shares and the award holders were 
not able to request early conversion in 2010 andor 2011 the 
rights attaching to the 2009 incentive shares remained the same 
both before and after the share capital consolidation
holders of the 2009 incentive shares will be entitled to either a cash 
dividend or a number of ordinary shares in the company aligned to 
the increase in shareholder value between july 2007 and may 2012
the 2009 incentive shares do not confer a right to be paid an 
interim or final dividend or to vote at a general meeting on winding 
up the holders are entitled to participate in the company’s assets 
equal to an amount to which they would have been entitled if their 
2009 incentive shares had crystallised as at the date of winding 
up further details of the 2009 incentive shares can be found in the 
remuneration report on pages 56 to 59
further rights and obligations attaching  
to shares
the following summary is based on the company’s articles as 
adopted at a general meeting of the company on 8 august 2011
voting
only new ordinary shares have voting rights attached in a 
general meeting of the company subject to the provisions of the 
current articles and to any special rights or restrictions as to voting 
attached to any other class of shares in the company of which 
there are currently none
•	 on a show of hands every member present shall have one vote 
and
•	 on a poll every member who is present in person or by proxy 
shall have one vote for every share of which he is the holder
the company’ s articles were amended pursuant to a special 
resolution approved at a general meeting of the company held on 
8 august 2011 to reflect the rights and restrictions attaching to the 
c shares and the c deferred shares and certain other changes 
required in connection with the share capital consolidation the rights 
attaching to the new ordinary shares following the share capital 
consolidation remained exactly the same as those attaching to the old 
ordinary shares immediately prior to the share capital consolidation
if any call or other sum payable by a holder of new ordinary shares 
remains unpaid they shall not be entitled to vote at any general 
meeting or class meeting in respect of any shares held by him 
currently all issued new ordinary shares are fully paid
as at 7 march 2012 the melrose plc employee benefit trust held 
19862 new ordinary shares 2010 25279 old ordinary shares 
at a nominal value of 1455 pence per share 2010 02 pence per 
share resulting from the crystallisation of the original incentive 
scheme in august 2007 the fki employee benefit trust held a 
further 124232 new ordinary shares 2010 158114 old ordinary 
shares at a nominal value of 1455 pence per share 2010 02 
pence per share arising from the melrose acquisition of fki plc 
the remuneration committee may direct how the voting rights of 
those shares are exercised
deadlines for voting rights
full details of the deadlines for exercising voting rights in respect of 
the resolutions to be considered at the agm to be held on 9 may 
2012 are set out in the notice of agm on pages 118 to 120
dividends and distributions
subject to the provisions of the companies act 2006 the 
company may by ordinary resolution declare a dividend to be 
paid to the ordinary shareholders but no dividend shall exceed the 
amount recommended by the board the board may pay interim 
dividends and also any fixed rate dividend whenever the financial 
position of the company in the opinion of the board justifies its 
payment all dividends shall be apportioned and paid prorata 
according to the amounts paid up on the shares
the board may deduct from a dividend or other amounts payable 
to a person in respect of their shares amounts due from him to the 
company on account of a call or otherwise in relation to such shares melrose plc
annual report 2011 42
2101204   26032012   proof 6
directors’ report continued
liquidation
under the current articles if the company is in liquidation the 
liquidator may on obtaining any sanction required by law
•	 divide amongst the shareholders in kind the whole or any part of 
the assets of the company or
•	 vest the whole or any part of the assets in trust for the benefit of 
shareholders as the liquidator shall determine
transfer of shares
subject to the articles any member may transfer all or any of 
his shares in any form which the board may approve and the 
transfer shall be executed by or on behalf of the transferor subject 
to the articles and the requirements of any relevant investment 
exchange the board may in its absolute discretion refuse to 
register a transfer of a share which is not a fully paid share or on 
which the company has a lien the board may also decline to 
register a transfer unless the transfer is i in respect of only one 
class of shares ii in favour of not more than four joint transferees 
or renouncees iii duly stamped if required and iv delivered 
for registration to the registered office or such other place as the 
board may decide accompanied by the certificate for the shares 
to which it relates and such other evidence as the board may 
reasonably require to prove the title of the transferor 
substantial shareholdings
as at 7 march 2012 the company has been advised of the 
following substantial interests in the ordinary share capital of the 
company
shareholder holding 
blackrock inc 47823838 1223
threadneedle asset 
     management ltd 31065172 795
standard life investments ltd 28659567 733
artemis investment management 25701112 657
scottish widows investment 
     partnership 23364440 598
ignis asset management 20242952 518
aviva investors 17616351 450
legal  general investment 
     management ltd 16576989 424
f  c asset management plc 14728830 377
corporate governance
the corporate governance report is included as a separate report 
on pages 50 to 55
risks and uncertainties
the group operates a variety of risk management processes 
designed to take into account the identification management and 
mitigation of business risk where both short term and long term 
considerations are monitored a review of the effectiveness of the 
company’s risk management and internal control systems is carried 
out on a regular basis and at least annually in accordance with 
the provisions of the uk corporate governance code a summary 
of the material strategic operational compliance ethical and 
financial risks and uncertainties that could impact on the group’s 
performance is shown on pages 31 to 33 internal control and risk 
management is also discussed further within the finance director’s 
review on pages 23 to 30 and the corporate governance report on 
pages 50 to 55 additionally key commercial and economic risks 
are covered in the chief executive’s review on pages 12 to 22
significant agreements and change of control
with the exception of the group’s banking facilities the melrose 
2009 incentive share scheme and the divisional management long 
term incentive schemes there are no other agreements that take 
effect alter or terminate upon a change of control of the company 
following a takeover bid that are considered to be significant in 
terms of their potential impact on the business of the group as a 
whole on 7 march 2012
on 22 december 2011 the group agreed a new syndicated 
£600 million fiveyear multicurrency committed revolving credit 
facility which has the same change of control provisions as the 
previous £750 million facility in the event of a change of control of 
the company following a takeover bid the company and lenders 
under this facility are obliged to enter into negotiations to determine 
whether and if so how to continue with the facility there is no 
obligation for the lenders to continue to make the facility available 
for more than 30 days beyond any change of control failure to 
reach agreement with parties on revised terms could require an 
acquirer to put in place replacement facilities
in the event of a takeover of the company the 2009 incentive 
shares convert into new ordinary shares or an entitlement to a 
dividend paid in cash the conversion being based upon the offer 
price of the company’s new ordinary shares as calculated on 
the date of the change of control of the company if part or the 
entire offer price is not in cash the remuneration committee will 
determine the value of the noncash element having been advised 
by an investment bank of repute that such valuation is fair and 
reasonable wwwmelroseplcnet
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product and employer’s liability claims
the group seeks to assess its ongoing risks in relation to potential 
future liabilities arising from insurance claims via the use of external 
actuarial projections to measure material exposures historic claims 
experience data is used to analyse risks in relation to less significant 
exposures actuarial projections and claims history experience are 
regularly analysed by management and key issues trends and 
statistics are also discussed at board level
risks within the group relate to potential future liabilities arising 
from product industrial disease including asbestos employer’s 
liability and workers’ compensation claims provisions in relation 
to such risks are recognised in the group’s balance sheet where 
appropriate note 30 to the consolidated financial statements 
provides further information with regard to contingent product 
liabilities
a number of businesses have iso 9001 and iso 16949 
certifications for their quality management systems which also help 
to ensure their products and processes are of a recognised quality 
reducing the risk of product claims some businesses within the 
group are also certified to international health and safety standards 
via iso 18001 which helps to further ensure that risks in relation to 
employer’s liability claims are kept to a minimum
payments to suppliers
the company has decided not to utilise standard protocols in 
respect of payments to suppliers given the international nature 
of the group’s operations it is the responsibility of each business 
to agree the exact terms and conditions of transactions with their 
suppliers and these arrangements are adhered to provided that 
suppliers meet their contractual commitments the company as 
a holding company did not have any material amounts owing to 
trade creditors at 31 december 2011
intellectual property
the company and each of its businesses recognise the value and 
importance of its intellectual property ‘ip’ and where appropriate 
will seek to protect and enforce its rights over ip  due to the varying 
types of ip rights held or licensed within the group each business 
is responsible for the management and enforcement of these on a 
decentralised basis through the use of external advisers and the 
support of the company as part of this process and to try and 
reduce risks in this area internal ip audits are conducted by all 
businesses within the group
employment policies
the group recognises its responsibilities for the fair treatment of 
all its employees in accordance with legislation applicable to the 
territories within which it operates due to the diverse nature of 
the group businesses are required to manage their employment 
matters on a decentralised basis and therefore responsibility 
for the adoption of employment policies and practices sits at a 
local business unit level this position ensures that policies and 
procedures meet both site and local regulatory requirements taking 
into account the size and nature of the businesses
as part of this decentralised approach each business is responsible 
for setting and measuring its own kpis and as such these vary 
throughout the group however such measurements will generally 
include absenteeism punctuality headcount and employee relations 
issues any concerns or adverse trends are responded to in a timely 
manner further as a groupwide policy and so far as particular 
disabilities permit the company and each of its businesses will give 
employees disabled during their period of employment continued 
employment in the same job or if this is not practicable a suitable 
alternative job equal opportunities for appropriate training career 
development and promotion are also available to all employees within 
the group regardless of any physical disability gender religion race 
nationality sexual orientation or age
applications for employment by disabled persons are always 
fully considered by the group taking into account jobspecific 
requirements and applicant aptitude it is the policy of the group 
that in recruitment training career development and promotion 
the treatment of disabled persons should as far as possible be 
identical to that of other employees
the group regards employee training and advancement as an 
essential element of industrial relations disputes and days lost 
through strike action are negligible
employee involvement consultation and 
development
the group attaches great importance to good labour relations 
employee involvement and employee development the nature of the 
group’s activities places the responsibility for employment practices 
with local management in a manner appropriate to each business
a culture of clear communication and employee consultation is 
inherent in the group’s businesses employee briefing sessions 
are held on a regular basis to communicate strategy key changes 
financial results achievements and other important issues regular 
appraisals employee surveys noticeboards intranet sites team 
meetings suggestion boxes and newsletters are also used to 
communicate with employees
extensive training is available to all staff and is actively encouraged 
to ensure a high standard of skill is maintained across the group 
crosstraining programmes are also in place at a number of the 
group’s businesses the importance of training extends beyond 
onthejob training and also focuses on enhancing personal 
development apprenticeship programmes are in place at the 
majority of sites which help to assist with succession planning 
in locations where there is an ageing workforce employees are 
encouraged to think in an innovative manner across the group melrose plc
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directors’ report continued
human resource initiatives
during 2011 many of the group’s businesses implemented a range 
of employeerelated initiatives which include the following
•	 within the turbogenerators business at loughborough a 
substantial investment has been made in a new learning 
academy which was officially opened in july 2011 classroom 
style facilities have been provided to enhance the skills of 
existing employees and to ensure that future apprentices can 
benefit from a structured learning environment these new 
training facilities are also being used to carry out customer 
training courses in relation to the growing aftermarket business 
during 2011 brush invested in a series of ‘next generation’ 
management development programmes aimed at managers 
who have responsibility for apprentices the programme is being 
developed further during 2012 turbogenerators were awarded a 
‘gold standard’ from the national apprenticeship service during 
2011 in relation to their highly regarded apprenticeship scheme 
•	 at bridon’s doncaster uk facility efforts have been made to 
encourage employee engagement in health and safety matters 
in order to improve further the safety record of the site this 
resulted in the business being awarded a steel industry ‘live 
wire’ award in 2011 for its efforts in involving employees in a 
variety of health and safety initiatives
•	 within each of the usbased businesses a focus has been 
placed on various employee health and wellness initiatives 
these include the introduction of tobaccofree sites provision 
of flu jabs weight loss initiatives wellness fairs and free medical 
testing services these initiatives are ongoing
a significant number of employees are members of unions and 
some businesses operate works councils both of which are used 
for consultation and dissemination of information as appropriate
the directors have monthly meetings with divisional senior 
management and visit the sites on an ad hoc basis to communicate 
with the wider group financial results of the company for the 
half year and full year are discussed with the group’s senior 
management team group developments are communicated 
to the businesses as appropriate employee involvement in and 
commitment to the group’s profitability is encouraged through 
appropriate bonus schemes
pensions
companies within the group operate various pension schemes 
around the world the table at the bottom of this page shows 
defined benefit schemes that are material to the group
the fki uk pension plan ‘fki uk plan’ is a uk defined benefit 
pension plan with fki limited as its principal employer the primary 
liability for funding rests with the participating employers which 
currently pay £185 million annually into the fki uk plan this is 
expected to remove the funding deficit by 31 december 2022 
when the contribution levels were last formally assessed as at  
31 december 2008 a formal actuarial valuation of the fki uk plan 
is currently being carried out which will record the funding position 
as at 31 december 2011 the company and the trustees of the 
plan will be discussing valuation results and funding requirements 
during the course of 2012 the fki uk plan closed to the accrual 
of future benefits for existing members on 28 february 2011 and 
this is expected to lead to the funding deficit being removed earlier 
than would otherwise have been the case
the mckechnie uk pension plan ‘mckechnie uk plan’ is a uk 
defined benefit pension plan with mckechnie limited as its principal 
employer the primary liability for funding rests with the participating 
employers the company and trustees reviewed the funding of the 
mckechnie uk plan as part of the actuarial valuation as at  
31 december 2008 and it was agreed that the participating 
employers would contribute £46 million annually into the 
mckechnie uk plan the company has guaranteed the funding 
of the mckechnie uk plan on an ongoing basis a formal actuarial 
valuation of the mckechnie uk plan is currently being carried out 
which will record the funding position as at 31 december 2011 
the company and trustees of the plan will be discussing valuation 
results and funding requirements during the course of 2012
the fki us pension plan is a defined benefit pension plan covering 
several of fki’s us businesses the primary liability for funding 
the fki us pension plan rests with the participating employers 
the company and trustees of the plan reviewed the funding 
requirements of the fki us pension plan based on its 1 january 
2011 actuarial valuation and no contributions will need to be made 
during 2012 unlike the uk pension plans deferred member 
liabilities do not increase by inflation each year 
defined benefits pension schemes material to the group as at 31 december 2011
name of plan status
assets
£m
liabilities
£m
number
of
members
fki uk
pension plan
closed to new members in october 2001
closed to the accrual of future benefits on
28 february 2011
6003
2010 5492
6797
2010 6278
10639
2010 10753
mckechnie 
uk pension plan
closed to new members in 2003 
closed for future accrual in 2005
1575
2010 1438
1545
2010 1419
3217
2010 3311
fki us
pension plan
closed to new members in april 2003 
closed for future accrual in 2009
1952
2010 1933
2287
2010 2131
8194
2010 8401
1
1  a review of the fki us pension plan was carried out in 2011 by the plan administrators who have subsequently confirmed that the number of members within the fki 
us plan should be restated for the year ended 31 december 2010 wwwmelroseplcnet
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health and safety
the directors of the company are committed to minimising the 
health and safety risks that each of the group’s employees are 
exposed to by promoting the effective use and management of 
business specific policies and procedures 
the group has a policy to ensure that the directors are made aware 
of any serious health and safety incidents wherever they occur in 
the world without delay to ensure that suitable investigations and 
corrective action can be organised health and safety is also covered 
at every quarterly board meeting of the company
each of the group’s businesses has specific health and safety kpis 
in use which are specific to the exact nature of their business and 
allow for focus analysis and improvement at local business levels 
often on a location by location basis
to supplement the business specific kpis groupwide health 
and safety kpis were developed during 2011 going forward this 
will allow the directors to review group statistics on a regular and 
consistent basis it will also ensure they have a greater visibility of 
the key group health and safety trends in order to help them to 
make decisions on where future focus should be placed
the group health and safety kpis that are actively being used 
are major accident frequency rate defined as an accident 
that resulted in an employee having more than three days off 
work due to a workrelated injury per 200000 working hours 
accident frequency rate defined as an accident that resulted in 
an employee having between one and three days off work due to 
a workrelated injury per 200000 working hours and accident 
severity rate which calculates the average number of lost working 
days per accident such statistics are collected quarterly on a site
bysite basis from an overall group perspective each of the three 
kpi statistics had improved in the period from 2009 to 2011
each business is responsible for setting its own detailed 
arrangements concerning health and safety policies and 
procedures in accordance with local health and safety legislation 
as a general rule businesses strive to achieve best practice in 
terms of what is suitable and practical for the size and nature 
of their operations several of the group’s businesses already 
hold iso 18001 certification the internationally recognised 
assessment standard for occupational health and safety 
management systems this certification includes some of the 
major manufacturing locations within the group such as the 
brush sites at loughborough uk and in the czech republic the 
certification process is also currently underway at the two mpc 
sites in yorkshire the bridon business has a medium term strategy 
to achieve iso 18001 international health and safety standards for 
all of its sites
divisional managers within each business unit have responsibilities 
to ensure that health and safety remains a key focus and to ensure 
that active procedures and monitoring systems are in place to 
provide substance to written policies detailed health and safety 
plans are set by businesses each year to determine annual targets 
and improvement initiatives
all businesses have an established health and safety committee 
‘hs committee’ structure in place such committees meet on 
a regular basis and are made up of representatives from both 
management and shop floor level personnel each of the hs 
committees has wideranging responsibilities which vary from 
business to business and include the review of reported incidents 
and the monitoring of incident trends these hs committees 
are also responsible for ensuring that corrective measures are 
implemented when accidents occur and that all incidents whether 
or not they are deemed reportable under local legislation are given 
due attention
one of the key responsibilities for these hs committees is to 
carry out regular tours of the premises in which they work in order 
to ensure compliance with local policies and procedures these 
tours also identify potential hazards for which counter measures 
can be identified to prevent accidents from happening each hs 
committee recommendation is followed up at the next committee 
meeting to ensure that issues are resolved additionally operations 
are audited by the hs committees at least annually and reports of 
performance and recommended improvements are prepared and 
circulated to the divisional senior management teams divisional 
managers are provided with detailed health and safety reports on a 
frequent basis to ensure that such matters are given high visibility 
and that improvements are authorised and implemented quickly
health and safety initiatives
during 2011 many of the group’s businesses implemented a range 
of initiatives aimed at improving health and safety performance as 
part of the group’s goal of achieving zero preventable accidents 
and these include 
•	 ongoing development within bridon of a new team meeting 
structure throughout its worldwide locations at such meetings 
bridon’s policy dictates that health and safety should be top of 
the agenda thus providing suitable forums to discuss relevant 
issues and escalate these to management quickly as part of 
this approach a variety of different meetings take place on a 
daily weekly and monthly basis to discuss a whole range of 
business issues with the aim of improving visibility ownership 
and leadership on a sitebysite basis this structure is already 
in place within bridon’s european sites and is now being rolled 
out to its sites in the us asia and new zealand bridon is also in 
the process of further developing their existing health and safety 
auditing systems
•	 during 2011 investment of approximately £05 million was 
provided to various bridon facilities to further improve barriers 
designed to segregate walkways from forklift truck usage and to 
improve machine guarding melrose plc
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directors’ report continued
the photograph above shows a ‘level one’ shop floor meeting 
taking place at bridon’s factory in willington quay near 
newcastle upon tyne uk with heavy industrial processes 
taking place in bridon’s worldwide locations health and safety 
takes a top priority at daily meetings such as this
more information about bridon is available online at 
wwwbridoncom
•	 at turbogenerators focus continues to be placed on 
driving down the number of accidents within each of its key 
manufacturing locations through the process of cultural change 
improved safety committee structures and site safety tours are 
all helping the business to reduce its accident rate during 2011 
a full equipment audit took place within turbogenerators to 
develop a register of machinery that has the potential to cause 
hand arm vibration or noise induced injuries which will allow 
usage levels to be monitored going forward equipment has also 
been identified that either needs to be repaired recalibrated or 
replaced
•	 hss implemented production line process changes during 2011 
in order to reduce the number of manual handling injuries and 
this will continue to be monitored throughout the course of 2012 
the use of safety eye wear has also been made compulsory 
in certain parts of the blackwood site in south wales together 
with a communication programme to ensure all employees are 
aware of the policy they have also just implemented an initiative 
in conjunction with some of their sheet metal suppliers to ensure 
that materials arrive in a ‘deburred’ state which ensures all 
sharp edges are removed to further reduce the number of cut
related injuries
•	 marelli are currently rolling out an inhouse risk perception 
training course for four hundred of its employees at their main 
manufacturing location in arzignano italy this is designed to 
communicate further the importance of risk reduction and the health 
and safety policies that need to be adhered to whilst on site
•	 within several of the us businesses efforts are being made 
to reduce specific accident causes such as slips falls and 
repetitive strain type injuries investments include the use of 
nonslip coatings on factory floors and the installation of cranes 
to allow for the safer loading and unloading of heavy materials 
additional safety training and awareness programmes have also 
been introduced to assist further in working towards the goal of 
achieving a zerotolerance approach to preventable accidents
the environment
the company’s main impact on the environment is through its 
energy use and associated carbon dioxide co 2 emissions and 
waste the directors fully understand the importance of the group’s 
environmental responsibilities each of the company’s businesses 
are committed to ensuring that their operations have a minimum 
adverse effect on the environment and that ongoing reductions 
in both energy usage and co 2 emissions are achieved wherever 
practicable
many of the group’s businesses are developing environmental 
policies and procedures in line with best practice guidelines via 
ongoing improvements to local processes to reduce the impact of 
their activities a number of the businesses have achieved or are 
currently in the process of achieving the high standards required to 
obtain iso 14001 environmental management systems certification 
in addition uk subsidiaries comply with the uk packaging waste 
regulations and reach registration evaluation authorisation and 
restriction of chemicals as appropriate
although there are no standardised environmental kpis currently 
used within the group each business fully understands the 
importance of monitoring the impact of its operations on the 
environment a range of kpis are used as environmental measures 
including energy consumption co 2 emissions water consumption 
water contamination waste disposal solid and liquid waste 
generation recycling and volatile organic compound emissions 
environmental performance is measured via the use of kpis in order 
that each of the businesses can plan for ongoing reductions
environmental initiatives
in terms of environmental initiatives that have either been 
completed in 2011 or are ongoing for 2012 there are a variety of 
examples from the group’s businesses and these include
•	 continuing development of a new ‘triple rinse system’ at bridon’s 
doncaster uk site which is designed to conserve water used 
to rinse products and recover acid this project was ongoing 
through 2011 and it is hoped the system will be fully operational 
from mid2012 wwwmelroseplcnet
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•	 planned reduction in the use of hydrochloric acid as a pickling 
agent at bridon’s doncaster site this will be achieved by the 
greater use of mechanical descaling and ultrasonic technology 
using phosphoric acid as the cleaning agent phosphoric acid is 
preferred to hydrochloric acid as it does not spontaneously fume 
and therefore no emissions are released into the atmosphere it is 
anticipated that this project will be completed by the end of 2012
•	 the installation of variable speed drives on pumps within 
bore hole abstraction wells and the effluent plant at bridon’s 
doncaster site was completed during the year prior to this 
such processes had operated on a constant full power setting 
the benefits of this investment include the reduction of energy 
consumption of up to 65 per cent on the specific processes to 
which the variable speed drives were applied together with a 30 
per cent reduction in the use of bore hole water thus conserving 
local water supplies 
•	 a reduction in waste product is planned at turbogenerators 
loughborough uk site during 2012 by a further commitment to 
recycle not only general waste but also shop floor waste such 
as copper other metals and plastic further workforce training 
will help to ensure recycling figures increase and waste product 
declines going forward various other initiatives are also currently 
taking place within brush to reduce energy consumption such 
as investment in automatic roller shutter doors to aid heat 
retention trials of led energy efficient lighting and an increase in 
the number of lights around the site that are on timers
•	 truth have recently made a considerable investment in a new air 
compressor system at their owatonna minnesota us facility 
designed to substantially reduce energy consumption a similar 
investment will be made in truth’s canadian facility at brampton 
ontario during 2012
•	 at crosby’s tulsa oklahoma site in the us during december 
2011 a sulphuric acid recovery system was installed within the 
galvanizing department this allows for the acid to be recovered 
and recycled as part of the cleaning process on the galvanizing 
line thus reducing the amount of hazardous waste generated 
from this operation as well as providing a significant return on 
the investment 
•	 a programme to reduce the amount of energy used for lighting 
within crosby’s site in tulsa has been very successful resulting 
in a 50 per cent reduction in energy consumed by such usage 
further energy efficient improvements were made including 
insulation of exterior walls and new energy efficient windows 
the replacement of old and inefficient preheating stations used 
for welding operations was also carried out during the year with 
the new equipment being 50 per cent more efficient due to the 
reduction in preheating times
•	 emergency spill kits have been introduced to crosby’s 
jacksonville us site during the year which will substantially 
improve the containment response time in the event of a large 
spill of hazardous material from the drums used to hold such 
liquids training courses were also provided for employees 
working in these areas in relation to the new equipment
during the year the company filed its first annual report to the 
environment agency to ensure compliance with the carbon 
reduction commitment energy efficiency scheme ‘crc’ this is 
a mandatory climate change and energy saving scheme introduced 
in the uk during april 2010 designed to record the group’s co 2 
usage within the uk the company will ensure that it continues to 
comply with the ongoing annual reporting requirements of the crc 
and to further reduce energy consumption wherever possible
environmental liabilities
the directors seek to ensure that all environmental risks are closely 
managed by external environmental specialists in conjunction 
with internal management the environmental laws of certain 
jurisdictions impose obligations to remediate contaminated sites in 
relation to sites both currently and previously owned by the group
the company secretary is made aware of all major environmental 
liabilities that may occur within any of the group’s businesses 
the board are also regularly updated on such matters all costs 
incurred by the group with regard to environmental liabilities are 
monitored with provisions being made as appropriate
research and development
the company actively encourages ongoing research and 
development within each of its businesses investment funds are 
made available for this purpose to ensure that new designs can be 
introduced to market and that existing processes can be further 
enhanced this helps to ensure that each business unit remains 
at the forefront of technological advances and is able to meet the 
everchanging demands of its customers details of some of the 
new products currently being introduced to the market are included 
within the chief executive’s review on pages 12 to 22 due to the 
nature of the research and development that occurred in 2011 the 
associated costs were expensed during the year rather than being 
capitalised in line with the group’s accounting policy on page 71
corporate social responsibility
due to the heavy industrial nature of some of the group activities 
the directors recognise that its operations will potentially impact 
on a wide variety of stakeholders in terms of social environmental 
and ethical matters including employees customers suppliers and 
local communities
many of the group’s businesses have social and ethical policies 
with responsibility for communication and implementation resting 
with relevant senior divisional managers such policies apply and 
extend to local law and standards and as a minimum include equal 
opportunities and antidiscrimination policies
the majority of the businesses provided community support during 
the year with efforts ranging from charitable donations to voluntary 
assistance and fund raising 
the company is committed to continuing to invest in its businesses 
during its ownership thus enhancing their reputation within the 
markets and communities in which they operate melrose plc
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directors’ report continued
charitable and political donations
the group paid £50000 2010 £21550 to charities during  
the year there were no political donations made during the year 
2010 nil
auditor
so far as each director is aware there is no relevant audit 
information of which the auditor is unaware and the directors have 
taken all the steps which they ought to have taken as directors to 
make themselves aware of any relevant audit information and to 
establish that the company’s auditor is aware of that information
this confirmation is given and should be interpreted in accordance 
with the provisions of section 418 of the companies act 2006
deloitte llp have expressed their willingness to continue in office 
as auditor accordingly a resolution will be proposed at the agm of 
the company to reappoint deloitte llp as auditor of the company 
and to authorise the directors to determine their remuneration
going concern
the group’s business activities together with the factors likely to 
affect its future development performance and position are set out 
in the divisional reviews on pages 14 to 22 the financial position of 
the group its cash flows liquidity position and borrowing facilities 
are described in the finance director’s review on pages 23 to 30 in 
addition notes 19 and 24 to the consolidated financial statements 
include the group’s policies and processes for managing its capital 
exposures to liquidity risk and financial risk management objectives 
as well as details of its financial instruments and hedging strategies 
credit risk exposure is discussed in notes 16 and 24 to the 
consolidated financial statements
the group prepares regular business forecasts and monitors 
projected facility headroom and compliance with its banking 
covenants which are reviewed by the board forecasts are 
then adjusted for sensitivities which address the principal 
risks to which the group is exposed such as fluctuations in 
exchange rates and best estimates of the possible impact of the 
macroeconomic environment on the group’s underlying trading 
results consideration is then given to the potential actions available 
to management to mitigate the impact of one or more of the 
sensitivities
taking all this into consideration the group should be able to 
operate within the level of its current banking facilities and remain 
covenant compliant for the foreseeable future being a period of 
at least twelve months from the date of approval of these financial 
statements
after making appropriate enquiries the directors have a reasonable 
expectation that the company and the group have adequate 
resources to continue in operational existence for the foreseeable 
future accordingly they continue to adopt the going concern basis 
in preparing the annual report and financial statements
agm
the agm of the company will be held at barbersurgeons’ hall 
monkwell square wood street london ec2y 5bl at 1100 am 
on 9 may 2012
in accordance with the uk corporate governance code published 
in june 2010 which applies to all accounting periods beginning 
on or after 29 june 2010 all directors will offer themselves for 
election or reelection at this year’s agm as per resolutions 4 
to 10 of the notice of meeting shown on pages 118 to 120 
following his appointment to the board on 1 september 2011 and 
in accordance with the company’s articles of association justin 
dowley will retire and offer himself for election at the agm as per 
resolution 11 of the notice of meeting
resolutions dealing with the following special business will be 
proposed at the agm
resolution 13 will seek shareholder approval to renew the 
directors’ authority to allot shares or grant rights to subscribe 
for or convert any securities into shares pursuant to section 551 
of the companies act 2006 the ‘section 551 authority’ the 
authority contained in paragraph a of the resolution will be limited 
to an aggregate nominal value representing £331724 being 
approximately one third of the company’s issued ordinary share 
capital as at 7 march 2012
in line with guidance issued by the association of british insurers 
paragraph b of this resolution would give the directors authority to 
allot shares or grant rights to subscribe for or convert any securities 
into shares in connection with a rights issue up to an aggregate 
nominal value of £663448 representing approximately twothirds 
of the company’s issued ordinary share capital as at 7 march 
2012 as reduced by the nominal amount of any shares issued 
under paragraph a of this resolution
the company does not hold any treasury shares
resolution 14 will seek to renew the authority conferred on the 
board to allot equity securities of the company or sell any shares 
which the company may elect to hold in treasury for cash pursuant 
to section 570 of the companies act 2006 the ‘section 570 
authority’ without first offering them to existing shareholders in 
proportion to their existing shareholdings
the authority is limited to allotments or sales in connection 
with preemptive offers subject to any arrangements that the 
directors consider appropriate to deal with fractions and overseas 
requirements and otherwise up to a maximum nominal value of 
£49758 representing approximately 5 per cent of the company’s 
issued ordinary share capital as at 7 march 2012 which is in 
accordance with the relevant guidelines for the company wwwmelroseplcnet
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if approved the section 551 authority and the section 570 
authority will expire at the conclusion of next year’s agm or if 
earlier at the close of business on 30 june 2013 the directors 
have no present intention of exercising the section 551 authority or 
the section 570 authority
resolution 15 will seek to renew the authority conferred on the 
company to purchase its own shares pursuant to sections 693 
and 701 of the companies act 2006 this authority is limited to 
an aggregate maximum number of 39096104 ordinary shares 
representing 10 per cent of the company’s issued ordinary share 
capital as at 7 march 2012 this power will expire at the conclusion 
of next year’s agm or if earlier at the close of business on 30 june 
2013 the maximum price which may be paid for an ordinary share 
will be an amount which is not more than 5 per cent above the 
average of the middle market quotation for an ordinary share as 
derived from the london stock exchange plc’s daily official list for 
the five business days immediately preceding the day on which the 
ordinary share is purchased the directors have no present intention 
of exercising all or any of the powers conferred by this resolution and 
will only exercise their authority if it is in the interests of shareholders 
generally
resolution 16 will seek shareholder approval to allow the company 
to continue to call general meetings other than agms on 14 clear 
days’ notice in accordance with the companies shareholders’ 
rights regulations 2009 the notice period required for general 
meetings of the company is 21 days unless shareholders approve a 
shorter notice period subject to a minimum period of 14 clear days 
agms will continue to be held on at least 21 clear days’ notice
the approval will be effective until the company’s next agm 
when it is intended that a similar resolution will be proposed in 
accordance with the companies act 2006 the company must 
make a means of electronic voting available to all shareholders for 
that meeting in order to be able to call a general meeting on less 
than 21 clear days’ notice 
recommendations
the board believes that each of the resolutions to be proposed 
at the agm is in the best interests of the company and its 
shareholders as a whole accordingly the directors unanimously 
recommend that ordinary shareholders vote in favour of all of the 
resolutions proposed as they intend to do in respect of their own 
beneficial holdings
disclosures in the directors’ report
the corporate governance report divisional reviews and finance 
director’s review form part of the directors’ report
approved by the board of directors and signed on its behalf by
garry barnes
secretary
7 march 2012 50
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melrose plc
annual report 2011
corporate governance report
statement of compliance
the board of directors remains committed to maintaining the 
high standards of corporate governance required to ensure the 
company can continue to deliver its long term strategic goals 
for shareholders as part of this approach the board supports 
the principles of the uk corporate governance code the “uk 
code” which replaced the 2008 combined code on corporate 
governance with effect from financial years beginning on or after  
29 june 2010
the board is accountable to the company’s shareholders for good 
governance throughout the year ended 31 december 2011 the 
company complied with the provisions of the uk code and with 
the requirements of the disclosure and transparency rules ‘dtr’ 
on audit committees and corporate governance statements the 
statements below describe how the company has applied the 
principles identified in the uk code and dtr directives
the board
members   christopher miller executive chairman
 david roper chief executive
 simon peckham chief operating officer
 geoffrey martin group finance director
 perry crosthwaite nonexecutive director
 justin dowley nonexecutive director
 john grant nonexecutive director
 miles templeman senior nonexecutive director
all of the above directors served throughout the year with the 
exception of justin dowley who was appointed as a nonexecutive 
director on 1 september 2011
the main responsibilities
•	 effectively manage and control the company via a formal 
schedule of matters reserved for its decision
•	 determine and review company strategy and policy
•	 consider acquisitions disposals and asset requests for major 
capital expenditure
•	 review trading performance
•	 ensure that adequate funding and personnel are in place
•	 maintain sound internal control systems and
•	 report to shareholders and give consideration to all other 
significant financial matters
board responsibilities are undertaken in conjunction with senior 
management who in turn are responsible for the daytoday 
conduct of the group’s operations and for reporting to the board 
on items of significance and progress against objectives the board 
meets regularly during the year as well as on an ad hoc basis as 
required by time critical business needs there were four scheduled 
board meetings held during the year and the attendance of each of 
the directors is shown on page 54
board balance independence and performance
the board believes that the directors possess diverse business 
experience in areas complementary to the activities of the 
company this position has been enhanced further by the 
appointment of justin dowley during the year biographies of 
the directors are shown on pages 36 and 37 these biographies 
identify any other appointments held by the directors the only 
executive director to hold nonexecutive director appointments 
elsewhere is christopher miller who is a nonexecutive director of 
tmo renewables limited and is allowed to retain the remuneration 
he receives from that appointment
in accordance with the provisions of the uk code consideration 
has been given to the independence of all the nonexecutive 
directors the board considers all the nonexecutive directors to 
be independent the nonexecutive directors are not entitled to 
any bonus or shares under the 2009 incentive share scheme 
performance of the board and each committee is evaluated 
annually 
as part of the performance appraisal process both the executive 
and nonexecutive directors are required to complete performance 
questionnaires on an annual basis in relation to the board its three 
committees of audit remuneration and nomination and their fellow 
directors all responses are reviewed and collated by the company 
secretary before further action is taken as necessary this process 
also helps to determine if any of the directors have any specific 
training requirements
the chairman has held meetings with the directors including the 
senior independent nonexecutive director miles templeman to 
discuss the performance of individual executive directors and the 
board as a whole it was considered that the individual directors 
and the board as a whole were operating effectively the non
executive directors led by miles templeman the senior non
executive director are responsible for the performance evaluation 
of the chairman and as part of this process also took account of 
the views of the executive directors
the board are currently considering the impact on the performance 
evaluation process with respect to the new requirement under the 
uk code to carry out externally facilitated performance evaluations 
at least every three years the company has therefore not yet 
carried out an external evaluation of its directors’ performance 
the nomination committee currently takes into account a variety 
of factors before recommending any new appointments to the 
board including relevant skills to perform in the role experience 
knowledge ethnicity and gender the most important priority of the 
nomination committee has been and will continue to be ensuring 
that the best candidate is selected to join the board and this 
approach will remain in place going forward 51
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new directors joining the board receive a formal and tailored 
induction shortly after their appointment directors are advised 
that they have access to the advice and services of the company 
secretary who is responsible for ensuring that board procedures 
are followed and that applicable rules and regulations are complied 
with the board may seek independent legal and financial advice in 
the furtherance of its duties at the company’s expense
a pack of briefing papers and an agenda are provided to each 
director in advance of each scheduled board or standing 
committee meeting the directors are able to seek further 
clarification and information on any matter from any other director 
or employee of the group whenever necessary decisions are 
taken by the board in conjunction with the recommendations of its 
committees and advice from external consultants advisers and 
senior management
director terms and conditions
the terms and conditions of the executive directors’ service 
contracts and the nonexecutive directors’ appointments are 
available for inspection at the company’s registered office the 
nonexecutive directors’ appointment letters are also available on 
the company’s website wwwmelroseplcnet
annual reelection of directors
in previous years one third of the company’s directors have 
been subject to retirement by rotation with a requirement then 
to offer themselves for reelection however going forward and 
notwithstanding the company’s articles the board has determined 
that all directors of the company will stand for election or re
election at the forthcoming agm and annually thereafter in 
compliance with the provisions of the uk code
the board and nomination committee have carefully considered 
the time commitments required and the contribution made by 
each director both the nomination committee and the board are 
of the belief that the performance of each executive and non
executive director continues to be effective and that each director 
demonstrates commitment to his role
chairman and chief executive
the roles of the chairman and chief executive of the company 
are and will remain separate and distinct from one another in 
accordance with best practice and board policy
the chairman alone is responsible for leadership of the board 
responsibility for ensuring effective communications with 
shareholders rests with the chairman and other executive directors 
the chief executive is responsible for strategic direction and 
decisions involving the daytoday management of the company 
these respective responsibilities are set out in writing and have 
been approved by the board which considers that the respective 
roles and responsibilities are clearly understood by both individuals 
and by the board as a whole
committees of the board
in accordance with the provisions of the uk code the board 
has three standing committees the audit remuneration 
and nomination committees each of these includes the four 
independent nonexecutive directors the duties of the committees 
are set out in formal terms of reference these are available from 
the board
christopher miller — executive chairman
david roper 
1
 — chief executive
simon peckham 
2
 — chief operating officer
geoffrey martin — group finance director
perry crosthwaite — nonexecutive director
justin dowley — nonexecutive director
john grant — nonexecutive director
miles templeman — senior nonexecutive director
audit committee
john grant
3
 — chairman
perry crosthwaite
justin dowley
miles templeman
remuneration committee
perry crosthwaite — chairman
justin dowley
john grant
miles templeman
nomination committee
miles templeman — chairman
perry crosthwaite
justin dowley
john grant
christopher miller
1  david roper will become executive vicechairman with effect from the company’s agm on 9 may 2012
2 simon peckham will become chief executive with effect from the company’s agm on 9 may 2012
3 john grant became chairman of the audit committee on 6 march 2012 prior to this the chairman of this committee was miles templeman 52
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melrose plc
annual report 2011
corporate governance report continued
the company secretary and on the company’s website  
wwwmelroseplcnet the company secretary acts as secretary  
to each of the committees
audit committee
members      john grant chairman from 6 march 2012
       perry crosthwaite
                     justin dowley
                     miles templeman chairman to 6 march 2012
main responsibilities
•	 review and monitor the integrity of the financial statements of the 
group including its interim accounts the annual report interim 
management and preliminary statements and any other formal 
announcements relating to the financial performance of the 
group
•	 keep under review the effectiveness of the group’s financial 
reporting internal controls risk management systems and 
compliance controls
•	 focus and challenge the consistency of accounting policies 
methods used to account for significant or unusual transactions 
and compliance with accounting standards
•	 review the group’s arrangements for its employees to raise 
concerns in confidence about possible wrongdoing in financial 
reporting in accordance with the company’s whistleblowing 
policy and
•	 develop implement and monitor the group’s policy on external 
audit and for overseeing the objectivity and effectiveness of the 
auditor
each member of the audit committee brings relevant financial 
experience from senior executive and nonexecutive positions as 
described in their biographies on pages 36 and 37
the audit committee invites the group finance director the head 
of financial reporting and senior representatives of the external 
and internal auditors to attend meetings as appropriate to the 
business being considered the audit committee has the right 
to invite any other employees to attend meetings where this is 
considered appropriate in addition the audit committee meets 
at least once per year with both the external and internal auditors 
without management present
the audit committee is expected to meet not less than three times 
a year and the audit committee met three times during 2011 the 
attendance of its members along with the group finance director 
is shown in the table on page 54
group auditor
the group’s external auditor is recommended for reappointment by 
the audit committee which also assesses the appropriateness of 
the scope of audit work performed and provides recommendations 
in respect of their remuneration and terms of engagement the 
audit committee receives regular reports from the group’s external 
auditor
the audit committee has a policy on the engagement of the 
external auditor for the supply of nonaudit services in accordance 
with best practice frc guidelines which apply from 30 april 2011 
onwards the company policy in relation to nonaudit services 
is kept under regular review the policy outlines which nonaudit 
services are preapproved which services require the prior approval 
of the audit committee and which services the auditor is excluded 
from providing
during 2011 the main nonaudit services provided by deloitte llp 
were in relation to taxation compliance tax planning corporate 
finance which includes work carried out around the sale of 
dynacast and aborted purchase of charter international plc and 
uk pensions
the audit committee carries out regular reviews to ensure that 
auditor objectivity and independence is maintained at all times 
a different senior partner carries out the taxation audit of the 
company compared to those working on the nonaudit taxation 
services with regard to corporate finance services a separate 
team which was independent from the audit team was used within 
deloitte llp to carry out this work the nonaudit work provided 
on pensions was performed either by a different senior partner 
to those involved in audit work or by independent actuaries who 
have no links with deloitte llp  based on these strict procedures 
the audit committee remains confident that auditor objectivity and 
independence has been maintained but accepts that nonaudit 
work should be controlled to ensure that it does not compromise 
the auditor’s position
deloitte llp was appointed in 2003 at each year end deloitte 
llp submits a letter setting out how it believes its independence 
and objectivity have been maintained they are also required to 
rotate the audit partner responsible for the group and subsidiary 
audits every five years the group’s audit signing partner changed 
as part of that rotation process in 2010 there are no contractual 
obligations that restrict the group’s capacity to recommend a 
particular firm for appointment as auditor
internal audit programme
due to the size and complexity of the group it is appropriate for an 
internal audit programme to be used within the business bm howarth 
an external firm provides internal audit services to the group a 
rotation programme is in place such that every business unit will have 
an internal audit at least once every three years with the largest sites 
being reviewed at least once every two years the rotation programme 
allows divisional management’ s actions and responses to be followed 
up on a timely basis during the year bm howarth also carried out an 
audit of the group’ s central head office functions 
the internal auditor’s remit includes assessment of the effectiveness 
of internal control systems compliance with the group’s 
policies and procedures manual and a review of the businesses’ 
balance sheets a report of key findings and recommendations 
is presented to the group finance director head of financial 
reporting and group operations controller followed by a meeting  53
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to discuss key findings and resulting action points bm howarth 
also presented their key findings to the audit committee twice 
during the year review of the internal audit process and scope 
of work covered by the internal auditor is the responsibility of the 
audit committee to ensure their objectives level of authority and 
resources are appropriate for the nature of the businesses under 
review a report of significant findings is presented by the internal 
auditor to the committee at each meeting and implementation of 
recommendations by the board are followed up at the subsequent 
committee meeting
remuneration committee
members     perry crosthwaite chairman
                     justin dowley
                     john grant
                     miles templeman
main responsibilities
•	 annually review remuneration trends across the group and obtain 
reliable and uptodate information about the remuneration of 
directors and senior employees in other companies
•	 consider and make recommendations to the board on the 
framework for the remuneration of the company’s executive 
directors the company secretary and other senior employees
•	 ensure the executive directors and senior employees are 
provided with appropriate annual incentives to encourage 
enhanced performance and that they are rewarded for their 
individual contributions to the success of the company and
•	 approve the structure of and determine targets for any long 
term incentive plans operated by the company
in developing its recommendations the committee has given due 
consideration to schedule 8 of part 15 of the companies act 2006
the remuneration committee is expected to meet not less than 
twice a year and during 2011 the remuneration committee met 
twice the attendance of its members is shown in the table on page 
54 the report to shareholders on how directors are remunerated 
together with details of individual directors’ remuneration is shown 
in the remuneration report on pages 56 to 59
nomination committee
members     miles templeman chairman
                     perry crosthwaite
                     justin dowley
                     john grant
                     christopher miller
main responsibilities
•	 keep the size structure and composition of the board under 
regular review and recommend to the board any adjustments as 
may be necessary from time to time
•	 give full consideration to succession planning to ensure an 
optimum balance of executive and nonexecutive directors in 
terms of skills experience and diversity
•	 keep under review the leadership needs of the business and
•	 keep up to date and fully informed about strategic issues and 
commercial changes affecting the company and the markets in 
which it operates
as one of the main responsibilities of the nomination committee 
is to recommend any adjustments to the size or structure of the 
board it was involved in the recruitment of justin dowley who 
was appointed as a nonexecutive director on 1 september 2011 
prior to justin’s appointment the committee agreed upon a specific 
recruitment process this included the development of a candidate 
specification which set out the required skills qualifications and 
experience followed by a thorough interview process
the nomination committee is expected to meet not less than twice 
a year and during 2011 the nomination committee met three times 
the attendance of its members is shown in the table overleaf
the nomination committee uses external search consultants as 
appropriate
attendance at meetings
the table over the page shows the attendance of each of the 
directors at the scheduled and significant meetings of the board 
and its standing committees held during the year the quorum 
necessary for the transaction of business by the board and 
each of its standing committees is two briefing papers and 
meeting agendas are provided to each director in advance of 
each meeting decisions are taken by the board in conjunction 
with the recommendations of its committees and advice from 
external advisers and senior management as appropriate the 
representations of any director who is unable to attend a meeting 
of the board or a standing committee are duly considered by those 
directors in attendance 54
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melrose plc
annual report 2011
corporate governance report continued
board audit remuneration nomination
number of meetings
1
4 3 2 3
christopher miller 4 — — 3
david roper 4 — — —
simon peckham 4 — — —
geoffrey martin 4 3
2
— —
miles templeman 4 3 2 3
perry crosthwaite 4 3 2 3
john grant 4 3 2 3
justin dowley
3
1 1 1 1
1  in addition adhoc meetings are held from timetotime which are attended by a quorum of directors and are convened to deal with specific items of business
2  geoffrey martin attends by invitation
3  justin dowley was appointed as a nonexecutive director on 1 september 2011 and attended the remaining board meeting of the year in december 2011  
together with the december meetings of the audit remuneration and nomination committees
internal control and risk management
objectives and policy
the objectives of the directors and senior management are to 
safeguard and increase the value of the business and assets of the 
group achievement of their objectives requires the development 
of policies and appropriate internal control frameworks to ensure 
the group’s resources are managed properly and any key risks are 
identified and mitigated where possible
the board is ultimately responsible for the group’s overall system 
of internal control and for reviewing its effectiveness while the 
role of management is to implement the policies set by the 
board in respect of risk management and controls the directors 
recognise that the systems and processes established by the 
board are designed to manage rather than eliminate the risk of 
failure to achieve business objectives and cannot provide absolute 
assurance against material financial misstatement or loss
the board is committed to satisfying the internal control guidance 
for directors set out in the revised version of the turnbull guidance 
on internal control in accordance with this guidance there is an 
ongoing process regularly reviewed by the directors for identifying 
evaluating managing and mitigating where possible the significant 
risks faced by the group this process for reviewing the group’s 
internal controls is consistent with prior years and has been in place 
throughout the 2011 financial year and up to the date of approval of 
this annual report
managing and controlling risk
the group has policies which address a number of key business 
risks including strategic operational compliance ethical and 
financial risks a summary of some of the strategic and operational 
risks and uncertainties that could impact on the company’s 
performance is set out on pages 31 to 33 the group’s financial 
risk management objectives and policies are also described in the 
finance director’s review on pages 23 to 30 further information 
can also be found in the chief executive’s review on pages 12 to 
22 and the directors’ report on pages 38 to 49
the group operates on a decentralised basis and the board 
has established an organisational structure with clear reporting 
procedures lines of responsibility and delegated authority divisional 
senior management plant managers and financial controllers have 
been delegated responsibility by the board for the establishment 
and implementation of detailed control systems as appropriate for 
their business
an established programme of regular review is in place at the 
businesses and a culture of continuous improvement is encouraged 
by the board through regular meetings with senior management 
review of operating performance and progress against business 
plans the ongoing process of review provides assurance that the 
control environment is operating as intended
the audit committee also monitors the effectiveness of the 
internal control processes implemented across the group 
through review of the key findings presented by the external and 
internal auditors and discussions with senior management on 
an adhoc basis the board is responsible for considering audit 
committee recommendations in respect of internal controls and 
risk management and ensuring implementation by management of 
those recommendations it deems appropriate for the business
internal financial controls
the group has a comprehensive system for assessing the 
effectiveness of the group’s systems of internal financial controls 
including strategic business planning and regular monitoring and 
reporting of financial performance a detailed annual budget is 
prepared by senior management and thereafter is reviewed and 
formally adopted by the board the budget and other targets are 
regularly updated via a rolling forecast process and regular business 
review meetings are held involving senior management to assess 
performance the results of these reviews are in turn reported to 
and discussed by the board at each meeting 55
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as discussed in the audit committee section on pages 52 and 
53 of this report bm howarth is the group’s internal auditor a 
total of 21 businesses have been visited during the year including 
the group’s central head office functions and the directors are 
pleased to report that there were no material deficiencies and 
that the majority of recommendations presented in the internal 
auditor reports have now been or are in the process of being 
implemented a further 23 businesses are planned for review during 
2012
the board confirms that from the review of internal controls it  
has not determined any significant failings or weaknesses that  
it considers require remedial action the board also confirms that 
it has not been advised of any material weaknesses in the internal 
control systems that relate to financial reporting
whistleblowing antibribery and corruption 
policies
during the year the company updated its antibribery and 
corruption policy in accordance with the bribery act 2010 the 
‘2010 act’ which came into force on 1 july 2011 as part of 
this process a full audit of each group business was carried out 
in which key risks were identified and mitigating actions agreed 
the results of the audit confirmed that additional procedures were 
required within some of the group businesses in relation to the 
use of sales agents who operate in high risk areas of the world 
together with the general development of stricter policies and 
procedures when trading in certain territories for the first time 
additional procedures have also been developed with regard to gift 
hospitality and charitable donation registers 
in order to ensure compliance with the 2010 act the company 
developed a specific training and communication process to ensure 
all relevant senior employees were aware of the group’s policy and 
their individual obligations in helping to ensure adherence this 
process involved the development of a specific internally designed 
training portal for use by relevant employees within the group 
an internal review process has also been incorporated into the 
annual audit programme carried out by bm howarth to ensure 
ongoing compliance to the group policy as an addition to this 
each business is required to provide an annual confirmation to the 
company that it has fully complied with the group’s antibribery 
and corruption policy
the group’s antibribery and corruption policy applies to all 
directors employees whether permanent fixedterm or 
temporary pension trustees consultants and other business 
advisers contractors trainees volunteers business agents 
distributors joint venture partners or any other person working for 
or performing a service on behalf of the company its subsidiaries 
and associated companies in which it has a majority interest
responsibility for anticorruption policies and procedures rests with 
the board of directors it is tasked with ensuring that adequate 
internal financial controls and record keeping is in place within the 
group in order to minimise the risk of bribery and corruption
the company also updated its whistleblowing policy during the 
year as part of the antibribery and corruption communication 
process within the group this enables individuals to make 
protected disclosures to their divisional human resources manager 
group company secretary or the senior nonexecutive director 
if they have concerns about possible improprieties in financial 
reporting or other malpractices within their business
communications with shareholders
the company seeks to build on a mutual understanding of 
objectives with its institutional shareholders via the executive 
directors through regular meetings and presentations following 
announcements of its annual and interim results the nonexecutive 
directors are available to meet institutional shareholders should 
there be unresolved matters they wish to bring to their attention 
the views of key analysts and major shareholders are fed back 
to the board directly by individual directors or via the company’s 
brokers this helps to ensure that all members of the board 
develop an understanding of the views of major shareholders 
corporate information is available on the company’s website 
wwwmelroseplcnet
the board welcomes the attendance of shareholders at the 
agm the number of proxy votes cast for and against each of the 
resolutions proposed is announced at the agm and a summary will 
be provided shortly after the agm on the company’s website
by order of the board
garry barnes
secretary
7 march 2012 56
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melrose plc
annual report 2011
remuneration report
introduction and compliance
the directors’ remuneration report has been prepared by the 
remuneration committee and approved by the board the report 
has been drawn up in accordance with relevant sections of the 
uk corporate governance code the large and mediumsized 
companies and groups accounts and reports regulations 2008 
the companies act 2006 and the uk listing authority listing rules
a resolution inviting shareholders to approve the report will be put 
to the annual general meeting on 9 may 2012
the remuneration report is divided into two parts the first part 
contains commentary on remuneration policy which is not required 
to be audited the second part contains details of the directors’ 
remuneration which has been audited in accordance with the 
relevant statutory requirements
biographies of the directors are shown on pages 36 and 37 these 
biographies identify any other significant appointments held by the 
directors
unaudited information
remuneration committee
the remuneration committee is chaired by perry crosthwaite 
an independent nonexecutive director miles templeman john 
grant and justin dowley appointed on 1 september 2011 the 
other three independent nonexecutive directors complete the 
committee
the terms of reference of the remuneration committee are 
posted on the corporate governance section of the company’s 
website wwwmelroseplcnet and are also available from the 
company secretary at the registered office address page 53 of 
the corporate governance report sets out the functions of the 
remuneration committee
remuneration policy
remuneration packages are reviewed regularly and changes are 
effective from 1 january each year the remuneration committee 
and its advisers use a number of third party remuneration surveys 
from which to obtain remuneration data in order to carry out 
benchmarking exercises
the remuneration package for all executive directors comprises 
base salary and benefits annual bonus long term incentive 
arrangements and pension contributions as described within this 
report some senior employees of the group are also entitled to 
bonuses and long term incentive arrangements as noted below
executive directors and other senior employees
the board establishes the remuneration policy based on 
the recommendations of the remuneration committee the 
remuneration policy adopted by the company requires the package 
offered to any executive director or senior employee to be sufficient 
to attract retain and motivate management of a suitable quality but 
not to be more than is necessary for this purpose it is intended that 
performance related pay should comprise a significant proportion of 
the total remuneration package
nonexecutive directors
the executive directors are responsible for proposing the non
executive directors’ fees in proposing such fees they take account 
of fees paid to nonexecutive directors of similar sized listed 
companies within the company’s listing sector as well as the time 
commitment and responsibility of the role any decisions regarding 
fee changes are taken by the executive directors as a whole and 
nonexecutive directors do not take part in discussions on their 
own remuneration nonexecutive directors do not receive other 
taxable benefits or pension contributions from the group
base salary and benefits
the remuneration committee gives consideration to both the 
performance of the individual during the period of review and of 
current market salaries for equivalent roles based on independently 
sourced market information
the salaries of all executive directors and the senior management 
team are reviewed by the remuneration committee prior to the 
beginning of each year base salaries for 2011 were reviewed 
in december 2010 in january 2011 each of the executive and 
nonexecutive directors received an inflationary increase of three 
per cent in addition a further inflationary increase of three per cent 
was awarded in december 2011 effective from january 2012
the executive directors also receive a company car allowance fuel 
allowance private medical insurance life insurance and permanent 
health insurance cover mr martin also receives paid train travel to 
and from london and accommodation for working in london
annual bonuses
bonus scheme arrangements are in place for executive directors 
and senior management the maximum bonus payable is 100 
per cent of base salary the annual bonus scheme has two 
components up to 80 per cent of base salary is payable based 
on diluted earnings per share growth and the remaining 20 per 
cent is discretionary the discretionary element is payable based 
on the remuneration committee considering a range of financial 
and nonfinancial factors including working capital management 
and cash generation overhead cost control liability management 
health and safety improvements and any other factors which the 
remuneration committee considers to be relevant the chairman 
does not participate in the annual bonus scheme and the same 
will also apply to the executive vicechairman with effect from the 
company’s agm on 9 may 2012
long term incentives
long term incentives are granted to directors and other senior 
employees in order to promote the success of the company the 
long term incentive arrangements currently in place are structured 
to ensure that participants are only rewarded for growth in the 
underlying value of the business in order to align the interests of the 
directors with those of the company’s shareholders 57
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during 2011 the group operated the following long term incentive 
schemes
•	 2009 incentive share scheme
•	 divisional long term incentive plans
•	 fki cash long term incentive plan
2009 incentive share scheme
the 2009 incentive share scheme the ‘2009 scheme’ was 
approved by shareholders at a general meeting held in may 2009 
it replaced the 2007 incentive share scheme and as at 7 march 
2012 continues to ensure the interests of the executive directors 
and senior employees are aligned with those of shareholders by 
only rewarding participants if shareholder value is created the 
executive directors and five other senior employees are the only 
participants in the 2009 scheme as at 7 march 2012
participants of the 2009 scheme are entitled to either a cash 
dividend or a number of ordinary shares equal in value to 10 
per cent of the increase in shareholder value from 18 july 2007 
to 31 may 2012 or earlier upon a takeover of the company the 
‘trigger date’ the increase in shareholder value is calculated as 
the difference between the market capitalisation on the trigger 
date determined by reference to the average market price of an 
ordinary share over 40 business days prior to the trigger date or 
the offer price as appropriate and the net invested capital in the 
company the net invested capital is the issued share capital at  
18 july 2007 plus any amounts paid up for the issue of new 
ordinary shares less all dividend payments or other distributions 
made by the company in respect of its ordinary shares as 
adjusted in line with the movement in the rpi plus 2 per cent per 
annum
as at 31 december 2011 the fair value attributable to the 2009 
incentive shares including those held by the employee benefit 
trust was £994 million 2010 £707 million of which £865 million 
2010 £615 million was attributable to the executive directors 
details of the directors’ beneficial interest in the 2009 incentive 
shares as at 7 march 2012 are shown in the table of directors’ 
shareholdings later in this report
as at 7 march 2012 the melrose employee benefit trust held 500 
of the 2009 incentive shares
divisional long term incentive plans
divisional long term incentive plans have been implemented for 
certain divisional senior managers it is the intention of the board 
that participants will receive a cash payment upon the sale of a 
division or based upon financial performance as measured by 
growth in operating profit from the date of the fki acquisition in july 
2008 through to variable end dates which vary by business
fki cash long term incentive plan
the cash long term incentive plan for senior management of the 
fki businesses ended on 31 march 2011 it was replaced by 
the divisional long term incentive plan arrangements for certain 
divisional senior managers as mentioned above
pension
no director is a member of any group pension arrangement the 
executive directors may elect to receive a company contribution 
to their individual pension arrangement or a supplement to base 
salary in lieu of a pension arrangement company contributions are 
calculated on base salary only
service contracts
consistent with the best practice guidance provided by the 
uk corporate governance code the company’s policy is for 
directors’ service contracts to be terminable on a maximum of 
one year’s notice directors’ service contracts do not provide for 
predetermined compensation in the event of termination any 
payments made would be subject to normal contractual principles 
including mitigation as appropriate the length of service for any 
one executive director is not defined and is subject to both the 
requirements of annual reelections under the uk corporate 
governance code and the company’s articles of association 
the nonexecutive directors do not have service contracts but 
have letters of appointment for an initial period of three years which 
may be renewed by mutual agreement generally a nonexecutive 
director may be appointed for up to a further two periods of three 
years after the initial three year period has expired the terms of 
appointment do not contain any contractual provisions regarding a 
notice period or the right to receive compensation in the event of 
early termination
details of the directors’ appointment or reappointment dates and 
notice periods are as set out below
executive directors
date of 
appointment as 
a director notice period
christopher miller 29 may 2003 12 months
david roper 29 may 2003 12 months
simon peckham 29 may 2003 12 months
geoffrey martin 7 july 2005 12 months
nonexecutive 
directors
date of 
appointment or 
most recent 
reappointment
end of 
appointment 
period
miles templeman 28 october 2009 27 october 2012
perry crosthwaite 25 july 2011 24 july 2014
john grant 1 august 2009 31 july 2012
justin dowley 1 september 2011 31 august 2014 58
2101204   26032012   proof 6
melrose plc
annual report 2011
remuneration report continued
directors’ shareholdings
ordinary shares
following the sale of the company’s dynacast business and subsequent return of £3732 million to shareholders a share consolidation and 
subdivision took place on 8 august 2011 pursuant to which every 14 ordinary shares of 02p nominal value in the capital of the company 
‘old ordinary shares’ were converted into 11 ordinary shares of 1455p nominal value in the capital of the company ‘new ordinary 
shares’ the ‘share capital consolidation’ the information in the table below shows the directors’ beneficial interests including interests of 
connected persons within the meaning of section 252 of the companies act 2006 in the new ordinary shares of the company as at  
31 december 2011 holdings at the start of the period and prior to the share capital consolidation are shown as old ordinary shares
director
number of old 
ordinary shares 
as at 1 january 
2011
number of old 
ordinary shares 
purchased 
between  
1 january 
2011 and the 
share capital 
consolidation
number of new 
ordinary shares 
held immediately 
following the 
share capital 
consolidation
number of new 
ordinary shares 
purchased 
following the 
share capital 
consolidation and 
prior to  
31 december 
2011
number of 
new ordinary 
shares as at 31 
december 2011
christopher miller
1
5702464 — 4480507 100000 4580507
david roper 2462292 — 1934658 341500 2276158
simon peckham 1948067 — 1530624 341500 1872124
geoffrey martin 711580 — 559098 100000 659098
miles templeman 398787 — 313332 — 313332
perry crosthwaite 131250 — 103125 — 103125
john grant 153806 — 120847 25000 145847
justin dowley — — — 138000 138000
total 11508246 — 9042191 1046000 10088191
1  the interest of christopher miller includes 2160714 new ordinary shares 31 december 2010 2750000 old ordinary shares held by harris  sheldon investments 
limited a company which is connected with christopher miller within the meaning of section 252 of the companies act 2006
none of the directors who held office at the end of the financial year had any beneficial interest in the shares of other group companies
total shareholder return
the ordinary shares of melrose plc were admitted to the official list and to trading on the london stock exchange on 9 december 2005 
following the share capital consolidation as a result of the return of proceeds generated from the sale of the company’s dynacast division 
the new ordinary shares were admitted to the official list and to trading on the london stock exchange on 9 august 2011 
the total shareholder return graph shows the value as at december 2011 of £100 invested in the company in december 2005 compared 
with £100 invested in the ftse all share index 
400
300
200
150
100
50
0
dec 05 june 06 dec 06 june 07 dec 07 june 08 dec 08 june 09 dec 09 june 10 dec 10
£
june 11
350
250
dec 11
— melrose return
— ftse all share index 59
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
shareholder information financials business performance governance
the source data for the graph on the previous page assumes that the £220 million of cash returned to shareholders in august 2007 
following the mckechnie aerospace and psm fasteners disposals together with the £3732 million that was approved to be returned 
to shareholders in august 2011 following the sale of dynacast was reinvested to purchase shares in the company this results in an 
adjustment factor on the price and this factor is used in ongoing calculations of shareholder return for the company as ordinarily a return of 
capital would reduce the share price and an analysis of returns going forward would not reflect value already returned to shareholders the 
benefit of any cash distribution is thereby reflected within the shareholder return performance of the company
audited information
directors’ remuneration and 2009 incentive shares
emoluments during 2011
directors
salaries
fees
£
bonus
£
taxable
benefits
£
in lieu of
pension
contributions
1
               £
2011
t otal
emoluments
£
pension
contributions
1
£
2011
t otal
remuneration
£
2010
t otal
remuneration
£
christopher miller
2
397850 — 20121 59678 477649 — 477649 463602
david roper 397850 334194 19430 59678 811152 — 811152 849341
simon peckham 397850 334194 19891 16176 768111 43500 811611 849353
geoffrey martin 318300 267372 53217 9941 648830 37800 686630 718139
miles templeman
3
61650 — — — 61650 — 61650 60000
perry crosthwaite
4
61650 — — — 61650 — 61650 60000
john grant 56650 — — — 56650 — 56650 55000
justin dowley
5
18883 — — — 18883 — 18883 nil
total 1710683 935760 112659 145473 2904575 81300 2985875 3055435
1  of the £226773 attributable to pension contributions £145473 was paid as a supplement to base salary in lieu of pension arrangements the balance of £81300 was 
paid into the individual directors’ nominated private pension schemes
2  christopher miller is a nonexecutive director of tmo renewables limited his fees for the year were £27472 this amount is retained by christopher miller and therefore 
excluded from the table above
3  includes £5000 per annum in recognition of chairmanship of the audit and nomination committees
4 includes £5000 per annum in recognition of chairmanship of the remuneration committee
5 justin dowley was appointed as a nonexecutive director of the company on 1 september 2011
2009 incentive shares
the directors also had a beneficial interest in the company’s 2009 incentive shares nominal value £100 at 31 december 2011 as follows
 number of 2009 incentive shares of melrose plc as at 
director  1 january 2011 and 31 december 2011
christopher miller 12000
david roper 12000
simon peckham 12000
geoffrey martin 7500
miles templeman nil
perry crosthwaite nil
john grant nil
justin dowley nil
there were no options over 2009 incentive shares outstanding as at 31 december 2011
this report was approved by the board on 7 march 2012 and signed on its behalf by
perry crosthwaite
chairman of the remuneration committee
7 march 2012 60
2101204   26032012   proof 6
melrose plc
annual report 2011
statement of directors’ responsibilities
the directors are responsible for preparing the annual report and 
the financial statements in accordance with applicable law and 
regulations
company law requires the directors to prepare financial statements 
for each financial year under that law the directors are required 
to prepare the group financial statements in accordance with 
international financial reporting standards “ifrss” as adopted by 
the european union and article 4 of the ias regulation and have 
chosen to prepare the parent company financial statements in 
accordance with united kingdom generally accepted accounting 
practice united kingdom accounting standards and applicable 
law under company law the directors must not approve the 
accounts unless they are satisfied that they give a true and fair view 
of the state of affairs of the company and of the profit or loss of the 
company for that period
in preparing the parent company financial statements the directors 
are required to
•	 select suitable accounting policies and then apply them 
consistently
•	 make judgements and accounting estimates that are reasonable 
and prudent
•	 state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the financial statements and
•	 prepare the financial statements on the going concern basis 
unless it is inappropriate to presume that the company will 
continue in business
in preparing the group financial statements international 
accounting standard 1 requires that directors
•	 properly select and apply accounting policies
•	 present information including accounting policies in a manner 
that provides relevant reliable comparable and understandable 
information
•	 provide additional disclosures when compliance with the 
specific requirements in ifrss are insufficient to enable users to 
understand the impact of particular transactions other events 
and conditions on the entity’s financial position and financial 
performance and
•	 make an assessment of the company’s ability to continue as a 
going concern
the directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time 
the financial position of the company and enable them to ensure 
that the financial statements comply with the companies act 
2006 they are also responsible for safeguarding the assets of the 
company and hence for taking reasonable steps for the prevention 
and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of 
the corporate and financial information included on the company’s 
website legislation in the united kingdom governing the 
preparation and dissemination of financial statements may differ 
from legislation in other jurisdictions
directors’ responsibility statement
the directors confirm that to the best of their knowledge
•	 the financial statements prepared in accordance with the 
relevant financial reporting framework give a true and fair view 
of the assets liabilities financial position and profit or loss of the 
company and the undertakings included in the consolidation 
taken as a whole and
•	 the chairman’s statement chief executive’s review finance 
director’s review and directors’ report include a fair review of 
the development and performance of the business and the 
position of the company and the undertakings included in the 
consolidation taken as a whole together with a description of the 
principal risks and uncertainties that they face
by order of the board
geoffrey martin simon peckham
group finance director chief operating officer
7 march 2012 7 march 2012 61
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
financial contents
consolidated statements
independent auditor’s report – consolidated statements 62
consolidated income statement 63
consolidated statement of comprehensive income 64
consolidated statement of cash flows 65
consolidated balance sheet 66
consolidated statement of changes in equity 67
notes to the financial statements
note
1 corporate information 68
2 summary of significant accounting policies 69
3 critical accounting judgements and key sources of 
 estimation uncertainty 76
4 revenue 77
5 segment information 77
6 exceptional costs and income 80
7 revenues and expenses 81
8 tax 84
9 discontinued operations 85
10 dividends 86
11 earnings per share 87
12 goodwill and other intangible assets 88
13 property plant and equipment 89
14 interests in joint ventures 90
15 inventories 90
16 trade and other receivables 91
17 cash and cash equivalents 92
18 trade and other payables 93
19 interestbearing loans and borrowings 93
20 provisions 94
21 deferred tax 95
22 sharebased payments 96
23 retirement benefit obligations 96
24 financial instruments and risk management 101
25 issued share capital and reserves 105
26 cash flow statement 106
27 commitments and contingencies 107
28 related parties 108
29 post balance sheet events 108
30 contingent liabilities 108
company statements
independent auditor’s report — company statements 109
company balance sheet 110
notes to the company balance sheet
note
1 significant accounting policies 111
2 profit for the year 112
3 investment in subsidiaries 113
4 tangible fixed assets 114
5 derivative financial instruments 114
6 debtors 114
7 creditors 114
8 bank loans 115
9 provisions for liabilities 115
10 issued share capital 116
11 reserves 117
12 hedging reserve 117
13 reconciliation of movement in shareholders’ funds 117
14 related party transactions 117 melrose plc
annual report 2011 62
2101204   26032012   proof 6
auditor’s report on the  
consolidated financial statements
independent auditor’s report to the members of melrose plc
we have audited the consolidated financial statements of melrose 
plc for the year ended 31 december 2011 which comprise the 
consolidated income statement the consolidated statement 
of comprehensive income the consolidated statement of 
cash flows the consolidated balance sheet the consolidated 
statement of changes in equity and the related notes 1 to 30 
the financial reporting framework that has been applied in their 
preparation is applicable law and international financial reporting 
standards ‘ifrss’ as adopted by the european union
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might 
state to the company’s members those matters we are required 
to state to them in an auditor’s report and for no other purpose 
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and the 
company’s members as a body for our audit work for this report 
or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the statement of directors’ 
responsibilities the directors are responsible for the preparation 
of the consolidated financial statements and for being satisfied 
that they give a true and fair view our responsibility is to audit 
and express an opinion on the consolidated financial statements 
in accordance with applicable law and international standards on 
auditing uk and ireland those standards require us to comply 
with the auditing practices board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate to 
the group’s circumstances and have been consistently applied and 
adequately disclosed the reasonableness of significant accounting 
estimates made by the directors and the overall presentation of 
the financial statements in addition we read all the financial and 
nonfinancial information in the annual report to identify material 
inconsistencies with the audited financial statements if we become 
aware of any apparent material misstatements or inconsistencies 
we consider the implications for our report
opinion on financial statements
in our opinion the consolidated financial statements
•	 give a true and fair view of the state of the group’s affairs as at 
31 december 2011 and of its profit for the year then ended
•	 have been properly prepared in accordance with ifrss as 
adopted by the european union and
•	 have been prepared in accordance with the requirements of the 
companies act 2006 and article 4 of the ias regulation
opinion on other matter prescribed by the companies act 
2006
in our opinion the information given in the directors’ report for the 
financial year for which the consolidated financial statements are 
prepared is consistent with the consolidated financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if 
in our opinion
•	 certain disclosures of directors’ remuneration specified by law 
are not made or
•	 we have not received all the information and explanations we 
require for our audit
under the listing rules we are required to review
•	 the directors’ statement contained within the directors’ report 
in relation to going concern 
•	 the part of the corporate governance statement relating to 
the company’s compliance with the nine provisions of the uk 
corporate governance code specified for our review and
•	 certain elements of the report to shareholders by the board on 
directors’ remuneration
other matter
we have reported separately on the company financial statements 
of melrose plc for the year ended 31 december 2011 and on the 
information in the remuneration report that is described as having 
been audited 
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
7 march 2012 63
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
consolidated income statement
 
notes
year ended 
31 december 
 2011
£m
restated
1
year ended
31 december
2010
£m
continuing operations
revenue 45 11539  10354 
cost of sales 8129 7310
gross profit 3410  3044 
headline
2
 operating expenses 1602 1570
share of results of joint ventures 14 —  04
intangible asset amortisation 237 241
exceptional costs 6 401 103
exceptional income 6 —  214 
total net operating expenses 7 2240 1704
operating profit 1170  1340 
headline
2
 operating profit 5 1808  1470 
finance costs 7 296 346
finance income 47 100  93 
profit before tax 974  1087 
headline
2
 profit before tax 1612  1217 
headline
2
 tax 414 345
exceptional tax
3
 588  295 
total tax 8 174  50
profit for the year from continuing operations 1148  1037 
headline
2
 profit for the year from continuing operations 1198  872 
discontinued operations
profit for the year from discontinued operations 9 1717  376 
profit for the year 2865  1413 
attributable to
owners of the parent 2864  1411 
noncontrolling interests 01  02 
2865  1413 
earnings per share
from continuing operations
— basic 11 252p 208p
— diluted 11 237p 198p
from continuing and discontinued operations
— basic 11 629p 284p
— diluted 11 590p 270p
— headline
2 
diluted 11 288p 241p
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 before exceptional costs exceptional income and intangible asset amortisation 
3 includes exceptional tax and tax on exceptional items and intangible asset amortisation melrose plc
annual report 2011 64
2101204   26032012   proof 6
consolidated statement of comprehensive income
notes
year ended 
31 december
2011
£m
year ended
31 december 
2010
£m
profit for the year 2865  1413 
currency translation on net investments 25 173 80 
currency translation on noncontrolling interests —  01 
transfer to income statement from equity of cumulative translation differences on  
 disposal of foreign operations 25 526 01
losses on cash flow hedges 25 01 78
transfer to income statement on cash flow hedges 25 51 05
actuarial lossgain on retirement benefit obligations 23 371 138 
other comprehensive expenseincome before tax 1122 135 
tax relating to components of other comprehensive expenseincome 8 168  79 
other comprehensive expenseincome after tax 954 214 
total comprehensive income for the year 1911  1627 
attributable to
owners of the parent 1910  1624 
noncontrolling interests 01  03 
1911  1627  65
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
consolidated statement of cash flows
notes
year ended
31 december 
 2011
£m
restated
1
year ended
31 december
2010
£m
net cash from operating activities from continuing operations 26 746  727 
net cash from operating activities from discontinued operations 26 166  452 
net cash from operating activities 912  1179 
investing activities
disposal of businesses 3744  01
net cash disposed 9 05 — 
acquisition and disposal costs 6 32 — 
purchase of property plant and equipment 376 229
proceeds from disposal of property plant and equipment 03  02 
purchase of computer software 16 12
dividends received from joint ventures 14 —  03 
interest received 100 93 
acquisition of subsidiaries and noncontrolling interests —  91
net cash fromused in investing activities from continuing operations 3418  235
net cash used in investing activities from discontinued operations 26 46 67
net cash fromused in investing activities 3372  302
financing activities
return of capital 10 3721 — 
repayment of obligations under finance leases —  11
dividends paid 10 528 438
net cash used in financing activities from continuing operations 4249 449
net cash used in financing activities from discontinued operations 26 03 05
net cash used in financing activities 4252 454
net increase in cash and cash equivalents 32  423 
cash and cash equivalents at beginning of year 26 1957  1475 
effect of foreign exchange rate changes 26 33 59 
cash and cash equivalents at end of year 1726 1956  1957 
1 restated to include the cash flows of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
as at 31 december 2011 the group’s net debt was £2896 million 31 december 2010 £2874 million a reconciliation of the movement in 
net debt is shown in note 26 melrose plc
annual report 2011 66
2101204   26032012   proof 6
consolidated balance sheet
notes
31 december 
 2011
£m
31 december 
 2010
£m
noncurrent assets
goodwill and other intangible assets 12 9061  11816
property plant and equipment 13 2153  2537
deferred tax assets 21 404  330
trade and other receivables 16 03  19
11621  14702
current assets
inventories 15 2058  2163
trade and other receivables 16 2163  2577
derivative financial assets 24 17  39
cash and cash equivalents 17 1956  1957
6194  6736
total assets 5 17815  21438
current liabilities
trade and other payables 18 2760  3553
interestbearing loans and borrowings 19 288  03
derivative financial liabilities 24 141  83
current tax liabilities 169  524
provisions 20 582  359
3940  4522
net current assets 2254  2214
noncurrent liabilities
trade and other payables 18 16  47
interestbearing loans and borrowings 19 4575  4828
derivative financial liabilities 24 16  39
deferred tax liabilities 21 983  1149
retirement benefit obligations 23 1177  1196
provisions 20 624  828
7391  8087
total liabilities 5 11331  12609
net assets 6484  8829
equity 
issued share capital 25 268  11
share premium account 1260  2791
merger reserve 2851  2851
capital redemption reserve 3464  2201
hedging and translation reserves 25 26 710
retained earnings 1334 251
equity attributable to owners of the parent 6483  8815
noncontrolling interests 01  14
total equity 6484  8829
the financial statements were approved and authorised for issue by the board of directors on 7 march 2012 and were signed on its  
behalf by
geoffrey martin simon peckham 
group finance director  chief operating officer 67
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
consolidated statement of changes in equity
reserves
issued 
share 
capital
£m
share 
premium
account
£m
merger 
reserve
£m
capital 
redemption
reserve
£m
hedging 
and
translation
reserves
£m
retained 
earnings
£m
equity 
attributable 
to owners 
of the 
parent
£m
non
controlling 
interests
£m
total 
equity
£m
at 1 january 2010 11  2791  2851 2201  716  954 7616  17  7633 
profit for the year —  —  — —  —  1411  1411  02  1413 
other comprehensive 
 expenseincome — — — — 06 219 213 01 214
total comprehensive 
 expenseincome — — — — 06 1630 1624 03 1627
dividends paid —  —  — —  —  438 438 02 440
credit to equity for 
 equitysettled share
 based payments —  —  — —  —  18  18  —  18 
acquisition of 
 noncontrolling interest — — — — — 05 05 04 09
at 31 december 2010 11  2791  2851 2201  710  251  8815  14  8829 
profit for the year —  —  — —  —  2864  2864  01  2865 
other comprehensive 
 expense — — — — 736 218 954 — 954
total comprehensive 
 expenseincome — — — — 736 2646 1910 01 1911
issue of redeemable 
 preference c shares 3721  1531 — 2201 —  —  11 —  11
preference c shares 
 redeemed 3464 —  — 3464  —  —  —  —  — 
return of capital —  —  — —  —  3721 3721 —  3721
dividends paid —  —  — —  —  528 528 02 530
credit to equity for 
 equitysettled share
 based payments —  —  — —  —  18  18  —  18 
disposal of 
 noncontrolling interests — — — — — — — 12 12
at 31 december 2011 268  1260  2851 3464  26 1334 6483  01  6484 
    melrose plc
annual report 2011 68
2101204   26032012   proof 6
notes to the financial statements
1 corporate information
the consolidated financial statements of melrose plc ‘the group’ for the year ended 31 december 2011 were authorised in accordance 
with a resolution of the directors of melrose plc on 7 march 2012
melrose plc ‘the company’ is a company incorporated in the united kingdom under the companies act 2006 the address of the 
registered office is given on page 121 the nature of the group’s operations and its principal activities are set out in note 5
these financial statements are presented in pounds sterling which is the currency of the primary economic environment in which the 
company is based foreign operations are included in accordance with the policies set out in note 2
the comparative information for the year ended 31 december 2010 in these financial statements has been restated to include the results 
and cash flows of the dynacast segment along with four businesses previously shown in the other industrial segment namely brush 
traction logistex uk madico and weber knapp within discontinued operations
11 new standards and interpretations affecting amounts presentation or disclosure reported in the current period
during the period the group adopted three new or revised standards and interpretations none of which significantly affected the amounts 
reported in these financial statements details of the standards and interpretations that were adopted are set out in section 12
12  new standards and interpretations adopted with no significant effect on financial statements
the following new and revised standards and interpretations have been adopted in the current year their adoption has not had any 
significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions and 
arrangements
ias 24 revised related party disclosures
amendments to ifric 14 prepayments of a minimum funding requirement
annual improvements to ifrss 2010
13  new standards and interpretations in issue but not yet effective
at the date of authorisation of these financial statements the following standards and interpretations are in issue but not yet effective
amendments to ias 1 presentation of items of other comprehensive income
amendments to ias 12 deferred tax — recovery of underlying assets
ias 19 revised employee benefits
ias 27 revised separate financial statements 
ias 28 revised investments in associates and joint ventures 
amendments to ifrs 7 financial instruments disclosures
ifrs 9 financial instruments
ifrs 10 consolidated financial statements
ifrs 11 joint arrangements
ifrs 12 disclosure of interest in other entities
ifrs 13 fair value measurement
annual improvements to ifrss 2011
the directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group’s financial 
statements in the period of initial application except as follows
ias 19 revised will impact the measurement of the various components representing movements in the defined benefit pension obligation 
and associated disclosures but not the group’s total obligation following the adoption of ias 19 revised effective from 1 january 2013 
the net retirement benefit obligation in the balance sheet will not be impacted but the net finance cost of pensions within the income 
statement will increase this will reduce profit for the year and accordingly increase other comprehensive income 69
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
2 summary of significant accounting policies
basis of accounting
the consolidated financial statements have been prepared in accordance with international financial reporting standards ‘ifrss’ the 
consolidated financial statements have also been prepared in accordance with ifrss adopted for use in the european union and therefore 
comply with article 4 of the eu ias regulation
the consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial 
instruments which are recognised at fair value historical cost is generally based on the fair value of the consideration given in exchange for 
these assets the principal accounting policies adopted are consistent with the prior year and are set out below 
basis of consolidation
the group financial statements include the results of the parent undertaking and all of its subsidiary undertakings the results of businesses 
acquired during the period are included from the effective date of acquisition and for those sold during the period to the effective date of 
disposal where necessary adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line 
with those used by the group all intergroup balances and transactions including unrealised profits arising from intragroup transactions 
have been eliminated in full
noncontrolling interests in subsidiaries are identified separately from the group’s equity therein the interest of noncontrolling shareholders 
is initially measured at the noncontrolling interests’ proportion of the share of the fair value of the acquiree’s identifiable net assets 
subsequent to acquisition the carrying amount of noncontrolling interests is the amount of those interests at initial recognition plus the non
controlling interests’ share of subsequent changes in equity total comprehensive income is attributed to noncontrolling interests even if this 
results in the noncontrolling interests having a deficit balance
going concern
the directors have at the time of approving the financial statements a reasonable expectation that the company and the group have 
adequate resources to continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis of 
accounting in preparing the financial statements further detail is contained in the directors’ statement of going concern on page 48 of the 
directors’ report
business combinations and goodwill
the acquisition of subsidiaries is accounted for using the purchase method the cost of acquisition is measured at the fair value of assets given 
the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the group in exchange for control of the 
acquiree costs directly attributable to business combinations are recognised as an expense in the income statement as incurred 
the acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific guidance 
is provided by ifrss noncurrent assets and directly attributable liabilities that are classified as held for sale in accordance with ifrs 5 
‘noncurrent assets held for sale and discontinued operations’ are recognised and measured at fair value less costs to sell also deferred tax 
assets and liabilities are recognised and measured in accordance with ias 12 ‘income taxes’ liabilities and assets related to employee benefit 
arrangements are recognised and measured in accordance with ias 19 ‘employee benefits’ and liabilities or equity instruments related to the 
replacement by the group of an acquiree’s sharebased payments awards are measured in accordance with ifrs 2 ‘sharebased payments’ 
any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill 
if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the 
group reports provisional amounts where appropriate those provisional amounts are adjusted during the measurement period or additional 
assets or liabilities recognised to reflect new information obtained about facts and circumstances that existed as of the acquisition date that 
if known would have affected the amounts recognised at that date
the measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and 
circumstances that existed as of the acquisition date and is subject to a maximum period of one year
goodwill on acquisition is initially measured at cost being the excess of the sum of the consideration transferred the amount of any non
controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree over the acquirer’s interest 
in the net fair value of the identifiable assets liabilities and contingent liabilities following initial recognition goodwill is measured at cost less 
any accumulated impairment losses goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances 
indicate that the carrying value may be impaired
if after reassessment the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration 
transferred the amount of any noncontrolling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the 
acquiree the excess is recognised immediately in profit or loss as a bargain purchase gain melrose plc
annual report 2011 70
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2 summary of significant accounting policies continued
as at the acquisition date any goodwill acquired is allocated to each of the cashgenerating units acquired impairment is determined 
by assessing the recoverable amount of the cashgenerating unit to which goodwill relates where the recoverable amount of the cash
generating unit is less than the carrying amount an impairment loss is recognised in the income statement and is not subsequently 
reversed when there is a disposal of a cashgenerating unit goodwill relating to the operation disposed of is taken into account in 
determining the gain or loss on disposal of that operation the amount of goodwill allocated to a partial disposal is measured on the basis of 
the relative values of the operation disposed of and the operation retained
joint ventures
a joint venture is an entity which is not a subsidiary undertaking but the interest of the group is that of a partner in a business over which the 
group exercises joint control the results assets and liabilities of joint ventures are accounted for using the equity method of accounting
revenue
revenue is recognised when the significant risks and rewards of ownership of goods have passed to the buyer and can be reliably 
measured revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods 
provided in the normal course of business net of discounts customs duties and sales taxes
where percentage of completion accounting is applied and where the outcome of a construction contract can be estimated reliably 
revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date this is normally 
measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs except 
where this would not be representative of the stage of completion variations in contract work claims and incentive payments are included 
to the extent that they have been agreed with the customer
where the outcome of a construction contract cannot be estimated reliably contract revenue is recognised to the extent of contract costs 
incurred where it is probable they will be recoverable contract costs are recognised as expenses in the period in which they are incurred
when it is probable that total contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately 
interest income is recognised when it is probable that the economic benefits will flow to the group and the amount of revenue can be 
measured reliably interest income is accrued on a time basis by reference to the principal outstanding and the effective interest applicable
exceptional costsincome
exceptional costsincome are those costsincome of a significant and nonrecurring nature or those associated with significant restructuring 
programmes acquisitions or disposals
operating profit
operating profit is stated after exceptional operating costs and income intangible asset amortisation and the group’s share of results of joint 
ventures but before finance income and finance costs
borrowing costs
borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily take 
a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets 
are substantially ready for their intended use or sale 
investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted 
from the borrowing costs eligible for capitalisation
all other borrowing costs are recognised in the income statement in the period in which they are incurred
issue costs of loans
the finance cost recognised in the income statement in respect of the issue costs of borrowings is allocated to periods over the terms of 
the instrument using the effective interest rate method
property plant and equipment
property plant and equipment are stated at cost less accumulated depreciation and any impairment in value
the initial cost of an asset comprises its purchase price or construction cost and any costs directly attributable to bring the asset into 
operation the purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to 
acquire the asset  71
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depreciation is calculated on a straightline basis over the estimated useful life of the asset as follows
freehold land nil 
freehold buildings and long leasehold property over expected economic life not exceeding 50 years
short leasehold property over the term of the lease
plant and equipment 3–12 years
the estimated useful lives of property plant and equipment are reviewed on an annual basis and if necessary changes in useful lives are 
accounted for prospectively
the carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that 
the carrying value may not be recoverable if any such indication exists an impairment review is performed and where the carrying values 
exceed the estimated recoverable amount the assets are written down to their recoverable amount the recoverable amount of property 
plant and equipment is the greater of net selling price and value in use in assessing value in use the estimated future cash flows are 
discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the 
risks specific to the asset for an asset that does not generate largely independent cash inflows the recoverable amount is determined for 
the cashgenerating unit to which the asset belongs 
an item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from 
the continued use of the asset any gain or loss arising on derecognition of the asset calculated as the difference between the net disposal 
proceeds or costs and the carrying amount of the item is included in the income statement in the year that the item is derecognised
intangible assets
intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses
on acquisition of businesses separately identifiable intangible assets are determined in relation to the specific circumstances of the business 
acquired and are valued on an appropriate basis
access to the use of patented technology and trade names are valued using a ‘relief from royalty’ method which determines the net present 
value of future additional cash flows arising from the use of the intangible asset
customer relationships are valued on the basis of the net present value of the future additional cash flows arising from customer 
relationships with appropriate allowance for attrition of customers
the estimated useful lives of intangible assets are
computer software 5 years or less
patented technology 5 years or less
customer relationships 10 years or less
trade names 20 years or less
computer software is initially recorded at cost where these assets have been acquired through a business combination this will be the fair 
value allocated in the acquisition accounting where these have been acquired other than through a business combination the initial cost is 
the aggregate amount paid and the fair value of any other consideration given to acquire the asset
computer software assets are amortised over their estimated useful lives on a straightline basis
intangible assets are tested for impairment annually or more frequently whenever events or changes in circumstances indicate that the 
carrying value may not be recoverable impairment losses are measured on a similar basis to property plant and equipment useful lives are 
also examined on an annual basis and adjustments where applicable are made on a prospective basis
research and development costs
research costs are expensed as incurred
costs relating to clearly defined and identifiable development projects are capitalised when there is a technical degree of exploitation 
adequacy of resources and a potential market or development possibility in the undertaking that are recognisable and where it is the 
intention to produce market or execute the project a correlation must also exist between the costs incurred and future benefits and those 
costs can be measured reliably capitalised expenses are expensed on a straightline basis over their useful lives costs not meeting such 
criteria are expensed as incurred melrose plc
annual report 2011 72
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2 summary of significant accounting policies continued
inventories
inventories are valued at the lower of cost and net realisable value cost includes all direct expenditure and appropriate production overhead 
expenditure incurred in bringing goods to their current state under normal operating conditions net realisable value is based on estimated 
selling price less costs expected to be incurred to completion and disposal provisions have been made for obsolescence or other expected 
losses where necessary
trade and other receivables
trade receivables and other receivables are measured and carried at amortised cost using the effective interest method less any 
impairment the carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded in the income 
statement for trade receivables the carrying amount is reduced through the use of an allowance account subsequent recoveries of 
amounts previously written off are credited against the allowance account and changes in the carrying amount of the allowance account are 
recognised in the income statement
trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis objective 
evidence of impairment for a portfolio of receivables could include the group’s past experience of collecting receipts an increase in the 
number of delayed receipts in the portfolio past the average credit period as well as observable changes in national or local economic 
conditions that correlate with default on receivables 
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in hand and current balances with banks and similar institutions and short
term deposits which are readily convertible to cash which are subject to insignificant risks of changes in value
for the purpose of the cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above net of 
outstanding bank overdrafts
interestbearing loans and borrowings
all loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowings
after initial recognition interestbearing loans and borrowings are subsequently measured at amortised cost using the effective interest 
method amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement
gains and losses are recognised in the income statement when the liabilities are derecognised or impaired as well as through the 
amortisation process
leases
finance leases which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item are capitalised 
at the inception of the lease at the fair value of the lease or if lower at the present value of the minimum lease payments the corresponding 
liability to the lessor is included in the balance sheet as a finance lease obligation lease payments are apportioned between the finance 
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability 
finance charges are charged directly against income capitalised leased assets are depreciated over the shorter of the estimated useful life 
of the asset or the lease term
operating lease payments are recognised as an expense in the income statement on a straightline basis over the lease term rental 
income from operating leases is recognised on a straightline basis over the term of the relevant lease
other financial liabilities 
other financial liabilities are initially measured at fair value net of transaction costs other financial liabilities are subsequently measured 
at amortised cost using the effective interest method with interest expense recognised on an effective yield basis the effective interest 
method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant periods the 
effective interest rate is the rate that discounts estimated future cash payments throughout the expected life of the financial liability or where 
appropriate a shorter period to the net carrying amount on initial recognition the group derecognises financial liabilities when the group’s 
obligations are discharged cancelled or they expire
derivative financial instruments and hedging
the group uses derivative financial instruments to manage its exposure to interest rate foreign exchange rate and commodity risks arising 
from operating and financing activities the group does not hold or issue derivative financial instruments for trading purposes details of 
derivative financial instruments are disclosed in note 24 of the financial statements movements on the hedging reserve in equity are detailed 
in note 25 73
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derivative financial instruments are recognised and stated at fair value their fair value is recalculated at each reporting date the accounting 
treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for hedge accounting
where derivatives do not meet the criteria to qualify for hedge accounting any gains or losses on the revaluation to fair value at the period 
end are recognised immediately in the income statement where derivatives do meet the criteria to qualify for hedge accounting recognition 
of any resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged
derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the  
balance sheet 
hedge accounting
in order to qualify for hedge accounting the group is required to document from inception the relationship between the item being hedged 
and the hedging instrument and to show that the hedge will be highly effective on an ongoing basis this effectiveness testing is performed 
at each period end to ensure that the hedge remains highly effective
hedge accounting is discontinued when the group revokes the hedging relationship the hedge instrument expires or is sold terminated 
exercised or no longer qualifies for hedge accounting 
the group designates certain hedging instruments as either fair value hedges cash flow hedges or hedges of net investments in foreign 
operations
fair value hedge
derivative financial instruments are classified as fair value hedges when they hedge the group’s exposure to changes in the fair value of a 
recognised asset or liability changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the 
income statement immediately together with any changes in the fair value of the hedged item that is attributable to the hedged risk  
cash flow hedge
derivative financial instruments are classified as cash flow hedges when they hedge the group’s exposure to the variability in cash flows that 
are either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecasted cash flow 
the effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the statement of comprehensive 
income and accumulated in equity the gain or loss relating to the ineffective portion is recognised immediately in the income statement  
amounts previously recognised in the statement of comprehensive income and accumulated in equity are recycled to the income 
statement in the periods when the hedged item is recognised in the income statement or the hedged relationship is discontinued  
however when the forecast transaction that is hedged results in the recognition of a nonfinancial asset or a nonfinancial liability the gains 
and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the nonfinancial 
asset or nonfinancial liability
hedges of net investments in foreign operations
derivative financial instruments are classified as net investment hedges when they hedge the group’s net investment in foreign operations  
the effective element of any foreign exchange gain or loss from revaluing the derivative at a reporting period end is recognised in the 
statement of comprehensive income any ineffective element is recognised immediately in the income statement
gains and losses accumulated in equity are recognised immediately in the income statement when the foreign operation is disposed of or 
the hedged relationship is discontinued
provisions
provisions are recognised when the group has a present obligation legal or constructive as a result of a past event it is probable that 
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the 
amount of the obligation if the effect of the time value of money is material provisions are determined by discounting the expected future 
cash flows at a rate that reflects the current market assessment of the time value of money and where appropriate the risks specific to the 
liability where discounting is used the increase in the provision due to the passage of time is recognised as a finance cost
environmental liabilities
liabilities for environmental costs are recognised when environmental assessments or cleanups are probable and the associated costs 
can be reasonably estimated generally the timing of these provisions coincides with the commitment to a formal plan of action the 
amount recognised is the best estimate of the expenditure required where the liability will not be settled for a number of years the amount 
recognised is the present value of the estimated future expenditure melrose plc
annual report 2011 74
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notes to the financial statements continued
2 summary of significant accounting policies continued
employee benefits
wages salaries bonuses social security contributions paid annual leave and sick leave are accrued in the year in which the associated 
services are rendered by employees of the group the accounting policy for pensions and other retirement benefits is described below
the group also operates long term incentive plans ltips for directors and certain employees the expected settlement costs of these 
plans are expensed on a straightline basis over the life of the plans
pensions and other retirement benefits
the group operates defined benefit pension plans and defined contribution plans some of which require contributions to be made to 
administered funds separate from the group in some jurisdictions funds are not administered separately from the group but appropriate 
liabilities are recognised in the balance sheet
for the defined benefit pension and retirement benefit plans plan assets are measured at fair value and plan liabilities are measured on an 
actuarial basis using the projected unit credit method and discounted at an interest rate equivalent to the current rate of return on a high 
quality corporate bond of equivalent currency and term to the plan liabilities any assets resulting from this calculation are limited to past 
service cost plus the present value of available refunds and reductions in future contributions to the plan
the service cost of providing pension and other retirement benefits to employees for the period is charged to the income statement
a charge representing the unwinding of the discount on the plan liabilities during the period is included within finance costs
a credit representing the expected return on the plan assets during the period is included within finance costs this credit is based on the 
market value of the plan assets and expected rates of return at the beginning of the year
actuarial gains and losses may result from differences between the expected return and the actual return on plan assets differences 
between the actuarial assumptions underlying the plan liabilities and actual experience during the period or changes in the actuarial 
assumptions used in the valuation of the plan liabilities actuarial gains and losses and taxation thereon are recognised in full in the period 
in which they occur in the statement of comprehensive income
for defined contribution plans contributions payable are charged to the income statement as they fall due as an operating expense
foreign currencies
the individual financial statements of each group company are presented in the currency of the primary economic environment in which 
it operates its functional currency for the purpose of the consolidated financial statements the results and financial position of each 
group company are expressed in pounds sterling which is the functional currency of the company and the presentation currency for the 
consolidated financial statements
in preparing the financial statements of the individual companies transactions in currencies other than the entity’s functional currency 
foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions at each balance sheet date monetary 
assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date non
monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair 
value was determined nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated
exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in the income 
statement for the period exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in the 
income statement for the period except for differences arising on the retranslation of nonmonetary items in respect of which gains and 
losses are recognised directly in equity for such nonmonetary items any exchange component of that gain or loss is also recognised 
directly in equity
for the purpose of presenting consolidated financial statements the assets and liabilities of the group’s foreign operations are translated 
at exchange rates prevailing on the balance sheet date income and expense items are translated at the average exchange rates for the 
period unless exchange rates fluctuate significantly during that period in which case the exchange rates at the date of transactions are 
used exchange differences arising if any are recognised in the statement of comprehensive income and accumulated in equity attributed 
to noncontrolling interests as appropriate such translation differences are recognised as income or as expenses in the period in which the 
related operation is disposed of any exchange differences that have previously been attributed to noncontrolling interests are derecognised 
but they are not reclassified to the income statement
goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and 
translated at the rate prevailing at the balance sheet date 75
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taxation
the tax expense is based on the taxable profits for the period and represents the sum of the tax paid or currently payable and deferred tax
taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or 
deductible in other years and it further excludes items that are never taxable or deductible the group’s liability for current tax is calculated 
using tax rates that have been enacted or substantively enacted by the balance sheet date
deferred tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets 
and liabilities and their carrying amounts for financial reporting purposes
deferred tax liabilities are recognised for all taxable temporary differences except
 • where the deferred tax liability arises on goodwill that is not tax deductible or the initial recognition of an asset or liability in a transaction 
that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss and
 • where the timing of the reversal of the temporary differences associated with investments in subsidiaries and interests in joint ventures 
can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
deferred tax assets are recognised for all deductible temporary differences carryforward of unused tax assets and unused tax losses to 
the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward of 
unused tax assets and unused tax losses can be utilised except
 • where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination 
and at the time of the transaction affects neither the accounting profit nor taxable profit or loss and
 • in respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures deferred tax 
assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and 
taxable profit will be available against which the temporary differences can be utilised
the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable 
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised
deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the 
liability is settled based on tax rates and tax laws that have been enacted or substantially enacted at the relevant balance sheet date
tax relating to items recognised directly in other comprehensive income is recognised in the statement of comprehensive income and not in 
the income statement
revenues expenses and assets are recognised net of the amount of sales tax except
 • where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority in which case the sales 
tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable and
 • where receivables and payables are stated with the amount of sales tax included
the net amount of sales tax recoverable from or payable to the taxation authority is included as part of receivables or payables in the 
balance sheet
sharebased payments
the group has applied the requirements of ifrs 2 ‘sharebased payments’ the group issues equitysettled sharebased payments to 
certain employees equitysettled sharebased payments are measured at fair value of the equity instrument excluding the effect of non
market based vesting conditions at the date of grant the fair value determined at the grant date of the equitysettled sharebased payments 
is expensed on a straightline basis over the vesting period based on the group’s estimate of shares that will eventually vest and adjusted 
for the effect of nonmarket based vesting conditions
fair value is measured by use of the black–scholes pricing model the expected life used in the model has been adjusted based on 
management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations melrose plc
annual report 2011 76
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notes to the financial statements continued
2 summary of significant accounting policies continued
noncurrent assets and businesses held for sale
noncurrent assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell
noncurrent assets and businesses are classified as held for sale if their carrying amount will be recovered principally through a sale 
transaction rather than through continuing use this condition is regarded as having been met only when the sale is highly probable and 
the asset or business is available for immediate sale in its present condition management must be committed to the sale which should be 
expected to qualify for recognition as a completed sale within one year from the date of classification
3 critical accounting judgements and key sources of estimation uncertainty
in applying the group’s accounting policies as set out in note 2 management has made critical accounting judgements in the quantification 
of provisions the impairment of noncurrent assets and the valuation of retirement benefit obligations and taxation due to the inherent 
uncertainty involved in making assumptions and estimates actual outcomes will differ from those assumptions and estimates an analysis 
of the key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the 
carrying amount of assets and liabilities within the next financial year is provided below
provisions
the quantification of certain liabilities within provisions environmental remediation obligations and future costs and settlements in relation 
to certain legal claims have been estimated using the best information available however such liabilities depend on the actions of third 
parties and on the specific circumstances pertaining to each obligation neither of which is controlled by the group although provisions are 
reviewed on a regular basis and adjusted for management’s best current estimates the judgemental nature of these items means that future 
amounts settled may be different from those provided further details are set out in note 6 and note 20
impairment of noncurrent assets
goodwill and intangible assets are tested for impairment whenever events or circumstances indicate that their carrying amounts might be 
impaired and at least annually such events and circumstances include the effects of restructuring initiated by management 
to determine whether goodwill and intangible assets are impaired requires an estimation of the value in use of the cashgenerating units 
to which goodwill and other intangible assets has been allocated the value in use calculation requires management to estimate the future 
cash flows expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate present value such calculations 
require judgement relating to the appropriate discount factors and long term growth prevalent in a particular market as well as short and 
medium term business plans the directors draw upon experience as well as external resources in making these judgements
the carrying amount of goodwill and other intangible assets including computer software at the balance sheet date was £9061 million  
31 december 2010 £11816 million at 31 december 2011 and 2010 the group recognised no impairment loss in respect of these assets 
retirement benefit obligations
retirement benefits are accounted for under ias 19 ‘employee benefits’ for defined benefit plans obligations are measured at discounted 
present value whilst plan assets are recorded at fair value because of changing market and economic conditions the expenses and 
liabilities actually arising under the plans in the future may differ materially from the estimates made on the basis of these actuarial 
assumptions therefore declining returns on equity markets and markets for fixedincome instruments could necessitate additional 
contributions to the plans in order to cover future pension obligations also higher or lower withdrawal rates or longer or shorter life of 
participants may have an impact on the amount of pension income or expense recorded in the future
the interest rate used to discount retirement benefit obligations to present value is derived from the yields of senior highquality corporate 
bonds at the balance sheet date these generally include aarated securities the discount rate is based on the yield of a portfolio of bonds 
whose weighted residual maturities approximately correspond to the duration necessary to cover the entire benefit obligation
pension and other retirement benefits are inherently long term and future experience may differ from the actuarial assumptions used 
to determine the net charge for retirement benefit obligations note 23 to the consolidated financial statements describes the principal 
discount rate earnings increase and pension retirement benefit obligation assumptions that have been used to determine the net charge 
for retirement benefit obligations in accordance with ias 19 the calculation of any charge relating to retirement benefit obligations is clearly 
dependent on the assumptions used which reflects the exercise of judgement the assumptions adopted are based on prior experience 
market conditions and the advice of plan actuaries
at 31 december 2011 the group’s retirement benefit obligation deficit was £1177 million 31 december 2010 £1196 million further 
details on the sensitivities and assumptions are discussed in the finance director’s review on pages 23 to 30 77
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3 critical accounting judgements and key sources of estimation uncertainty continued
taxation
the group is subject to income tax in most of the jurisdictions in which it operates management is required to exercise judgement in 
determining the group’s provision for income taxes management’s judgement is required in estimating tax provisions where additional 
current tax may become payable in the future following the audit by the tax authorities of previously filed tax returns management’s 
judgement is also required as to whether a deferred tax asset should be recognised based on the availability of future taxable profits while 
the group aims to ensure that the estimates recorded are accurate the actual amounts could be different from those expected
4 revenue
an analysis of the group’s revenue as defined by ias 18 is as follows
 
notes
year ended
31 december 
2011
£m
restated
1
year ended
31 december
2010
£m
continuing operations
revenue from the sale of goods 11224 10205
revenue recognised on longterm contracts 315 149
revenue 5 11539 10354
finance income 7 100 93
total revenue from continuing operations as defined by ias 18 11639 10447
discontinued operations
revenue from the sale of goods 1774 3374
revenue recognised on longterm contracts 04 67
revenue 59 1778 3441
finance income 05 —
total revenue from discontinued operations as defined by ias 18 1783 3441
total revenue as defined by ias 18 13422 13888
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
5 segment information
segment information is presented in accordance with ifrs 8 ‘operating segments’ which requires operating segments to be identified on 
the basis of internal reports about components of the group that are regularly reported to the group’s board in order to allocate resources 
to the segments and assess their performance the group’s reportable operating segments under ifrs 8 are as follows
 • energy
 • lifting
 • other industrial
the energy segment incorporates the turbogenerators now including the hawker siddeley switchgear business unit and marelli business 
units specialist suppliers of energy industrial products to the global market the lifting segment consists of the businesses of bridon 
crosby and acco serving oil  gas production mining petrochemical alternative energy and general construction markets the other 
industrial segment consists of the businesses of truth harris and mpc primarily serving the housing scrap processing engineered plastic 
and automotive markets 
there are two central cost centres which are also separately reported to the board
 • central — corporate
 • central — ltips
1
1 long term incentive plans
the central corporate cost centre contains the melrose group head office costs whilst the central ltips cost centre contains the costs 
associated with the 2009 melrose incentive scheme and the divisional management ltip schemes that are in operation across the group
the discontinued segment incorporates the dynacast segment along with four businesses previously shown in the other industrial segment 
namely brush traction logistex uk madico and weber knapp melrose plc
annual report 2011 78
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notes to the financial statements continued
5 segment information continued
transfer prices between business units are set on an arm’s length basis in a manner similar to transactions with third parties
the group’s geographical segments are determined by the location of the group’s noncurrent assets and for revenue the location of 
external customers intersegment sales are not material and have not been included in the analysis below
the following tables present revenue profit and certain asset and liability information regarding the group’s operating segments for the year 
ended 31 december 2011 and the comparative period note 6 gives details of exceptional costs and income
segment revenues and results
segment revenue from external customers
notes
year ended 
31 december 
2011
£m
restated
1
year ended 
31 december 
2010
£m
continuing operations
energy 4616 4275
lifting 4844 4227
other industrial 2079 1852
total continuing operations 4 11539 10354
discontinued operations 49 1778 3441
total revenue 13317 13795
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
segment result
notes
year ended 
31 december 
2011
£m
restated
1
year ended 
31 december 
2010
£m
continuing operations
energy 911  737 
lifting 826  667 
other industrial 231  218 
central — corporate 92 86
central — ltips
2
68 66
headline
3
 operating profit 1808  1470 
intangible asset amortisation 237 241
exceptional costs 6 401 103
exceptional income 6 —  214 
operating profit 1170  1340 
finance costs 7 296 346
finance income 7 100  93 
profit before tax 974  1087 
tax 8 174  50
profit for the year from discontinued operations 9 1717  376 
profit for the year 2865  1413 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 long term incentive plans
3 as defined on the income statement 79
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
5 segment information continued
total assets total liabilities
31 december 
 2011
£m
restated
1
31 december
2010
£m
31 december 
 2011
£m
restated
1
31 december
2010
£m
energy 6410 6437 2316 2160
lifting 7673 7504 2123 1901
other industrial 1215 1172 417 480
central — corporate 2517 2434 6322 6784
central — ltips
2
— — 153 125
total continuing operations 17815 17547 11331 11450
discontinued operations — 3891 — 1159
total 17815 21438 11331 12609
1 restated to include the total assets and total liabilities of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 long term incentive plans
capital expenditure
1
depreciation
1
 
year ended 
31 december 
 2011
£m
restated
2
year ended
31 december
2010
£m
year ended 
31 december 
 2011
£m
restated
2
year ended
31 december
2010
£m
continuing operations
energy 114 94 79 80
lifting 213 98 88 94
other industrial 65 48 58 59
central — corporate — 02 06 07
total continuing operations 392 242 231 240
discontinued operations 36 77 41 89
total 428 319 272 329
1 including computer software
2 restated to include the capital expenditure
1
 and depreciation
1
 of dynacast brush traction logistex uk madico and weber knapp within discontinued operations melrose plc
annual report 2011 80
2101204   26032012   proof 6
notes to the financial statements continued
5 segment information continued
geographical information
the group operates in various geographical areas around the world the group’s country of domicile is the uk and the group’s revenues 
and noncurrent assets in europe and north america are also considered to be material
the group’s revenue from external customers and information about its segment assets noncurrent assets excluding deferred tax assets 
and noncurrent trade and other receivables by geographical location are detailed below
revenue
1
 from external 
customers noncurrent assets
year ended 
31 december 
 2011
£m
restated
2
year ended
31 december
2010
£m
 
31 december 
 2011
£m
restated
2
31 december
2010
£m
uk 1952 1565 3670 3624
europe 2876 2941 3217 3396
north america 4635 4198 4222 4302
other 2076 1650 105 98
total continuing operations 11539 10354 11214 11420
discontinued operations 1778 3441 — 2933
total 13317 13795 11214 14353
1 revenue is presented by destination
2 restated to include the revenue and noncurrent assets of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
6 exceptional costs and income
exceptional costs
year ended
31 december 
2011
£m
year ended
31 december 
2010
£m
continuing operations
increase in legal provision 210 — 
restructuring costs 159 59
acquisitions and disposals of businesses 32 04
defined benefit pension plan disposal —  40
total exceptional costs 401 103
during the year a legal provision in respect of two bridon companies in connection with product liability litigation in the us inherited 
in part from the fki acquisition has been increased to £258 million us 400 million noble drilling services ‘noble’ is claiming from 
bridon and its us distributor for alleged losses arising from hurricane ike causing two offshore drilling rigs secured by bridon ropes to break 
station in the gulf of mexico the operator of the wells anadarko petroleum corp then opportunistically joined the litigation seeking to 
recover alleged losses of its own from all parties including noble but the court endorsed bridon’s analysis that this claim was meritless 
and dismissed it in full by way of summary judgement the amount of the noble claim is us 104 million which based on legal and factual 
analysis bridon considers to be grossly inflated bridon intends to vigorously defend against all claims asserted against it at trial which is 
set for later this year and has robust defences to all allegations in the event of an adverse ruling bridon already has a number of strong 
grounds for appeal which itself could take a further six to eighteen months bridon has an insurance programme of up to £105 million 
us163 million at 31 december 2011 that may be available to respond and bridon is currently in discussions with its insurers in relation to 
the extent of this coverage 
during 2011 the group incurred £159 million 2010 £59 million of costs relating to restructuring programmes which include the 
integration of the hawker siddeley switchgear business into the turbogenerators business within the energy division the reorganisation of 
the brush facility in the netherlands also within the energy division and within the lifting division the restructuring at bridon’s doncaster 
works following the large scale investment to relocate certain activities from doncaster to the newly invested neptune energy park facility in 
newcastle upon tyne 81
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
6 exceptional costs and income continued
costs associated with acquisitions and disposals of businesses consist predominately of the expenses arising during the aborted process to 
acquire charter international plc and the costs associated with the return of capital following the disposal of dynacast
in addition the group incurred two exceptional cash costs during the year both were fully anticipated and fully provided and represented 
two exceptional liabilities that were acquired with fki plc the first related to the transfer of £104 million at a cash cost of £90 million of 
fki captive insurance liabilities to an external party so that the group has no further exposure to these risks the second related to a legal 
settlement in respect of an historical fki owned company dewind gmbh paid in two tranches totalling £104 million 
on 12 february 2010 the group acquired 100 of the share capital of generator  motor services of pennsylvania llc also during 2010 
the prelok france business was disposed of a net loss of £02 million was incurred which included a cumulative exchange gain of £01 
million recycled from equity
in 2010 the group entered into a buyout arrangement to dispose of the liabilities of the bridon group senior executive plan for £40 million 
in excess of the ias 19 carrying value of plan net liabilities
exceptional income
year ended 
31 december 
2011 
£m
year ended
31 december 
2010
£m
continuing operations
pension curtailment gain — 131
fki captive insurance commutation gain — 56
net release of provisions — 27
total exceptional income — 214
in 2010 it was announced to the members that the fki uk pension plan would be closed to the accrual of future benefits for existing 
members on 28 february 2011 resulting in a curtailment gain of £131 million in that year
in 2010 a gain of £56 million was generated by the commutation of certain insurance policies within the fki captive insurance company
the net release of provisions of £27 million during 2010 represented the release of a provision set up on the acquisition of fki net of an 
additional environmental and legal provision 
7 revenues and expenses
continuing operations discontinued operations total
net operating expenses comprise
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
selling and distribution costs 792 766 55 106 847 872
administration expenses 1047 1045 129 286 1176 1331
share of results of joint ventures note 14 —  04 —  —  —  04
other operating costs — exceptional 401 103 —  —  401 103
other operating income — exceptional —  214  —  —  —  214 
total net operating expenses 2240 1704 184 392 2424 2096
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations melrose plc
annual report 2011 82
2101204   26032012   proof 6
notes to the financial statements continued
7 revenues and expenses continued
continuing operations discontinued operations total
operating profit is 
stated after charging
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
depreciation and impairment 243 233  39 87 282 320
cost of inventories 8129 7310  1334 2575 9463 9885
amortisation of other intangible assets 
 note 12 237 241  14 25 251 266
amortisation of computer software 
 note 12 06 07  02 02 08 09
operating lease expense 79 75  27 44 106 119
staff costs 2833 2717  456 958 3289 3675
research and development costs 20 24  — — 20 24
profitloss on disposal of property 
 plant and equipment — 01 — 04 — 03
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
the analysis of auditor’s remuneration is as follows
year ended 
31 december 
2011 
£m
year ended 
31 december 
2010 
£m
fees payable to the company’s auditor for the audit of the company’s annual accounts 06 06
fees payable to the company’s auditor and their associates for other services to the group
 — the audit of the company’s subsidiaries pursuant to legislation 06 08
total audit fees 12 14
year ended 
31 december 
2011 
£m
year ended 
31 december 
2010 
£m
taxation compliance services 04 03
other taxation advisory services 12 10
corporate finance services 10 11
other services 02 02
total nonaudit fees 28 26
fees for the audit of the company’s accounts represent fees payable to deloitte llp in respect of the audit of the company’s individual 
financial statements and the group’s consolidated financial statements corporate finance services include due diligence and other 
transaction related services 83
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
7 revenues and expenses continued
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
staff costs during the year including executive directors
wages and salaries 2375 2233
social security costs 350 320
pension costs
 — defined benefit plans 04 39
 — defined contribution plans 104 125
total continuing staff costs 2833 2717
discontinued staff costs
2
 456 958
total staff costs 3289 3675
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 includes £02 million 2010 £04 million of defined benefit pension costs and £05 million 2010 £19 million of defined contribution pension costs
year ended 
31 december 
2011
number
restated
1
year ended
31 december
2010
number
average monthly number of persons employed including executive directors
energy 3341 3277
lifting 3079 2917
other industrial 1670 1650
central — corporate 33 33
total continuing operations 8123 7877
discontinued operations 1884 3297
total average number of persons employed 10007 11174
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
notes
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
finance costs and income
interest on bank loans and overdrafts 257 272
amortisation of costs of raising finance 25 23
interest on obligations under finance leases —  01
net finance cost of pensions 03 33
unwind of discount on provisions 20 11 17
total finance costs 296 346
finance income 4 100  93 
total continuing operations 196 253
discontinued operations
2
 9 03  08
total net finance costs 193 261
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 includes £02 million 2010 £08 million net finance cost of pensions
the finance cost of pensions in the continuing group is the interest cost on benefit obligations of £526 million net of the expected return on 
plan assets of £523 million 2010 £551 million and £518 million respectively
the interest cost on discontinued defined benefit obligations was £02 million and the expected return on plan assets was £nil 2010 £22 
million and £14 million respectively melrose plc
annual report 2011 84
2101204   26032012   proof 6
notes to the financial statements continued
8 tax
continuing operations discontinued operations total
analysis of creditcharge in year
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
current tax 59 163  72  125  13  288 
deferred tax note 21 115 113 02 35 117 148
total income tax creditcharge 174 50 70 90 104 140
tax charge on headline
2
 profit before tax 414  345  78  99  492  444 
exceptional tax credit 381 235 — — 381 235
t ax creditcharge on net exceptional items 76 43  —  —  76 43 
tax credit in respect of intangible 
 asset amortisation 131 103 08 09 139 112
total income tax creditcharge 174 50  70  90  104 140 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined on the income statement
the tax credit for the year ended 31 december 2011 charge for the year ended 31 december 2010 includes an exceptional tax credit 
of £381 million 2010 £235 million of this exceptional tax credit £286 million 2010 £nil relates to the change in the company’s 
expectation of the outcome of overseas tax audits inherited on the acquisition of fki and £95 million 2010 £235 million relates to the 
recognition of a previously unrecognised deferred tax asset during the period that is now considered to be recoverable 
the income tax rate for the current year is lower 2010 lower than the average standard rate of corporation tax in the uk for the year of 
265 2010 280 the differences are explained in the following table
year ended 
31 december 
2011
£m
restated
1
year ended
31 december
2010
£m
profit on ordinary activities before tax
continuing operations 974  1087 
discontinued operations note 9 263  466 
1237  1553 
tax on profit on ordinary activities at uk corporate tax rate 265 2010 280 328  435 
tax effect of
net permanent differences 17  12 
adjustment in respect of foreign tax rates 37  02
effect of uk rate change on deferred tax liability 72 38
timing differences not recognised in deferred tax 06  29
prior year tax adjustments 39 03
exceptional tax credit 381 235
total tax creditcharge for the year 104 140 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
in addition to the amount creditedcharged to the income statement a tax credit of £168 million 2010 £79 million has been recognised 
directly in the statement of comprehensive income this represents a tax credit of £120 million 2010 £81 million in respect of retirement 
benefit obligations a tax credit of £15 million 2010 charge of £02 million in respect of movements on cash flow hedges and a tax credit 
of £33 million 2010 £nil in respect of the use of losses on items taken directly to reserves in prior years
a tax charge of £08 million arising on the disposal of businesses has been included as a cost of disposal in the net gain on disposal of net 
assets of discontinued operations note 9 85
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
9 discontinued operations
disposal of businesses
on 19 july 2011 the group completed the disposal of the dynacast business for a cash consideration of us 5900 million £3665 million 
the costs charged during the year associated with the disposal were £128 million and the profit on disposal in the year was £1505 million 
after the recycling of cumulative translation differences of £514 million in addition disposal costs of £23 million were paid during the year 
which had been accrued in 2010
during the year the group also disposed of four other businesses namely brush traction logistex uk madico and weber knapp 
previously shown within the other industrial segment the cash consideration received for these businesses was £240 million and the costs 
incurred were £18 million including £08 million of tax charged on the disposal of the assets of brush traction the profit on disposal of 
these businesses was £19 million after the recycling of cumulative translation differences of £12 million 
financial performance of discontinued operations
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
revenue 1778  3441 
operating costs 1504 2942
headline
2
 operating profit 274  499 
intangible asset amortisation 14 25
net finance incomecosts 03  08
profit before tax 263  466 
headline tax 78 99
tax on intangible asset amortisation 08  09 
profit after tax 193  376 
cumulative translation differences recycled on disposals 526  — 
gain on disposal of net assets of discontinued operations 998  — 
profit for the period from discontinued operations 1717  376 
attributable to
owners of the parent 1716  374 
noncontrolling interests 01  02 
1717  376 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined in the income statement
during the year up until its sale on 19 july 2011 the dynacast business contributed £1640 million of revenue and £264 million of headline 
operating profit the disposed businesses from the other industrial segment contributed £138 million to revenue and £10 million to 
headline operating profit up to the point of sale melrose plc
annual report 2011 86
2101204   26032012   proof 6
notes to the financial statements continued
9 discontinued operations continued
the major classes of assets and liabilities disposed of during the year were as follows
dynacast
£m
other 
industrial
£m
discontinued 
operations
£m
goodwill and other intangible assets 2238 164 2402
property plant and equipment 401 76 477
inventories 241 76 317
trade and other receivables 519 119 638
cash and cash equivalents — 05 05
total assets disposed of 3399 440 3839
trade and other payables 656 220 876
tax
1 
48 — 48
retirement benefit obligations 105 01 106
provisions 32 04 36
noncontrolling interests 12 — 12
total liabilities disposed of 853 225 1078
net assets disposed of 2546 215 2761
cash consideration net of costs
2
3537 222 3759
gain on disposal of net assets 991 07 998
cumulative translation differences recycled on disposals 514 12 526
profit on disposal of businesses 1505 19 1524
1 includes £17 million of net deferred tax assets
2 in addition £23 million of cash costs were incurred on the disposal of dynacast which had been accrued in 2010
10 dividends
year ended 
31 december 
2011 
£m
year ended 
31 december 
2010 
£m
second interim dividend for the year ended 31 december 2010 of nil 2009 48p — 239
final dividend for the year ended 31 december 2010 paid of 70p 2009 nil 348 —
interim dividend for the year ended 31 december 2011 paid of 46p 2010 40p 180 199
528 438
proposed final dividend for the year ended 31 december 2011 of 84p 2010 70p 328 348
a final dividend of 84p was proposed by the board on 7 march 2012 and in accordance with ias 10 has not been included as a liability in 
these financial statements
in addition to dividends paid shareholders approved a £3732 million return of capital on 8 august 2011 of which £3721 million was paid 
on 19 august 2011 87
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
11 earnings per share
earnings attributable to owners of the parent
year ended 
31 december 
2011 
£m
restated
1
year ended
31 december
2010
£m
profit for the purposes of earnings per share 2864  1411 
less profit for the year from discontinued operations note 9 1716 374
earnings for basis of earnings per share from continuing operations 1148  1037 
continuing operations
intangible asset amortisation 237  241 
exceptional costs note 6 401  103 
exceptional income note 6 —  214
exceptional tax
2
588 295
earnings for basis of headline
2
 earnings per share from continuing operations 1198  872 
discontinued operations
profit for the period from discontinued operations note 9 1716  374 
profit on disposal of businesses 1524 — 
intangible asset amortisation 14  25 
tax on intangible asset amortisation 08 09
earnings for basis of headline
2
 earnings per share from continuing and discontinued operations 1396  1262 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined on the income statement
number number
weighted average number of ordinary shares for the purposes of basic earnings per share million 4553 4976
further shares for the purposes of diluted earnings per share million
1
301 253
weighted average number of ordinary shares for the purposes of diluted earnings per share million 4854 5229
1 relating to the 2009 melrose incentive scheme
earnings per share
year ended 
31 december 
2011 
pence
restated
1
 
year ended
31 december
2010
pence
basic earnings per share
from continuing and discontinued operations 629 284
from continuing operations 252 208
from discontinued operations 377 76
diluted earnings per share
from continuing and discontinued operations 590 270
from continuing operations 237 198
from discontinued operations 353 72
headline
2
 basic earnings per share
from continuing and discontinued operations 307 254
headline
2
 diluted earnings per share
from continuing and discontinued operations 288 241
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined on the income statement melrose plc
annual report 2011 88
2101204   26032012   proof 6
notes to the financial statements continued
12 goodwill and other intangible assets
goodwill
£m
other 
intangible
assets
£m
computer
software
£m
total
£m
cost
at 1 january 2010 7792  4498  25  12315 
acquisitions 78  07  —  85 
additions —  —  12  12 
disposals —  —  07 07
exchange adjustments 111  42  —  153 
at 31 december 2010 7981  4547  30  12558 
additions —  —  16  16 
disposal of businesses 2208 340 14 2562
exchange adjustments 88 24 01 113
at 31 december 2011 5685  4183  31  9899 
amortisation
at 1 january 2010 —  467 05 472
charge for period —  266 09 275
disposals —  —  07  07 
exchange adjustments —  03 01  02
at 31 december 2010 —  736 06 742
charge for the period —  251 08 259
disposal of businesses —  150  10  160 
exchange adjustments —  02  01  03 
at 31 december 2011 —  835 03 838
net book value
at 31 december 2011 5685  3348  28  9061 
at 31 december 2010 7981  3811  24  11816 
at 1 january 2010 7792  4031  20  11843 
other intangible assets include patented technology customer relationships and trade names 
goodwill has been allocated to the business segments each of which comprises several cashgenerating units as follows
31 december 
2011 
£m
restated
1
31 december
2010
£m
energy 2473 2521
lifting 2988 2997
other industrial 224 223
discontinued — 2240
5685 7981
1 restated to include the goodwill of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired
the recoverable amounts of the cashgenerating units are determined from value in use calculations the key assumptions for the value in 
use calculations are those regarding the discount rates growth rates and expected changes to selling prices and direct costs during the 
period the group estimates discount rates using pretax rates that reflect current market assessments of the time value of money and 
the risks specific to each cashgenerating unit the growth rates are based on a prudent estimate of long term industry growth forecasts 
changes in selling prices and direct costs are based on past practices and expectations of future changes in the market 89
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
12 goodwill and other intangible assets continued
the group prepares cash flow forecasts derived from financial budgets approved by management and extrapolates pretax cash flows 
based on estimated growth rates of between 2 and 3 2010 2 and 3 this rate does not exceed the average long term growth rate 
for the relevant markets the pretax discount rate applied is between 9 and 10 2010 8 and 10 depending on the risk elements 
associated with each cashgenerating unit the key assumptions used in forecasting pretax cash flows relate to future budgeted revenue 
and operating margins likely to be achieved and likely rates of longterm growth by market sector budgeted revenue and operating margins 
are based on views on past performance secured orders and orders likely to be achieved in the short to mediumterm given trends in the 
relevant market sector no impairment was identified and a reasonable possible change in the assumptions applied would not result in any 
impairment
13 property plant and equipment
land and 
buildings
£m
plant and 
equipment
£m
total
£m
cost
at 1 january 2010 1126  2258  3384 
acquisition —  03  03 
additions 38  269  307 
disposals —  63 63
disposal of businesses —  05 05
exchange adjustments 11  39  50 
at 31 december 2010 1175  2501  3676 
additions 36  376  412 
disposals 01 21 22
disposal of businesses 164 926 1090
exchange adjustments 17 23 40
at 31 december 2011 1029  1907  2936 
accumulated depreciation and impairment
at 1 january 2010 64 797 861
charge for the period 34 286 320
disposals —  57  57 
disposal of businesses —  02  02 
exchange adjustments 03 14 17
at 31 december 2010 101 1038 1139
charge for the period 33 231 264
impairments
1
14 04 18
disposals 01  18  19 
disposal of businesses 47  566  613 
exchange adjustments —  06  06 
at 31 december 2011 100 683 783
net book value
at 31 december 2011 929  1224  2153 
at 31 december 2010 1074  1463  2537 
at 1 january 2010 1062  1461 2523 
1 in respect of assets held in the brush facility in the netherlands impaired following the restructuring programme in 2011 see note 6 melrose plc
annual report 2011 90
2101204   26032012   proof 6
notes to the financial statements continued
14 interests in joint ventures
31 december 
2011 
£m
31 december 
2010 
£m
aggregated amounts relating to joint ventures
total assets 39  04 
total liabilities 43 08
interests in joint ventures 04 04
share of joint venture revenues 32  08 
share of results of joint ventures —  04
dividends received —  03
interests in joint ventures are in a net liability position and are therefore recognised within current liabilities
a list of all the significant investments in subsidiaries including the name country of incorporation and proportion of ownership interest is 
given in note 3 to the company’s separate financial statements
15 inventories
31 december 
2011 
£m
31 december 
2010 
£m
raw materials 533 543
work in progress 779 796
finished goods 746 824
2058 2163
the directors consider that there is no material difference between the balance sheet value of inventories and their replacement cost
construction contracts
31 december
2011
£m
31 december
2010
£m
contracts in progress at the balance sheet date
amounts due from contract customers included in other receivables 29  49 
amounts due to contract customers included in other payables —  52
29  03
contract costs incurred plus recognised profit less recognised losses to date 190  261 
less progress billings 161 264
29  03
the average life of contracts is 1–2 years 31 december 2010 2–3 years 91
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
16 trade and other receivables
current
31 december 
2011 
£m
31 december 
2010 
£m
trade receivables 1959  2315 
allowance for doubtful receivables 32 66
other receivables 91  131 
prepayments 145  197 
2163  2577 
trade receivables are noninterest bearing credit terms offered to customers vary upon the country of operation but are generally between 
30 and 90 days 
noncurrent
31 december 
2011 
£m
31 december 
2010 
£m
other receivables 03 19
an allowance has been made for estimated irrecoverable amounts made with reference to past default experience and management’s 
assessment of creditworthiness an analysis of which is as follows
energy
£m
lifting
£m
other
1
industrial
£m
central
£m
discontinued
1
 
£m
total
£m
at 1 january 2010 28  14  09  01  29  81 
income statement charge 02  03  02  01  04  12 
utilised 08 06 03 —  12 29
exchange differences —  —  01  —  01  02 
at 31 december 2010 22  11  09  02  22  66 
disposal of businesses —  —  —  —  21 21
income statement charge 03  04  —  —  01  08 
utilised 10 06 01 01 02 20
exchange differences 01 —  —  —  —  01
at 31 december 2011 14  09  08  01  —  32 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
the concentration of credit risk is limited due to the large number of customers and because they are unrelated to each other credit 
control procedures are implemented to ensure that sales are only made to organisations that are willing and able to pay for them such 
procedures include the establishment and review of customer credit limits and terms the group does not hold any collateral or any other 
credit enhancements over any of its trade receivables nor does it have a legal right of offset against any amounts owed by the group to the 
counterparty melrose plc
annual report 2011 92
2101204   26032012   proof 6
notes to the financial statements continued
16 trade and other receivables continued
the ageing of impaired trade receivables past due is as follows
ageing of impaired trade receivables past due
31 december 
2011 
£m
31 december 
2010 
£m
0–30 days 04 13
31–60 days 03 09
60 days 25 44
32 66
included in the group’s trade receivables balance are overdue trade receivables with a carrying amount of £373 million 31 december 2010 
£434 million against which an appropriate provision of £32 million 31 december 2010 £66 million is held
the balance deemed recoverable of £341 million 31 december 2010 £368 million is past due as follows
31 december 
2011 
£m
31 december 
2010 
£m
0–30 days 233 259
31–60 days 58 65
60 days 50 44
341 368
the directors consider that the carrying amount of trade and other receivables including amounts not past due and not impaired 
approximates to their fair value 
17 cash and cash equivalents
31 december 
2011 
£m
31 december 
2010 
£m
cash and cash equivalents 1956 1957
cash and cash equivalents comprises cash at bank and in hand which earns interest at floating rates based on daily bank deposit rates and 
shortterm deposits which are made for varying periods of between one day and one month and earn interest at the respective shortterm 
deposit rates the carrying amount of these assets is considered to be equal to their fair value 93
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
18 trade and other payables
current
31 december 
2011 
£m
31 december 
2010 
£m
trade payables 1440 1605
other payables 544 878
other taxes and social security 74 115
accruals 702 955
2760 3553
trade payables are noninterest bearing normal settlement terms vary by country and the average credit period taken for trade purchases is 
91 days 2010 95 days other payables are noninterest bearing and have an average term of approximately 60 days
noncurrent
31 december 
 2011
£m
31 december 
2010 
£m
other payables — 33
accruals 16 14
16 47
the directors consider that the carrying amount of trade and other payables approximates to their fair value
19 interestbearing loans and borrowings
this note provides information about the contractual terms of the group’s interestbearing loans and borrowings details of the group’s 
exposure to credit liquidity interest rate and foreign currency risk are included in note 24
current noncurrent total
31 december
2011
£m
31 december
2010
£m
31 december
2011
£m
31 december
2010
£m
31 december
2011
£m
31 december
2010
£m
fixed rate obligations
bank borrowings — euro loan austria
1
— 03 —  —  —  03 
— 03 —  —  —  03 
floating rate obligations
bank borrowings — us dollar loan
2
— — 3901 3885 3901 3885
bank borrowings — euro loan
3
— — 486  503  486  503 
bank borrowings — sterling loan
4
277 — 223 500 500 500
277 — 4610  4888  4887  4888 
redeemable preference c shares 11 — — — 11 —
unamortised finance costs — — 35 60 35 60
total interestbearing loans 
 and borrowings 288 03 4575  4828  4863  4831 
1 interest rate 150 repaid june 2011
2 interest rate libor 135 final maturity april 2013
3 interest rate euribor 135 final maturity april 2013
4 interest rate libor 135 final maturity april 2013
during 2011 the group utilised a £750 million multicurrency committed bank facility that provided term loan and revolving credit facilities 
through to 22 april 2013 a number of group companies act as guarantors to this facility drawdowns bear interest at interbank rates of 
interest plus a margin determined by reference to the group’s performance under its debt cover covenant ratio and ranges between 125 
and 235 the margin as at 31 december 2011 was 135 31 december 2010 150 melrose plc
annual report 2011 94
2101204   26032012   proof 6
notes to the financial statements continued
19 interestbearing loans and borrowings continued
throughout the year the group remained compliant with all covenants under these facilities the term loan facility is fully drawn down having 
originally been set at £500 million in 2009 the group repaid and cancelled us 80 million of this term loan facility following the disposal of 
the logistex business 
on 22 december 2011 the group agreed a new five year banking facility on 31 january 2012 all amounts outstanding on the original 
facility were repaid using surplus cash in the group at that time and by partially utilising the new facility 
the new facility is a £600 million multicurrency committed revolving credit facility a number of group companies continue to act as 
guarantors under the new facility drawdowns bear interest at interbank rates of interest plus a margin determined by reference to the 
group’s performance under its debt cover covenant ratio and ranges between 120 and 200
the interest rate repricing profile of financial liabilities after taking into account hedging interest rate derivatives is described in note 24
as described in note 25 the 1392194 redeemable preference c shares will be redeemed on 30 april 2012 at a value of £11 million in 
accordance with applicable accounting standards the liability is not included in net debt 
maturity of financial liabilities
the maturity profile of anticipated future cash flows including interest in relation to the group’s financial liabilities on an undiscounted basis and 
which therefore differs from both the carrying value and fair value is shown in the table below interest on floating rate debt is based on the 
relevant libor curve for us dollar and sterling balances and euribor curve for euro balances interest on hedging interest rate swaps is 
based on the relevant forward libor curve for us dollar amounts and euribor curve for euro amounts and is illustrated as a net cash flow
interest
bearing 
loans and 
borrowings
£m
derivative 
financial 
liabilities
£m
other 
financial 
liabilities 
£m
total financial 
liabilities
£m
within one year 387  141 2686 3214 
in one to two years 4642  16 16 4674 
effect of financing rates 166 — — 166
31 december 2011 4863  157 2702 7722 
within one year 103  83 3438 3624 
in one to two years 408  37 47 492 
in two to three years 4662  02 — 4664 
effect of financing rates 342 — — 342
31 december 2010 4831  122 3485 8438 
20 provisions
surplus 
leasehold
property costs
£m
environmental 
and 
legal costs
£m
incentive 
scheme 
related
£m
fki
captive 
insurance
£m
other
£m
total
£m
at 31 december 2010 264  577  125  110  111  1187 
disposal of businesses 21 —  —  —  15 36
utilised
1
52 160 22 110 48 392
arising in the year
2
—  210  50  —  176  436 
unwind of discount note 7 06  05  —  —  —  11 
exchange differences —  05  —  —  05 — 
at 31 december 2011 197  637  153  —  219  1206 
current 47  316  —  —  219  582 
noncurrent 150  321  153  —  —  624 
197  637  153  —  219  1206 
1 includes £376 million of provisions utilised by cash and £16 million through headline
3
 operating profit 
2 includes £351 million of provisions arising in the year through exceptional costs note 6 and £85 million of provisions arising in the year through headline
3 
operating profit
3 as defined on the income statement 95
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
20 provisions continued
the provision for surplus leasehold property costs represents the estimated net payments payable over the term of these leases together 
with any dilapidation costs this is expected to result in cash expenditure over the next one to seven years
environmental and legal costs provisions relate to the estimated remediation costs of pollution soil and groundwater contamination at 
certain sites and estimated future costs and settlements in relation to legal claims due to their nature it is not possible to predict precisely 
when these provisions will be utilised 
incentive scheme related provisions are in respect of long term incentive plans for divisional senior management expected to result in cash 
expenditure in the next three to four years
the fki captive insurance provision related to known and actuarial assessments of future claims covered by the captive including but not 
limited to public and product liability employer’s liability in the uk workers’ compensation in the us and us automotive claims following 
the sale of these liabilities within the year at 31 december 2011 the group has no further exposure to these claims 
other provisions relate primarily to costs that will be incurred in respect of restructuring programmes and warranty provisions 
where appropriate provisions have been discounted using a discount rate of 3 31 december 2010 3
21 deferred tax
the following are the major deferred tax assets and liabilities recognised by the group and movements thereon during the current and prior 
reporting period
deferred tax 
assets deferred tax liabilities
notes
tax losses and 
other assets
£m
accelerated 
capital 
allowances 
and other 
liabilities
£m
deferred tax 
on intangible 
assets
£m
total deferred 
tax liabilities
£m
total net
deferred tax
£m
at 1 january 2010 221  124 1129 1253 1032
credit to income 8 26  10  112  122  148 
creditcharge to other
 comprehensive income 81  02 —  02 79 
acquisition —  03 —  03 03
exchange differences 02  02 11 13 11
at 31 december 2010 330  121 1028 1149 819
creditcharge to income 8 21  43 139  96  117 
credit to other comprehensive income 120  15  —  15  135 
disposal of businesses 66 02  47  49  17
exchange differences 01 —  06  06  05 
at 31 december 2011 404  147 836 983 579
as at 31 december 2011 the group has gross unused losses of £2014 million 31 december 2010 £2517 million available for offset 
against future profits the group has recognised deferred tax assets in respect of certain unused losses during the year at 31 december 
2011 an £89 million deferred tax asset 31 december 2010 £nil in respect of £350 million of these gross losses remains in the balance 
sheet no asset has been recognised in respect of the remaining losses due to the divisional and geographic split of anticipated future profit 
streams the majority of these losses may be carried forward indefinitely subject to certain continuity of business requirements 
a significant part of the retirement benefit obligations recognised in the group accounts relates to the fki uk pension plan the mckechnie 
uk pension plan and the fki us pension plan a deferred tax asset of £184 million 31 december 2010 £129 million has been 
recognised on these obligations being the extent to which they are expected to generate tax deductions against foreseeable profits
as at 31 december 2011 the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which 
deferred tax liabilities have not been recognised was £34 million 31 december 2010 £45 million no liability has been recognised in 
respect of these differences because the group is in a position to control the timing of the reversal of the temporary differences and it is 
probable that such differences will not reverse in the foreseeable future melrose plc
annual report 2011 96
2101204   26032012   proof 6
notes to the financial statements continued
22 sharebased payments
melrose 2009 incentive scheme
the company has 50000 2009 incentive shares held by directors employees and the melrose employee benefit trust further details of 
the scheme are provided in the remuneration report on pages 56 to 59
the estimated fair value attributable to the 2009 incentive shares formerly the 2007 incentive shares using a black–scholes option pricing 
model at 31 december 2011 was £994 million 31 december 2010 £707 million 
the inputs into the black–scholes model that were used to fair value the scheme when it was originally established in 2007 were as follows
valuation 
assumptions
weighted average share price £167
weighted average exercise price £100
expected volatility 250
expected life as at inception 48yrs
risk free interest 20
expected dividend yield 32
expected volatility was determined by calculating the historical volatility of the company’s share price 
the group recognised an ifrs 2 charge of £18 million 2010 £18 million in relation to the melrose 2009 incentive scheme in the year 
ended 31 december 2011 
23 retirement benefit obligations
melrose holds several pension plans covering many of its employees operating in several jurisdictions
the most significant defined benefit plans are
 • the fki uk pension plan is defined benefit in type and is a funded plan where the future liabilities for members’ benefits are provided for 
by the accumulation of assets held externally to the group in separate trustee administered funds the plan is closed to new members 
and on 28 february 2011 was closed to the accrual of future benefits for existing members
 • the mckechnie uk pension plan is defined benefit in type and is a funded plan other than £35 million of unfunded liabilities where the 
future liabilities for members’ benefits are provided for by the accumulation of assets held externally to the group in separate trustee 
administered funds the plan is closed to the accrual of future benefits
 • the fki us pension plan is defined benefit in type and is a funded plan where the future liabilities for members’ benefits are provided for 
by the accumulation of assets held externally to the group in separate trustee administered funds the plan is closed to the accrual of 
future benefits
other plans include a number of funded and unfunded defined benefit arrangements across europe
further details of the status of the significant plans are disclosed in the directors’ report on page 44
upon the sale of dynacast and logistex uk £411 million of plan obligations and £305 million of plan assets were disposed
the cost of the group’s defined benefit plans is determined in accordance with ias 19 with the advice of independent professionally qualified 
actuaries on the basis of formal actuarial valuations using the projected unit credit method in line with normal practice these valuations are 
undertaken triennially in the uk and annually in the us
the valuations are based on the uk full actuarial valuations as of 31 december 2008 updated at 31 december 2011 by independent 
actuaries and us full actuarial valuations as of 31 december 2010 updated at 31 december 2011 by independent actuaries the next formal 
uk valuations as at 31 december 2011 are currently being undertaken
the group also operates unfunded retiree medical and welfare benefit plans principally in the us 
the company contributes £185 million per annum to the fki uk pension plan and £46 million per annum to the mckechnie uk pension plan 97
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
23 retirement benefit obligations continued
in addition to this there are a number of defined contribution plans across the group contributions during the year were £109 million 
2010 £144 million
actuarial assumptions
the major weighted average assumptions used by the actuaries in calculating the group’s pension plan assets and liabilities are as set out 
below
31 december 2011
fki uk 
plan
 pa
mckechnie 
uk plan 
 pa
fki us 
plan 
 pa
us retiree 
benefit plans
 pa
other plans
 pa
rate of increase in salaries na 360
1
na na na
rate of increase in pensions in payment 300 310 na na na
discount rate 490 490 430 400 460
rpi inflation assumption 310 310 275 na 250
1 closed to the accrual of future benefits but active members benefits are still linked to current salaries 
31 december 2010
fki uk 
plan
 pa
mckechnie 
uk plan 
 pa
fki us 
plan 
 pa
us retiree 
benefit plans
 pa
other plans
 pa
rate of increase in salaries 400 395 350 na 300
rate of increase in pensions in payment 330 345 na na 322
discount rate 555 555 510 510 544
rpi inflation assumption 345 345 275 na 341
mortality
fki uk pension plan 
mortality assumptions for the most significant plan in the group the fki uk plan as at 31 december 2011 are based on 90 of the ‘heavy’ 
self administered pension scheme saps tables reflecting the plan membership being largely employed in the industrial sector future 
improvements are in line with 80 60 for women of the long cohort subject to a minimum underpin of 1 pa
the assumptions are that a member currently aged 65 will live on average for a further 203 years if they are male and for a further 237 
years if they are female for a member who retires in 2036 at age 65 the assumptions are that they will live for a further 228 years after 
retirement if they are male and for a further 260 years after retirement if they are female
the mortality assumptions are in line with those adopted for the triennial valuation results as at 31 december 2008
sensitivities
sensitivities around movements in the principal assumptions of the discount rate inflation rate and mortality are discussed in the finance 
director’s review on page 28
balance sheet disclosures
the amount recognised in the balance sheet arising from net liabilities in respect of defined benefit plans is as follows
31 december
2011
£m
31 december
2010 
£m
31 december
2009
£m
31 december
2008
£m
31 december
2007
£m
plan liabilities 10767 10394 10335 9397 1484
plan assets 9590  9198  8644  8105  1232 
limit on pension plan surplus —  —  —  141 —
net liabilities 1177 1196 1691 1433 252 melrose plc
annual report 2011 98
2101204   26032012   proof 6
notes to the financial statements continued
23 retirement benefit obligations continued
the five year history of experience adjustments is as follows
31 december
2011
£m
31 december
2010 
£m
31 december
2009
£m
31 december
2008
£m
31 december
2007
£m
experience adjustments on plan liabilities 724 238 1309 707  12 
experience adjustments on plan assets 353  376  410  789 23 
the plan liabilities and assets at 31 december 2011 were split by plan as follows
fki uk 
plan
£m
mckechnie 
uk plan
£m
fki us 
plan
£m
us retiree 
benefit plans
£m
other
plans
£m
total
£m
plan liabilities 6797 1545 2287 09 129 10767
plan assets 6003  1575  1952  —  60  9590 
net liabilitiesassets 794 30  335 09 69 1177
this amount is presented in the balance sheet
31 december
2011
£m
31 december
2010 
£m
31 december
2009
£m
31 december
2008
£m
31 december
2007
£m
net liabilities
 — unfunded plans 112 210 242 452 41
 — funded plans 1065 986 1449 840 211
limit on pension plan surplus — — — 141 —
1177 1196 1691 1433 252
expected returns and fair value of assets
expected rates of return fair value of assets
31 december
2011

31 december
2010

31 december
2011
£m
31 december
2010
£m
equity instruments 70 84 3487 4111
debt instruments 38 51 5142 4305
other assets 44 34 961 782
weighted averagetotal 50 64 9590 9198
the expected return on plan assets at 31 december 2011 is based on market expectations at 1 january 2012 for returns on assets over the 
entire life of the obligation
there is no self investment other than in relevant tracker funds either in the group’s own financial instruments or property or other assets 
used by the group 99
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
23 retirement benefit obligations continued
movements in the present value of defined benefit obligations during the year
year ended 
31 december
2011
£m
year ended 
31 december
2010
£m
at beginning of year 10394  10335 
disposal of businesses 411 — 
disposal of pension plan —  183
current service cost 06  43 
interest cost 528  573 
actuarial losses 724  238 
benefits paid 477 528
plan curtailments 08 165
currency losses 11  81 
at end of year 10767  10394 
movements in the fair value of plan assets during the year
year ended 
31 december
2011
£m
year ended 
31 december
2010
£m
at beginning of year 9198  8644 
disposal of businesses 305 — 
disposal of pension plan —  223
settlement contribution on disposal —  49 
expected return on assets 523  532 
actuarial gains 353  376 
contributions 288  275 
benefits paid 477 528
currency gains 10  73 
at end of year 9590  9198 
the actual return on plan assets was a gain of £876 million 2010 gain of £908 million  melrose plc
annual report 2011
2101204   26032012   proof 6
100
notes to the financial statements continued
23 retirement benefit obligations continued
income statement disclosures
amounts recognised in the income statement in respect of these defined benefit plans are as follows
year ended 
31 december
2011
£m
restated
1
year ended 
31 december
2010
£m
continuing operations
included within headline
2
 operating profit
 — current service cost 04  39 
 — net effects of curtailments and settlements 08 34
included within net finance costs
 — interest cost 526  551 
 — expected return on assets 523 518
included within exceptional items
 — net effects of curtailments and settlements —  91
discontinued operations
included within headline
2
 operating profit
 — current service cost 02  04 
included within net finance costs
 — interest cost 02  22 
 — expected return on assets —  14
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined on the income statement 
statement of comprehensive income disclosures
the amount recognised in the statement of comprehensive income is as follows
year ended
31 december
2011
£m
year ended
31 december
2010
£m
actuarial losses on plan liabilities 724 238
actuarial gains on plan assets 353  376 
371 138 
the cumulative amount of actuarial gains and losses recognised in the statement of comprehensive income is a total loss of £1145 million 
2010 loss of £774 million 2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
101
24 financial instruments and risk management
the table below sets out the group’s accounting classification of each category of financial assets and liabilities and their fair values at  
31 december 2011 and 31 december 2010
energy
£m
lifting
£m
other
1 
industrial
£m
central
£m
discontinued
1
£m
total
£m
31 december 2011
financial assets
cash and cash equivalents —  —  —  1956  —  1956 
trade receivables 940  746  240  01  —  1927 
derivative financial assets 04  09  —  04  —  17 
financial liabilities
interestbearing loans and borrowings — — — 4863 — 4863
derivative financial liabilities 86 10 03 58 —  157
other financial liabilities 1168 837 362 335 —  2702
31 december 2010
financial assets
cash and cash equivalents —  —  —  1957  —  1957 
trade receivables 884  655  181 02  527 2249 
derivative financial assets 23  04  01 05  06  39 
financial liabilities
interestbearing loans and borrowings — — — 4828 03 4831
derivative financial liabilities 06 10 —  105 01 122
other financial liabilities 1053 798 376 408 850 3485
1 restated to include the financial assets and financial liabilities of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
credit risk
the group considers its maximum exposure to credit risk to be as follows
energy
£m
lifting
£m
other
1
 
industrial
£m
central
£m
discontinued
1
£m
total
£m
31 december 2011
financial assets
cash and cash equivalents — — — 1956 — 1956
trade receivables 940 746 240 01 — 1927
derivative financial assets 04 09 — 04 — 17
31 december 2010
financial assets
cash and cash equivalents — — — 1957 — 1957
trade receivables 884 655 181 02 527 2249
derivative financial assets 23 04 01 05 06 39
1 restated to include the financial assets of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
the group’s principal financial assets are cash and cash equivalents trade receivables and derivative financial assets which represent the 
group’s maximum exposure to credit risk in relation to financial assets
the group’s credit risk on cash and cash equivalents and derivative financial instruments is limited because the counterparties are 
banks with high creditratings assigned by international creditrating agencies the group’s credit risk is primarily attributable to its trade 
receivables the amounts presented in the balance sheet are net of allowances for doubtful receivables estimated by the group’s 
management based on prior experience and their assessment of the current economic environment note 16 provides further details 
regarding the recovery of trade receivables melrose plc
annual report 2011
2101204   26032012   proof 6
102
notes to the financial statements continued
24 financial instruments and risk management continued
capital risk
the group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to 
stakeholders through the optimisation of the group’s net debt and equity balance
the capital structure of the group consists of net debt which includes the borrowings disclosed in note 19 after deducting cash and cash 
equivalents and equity attributable to equity holders of the parent comprising issued share capital reserves and retained earnings as 
disclosed in the statement of changes in equity 
liquidity risk
the group’s policy for managing liquidity rate risk is set out in the finance director’s review
fair values
the directors consider that the financial assets and liabilities have fair values not materially different to the carrying values
foreign exchange contracts
as at 31 december 2011 the group held foreign exchange forward contracts to mitigate expected exchange fluctuations on cash flows on 
sales to customers and purchases from suppliers these instruments operate as cash flow hedges unless the amounts involved are small 
the terms of the material currency pairs with total principals in excess of sterling £1 million equivalent are as follows 
31 december
2011
selling 
currency
millions
31 december
2011
average 
hedged 
rate
31 december
2010
selling 
currency 
millions
31 december
2010
average 
hedged 
rate
sell australian dollarbuy sterling aud 43 gbpaud 160 aud 46 gbpaud 169
sell canadian dollarbuy sterling cad 43 gbpcad 160 cad 61 gbpcad 162
sell canadian dollarbuy us dollar cad 19 usdcad 099 — —
sell chinese renminbibuy us dollar cny 103 usdcny 643 — —
sell czech korunabuy euro — — czk 1600 eurczk 2489
sell eurobuy chinese renminbi eur 23 eurcny 874 — —
sell eurobuy czech koruna eur 168 eurczk 2459 eur 415 eurczk 2534
sell eurobuy sterling eur 244 gbpeur 115 eur 164 gbpeur 118
sell eurobuy us dollar eur 28 eurusd 138 eur 14 eurusd 134
sell hong kong dollarbuy sterling hkd 217 gbphkd 1211 — —
sell norwegian kronebuy euro nok 281 eurnok 786 — —
sell norwegian kronebuy sterling nok 569 gbpnok 913 nok 117 gbpnok 958
sell polish zlotybuy sterling — — pln 103 gbppln 470
sell singapore dollarbuy us dollar — — sgd 52 usdsgd 137
sell south african randbuy euro zar 347 eurzar 1051 zar 302 eurzar 978
sell south african randbuy sterling — — zar 164 gbpzar 1154
sell sterlingbuy czech koruna gbp 871 gbpczk 2855 gbp 322 gbpczk 2989
sell sterlingbuy euro gbp 355 gbpeur 115 gbp 118 gbpeur 117
sell sterling buy us dollar gbp 11 gbpusd 158 gbp 13 gbpusd 157
sell uae dirhambuy sterling — — aed 75 gbpaed 564
sell us dollarbuy canadian dollar usd 49 usdcad 099 usd 138 usdcad 104
sell us dollarbuy chinese renminbi usd 16 usdcny 643 usd 163 usdcny 656
sell us dollar buy czech koruna usd 42 usdczk 1850 usd 42 usdczk 1906
sell us dollarbuy euro usd 64 eurusd 138 usd 71 eurusd 136
sell us dollarbuy malaysian ringgit — — usd 80 usdmyr 315
sell us dollarbuy singapore dollar — — usd 140 usdsgd 135
sell us dollarbuy sterling usd 798 gbpusd 159 usd 675 gbpusd 154
the foreign exchange contracts all mature between january 2012 and august 2013
the fair value of the contracts at 31 december 2011 was a net liability of £83 million 31 december 2010 net asset of £15 million 2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
103
24 financial instruments and risk management continued
commodity swap contracts
as at 31 december 2011 the group held a number of copper swap contracts that were designated as cash flow hedges these swap 
contracts lock the group into fixed copper prices to protect against fluctuations in the market price of copper the terms of the contracts are
commodity swaps commodity total quantity maturity pricing
group pays copper 150 tonnes 04 january 2012 fixed price of us dollar 8809 per tonne
group receives copper 150 tonnes 04 january 2012 average lme price for the month
group pays copper 150 tonnes 02 february 2012 fixed price of us dollar 7698 per tonne
group receives copper 150 tonnes 02 february 2012 average lme price for the month
group pays copper 150 tonnes 02 march 2012 fixed price of us dollar 7405 per tonne
group receives copper 150 tonnes 02 march 2012 average lme price for the month
group pays copper 170 tonnes 03 april 2012 fixed price of us dollar 7395 per tonne
group receives copper 170 tonnes 03 april 2012 average lme price for the month
group pays copper 60 tonnes 02 may 2012 fixed price of us dollar 7323 per tonne
group receives copper 60 tonnes 02 may 2012 average lme price for the month
group pays copper 60 tonnes 06 june 2012 fixed price of us dollar 7327 per tonne
group receives copper 60 tonnes 06 june 2012 average lme price for the month
group pays copper 50 tonnes 03 july 2012 fixed price of us dollar 7330 per tonne
group receives copper 50 tonnes 03 july 2012 average lme price for the month
the fair value of the contracts at 31 december 2011 was £nil 31 december 2010 net asset of £02 million
hedge of net investments in foreign entities
included in interestbearing loans at 31 december 2011 were the following amounts which were designated as hedges of net investments in 
the group’s subsidiaries in europe and the usa and were being used to reduce the exposure to foreign exchange risks 
borrowings in local currency
31 december 
2011
£m
31 december
2010
£m
us dollar 3901 3885
euro 486 503
interest rate sensitivity analysis
a one percentage point rise in market interest rates for all currencies would increasedecrease profit before tax by the following amounts 
assuming the net debt as at the balance sheet date was outstanding for the whole year
year ended 
31 december 
2011
 £m
year ended 
31 december 
2010
£m
sterling 04  01
us dollar 03  — 
euro 02 02
01 03
interest rate risk management
the group’s policy for managing interest rate risk is set out in the finance director’s review
in january 2009 the group entered into a number of interest rate swaps to hedge us 5460 million of us dollar denominated bank debt 
into fixed rates of interest under the terms of these swaps the group will pay an average rate of 21 pa plus a 20 margin annually in 
arrears and receive 3 month us dollar libor plus 20 quarterly in arrears these swaps were all due to mature in january 2013  melrose plc
annual report 2011
2101204   26032012   proof 6
104
notes to the financial statements continued
24 financial instruments and risk management continued
in april 2009 the group also took out an interest rate swap to hedge €333 million of euro denominated debt into fixed rates of interest the 
swap is structured in a similar way to the us dollar interest rate swaps with the group paying 26 plus a 20 margin annually in arrears 
and receiving 3 month euribor plus 20 quarterly in arrears this swap was due to mature in april 2013 
a corresponding amount of debt drawn under the £500 million term loan is matched with these swaps
these interest rate swaps have been designated as cash flow hedges and were highly effective throughout 2011 the fair value of the 
contracts at 31 december 2011 was a net liability of £57 million 31 december 2010 net liability of £100 million
in february 2012 the group closed out the swap arrangements which were entered into in 2009 and entered into a number of new interest 
swaps to hedge us 2310 million €420 million and £1050 million denominated bank debt these swaps mature in january 2017 under 
the terms of these swaps the group will pay annually in arrears 10 for us dollar swaps 11 for euro swaps and 11 for sterling 
swaps plus a margin of 15 these interest rate swaps have been designated as cash flow hedges
foreign currency risk
the group’s policy for managing foreign currency risk is set out in the finance director’s review on pages 29 and 30 
foreign currency sensitivity analysis
currency risks are defined by ifrs 7 as the risk that the fair value or future cash flows of a financial asset or liability will fluctuate because of 
changes in foreign exchange rates
the following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at 
the balance sheet date illustrating the decreaseincrease in group operating profit caused by a 10 cent strengthening of the us dollar 
and euro against sterling and a 10 strengthening of the czech koruna against sterling compared to the year end spot rate the analysis 
assumes that all other variables in particular other foreign currency exchange rates remain constant the group operates in a range of 
different currencies and those with a material impact are noted here 
year ended
31 december 
2011
 £m
year ended
31 december 
2010
£m
us dollar 04 18
euro 05  27
czech koruna 20  07
the following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance 
sheet date illustrating the decreaseincrease in group equity caused by a 10 cent strengthening of the us dollar and euro against sterling 
and a 10 strengthening of the czech koruna against sterling the analysis assumes that all other variables in particular other foreign 
currency exchange rates remain constant the group operates in a range of different currencies and those with a material impact are noted 
here
31 december 
2011
 £m
31 december 
2010
£m
us dollar 07 16
euro 23  04 
czech koruna 01  01
in addition the change in equity due to a 10 cent strengthening of the us dollar and euro against sterling for the translation of net 
investment hedging instruments would be a decrease of £268 million 31 december 2010 £266 million and £44 million 31 december 
2010 £47 million respectively however there would be no overall effect on equity because there would be an offset in the currency 
translation of the foreign operation 105
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
24 financial instruments and risk management continued
fair value measurements recognised in the balance sheet 
foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates 
matching the maturities of the contracts
commodity swaps are measured using quoted forward commodity prices
interest rate swap contracts are measured using yield curves derived from quoted interest rates the fair value is shown below 
31 december 
2011
current
£m
31 december
2011
noncurrent
£m
31 december 
2011
total
£m
31 december 
2010
current
£m
31 december
2010
noncurrent
£m
31 december 
2010
total
£m
derivative financial assets
foreign currency forward contracts 16 — 16 37  — 37
commodity swaps 01  —  01  02   —  02 
17  —  17  39   —  39 
derivative financial liabilities
foreign currency forward contracts 87 12 99 22 — 22
commodity swaps 01 —  01 —  —  — 
interest rate swaps 53 04 57 61 39 100
141 16 157 83 39 122
the fair value of these are derived from inputs other than quoted prices that are observable for the asset or liability either directly ie as 
prices or indirectly ie derived from prices and they therefore are categorised within level 2 of the fair value hierarchy set out in ifrs 7
25 issued share capital and reserves
share capital
31 december
 2011 
£m
31 december
2010
£m
allotted calledup and fully paid 
390961043 31 december 2010 497586779 ordinary shares of 1455p each 
 31 december 2010 02p each 10 10
34331656 31 december 2010 nil c deferred shares of 750p each 257 —
50000 31 december 2010 50000 2009 incentive shares of £1 each 01 01
268 11
on 8 august 2011 at a general meeting shareholders approved resolutions to return capital of £3732 million to shareholders
the return of capital took place by increasing the authorised share capital by £3732 million through the issue of 497586779 redeemable 
preference c shares ‘c shares’ of 750p nominal value each and capitalising £2201 million of the capital redemption reserve and £1531 
million of the share premium account to pay up in full the c shares the c shares were allotted on the basis of one c share for each 
ordinary share of 02p each held on 8 august 2011 shareholders had the option to receive the cash value inherent in the c share by way 
of income or the choice of two capital options as a result of the elections made by shareholders in respect of the return of capital
 • 461862929 c shares were redeemed and subsequently cancelled with effect from 19 august 2011
 • 1392194 c shares will be redeemed on 30 april 2012
 • 34331656 c shares were paid a dividend which was paid on 19 august 2011 and these c shares converted into c deferred shares
both the remaining 1392194 c shares and the 34331656 c deferred shares carry no voting rights or rights to dividends
in conjunction with the return of capital on 9 august 2011 an 11 for 14 share consolidation took place which reduced the issued ordinary 
share capital to 390961043 shares of 1455 pence each
redemption of the c deferred shares on 30 april 2012 will result in a £257 million transfer from share capital into the capital redemption 
reserve in addition the 1392194 c shares will be redeemed and cancelled on 30 april 2012 at a value of £11 million which will also be 
transferred to the capital redemption reserve melrose plc
annual report 2011 106
2101204   26032012   proof 6
notes to the financial statements continued
25 issued capital and reserves continued
the rights of each class of share are described in the directors’ report
own shares
the trustee of the melrose plc employee benefit trust ‘ebt’ holds 500 2009 incentive shares of £1 each 31 december 2010 500 the 
melrose plc ebt also holds 19862 ordinary shares of 1455p each in melrose plc 31 december 2010 25279 ordinary shares of 02p 
each relating to unallocated shares following the crystallisation of the original incentive scheme in august 2007 the fki ebt holds 124232 
ordinary shares of 1455p each in melrose plc 31 december 2010 158114 ordinary shares of 02p each which arose upon disposal of 
its fki plc shares when fki plc was acquired by melrose plc
hedging and translation reserves
the hedging and translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign 
subsidiaries it is also used to record the foreign exchange movements of instruments designated as net investment hedges and cash flow 
hedges
hedging and translation reserves note
hedging 
reserve 
£m
translation 
reserve
£m
total
£m
at 1 january 2010 01 717  716 
currency translation on net investments —  80  80 
losses on cash flow hedges 78 —  78
taxation adjustments to equity 02 —  02
transfer to income statement on cash flow hedges 05 —  05
transfer to income statement on disposal of foreign operations —  01 01
at 31 december 2010 86 796  710 
currency translation on net investments 04  177 173
losses on cash flow hedges 01 —  01
taxation adjustments to equity 15  —  15 
transfer to income statement on cash flow hedges 51 —  51
transfer to income statement on disposal of foreign operations 9 —  526 526
at 31 december 2011 119 93  26
26 cash flow statement
year ended 
31 december
 2011
£m
restated
1
 
year ended 
31 december
2010
£m
reconciliation of operating profit to cash generated by continuing operations
headline
2
 operating profit from continuing operations 1808  1470 
adjustments for
depreciation of property plant and equipment 225  233 
amortisation of computer software 06  07 
restructuring costs paid and decrease in other provisions 322 292
operating cash flows before movements in working capital 1717  1418 
increasedecrease in inventories 204 122 
increase in receivables 169 347
increase in payables 140  282 
cash generated by operations 1484  1475 
tax paid 229 237
interest paid 260 256
defined benefit pension contributions paid 249 255
net cash from operating activities from continuing operations 746  727 
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
2 as defined on the income statement 107
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
26 cash flow statement continued
cash flow from discontinued operations
year ended 
31 december
 2011
£m
restated
1
 
year ended 
31 december
2010
£m
cash generated from discontinued operations 243  510 
tax paid 38 35
interest paid —  03
defined benefit pension contributions paid 39 20
net cash from operating activities from discontinued operations 166  452 
purchase of property plant and equipment 49 66
proceeds from disposal of property plant and equipment —  01 
interest received 05  — 
dividends paid to noncontrolling interests 02 02
net cash used in investing activities from discontinued operations 46 67
net movement in borrowing 03 05
net cash used in financing activities from discontinued operations 03 05
1 restated to include the results of dynacast brush traction logistex uk madico and weber knapp within discontinued operations
net debt reconciliation
at 
31 december 
2010
£m
cash flow
£m
disposals
£m 
other 
noncash 
movements
£m
foreign 
exchange 
difference
£m
at 
31 december 
2011
£m
cash 1957  3712 3744 —  33 1956 
debt due within one year 03 03  — 277 —  277
debt due after one year 4828 —  — 252  01  4575
net debt 2874 3709 3744 25 32 2896
27 commitments and contingencies
future total minimum rentals payable under noncancellable operating leases were as follows
31 december 
 2011
£m
31 december 
2010
£m
amounts payable
within one year 77 112
after one year but within five years 168 277
over five years 103 206
348 595
capital commitments
at 31 december 2011 there were commitments of £189 million 31 december 2010 £72 million relating to the acquisition of new plant 
and machinery melrose plc
annual report 2011 108
2101204   26032012   proof 6
notes to the financial statements continued
28 related parties
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not 
disclosed in this note
the group did not enter into any significant transactions in the ordinary course of business with joint ventures during the current or 
prior year
sales to and purchases from group companies are priced at arm’s length transactions and generally are settled on 30 day terms 
remuneration of key management personnel
the remuneration of the directors who are the key management personnel of the group is set out below in aggregate for each of the 
categories specified in ias 24 “related party disclosures” further information about the remuneration of individual directors is provided in 
the audited part of the directors’ remuneration report on page 59
year ended
31 december 
2011
£m
year ended
31 december 
2010
£m
shortterm employee benefits 30 31
sharebased payments 16 16
46 47
29 post balance sheet events
there are no post balance sheet events which require disclosure
30 contingent liabilities
two bridon companies that melrose acquired as part of the acquisition of fki plc have been sued in us federal court in houston texas 
along with their american distributor certex usa inc ‘certex’ by noble drilling services inc ‘noble’ a purchaser of wire anchor lines 
that were manufactured by bridon prior to its acquisition by melrose sold by certex and used by noble to moor certain of its mobile 
semisubmersible offshore drilling rigs in the gulf of mexico noble alleges that certain ropes were defective and broke during hurricane ike in 
2008 when they should not have noble claims approximately us 104 million in damages based upon allegations of product defect which 
the court has ruled are governed by louisiana law bridon believes noble’s damages are grossly inflated and that the purported defect with 
the product did not cause the claimed damages rather noble’s use of the product in violation of industry requirements did so bridon intends 
vigorously to defend against the claims asserted against it at trial and has robust defences to all allegations 
 
in a separate case previously consolidated with the noble action before the same court the lessee of the rigs anadarko petroleum corp 
‘anadarko’ opportunistically sued noble bridon and certex claiming that the rigs that employed these ropes were unseaworthy bridon’s 
and noble’s legal and factual analysis of anadarko’s claim was that it was meritless and this analysis was endorsed by the court when it 
ruled in summary judgment on 2 march 2012 to dismiss anadarko’s claims in full enter final judgment to that effect and administratively 
close the case     
 
discovery concluded on 15 december 2011 and the trial of noble’s claims is scheduled for later this year any appeal thereafter could itself 
be expected to take well over a year and bridon considers it already has a number of strong grounds for appeal in the event of an adverse 
ruling  
 
bridon has an insurance programme providing coverage of up to £105 million us 163 million at 31 december 2011 that may be available 
to respond should the noble claim succeed and bridon is currently in discussions with its insurers in relation to the extent of this coverage   
in recognition of the inherent risk associated with us litigation bridon has increased the legal provision to us 40 million in respect of this 
claim
 
in addition as a result of the acquisition of the mckechnie and fki businesses certain further contingent legal environmental and tax 
liabilities were identified whilst it is difficult to reasonably estimate the ultimate outcome of these claims the directors’ best estimate of the 
outcome of these claims has been included in the balance sheet
the group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of 
trading subsidiaries no losses are anticipated to arise on these contingent liabilities 109
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
auditor’s report on the  
company financial statements
independent auditor’s report to the members of melrose plc
we have audited the company financial statements of melrose 
plc for the year ended 31 december 2011 which comprise the 
balance sheet and the related notes 1 to 14 the financial reporting 
framework that has been applied in their preparation is applicable 
law and united kingdom accounting standards united kingdom 
generally accepted accounting practice
this report is made solely to the company’s members as a body in 
accordance with chapter 3 of part 16 of the companies act 2006 
our audit work has been undertaken so that we might state to the 
company’s members those matters we are required to state to 
them in an auditor’s report and for no other purpose to the fullest 
extent permitted by law we do not accept or assume responsibility 
to anyone other than the company and the company’s members 
as a body for our audit work for this report or for the opinions we 
have formed
respective responsibilities of directors and auditor
as explained more fully in the statement of directors’ 
responsibilities the directors are responsible for the preparation of 
the company financial statements and for being satisfied that they 
give a true and fair view our responsibility is to audit and express 
an opinion on the company financial statements in accordance with 
applicable law and international standards on auditing uk and 
ireland those standards require us to comply with the auditing 
practices board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate 
to the company’s circumstances and have been consistently 
applied and adequately disclosed the reasonableness of significant 
accounting estimates made by the directors and the overall 
presentation of the financial statements in addition we read all the 
financial and nonfinancial information in the annual report to identify 
material inconsistencies with the audited financial statements 
if we become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report
opinion on financial statements
in our opinion the company financial statements
•	 give a true and fair view of the state of the company’s affairs as at 
31 december 2011
•	 have been properly prepared in accordance with united kingdom 
generally accepted accounting practice and
•	 have been prepared in accordance with the requirements of the 
companies act 2006
opinion on other matters prescribed by the  
companies act 2006
in our opinion
•	 the part of the remuneration report to be audited has been 
properly prepared in accordance with the companies act 2006 
and
•	 the information given in the directors’ report for the financial year 
for which the financial statements are prepared is consistent with 
the company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters where 
the companies act 2006 requires us to report to you if in our 
opinion
•	 adequate accounting records have not been kept by the 
company or returns adequate for our audit have not been 
received from branches not visited by us or
•	 the company financial statements and the part of the 
remuneration report to be audited are not in agreement with the 
accounting records and returns or
•	 certain disclosures of directors’ remuneration specified by law are 
not made or
•	 we have not received all the information and explanations we 
require for our audit
other matter
we have reported separately on the group financial statements of 
melrose plc for the year ended 31 december 2011
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
7 march 2012 melrose plc
annual report 2011 110
2101204   26032012   proof 6
company balance sheet for melrose plc
notes
31 december 
 2011
£m
31 december 
2010
£m
fixed assets
investment in subsidiaries 3 11533  8919 
tangible fixed assets 4 –  01 
11533  8920 
current assets
debtors 6 7720  11099 
derivative financial instruments 5 04  – 
current tax assets 32  – 
cash at bank and in hand 682  – 
8438  11099 
creditors amounts falling due within one year
creditors 7 4562 1932
bank loans 8 277 –
bank overdrafts –  49
derivative financial instruments 5 54 61
4893 2042
net current assets 3545  9057 
total assets less current liabilities 15078  17977 
creditors amounts falling due after more than one year
bank loans 8 4575 4828
derivative financial instruments 5 04 39
provision for liabilities 9 153 125
net assets 10346  12985 
capital and reserves 
issued share capital 10 268  11 
share premium account 11 1260  2791 
merger reserve 11 2851  2851 
capital redemption reserve 11 3464  2201 
retained earnings 11 2561  5231 
hedging reserve 12 58 100
shareholders’ funds 13 10346  12985 
the financial statements were approved by the board of directors on 7 march 2012 and were signed on its behalf by
geoffrey martin simon peckham
group finance director  chief operating officer
registered number 4763064 111
2101204   26032012   proof 6
wwwmelroseplcnet
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governance shareholder information financials business performance
notes to the company balance sheet
1 significant accounting policies
basis of accounting 
the separate financial statements of the company are presented as required by the companies act 2006 they have been prepared 
under the historical cost convention except for the revaluation of certain financial instruments which are recognised at fair value and in 
accordance with applicable united kingdom generally accepted accounting practice ‘uk gaap’ and law
the principal accounting policies are summarised below they have all been applied consistently throughout the year and the preceding year 
going concern
the directors have at the time of approving the financial statements a reasonable expectation that the company has adequate resources to 
continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis of accounting in preparing the 
financial statements further detail is contained in the directors’ statement of going concern on page 48 of the directors’ report
investments
fixed asset investments in subsidiaries are shown at cost less provision for impairment
for investments in subsidiaries acquired for consideration including the issue of shares qualifying for merger relief cost is measured at the 
fair value of the consideration paid any premium is ignored
bank borrowings
interestbearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs finance charges including direct 
issue costs are accounted for on an accruals basis in the profit and loss account using the effective interest rate method and are added to 
the carrying amount of the investment to the extent that they are not settled in the period in which they arise
tangible fixed assets
tangible fixed assets are stated at cost less accumulated depreciation and any impairment in value the initial cost of an asset comprises 
its purchase price or construction cost and any costs directly attributable to bringing the asset into operation the purchase price or 
construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset 
depreciation of fixtures and fittings is calculated on a straightline basis over the useful economic life of the assets being three to twelve 
years the estimated useful lives are reviewed on an annual basis and if necessary changes in useful lives are accounted for prospectively
a tangible fixed asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of 
the asset any gain or loss arising on derecognition of the asset calculated as the difference between the net disposal proceeds and the 
carrying amount of the item is included in the profit and loss account in the year the item is derecognised
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in hand and current balances with banks and similar institutions and short
term deposits which are readily convertible to cash and are subject to insignificant risks of changes in value
derivative financial instruments and hedging
derivative financial instruments are initially recognised in the balance sheet at cost and subsequently remeasured to their fair value the 
method of recognising the resulting gain or loss is dependent on whether the derivative contract is designed to hedge a specific risk and 
qualifies for hedge accounting on the date a derivative contract is entered into the company designates derivatives which qualify as 
hedges for accounting purposes as either a a hedge of the fair value of a recognised asset or liability fair value hedge or b a hedge of a 
forecast transaction or firm commitment cash flow hedge or c a hedge of a net investment in a foreign operation
changes in the fair value of derivatives which are fair value hedges and that are highly effective are recognised in the profit and loss 
account along with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk changes in the 
fair value of derivatives in cash flow hedges are recognised in equity where the forecasted transaction or firm commitment results in the 
recognition of an asset or liability the gains and losses previously included in equity are included in the initial measurement of the asset or 
liability otherwise amounts recorded in equity are transferred to the profit and loss account and classified as revenue or expense in the 
same period in which the forecasted transaction affects the profit and loss account
hedges of net investments in foreign operations are accounted for similarly to cash flow hedges the company hedges certain net investments 
in foreign operations with foreign currency borrowings all foreign exchange gains or losses arising on translation are recognised in equity and 
included in cumulative translation differences and are recycled through the profit and loss account upon derecognition of the hedged item melrose plc
annual report 2011 112
2101204   26032012   proof 6
1 significant accounting policies continued
certain derivative instruments while providing effective economic hedges under the company’s policies do not qualify for hedge 
accounting changes in the fair value of any derivative instruments that do not qualify for cash flow hedge accounting are recognised 
immediately in the profit and loss account along with any ineffectiveness on cash flow and net investment hedges
sharebased payments
the company has applied the requirements of frs 20 ‘sharebased payments’ the company issues equitysettled sharebased 
payments to certain employees equitysettled sharebased payments are measured at fair value excluding the effect of nonmarket based 
vesting conditions at the date of grant the fair value determined at the grant date of the equitysettled sharebased payments is expensed 
on a straightline basis over the vesting period based on the company’s estimate of the shares that will eventually vest and adjusted for the 
effect of non marketbased vesting conditions
fair value is measured by use of the black–scholes pricing model the expected life used in the model has been adjusted based on 
management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
cash flow statement
the company has taken advantage of the exemption from preparing a cash flow statement under the terms of frs 1 revised ‘cash 
flow statements’ because it prepares a consolidated cash flow statement which is shown on page 65 of the group financial statements
taxation
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates and 
laws that have been enacted or substantively enacted by the balance sheet date
deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where 
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the 
balance sheet date timing differences are differences between the company’s taxable profits and its results as stated in the financial 
statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised 
in the financial statements
foreign currencies
monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the year end or if hedged 
at the forward contract rate transactions in foreign currencies are translated into sterling at the exchange rates ruling at the dates of the 
transactions or if hedged at the forward contract rate profits and losses on exchange arising in the normal course of trading and realised 
exchange differences arising on the conversion of foreign currency assets and liabilities are recognised within the profit and loss account 
2 profit for the year
as permitted by section 408 of the companies act 2006 the company has elected not to present its own profit and loss account for the 
year melrose plc reported a profit for the financial year ended 31 december 2011 of £1561 million 2010 £5197 million the company 
paid a dividend of £528 million 2010 £438 million during the year and in addition the shareholders authorised a return of capital of 
£3732 million of which £3721 million was paid during the year further details are provided in the directors’ report on pages 38 to 49
the company has unused tax losses of approximately £73 million 31 december 2010 £197 million available to carry forward and offset 
against future profits no deferred tax asset has been recognised in respect of these losses due to uncertainty over future taxable profits 
arising in the foreseeable future 
the estimated value of the deferred tax asset not recognised at a tax rate of 25 31 december 2010 27 is £18 million 31 december 
2010 £53 million
the auditor’s remuneration for audit services to the company is disclosed in note 7 to the group consolidated financial statements
notes to the company balance sheet continued 113
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wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
3 investment in subsidiaries
£m
at 1 january 2011 8919 
additions 3547 
disposal 933
at 31 december 2011 11533 
the increase in investments during the year occurred following subsidiary reorganisations which resulted in an increase in the investment 
in fki limited and a new investment in melrose pfg company number 1 limited dynacast holdings limited and dynacast international 
limited were both disposed by the company during the year as a result of the group’s disposal of the dynacast business and resulted in a 
profit on disposal of £294 million melrose management resources limited was liquidated during the year
the company has investments in the following subsidiaries which principally affected the profits and net assets of the group 
the following subsidiaries are directly owned by melrose plc
subsidiaries country of incorporation principal activity holding 
fki limited great britain holding company 100
melrose overseas holdings limited great britain holding company 100
melrose uk holdings limited great britain holding company 100
mckechnie holdings uk limited great britain holding company 100
eachairn aerospace holdings limited great britain holding company 100
mckechnie ep holdings limited great britain holding company 100
melrose north america inc usa holding company 100
melrose pfg company number 1 limited great britain holding company 100
other significant indirectly owned subsidiaries of the group are
subsidiaries country of incorporation principal activity equity interest 
energy
brush electrical machines limited great britain engineering company 100
brush hma bv netherlands engineering company 100
brush sem sro czech republic engineering company 100
brush transformers limited great britain engineering company 100
harrington generators international limited great britain engineering company 100
hawker siddeley switchgear limited great britain engineering company 100
marelli motori spa italy engineering company 100
generator and motor services of pennsylvania llc usa engineering company 100
lifting
bridonamerican corporation usa engineering company 100
bridon international gmbh germany engineering company 100
bridon international limited great britain engineering company 100
bridon new zealand limited new zealand engineering company 100
crosby canada inc canada engineering company 100
crosby europe nv belgium engineering company 100
the crosby group llc usa engineering company 100
other industrial
mckechnie engineered plastics limited great britain engineering company 100
mckechnie specialist products limited great britain engineering company 100
the harris waste management group inc usa engineering company 100
truth hardware corporation usa engineering company 100
group
fki engineering limited great britain holding company 100
fki industries inc usa holding company 100
mckechnie management services limited great britain management services company 100 melrose plc
annual report 2011 114
2101204   26032012   proof 6
4 tangible fixed assets
fixtures 
and fittings
£m
cost
at 1 january 2011 and 31 december 2011 07
depreciation
at 1 january 2011 06
charge for the period 01
at 31 december 2011 07
net book value
at 31 december 2011 –
at 31 december 2010 01
5 derivative financial instruments 
31 december
2011
current
£m
31 december 
2011
noncurrent
£m
31 december
2011
total
£m
31 december
2010
current
£m
31 december
2010
noncurrent
£m
31 december
2010
total
£m
derivative financial assets
foreign currency forward contracts 04 – 04 – – –
04 – 04 – – –
derivative financial liabilities
interest rate swaps 53 04 57 61 39 100
foreign currency forward contracts 01 – 01 – – –
54 04 58 61 39 100
details of the foreign currency forward contracts and the interest rate swaps are provided in note 24 to the group consolidated financial 
statements on pages 101 to 105
6 debtors 
31 december 
 2011
£m
31 december 
2010
£m
amounts falling due within one year
amounts owed by group undertakings 7713 11097
prepayments 07 02
7720 11099
the directors consider that the carrying amounts owed by group undertakings approximate to their fair value
7 creditors 
31 december 
 2011
£m
31 december 
2010
£m
amounts falling due within one year
amounts owed to group undertakings 4374 1726
accruals and other payables 177 206
redeemable preference c shares 11 –
4562 1932
the directors consider that amounts owed to group undertakings approximate to their fair value
as described in note 10 the 1392194 redeemable preference c shares will be redeemed on 30 april 2012 at a value of £11 million
notes to the company balance sheet continued 115
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
8 bank loans
interest rate 

final
maturity
31 december 
2011
£m
31 december
2010
£m
noncurrent bank loans
denominated in the following currencies
bank borrowings – us dollar loan libor  135 april 2013 3901 3885
bank borrowings – euro loan euribor  135 april 2013 486 503
bank borrowings – sterling loan libor  135 april 2013 223 500
4610 4888
unamortised finance costs 35 60
4575 4828
interest rate 

final
maturity
31 december 
2011
£m
31 december
2010
£m
current bank loans
bank borrowings – sterling loan libor  135 april 2013 277 –
during 2011 the company utilised a £750 million multicurrency committed bank facility that provided term loan and revolving credit facilities 
through to 22 april 2013 a number of group companies act as guarantors to this facility drawdowns bear interest at interbank rates of 
interest plus a margin determined by reference to the group’s performance under its debt cover covenant ratio and ranges between 125 
and 235 the margin as at 31 december 2011 was 135 31 december 2010 150
throughout the year the company remained compliant with all covenants under these facilities the term loan facility is fully drawn down 
having originally been set at £500 million in 2009 the company repaid and cancelled us 80 million of this term loan facility following the 
disposal of the logistex business 
on 22 december 2011 the company agreed a new five year banking facility on 31 january 2012 all amounts outstanding on the original 
facility were repaid using surplus cash in the group at that time and by partially utilising the new facility 
the new facility is a £600 million multicurrency committed revolving credit facility a number of group companies continue to act as 
guarantors under the new facility drawdowns bear interest at interbank rates of interest plus a margin determined by reference to the 
group’s performance under its debt cover covenant ratio and ranges between 120 and 200
the interest rate repricing profile of financial liabilities after taking into account hedging interest rate derivatives is described in note 24 of 
the group consolidated financial statements
9 provisions for liabilities 
incentive 
plan related
£m
at 1 january 2011 125
additional provision in the year 50
utilised 22
at 31 december 2011 153
the provision relates to cash long term incentive plans for divisional senior management and is expected to result in cash expenditure in the 
next three to four years melrose plc
annual report 2011 116
2101204   26032012   proof 6
10 issued share capital
share capital
31 december
 2011 
£m
31 december
2010
£m
allotted called up and fully paid 
390961043 31 december 2010 497586779 ordinary shares of 1455p each
 31 december 2010 02p each 10 10
34331656 31 december 2010 nil c deferred shares of 750p each 257 –
50000 31 december 2010 50000 2009 incentive shares of £1 each 01 01
268 11
on 8 august 2011 at a general meeting shareholders approved resolutions to return capital of £3732 million to shareholders
the return of capital took place by increasing the authorised share capital by £3732 million through the issue of 497586779 redeemable 
preference c shares ‘c shares’ of 750p nominal value each and capitalising £2201 million of the capital redemption reserve and £1531 
million of the share premium account to pay up in full the c shares the c shares were allotted on the basis of one c share for each 
ordinary share of 02p each held on 8 august 2011 shareholders had the option to receive the cash value inherent in the c share by way 
of income or the choice of two capital options as a result of the elections made by shareholders in respect of the return of capital
 • 461862929 c shares were redeemed and subsequently cancelled with effect from 19 august 2011
 • 1392194 c shares will be redeemed on 30 april 2012
 • 34331656 c shares were paid a dividend which was paid on 19 august 2011 and these c shares converted into c deferred shares
both the remaining 1392194 c shares and the 34331656 c deferred shares carry no voting rights or rights to dividends
in conjunction with the return of capital on 9 august 2011 an 11 for 14 share consolidation took place which reduced the issued ordinary 
share capital to 390961043 shares of 1455 pence each
redemption of the c deferred shares on 30 april 2012 will result in a £257 million transfer from share capital into the capital redemption 
reserve in addition the 1392194 c shares will be redeemed and cancelled on 30 april 2012 at a value of £11 million which will also be 
transferred to the capital redemption reserve
the rights of each class of share are described in the directors’ report on pages 40 to 42
own shares
the trustee of the melrose plc employee benefit trust ‘ebt’ holds 500 2009 incentive shares of £1 each 31 december 2010 500 the 
melrose plc ebt also holds 19862 ordinary shares of 1455p each in melrose plc 31 december 2010 25279 ordinary shares of 02p 
each relating to unallocated shares following the crystallisation of the original incentive scheme in august 2007 the fki ebt holds 124232 
ordinary shares of 1455p each in melrose plc 31 december 2010 158114 ordinary shares of 02p each which arose upon disposal of 
its fki plc shares when fki plc was acquired by melrose plc
notes to the company balance sheet continued 117
2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro
governance shareholder information financials business performance
11 reserves
reserves
share 
premium
account
£m
merger 
reserve
£m
capital 
redemption
reserve
£m
retained 
earnings
£m
at 1 january 2010 2791  2851 2201  454
dividend paid –  – –  438
profit for the year –  – –  5197
credit to equity for equitysettled sharebased payments –  – –  18
at 31 december 2010 2791  2851 2201  5231
issue of redeemable preference c shares 1531 – 2201 –
dividends paid –  – –  528
return of capital –  – –  3721
preference c shares redeemed –  – 3464  –
profit for the year –  – –  1561
credit to equity for equitysettled sharebased payments –  – –  18
at 31 december 2011 1260  2851 3464  2561
details of sharebased payments are given in note 22 to the group consolidated financial statements
12 hedging reserve
£m
at 1 january 2010 08
losses on cash flow hedges 108
at 31 december 2010 100
gains on cash flow hedges 42
at 31 december 2011 58
13 reconciliation of movements in shareholders’ funds
£m
at 1 january 2010 8316
dividends paid 438
profit for the year 5197
decrease in hedging reserve 108
credit to equity for equitysettled sharebased payments 18
at 31 december 2010 12985
dividends paid 528
return of capital 3721
creation of redeemable preference c shares 11
profit for the year 1561
increase in hedging reserve 42
credit to equity for equitysettled sharebased payments 18
at 31 december 2011 10346
14 related party transactions
the company has taken the exemption in frs 8 ‘related party transactions’ not to disclose intercompany balances and transactions in the 
year 118
2101204   26032012   proof 6
melrose plc
annual report 2011
this document is important and requires your 
immediate attention if you are in any doubt as to 
the action you should take you should consult 
your stockbroker bank solicitor accountant 
fund manager or other appropriate independent 
financial adviser
if you have sold or otherwise transferred all of your shares in melrose 
plc you should send this document as soon as possible to the 
purchaser or transferee or to the stockbroker bank or other agent 
through whom the sale or transfer was effected for delivery to the 
purchaser or transferee
notice is hereby given that the ninth annual general meeting of the 
company will be held at barbersurgeons’ hall monkwell square 
wood street london ec2y 5bl at 1100 am on 9 may 2012 for 
the following purposes resolutions 1 to 13 will be proposed as 
ordinary resolutions and resolutions 14 to 16 as special resolutions
ordinary resolutions
1  to receive the company’s audited financial statements for the 
financial year ended 31 december 2011 together with the 
directors’ report and the auditor’s report on those financial 
statements
2 to approve the directors’ remuneration report contained in the 
company’s annual report and financial statements for the year 
ended 31 december 2011
3  to declare a final dividend of 84p per ordinary share for the year 
ended 31 december 2011
4 to reelect mr christopher miller as a director of the company
5 to reelect mr david roper as a director of the company
6 to reelect mr simon peckham as a director of the company
7 to reelect mr geoffrey martin as a director of the company
8 to reelect mr miles templeman as a director of the company
9 to reelect mr perry crosthwaite as a director of the company
10 to reelect mr john grant as a director of the company
11 to elect mr justin dowley as a director of the company
12  to reappoint deloitte llp as auditor of the company to hold 
office from the conclusion of this meeting until the  
conclusion of the next annual general meeting of the company 
at which accounts are laid and to authorise the directors to 
determine their remuneration
13  that in substitution for all existing authorities the directors 
be generally and unconditionally authorised to exercise all the 
powers of the company to allot shares in the company and 
grant rights to subscribe for or to convert any security into 
shares in the company
a  up to an aggregate nominal amount of £331724 and
b  comprising equity securities as defined in section 5601 
of the companies act 2006 the ‘act’ up to an aggregate 
nominal amount of £663448 such amount to be reduced 
by the aggregate nominal amount of any allotments or 
grants made under paragraph a of this resolution in 
connection with an offer by way of a rights issue
i  to ordinary shareholders in proportion as nearly as may 
be practicable to their existing holdings and
ii  to holders of other equity securities as required by the 
rights of those securities or subject to such rights as 
the directors otherwise consider necessary and so that 
the directors may impose any limits or restrictions and 
make any arrangements which they consider necessary 
or appropriate to deal with treasury shares fractional 
entitlements record dates legal regulatory or practical 
problems in or under the laws of any territory or any 
other matter
 such authorities to apply until the end of the company’s next 
annual general meeting after this resolution is passed or if 
earlier until the close of business on 30 june 2013 but in each 
case so that the company may make offers and enter into 
agreements before the authority expires which would or might 
require shares to be allotted or rights to subscribe for or convert 
securities into shares to be granted after the authority expires 
and the directors may allot shares or grant rights under any 
such offer or agreement as if the authority had not expired
special resolutions
14  that in substitution for all existing powers and subject to the 
passing of resolution 13 the directors be generally empowered 
to allot equity securities as defined in the act for cash pursuant 
to the authority granted by resolution 13 andor to sell ordinary 
shares in the capital of the company held by the company as 
treasury shares for cash in each case free of the restriction in 
section 5611 of the act such power to be limited
a  to the allotment of equity securities and sale of treasury 
shares for cash in connection with an offer of equity 
securities but in the case of an allotment pursuant to the 
authority granted by paragraph b of resolution 13 such 
power shall be limited to the allotment of equity securities in 
connection with an offer by way of a rights issue only
i to ordinary shareholders in proportion as nearly as may 
be practicable to their existing holdings and
ii to holders of other equity securities as required by the 
rights of those securities or subject to such rights as 
the directors otherwise consider necessary
 and so that the directors may impose any limits or restrictions 
and make any arrangements which they consider necessary or 
appropriate to deal with treasury shares fractional entitlements 
record dates legal regulatory or practical problems in or under 
the laws of any territory or any other matter and
b to the allotment otherwise than in the circumstances set 
out in paragraph a of this resolution of equity securities 
pursuant to the authority granted by paragraph a of 
resolution 13 andor the sale of treasury shares for cash up 
to a nominal amount of £49758
 such power to apply until the end of the company’s next 
annual general meeting after this resolution is passed or if 
earlier until the close of business on 30 june 2013 but so 
that the company may make offers and enter into agreements 
before the power expires which would or might require equity 
securities to be allotted and treasury shares to be sold after the 
power expires and the directors may allot equity securities and 
sell treasury shares under any such offer or agreement as if the 
power had not expired
notice of annual general meeting 2101204   26032012   proof 6
wwwmelroseplcnet
stock code mro 119
financials governance shareholder information business performance
15  that the company be generally and unconditionally authorised 
to make one or more market purchases within the meaning of 
section 693 of the act of ordinary shares in the capital of the 
company provided that
a  the maximum aggregate number of ordinary shares 
authorised to be purchased is 39096104 representing 
10 of the issued ordinary share capital
b the minimum price which may be paid for an ordinary share 
shall not be less than the nominal value of an ordinary share 
at the time of such purchase
c the maximum price which may be paid for an ordinary share 
is not more than the higher of
i  105 per cent of the average of the middle market 
quotation for an ordinary share as derived from the 
london stock exchange plc’s daily official list for the 
five business days  immediately preceding the day on 
which the ordinary share is purchased and
ii the higher of the price of the last independent trade 
and the highest current independent bid on the trading 
venue where the purchase is carried out
 in each case exclusive of expenses
d this authority will expire at the end of the next annual 
general meeting of the company following the passing of 
this resolution or if earlier at the close of business on  
30 june 2013
e  the company may make a contract to purchase ordinary 
shares under this authority before expiry of the authority 
which will or may be executed wholly or partly after the 
expiry of that authority and may make a purchase of 
ordinary shares in pursuance of any such contract and
f  any ordinary shares purchased pursuant to this authority 
may either be held as treasury shares or cancelled by 
the company depending on which course of action is 
considered by the directors to be in the best interests of 
shareholders at the time
16  that a general meeting other than an annual general meeting 
may be called on not less than 14 clear days’ notice
by order of the board  registered office
  precision house
  arden road
  alcester
  b49 6hn
garry barnes
company secretary
7 march 2012
notes
1 the holders of ordinary shares and 2009 incentive shares in the 
company are entitled to attend the annual general meeting but 
only holders of ordinary shares are entitled to vote the holders 
of noncumulative redeemable preference shares of 75 pence 
each and c deferred shares of 75 pence each in the capital of 
the company shall not be entitled to attend speak or vote at the 
annual general meeting a member entitled to attend and vote 
may appoint a proxy to exercise all or any of their rights to attend 
speak and vote at a general meeting of the company such a 
member may appoint more than one proxy provided that each 
proxy is appointed to exercise the rights attached to different 
shares a proxy need not be a member of the company
2 a form of proxy is enclosed with this notice to be effective a 
form of proxy must be completed and returned together with 
any power of attorney or authority under which it is completed or 
a certified copy of such power or authority so that it is received 
by the company’s registrars at the address specified on the form 
of proxy not less than 48 hours excluding any part of a day that 
is not a working day before the time for holding the meeting 
returning a completed form of proxy will not preclude a member 
from attending the meeting and voting in person
3 any person to whom this notice is sent who is a person 
nominated under section 146 of the act to enjoy information 
rights a “nominated person” may under an agreement 
between him and the shareholder by whom he was nominated 
have a right to be appointed or to have someone else 
appointed as a proxy for the annual general meeting if a 
nominated person has no such proxy appointment right 
or does not wish to exercise it he may under any such 
agreement have a right to give instructions to the shareholder 
as to the exercise of voting rights the statement of the rights 
of shareholders in relation to the appointment of proxies in 
paragraphs 1 and 2 above does not apply to nominated 
persons the rights described in paragraphs 1 and 2 can only 
be exercised by ordinary shareholders of the company
4 t o be entitled to attend and vote at the annual general meeting 
and for the purposes of the determination by the company of the 
number of votes they may cast members must be entered on 
the company’ s register of members by 600 pm on 4 may 2012 
or in the event of an adjournment on the date which is two days 
before the time of the adjourned meeting changes to entries 
on the register of members after this time shall be disregarded in 
determining the rights of any person to attend or vote at the meeting
5 as at 7 march 2012 the company’s issued share capital 
consists of i 390961043 ordinary shares carrying one 
vote each and ii 50000 2009 incentive shares of £1 each 
1392194 noncumulative redeemable preference shares of 
75 pence each and 34331656 c deferred shares of 75 pence 
each in the capital of the company each of which shall not 
carry a right to vote on the resolutions to be considered at the 
annual general meeting therefore the total voting rights in the 
company as at 7 march 2012 are 390961043 120
2101204   26032012   proof 6
melrose plc
annual report 2011
6 crest members who wish to appoint a proxy or proxies through 
the crest electronic proxy appointment service may do so by 
using the procedures described in the crest manual crest 
personal members or other crest sponsored members and 
those crest members who have appointed a service providers 
should refer to their crest sponsor or voting service providers 
who will be able to take the appropriate action on their behalf
7 in order for a proxy appointment or instruction made using  
the crest service to be valid the appropriate crest message 
a ‘crest proxy instruction’ must be properly authenticated  
in accordance with euroclear uk  ireland limited’s 
specifications and must contain the information required for 
such instruction as described in the crest manual available 
via wwweuroclearcomcrest the message regardless 
of whether it constitutes the appointment of a proxy or is an 
amendment to the instruction given to a previously appointed 
proxy must in order to be valid be transmitted so as to be 
received by the issuer’s agent id ra19 by 1100 am on  
4 may 2012 for this purpose the time of receipt will be taken 
to be the time as determined by the time stamp applied to 
the message by the crest application host from which the 
issuer’s agent is able to retrieve the message by enquiry to 
crest in the manner prescribed by crest after this time any 
change of instructions to proxies appointed through crest 
should be communicated to the appointee through other 
means
8 crest members and where applicable their crest sponsors 
or voting service providers should note that euroclear uk  
ireland limited does not make available special procedures in 
crest for any particular message normal system timings and 
limitations will therefore apply in relation to the input of crest 
proxy instructions it is the responsibility of the crest member 
concerned to take or if the crest member is a crest 
personal member or sponsored member or has appointed 
a voting service provider to procure that his crest sponsor 
or voting service providers takes such action as shall be 
necessary to ensure that a message is transmitted by means 
of the crest system by any particular time in this connection 
crest members and where applicable their crest sponsors 
or voting system providers are referred in particular to those 
sections of the crest manual concerning practical limitations 
of the crest system and timings
9 the company may treat as invalid a crest proxy instruction 
in the circumstances set out in regulation 355 a of the 
uncertificated securities regulations 2001
10 any corporation which is a member can appoint one or more 
corporate representatives who may exercise on its behalf all 
of its powers as a member provided that they do not do so in 
relation to the same shares
11 under section 527 of the act members meeting the threshold 
requirements set out in that section have the right to require 
the company to publish on a website a statement setting out 
any matter relating to i the audit of the company’s accounts 
including the auditor’s report and the conduct of the audit 
that are to be laid before the annual general meeting or ii 
any circumstance connected with an auditor of the company 
ceasing to hold office since the previous meeting at which 
annual accounts and reports were laid in accordance with 
section 437 of the act the company may not require the 
shareholders requesting any such website publication to pay 
its expenses in complying with sections 527 or 528 of the 
act where the company is required to place a statement 
on a website under section 527 of the act it must forward 
the statement to the company’s auditor not later than the 
time when it makes the statement available on the website 
the business which may be dealt with at the annual general 
meeting includes any statement that the company has been 
required under section 527 of the act to publish on a website
12 any member holding ordinary shares attending the meeting 
has the right to ask questions the company must answer any 
such questions relating to the business being dealt with at the 
meeting but no such answer need be given if a to do so would 
interfere unduly with the preparation for the meeting or involve the 
disclosure of confidential information b the answer has already 
been given on a website in the form of an answer to a question 
or c it is undesirable in the interests of the company or the good 
order of the meeting that the question be answered
13 a copy of this notice and other information required by section 
311a of the act can be found at wwwmelroseplcnet
14 you may not use an electronic address provided in either this 
notice of annual general meeting or any related documents 
including the proxy form to communicate with the company 
for any purposes other than those expressly stated
15 the following documents will be available for inspection at the 
company’s registered office during normal business hours 
saturdays sundays and public holidays excepted from the 
date of this notice until the date of the annual general meeting 
and at the place of the annual general meeting for 15 minutes 
prior to and during the meeting
a copies of all service agreements under which directors 
of the company are employed by the company or any 
subsidiaries and
b  a copy of the terms of appointment of the nonexecutive 
directors of the company
16 you may register your vote online by visiting equiniti’ s website at 
wwwsharevotecouk in order to register your vote online you 
will need to enter the t ask id together with your voting id and 
shareholder reference number which are set out on the enclosed 
proxy form the return of the proxy form by post or registering 
your vote online will not prevent you from attending the annual 
general meeting and voting in person should you wish alternatively 
shareholders who have already registered with equiniti’ s online 
portfolio service shareview can appoint their proxy electronically 
by logging on to their portfolio at wwwshareviewcouk and then 
clicking on the link to vote under their melrose plc holding details 
the onscreen instructions give details on how to complete the 
appointment process a proxy appointment made electronically will 
not be valid if sent to any address other than those provided or if 
received after 1100 am on 4 may 2012
notice of annual general meeting continued 2101204   proof 6  2632012
as at 31 december 2011 there were 7995 holders of ordinary shares in the company their shareholdings are analysed as follows
size of shareholding
number of
shareholders
percentage of
total number
of shareholders
number of
ordinary shares
percentage of
ordinary shares
1–5000 7228 9041 5409514 138
5001–50000 431 539 5976211 153
50001–100000 69 086 5162503 132
100001–500000 150 188 36684756 938
over 500000 117 146 337728059 8639
total 7995 10000 390961043 10000
financial calendar 2012
exdividend date for final dividend 4 april 2012
1
record date for final dividend 10 april 2012
1
annual general meeting 9 may 2012
payment of final dividend 14 may 2012
announcement of interim results august 2012
intended payment of interim dividend november 2012
preliminary announcement of 2012 results march 2013
directors registered office legal advisers
christopher miller precision house simpson thacher  bartlett llp
david roper arden road citypoint
simon peckham alcester one ropemaker street
geoffrey martin warwickshire london
miles templeman b49 6hn ec2y 9hu
perry crosthwaite
john grant tel  44 0 1789 761020 brokers
justin dowley fax  44 0 1789 761057 investec
2 gresham street
company secretary registered number london
garry barnes 4763064 ec2v 7qp
head office bankers jp  morgan cazenove
leconfield house bank of america merrill lynch 20 moorgate
curzon street barclays bank plc london
london commerzbank ag ec2r 6da
w1j 5ja hsbc bank plc
icbc london plc
tel 44 0 20 7647 4500 jp  morgan plc registrars
fax44 0 20 7647 4501 lloyds tsb bank plc equiniti
wwwmelroseplcnet royal bank of canada aspect house
santander uk plc spencer road
auditor the royal bank of scotland plc lancing
deloitte llp wells fargo bank international west sussex
2 new street square bn99 6da
london
ec4a 3bz
shareholders can view up to date information about their shareholding by visiting the shareholders’ website at wwwshareviewcouk
the shareholder helpline number is 0871 384 2030 calls charged at 8p per minute from a bt landline other provider call costs may vary
if calling from overseas 44 0121 415 7047 lines are open 830 am to 530 pm monday to friday
1
 
on 23 march 2012 the board announced an amendment to the dividend timetable that had originally been announced on 7 march 2012 the final dividend payment  
 date of 14 may 2012 remains unchanged and it will be paid to those shareholders on the register on 10 april 2012 instead of 13 april 2012 as announced previously  
 subject to approval at the agm on 9 may 2012 this change has been made in order to prevent the new ordinary shares resulting from the proposed conversion of the  
 existing incentive shares as defined in the circular sent to shareholders on 23 march 2012 qualifying for the proposed final dividend payment
company and shareholder information
wwwmelroseplcnet
stock code mro 121
financials governance shareholder information business performance 2101205   03042012 proof 6
iwe the undersigned being a shareholder of melrose plc hereby appoint the chairman of the meeting or
as myour proxy to vote for meus at the annual general meeting of the company on 9 may 2012 at 
barbersurgeons’ hall monkwell square wood street london ec2y 5bl at 1100am and at any 
adjournment thereof
please tick here if this proxy appointment is one of multiple appointments being made   
note 3
please indicate your vote by marking the appropriate boxes in black ink  
x
ordinary resolutions  for against  withheld 
    note 6
1  to receive the annual report and financial statements for the  
year ended 31 december 2011    
2 to approve the 2011 directors’ remuneration report    
3 to declare a final dividend of 84p per ordinary share    
4 to reelect mr christopher miller as a director    
5 to reelect mr david roper as a director    
6 to reelect mr simon peckham as a director    
7 to reelect mr geoffrey martin as a director    
8 to reelect mr miles templeman as a director    
9 to reelect mr perry crosthwaite as a director    
10 to reelect mr john grant as a director    
11 to elect mr justin dowley as a director    
12 to reappoint deloitte llp as auditor and to authorise the directors 
 to set the auditor’s remuneration    
13 to renew the authority given to directors to allot shares    
special resolutions
14 to give the directors authority to allot equity securities without 
 application of preemption rights    
15 to authorise market purchases of shares    
16 to approve the calling of a general meeting other than an  
 annual general meeting on not less than 14 clear days’ notice   
 
signature      date 
this card should not be used for any comments change of address or other queries please send separate instructions
melrose plc
form of proxy
voting id task id shareholder reference number




note 1 note 2
melrose plc
attendance card
the annual general meeting will be held at barbersurgeons’ hall monkwell square
wood street london ec2y 5bl on wednesday 9 may 2012 at 1100am
shareholder reference number
if you come to the meeting please bring this card with you
it is evidence of your right to attend and vote at the meeting
and will help you gain admission as quickly as possible
a map of the venue is shown overleaf
notes
1 a member entitled to attend and vote at the meeting may appoint a proxy 
to exercise all or any of its rights to attend speak and vote at the meeting 
a member may appoint more than one proxy provided that each proxy is 
appointed to exercise the rights attached to different shares a proxy need not 
be a member of the company
2 if the proxy is being appointed in relation to less than your full voting entitlement 
please enter the number of shares in relation to which they are authorised to act 
as your proxy if left blank your proxy will be deemed to be authorised in respect 
of your full voting entitlement
3 to appoint more than one proxy you may photocopy this form please indicate in 
the box next to the proxy holder’s name the number of shares in relation to which 
they are authorised to act as your proxy and tick the box to indicate if the proxy 
instruction is one of multiple instructions being given all forms should be signed 
and returned together in the same envelope
4 to be valid your signed and dated proxy forms must be completed and 
deposited together with any power of attorney or authority under which it 
is signed or a certified copy of such power or authority at the offices of the 
company’s registrars equiniti aspect house spencer road lancing west 
sussex bn99 6da as soon as possible and no later than 1100am on 4 may 
2012 in the case of a corporation the proxy forms should be executed under 
its common seal andor the hand of a duly authorised officer or person
5 if you wish you may register the appointment of a proxy for this meeting 
electronically by contacting the website wwwsharevotecouk and following the 
onscreen instructions you will need your voting id task id and shareholder 
reference number shown on this form of proxy crest members may appoint a 
proxy or proxies electronically via equiniti id ra19 not later than 1100am on 4 
may 2012
6 the “withheld” box is provided to enable you to abstain on any particular 
resolution however it should be noted that a “vote withheld” is not a vote in law 
and will not be counted in the calculation of the proportion of votes “for” and 
“against” a resolution but will be counted to establish if a quorum is present
7 only those members registered in the register of members of the company at 
600pm on 4 may 2012 shall be entitled to attend and vote at the meeting in 
respect of the number of shares registered in their name at that time changes 
to the entries on the register of members after 600pm on 4 may 2012 shall 
be disregarded in determining the rights of any person to attend or vote at the 
meeting
8 in the case of joint registered holders the signature of one holder on a proxy 
card will be accepted and the vote of the senior holder who tenders a vote 
whether in person or by proxy shall be accepted to the exclusion of the votes 
of the other joint holders for this purpose seniority shall be determined by the 
order in which the names appear on the register of members of the company in 
respect of the relevant joint holding
9 returning this form of proxy will not prevent a registered member from attending 
the meeting and voting in person 
if you will not be attending the annual general meeting please complete detach and return this proxy form alternatively 
you can submit your proxy form electronically at wwwsharevotecouk see notes opposite using the above numbers
3079–025–s
2101205melroseindd   1 03042012   141203 2101205   03042012 proof 6
location of the annual general meeting 
barbersurgeons’ hall
monkwell square
wood street
london
ec2y 5bl
2101205melroseindd   2 03042012   141204 2101204   proof 6  2632012 2101204   proof 6  2632012
melrose plc
precision house
arden road
alcester
warwickshire
b49 6hn
telephone  44 0 1789 761020
facsimile  44 0 1789 761057
wwwmelroseplcnet
stock code mro
melrose plc  annual report 2011


Summary:
 melrose plc
annual report 2011 10
2101204   26032012   proof 6
’09 ’10 ’11
 
10
163p
241p
288p
288p
up 20 
’09 ’10 ’11
 
10
77p
110p
130p
130p
up 18 
chairman’s statement
i am pleased to report melrose’s ninth set of annual results 
since flotation in 2003 in this time melrose has raised £785 
million in capital for acquisitions and has returned £771 million in 
capital returns and dividends giving a current net investment by 
shareholders of £14 million after payment of the final dividend 
proposed below melrose will have repaid all equity raised 
at the current share price our market capitalisation means 
that approximately £15 billion of value has been created for 
shareholders since 2003 
results for the group
these accounts report the results for the group for the year to  
31 december 2011 and comparatives for the previous year
revenue from continuing businesses for the year was £11539 
million 2010 £10354 million and headline profit before tax 
before exceptional costs exceptional income and intangible asset 
amortisation was £1612 million 2010 £1217 million headline 
diluted earnings per share ‘eps’ on continuing and discontinued 
businesses were 288p 2010 241p diluted eps on continuing 
and discontinued businesses were 590p 2010 270p 
further details of these results are contained in the finance 
director’s review
dividends
the board intends to pay a final dividend of 84p per share 2010 
70p on 14 may 2012 to those shareholders on the register at  
13 april 2012 subject to approval at the agm on 9 may 2012 this 
gives a total for the year of 130p per share 2010 110p which 
represents an 18 increase
we continue to pursue a progressive policy even in years such as 
this where a capital return has been made
“at the current share price our market 
capitalisation means that approximately 
£15 billion of value has been created for 
shareholders since 2003”
dividend per share
2
headline
1
 diluted earnings per share
1  before exceptional costs exceptional income and intangible asset amortisation
2 excludes special dividends wwwmelroseplcnet
stock code mro 11
business performance governance financials shareholder information
2101204   26032012   proof 6
trading
2011 saw an excellent performance from our businesses headline 
operating profit was up 23 on sales up 11 reflecting another 
year of increased headline operating margins which are now at 
157 we believe there is more to come from these businesses 
both in profits and margins and in this context the most 
encouraging sign was the increase in order intake throughout the 
year with the fourth quarter being the strongest
we have now fully entered the investment phase with increased 
capital expenditure across all of our businesses nevertheless 
net debt has remained at £290 million which means that this 
investment has been funded out of operational cash generation 
we continued to maintain strict controls on working capital and we 
expect this excellent cash generation to continue
further details on trading are included in the chief executive’s 
review
board changes
we have announced today a forthcoming change of roles within 
the melrose board simon peckham currently our chief operating 
officer will take over as chief executive from the next annual 
general meeting david roper whom he succeeds will become 
executive vicechairman as a founder director david has been a 
highly important and fundamental part of melrose and its success 
since inception in 2003 equally simon also a founder director 
has made a huge contribution to our progress and has fully earned 
this appointment on behalf of shareholders i would like to thank 
them both for their efforts past and future this is part of a planned 
management succession programme and all your executive 
directors remain fully committed and are looking forward to 
continuing melrose’s development and success 
we were delighted to welcome justin dowley to our board as a non
executive director last september he has had a distinguished career 
in the city and we look forward to his contribution to melrose
strategy and outlook
the sale of dynacast in july 2011 for an enterprise value of 
£377 million and the subsequent return of these proceeds to 
shareholders was a further demonstration of our strategy the first 
and most important part of our strategy of ‘buy improve sell’ is of 
course making good acquisitions we continue to look for suitable 
opportunities but it should go without saying we will be extremely 
careful in the application of our criteria which include price we are 
optimistic that we will identify something which will add further to 
the excellent growth of the group
at the interim stage we highlighted the strong end markets which 
most of our businesses serve and the expected return in due 
course on our increased investment programmes since then 
order books have continued to improve and we feel we are seeing 
early signs of recovery in the usa our businesses in the rest of 
the world continue to perform well while we are naturally cautious 
about economies in continental europe we are encouraged by 
current trading and the outlook for 2012
christopher miller
executive chairman
7 march 2012
“2011 saw an excellent performance from our businesses headline 
operating profit was up 23 on sales up 11 reflecting another year of 
increased headline operating margins which are now at 157 we believe 
there is more to come from these businesses both in profits and margins”
pictured 
bridon supplied 16 spiral strand ‘stay cables’ with ‘stylite sockets’ for the 
media city footbridge salford quays salford uk which spans 100 metres 
across the manchester ship canal