melrose
buy
improve
sell
melrose industries plc  annual report 2013
 melrose industries plc
annual report  
for the year ended 31 december 2013
melrose industries plc
11th floor
colmore plaza
20 colmore circus queensway
birmingham
west midlands b4 6at
telephone 44 0 121 296 2800
facsimile 44 0 121 296 2839
wwwmelroseplcnet
stock code mro melrose 
industries plc
measuring success
during the 10 year period since first listing  
melrose has grown its market capitalisation from 
£13 million to £39 billion and has created £3 billion  
of shareholder value the average annual return  
on investment during this period is 27
business strategy
melrose buys good manufacturing businesses  
with strong fundamentals whose performance  
can be improved melrose finances its acquisitions  
using a low level of leverage improves the  
businesses by a mixture of investment and  
changed management focus sells them  
and returns the proceeds to shareholders
download the latest annual report at 
wwwmelroseplcnetinvestorsreports
read more about how  
melrose measures success
read more about the 
melrose business strategy
 october 2003 to 31 december 2013
 since the first acquisition in 2005
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p32
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telephone 020 7403 4099 wwwsampsonmaycom contents
market overview 
melrose business strategies 
reflect an indepth knowledge 
and understanding of its markets 
and of the current and emerging 
trends and regulations
strategy in action
proven ‘buyimprovesell’ 
track record
review of operations
the group is made up of five 
distinct operating segments
elster gas elster electricity 
elster water energy and lifting
board of directors
the board has ultimate 
responsibility for the overall 
leadership of the company
financials
audited financial statements of 
melrose industries plc for the 
year ended 31 december 2013
governance overview
the board remains committed 
to maintaining high corporate 
governance standards
strategic report
highlights 02
melrose at a glance 04
market overview 06
chairman’s statement 10
chief executive’s review 12
business strategy 14
strategy in action 16
elster gas business review 22
elster electricity business review 24
elster water business review 26
energy business review 28
lifting business review 30
key performance indicators 32
risk management 34
risks and uncertainties 36
finance director’s review 40
corporate social responsibility 48
governance
overview 54
board of directors 56
directors’ report 58
corporate governance report 62
audit committee report 66
nomination committee report 69
directors’ remuneration report 70
statement of directors’ responsibilities 85
financials
contents 86
independent auditor’s report to the members 
of melrose industries plc 87
consolidated income statement 92
consolidated statement of  
comprehensive income 93
consolidated statement of cash flows 94
consolidated balance sheet 95
consolidated statement of changes in equity 96
notes to the financial statements  97
company balance sheet for  
melrose industries plc  141
notes to the company balance sheet  142
shareholder information
notice of annual general meeting  146
company and shareholder information  152
cautionary statement
the strategic report has been prepared solely to provide additional information to shareholders to assess 
the company’s strategies and the potential for those strategies to succeed
the strategic report contains certain forwardlooking statements these statements are made by the 
directors in good faith based on the information available to them up to the time of their approval of this 
report and such statements should be treated with caution due to the inherent uncertainties including both 
economic and business risk factors underlying any such forwardlooking information
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01
 melrose industries plc
annual report 2013
strategic report governance financials shareholder information transformational growth
10 year timeline
melrose is led by a management team which has a strong track record in  
the successful implementation of a disciplined strategy which has seen 
the company grow its market capitalisation from £13 million to approximately 
£39 billion since listing on the london stock exchange in 2003
melrose success story
highlights
operational
2005
2007
2008
2009
may
acquired mckechnie and 
dynacast for £429 million from 
private equity group cinven 
raised £230 million in equity
december 2005
listed on london’s main 
exchange entered the 
ftse 250
may
sold the mckechnie 
aerospace business for 
£428 million and the psm 
business for £30 million 
doubling the shareholder 
value in 18 months
august
shareholders received a 
capital return of £220 million
october 2003
listed on aim – 
£13 million
july
completed the acquisition 
of fki plc for a total 
consideration including  
debt of just under £1 billion
june
sold logistex 
excluding uk for 
£50 million
£13m
during 2013 melrose sold five  
of its businesses – crosby  
acco marelli truth and harris –  
for a combined price of 
approximately £950 million
in accordance with the melrose  
strategy a return of capital was made  
to shareholders in february 2014 to  
the value of approximately £600 million
elster
within all elster divisions operating profit 
improved significantly in 2013 as a result  
of strategic actions identified by melrose  
on acquisition in august 2012
gas – good progress has been made in rationalising the 
european manufacturing footprint with production of a 
number of products previously manufactured in western 
europe transferred to the newly extended plant in slovakia
electricity – production and assembly for north america 
moved to mexico during 2013
water – successful in reducing its overhead cost base  
through restructuring which significantly contributed to  
the operating profit improvement during 2013
2003
china
£30 million investment is being  
made in china to build a new  
manufacturing facility for brush  
which is scheduled to be  
operational during 2015
02
 melrose industries plc 
annual report 2013
strategic report financial
1
headline
2
 operating profit
£2749m
2012
2013
£2285m
3
£2749m
headline
2
 diluted earnings per share
128p
2012
2013
94p
3
128p
revenue
£17328m
2012
2013
£17919m
3
£17328m
1 continuing operations only unless otherwise stated
2 before exceptional costs exceptional income and intangible asset amortisation as explained in the  
finance director’s review
3 assuming a full year’s ownership of elster in 2012 as explained in the finance director’s review
4 headline
2
 operating profit before depreciation and amortisation 
5 restated to include the effects of the 2 for 1 rights issue that concluded in august 2012 resulting in the  
issue of 844418024 new ordinary shares in the capital of melrose plc raising approximately £12 billion  
in relation to the purchase of elster
2011
2012
february
sold brush traction logistex uk and  
madico for £18 million
july
sold dynacast for £367 million generating  
4x original equity investment nearly  
£1 billion in cash generated from mckechnie 
and dynacast acquisition
august
gave back £373 million to shareholders  
which returned virtually all of the previous  
equity raised from shareholders
june
disposal of mpc for £307 million the final  
piece of the mckechnie and dynacast 
businesses generating a return on initial  
equity of approximately 325x
august
completed the acquisition of elster group se 
for £18 billion fully underwritten £12 billion 
rights issue and new £15 billion five year  
bank facility
july
disposal of truth hardware for us 200 million
august
disposal of marelli motori for €212 million which 
in combination with the truth disposal generated  
four x the original equity investment
november
sold crosby and acco for us 101 billion equal 
to a return on the original equity of over three x
december
sale of harris
£39bn
market cap as at  
31 december 2013
proforma
3
 headline
2
 results
• revenue of £17328 million 2012 £17919 million down 3 
• operating profit of £2749 million 2012 £2285 million up 20 
• elster operating profit up 37 
• elster operating margin of 174 2012 124 up 50 percentage points
• diluted earnings per share of 128p 2012 94p up 36
results after exceptional items and intangible asset amortisation 
• profit after tax of £1219 million 2012 loss of £69 million
• diluted earnings per share of 93p 2012 loss of 09p
net debt of £1408 million 31 december 2012 £9977 million net debt 
equal to 04x ebitda
4
 31 december 2012 26x adjusting for the return  
of capital proforma net debt would have been £7361 million 23x ebitda
4

completion of the disposal of five of the businesses acquired with fki  
for gross proceeds of £950 million which more than tripled their value 
since 2008 for shareholders in the five years of ownership
shareholder payments
•  return of capital of approximately £600 million 470p per share 
on 28 february 2014 alongside an 11 for 13 share consolidation
•  final proposed dividend of 50p per share 2012 50p full year 
dividend increased by 2 to 775p per share 2012 76p
following the return of capital the net shareholder investment in  
melrose is £05 billion which has successfully grown into the current 
market capitalisation of £35 billion
2013
03
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information melrose  
at a glance
melrose aims to create significant gains by 
increasing the value of the businesses currently 
owned through substantial investment and  
by seeking to make suitable acquisitions which  
have attractive potential rewards
the melrose group is split into five segments  
elster gas elster electricity elster water energy  
and lifting the other industrial division is now  
included in discontinued operations following the  
sale of truth and harris during 2013
international 
operations
melrose operates internationally it has 
manufacturing facilities located throughout 
the world predominantly in europe and 
north america but also has a growing 
presence in south america and the 
far east together with smaller scale 
operations in south africa and australasia
2013 group revenue 
1
2
3
4
5
1 elster gas £6889m
2 elster electricity £2475m
3 elster water £1799m
4 energy £3501m 
5 lifting £2664m
1 restated to include  
the results of truth 
marelli crosby acco  
and harris within 
discontinued operations
2 relates to elster for  
the four month period 
from acquisition to 
31 december 2012
1 2
3
4
£6889m
revenue by geographical 
destination
year ended 31 december 2013
elster  
gas
1
2
3
4
£2475m
revenue by geographical 
destination
year ended 31 december 2013
2013
2011
2012
na
£2475m
£1068m
2
revenue
elster gas meters systems heat  
process units and technologies are 
deployed all over the world for over  
175 years elster gas has engineered  
the vital connections between  
integral infrastructure technology  
and communities with bestinclass  
products and solutions for measurement 
regulation and the safe control and 
application of gases
elster electricity meters communications 
and energy management platforms are 
engineered for residential commercial 
and industrial and interchange metering 
applications elster electricity meets the 
expanding needs of utilities by providing 
advanced metering products and  
services worldwide
2013
2011
2012
na
£6889m
£2369m
2
revenue
1 europe 55
2 north america 29
3 asia 12
4 row 4
1 europe 28
2 north america 46
3 asia 8
4 row 18
elster  
electricity
04
 melrose industries plc 
annual report 2013
strategic report key 
  manufacturing locations 
around the world
location of the new £30 million 
brush manufacturing facility  
which is based near shanghai 
china scheduled to be  
operational during 2015
1
3
2
4
£1799m £3501m £2664m
revenue by geographical 
destination
year ended 31 december 2013
revenue by geographical 
destination
year ended 31 december 2013
revenue by geographical 
destination
year ended 31 december 2013
2013
2011
2012
na
£1799m
£674m
2
revenue revenue revenue
2013
2011
2012
£3535m
1
£3501m
£3716m
1
1
2
3
4
2013
2011
2012
£2587m
1
£2664m
£2684m
1
1
2
3
4
elster water engineers awardwinning 
metering and communication systems 
for water utilities and industries to 
meet the demands of an expanding 
and increasingly connected global 
community elster provides the 
technology and products to manage 
preserve and deliver this valuable 
resource around the world in a cost
effective way
world number one independent 
supplier of turbogenerators and leading 
supplier of other electricity generating 
machinery switchgear transformers 
and power infrastructure equipment 
for the power generation industrial 
oil  gas and offshore sectors strong 
aftermarket service and product 
support capabilities 
global technology leading supplier  
for wire rope key product lines  
include wire rope and strand fibre  
rope and wire specialist installations 
and inspection services supplying 
global customers in the oil  gas 
mining industrial marine and 
infrastructure sectors
1 europe 43
2 north america 15
3 asia 9
4 row 33
1 europe 49
2 north america 35
3 asia 9
4 row 7
1 europe 33
2 north america 30
3 asia 19
4 row 18
elster  
water
energy lifting
05
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information market  
overview
businesses within the melrose group operate in diverse markets around 
the world in this section current market trends and external factors 
affecting the growth of each melrose business are considered together 
with individual business responses to these trends and factors 
elster gas
elster gas is a world leader in the 
design and manufacture of gas 
measurement process heat control 
and gas safety control equipment 
supplying a global customer base  
in more than 110 countries it has  
one of the most extensively installed 
utility measurement bases in the world 
with more than 75 million gas metering 
devices deployed in the last 10 years 
alone its complete range of endto
end solutions enables customers to 
efficiently manage and control natural 
gas resources
current market trends
global energy consumption is continuing 
to increase natural gas is increasing its 
share whilst reliance on coal and oil is 
diminishing new gas resources such 
as shale gas in the us are also helping 
to change the energy mix
while environmental concerns are 
driving european union “eu” targets 
on energy consumption the global 
economic situation is in certain areas 
increasing competition
the increasing global gas consumption 
and the growing demand for unconventional 
gas sources such as shale and biogas 
are driving an increase in infrastructure 
projects including liquefied natural 
gas terminals 
external factors competition 
and regulation
the eu directive to replace the majority of 
existing meters with smart meters by the 
end of the decade has been implemented 
in different ways across the eu the 
uk italy france and the netherlands 
are leading the roll out the precise 
timing of the roll out is still uncertain 
the market is also governed by both 
national and international metrology and 
safety standards
international legislation is aimed at driving 
down emission levels and increasing 
efficiency the ongoing global trend to 
harmonise all regional standards to one 
global iso standard is putting pressure on 
china to meet this global standard china 
accounts for almost 50 of global steel 
production and steel applications are the 
most important drivers for growth within 
the process heat market 
business response
in response to the growth in gas 
infrastructure elster is supplying the  
full scope of energy measurement 
solutions worldwide with a strong 
focus on asia the middle east and 
the us the international nature of 
the larger infrastructure projects is 
matched by elster’s international 
presence and wide project experience
elster has developed a range of  
customer and marketspecific integrated 
technology solutions covering residential 
commercial and industrial applications 
elster is actively involved in major pilot 
projects in preparation for the large scale 
implementation of smart meters and is 
working in close partnership with key 
customers and technology providers in  
a number of countries 
specific solutions for process heat and 
heating applications are being developed 
by elster a dedicated elster gas service 
team is available around the world to 
support customers during the planning 
and startup process sales and 
application skills of the engineering team 
are key factors in continuing to deliver 
high quality products and solutions 
with “added value thinking” this is an 
important market differentiator for the  
gas utilisation business
“ increasing global gas 
consumption and the 
growing demand for 
unconventional gas sources 
are driving an increase in 
infrastructure projects”
06
 melrose industries plc 
annual report 2013
strategic report elster electricity elster water
elster electricity is one of the  
largest international smart metering 
solutions providers for residential 
commercial industrial transmission 
and distribution markets
current market trends
elster electricity’s primary markets are the 
eu us the middle east and africa the eu 
which is its largest market has experienced 
significant growth during the last year  
and following calls for a european wide  
roll out of smart meter solutions by 2022 
significant growth is expected during the 
coming years a regulatory framework is 
now in place in parts of the middle east to 
upgrade the metering infrastructure which 
is expected to result in substantial growth 
over the coming years
external factors competition 
and regulation
the global market will continue to see a shift 
from “traditional” metering to smart meter 
solutions whilst the north america market is 
expected to remain constant at existing sales 
volumes other markets are expected to see 
growth in europe further pilot projects are 
planned which will lead to significant tender 
activities from 2015 onwards
business response
new products and technologies have 
been developed and successfully launched 
during 2014 further investment will be 
made in meter data collection solutions 
and in partnerships with smart grid 
application providers
“ the global market  
will continue to see a  
shift from ‘traditional’ 
electricity metering to 
smart meter solutions”
elster water is a leading supplier  
of water meters recognised globally 
with sales revenue derived from  
more than 90 countries 
current market trends
there is an increase in the adoption of 
communicating meters for smart metering 
projects particularly in europe the middle 
east and north america this trend is 
also pushing growth in electronic meters 
equipped with standard communication 
interfaces this technology allows extended 
meter life in harsh water quality conditions 
for example in the middle east elsewhere 
legislation on water quality is driving lead
free materials resulting in an increase in 
sales of polymerbodied water meters in 
emerging as well as established markets
external factors competition  
and regulation
the global water industry continues to 
seek innovative metering solutions to 
support the objectives of water providers 
including water conservation customer 
service and resource efficiency the 
competitive environment is comprised of 
a few large suppliers based in europe and 
north america together with many regional 
companies regulations are both regional 
and national however most markets adopt 
international standards
business response
there is a continued focus on the delivery 
of innovative value added products in 
market segments that are responsive to 
higher performing metering products 
recent innovations by the business 
include an award winning polymerbodied 
residential meter
elster water continues to work with key 
water industry partners in several regions  
to address local requirements strong 
customer relationships in major markets 
will ensure that water business can 
develop meter products and solutions 
tailored to customer needs over the 
medium term further growth is expected  
in strategic products including polymer 
meters smart meters and electronic meters
“ smart meter technology 
allows extended meter 
life in harsh water quality 
conditions for example 
in the middle east”
07
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information market overview 
continued
brush is the world’s number one 
independent supplier of turbogenerators 
and a leading supplier of other 
electricity generating machinery 
switchgear transformers and power 
infrastructure equipment with strong 
aftermarket service and product 
support capabilities
current market trends
there is a continuing trend towards 
power generation through aero derivative 
gas turbine packages gas is cleaner than 
coal fired generation and is an attractive 
alternative with a lower infrastructure 
cost and increasing availability of relatively 
low cost shale gas emissions regulations 
and increasing concerns about the 
economics of renewals and safety of 
nuclear power means that gas will be 
preferred for the replacement of existing 
coal fired power generation
 
power infrastructure particularly in 
the mature economies is ageing which 
is increasing demand for both new 
equipment and aftermarket services as 
plant comes to the end of its useful life 
although the mediumterm outlook 
particularly for the aero derivative gas 
turbine sector is encouraging in the short 
term the utility oil  gas and industrial 
market sectors have suffered from 
investment stagnation as a result of the 
global financial crisis this has resulted 
in many projects being delayed due to 
an inability to complete financing 
external factors competition  
and regulation
the brush businesses have strong  
uk revenue streams which are  
regulated by ofgem office of gas  
and electricity markets 
national content rules have also made 
direct access to the brazilian oil  gas 
market difficult for nonindigenous 
manufacturers
business response
in 2014 brush will begin delivering 
turbogenerators to chinese customers 
from its european factories these 
deliveries are expected to increase  
in 2015
in addition continued activity in the 
middle east power market is expected  
to increase demand for brush’s large 
aircooled generators in 2015
energy
“ there is a continuing trend 
towards power generation 
through aero derivative gas 
turbine packages” 
“ gas is cleaner than coal 
fired generation and is  
an attractive alternative 
with a lower infrastructure 
cost and increasing 
availability of relatively  
low cost shale gas”
08
 melrose industries plc 
annual report 2013
strategic report 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
current market trends
within the oil  gas sector rope demand  
is likely to remain strong in the short to 
medium term in the offshore sector with 
an increasing emphasis on the extraction 
of deep water reserves to meet growing 
global demand for oil activity in the 
exploration construction production  
and decommissioning segments is 
forecast to increase in target territories 
such as brazil west africa australia  
and the gulf of mexico 
the global mining sector weakened 
significantly in 2013 owing to falling 
commodity prices slowing demand in 
china and a consequent restriction in 
capital and operating expenditure by the 
global mining companies this impacted 
both new equipment orders and 
maintenance expenditure 
demand for ropes within the industrial 
sector improved in 2013 and is likely to 
continue as global economic growth 
increases the commercial construction 
market has improved in north america and 
the middle east and there are tentative signs 
of recovery in other developed economies 
the chinese domestic market has been 
subdued although it will remain a significant 
driver of demand owing to its size in the 
medium term global trade and the growing 
demand for energy and infrastructure are 
likely to drive crane activity and therefore 
demand for industrial ropes 
demand for minerals appears to have 
stabilised although new supply sources 
lead to uncertainty regarding the trends 
for commodity prices the global mining 
companies remain largely positive on 
growth for 2014 however this is based 
principally on the ability of miners to cut 
costs and drive productivity rather than 
as a result of any immediate increase in 
demand marginal projects are unlikely  
to be pursued but essential maintenance 
will still have to be carried out increased 
forecasts for coal consumption in china 
india and other developing countries are 
driven by urbanisation and higher 
energy demand 
as mines begin to undertake essential 
maintenance work and more mines  
are brought under the authority of  
the chinese government regulator  
businesses will seek suppliers who  
deliver value reduced demand has  
led to intense price competition
external factors competition  
and regulation
the offshore oil  gas industry is heavily 
regulated by organisations such as 
the america petroleum institute 
lloyd’s of london and various industry 
and government bodies 
competition is increasing in the 
industrial sector particularly from asian 
manufacturers in the bulkcommodity end 
of the market although the need for high 
capacity crawler port and marine cranes 
requires high performance solutions 
business response
the bridon technology centre has 
enhanced the technological capabilities  
of the business this combined with  
the new factory at neptune quay uk 
provides a strong foundation to solve the 
challenges of deeper water operations 
and changing regulations the fasttrack 
development of differentiated marketled 
technology solutions will deliver growth 
within the offshore construction market
within the mining sector bridon’s  
high performance ropes coupled with 
their technical applications support 
enable mines to operate more safely  
and consistently in order to achieve 
productivity gains
within the industrial sector bridon  
will launch next generation products  
this year and it continues to work on  
new developments to help extend the 
service life of cranes
lifting
“ rope demand in the oil  gas sector is likely to  
remain strong in the offshore sector with an increasing 
emphasis on the extraction of deep water reserves to 
meet growing global demand for oil”
09
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information chairman’s 
statement
i am pleased to report our 11th set of 
annual results since flotation in 2003
2013 has been an extremely busy year 
for your company it has seen the 
successful integration of elster acquired 
in 2012 as well as the disposal of five 
businesses from our fki acquisition in 
2008 truth marelli crosby acco and 
harris were sold during the year for a total 
of £950 million representing a more than 
tripling of their value for shareholders 
during the five years of melrose ownership 
associated with these sales and in  
line with our proven strategy a return 
of capital of approximately £600 million 
was announced on 21 january 2014 and 
was paid on 28 february 2014 two large 
businesses from the fki acquisition  
brush and bridon still remain in the group
the current shareholder investment in 
melrose net of annual dividends and 
all returns of capital since 2003 totalling 
£15 billion amounts to approximately 
£05 billion our market capitalisation 
at the current share price amounts to 
£35 billion meaning that approximately 
£30 billion of shareholder value has 
been created over the period
we are proud of this achievement in 
growing shareholder value and the board 
on behalf of shareholders recognises the 
efforts of our employees and thanks them 
for their outstanding contribution to this
results for the group
these financial statements report the 
results for the group for the year to 
31 december 2013 and comparatives 
for the previous year
revenue from continuing businesses 
for the year was £17328 million 
2012 £10511 million and headline profit 
before tax before exceptional costs 
exceptional income and intangible asset 
amortisation was £2261 million 
2012 £1179 million 
adjusting for the five disposals in the year 
headline diluted eps before exceptional 
costs exceptional income and intangible 
asset amortisation on continuing 
businesses was 128p 2012 proforma 
94p an increase of 36
further details of these results are 
contained in the finance director’s review
headline
1
 diluted earnings  
per share
2
128p  36
3
trading
the speedy and rigorous implementation 
of restructuring projects in our 2012 
elster acquisition produced an equally 
swift improvement in operating margins 
– ahead of our best expectations – which 
led to an increase of over a third in elster’s 
profits in its first full year since acquisition 
we have raised our expectations of what 
elster can achieve and the outcome to 
date is very encouraging
as we indicated despite the subdued 
order books of recent periods the 
remaining “fki” businesses of bridon and 
brush maintained their operating margins 
– a good performance the recent and 
continuing level of investment in these two 
businesses means that the mediumterm 
outlook remains positive but weakness 
in specific market areas may hold back 
growth in the short term
operating cash generation remains a major 
focus and this has been another excellent 
year this together with the proceeds 
from disposals has meant a substantial 
reduction of net debt to £141 million at 
the year end from £998 million last year 
the return of capital after the year end has 
returned debt to our more usual levels
dividends
the board proposes to pay a final 
dividend of 50p per share 2012 50p 
this will be paid on 15 may 2014 to those 
shareholders on the register at 22 april 
2014 subject to approval at the agm 
on 13 may 2014 this gives a total for 
the year of 775p per share 2012 76p
we continue to pursue a progressive 
dividend policy 1 before exceptional costs exceptional income and intangible asset amortisation
2 calculated using continuing businesses
3 assuming a full year’s ownership of elster in 2012 as explained in the finance director’s review
dividend per share
775p  2
10
 melrose industries plc 
annual report 2013
strategic report  the board
  we are committed to the highest standards of corporate governance and consider  
it critical for upholding our business integrity wherever we work around the world
1  miles templeman will be retiring from the board at the conclusion of the 2014 annual general meeting to be held on 13 may 2014
2 liz hewitt was appointed to the board on 8 october 2013
board composition
executive chairman 1
executive directors 3
nonexecutive directors 5
1
3
5
industry background
finance 6
industry 3
board changes
miles templeman our senior non
executive director will be stepping down 
at the conclusion of the agm in may he 
has been a director since our inception in 
2003 and in this time his experience and 
judgement have been highly valued by the 
board we will miss his distinctive input
at the same time we were delighted 
to welcome liz hewitt to the board on 
8 october 2013 liz has an excellent 
background and experience in areas very 
relevant to melrose’s operations and we are 
already benefiting from her contribution
following miles’ departure perry 
crosthwaite will become our senior non
executive director perry will simultaneously 
relinquish his position as chairman of the 
remuneration committee a role that will 
be filled by justin dowley following the 
conclusion of this year’s agm liz hewitt 
will chair the nomination committee with 
effect from the end of the 2014 agm
strategy 
our strategy of “buy improve sell” is by 
now well understood 2013 was a highly 
successful year particularly in the “improve” 
and “sell” categories the speed of 
improvement in operating margins at  
elster is a tribute to the strength of our 
management teams but this did not dilute 
our focus on realising the value in several 
of our “fki” businesses nor in returning 
this to shareholders as stated before we 
are now actively looking for an appropriate 
opportunity to repeat the success of our 
previous acquisitions this is a rigorous 
process and we will take as long as is 
necessary to identify the right company
outlook 
the recovery from the financial crisis of 
2008 has been slow anaemic and patchy 
much of our growth in recent years has 
been from margin improvement rather 
than revenue growth in common with 
many other companies sales growth 
remains challenging and we face a 
headwind from the current strength of 
sterling however there is more margin 
improvement still achievable which 
together with the inherent strength of our 
businesses and the continuing recovery 
in most of the world’s economies gives 
us confidence over the medium term 
christopher miller
chairman
5 march 2014
christopher miller 
executive 
chairman
miles templeman
1
senior non
executive director
david roper
executive 
vicechairman
perry crosthwaite
nonexecutive 
director
simon peckham
chief executive
justin dowley
nonexecutive 
director
geoffrey martin
group finance 
director
john grant
nonexecutive 
director
liz hewitt
2
nonexecutive 
director
£4 billion 
market capitalisation from £13 million in 10 years
£3 billion
of shareholder value created
27
average annual return on investment
since first deal in 2005
“ last year was a tremendous year for 
melrose with great successes in the 
‘improve’ and ‘sell’ parts of our strategy 
almost £1 billion was raised from 
disposals which trebled shareholders’ 
money and elster increased its profits 
by over a third in our first full year of 
ownership we are ready and keen to 
buy again but we remain patient for 
the right opportunity to arise”
6
3
11
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information chief executive’s 
review
divestments during the year
realising value in businesses at the 
appropriate time and returning all or part 
of this value to shareholders has been 
a fundamental part of the “buy improve 
sell” strategy that melrose has followed 
since being founded 10 years ago 
2013 has been another highly successful 
year for melrose as we continue to 
“improve” elements of the portfolio and 
have implemented the “sell” phase of 
our strategy in the second half of the year 
we completed the disposals of five of our 
“fki” businesses for a total consideration 
of approximately £950 million having 
more than tripled the shareholder value 
in respect of these businesses in five 
years of melrose ownership in july 2013 
melrose sold truth hardware to tyman 
plc for £135 million in the following 
month we completed the disposal of 
marelli motori to an affiliate of the carlyle 
group for a total consideration of 
£177 million in november 2013 the 
disposal of crosby and acco to an affiliate 
of kkr  co lp was completed for 
a consideration of £633 million finally 
in december 2013 melrose disposed of 
harris waste management group to avis 
industrial corporation
return of capital
following these divestments and in 
accordance with our strategy we 
announced in january 2014 our intention 
to use part of the proceeds of the 
disposals to return approximately 
£600 million in cash to shareholders 
and to undertake a share consolidation 
on an 11 for 13 basis the balance of the 
net sale proceeds have been used to 
pay down melrose’s existing borrowings
improving the portfolio
elster
following the sale of crosby and acco 
the three elster businesses represent two 
thirds of the revenue of the continuing 
group in the 18 months since their 
acquisition the improvement programmes 
implemented within the elster businesses 
are yielding significant results 
the gas business has benefited from 
strategic and operational initiatives including 
the closure of uneconomic facilities new 
product launches and the rationalisation 
and relocation of manufacturing operations 
the gas business is well positioned to 
benefit from a continued growth in gas 
usage across the world 
operating profits in the electricity business 
have improved significantly as a result of 
the relocation reorganisation and 
consolidation of operational and functional 
activities both in north america and europe 
new products and technologies have 
been launched enhanced quality control 
processes implemented and improvements 
to the supply chain initiated across the 
global market regulatory frameworks are 
being put in place to upgrade the metering 
infrastructure from traditional metering to 
smart meter solutions providing significant 
growth opportunities
in the water business operating profit has 
also improved substantially following the 
completion of a restructuring programme 
product and business rationalisation and 
new product launches water is well 
positioned for growth
1 restated to include the truth marelli 
crosby acco and harris results within 
discontinued operations
2 before exceptional costs exceptional 
income and intangible asset amortisation
3 assuming a full year’s ownership of  
elster in 2012 as explained in the  
finance director’s review
headline
2
 operating profit
£2749m
2012
2013
£2285m
1 3
£2749m
revenue
£17328m
2012
2013
£17919m
1 3
£17328m
12
 melrose industries plc 
annual report 2013
strategic report bridon
turning to the rest of the group bridon’s 
trading results in 2013 were marginally 
down on 2012 reductions in operating 
expenditure in the mining industry 
continued to impact demand for mining 
ropes and this has offset improved trading 
conditions in other core sectors such as 
the oil  gas commercial construction  
and industrial markets the difficult trading 
circumstances in the mining sector are 
expected to continue for at least the first 
half of 2014 
bridon’s strategy is to be a global 
technology leader for demanding rope 
applications bridon’s new factory in 
newcastle uk is fully operational and the 
bridon technology centre providing state 
of the art product design development 
and testing facilities was opened in 
early 2013 during the year 19 product 
development and enhancement projects 
were completed resulting in higher 
performance ropes for the mining  
oil  gas and industrial sectors 
looking ahead while the outlook for the 
mining sector remains uncertain demand 
from the oil  gas sector is expected 
to be solid in 2014 at the same time 
commercial construction and industrial 
activity continue to grow in china 
and signs of recovery are also visible 
in the us to mitigate the effects of the 
downturn in the mining sector bridon  
has focused on implementing operational 
efficiency improvements and strong 
working capital control
brush
market dynamics for new generators  
are likely to remain subdued in 2014 
however brush has outperformed the 
turbogenerator market with operational 
efficiency gains a strong return on  
capital investment and growth in the 
aftermarket business 
we are investing £30 million in a new 
manufacturing plant in china to meet the 
rapid growth in demand for gas turbines  
in the region 
a key priority for brush is the growth and 
development of the aftermarket business 
which during 2013 was consolidated  
into a single focused global business  
unit this restructuring together with 
capital investment in an aftermarket 
workshop facility in the us and new 
service offerings has driven order intake 
up 34 on the previous year 
hawker siddeley switchgear had another 
strong year with sales and operating  
profit achieving gains of 6 and 37 
respectively performance at the 
transformers business also improved  
with revenue up 6 yearonyear 
the medium to longterm outlook for 
power generation and the gas turbine 
market is positive and brush is well placed 
to benefit from this and the additional 
growth opportunities in china and the 
aftermarket business
“ 2013 has been another highly successful  
year for melrose as we continue to 
‘improve’ elements of the portfolio and 
have implemented the ‘sell’ phase of  
our strategy” 
outlook
overall market conditions remain 
challenging and sales growth in 2014 is 
not going to be easy to achieve we are 
confident that we will see further progress 
in our elster businesses in 2014 however 
bridon and brush will find it more difficult 
to improve their performance foreign 
exchange rates have continued to become 
an increasing headwind into 2014
we are actively looking for our next 
acquisition and are hopeful of progress 
this year although as ever we remain 
disciplined in applying our criteria
simon peckham
chief executive
5 march 2014
business strategy
buy
melrose aims to acquire good 
manufacturing businesses that are 
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
improve
the melrose directors are actively 
involved within each of the businesses 
to agree strategy and targets drive 
operational improvements invest in  
the businesses it purchases and 
oversee change management
sell
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 acquisitions and return  
funds to investors
13
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information business  
strategy
elster gas elster water elster electricity
melrose business strategy
melrose business principles
melrose areas of operation
melrose buys good manufacturing businesses with strong fundamentals whose 
performance can be improved melrose finances its acquisitions using a low level 
of leverage improves the businesses by a mixture of investment and changed 
management focus sells them and returns the proceeds to shareholders
governance
the board of directors remains committed to maintaining the  
high standards of corporate governance required to ensure the 
company can continue to deliver its longterm strategic goals for 
shareholders as part of this approach the board supports the 
principles of the uk corporate governance code the “uk code” 
as it applied to the year ended 31 december 2013
gov res
profit made by improved 
acquisition performance
buy
•  good manufacturing businesses whose  
performance can be improved
• use low public market leverage
improve
• set strategy and targets and sign off investments
• drive operational improvements
 • invest in the business 
• change management focus incentivise well
• focus on operating cash generation
capital realised  
from markets
p16 p18
p24 p22 p26
14
 melrose industries plc 
annual report 2013
strategic report energy lifting
returns to shareholders
responsibility
through supporting the development of employees developing and 
maintaining close ties with stakeholders and minimising waste melrose 
believes good corporate social responsibility is not only desirable in 
its own right but also makes good business sense group companies 
work closely with their local communities engaging with them and 
building relationships with charities and environmental organisations
operational and financial efficiency
melrose is not a passive investor in the businesses it acquires 
our directors and senior management team have a handson 
relationship with each acquired company and work closely with 
them to develop the longterm strategic plans of the business 
as well as having regular input on restructuring decisions 
capital expenditure and working capital management
ofe
sell
•  identify the optimal time to sell often between 
three to five years but flexible
•  return value to shareholders from  
significant disposals
melrose 
group
capital realised 
 profit made
melrose  
management team 
own a substantial 
shareholding in  
the company
p20
p28 p30
15
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information strategy  
in action
buy improve sell
during the 10 years since first 
listing in 2003 there have been 
three major acquisitions 
elster
the largest and most recent of these was elster 
group se purchased for an enterprise value of 
£18 billion in august 2012 elster is a world leading 
engineering business established over 100 years 
ago designing and making meters and gas utilisation 
products mainly for the energy market the deal was 
funded by a fully underwritten rights issue which 
raised £12 billion
fki
fki plc was acquired in july 2008 for an enterprise 
value of approximately £1 billion fki was a major 
international diversified engineering group including 
some businesses with very good market positions 
bridon brush crosby marelli truth harris and acco 
were all part of fki however now all but the first two 
of these businesses have been sold
mckechnie and dynacast
the mckechnie and dynacast businesses were 
acquired in may 2005 for £429 million the various 
individual businesses that were acquired at this time 
were subsequently sold between may 2007 and june 
2012 and created considerable shareholder returns
buy
melrose aims to acquire good 
manufacturing businesses that  
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
16
 melrose industries plc 
annual report 2013
strategic report image brush engineers in loughborough uk making  
final checks and setting the exciter outboard shaft seal
17
strategic report governance financials shareholder information
 melrose industries plc
annual report 2013
strategic report image reels of bridon rope being lifted into position ready for delivery to 
the quayside at bridon’s new neptune quay facility near newcastle uk
strategy  
in action
buy improve sell
 impr ove
£3 billion
of shareholder value created during the 
10 years since first listing in 2003
melrose is actively involved within  
each of the businesses to agree 
strategy and targets drive operational 
improvements invest in the businesses 
it purchases oversee change 
management and ensure a focus  
on operational improvements
18
 melrose industries plc 
annual report 2013
strategic report fki
fki had a weak balance sheet and 
borrowings which were 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
in addition to addressing the 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 continues to invest in existing 
facilities and new capacity within the 
remaining businesses in order to continue 
growing these businesses examples of 
recent investments include bridon’s new 
£20 million facility at neptune energy park 
newcastle upon tyne uk which became 
operational in november 2012 and a 
£30 million investment in a new production 
facility for brush in china which is due to 
commence production during 2015
since the acquisition of fki steps taken 
by melrose have resulted in an increase  
in operating margin from 10 to 17 
which will result in substantial shareholder 
value being created
elster
a business with strong fundamentals 
elster fits the melrose acquisition criteria  
it is a high quality business with strong 
end markets which has the potential for 
significant development and improvement 
under melrose management
elster serves markets with attractive 
longterm demand drivers such as 
growing global energy demand energy 
efficiency and conservation and global 
gasification and is the global market 
leader in gas metering
melrose sees opportunities to improve 
elster’s performance through expanding 
margins and improving the quality of 
the business through investment and 
development following its acquisition 
in august 2012 a variety of restructuring 
projects have already been completed 
within the elster businesses
dynacastmckechnie
melrose successfully steered dynacast 
through the global slowdown and the 
cost savings made during the downturn 
were retained as sales recovered 
melrose invested fully in dynacast to 
expand capacity particularly in the far 
east and to improve efficiency
dynacast also successfully completed 
some bolt on acquisitions under melrose 
ownership sales in all three of dynacast’s 
main geographic regions grew
within mckechnie melrose saw 
significant scope to invest in the business 
and improve its operational and financial 
performance by adopting a vigorous 
handson approach
elster gas  
business review
p22
elster electricity  
business review
p24
elster water  
business review
p26
energy business review
p28
lifting business review
p30
19
strategic report governance financials shareholder information
 melrose industries plc
annual report 2013
strategic report image mckechnie plastic components manufactures 
engineered plastic injectionmoulded and extruded 
components and metal pressings for sectors including 
food and beverage packaging automotive construction 
and industrial this business was sold by melrose in  
june 2012 for £307 million
buy improve sell
sell
£600 million
approximate return of capital to 
shareholders in february 2014
strategy  
in action
at the appropriate time each business 
will be sold 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 acquisitions 
and return funds to investors
20
 melrose industries plc 
annual report 2013
strategic report fki
in 2013 melrose sold five fki businesses 
truth marelli crosby acco and harris 
which made up approximately half of the 
fki group on average these produced 
a return on the original shareholder value 
of over three times
the combined sale price of these  
five businesses was approximately 
£950 million in accordance with the 
melrose strategy a return of capital  
was made to shareholders in february 
2014 to the value of approximately 
£600 million the balance of the net 
proceeds has been used to pay down 
melrose’s existing borrowings
dynacastmckechnie
following the acquisition of the mckechnie 
business in 2005 its aerospace business 
was subsequently sold for £428 million 
in may 2007 two years after the initial 
acquisition this resulted in acquisition 
debt being repaid and a return of capital 
to shareholders of £220 million
during the six years of ownership of 
dynacast as a result of the improvement 
in its performance melrose quadrupled 
shareholders’ investment selling the 
business for an enterprise value of 
£377 million in july 2011 consistent with 
melrose strategy following the disposal 
approximately £373 million was returned 
to shareholders in august 2011 
the final part of the mckechnie business 
being mckechnie plastic components 
was sold for £307 million in june 2012
the sale of dynacast means that nearly 
£1 billion in cash was generated from 
the original £429 million mckechnie and 
dynacast acquisition
21
strategic report governance financials shareholder information
 melrose industries plc
annual report 2013
strategic report quality and safety are 
elster’s first priority
each gas meter that  
leaves the production line 
is leakage tested this test 
is carried out in the highly 
automated assembly 
line and is controlled by 
standardised touch 
screen panels
business  
review
elster gas is a world leader 
in gas measurement and gas 
safety control equipment 
supplying a global customer 
base in more than 110 countries 
with one of the most extensive 
installed utility measurement 
bases in the world and more 
than 75 million gas metering 
devices deployed over the 
last 10 years alone elster gas 
products enable customers  
to efficiently measure  
manage and control natural  
gas resources across the 
complete gas value chain
from its four lead plants in europe and 
the us coupled with sizeable subsidiary 
operations in china malaysia russia 
and mexico elster gas designs and 
manufactures gas meters and related 
products for residential commercial and 
industrial customers in addition the elster 
gas control equipment range of products 
is used extensively by global customers in 
both the midstream and downstream gas 
market sectors 
global revenues increased by over 5 in 
2013 there were strong performances 
from the integrated gas metering station 
business the new wholly owned russian 
plant and the us “perfection” connections 
business global demand for conventional 
gas meters remained robust which 
compensated for further delays in the roll 
out of smart meters in europe the control 
equipment market saw strong demand for 
residential heating products although the 
process heat market remained flat as 
global steel production stagnated in 2013 
operating profit increased significantly 
when compared to 2012 as the actions 
identified by the new management team  
at acquisition started to take effect  
there has been a significant improvement 
within the north american businesses 
where operational improvements were 
implemented during the year this included 
the closure of the inhouse die casting 
operation at the nebraska city facility
further good progress has also been 
made in rationalising the european 
manufacturing footprint with production  
of a number of products previously 
manufactured in western europe transferred 
to the newly extended plant in slovakia  
in addition three sites were closed in  
2013 and this strategy will continue to be 
executed throughout 2014 and 2015
total revenue 
year ended 31 december 2013
£6889m
2012 £2369m
2

headline
1
 operating profit 
year ended 31 december 2013
£1524m
2012 £467m
2

proportion of group revenue
year ended 31 december 2013
1 before exceptional costs exceptional income and intangible asset amortisation
2 2012 figures for elster relate only to the four month period postacquisition 
 including the period in 2012 prior to acquisition
1
2
3
4
5
1 elster gas
2 elster electricity
3 elster water
4 energy 
5 lifting
elster gas
wwwelstercom
22
 melrose industries plc 
annual report 2013
strategic report proven trusted metering solutions  
for the gas industry
the introduction of new products and 
technologies requires a clear focus on 
productivity value stream and quality this 
includes both the metrology and safety 
aspects of gas measurement instruments 
a key element of this is the complete 
traceability of all components over the 
entire value chain
semiautomatic production lines
the elster gas site at lotte germany features a highly automated production line  
with an annual capacity of 2 million gas meters in future elster gas’s global manufacturing  
network will be managed from lotte the implementation of the eu directive to replace  
the majority of existing meters with smart meters by 2022 is expected to result in demand  
for up to 70 million smart meters the lotte site is increasing its operational capacity to  
meet this demand
products
universal device for volume 
conversion billing and system 
monitoring with optional gsmgprs 
modem – used in diaphragmturbine 
or rotary meters
rotary gas meter rabo for high 
measuring rates compact dimensions 
and high accuracy
encal 3000 gas chromotograph for 
biogas analysis applications
chekker mechanical index for 
diaphragm gas meters with checksum 
generation to crosscheck data for 
accurate billing
key strengths
with proven excellence in engineering 
sales and operational capability and a 
“best in class” approach to everything 
it does elster gas is well positioned to 
exploit growth opportunities and to 
succeed as technology shifts towards 
smart meter solutions in parallel 
elster gas is expanding its global 
service network winning customer 
loyalty across the world
capital investment to support smart meter 
growth will be committed as required 
these investments will primarily be at our 
osnabruck and stara tura facilities and 
will be phased as the smart rollout in 
europe gains momentum
in 2013 there were four major new 
product launches focused primarily at the 
commercial and industrial sector which is 
a key element in better positioning the 
business to exploit the projected longterm 
growth in its end markets in italy elster 
launched themis plus the first commercial 
and industrial diaphragm meter in the world 
to measure display and transmit billing data 
daily based on the standard volume of gas 
until now in the gas industry these functions 
have been carried out by separate devices 
75 million
gas metering devices deployed over  
the last 10 years
elster are also involved in the smart 
residential gas meter programmes in the 
uk while overall progress in the uk has 
been slower than expected a number of 
key milestones have recently been passed 
and there is an expectation that more 
significant progress will be made in 2014
outlook
elster gas end markets remain healthy 
with order input in 2013 similar to that 
achieved in 2012 when coupled with 
further planned operational and cost 
improvements elster gas should enjoy 
another good performance in 2014
70 million
expected demand for smart meters by 2022
23
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information smart metering solutions
through elster electricity’s 
portfolio of innovative and 
trusted smart metering 
solutions elster’s products 
help utilities globally to improve 
energy efficiency through 
accurate measurement 
of consumption
elster electricity is one of the 
largest international smart 
metering solutions providers 
supplying both traditional 
and smart meter equipment 
including applications for 
residential commercial 
industrial transmission and 
distribution markets
the product range includes distribution 
and control monitoring equipment 
advanced smart metering demand 
response networking and software 
solutions including mdc meter data 
collection together with several other 
communication products and services 
elster has key production facilities  
located in europe north america and 
south america
elster electricity operates in most global 
markets through its own offices or agents 
in south america the biggest markets  
are brazil argentina and colombia  
where elster electricity has a market 
leading position selling standalone 
metering and advanced metering systems 
market leading technology has also been 
developed by elster electricity to prevent 
electricity theft through the accessing of 
power lines before it arrives at the meter 
this solution also allows utility companies 
to pinpoint where there may have been  
a potential breach of their electricity  
power lines an increasing demand for 
similar solutions across the region will 
further strengthen elster’s position across 
south america
north america is served through factories 
and sales offices and offers smart 
metering solutions to commercial 
industrial and residential markets elster 
has deployed more than five million smart 
residential meters over the last six years 
and thus has one of the largest installed 
meter bases most of the large utilities 
across the region have started deploying 
smart meter solutions and it is expected 
that the future market demand will stabilise 
at the current level growth is expected 
in mexico where a regulatory framework 
is in place to accelerate further the 
deployment of smart meters
1 before exceptional costs exceptional income and intangible asset amortisation
2 2012 figures for elster relate only to the four month period postacquisition 
total revenue 
year ended 31 december 2013
£2475m
2012 £1068m
2

headline
1
 operating profit 
year ended 31 december 2013
£215m
2012 £126m
2

proportion of group revenue
year ended 31 december 2013
1
2
3
4
5
1 elster gas
2 elster electricity
3 elster water
4 energy 
5 lifting
business  
review
elster electricity
wwwelstercom
24
 melrose industries plc 
annual report 2013
strategic report europe and africa have seen significant 
growth over the last year in europe 
the third energy package is calling for a 
europeanwide roll out of smart meter 
solutions through to 2022 and significant 
growth is expected in the coming years 
elster electricity is well positioned with 
a broad range of products and solutions 
to capture its fair share of the market 
the middle east led by united arab 
emirates where a regulatory framework 
is now in place to upgrade the metering 
infrastructure is also expected to 
experience further growth
the main markets served in the 
asia pacific regions are australia and 
new zealand these are managed 
through dedicated sales offices as with 
other regions served the regulatory 
framework is in place to upgrade the 
metering infrastructure 
5 million
elster electricity has deployed more than 5 million 
smart residential meters over the last six years
sales grew in europe based on initial 
smart metering pilot projects which will 
pave the way for later full deployments 
across a number of key utilities within 
most served markets tender activities  
in the year give management confidence 
that further growth is to be expected in  
the coming years the north american 
market saw a slight revenue decrease 
compared to the previous period in line 
with expectations following significant 
smart metering deployment over the  
last few years
operating profit improved significantly 
as a result of consolidation activities 
started in 2012 both in north america 
and europe 
development centre for data concentrators
maintaining our high quality standards is the 
true driving force behind elster electricity’s 
development centres data concentrators are 
rigorously tested throughout every step of the 
development and production phase
research and development
looking at the smallest detail to deliver the absolute best products to its clients is at  
the heart of every research and development engineer at elster electricity staying at the  
forefront of new and emerging technologies requires dedication and expert knowledge  
which is shared throughout the business
products
complete endtoend product range 
covering every aspect of the value chain
innovative advanced and modular 
electricity meters for both residential 
commercial and industrial markets
providing new concepts and 
technologies in data collection 
and communication
full range of services delivering 
business solutions
key strengths
endtoend solution provider for 
the smart grid covering the entire 
energy distribution value chain
delivering complete smart grid and 
energy management solutions that 
drive energy efficiency operational 
improvements and cost savings
driving interoperability and open 
standards through strategic collaboration 
with customers and partners
leading on privacy enhancement 
technology and security
reputation for quality reliability 
accuracy and innovation
in 2013 production and assembly for 
north america was moved to mexico  
this also resulted in a streamlining of all 
other central functions across sales 
development and product management  
in the us in europe a similar initiative 
commenced with key operational functions 
consolidated into romania at the same 
time development product management 
and sales were strengthened across all 
markets served to support the future roll 
out of smart metering solutions 
during 2014 management focus will be on 
further optimising processes across all 
functions with investments in open meter 
data collection solutions and partnerships  
with smart grid application providers 
outlook
the global market will continue to see  
a shift from “traditional” metering to 
smart meter solutions in 2014 whilst 
management expect the north america 
market to stabilise at current sales 
volumes other markets are expected to 
see growth especially europe where the 
year will see further pilot projects and 
significant tender activities for deployment 
in 2015 and beyond
25
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information v210 volumetric  
polymer water meter
the v210 volumetric 
polymer water meter  
offers longlife and high 
accuracy over a wide 
operating range with 
very low environmental 
impact for residential 
billing applications
business  
review
elster water designs 
manufactures and provides a 
comprehensive range of water 
metering solutions including 
high accuracy mechanical 
meters fully electronic meters 
and smart metering solutions 
for residential commercial and 
industrial sectors
operating profit substantially improved in 
2013 when compared to 2012 this 
followed the completion of restructuring 
work that was started in 2012 and 
completed during the first half of 2013 
the business ceased its manufacture of 
mechanical meters for the north american 
market which resulted in the closure of its 
large production site and the creation of a 
sales and distribution centre focusing on 
electronic residential and commercial and 
industrial products for the us market in 
europe elster water further rationalised 
product lines and closed production sites 
with the consolidation of its production 
into its core manufacturing sites and 
further investment in local sales and 
distribution centres 
the move to higher accuracy meters and 
the discontinuation of low margin low 
accuracy meters favourably impacted 
average meter selling prices the elster 
water business continued to be very 
successful in reducing its overhead cost 
base through restructuring which 
significantly contributed to the operating 
profit improvement the business also 
benefited from a yearonyear reduction  
in working capital with strong 
cash conversion 
total revenue reduced 15 in 2013 when 
compared to 2012 this was due to the 
cessation of north american mechanical 
meter production from the end of the  
first half of 2013 the rationalisation of  
low accuracy low margin products in 
germany and poland the closure of  
sales offices the completion of a large 
australian contract in 2012 and a move to 
third party distribution in south america 
within europe the middle east and the 
asia pacific regions revenues were 
generally flat africa delivered good  
levels of growth 
1 before exceptional costs exceptional income and intangible asset amortisation
2 2012 figures for elster relate only to the four month period postacquisition 
total revenue 
year ended 31 december 2013
£1799m
2012 £674m
2

headline
1
 operating profit 
year ended 31 december 2013
£230m
2012 £14m
2

proportion of group revenue
year ended 31 december 2013
1
2
3
4
5
1 elster gas
2 elster electricity
3 elster water
4 energy 
5 lifting
elster water
wwwelstercom
26
 melrose industries plc 
annual report 2013
strategic report new product launches in 2013 included 
the introduction of the polymerbodied 
version of the s150 single jet meter  
range reducing environmental impact  
and complying with future water quality 
requirements a new generation of 
mechanical submeters was also 
launched compatible with the latest data 
communication systems and an extension 
of the advanced electronic water meter 
range this provides a full portfolio of 
residential products with improved battery 
life and polymer body technology in 
north america 
the commercial and industrial high 
accuracy mechanical range of products 
have also been enhanced following the 
metrological approval of the h5000 meters 
which offer customers improved flexibility 
and lower installation costs also within this 
market the emeris log system has recently 
been launched offering advanced data 
logging storage and management 
features with gprs communications
globally sales of polymerbodied 
meters continue to grow with more than 
1 million units sold in 2013 elster’s award 
winning polymer meters are helping 
customers achieve their co
2 reduction 
targets as well as providing leadfree 
alternatives to traditional brass and 
bronzebodied products
significant capital expenditure has been 
approved in the year to increase capacity 
at our luton plant for polymerbodied 
meter production and on radio module 
designs to support customer amrami 
product solutions
outlook
following the completion of the 
restructuring programme in 2013 the 
business is well positioned for further 
growth focus will continue to be on 
high accuracy meters and advanced 
metering solutions where good 
opportunities exist within core markets 
products
broad range of class leading 
mechanical water meters  
preequipped for smart metering
advanced electronic water meters  
for both residential and commercial 
customers
innovative smart metering solutions 
and services
key strengths
leading position in many of the  
world markets for water metering 
at the forefront of developing the  
next generation of water metering 
technology 
leading innovative product 
development and technology choice  
for customers
world leader in polymer and high 
accuracy metering technology
strong longterm customer 
relationships and strategic 
partnerships
reputation for quality reliability 
accuracy and innovation within the 
water industry
1 million
polymerbodied meters sold in 2013
h5000 woltmann water meter
with a measuring range of 20001 the h5000 offers customers a solution that  
provides accurate water measurement in support of both commercial billing  
and network applications it also simplifies meter selection and helps to provide  
reliable connectivity for smart metering and other telemetry devices
h5000 uses the same body as elster’s industry leading h4000 woltmann meter  
providing simple cost effective changeout of existing meter stocks
27
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information business 
review
energy
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 czech 
republic netherlands and us 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 system 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 
harrington generators international “hgi” 
is a specialist uk based small generator 
manufacturer supplying the construction 
military telecoms and rail sectors
turbogenerators is a late cycle business 
and as such macroeconomic factors 
typically impact new machine order intake 
with a lag of approximately 18 months 
the global financial crisis has created 
delays in funding approvals and 
uncertainty in investment decisions 
affecting the order intake levels of brush’s 
turbine oem customers these factors  
all had a subsequent impact on market 
levels during the first half of 2013 and are 
anticipated to do so in 2014
whilst the turbogenerator market in 
general is believed to be circa 35 down 
brush managed to outperform the market 
with generator sales down just 17 this 
performance has continued to include a 
higher than normal proportion of smaller 
machines with unit sales just 4 down 
yearonyear
brush has continued its extensive capital 
investment programme across all of its 
units focused on efficiency improvement 
state of the art engineering machinery and 
production processes as well as product 
development these benefits are delivering 
positive results
£30m
capital investment to produce generators  
primarily for the chinese market
stateoftheart 
manufacturing equipment
investment has been made 
in a new stateoftheart 
plasma and oxy cutter  
at the brush manufacturing 
facility in loughborough 
uk this machine is used 
to manufacture heavy  
steel plates as part of the 
manufacturing process to 
produce stator frames and 
can cut through steel plate 
in excess of 100mm in 
thickness with a high 
degree of accuracy
1 before exceptional costs exceptional income and intangible asset amortisation
total revenue 
year ended 31 december 2013
£3501m
2012 £3716m 
headline
1
 operating profit 
year ended 31 december 2013
£731m
2012 £779m
proportion of group revenue
year ended 31 december 2013
1
2
3
4
5
1 elster gas
2 elster electricity
3 elster water
4 energy 
5 lifting
wwwbrusheu
28
 melrose industries plc 
annual report 2013
strategic report precise engineering
employees at the brush facility in 
loughborough uk carrying out the very 
precise operation of threading a balanced 
rotor through the completed stator winding 
of a bdax 62170er turbogenerator
bring increased demand for the european 
factories to satisfy the demand during 
the factory build and into the long term 
for key subcomponent manufacture
the turbogenerator plant in the 
netherlands had an improved year 
benefiting from restructuring that took 
place in 2012 the industrial market for 
these machines remains competitive and 
further efficiency restructuring during 2014 
will position this business to compete 
more aggressively in the global market
investment in research and development 
continues at a strong pace in brush with 
the introduction of uprated and new 
products across its product lines one  
of these developments resulted in the 
delivery in the last quarter of 2013 of a 
200 mw turbogenerator for a project in 
colombia this is the largest aircooled 
generator ever built by brush existing 
generators in the range have had their 
output and performance significantly 
increased as a result of the research and 
development programmes put in place by 
brush this has led to new orders and the 
successful retention of existing business
the growth and development of the 
aftermarket business remained a key 
priority capitalising on the significant fleet 
of brush machines in the market globally 
many of which are of an age to benefit 
from lifetime extension activities as well as 
opportunities to use aftermarket expertise 
on third party machines during the year 
the aftermarket business was separated 
out into one global business unit within 
brush to focus on this growth this also 
allowed workshop facilities and service 
engineers to be managed more efficiently 
as one global resource aftermarket 
contributed strongly to 2013 helping to 
mitigate a softer market for new machines 
by launching various new service offerings
the aftermarket workshop facility in 
the us benefited from significant capital 
investment increasing its efficiency and 
capacity and thus its ability to address 
the key markets of the americas and 
was completed in time for the important 
autumn outage season as a result of all 
these initiatives aftermarket order intake 
was 34 above the previous year
the hss business had another strong 
year with sales 6 ahead and operating 
profit 37 ahead of the previous year  
the business was able to benefit from both  
the restructuring programme in 2012 and  
the capital project to convert the factory 
layout to product flow lines new product 
development remains a key priority for the 
hss business with further enhancements 
to the indoor ac eclipse and acdc rail 
network products a major focus
revenue within the transformers 
business has improved by 5 yearon
year as we enter the fourth of the current 
five year ofgem the uk government’s 
office of gas and electricity markets 
cycle the capital expenditure 
programme approved to reorganise the 
production process and value engineer 
the product is nearing completion 
this has resulted in significant margin 
improvement and another strong year 
of growth for the transformers business 
capital was approved to develop 
design and manufacture high voltage 
132kv transformers to support our power 
distribution customers in the uk and 
open up increased export opportunities
outlook
the medium to longterm growth 
prospects in power generation and in 
particular the aeroderivative gas turbine 
market where brush has such a strong 
leading position remain positive this 
coupled with the additional growth 
available by entering the chinese market 
and continued operational improvements 
means the business is well positioned to 
benefit as stated above the overall 
market dynamics remain challenging in the 
short term however this will continue to 
be mitigated by growth in the aftermarket 
business aided by internal reorganisation 
product development continued 
investment and efficiency improvements 
products
quality products and service
power generation equipment from 
10 mva to 300 mva
synchronous motors induction motors 
submersible and traction motors
power management and  
excitation systems
medium voltage ac and dc switchgear
power and system transformers
aftermarket servicingsupport 
spareslifetime extension
key strengths
expertise in the design and 
manufacture of an extensive range of 
high quality 2 and 4 pole high voltage 
generators and electric motors
innovative design and developments
comprehensive and integrated 
aftermarket support tailored to  
meet customers’ needs
 switchgear and transformer  
products in service with all uk  
energy supply authorities
 hydropower generators to produce 
environmentally green energy
generators and electric motors for  
marine applications
 strategically located around the world
in addition to productivitybased 
investments brush is proceeding with 
the construction of a greenfield generator 
manufacturing plant near shanghai china 
this £30 million capital investment will 
produce generators primarily for the 
chinese market the investment is being 
made in support of several of its 
international turbine customers who 
are setting up manufacturing operations 
in china to address this significant 
developing market the factory has 
commenced construction and is expected 
to deliver its first generator during the last 
quarter of 2015 brush has already signed 
a six year longterm purchase agreement 
with one of its major customers huadian 
ge aero gas turbine equipment company 
ltd for the supply of generators from the 
new factory in the short term this will 
29
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information lifting
rope closing machine 
at bridon
bridon’s new neptune quay 
stateoftheart manufacturing 
facility is capable of producing 
highly engineered ropes in 
package weights of 650 tonnes 
the rope closing machine 
pictured which is the largest  
of its kind in existence was 
constructed to a unique 
specification and will enable 
bridon to produce engineered 
nonrotating multistrand  
ropes for critical deepwater  
oil and gas applications
business  
review  
bridon designs and 
manufactures a comprehensive 
range of lifting and stabilising 
solutions for applications in wire 
rope fibre rope steel wire and 
strand the business services 
global customers in the oil  
gas mining industrial marine 
and infrastructure sectors
bridon’s trading results were slightly  
lower in 2013 compared to 2012 whilst 
demand in most of bridon’s core markets 
remained solid reductions in expenditure 
in the mining industry impacted demand 
for mining ropes this effect is likely to 
continue into 2014 bridon primarily 
supplies ropes for use in existing mines 
rather than in the development of new 
mines and so should be well placed  
when the mining cycle starts to pick up 
bridon continued to focus on operational 
improvements across all its factories 
working capital control remained  
strong and profit to cash conversion 
improved significantly
while the onshore rig count in the us and 
canada was flat bridon saw increases for 
onshore oil  gas ropes reflecting a growth 
in market share through new distribution 
channels the offshore sector also improved 
as global production companies invested 
in new ships and platforms the expansion 
in exploration and drilling also offers bridon 
the chance to compete for some significant 
contracts for bespoke anchor lines deep 
water mooring systems and offshore crane 
ropes the contract for the stella deep 
water mooring system for offshore 
production was won during the year
the mining market was much weaker in 
2013 compared to 2012 and this effect was 
felt strongly in the second half of the year 
falling commodity prices reductions in 
capital expenditure by most of the larger 
mining companies industrial relations issues 
in south africa and lower order books for 
the mining machine oems combined to 
reduce demand significantly sales to china 
remained solid but demand in russia and 
south africa was subdued in north 
america demand was also depressed 
342 tonnes
bridon’s new factory in newcastle has already 
produced the largest rope ever made in the uk 
weighing 342 tonnes the rope has a length of 35km 
and is used as a hoist rope within offshore oil and 
gas vessels
1 before exceptional costs exceptional income and intangible asset amortisation
total revenue 
year ended 31 december 2013
£2664m
2012 £2684m
headline
1
 operating profit 
year ended 31 december 2013
£341m
2012 £358m
proportion of group revenue
year ended 31 december 2013
1
2
3
4
5
1 elster gas
2 elster electricity
3 elster water
4 energy 
5 lifting
wwwbridoncom
30
 melrose industries plc 
annual report 2013
strategic report products
wire rope and strand
fibre rope and wire
specialist installations
inspection services
the commercial construction market in 
the middle east demonstrated some signs 
of improvement in 2013 while crane rope 
sales showed moderate growth in north 
america reflecting bridon’s premier 
position with oems demand for crane 
and mining ropes remained solid in china 
and demand for oil  gas and industrial 
ropes held up well in asia bridon’s 
chinese operation based in hangzhou 
continued to make progress both in 
domestic and local export markets
during the year bridon opened a technical 
and service office in aberdeen uk in 
addition a new warehouse and service 
centre in macae brazil is now fully 
operational this facility provides wire rope 
termination and inspection services to rig 
operators in the fast growing brazilian  
oil  gas market as well as supporting 
import sales into latin america 
bridon has continued to upgrade its 
operations through targeted investment and 
by progress in programmes to drive quality 
efficiency and health and safety in both north 
america and europe significant improvements 
were made throughout the factories in 
terms of waste reduction and efficiencies 
in keeping with bridon’s strategy to be the 
global technology leader for demanding  
rope applications bridon’s new factory in 
newcastle uk is now fully operational 
this facility has already produced the largest 
rope ever made in the uk which weighs  
342 tonnes has a length of 35km and is 
used as a hoist rope on offshore oil  gas 
vessels the plant was profitable in its first 
year of operation the neptune quay facility 
is capable of producing the world’s largest 
and most complex ropes and is equipped to 
load them directly onto barges or vessels in 
the deep water port of the river tyne for 
export in addition the bridon technology 
centre was formally opened in february 
2013 and has been fully operational since the 
middle of the year the technology centre 
provides state of the art new product design 
development and testing facilities and is 
already fully utilised
in 2013 bridon completed 19 product 
development and enhancement projects 
for the oil  gas sector a low temperature 
polymer core was developed for the bristar 
and zebra ropes to allow the first high 
performance ropes to be used in arctic 
conditions at temperatures down to 50°c
laboratory at bridon technology centre 
bridon’s new pioneering stateoftheart 
manufacturing facility at neptune quay 
newcastle uk and the bridon technology 
centre doncaster uk demonstrate bridon’s 
commitment to global technology 
leadership these significant investments in 
world leading facilities and expertise greatly 
enhance the organisation’s ability to enable 
its customers to confidently face the 
toughest challenges of deepwater 
exploration and production
during 2013 bridon further developed its  
bridon academy as part of its strategy of 
continuing to develop people capability the 
academy represents bridon’s strong commitment 
to invest in its workforce the academy offers the 
following learning solutions management and 
leadership personal effectiveness technical and 
compliance bridon is adopting the principle of 
702010 learning – 70 on the job 20 coaching 
and 10 formal training comprehensive trainer 
material has been developed and internal 
facilitators have been introduced to ensure that 
bridon is selfsufficient with expertise being 
retained inhouse
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
advanced manufacturing facility  
on neptune quay in newcastle uk
expert technical and services support
stateoftheart technology centre  
in doncaster uk
strategically located around the world
three new high strength compacted 
crane ropes were developed for the 
industrial sector meanwhile in the mining 
sector further enhancements were made 
to triangular strand and tiger blue shovel 
ropes to enhance rope performance and 
improve service life as well as the 
development of a plastic impregnated 
rope to increase corrosion resistance in 
challenging operating conditions 
a fully synthetic trawl warp was launched 
for use in the marine sector which offers 
significant fuel savings to the vessels 
through reduced drag in the water while  
a synthetic mooring rope was developed 
for liquefied natural gas vessels with 
superior stability and fatigue performance
major planned activities for 2014 include  
a spiral strand design enhancement 
involving larger diameter wires a patented 
advanced sheathing technology with 
translucent inspection windows and a  
new slimline socket for structural and deep 
water mooring applications further planned 
projects include improving rope lubrication 
extralong deep shaft mining ropes as well 
as continuing the work on hybrid ropes
outlook
bridon expects demand in oil  gas to 
remain solid in 2014 the oil price and 
demand for oil particularly in the emerging 
markets should support activity levels  
in this sector however the outlook for 
mining remains very uncertain although 
the need for mines to begin replenishing 
their operating equipment should benefit 
bridon the timing of this is difficult to 
predict commercial construction and 
industrial activity appears to be picking  
up in the us and continuing in china  
but still remains subdued in some 
developed countries
31
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information key performance 
indicators
headline
1
 diluted earnings  
per share 
128p
67p
5
88p proforma
7
 94p
128p
2011
2012
2013
method of calculation
group headline
1
 profit after tax excluding 
the profit on disposal of businesses from 
continuing operations as reported in this 
2013 annual report divided by the diluted 
weighted average number of ordinary  
shares in issue
strategic objective
to create consistent and longterm value 
for shareholders
headline
1
 operating profit 
£2749m
2012
2013
£1493m
4
 proforma
7
 £2285m
2011 £964m
4
£2749m
method of calculation
headline
1
 operating profit for the 
continuing group
strategic objective
to improve the profitability of 
group operations
dividend per share 
775p
2011
2012
2013
74p
5
76p
775p
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
cash conversion 
96
2011
2012
2013
96
4
85
4
96
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
net debt to headline
1
 ebitda
2
 
05×
2011
2012
2013
14×
3
26×
6
05×
method of calculation
net debt at average exchange rates 
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
interest cover
118×
2011
2012
2013
117×
3
91×
118×
method of calculation
calculated as headline
1
 ebitda
2
 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
financial kpis
in order to support the group’s strategy and to monitor performance the board uses a number of financial 
and nonfinancial 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 
32
 melrose industries plc 
annual report 2013
strategic report headline
1
 operating 
profit margin 
159
142
4
 proforma
7
 128
159
2012
2013
157
4
2011
method of calculation
headline
1 
operating profit as a percentage  
of revenue for the continuing group
strategic objective
to improve the profitability of 
group operations
health and safety
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 
strategic objective
the company has an objective to stop all preventable accidents
performance
as each business uses its own health and safety kpis performance in 2013 when compared to 
2012 will vary further information in relation to the various health and safety initiatives undertaken 
by the group’s businesses during 2013 can be found within the corporate social responsibility 
section of this strategic report on page 51
environmental and energy usage
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
strategic objective
each of the group’s businesses is 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 2013 the group is now required to disclose greenhouse gas emissions data in relation to 
the 2013 financial year see the corporate social responsibility section of this strategic report 
on pages 52 and 53
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 headline
1
 operating profit before depreciation and 
amortisation of computer software and development costs
3 calculated under previous banking covenants as required 
by banking facilities in place at that time 
4 restated to include the results of truth marelli crosby 
acco and harris within discontinued operations
5 restated to include the effects of the 2 for 1 rights issue 
that concluded in august 2012 resulting in the issue of 
844418024 new ordinary shares in the capital of 
melrose plc raising approximately £12 billion in relation 
to the purchase of elster
6 based on 1 january 2012 to 31 december 2012 ebitda
2
 
for all continuing businesses elster pre acquisition 
ebitda
2
 has been adjusted to estimate the impact of the 
transition to melrose accounting policies under ifrs
7 assuming a full year’s ownership of elster in 2012 as 
explained in the finance director’s review
nonfinancial kpis
other nonfinancial kpis
method of calculation
due to the diverse nature of the group each business uses a range of its own specific non
financial 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 corporate social responsibility section of this strategic report on pages 
48 to 53
33
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information risk  
management
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 these 
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 at a business 
level is to implement the policies adopted 
by the board
the audit committee also monitors the 
effectiveness of the internal control 
processes implemented across the 
group through a review of the key 
findings presented by the external and 
internal auditors and discussions with 
senior management
the board is responsible for considering 
audit committee recommendations  
and ensuring implementation by 
management of those recommendations 
it deems appropriate for the business
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  
as depicted in the diagram opposite
a summary of the principal risks and 
uncertainties that could impact on the 
group’s performance is shown on pages 
36 to 39 further information detailing the 
internal control and risk management 
policies and procedures operated within 
the group are shown on pages 64 and 
65 of the corporate governance report
melrose operates in a variety of sectors and  
countries and is exposed to a wide range of risks  
and uncertainties from a strategic operational 
compliance and financial perspective
view our risks and uncertainties
mitigation
risk owners  
identified and action 
plans implemented
robust mitigation 
strategy subject to regular  
and rigorous review
identification
financial and  
nonfinancial risks  
recorded in controlled 
risk registers
evaluation
risk exposure  
reviewed and  
risks prioritised
analysis
risks analysed  
for impact  
and probability  
to determine  
gross exposure
identification
evaluation
analysis
mitigation
risk management framework the board has approved  
a formalised but pragmatic 
group risk management 
framework
identifying risks
the identification and 
management of risks across  
the group are integral to the 
group’s strategic objectives 
they are vital in helping  
protect the group’s 
businesses its people  
and its reputation
view our governance overview
p54
p36
34
 melrose industries plc 
annual report 2013
strategic report operational managers and financial controllers
board
overall responsibility for risk management
audit committee
monitors the effectiveness of the group’s internal control processes
elster  
gas
elster 
electricity
elster 
water
energy lifting
divisional senior managers
35
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information risks and 
uncertainties
the table below lists the principal risks and uncertainties that may affect the group and highlights the mitigating actions that 
are being taken and the opportunities that the group aims to exploit the content of the table however is not intended to be 
an exhaustive list of all the risks and uncertainties that may arise
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 each group business maintains a risk register which is reviewed regularly
key risk description and impact mitigation strategic priorities
strategic risk
acquisition of new 
businesses and 
improvement strategies
as per the group’s strategy to buy and improve good underperforming manufacturing 
businesses there is a risk that the group will not succeed in driving strategic operational 
improvements to generate value post acquisition or in integrating the newly acquired business 
within the melrose group in making acquisitions there is a risk of unforeseen liabilities being 
discovered which are not known at the time of the due diligence process but which arose in the 
business before it was acquired the success of the group’s acquisition strategy depends on 
identifying targets obtaining authorisations and having the necessary financing even if an 
acquisition is completed the acquired products and technologies may not be successful or 
may require significantly greater resources and investment than anticipated the group may not 
be able to integrate the businesses that it acquires if integration is unsuccessful anticipated 
benefits are not realised or trading by acquired businesses falls below expectations it may be 
necessary to impair the carrying value of these assets the group’s return on capital employed 
may fall if acquisition hurdle rates are not met the group’s financial performance may suffer 
from goodwill or other acquisitionrelated impairment charges or from the identification of 
additional liabilities not known at the time of the acquisition 
• 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
timing of disposals in line with our strategy and depending where the group is within the buy improve and sell  
strategic cycle the expected timing of disposal of companies is considered as a principal risk which 
could have a material impact on the group strategy further due to the group’s global operations 
there may be a significant impact on timing of disposal due to political and macroeconomic factors 
depending on the timings of disposals and nature of companies’ operations there may be  
longterm liabilities which could be retained by the group insufficient allowance for indemnities 
and warranties given at disposal may also affect the group’s financial position 
•  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
economic and political risk the group operates through manufacturing andor sales facilities in over 50 countries and is 
affected by global economic conditions particularly in the us and europe businesses are also 
affected by government spending priorities and the willingness of governments to commit 
substantial resources current global economic and financial market conditions and the 
potential for a significant and prolonged global recession may materially and adversely affect 
the group’s operational performance financial condition and could have significant impact on 
timing of acquisitions and disposals 
a recession may also materially affect customers suppliers and other parties with which the 
group does business adverse economic and financial market conditions may cause 
customers to terminate existing orders to reduce their purchases from the group or to be 
unable to meet their obligations to pay outstanding debts to the group these market 
conditions may also cause our suppliers to be unable to meet their commitments to the group 
or to change the credit terms they extend to group businesses 
•  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
loss of key management the success of the group is built upon strong management teams as a result the loss of key 
personnel can have a significant impact on performance at least for a time the loss of key 
personnel or the failure to plan adequately for succession or develop new talent may impact the 
reputation of the group or lead to a disruption in the leadership of the business competition for 
personnel is intense and the group may not be successful in attracting or retaining qualified 
personnel particularly engineering professionals the loss of key employees the group’s inability 
to attract new and adequately trained employees or a delay in hiring key personnel could 
seriously harm the group’s business over time the group’s competitive advantage is defined by 
the quality of its people should the group fail to attract develop and retain key talent in time the 
competitive advantage will erode leading to weaker growth potential or returns in particular with 
significant restructuring activities undertaken to improve the acquired businesses 
•  succession planning within the group and its various businesses is coordinated via the nomination 
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 longterm incentive arrangements are offered in an effort 
to retain such individuals
36
 melrose industries plc 
annual report 2013
strategic report key risk description and impact mitigation strategic priorities
strategic risk
acquisition of new 
businesses and 
improvement strategies
as per the group’s strategy to buy and improve good underperforming manufacturing 
businesses there is a risk that the group will not succeed in driving strategic operational 
improvements to generate value post acquisition or in integrating the newly acquired business 
within the melrose group in making acquisitions there is a risk of unforeseen liabilities being 
discovered which are not known at the time of the due diligence process but which arose in the 
business before it was acquired the success of the group’s acquisition strategy depends on 
identifying targets obtaining authorisations and having the necessary financing even if an 
acquisition is completed the acquired products and technologies may not be successful or 
may require significantly greater resources and investment than anticipated the group may not 
be able to integrate the businesses that it acquires if integration is unsuccessful anticipated 
benefits are not realised or trading by acquired businesses falls below expectations it may be 
necessary to impair the carrying value of these assets the group’s return on capital employed 
may fall if acquisition hurdle rates are not met the group’s financial performance may suffer 
from goodwill or other acquisitionrelated impairment charges or from the identification of 
additional liabilities not known at the time of the acquisition 
• 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
timing of disposals in line with our strategy and depending where the group is within the buy improve and sell  
strategic cycle the expected timing of disposal of companies is considered as a principal risk which 
could have a material impact on the group strategy further due to the group’s global operations 
there may be a significant impact on timing of disposal due to political and macroeconomic factors 
depending on the timings of disposals and nature of companies’ operations there may be  
longterm liabilities which could be retained by the group insufficient allowance for indemnities 
and warranties given at disposal may also affect the group’s financial position 
•  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
economic and political risk the group operates through manufacturing andor sales facilities in over 50 countries and is 
affected by global economic conditions particularly in the us and europe businesses are also 
affected by government spending priorities and the willingness of governments to commit 
substantial resources current global economic and financial market conditions and the 
potential for a significant and prolonged global recession may materially and adversely affect 
the group’s operational performance financial condition and could have significant impact on 
timing of acquisitions and disposals 
a recession may also materially affect customers suppliers and other parties with which the 
group does business adverse economic and financial market conditions may cause 
customers to terminate existing orders to reduce their purchases from the group or to be 
unable to meet their obligations to pay outstanding debts to the group these market 
conditions may also cause our suppliers to be unable to meet their commitments to the group 
or to change the credit terms they extend to group businesses 
•  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
loss of key management the success of the group is built upon strong management teams as a result the loss of key 
personnel can have a significant impact on performance at least for a time the loss of key 
personnel or the failure to plan adequately for succession or develop new talent may impact the 
reputation of the group or lead to a disruption in the leadership of the business competition for 
personnel is intense and the group may not be successful in attracting or retaining qualified 
personnel particularly engineering professionals the loss of key employees the group’s inability 
to attract new and adequately trained employees or a delay in hiring key personnel could 
seriously harm the group’s business over time the group’s competitive advantage is defined by 
the quality of its people should the group fail to attract develop and retain key talent in time the 
competitive advantage will erode leading to weaker growth potential or returns in particular with 
significant restructuring activities undertaken to improve the acquired businesses 
•  succession planning within the group and its various businesses is coordinated via the nomination 
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 longterm incentive arrangements are offered in an effort 
to retain such individuals
37
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information risks and  
uncertainties
continued
key risk description and impact mitigation strategic priorities
compliance and ethical risk
legal regulatory and 
intellectual property “ip”
there is a risk that the group may not always be in complete compliance with laws regulations 
or permits for example concerning environmental or safety requirements the group could be 
held responsible for liabilities and consequences arising from past or future environmental 
damage including potentially significant remedial costs there can also be no assurance that 
any provisions for expected environmental liabilities and remediation costs will adequately cover 
these liabilities or costs
the group operates in highly regulated sectors in addition new legislation regulations or 
certification requirements may require additional expense restrict commercial flexibility and 
business strategies or introduce additional liabilities for the company or directors should a 
regulator’s approval process take a particularly long time our products may be delayed in getting 
to market which could lead to a loss of revenue or benefit a competitor with a similar product 
failure to comply with certain regulations may result in significant financial penalties debarment 
from government contracts andor reputational damage and impact our business strategy 
•  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 and compliance procedures both at a group and 
business unit level
• protection of rights over trademarks copyright patents designs and trade secrets where necessary
financial risk
foreign exchange rate due to the global nature of operations and volatility in the foreign exchange market exchange 
rate fluctuations have and could continue to have a material impact on the reported results the 
group is exposed to three types of currency risk transaction risk translation risk and risk when 
a business that is predominantly based in a foreign currency is sold the group’s reported 
results will fluctuate as average exchange rates change the group’s reported net assets will 
fluctuate as the yearend exchange rate changes
•  the group policy is to protect against the majority of foreign exchange risk which affects cash via 
financial instruments such as hedging
•  protection against specific transaction risks is taken by the board on a casebycase basis
pensions as at 31 december 2013 the group has legacy defined benefit pension plans with aggregate 
net liabilities of £2193 million on an accounting basis changes in discount rates inflation asset 
values or mortality assumptions could lead to a materially higher deficit for example the cost 
of a buyout on a discontinued basis uses more conservative assumptions and is likely to be 
significantly higher than the accounting deficit in addition there is a risk that the plan’s assets 
such as investments in equity and debt securities will not be sufficient to cover the value of 
those benefits the implications of a higher pension deficit include a direct impact on valuation 
credit rating and potential additional funding requirements at subsequent triennial reviews 
in the event of a major disposal that generates significant cash proceeds which are returned 
to the shareholders the group may be required to make additional cash payments to the plans 
or provide additional security 
•  each of the group’s key funded pension plans are now closed to new entrants and future service 
accrual longterm funding arrangements are agreed with each of these plans and reviewed following 
completion of actuarial valuations other pension plans exist within the group but these are largely 
unfunded plans whereby funding plans are not required and benefit obligations are paid when due
• active management of pension plan assets
liquidity the group has £3412 million of debt as at 31 december 2013 the ability to refinance its 
borrowings in the bank or capital markets is dependent on market conditions and the proper 
functioning of financial markets furthermore in line with the group’s strategy investment  
is made in the businesses capital expenditure in excess of depreciation and there is a 
requirement to assess liquidity and headroom when new businesses are acquired and  
the group may be unable to refinance its debt when it falls due 
•  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
38
 melrose industries plc 
annual report 2013
strategic report key risk description and impact mitigation strategic priorities
compliance and ethical risk
legal regulatory and 
intellectual property “ip”
there is a risk that the group may not always be in complete compliance with laws regulations 
or permits for example concerning environmental or safety requirements the group could be 
held responsible for liabilities and consequences arising from past or future environmental 
damage including potentially significant remedial costs there can also be no assurance that 
any provisions for expected environmental liabilities and remediation costs will adequately cover 
these liabilities or costs
the group operates in highly regulated sectors in addition new legislation regulations or 
certification requirements may require additional expense restrict commercial flexibility and 
business strategies or introduce additional liabilities for the company or directors should a 
regulator’s approval process take a particularly long time our products may be delayed in getting 
to market which could lead to a loss of revenue or benefit a competitor with a similar product 
failure to comply with certain regulations may result in significant financial penalties debarment 
from government contracts andor reputational damage and impact our business strategy 
•  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 and compliance procedures both at a group and 
business unit level
• protection of rights over trademarks copyright patents designs and trade secrets where necessary
financial risk
foreign exchange rate due to the global nature of operations and volatility in the foreign exchange market exchange 
rate fluctuations have and could continue to have a material impact on the reported results the 
group is exposed to three types of currency risk transaction risk translation risk and risk when 
a business that is predominantly based in a foreign currency is sold the group’s reported 
results will fluctuate as average exchange rates change the group’s reported net assets will 
fluctuate as the yearend exchange rate changes
•  the group policy is to protect against the majority of foreign exchange risk which affects cash via 
financial instruments such as hedging
•  protection against specific transaction risks is taken by the board on a casebycase basis
pensions as at 31 december 2013 the group has legacy defined benefit pension plans with aggregate 
net liabilities of £2193 million on an accounting basis changes in discount rates inflation asset 
values or mortality assumptions could lead to a materially higher deficit for example the cost 
of a buyout on a discontinued basis uses more conservative assumptions and is likely to be 
significantly higher than the accounting deficit in addition there is a risk that the plan’s assets 
such as investments in equity and debt securities will not be sufficient to cover the value of 
those benefits the implications of a higher pension deficit include a direct impact on valuation 
credit rating and potential additional funding requirements at subsequent triennial reviews 
in the event of a major disposal that generates significant cash proceeds which are returned 
to the shareholders the group may be required to make additional cash payments to the plans 
or provide additional security 
•  each of the group’s key funded pension plans are now closed to new entrants and future service 
accrual longterm funding arrangements are agreed with each of these plans and reviewed following 
completion of actuarial valuations other pension plans exist within the group but these are largely 
unfunded plans whereby funding plans are not required and benefit obligations are paid when due
• active management of pension plan assets
liquidity the group has £3412 million of debt as at 31 december 2013 the ability to refinance its 
borrowings in the bank or capital markets is dependent on market conditions and the proper 
functioning of financial markets furthermore in line with the group’s strategy investment  
is made in the businesses capital expenditure in excess of depreciation and there is a 
requirement to assess liquidity and headroom when new businesses are acquired and  
the group may be unable to refinance its debt when it falls due 
•  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
39
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information finance director’s 
review
the year to 31 december 2013 included the disposal of five 
businesses which in the prior year comprised 22 of annualised 
group revenue and 28 of annualised group headline operating 
profit consequently in accordance with ifrs 5 the trading 
results of these businesses have been shown as discontinued 
in both years 
split of divisions
the continuing operations consist of the fki businesses 
containing the divisions of energy and lifting and the elster 
businesses containing the divisions of gas electricity and water
 
the discontinued operations include the results up until the date 
of disposal of the marelli business previously shown within the 
energy division the crosby and acco businesses previously 
shown within the lifting division and the truth and harris 
businesses previously shown within the other industrial division 
in addition the discontinued operations in 2012 include the 
results of the mpc business previously shown within the 
other industrial division
group trading results – continuing operations
to help understand the results of the continuing 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 board 
to be the best measure of performance
for the year ended 31 december 2013 the group achieved 
revenue from continuing operations of £17328 million 2012 
£10511 million headline operating profit in the year ended 
31 december 2013 was £2749 million 2012 £1493 million and 
the headline operating profit margin defined as the percentage 
of headline operating profit to revenue increased from 142  
in 2012 to 159 in 2013 the results for 2013 are not directly 
comparable to 2012 as the prior year performance includes only 
four months of elster trading after its acquisition on 23 august 
2012 this is explained in more detail later in this report
after exceptional costs exceptional income and intangible  
asset amortisation group operating profit was £2199 million 
2012 £540 million
group – headline
1
 operating 
profit margin
159
2012
2013
128
2
2011 na
159
elster – headline
1
 operating 
profit margin
174
2012
2013
124
2
2011 na
174
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 proforma results adjusted for a full year of ownership  
for elster in 2012 as explained on page 41
40
 melrose industries plc 
annual report 2013
strategic report trading results by division – continuing operations
a split of revenue headline operating profit and headline 
operating profit margin for 2013 and 2012 is as follows
2013
revenue
£m
2013
 headline
 operating
profitloss
£m
2013
headline
operating
profit 
margin

2012
revenue
£m
2012
headline
operating
profitloss
£m
2012
headline
operating
profit 
margin

elster 11163 1942 174 4111 578 141
fki 6165 1072 174 6400 1137 178
central – 
corporate
– 135 na – 137 na
central – 
ltips
1
– 130 na – 85 na
continuing 
group
17328 2749 159 10511 1493 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 £135 million 2012 £137 million of 
melrose corporate costs and a long term incentive plan “ltip” 
accrual of £130 million 2012 £85 million the ltip accrual 
includes an amount of £40 million in respect of the melrose 
sharebased incentive plan 2012 £35 million and a charge of 
£90 million 2012 £50 million for the cashbased divisional 
management incentive plans 
“ headline operating profit in the year ended 
31 december 2013 was £2749 million  
headline operating profit margin increased  
from 142 in 2012 to 159 in 2013”
proforma group trading results
the results for 2013 are not directly comparable to 2012 as the 
prior year performance includes only four months of elster trading 
after its acquisition on 23 august 2012 a more appropriate 
comparative to use for 2012 would include a full year’s ownership 
of elster in 2012 along with an allowance for the finance costs of 
the acquisition and a consistent number of shares in both years 
at constant currency the preownership results of elster were 
prepared under previous accounting policies and us gaap 
on this basis the unaudited proforma headline results would be
2013 actual 
£m
2012 proforma
£m
proforma 
growth

revenue
elster
1
11163 11466 3
fki
2
6165 6453 4
continuing group 17328 17919 3
headline operating profit
elster
1
1942 1416 37
fki
2
1072 1141 6
continuing group
3
2749 2285 20
headline operating margin
elster 174 124 50ppts
fki 174 177 03ppts
continuing group 159 128 31ppts
headline diluted eps 128p 94p 36
1  elster revenue as reported in 2012 of £4111 million plus £7178 million to include the  
preownership revenue and also £177 million to show at constant currency elster headline 
operating profit as reported in 2012 of £578 million plus £815 million to include the  
preownership profits and also £23 million to show at constant currency
2  fki revenue as reported in 2012 of £6400 million plus £53 million to show at constant 
currency fki headline operating profit as reported in 2012 of £1137 million plus 
£04 million to show at constant currency
3  includes the melrose central costs and an additional divisional ltip charge of £5 million in 
2012 as if elster were owned for the full year
41
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information finance director’s review 
continued
finance costs and income
the net headline finance cost in 2013 was £488 million 2012 
£314 million
in 2013 the group had a blended interest rate of 31 2012 
27 the increase in the absolute value of finance costs results 
from the full year effect of the higher net debt following the 
acquisition of elster on 23 august 2012 
net interest on external bank loans overdrafts and cash balances 
was £344 million 2012 £219 million melrose uses interest rate 
swaps to fix the majority of the interest rate exposure on its drawn 
debt more detail on these swaps is given in the finance cost risk 
management section of this review 
also included in the net headline finance cost is a £47 million 
2012 £24 million amortisation charge relating to the 
arrangement costs of raising the bank facility a net interest cost 
on pension liabilities of £90 million 2012 £62 million and a 
charge for the unwinding of discounts on longterm provisions of 
£07 million 2012 £09 million 
the introduction of ias 19 revised “employee benefits” in 2013 
has resulted in the pension interest charge being £51 million 
higher than it would have been under the previous accounting 
standard and increased the 2012 pension interest charge by 
£27 million
tax
the headline income statement tax rate was 27 2012 27 
the headline tax rate was expected to increase in 2013 where a 
full year of 2013 elster results are included but the disposal of 
fki businesses with tax rates higher than the group average 
offset this expected increase
the reason that the headline tax rate for the group is lower than 
the weighted blend of the statutory tax rates around the world is 
the recognition of deferred tax assets that were not previously 
thought to be recoverable there is also a small benefit from the 
release of provisions previously held against potential overseas 
tax audits which have been successfully cleared for less cost 
than expected 
 
the tax rate after exceptional items and intangible asset 
amortisation is 29 2012 210 the main reason for the higher 
rate after exceptional items than the headline rate is the 
£81 million exceptional tax charge on group reorganisations 
against which there is no income
the cash tax rate on headline continuing operations of 21 
2012 24 is again below the headline income statement rate 
due to the benefit arising from the utilisation of preexisting 
melrose group tax losses and other deferred tax assets the rate 
includes £9 million paid during the year in settlement of tax audits 
of the elster businesses relating to tax periods ended prior to our 
ownership of elster
the deferred tax liability of £2874 million 2012 £3472 million in 
respect of intangible assets is not expected to 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 
during the year due to their utilisation against taxable profits and 
also as a result of some forfeiture on group reorganisations 
the total gross tax losses within the group are shown below
tax  
losses
recognised
£m
unrecognised
£m
total
£m
uk 225 1248 1473
north america 03 31 34
rest of world 192 472 664
total 2013 420 1751 2171
total 2012 355 2151 2506 
exceptional items and amortisation of intangible assets
in the year ended 31 december 2013 the group incurred 
exceptional operating costs of £193 million 2012 £708 million 
these include £141 million of restructuring costs in elster which 
are expected to deliver further cost savings in the future and 
other restructuring costs of £47 million which occurred in fki 
the group benefited from exceptional income of £289 million 
2012 £70 million mainly as a result of success in resolving a 
number of warranty issues inherited with the acquisition of elster 
for less expense than expected there were no exceptional 
finance costs in the year 2012 £163 million
in addition intangible asset amortisation of £646 million 2012 
£315 million was charged a net tax credit on these exceptional 
costs exceptional income and intangible asset amortisation of 
£189 million 2012 £241 million and an exceptional tax charge 
of £81 million 2012 £58 million has been taken in the year
overall the net exceptional items and intangible asset 
amortisation after tax shows a net expense of £442 million 
2012 £933 million
fair value exercise
upon the acquisition of elster on 23 august 2012 in accordance 
with ifrs 3 “business combinations” an extensive review of the 
elster assets liabilities and accounting policies commenced and 
this was completed by the half year in 2013 certain fair value 
adjustments were identified in the first half of 2013 which 
increased goodwill by £293 million with corresponding increases 
to provisions of £329 million deferred tax assets of £52 million 
and other balance sheet items of £16 million the 2012 balance 
sheet was restated for these items in accordance with ifrs 3
earnings per share eps and number of shares in issue
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 2013 the diluted 
eps for continuing operations was 93p 2012 loss of 09p for 
continuing and discontinued operations the diluted eps for 2013 
was 437p 2012 41p
42
 melrose industries plc 
annual report 2013
strategic report headline continuing diluted eps for 2013 was 128p 2012 
88p however to reflect the underlying earnings performance 
a proforma basis has been used for the continuing results in 
2012 this assumes that elster had been owned for the full year 
in 2012 unaudited with an allowance for the finance cost of 
the acquisition for the period elster was not owned and uses 
the same number of shares in both years at constant currency 
on this basis the proforma headline continuing diluted eps 
growth is 36
disposals during the year
on 22 november 2013 the disposal of crosby and acco to a 
newly incorporated company controlled by affiliates of kohlberg 
kravis roberts  co lp was completed for a gross cash 
consideration of £6326 million the profit on disposal of these 
two businesses was £2566 million after costs of £130 million
three other businesses were disposed in 2013 truth marelli and 
harris the gross disposal proceeds for these three businesses 
was £3178 million with related costs of £120 million realising 
a profit on disposal of £1441 million 
these five businesses were all acquired with fki in july 2008 
and contributed £3928 million of revenue and £795 million of 
headline operating profit in 2013 shown within discontinued 
operations during the five years of melrose ownership the 
shareholder value in these businesses increased by 
approximately 35 times 
at 31 december 2013 £17 billion of cash had been generated 
from trading and disposal proceeds in respect of the fki 
acquisition so far which compares to the acquisition cost of just 
under £1 billion even though two large businesses namely 
brush and bridon remain in the melrose group
cash generation and management
the cash generation performance in 2013 and the movement 
in net debt are summarised as follows
2013
£m
headline operating profit 2749 
depreciation and amortisation of computer software 
and development costs 407 
working capital movement 135
headline operating cash flow pre capex 3021 
headline ebitda conversion to cash pre capex  96
net capital expenditure 446
net interest and net tax paid 784
defined benefit pension contributions 327
other including discontinued operations 371
cash inflow from trading after all costs including tax 1093
the conversion of headline operating profit before depreciation 
and amortisation into cash was 96 in 2013 2012 85 this 
strong level of cash generation was consistent across both the 
fki and elster businesses
the movement in net debt in the year is reconciled as follows
2013
£m
opening net debt 9977
cash inflow from trading after all costs including tax 1093
net cash flow from disposals
1
8882 
amounts paid to shareholders 981
foreign exchange and other 425 
closing net debt 1408
1  gross disposal proceeds of £9504 million less costs of £250 million and cash  
disposed of £372 million
the balance sheet leverage calculated as net debt divided 
by continuing headline operating profit before depreciation 
and amortisation was approximately 04x at 31 december 2013 
31 december 2012 26x net debt increased in february 
2014 following the return of capital and allowing for this the 
proforma leverage at 31 december 2013 would have been 
23x which is considered to be a better measure of the 
underlying leverage level
capital expenditure
by business the net capital expenditure and depreciation in the 
year was as follows
elster fki central total
net capital expenditure £m 188 251 07 446
depreciation £m 266 134 07 407
net capital expenditure to 
depreciation ratio full year 07x 19x 10x 11x
melrose nine year 20052013 
average annual multiple 13x
the net capital spend to depreciation ratio was 11x in 2013 
2012 17x within this the ratio in the fki businesses was 19x 
which included the commencement of the significant investment 
in a new factory in the shanghai area of china this is discussed 
further in the chief executive’s review the net capital spend to 
depreciation ratio in elster was 07x while the board assessed 
strategies for these businesses elster is inherently a less capital 
intensive business than fki
assets and liabilities
the summary melrose group assets and liabilities are shown below
2013
£m
2012
£m
fixed assets including computer  
software and development costs 2653 3451 
intangible assets 9859 11563 
goodwill 16020 18662 
net working capital 1269 2170 
retirement benefit obligations 2193 2613
provisions 1778 2872
deferred tax and current tax 2729 3019
other
¹
186 52
total 23287 27394 
1 includes interests in joint ventures and derivative instruments
43
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information finance director’s review 
continued
these assets and liabilities are funded by
2013
£m
2012
£m
net debt 1408 9977
equity 21879 17417
total 23287 27394
the movements in net debt and equity primarily relate to the five 
disposals in the year
goodwill intangible assets and impairment review
the total value of goodwill as at 31 december 2013 was 
£16020 million 31 december 2012 £18662 million and 
intangible assets was £9859 million 31 december 2012 
£11563 million these balances reduced as a result of the 
disposals in the year and the split is as follows
elster
£m
fki
£m 
total 
£m 
goodwill 13084 2936 16020 
intangible assets 8049 1810 9859
deferred tax on 
intangible assets 2476 398 2874
other net assets 172 1685 1513 
total carrying value 18485 6033 24518
the goodwill and intangible assets have been tested for 
impairment as at 31 december 2013 the board is comfortable 
that no impairment is required
provisions
total provisions at 31 december 2013 were £1778 million 
31 december 2012 £2872 million the significant decrease year 
on year related to the cash spend on restructuring provisions that 
were mainly set up in 2012 following the acquisition of elster 
along with a conscious decision to resolve certain warranty 
liabilities inherited with elster in total £982 million of cash was 
spent on provisions of which £722 million related to restructuring 
and warranty the following table details the movement in 
provisions in the year
total
£m
at 31 december 2012 2872 
cash spent on the utilisation of provisions 982
noncash utilisation of provisions 72
net release to exceptional items 37
net charge to headline operating profit 79 
disposal of businesses 98
other including foreign exchange 16 
at 31 december 2013 1778 
the net release to exceptional items of £37 million includes 
£269 million of provisions originally booked as fair value 
adjustments but no longer required due to their successful 
resolution offset by £232 million of exceptional costs in the year 
mainly relating to further restructuring costs at elster
the significant reduction in provisions has not distorted headline 
operating profit because there was a net charge to headline 
operating profit in the year of £79 million
pensions
the group has a number of defined benefit and defined 
contribution pension plans
on 1 january 2013 ias 19 revised “employee benefits” was 
adopted which increased the pretax pension expense in the year 
by £79 million 2012 £48 million
in july 2013 the fki uk pension plan was demerged into three 
pension plans resulting in two new pension plans being set up 
namely the brush group 2013 pension plan and the bridon 
group 2013 pension plan these three defined benefit plans are 
now run independently and are closed to new members and to 
current members’ future service
despite the demerger in july 2013 the fki uk pension plan 
remains the most significant pension plan in the group with an 
accounting net deficit of £708 million at 31 december 2013 plan 
assets were £4525 million and plan liabilities were £5233 million 
at 31 december 2013 the three fki uk plans had an  
accounting net deficit of £1092 million 31 december 2012 
£1000 million this was net of plan assets at 31 december 2013 
of £6714 million 31 december 2012 £6302 million and liabilities 
of £7806 million 31 december 2012 £7302 million 
the other uk defined benefit pension plan of significant size  
in the group namely the mckechnie uk pension plan had a 
deficit of £05 million at 31 december 2013 31 december 2012 
£82 million this plan had assets at 31 december 2013 of 
£1825 million 31 december 2012 £1708 million and liabilities  
of £1830 million 31 december 2012 £1790 million the 
mckechnie uk pension plan is closed both to new members  
and current members’ future service
 
in addition a us defined benefit plan for fki exists at 31 december 
2013 the fki us plan had assets of £1776 million 31 december 
2012 £1983 million liabilities of £1830 million 31 december 
2012 £2284 million and consequently a net deficit of £54 million 
31 december 2012 £301 million this plan is closed to new 
members and to current members’ future service
elster has a number of defined benefit plans most of which 
are unfunded with a net accounting deficit at 31 december 2013  
of £1015 million 31 december 2012 £1152 million within  
this 82 £836 million 31 december 2012 78 related 
to unfunded german defined benefit plans and early 
retirement programmes
44
 melrose industries plc 
annual report 2013
strategic report the assumptions used to calculate the ias 19 deficit for all 
pension plans within the melrose group are considered carefully 
by the board of directors 
for the most significant plan the fki uk pension plan a male 
aged 65 in 2013 is expected to live for a further 219 years 
31 december 2012 221 years whilst a woman aged 65 would 
live for a further 241 years 31 december 2012 242 years this 
is assumed to increase by 14 years 6 for a male and 15 years 
6 for a female aged 65 in 2033 
a summary of the other key assumptions used for all of the uk 
plans is shown below
2013 assumptions 

2012 assumptions 

discount rate 440 450
inflation 340 300
it is noted that a 01 percentage point decrease in the discount 
rate would increase the pension liabilities on the uk pension 
plans by £148 million or 2 and a 01 percentage point 
increase to inflation would increase the liabilities on these plans 
by £109 million or 1 furthermore an increase by one year in 
the expected life of a 65 year old member would increase the 
pension liabilities on these plans by £244 million or 3
the longterm 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 beyond 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 in 2013 
the melrose group made annual contributions of £200 million  
in total 2012 £185 million to the three uk schemes within  
the fki businesses and £52 million 2012 £46 million to the 
mckechnie uk pension plan 
the melrose board recognises that as businesses are bought and 
sold then pension plan liabilities need to exit the group however 
this can be done at a time which is commercially sensible
risk management
the financial risks the group faces have been considered and 
policies have been implemented to best deal with each risk 
the most significant financial risks are considered to be liquidity 
risk finance cost risk exchange rate risk contract and warranty 
risk and commodity cost risk these are discussed in turn below
liquidity risk management
the group’s net debt position at 31 december 2013 was 
£1408 million compared to £9977 million a year earlier the 
decrease in net debt resulted primarily from the five disposals 
completed during the year the return of capital of £5953 million 
discussed under post balance sheet events later in this review 
increased net debt in february 2014
at 31 december 2013 the group had a committed term loan 
drawn down in two tranches of £180 million and us 290 million 
in addition the group has two revolving credit facilities  
of £7415 million and €300 million at 31 december 2013  
these facilities are due to mature on 29 june 2017 
the sterling denominated term loan is subject to mandatory 
repayments of 5 on 30 june 2015 30 june 2016 and 
31 december 2016 adjusted for nonmandatory repayments and 
cancellations the us dollar denominated term loan is no longer 
subject to mandatory repayment following the repayment and 
cancellation of us 210 million in the year
the facility has two financial covenants a net debt to headline 
ebitda headline operating profit before depreciation and 
amortisation covenant and an interest cover covenant both of 
which are tested half yearly at june and december and both of 
which afforded comfortable headroom at 31 december 2013
the first covenant which calculates net debt at average 
exchange rates during the period was set at 325x at 
31 december 2013 and reduces to 30x from 30 june 2015 
onwards for the year ended 31 december 2013 it was 05x 
31 december 2012 26x but allowing for the return of capital 
was 23x on a proforma basis at this date 
the interest cover covenant remains at 40x throughout the life  
of the facility at 31 december 2013 it was 118x 31 december 
2012 91x 
the drawdown of the facilities are made in the core currencies  
of the group being us dollars euro and sterling and in 
proportions to protect the group as efficiently as possible from 
currency fluctuations on net assets and profit
 
in addition there are a number of uncommitted overdraft 
guarantee and borrowing facilities made available to the group 
these uncommitted facilities are lightly used
cash deposits and marketable securities amounted to 
£2004 million at 31 december 2013 31 december 2012 
£1565 million and are offset against gross debt of £3412 million 
31 december 2012 £11542 million to arrive at the net debt 
position of £1408 million 31 december 2012 £9977 million the 
combination of this cash and the size of the debt facilities allows 
the directors to consider that the group has sufficient access to 
liquidity for its current needs
the board takes careful consideration of counterparty risk with 
banks when deciding where to place melrose’s cash on deposit 
45
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information finance director’s review 
continued
finance cost risk management
the group remained in a net debt position at 31 december 2013 
the group’s facility bears interest at interbank rates plus a margin 
which varies dependent on the level of the leverage and which 
ranges from 140 to 265 as at 31 december 2013 the 
margin was 225 31 december 2012 200 
at the beginning of 2013 the group protected just under 80 of 
gross borrowings from exposure to changes in interest rates by 
holding a number of interest rate swaps to fix the interest rate cost 
on us 5600 million £3368 million and €2920 million of debt 
during the year post the disposals of businesses and the 
resulting reduction in gross debt several interest rate swap 
arrangements were closed out this left swap arrangements in 
place fixing the interest rate cost on us 2468 million 
£3368 million and €2000 million of gross borrowings
for the swap arrangements that remain the group will pay 
annually in arrears a weighted blended fixed finance cost of 
070 2012 084 for us dollar swaps 072 2012 078 
on euro swaps and 091 2012 091 on sterling swaps 
plus the relevant bank margin which is currently 225 
following the return of capital on 28 february 2014 78 
of gross borrowings are now protected against exposure to 
movement in interest rates
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 below 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 12 months placed on a rolling quarterly basis 
and for 100 of each material contract this does not eliminate 
the cash risk but does bring some certainty to it
exchange rates used in the year
us dollar
12 month 
average rate closing rate
2013 156 166
2012 159 162
euro
2013 118 120
2012 123 123
the effect on the key headline numbers in 2013 for the continuing 
group due to the translation movement of exchange rates from 
2012 to 2013 is shown below the table illustrates the translation 
movement in revenue and headline operating profit if the 2012 
average exchange rates had been used to calculate the 2013 
results rather than the 2013 average exchange rate
the translation difference in 2013 £m
revenue decrease 213
headline operating profit decrease 40
for reference in respect of the enlarged group an indication of 
the shortterm 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
50
for every 10 cent strengthening  
of the euro against sterling
84
the longterm 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
73
for every 10 cent strengthening  
of the euro against sterling
64
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 
multicurrency debt facility funding these foreign currency trading 
units protects against some of the balance sheet and banking 
covenant translation risk
46
 melrose industries plc 
annual report 2013
strategic report 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 
contract and warranty risk management
the financial risks connected with contracts and warranties 
which include the consideration of warranty terms duration and 
any other commercial or legal terms are considered carefully by 
melrose before being entered into
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 these risks 
are minimised through sourcing policies including the use of 
multiple sources where possible and procurement contracts 
where prices are agreed for up to one year to limit exposure to 
price volatility
post balance sheet events – return of capital
consistent with the melrose strategy of returning proceeds to 
shareholders following significant disposals melrose announced 
the return of £5953 million to shareholders on 21 january 2014 
which was subsequently approved by shareholders on 
7 february 2014
the return was made via a redeemable share scheme which 
gave shareholders the option of receiving a payment either on 
28 february 2014 or 7 may 2014 or a combination of both
alongside the capital return a share consolidation took place 
which reduced the number of ordinary shares by a factor of 
11 for 13 or 15 from 12666 million to 10718 million
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 strategic report section of the annual report  
as is the financial position of the group its cash flows liquidity 
position and borrowing facilities in addition the consolidated 
financial statements include the group’s objectives policies and 
processes for managing its capital its financial risk management 
objectives details of its financial instruments and hedging 
activities and its exposures to credit risk and liquidity risk
the group has considerable financial resources and 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 and as a consequence the 
directors believe that the group is well placed to manage its 
business risks successfully despite the current uncertain 
economic outlook
after making enquiries the directors have a reasonable 
expectation that the group has adequate resources to continue 
in operational existence for the foreseeable future for this 
reason they continue to adopt the going concern basis in 
preparing the financial statements
geoffrey martin
group finance director
5 march 2014
47
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information corporate social 
responsibility
employment policies
the group recognises its responsibilities 
for the fair treatment of all its current and 
potential employees in accordance with 
legislation applicable to the territories 
within which it operates together with 
relevant guidance on good practice where 
applicable due to the diverse nature of 
the group’s activities businesses are 
required to manage their employment 
matters on a decentralised basis 
therefore responsibility for the adoption 
of employment policies and practices sits 
at a local business unit level this position 
ensures that rigorous and targeted 
policies and procedures are implemented 
that 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 employment and 
employeerelated 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 together with 
appropriate training andor retraining
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 and 
fairly considered by the group and are 
considered on merit with regard only 
to the jobspecific requirements and the 
relevant applicant’s aptitude and ability to 
carry out the role and where reasonable 
to do so arrangements to enable disabled 
persons to carry out a specific role will be 
made 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 recognises its 
responsibilities for the fair 
treatment of all its current 
and potential employees”
melrose seeks to be a good 
corporate citizen wherever it 
conducts business to observe 
all national and local laws and 
take into account regional 
and local concerns customs 
and traditions one of the 
fundamental principles of 
melrose is to conduct all of its 
business in an open honest 
and ethical manner
48
 melrose industries plc 
annual report 2013
strategic report employee initiatives
during 2013 the group’s businesses 
implemented a range of employeerelated 
initiatives some of these are listed below
• within bridon over 1400 employees 
which represents 85 of its global 
workforce completed the second 
bridon employee opinion survey in 
march 2013 the survey was designed 
to highlight areas for improvement but 
the results for 2013 also confirmed that 
positive progress in engaging the 
workforce has been made since the first 
survey in 2011 for instance employees 
reported a better understanding of the 
link between the bridon strategy and 
their personal objectives and daily work 
activities it was also acknowledged  
that there were better opportunities to 
learn new skills and that management 
coaching and feedback had improved
• in march 2013 bridon established the 
“bridon academy” a virtual framework 
for all the learning and development  
that takes place worldwide across its 
business the academy offers learning 
solutions in the areas of management 
and leadership personal effectiveness 
technical skills and ethical compliance 
and has adopted the 702010 principle 
of learning – 70 on the job 20 coaching 
and 10 formal training although the 
majority of training is delivered by internal 
experts and facilitators external trainers 
are used in specialist areas participants 
are from a variety of functions including 
sales technical finance supply chain 
and operations over 350 employees 
globally have benefitted so far from 
internal learning solutions as part of the 
coaching and formal training elements  
of the academy
• the brush czech “talent academy”  
was officially launched in 2013 this  
is a four year training programme for 
selected employees with high potential 
and is divided into two parts for the 
first three years the courses focus  
on the development of managers’ 
competences and leadership skills  
the fourth year is focused on practice 
the first six months in finance and sales 
training and the next six months in 
developing operational and technical 
skills the training is provided by an 
external company
• within elster electricity there were 
various employee related initiatives in 
2013 including an employee satisfaction 
survey in brazil a management 
360 degree evaluation in romania 
health checks for employees in russia 
and a series of “knowledge transfer” 
training sessions including topics such 
as pensions and health insurance
• the elster gas leadership conference 
was established in 2013 to introduce the 
new vision goals and future strategy for 
the business and to align management 
and business priorities with this new 
strategy two conferences were held  
in 2013 and senior management team 
members managing directors and 
other executives were invited from  
elster gas businesses in europe  
north america and asia
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 engagement 
and employee development the diverse 
nature of the group’s activities places the 
responsibility for the implementation and 
management of employment practices with 
local management in a manner appropriate 
to each business
a culture of clear communication and 
employee consultation and engagement 
is inherent in the group’s businesses 
employee briefing sessions with employee 
representatives are held on a regular basis 
to communicate strategy key changes 
financial results achievements and other 
important issues to employees and receive 
feedback from them on these issues 
regular appraisals employee surveys 
notice boards team meetings suggestion 
boxes and newsletters are also used to 
communicate and engage with employees 
and to solicit their feedback on issues of 
concern to them as 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 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 and have regard for both financial 
and economic factors affecting the group
“ in march 2013 bridon 
established the ‘bridon 
academy’ a virtual 
framework for all the 
learning and development 
that takes place worldwide 
across its business” 
350 
employees globally have  
benefitted so far from elements  
of the bridon academy
49
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information corporate social 
responsibility  
continued
gender diversity
the chart below shows the total number 
of males and females working within the 
group as at 31 december 2013 
the total number of women employed 
represents 21 of the group’s workforce
health  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 
current events and issues relating to 
health and safety matters are also 
discussed within the group at quarterly 
board meetings of the company
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 the use of 
defined and business specific health and 
safety key performance indicators are also 
used within the group’s businesses which 
are specific to the exact nature of their 
businesses and allow for focus analysis 
and improvement at local levels often on  
a location by location basis
many manufacturing locations within the 
group hold iso 18001 certification the 
internationally recognised assessment 
standard for occupational health and 
safety management systems this 
certification includes several of the major 
manufacturing locations within the group
21
the total number of women  
employed represents 21  
of the group’s workforce
melrose industries plc board
other employees senior managers
1
total group employees
male 8224
female 2190
male 7
female  0
male 8
female 1
2
male 8209
female  2189
1 defined as senior head office employees of melrose industries plc located in the london and birmingham offices
2 liz hewitt was appointed to the board of melrose industries plc on 8 october 2013
50
 melrose industries plc 
annual report 2013
strategic report divisional managers within each business 
unit have responsibility 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 procedures 
detailed health and safety plans are set 
by businesses each year to determine 
annual targets and improvement initiatives
all businesses have health and safety 
committees “hs committees” which 
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 
countermeasures can be identified to 
prevent accidents from happening  
each hs committee recommendation  
is followed up at the next board meeting 
to ensure that issues are resolved 
additionally operations are audited by  
the hs committee 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 2013 many of the group’s 
businesses implemented a range of health 
and safety initiatives some of these are 
listed below
• within elster water a global 
occupational health  safety audit 
was carried out in 2013 all sites with 
assembly andor test activities were 
reviewed by independent professional 
auditors for compliance with national 
elster and best practice standards 
the intention is to provide safe and 
secure work environments for all 
employees worldwide and to motivate 
employees and management to maintain 
these standards the audit focused on 
workplace regulations provision and  
use of work equipment machine safety 
lifting operation and lifting equipment 
regulations manual handling operations 
and personal protective equipment 
regulations the implementation of 
identified improvement opportunities 
was initiated immediately no significant 
shortfall for immediate attention was 
highlighted by the auditors 
• in 2013 brush czech focused on 
working at height which represents 
a serious potential workplace risk 
new measures were introduced 
which improved safety and additionally 
helped to ensure compliance with 
iso 18001 standards
• elster electricity carried out numerous 
health  safety training courses in 
2013 including the prevention of 
accidents and occupational diseases 
in argentina training on firefighting 
equipment and fire safety in china 
working at height in russia and 
electricity safety and new hazardous 
communication standardisation 
training in the us
• in 2013 a new work process was 
introduced at the bridon site in 
doncaster known as a mission directed 
work stream for safety health and the 
environment this aims to assist shift 
managers team leaders and their teams 
in creating a work environment that is 
safe healthy and where environmental 
risks are managed the objectives 
include enabling employees to 
understand and apply health safety and 
environmental policies and procedures 
to set up and use visual controls to 
identify and control hazards to develop 
and implement a health safety and 
environmental audit and to continually 
improve risk management in the work 
place this has been implemented in  
all areas of the doncaster site and 
assessment takes place on a monthly 
basis to ensure continual improvement
“ divisional managers within each business 
unit have responsibility to ensure that 
health and safety remains a key focus” 
51
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information corporate social  
responsibility  
continued
the environment
the directors of the company fully 
understand the importance of the group’s 
environmental responsibilities each of 
the company’s businesses is 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
although there are no standardised 
environmental kpis currently used within 
the group each business 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
a number of the group’s businesses have 
achieved or are currently in the process 
of achieving the high standards required 
to obtain iso 14001 environmental 
management systems certification
during the year the company continued 
to comply with the ongoing annual 
reporting requirements of the uk’s  
carbon reduction commitment energy 
efficiency scheme
environmental initiatives
during 2013 many of the group’s 
businesses implemented a range of 
environmental improvement initiatives 
some of these are listed below
• investment in stateoftheart energy 
efficient production and test equipment 
for water meters continues to reduce 
carbon emissions during the production 
process of the meters elster water 
introduced two further rapid test rigs in 
luton and brussels these rigs which 
are specifically designed for volumetric 
meters reduce test time and required 
water volume significantly compared to 
standard test rigs for other product 
lines this reduces energy and water 
consumption considerably
• at bridon hangzhou china the 
maintenance department suggested 
ways to save water following an 
inspection of the cooling water circulation 
system and monitoring the water usage 
in the wire drawing and extrusion 
processes by reusing cooling water 
wherever possible and introducing a 
water cooling system the site was able 
to save 24500 tons of water in 2013
• at the brush czech facility heating  
and lighting consumption is the major 
source of co
2
 emissions and represents 
a substantial production cost in order 
to decrease this cost the company is 
renovating a different part of the building 
insulation each year in particular 
windows and doors they are also using 
sophisticated heating software which 
allows them to monitor and regulate the 
interior temperature during the colder 
times of the year the temperature is 
also monitored daily and evaluated and 
adapted to current requirements of 
individual workplaces in 2013 the 
heating temperature in the production 
buildings was optimised which reduced 
the heating consumption by 17
• in 2013 a 74 saving was made in 
water usage at the brush loughborough 
uk site the main water saving across 
the site came from the introduction of 
a new urinal outlet system called ureco 
this accounted for a 97 saving in 
2013 on water consumption for all of the 
mains waterfed urinals throughout the 
brush uk site
• at elster electricity in mexico a “green 
day” was held in 2013 to promote the 
care of the environment which included 
workshops on recycling reforestation 
and water saving this was attended  
by both employees and their families
• the three largest facilities in elster  
gas north america – nebraska city 
nebraska perfection in geneva 
ohio and hauck manufacturing in 
lebanon pennsylvania – completed 
their first ever registration with 
iso 14001 environmental management 
systems and attained certification in 
2013 the two facilities in germany 
at mainz and lotte of elster gmbh 
are not yet registered with iso 14001 
but certification is expected to be 
obtained during 2015
greenhouse gas emissions
this greenhouse gas “ghg” report has 
been prepared for the reporting period of 
1 january 2013 to 31 december 2013 
the data has been prepared in 
accordance with the principles and 
requirements of the greenhouse gas 
protocol revised edition iso 14064 
part 1 and the uk government’s 
department for environment food and 
rural affairs defra guidance on how 
to measure and report on greenhouse 
gas emissions 2013
the group has reported on all of the 
emission sources required under the 
companies act 2006 strategic report 
and directors’ reports regulations 43 
see companies act 2006 strategic 
report and directors’ reports 
regulations 2013 paragraph 18
 
the group does not have responsibility  
for any emission sources that are not 
included in the consolidated statement 
the group has used the ghg protocol 
corporate accounting and reporting 
standard revised edition data gathered 
in accordance with the ghg reporting 
procedure and emission factors from uk 
government’s ghg conversion factors 
for company reporting 2014
 
the financial reporting year of 2013 is the 
first year in which the company has been 
required to disclose its ghg emissions 
data within the annual report therefore 
the 2013 data represents the baseline 
against which reduction targets will be set
the reported emissions cover all entities 
over which the organisation had financial 
control as at 31 december 2013 
emissions from entities acquired or 
disposed of during the reporting period 
ie disposed on or before 31 december 
2013 or acquired after 1 january 2013 are 
not accounted for in the report therefore 
data from crosby acco truth marelli and 
harris businesses has not been included 
within the reported ghg data as these 
businesses were divested during 2013  
no businesses were acquired during the 
reporting period
 
52
 melrose industries plc 
annual report 2013
strategic report all material emissions from within the 
organisational and operational scope 
and boundaries of the group are reported  
the emissions from owned vehicle 
transport ie group owned cars and 
vans lorries and fork lift trucks and the 
emissions associated with refrigeration 
have been excluded from the report on 
a de minimis basis the ghg emissions 
from these sources have been estimated 
to account for less than 1 of the total 
melrose emissions reported on an 
individual basis and as a combined total 
to account for less than 2 of the total 
melrose ghg emissions reported 
supply chain assurance
owing to the geographical and operational 
diversity of the group’s businesses and 
therefore its supplier base there is no 
single overarching group policy currently 
in use in relation to suppliers however  
the security assurance and ethical 
compliance of business supply chains is 
very important to melrose responsibility 
for the implementation and management 
of all supplierrelated policies rests with 
local management in each business  
such policies are used in a manner 
appropriate to the size and complexity  
of each business and also take into 
account the nature and geographical 
representation of key suppliers a supplier 
approval process exists within the 
businesses which is linked to specific  
and tailored supplier assessments and 
due diligence requirements
human rights and ethical standards
as is stated within the employee policies 
and supply chain assurance sections 
above the decentralised nature of the 
group means there is no single over
arching policy currently in place with 
regard to human rights however sound 
business ethics and integrity are core to 
the group’s values and each business 
places a high importance on its dealings 
with all employees customers suppliers 
and other stakeholders and is committed 
to good practice in respect of human 
rights employees within each group 
business are required at all times to 
exhibit the highest ievels of integrity and  
to maintain the highest ethical standards 
in business affairs
each of the group’s businesses will have 
their own code of ethics in dealing with 
matters such as human rights with all 
employee policies also being set locally 
within each business in order to ensure 
compliance with local laws and standards 
as a minimum responsibility for the 
communication and implementation of 
such policies rests with the relevant senior 
divisional managers
global ghg emissions data for period  
1 january 2013 – 31 december 2013 
 
emissions sources tonnes co
2
e
1
combustion of fuel  operation of facilities 41182
electricity heat and steam purchased for own use 29678
overseas electricity
2
46158
company’s chosen intensity measurement 
emissions reported above normalised to tonnes per £1000 turnover
0068
 1  c o
2
e – carbon dioxide equivalent this figure includes greenhouse gases in addition to carbon dioxide
2  the emissions associated with overseas electricity are presented in tonnes carbon dioxide only as per the defra guidance
the strategic report 
as set out on pages 2 
to 53 has been approved 
by the board
on behalf of the board
simon peckham
chief executive
5 march 2014
53
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information 1
3
5
governance 
overview
dear shareholder
the board remains committed to 
maintaining the high standards of 
corporate governance required to ensure 
that the company can continue to deliver 
on its strategic goals and to achieve 
longterm success for the benefit of its 
shareholders as part of this approach 
the board supports applies and complies 
with the main principles the supporting 
principles and the respective related 
provisions of corporate governance 
contained in the 2012 uk corporate 
governance code the “uk code” issued 
by the financial reporting council and 
available to view on the financial 
reporting council’s website at  
wwwfrcorgukourworkcodes
standardscorporategovernanceaspx
in support of this commitment the  
board carried out a number of actions 
during 2013 designed to ensure that the 
company remains compliant with the 
provisions of the uk code and also  
to enable continuous improvement  
in line with best practice corporate 
governance guidelines 
an externally facilitated board evaluation 
process was completed towards the end 
of 2013 this is the first time that an 
external evaluation has been carried out 
in relation to the melrose board this 
evaluation focused on the composition 
and performance of the board and its 
committees and the performance of the 
chairman and the senior nonexecutive 
director this evaluation process proved 
to be a valuable exercise from both a 
corporate governance and wider business 
perspective further details on this 
evaluation process can be found on  
pages 63 and 64 of this corporate 
governance report
a number of changes are planned for the 
melrose board during 2014 as we have 
previously announced miles templeman 
will be retiring from his role as senior 
nonexecutive director at the conclusion 
of this year’s annual general meeting 
“agm” to be held on 13 may 2014 
miles templeman has held a non
executive position on the melrose board 
since the original flotation in 2003 his 
advice and experience have been 
invaluable to melrose over the last 
10 years he has contributed in many  
ways to the company’s success over this 
period and we wish him all the very best 
for the future miles will be replaced as the 
senior nonexecutive director by perry 
crosthwaite who will simultaneously 
relinquish his position as chairman of the 
remuneration committee a role that will 
be filled by justin dowley following the 
conclusion of this year’s agm liz hewitt 
who joined the melrose board on 
8 october 2013 will chair the nomination 
committee with effect from the end of the 
2014 agm liz has already made a 
significant contribution since joining the 
board and we are confident that her 
longestablished and pertinent experience 
will be of considerable benefit to melrose 
as we continue to grow the business
christopher miller
executive chairman
5 march 2014
executive chairman   1
executive directors   3
nonexecutive  
directors   5 
male   8
female   1
finance   6
industry   3
introduction from 
the chairman 
christopher miller
board composition
industry background
board diversity 
8
1
6
3
54
 melrose industries plc 
annual report 2013
governance  board structure
the board
christopher miller – executive chairman
david roper – executive vicechairman
simon peckham – chief executive
geoffrey martin – group finance director
miles templeman
1
 – senior nonexecutive director
perry crosthwaite
2
 – nonexecutive director
justin dowley – nonexecutive director
john grant – nonexecutive director
liz hewitt
3
 – nonexecutive director
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 
•  report to shareholders and give 
consideration to all other significant 
financial matters
•  agree board succession plans and 
consider the evaluation of the board’s 
performance over the preceding year
•  review the group’s risk management 
and internal control systems and
•  agree the group’s governance 
framework and approve the standards 
of business conduct and other 
group policies
1 miles templeman will be retiring from the board at the conclusion of the 2014 agm
2 perry crosthwaite will assume the position of senior nonexecutive director at the conclusion of the 2014 agm
3 liz hewitt was appointed to the board on 8 october 2013 and shortly after also joined each of the board committees
4 perry crosthwaite will be replaced by justin dowley as chairman of the remuneration committee at the conclusion  
of the 2014 agm
5 liz hewitt will become the chair of the nomination committee at the conclusion of the 2014 agm
nomination committee 
report 
directors’ remuneration 
report 
audit  
committee
john grant
 
– chairman
perry crosthwaite
justin dowley
miles templeman
1
liz hewitt
3
remuneration  
committee
perry crosthwaite – chairman
4
justin dowley
4
john grant
miles templeman
1
liz hewitt
3
nomination  
committee
miles templeman
1
 – chairman
perry crosthwaite
justin dowley
john grant
liz hewitt
3 5
christopher miller
audit committee 
report
perry crosthwaite
remuneration  
committee chairman
directors’  
remuneration report
dear shareholder on behalf of the board i am pleased to present our report on directors’ remuneration at the end of yet another highly successful year the directors’ remuneration report sets out the amounts earned in respect of the year ended 31 december 2013 and the remuneration policy for the directors of melrose 
new regulations have come into effect which impact the presentation and disclosure of directors’ remuneration and the layout of this report reflects those new regulations this report is therefore presented in two sections the annual report on remuneration and the directors’ remuneration policy the annual report on remuneration provides details on the amounts earned in respect of the year ended 31 december 2013 and will be subject to an advisory vote at the agm the directors’ remuneration policy sets out the forwardlooking remuneration policy that will be subject to a binding vote at the agm and shall take binding effect from the conclusion of that meeting 
since flotation in 2003 melrose has always obtained special resolution support requiring 75 shareholder approval rather than the simple majority approval required for an ordinary resolution for its directors’ longterm incentive arrangements  from shareholders including in respect of the 2012 incentive plan the “ltip” that was established in 2012 your board understands that these arrangements are fundamental to achieving the strong returns for shareholders since flotation and closely align the interests of directors and senior employees to those of shareholders base salaries and annual bonuses are deliberately set at or below the lower end of a market competitive range compared to companies of similar size and complexity to ensure  a clear focus on generation of longterm value through the ltip  the level of reward earned by directors and senior management under the ltip will be dependent upon shareholder value created 
the board has delegated to the remuneration committee responsibility for overseeing the remuneration of the company’s directors company secretary and other senior employees
performance in 2013 2013 was a strong year for melrose and marked another milestone in our “buy improve sell” strategy
•  we crystallised more than three times the original shareholder value in five of the “fki” businesses acquired in 2008
•  these five disposals yielded a total consideration of approximately £950 million together more than tripling shareholder value in respect of these businesses during five years of melrose ownership
•  in accordance with our strategy the board has returned approximately £600 million in cash to shareholders equivalent to 470 pence per existing ordinary share the balance of the net proceeds has been used to pay down existing borrowings of the company
•  the elster improvement plan is ahead of schedule with operating margin increased by 5 percentage points to 174 and operating profit up 37
•  headline diluted earnings per share from continuing operations of 128p 2012 94p an increase of 36 
•  group revenue for continuing operations during the year was £17328m 2012 £10511m
•  group headline profit for continuing operations before tax was £2261m 2012 £1179m
•  full year dividend of 775p per share 2012 76p per share
it is with this in mind and in line with melrose’s remuneration philosophy of pay for performance that the remuneration committee has taken its decisions in respect of executive directors’ remuneration arrangements for 2013 and 2014
our remuneration structure for executive directors melrose’s remuneration philosophy is that executive remuneration should be simple and transparent support the delivery of the business strategy and pay for performance
the remuneration committee feels strongly that rewards should be linked to generation and delivery of real returns to shareholders
•  base salary base salaries for all executive directors are deliberately set at or below the lower end of a market competitive range compared to companies of similar size and complexity since flotation in 2003 all current executive directors have received the same annual increases to base salary in the last five years these increases have averaged 3
•  pension pension contributionssalary supplements for executive directors are payable at the level of 15 of base salary which is considered modest for a business of the size and complexity of melrose no executive director participates in or has ever participated in any melrose defined benefit pension scheme
•  annual bonus the maximum bonus payable is set at 100  of base salary all directors who participate in the annual bonus scheme receive the same percentage bonus in the  last five years the average percentage of base salary payable has been 84 the maximum opportunity is deliberately positioned below the median maximum opportunity for ftse 100 companies
•  longterm incentives the only longterm incentive arrangement in which the executive directors participate is the 2012 incentive plan which was approved by shareholders by special resolution in a general meeting held on 11 april 2012 entitlements under the 2012 incentive plan details of which are provided on page 74 were awarded in april 2012 any payment made will be dependent upon shareholder value generated over a five year time period
the remuneration committee strongly believes that this simple and transparent incentive framework is aligned with the company’s strategy for growth we believe that this remuneration strategy has also directly driven historical outperformance supported the company’s success and has clearly led to increased shareholder value in this regard our remuneration arrangements are tailored to the culture and strategy of the company take account of the current and forecast economic climate and provide a strong platform for the ongoing longterm success of the company
the remuneration policy has also enabled the executive directors to build up and retain significant shareholdings in the company further detail is given on page 74 however the table below shows the number of ordinary shares held by the executive directors as at 31 december 2013 and the value of each executive director’s shareholding at that date as a multiple  of his 2013 base salary
executive director
number of shares  held at 31 december 2013
value of shares  held at 31 december 2013 1
value of shares  held at 31 december 2013 as a multiple of 2013 base salary christopher miller 17300343 2 £52887149 125 david roper 9584633 £29300223 69 simon peckham 9664068 £29543056 69 geoffrey martin 4758797 £14547642 43 1  for these purposes the value of a share is 3057 pence being the closing midmarket price on 31 december 2013 2  as at 31 december 2013 the interest of christopher miller included 6760000 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
2013 key decisions and incentive payouts the remuneration committee remains committed to a responsible approach to executive pay as described in the business review section of this annual report and highlighted above the company delivered strong financial and operational results in 2013 the executive directors’ remuneration rewards that performance 
annual bonuses for executive directors are based on diluted earnings per share growth and a discretionary element based on the achievement of a range of operational deliverables bonuses of 100 of maximum were awarded to the executive directors in respect of 2013
in line with increases in previous years an inflationary increase of 3 was made to the executive directors’ salaries with effect from 1 january 2013 the same as for other head office employees 
awards under the 2012 incentive plan were made in april 2012 and are due to crystallise in may 2017 accordingly no executive director received any payout under a longterm incentive plan in 2013 any payment made will be dependent upon shareholder value created by may 2017 while potential value attributable to the 2012 incentive plan is included in the charts on page 81 this is included for illustrative purposes only the value ultimately delivered under this plan will be determined by reference to the value delivered to shareholders over the period to crystallisation such that the value shown in those charts is unlikely to reflect the value ultimately delivered
remuneration policy for 2014 the remuneration policy is set out for shareholder approval in the policy report on pages 77 to 84 details of how the policy will be applied in practice for 2014 are set out in the annual report on remuneration on page 76 executive directors’ base salaries have been increased by 3 with effect from january 2014 the same as for other head office employees nonexecutive directors’ basic fees increased by 3 with effect from january 2014 the additional fees payable to the committee chairmen and senior independent director which have been unchanged since 2006 have been reviewed the additional fees were considered to be below the market competitive range and have therefore been increased with effect from the 2014 agm to bring them more in line with the market the previous and new  fee levels are set out in the table on page 76 no other changes have been made to the structure of our executive director remuneration for the coming year 
shareholder engagement we remain committed to maintaining an open and transparent engagement with our investors we believe that a key objective of the directors’ remuneration report is to communicate clearly how much our executive directors are earning and how this is clearly linked to performance i trust that you will find the new style report informative 
perry crosthwaite chairman of the remuneration committee 5 march 2014
member no of meetings perry crosthwaite chairman 22 miles templeman 12 justin dowley 22 john grant 22 liz hewitt 1 11 1 following her appointment to the board on 8 october 2013
  assuming a full year’s ownership of elster in 2012 as explained in the finance director’s review
70 71 melrose industries plc annual report 2013 governance
 melrose industries plc annual report 2013 governance
strategic report governance financials shareholder information
p70
audit 
committee report
role and responsibilities the audit committee’s the “committee” role and responsibilities are set out in its terms of reference these are available on the company’s website and from the company secretary at the registered office in discharging its duties the committee embraces its role of protecting the interests of shareholders with respect to the integrity of financial information published by the company and the effectiveness of the audit specifically the committee is responsible for
•  reviewing and monitoring the integrity of the financial statements of the group including the annual report and interim report
•  keeping under review the effectiveness of the group’s financial reporting internal audit and controls risk management systems and compliance controls
•  focusing and challenging the consistency of accounting policies methods used to account for significant or unusual transactions and compliance with accounting standards
•  reviewing 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
•  developing implementing and monitoring the group’s policy  on external audit and for overseeing the objectivity and effectiveness of the auditor and
•  reviewing and considering the annual report and  financial statements to ensure that it is fair balanced and understandable and advising the board that the statement  can be made by the board that this is the case
composition each member of the committee is deemed to be independent by the company and brings recent and relevant financial experience from senior executive and nonexecutive positions as described  in their biographies on pages 56 and 57 given her financial qualifications and relevant experience the board concluded that liz hewitt should be invited to join the committee
the company secretary acts as secretary to the committee
the committee invites the group finance director the head of financial reporting and senior representatives of the external and internal auditors to attend meetings where appropriate to the business being considered the committee has the right to invite any other directors andor employees to attend meetings where this is considered appropriate in addition the committee meets at least once per year with both the external and internal auditors without management present
summary of meetings in the year the committee is expected to meet not less than three times  a year in 2013 the committee met in march august and november the scheduling of these meetings is designed to be aligned with the financial reporting timetable thereby enabling the committee to review the annual report and financial statements the interim financial report and the audit plan ahead of the year end audit and maintaining a view of the internal controls and processes throughout the year 
the attendance of its members at these meetings is shown above
significant issues related to the financial statements in discharging its duties under its terms of reference the committee undertook the following recurring activities that receive annual scrutiny
•  reviewed the annual report and financial statements and interim financial report as part of this review the committee received a report from the external auditor on their audit of the annual report and the financial statements and review of the interim report
•  considered the processes in place to generate forecasts of cash flows and accounting valuation information including the reasonableness and consistent use of assumptions
•  reviewed the effectiveness of the group’s internal controls and disclosures made in the annual report and financial statements on this matter 
•  considered the annual report and financial statements in the context of being fair balanced and understandable and reviewed the content of a paper prepared by management with regard to this principle in relation to the 2013 annual report and financial statements advised the board that in its view the 2013 annual report and financial statements when taken as a whole is fair balanced and understandable and provides the information necessary for shareholders to assess the group’s performance business model and strategy and 
•  reviewed and agreed the scope of the audit work to be undertaken by the auditor
john grant
audit committee  
chairman
the board has delegated to the audit committee responsibility for overseeing the financial reporting and internal control review and reporting and for making recommendations to the board in relation to the appointment of the company’s internal and external auditors
significant issue considered by the audit committee how the issue was addressed by the audit committee
provisions for legal and environmental claims and other provisions the level of provisioning for legal and environmental claims and other provisions require significant judgement 
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
refer to notes 3 and 20 
  the committee considered management’s proposed provisioning in respect of these legal and environmental claims and other provisions including the key judgements made and relevant legal advice
the external auditor also reported on all material provisions to the committee
having considered the matter and sought guidance from the external auditor the committee concluded that management’s proposed provisioning and the associated disclosures in the annual report were appropriate
classification of exceptional items the reporting classification and consistency of exceptional items specifically restructuring and fair value releases were an area of focus for the committee
refer to note 6 
 the committee considered the nature classification and consistency of exceptional items these items were detailed in the external auditor’s paper to the committee the committee considered this issue and concluded that these exceptional items were appropriately captured and disclosed
taxation risks and recognition of deferred tax assets judgement is required in determining the group’s provision for income taxes including 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 judgement is also required as to whether a deferred tax asset should be recognised based on the availability of future taxable profits 
refer to notes 3 8 and 21 
 management’s taxation judgements accounting treatment and the appropriateness of tax disclosures have been reviewed by the committee 
the committee considered whether from an accounting perspective an update was required to the tax provisions previously recorded in respect of specific exposures identified in addition the committee reviewed the tax implications of corporate transactions undertaken during the year the committee debated whether additional deferred tax assets should be brought onto the balance sheet as a consequence of for example the expected timing of future corporate transactions 
having taken input from the external auditor the committee agreed with management’s proposed treatment of tax risks and deferred tax assets 
impairment of goodwill intangible assets and other fixed assets the judgements in relation to goodwill impairment testing relate to the assumptions applied in calculating the value in use of the cashgenerating units being tested for impairment the key assumptions applied in the calculation relate to the future performance expectations of the cashgenerating units 
the committee has also considered the related disclosures within the financial statements
refer to notes 3 and 12 
  business plans prepared by management supporting future performance expectations used in the calculation were approved by the board the committee received a detailed report on the outcome of the impairment review performed by management the impairment review was also an area of focus for the external auditor who reported their findings to the committee
the committee considered management’s approach the assumptions applied in relation to the impairment of goodwill intangible assets and other fixed assets and related disclosures and having taken input from the external auditor agreed with management’s assessment that there were no indicators of impairment for any of the group’s business units during the year 
valuation of pension liabilities the calculation of the accounting position at the year end of the group’s pension liabilities is based on material judgemental estimates
refer to notes 3 and 23
 the committee has considered the appropriateness of the actuarial assumptions applied by management to the valuation of the group’s retirement plans at the year end 
these assumptions were reviewed with the external auditor with input and assistance from employee benefit experts the committee supported the assumptions and judgements applied by management  
member no of meetings john grant chairman 33 perry crosthwaite 33 justin dowley 33 liz hewitt 1 11 miles templeman 33 1 following her appointment to the board on 8 october 2013
in addition to these matters the committee considered the following significant issues in relation to the financial statements during the year
the audit committee’s activities during 2013
66 67 melrose industries plc annual report 2013 governance
 melrose industries plc annual report 2013 governance
strategic report governance financials shareholder information
p66
audit committee report 
continued
nomination 
committee report
external audit appointment reappointment and assessment of effectiveness the committee reviews and makes recommendations with regard to the reappointment of the external auditors in making these recommendations the committee considers auditor effectiveness and independence partner rotation and any other factors which may impact the external auditor’s reappointment
the external auditor is required to rotate the audit signing partner every five years the group’s audit signing partner changed as part of that rotation process in 2010 and therefore partner rotation is due in the financial year ending 31 december 2015
the committee has reviewed the external auditor’s performance and effectiveness taking into account input from management together with feedback from the public report on the audit quality inspection of deloitte llp  issued by the financial reporting council in may 2013 in making its assessment the committee focused on the robustness of the audit the quality of delivery of audit services and the quality of the auditor’s staff based on this information the committee concluded that the external audit process is operating effectively and deloitte llp continues to prove effective in its role  as external auditor as detailed below the committee regularly monitors the objectivity and independence of the external auditor 
deloitte llp was appointed in 2003 when the company commenced trading and the external audit has not been  formally tendered since then the committee is satisfied that the effectiveness and independence of the external auditors is not impaired in any way there are no legal or contractual obligations that restrict the group’s capacity to recommend a particular firm for appointment as auditor and therefore a resolution proposing the reappointment of deloitte llp as external auditors will be put to the shareholders at the 2014 annual general meeting
audit tendering the committee is mindful of the recommendations of the uk corporate governance code that the external audit should be put out to tender every 10 years the company will comply with the competition commission order relating to the statutory audit market for ftse350 companies which is expected to come into effect from 1 october 2014 under the proposed transitional arrangements the committee expects a formal tender process to be held no later than two years from the end of the current audit engagement partner rotation period which is due in the year ending 31 december 2015 this matter will be kept under review
nonaudit services the committee has a policy on the engagement of the external auditor for the supply of nonaudit services this is to ensure that the provision of nonaudit services does not impair the external auditor’s independence or objectivity in accordance with best practice frc guidelines the company policy in relation to non audit services is kept under regular review the policy outlines which nonaudit services are preapproved being those which are routine in nature with a fee that is not significant in the context of the audit or auditrelated services which services require the prior approval of the committee and which services the auditor is excluded from providing the general principle is that the audit firm should not be requested to carry out nonaudit services on any activity of the company where they may in the future be required to give an audit opinion
during 2013 the main nonaudit services provided by  deloitte llp were in relation to taxation advisory compliance  and planning services
an analysis of the fees earned by the external auditors for  audit and nonaudit services can be found in note 7 to the consolidated financial statements
auditor objectivity and independence the committee carries out regular reviews to ensure that auditor objectivity and independence is maintained at all times a different senior partner oversees the taxation audit of the company compared to those working on the nonaudit taxation services 
no fees were paid to deloitte llp on a contingent basis based on these strict procedures the 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
at each year end deloitte llp submits a letter setting out how it believes its independence and objectivity have been maintained as noted above they are also required to rotate the audit partner responsible for the group audit every five years and significant subsidiary audits every seven years 
internal audit 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 the internal audit programme of planned visits is discussed and agreed with the committee during the year
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 the head of financial reporting and the group operations controller followed by a meeting to discuss these key findings and to agree on resulting actions
bm howarth present their key findings to the committee twice during the year these presentations include details of the site coverage for the previous year and an outline of the planned visits  for the current year a review of the internal audit process and scope of work covered by the internal auditor is the responsibility of the committee to ensure their objectives level of authority and resources are appropriate for the nature of the businesses under review the committee also reviews bm howarth’s performance against the agreed internal audit programme a report of significant findings is presented by the internal auditor to the committee at each meeting and implementation of recommendations by the board is followed up at the subsequent committee meeting
john grant chairman audit committee 5 march 2014
diversity the committee currently takes into account a variety of factors before recommending any new appointments to the board including relevant skills to perform the role experience knowledge ethnicity and gender the most important priority of the committee however 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
whilst the committee will endeavour to pursue diversity including gender diversity throughout the melrose group and concurs with the recommendations of lord davies’ review “women on boards” the committee does not think it appropriate to have nor will it be committing to any specific diversity targets in relation to the composition of the board or the wider businesses within the group
succession planning in line with the succession planning responsibilities of the committee the decision was taken in early 2013 to recruit another nonexecutive director to the board in order to take account of the impending retirement of miles templeman from the position of senior nonexecutive director at the conclusion  of the 2014 agm it was also felt by the committee that an additional nonexecutive director serving on the melrose board would further complement the skill set of the board
the committee undertook a formal and rigorous recruitment exercise to find a suitable nonexecutive director to join the melrose board see “what the committee did in 2013” below  for further details following this process the committee recommended to the board the appointment of liz hewitt on 8 october 2013 in accordance with the articles ms hewitt will stand for election as a director of the company at the 2014 agm
at the conclusion of the 2014 agm liz hewitt will replace miles templeman as chairman of the committee
what the committee did in 2013 the main focus of the committee during 2013 as described above was the recruitment of a new nonexecutive director to the board 
after the discussion of alternatives the committee decided to use the services of stonehaven executive search an external recruitment firm who have no other connection with the company to conduct an extensive search exercise
following a formal and rigorous recruitment process the committee recommended to the board that ms hewitt’s long established and highly pertinent experience would be of significant benefit to melrose as the business continues to grow as such ms hewitt was appointed to the board on 8 october 2013 and subsequently also became a member of the audit remuneration and nomination committees
 miles templeman chairman nomination committee 5 march 2014
miles templeman
nomination committee  
chairman
committee responsibilities the nomination committee the “committee” discharges these responsibilities through 
•  regular review of the size structure and composition of the board and by providing recommendations to the board of any adjustments that may be necessary from time to time
•  giving full consideration to succession planning in order to ensure an optimum balance of executive and nonexecutive directors in terms of skills experience and diversity
• keeping under review the leadership needs of the business and
•  keeping up to date and fully informed about strategic issues and commercial changes affecting the company and the markets in which it operates
the committee is expected to meet not less than twice a year and during 2013 the committee met twice the attendance of its members at these committee meetings is shown above
the committee’s full terms of reference are available to view on the company’s website at wwwmelroseplcnetaboutus governancenominationcommittee
further details regarding the composition diversity policy and the 2013 activities of the committee are shown below
composition in compliance with the uk corporate governance code the majority of the members of the committee were independent nonexecutive directors throughout 2013 during the year the committee was chaired by miles templeman with perry crosthwaite john grant and justin dowley also serving throughout the year liz hewitt became a member of the committee upon her appointment to the board on 8 october 2013 see “succession planning” and “what the committee did in 2013” below for further details christopher miller executive chairman of the board was also a member of the committee throughout the year
the nomination committee has overall responsibility  for ensuring that the board and its committees have  the appropriate balance of skills experience independence and knowledge of the company to  enable them to discharge their respective duties  and responsibilities effectively 
member no of meetings miles templeman chairman 22 perry crosthwaite 22 justin dowley 22 john grant 22 liz hewitt 1 – christopher miller 22 1 following her appointment to the board on 8 october 2013
68 69 melrose industries plc annual report 2013 governance
 melrose industries plc annual report 2013 governance
strategic report governance financials shareholder information
p69
55
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information board of  
directors
name and title
christopher  
miller
executive  
chairman
david  
roper
executive  
vicechairman
simon  
peckham
chief  
executive
geoffrey  
martin
group finance  
director
miles  
templeman
1
senior nonexecutive 
director
perry  
crosthwaite
2
nonexecutive  
director
john  
grant
nonexecutive  
director
justin  
dowley
nonexecutive  
director
liz 
hewitt
3
nonexecutive  
director
year appointed
appointed as executive 
chairman of melrose on  
29 may 2003
appointed as chief executive 
on 29 may 2003 and as 
executive vicechairman  
on 9 may 2012
appointed as chief operating 
officer on 29 may 2003 and 
then as chief executive on  
9 may 2012
appointed as group finance 
director on 7 july 2005
appointed as a nonexecutive 
director on 8 october 2003
appointed as a nonexecutive 
director on 26 july 2005
appointed as a  
nonexecutive director  
on 1 august 2006
appointed as a nonexecutive 
director on 1 september 2011
appointed as a nonexecutive 
director of melrose on 
8 october 2013
skills and experience
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
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
qualified as a solicitor in 1986 
in 1990 he joined wassall 
plc and became an executive 
director in 1999 from 
october 2000 until may 2003 
he worked for the equity 
finance division of the royal 
bank of scotland and was 
also involved in several high 
profile transactions
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 which 
was a period of significant 
restructuring for the company
previously 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 between 
october 2004 and october 
2011 mr templeman also 
occupied the position of 
director general of the 
institute of directors
over 30 years’ experience  
as a director in the city of 
london perry 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
executive career in  
a variety of senior 
international roles within  
the automotive industry  
and other engineering 
businesses john was  
chief executive of ascot plc 
between 1997 and 2000 
prior to that he was group 
finance director of lucas 
industries plc subsequently 
lucasvarity plc between 
1992 and 1996 he also 
previously held several senior 
strategy and finance 
positions with ford motor 
company in europe and  
the us
qualified as a chartered 
accountant with price 
waterhouse 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 justin was 
also a founder partner of 
tricorn partners head of 
investment banking at merrill 
lynch europe and a director  
of morgan grenfell
qualified as a chartered 
accountant with arthur 
andersen  co following 
which she held a variety  
of senior positions within 
gartmore investment 
management cvc and  
3i group plc between 2004 
and 2011 ms hewitt was 
group director of corporate 
affairs for smith  nephew plc 
following a secondment to  
the department for business 
innovation and skills and  
hm treasury where she 
worked to establish the 
enterprise capital fund 
ms hewitt was a trustee of 
cancer research from 2005  
to 2011 
board meetings 
attended
44 44 44 44 44 44 44 34 11
other appointments
nonexecutive chairman  
of shepherd neame 
chairman of aspria 
nonexecutive director  
of the rugby football union
chairman of jupiter green 
investment trust plc 
nonexecutive director  
of investec limited  
and investec plc
nonexecutive director  
of mhp sa 
nonexecutive director  
of pace plc 
nonexecutive  
director of wolfson 
microelectronics plc
chairman of british racing 
drivers club ltd
chairman of intermediate 
capital group plc a specialist 
investment and asset 
management company 
nonexecutive director of a 
number of private companies 
including ascot authority 
holdings limited
nonexecutive director of  
the national crime agency
nonexecutive director of  
novo nordisk as and  
synergy health plc
committee 
membership 
nomination committee audit committee
1
remuneration committee
1
 
nomination committee 
chairman
1 4
audit committee 
remuneration committee 
chairman
2 5
nomination committee 
audit committee chairman
remuneration committee 
nomination committee 
audit committee 
remuneration committee
5
 
nomination committee 
audit committee
3
remuneration committee
3
nomination committee
3 4
independent
not applicable not applicable not applicable not applicable yes yes yes yes yes
1 miles templeman will be retiring from the board at the conclusion of the 2014 agm
2  perry crosthwaite will assume the position of senior nonexecutive director at the conclusion of the 2014 agm and will resign as chairman of the remuneration committee
3 liz hewitt was appointed to the board on 8 october 2013 and shortly after also joined each of the board committees
56
 melrose industries plc 
annual report 2013
governance name and title
christopher  
miller
executive  
chairman
david  
roper
executive  
vicechairman
simon  
peckham
chief  
executive
geoffrey  
martin
group finance  
director
miles  
templeman
1
senior nonexecutive 
director
perry  
crosthwaite
2
nonexecutive  
director
john  
grant
nonexecutive  
director
justin  
dowley
nonexecutive  
director
liz 
hewitt
3
nonexecutive  
director
year appointed
appointed as executive 
chairman of melrose on  
29 may 2003
appointed as chief executive 
on 29 may 2003 and as 
executive vicechairman  
on 9 may 2012
appointed as chief operating 
officer on 29 may 2003 and 
then as chief executive on  
9 may 2012
appointed as group finance 
director on 7 july 2005
appointed as a nonexecutive 
director on 8 october 2003
appointed as a nonexecutive 
director on 26 july 2005
appointed as a  
nonexecutive director  
on 1 august 2006
appointed as a nonexecutive 
director on 1 september 2011
appointed as a nonexecutive 
director of melrose on 
8 october 2013
skills and experience
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
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
qualified as a solicitor in 1986 
in 1990 he joined wassall 
plc and became an executive 
director in 1999 from 
october 2000 until may 2003 
he worked for the equity 
finance division of the royal 
bank of scotland and was 
also involved in several high 
profile transactions
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 which 
was a period of significant 
restructuring for the company
previously 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 between 
october 2004 and october 
2011 mr templeman also 
occupied the position of 
director general of the 
institute of directors
over 30 years’ experience  
as a director in the city of 
london perry 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
executive career in  
a variety of senior 
international roles within  
the automotive industry  
and other engineering 
businesses john was  
chief executive of ascot plc 
between 1997 and 2000 
prior to that he was group 
finance director of lucas 
industries plc subsequently 
lucasvarity plc between 
1992 and 1996 he also 
previously held several senior 
strategy and finance 
positions with ford motor 
company in europe and  
the us
qualified as a chartered 
accountant with price 
waterhouse 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 justin was 
also a founder partner of 
tricorn partners head of 
investment banking at merrill 
lynch europe and a director  
of morgan grenfell
qualified as a chartered 
accountant with arthur 
andersen  co following 
which she held a variety  
of senior positions within 
gartmore investment 
management cvc and  
3i group plc between 2004 
and 2011 ms hewitt was 
group director of corporate 
affairs for smith  nephew plc 
following a secondment to  
the department for business 
innovation and skills and  
hm treasury where she 
worked to establish the 
enterprise capital fund 
ms hewitt was a trustee of 
cancer research from 2005  
to 2011 
board meetings 
attended
44 44 44 44 44 44 44 34 11
other appointments
nonexecutive chairman  
of shepherd neame 
chairman of aspria 
nonexecutive director  
of the rugby football union
chairman of jupiter green 
investment trust plc 
nonexecutive director  
of investec limited  
and investec plc
nonexecutive director  
of mhp sa 
nonexecutive director  
of pace plc 
nonexecutive  
director of wolfson 
microelectronics plc
chairman of british racing 
drivers club ltd
chairman of intermediate 
capital group plc a specialist 
investment and asset 
management company 
nonexecutive director of a 
number of private companies 
including ascot authority 
holdings limited
nonexecutive director of  
the national crime agency
nonexecutive director of  
novo nordisk as and  
synergy health plc
committee 
membership 
nomination committee audit committee
1
remuneration committee
1
 
nomination committee 
chairman
1 4
audit committee 
remuneration committee 
chairman
2 5
nomination committee 
audit committee chairman
remuneration committee 
nomination committee 
audit committee 
remuneration committee
5
 
nomination committee 
audit committee
3
remuneration committee
3
nomination committee
3 4
independent
not applicable not applicable not applicable not applicable yes yes yes yes yes
4 liz hewitt will become chairman of the nomination committee at the conclusion of the 2014 agm
5  justin dowley will become chairman of the remuneration committee at the conclusion of the 2014 agm
57
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’ report
the directors of melrose industries plc 
the “company” present their annual report 
and audited financial statements of the group 
for the year ended 31 december 2013
the corporate governance report set out on pages 62 to 65 the 
finance director’s review on pages 40 to 47 and the corporate 
social responsibility section of the strategic report on pages 48 
to 53 are each incorporated by reference into this directors’ 
report disclosures elsewhere in the annual report are cross
referenced where appropriate taken together they fulfil the 
combined requirements of the companies act 2006 the “act” 
and of the disclosure and transparency rules and the listing 
rules of the financial conduct authority
details of significant events since the balance sheet date are 
contained in note 29 to the financial statements an indication of 
likely future developments in group businesses is included within 
the strategic report
directors
the directors of the company as at the date of this report 
together with their biographical details are given on pages 56 and 
57 there were no other persons who at any time during the year 
ended 31 december 2013 were directors of the company
changes to the board during the year are set out in the 
corporate governance report on pages 62 to 65 details of 
directors’ service contracts are set out in the directors’ 
remuneration report on page 83
the statement of directors’ responsibilities in relation to the 
consolidated financial statements is set out on page 85
appointment and removal of directors and their powers
the company’s articles of association “articles” give the 
directors the power to appoint and replace other directors 
under the terms of reference of the nomination committee  
any appointment must be recommended by the nomination 
committee for approval by the board 
with effect from the 2012 annual general meeting “agm”  
the board determined that all directors of the company should 
stand for reelection on an annual basis in compliance with  
the provisions of the uk corporate governance code and this 
requirement is now contained in the articles therefore all 
directors will offer themselves for election or reelection at the 
agm to be held on 13 may 2014 
the company’s senior nonexecutive director miles templeman 
has confirmed that he will retire from the board at the conclusion 
of the 2014 agm and so will not stand for reelection miles will 
be replaced in the position of senior nonexecutive director by 
perry crosthwaite 
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 and regulations specific powers relating to the allotment 
and issuance 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 act and a special resolution 
passed at the agm in 2013 the company was authorised to 
purchase its own shares limited to an aggregate maximum number 
equal to 10 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
insurance and indemnities
the directors have the benefit of an indemnity from the company 
in respect of its liabilities incurred as a result of their office  
this indemnity is provided under the company’s articles and 
satisfies the indemnity provisions of the act
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 
agm
the agm of the company will be held at barbersurgeons’ hall 
monkwell square wood street london ec2y 5bl at 1100am on 
13 may 2014 the notice convening the meeting is shown on pages 
146 to 151 and includes full details of the resolutions to be proposed 
together with explanatory notes in relation to such resolutions
post balance sheet events
in the second half of the year ended 31 december 2013 the 
company completed the disposals of five of its “fki” businesses 
namely crosby acco marelli truth and harris for a total 
consideration of approximately £950 million see note 9 to the 
financial statements for further details in accordance with its 
strategy the board decided to use part of the net proceeds 
of the disposals to return approximately £600 million in cash 
to shareholders the “return of capital” at the time of such 
decision this return was equivalent to 47 pence per existing 
ordinary share of 01 pence nominal value each in the capital of 
the company in issue at that time the “existing ordinary shares”
the return of capital was approved by shareholders at a general 
meeting of the company held on 7 february 2014 using a 
redeemable share scheme in this case involving b shares andor 
c shares and was structured with the objective of enabling 
shareholders subject to restrictions in respect of certain 
overseas shareholders to elect to receive their cash proceeds 
of 47 pence per existing ordinary share as
•  an immediate income payment the ‘‘income option’’ or
•  an immediate capital payment the ‘‘immediate capital 
option’’ or
•  a capital payment deferred until after 6 april 2014 the ‘‘deferred 
capital option’’ collectively the “share alternatives”
shareholders were also offered a mix and match facility such 
that they could choose to receive the cash proceeds through any 
combination of the share alternatives
only shareholders who were on the register of members at 
500 pm on 7 february 2014 the “bc share record date” 
were entitled to participate in the return of capital and the 
deadline for shareholders making their elections in respect  
of the share alternatives was 430 pm on 14 february 2014 
58
 melrose industries plc 
annual report 2013
governance further details of the share alternatives are listed in the table below together with details of the number of existing ordinary shares in 
respect of which each share alternative was chosen by shareholders 
share alternative details of share alternative
number of existing 
ordinary shares in  
respect of which share 
alternative chosen
1
income option relevant shareholders received one c share with a nominal value of 000001 pence for  
every existing ordinary share held at the bc share record date and a single c share 
dividend of 47 pence per c share held the single c share dividend became due and 
payable on 17 february 2014 and thereafter the c shares were automatically converted into 
c deferred shares with a nominal value of 000001 pence each proceeds in respect of the 
income option were paid to relevant shareholders on 28 february 2014 and the c deferred 
shares will be redeemed by the company on 30 april 2014 or such other date as the 
directors may determine for an aggregate consideration of one penny
757503886
immediate capital option relevant shareholders received one b share with a nominal value of 47 pence for every 
existing ordinary share held at the bc share record date and have such b shares 
redeemed by the company on 17 february 2014 proceeds in respect of the immediate 
capital option were paid to relevant shareholders on 28 february 2014
493363270
deferred capital option relevant shareholders received one b share with a nominal value of 47 pence for every 
existing ordinary share held at the bc share record date and have such b shares 
redeemed by the company on 30 april 2014 or such other date as the directors may 
determine proceeds in respect of the deferred capital option will be paid to relevant 
shareholders on 7 may 2014 or such other date as the directors may determine
15759880
1  neither the immediate capital option nor the deferred capital option were made available to any shareholders with a registered address in or who were resident or located in australia 
canada japan new zealand the republic of south africa united states and any other territory where the invitation to participate in the return of capital proposals and any election for either 
the immediate capital option andor the deferred capital option in respect of all or some of such shareholder’s entitlement to the return of capital would violate the laws of that jurisdiction or 
would require the registration of the b shares c shares andor c deferred shares and all such shareholders were automatically deemed to have elected for the income option
associated with the return of capital a oneoff ordinary share 
capital consolidation was approved by shareholders at the 
general meeting of the company held on 7 february 2014 in 
the ratio of 11 for 13 the “share capital consolidation” and the 
record date for the share capital consolidation was 600pm on 
the same day the “share capital consolidation record date”
the aim of the share capital consolidation was to ensure 
so far as possible that the market price of an ordinary share 
remained approximately the same before and after the return 
of capital and so far as possible to maintain comparability of 
historical and future per share data
the share capital consolidation was effected by the subdivision 
of every existing ordinary share into 11 shares of 1110 pence 
each in the capital of the company and forthwith upon such 
subdivision the consolidation of every 13 shares of 1110 pence 
each in the capital of the company resulting from such sub
division into one new ordinary share of 13110 pence in the 
capital of the company the “new ordinary shares” 
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 as at 
31 december 2012 31 december 2013 and immediately 
following the share capital consolidation on 7 february 2014 
are set out within the following sections shareholders continued 
to own approximately the same proportion of the company after 
the share capital consolidation as they did before subject to 
fractional entitlements
capital structure
the table below shows details of the company’s issued share 
capital as at 31 december 2012 31 december 2013 and 
immediately following the share capital consolidation becoming 
effective on 10 february 2014
share class
31 december 
2012
31 december 
2013
10 february 2014
post the 
share capital 
consolidation
existing ordinary 
shares of 
01 pence each
1266627036 1266627036 nil
new ordinary shares 
of 13110 pence each
nil nil 1071761339
1
1   fractional entitlements resulting from the share capital consolidation were aggregated 
and sold in the market on shareholders’ behalf in order to ensure that the aggregate of 
all fractional entitlements to be sold in the market added up to a whole number of new 
ordinary shares between the bc share record date and the share capital consolidation 
record date one ordinary share was allotted fully paid up for cash to investec at a price 
which was equal to the closing middlemarket price of an existing ordinary share on 
7 february 2014 less 47 pence this ordinary share was not entitled to participate in the 
return of capital but was subject to the share capital consolidation 
only the new ordinary shares are traded on the london 
stock exchange
the company is not aware of any agreements between 
shareholders that restrict the transfer of new ordinary shares or 
that restrict voting rights attached to the new ordinary shares
details of the 2012 incentive share plan are set out on pages 
70 to 84 of the directors’ remuneration report and note 22 to the 
financial statements
59
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’ report 
continued
shareholders’ voting rights
only the 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 from 
time to time
•  on a show of hands every member who is present in person 
or by proxy 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
if any call or other sum payable by a holder of new ordinary 
shares remains unpaid they shall not be entitled to vote at a 
general meeting or class meeting in respect of any shares held 
by them currently all new ordinary shares are fully paid
articles of association
the company’s articles were amended pursuant to a special 
resolution approved at the general meeting of the company held 
on 7 february 2014 in order to reflect the rights and restrictions 
attaching to the b shares the c shares and the c deferred 
shares and certain other changes required in relation to the 
share capital consolidation the rights and restrictions attaching 
to the new ordinary shares following the share capital 
consolidation remained exactly the same as those attaching to 
the existing ordinary shares immediately prior to the share 
capital consolidation
substantial shareholdings
as at 31 december 2013 and 4 march 2014 the company has 
been advised of the following substantial interests in the new 
ordinary share capital of melrose industries plc
shareholder
holding as at 
31 december 2013 
holding as at
4 march 2014 
blackrock inc 164027614 1295 137308187 1281
schroders plc 104406194 824 87730453 819
threadneedle asset 
management ltd
74255412 586 62152083 580
legal  general 
investment 
management ltd
59863410 473 50519233 471
aviva investors 57576569 455 48543369 453
scottish widows 
investment 
partnership
52321407 413 48755878 455
shareholder dividend
the directors are pleased to recommend the payment of a final 
dividend of 50p per share 2012 50p on 15 may 2014 to 
ordinary shareholders on the register of members of the 
company at the close of business on 22 april 2014 this dividend 
recommendation will be put to shareholders at the forthcoming 
agm of the company to be held on 13 may 2014 subject to 
shareholder approval being obtained at the agm for the final 
dividend this will mean a full year 2013 dividend of 775p per 
share 2012 76p
in the second half of the year ended 31 december 2013 the 
company completed the disposals of five of its “fki” businesses 
namely crosby acco marelli truth and harris for a total 
consideration of approximately £950 million see note 9 to the 
financial statements for further details in accordance with its 
strategy the board decided to use part of the net proceeds of 
the disposals to return approximately £600 million in cash to 
shareholders by way of the return of capital proposals 
described earlier in this directors’ report the return of capital 
was approved by shareholders at the general meeting of the 
company held on 7 february 2014 this return to shareholders is 
not included in the full year dividend figure stated above 
it is the intention of the board to continue to pursue a progressive 
dividend policy where appropriate 
the company offers a dividend reinvestment plan “drip” 
which gives shareholders the opportunity to use their  
dividend payments to purchase further ordinary shares in 
melrose industries plc further details about the drip and its 
terms and conditions can be found within the investors section 
on the company’s website at wwwmelroseplcnet to the 
extent that shareholders chose the income option in respect  
of all or some of their entitlement to the return of capital the 
drip could not be used in relation to the single c share dividend 
paid to such shareholders in respect of their holdings of such 
c shares
financial instruments
the disclosures required in relation to the use of financial 
instruments by the company including the financial risk 
management objectives and policies of the company and the 
exposure of the company to liquidity risk exchange rate risk 
contract and warranty risk and commodity cost risk can be 
found in the finance director’s review on pages 40 to 47 
which is incorporated by reference into this directors’ report 
and in note 24 to the financial statements
research and development activities
melrose group businesses are encouraged to focus on research 
and development and to ensure that new and innovative product 
lines continue to be developed during 2013 investment 
continued and several new product launches were either realised 
during 2013 or planned for 2014 this group strategy helps to 
ensure that each business can remain at the forefront of 
technological advances within defined market sectors and be able 
to meet specific customer demands some examples of the types 
of new products being launched within the various markets are 
discussed within the chief executive’s business reviews on pages 
22 to 31 of the strategic report
60
 melrose industries plc 
annual report 2013
governance employees
further details in relation to employment policies employee 
involvement consultation and development together with  
details of some of the human resource improvement initiatives 
implemented during 2013 are shown on pages 48 and 49 of the 
corporate social responsibility section of the strategic report 
which is incorporated by reference into this directors’ report
environmental
the directors of the company fully understand the importance  
of the group’s environmental responsibilities each of the 
company’s businesses is 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 
further details in relation to the various environmental initiatives 
that are ongoing within some of the group’s businesses and 
statistics showing greenhouse gas emissions data are shown on 
pages 52 and 53 of the corporate social responsibility section 
of the strategic report which is incorporated by reference into 
this directors’ report 
political donations
the company’s policy is not to make any political donations and 
there were no political donations made during the year ended 
31 december 2013 2012 nil
significant agreements and change of control
with the exception of the group’s banking facilities the 2012 
incentive plan including the options over 2012 incentive shares 
and the divisional management longterm incentive plans there 
are no other agreements that would have a significant effect upon 
a change of control of melrose industries plc as at 5 march 2014
in june 2012 as part of the process to acquire elster the group 
agreed a £15 billion five year multicurrency committed bank 
facility which states that 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 options over the 2012 
incentive shares would be exercised and any 2012 incentive 
shares resulting from such exercise or that have previously been 
issued would convert into ordinary shares of 13110 pence or 
an entitlement to a dividend paid in cash the rate of conversion 
being based upon the offer price of the company’s 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 non
cash element having been advised by an investment bank of 
repute that such valuation is fair and reasonable
auditor
so far as each director is aware there is no relevant audit 
information of which the company’s 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
on behalf of the board the audit committee has reviewed 
the effectiveness performance independence and objectivity 
of the existing external auditor deloitte llp for the year ended 
31 december 2013 and concluded that the external auditor 
was in all respects effective deloitte llp has expressed its 
willingness to continue in office as auditor accordingly 
resolutions 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 
approved by the board of directors and signed on its behalf by
adam westley
company secretary
5 march 2014
61
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information corporate 
governance report
statement of compliance
the company is required to make certain statements relating 
to the way it is governed as laid down in the uk code the 
remainder of this corporate governance report describes the 
way in which the company has applied and complied with the 
main principles the supporting principles and the respective 
related provisions of governance set out in the uk code
the board is accountable to the company’s shareholders for 
good governance throughout the year ended 31 december 
2013 the company applied and complied with the main 
principles the supporting principles and the respective related 
provisions of the uk code with the exception of a specific 
element of schedule a which recommends that grants under 
executive share options and longterm incentive plans should 
normally be phased rather than awarded in one block under 
the 2012 incentive plan details of which are provided on pages 
70 to 84 of the directors’ remuneration report entitlements to 
executive directors were awarded in one block rather than 
phased the 2012 incentive plan was recommended as being 
in the best interests of shareholders as a whole by the board of 
directors and was approved by shareholders at a general 
meeting held on 11 april 2012 with regard to all other aspects of 
executive directors’ remuneration the company’s policies fully 
comply with the provisions of schedule a of the uk code
the audit committee report nomination committee report and 
directors’ remuneration report also form part of this corporate 
governance report
main principle a leadership
the board
details of the structure of the board and its key responsibilities 
are shown on page 55
board responsibilities are discharged 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 adhoc 
basis as required by timecritical business needs 
there were four formally scheduled board meetings held during 
the year and the attendance of each director at these meetings 
is shown on page 64 in addition a number of unscheduled 
board meetings were held during the year in connection with 
corporate transactions for example business divestments and 
more recently the return of capital to shareholders and 
associated share capital consolidation
a pack of briefing papers and an agenda are provided to each 
director in advance of each scheduled board or committee 
meeting the directors are able to seek further clarification and 
information on any matter from any other director the company 
secretary or any other 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
the board has introduced a fully encrypted electronic board 
portal system enabling board and committee papers to be 
delivered securely to directors this facilitates a faster and more 
secure distribution of information accessed using electronic 
tablets and reduced resource usage
the company secretary is responsible for advising and 
supporting the chairman and the board on corporate 
governance matters as well as ensuring a smooth flow of 
information to enable effective decision making all directors 
have access to the advice and services of the company 
secretary and through him have access to independent 
professional advice in respect of their duties at the company’s 
expense the company secretary acts as secretary to the 
board the audit committee the nomination committee and the 
remuneration committee
in addition business review meetings are held between 
scheduled board meetings these meetings are critical to 
providing the directors with a comprehensive understanding of 
the current performance and the key issues affecting group 
businesses without the formality or rigidity of a board meeting 
chief executives and other senior management from the melrose 
businesses are periodically invited to attend and present to 
these meetings providing the directors with an opportunity to 
meet and engage with existing and emerging talent from across 
the organisation
in accordance with its articles and in compliance with the 
companies act 2006 the company has granted a qualifying 
third party indemnity to each director the company also 
maintains directors’ and officers’ liability insurance
chairman vicechairman and chief executive
the roles of chairman and vicechairman are and will remain 
separate to that of the chief executive of the company in 
accordance with best practice and board policy
the chairman with the assistance of the vicechairman is 
responsible for leadership of the board the chairman sets the 
board agenda and ensures that adequate time is given to the 
discussion of issues particularly those of a strategic nature 
responsibility for ensuring effective communications with 
shareholders rests with the chairman vicechairman and the 
two other executive directors 
during 2013 the nonexecutive directors led by the current 
senior nonexecutive director miles templeman held meetings 
to discuss and appraise the performance of the chairman
the chief executive is responsible for strategic direction and 
decisions involving the daytoday management of the company
main principle b  effectiveness
board composition
as at 5 march 2014 the board was comprised of an executive 
chairman three other executive directors and five nonexecutive 
directors all of whom the board considers to be independent 
the board believes that the directors possess diverse business 
experience in areas complementary to the activities of the 
company biographies of the directors are shown on pages 
56 and 57 and on the company’s corporate website at 
wwwmelroseplcnet these biographies identify any other 
appointments held by the nonexecutive directors none of the 
executive directors hold nonexecutive positions outside 
the company
62
 melrose industries plc 
annual report 2013
governance nonexecutive director independence
in accordance with the provisions of the uk code consideration 
has been given to the independence of all nonexecutive 
directors the board considers all of the nonexecutive directors 
to be independent
miles templeman currently the board’s senior nonexecutive 
director will retire from his position at the conclusion of the 2014 
annual general meeting having been a nonexecutive director of 
melrose for the past 10 years as part of the board’s succession 
planning processes liz hewitt was appointed as a nonexecutive 
director on 8 october 2013 the board is of the opinion that ms 
hewitt’s longestablished and highly pertinent experience will be 
of significant benefit to melrose as the business continues to grow 
and that ms hewitt’s appointment will help to further strengthen 
the independence of the board in accordance with the company’s 
articles ms hewitt will stand for election at the 2014 agm
the board notes that perry crosthwaite has served as a  
nonexecutive director on the melrose board since july 2005 
and as a result he will have served in this position for more 
than nine years during the course of 2014 the board is of the 
opinion that due to his invaluable experience in financial and 
other corporate matters mr crosthwaite continues to maintain 
both his effectiveness and his independence the board 
will continue to monitor this position but feels at the present 
time that mr crosthwaite continues to make an important 
contribution to the company
the nonexecutive directors are not entitled to any cash bonus 
or shares under the 2012 incentive plan
board induction training and support
a full and formal induction programme tailored to the needs 
of individual directors is provided for new directors joining the 
board the primary aim of the induction programme is to 
introduce new directors to and educate new directors about 
the group’s businesses its operations and its governance 
arrangements in the case of liz hewitt the induction process 
included meetings with senior management and external 
advisers a thorough briefing on the businesses of the company 
and site visits to the company’s various business operations 
individual induction requirements are monitored by the chairman 
and the company secretary to ensure that new directors gain 
sufficient knowledge to enable them to contribute to the 
board’s deliberations as quickly as possible
one of the outputs from the 2013 board evaluation exercise was 
a desire for the board as a whole to gain greater visibility of and 
connection with the group’s business operations following this 
feedback a visit is being organised to the elster gas operations 
at osnabrück in germany this visit will provide the board with an 
opportunity to meet with senior management and staff at elster 
gas and to receive presentations and updates on developments 
and other changes occurring in that business segment 
board evaluation 
evaluation approach and process
during 2013 the chairman held meetings with each of the 
directors individually including the senior nonexecutive director 
miles templeman to discuss the performance of individual 
executive directors and the board as a whole in accordance 
with the provisions of the uk code during 2013 the board 
engaged lintstock limited to undertake an independent 
evaluation of board and board committee performance and to 
identify areas where performance and procedures might be 
further improved lintstock limited is a specialist corporate 
governance consultancy and has no commercial dealings or 
other connection with the melrose group
the first stage of the evaluation involved lintstock engaging with 
the chairman and the company secretary to discuss and agree 
the scope of the proposed evaluation and to develop a series of 
comprehensive questionnaires tailored to the specific 
circumstances of melrose 
all respondents were then requested to complete online 
questionnaires addressing the composition and performance of 
the board and its committees and the performance of the 
chairman and the senior nonexecutive director the anonymity 
of all respondents was ensured throughout the process in order 
to promote the open and frank exchange of views 
lintstock subsequently produced a report which addressed the 
following areas 
•  the composition of the board and the board’s understanding 
of the views of the company’s major investors stakeholders 
and of the markets in which the company operates
•  the involvement of the nonexecutive directors in the affairs of 
the company outside of board and committee meetings the 
dynamics between the board members and between the 
board and senior management and the atmosphere in the 
board room 
•  the board’s time management and the annual time 
commitment required of directors together with the board’s 
annual cycle of work and the support afforded to the board 
•  the board’s oversight of strategy and the board members’ 
views over the principal strategic challenges and opportunities 
facing the company 
•  the risk appetite of the board and the board’s management of 
the principal risks and uncertainties to the group 
•  the succession planning for executive directors and for senior 
management at the level below the board and the board’s 
visibility of potential successors for key positions from within 
the business and 
•  the composition and performance of the board and its 
committees and the performance of the chairman and the 
senior nonexecutive director 
at a dedicated board session a report of the findings of the 
evaluation and its recommendations were discussed and specific 
actions agreed
63
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information corporate  
governance report 
continued
outputs of the evaluation
the board recognises the benefits of a thorough board and 
committee evaluation process overall the evaluation 
demonstrated that the composition and performance of the 
board and its committees and the performance of the chairman 
and the senior nonexecutive director were very effective 
as a result of the review amongst other things the board agreed
•  to incorporate into the board schedule visits to major operating 
businesses and periodic sessions with senior management 
from those business units
•  that there was a need to increase the frequency of 
management presentations to the board
•  that further board time should be devoted to discussions 
concerning talent management and executive and non
executive succession planning and
•  that there was a need to further enhance the board’s 
understanding of risk identification and management
in accordance with the provisions of the uk code it is 
anticipated that externally facilitated board evaluations will be 
carried out every three years in years when an external 
evaluation is not carried out the board will continue to complete 
internal performancebased questionnaires with the process 
managed by the company secretary the scope for each 
subsequent evaluation will be designed to build upon learning 
gained in the previous year to ensure that the recommendations 
agreed in the evaluations are implemented and that yearonyear 
progress is measured and reported upon
annual reelection of directors
in accordance with the provisions of the uk code all of the 
directors stood for reelection at the 2013 annual general 
meeting the articles of association of the company require the 
directors to stand for annual reelection thus ensuring continued 
compliance with the uk code as such all directors will offer 
themselves for election or reelection as the case may be at the 
2014 annual general meeting to be held on 13 may 2014 with 
the exception of miles templeman who is retiring at the 
conclusion of the annual general meeting
following the formal performance evaluations of each of the 
directors and having carefully considered the commitments 
required and the contribution made by each director the 
chairman is of the opinion that each director’s performance 
continues to be effective and continues to demonstrate 
commitment to the role
attendance of directors at meetings
the following table shows the attendance of each of the directors 
at the scheduled meetings of the board and its committees held 
during the year the quorum necessary for the transaction of 
business by the board and each of its 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
attendance of directors
board audit remuneration nomination
number of meetings
1
4 3 2 2
christopher miller 4 – – 2
david roper 4 – – –
simon peckham 4 – – –
geoffrey martin 4 3
2
– –
miles templeman 4 3 1 2
perry crosthwaite 4 3 2 2
john grant 4 3 2 2
justin dowley 3 3 2 2
liz hewitt
3
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  liz hewitt was appointed to the board on 8 october 2013 since her appointment ms hewitt 
attended each of the remaining board and committee meetings through to year end
main principle c accountability
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 for the benefit of its shareholders 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 development of the 
group’s overall risk management policies and system of internal 
control frameworks and for reviewing their respective 
effectiveness while the role of management is to implement 
these policies and frameworks across the group’s business 
operations 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 2013 financial year 
and up to the date of approval of this annual report
a separate audit committee report is set out on pages 66 to 68 
and provides details of the role and activities of the committee 
and its relationship with the internal and external auditors
managing and controlling risk
the group has policies and internal control frameworks which 
address a number of key business risks including strategic 
operational compliance ethical and financial risks a summary 
of the principal risks and uncertainties that could impact upon 
the group’s performance is set out on pages 36 to 39
64
 melrose industries plc 
annual report 2013
governance the group’s financial risk management objectives and 
policies are also described in the finance director’s review on 
pages 40 to 47 
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 operational 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 process implemented across the group through  
a review of the key findings presented by the external and internal 
auditors management is responsible for ensuring that the audit 
committee’s recommendations in respect of internal controls 
and risk management are implemented
following the acquisition of elster in august 2012 the company 
has been working hard to ensure the successful integration of 
this business into melrose reporting and governance frameworks 
in order to ensure a consistent approach is maintained 
throughout the group
internal financial controls and reporting
the group has a comprehensive system for assessing the 
effectiveness of the group’s internal 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 as discussed 
in the audit committee report on pages 66 to 68 bm howarth 
is the group’s internal auditor they also assumed internal audit 
responsibility for the elster businesses from acquisition in 
august 2012 onwards
a total of 42 internal audit visits covering 459 of group 
turnover were completed during 2013 these visits include 
27 elster reporting units which combined with the planned 
visits for 2014 will ensure that 98 of the elster units will have 
been visited by internal audit within two years of acquisition 
the directors are pleased to report that there were no material 
deficiencies the majority of the recommendations presented in 
the internal audit reports have now been or are in the process 
of being implemented of the 42 sites visited in 2013 three 
sites have been chosen for “revisits” in 2014 to ensure that  
the agreed improvements to systems and processes have 
been implemented
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
the company takes very seriously its responsibilities under the 
bribery act 2010 and has in place appropriate measures to ensure 
compliance policies in place within each business apply 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
the company is currently in the process of updating its 
compliance policies and this is expected to be finalised during 
2014 as part of these ongoing improvements it is expected  
that an independent and externally facilitated whistleblowing 
hotline will be made available to all employees within the group 
this facility is currently only available to elster employees
main principle d remuneration
following changes to the companies act 2006 and in line with 
new regulations which came into effect on 1 october 2013 
details around directors’ remuneration both generally and as it 
relates to the uk code are set out in the directors’ remuneration 
report and are now presented in the following three sections
•  the annual statement from the chairman of the remuneration 
committee which can be found on pages 70 and 71 
•  the annual report on remuneration which can be found on 
pages 72 to 77 and
•  the directors’ remuneration policy which can be found on 
pages 77 to 84
main principle e relations 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 non
executive 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 
shareholders generally 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
the board welcomes the attendance of shareholders at the 
annual general meeting the results of the voting on each of the 
resolutions proposed will be announced shortly after the annual 
general meeting has concluded via the melrose corporate 
website at wwwmelroseplcnet
65
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information audit 
committee report
role and responsibilities
the audit committee’s the “committee” role and responsibilities 
are set out in its terms of reference these are available on the 
company’s website and from the company secretary at the 
registered office in discharging its duties the committee 
embraces its role of protecting the interests of shareholders with 
respect to the integrity of financial information published by the 
company and the effectiveness of the audit specifically the 
committee is responsible for
•  reviewing and monitoring the integrity of the financial 
statements of the group including the annual report and 
interim report
•  keeping under review the effectiveness of the group’s financial 
reporting internal audit and controls risk management 
systems and compliance controls
•  focusing and challenging the consistency of accounting 
policies methods used to account for significant or unusual 
transactions and compliance with accounting standards
•  reviewing 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
•  developing implementing and monitoring the group’s policy  
on external audit and for overseeing the objectivity and 
effectiveness of the auditor and
•  reviewing and considering the annual report and  
financial statements to ensure that it is fair balanced and 
understandable and advising the board that the statement  
can be made by the board that this is the case
composition
each member of the committee is deemed to be independent by 
the company and brings recent and relevant financial experience 
from senior executive and nonexecutive positions as described  
in their biographies on pages 56 and 57 given her financial 
qualifications and relevant experience the board concluded that 
liz hewitt should be invited to join the committee
the company secretary acts as secretary to the committee
the committee invites the group finance director the head of 
financial reporting and senior representatives of the external 
and internal auditors to attend meetings where appropriate to the 
business being considered the committee has the right to invite 
any other directors andor employees to attend meetings where 
this is considered appropriate in addition the committee meets 
at least once per year with both the external and internal auditors 
without management present
summary of meetings in the year
the committee is expected to meet not less than three times  
a year in 2013 the committee met in march august and 
november the scheduling of these meetings is designed to be 
aligned with the financial reporting timetable thereby enabling the 
committee to review the annual report and financial statements 
the interim financial report and the audit plan ahead of the year 
end audit and maintaining a view of the internal controls and 
processes throughout the year 
the attendance of its members at these meetings is 
shown above
significant issues related to the financial statements
in discharging its duties under its terms of reference the 
committee undertook the following recurring activities that 
receive annual scrutiny
•  reviewed the annual report and financial statements and 
interim financial report as part of this review the committee 
received a report from the external auditor on their audit of the 
annual report and the financial statements and review of the 
interim report
•  considered the processes in place to generate forecasts of 
cash flows and accounting valuation information including the 
reasonableness and consistent use of assumptions
•  reviewed the effectiveness of the group’s internal controls and 
disclosures made in the annual report and financial 
statements on this matter 
•  considered the annual report and financial statements in the 
context of being fair balanced and understandable and 
reviewed the content of a paper prepared by management with 
regard to this principle in relation to the 2013 annual report 
and financial statements advised the board that in its view the 
2013 annual report and financial statements when taken as a 
whole is fair balanced and understandable and provides the 
information necessary for shareholders to assess the group’s 
performance business model and strategy and 
•  reviewed and agreed the scope of the audit work to be 
undertaken by the auditor
john grant
audit committee  
chairman
the board has delegated to the audit committee 
responsibility for overseeing the financial reporting and 
internal control review and reporting and for making 
recommendations to the board in relation to the 
appointment of the company’s internal and external auditors
member no of meetings
john grant chairman 33
perry crosthwaite 33
justin dowley 33
liz hewitt
1
11
miles templeman 33
1 following her appointment to the board on 8 october 2013
66
 melrose industries plc 
annual report 2013
governance significant issue considered by the audit committee how the issue was addressed by the audit committee
provisions for legal and environmental claims 
and other provisions
the level of provisioning for legal and environmental 
claims and other provisions require significant judgement 
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
refer to notes 3 and 20 
 
 
the committee considered management’s proposed provisioning in respect 
of these legal and environmental claims and other provisions including the key 
judgements made and relevant legal advice
the external auditor also reported on all material provisions to the committee
having considered the matter and sought guidance from the external auditor 
the committee concluded that management’s proposed provisioning and the 
associated disclosures in the annual report were appropriate
classification of exceptional items 
the reporting classification and consistency of 
exceptional items specifically restructuring and 
fair value releases were an area of focus for 
the committee
refer to note 6 
 
the committee considered the nature classification and consistency of exceptional 
items these items were detailed in the external auditor’s paper to the committee 
the committee considered this issue and concluded that these exceptional items 
were appropriately captured and disclosed
taxation risks and recognition of deferred tax assets
judgement is required in determining the group’s 
provision for income taxes including 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 judgement 
is also required as to whether a deferred tax asset 
should be recognised based on the availability of 
future taxable profits 
refer to notes 3 8 and 21 
 
management’s taxation judgements accounting treatment and the appropriateness 
of tax disclosures have been reviewed by the committee 
the committee considered whether from an accounting perspective an update was 
required to the tax provisions previously recorded in respect of specific exposures 
identified in addition the committee reviewed the tax implications of corporate 
transactions undertaken during the year the committee debated whether additional 
deferred tax assets should be brought onto the balance sheet as a consequence of 
for example the expected timing of future corporate transactions 
having taken input from the external auditor the committee agreed with 
management’s proposed treatment of tax risks and deferred tax assets 
impairment of goodwill intangible assets and 
other fixed assets
the judgements in relation to goodwill impairment 
testing relate to the assumptions applied in calculating 
the value in use of the cashgenerating units being 
tested for impairment the key assumptions applied 
in the calculation relate to the future performance 
expectations of the cashgenerating units 
the committee has also considered the related 
disclosures within the financial statements
refer to notes 3 and 12 
 
 
business plans prepared by management supporting future performance 
expectations used in the calculation were approved by the board the committee 
received a detailed report on the outcome of the impairment review performed by 
management the impairment review was also an area of focus for the external 
auditor who reported their findings to the committee
the committee considered management’s approach the assumptions applied in 
relation to the impairment of goodwill intangible assets and other fixed assets and 
related disclosures and having taken input from the external auditor agreed with 
management’s assessment that there were no indicators of impairment for any of 
the group’s business units during the year 
valuation of pension liabilities
the calculation of the accounting position at the year 
end of the group’s pension liabilities is based on 
material judgemental estimates
refer to notes 3 and 23
 
the committee has considered the appropriateness of the actuarial assumptions 
applied by management to the valuation of the group’s retirement plans at the 
year end 
these assumptions were reviewed with the external auditor with input and 
assistance from employee benefit experts the committee supported the 
assumptions and judgements applied by management  
in addition to these matters the committee considered the following significant issues in relation to the 
financial statements during the year
the audit committee’s activities during 2013
67
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information audit committee report 
continued
external audit
appointment reappointment and assessment 
of effectiveness
the committee reviews and makes recommendations with 
regard to the reappointment of the external auditors in making 
these recommendations the committee considers auditor 
effectiveness and independence partner rotation and any other 
factors which may impact the external auditor’s reappointment
the external auditor is required to rotate the audit signing partner 
every five years the group’s audit signing partner changed as 
part of that rotation process in 2010 and therefore partner 
rotation is due in the financial year ending 31 december 2015
the committee has reviewed the external auditor’s performance 
and effectiveness taking into account input from management 
together with feedback from the public report on the audit quality 
inspection of deloitte llp  issued by the financial reporting council 
in may 2013 in making its assessment the committee focused on 
the robustness of the audit the quality of delivery of audit services 
and the quality of the auditor’s staff based on this information the 
committee concluded that the external audit process is operating 
effectively and deloitte llp continues to prove effective in its role  
as external auditor as detailed below the committee regularly 
monitors the objectivity and independence of the external auditor 
deloitte llp was appointed in 2003 when the company 
commenced trading and the external audit has not been  
formally tendered since then the committee is satisfied that the 
effectiveness and independence of the external auditors is not 
impaired in any way there are no legal or contractual obligations 
that restrict the group’s capacity to recommend a particular firm 
for appointment as auditor and therefore a resolution proposing 
the reappointment of deloitte llp as external auditors will be put 
to the shareholders at the 2014 annual general meeting
audit tendering
the committee is mindful of the recommendations of the uk 
corporate governance code that the external audit should be 
put out to tender every 10 years the company will comply with 
the competition commission order relating to the statutory audit 
market for ftse350 companies which is expected to come into 
effect from 1 october 2014 under the proposed transitional 
arrangements the committee expects a formal tender process 
to be held no later than two years from the end of the current 
audit engagement partner rotation period which is due in the year 
ending 31 december 2015 this matter will be kept under review
nonaudit services
the committee has a policy on the engagement of the external 
auditor for the supply of nonaudit services this is to ensure that 
the provision of nonaudit services does not impair the external 
auditor’s independence or objectivity in accordance with best 
practice frc guidelines the company policy in relation to non
audit services is kept under regular review the policy outlines 
which nonaudit services are preapproved being those which 
are routine in nature with a fee that is not significant in the 
context of the audit or auditrelated services which services 
require the prior approval of the committee and which services 
the auditor is excluded from providing the general principle is 
that the audit firm should not be requested to carry out nonaudit 
services on any activity of the company where they may in the 
future be required to give an audit opinion
during 2013 the main nonaudit services provided by  
deloitte llp were in relation to taxation advisory compliance  
and planning services
an analysis of the fees earned by the external auditors for  
audit and nonaudit services can be found in note 7 to the 
consolidated financial statements
auditor objectivity and independence
the committee carries out regular reviews to ensure that auditor 
objectivity and independence is maintained at all times a different 
senior partner oversees the taxation audit of the company 
compared to those working on the nonaudit taxation services 
no fees were paid to deloitte llp on a contingent basis based 
on these strict procedures the 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
at each year end deloitte llp submits a letter setting out how it 
believes its independence and objectivity have been maintained 
as noted above they are also required to rotate the audit partner 
responsible for the group audit every five years and significant 
subsidiary audits every seven years 
internal audit
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 the internal audit programme of planned visits is 
discussed and agreed with the committee during the year
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 the head of financial reporting and 
the group operations controller followed by a meeting to discuss 
these key findings and to agree on resulting actions
bm howarth present their key findings to the committee twice 
during the year these presentations include details of the site 
coverage for the previous year and an outline of the planned visits  
for the current year a review of the internal audit process and scope 
of work covered by the internal auditor is the responsibility of the 
committee to ensure their objectives level of authority and 
resources are appropriate for the nature of the businesses under 
review the committee also reviews bm howarth’s performance 
against the agreed internal audit programme a report of significant 
findings is presented by the internal auditor to the committee at 
each meeting and implementation of recommendations by the 
board is followed up at the subsequent committee meeting
john grant
chairman audit committee
5 march 2014
68
 melrose industries plc 
annual report 2013
governance nomination 
committee report
diversity
the committee currently takes into account a variety of factors 
before recommending any new appointments to the board 
including relevant skills to perform the role experience 
knowledge ethnicity and gender the most important priority 
of the committee however 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
whilst the committee will endeavour to pursue diversity including 
gender diversity throughout the melrose group and concurs with the 
recommendations of lord davies’ review “women on boards” 
the committee does not think it appropriate to have nor will it be 
committing to any specific diversity targets in relation to the 
composition of the board or the wider businesses within 
the group
succession planning
in line with the succession planning responsibilities of the 
committee the decision was taken in early 2013 to recruit 
another nonexecutive director to the board in order to take 
account of the impending retirement of miles templeman from 
the position of senior nonexecutive director at the conclusion  
of the 2014 agm it was also felt by the committee that an 
additional nonexecutive director serving on the melrose board 
would further complement the skill set of the board
the committee undertook a formal and rigorous recruitment 
exercise to find a suitable nonexecutive director to join the 
melrose board see “what the committee did in 2013” below  
for further details following this process the committee 
recommended to the board the appointment of liz hewitt on 
8 october 2013 in accordance with the articles ms hewitt will 
stand for election as a director of the company at the 2014 agm
at the conclusion of the 2014 agm liz hewitt will replace 
miles templeman as chairman of the committee
what the committee did in 2013
the main focus of the committee during 2013 as described 
above was the recruitment of a new nonexecutive director to 
the board 
after the discussion of alternatives the committee decided to 
use the services of stonehaven executive search an external 
recruitment firm who have no other connection with the 
company to conduct an extensive search exercise
following a formal and rigorous recruitment process the 
committee recommended to the board that ms hewitt’s long
established and highly pertinent experience would be of 
significant benefit to melrose as the business continues to grow 
as such ms hewitt was appointed to the board on 8 october 
2013 and subsequently also became a member of the audit 
remuneration and nomination committees
 
miles templeman
chairman nomination committee
5 march 2014
miles templeman
nomination committee  
chairman
committee responsibilities
the nomination committee the “committee” discharges these 
responsibilities through 
•  regular review of the size structure and composition of the 
board and by providing recommendations to the board of any 
adjustments that may be necessary from time to time
•  giving full consideration to succession planning in order to 
ensure an optimum balance of executive and nonexecutive 
directors in terms of skills experience and diversity
• keeping under review the leadership needs of the business and
•  keeping up to date and fully informed about strategic issues 
and commercial changes affecting the company and the 
markets in which it operates
the committee is expected to meet not less than twice a year 
and during 2013 the committee met twice the attendance of its 
members at these committee meetings is shown above
the committee’s full terms of reference are available to view on 
the company’s website at wwwmelroseplcnetaboutus
governancenominationcommittee
further details regarding the composition diversity policy and the 
2013 activities of the committee are shown below
composition
in compliance with the uk corporate governance code the 
majority of the members of the committee were independent 
nonexecutive directors throughout 2013 during the year the 
committee was chaired by miles templeman with perry 
crosthwaite john grant and justin dowley also serving throughout 
the year liz hewitt became a member of the committee upon her 
appointment to the board on 8 october 2013 see “succession 
planning” and “what the committee did in 2013” below for further 
details christopher miller executive chairman of the board was 
also a member of the committee throughout the year
the nomination committee has overall responsibility  
for ensuring that the board and its committees have  
the appropriate balance of skills experience 
independence and knowledge of the company to  
enable them to discharge their respective duties  
and responsibilities effectively 
member no of meetings
miles templeman chairman 22
perry crosthwaite 22
justin dowley 22
john grant 22
liz hewitt
1
–
christopher miller 22
1 following her appointment to the board on 8 october 2013
69
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information perry crosthwaite
remuneration  
committee chairman
directors’  
remuneration report
dear shareholder 
on behalf of the board i am pleased to present our report on 
directors’ remuneration at the end of yet another highly 
successful year the directors’ remuneration report sets out the 
amounts earned in respect of the year ended 31 december 2013 
and the remuneration policy for the directors of melrose 
new regulations have come into effect which impact the 
presentation and disclosure of directors’ remuneration and the 
layout of this report reflects those new regulations this 
report is therefore presented in two sections the annual 
report on remuneration and the directors’ remuneration policy 
the annual report on remuneration provides details on the 
amounts earned in respect of the year ended 31 december 2013 
and will be subject to an advisory vote at the agm the directors’ 
remuneration policy sets out the forwardlooking remuneration 
policy that will be subject to a binding vote at the agm and shall 
take binding effect from the conclusion of that meeting 
since flotation in 2003 melrose has always obtained special 
resolution support requiring 75 shareholder approval rather 
than the simple majority approval required for an ordinary 
resolution for its directors’ longterm incentive arrangements  
from shareholders including in respect of the 2012 incentive plan 
the “ltip” that was established in 2012 your board understands 
that these arrangements are fundamental to achieving the strong 
returns for shareholders since flotation and closely align the 
interests of directors and senior employees to those of 
shareholders base salaries and annual bonuses are deliberately 
set at or below the lower end of a market competitive range 
compared to companies of similar size and complexity to ensure  
a clear focus on generation of longterm value through the ltip  
the level of reward earned by directors and senior management 
under the ltip will be dependent upon shareholder value created 
the board has delegated to the remuneration committee 
responsibility for overseeing the remuneration of the 
company’s directors company secretary and other 
senior employees
performance in 2013
2013 was a strong year for melrose and marked another 
milestone in our “buy improve sell” strategy
•  we crystallised more than three times the original shareholder 
value in five of the “fki” businesses acquired in 2008
•  these five disposals yielded a total consideration of 
approximately £950 million together more than tripling 
shareholder value in respect of these businesses during five 
years of melrose ownership
•  in accordance with our strategy the board has returned 
approximately £600 million in cash to shareholders equivalent 
to 470 pence per existing ordinary share the balance of the 
net proceeds has been used to pay down existing borrowings 
of the company
•  the elster improvement plan is ahead of schedule with 
operating margin increased by 5 percentage points to 174 
and operating profit up 37
•  headline diluted earnings per share from continuing operations 
of 128p 2012 94p an increase of 36 
•  group revenue for continuing operations during the year was 
£17328m 2012 £10511m
•  group headline profit for continuing operations before tax was 
£2261m 2012 £1179m
•  full year dividend of 775p per share 2012 76p per share
it is with this in mind and in line with melrose’s remuneration 
philosophy of pay for performance that the remuneration 
committee has taken its decisions in respect of executive 
directors’ remuneration arrangements for 2013 and 2014
our remuneration structure for executive directors
melrose’s remuneration philosophy is that executive remuneration 
should be simple and transparent support the delivery of the 
business strategy and pay for performance
the remuneration committee feels strongly that rewards should 
be linked to generation and delivery of real returns to shareholders
•  base salary base salaries for all executive directors are 
deliberately set at or below the lower end of a market 
competitive range compared to companies of similar size and 
complexity since flotation in 2003 all current executive 
directors have received the same annual increases to base 
salary in the last five years these increases have averaged 3
•  pension pension contributionssalary supplements for 
executive directors are payable at the level of 15 of base 
salary which is considered modest for a business of the size 
and complexity of melrose no executive director participates 
in or has ever participated in any melrose defined benefit 
pension scheme
member no of meetings
perry crosthwaite chairman 22
miles templeman 12
justin dowley 22
john grant 22
liz hewitt
1
11
1 following her appointment to the board on 8 october 2013
  assuming a full year’s ownership of elster in 2012 as explained in the finance director’s review
70
 melrose industries plc 
annual report 2013
governance •  annual bonus the maximum bonus payable is set at 100  
of base salary all directors who participate in the annual 
bonus scheme receive the same percentage bonus in the  
last five years the average percentage of base salary payable 
has been 84 the maximum opportunity is deliberately 
positioned below the median maximum opportunity for 
ftse 100 companies
•  longterm incentives the only longterm incentive 
arrangement in which the executive directors participate is 
the 2012 incentive plan which was approved by shareholders 
by special resolution in a general meeting held on 11 april 
2012 entitlements under the 2012 incentive plan details of 
which are provided on page 74 were awarded in april 2012 
any payment made will be dependent upon shareholder 
value generated over a five year time period
the remuneration committee strongly believes that this simple 
and transparent incentive framework is aligned with the 
company’s strategy for growth we believe that this remuneration 
strategy has also directly driven historical outperformance 
supported the company’s success and has clearly led to 
increased shareholder value in this regard our remuneration 
arrangements are tailored to the culture and strategy of the 
company take account of the current and forecast economic 
climate and provide a strong platform for the ongoing longterm 
success of the company
the remuneration policy has also enabled the executive directors 
to build up and retain significant shareholdings in the company 
further detail is given on page 74 however the table below 
shows the number of ordinary shares held by the executive 
directors as at 31 december 2013 and the value of each 
executive director’s shareholding at that date as a multiple  
of his 2013 base salary
executive director
number of shares  
held at 
31 december 2013
value of shares  
held at 
31 december 2013
1
value of shares  
held at 
31 december 2013 
as a multiple of 
2013 base salary
christopher miller 17300343
2
£52887149 125
david roper 9584633 £29300223 69
simon peckham 9664068 £29543056 69
geoffrey martin 4758797 £14547642 43
1  for these purposes the value of a share is 3057 pence being the closing midmarket 
price on 31 december 2013 
2  as at 31 december 2013 the interest of christopher miller included 6760000 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
2013 key decisions and incentive payouts
the remuneration committee remains committed to a 
responsible approach to executive pay as described in the 
business review section of this annual report and highlighted 
above the company delivered strong financial and operational 
results in 2013 the executive directors’ remuneration rewards 
that performance 
annual bonuses for executive directors are based on diluted 
earnings per share growth and a discretionary element based on 
the achievement of a range of operational deliverables bonuses 
of 100 of maximum were awarded to the executive directors in 
respect of 2013
in line with increases in previous years an inflationary increase of 
3 was made to the executive directors’ salaries with effect from 
1 january 2013 the same as for other head office employees 
awards under the 2012 incentive plan were made in april 2012 
and are due to crystallise in may 2017 accordingly no executive 
director received any payout under a longterm incentive plan 
in 2013 any payment made will be dependent upon shareholder 
value created by may 2017 while potential value attributable to 
the 2012 incentive plan is included in the charts on page 81 
this is included for illustrative purposes only the value ultimately 
delivered under this plan will be determined by reference to the 
value delivered to shareholders over the period to crystallisation 
such that the value shown in those charts is unlikely to reflect 
the value ultimately delivered
remuneration policy for 2014
the remuneration policy is set out for shareholder approval in the 
policy report on pages 77 to 84 details of how the policy will be 
applied in practice for 2014 are set out in the annual report on 
remuneration on page 76 executive directors’ base salaries 
have been increased by 3 with effect from january 2014 the 
same as for other head office employees nonexecutive 
directors’ basic fees increased by 3 with effect from january 
2014 the additional fees payable to the committee chairmen 
and senior independent director which have been unchanged 
since 2006 have been reviewed the additional fees were 
considered to be below the market competitive range and have 
therefore been increased with effect from the 2014 agm to 
bring them more in line with the market the previous and new  
fee levels are set out in the table on page 76 no other changes 
have been made to the structure of our executive director 
remuneration for the coming year 
shareholder engagement
we remain committed to maintaining an open and transparent 
engagement with our investors we believe that a key objective 
of the directors’ remuneration report is to communicate clearly 
how much our executive directors are earning and how this is 
clearly linked to performance i trust that you will find the new 
style report informative 
perry crosthwaite
chairman of the remuneration committee
5 march 2014
71
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
year ended 31 december 2013
total salary  
and fees
£
taxable  
benefits
£
annual  
bonus
£
longterm  
incentives
1 6
£
pension 
related  
benefits
2
£
total
£
christopher miller 422100 19293 – – 63315 504708
david roper 422100 18893 – – 63315 504308
simon peckham 422100 19761 422100 – 63315 927276
geoffrey martin 337800 55891 337800 – 50653 782144
miles templeman 60100 – – – – 60100
perry crosthwaite
3
65100 – – – – 65100
john grant
4
65100 – – – – 65100
justin dowley 60100 – – – – 60100
liz hewitt
5
14177 – – – – 14177
total 1868677 113838 759900 – 240598 2983013
1  the company’s longterm incentive arrangement for directors is the 2012 incentive plan this five year plan is scheduled 
to crystallise in 2017 and accordingly no value vested to participants in respect of the year to 31 december 2013 
2  of the £240598 attributable to pension contributions £159298 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 plans
3 includes £5000 per annum in recognition of chairmanship of the remuneration committee
4 includes £5000 per annum in recognition of chairmanship of the audit committee
5 liz hewitt was appointed as a nonexecutive director of the company on 8 october 2013 
6  under the new regulations the company is required to only include sums that are vested under the 2012 incentive 
share plan as at 31 december 2013 however for the sake of transparency the company has set out in this footnote an 
indicative value attributable to the 2012 incentive share plan note 22 on page 128 of this annual report illustrates that 
using the black scholes option pricing model the estimated value of the 2012 incentive share plan as at 31 december 
2013 was £730 million one fifth representing one year of the intended five year life of this plan of each of messrs miller’s 
roper’s peckham’s and martin’s prorata share of this value would be £2482000 it is important to note that the valuation 
is purely indicative and is likely to vary given that the value delivered under the plan is entirely determined by reference  
to the value delivered to shareholders over the period to crystallisation
6
6
6
6
year ended 31 december 2012
total salary  
and fees
£
taxable  
benefits
£
annual cash  
bonus
£
longterm  
incentives
6
£
pension 
related  
benefits
5
£
total
£
christopher miller 409800 19454 – 30448018 61470 30938742
david roper 409800 19060 87424
1
30448018 61470 31025772
simon peckham 409800 19338 262272 30448018 61470 31200898
geoffrey martin 327900 51069 209856 19030011 49185 19668021
miles templeman
2
59235 – – – – 59235
perry crosthwaite
3
63350 – – – – 63350
john grant
4
62465 – – – – 62465
justin dowley 58350 – – – – 58350
total 1800700 108921 559552 110374065 233595 113076833
1  david roper’s cash bonus for 2012 was paid on a prorata basis reflecting the period for which he held the office of 
chief executive officer no cash bonus was paid for the period from 9 may 2012 which is the date on which he became 
executive vicechairman
2  miles templeman was chairman of the audit committee up to 6 march 2012 but was then replaced by john grant 
mr templeman received an amount of £885 in recognition of chairmanship of the audit committee from 1 january 2012  
to 6 march 2012 
3 includes £5000 in recognition of chairmanship of the remuneration committee 
4  john grant became chairman of the audit committee on 6 march 2012 in place of miles templeman in recognition of 
mr grant’s chairmanship of this committee from 6 march 2012 to 31 december 2012 an amount of £4115 was paid
5  of the £233595 attributable to pension related benefits £152295 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 plans
6  the figures quoted within the longterm incentive column above represent the total market value of the ordinary shares 
awarded to each of the executive directors following crystallisation of the 2009 incentive share plan on 11 april 2012 
these amounts were earned in respect of the circa five year period from july 2007 to april 2012 under the new regulations 
a payment in respect of a five year period has to be recorded as paid in the year of vesting rather than apportioned over 
the period it was earned the market value of each ordinary share on this date was 406 pence the total number of 
ordinary shares obtained by the executive directors following crystallisation was 27185731 this value and the numbers 
of shares are stated before the rights issue that took place in august 2012 
annual report on remuneration 
single total figure of remuneration 
audited information
in accordance with the new regulations 
governing the reporting of directors’ 
remuneration the total figure of 
remuneration set out in the tables 
adjacent includes the value of long
term incentive vesting in respect of the 
financial year
as set out on page 74 the executive 
directors’ entitlements under the 2012 
incentive plan were granted in april 
2012 and deliver to participants part 
of the growth in value of the company 
over the five year period from march 
2012 until may 2017 or an earlier 
trigger date determined in accordance 
with the arrangements this means 
that for the year ended 31 december 
2013 no longterm incentive vested in 
respect of the financial year
the value of longterm incentives shown 
for the year ended 31 december 2012 
relates to the crystallisation of the 2009 
incentive share plan on 11 april 2012 
it should be noted that this value was 
earned over a period of approximately 
five years from 18 july 2007 and no 
other longterm incentive plan vested in 
favour of any executive director in this 
period as disclosed in the directors’ 
remuneration report for the year ended 
31 december 2012 during the term of 
the 2009 incentive share plan the 
directors and senior management team 
were successful in generating real 
returns for shareholders market 
capitalisation just prior to the maturity 
date of the 2009 incentive share plan 
was £165 billion against a net 
shareholder investment of approximately 
£14 million and approximately £15 billion 
of shareholder value was created 
headline eps increased by 120 
dividends to shareholders increased by 
93 and total shareholder return was 
197 against a return of 15 for the 
ftse 350 
72
 melrose industries plc 
annual report 2013
governance base salary
salaries are fixed at a level which is at or below the lower end of a 
market competitive range compared to companies of similar size 
and complexity to reflect participation in the 2012 incentive plan 
each executive director received an inflationary increase in base 
salary of approximately 3 effective from january 2013 
benefits
the range of benefits provided to directors has not changed in 
the last three years and there is no intention to widen the range 
of benefits directors may receive all of the executive directors 
received other taxable benefits during 2013 being a company 
car allowance private fuel allowance and private medical 
insurance mr martin also received paid train travel to and from 
london and accommodation whilst working in london 
bonus
the maximum bonus opportunity is set below the maximum 
median annual bonus opportunity for ftse 100 companies to 
reflect the participation of the executive directors in the 2012 
incentive plan for the year ended 31 december 2013 simon 
peckham’s and geoffrey martin’s being the only executive 
directors participating in the annual bonus plan bonus 
opportunity was equal to 100 of base salary and bonuses 
earned were equal to 100 of base salary 
scheme interests awarded during the year
no awards were granted to directors in the year under  
any longterm incentive plan 
payments to past directors
no payments were made in the year to any former  
director of the company
payments for loss of office
no payments for loss of office were made in the year  
to any director
executive  
director
performance  
measure weighting target performance level of award
simon  
peckham 
geoffrey  
martin
 each of these 
executive 
directors 
participated 
in the annual 
bonus plan on 
the same basis
growth in  
diluted earnings 
per share
for these 
purposes 
earnings per 
share is adjusted 
for the impact 
of transactions 
80 the percentage of this element 
of the bonus which is earned 
is calculated by reference to 
eps growth and subject to a 
five x multiple capped at 80 
of salary 
for 2013 growth in earnings per share as 
adjusted for the purposes of the annual 
bonus for the impact of transactions
was 26 applying the multiple of 5 results  
in a figure of 130 accordingly 80 of 
salary was earned for this element
80 of salary 
100 of the 
maximum for  
this element  
of the bonus
discretionary  
element
20 determined to the extent 
assessed by the remuneration 
committee between 0 
and 20 of salary based  
on a range of financial and  
nonfinancial metrics
the factors taken into account for the 
purposes of the 2013 bonus include
•  corporate actions and disposals including 
the disposal of five group businesses
• working capital management 
•  group structural reorganisations for 
example elster water 
•  liability management 
•  the settlement of us and uk litigation
•  accountingfinance initiatives for example 
the completion of the fair value process 
and replacement of existing financial 
reporting systems and
•  changes implemented to the 2014 medical 
plans yielding significant yearonyear savings 
the remuneration committee determined 
that a bonus equal to 20 of salary for this 
element should be paid  
20 of salary 
100 of the 
maximum for  
this element  
of the bonus
73
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
statement of directors’ shareholding and share interests 
audited information
as disclosed at the time of the crystallisation of the 2009 incentive 
share plan the executive directors considered it appropriate 
that they together with their immediate families would hold at 
least half of the shares acquired pursuant to that crystallisation 
after making adequate provision for any tax liability arising in 
connection with that crystallisation for the foreseeable future 
accordingly the remuneration committee has adopted the 
following guidelines in relation to the holding of ordinary shares by 
executive directors who participated in the 2009 incentive share 
plan and who participate in the 2012 incentive plan reinforcing 
the executive directors’ longterm stewardship of the company 
and longterm investment in the company’s shares no executive 
director may dispose of any such ordinary shares without the 
consent of the remuneration committee which will not normally 
be withheld provided the executive director holds at least the 
“minimum number of ordinary shares” referred to below 
executive director
minimum number  
of ordinary shares 
to be held by the 
executive directors
number of 
ordinary shares 
held as at  
31 december 2013
value of 
ordinary shares 
held as at  
31 december 2013  
as a multiple 
of salary for the 
year ended  
31 december 2013
2
christopher miller 1749756 17300343
1
125
david roper 1649756 9584633 69
simon peckham 1874878 9664068 69
geoffrey martin 1054619 4758797 43
1  as at 31 december 2013 the interest of christopher miller included 6760000 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
2  for these purposes the value of an ordinary share is 3057 pence being the closing  
midmarket price on 31 december 2013
as at 31 december 2013 each executive director held significantly 
more than the minimum number of ordinary shares and so 
satisfied the guideline 
performance graph
the total shareholder return graph below shows the value as  
at 31 december 2013 of £100 invested in the company on 
31 december 2008 compared with £100 invested in the ftse 
100 index or the ftse all share index the remuneration 
committee considers the ftse 100 index and the ftse all 
share index to be appropriate indices for the purposes of this 
comparison because of the comparable size of the companies 
which comprise the ftse 100 index and the broad nature of 
companies which comprise the ftse all share index the source 
data for the graph below assumes that all cash returns to 
shareholders made by the company during this period are 
reinvested in ordinary shares
performance graph
 melrose  ftse all share  ftse 100
ftse 100
ftse all share
melrose
dec 13 june 13 dec 12 june 12 dec 11 june 11 dec 10 june 10 dec 09 june 09 dec 08
900
£
800
700
600
500
400
300
200
100
0
unvested interests under share schemes
director type
ordinary shares held as  
at 31 december 2013
1
vested interests  
under share schemes
subject to  
performance conditions
not subject to  
performance conditions
christopher miller ordinary shares 17300343
2
na na na
option
3
na na 8500 na
david roper ordinary shares 9584633 na na na
option
3
na na 8500 na
simon peckham ordinary shares 9664068 na na na
option
3
na na 8500 na
geoffrey martin ordinary shares 4758797 na na na
option
3
na na 8500 na
miles templeman ordinary shares 692343 na na na
perry crosthwaite ordinary shares 222377 na na na
john grant ordinary shares 295817 na na na
justin dowley ordinary shares 425867 na na na
liz hewitt ordinary shares 6550 na na na
1  the directors’ holdings in ordinary shares were adjusted in the share consolidation in february 2014 in the same manner as other shareholders accordingly following the consolidation 
christopher miller held 14638751 ordinary shares including 5720000 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 david roper held 8110074 ordinary shares simon peckham held 8177288 ordinary shares geoffrey martin held 
4026674 ordinary shares miles templeman held 585828 ordinary shares perry crosthwaite held 188165 ordinary shares john grant held 250306 ordinary shares justin dowley  
held 360349 ordinary shares and liz hewitt held 5542 ordinary shares
2  as at 31 december 2013 the interest of christopher miller included 6760000 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
3  each of these options is over 2012 incentive shares although the option can be exercised at any time the value which may be derived from the shares acquired on exercise will be 
determined at the relevant “trigger date” as discussed on page 79 2012 incentive shares acquired on or before the trigger date may be forfeited in accordance with the company’s  
articles of association the option exercise price is £1 per share which is equal to the nominal value of those shares 
74
 melrose industries plc 
annual report 2013
governance in accordance with the new regulations governing the reporting of directors’ remuneration the total figure of remuneration 
set out in the table below includes the value of longterm incentive vesting in respect of the financial year this means  
that the full value of the crystallisation of the 2009 incentive share plan on 11 april 2012 is shown for the year ending 
31 december 2012 and no value will be reflected in the total figure of remuneration for the 2012 incentive plan until the 
trigger date which will be may 2017 or an earlier trigger date determined in accordance with the arrangements
the value of the 2009 incentive share plan was earned over a period of approximately five years therefore in the view of 
the remuneration committee inclusion of this value in respect of the year ended 31 december 2012 does not give a fair 
representation of the chief executive officer’s yearly remuneration over each of the previous five years therefore an 
additional column has been added to the table below to show total remuneration excluding the value received on the 
maturity in april 2012 of the 2009 incentive share plan no other longterm incentive plan vested in favour of any executive 
director in any of the other years 
the amount of that value shown in respect of david roper and simon peckham for 2012 reflects the proportion of 2012 for 
which each was the chief executive officer 
financial year chief executive officer total remuneration 
total remuneration  
excluding the longterm 
incentive value
annual bonus as  
a percentage of  
maximum opportunity
longterm incentives as  
a percentage of  
maximum opportunity
year ended  
31 december 2013
simon peckham 927276 927276 100 –
year ended  
31 december 2012
1
simon peckham 20280584
3
489372 64 na
2
david roper 10915846
3
259040 64 na
2
year ended  
31 december 2011
david roper 811152 811152 84 –
year ended  
31 december 2010
david roper 849341 849341 100 –
year ended  
31 december 2009
david roper 712372 712372 70 –
1  in the year ending 31 december 2012 david roper was chief executive officer for the period from 1 january 2012 until 9 may 2012 and simon peckham was chief executive officer  
for the period from 9 may 2012 onwards in the table above
  i  the “total remuneration” figure shows in respect of david roper his total remuneration in respect of his service in the period 1 january 2012 to 9 may 2012 and in respect of  
simon peckham his total remuneration in respect of his service in the period from 9 may 2012 to 31 december 2012 included in this figure for each of david roper and simon peckham  
is the value of the longterm incentives vesting in the year prorated to reflect the portion of the year for which he was chief executive officer and
  ii  the “total remuneration excluding the longterm incentive value” shows in respect of each of david roper and simon peckham total remuneration in respect of the period for which  
he was chief executive officer excluding any value received on the maturity in april 2012 of the 2009 share incentive plan 
2   on the crystallisation in april 2012 of the 2009 incentive shares awarded in 2009 participants in the 2009 incentive share plan as a whole were entitled to 10 of the increase in 
shareholder value from 18 july 2007 to 23 march 2012 as the value derived on the crystallisation of the 2009 incentive shares depended upon the shareholder value created  
over the relevant period it is not possible to express the value derived as a percentage of the maximum opportunity the crystallisation of the 2009 incentive shares was satisfied by  
the conversion of those shares into ordinary shares 
3   the value derived in 2012 from the 2009 incentive shares represents the chief executive’s share determined in accordance with the terms of those shares of the shareholder  
value created over a period of circa five years 
chief executive officer’s remuneration for previous five years
75
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
percentage change in chief executive officer’s remuneration
the table below sets out in relation to salary taxable benefits 
and annual bonus the percentage increase in pay for the 
company’s chief executive officer compared to the average 
increase for a group consisting of the company’s senior head 
office employees managing directors and finance directors of 
group businesses and direct senior reports of those managing 
directors and finance directors the percentages shown  
below relate to the financial year ended 2013 as a percentage 
comparison to the financial year ended 2012 this group of senior 
management was considered an appropriate comparator group 
because of their level of seniority and the structure of their 
remuneration package the spread of the company’s operations 
across various countries and industries means that remuneration 
policies vary to take account of geography and industry such that 
the remuneration committee considers that selecting a wider 
group of employees would not provide a meaningful comparison 
element of remuneration
chief executive officer 
percentage change
1
company’s senior 
head office employees 
managing directors and 
chief financial directors 
of group businesses and 
direct senior reports of 
those managing directors 
and chief financial 
directors – average 
percentage change
basic salary 3 9
benefits 27 89
annual bonus 637 572
1  in the year ending 31 december 2012 david roper was chief executive officer for the 
period from 1 january 2012 until 9 may 2012 and simon peckham was chief executive 
officer for the period from 9 may 2012 onwards in the table above the changes in the 
chief executive officer’s basic salary benefits and bonus are calculated by reference to 
the amounts earned by david roper and simon peckham in the period for which each 
was chief executive officer 
relative importance of spend on pay
implementation of directors’ remuneration policy for the 
financial year commencing on 1 january 2014
the remuneration committee strongly believes that its 
remuneration framework is aligned with the company’s strategy 
for growth and no structural changes to the directors’ 
remuneration arrangements are proposed for 2014 executive 
directors’ salaries have increased by 3 with effect from january 
2014 nonexecutive directors’ basic fees increased by 3 with 
effect from january 2014 the additional fees payable to the 
committee chairmen and senior nonexecutive director 
which have been unchanged since 2006 have been reviewed 
the additional fees were considered to be below the market 
competitive range and have therefore been increased with effect 
from the 2014 agm to bring them more in line with the market 
the previous and new fee levels are set out in the table below 
fee element previous fee new fee
basic nonexecutive director fee £60100 £61900
with effect from
january 2014
additional fee for holding  
the chairmanship of the 
remuneration committee
£5000 £10000 
with effect from the
2014 agm
additional fee for holding  
the chairmanship of the  
audit committee
£5000 £10000
with effect from the
2014 agm
additional fee for holding  
the chairmanship of the  
nomination committee
£0 £2500
with effect from the
2014 agm
additional fee for holding  
the position of senior  
nonexecutive director
£0 £5000
with effect from the
2014 agm
consideration by the directors of matters relating to 
directors’ remuneration
the responsibilities of the remuneration committee
the remuneration committee is responsible for
•  considering and making recommendations to the board on the 
framework for the remuneration of the company’s executive 
directors the company secretary and other senior employees
•  ensuring 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 noting 
any major changes in employee benefit structures throughout 
the group and ensuring that executive director remuneration 
practice is consistent with any such changes 
•  approving the structure of and determining targets for any  
longterm incentive plans operated by the company and
•  reviewing on an annual basis remuneration trends across 
the group and obtaining reliable and uptodate information 
about the remuneration of directors and senior employees 
in other companies
full details can be found in the terms of reference available in the 
investor section of our website at wwwmelroseplcnet
fees for nonexecutive directors are determined by the  
executive directors 
the following table sets out the percentage change in 
dividends and the overall expenditure on pay as a whole 
across the organisation
expenditure
year ended 
31 december 2012
year ended 
31 december 2013
percentage 
change
remuneration paid 
to all employees 
£3598 million
1
£4714 million
1
31
distributions to 
shareholders by 
way of dividend 
and share buy back
£657 million £981 million
2
493
1  the figure for the year ended 31 december 2012 is the restated year end 31 december 
2012 total staff costs as stated in note 7 on page 113 of the 2013 annual report and 
financial statements and the figure for the year ended 31 december 2013 is the year end 
31 december 2013 total staff costs as stated in note 7 on page 113 of the 2013 annual 
report and financial statements in light of the company’s business model of buy 
improve sell and return of capital to shareholders your board does not consider that the 
table is meaningful in the context of the group’s remuneration structure which provides 
a strong alignment with shareholder interests 
2  the figure for year ended 2013 does not include the return of capital to shareholders in 
february 2014 
76
 melrose industries plc 
annual report 2013
governance the members of the remuneration committee
the members of the remuneration committee during the year 
were perry crosthwaite committee chairman justin dowley 
john grant and miles templeman liz hewitt also became a 
member of the remuneration committee on 8 october 2013 
following her appointment to the board the company regards 
all members of the remuneration committee as independent 
nonexecutive directors the composition of the remuneration 
committee is therefore in accordance with the uk corporate 
governance code during the year the remuneration 
committee met twice miles templeman did not attend one of 
the meetings and liz hewitt did not attend the meeting which 
took place before her appointment other than in these two 
cases all members were in attendance 
advisers to the remuneration committee
during the year the remuneration committee received advice 
on the new remuneration reporting regulations from deloitte llp 
deloitte llp was appointed by the company secretary on 
behalf of the remuneration committee deloitte llp’s fees for 
this advice were £16500 which were charged on a timecost 
basis deloitte llp is external auditor to the company and 
provides certain other services as described on page 68 of 
the annual report and financial statements 
the remuneration committee is satisfied that the advice 
provided by deloitte llp in relation to the new remuneration 
reporting regulations is objective and independent
statement of voting at general meeting
the company remains committed to ongoing shareholder 
dialogue and takes an active interest in voting outcomes 
the following table sets out actual voting in respect of 
the resolution to approve the directors’ remuneration report 
at the company’s annual general meeting on 8 may 2013
directors’ remuneration policy
this part of the report sets out the company’s directors’ remuneration policy which subject to shareholder approval at the 2014 
annual general meeting shall take binding effect from the conclusion of that meeting 
executive directors
component of 
remuneration purpose and link to strategy operation opportunity performance metrics
base  
salary
core element of fixed 
remuneration reflecting the  
size and scope of the role 
purpose is to attract and retain 
directors of the calibre required 
for the business
normally reviewed annually 
and usually fixed for 12 months 
from 1 january although 
salaries may be reviewed more 
frequently or at different times 
of the year if the remuneration 
committee determines this is 
appropriate
salary is paid in cash and 
levels are determined by the 
remuneration committee  
taking into account a range  
of factors including
•  role experience and 
performance 
• prevailing market conditions 
•  external benchmarks for 
similar roles at comparable 
companies and
•  salary increases awarded for 
other employees in the group 
to avoid setting expectations  
of executive directors and  
other employees no maximum 
has been set under the 
remuneration policy
increases may be made 
to salary levels in certain 
circumstances as required  
for example to reflect
•  increase in scope of role or 
responsibility and
• performance in role
salary increases will take into 
account the average increase 
awarded to other employees 
in the worldwide group
not applicable although the 
individual’s contribution and 
overall performance is one of the 
considerations in determining  
the level of any salary increase 
votes for the 
resolution
percentage of 
votes cast for the 
resolution
votes against the 
resolution
percentage of votes 
cast against the 
resolution total votes cast votes withheld
resolution to approve the directors’ 
remuneration report for the year 
ended 31 december 2012
760449382 8453 139210403 1547 899659785 37794324
77
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
executive directors
component of 
remuneration purpose and link to strategy operation opportunity performance metrics
annual 
bonus
rewards performance against 
annual targets which support 
the strategic direction of 
the company 
financial targets are 
set annually and pay
out is determined by the 
remuneration committee 
after the yearend based on 
performance against those 
targets the remuneration 
committee has discretion 
to vary the bonus payout 
upwards or downwards 
should any formulaic output 
not produce a fair result for 
either the individual executive 
director or the company taking 
account of overall business 
performance
the treatment of a “leaver’s” 
bonus participation is described 
on page 84 
for executive directors 
participating in the company’s 
2012 incentive plan the  
maximum annual bonus 
opportunity is 100 of 
base salary 
the remuneration committee 
will have regard to various 
performance metrics which 
will be determined by the 
remuneration committee 
measured over the relevant 
financial year when determining 
bonuses 
at least 50 of the award will be 
based on financial measures and 
the balance of the award will be 
determined at the discretion of 
the remuneration committee
financial metrics 
the element of the bonus 
subject to a financial metric will 
be determined between 0 and 
100 for performance between 
“threshold” performance the 
minimum level of performance 
that results in any level of payout 
and “maximum” performance 
discretionary element 
the discretionary element of 
an award will be determined 
to the extent assessed by 
the remuneration committee 
between 0 and 100 based on 
the remuneration committee’s 
assessment of a range of financial 
and nonfinancial metrics 
benefits ensures the overall package 
is competitive 
purpose is to recruit and retain 
directors of the calibre required 
for the business 
executive directors receive 
benefits in line with market 
practice and these include a 
company car allowance fuel 
allowance private medical 
insurance life insurance and 
group income protection 
other benefits may be 
provided based on individual 
circumstances such benefits  
may include but are not limited 
to travel costs to and from 
london and accommodation in 
london for executive directors 
who are not based in london 
but who are required to work 
there and relocation allowances 
 
whilst the remuneration 
committee has not set an 
absolute maximum on the 
level of benefits executive 
directors may receive the 
value of benefits is set at a 
level which the remuneration 
committee considers 
appropriate against the market 
and to support the ongoing 
strategy of the company 
not applicable
78
 melrose industries plc 
annual report 2013
governance executive directors
component of 
remuneration purpose and link to strategy operation opportunity performance metrics
2012 
incentive 
plan
incentivises executive directors 
over the longerterm and aligns 
their interests with those of 
shareholders by linking the level  
of reward to the value delivered  
to shareholders
this plan was approved by  
a special resolution of 
shareholders on 11 april 2012  
and has been unchanged since
options are granted over 
a separate class of shares 
known as the “2012 incentive 
shares” the options have 
an exercise price per share 
equal to the nominal value of 
a 2012 incentive share the 
rights attaching to the 2012 
incentive shares are set out 
in the company’s articles of 
association 
options may be exercised at 
any time up to 31 may 2017 
the “trigger date” and will be 
automatically exercised prior to 
the trigger date if not already 
exercised in the event of a 
change of control or winding 
up of the company the trigger 
date may be a date before 
31 may 2017 
on the trigger date the 
holders of the 2012 incentive 
shares shall be entitled to 
75 of the increase in value 
of the company from and 
including 22 march 2012 to the 
trigger date this value may 
be delivered in the form of a 
dividend andor the conversion 
of the 2012 incentive shares 
into an appropriate number of 
ordinary shares or in certain 
other ways permitted under 
the company’s articles of 
association
the calculation of the growth 
in value of the company shall 
be determined in accordance 
with the formula set out in 
the company’s articles of 
association
the treatment of an executive 
director’s participation in 
the 2012 incentive plan if he 
becomes a “leaver” is described 
on page 84  
the value that may be delivered 
under the 2012 incentive plan is 
linked to the shareholder value 
created over the period from 
and including 22 march 2012 
to crystallisation accordingly 
it is not possible to express 
the maximum opportunity as a 
multiple of salary options may 
be granted over in aggregate 
50000 2012 incentive shares 
the options held by the 
executive directors over 
2012 incentive shares as at 
31 december 2013 are set out 
on page 74
the maximum aggregate value 
that may be realised under 
the 2012 incentive shares 
shall be 75 of the increase 
in shareholder value from and 
including 22 march 2012 to 
and including the trigger date 
as determined in accordance 
with the company’s articles of 
association 
the maximum number of 
new ordinary shares in the 
company that may be issued is 
5 of the aggregate number of 
ordinary shares in melrose plc 
in issue on 22 march 2012 plus 
5 of any additional ordinary 
shares issued or created by 
melrose plc after that date 
and prior to 27 november 
2012 or by the company after 
27 november 2012 
the value that may be delivered 
under the 2012 incentive plan  
will be determined by reference 
to the growth in value of the 
company from and including 
22 march 2012 to and including 
the trigger date calculated in 
accordance with the company’s 
articles of association
retirement 
benefits
purpose is to recruit and retain 
directors of the calibre required  
for the business 
provides market competitive  
postemployment benefits  
or cash equivalent 
directors may elect to receive 
a company contribution to an 
individual defined contribution 
pension arrangement or a 
supplement to base salary in 
lieu of a pension arrangement
for participants in the 2012 
incentive plan 15 of 
base salary
not applicable 
although neither clawback nor malus applies to any element of the remuneration package the company’s articles of association give the remuneration committee discretion to adjust the 
calculation of the amount to which holders of 2012 incentive shares and of options over such shares shall be entitled in certain circumstances as referred to on page 84 
79
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
nonexecutive directors
component of 
remuneration purpose and link to strategy operation opportunity performance metrics
non
executive 
director  
fees
set at a level that reflects market 
conditions and is sufficient 
to attract individuals with 
appropriate knowledge and 
expertise 
fees are reviewed periodically 
and amended to reflect market 
positioning and any change 
in responsibilities fees for 
nonexecutive directors are 
determined by the executive 
directors 
fees are based on the level 
of fees paid to nonexecutive 
directors serving on boards 
of similarsized uklisted 
companies and the time 
commitment and contribution 
expected for the role
nonexecutive directors receive 
a basic fee and a further fee for 
the chairmanship of a board 
committee or for holding the 
office of senior nonexecuitve 
director
nonexecutive directors may 
be eligible to benefits such 
as use of secretarial support 
reimbursement of travel costs 
and other benefits that may be 
appropriate  
not applicable 
explanation of performance metrics chosen
performance measures are chosen which are aligned to the 
company’s strategy 
annual bonus
stretching performance targets are set each year for the annual 
bonus to reflect the key financial and strategic objectives of the 
company and reward for delivery against these targets when 
setting the targets the remuneration committee will take into 
account a number of different reference points including its plans 
and strategy and the market environment
2012 incentive plan
value delivered under the 2012 incentive plan is determined 
by reference to the growth in the value of the company such 
that the performance metric is the level of such growth that is 
delivered to shareholders this arrangement was considered 
appropriate by the remuneration committee which considers 
that the previous and similar incentive share arrangements 
introduced in 2009 and which crystallised in 2012 have been 
very effective in incentivising management to deliver real value 
to shareholders over the applicable performance period
the company’s articles of association provide that the 
remuneration committee may make adjustments to the 
calculation of the amount to which the holders of the 2012 
incentive shares shall be entitled in certain circumstances 
these circumstances include but are not limited to the 
company’s articles of association or a change in the capital 
structure of the company otherwise producing an anomalous 
result any such adjustment shall be such as the remuneration 
committee considers fair and reasonable and as an investment 
bank shall have confirmed is fair and reasonable so far as the 
ordinary shareholders are concerned 
differences between the company’s policy on directors’ 
remuneration and its policy on remuneration for 
other employees
remuneration arrangements throughout the group are 
determined based on the same principle that reward should be 
sufficient as is necessary to attract and retain high calibre talent 
without paying more than is necessary and should be achieved 
for delivery of the company’s strategy
the company has operations in various countries and across 
various industries with group employees of differing levels of 
seniority accordingly though based on the overarching principle 
above reward policies vary to take account of these factors 
on the introduction of the 2012 incentive plan the remuneration 
committee considered it appropriate to recognise the required 
growth of the senior management team beyond the executive 
directors necessary to further develop the business and 
participation includes certain nondirector employees
the company has also implemented divisional longterm 
incentive plans for senior managers of certain businesses within 
the group to incentivise them to create value for the company 
and its shareholders
80
 melrose industries plc 
annual report 2013
governance illustration of the application of directors’ 
remuneration policy
in illustrating the potential reward the following assumptions have 
been made
•  minimum performance fixed elements of remuneration only 
base salary effective from 1 january 2014 benefits as set out 
in the single figure table for the year ended 31 december 2013 
on page 72 and pension
•  performance in line with expectations fixed elements of 
remuneration as above plus bonus of 50 of salary other 
than in the case of christopher miller and david roper who do 
not participate in the annual bonus arrangements plus an 
amount in relation to the executive directors’ entitlements 
under the 2012 incentive plan as described opposite
•  maximum performance fixed elements of remuneration as 
above plus bonus of 100 of salary other than in the case of 
christopher miller and david roper who do not participate in 
the annual bonus arrangements plus an amount in relation to 
the executive directors’ entitlements under the 2012 incentive 
plan as described opposite 
the executive directors’ entitlements under the 2012 incentive 
plan were granted in april 2012 and deliver to participants part 
of the growth in value of the company from march 2012 until 
may 2017 or an earlier trigger date determined in accordance 
with the arrangements accordingly the value of participation in 
the 2012 incentive plan depends on shareholder value created 
and cannot be expressed as a multiple of salary while the 
company is not required to show the potential reward from  
that plan in these charts because they were granted in 2012 
prior to the policy coming into effect and were granted in one 
block rather than being granted annually it has done so for  
the sake of transparency therefore for illustrative purposes  
in the charts below the value attributable to the 2012 incentive 
plan is each executive director’s prorata share of the black 
scholes option pricing model value of the plan as at grant 
£20693 million for performance “in line with expectations” 
one fifth representing one year of the intended five year life  
of 50 of this value is shown for “maximum performance” 
onefifth representing one year of the intended five year life of 
100 of this value is shown as the value delivered under the 
2012 incentive plan is entirely determined by reference to the 
value delivered to shareholders over the period to crystallisation 
the value shown in the charts is unlikely to reflect the value 
ultimately delivered to participants
maximum 
performance
performance 
in line with 
expectations
minimum
performance
5193 100
60
42
40
58
8711
12229
total remuneration christopher miller
£’000
maximum 
performance
performance 
in line with 
expectations
minimum
performance 5198 100
48 20
31 26
32
43
10890
1658 1
total remuneration simon peckham
£’000
maximum 
performance
performance 
in line with 
expectations
minimum
performance
5189 100
40
58
60
42
8707
12225
total remuneration david roper
£’000
maximum 
performance
performance 
in line with 
expectations
minimum
performance 4561 100
46 18
30 23 47
36 9819
15077
total remuneration geoffrey martin
£’000
  base salary benefits and pension
 annual bonus
 2012 incentive plan
81
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
recruitment remuneration policy
when agreeing a remuneration package for the appointment of a 
new executive director the remuneration committee will apply 
the following principles
•  the package will be sufficient to attract the calibre of director 
required to deliver the company’s strategy 
•  the remuneration committee will seek to ensure that no more 
is paid than is necessary and
•  in the next annual report on remuneration after an 
appointment the remuneration committee will explain to 
shareholders the rationale for the arrangements implemented 
in addition to the policy elements set out in the table on pages 
77 to 80 the remuneration committee retains discretion to make 
appropriate remuneration decisions outside the standard policy 
to meet the individual circumstances of the recruitment including 
discretion to include any other remuneration component or 
award the remuneration committee does not intend to use this 
discretion to make a nonperformance related incentive payment 
for example a “golden hello” in this regard elements that the 
remuneration committee may consider for the purposes of a 
remuneration package for the recruitment of a new executive 
director include but are not limited to the following 
element approach
incentive remuneration  
opportunity
the remuneration committee’s intention is that a new executive director’s incentive remuneration opportunity 
will consist of
•  an annual bonus up to a maximum of 100 of salary ie as applies for existing executive directors and
•  an award of options over 2012 incentive shares with the number of such shares awarded being equal to 
the number of such shares over which an existing executive director was granted an option in april 2012 
as reduced to take into account the proportion of the 2012 incentive plan’s life that has elapsed at the time 
of the new executive director’s appointment 
the remuneration committee’s intention is that a new executive director would only participate in the 2012 
incentive plan on this basis if heshe had a similar level of experience and responsibility as the existing 
executive directors 
if a new executive director did not participate in the 2012 incentive plan the remuneration committee 
may award a maximum annual bonus opportunity of up to 300 of salary until such time as a new long
term incentive arrangement is put in place for the executive directors in which that new executive director 
could participate  
 
compensation for  
forfeited remuneration  
arrangements 
whilst considered unlikely the remuneration committee may make awards on hiring an external candidate to 
buy out remuneration arrangements forfeited on leaving a previous employer in doing so the remuneration 
committee will have regard to relevant factors including any performance conditions attached to such 
arrangements the form of those awards eg cash or shares and the timeframe of such awards while such 
awards are excluded from the maximum level of variable remuneration referred to below the remuneration 
committee’s intention is that the value awarded as determined by the remuneration committee on a fair and 
reasonable basis would be no higher than the expected value of the forfeited arrangements where considered 
appropriate buyout awards will be subject to forfeiture or clawback on early departure  
notice period the notice period will be the same as the company’s ordinary policy of 12 months  
relocation costs where necessary the company will pay appropriate relocation costs the remuneration committee will seek 
to ensure that no more is paid than is necessary  
retirement benefits the maximum contribution of 15 of salary referred to in the policy table on page 79 will apply to any new 
executive director however the remuneration committee reserves the right to pay the contribution into any 
pension arrangement or to pay the amount as a supplement to base salary in lieu of a pension arrangement  
82
 melrose industries plc 
annual report 2013
governance under the new reporting regulations the company is required 
to set out the maximum level of variable remuneration that may 
be granted when agreeing the components of a remuneration 
package for the appointment of directors excluding any 
remuneration constituting compensation for the forfeiture of any 
variable remuneration award with a previous employer in order to 
provide sufficient flexibility in recruitment scenarios and to reflect 
the fact that the value of participation in the 2012 incentive plan 
depends on shareholder value created and so cannot be 
expressed as a multiple of salary the remuneration committee 
has set this level as maximum variable remuneration of
•  if the director participates in the 2012 incentive plan
 • one times salary plus
 •  an award of options over a number of 2012 incentive shares 
equal to the number of such shares over which an existing 
executive director was granted an option in april 2012 as 
reduced to take into account the proportion of the 2012 
incentive plan’s life that has elapsed at the time of the new 
executive director’s appointment and
•  if the director does not participate in the 2012 incentive plan 
three times salary
while longterm incentive awards and “buyout” awards may be 
granted under the 2012 incentive plan if necessary and subject 
where relevant to the limits referred to above awards may be 
granted outside this plan as permitted under the listing rules 
which allow for the grant of awards to facilitate in unusual 
circumstances the recruitment of a director 
where a position is filled internally any ongoing remuneration 
obligations or outstanding variable pay elements shall be allowed 
to continue according to their subsisting terms 
the remuneration package for a newly appointed nonexecutive 
director would normally be in line with the structure set out in the 
policy table for nonexecutive directors 
service contracts and policy on payment for loss of office
the company’s policy is for executive directors to be employed 
on the terms of service agreements which may be terminated by 
either the director or the company on the giving of not less than 
12 months’ written notice subject to certain exceptions 
each of the executive directors had entered into a service 
agreement with melrose plc which was novated on exactly the 
same terms to the company with effect from 27 november 2012 
when the company became the new parent company of the 
group details of the executive directors’ original appointment 
dates and notice periods are set out below 
each of the nonexecutive directors other than liz hewitt entered into new letters of appointment with the company with effect from 
8 october 2012 liz hewitt entered into a letter of appointment with the company with effect from 8 october 2013 details of the 
nonexecutive directors’ appointment dates and duration are shown below 
executive directors
date of original appointment as an  
executive director of melrose plc
date of appointment as an  
executive director of the company notice period
christopher miller 29 may 2003
1
8 october 2012 12 months
david roper 29 may 2003
1
8 october 2012 12 months
simon peckham 29 may 2003 8 october 2012 12 months
geoffrey martin 7 july 2005 8 october 2012 12 months
1  both of christopher miller and david roper resigned as directors of melrose plc on 27 november 2012
nonexecutive directors
date of original appointment as a  
nonexecutive director of melrose plc
date of appointment as a  
nonexecutive director of the company end of appointment period
miles templeman 8 october 2003 8 october 2012 conclusion of the 2015 agm  
unless extended or renewed
1
perry crosthwaite 26 july 2005 8 october 2012 conclusion of the 2015 agm  
unless extended or renewed
1
john grant 1 august 2006 8 october 2012 conclusion of the 2015 agm  
unless extended or renewed
1
justin dowley 1 september 2011 8 october 2012 conclusion of the 2015 agm  
unless extended or renewed
1
liz hewitt na 8 october 2013 conclusion of the 2016 agm  
unless extended or renewed
2
1 assuming reelection at the 2014 agm
2 assuming election at the 2014 agm and reelection at the 2015 agm
83
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information directors’  
remuneration report  
continued
the principles on which the determination of payments for loss of office will be approached are summarised below
on a change of control or windingup of the company the 2012 
incentive shares will crystallise early in the event of a change of 
control the date of the change of control shall be the “trigger 
date” for the purposes of determining the number of ordinary 
shares into which the 2012 incentive shares shall convert or the 
dividend amount to be paid in the event of a winding up the 
2012 incentive shares shall be treated as if they had converted 
into ordinary shares immediately prior to the windingup and the 
holders of the 2012 incentive shares shall be entitled to a sum 
equal to the amount to which they would have been entitled  
on a return of capital on a windingup if they had held those 
ordinary shares 
statement of consideration of employment conditions 
elsewhere in the company
salary benefits and performancerelated rewards provided 
to employees are taken into account when setting policy for 
executive directors’ remuneration there is no consultation 
with employees on directors’ remuneration 
statement of consideration of shareholder views
the company is committed to ongoing engagement and seeks 
the views of major shareholders in advance of amending its 
remuneration policies the policies are set to reflect the 
company’s commercial strategy and the 2012 incentive plan 
was approved by shareholders in 2012
payments outside the policy in this report
the remuneration committee retains discretion to make any 
remuneration payments and payments for loss of office outside 
the policy in this report
•  where the terms of the payment were agreed before the policy 
came into effect
•  where the terms of the payment were agreed at a time when 
the relevant individual was not a director of the company and 
in the opinion of the remuneration committee the payment 
was not in consideration of the individual becoming a director 
of the company or
•  to satisfy contractual commitments under legacy remuneration 
arrangements
for these purposes “payments” includes the satisfaction of awards 
of variable remuneration and in relation to an award over shares the 
terms of the payment are “agreed” at the time the award is granted 
this report was approved by the board on 5 march 2014 and 
signed on its behalf by
perry crosthwaite
chairman remuneration committee
5 march 2014
provision treatment upon loss of office
payment in lieu  
of notice
if the company terminates an executive director’s employment with immediate effect a payment in lieu of notice may be made  
this may include base salary pension contributions and benefits 
annual bonus this will be at the discretion of the remuneration committee on an individual basis and the decision whether or not to award 
a bonus in full or in part will be dependent upon a number of factors including the circumstances of the executive director’s 
departure and their contribution to the business during the bonus period in question typically bonus amounts will be prorated for 
time in service to termination 
2012 incentive 
plan
if an executive director holding 2012 incentive shares ceases employment in circumstances in which he is a “good leaver” the 
remuneration committee may other than if he is a good leaver as a result of his resignation in connection with a change of 
control of the company require that he transfer some or all of the “unvested proportion” of his 2012 incentive shares for their 
nominal value an executive director who is a good leaver will be entitled to retain any 2012 incentive shares which he is not 
required to transfer for these purposes the “unvested proportion” shall be the proportion of his 2012 incentive shares equal to 
the unexpired proportion of the period from 11 april 2012 to 31 may 2017 calculated on a full month basis 
if an executive director holding an option over 2012 incentive shares ceases employment in circumstances in which he is a 
“good leaver” at the discretion of the remuneration committee some or all of his unexercised options shall lapse the number of 
options which shall lapse shall not exceed the number equal to the “unvested portion” of the executive director’s 2012 incentive 
shares had the executive director’s options been exercised immediately before the executive director became a good leaver  
the executive director will be entitled to retain any options which do not lapse
for these purposes an executive director shall be a “good leaver” if he leaves because of death permanent ill health permanent 
disability resignation in connection with a change of control or termination by the company without cause 
other payments the remuneration committee reserves the right to make additional exit payments where such payments are made in good faith 
in discharge of an existing legal obligation or by way of damages for breach of such an obligation or by way of settlement or 
compromise of any claim arising in connection with the termination of a director’s office or employment 
in appropriate circumstances payments may also be made in respect of legal fees
the overall amount of any payment made in respect of a loss of office will not exceed the aggregate of any payment in lieu of 
notice and any payment made in respect of annual bonus as referred to above entitlements under the 2012 incentive plan will 
be dealt with in accordance with the terms of that plan and were the company to make an award on recruitment of an executive 
director to buy out remuneration arrangements forfeited on leaving a previous employer then the leaver provisions for that award 
would be determined at the time of grant 
84
 melrose industries plc 
annual report 2013
governance statement of directors’ 
responsibilities
the directors are responsible for preparing the annual report 
and 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 elected 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 financial statements 
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 
we confirm that to the best of our 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 
•  the strategic report includes 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 and
 •  the annual report and financial statements taken as a whole 
are fair balanced and understandable and provide the 
information necessary for shareholders to assess the 
company’s performance business model and strategy
by order of the board 
geoffrey martin simon peckham
group finance director  chief executive
5 march 2014 5 march 2014
85
 melrose industries plc
annual report 2013
governance
strategic report governance financials shareholder information financial  
contents
consolidated statements
independent auditor’s report 87
consolidated income statement 92
consolidated statement of comprehensive income 93
consolidated statement of cash flows 94
consolidated balance sheet 95
consolidated statement of changes in equity 96
notes to the financial statements
note
1 corporate information 97
2 summary of significant accounting policies 98
3 critical accounting judgements and key sources 
 of estimation uncertainty 106
4 revenue 108
5 segment information 108
6 exceptional costs and income 111
7 revenues and expenses 112
8 tax 114
9 discontinued operations 115
10 dividends 116
11 earnings per share 117
12 goodwill and other intangible assets 118
13 property plant and equipment 122
14 interests in joint ventures 123
15 inventories 123
16 trade and other receivables 124
17 cash and cash equivalents  125
18 trade and other payables  125
19 interestbearing loans and borrowings  126
20 provisions  127
21 deferred tax  128
22 sharebased payments  128
23 retirement benefit obligations  129
24 financial instruments and risk management  133
25 issued capital and reserves  137
26 cash flow statement  138
27 commitments and contingencies  139
28 related parties  139
29 post balance sheet events  140
30 contingent liabilities  140
company statements
company balance sheet for melrose industries plc  141
notes to the company balance sheet
note
1 significant accounting policies  142
2 profit for the period  142
3 investment in subsidiaries  143
4 creditors  144
5 issued share capital  144
6 reserves  144
7 reconciliation of movements in shareholders’ funds  144
8 related party transactions  145
9 post balance sheet events 145
86
 melrose industries plc 
annual report 2013
financials independent auditor’s report 
to the members of melrose 
industries plc 
opinion on financial statements of melrose industries plc
in our opinion
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 
31 december 2013 and of the group’s profit and the parent company’s loss for the year then ended
• the group financial statements have been properly prepared in accordance with international financial reporting standards 
ifrss as adopted by the european union
• the parent company financial statements have been properly prepared in accordance with united kingdom generally accepted 
accounting practice and
• the financial statements have been prepared in accordance with the requirements of the companies act 2006 and as regards 
the group financial statements article 4 of the ias regulation
the financial statements comprise consolidated income statement the consolidated statement of comprehensive income 
the consolidated and the company balance sheets the consolidated statement of cash flows the consolidated statement 
of changes in equity the related notes 1 to 30 to the consolidated financial statements and the related notes 1 to 9 to the 
company financial statements the financial reporting framework that has been applied in the preparation of the group financial 
statements is applicable law and ifrss as adopted by the european union the financial reporting framework that has been 
applied in the preparation of the parent company financial statements is applicable law and united kingdom accounting 
standards united kingdom generally accepted accounting practice
going concern
as required by the listing rules we have reviewed the directors’ statement on page 47 that the group is a going concern  
we confirm that
• we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial 
statements is appropriate and
• we have not identified any material uncertainties that may cast significant doubt on the group’s ability to continue as 
a going concern
however because not all future events or conditions can be predicted this statement is not a guarantee as to the group’s 
ability to continue as a going concern
our assessment of risks of material misstatement
the assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy 
the allocation of resources in the audit and directing the efforts of the engagement team
risk how the scope of our audit responded to the risk
provisions
the judgement involved in the 
recognition and valuation of 
the expected outcome of legal 
environmental restructuring 
and warranty provisions 
which require the exercise of 
management judgement and 
the use of estimates giving 
rise to inherent subjectivity in 
the amounts recorded in the 
financial statements 
we challenged the assumptions underlying the recognition and valuation of provisions through checking 
and verifying the inputs used to calculate the provisions including review of the nature and timings of formal 
restructuring plans review of third party correspondence discussion with the group’s lawyers and review 
of agreements 
further we assessed the level of historical warranty claims and obtained the specific warranty terms and 
conditions provided in order to ascertain whether the warranty provisions held were sufficient to cover all 
obligations in existence at the yearend in light of known claims and standard warranty periods provided  
we also considered the adequacy of disclosures made in note 20 to the financial statements
exceptional items
the presentation and consistency 
of costs and income within 
exceptional items is a key 
determinant in the assessment 
of the quality of the group’s 
underlying earnings 
a sample of exceptional items including all material items has been agreed to source documentation and 
evaluated by the local and group audit teams as to their nature in order to assess whether they are in line 
with the group’s accounting policy and also to ensure consistency of management’s application of the 
policy with previous accounting periods in particular we ensure the reversal of any items originally booked 
as exceptional and the reversal of any fair value items recorded on acquisition are appropriately classified as 
exceptional items
we also assessed whether the disclosures within the financial statements in note 6 provide sufficient detail 
for the reader to understand the nature of these items 
87
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information independent auditor’s report 
to the members of melrose 
industries plc continued
risk how the scope of our audit responded to the risk
goodwill and intangibles
the key assumptions used in the 
assessment of the carrying value 
of goodwill and intangible assets 
are determined with reference to 
judgemental factors such as future 
projected cash flows and the 
appropriate discount rate 
we assessed the assumptions used in the impairment model for goodwill and intangible assets described 
in note 12 specifically including the cash flow projections discount rates perpetuity growth rates and the 
sensitivities applied
our procedures included reviewing forecast cash flows with reference to historical trading performance 
consulting with our valuation specialists and benchmarking assumptions such as the perpetual growth rate 
and discount rate to external macroeconomic and market data having ascertained the extent of change in 
those assumptions that either individually or collectively would be required for the assets to be impaired by 
performing sensitivity analysis on the key assumptions we considered the likelihood of such a movement in 
those assumptions arising and the adequacy of the disclosures made in note 12 to the financial statements 
recognition of deferred tax 
assets and accounting for 
uncertain tax positions
recognition of deferred tax 
assets is based on management’s 
judgements of the availability of 
future taxable profits
the value of the tax provisions 
recorded in respect of a number 
of uncertain tax positions which 
require judgements in respect of 
the likely outcome of negotiations 
with and enquiries from various 
tax authorities 
 
 
we tested the appropriateness of the assumptions and estimates in relation to the likelihood of generating 
future taxable profits to support the recognition of deferred tax assets as described in note 21 to the 
financial statements we considered those assumptions including the expected timing of disposals and 
supporting forecasts and estimates as well as the appropriateness of the tax disclosures
we worked with our tax audit specialists in relation to the recognition of deferred tax assets and to appraise 
the likely outcome of technical tax treatments including the review of correspondence with the revenue 
authorities to assess the reasonableness of the provisions made
the audit committee’s consideration of these risks is set out on page 67 
our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole 
and not to express an opinion on individual accounts or disclosures our opinion on the financial statements is not modified with 
respect to any of the risks described above and we do not express an opinion on these individual matters
88
 melrose industries plc 
annual report 2013
financials our application of materiality
we define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic 
decisions of a reasonably knowledgeable person would be changed or influenced we use materiality both in planning the scope of 
our audit work and in evaluating the results of our work
we determined planning materiality for the group to be £13 million which is approximately 57 of headline profit before tax and 
less than 1 of equity we use headline profit before tax to provide a stable basis for materiality that reflects the focus of the users 
of the financial statements this excludes the effect of separately disclosed exceptional items as these can be volatile and the 
amortisation of acquired intangibles as excluding the relatively high amortisation charge given the acquisitive nature of the group 
provides a more comparable measure with similar organisations and is consistent with the profit measure most relevant to analysts 
and investors 
we agreed with the audit committee that we would report to the committee all audit differences in excess of £250000 as well as 
differences below that threshold that in our view warranted reporting to them on qualitative grounds
we also report to the audit committee on disclosure matters that we identified when assessing the overall presentation of the 
financial statements 
an overview of the scope of our audit
the group’s 72 locations are organised into the five continuing divisions described in the divisional review on pages 22 to 31 
of this annual report our group audit scope focused primarily on audit work at 25 locations 18 of these were subject to a full 
audit whilst the remaining seven were subject to specified audit procedures where the extent of our testing was based on our 
assessment of the risks of material misstatement and on the materiality of the group’s business operations at those locations 
the 18 locations subject to full audit represent business units within the each of the group’s continuing reportable segments and 
accounted for 63 of the continuing group’s revenue 70 of the total operating segments’ continuing headline operating profit 
ie before central costs the seven locations subject to specified audit procedures account for 24 of the continuing group’s 
revenue and 21 of the continuing group’s headline operating profit full audit or audit procedures undertaken at the 25 locations 
or performed centrally by the group audit team accounted for 94 of the group’s net assets the locations subject to full audit or 
specified audit procedures were selected to provide an appropriate basis for undertaking audit work to address the risks of material 
misstatement identified above 
our audit work and specified audit procedures at the 25 locations were executed at levels of materiality applicable to each 
individual entity which were much lower than group materiality and appropriate to the relative scale of the business concerned 
the senior statutory auditor or other senior members of the group audit team visited 12 of the largest locations for the audit which 
include some locations where specified audit procedures were performed the group audit team met with the management teams 
including managing directors and finance directors of all the continuing businesses during the year end audit the senior statutory 
auditor also held audit close meetings with all of the five continuing businesses which cover all locations in years when we do not 
visit a component within our group audit scope we will include the component audit team in our team briefing discuss their risk 
assessment and review documentation of the findings from their work
at the parent entity level we also tested the consolidation process and carried out review procedures to confirm our conclusion that 
there were no significant risks of material misstatement of the aggregated financial information of the remaining components not 
subject to audit or audit of specified account balances
opinion on other matters prescribed by the companies act 2006
in our opinion
• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the companies act 
2006 and
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are 
prepared is consistent with the financial statements
89
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information independent auditor’s report 
to the members of melrose 
industries plc continued
matters on which we are required to report by exception
adequacy of explanations received and accounting records
under the companies act 2006 we are required to report to you if in our opinion
• we have not received all the information and explanations we require for our audit or
• adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been 
received from branches not visited by us or
• the parent company financial statements are not in agreement with the accounting records and returns
we have nothing to report in respect of these matters
directors’ remuneration
under the companies act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have 
not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and 
returns we have nothing to report arising from these matters
corporate governance statement
under the listing rules we are also required to review the part of the corporate governance statement relating to the company’s 
compliance with nine provisions of the uk corporate governance code we have nothing to report arising from our review
our duty to read other information in the annual report
under international standards on auditing uk and ireland we are required to report to you if in our opinion information in the 
annual report is
• materially inconsistent with the information in the audited financial statements or
• apparently materially incorrect based on or materially inconsistent with our knowledge of the group acquired in the course of 
performing our audit or
• otherwise misleading
in particular we are required to consider whether we have identified any inconsistencies between our knowledge acquired during 
the audit and the directors’ statement that they consider the annual report is fair balanced and understandable and whether the 
annual report appropriately discloses those matters that we communicated to the audit committee which we consider should 
have been disclosed we confirm that we have not identified any such inconsistencies or misleading statements
90
 melrose industries plc 
annual report 2013
financials 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 
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 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 we also comply with 
international standard on quality control 1 uk and ireland our audit methodology and tools aim to ensure that our quality control 
procedures are effective understood and applied our quality controls and systems include our dedicated professional standards 
review team strategically focused second partner reviews and independent partner reviews
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
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 and the parent 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 and to identify any information 
that is apparently materially incorrect based on or materially inconsistent with the knowledge acquired by us in the course of 
performing the audit if we become aware of any apparent material misstatements or inconsistencies we consider the implications 
for our report
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
5 march 2014
91
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information consolidated  
income statement
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
continuing operations
revenue 45 17328 10511 
cost of sales 11255 7201
gross profit 6073 3310 
headline
2
 operating expenses 3352 1825
share of headline
2
 results of joint ventures 14 28 08 
intangible asset amortisation 646 315
exceptional operating costs 6 193 708
exceptional operating income 6 289 70 
total net operating expenses 7 3874 2770
operating profit 2199 540 
headline
2
 operating profit 5 2749 1493 
headline
2
 finance costs 7 705 423
exceptional finance costs 67 – 163
total finance costs 7 705 586
finance income 7 217 109 
profit before tax 1711 63 
headline
2
 profit before tax 2261 1179 
headline
2
 tax 600 315
exceptional tax
3
108 183 
total tax 8 492 132
profitloss for the year from continuing operations 1219 69
headline
2
 profit for the year from continuing operations 1661 864 
discontinued operations
profit for the year from discontinued operations 9 4427 477
profit for the year 5646 408
attributable to
owners of the parent 5627 391 
noncontrolling interests 19 17 
5646 408 
earnings per share
from continuing operations
– basic 11 95 09
– diluted 11 93 09
– headline
2
 diluted 11 128 88
4
from continuing and discontinued operations
– basic 11 444 41 
– diluted 11 437 41 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 before exceptional costs exceptional income and intangible asset amortisation 
3
 includes exceptional tax and tax on exceptional items and intangible asset amortisation
4
 88p is the restated 2012 headline
2
 diluted earnings per share from continuing operations the board believe that 94p is a more appropriate measure to use for 2012 to compare 
against 2013 performance being the headline
2
 diluted earnings per share from continuing operations assuming elster was owned for the full year in 2012 unaudited with an 
allowance for the finance costs of the acquisition for the period elster was not owned and using a consistent number of shares in both years at constant currency
92
 melrose industries plc 
annual report 2013
financials consolidated statement  
of comprehensive income
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
profit for the year 5646 408 
items that will not be reclassified subsequently to the income statement
net remeasurement gainloss on retirement benefit obligations 23 201 590
income tax chargecredit relating to items that will not be reclassified 8 06 35 
195 555
items that may be reclassified subsequently to the income statement
currency translation on net investments 259 12
currency translation on noncontrolling interests 03 02 
transfer to income statement from equity of cumulative translation
 differences on disposal of foreign operations 9 121 –
gainslosses on cash flow hedges 100 62
transfer to income statement on cash flow hedges 30 119 
income tax creditcharge relating to items that may be reclassified 8 06 22
247 25 
other comprehensive expense after tax 52 530
total comprehensive incomeexpense for the year 5594 122
attributable to
owners of the parent 5578 141
noncontrolling interests 16 19 
5594 122
1
 restated for the adoption of ias 19 revised “employee benefits” and ias 1 amended “presentation of items of other comprehensive income” note 1
93
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information consolidated statement  
of cash flows
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
net cash fromused in operating activities from continuing operations 26 912 406
net cash from operating activities from discontinued operations 26 448 579 
net cash from operating activities 1360 173 
investing activities
disposal of businesses 9 9504 307 
disposal costs 9 250 24
net cash disposed 9 372 12
purchase of property plant and equipment 470 365
proceeds from disposal of property plant and equipment 62 11 
purchase of computer software 38 19
dividends received from joint ventures 14 27 03 
interest received 217 109 
acquisition of subsidiaries and noncontrolling interests 128 15004
cash acquired on acquisition of elster 12 – 1056 
dividends paid to noncontrolling interests 63 01
net cash fromused in investing activities from continuing operations 8489 13939
net cash used in investing activities from discontinued operations 26 116 173
net cash fromused in investing activities 8373 14112
financing activities
return of capital – 11
repayment of borrowings 8340 11769
net proceeds from rights issue – 11681
new bank loans raised – 14671
costs of raising and settling finance – 331
dividends paid 10 981 657
net cash used infrom financing activities from continuing operations 9321 13584 
net cash used in financing activities from discontinued operations 26 – – 
net cash used infrom financing activities 9321 13584 
net increasedecrease in cash and cash equivalents 412 355
cash and cash equivalents at the beginning of the year 26 1565 1956 
effect of foreign exchange rate changes 26 27 36
cash and cash equivalents at the end of the year 1726 2004 1565 
1
 restated to include the cash flows of truth marelli crosby acco and harris within discontinued operations note 9
as at 31 december 2013 the group’s net debt was £1408 million 31 december 2012 £9977 million a reconciliation of the 
movement in net debt is shown in note 26 the decrease in net debt is primarily as a result of proceeds received from business 
disposals in the year 
94
 melrose industries plc 
annual report 2013
financials consolidated  
balance sheet
notes
31 december
2013
£m
restated
1
31 december
2012
£m 
noncurrent assets
goodwill and other intangible assets 12 26120 30488 
property plant and equipment 13 2412 3188 
interests in joint ventures 14 126 124 
deferred tax assets 21 703 1503 
derivative financial assets 24 81 – 
trade and other receivables 16 03 03 
29445 35306 
current assets
inventories 15 2345 3755 
trade and other receivables 16 2928 3841 
derivative financial assets 24 51 33 
cash and cash equivalents 17 2004 1565 
7328 9194 
total assets 5 36773 44500 
current liabilities
trade and other payables 18 3992 5403 
interestbearing loans and borrowings 19 – 62 
derivative financial liabilities 24 72 70 
current tax liabilities 436 410 
provisions 20 744 1018 
5244 6963 
net current assets 2084 2231 
noncurrent liabilities
trade and other payables 18 15 26 
interestbearing loans and borrowings 19 3412 11480 
derivative financial liabilities 24 – 35 
deferred tax liabilities 21 2996 4112 
retirement benefit obligations 23 2193 2613 
provisions 20 1034 1854 
9650 20120 
total liabilities 5 14894 27083 
net assets 21879 17417 
equity 
issued share capital 25 13 13 
merger reserve 11906 11906 
other reserves 7571 7571
hedging reserve 58 77
translation reserve 299 80 
retained earnings 17753 12995 
equity attributable to owners of the parent 21860 17346 
noncontrolling interests 19 71 
total equity 21879 17417 
1
 restated to reflect the completion of the acquisition accounting for elster note 12 
the financial statements were approved and authorised for issue by the board of directors on 5 march 2014 and were signed on 
its behalf by
geoffrey martin  simon peckham 
group finance director chief executive 
95
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information consolidated statement  
of changes in equity
issued 
share
 capital
£m
merger 
reserve
£m
other 
reserves
£m
capital 
redemption
reserve
£m
hedging 
reserve
£m
translation
 reserve
£m
retained
 earnings
£m
equity 
attributable 
to owners 
of the 
parent
£m
non
controlling 
interests
£m
total 
equity
£m
at 1 january 2012 4949 11906 8744 268 119 93 1334 6483 01 6484 
profit for the year
1 
– – – – – – 391 391 17 408 
other comprehensive incomeexpense
1
– – – – 42 13 561 532 02 530
total comprehensive incomeexpense – – – – 42 13 170 141 19 122
preference c shares redeemed 257 – – 268 – – 11 – – –
dividends paid – – – – – – 657 657 01 658
credit to equity for equitysettled 
 sharebased payments – – – – – – 35 35 – 35
issue of new shares 10508 – 1173 – – – – 11681 – 11681 
acquisition of elster – – – – – – – – 61 61 
purchase of noncontrolling interests – – – – – – 55 55 09 64
capital reduction 15187 – – – – – 15187 – – – 
at 31 december 2012 13 11906 7571 – 77 80 12995 17346 71 17417 
profit for the year – – – – – – 5627 5627 19 5646 
other comprehensive incomeexpense – – – – 135 379 195 49 03 52
total comprehensive incomeexpense – – – – 135 379 5822 5578 16 5594
dividends paid – – – – – – 981 981 63 1044
credit to equity for equitysettled 
 sharebased payments – – – – – – 40 40 – 40
purchase of noncontrolling interests – – – – – – 123 123 05 128
at 31 december 2013 13 11906 7571 – 58 299 17753 21860 19 21879 
1
 restated for the adoption of ias 19 revised “employee benefits” note 1 
96
 melrose industries plc 
annual report 2013
financials notes to the  
financial statements
1 corporate information
melrose industries 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 152 the nature of the group’s operations and its principal activities are set out in 
note 5 and in the business review sections on pages 22 to 31
the consolidated financial statements of the group for the year ended 31 december 2013 were authorised in accordance with a 
resolution of the directors of melrose industries plc on 5 march 2014
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 2012 in these financial statements has been restated to include the 
results and cash flows of truth marelli crosby acco and harris within discontinued operations and exclude them from continuing 
operations truth and harris were previously disclosed within the other industrial segment marelli within the energy segment and 
crosby and acco within the lifting segment the comparative information has also been restated in accordance with the adoption 
of ias 19 revised “employee benefits” the balance sheet at 31 december 2012 has been restated to reflect the completion of 
the acquisition accounting of elster
11 new standards and interpretations affecting amounts presentation or disclosure reported in the current period
in the current financial year the group has adopted the amendments to ias 1 amended “presentation of items of other 
comprehensive income” ias 19 revised “employee benefits” and ifrs 13 “fair value measurement”
the amendments to ias 1 require items of other comprehensive income to be grouped by those items that may be reclassified 
subsequently to the income statement and those that will not be reclassified to the income statement together with their 
associated income tax the amendments have been applied retrospectively and hence the presentation of items of comprehensive 
income have been restated to reflect the change the effect of these changes is evident from the consolidated statement of 
comprehensive income
the adoption of ias 19 revised “employee benefits” impacts the measurement of the various components representing 
movements in the defined benefit pension obligation and associated disclosures but not the total obligation itself the impact on 
the current year in adopting the revised standard has been to increase headline operating expenses by £28 million and finance 
costs by £51 million whilst reducing taxation expense by £21 million and increasing other comprehensive income by £58 million 
in accordance with ias 19 revised “employee benefits” the comparative periods have been restated as if the new standard had 
been effective from 1 january 2012 the impact has been to increase headline operating expenses in 2012 by £21 million increase 
finance costs in 2012 by £27 million whilst reducing taxation expense by £14 million and increasing other comprehensive income 
in 2012 by £34 million
the adoption of ifrs 13 “fair value measurement” has introduced new disclosures as set out in note 24
the annual improvements to ifrss 20092011 cycle incorporated necessary but nonurgent amendments to five international 
financial reporting standards the amendments most relevant to the group are
ias 1 “presentation of financial statements” 
the amendments clarify the requirement for additional comparative information and have not had a material impact on these 
financial statements
ias 34 “interim financial reporting” 
the amendments clarify the disclosure requirements for segment information and fair value of financial instruments the interim 
financial statements as at 30 june 2013 reflected these amendments where applicable
the remaining three amendments in the improvements to ifrss 20092011 cycle do not currently impact these 
financial statements
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
97
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
1 corporate information continued
early adoption of ias 36 amended impairment of assets
the amendment to ias 36 removes a requirement to disclose the recoverable amount of a cashgenerating unit whether or not an 
impairment loss has been recognised in respect of that unit in the current period the amendment instead requires the disclosure 
of the determined recoverable amount only where an impairment loss has been recognised during the reporting period the group 
has elected to early adopt this amendment for the current year
ifrs 7 amended disclosures – offsetting financial assets and financial liabilities
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 and in some cases have not been adopted by the eu
ias 32 amended offsetting financial assets and financial liabilities
ias 27 revised separate financial statements
ias 28 revised investments in associates and joint ventures
ifrs 10 ifrs 12 and ias 27 amended investment entities
ifrs 9 financial instruments
ifrs 10 consolidated financial statements
ifrs 11 joint arrangements
ifrs 12 disclosure of interest in other entities
transition guidance amendments to ifrs 10 ifrs 11 and ifrs 12
ias 36 amended recoverable amount disclosures for nonfinancial assets
ias 39 amended novation of derivatives and continuation of hedge accounting
ias 19 amended employee contributions
annual improvements to ifrss 201012 cycle
annual improvements to ifrss 201113 cycle
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
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 an historical cost basis except for the revaluation of certain financial 
instruments which are recognised at fair value at the end of each reporting period historical cost is generally based on the fair 
value of the consideration given in exchange for 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 intragroup 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 noncontrolling 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 on page 47 of the finance 
director’s review
98
 melrose industries plc 
annual report 2013
financials 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 transferred 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 control is achieved where the company has the power to govern the financial 
and operating policies of an investee entity so as to obtain benefits from its activities 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 revised 
“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 payment” 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 noncontrolling 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
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 cashgenerating 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 measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and 
services provided in the normal course of business net of discounts customs duties and sales related taxes revenue is reduced for 
estimated customer returns rebates and other similar allowances the nature of agreements into which the group enters means that
•  the contracts usually contain discrete elements each of which transfers risks and rewards to the customer where such discrete 
elements are present revenue is recognised on each element in accordance with the policy on the sale of goods 
•  the service element of the contract is usually insignificant in relation to the total contract value and is often provided on a short
term or oneoff basis where this is the case revenue is recognised when the service is complete 
•  aftermarket activities generally relate to the provision of spare parts repairs and the rebuild of equipment revenue on the 
provision of parts is recognised in accordance with the policy on the sale of goods and revenue for repairs and rebuild is 
recognised upon completion of the activity
99
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
2 summary of significant accounting policies continued
the significant majority of the group’s revenue is recognised on a sale of goods basis 
the specific methods used to recognise the different forms of revenue earned by the group are as follows 
sale of goods
revenue is recognised when all of the following conditions are satisfied
• the group has transferred to the buyer the significant risks and rewards of ownership of the goods
•  the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective 
control over the goods
• the amount of revenue can be measured reliably
• it is probable that the economic benefits associated with the transaction will flow to the group and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably
transfers of risks and rewards vary depending on the nature of the products sold and the individual terms of the contract of sale 
sales made under internationally accepted trade terms are recognised as revenue when the group has completed the primary 
duties required to transfer risks as stipulated in those terms sales made outside of such terms are generally recognised on delivery 
to the customer no revenue is recognised where recovery of the consideration is not probable or there are significant uncertainties 
regarding associated costs or the possible return of goods 
provision of services
as noted above because revenue from the rendering of services is usually insignificant in relation to the total contract value and is 
generally provided on a shortterm or oneoff basis revenue is usually recognised when the service is complete 
construction contracts
as noted above customer contracts usually contain discrete elements separately transferring risks and rewards to the customer 
where such discrete elements are present revenue is recognised on each element in accordance with the policy on the sale 
of goods 
where such discrete elements are not in place revenue from significant contracts is recognised in proportion to the stage of 
completion of the contract by reference to the specific contract terms and the costs incurred on the contract at the balance sheet 
date in comparison to the total forecast costs of the contract 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 in revenue from construction contracts when the amount 
can be measured reliably and its receipt is considered probable variations are included when the customer has agreed to the 
variation or acknowledged liability for the variation in principle claims are included when negotiations with the customer have 
reached an advanced stage such that it is probable that the customer will accept the claim incentive payments are included when 
a contract is sufficiently advanced that it is probable that the performance standards triggering the incentive will be achieved
profit attributable to contract activity is recognised if the final outcome of such contracts can be reliably assessed where this is not 
the case contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recovered when it 
is probable that total contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately
interest income
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 
rate applicable
exceptional costsincome
exceptional costsincome are those costsincome of a significant and nonrecurring nature or those associated with significant 
restructuring programmes acquisitions or disposals which warrant separate additional disclosure in the financial statements in 
order to fully understand the underlying performance of the group
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
100
 melrose industries plc 
annual report 2013
financials 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 
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  312 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 initially recorded at their fair value at the acquisition date
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
amortisation is calculated on a straightline basis over the estimated useful lives of the asset as follows
customer relationships 20 years or less
brand names 20 years or less
computer software 5 years or less
development costs 5 years or less
101
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
2 summary of significant accounting policies continued
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
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 costs are expensed on a straightline basis over their useful 
lives of five years or less costs not meeting such criteria are expensed as incurred
inventories
inventories are valued at the lower of cost and net realisable value and measured using a first in first out basis 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 are 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 current balances with banks and similar institutions and 
shortterm deposits which are readily convertible to cash which are subject to insignificant risks of changes in value
for the purpose of the consolidated 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
102
 melrose industries plc 
annual report 2013
financials 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
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 when the forecast transaction is no 
longer expected to occur 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
103
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
2 summary of significant accounting policies continued
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 when the hedge is no longer expected to occur
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
restructurings
a restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a 
valid expectation in those affected that it will carry out the restructuring by either starting to implement the plan or by announcing 
its main features to those affected by it the measurement of a restructuring provision includes only the direct expenditures arising 
from the restructuring which are those amounts that are both necessarily entailed by the restructuring and not associated with the 
ongoing activities of the entity
warranties
provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of 
the relevant products at the directors’ best estimate of the expenditure required to settle the group’s obligation
onerous contracts
present obligations arising under onerous contracts are recognised and measured as provisions an onerous contract is 
considered to exist where the group has a contract under which the unavoidable costs of meeting the obligations under the 
contract exceed the economic benefits expected to be received under it
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
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
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 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 present value of the defined 
benefit obligation and the related current service cost and past service cost are measured using the projected unit credit method
the service cost of providing pension and other retirement benefits to employees for the period is charged to the 
income statement
104
 melrose industries plc 
annual report 2013
financials net interest expense on net defined benefit obligations is determined by applying discount rates used to measure defined benefit 
obligations at the beginning of the year to net defined benefit obligations at the beginning of the year net interest expense is 
recognised within finance costs
remeasurement gains and losses comprise actuarial gains and losses the effect of the asset ceiling if applicable and the return 
on plan assets excluding interest remeasurement gains and losses and taxation thereon are recognised in full in the statement 
of comprehensive income in the period in which they occur and are not subsequently recycled
actuarial gains and losses may result from differences between the actuarial assumptions underlying the plan obligations and 
actual experience during the period or changes in the actuarial assumptions used in the valuation of the plan obligations 
for defined contribution plans contributions payable are charged to the income statement as an operating expense when 
employees have rendered services entitling them to the contributions
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 nonmonetary 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
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 the initial recognition of goodwill or 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
105
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
2 summary of significant accounting policies continued
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 substantively 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 nonmarket based vesting conditions at the date of grant the fair value determined at the grant date of the equity
settled 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 the directors’ best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
government grants
government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attaching 
to them and that the grants will be received
government grants relating to property plant and equipment are treated as deferred income and released to profit or loss over the 
expected useful lives of the assets concerned 
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 have made critical accounting judgements these 
include the completion of the quantification of the fair value of assets and liabilities following the acquisition of elster in 2012 in 
addition the impairment of noncurrent assets the quantification of provisions the valuation of retirement benefit obligations 
and taxation require management judgements due to the inherent uncertainty involved in making assumptions and estimates 
106
 melrose industries plc 
annual report 2013
financials actual outcomes may 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
fair values at acquisition
as a result of the acquisition of elster management made judgements in the 2012 annual report regarding the fair value of assets 
and liabilities acquired particularly in relation to provisions and intangible assets in 2013 in accordance with ifrs 3 “business 
combinations” this extensive review of assets and liabilities was completed by the half year and fair values have been restated from 
the provisional values recorded as at 31 december 2012 the measurement period is now closed the finalised fair value of assets 
and liabilities acquired are shown in note 12
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 have 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 the 
net present value such calculations require judgement relating to the appropriate discount factors and longterm growth prevalent 
in a particular market as well as short and mediumterm business plans management draw upon experience as well as external 
resources in making these judgements
the carrying amount of goodwill and other intangible assets including computer software and development costs at the balance 
sheet date was £26120 million 31 december 2012 £30488 million at 31 december 2013 and 2012 the group recognised no 
impairment loss in respect of these assets 
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 20
retirement benefit obligations
retirement benefits are accounted for under ias 19 revised “employee benefits” for defined benefit plans obligations are measured 
at the 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 discount 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 market 
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 longterm and future experience may differ from the actuarial assumptions 
used to determine the net charge for retirement benefit obligations note 23 to these 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 revised “employee benefits” 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 2013 the group’s retirement benefit obligation deficit was £2193 million 31 december 2012 £2613 million 
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
107
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
4 revenue
an analysis of the group’s revenue as defined by ias 18 “revenue” is as follows
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
continuing operations
revenue from the sale of goods 16355 9810
revenue recognised on longterm contracts 65 92
revenue from the provision of services 908 609
revenue 5 17328 10511
finance income 7 217 109
total revenue from continuing operations as defined by ias 18 17545 10620
discontinued operations
revenue from the sale of goods 3912 5336
revenue from the provision of services 16 26
revenue 59 3928 5362
finance income 01 01
total revenue from discontinued operations as defined by ias 18 3929 5363
total revenue as defined by ias 18 21474 15983
1
 restated to include the revenues of truth marelli crosby acco and harris within discontinued operations note 9
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 
categorised as follows
fki segments
• energy
• lifting
elster segments
• gas
• electricity
• water
• elster central 
the energy segment consists of the brush business a specialist supplier of energy industrial products to the global market 
the lifting segment consists of the bridon business serving oil  gas production mining petrochemical alternative energy 
and general construction markets elster comprises the gas electricity and water segments along with their associated central 
costs these businesses serve residential and industrial metering and utilisation markets whilst providing related communications 
networking and software solutions
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 the central ltips cost centre contains the costs 
associated with the new five year melrose incentive plan granted on 11 april 2012 the previous melrose incentive plan which 
crystallised on 22 march 2012 and the divisional management ltips that are in operation across the group
following the disposal of truth and harris the other industrial segment has ceased to exist and the results of these businesses 
have been included within discontinued operations
the discontinued segment comprises truth marelli crosby acco and harris in both years the discontinued segment in 2012 also 
contains the mpc business
108
 melrose industries plc 
annual report 2013
financials transfer prices between business units are set on an arms 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 2013 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
2013
£m
restated
1
year ended
31 december
2012
£m 
continuing operations
energy 3501 3716
lifting 2664 2684
fki total 6165 6400
gas 6889 2369
electricity 2475 1068
water 1799 674
elster total 11163 4111
total continuing operations 4 17328 10511
discontinued operations 49 3928 5362
total revenue 21256 15873
1
 restated to include the revenues of truth marelli crosby acco and harris within discontinued operations note 9
segment result
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
continuing operations
energy 731 779 
lifting 341 358 
fki headline
2
 operating profit 1072 1137 
gas 1524 467 
electricity 215 126 
water 230 14 
elster central 27 29
elster headline
2
 operating profit 1942 578 
central – corporate 135 137
central – ltips
3
130 85
headline
2
 operating profit 2749 1493 
intangible asset amortisation 646 315
exceptional operating costs 6 193 708
exceptional operating income 6 289 70 
operating profit 2199 540 
finance costs – headline
2
7 705 423
finance costs – exceptional 67 – 163
finance income 7 217 109 
profit before tax 1711 63 
tax 8 492 132
profit for the year from discontinued operations 9 4427  477 
profit for the year 5646 408 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement
3
 long term incentive plans
109
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
5 segment information continued
total assets total liabilities
31 december
2013
£m
restated
1
31 december
2012
£m
31 december
2013
£m
restated
1
31 december
2012
£m
energy 4977 4984 1465 1841
lifting 3404 3485 883 1297
fki total 8381 8469 2348 3138
gas 20387 21340 4703 6009
electricity 3430 3457 1177 1282
water 2016 2573 926 1719
elster central 63 250 605 478
elster total 25896 27620 7411 9488
central – corporate 2496 1854 4919 12719
central – ltips
2
– – 216 203
total continuing operations 36773 37943 14894 25548
discontinued operations – 6557 – 1535
total 36773 44500 14894 27083
1
 restated to reflect the completion of the acquisition accounting for elster note 12 and to include the total assets and total liabilities of truth marelli crosby acco and harris within 
discontinued operations note 9
2
 long term incentive plans
capital expenditure
1
depreciation
1
year ended
31 december
2013
£m
restated
2
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
2
year ended
31 december
2012
£m 
continuing operations
energy 168 87 59 51
lifting 86 205 75 57
fki total 254 292 134 108
gas 141 55 154 51
electricity 69 15 67 20
water 37 20 45 20
elster central 03 – – –
elster total 250 90 266 91
central – corporate 06 09 07 06
total continuing operations 510 391 407 205
discontinued operations 103 176 77 109
total 613 567 484 314
1
 including computer software and development costs
2
 restated to include the capital expenditure
1
 and depreciation
1
 of truth marelli crosby acco and harris within discontinued operations note 9
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 interests in 
joint ventures deferred tax assets derivative financial assets and noncurrent trade and other receivables by geographical location 
are detailed below
110
 melrose industries plc 
annual report 2013
financials revenue
1
 from external customers noncurrent assets
year ended
31 december
2013
£m
restated
2
year ended
31 december
2012
£m
31 december
2013
£m
restated
23
31 december
2012
£m 
uk 2135 1262 4172 4009
europe 5744 3329 15571 16372
north america 5405 3482 7619 7995
other 4044 2438 1170 869
total continuing operations 17328 10511 28532 29245
discontinued operations 3928 5362 – 4431
total 21256 15873 28532 33676
1
 revenue is presented by destination
2 
restated to include the revenue and noncurrent assets of truth marelli crosby acco and harris within discontinued operations note 9
3
 restated to reflect the completion of the acquisition accounting for elster note 12
6 exceptional costs and income
exceptional costs
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
continuing operations
restructuring costs 188 513
acquisition disposal and financing costs
– operating 05 195
– financing – 163
total exceptional costs 193 871
total exceptional costs – operating 193 708
total exceptional costs – financing – 163
total exceptional costs 193 871
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9
during 2013 the continuing group incurred £188 million 2012 £513 million of costs relating to restructuring programmes 
these costs include £141 million in relation to restructuring within the elster segment and £47 million in relation to the 
fki businesses mainly within the energy segment 
restructuring costs incurred in 2012 included £91 million relating to the closure of the old elster head office along with £279 million 
of other restructuring costs that occurred within several of the key elster businesses in addition £111 million of surplus leasehold 
property costs were identified during 2012 and £32 million of restructuring costs were incurred in the fki businesses 
the group incurred £05 million of expenses on acquisition and disposal related activities during the year in 2012 operating 
acquisition and disposal costs of £195 million related primarily to the costs incurred in acquiring elster
financing exceptional costs in 2012 related to the debt refinancings performed mainly in respect of the acquisition of elster
exceptional income
year ended
31 december
2013
£m
year ended
31 december
2012
£m 
continuing operations
release of items previously booked as fair value adjustments 289 –
pension curtailment gain – 70
total exceptional income 289 70
following the successful resolution of certain warranty and legal issues in the second half of the year and therefore outside of 
the fair value window £289 million of provisions inherited with the acquisition of elster have been released during the year as 
exceptional income
during 2012 a number of amendments were made to elster retirement medical benefits and retirement life insurance benefits in the 
us these removed £70 million of liabilities resulting in a curtailment gain on these plans
111
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
7 revenues and expenses
continuing operations discontinued operations total
net operating expenses comprise
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
selling and distribution costs 1483 831 228 315 1711 1146
administration expenses 2515 1309 305 393 2820 1702
share of headline
2
 results of joint ventures note 14 28 08 – – 28 08
other operating costs – exceptional note 6 193 708 07 31 200 739
other operating income – exceptional note 6 289 70 – – 289 70
total net operating expenses 3874 2770 540 739 4414 3509
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement
continuing operations discontinued operations total
operating profit is stated  
after chargingcrediting
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
depreciation and impairment 378 193 79 106 457 299 
cost of inventories 11255 7201 2663 3788 13918 10989 
amortisation of customer relationships 
 and brand names note 12 646 315 63 76 709 391
amortisation of computer software and 
 development costs note 12 53 21 02 03 55 24
operating lease expense 113 74 25 37 138 111 
staff costs
2
3802 2325 912 1273 4714 3598 
research and development costs
2
189 74 03 02 192 76
profitloss on disposal of property 
 plant and equipment 11 02 – 03 11 01
impairment recognised on trade receivables 29 04 04 04 33 08
1 
restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 staff costs include £363 million 2012 £127 million of research and development related costs in continuing operations
the analysis of auditor’s remuneration is as follows
year ended
31 december
2013
£m
year ended
31 december
2012
£m 
fees payable to the company’s auditor for the audit of the company’s annual accounts 14 13
fees payable to the auditor for the audit of the elster acquisition balance sheet – 04 
fees payable to the previous auditor of elster – 02 
total fees payable for the audit of the company’s annual accounts 14 19 
fees payable to the company’s auditor and their associates for other audit services to the group
 – the audit of the company’s subsidiaries pursuant to legislation 14 13
total audit fees 28 32
auditrelated assurance services
review of the half year interim statement 02 01
nonstatutory audit of certain of the company’s businesses 10 –
other auditrelated assurance services – 04
total auditrelated assurance services 12 05
total audit and auditrelated assurance services 40 37
taxation compliance services 01 02
other taxation advisory services 09 03
corporate finance services – 17
other services 03 02
total audit and nonaudit fees 53 61
the other auditrelated assurance services in 2012 related to investment circulars issued for the acquisition of elster and 
the creation of the new parent company corporate finance services in 2012 include due diligence and other transaction 
related services
112
 melrose industries plc 
annual report 2013
financials details of the company’s policy on the use of auditors for nonaudit services and how auditor’s independence and objectivity 
were safeguarded are set out in the audit committee report on page 68 no services were provided pursuant to contingent 
fee arrangements
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
staff costs during the year including executive directors
wages and salaries 2935 1836
social security costs 581 294
pension costs
– defined benefit plans 34 11
– defined contribution plans 122 99
ltips
2
130 85
total continuing staff costs 3802 2325
discontinued staff costs
3
912 1273
total staff costs 4714 3598
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 
2 
long term incentive plans
3 
includes £07 million 2012 £01 million of defined benefit pension costs and £25 million 2012 £33 million of defined contribution pension costs
year ended
31 december
2013
number
restated
1
year ended
31 december
2012
number 
average monthly number of persons employed including executive directors
energy 2691 2724
lifting 1696 1706
gas 3827 4017
electricity 1391 1530
water 1104 1310
central – corporate 35 33
total continuing operations 10744 11320
discontinued operations 2999 3453
total average number of persons employed 13743 14773
1
 restated to include the employees of truth marelli crosby acco and harris within discontinued operations note 9
notes
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
finance costs and income
interest on bank loans and overdrafts 561 328
amortisation of costs of raising finance 47 24
net interest cost on pensions 90 62
unwind of discount on provisions 20 07 09
headline
2 
finance costs 705 423
exceptional finance costs 6 – 163
total finance costs 705 586
finance income 217 109 
total continuing operations 488 477
discontinued operations
3
9 01 01
total net finance costs 489 478
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement
3
 includes £02 million 2012 £01 million net interest cost in relation to pensions
113
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
8 tax
continuing operations discontinued operations total
analysis of chargecredit in year
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
year ended
31 december
2013
£m
year ended
31 december
2012
£m 
current tax 441 179 329 260 770 439 
deferred tax note 21 51 47 25 91 26 44 
total income tax charge 492 132 304 351 796 483 
tax charge on headline
2
 profit before tax 600 315 325 255 925 570
exceptional tax charge 81 58 – – 81 58 
tax chargecredit on net exceptional items 37 131 – – 37 131
tax creditcharge in respect of 
 intangible asset amortisation 226 110 21 96 247 14
total income tax charge 492 132 304 351 796 483 
1 
restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement
the tax charge for the year ended 31 december 2013 includes an exceptional tax charge of £81 million relating to the tax costs 
arising on an internal reorganisation of the water segment within the 2012 exceptional tax charge of £58 million £42 million 
related to the tax impact of the holding company restructuring that took place during the year as certain deferred tax assets were 
no longer considered likely to be available and £16 million related to businesses previously disposed 
the charge for the year can be reconciled to the profit per the income statement as follows
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
profit on ordinary activities before tax
continuing operations 1711 63 
discontinued operations note 9 724 834 
2435 897 
tax on profit on ordinary activities at weighted average rate 2989 2012 2833 728 254 
tax effect of
net permanent differencesnondeductible items 58 69 
change to calculation of deferred tax liability on intangible asset – 98 
effect of rate change on deferred tax liability on intangible asset 39 – 
temporary differences not recognised in deferred tax 22 44 
tax credits withholding taxes and other rate differences 14 16 
prior year tax adjustments 24 56
exceptional tax charge 81 58 
total tax charge for the year 796 483 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
the reconciliation has been performed at a blended group tax rate of 2989 2012 2833 which represents the weighted 
average of the tax rates applying to taxable profits in the jurisdictions in which those profits arose 
in addition to the amount charged to the income statement a tax credit of £nil 2012 £13 million has been recognised directly 
in the consolidated statement of comprehensive income this represents a tax charge of £06 million 2012 £35 million credit 
in respect of retirement benefit obligations a tax credit of £06 million 2012 £16 million charge in respect of movements on 
cash flow hedges and a tax charge of £nil 2012 £06 million in respect of the use of losses on items taken directly to reserves in 
prior years
114
 melrose industries plc 
annual report 2013
financials 9 discontinued operations
disposal of businesses
on 22 november 2013 the group completed the disposal of crosby and acco two businesses acquired as part of the fki 
acquisition in 2008 for gross cash consideration of us 10169 million £6326 million the costs charged during the year 
associated with the disposal were £130 million the profit on disposal in the year was £2566 million after the recycling of 
cumulative translation differences of £66 million the crosby and acco businesses were previously classified within the lifting 
segment and are now shown within discontinued operations
on 1 august 2013 the group completed the disposal of marelli also acquired as part of fki for cash consideration of 
€2072 million £1771 million the costs charged during the year associated with the disposal were £73 million the profit on 
disposal in the year was £704 million after the recycling of cumulative translation differences of £35 million the marelli business 
was previously classified within the energy segment and is now shown within discontinued operations
during the year the group also disposed of two other businesses namely truth disposed on 3 july 2013 and harris disposed on 
31 december 2013 both previously shown within the other industrial segment the combined cash consideration received for 
these businesses was us 2154 million £1407 million and the costs incurred were £47 million the combined profit on disposal 
of these businesses was £737 million after the recycling of cumulative translation differences of £20 million
during the year up until the date of disposal these businesses contributed £3928 million of revenue and £795 million of headline 
operating profit
the comparative information for the year ended 31 december 2012 has been restated to exclude the results and cashflows of 
these businesses from continuing operations and include them as discontinued operations
discontinued operations in 2012 also contain the results and cashflows of the mpc business which was disposed on 
25 june 2012
financial performance of discontinued operations
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
revenue 3928 5362 
operating costs 3133 4420
headline
2
 operating profit 795 942 
intangible asset amortisation 63 76 
exceptional items 07 31 
net finance costs 01 01 
profit before tax 724 834 
headline
2
 tax 325 255
exceptional tax 21 96
profit after tax 420 483 
cumulative translation differences recycled on disposals 121 –
gainloss on disposal of net assets of discontinued operations 3886 06
profit for the period from discontinued operations 4427 477 
attributable to
owners of the parent 4427 477 
noncontrolling interests – –
4427 477 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations
2
 as defined on the income statement
115
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
9 discontinued operations continued
the major classes of assets and liabilities by segment disposed within these businesses were as follows
lifting
£m
energy
£m
other 
industrial
£m
discontinued 
operations
£m
goodwill and other intangible assets 2855 424 347 3626
property plant and equipment 402 300 126 828
inventories 542 333 186 1061
trade and other receivables 476 418 136 1030
cash and cash equivalents 253 66 53 372
total assets 4528 1541 848 6917
trade and other payables 331 384 145 860
retirement benefit obligations 61 41 – 102
provisions 93 04 01 98
tax and deferred tax 347 83 59 489
total liabilities 832 512 205 1549
net assets 3696 1029 643 5368
cash consideration net of costs
1
6196 1698 1360 9254
cumulative translation differences recycled on disposals 66 35 20 121
profit on disposal of businesses 2566 704 737 4007
1
 net of £250 million of disposal costs
10 dividends
year ended
31 december
2013
£m
year ended
31 december
2012
£m 
final dividend for the year ended 31 december 2011 paid of 84p 48p
1
– 328
interim dividend for the year ended 31 december 2012 paid of 26p – 329
final dividend for the year ended 31 december 2012 paid of 50p 633 –
interim dividend for the year ended 31 december 2013 paid of 275p 348 –
981 657
1
 adjusted to include the effects of the rights issue on 1 august 2012 note 11
proposed final dividend for the year ended 31 december 2013 of 50p per share 2012 50p per share totalling £536 million 
2012 £633 million
the final dividend of 50p was proposed by the board on 5 march 2014 and in accordance with ias 10 “events after the reporting 
period” has not been included as a liability in these financial statements
116
 melrose industries plc 
annual report 2013
financials 11 earnings per share
earnings attributable to owners of the parent
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m 
profit for the purposes of earnings per share 5627 391 
less profit for the year from discontinued operations note 9 4427 477
earnings for basis of earnings per share from continuing operations 1200 86
continuing operations
intangible asset amortisation 646 315 
exceptional costs note 6 – operating 193 708 
exceptional income note 6 – operating 289 70
exceptional costs note 6 – financing – 163 
exceptional tax
2
108 183
earnings for basis of headline
2
 earnings per share from continuing operations 1642 847 
discontinued operations note 9
profit for the period from discontinued operations 4427 477 
profitloss on disposal of businesses 4007 06 
intangible asset amortisation 63 76 
exceptional items 07 31 
exceptional tax
2
21 96 
earnings for basis of headline
2
 earnings per share from continuing and discontinued operations 2111 1533
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement 
number number
weighted average number of ordinary shares for the purposes of basic earnings
 per share including for 2012 the effects of the rights issue
1
 million 12666 9454
further shares for the purposes of diluted earnings per share
2
 including for 2012
  the effects of the rights issue
1
 million 201 153
weighted average number of ordinary shares for the purposes of 
 diluted earnings per share million 12867 9607
1
 on 1 august 2012 a 2 for 1 fully underwritten rights issue was completed by melrose plc and subsequently 8444 million new melrose ordinary shares were issued raising 
£12 billion to part fund the acquisition of elster group se in accordance with ias 33 “earnings per share” a bonus factor associated with the issue of the new share capital of 
57 was applied to the number of ordinary shares for the purpose of earnings per share calculations for 2012
2
 relating to the 2012 melrose incentive plan and the previous melrose incentive plan which crystallised on 11 april 2012
earnings per share
year ended
31 december
2013
pence
restated
1
year ended
31 december
2012
pence 
basic earnings per share
from continuing and discontinued operations 444 41 
from continuing operations 95 09
from discontinued operations 349 50 
diluted earnings per share
from continuing and discontinued operations 437 41 
from continuing operations 93 09
from discontinued operations 344 50 
headline
2
 basic earnings per share
from continuing and discontinued operations 167 162 
from continuing operations 130 90 
headline
2
 diluted earnings per share
from continuing and discontinued operations 164 160 
from continuing operations 128 88 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2 
as defined on the income statement
117
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
12 goodwill and other intangible assets
restated
1
goodwill
£m
customer 
relationships
£m
brand 
names
£m
computer
software and 
development
costs
£m
restated
1
total
£m
cost
at 1 january 2012 5685 597 3586 31 9899 
acquisitions 13071 8138 488 241 21938 
additions – – – 22 22 
disposal of businesses 32 – – 06 38
exchange adjustments 62 40 81 02 101
at 31 december 2012 18662 8775 3993 290 31720 
additions – – – 39 39 
disposal of businesses 2591 90 1344 38 4063
exchange adjustments 51 10 32 01 30
at 31 december 2013 16020 8675 2681 290 27666 
amortisation
at 1 january 2012 – 207 628 03 838
charge for the period – 206 185 24 415
exchange adjustments – 03 18 – 21 
at 31 december 2012 – 410 795 27 1232
charge for the period – 514 195 55 764
disposal of businesses – 44 360 33 437 
exchange adjustments – 17 04 – 13 
at 31 december 2013 – 863 634 49 1546
net book value
at 31 december 2013 16020 7812 2047 241 26120 
at 31 december 2012
1
18662 8365 3198 263 30488 
at 1 january 2012 5685 390 2958 28 9061 
1 
restated to reflect the completion of the acquisition accounting for elster
included within customer relationships is an element in relation to the gas segment which has a carrying amount as at 
31 december 2013 of £6475 million 2012 £6790 million and a remaining amortisation period of 18 years and 8 months
the goodwill generated as a result of acquisitions represents the premium paid in excess of the fair value of all assets including 
intangible assets identified at the point of acquisition and in the subsequent review period this premium reflects the directors’ 
view at the date of acquisition and before any turnaround processes have been applied of the future growth potential of the 
businesses acquired at that date 
furthermore value is added to the businesses acquired through future improvements that are applied achieved through a 
combination of revised strategic direction operational improvements and investment this is expected to result in improved 
profitability and cash flows of the acquired businesses during the period of ownership and is also expected to result in enhanced 
disposal proceeds when the acquired businesses are ultimately disposed the combined value achieved from these improvements 
is expected to result in the businesses being valued in excess of the fair value of all assets and goodwill acquired
118
 melrose industries plc 
annual report 2013
financials goodwill has been allocated to the businesses each of which comprises several cashgenerating units as follows
31 december
2013
£m
restated
1
31 december
2012
£m
energy 2074 2091
lifting 862 863
fki total 2936 2954
gas 10720 10681
electricity 1579 1639
water 785 820
elster total 13084 13140
discontinued – 2568
16020 18662
1
 restated to reflect the completion of the acquisition accounting for elster and to include the goodwill of truth marelli crosby acco and harris within discontinued operations note 9
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired value 
in use calculations are used to determine the recoverable amount of goodwill allocated to each group of cashgenerating units 
cgus and use the latest approved forecasts extrapolated to perpetuity using growth rates shown below which do not exceed 
the longterm growth rate for the relevant market no impairment was identified the basis of these impairment tests and the key 
assumptions are set out in the table below
31 december 2013
group of cgus
basis of 
valuation
carrying 
value of 
goodwill
£m
pretax 
discount 
rates
1
period of 
forecast
key assumptions applied in the  
forecast cash flow projections
2
longterm 
growth 
rates
3
energy value in use 2074 104 4 years revenue growth operating margins 25
lifting value in use 862 98 5 years revenue growth operating margins 32
gas value in use 10720 98 4 years revenue growth operating margins 25
electricity value in use 1579 98 4 years revenue growth operating margins 29
water value in use 785 100 3 years revenue growth operating margins 25
31 december 2012
group of cgus
basis of 
valuation
carrying 
value of 
goodwill
£m
pretax 
discount 
rates
1
period of 
forecast
key assumptions applied in the  
forecast cash flow projections
2
longterm 
growth 
rates
3
energy value in use 2091 79 2 years revenue growth operating margins 25
lifting value in use 863 92 2 years revenue growth operating margins 25
gas value in use 10681 85 3 years revenue growth operating margins 30
electricity value in use 1639 87 3 years revenue growth operating margins 30
water value in use 820 80 3 years revenue growth operating margins 30
1 pretax risk adjusted discount rates
cash flows are discounted using a pretax discount rate specific to each cgu discount rates reflect the current market 
assessments of the time value of money and are based on the estimated cost of capital of each cgu in determining the cost 
of equity the capital asset pricing model capm has been used under capm the cost of equity is determined by adding a 
risk premium to the risk free rate to reflect the additional risk associated with investing outside of lending to a country eg the 
purchase of uk gilts the premium is based on an industry adjustment ‘beta’ to the expected return of the equity market above 
the risk free return the relative risk adjustment reflects the risk inherent in each cgu relative to all other sectors and geographies 
on average 
119
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
12 goodwill and other intangible assets continued
2 assumptions applied in financial forecasts
the group prepares cash flow forecasts derived from financial budgets and midterm plans approved by management the key 
assumptions used in forecasting pretax cash flows relate to future budgeted revenue and operating margins likely to be achieved 
and the likely rates of longterm growth by market sector underlying factors in determining the values assigned to each key 
assumption by cgu are shown below
revenue growth
revenue growth assumptions in the forecast period are based on financial budgets and midterm plans approved by management 
taking into account industry growth rates and management of each division’s historical experience in the context of wider industry 
and economic conditions projected sales are built up with reference to markets and product categories they incorporate past 
performance historical growth rates projections of developments in key markets secured orders and orders likely to be achieved 
in the short to mediumterm given trends in the relevant market sector
fki
bridon designs and manufactures lifting and stabilising solutions for applications in wire rope fibre rope steel wire and strand 
the business services global customers in the oil  gas mining industrial marine and infrastructure sectors the key drivers for 
revenues are i oil  gas drilling and rig count which in turn is dependent upon oil  natural gas prices and storage levels ii global 
mining activity both operating and capital expenditures from mining companies which in turn is dependent upon demand for coal 
and metals iii commercial construction iv trade through seaports and demand from crane oems independent forecasts of growth 
in these served end markets have been used to derive revenue growth assumptions 
brush is a supplier of turbogenerators for the power generation industrial oil  gas and offshore sectors and a leading supplier 
of switchgear transformers and other power infrastructure equipment the key drivers for revenues are i original equipment 
investments in the global power market both new capacity mainly emerging markets and replacement capacity mainly in mature 
markets ii growth in service requirements of a growing installed base iii new product introduction independent forecasts of 
growth in these power generation markets have been used to derive revenue growth assumptions 
elster
elster gas designs and manufactures gas measurement process heat control and gas safety control equipment the key drivers 
for growth are i global energy consumption and the growing share for natural gas ii international legislation aimed at driving 
down emission levels and increasing efficiency which in turn stimulates demand for smart meters and process heat applications 
independent forecasts of the growth in these end markets have been used to derive revenue growth assumptions as well as 
management’s best estimates of the impact of residential smart meter rollouts in the eu
elster electricity is an international metering solution provider supplying both traditional and smart meter equipment including 
applications for residential commercial industrial transmission and distribution markets the key drivers for revenues are i global 
demand for electricity metering requirements both traditional and smart ii market developments in meter data software solutions 
independent forecasts of the growth in the meter hardware and related meter software end markets have been used to derive 
revenue growth assumptions as well as management’s best estimates of the impact of residential smart meter rollouts in the eu
elster water designs and manufactures a comprehensive range of water metering solutions the key driver for revenue growth is 
the global demand for water meters both traditional and smart revenue growth assumptions have been built up with reference to 
past performance historical growth rates and projections of developments in key markets
operating margins
operating margins have been forecast based on historical levels considering the likely impact of changing economic environments 
and competitive landscapes on volumes and revenues and the impact of management actions on costs projected margins reflect 
the impact of all initiated projects to improve operational efficiency and leverage scale the projections do not include the impact 
of future restructuring projects to which the group is not yet committed forecasts for other overhead costs are based on inflation 
forecasts and supply and demand factors
3 longterm growth rates
longterm growth rates are based on longterm economic forecasts for growth in the manufacturing sector in the geography in 
which the cgu operates longterm growth rates are determined using a blend of publicly available historical data and a longterm 
growth rate forecast published by external analysts and further take into account the international presence and the markets in 
which each business operates
120
 melrose industries plc 
annual report 2013
financials sensitivity analysis
a reasonable possible change in the assumptions applied would not result in any impairment base case forecasts show significant 
headroom above the carrying value for each group of cgus sensitivity analysis has been undertaken for each group of cgus 
to assess the impact of any reasonable possible change in key assumptions there is no reasonable possible change that would 
cause the carrying values to exceed recoverable amounts
acquisition of subsidiaries
during the year the noncontrolling interest of a gas subsidiary business was acquired for total consideration of £98 million
in line with the group’s strategy to acquire good manufacturing businesses with potential for improvements on 23 august 2012 
the group acquired 9935 of the issued share capital and obtained control of elster group se for cash consideration of 
£14698 million subsequently a further 045 of the remaining 065 share capital was purchased on various dates in 2012 for 
total consideration of £64 million the final 020 share capital was purchased during 2013 for total consideration of £30 million
the amounts recognised in respect of the identifiable assets acquired and liabilities assumed on the acquisition of elster were 
set out in the 2012 annual report during the year the group has completed its review of the assets and liabilities acquired as a 
result the group recorded its final adjustments to the opening balance sheet of elster at the half year in accordance with ifrs 3 
“business combinations” the balance sheet at 31 december 2012 has been restated to reflect this these adjustments increased 
provisions by £329 million deferred tax assets by £52 million other payables by £09 million and reduced inventory and property 
plant and equipment by £06 million and £01 million respectively the corresponding adjustment is to increase goodwill by 
£293 million the measurement period was closed at 30 june 2013
restated
1
fair value
£m
elster
property plant and equipment 1002 
intangible assets computer software and development costs 8867 
derivative financial assets 03 
interests in joint ventures 98 
inventories 1756 
trade and other receivables 1826 
cash and cash equivalents 1056 
trade and other payables 3569
provisions 1759
deferred tax 2008
retirement benefit obligation 1173
current tax 292
interestbearing loans and borrowings 4119
noncontrolling interests 49
net assets 1639 
noncontrolling interests elster shares 12
goodwill 13071 
total consideration 14698 
satisfied by
cash consideration 14698 
1
 restated to reflect the completion of the acquisition accounting for elster
121
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
13 property plant and equipment
land and 
buildings
£m
restated
1
plant and
equipment
£m
restated
1
total
£m
cost
at 1 january 2012 1029 1907 2936 
acquisitions 273 729 1002 
additions 75 470 545 
disposals 03 26 29
disposal of businesses 58 190 248
exchange adjustments 20 47 67
at 31 december 2012 1296 2843 4139 
additions 45 529 574 
disposals 11 57 68
disposal of businesses 366 919 1285
exchange adjustments 13 19 32
at 31 december 2013 951 2377 3328 
accumulated depreciation and impairment
at 1 january 2012 100 683 783
charge for the period 33 257 290
impairments – 09 09
disposals – 16 16 
disposal of businesses 09 88 97 
exchange adjustments 02 16 18 
at 31 december 2012 122 829 951
charge for the period 46 383 429
impairments
2
– 28 28
disposals – 17 17 
disposal of businesses 52 405 457 
exchange adjustments 01 17 18 
at 31 december 2013 115 801 916
net book value
at 31 december 2013 836 1576 2412 
at 31 december 2012 1174 2014 3188 
at 1 january 2012 929 1224 2153 
1
 restated to reflect the completion of the acquisition accounting for elster note 12
2
 the impairment of plant and equipment comprises £06 million in relation to the energy segment £18 million in relation to the water segment and £04 million in relation to 
discontinued operations
122
 melrose industries plc 
annual report 2013
financials 14  interests in joint ventures
31 december
2013
£m
31 december
2012
£m
aggregated amounts relating to joint ventures
share of assets 240 224 
share of liabilities 114 100
interests in joint ventures 126 124 
share of joint venture revenues 366 114 
share of results of joint ventures 28 08 
dividends received from joint ventures 27 03
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
2013
£m
restated
1
31 december
2012
£m
raw materials 751 1148
work in progress 892 1569
finished goods 702 1038
2345 3755
1
 restated to reflect the completion of the acquisition accounting for elster note 12
the directors consider that there is no material difference between the balance sheet value of inventories and their replacement cost
the expense of writing down inventory to net realisable value during the year totalled £87 million whilst reversals of previous write 
downs of inventory amounted to £53 million
construction contracts
31 december
2013
£m
31 december
2012
£m
contracts in progress at the balance sheet date
amounts due from contract customers included in other receivables 47 30 
47 30 
contract costs incurred plus recognised profit less recognised losses to date 148 94 
less progress billings 101 64
47 30 
the average life of contracts is 12 years 31 december 2012 12 years
123
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
16 trade and other receivables
current
31 december
2013
£m
31 december
2012
£m
trade receivables 2572 3341 
allowance for doubtful receivables 82 126
amounts due from joint ventures 10 13 
other receivables 275 422 
prepayments 153 191 
2928 3841 
trade receivables are non interestbearing credit terms offered to customers vary upon the country of operation but are generally 
between 30 and 90 days 
noncurrent
31 december
2013
£m
31 december
2012
£m
other receivables 03 03
an allowance has been made for estimated irrecoverable amounts with reference to past default experience and management’s 
assessment of credit worthiness an analysis of which is as follows
fki
£m
elster
£m
central
£m
discontinued
1
£m
total
£m
at 1 january 2012 07 – 01 24 32 
acquired with business – 102 – – 102 
disposal of businesses – – – 03 03
income statement charge 02 02 – 04 08 
utilised 02 09 – 02 13
exchange differences – – – – – 
at 31 december 2012 07 95 01 23 126 
disposal of businesses – – – 26 26
income statement charge 08 21 – 04 33 
utilised 02 48 01 01 52
exchange differences – 01 – – 01 
at 31 december 2013 13 69 – – 82 
1 
restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9
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
the ageing of impaired trade receivables past due is as follows
ageing of impaired trade receivables past due
31 december
2013
£m
31 december
2012
£m
0 – 30 days 04 19
31 – 60 days 02 04
60 days 76 103
82 126
included in the group’s trade receivables balance are overdue trade receivables with a carrying amount of £427 million 
31 december 2012 £880 million against which an appropriate provision of £82 million 31 december 2012 £126 million is held
124
 melrose industries plc 
annual report 2013
financials the balance deemed recoverable of £345 million 31 december 2012 £754 million is past due as follows
31 december
2013
£m
31 december
2012
£m
0 – 30 days 239 581
31 – 60 days 72 79
60 days 34 94
345 754
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
2013
£m
31 december
2012
£m
cash and cash equivalents 2004 1565
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
18 trade and other payables
current
31 december
2013
£m
restated
1
31 december
2012
£m
trade payables 1953 2534
other payables 1118 1695
other taxes and social security 130 165
deferred government grants 22 24
accruals 769 985
3992 5403
1 
restated to reflect the completion of the acquisition accounting of elster note 12
trade payables are non interestbearing normal settlement terms vary by country and the average credit period taken for trade 
purchases is 100 days 2012 98 days other payables are non interestbearing and have an average term of approximately 
60 days
noncurrent
31 december
2013
£m
31 december
2012
£m
other payables 11 09
accruals 04 17
15 26
the directors consider that the carrying amount of trade and other payables approximates to their fair value
125
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
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
2013
£m
31 december
2012
£m
31 december
2013
£m
31 december
2012
£m
31 december
2013
£m
31 december
2012
£m 
fixed rate obligations
bank borrowings – brazilian real – 62 – – – 62 
– 62 – – – 62 
floating rate obligations
bank borrowings – us dollar loan
1
– – 1751 4233 1751 4233 
bank borrowings – euro loan
2
– – – 2982 – 2982 
bank borrowings – sterling loan
3
– – 1800 4475 1800 4475 
bank borrowings – brazilian real – – 24 – 24 – 
– – 3575 11690 3575 11690 
unamortised finance costs – – 163 210 163 210
total interestbearing loans and borrowings – 62 3412 11480 3412 11542
1
 interest rate libor 225 final maturity june 2017 31 december 2012 interest rate libor 200 final maturity june 2017
2
 interest rate euribor 225 final maturity june 2017 31 december 2012 interest rate euribor 200 final maturity june 2017
3
 interest rate libor 225 final maturity june 2017 31 december 2012 interest rate libor 200 final maturity june 2017
as at 1 january 2013 the group held a five year multicurrency facility split between a £05 billion term loan and a £10 billion 
revolving credit facility these facilities are due to mature on 29 june 2017 
as at 1 january 2013 the term loan was split into two tranches of £180 million and us 500 million during the year following the 
receipt of business disposal proceeds us 210 million was repaid and cancelled against the us dollar denominated term loan 
at 31 december 2013 the £180 million and the remaining us 290 million term loan tranches remain drawn down 
the sterling denominated term loan is subject to mandatory repayments of 5 on june 2015 june 2016 and 31 december 2016 
adjusted for any term loan repayments made prior to these dates following the repayments made against the us dollar 
denominated tranche in the year no further mandatory repayments are due in respect of the us dollar denominated term loan 
before 29 june 2017
as at 1 january 2013 the revolving credit facility was split between a £760 million sterling denominated multicurrency facility and 
a €300 million euro denominated facility these were both partially drawn at 1 january 2013 during the year £185 million of the 
sterling denominated facility was repaid and cancelled the remaining revolving credit facilities of £7415 million and €300 million 
were repaid but not cancelled during the year following the receipt of business disposals there were no drawdowns against 
these facilities at 31 december 2013
throughout the year the group remained compliant with all covenants under the facilities disclosed above a number of companies 
continue to be guarantors under the bank facilities in addition until elster group se becomes converted into a german limited 
liability company a pledge has been given over the shares of elster group se
drawdowns under the existing facility 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 which ranges between 140 and 265 the margin as at 
31 december 2013 was 225 31 december 2012 200
126
 melrose industries plc 
annual report 2013
financials 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 the euribor curve for euro 
balances interest on hedging interest rate swaps is based on the relevant forward libor curves for us dollar and sterling 
amounts and euribor curve for euro amounts and is illustrated as a net cash flow
interestbearing
 loans and
 borrowings
£m
derivative 
financial
liabilities
£m
restated
1
 
other financial 
liabilities
£m
restated
1
 
total financial 
liabilities
£m
within one year 96 72 3840 4008 
in one to two years 220 – 15 235 
in two to five years 3688 – – 3688 
effect of financing rates 592 – – 592
31 december 2013 3412 72 3855 7339 
within one year 333 70 5214 5617 
in one to two years 282 38 26 346 
in two to five years 12529 03 – 12526 
effect of financing rates 1602 – – 1602
31 december 2012 11542 105 5240 16887 
1
 restated to reflect the completion of the acquisition accounting for elster note 12 
20 provisions
surplus 
leasehold
property costs
£m
environmental 
and legal costs
£m
incentive plan 
related
£m
warranty 
related costs
£m
other
£m
total
£m
at 31 december 2012 restated
1
315 687 203 1025 642 2872 
utilised
2
106 77 77 241 553 1054
net release to exceptional items
3
05 18 – 197 147 37
net charge to headline
4
 operating profit – 09 90 28 08 79
disposal of businesses – 92 – – 06 98
unwind of discount note 7 06 01 – – – 07 
exchange differences 02 05 – 02 10 09 
at 31 december 2013 212 541 216 561 248 1778 
current 66 83 – 381 214 744 
noncurrent 146 458 216 180 34 1034 
212 541 216 561 248 1778 
1
 restated to reflect the completion of the acquisition accounting for elster note 12
2
 includes £982 million of cash spend against provisions and £72 million non cash utilisation
3
 net of £269 million of provisions originally booked as fair value adjustments on acquisition of elster released to exceptional income and £232 million of other exceptional costs 
mainly relating to restructuring
4
 as defined on the income statement
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 five 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 plan related provisions are in respect of long term incentive plans for divisional senior management expected to result in 
cash expenditure in the next four years
the provision for warranty related costs represents the best estimate of the expenditure required to settle the group’s obligations 
warranty terms are on average between one and five years
other provisions relate primarily to costs that will be incurred in respect of restructuring programmes usually resulting in cash 
spend within one year
where appropriate provisions have been discounted using a discount rate of 3 31 december 2012 3
127
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
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
restated
1
tax losses and
 other assets
£m
accelerated 
capital 
allowances and
 other liabilities
£m
deferred 
tax on 
intangible 
assets
£m
total deferred 
tax liabilities
£m
restated
1
total net
deferred tax
£m
at 1 january 2012 404 147 836 983 579
chargecredit to income 8 16 42 14 28 44
creditcharge to other comprehensive income 35 16 – 16 19
acquisition of businesses 12 1090 434 2664 3098 2008
exchange differences 10 01 14 13 03 
at 31 december 2012 1503 640 3472 4112 2609
chargecredit to income 8 641 368 247 615 26
chargecredit to other comprehensive income 06 06 – 06 –
disposal of businesses 158 144 362 506 348 
exchange differences 05 – 11 11 06
at 31 december 2013 703 122 2874 2996 2293
1
 restated to reflect the completion of the acquisition accounting for elster note 12 and for the adoption of ias 19 revised “employee benefits” note 1
as at 31 december 2013 the group had gross unused losses of £2171 million 31 december 2012 £2506 million available for 
offset against future profits at 31 december 2013 a £97 million deferred tax asset 31 december 2012 £91 million in respect 
of £420 million 31 december 2012 £355 million of these gross losses were recognised in the balance sheet no asset was 
recognised in respect of the remaining losses due to the divisional and geographic split of anticipated future profit streams and 
the effect of possible disposals in future years the majority of these losses may be carried forward indefinitely subject to certain 
continuity of business requirements 
a deferred tax asset of £256 million 31 december 2012 £378 million was recognised on group retirement benefit obligations 
being the extent to which they are expected to generate tax deductions against foreseeable taxable profits 
the remaining asset of £350 million 31 december 2012 £1034 million relates to other temporary differences 
as at 31 december 2013 the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for 
which deferred tax liabilities had not been recognised was £33 million 31 december 2012 £66 million no liability was 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
22 sharebased payments
melrose incentive plans
the company has 50000 options 31 december 2012 50000 options in issue which enable the holder of these options to 
subscribe for 2012 incentive shares these options are held by directors and senior employees further details of the 2012 melrose 
incentive plan are provided in the directors’ remuneration report on pages 70 to 84
the estimated value of the 2012 incentive shares at 31 december 2013 was £730 million 31 december 2012 £86 million using 
a black scholes option pricing model the estimated fair value attributable to this plan in over three years time at 31 may 2017 will 
be £1017 million 31 december 2012 £602 million 
the inputs into the black scholes model that were used to fair value the plan when it was originally established in 2012 were as follows
valuation 
assumptions
weighted average share price £227
weighted average exercise price £285
expected volatility 300
expected life as at inception 50 yrs
risk free interest 10
expected volatility was determined by calculating the historical volatility of the company’s share price 
the group recognised an ifrs 2 charge of £40 million 2012 £35 million of which £08 million related to the previous melrose 
incentive plan in the year ended 31 december 2013 in relation to the equity settled 2012 melrose incentive plan
128
 melrose industries plc 
annual report 2013
financials 23 retirement benefit obligations
defined contribution plans
the group operates defined contribution plans for qualifying employees across several jurisdictions the assets of the plans are 
held separately from those of the group in funds under the control of trustees
the total costs charged in relation to the continuing businesses during the year of £122 million 2012 £99 million represents 
contributions payable to these plans by the group at rates specified in the rules of the plans
defined benefit plans
the group sponsors defined benefit plans for qualifying employees of certain subsidiaries the funded defined benefit plans are 
administered by a separate fund that is legally separated from the group the trustees of the funds are required by law to act 
in the interest of the fund and of all relevant stakeholders in the plans the trustees of the pension funds are responsible for the 
investment policy with regard to the assets of the fund
during july 2013 the most significant defined benefit plan in the group being the fki uk pension plan was demerged into three 
separate independent plans two new plans namely the bridon group 2013 pension plan and the brush group 2013 pension 
plan were established throughout this note these three plans are collectively referred to as the fki uk pension plans
the most significant defined benefit pension plans are
• the fki uk pension plans which are defined benefit in type and are funded plans the plans are closed to new members 
and the accrual of future benefits for existing members 
• the mckechnie uk pension plan which is defined benefit in type and is a funded plan other than £40 million of unfunded 
liabilities the plan is closed to new members and the accrual of future benefits for existing members
• the fki us pension plan which is defined benefit in type and is a funded plan the plan is closed to new members and the 
accrual of future benefits for existing members
other plans include a number of funded and unfunded defined benefit arrangements across europe north america and the rest 
of the world the group also operates unfunded retiree medical and welfare benefit plans principally in the us 
the cost of the group’s defined benefit plans is determined in accordance with ias 19 revised “employee benefits” 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
valuations of the fki uk pension plans are based on full actuarial valuations as of 31 march 2013 and updated at 
31 december 2013 by independent actuaries the mckechnie uk pension plan valuation is based on a full valuation at 
31 december 2011 updated at 31 december 2013 by independent actuaries the fki us pension plan valuation is based  
on the us full actuarial valuation as of 31 december 2012 updated at 31 december 2013 by independent actuaries 
the group contributed £200 million 2012 £185 million to the fki uk pension plans and £52 million 2012 £46 million to the 
mckechnie uk pension plan in the year ended 31 december 2013 similar contributions will be made to these plans in 2014
in total the group expects to contribute approximately £334 million to its defined benefit plans in the year ended 31 december 2014
in the year the group has adopted ias 19 revised “employee benefits” and restated prior year pension numbers as if the new 
standard had been effective from 1 january 2012 the impact of this new standard is disclosed in note 1
actuarial assumptions
the major weighted average assumptions used by the actuaries in calculating the group’s pension liabilities are as set out below
31 december 2013
fki uk 
plans
 pa
mckechnie
uk plan
 pa
fki us 
plan 
 pa
us plans
 pa
european
plans
 pa
other plans
 pa
rate of increase in salaries na 390
1
na 400 275 300
rate of increase in pensions in payment 320 320 na na 190 na
discount rate 440 440 470 470 350 470
rpi inflation assumption 340 340 na na 190 225
1
 closed to the accrual of future benefits but active members’ benefits are still linked to current salaries
129
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
23 retirement benefit obligations continued
31 december 2012
fki uk 
plans
 pa
mckechnie
uk plan
 pa
fki us 
plan 
 pa
us plans
 pa
european
plans
 pa
other plans
 pa
rate of increase in salaries na 350
1
na 400 275 300
rate of increase in pensions in payment 290 300 na na 190 na
discount rate 450 450 390 390 290 390
rpi inflation assumption 300 300 na na 190 290
1
 closed to the accrual of future benefits but active members’ benefits are still linked to current salaries 
mortality
fki uk pension plans 
mortality assumptions for the most significant plans in the group the fki uk plans as at 31 december 2013 are based on the 
self administered pension scheme “saps” “s1” base tables with scaling factors of 110 and 105 for deferred members and 
pensioners respectively which reflect the results of a mortality analysis carried out on the plan’s membership future improvements 
are in line with the continuous mortality investigation “cmi” improvement model with a longterm rate of improvement of 125 
pa for both males and females 
the assumptions are that a member currently aged 65 will live on average for a further 219 years 31 december 2012 221 years 
if they are male and for a further 241 years 31 december 2012 242 years if they are female for a member who retires in 2033 
at age 65 the assumptions are that they will live for a further 233 years 31 december 2012 235 years after retirement if they are 
male and for a further 256 years 31 december 2012 258 years after retirement if they are female
the mortality assumptions are in line with those adopted for the full valuation as at 31 march 2013
other plans
the mortality assumptions adopted as at 31 december 2013 have been set to reflect the group’s best estimate view of life 
expectancies of members of each individual pension arrangement these mortality assumptions vary by arrangement each 
assumption reflecting the characteristics of the membership of that arrangement
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
2013
£m
31 december
2012
£m
present value of funded defined benefit obligations 11876 11866
fair value of plan assets 10708 10433 
funded status 1168 1433
present value of unfunded defined benefit obligations 1025 1180
net liabilities 2193 2613
the plan liabilities and assets at 31 december 2013 were split by plan as follows
fki uk 
plans
1
£m
mckechnie
uk plan
£m
fki us 
plan 
£m
us plans
£m
european
plans
£m
other plans
£m
total
£m
plan liabilities 7806 1830 1830 393 1015 27 12901
plan assets 6714 1825 1776 274 95 24 10708 
net liabilities 1092 05 54 119 920 03 2193
1
 the fki uk plans comprise three separate plans the fki uk pension plan the brush group 2013 pension plan and the bridon group 2013 pension plan the net liabilities of these 
plans are £708 million £294 million and £90 million respectively
130
 melrose industries plc 
annual report 2013
financials the major categories and fair values of plan assets at the end of the reporting period for each category are as follows
31 december
2013
£m
31 december
2012
£m
equities 3816 4107
government bonds 2158 1944
corporate bonds 3186 3399
property 185 194
insurance contracts 135 144
other 1228 645
total 10708 10433
the assets are well diversified and the majority of plan assets have quoted prices in active markets all government bonds are 
issued by reputable governments and are generally aa rated or higher interest rate and inflation rate swaps are also employed to 
complement the role of fixed and indexlinked bond holdings for liability risk management
the trustees continually review whether the chosen investment strategy is appropriate with a view to providing the pension benefits 
and to ensure appropriate matching of risk and return profiles the main strategic policies include maintaining an appropriate asset 
mix managing interest rate sensitivity and maintaining an appropriate equity buffer investment results are regularly reviewed
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
movements in the present value of defined benefit obligations during the year
year ended
31 december
2013
£m
year ended
31 december
2012
£m
at beginning of year 13046 10767 
acquisition of business – 1551 
disposal of businesses 356 07
current service cost 34 12 
past service cost – 09
lossesgains on curtailments 07 70
interest cost on obligations 542 514 
remeasurement gainslosses – demographic 185 269 
remeasurement losses – financial 29 806 
remeasurement lossesgains – experience 352 174
benefits paid out of plan assets 541 499
benefits paid out of group assets for unfunded plans 47 18
currency translation differences 20 96
at end of year 12901 13046 
the defined benefit plan liabilities are 5 31 december 2012 6 in respect of active plan participants 44 31 december 2012 
45 in respect of deferred plan participants and 51 31 december 2012 49 in respect of pensioners
the weighted average duration of the defined benefit plan liabilities at 31 december 2013 is 153 years 31 december 2012 
155 years
131
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
23 retirement benefit obligations continued
movements in the fair value of plan assets during the year
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
at beginning of year 10433 9590 
acquisition of business – 378 
disposal of businesses 254 – 
interest income on plan assets 450 451 
return on plan assets excluding interest income 397 311 
contributions 289 319 
benefits paid out of plan assets 541 499
plan administrative costs 28 21
currency translation differences 38 96
at end of year 10708 10433 
1
 restated for the adoption of ias 19 revised “employee benefits” note 1
the actual return on plan assets was a gain of £847 million 2012 £762 million 
income statement disclosures
amounts recognised in the income statement in respect of these defined benefit plans are as follows
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
continuing operations
included within headline
2
 operating profit
– current service cost 34 11 
– plan administrative costs 28 21 
– past service cost – 03
included within net finance costs
– interest cost on obligations 533 501 
– interest income on plan assets 443 439
included within exceptional items
– curtailment gain – 70
discontinued operations
included within headline
2
 operating profit
– current service cost – 01 
– past service cost – 06
included within net finance costs
– interest cost on obligations 09 13 
– interest income on plan assets 07 12
included within exceptional items
– curtailment loss 07 –
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9 and for the adoption of ias 19 revised “employee benefits” note 1
2
 as defined on the income statement 
statement of comprehensive income disclosures
amounts recognised in the statement of comprehensive income in respect of these defined benefit plans are as follows
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
return on plan assets excluding amounts included in net interest expense 397 311 
actuarial gainslosses arising from changes in demographic assumptions 185 269
actuarial losses arising from changes in financial assumptions 29 806
actuarial lossesgains arising from experience adjustments 352 174 
net remeasurement gainloss on retirement benefit obligations 201 590
1 
restated for the adoption of ias 19 revised “employee benefits” note 1
132
 melrose industries plc 
annual report 2013
financials risks and sensitivities 
the defined benefit plans expose the group to actuarial risks such as longevity risk currency risk salary risk interest rate risk and 
market investment risk the group is not exposed to any unusual entity specific or plan specific risks
a sensitivity analysis on the principal assumptions used to measure the plan liabilities at the year end is as follows
change in
assumption
decrease
increase to
plan liabilities
£m
increase
decrease to 
profit before tax
£m
discount rate increase by 010 185 06 
decrease by 010 188 06
rpi inflation assumption
1
increase by 010 118 na
decrease by 010 117 na
assumed life expectancy at age 65 rate of mortality increase by 1 year 345 na
decrease by 1 year 336 na
1 
the rpi inflation sensitivity encompasses the impact on pension increases where applicable
the sensitivity analysis above has been determined based on reasonable possible changes to the respective assumptions 
while holding all other assumptions constant there has been no change in the methods and assumptions used in preparing the 
sensitivity analysis from prior years
the sensitivities are based on the relevant assumptions and membership profile as at 31 december 2013 and are applied to 
the obligations at the end of the reporting period whilst the analysis does not take account of the full distribution of cash flows 
expected it does provide an approximation to the sensitivity of the assumptions shown extrapolation of these results beyond the 
sensitivity figures shown may not be appropriate and the sensitivity analysis presented may not be representative of the actual 
change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as 
some of the assumptions may be correlated 
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 2013 and 31 december 2012
fki 
£m
restated
2
elster
£m
central
£m
restated
1
discontinued
£m
restated
2
total
£m
31 december 2013
financial assets
cash and cash equivalents – – 2004 – 2004 
net trade receivables 1076 1413 01 – 2490 
derivative financial assets 26 09 97 – 132 
financial liabilities
interestbearing loans and borrowings – 24 3388 – 3412
derivative financial liabilities 36 11 25 – 72
other financial liabilities 1254 2284 317 – 3855
31 december 2012
financial assets
cash and cash equivalents – – 1565 – 1565 
net trade receivables 1043 1419 01 752 3215 
derivative financial assets 27 02 01 03 33 
financial liabilities
interestbearing loans and borrowings – 62 11480 – 11542
derivative financial liabilities 20 02 82 01 105
other financial liabilities 1295 2805 335 805 5240
1
 restated to include the financial assets and financial liabilities of truth marelli crosby acco and harris within discontinued operations note 9
2
 restated to reflect the completion of the acquisition accounting for elster note 12
133
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
24 financial instruments and risk management continued
credit risk
the group considers its maximum exposure to credit risk to be as follows
fki 
£m
elster
£m
central
£m
restated
1
discontinued
£m
total
£m
31 december 2013
financial assets
cash and cash equivalents – – 2004 – 2004
trade receivables 1076 1413 01 – 2490
derivative financial assets 26 09 97 – 132
31 december 2012
financial assets
cash and cash equivalents – – 1565 – 1565
trade receivables 1043 1419 01 752 3215
derivative financial assets 27 02 01 03 33
1 
restated to include the financial assets of truth marelli crosby acco and harris within discontinued operations note 9
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 assets is limited because the counterparties are 
banks with strong creditratings assigned by international creditrating agencies the group’s credit risk is primarily attributable to 
its trade receivables the amounts presented in the consolidated 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
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 consolidated 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
134
 melrose industries plc 
annual report 2013
financials foreign exchange contracts
as at 31 december 2013 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 £10 million equivalent are 
as follows 
31 december
2013
selling currency
millions
31 december
2013
average hedged
rate
31 december
2012
selling currency
millions
31 december
2012
average hedged
rate
sell australian dollarbuy euro – – aud 47 euraud 127
sell australian dollarbuy sterling aud 19 gbpaud 176 aud 43 gbpaud 158
sell brazilian realbuy us dollar brl 43 usdbrl 233 – –
sell canadian dollarbuy us dollar cad 18 usdcad 105 cad 17 usdcad 100
sell czech korunabuy euro czk 770 eurczk 2584 – –
sell czech korunabuy sterling czk 1883 gbpczk 3269 – –
sell czech korunabuy us dollar – – czk 339 usdczk 2024
sell eurobuy czech koruna eur 91 eurczk 261 eur 71 eurczk 2520
sell eurobuy mexican peso – – eur 41 eurmxn 1701
sell eurobuy polish zloty – – eur 18 eurplz 409
sell eurobuy russian ruble eur 55 eurrub 4521 – –
sell eurobuy sterling eur 330 gbpeur 118 eur 374 gbpeur 124
sell eurobuy us dollar eur 15 eurusd 134 eur 27 eurusd 128
sell hong kong dollarbuy sterling – – hkd 169 gbphkd 1241
sell malaysian ringgitbuy euro – – myr 58 eurmyr 400
sell malaysian ringgitbuy us dollar – – myr 56 usdmyr 311
sell norwegian kronebuy sterling nok 549 gbpnok 959 nok 923 gbpnok 930
sell russian rublebuy euro rub 700 eurrub 4476 – –
sell singapore dollarbuy sterling – – sgd 21 gbpsgd 198
sell south african randbuy euro zar 228 eurzar 138 zar 211 eurzar 1060
sell south african randbuy sterling zar 233 gbpzar 1667 zar 293 gbpzar 1421
sell sterlingbuy czech koruna gbp 431 gbpczk 3093 gbp 621 gbpczk 3058
sell sterlingbuy euro gbp 535 gbpeur 118 gbp 370 gbpeur 122
sell sterlingbuy singapore dollar gbp 19 gbpsgd 197 – –
sell sterlingbuy us dollar gbp 115 gbpusd 157 gbp 31 gbpusd 161
sell uae dirhambuy sterling – – aed 68 gbpaed 590
sell us dollarbuy canadian dollar – – usd 37 usdcad 100
sell us dollarbuy czech koruna usd 42 usdczk 1938 – –
sell us dollarbuy euro usd 61 eurusd 134 usd 56 eurusd 122
sell us dollarbuy sterling usd 615 gbpusd 158 usd 845 gbpusd 159
the foreign exchange contracts all mature between january 2014 and may 2015
the fair value of the contracts at 31 december 2013 was a net asset of £04 million 31 december 2012 £08 million
commodity swap contracts
the fair value of existing contracts remaining on the balance sheet as at 31 december 2013 was £nil 31 december 2012 net 
asset of £01 million
hedge of net investments in foreign entities
at 31 december 2013 the group held the following amounts which were designated as hedges of net investments in the group’s 
subsidiaries in the usa and were being used to reduce the exposure to foreign exchange risks at 31 december 2013 there were 
no borrowings in euros due to the disposal proceeds received in the year which were used to temporarily pay down debt prior to 
the return of capital in february 2014
135
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
24 financial instruments and risk management continued
borrowings in local currency
31 december
2013
£m
31 december
2012
£m
us dollar 1449 3078
euro – 2819
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 at 31 december 2013 the group 
temporarily held excess sterling and euro interest rate swaps as a result of paying down all of the debt relating to the revolving 
credit facilities with the proceeds received from the disposals that occurred in the year this position was reversed following the 
return of capital on 28 february 2014 adjusting for this excess position the sensitivity for sterling would decrease profit after tax 
by £01 million and by £02 million for euros
year ended
31 december
2013
£m
year ended
31 december
2012
£m
sterling 27 10
us dollar 01 05
euro 18 06
44 21
interest rate risk management
the group’s policy for managing interest rate risk is set out in the finance director’s review
the group entered 2013 protecting 79 of its gross debt from exposure to changes in interest rates by holding a number of 
interest rate swaps to fix the interest rate cost on us 5600 million £3368 million and €2920 million of debt 
during the year the group closed out several interest rate swap arrangements as a result of the reduction in gross debt following 
the receipt of proceeds from the business disposals as at 31 december 2013 swap arrangements exist which will fix the finance 
cost on us 2468 million £3368 million and €2000 million
following the capital return on 28 february 2014 78 of the group’s gross debt is now fixed and the weighted blended fixed 
finance cost is 070 31 december 2012 084 on us dollar swaps 072 31 december 2012 078 on euro swaps and 
091 31 december 2012 091 on sterling swaps plus the bank margin which is 225
the interest rate swaps are designated as cash flow hedges and were highly effective throughout 2013 the fair value of the 
contracts at 31 december 2013 was a net asset of £56 million 31 december 2012 net liability of £81 million
foreign currency risk
the group’s policy for managing foreign currency risk is set out in the finance director’s review on page 46 
foreign currency sensitivity analysis
currency risks are defined by ifrs 7 “financial instruments disclosures” 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
2013
£m
year ended
31 december
2012
£m
us dollar 08 07
euro 05 04 
czech koruna 01 02 
136
 melrose industries plc 
annual report 2013
financials 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 increasedecrease 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 high sensitivity in relation to the euro is because of a 
currency swap for €2350 million that was put in place ahead of the year end to temporarily repay euro debt using a proportion 
of the disposal proceeds received in the year the euro debt was redrawn ahead of the return of capital on 28 february 2014 
adjusting for the currency swap the sensitivity on the euro is £30 million the group operates in a range of different currencies 
and those with a material impact are noted here
31 december
2013
£m
31 december
2012
£m
us dollar 15 16
euro 208 17
czech koruna 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 £93 million 31 december 2012 £202 million and £nil 
31 december 2012 £249 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
fair value measurements recognised in the balance sheet 
the fair value of foreign currency forward contracts is determined using quoted forward exchange rates at the reporting date and 
yield curves derived from quoted interest rates matching the maturities of the contracts
the fair value of interest rate swap contracts is determined using yield curves derived from quoted interest rates 
the following table sets out the group’s assets and liabilities that are measured and recognised at fair value 
recurring fair value measurements
31 december
2013
current
£m
31 december
2013
noncurrent
£m
31 december
2013
total
£m
31 december
2012
current
£m
31 december
2012
noncurrent
£m
31 december
2012
total
£m
derivative financial assets
foreign currency forward contracts 51 – 51 32 – 32 
commodity swaps – – – 01 – 01 
interest rate swaps – 81 81 – – – 
total recurring financial assets 51 81 132 33 – 33 
derivative financial liabilities
foreign currency forward contracts 47 – 47 24 – 24
interest rate swaps 25 – 25 46 35 81
total recurring financial liabilities 72 – 72 70 35 105
the fair value of these financial instruments 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 are therefore categorised within level 2 of  
the fair value hierarchy set out in ifrs 13 “fair value measurement” the group’s policy is to recognise transfers into and out  
of the different fair value hierarchy levels at the date of the event or change in circumstances that caused the transfer to occur 
there have been no transfers between levels in the year
25 issued capital and reserves
share capital
31 december
2013
£m
31 december
2012
£m
allotted calledup and fully paid 
1266627036 31 december 2012 1266627036 ordinary shares of 01p each 31 december 2012 01p each 13 13
13 13
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 no shares in melrose industries plc at either 31 december 2013 
or 31 december 2012
137
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
26 cash flow statement
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
reconciliation of headline
2
 operating profit to cash generated by continuing operations
headline
2
 operating profit from continuing operations 2749 1493 
adjustments for
depreciation of property plant and equipment 354 184 
amortisation of computer software and development costs 53 21 
restructuring costs paid and movements in other provisions 633 571
operating cash flows before movements in working capital 2523 1127 
decrease in inventories 279  124 
increase in receivables 12 24
decrease in payables 402 347
cash generated by operations 2388 880 
tax paid 469 283
interest paid 532 428
acquisition costs 114 252
defined benefit pension contributions paid 327 323
incentive scheme payments 34 – 
net cash fromused in operating activities from continuing operations 912 406
1 
restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9
2 
as defined on the income statement
cash flow from discontinued operations
year ended
31 december
2013
£m
restated
1
year ended
31 december
2012
£m
cash generated from discontinued operations 596 804 
tax paid 139 211
defined benefit pension contributions paid 09 14
net cash from operating activities from discontinued operations 448 579 
purchase of property plant and equipment 116 174
purchase of computer software 01 03
proceeds from disposal of property plant and equipment – 03 
interest received 01 01 
net cash used in investing activities from discontinued operations 116 173
net movement in borrowing – – 
net cash used in financing activities from discontinued operations – – 
1
 restated to include the results of truth marelli crosby acco and harris within discontinued operations note 9
net debt reconciliation
at  
31 december 
2012
£m
cash flow
£m
acquisitions
£m
disposals
£m
other 
noncash
movements
£m
foreign 
exchange 
difference
£m
at
31 december
2013
£m
cash 1565 8228 242 8882 – 27 2004 
debt due within one year 62 57 – – – 05 – 
debt due after one year 11480 8283 – – 47 168 3412
net debt 9977 112 242 8882 47 136 1408
138
 melrose industries plc 
annual report 2013
financials 27 commitments and contingencies
future total minimum rentals payable under noncancellable operating leases were as follows
31 december
2013
£m
31 december
2012
£m
amounts payable
within one year 93 163
after one year but within five years 201 330
over five years 284 309
578 802
the group leases properties plant machinery and vehicles for operational purposes property leases vary in length up to a period 
of 25 years plant machinery and vehicle leases typically run for periods of up to five years
capital commitments
at 31 december 2013 there were commitments of £138 million 31 december 2012 £168 million relating to the acquisition of new 
plant and machinery
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 on an arms length basis 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 72
year ended
31 december
2013
£m
year ended
31 december
2012
£m
shortterm employee benefits 30 27
sharebased payments 27 25
57 52
139
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the  
financial statements 
continued
29 post balance sheet events
at a general meeting of the company held on 7 february 2014 shareholders approved a return of capital of 47 pence per 
ordinary share totalling £5953 million
‘b’ and ‘c’ shares with a total value of £5953 million have been created resulting in a corresponding reduction in the merger 
reserve as the capital return payments are made either on 28 february 2014 7 may 2014 or a combination of both depending 
upon elections made by shareholders the ‘b’ and ‘c’ shares will be redeemed and £5953 million will be transferred to the capital 
redemption reserve
as a result of the approval of the capital return on 10 february 2014 the number of ordinary shares in issue was consolidated 
in a ratio of 11 for 13 in order to maintain comparability of the company’s share price before and after the capital return 
on 10 february 2014 the number of ordinary shares in issue became 1071761339 each with a nominal value of 13110 pence
 
further details of the capital return are provided on pages 58 and 59 in the directors’ report
30 contingent liabilities
as a result of the acquisitions of the fki and elster businesses certain contingent legal environmental warranty and tax liabilities 
were identified either at the time of acquisition or as part of the completion of the acquisition accounting whilst it is difficult to 
reasonably estimate the ultimate outcome of these claims the directors’ best estimate has been included in the balance sheet 
when they existed at the time of acquisition and hence were recognised in accordance with ifrs 3 “business combinations” 
where a provision has been recognised information regarding the different categories of such liabilities and the amount and timing 
of outflows is included within note 20
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 the group does not have any other 
significant contingent liabilities 
140
 melrose industries plc 
annual report 2013
financials notes
31 december
2013
£m
31 december
2012
£m 
fixed assets
investment in subsidiaries 3 27119 27106
27119 27106
creditors amounts falling due within one year
creditors 4 1008 03
net current liabilities 1008 03
net assets 26111 27103
capital and reserves 
issued share capital 5 13 13
merger reserve 6 11906 11906
retained earnings 6 14192 15184
shareholders’ funds 7 26111 27103
the financial statements were approved by the board of directors on 5 march 2014 and were signed on its behalf by
geoffrey martin  simon peckham 
group finance director chief executive 
registered number 8243706
company balance sheet for 
melrose industries plc
141
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information 1 significant accounting policies
basis of accounting 
the separate financial statements of melrose industries plc “the company” are presented as required by the companies act 
2006 they have been prepared under the historical cost convention 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 
preceding period 
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 
47 of the finance director’s review
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
sharebased payments
the company has applied the requirements of frs 20 “sharebased payment” the company issues equitysettled sharebased 
payments to certain employees equitysettled sharebased payments are measured at fair value 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 company’s estimate of the 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 the directors’ best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
where equitysettled sharebased payments are made available to employees of the company’s subsidiaries these are treated as 
increases in equity over the vesting period of the award with a corresponding increase in the company’s investment in subsidiaries
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 94 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
2 profit for the period
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 industries plc reported a loss for the financial year ended 31 december 2013 of £51 million period ended 
31 december 2012 £06 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
142
 melrose industries plc 
annual report 2013
financials 3 investment in subsidiaries
£m
at 1 january 2013 27106
additions – sharebased payments 13
at 31 december 2013 27119
the company has investments in the following subsidiaries which principally affected the profits and net assets of the group 
the following subsidiary is directly owned by melrose industries plc
subsidiary country of incorporation principal activity holding 
melrose plc great britain holding company 100
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
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
elster
elster american meter company llc usa engineering company 100
elster perfection corporation usa engineering company 100
elster nv belgium engineering company 100
elster gmbh germany engineering company 100
elster sas france engineering company 100
ooo elster gaselectronica russia engineering company 100
elster metering limited great britain engineering company 100
hauck manufacturing company inc usa engineering company 100
elster solutions llc usa engineering company 100
elster medicao de energia ltda brazil engineering company 100
elster amco water llc usa engineering company 100
elster metering pty ltd australia engineering company 100
elster messtechnik gmbh germany engineering company 100
elster sro slovakia engineering company 100
elster group se germany holding company 100
elster holdings netherlands bv netherlands holding company 100
elster holdings us inc usa holding company 100
elster water metering holdings limited great britain holding company 100
group
fki limited great britain holding company 100
fki engineering limited great britain holding company 100
precision house management services limited great britain management services company 100
143
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notes to the company 
balance sheet  
continued
4 creditors 
31 december
2013
£m
31 december
2012
£m
amounts falling due within one year
amounts owed to group undertakings 1000 03
accruals and other payables 08 –
1008 03
the directors consider that amounts owed to group undertakings approximate to their fair value
5 issued share capital
share capital
31 december
2013
£m
31 december
2012
£m
allotted calledup and fully paid 
1266627036 ordinary shares of 01p each 13 13
13 13
6 reserves
reserves
issued share 
capital
£m
merger 
reserve
£m
retained 
earnings
£m
at beginning of period – – – 
issue of share capital 15200 11906 – 
capital reduction 15187 – 15187 
loss for the period – – 06
credit to equity for equitysettled sharebased payments – – 03 
at 31 december 2012 13 11906 15184 
dividends paid – – 981
loss for the year – – 51
credit to equity for equitysettled sharebased payments – – 40 
at 31 december 2013 13 11906 14192
details of sharebased payments are given in note 22 to the group consolidated financial statements
7 reconciliation of movements in shareholders’ funds
£m
at beginning of period –
issue of share capital 27106
loss for the period 06
credit to equity for equitysettled sharebased payments 03
at 31 december 2012 27103
dividends paid 981
loss for the year 51
credit to equity for equitysettled sharebased payments 40
at 31 december 2013 26111
144
 melrose industries plc 
annual report 2013
financials 8 related party transactions
the company has taken the exemption in frs 8 “related party disclosures” not to disclose intercompany balances and 
transactions in the period with fully owned subsidiary undertakings
9 post balance sheet events
at a general meeting of the company held on 7 february 2014 shareholders approved a return of capital of 47 pence per ordinary 
share totalling £5953 million
‘b’ and ‘c’ shares with a total value of £5953 million have been created resulting in a corresponding reduction in the merger 
reserve as the capital return payments are made either on 28 february 2014 or 7 may 2014 or a combination of both depending 
upon elections made by shareholders the ‘b’ and ‘c’ shares will be redeemed and £5953 million will be transferred to the capital 
redemption reserve
as a result of the approval of the capital return on 10 february 2014 the number of ordinary shares in issue was consolidated 
in a ratio of 11 for 13 in order to maintain comparability of the company’s share price before and after the capital return 
on 10 february 2014 the number of ordinary shares in issue became 1071761339 each with a nominal value of 13110 pence
further details of the capital return are provided on pages 58 and 59 in the directors’ report
145
 melrose industries plc
annual report 2013
financials
strategic report governance financials shareholder information notice of annual  
general meeting
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 industries plc the “company” 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 given that the annual general meeting of the company 
will be held at barbersurgeons’ hall monkwell square wood 
street london ec2y 5bl at 1100 am on 13 may 2014 for the 
following purposes resolutions 1 to 15 inclusive will be 
proposed as ordinary resolutions and resolutions 16 to 18 
inclusive as special resolutions
ordinary resolutions
1  to receive the company’s audited financial statements for the 
financial year ended 31 december 2013 together with the 
directors’ report and the auditor’s report on those 
financial statements
2  to approve the directors’ remuneration report other than the 
part containing the directors’ remuneration policy for the 
year ended 31 december 2013 as set out on pages 70 to 77 
of the company’s 2013 annual report
3  to approve the directors’ remuneration policy as set out on 
pages 77 to 84 of the company’s 2013 annual report
4  to declare a final dividend of 50p per ordinary share for the 
year ended 31 december 2013
5  to reelect mr christopher miller as a director of the company
6 to reelect mr david roper as a director of the company
7  to reelect mr simon peckham as a director of the company
8  to reelect mr geoffrey martin 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 reelect mr justin dowley as a director of the company
12 to elect ms liz hewitt as a director of the company
13  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
14  to authorise the directors to determine the remuneration of 
the auditor of the company
15  that in accordance with the provisions of section 551 of the 
companies act 2006 the “act” the directors be and are 
generally and unconditionally authorised to allot shares in the 
company or to grant rights to subscribe for or to convert any 
security into shares in the company “rights”
  a  up to an aggregate nominal amount of £422209 and
  b  comprising equity securities as defined in section 560 
of the act up to an aggregate nominal amount of 
£844418 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 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 expire at the conclusion of the company’s 
next annual general meeting after this resolution is passed 
or if earlier at the close of business on 30 june 2015 but in 
each case so that the company may make offers or 
agreements before the authority expires which would or 
might require shares to be allotted or rights to be granted 
after the authority expires and so that the directors may allot 
shares or grant rights in pursuance of any such offer or 
agreement notwithstanding that the authority conferred by 
this resolution has expired 
146
 melrose industries plc 
annual report 2013
shareholder information special resolutions
16  that subject to the passing of resolution 15 in accordance 
with the provisions of sections 570 and 573 of the act the 
directors be and are generally empowered to allot equity 
securities as defined in section 560 of the act for cash 
pursuant to the authorities granted by resolution 15 as if 
section 5611 of the act did not apply to any such allotment 
provided that this power shall be limited
  a  to the allotment of equity securities in connection with 
an offer of equity securities but in the case of an 
allotment pursuant to the authority granted under 
paragraph b of resolution 15 such power shall be 
limited to the allotment of equity securities in connection 
with an offer by way of 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 15 up to an aggregate 
nominal amount of £63331
  such power to expire at the conclusion of the company’s 
next annual general meeting after this resolution is passed 
or if earlier at the close of business on 30 june 2015 but so 
that the company may make offers or agreements before the 
power expires which would or might require equity securities 
to be allotted after the power expires and so that the 
directors may allot equity securities in pursuance of any such 
offer or agreement notwithstanding that the power conferred 
by this authority has expired 
17  that the company be and is generally and unconditionally 
authorised to make one or more market purchases as 
defined in 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 107176133
  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 of the average of the middle market 
quotation for an ordinary share as derived from 
the daily official list of the london stock 
exchange 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 shall expire at the conclusion of the 
company’s next annual general meeting after this 
resolution is passed or if earlier at the close of 
business on 30 june 2015
  e  the company may make a contract of purchase of 
ordinary shares under this authority which would or 
might be executed wholly or partly after the expiry of 
this 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
18  that a general meeting other than an annual general meeting 
may be called on not less than 14 clear days’ notice
recommendation
the board believes that each of the resolutions to be proposed 
at the annual general meeting 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 the directors 
intend to do in respect of their own beneficial holdings
by order of the board
adam westley
company secretary
4 april 2014
registered office 
11th floor colmore plaza 
20 colmore circus queensway 
birmingham 
west midlands 
b4 6at
147
 melrose industries plc
annual report 2013
shareholder information
strategic report governance financials shareholder information notice of annual  
general meeting
continued
explanatory notes to the proposed resolutions
resolutions 1 to 15 inclusive are proposed as ordinary 
resolutions which means that for each of those resolutions to  
be passed more than half the votes cast must be cast in favour 
of the resolution resolutions 16 to 18 inclusive are proposed  
as special resolutions which means that for each of those 
resolutions to be passed at least threequarters of the votes  
cast must be cast in favour of the resolution
resolution 1 – receipt of 2013 annual report and  
financial statements
the directors are required to lay the company’s financial 
statements and the directors’ and auditor’s reports on those 
financial statements collectively the “annual report” before 
shareholders each year at the annual general meeting “agm” 
resolutions 2 and 3 – approval of directors’ remuneration 
report and directors’ remuneration policy
following changes to the act and in line with new regulations 
which came into effect on 1 october 2013 the directors’ 
remuneration report the “directors’ remuneration report” is 
now presented in three sections
• the annual statement from the chairman of the remuneration 
committee 
• the annual report on remuneration and
• the directors’ remuneration policy
the annual statement from the chairman of the remuneration 
committee set out on pages 70 and 71 of the 2013 annual 
report summarises for the year ended 31 december 2013 
the major decisions taken on directors’ remuneration any 
substantial changes relating to directors’ remuneration made 
during the year and the context in which those changes 
occurred and decisions that have been taken
the annual report on remuneration set out on pages 72 to 77 
of the 2013 annual report provides details of the remuneration 
paid to directors in respect of the year ended 31 december 
2013 including base salary taxable benefits shortterm 
incentives including percentage deferred longterm incentives 
vested in the year pensionrelated benefits any other items in 
the nature of remuneration and any sums recovered or withheld 
during the year in respect of amounts paid in earlier years 
the directors’ remuneration policy set out on pages 77 to 84 
of the 2013 annual report provides details of the company’s 
proposed policy on directors’ remuneration including the 
proposed policy on payments for loss of office 
the directors’ remuneration report other than the part 
containing the directors’ remuneration policy is subject to  
an annual advisory shareholder vote by way of an ordinary 
resolution resolution 2 is to approve the directors’ 
remuneration report other than the part containing  
the directors’ remuneration policy
the directors’ remuneration policy is subject to a binding 
shareholder vote by way of an ordinary resolution at least  
once every three years resolution 3 is to approve the directors’ 
remuneration policy the directors’ remuneration policy will 
subject to shareholder approval take effect from the conclusion 
of the agm payments including payments for loss of office 
will continue to be made to the current and any former directors 
in line with existing contractual arrangements until this time
once the directors’ remuneration policy takes effect all 
remuneration payments and payments for loss of office made by 
the company to the current and any former directors must be 
consistent with the directors’ remuneration policy or if inconsistent 
with the directors’ remuneration policy must have been separately 
approved by way of an ordinary resolution of the shareholders in 
accordance with the relevant provisions of the act
if the directors’ remuneration policy is approved and remains 
unchanged it will be valid for up to three years without a new 
shareholder approval if the company wishes to change the 
directors’ remuneration policy it must first seek the approval 
of the proposed revised directors’ remuneration policy from 
the shareholders before it can implement the proposed new 
directors’ remuneration policy
if the directors’ remuneration policy is not approved for any 
reason the company will if and to the extent permitted by the 
act continue to make payments including payments for loss  
of office to the current and any former directors in accordance 
with existing contractual arrangements and will seek the approval 
of a proposed revised directors’ remuneration policy from the 
shareholders as soon as practicable
resolution 4 – declaration of final dividend
the board is recommending and the shareholders are being 
asked to approve the declaration of a final dividend of 50 pence 
per ordinary share for the year ended 31 december 2013 
the final dividend will subject to shareholder approval be paid 
on 15 may 2014 to the holders of ordinary shares whose names 
are recorded on the register of members of the company at the 
close of business on 22 april 2014 
resolutions 5 to 11 inclusive – reelection of directors 
in accordance with the uk corporate governance code the 
“code” and the company’s articles of association the “articles” 
every director other than senior nonexecutive director 
miles templeman who will retire at the conclusion of the agm 
and will not stand for reelection and liz hewitt who is standing 
for election will stand for reelection at the agm biographical 
details of each director can be found on pages 56 and 57 of the 
2013 annual report all of the nonexecutive directors standing 
for reelection are considered independent under the code 
148
 melrose industries plc 
annual report 2013
shareholder information resolution 12 – election of a director
in accordance with the articles liz hewitt is standing for 
election as a director of the company following her appointment 
to the board on 8 october 2013 she is currently a nonexecutive 
director of novo nordisk as and synergy health plc and is 
an external member of the house of lords audit committee 
biographical details for liz hewitt can be found on page 57 of 
the 2013 annual report 
resolution 13 – reappointment of auditor
the company is required to appoint auditors at each general 
meeting at which accounts are laid before shareholders to hold 
office until the next such meeting 
the audit committee has reviewed the effectiveness 
performance independence and objectivity of the existing 
external auditor deloitte llp on behalf of the board and 
concluded that the external auditor was in all respects effective
this resolution proposes the reappointment of deloitte llp until 
the conclusion of the next agm
resolution 14 – authority to agree auditor’s remuneration
this resolution authorises the directors in accordance with 
standard practice to negotiate and agree the remuneration of 
the auditor in practice the audit committee will consider and 
approve the remuneration of the auditor on behalf of the board
resolution 15 – authority to allot shares
this resolution seeks shareholder approval to grant the directors 
the authority to allot shares in the company or to grant rights to 
subscribe for or convert any securities into shares in the 
company “rights” pursuant to section 551 of the act the 
“section 551 authority” the authority contained in paragraph a 
of the resolution will be limited to an aggregate nominal amount 
of £422209 being approximately onethird of the company’s 
issued ordinary share capital as at 4 april 2014 
in line with guidance issued by the association of british insurers 
paragraph b of this resolution would give the directors authority 
to allot shares in the company or grant rights in connection with 
a rights issue up to aggregate nominal amount of £844418 
representing approximately twothirds of the company’s issued 
ordinary share capital as at 4 april 2014 as reduced by the 
aggregate nominal amount of any allotments or grants under 
paragraph a of this resolution
the company does not hold any shares in treasury
if approved the section 551 authority shall unless renewed 
revoked or varied by the company expire at the end of the 
company’s next agm after the resolution is passed or if earlier 
at the close of business on 30 june 2015 the exception to this is 
that the directors may allot shares or grant rights after the 
authority has expired in connection with an offer or agreement 
made or entered into before the authority expired the directors 
have no present intention to exercise the section 551 authority
resolution 16 – partial disapplication of preemption rights
this resolution seeks shareholder approval to grant the directors 
the power to allot equity securities of the company pursuant to 
sections 570 and 573 of the act the “section 570 and 573 
power” without first offering them to existing shareholders in 
proportion to their existing shareholdings
the power is limited to allotments for cash in connection  
with preemptive offers subject to any arrangements that  
the directors consider appropriate to deal with fractions and 
overseas requirements and otherwise for cash up to a maximum 
nominal value of £63331 representing approximately 5 of the 
company’s issued ordinary share capital as at 4 april 2014 
which is in accordance with the relevant guidelines for 
the company
if approved the section 570 and 573 power shall apply until the 
end of the company’s next agm after the resolution is passed  
or if earlier until the close of business on 30 june 2015 the 
exception to this is that the directors may allot equity securities 
after the power has expired in connection with an offer or 
agreement made or entered into before the power expired  
the directors have no present intention to exercise the  
section 570 and 573 power
resolution 17 – authority to purchase own shares
this resolution seeks shareholder approval to grant the company 
the authority to purchase its own shares pursuant to sections 
693 and 701 of the act 
this authority is limited to an aggregate maximum number of 
107176133 ordinary shares representing 10 of the company’s 
issued ordinary share capital as at 4 april 2014 
the maximum price which may be paid for an ordinary share will 
be an amount which is not more than the higher of i 5 above 
the average of the middle market quotation for an ordinary share 
as derived from the daily official list of the london stock 
exchange 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 
if approved the authority shall unless varied revoked or renewed 
expire at the end of the company’s next agm after the resolution 
is passed or if earlier at the close of business on 30 june 2015 
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
149
 melrose industries plc
annual report 2013
shareholder information
strategic report governance financials shareholder information notice of annual  
general meeting
continued
resolution 18 – notice period for general meetings other 
than agms 
this resolution seeks 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 act 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
explanatory notes as to the proxy voting and attendance 
procedures at the annual general meeting
1  the holders of ordinary shares in the company are entitled 
to attend the annual general meeting and are entitled to vote 
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 stated 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   to 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 
600pm on 9 may 2014 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 4 april 2014 the company’s issued share capital 
consists of 1071761339 ordinary shares of 13110 pence 
each carrying one vote each 15759880 b shares of 
47 pence each with limited voting rights and 757 503886 c 
deferred shares of 000001 pence each without voting rights 
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 wwweuroclearcom 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 1100am on 9 may 
2014 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
150
 melrose industries plc 
annual report 2013
shareholder information 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 
uncertified 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 non
executive 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 task 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 click on the link to vote  
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 9 may 2014
151
 melrose industries plc
annual report 2013
shareholder information
strategic report governance financials shareholder information company and  
shareholder information
as at 31 december 2013 there were 9808 holders of ordinary shares of 01 pence each in the capital of the company 
their shareholdings are analysed below and show shareholding numbers as at 31 december 2013
shareholdings
size of shareholding number of shareholders
percentage of the total  
number of shareholders
number of ordinary  
shareholders as at  
31 december 2013
percentage of ordinary  
shares in issue
15000 7835 7988 9996873 079
500150000 1385 1412 18385216 145
50001100000 110 112 8120355 064
100001500000 230 235 53775788 425
over 500000 248 253 1176348804 9287
total 9808 10000 1266627036
1
10000
1  following the return of capital to shareholders and the subsequent share capital consolidation details of which can be found on pages 58 and 59 of the directors’ report the total 
number of issued ordinary shares in the capital of the company was 1071761339 with a nominal value of 13110 pence each shareholders continued to own approximately the same 
proportion of the company after the share capital consolidation as they did before subject to fractional entitlements 
financial calendar 2014
exdividend date for final dividend 16 april 2014
record date for final dividend 22 april 2014
annual general meeting 13 may 2014
payment date of final dividend 15 may 2014
announcement of interim results august 2014
intended payment of interim dividend november 2014
preliminary announcement of 2014 results march 2015
directors
christopher miller
david roper
simon peckham
geoffrey martin
miles templeman
perry crosthwaite
john grant
justin dowley
liz hewitt
company secretary
adam westley
registered office
11th floor colmore plaza
20 colmore circus queensway
birmingham
west midlands
b4 6at
tel 44 0 121 296 2800
fax 44 0 121 296 2839
registered number
08243706
head office
leconfield house
curzon street
london
w1j 5ja
tel 44 0 20 7647 4500
fax 44 0 20 7647 4501
website address
wwwmelroseplcnet 
auditor
deloitte llp
2 new street square
london
ec4a 3bz
bankers
barclays bank plc
commerzbank ag
hsbc bank plc
jp morgan plc
lloyds tsb bank plc
royal bank of canada
the royal bank of scotland plc
bayernlb
dbs bank
fifth third bank
icbc
mizuho
santander uk plc
unicredit
wells fargo bank international 
legal advisers
simpson thacher  bartlett llp
citypoint
one ropemaker street
london
ec2y 9hu
brokers
investec
2 gresham street
london
ec2v 7qp
jp morgan cazenove
25 bank street
london
e14 5jp
registrars
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
shareholders can view up to date information about their shareholding by visiting wwwshareviewcouk
the shareholder helpline number is 0871 384 2030 or 44 0 121 415 7047 if calling from overseas lines are open 830am to 
530pm monday to friday excluding public holidays calls to these numbers are charged at 8 pence per minute excluding vat plus 
network extras calls to the shareholder helpline from overseas will be charged at the applicable international rate different charges 
may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes 
152
 melrose industries plc 
annual report 2013
shareholder information melrose 
industries plc
measuring success
during the 10 year period since first listing  
melrose has grown its market capitalisation from 
£13 million to £39 billion and has created £3 billion  
of shareholder value the average annual return  
on investment during this period is 27
business strategy
melrose buys good manufacturing businesses  
with strong fundamentals whose performance  
can be improved melrose finances its acquisitions  
using a low level of leverage improves the  
businesses by a mixture of investment and  
changed management focus sells them  
and returns the proceeds to shareholders
download the latest annual report at 
wwwmelroseplcnetinvestorsreports
read more about how  
melrose measures success
read more about the 
melrose business strategy
 october 2003 to 31 december 2013
 since the first acquisition in 2005
p14
p32
printed by cpi colour on magno silk – an fsc
®
 mix certified grade and is produced at  
a mill that is certified to the iso14001 and emas environmental management standards
designed and produced by sampsonmay
telephone 020 7403 4099 wwwsampsonmaycom melrose
buy
improve
sell
melrose industries plc  annual report 2013
 melrose industries plc
annual report  
for the year ended 31 december 2013
melrose industries plc
11th floor
colmore plaza
20 colmore circus queensway
birmingham
west midlands b4 6at
telephone 44 0 121 296 2800
facsimile 44 0 121 296 2839
wwwmelroseplcnet
stock code mro


Summary:
 chairman’s 
statement
i am pleased to report our 11th set of 
annual results since flotation in 2003
2013 has been an extremely busy year 
for your company it has seen the 
successful integration of elster acquired 
in 2012 as well as the disposal of five 
businesses from our fki acquisition in 
2008 truth marelli crosby acco and 
harris were sold during the year for a total 
of £950 million representing a more than 
tripling of their value for shareholders 
during the five years of melrose ownership 
associated with these sales and in  
line with our proven strategy a return 
of capital of approximately £600 million 
was announced on 21 january 2014 and 
was paid on 28 february 2014 two large 
businesses from the fki acquisition  
brush and bridon still remain in the group
the current shareholder investment in 
melrose net of annual dividends and 
all returns of capital since 2003 totalling 
£15 billion amounts to approximately 
£05 billion our market capitalisation 
at the current share price amounts to 
£35 billion meaning that approximately 
£30 billion of shareholder value has 
been created over the period
we are proud of this achievement in 
growing shareholder value and the board 
on behalf of shareholders recognises the 
efforts of our employees and thanks them 
for their outstanding contribution to this
results for the group
these financial statements report the 
results for the group for the year to 
31 december 2013 and comparatives 
for the previous year
revenue from continuing businesses 
for the year was £17328 million 
2012 £10511 million and headline profit 
before tax before exceptional costs 
exceptional income and intangible asset 
amortisation was £2261 million 
2012 £1179 million 
adjusting for the five disposals in the year 
headline diluted eps before exceptional 
costs exceptional income and intangible 
asset amortisation on continuing 
businesses was 128p 2012 proforma 
94p an increase of 36
further details of these results are 
contained in the finance director’s review
headline
1
 diluted earnings  
per share
2
128p  36
3
trading
the speedy and rigorous implementation 
of restructuring projects in our 2012 
elster acquisition produced an equally 
swift improvement in operating margins 
– ahead of our best expectations – which 
led to an increase of over a third in elster’s 
profits in its first full year since acquisition 
we have raised our expectations of what 
elster can achieve and the outcome to 
date is very encouraging
as we indicated despite the subdued 
order books of recent periods the 
remaining “fki” businesses of bridon and 
brush maintained their operating margins 
– a good performance the recent and 
continuing level of investment in these two 
businesses means that the mediumterm 
outlook remains positive but weakness 
in specific market areas may hold back 
growth in the short term
operating cash generation remains a major 
focus and this has been another excellent 
year this together with the proceeds 
from disposals has meant a substantial 
reduction of net debt to £141 million at 
the year end from £998 million last year 
the return of capital after the year end has 
returned debt to our more usual levels
dividends
the board proposes to pay a final 
dividend of 50p per share 2012 50p 
this will be paid on 15 may 2014 to those 
shareholders on the register at 22 april 
2014 subject to approval at the agm 
on 13 may 2014 this gives a total for 
the year of 775p per share 2012 76p
we continue to pursue a progressive 
dividend policy 1 before exceptional costs exceptional income and intangible asset amortisation
2 calculated using continuing businesses
3 assuming a full year’s ownership of elster in 2012 as explained in the finance director’s review
dividend per share
775p  2
10
 melrose industries plc 
annual report 2013
strategic report  the board
  we are committed to the highest standards of corporate governance and consider  
it critical for upholding our business integrity wherever we work around the world
1  miles templeman will be retiring from the board at the conclusion of the 2014 annual general meeting to be held on 13 may 2014
2 liz hewitt was appointed to the board on 8 october 2013
board composition
executive chairman 1
executive directors 3
nonexecutive directors 5
1
3
5
industry background
finance 6
industry 3
board changes
miles templeman our senior non
executive director will be stepping down 
at the conclusion of the agm in may he 
has been a director since our inception in 
2003 and in this time his experience and 
judgement have been highly valued by the 
board we will miss his distinctive input
at the same time we were delighted 
to welcome liz hewitt to the board on 
8 october 2013 liz has an excellent 
background and experience in areas very 
relevant to melrose’s operations and we are 
already benefiting from her contribution
following miles’ departure perry 
crosthwaite will become our senior non
executive director perry will simultaneously 
relinquish his position as chairman of the 
remuneration committee a role that will 
be filled by justin dowley following the 
conclusion of this year’s agm liz hewitt 
will chair the nomination committee with 
effect from the end of the 2014 agm
strategy 
our strategy of “buy improve sell” is by 
now well understood 2013 was a highly 
successful year particularly in the “improve” 
and “sell” categories the speed of 
improvement in operating margins at  
elster is a tribute to the strength of our 
management teams but this did not dilute 
our focus on realising the value in several 
of our “fki” businesses nor in returning 
this to shareholders as stated before we 
are now actively looking for an appropriate 
opportunity to repeat the success of our 
previous acquisitions this is a rigorous 
process and we will take as long as is 
necessary to identify the right company
outlook 
the recovery from the financial crisis of 
2008 has been slow anaemic and patchy 
much of our growth in recent years has 
been from margin improvement rather 
than revenue growth in common with 
many other companies sales growth 
remains challenging and we face a 
headwind from the current strength of 
sterling however there is more margin 
improvement still achievable which 
together with the inherent strength of our 
businesses and the continuing recovery 
in most of the world’s economies gives 
us confidence over the medium term 
christopher miller
chairman
5 march 2014
christopher miller 
executive 
chairman
miles templeman
1
senior non
executive director
david roper
executive 
vicechairman
perry crosthwaite
nonexecutive 
director
simon peckham
chief executive
justin dowley
nonexecutive 
director
geoffrey martin
group finance 
director
john grant
nonexecutive 
director
liz hewitt
2
nonexecutive 
director
£4 billion 
market capitalisation from £13 million in 10 years
£3 billion
of shareholder value created
27
average annual return on investment
since first deal in 2005
“ last year was a tremendous year for 
melrose with great successes in the 
‘improve’ and ‘sell’ parts of our strategy 
almost £1 billion was raised from 
disposals which trebled shareholders’ 
money and elster increased its profits 
by over a third in our first full year of 
ownership we are ready and keen to 
buy again but we remain patient for 
the right opportunity to arise”
6
3
11
 melrose industries plc
annual report 2013
strategic report
strategic report governance financials shareholder information