meggitt plc   annual report and accounts  2014
company information 
meggitt plc
atlantic house
aviation park west
bournemouth international airport
christchurch
dorset bh23 6ew
united kingdom
t 44 0 1202 597 597
f 44 0 1202 597 555
wwwmeggittcom
registered in england and wales
company number 432989
annual report and 
accounts 2014
smart engineering is second nature to us
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download the 2014 meggitt plc annual report  
and accounts from wwwmeggittcom
quick reference contents
what is meggitt 
 
 
 
 02
how did we 
perform in 2014 
 
 04
 31
how do we 
manage risk 
 
 24
what are our key 
performance 
indicators 
 27 
how do we 
perform as 
corporate 
citizens
 38
what is our 
strategy and 
business model 
 06
 08
what are our 
markets and  
what drives  
them
 10
who runs meggitt 
and how do we 
reward them 
 44
 55
0141  strategic report
01  introduction
02  group overview
03  capabilities
04  financial highlights
05  chairman’s statement
0607 chief executive’s review
0809 group strategy
1012  market review
1317 meggitt divisions
1819 the meggitt production system 
2021 talent 
2223 technology
2426 principal risks and uncertainties
2730  key performance indicators
3137 chief financial officer’s review
3841 corporate responsibility
4279 governance reports
43  chairman’s introduction
4445 board of directors
4650 corporate governance report
5153 audit committee report
54 nominations committee report
5575 directors’ remuneration report
7679 directors’ report 
80140 financial statements
 group financial statements
8084  independent auditors’ report to the members  
of meggitt plc
85 consolidated income statement
86  consolidated statement of comprehensive income
87  consolidated balance sheet
88  consolidated statement of changes in equity
89 consolidated cash flow statement
90132  notes to the consolidated financial statements
 company financial statements
133  independent auditors’ report to the members  
of meggitt plc
134  company balance sheet
135140  notes to the financial statements of the company
141144 supplementary information
141 fiveyear record
142  investor information
143144  glossary
smart engineering is second nature to us
high pressure air travelling through the 
geometry of bleed air valves cast or 
machined in the traditional way is 
extremely noisy something that will be 
familiar to those who live near airports 
in future air could flow more quietly 
through a radical new concept from 
meggitt based on a fircone design an 
organic structure made possible through 
additive layer manufacturing the bold use 
of innovative processes forms part of 
meggitt’s centrally coordinated and highly 
focused technology strategy
93987coverindd   2 04032015   1610 supplementary information financial statements governance reports strategic report 1
meggitt’s smart engineering for 
extreme environments attracted  
an unprecedented number of 
programme wins in the current civil 
aerospace cycle of new platform 
launches making 2014 a year of 
accelerating new product 
introduction ready to meet the 
manufacturing rampup that will 
drive financial returns for the next 
decade and more
we will continue to focus on the industrialisation of 
new products in 2015 supported by the widening 
implementation of the meggitt production system 
mps this combination of triedandtested 
business improvement methodologies tailored to 
meggitt is fundamental to defining how we work 
throughout the group   
the system consists of six demanding phases with 
the final silver and gold certifications delineating 
operations excellence as a defining sustainable 
competitive advantage while achieving gains in 
productivity and employee engagement wherever 
mps has been introduced we are at the beginning 
of a journey that will extend from the factory floor 
into every function and that will touch every  
meggitt employee 
operations excellence at the core
across the group mps has strengthened the 
foundations for greater operations excellence 
giving us a comprehensive but flexible framework 
for continuous improvement ontimedelivery and 
quality are up in many of our businesses as a result 
mps’ new global standards make our core stronger 
creating a secure platform for growth see page 18
making more of our talent
mps is also reshaping our culture our new 
operating system has renewed employee 
confidence and commitment increasing numbers 
of operators supervisors and managers have the 
tools and processes they need to make a very 
personal contribution to improving the business 
and leaders now have more time to lead spotting 
opportunities for growth and innovation  
see page 20
a new wave of technology
the operational savings and productivity 
improvements won by mps will allow us 
to invest more in innovation—what we make  
and how we make it
we’re looking ahead not only to product 
innovation but advances in how we make products 
we are already investigating a new approach to 
manufacturing engineering taking the first steps 
toward developing the factories of the future  
see page 22
93987p0104indd   1 04032015   1621 95 14
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2 meggitt plc          report and accounts 2014
group overview
headquartered in the uk meggitt plc is a global 
engineering group specialising in smart 
engineering for extreme environments—
components and subsystems providing critical 
functionality in challenging applications within  
civil aerospace military and energy markets
over 10500 people are employed across 
manufacturing facilities in asia europe and  
north america and in sales offices in brazil  
india and the middle east
our civil aerospace interests cover large 
commercial jets regional aircraft business jets 
helicopters and general aviation 
our military markets encompass all aircraft types 
land systems naval platforms and aerial land
based and marine threat simulation for personnel 
training and weapons systems development 
training extends to law enforcement and security 
organisations
the group’s growing presence in energy is driven 
by core capabilities in control valves for industrial 
gas turbines heat transfer engineering for oil and 
gas platforms and offshore gas processing and 
storage and sensing and monitoring capabilities 
deployed in rotating power generation equipment 
these promote safety and reduce maintenance 
costs fuel consumption and carbon emissions
the transfer of meggitt’s core technologies to  
other markets includes sensing materials for 
breakthrough medical devices and the test and 
measurement industry worldwide 
revenue by market  total revenue £ millions
employees by region  number of employees
revenue by destination  total revenue £ millions
total rd as a  of revenue

  civil aerospace
 7412  48

  military 
 5394  34

  energy and other 
 2731  18
15537

  usa
 7711  49

  uk
 1524  10

  rest of europe 
 3381  22

  rest of world
 2921  19
15537

  usa
 5385  50

  uk
 2847  26

  mainland europe 
 1554  14

  rest of world
 1037  10
10823
93987p0104indd   2 04032015   1621 capabilities
just some of the smart 
subsystems and critical 
components created by 
meggitt 
for the full picture take  
our meggittinaminute 
etour
wwwmeggittcometour
supplementary information financial statements governance reports strategic report 3

  usa
 7711  49

  uk
 1524  10

  rest of europe 
 3381  22

  rest of world
 2921  19
combat support
pr     tect
heat transfer engineering ice protection
wheels brakes and 
brake control
aircraft safety and security
sensing and health 
monitoring
small arms training systems
polymer seals
composites
avionics 
power products
fire protection fuel containment
bullet
thermal management  
and fluid control
 
pressure up to
precision micro metal 
engineering
structural
design
materials
technology
thermal
management
93987p0104indd   3 04032015   1621 financial highlights
meggitt’s 2014 results continued to demonstrate the breadth  
and resilience of its portfolio during a period when our suite of 
products is being substantially refreshed our equipment is 
installed on over 63000 aircraft worldwide—a growing fleet—
with a predictable aftermarket revenue stream stretching out for 
many decades our excellent win rate on the many new aircraft 
programmes entering service which drove our investment in 
research and development of £1483m 95 of revenue gives  
us confidence in making good progress in the years to come
1
  the definition of ‘underlying’ is provided in notes 10 and 15 to the consolidated financial statements on pages 103 and 106 respectively 
revenue
£ millions 
15537
underlying profit before tax 
£ millions
1
 
 
3287
free cash flow
£ millions
1468
dividends per share
pence  
1375
return on trading assets
  
265
underlying earnings per share
pence
1
 
324
265 1375 324
360 1275 375
408 1180 365
394 1050 321
354 920 286
i
 
see page 31 
i
 
see page 34 i
 
see page 34 i
 
see page 28 
i
 
see page 32 i
 
see page 35
3287 15537 1468
3778 16373 1104
3660 16058 1824
3253 14553 1930
2637 11620 1630
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4 meggitt plc          report and accounts 2014
93987p0104indd   4 04032015   1621 chairman’s statement
growing the group
it’s been over a decade since i joined 
meggitt as a nonexecutive director 
becoming chairman in 2004 during that 
time meggitt has evolved from a group 
of individuallyrun industrial businesses 
into an increasingly integrated 
international enterprise focusing 
on aerospace defence and energy  
we have grown revenue threefold 
organically and by acquisition increased 
our market capitalisation fivefold and 
doubled our workforce to over 10500 
a brandnew braking systems business 
has emerged from two significant 
acquisitions both of which also boosted 
our existing thermal management and 
polymers and composites capabilities 
an industry leader in aircraft fire protection 
and control emerged from another 
in 2009 we restructured our business  
into capabilitybased divisions with 
streamlined management that made us 
easier to do business with in 2013 we 
launched our continuous improvement 
initiative the meggitt production system 
mps which is already having a marked 
impact on our operational performance 
with much more to come   
talent
meggitt has a strong focus on talent 
development sponsoring aspiring 
engineers through successive arkwright 
scholarship trust awards entering into 
a longterm partnership with the 
institution of mechanical engineers to 
provide training management and 
leadership development for meggitt 
engineers appointing technical fellows 
and creating a worldclass biannual 
executive training programme with oxford 
university’s saïd business school 
in the last three years we have launched  
a hugely successful graduate training 
programme we have attracted the best 
recruits from leading engineering 
faculties worldwide participants have 
been given the time and resources to 
focus on specific projects with excellent 
results exemplified most recently by 
development work on a critical component 
for a major engine manufacturer using 
meggitt’s growing capability in additive 
layer manufacturing
doing business the right way
meggitt’s growth has been based on fair 
and impartial conduct of business fully 
compliant with applicable laws and 
regulations worldwide and integrity in 
every business relationship 
meggitt was one of the first uk companies 
to commit to comprehensive ethics 
policies programmes and practice when 
we signed the statement of adherence to 
the global principles of business ethics 
for the aerospace and defense industry 
as chairman of the group’s ethics and 
trade compliance committee i take great 
pride in the strength of our programmes
capital deployment 
meggitt’s capital allocation policy focuses 
on investing in organic growth increasing 
ordinary dividends in line with earnings 
through the cycle and where appropriate 
enhancing capability in its core markets 
through targeted accretive acquisitions 
as the year closed we acquired precision 
engine controls corporation pecc this 
leading supplier of actuation systems and 
fuel metering valves to manufacturers of 
smallframe gas turbines complements 
meggitt control systems’ capability further 
extending its reach in the oil and gas and 
power generation sectors      
demonstrating our commitment to 
maintaining an efficient balance sheet 
we launched a share buyback programme 
for the first time in 2014 this is already 
improving shareholder returns and will 
deliver gearing at or slightly above  
15 times net debt to ebitda earnings 
before interest taxes depreciation and 
amortisation by the end of 2015 
board of directors 
alison goligher was appointed nonexecutive 
director to the board in october alison an 
executive vice president in shell’s upstream 
international division brings a wealth of 
experience in technology deployment and 
integrated project management in the 
energy sector   
in december nonexecutive director 
philip cox resigned to take up a new role 
as chairman of drax group plc we thank 
philip for his outstanding contribution to 
the board 
i will be retiring at april’s agm and will  
be succeeded by sir nigel rudd whose 
extensive international business and 
boardroom experience spans many 
industries including those in which 
we specialise 
i have enjoyed my time at meggitt 
immensely and i am proud to have played 
my part in its transformation into a 
ftse100 global engineering group 
delivering critical products and solutions 
in its chosen markets i look forward to 
seeing even greater success as meggitt 
continues to evolve and grow 
i would like to take this opportunity to extend 
my heartfelt thanks to all meggitt employees 
for their outstanding work during my tenure 
as chairman particularly after a challenging 
year in some of our key markets
sir colin terry  chairman
meggitt was one of the first uk 
companies to commit to 
comprehensive ethics policies 
as chairman of the group’s 
ethics and trade compliance 
committee i take great pride in 
the strength of our programmes
“
”
supplementary information financial statements governance reports strategic report 5
93987p05indd   5 04032015   1623 “
”
6 meggitt plc          report and accounts 2014
superior performance 
defined by quality cost 
and ontime delivery is 
key to realising our 
growth potential and we 
are determined to make 
operations excellence  
a core competitive 
strength
group strategy
meggitt aims to be a leading provider  
of smart engineering for extreme 
environments we invest in developing 
hightechnology components and sub
systems which play mission or safety
critical roles over long operating lives 
we seek to improve our operational 
performance continuously to offer 
industryleading levels of quality 
ontime delivery and competitiveness 
enabling us to reinvest in new capabilities 
and technologies while generating 
attractive returns for shareholders
technology 
we focus on targeted investment to 
drive future growth we seek to grow 
organically by investing in the product 
and manufacturing technologies 
that count across a broad range of 
platforms and customers to secure 
positions on specific platforms we 
align our development focus with our 
customers’ technology roadmaps 
we look to supplement organic growth 
with acquisitions that enhance our 
capabilities and routes to market 
in 2014 we continued to refine our 
complete ata26 fire protection 
systems for aircraft as we progressed 
our development of innovative 
environmentallysound suppression 
technology we continued to invest in fluid 
control and thermal management products 
capable of operating at the everhigher 
temperatures required to enable the latest 
generation of jet engines to deliver the 
efficiencies demanded by their operators 
to deliver these and many other 
capabilities competitively we maintained 
our investment in cuttingedge 
manufacturing technologies such as 
additive layer manufacturing which we 
now employ in the production of some 
inservice components and meggitt 
modular modifiable manufacturing m
4
 
our pioneering approach to the factories 
of the future m
4
 is designed to enable 
operators to manufacture a broader 
range of lowvolume highly complex 
components through greater deployment 
of technology through the factory this 
includes the realtime monitoring of  
key parameters including product weight 
and touchtime and the provision of 
instantaccess support to the operator 
if required the result is greater 
optimisation of all aspects of the 
manufacturing process from machining 
and assembly to machine utilisation and 
traceability enabling our businesses to 
invest in stateoftheart equipment in 
the knowledge that it will be fully utilised 
in ‘smart’ facilities 
our acquisition of precision engine 
controls corporation pecc in december 
2014 exemplifies targeted valueadded 
portfolio enhancement pecc now 
a meggitt control systems product range 
builds on our existing thermal management 
and fluid control capabilities in the 
aeroderivative gas turbine market 
broadening our reach into smallframe 
gas turbines in the 130mw power range 
and widening our actuation technology 
offering for the combined customer base 
operations excellence
superior performance defined by quality 
cost and ontime delivery is another key 
to realising our growth potential and we 
are determined to make operations 
excellence a core competitive strength 
with meaningful improvements in 
operating performance such as defective 
parts per million down 84 and ontime 
delivery up 10 the meggitt production 
system—our single global approach to 
continuous improvement—has progressed 
well since its inception we have launched 
the system across two thirds of our 
manufacturing estate and expect to see 
it adopted at all primary sites by the end of 
2015 several sites have entered the second 
phase in the sixphase programme 
extending the reach of the system beyond 
the factory floor and supply chain into 
functions and leadership 
we have undertaken considerable work 
optimising our manufacturing footprint 
over the last few years consolidating six 
sites into three and investing in lowcost 
manufacturing centres in china vietnam 
and mexico in 2014 we made good 
progress in enhancing the level of 
manufacturing capability of our facility 
in querétaro mexico with the start of 
a substantial transfer of product lines 
from our control systems businesses 
in north america in china we increased 
the scope of our xiamen facility 
responding to customers’ global sourcing 
requirements with the successful 
replication of a hightech process from 
one of our european facilities involving 
the printing of sensors onto printed 
circuit boards we will continue to evolve 
our manufacturing estate in response to 
the requirements of our customer base
chief executive’s review
93987p0607indd   6 04032015   1652 supplementary information financial statements governance reports strategic report 7
renewing our customer focus
making ourselves easy to do business 
with while responding to the dynamic 
markets in which we operate is core to 
our business philosophy for original 
equipment oe and aftermarket 
customers alike to enhance our 
customer focus we have recently 
appointed two senior executives 
dedicated to the requirements of our  
oe customers and the aftermarket 
respectively 
the manufacturers of aircraft and 
engines will see a renewed focus on their 
interests as we strengthen key account 
relationship management and bring 
together crossgroup product packages 
that simplify their supply chains 
the aftermarket is central to the meggitt 
business model we will improve service 
through the meggitt production system 
and focus on the development of innovative 
support solutions for our oe customers 
as they seek to maintain more of their 
products in service 
cradletograve programme 
management underpins original 
equipment manufacturer oem and 
aftermarket relationships we are 
strengthening this function shortening 
the lines of communication between 
oems and operators championing their 
interests inside meggitt and allowing 
closer collaboration than ever before 
this is how we will achieve specific 
programme success insights into 
customer’s technology aspirations over 
the longer term and opportunities to 
create better products from our  
existing portfolio 
performance in 2014
performance in our endmarkets was 
mixed good growth in civil aerospace 
was driven by a rise in aircraft deliveries 
from the major manufacturers greater 
meggitt content on newer platforms 
and a continued recovery in 
aftermarket revenues
there were however challenges in our 
military market particularly during the 
first half of the year the effect of the us 
military drawdown from afghanistan was 
compounded by the completion of two 
large retrofit contracts in the first half 
of the prior year both issues constituted 
a significant headwind to military 
aftermarket performance although our 
overall military revenues stabilised on an 
organic basis in the second half of 2014 
in energy we continued to make good 
progress on the issue highlighted in 2013 
concerning the lack of availability of 
tourmaline a key raw material this is 
now behind us—we have migrated a 
number of customers onto alternative 
inhouse materials and we are receiving 
positive customer feedback on product 
performance energy performance in the 
second half was hampered by lower 
revenues at heatric our printed circuit 
heat exchanger business its local content 
provider in brazil is experiencing financial 
challenges causing revenue to be 
deferred from 2014 
against this background we have 
delivered flat organic revenues in 2014 
with a decrease in underlying earnings 
per share of 51p to 324p reflecting 
currency movements business mix 
disposals and the investment being made 
in new aircraft programmes net debt to 
ebitda at the end of the year was 12x 
in november we announced a share 
buyback with the intention of increasing 
this ratio to 15x by the end of 2015 to 
maintain an efficient balance sheet 
outlook
the outlook for our civil aerospace 
markets remains encouraging 
production rates of large jets are 
expected to continue to grow and the 
relatively high shipset values we enjoy 
on the latest generation of widebody 
aircraft together with our positions on 
the reengined narrowbodies should 
underpin organic civil oe revenue growth 
of 7 to 8 over the medium term 
reflecting recent inventory build at 
aircraft manufacturers ahead of new 
product launches and production rate 
increases 2015 will be moderately 
below this level 
available seat kilometres the key driver 
of our large and regional jet aftermarket 
are growing at above the longterm trend 
and lower oil prices should see this 
continue however we are seeing 
monthtomonth volatility in revenues 
and a continuing impact from surplus 
parts we therefore expect civil 
aftermarket growth in midsingle 
digits for 2015
in the military market we look to be 
entering a more benign phase with 
military budgets seeing lower rates of 
decline than in recent years and even 
some suggestion of growth in the 
allimportant us budget from 2016 
order intake in 2014 has been strong with 
book to bill of 103 covering a number of 
shortterm and multiyear contracts 
on this basis we expect a return to 
modest growth in 2015 driven by good 
growth in military training partially 
offset by a decline in mabs following the 
completion of the b1b and taiwanese 
upgrade programmes we maintain our 
mediumterm expectation of an average 
of 2 growth per annum excluding the 
effects of sequestration 
our energy businesses driven by 
heightened demand for our printed circuit 
heat exchangers and increasing market 
share in conditionmonitoring equipment 
should continue to deliver revenue growth 
averaging greater than 10 over the 
medium term however in 2015 we expect 
good organic growth in energy control 
valves and condition monitoring to be 
largely offset by a decline at heatric 
reflecting the impact of capital 
expenditure deferrals by our major 
oil and gas customers 
on the basis of the above the 
group continues to expect organic 
revenue growth in 2015 of low to 
midsingle digit percentage points 
in line with the guidance given in our 
interim management statement in 
november 2014
stephen young chief executive
93987p0607indd   7 04032015   1652 8 meggitt plc          report and accounts 2014
group strategy
strategy
 
we select highgrowth markets where we can deploy our smart engineering 
for extreme environments and ability to navigate the complex regulatory and 
certification environment associated with safety and missioncritical 
products these markets must deliver longterm predictable revenue 
streams in line with our business model    
we set strategic priorities according to the dynamics of this business model 
today we are addressing core technology consolidating our resources and 
sharpening our focus to extend our intellectual property operations 
excellence from the factory floor to every function based on the meggitt 
production system and renewed focus on customers with dedicated 
management responsibility for oem and aftermarket customer relations 
underpinned by strong programme management
meggitt’s strategy by market and capability is outlined in the market review 
see page 10 and under meggitt divisions see page 13 
business model
we deliver strong and sustainable 
shareholder returns through leading 
positions in aerospace defence and 
energy markets  
throughout the business cycle revenue 
comes from successfully executing 
original equipment programmes often 
solesource and the aftermarket that 
flows from them aftermarket demand  
is driven by conditionbased demand 
caused by the wear and tear associated 
with the harsh environments in which  
our products operate    
airframers turbine manufacturers oil and 
gas platforms and processing vessels— 
60000plus platforms carry meggitt products
airlines militaries distributors mro integrators
supporting endusers through sales of spares 
and repairs for the life of programmes is a 
significant driver of returns
selling meggitt content onto new platforms 
provides aftermarket access
winning new programmes often on 
a solesource basis through technology 
and operations excellence
field knowledge 
enhances our 
intellectual property
reinvestment
know led ge
installed 
base
aftermarket
returns shareholders
technology operations
o perations
excellence
customer 
focus
grow th
technology
8
93987p0809indd   8 04032015   1624 supplementary information financial statements governance reports strategic report 9
investment cycle
we develop technology for applications involving product  
lifecycles measured in decades products must perform  
without fail in environmental extremes requiring replacement  
or overhaul generating strong returns from our initial investment 
over many years
our business model requires significant cash investment in the 
development phase of programmes for our wheels and brakes 
business this includes production we make strong positive 
cashflow within our civil aerospace and military endmarkets  
during the inservice phase resulting in cash breakeven between  
years 11 and 18 typically with a shorter cash breakeven in the 
energy market  
as our products are developed in line with our customers’ 
technology goals we have performed strongly in recent bid cycles 
securing positions on key platforms and refreshing the longterm 
aftermarket pipeline
our nearterm business is weighted therefore towards investment 
in new development programmes and the transition of new products 
to full runrate manufacturing the source of sustainable growth 
over the long term
typical product lifecycle years
cumulative 
cash flow £
wheels and brakes
civil
military
energy
development in production mature
5
0
10 15 20 25 30 35 40
93987p0809indd   9 04032015   1624 market review
market review 
meggitt’s core civil aerospace military  
and energy markets share a common 
requirement for smart engineering for 
extreme environments mission and 
safetycritical components and subsystems 
that function without fail for many years in 
highly demanding operating conditions  
from suppliers capable of meeting rigorous 
certification requirements 
civil aerospace 
civil aerospace accounts for 48 of group 
revenue with products and subsystems 
installed on almost every jet airliner 
regional aircraft and business jet in 
service this fleet has grown recently 
totalling over 43000 aircraft today versus 
31000 a decade ago new aircraft 
deliveries drive sales of original equipment 
oe and aircraft utilisation generates 
demand for spare parts and repairs over 
many decades so the growth of our fleet is 
a strong indication of future aftermarket 
revenue growth 
original equipment 
we classify civil aircraft deliveries by seat 
capacity large jets 100 seats regional 
aircraft 100 seats and business jets 
large jet deliveries in 2014 stood at a 
record 1380 8 higher than in 2013 
growth is underpinned by the order books 
of boeing and airbus the two major civil 
aircraft manufacturers which extend over 
seven years at current production levels 
plus other manufacturers investing in the 
large jet market including bombardier 
sukhoi and avic the high level of demand 
for new aircraft deliveries in recent years 
has been driven primarily by high oil prices 
the relatively low cost of debt and the wave 
of newer more fuelefficient aircraft coming 
to market including boeing’s 787 and 
737max and airbus’ a350xwb and 
a320neo despite the recent decrease in oil 
prices we expect no significant changes to 
new aircraft demand in the short term 
regional aircraft deliveries of 269 in 2014 
represented a 2 increase on 2013 with 
growth driven by 70plus seat aircraft 
growth looks set to continue over the 
medium term mirroring the increasing 
internationalisation of the regional 
aircraft fleet regional fleets outside 
north america account for 55 of the 
global fleet up from 44 a decade ago 
business jet deliveries totalled 675 a 6 
increase on 2013 although deliveries 
remain around 40 below the peak in 
2008 inventories are continuing to decline 
however and rising corporate profitability 
a good driver of business jet demand 
historically is forecast to continue as with 
regional aircraft the fleet is becoming 
increasingly global—customers in the 
americas currently comprise 75 of 
the global business jet fleet but order 
trends suggest this will move to around 
60 over the next decade ten years 
ago the americas represented 85 of 
the global fleet over the medium term 
we see deliveries continuing to recover 
particularly at the smaller end of the 
market driven by an improved economic 
growth outlook in developed economies and 
the large number of new aircraft models 
meggitt performance
meggitt’s oe revenue grew organically by 
6 in 2014 with significant contributions 
from the rampup of the boeing 787 and 
initial production revenue from the 
a350xwb large jet deliveries drive the 
majority of our oe revenues involving the 
supply of products and subsystems on 
engines and airframes covering thermal 
management and fluid control fire 
protection conditionmonitoring and 
highintegrity electronics our largest 
exposure to regional aircraft and 
business jets is through our wheels and 
brakes business which provides most 
original equipment free of charge to civil 
aircraft manufacturers strong oe 
performance is also driven by higher 
shipset values on new aircraft 
programmes whose order books and 
delivery forecasts lend confidence in 
growth prospects averaging 7 to 8  
per annum for the medium term 
market matrix
meggitt benefits from a balanced portfolio capabilitybased business units deploy 
technological knowhow and intellectual property across all our markets so we are not 
dependent on single customers individual programmes or market segments
civil
original equipment
aftermarket
military
original equipment
aftermarket
energy
other
meggitt aircraft
braking systems
meggitt control
systems
meggitt polymers 
 composites
meggitt sensing
systems 
meggitt equipment 
group
10 of group revenue 3—10 of group revenue  1  —3 of group revenue
10 meggitt plc          report and accounts 2014
93987p1012indd   10 04032015   1624 aftermarket
the civil aerospace aftermarket is driven 
primarily by aircraft utilisation which  
for large jets and regional aircraft is 
measured using available seat kilometres 
asks we use takeoffs and landings 
as a proxy for business jet utilisation 
asks in the commercial aircraft fleet 
grew 55 in 2014 above the 5 long
term average the middle east and asia 
saw particularly strong growth with the 
us market showing a steady recovery 
regional aircraft utilisation picked up 
noticeably driven by the recovery in  
north america business jet utilisation 
in the us and europe continued to exhibit 
the gradual improvement seen for the 
last two years with takeoffs and 
landings in 2014 up 3 versus 2013  
we would normally expect our 
aftermarket revenues to follow these 
leading indicators after a lag of a few 
months however revenue can be 
impacted by shortterm perturbations 
including destocking or restocking cycles 
and excess spare part inventory arising 
from the retirement of old aircraft and 
subsequent harvesting of serviceable 
components from these aircraft 
meggitt performance
meggitt’s organic aftermarket revenue 
was up 5 for the year with 2 growth in 
the first half accelerating to 7 growth in 
the second half the growth rate in the final 
quarter was 10 above our mediumterm 
expectation of 8 to 9 air traffic was good 
given the previously referenced 55 ask 
growth however aftermarket revenue 
growth overall was held back to a degree by 
the parting out of old aircraft resulting from 
the high delivery rates of new more 
fuelefficient aircraft 
regional aircraft and business jets 
are important contributors to the group’s 
aftermarket revenue the continued 
increase in fleet size and recovery in 
regional aircraft utilisation in 2014 
boosted overall aftermarket growth 
our regional aircraft aftermarket grew 
4 in the year with business jet aircraft 
up an impressive 13
aircraft utilisation remains very 
encouraging with asks now tracking above 
the longterm average a reduction in some 
of the current cyclical factors such as 
retirement rates and the subsequent parting 
out of aircraft would drive confidence in our 
mediumterm aftermarket revenue growth 
expectation of 8 to 9 on average 
military 
military accounts for 34 of group 
revenue meggitt has equipment on over 
20000 aircraft and a variety of ground 
vehicles naval vessels and training 
installations worldwide  
defence budgets in some key markets 
remained under pressure in 2014 
notably in the us where the effect of 
the drawdown from afghanistan and 
absence of equipment reset affected 
available seat kilometres asks
billions
3
6
5
0
1
2
4
7
1970
1971
1972
1973
1974
1975
1976
1977
1978
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989 
1990
1991
1992
1993
1994
1995
1996
1997
1998
2001 
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2014
2000
1999 
1979 
source meggitt management estimates
supplementary information financial statements governance reports strategic report 11
2013 2014 2015 2016 2017 2018 2019 
100
200
400
300
263
269
288 291
297
306
320
source meggitt management estimates
regional aircraft delivery forecast
2013 2014 2015 2016 2017 2018 2019 
300
900
600
1500
1800
1200
1279
1380
1417
1513
1603
1640
1701
source meggitt management estimates
large jet delivery forecast
2013 2014 2015 2016 2017 2018 2019 
200
600
400
1000
1200
800
637
675
757
811
835
881
932
source meggitt management estimates
business jet delivery forecast
93987p1012indd   11 04032015   1624 military revenue by region      total revenue £ millions
market review continued

  usa
 3195  59

  europe 
 1373  26

  rest of world 
 826  15
spending levels and the continuing 
resolution in the early part of the year 
impacted the timing and size of orders 
however european markets were stable 
and parts of the middle east and asia 
saw budget growth the us defence 
budget remains subject to ongoing fiscal 
pressures although industry forecasts 
suggest we are moving into a more 
benign budgetary environment in us and 
international markets 
while we do not expect significant growth 
in military expenditure in the near term 
opportunities remain for the reset and 
upgrade of repatriated equipment and the 
supply of new products as a significant 
tranche of military assets reach the end 
of their service lives 
meggitt performance 
meggitt’s military revenue declined 
organically by 7 in 2014 the first half 
decline was particularly affected by the 
completion of two substantial retrofit 
programmes in 2013 and a reduction in 
the sale of spares and repairs on some 
helicopter and heavylift platforms 
following the withdrawal of us equipment 
from afghanistan military revenues were 
flat in the second half 
our exposure to a broad range of fixed 
and rotary wing aircraft ground vehicles 
training facilities and naval vessels 
across original equipment and 
aftermarket spares and repairs has 
enabled us to demonstrate resilience in 
a challenging environment over the last 
few years we expect to continue to do so 
over the medium term we have enjoyed 
considerable success for example 
securing retrofit programmes for 
blastproof fuel tanks for the bradley 
fighting vehicle fleet and fuel bladders 
for the kc135 tanker aircraft while we 
have now completed these retrofit 
programmes further opportunities exist 
in the reset of recently repatriated 
equipment from afghanistan and we are 
engaged with us military customers on 
further ground vehicle fuel tank retrofits 
further revenue growth is supported by 
continuing expansion of the fleet of 
platforms on which we have good content 
such as the f35 joint strike fighter and 
a400m accordingly we are targeting an 
average of 2 per annum organic 
revenue growth in the medium term 
excluding the impact of sequestration 
energy 
our energy business accounted for 11 
of group revenue in 2014 we target 
power generation and oil and gas markets 
with conditionmonitoring hardware and 
software control valves and printed 
circuit heat exchanger technology 
the market for condition monitoring 
and control valves has continued to 
grow as high input costs particularly 
in the first half of 2014 drove operators 
to extract greater efficiency from 
their assets as newer more capable 
monitoring technologies come to market 
operators will maximise their asset 
utilisation and minimise unplanned 
downtime by retrofitting new condition
monitoring systems onto existing plant 
and machinery 
the oil and gas heat transfer market 
remained robust through 2014 
exploration and production companies 
have been increasingly turning to 
extraction sites which are further offshore 
and in deeper water necessitating the 
commissioning of new equipment designed 
to operate in these increasingly harsh 
environments these factors have 
resulted in good growth in demand for 
floating production storage and offload 
fpso and floating liquefied natural gas 
flng vessels however the sharp 
decline in the global oil price over the last 
few months of the year is likely to 
significantly dampen oil producers’ 
appetite for new capital projects in the 
short term resulting in the deferral and 
possible cancellation of projects 
meggitt performance 
meggitt’s energy revenue declined 3 
on an organic basis in 2014 sales to 
power generation customers declined 
modestly particularly in the first half 
of the year as a shortage of tourmaline 
impacted our ability to fulfil customer 
requirements we have however seen 
a considerable improvement as a result 
of migrating customers onto alternative 
technologies and we anticipate a return 
to growth from 2015 revenue at our 
heatric printed circuit heat exchanger 
business also declined as a result of the 
deferral of revenue out of 2014 driven by 
financial difficulties at our local content 
provider in brazil 
heightened demand for our printed circuit 
heat exchangers from an identified project 
pipeline totalling nearly £600 million and 
increasing market share in condition
monitoring equipment should continue to 
deliver revenue growth averaging greater 
than 10 over the medium term 
however in the short term we anticipate 
good growth in energy control valves and 
condition monitoring to be largely offset 
by a decline at heatric reflecting the 
impact of project deferrals resulting 
from the recent decline in the oil price 
5394
12 meggitt plc          report and accounts 2014
93987p1012indd   12 04032015   1624 meggitt divisions
a leading supplier of aircraft wheels 
brakes and brake control systems
capabilities
•	 	 wheels	and	brakes	
•	 	 control	systems—brake	nose	wheel	steering	and	landing	gear
•	 monitoring	systems
growth strategy
•	 extend	core	landing	gear	subsystems	technologies
•	 	 secure	solesource	positions	on	new	aircraft	programmes
•	 	 expand	share	of	maintenance	repair	and	overhaul	market	
meggitt aircraft braking systems
markets
civil	aerospace fixed	wing	military	aircraft rotary wing military aircraft
controlling	more	critical	systems
creating an effective anti skid system is amongst the 
greatest challenges a braking systems provider can 
overcome since 1948 we have accomplished this for 
over 90 aircraft programmes which is why 
customers are awarding more responsibility for 
aircraft safety to us with leadingedge developments 
including the landing gear control and monitoring 
unit nose wheel steering and aircraft hydraulics for 
dassault’s all new falcon 5x business jet advanced 
braking and monitoring systems for the gulfstream 
g500 and g600 and pioneering largejet style 
autobrakes for the g650 and g650 extended range 
aircraft we remain the large cabin business jet 
manufacturers’ preferred supplier
supplementary information financial statements governance reports strategic report 13
 of group  
revenue 
  
211
underlying  
operating profit 
£ millions  
1275
revenue £ millions 
3270
revenue by end market
  civil oe
6
 civil am
64
 military
30
 
energy and other
0
3270
93987p1317indd   13 04032015   1628 maximising	aircraft	takeoff	readiness
turning an aircraft back on a false alarm can  
cost up to us1 million which is why our goal is 
to maximise aircraft takeoff readiness without  
compromising safety our complete fire protection 
and control systems are highly discriminating  
with our latest smoke detectors reaching the 
stateoftheart in particulate recognition what’s 
more we have the largest range of components in 
the industry and worldclass integration expertise 
which is why our systems from detectors and 
controllers to fire extinguishers are carried by the 
latest generation of narrowbody aircraft including 
a320neo and 737 max
capabilities
•		heat	exchangers	
•	 control	valves	and	subsystems
•	 electromechanical	controls
•	 environmental	control
•	 fuel	handling
•	 aircraft	fire	protection	and	control	systems
growth strategy
•			 develop	lightweight	control	systems	for	extreme	 
temperature	and	pressure	environments	to	improve 
aircraft performance
•	 	 diversify	product	range	to	a	wider	range	of	energy	
and industrial turbines
•	 	 deploy	full	fire	protection	systems	to	secure	solesource	
positions on new platforms
•	 develop	‘green’	fire	suppressants	to	meet	changing	regulations		
	 and	gain	competitive	advantage	by	being	first	to	market
markets
14 meggitt plc          report	and	accounts	2014
meggitt	divisions continued
a leading supplier of pneumatic fluid control 
thermal	management	and	electromechanical	
equipment	and	subsystems	and	complete	
fire	protection	solutions
meggitt control systems
civil	aerospace military	ground	
vehicles
military	aircraft energy	industrial marine ground fuelling
3487
 of group  
revenue 
  
224
underlying  
operating profit 
£ millions  
918
revenue £ millions 
revenue by end market
 civil oe
	 26
 civil am
39
 military
25
 energy and other
	 10
3487
93987p1317indd   14 04032015   1628 components to systems
we made our mark in flexible ballisticallyresistant 
crashworthy fuel cells for a range of aerospace 
applications recently launching an iedresistant 
design for land vehicles now we are leveraging this 
expertise with capabilities from other meggitt 
divisions to deliver a fullycertified fuel containment  
system for sikorsky’s advanced s92® helicopter 
in a multimillion dollar contract extending to 2030  
our design significantly reduces manufacturing  
risk and the cost of field repairs an investment 
in line with our strategy to move into total fuel 
management systems   
capabilities
•	 flexible	fuel	tanks	for	military	and	civil	aircraft	and	military		
	 ground	vehicles
•	 	 smart	electrothermal	ice	protection	with	energysaving	
proportional	control
•	 complex	composites
•	 airframe	engine	and	oil	and	gas	sealing	solutions
growth strategy
•	 	 expand	our	industryleading	operational	performance	in	
polymers	with	further	investment	in	manufacturing	technology
•	 	 invest	in	advanced	polymer	materials	to	enter	attractive	 
adjacent	markets
•	 	 expand	capabilities	in	complex	composites	
•	 complete	fuel	management	systems
markets
supplementary information financial statements governance reports strategic report 15
a	leading	specialist	in	fuel	containment	
engineered	aircraft	sealing	solutions	and	
technical	polymers	electrothermal	ice	
protection	and	complex	composite	
structures and	assemblies
meggitt polymers  composites
civil	aerospace military	aircraft	and	ground	vehicles missile	systems	 
and	uavs
nuclear	marine	heavy	transportation	 
and	oil	and	gas	sectors
 of group  
revenue 
  
105
underlying  
operating profit 
£ millions  
202
revenue £ millions 
1623
revenue by end market
 civil oe
27
 civil am
18
 military
54
 energy and other
1
1623
93987p1317indd   15 12032015   0303 16 meggitt plc          report	and	accounts	2014
markets
a	leading	provider	of	highperformance	sensing	 
and	conditionmonitoring	solutions	for	highvalue	
rotating machinery and other assets
meggitt sensing systems
civil	aerospace energy test	and	measurement military	fixed	wing	and	rotary	aircraft	
ships missiles
 of group  
revenue 
  
256
underlying  
operating profit 
£ millions  
584
revenue £ millions 
3982
revenue by end market
 civil oe
35
 civil am
16
 military
21
 energy and other
28
3982
capabilities
•	 	 highperformance	sensing	in	extreme	environments	
•	 	 condition	monitoring	for	air	and	landbased	machinery
•	 	 power	electronics
•	 	 realtime	remote	aircraft	surveillance
•	 	 aircraft	ground	manoeuvring	collision	prevention
•	 	 wireless	emergency	systems
growth strategy
•	 	 develop	leadingedge	sensing	and	conditionmonitoring	
technologies	to	minimise	emissions	conserve	fuel	optimise	
engine performance and manage maintenance economically
•	 	 accelerate	growth	in	energy	segment	launching	innovative	
new products	and	expanding	sales	and	aftermarket	services	
in highgrowth	markets
•	 	 exploit	capabilities	in	power	generation	conversion	and	
storage for more electric aircraft
•	 	 deploy	advanced	sensing	knowledge	and	intellectual	property	 
for	highgrowth	medical	ultrasound	applications
improving	aircraft	operating	economics
our latest on engine condition monitoring system 
enters service in 2015 on the airbus a350 the latest 
widebody the system which has already been adopted 
by the airbus a380 and boeing 787 plays a critical role 
in an aircraft’s economics enabling maintainers not 
only to diagnose problems but anticipate wear and tear 
to prevent schedule disruption and expensive 
unscheduled maintenance onengine monitors are of 
particular interest to enginemakers who provide total 
care packages to operators
meggitt	divisions continued
93987p1317indd   16 04032015   1628 supplementary information financial statements governance reports strategic report 17
markets
created	to	enable	a	set	of	strong	technologically
distinct businesses to market their offerings to 
specialist	customers	while	benefiting	from	the	wider	
meggitt	group’s	investment	in	shared	services	and	
common processes
meggitt equipment group
civil	aerospace fixed	and	rotary	wing	 
military aircraft 
defence	and	
security
energy automotive	and	industrial
 of group  
revenue 
  
204
underlying  
operating profit 
£ millions  
481
revenue £ millions 
3175
revenue by end market
 civil oe
3
 civil am
1
 military
58
 energy and other
38
3175
capabilities
•	 	 combat	support	ammunitionhandling	military	electronics	
cooling	and	countermeasure	launch	and	recovery	systems
•	 livefire	and	virtual	training	systems
•	 	 heat	transfer	equipment	for	offshore	oil	and	gas	
•	 standby	flight	displays	and	air	data	systems
•	 linear	motion	control
•	 automotive	and	industrial	control	electronics
growth strategy
•	 	 build	on	marketleading	position	in	compact	and	highpressure	
heat	exchangers	for	highgrowth	energy	markets
•	 leverage	growing	us	military	systemofrecord	status	in	live	 
	 and	virtual	training	systems	for	international	customers	in	 
 defence and law enforcement markets 
•	 	 provide	smart	thermal	management	solutions	for	military	 
electronics	systems	and	extend	automatic	ammunition	
handling capability into larger calibre weapons 
systemofrecord	status	grows	 
business and influence 
meggitt ’s next generation small arms trainer will 
become the systemofrecord for the us army and  
us marine corps—an unprecedented dual win worth 
around us130 million both contracts won  
for best value optimise the cost of personnel 
training through technology meggitt’s significant 
investment in software architecture and military 
training expertise provides a virtual product that  
will not only improve the quality of training to  
soldiers but the efficiency and effectiveness of 
training instructors  
93987p1317indd   17 04032015   1628 the aim of the meggitt production system mps 
is to transform performance at our sites around 
the world day in day out new global standards 
of excellence will strengthen our core creating  
a solid platform for growth and innovation 
individual improvements are sometimes small 
together however they will reshape our future 
singapore outpacing the 
industry 
with a brandnew facility designed on 
lean manufacturing principles meggitt 
aerospace asia pacific maap already 
had very high standards of operational 
performance in the seven months it took 
to implement the first stage of the mps 
however standards rose even higher
“we believe mps is leading the industry” 
says james mariadass director of 
operations  continuous improvement in 
singapore “and it looks like the industry 
does too we won silver in the ‘singapore 
aerospace industry excellence award’ for 
outpacing the industry now we’re aiming 
for gold next time round”
everyone accountable every day 
daily layered accountability is a key 
concept within the mps it starts with 
factory floor meetings that take place 
at the same time every day issues that 
cannot be solved by operators or 
supervisors are escalated same day to 
functional leaders site leaders general 
managers and even divisional presidents 
issues are visited daily through this 
process until they are solved
mps boosting performance in our singapore facility 
 
 2014 2013
safety—number of lost time accidents 0 0 
quality—dppm
2
 external – all 243 1854
quality—number of mro
3
  0 4 
escapes workmanship
delivery—mro otd
4
 performance 95 84
2 
defective parts per million     
3 
maintenance repair and overhaul   
4
 ontime delivery
above  
the meggitt aerospace asia 
pacific aftermarket team holds  
its daily functional review  
lr james mariadass  
director of operations  
continuous improvement  
sharon fan head of customer 
service trebas kwek regional 
financial controller adrian 
plevin general manager roland 
thia head of quality  ehs dior 
ang materials manager mango 
tan inside sales manager and 
jeanali wu hr manager
1 
see page 8 for a full description of our strategy articulated within three themes technology operations excellence and customer focus
the meggitt  
production system 
excellence as standard
1
18 meggitt plc          report and accounts 2014
93987p1823indd   18 04032015   1633 california closer analysis 
shop floor knowhow saves 
us50000
i
n 2013 the main cause of internal scrap 
at meggitt control systems’ corona site 
was stator failure on a motor production 
line about two a week were failing the 
final test amounting to a loss of about 
us50000 a year
a crossfunctional team ran a root cause 
investigation using a range of mps tools 
revealing that shorting thermostats were 
a major cause of stator failure based on 
an idea from judy bunch leader of the 
motorwinding cell one of the engineers 
on the line solved the problem by 
preimpregnating the thermostats
judy also observed that when the 
stators were fitted into the motor 
housing the wires would occasionally 
get damaged and later short working 
with her a manufacturing engineer 
developed a replica of the motor housing 
assemblers now check for clearance 
issues without damaging the wires prior 
to fitting the failure rate has dropped 
to zero
“these are typical examples of how more 
ideas are coming up from the floor” says 
site operations director garret mertz 
“with mps we start the day with a set of 
short interlocking meetings which 
cascade information up and down the 
business escalating problems and 
potential solutions so they get the 
attention they need”
“it’s not ‘get it done’ anymore” says judy 
“it’s ‘how can we help you get it done’ 
that’s a huge difference”
switzerland better planning 
means higher productivity 
lower inventory
f
or the last 18 months helge 
huerkamp general manager meggitt 
sensing systems switzerland has 
been using mps to drive more accurate 
sales inventory and operations planning 
as well as driving efficiencies throughout 
the business cycle the revamped process 
allows managers to simulate the impact of 
new business more accurately
at the end of 2014 a key customer asked 
for 120 additional engine monitoring 
units each one consisting of thousands  
of components running the data through 
a more reliable planning and simulation 
model highlighted potential bottlenecks 
but just as important because key people 
are now used to a more rigorous stepby
step process of discussion forecasting 
and signoff there’s a much more 
accurate picture of what new business 
can be taken on and when
“that information is invaluable in 
customer discussions” says helge 
“we know we can trust it and of course 
the customer picks up on that too 
we were able to confirm this additional 
order plus we’ve been able to ramp up 
production in other areas productivity has 
increased by 8 over the last two years 
and inventory has improved by 10 days”
model planning  
helge huerkamp general 
manager meggitt sensing 
systems switzerland 
has confidence in data 
run through mps’s more 
reliable planning and 
simulation models
creativity on the factory floor  
garrett mertz site director business 
operations judy bunch lead assembly 
technician and derek harris lead test 
technician eliminating scrap at meggitt’s 
control systems facility in corona california
supplementary information financial statements governance reports strategic report 19
93987p1823indd   19 04032015   1633 to be the best in your field you need the  
best people
our senior leadership programme ensures 
we have a strong global leadership team
our graduate programme attracts talent from 
the world’s top universities adding cuttingedge 
technical knowledge to the group today and 
engaging technology thinking for the longer term
we continue to broaden the range of training  
for all employees a recent meggitt production 
system mps initiative for example funnels 
expertise right through the business via 
a network of subject matter experts 
flying higher 
e
nsuring we have the right talent to 
lead the organisation today and 
tomorrow is a key priority 
mps continues to strengthen training at 
site level with leadership ‘standard work’ 
and a set of four competencies such as 
leading by example and coaching daily 
weekly and monthly leaders are held 
accountable for ensuring their people  
are equipped to hit performance goals 
we have also developed a bespoke 
executive leadership programme with 
oxford university’s saïd business 
school taught by external experts 
from academia and business the one
year oxford leadership programme 
focuses on strategy operations and 
personal skills
“since 2008 it’s helped our brightest and 
best develop a greater understanding of 
meggitt as a whole helping them to 
develop systemic thinking beyond their 
functional areas” explains robin young 
group organisation  development 
director
participants attend three offsite 
intensives carrying out assignments  
in between on live strategic issues 
participants develop their ideas in small 
teams presenting recommendations  
and implementation plans to our 
executive board
“each year the programme brings 
together a peer group of very diverse 
talent new joiners and old meggitt hands 
it’s a powerful networking tool” says 
young the people who have taken the 
programme so far create the core of 
a strong global leadership team with 
a shared sense of priorities and values 
we gather round and help should the going 
get tough and we make sure everyone in 
our respective teams understands their 
role in the bigger picture”
the next generation 
n
ow in its third year the meggitt 
graduate programme has a dual 
purpose creating a group of 
future leaders in the key disciplines of 
engineering operations and procurement 
and bringing new insight into cutting
edge technology from the world’s 
leading universities
“a lot of research into areas such as 
additive layer manufacturing and 
nanotechnology is happening at places 
like georgia tech cal tech and mit” says 
chief technology officer keith jackson 
“the best graduates are ready to apply that 
knowledge to new and existing products”
in his first assignment blaise guélat who 
has a phd in microsystems was part of the 
team who produced a prototype for a next 
generation inclinometer it replaces 
electromechanical technology with a 
microelectromechanical system mems 
sensor in his second assignment he is 
developing a new algorithm for secondary 
flight displays to improve attitude and 
heading accuracy 
“it uses a statistical approach known 
as kalman filtering to generate a more 
accurate estimate than you get with 
a single measurement” explains blaise 
“and it’ll be able to use other data sources 
such as magnetic data and gps when 
they come online” 
elsewhere we have been working with 
local schools and universities to develop 
skills and create a pipeline of talent for 
tomorrow in the uk meggitt sponsored 
sheffield university’s formula student 
team thousands of young engineers 
from more than 100 universities all 
over the world compete to design and 
manufacture a singleseat racing car 
to run at silverstone 
“it gets our name as a top graduate choice 
out into the fast lane” says jackson 
“and it helps us get a good look at talent 
from all over the world”
learn teach learn teach—
the smart way to embed 
new knowledge
a
s part of the second phase of mps 
implementation subject matter 
experts in many of our sites around 
the world are training to become experts in 
one of 10 critical subjects from statistical 
analysis to project leadership engineer 
paul thomson has spent this year becoming 
one of the first 2 problemsolving experts at 
securaplane our aircraft security and 
battery specialists in tucson arizona  
 
talent more power  
to our people
1
1 
see page 8 for a full description of our strategy articulated within three themes technology operations excellence and customer focus
20 meggitt plc          report and accounts 2014
93987p1823indd   20 04032015   1633 “we started with offsite training in six 
sigma and presentation skills—you need 
to get people on your side when it comes to 
solving complex problems” he says “after 
that came two assignments designed to 
put what we’d learned into practice” 
the first assignment focused on quality 
issues with an emergency lighting 
system some 30 possible issues were 
revealed 80 of recommendations were 
implemented within two weeks and after 
one month there was a 30 improvement 
in the first pass yield fpy fpy shows 
how well standard work is undertaken 
minimising deviation from plans and 
the introduction of rework into our 
production processes 
paul is now passing on his learning in a 
trainthetrainer programme that will take 
all 180 people at the site up to the first tier of 
expertise in the subject by the end of 2015 
“we start with around six people they train 
up another four or five and on it goes” 
once the training is complete meggitt 
experts continuously develop their own 
understanding sharing best practice 
and benchmarking across the sector 
in order to champion their subject 
within the business 
left  
tomorrow’s leaders refreshing 
our technologies today dr blaise 
guélat front with fellow graduate 
programme participants back 
lr dr yair korenblit john 
borton stefan lespezeanu and  
dr jeff lehew
below 
first among experts as part of 
the meggitt production system 
implementation paul thompson 
sustaining engineering manager 
is the first in a cadre of experts 
being developed at every meggitt 
site in ten core disciplines 
ranging from problemsolving 
to project management 
model scores teri samsel buyerplanner reviews production scorecards for 
meggitt’s emergency backup battery line with paul thompson in securaplane’s 
brandnew model factory 
supplementary information financial statements governance reports strategic report 21
93987p1823indd   21 04032015   1633 to continue leading the world in our chosen 
fields we must become even better innovators 
by empowering people at every level to drive 
change themselves the meggitt production 
system mps is improving the way we innovate 
freeing up capital to reinvest in technology
we are not only focusing on developing greater 
maturity in next generation technologies we 
are looking at the advanced manufacturing 
capabilities needed to industrialise them 
factories of the future
our focus on manufacturing highvalue 
complex parts requires great expertise  
in assembling subcomponents that 
makes conventional automation difficult 
but as the volume variety and complexity 
of these parts grows we need to take 
performance optimisation up to the  
next level
our pioneering approach known  
as meggitt modular modifiable 
manufacturing m4 will do just that 
giving operators the right tools parts 
and information at the right time so they 
can radically improve performance at 
site level it will enable us to reconfigure 
our factories in real time adjusting plans 
to satisfy customer requirements and 
optimise inventory 
in 2014 we started this journey in 
partnership with the uk’s advanced 
manufacturing research centre amrc 
creating a prototype workstation laser 
and video projected guides plus sensor
enabled smart assembly fixtures allow 
operators to build a wider variety of 
products faster and more accurately 
automatic cameras keep detailed records 
throughout enhancing traceability while 
capturing ideas for improvement
starting in 2015 we will develop the other 
technologies m4 requires in partnership 
with the amrc the manufacturing 
technology centre mtc and a leading 
software provider we have also attracted 
significant interest from innovate uk  
the uk’s innovation agency and britain’s 
aerospace technology institute
“m4 will optimise factory performance by 
responding to changes at the micro level 
such as late customer demand and at the 
macro level such as buying more efficient 
equipment” says steve parker director 
of engineering “it supports investment in 
people and equipment by maximising our 
resources advanced workstations 
enable individual operators to work 
on the widest range of products” 
although the full programme will 
take three years m
4
 will initially run 
alongside existing factory operations 
using a combination of simulated and 
actual environments 
“we’re already looking at introducing 
findings from the scoping phase to some 
of our other facilities and that will continue 
throughout the programme” says parker 
“m
4
 isn’t just a oneoff improvement 
it’s giving us the tools we need to drive 
improvements year on year” 
lighter quieter more reliable 
and faster to manufacture
new manufacturing techniques are 
enabling us to improve existing product 
designs and create totally new ones 
take compressor bleed valves for 
example they’re used to prevent stalling 
by controlling engine pressure high 
pressure air makes a huge amount of 
noise as it travels through the valve 
geometry that has been cast or machined 
in a traditional way 
a team of meggitt engineers on our group 
graduate programme have used additive 
layer manufacturing alm to create a 
radical new component design for our 
engine customers 
the valve will significantly cut noise over 
residential areas surrounding major 
airports an important regulatory 
requirement for almost all existing 
jetengined planes 
scott lathrope matt scovell and david 
skolnik have led work on the new control 
valve concept which aims to be 25 
lighter as well as quieter more reliable 
and quicker to manufacture 
“air flows much more quietly around the 
kind of organic designs you can create 
with alm” explains lathrope “and our 
model is simpler to assemble as there are 
fewer parts that means less potential 
error and an increase in reliability”
group engineering and strategy director 
chris allen says “we hope to use 
optimisation techniques developed on  
this project to create a wide range 
of advanced components for next
generation aero platforms as well 
as products for the medical and 
energy sectors”
technology smarter 
engineering generation 
after generation 
1
1 
see page 8 for a full description of our strategy articulated within three themes technology operations excellence and customer focus
22 meggitt plc          report and accounts 2014
93987p1823indd   22 04032015   1633 intelligent workbench above and right  
amrc technician john hall examines a 
flexible fixturing solution a product of 
meggitt’s closed loop adaptive 
assembly workbench claaw project 
the aim of which is to achieve a quantum 
leap not only in production output but 
quality repeatability and traceability 
using guidance via lasers and display 
screens and ‘smart’ tools the sample 
part is meggitt’s electric brake
below right claaw’s fixture includes 
targets to guide the calibration of an 
overhead laser a shaft is encoded to 
enable precise rotation measurements 
a poweron brake provides stability for 
torque operations product assemblies 
can be mounted and removed swiftly 
using a pneumatic easyclick clamp
revolution lownoise  
aeroengine valve a  
concept enabled  
by meggitt additive 
layer manufacturing
supplementary information financial statements governance reports strategic report 23
93987p1823indd   23 04032015   1633 24 meggitt plc          report and accounts 2014
principal risks and uncertainties
types of risk
we monitor risk across strategic 
operational business environment  
and financial categories  
•	 strategic  
includes for example risk arising  
from making poor business decisions 
or substandard execution of 
business objectives
•	 operational  
covers business processes and  
the technical quality and project 
management or organisational risk 
associated with programmes 
•	 business environment  
arises when external forces could 
significantly change the fundamentals 
driving our overall objectives 
and strategies 
•	 financial  
encompasses key financial functions 
including the provision of adequate 
liquidity to meet our obligations and 
management of currency interest rate 
credit and other financial risks  
risk disclosure
in accordance with the group’s enhanced 
risk management policy and process we 
have evaluated our risk disclosure and 
focused this report on our most significant 
risks general financial risks including 
foreign exchange and tax risks are not 
disclosed here but are described in the 
chief financial officer’s review on 
pages 31 to 37 
the risks outlined overleaf which are not 
presented in order of priority are those the 
group believes are the principal ones it 
currently faces however additional risks 
of which the group is unaware or risks the 
group currently considers to be less 
significant could have an adverse impact 
the process requires each risk to have an 
individual owner who is responsible for 
regular review of that risk and 
consideration of new risks in that area 
risk identification is embedded in other 
processes for example project and 
programme management bid approvals 
and other operational activities 
after identification each risk is reviewed 
at a site level and then aggregated and 
reviewed at divisional and functional level 
and during the business review process 
at the end of this process there is a detailed 
review and discussion of the group risk 
register at the executive board the board 
of directors review the output of this 
process the senior executives also meet 
to discuss risks which may not have been 
identified through the normal channels
meggitt’s risk management framework includes  
a formal process for identifying assessing and 
responding to risk supporting the delivery of  
the group’s strategy and business objectives 
risk management operates at all levels 
throughout meggitt however the board takes 
overall responsibility determining the nature and 
extent of the principal risks it is willing to take in 
achieving meggitt’s strategic objectives and 
maintaining the group’s risk governance structure 
and an appropriate internal control framework 
willis risk advisory services supported by alvarez 
 marsal have been assisting in the implementation 
of the group’s risk management framework   
during 2013 the board approved an updated risk 
management policy a group risk management 
strategy and updated formats for regular board 
reports and the group risk register this was 
supported by process and guidance documentation 
detailing the revised groupwide framework   
these processes were in place throughout 2014
during 2014 we enhanced our risk management 
process further the board approved a group risk 
appetite statement and related financial risk 
tolerances to ensure that identified risks are 
managed within acceptable limits these risk 
tolerance levels are flowed down to divisional and 
functional levels for incorporation in the process 
described below we started a risk maturity exercise 
to capture the improvements which had been made 
to the group’s risk management culture following 
the implementation of the new processes
change in risk in year
no change                
←  →
 
higher risk               
↑
 
lower risk                
↓
93987p2426indd   24 04032015   1636 supplementary information financial statements governance reports strategic report 25
risk description and impact how we manage it
strategic
business model
 
failure to respond to fundamental 
changes in the aerospace business 
model such as the accelerated 
pace of oe deliveries leading to 
earlier retirement of older aircraft 
and the continued development of 
an indigenous chinese aerospace 
manufacturing industry 
impact decreased revenue  
and profit
•	 longterm customer agreements in place 
•	 customerfacing organisation restructured and strengthened 
•	 investing in research and development to maintain and enhance  
meggitt’s intellectual property 
•	 ongoing strategic review of aftermarket including evaluation 
of operational model 
•	 meggitt production system mps implementation and facilities investment 
in our aftermarket businesses
•	 maintaining a pricing strategy
•	 development of strategy for manufacture of nonaerospace products in china
•	 build relationships with chinese aerospace customers
 technology strategy
 
failure to develop and implement 
meaningful technology strategies to 
meet customers’ needs 
impact restriction of ability of 
group to compete on new 
programmes with consequent 
decrease in revenue and profit
•	 creation of technology roadmaps
•	 investing in advanced research and technology 
•	 focus on technology during the group strategy process 
•	 recruiting top calibre engineers with appropriate technology skills
•	 ringfenced budgets focused on longerterm technology developments
operational
quality escape
equipment failure
 
defective product leading to 
inservice failure accidents the 
grounding of aircraft and prolonged 
production shutdowns for meggitt 
and its customers 
impact decreased revenue and 
profit damage to reputation and 
operational performance
•	 welldeveloped verification validation and system safety analysis policy 
and processes in place 
•	 quality and customer audits and industry certifications 
•	 implementing mps across the group 
•	 implementing an enhanced supplier quality assurance process 
 customer 
satisfaction
failure to meet customers’ cost 
quality and delivery standards or 
qualify as preferred suppliers  
impact failure to win future 
programmes decreased revenue 
and profit 
•	 implemented supplier excellence framework through riskbased intervention 
following risk analysis and onsite assessments
•	 step change in performance enabled through ongoing implementation of mps 
•	 implementation of programme lifecycle management process  
•	 programme management reorganised to increase capability and focus on 
programme delivery and governance 
•	 developing our commercial function and engineering capability 
•	 increased utilisation of lowcost manufacturing base 
itsystems failure prolonged lack of availability of 
critical systems such as sap due to 
badlyexecuted implementation 
poor maintenance change control 
business continuity and backup 
procedures the failure of 
thirdparties to meet service 
level agreements cyber attack
impact decreased revenue  
and profits damage to  
operational performance
•	 rolling programme of system upgrades including sap implementation 
to replace legacy systems 
•	 ongoing programme of it security enhancements 
•	 reviewing existing systems thirdparty service providers and risks 
including resilience and disaster recovery processes taking mitigating 
action where appropriate 
•	 rollout of deployment and architectural review processes
meggitt’s corporate strategy is designed to optimise our business model and mitigate the risk inherent in it  
see page 8 for a full description of our strategy and business model  
group strategy
technology customer focus operations excellence
→
new
→
←  →
←  →
93987p2426indd   25 04032015   1636 26 meggitt plc          report and accounts 2014
risk description and impact how we manage it
supply chain failure or inability of critical 
suppliers to supply unique 
products capabilities or services 
which causes the group to be 
unable to satisfy customers or  
meet contractual requirements 
impact decreased revenue and 
profit damage to reputation
•	 implementation of supplier excellence framework
•	 buffer inventory maintained for critical and solesource suppliers 
•	 counterfeit and fraudulent parts policy implemented at highrisk facilities 
•	 implementing integrated commercial and procurement approach to contractual 
terms and conditions including the development of longterm agreements 
 projectprogramme 
management
failure to meet new product 
development and programme 
milestones and certification 
requirements and successfully 
transition new products 
into manufacturing 
impact significant financial 
penalties leading to decreased 
profit damage to reputation
•	 implementation of programme lifecycle management process  
and a range of engineering support applications
•	 implementation of improved technology readiness and bid approval  
diligence methodology
•	 delivering applied research and technology objectives in line with  
group strategy
•	 programme management reorganised to increase capability  
and focus on programme delivery and governance 
•	 step change in performance enabled by the mps implementation 
•	 enhanced internal review process to stresstest readiness  
to proceed at each stage of key programmes
 legal and regulatory 
 
 
  
significant breach of increasingly 
complex trade compliance bribery 
and corruption and ethics laws and 
violating the terms of meggitt’s 2013 
consent agreement with the 
us department of state  
impact damage to reputation  
loss of supplier accreditations 
suspension of activity fines from 
civil and criminal proceedings
•	 substantial investment in measures to ensure compliance with 2013 us 
department of state consent agreement and continuing investment  
in other compliance programmes 
•	 boardapproved trade compliance ethics and anticorruption policies
•	 implementing a trade compliance global it solution
•	 regular monitoring by the ethics and trade compliance committee
•	 ongoing trade compliance programme including external audits and 
comprehensive ethics programme including training anticorruption policy 
external audits and ethics line 
•	 implementing import compliance programme
 it and physical 
security 
failure to protect intellectual 
property or other sensitive 
information arising from cyber 
attack and physical theft of it 
and business assets
impact compromised market 
position damage to reputation 
financial or contractual liabilities
•	 ongoing implementation of it security strategy and enhancing it security 
infrastructure policies and procedures
•	 groupwide intellectual property protection programme in place 
•	 implementing physical security strategy including selfassessment 
and audits prioritising higher risk environments and regions
business 
environment 
 product demand
 
 
 
significant variation in demand for 
products should military and civil 
business downcycles coincide 
a serious political economic 
or terrorist event taking place 
or an industry consolidation 
materially changing the 
competitive landscape 
impact volatility in underlying 
profitability  
  
 
•	 monitoring external economic and commercial environment 
and longlead indicators
•	 focusing on balanced portfolio including expansion of energyrelated 
businesses
•	 regularly communicating strategy to shareholders
•	 maintaining sufficient headroom in committed bank facilities  
and against bank covenants
•	 maintaining appropriate costbase contingency plans
principal risks and uncertainties continued
meggitt’s corporate strategy is designed to optimise our business model and mitigate the risk inherent in it  
see page 8 for a full description of our strategy and business model  
group strategy
technology customer focus operations excellence
←  →
→
←  →
←  →
←  →
93987p2426indd   26 04032015   1636 the group uses a mix of financial and nonfinancial key 
performance indicators kpis to measure execution against its 
strategic objectives to ensure we deliver value to our 
shareholders over the cycle financial kpis balance shortterm 
measures underlying profit before tax and free cash flow in the 
year with longerterm measures organic revenue growth 
return on trading assets and underlying eps growth non
financial kpis focus on investment in rd to drive future 
revenues the health and safety of our employees and raising 
standards of operational performance to satisfy our customers 
there have been no changes to the kpis used in the year or to 
how they are calculated 
key performance indicators
supplementary information financial statements governance reports strategic report 27
operations excellence customer focus technology
strategic objectives  
  
organic revenue growth definition and basis of calculation 
revenue growth calculated by measuring current and prior year revenue at constant 
currency excluding revenue from any businesses acquired or disposed of in those 
periods to measure revenue at constant currency current year revenue is restated 
using translation and transaction exchange rates prevailing in the prior year 
see page 32 for a reconciliation of organic revenue to statutory revenue 
target 
low to midsingle digit in 2015 6 to 7 over the medium term
result 
2014 00 2013 14 average achieved over last five years 36 average achieved 
over four years since target was set 48 see page 31 for details
directors’ incentive plans 
organic revenue growth is a performance measure for the 2014 and 2015 long term 
incentive plan ltip see pages 68 and 71 for details
  
underlying pbt definition and basis of calculation 
underlying pbt is reconciled to statutory measures in note 10 of the group 
consolidated financial statements on page 103 
target 
we do not publish profit targets 
result 
2014 £3287 million 2013 £3778 million see page 32 for details
directors’ incentive plans 
underlying pbt is a performance measure in the 2014 short term incentive plan 
stip for the purpose of this plan underlying pbt is measured at constant currency 
see page 66 for details underlying operating profit is the new profit measure to be 
used in the 2015 stip for the reasons described on page 71 in 2015 the group will 
therefore replace the existing kpi based on underlying pbt with one based on 
underlying operating profit 

400
0
2
8
6
4
2
10
14
12
2010 2011 2012 2013 2014
400
1000
0
2000
3000
3500
2500
1500
500
4000
2010 2011 2012 2013 2014
£’m
93987p2730indd   27 04032015   1637   
return on trading assets definition and basis of calculation
underlying operating profit after tax expressed as a percentage of average trading 
assets underlying operating profit is defined and reconciled to statutory measures 
in note 10 of the group consolidated financial statements on page 103 underlying 
operating profit after tax applies the group’s underlying tax rate to underlying 
operating profit
trading assets are defined as net assets adjusted to exclude goodwill other intangible 
assets arising on the acquisition of businesses net debt share buyback commitment 
retirement benefit obligations derivative financial instruments and deferred tax 
average trading assets are calculated as the average of trading assets at the start 
and end of the year 
return on trading assets measures performance by linking operating performance 
to the amount of operating capital deployed
target
target is to achieve an average return on trading assets of 254 over the next three 
years the target has been reduced from that set in prior years recognising the need 
to continue to invest in trading assets during this elevated investment period in the 
aerospace cycle 
result
2014 265 2013 360 average achieved over last five years 356 see page 32 
for details of the group’s operating profit performance in the year see page 34 for 
details of the current high levels of investment to support future growth
directors’ incentive plans
return on trading assets is a performance measure for the 2014 and 2015 ltip for the 
purpose of these plans underlying operating profit after tax and trading assets are 
measured at constant currency see pages 68 and 71 for details 
  
underlying eps growth definition and basis of calculation
the percentage change in underlying earnings per share eps from the previous year 
underlying eps is reconciled to statutory measures in note 15 of the group 
consolidated financial statements on page 106 
target
we do not publish profit targets however the proposed 2015 ltip includes eps targets 
equivalent to growth ranging from 55 to 100 per annum over the next three years
result
2014 136 2013 27 average achieved over last five years 47 see page 34  
for details 
directors’ incentive plans
underlying eps is a performance measure for the 2014 and 2015 ltip for the purpose 
of these plans underlying eps is adjusted to exclude the impact of any scrip dividends 
see pages 68 and 71 for details
10
0
20
30
40
50
2010 2011 2012 2013 2014

15
5
5
20
20
10
0
15
10
2010 2011 2012 2013 2014

key performance indicators continued
28 meggitt plc          report and accounts 2014
93987p2730indd   28 04032015   1637   
free cash flow definition and basis of calculation 
cash generated excluding amounts in respect of acquisition of businesses disposal 
of businesses and paid to shareholders see page 35 for a reconciliation of free cash 
flow to statutory measures
target 
we do not publish free cash flow targets 
result 
2014 £1468 million 2013 £1104 million see page 35 for details
directors’ incentive plans 
free cash flow is a performance measure in the 2014 and 2015 stip for the purpose of 
these plans actual and target free cash flow figures are measured at constant currency 
see pages 66 and 71 for details 
  
rd investment definition and basis of calculation 
investment in research and development rd expressed as a percentage of revenue 
investment is measured as total expenditure in the year and is not adjusted for 
amounts capitalised or amortised investment is measured gross of funding 
received from customers 
target 
investment of 6 to 8 per annum this range reflects typical investment fluctuation 
within the industry cycle
result 
2014 95 2013 82 average achieved over last five years 80 see page 34  
for details
directors’ incentive plans 
rd investment is not a specific measure used in directors’ incentive plans 
however the 2014 and 2015 ltip include measures focused on delivery of rd 
programmes see pages 68 and 71 for details
  
accidentincident rate definition and basis of calculation
the number of injuries reportable under local laws and regulations multiplied 
by 100000 and then divided by the average employee headcount during the year 
target
yearonyear improvement with an ultimate goal of nil 
result
2014 337 2013 317 see page 40 for details
directors’ incentive plans
health and safety performance is included in the personal objectives of the 
chief executive
50
0
100
200
150
250
2010 2011 2012 2013 2014
£’m
2
0
4
6
8
10
2010 2011 2012 2013 2014

100
0
200
300
400
500
2011 2012 2013 2014

supplementary information financial statements governance reports strategic report 29
93987p2730indd   29 04032015   1637 key performance indicators continued
   
reduction in defective  
parts per million dppm
definition and basis of calculation
defective parts per million dppm for the year expressed as a percentage 
improvement from that achieved at 31 december 2011 the date at which the meggitt 
production system introduced this consistent method of measurement dppm is 
defined as the number of defective parts returned by customers in the year multiplied 
by 1000000 and then divided by the total number of parts delivered 
figures include the results of disposed businesses up to the date of sale and include 
the results of acquired businesses from the later of the start of the financial year 
following acquisition and the date the information is first available
this kpi monitors the success of the meggitt production system
target
to achieve the levels of performance excellence eg sometimes referred to as 
‘supplier gold’ expected by our customers we use simple ontime delivery and 
dppm measures aggregated at a group level to track overall progress towards these 
objectives given the complexity and variety of customer metrics driven by the large 
number of customers we serve we also track performance as reported by our 
customers through their own supplier scorecards
result
cumulative improvement since 31 december 2011 84 2013 54 see page 34  
for details 
directors’ incentive plans
dppm is a performance measure for the 2014 and 2015 ltip for the purpose of these 
plans it is measured by reference to the number of sites achieving individual targeted 
reductions in dppm see pages 68 and 71 for details 
    
ontime delivery  
improvement
definition and basis of calculation
average ontime delivery achieved in the year expressed as a percentage improvement 
from that achieved at 31 december 2011 the date at which the meggitt production 
system introduced this consistent method of measurement calculated as the 
12month average of the number of parts delivered on delivery dates agreed with 
customers divided by the total number of parts delivered 
figures include the results of disposed businesses up to the date of sale and include 
the results of acquired businesses from the later of the start of the financial year 
following acquisition and the date the information is first available
this kpi monitors the success of the meggitt production system
target
to achieve the levels of performance excellence eg sometimes referred to as 
‘supplier gold’ expected by our customers we use simple ontime delivery and 
dppm measures aggregated at a group level to track overall progress towards these 
objectives given the complexity and variety of customer metrics driven by the large 
number of customers we serve we also track performance as reported by our 
customers through their own supplier scorecards
result
cumulative improvement since 31 december 2011 10 2013 10 see page 34  
for details
directors’ incentive plans
ontime delivery is a performance measure for the 2014 and 2015 ltip for the 
purpose of these plans it is measured by reference to the number of sites achieving 
individual targeted improvements in ontime delivery figures see pages 68 and 71 
for details
80
100
0
60
40
20
2012 2013 2014

3
0
6
9
12
15
2012 2013 2014

30 meggitt plc          report and accounts 2014
93987p2730indd   30 04032015   1637 supplementary information financial statements governance reports strategic report 31
overall performance
good growth in civil aerospace original equipment oe 
and the accelerating recovery in civil aftermarket am 
was tempered by softness in military and energy 
markets organic revenue was flat and underlying profit 
before tax decreased by 11 resulting in a 14 decrease 
in underlying eps to 324 pence however with a strong 
order book and 3 organic revenue growth in the second 
half of the year there is good momentum going into 2015 
financial highlights table 1
2014 
£’m
2013  
£’m
reported 
change 
organic  
change 
revenue 15537 16373 5 0
underlying 
1

ebitda 
2
4296 4793 10 8
operating profit 3460 3972 13 11
profit before tax 3287 3778 13 11
earnings per share eps 324p 375p 14
statutory
operating profit 2362 3003 21
profit before tax 2089 2694 22
eps 220p 294p 25
free cash flow
3
1468 1104 33 38
net debt 5755 5646 2
1
  underlying profit and eps are defined and reconciled to statutory measures in notes  
10 and 15 respectively of the group financial statements 
2
  underlying ebitda represents underlying operating profit adjusted to add back 
depreciation amortisation and impairment losses  
3
  free cash flow is defined and reconciled to statutory measures in note 40  
of the group financial statements   
 
chief financial officer’s review
revenue 
reported revenue declined by 5 
to £15537 million table 2 details the 
revenue performance by end market 
as expected currency and disposals had 
a significant adverse impact on revenue 
currency movements reflecting the 
strength of sterling against the group’s 
major operating currencies of us dollar 
swiss franc and euro contributed  
£57 million or 3 to the decline of  
which £43 million is attributable to 
sterlingus dollar net disposals 
represented an additional net headwind of 
£26 million primarily reflecting the 2013 
disposals of the addison and sunbank 
businesses good organic growth in 
civil in 2014 was offset by declines in 
military and energy resulting in a flat 
overall organic revenue performance 
encouragingly the trajectory within the 
year was positive with second half organic 
revenue growth of 3
total civil aerospace revenues grew 
6 on an organic basis large jet oe 
the most significant driver of our oe 
revenues grew 7 driven principally 
by the 787 rampup and some initial 
a350xwb revenues with regional aircraft 
up 10 and business jets up 4 the 
aftermarket recovery seen in the latter 
half of 2013 continued through 2014 
although we still experienced significant 
monthly variations nevertheless 
the trend was positive with total civil 
aftermarket growing 5 organically for 
the full year and 7 in the second half 
business jets were the most significant 
contributor to the overall aftermarket 
performance delivering growth of 13 
for the year while large jet grew 3 and 
regional aircraft grew 4 the parting out 
of older aircraft continued fuelled by the 
increased retirement rate in recent years 
although quantification of the impact is 
difficult aftermarket order intake was 
positive with orders for the year up  
13 on an organic basis and a book 
to bill of 108
military revenues declined by 7 on an 
organic basis with a substantial decline 
in the first half of the year contrasting 
with a flat performance in the second 
half the fullyear decline was in part due 
to the previously announced winddown 
of two retrofit programmes in the first 
half of 2013 with the remainder driven 
by the larger than expected impact of 
the drawdown in afghanistan on 
military spares sales
93987p3137indd   31 04032015   1638 chief financial officer’s review continued
32 meggitt plc          report and accounts 2014
energy revenue declined by 3 on an 
organic basis the tourmaline shortage 
impacted growth in our condition 
monitoring business for the majority of 
the year although the situation is now 
resolved and we expect a return to growth 
in 2015 heatric our printed circuit heat 
exchanger business saw a modest 
revenue decline largely due to the 
financial difficulties being experienced by 
our local content provider in brazil which 
resulted in the deferral of revenue from 
2014 we continue to anticipate headwinds 
in this business in the short term largely 
driven by the decline in the oil price which 
is causing a number of our customers to 
delay capital expenditure on new gas 
projects some contracts we expected to 
be awarded in 2015 have been deferred for 
a year and it is possible that we will see 
further deferrals in the near future 
though we have not seen any 
project cancellations
meggitt’s other specialist markets saw 
organic growth of 5 with growth in 
medical and automotive products 
offsetting weakness in the test and 
measurement market 
revenue growth table 2
 
2014
revenue
growth 

or ganic  
growth 
civil oe 3016 0 6
civil am 4396 1 5
total civil aerospace 7412 1 6
military 5394 12 7
energy 1631 6 3
other 1100 1 5
total 15537 5 0
organic growth table 3
revenue underlying profit before tax
2014
£’m
2013
£’m
growth

2014
£’m
2013
£’m
growth

15537 16373 51 reported 3287 3778 130
89 354 impact of ma
1
06 21
568  impact of currency
2
51 
16016 16019 00 organic 3332 3757 113
1
 excludes the results of businesses acquired or disposed of during the current and prior year  
2 
restates the current year using 2013 translation and transaction exchange rates 
profit 
the board’s preferred measure of the 
group’s trading performance is 
underlying profit underlying operating 
profit for the year was £3460 million 
2013 £3972 million representing a 
margin of 223 2013 243 the 
principal drivers included adverse mix 
with oe growth outpacing that of 
aftermarket in both civil and military 
markets combined with a further 
increase in investment in research  
and development and new product 
introduction and the previously  
disclosed lower profitability on legacy 
contracts partially offset by operational 
improvements and a onetime benefit  
of a new arrangement for our us retiree 
healthcare provision we also took  
a £6 million provision against our 
investment on the learjet 85 following 
bombardier’s announcement in 
january 2015 that they were pausing 
the development programme
underlying net finance costs decreased 
to £173 million 2013 £194 million as 
a result of lower average debt and lower 
interest rates following the repayment 
of 180 million of us private placement 
debt in june 2013 partly offset by 
a nonrecurring £18 million charge 
relating to the cost of refinancing the 
group’s debt in september
underlying profit before tax was  
£3287 million 2013 £3778 million
the underlying tax rate was 21 2013 
21 lower than our forecast 22 due to 
a change in the geographical mix of profit 
delivery underlying earnings per share 
was 324 pence 2013 375 pence
on a statutory basis profit before tax was 
£2089 million 2013 £2694 million with 
the yearonyear decline driven by the fall 
in underlying operating profit and the 
marking to market of forward currency 
contracts earnings per share was  
220 pence 2013 294 pence
operational performance
meggitt aircraft braking systems mabs 
provides wheels brakes and brake control 
systems for over 34000 inservice aircraft 
it continues to develop innovative technology 
for new programmes allowing the business 
to retain its leading position in its target 
markets underscored by the recent 
programme awards on the dassault falcon 
8x business jet and gulfstream 500600 
family of aircraft the division targets 
solesource programmes and is particularly 
strong in regional aircraft large business 
jets and military aircraft the division 
represents 21 of group revenue 
generating 86 of its revenue from the 
aftermarket and 14 from oe sales
mabs’ revenue grew by 3 on an organic 
basis with growth in civil aftermarket and 
military regional aftermarket grew 4 
driven by increases in fleet size and 
utilisation and business jet aftermarket 
grew by 7 these were partially offset by 
a 9 decline in large jet aftermarket total 
military revenue grew 8 with aftermarket 
benefiting from upgrade contracts for the 
us b1b fleet and the taiwanese air force 
which were completed at the end of the 
year operating margins grew from 370 
to 390 benefiting from positive mix and 
operating efficiencies
meggitt control systems mcs designs 
and manufactures products which manage 
the flow of liquids and gases around aero 
and industrial turbines and control the 
temperature of oil fuel and air in aircraft 
engines the division which also provides 
fire protection equipment to engines and 
airframes represents 22 of group 
revenue generating 46 of its revenue from 
oe and 54 from the aftermarket 
for mcs revenue was up 1 on an organic 
basis with 7 growth in civil aerospace 
spread across both oe and aftermarket 
being partly offset by an 11 decline in 
military primarily aftermarket the most 
significant contributor to the military 
performance was a marked reduction in 
military spares largely related to the 
drawdown from afghanistan unfavourable 
mix within military the provision against our 
investment in the learjet 85 programme 
and increased costs related to new product 
introduction saw operating margins 
decrease from 296 to 263 pecc will  
be reported as part of mcs in 2015
93987p3137indd   32 04032015   1638 supplementary information financial statements governance reports strategic report 33
meggitt polymers  composites mpc 
has a bias towards military representing 
54 of its revenue it supplies flexible 
bladder fuel tanks ice protection 
products and composite assemblies for 
a range of fixed wing and rotorcraft 
platforms and complex seals packages 
for civil and military platforms these 
products are linked by their dependence 
on similar materials technology and 
manufacturing processes it supplies 
over 80 of the us military requirements 
for fuel bladders and ballistically
resistant and crashworthy fuel tanks 
mpc represents 11 of group revenue 
and generated 55 of its revenue from 
oe and 45 from the aftermarket 
mpc revenue declined by 7 on an 
organic basis largely reflecting the 
impact of the bradley and kc135 retrofit 
programmes completed in 2013 overall 
military revenue reduced by 17 partially 
offset by growth in civil aerospace of 9 
operating margins declined from 167 
to 124 due to lower volumes in the fuel 
bladder facility and high levels of upfront 
new product introduction costs ahead of 
production rampup on upcoming aircraft 
programmes over the next few years
meggitt sensing systems mss designs 
and manufactures highly engineered 
sensors to measure a variety of 
parameters such as vibration 
temperature pressure fluid level and 
flow as well as power storage conversion 
and distribution systems for aerospace 
applications its products are designed 
to operate effectively in the extreme 
conditions of temperature vibration and 
contamination that exist in an aircraft or 
groundbased turbine engine sensors 
are combined into broader electronics 
packages providing condition data to 
operators and maintainers of engines 
contributing to improved safety and lower 
operating costs mss has migrated these 
products into other specialist markets 
requiring similar capabilities such as test 
and measurement automotive crash test 
and medical combining its capabilities 
with mabs it is currently developing a 
number of civil aerospace tyre pressure 
monitoring systems having secured 
positions for this technology on 10 aircraft 
platforms mss represents 26 of group 
revenue and generated 81 of its revenue 
from oe and 19 from the aftermarket 
mss revenue grew 4 on an organic 
basis with 8 growth in civil offsetting 
a 6 decline in military largely 
aftermarket and a 3 decline in energy 
the military decline reflected the 
afghanistan drawdown and disruption 
linked to the us site consolidation in 2013 
as well as the shortage of tourmaline 
which impacted both military and energy 
growth operating margins decreased 
from 176 to 147 reflecting adverse 
mix in the lower margin civil oe revenue 
stream and additional costs incurred as 
a result of the tourmaline shortage 
offset by the renegotiation of a loss
making contract against which provision 
had previously been held operating 
margin in  the second half showed good 
improvement versus the first half
meggitt equipment group meg 
comprises principally our avionics 
nonengine actuation dedicated military 
and heatric businesses the division 
represents 20 of group revenue and 
generates 81 of its revenue from oe and 
19 from the aftermarket with effect 
from 1 january 2015 meggitt avionics 
will be reported as part of meggitt 
sensing systems
revenue in meg declined by 3 on an 
organic basis good growth in civil 
largely avionics was more than offset by 
a modest decline in heatric revenue and 
strong comparators in our training 
business operating margins decreased 
from 184 to 151 driven by lower 
volumes adverse mix and the provision 
against our investment in the learjet 85 
programme in addition to the previously 
disclosed investment in the heatric 
business for future growth and lower 
profitability on three contracts
taxation
meggitt’s underlying tax rate remained at 
21 2013 21 lower than our forecast 
22 due to a change in the mix of profit 
delivery our mediumterm guidance is 
unchanged at 22 based on our current 
business mix and barring any material 
changes in the tax legislation in the main 
countries in which we operate cash tax 
paid as a percentage of underlying profit 
was 6 2013 12 the rate of cash tax 
paid is typically lower than our underlying 
tax rate due to tax deductible items which 
do not affect underlying profit including 
goodwill amortisation and tax relief on 
retirement benefit deficit reduction 
payments it is lower than normal in 
2014 due to excess payments on account 
in prior years 
our statutory tax rate which includes 
items reported below underlying profit 
before tax was 15 2013 14 cash tax 
paid as a percentage of statutory profit 
was 9 2013 16 and is lower than 
normal for 2014 for the reasons 
described above
the group is committed to complying 
fully with the laws in the countries in 
which it operates it seeks to achieve 
a competitive tax rate by maintaining 
appropriate levels of debt in high tax 
jurisdictions claiming available tax 
credits and incentives and utilising 
common financing structures where 
appropriate we are rated as low risk 
by hm revenue and customs as for all 
companies the group is exposed to 
changing tax legislation in the territories 
in which we operate including as an 
international business changes that may 
arise due to local legislation arising from 
the oecd’s current base erosion and 
operational performance table 4
revenue underlying operating profit
2014 
£’m
2013
1
£’m
growth 

organic
growth
2

2014 
£’m
2013
1
£’m
growth 

organic
growth
2

3270 3304 10 25 aircraft braking systems 1275 1224 42 56
3487 3643 43 06 control systems 918 1077 148 123
1623 1810 103 73 polymers  composites 202 302 331 333
3982 3975 02 35 sensing systems 584 699 165 110
3175 3641 128 33 equipment group 481 670 282 293
15537 16373 51 00 3460 3972 129 110
1
 restated for the change in segmental structure announced on 7 may 2014 and as described in note 6 of the group financial statements
2
 organic growth excludes the impact of ma and currency and is reconciled in table 3
93987p3137indd   33 04032015   1638 chief financial officer’s review continued
34 meggitt plc          report and accounts 2014
profit shifting project we manage  
these risks by monitoring international 
developments participating in  
prelegislative consultations where 
appropriate and adapting our approach 
where necessary and practical 
earnings per share eps
underlying eps declined by 14 to  
324 pence 2013 375 pence an increase 
in shares in issue which includes the 51 
take up of scrip dividend on 2014 dividend 
payments resulted in the eps reduction 
being slightly greater than the reduction  
in underlying profit before tax 
the timing of the commencement of the 
share buyback programme in november 
2014 meant it had no significant impact on 
reported underlying eps this year but the 
programme will be accretive in 2015 as 
the issued share capital reduces 
in 2015 the scrip dividend plan will be 
replaced by a dividend reinvestment plan 
the dividend reinvestment plan provides 
an efficient reinvestment option for 
shareholders without the need for 
new shares to be issued
statutory eps declined by 25 to  
220 pence 2013 294 pence the decline 
is higher than in statutory profit before  
tax due to the increase in statutory tax 
rate and the higher issued share capital 
dividends
the board has recommended a final 
dividend of 950 pence 2013 880 pence 
which would result in an 8 increase in 
the fullyear dividend to 1375 pence  
2013 1275 pence
the company has a balance on its profit 
and loss reserve at 31 december 2014 of 
£12 billion the substantial majority of 
which relates to reserves which can be 
distributed as a dividend or used for share 
buybacks and accordingly we have a 
comfortable level of headroom we are 
monitoring the frc’s financial reporting 
lab project on dividend policy and 
capacity and will consider their final 
recommendations on future disclosures 
in this area
investing for the future
targeted investment in technology 
development remains critical to our 
longterm organic growth total rd 
expenditure in 2014 of £1483 million was 
95 of revenues 2013 £1349 million 
82 of which 19 2013 18 was 
funded by customers the net charge to 
operating costs including amortisation 
and impairment increased by 5 on  
an organic basis to £585 million  
2013 £571 million
growth in rd largely reflects our 
impressive win rate on new programmes 
as well as our ongoing investment in new 
technology aligned to our customers’ 
future technology requirements about 
30 of the expenditure was on new 
wheels and brakes programmes and over 
50 focused on products for engines and 
engine accessories including working 
towards meeting the longterm 
requirement of the aerospace industry to 
eliminate the use of halon gas in onboard 
fire protection systems the balance was 
spread across a range of civil military and 
energy applications including the initial 
investment resulting from the strong 
order intake in the period notably in 
military training this investment in rd 
supports our mediumterm revenue 
growth assumptions and increases 
revenue security particularly as the 
majority of the investment is on platforms 
where we have won solesource positions 
the record number of programmes 
entering service in the next few years will 
also drive new product introduction costs 
higher in 2014 we industrialised new 
products at three times our historical 
average rate which is good for future 
revenues but which impacts profitability 
in the short term
our investment in programme 
participation costs including the supply of 
equipment free of charge to new aircraft 
mostly in mabs increased by 33 
organically the pace of deliveries on 
programmes equipped with our wheels 
and brakes including the gulfstream 280 
and 650 platforms is expected to grow 
further over the medium term these 
programmes will drive aftermarket 
revenue for decades our market share of 
wheels and brakes on the fleet of super
mid size and large business jets in 2014 
was 64 supportive of our expectation 
that we will have a market share on the 
overall fleet in excess of 70 by 2020
capital expenditure on property plant and 
equipment and intangible assets was 
£422 million 2013 £669 million with 
2013 expenditure inflated by site 
consolidations and expansions we expect 
growth in expenditure in 2015 driven by 
increased investment in manufacturing 
equipment including new carbon furnaces 
in mabs and further movement 
of production to lowcost 
manufacturing locations
analysis of rd expenditure table 5
2014
£’m
2013
£’m
total rd expenditure 1483 1349
 of revenue 95 82
customerfunded rd 289 245
capitalised 777 702
amortisation
impairment
168 169
charge to net  
operating costs
585 571
driving organic growth through 
operational excellence
the meggitt production system mps 
our single global approach to continuous 
improvement was launched during 2013 
mps will create the sustainable quality and 
delivery culture that confers competitive 
advantage beyond our technical expertise 
enabling the group to deliver a higher rate 
of organic growth over the long term it 
will also enable us to become more cost 
competitive through the reduction of 
working capital and the elimination of the 
cost of poor quality mps a sixphase 
programme which will take five to seven 
years to become fully embedded has been 
launched at 29 sites in total representing 
71 of our manufacturing footprint with 
sixteen sites having successfully exited the 
first phase and one site having exited the 
second more demanding phase the 
launch of the programme at the remainder 
of the group’s primary facilities will be 
complete by the end of 2015 
we have already seen some significant 
improvements in quality and delivery 
since inception with defective parts per 
million down 84 and ontime delivery up 
by 10 the quality performance in the 
year improved significantly and the stable 
yearonyear ontime delivery metric 
reflects good underlying performance in 
reducing production arrears given the 
demonstrable success we have seen 
internally we have accelerated the 
planned deployment of the key tools and 
competencies to longterm partners in 
our supply chain
our culture of continuous improvement 
has resulted in the expansion of our 
footprint in lowcost manufacturing 
locations notably a 30 increase in 
activity in our mexican operations and an 
8 increase in our chinese facility in 2014 
93987p3137indd   34 04032015   1638 supplementary information financial statements governance reports strategic report 35
these activities will drive consistently 
high levels of quality and delivery 
performance across all of our 
businesses while retaining our focus on 
cost control in turn this will help us fund 
future technology development 
programmes and respond to changing 
customer requirements
cash flow and borrowings
free cash flow of £1468 million 2013 
£1104 million represents a substantial 
yearonyear improvement despite the 
reduction in profit and continued high 
levels of investment to support future 
growth this was driven by better working 
capital management and lower tax 
payments reflecting the unwinding 
of excess payments on account in 
prior years 
net cash flow reduced to £211 million 
2013 £632 million largely driven by the 
£283 million acquisition of precision 
engine controls corporation pecc and a 
£337 million outflow 2013 nil from the 
purchase of shares as part of the share 
buyback programme implemented in 
november 2014 dividend payments for 
the year reduced to £514 million 2013 
£756 million as a result of higher 
takeup of the scrip dividend the scrip 
dividend option has been replaced by 
a dividend reinvestment plan for future 
dividend payments 
debt structure and financing
the group’s borrowings comprise a 
combination of us private placement debt 
and syndicated bank credit facilities 
during the year the group took the 
opportunity to refinance its bank 
facilities agreeing a new usd900 million 
committed revolving credit facility from 
13 international banks 
the new facility has a five year term with 
oneyear extension options at the end of 
the first and second years it replaces 
existing facilities of usd700 million and 
usd400 million which were due to expire 
in 2016 and 2017 respectively the early 
refinancing resulted in £18 million 
accelerated amortisation of debt issue 
costs relating to the old facilities being 
recorded within finance costs in 2014
the terms of the new facility are 
substantially unchanged from those which 
it replaced except for a relaxation of the 
net debtebitda covenant to allow it to 
rise to 40x for two six month reporting 
periods after a significant acquisition 
there were no other changes in facilities 
available to the group in the year 
at 31 december 2014 the group had 
undrawn committed credit facilities of 
£431 million after taking account of 
surplus cash 2013 £504 million 
with the exception of usd70 million 
private placement notes which mature  
in june 2015 and will be repaid out of 
existing facilities the group has no 
committed facilities which expire  
before 2017
facility headroom £’m table 6
2014 2015 2016 2017 2018 2019
150 0
120 0
900
600
300
00
headroom £431 million
net debt 
£576 million
 fixed rate       floating rate
share buyback programme
the group has a strong track record of 
cash generation and net debt reduction 
even in periods of the aerospace cycle as 
we are currently experiencing that drive 
elevated organic investment in addition 
to supporting our regular dividend we 
seek to deploy this cash by investing in 
the acquisition of complementary 
businesses that will enhance our offering 
to customers accelerate the group’s 
growth and deliver good returns to 
shareholders 
whilst we continue to actively evaluate 
acquisition opportunities there is 
currently a relative lack of sizeable 
acquisition opportunities meeting our 
strict investment criteria 
the board believes that in maintaining an 
efficient balance sheet a net debt
ebitda ratio of between 15x and 25x is 
appropriate whilst retaining the flexibility 
to move outside the range if appropriate 
the group had a net debtebitda ratio of 
13x at 30 june 2014 and accordingly in 
november 2014 announced the 
introduction of a share buyback 
programme with the intention of 
delivering a net debtebitda ratio at or 
slightly above 15x as measured under 
the group’s committed credit facilities by 
the end of 2015 a share buyback 
programme was chosen as the most 
appropriate way to return excess capital 
to shareholders because the board wish 
to retain flexibility to evaluate future 
organic growth and acquisition 
opportunities
at 31 december 2014 the group had 
purchased 68 million shares at an 
average share price of 49049 pence  
and a cost of £337 million under the 
buyback programme the programme 
has continued in 2015 with a further  
29 million shares purchased at an 
average share price of 52264 pence  
and a cost of £152 million as at  
13 february 2015 these shares  
have all been cancelled
debt financing risks
the group seeks to minimise debt 
financing risk as follows
movements in net debt £’m table 7
2014 2013
cash flow from operations before exceptional operating costs 3640 3619
exceptional operating costs excluding ma costs 166 153
interest and tax 347 634
capitalised development costsprogramme participation costs 1237 1059
capital expenditure 422 669
free cash flow 1468 1104
net investment inproceeds from ma 291 259
dividends 514 756
purchaseissue of own shares 115 25
share buyback 337 –
net cash generated 211 632
currency movements 247 27
other noncash movements 73 120
opening net debt 5646 6425
closing net debt 5755 5646
93987p3137indd   35 04032015   1638 chief financial officer’s review continued
36 meggitt plc          report and accounts 2014
a  concentration of risk
we raise funds through private 
placement issuances and committed 
bank facilities to reduce reliance on any 
one market bank financing is sourced 
from 13 international institutions spread 
across north america europe and asia 
no single bank accounts for more than 6 
of the group’s total credit facilities and 
the credit rating of lenders is monitored 
by our treasury department our largest 
lenders are bank of america bank of 
china barclays bnp paribas crédit 
industriel et commercial hsbc  
jp morgan bank of tokyomitsubishi and 
sumitomo mitsui banking corporation 
we seek to maintain at least £200 million 
of undrawn committed facilities net of 
cash as a buffer
b  setoff arrangements
the group utilises setoff and netting 
arrangements where possible to reduce 
the potential effect of counterparty 
defaults all treasury transactions are 
settled on a net basis where possible and 
surplus cash is generally deposited with 
our lenders up to the level of their 
current exposure to us
c  refinancing risk
we seek to ensure the maturity of our 
facilities is staggered and any refinancing 
is concluded in good time typically more 
than 12 months before expiry
d  currency risk
to ensure we mitigate headroom erosion 
due to currency movements our credit 
facilities are denominated in us dollars 
the currency in which most of our 
borrowings are held
net debt by drawn currency £’m table 8
2014 2013
sterling 177 212
us dollar 5458 4629
euro 424 539
swiss franc 120 789
other 70 99
net debt 5755 5646
 
e  covenant risk 
our committed credit facilities contain 
two financial ratio covenants—interest 
cover and net debt to ebitda the 
covenant calculations are drafted to 
protect us from potential volatility caused 
by accounting standard changes sudden 
movements in exchange rates and 
exceptional items this is achieved by 
measuring ebitda on a frozen gaap 
basis retranslating net debt and ebitda 
at similar average exchange rates for the 
year and excluding exceptional items from 
the definition of ebitda we continue to 
have considerable headroom on both key 
financial covenant measures
covenant ratios £’m table 9
covenant 2014 2013
net debtebitda ≤35x
1
12x 12x
interest cover ≥30x 208x 220x
1  
a ratio of 40x applies in the two six month reporting 
periods following a significant acquisition
interest risk
the group seeks to reduce the volatility 
caused by interest rate fluctuations on net 
debt our us private placements are 
subject to fixed interest rates whereas 
borrowings under our syndicated bank 
credit facilities are at floating rates to 
manage interest rate volatility we use 
interest rate derivatives to either convert 
floating rate interest into fixed rate or vice 
versa our policy is to maintain at least 
25 of net debt at fixed rates with a 
weighted average maturity of two years  
or more at 31 december 2014 the 
percentage of net debt at fixed rates was 
48 2013 46 and the weighted 
average period to maturity of the first 
25 was 45 years 2013 54 years 
foreign exchange risk
the group is exposed to both translation 
and transaction risk due to changes in 
foreign exchange rates these risks 
principally relate to the us dollar
sterling rate although exposure also 
exists in relation to other currency pairs 
including translation risk for the sterling
euro and sterlingswiss franc and 
transaction risk for the us dollareuro 
and us dollarswiss franc
exchange rates table 10
2014 2013
average translation rates against sterling
us dollar 163 157
euro 124 118
swiss franc 151 145
average transaction rates
us dollarsterling 154 162
us dollareuro 130 129
us dollarswiss franc 108 106
yearend rates against sterling
us dollar 156 166
euro 129 120
swiss franc 155 147
the results of overseas businesses are 
translated into sterling at weighted 
average exchange rates compared to 
2013 the group’s underlying profit before 
tax for the year was adversely affected by 
£96 million from currency translation of 
which £78 million arose on us dollar 
denominated profits with the balance on 
other currencies 
translation currency sensitivity £’m  
table 11
revenue pbt
1
impact of 10 cent movement
2
 
us dollar 550 120
euro 100 10
swiss franc 70 20
1  
underlying profit before tax as defined and 
reconciled to statutory measures in note 10 of the 
group financial statements 
2 
 as measured against the 2014 average translation 
rates against sterling set out in table 10
the net assets of overseas businesses 
are translated into sterling at year end 
exchange rates the resultant exchange 
rate exposure is mitigated through holding 
our net debt in the currencies of those net 
assets principally the us dollar
transaction risk arises where revenues 
andor costs of our businesses are 
denominated in a currency other than 
their own we hedge known and some 
anticipated transaction currency 
exposures based on historical experience 
and projections our policy is to hedge 
at least 70 of the next 12 months’ 
anticipated exposure and to permit the 
placing of cover up to five years ahead 
compared to 2013 the group’s underlying 
profit before tax for the year benefited by 
£45 million from currency transaction 
movements including a favourable 
impact of £56 million relating to us 
dollarsterling exposure and adverse 
impacts from other currency pairs 
each ten cent movement in the us dollar 
against the average hedge rates achieved 
in 2014 would affect underlying profit 
before tax by approximately £80 million 
in respect of us dollarsterling exposure 
£30 million in respect of us dollareuro 
exposure and £40 million in respect of  
us dollarswiss franc exposure
at 31 december 2014 us dollarsterling 
cover for our estimated 2015 exposure is 
96 hedged at an average rate of 157 
and we have covered approximately 80 
of our exposure for the four subsequent 
years at an average rate of 154 we have 
93987p3137indd   36 04032015   1638 supplementary information financial statements governance reports strategic report 37
also hedged 96 of our estimated 2015  
us dollareuro exposure at a rate of 136 
and 100 of our estimated 2015 us dollar
swiss franc exposure at a rate of 108 
further hedging of approximately 80 of 
our us dollareuro exposure for the four 
subsequent years is in place at an average 
rate of 121 we do not have any hedging 
in place for 2016 or subsequent years 
in respect of us dollarswiss 
franc exposure 
postretirement benefit schemes
the group’s principal defined benefit 
pension schemes are in the uk and us 
and are closed to new members 
total pension scheme deficits increased 
to £2710 million 2013 £1898 million 
the main drivers of the movement were
•	 an increase in the deficit of  
£1246 million 2013 reduction of  
£106 million due to remeasurement 
losses on scheme liabilities the main 
cause of the increase was a significant 
reduction in the rates used to discount 
scheme liabilities accounting 
standards require these liabilities to be 
discounted using the yields on high 
quality aa corporate bonds with a 
maturity that reflects the duration of 
the scheme liabilities these yields 
reflecting the falls seen in gilt 
markets have reduced in 2014 by 100 
basis points in the uk and 70 basis 
points in the us to levels not seen in 
the last 10 years there has also been 
a modest increase in us liabilities 
following the adoption of new life 
expectancy tables which were 
published during the year 
•	 a reduction in the deficit of  
£309 million 2013 £255 million  
due to remeasurement gains on 
scheme assets principally driven  
by the continued global recovery in 
equity markets
•	 net deficit reduction payments of  
£278 million 2013 £267 million 
regulations in the uk and us require 
repayment of deficits over time in the 
uk the group is making deficit 
payments in accordance with an 
agreement reached with the trustees 
following the last actuarial valuation in 
2012 this agreement provides for 
payments to gradually increase over 
the period to 2024 the next actuarial 
valuation date is april 2015 in the us 
the level of deficit payments is 
principally driven by regulations 
amounts required to be paid in the 
us decreased slightly in the year 
reflecting the impact of new legislation 
regarding funding payments and are 
expected to reduce further in 2015 due 
to the full year impact of these 
changes overall the group expects 
deficit contributions to reduce to  
£257 million in 2015 based on the 
existing deficit reduction agreement 
with the uk trustees and absent 
further regulatory changes in the us
meggitt has two other principal post
retirement benefit schemes providing 
medical and life assurance benefits to 
certain us employees the group’s 
exposure to increases in future medical 
costs provided under these plans is 
capped both schemes are unfunded and 
have a combined deficit of £468 million 
2013 £483 million deficit payments 
during the year were £15 million 2013 
£07 million during the year the group 
made changes to the way in which medical 
benefits are provided these changes 
following which the group continues to 
provide comparable benefits resulted 
in a past service credit being recognised 
of £84 million 2013 nil
going concern
the group’s business activities are 
described on pages 10 to 17 which include 
those factors most likely to affect its 
future development performance and 
position the financial position of the 
group is set out in this report and 
additional information is provided in the 
financial statements including note 3 
financial risk management note 28 
bank and other borrowings and note 30 
derivative financial instruments 
details of the principal risks and 
uncertainties to which the group is 
exposed and the mitigation plans in 
place are set out on pages 24 to 26
the group describes in the strategic 
report on pages 8 to 9 its cash generative 
business model designed to deliver 
organic revenue growth of 6–7 in the 
mediumterm and its resilience to oneoff 
global shock events 
the group continues to be cash generative 
even at the current elevated level in the 
aerospace investment cycle has 
considerable headroom against existing 
bank facilities and covenants and there is 
no material facility expiry before 2017 
accordingly after making enquiries the 
directors have formed a judgement at  
the time of approving the financial 
statements that there is a reasonable 
expectation that the group and the 
company have adequate resources to 
continue in operational existence for the 
foreseeable future for this reason the 
directors continue to adopt the going 
concern basis in preparing the group  
and company financial statements
 
doug webb chief financial officer
defined benefit pension scheme summary £’m table 12
2014 2013
opening net deficit 1898 2412
service cost 119 127
group cash contributions 397 394
deficit reduction payments 278 267
other amounts charged to income statement
1
103 114
remeasurement gains—schemes’ assets 309 255
remeasurement lossesgains—schemes’ liabilities 1246 106
currency movements 50 –
closing net deficit 2710 1898
assets 7611 6884
liabilities 10321 8782
closing net deficit 2710 1898
funding status 74 78
1  
 comprises past service amounts administration expenses borne directly by schemes and net finance costs
93987p3137indd   37 04032015   1638 38 meggitt plc          report and accounts 2014
we recognise our responsibility to 
shareholders employees customers 
suppliers and the wider community to 
conduct our operations in a safe responsible 
and sustainable manner we believe that our 
focus on corporate responsibility creates 
value for meggitt and our stakeholders 
it helps us manage our businesses more 
efficiently which in turn helps us mitigate 
risks reduce costs and protect the 
communities in which we operate we are 
also committed to ensuring compliance with 
all relevant national laws and regulations 
and aim to continually improve our financial 
social and environmental performance 
policy
we are committed to
•	 upholding sound corporate 
governance principles 
•	 providing a supportive rewarding 
and safe working environment with 
modern operational practices 
•	 conducting business relationships in 
an ethical and responsible manner 
•	 minimising the environmental impact of 
products and processes and maintaining 
internationallyaccredited environmental 
management systems 
•	 acting as a responsible supplier and 
encouraging our contractors and 
suppliers to do the same 
•	 independent audits in key 
compliance areas 
•	 supporting our local communities and
•	 professional and comprehensive 
employee training programmes
governance and compliance
health safety and environment hse ethics 
and business conduct and trade compliance 
are managed by a highly experienced team 
of functional specialists under the 
leadership of the corporate affairs director 
divisional presidents and site directors are 
responsible for implementing policies and 
programmes locally 
boardapproved policies on corporate 
responsibility health and safety 
environment ethics and business conduct 
and trade compliance are published on the 
policies section of our website 
the board’s ethics and trade compliance 
committee meets quarterly to discuss these 
programmes in detail hse matters are 
reviewed and discussed at every 
board meeting
sustainability
meggitt appreciates the importance of 
conducting business in a sustainable 
manner and we will continue to incorporate 
this principle into the way we carry out 
our operations during 2014 we held 
initial discussions with business in 
the community a leading charitable 
organisation in this field to help 
develop our thinking further
activity in 2014 
environment
meggitt strives to achieve high levels 
of environmental performance 
throughout our businesses based 
on standards and procedures set by 
group leadership to achieve the goals 
of our environmental policy meggitt’s 
environmental management programme 
includes setting environmental targets 
communicating regulatory developments 
training and informationsharing data 
analysis and internal and external 
auditing of environmental management 
systems and practices 
our global environmental audit programme 
supported by external consultants includes 
a comprehensive review of applicable 
regulatory requirements and best 
practice standards at all manufacturing 
facilities every three years in total 
16 sites were audited in 2014 
some 86 of our manufacturing 
facilities had achieved iso 14001 
standard certification by the end of 2014 
the remaining facilities are targeting 
certification in 2015 
performance
table 1 shows our performance for key 
environmental metrics and table 2 
shows our progress on achieving 
internally set targets 
our performance is on track to meet 
targets for most metrics but facility 
consolidations and increased production of 
carbon brakes has impacted our progress 
on electricity and waste recycled in 2014
although we had already achieved our 
fiveyear target on co
2
 emissions relative 
to revenue as at the end of last year our 
performance slipped in 2014 to a 7  
reduction compared to our baseline year 
which means that we did not reach our 
fiveyear co
2
 reduction target by the end of 
2014 the increase in co
2
 emissions in 
2014 was primarily due to a significant 
increase in electricity and gas consumption 
in our us carbon manufacturing operations 
because of an increase in production as 
new aircraft programmes enter service 
we recycle an estimated average of 87000 
cubic metres of water each year through 
closedloop water recycling systems 
installed at several facilities other water 
conservation measures include 
installation of thermostatically controlled 
water circulation systems on process 
tanks reducing evaporative losses in 
2014 despite an increase in cooling water 
used in our carbon manufacturing 
operations our closedloop recycling 
systems and other water conservation 
efforts resulted in a decrease in absolute 
water consumption and consumption 
relative to revenue and we remain on track 
to meet our fiveyear target of reducing 
water consumption relative to revenue
we were able to realise the benefits of 
integrating the waste minimisation ideals 
of the meggitt production system mps by 
reducing the environmental impact of 
waste at many facilities within the group 
and were able to decrease the absolute 
amount of waste generated by 13 an 
example of the progress made in 2014 is at 
one of our us braking systems facilities 
which found a way to recycle carbon dust 
from carbon brake disk machining into 
electrically conductive plastic this facility 
also identified a recycling method for 
waste carbon insulation as an oxygen 
scavenger in thirdparty metal recovery 
corporate responsibility
environmental metrics
1
 table 1 
2014 change 2013
utilities 
electricity—gwh 201 192
mwh per £m revenue 127 6 120
natural gas—gwh 190 183
mwh per £m revenue 120 4 115
ghg emissions co
2
e
1
—tonnes 131897 126720
tonnes per £m revenue 835 5 793
waste—tonnes 12200 14182
tonnes per £m revenue 772 13 887
water—cubic metres 722200 744196 
cubic metres per £m revenue 457 2 466
1
   metrics per £m are calculated using revenue converted at constant exchange rates greenhouse gas 
emissions are calculated using conversion factors published in the 2013 and 2014 guidelines to defra
decc’s ghg conversion factors for company reporting emissions from overseas electricity are in co
2
 
only not co
2
e the 2013 reported ghg emissions have been restated to reflect the change in using the 
updated conversion factors
93987p3841indd   38 04032015   1640 supplementary information financial statements governance reports strategic report 39
furnaces in total these efforts have 
resulted in the facility diverting 35 tonnes 
of waste away from landfill since 2007 
we have been a participant in the carbon 
disclosure project cdp detailing our 
approach and performance in managing 
climate change in 2014 we increased our 
score by 60 and our submission can be 
viewed on the cdp website
greenhouse gas emissions ghg
table 3 shows the ghg emissions data for 
the large and mediumsized companies 
and groups accounts and reports 
regulation 2013 the regulations 
the sites reporting ghg data are the 
same as those consolidated in the 
group’s financial statements 
we had an absolute increase in our ghg 
emissions in 2014 and our ghg emissions 
relative to revenue increased slightly 
due to an increase in electricity and 
natural gas consumed in our us carbon 
manufacturing operations as described 
above notwithstanding this increase was 
partially offset by reductions in electricity 
and gas consumption and associated 
ghg emissions elsewhere due to site 
consolidations and energy efficiency 
measures as well as an increase in carbon 
recycling and reuse under our carbon 
refurbishment initiative described below 
to align the group’s emissions targets 
with the regulations we will be setting 
new fiveyear ghg emission reduction 
targets from 2016 using 2015 as the 
baseline year we will set separate ghg 
reduction targets for our carbon 
manufacturing operations due to the 
unique and complex process involved
saving energy 
in 2014 we achieved reductions in key 
sustainability metrics through investments 
in several energy efficiency projects these 
are exemplified by upgrading compressed 
air plants improving furnace controls and 
installing high efficiency lighting and 
controls at our facilities as follows 
•	 recladding of roofing insulation at  
a uk facility resulted in improved 
heating and cooling efficiencies 
•	  significant lighting upgrade projects  
at several facilities saving around  
300 tonnes of co
2
 per annum 
•	 replacement of fluorescent lighting with 
more efficient led lighting and 
replacement of two inefficient boilers 
with higher efficiency rated gas boilers  
at another of our uk facilities saving  
25 tonnes of co
2
 per annum the same 
facility made insulation upgrades to 
improve heating and cooling efficiencies 
•	 the carbon refurbishment programme 
at our braking systems facility in akron 
us continued to expand in 2014 with a 
59 increase in carbon discs recovered 
and refurbished from 2013 reductions 
in processing time and associated 
energy consumption of around 81 
resulted in savings of approximately 
2300 tonnes of co
2
 that would have 
otherwise been emitted in 2014  
meggitt uk facilities will be required 
to comply with the energy savings 
opportunity scheme esos in 2015 
as a result the facilities comprising at 
least 90 of our energy consumption in 
the uk will undergo energy assessments  
conducted by certified lead assessors 
these will assist us in identifying additional 
energy conservation opportunities the 
esos is derived from european union eu 
legislation and it is likely that eu member 
countries will implement similar schemes 
requiring energy assessments for other 
eu meggitt facilities 
we recognise the need to reduce our 
dependence on fossil fuels and are 
actively investigating cleaner energy 
technologies including fuel cell power 
generation systems and solar energy 
throughout the group
reach
compliance with the european community 
regulation on registration evaluation 
authorisation and restriction of chemicals 
reach is managed by the group’s reach 
steering committee which continues to 
address the risks associated with the 
potential obsolescence of chemicals used 
by aerospace manufacturers we 
continuously track substances regulated 
under reach and work closely with our 
chemical suppliers to ensure substances 
are registered and will be approved for 
continued use or a suitable alternative 
identified we participate in an aerospace 
industry group involved in researching the 
replacement of hexavalent chromium used 
in common applications impacting 
aerospace manufacturing 
obsolescence
the obsolescence review board orb 
continued to identify and define a 
coordinated response to issues 
potentially affecting our business 
including conflict minerals counterfeit 
and fraudulent materials and chemical 
obsolescence working with our 
customers and suppliers we continue to 
strive for the reduction and substitution of 
materials and substances impacted by 
regulatory developments performing 
material assessments surveying our 
suppliers and undertaking reliability and 
qualification testing of alternatives 
health and safety
we want our employees to work in safe and 
secure environments and believe that 
occupational injuries and illnesses are 
ghg emissions
1
 data table 3
2014
tonnes of 
co
2
e
2013
2
tonnes of  
co
2
e 
combustion of fuel and operation of facilities
3
 35693 34239
electricity heat steam and cooling purchased for own use 96204 92480
131897 126719
intensity measurement
emissions reported above normalised to tonnes per £m revenue 835 793
1
   global ghg emissions are calculated using conversion factors published in the guidelines to defra
decc’s ghg conversion factors for company reporting emissions factors from overseas electricity are 
in co
2
 only not co
2
e 
2
  2013 numbers have been restated to the updated 2013 conversion factors
3
   does not include ghg emissions generated from meggittowned and operated vehicles or refrigerant 
gases as these emissions are not material to the group’s emissions
targets table 2 
baseline 
year
five year 
performance period 
financial years
target 
improvement 
over performance 
period
achieved during 
performance  
period up to  
31 december 2014
co
2
 emissions 2009 to 31 december 2014 15 7
gas 2011 to 31 december 2016 15 11
electricity 2011 to 31 december 2016 15 10
water consumption 2011 to 31 december 2016 10 6
waste to landfill 2011 to 31 december 2016 10 6
waste recycled 2011 to 31 december 2016 10 0
93987p3841indd   39 04032015   1640 40 meggitt plc          report and accounts 2014
preventable our health and safety policy 
makes clear that we do not tolerate unsafe 
behaviours or conditions in our workplaces 
and that we seek to continuously improve 
our safety culture and performance with an 
ultimate goal of zero injuries and illnesses 
in 2014 we continued to implement 
measures to improve safety in the 
workplace these included 
•	 groupwide online health and safety 
awareness training for all employees 
•	 implementation of a behavioural 
health and safety programme at five 
facilities in 2014 with plans to roll it 
out at another ten facilities in 2015 
•	 development of a health and safety 
maturity index and a revision of the 
meggitt safety star recognition 
programme to focus on proactive 
health and safety leading indicators 
this will emphasise the importance 
of preventative actions to reduce 
incidents and injuries occurring 
in the workplace 
•	 integration of the reporting and 
investigation of nearmiss accidents 
and unsafe conditions with mps 
•	 continued dissemination of 
information and best practice through 
intragroup hse conferences health 
and safety alerts and allemployee 
safety bulletins
•	 roll out of a further three new meggitt 
health and safety procedures across 
the group
as a result of these measures we have 
made good progress on some of our 
safety metrics across the group 
most notably a 25 decrease in the 
us occupational safety and health 
administration osha recordable 
frequency rate for our us operations 
compared to the prior year however due 
to a substantial increase in the number of 
reported incidents at a small number of 
our sites the group overall experienced 
a slight increase in reportable incidents 
and associated incident rates as shown 
in table 4 in 2014 80 2013 80 of our 
manufacturing facilities achieved at least 
a bronze meggitt safety star award 
reflecting a 25 improvement in health 
and safety performance over the three
year average performance for years 2009 
to 2011 of those 23 facilities will receive 
a platinum safety star award for 
outstanding performance in 2014 
as reported in last year’s annual report we 
continue to cooperate fully with regulatory 
authorities in the investigation of the fatal 
accident that occurred at our rockmart 
us facility last year and we expect the 
investigation to conclude in 2015 
ethics and business conduct  
and trade compliance
our ethics and business conduct 
programme commits us to conducting 
business fairly impartially and in 
compliance with laws and regulations 
and acting with integrity and honesty 
in our business relationships 
in 2014 we provided training across the 
group on our code of conduct ‘reporting 
concerns—someone else’s problem’ and 
global anticorruption we held two 
inhouse ethics conferences one in the uk 
and one in the usa where facilitybased 
ethics coordinators reviewed and provided 
feedback on the ethics programme as a 
result of this feedback we are redesigning 
our ethics guide which will be available to 
all staff in printed form and on our website 
meggitt is a charter member of the 
international forum on business ethical 
conduct for the aerospace and defence 
industries and barney rosenberg our vice 
president ethics and business conduct 
serves on the steering committee that 
runs this global organisation 
the board revised the trade compliance 
policy which is available on our website 
in 2014 we have a highlydeveloped trade 
compliance programme based on the 
nunnwolfowitz task force report of 2000 
the influential report on export compliance 
best practice and guidelines issued by 
the regulatory authorities during 2014 
we continued to implement our global 
trade management software solution to 
enhance our trade compliance programme 
and continued implementation of our 
enhanced import compliance programme 
at a number of facilities in the us and the 
uk we also implemented phases 2 to 5 
of the us government’s export control 
reform programme 
local communities and 
charitable donations
we are committed to being good 
corporate citizens and continue to 
support the communities in which we 
operate our businesses and employees 
give back to our communities through 
volunteerism educational business 
partnerships and charitable donations  
as demonstrated by the following
•	 since 2007 we have continued to 
sponsor the arkwright engineering 
scholarship trust an independent 
charity that identifies inspires and 
nurtures future leaders in engineering 
and technical design the scholarship 
supports science technology 
engineering and mathematics stem 
initiatives that grant an annual financial 
award to young scholars and their 
schools the 2014 scholar will benefit 
from mentoring by an experienced 
member of the meggitt global 
engineering group and valuable work 
experience over the next two years  
•	 meggitt us businesses and employees 
have donated over usd 1 million in the 
past five years to the united way a 
usbased nonprofit organisation 
focusing on resolving local community 
issues through partnerships with local 
schools government agencies and 
voluntary and neighbourhood 
associations several meggitt us 
businesses hold annual united way 
drives to encourage employee 
engagement in local community 
activities and initiatives designed to 
improve education financial stability 
and health care for local families
•	 our mcminnville oregon facility 
partnered with local businesses 
community leaders and the 
mcminnville economic development 
partnership to establish a 
manufacturing training programme at 
a local high school to address a 
shortage of skilled local labour 
meggitt donated equipment 
and materials for student training and 
assisted in developing the syllabus 
local congressional officials who 
visited the high school and meggitt 
facility acknowledged the importance 
of innovative partnerships between the 
private sector and local schools to 
provide training leading to wellpaid 
local manufacturing jobs some 260 
of the school’s 400 students enrolled 
corporate responsibility continued
reportable accidents and incidents table 4 
2014 change 2013
reportable accidents and incidents
1
36 3 35
reportable accidentincident rate
2
337 6 317
1
  directly reportable to a regulatory authority
2
  the number of reportable accidentsincidents per 100000 employees
93987p3841indd   40 04032015   1640 supplementary information financial statements governance reports strategic report 41
•	 our poole uk facility partnered with 
the local bournemouth and poole 
college to develop an apprenticeship 
and training programme
•	 an annual charitable golf outing 
sponsored by our saginaw michigan 
facility is held in june donating funds to 
the local amyotrophic lateral sclerosis 
association and the saginaw ymca
•	 in the uk our birmingham facility 
commemorated the 100year 
anniversary of the start of world war 1 
with support for the help for heroes 
military charity
our employees
learning career development employee 
engagement strong leadership and 
effective teamwork are vital components 
of meggitt’s performance culture 
various initiatives are underway many 
of which have overt goals to improve or 
sustain engagement investment in 
learning and development is one we 
continue to increase corporate training 
enabling employees from different 
businesses to learn together and create 
a common culture the most significant 
investment is in mps our single global 
approach to the application of ‘lean’ tools 
and other continuous improvement 
practices the purpose of mps is to 
ensure that everything we do and 
everyone who does it supports the 
front line of our business 
our very successful graduate training 
scheme continues with a third generation 
of graduates and postgraduates from 
some of the world’s best engineering 
institutions our next executive leadership 
programme begins in 2015 tailored for 
meggitt by the saïd business school  
see page 20 
equal opportunities 
the group supports equal employment 
opportunities and opposes all forms 
of unlawful or unfair discrimination 
it is group policy to give full and fair 
consideration to job applications from 
disabled people to provide opportunities 
for their training career development 
and promotion and to continue 
wherever possible to employ staff 
who become disabled 
we require all meggitt employees 
reinforced through our ethics training 
programme and its values to treat all 
colleagues fairly and with respect we 
recognise the value of diversity amongst 
our employees table 6 shows the number 
of women employed at all levels of the 
workforce the board’s approach to 
diversity is discussed in the nominations 
committee report see page 54 
human rights
we confirm our commitment to the 
human rights of our employees in our 
corporate responsibility policy which 
we apply across all our businesses 
employee consultation 
the group regards employee 
communication as a vital business 
function communication and consultation 
is carried out at facilities by operations 
directors and other line managers using 
a variety of forums including daily 
meetings on shop floors monthly 
allemployee ‘town hall’ meetings team 
briefings and works councils we respect 
all employee relations regulations 
corporate communications take a variety 
of forms including presentations from 
the chief executive via audiovisual 
media global webenabled conferences 
publications such as the meggitt review 
and a variety of electronicallydistributed 
newsletters results presentations are 
disseminated across the group which 
enhance our employees’ understanding of 
the financial and economic factors 
affecting its performance 
the directors encourage employees to 
become shareholders to improve active 
participation in and commitment to the 
group’s success this policy has been 
pursued for all uk employees through the 
share incentive plan and the 
sharesave scheme
strategic report
this 2014 strategic report on pages 1 
to 41 is hereby signed on behalf of the 
board of directors
 
stephen young 
chief executive
23 february 2015
 aircraft braking systems 1267 12
 control systems 1902 17
 polymers  composites 1827 17
 sensing systems 3120 29
 equipment group 1995 18
 crossgroup facilities 712 7
1
  as at 31 december 2014 
 less than 5 4841 45
 between 5 and 10 2252 21
 between 10 and 15 1211 11
 between 15 and 20 976 9
 between 20 and 25 350 3
 over 25 1193 11
 usa 5385 50
 uk 2847 26
 mainland europe 1554 14
 rest of world 1037 10
10823 10823 10823
employees by region
number of employees
employees by length  
of service years 
number of employees
employees by division
number of employees
analysis of employees table 5
1
 
table 6
level
 of females at  
31 december 2014 number of females number of males
board of directors 20 2 8
executive board 13 1 7
senior executives 9 22 236
all employees 29 3111 7712
93987p3841indd   41 04032015   1640 42
who runs meggitt 
and how do we 
reward them 
 44
 55
4279 governance reports
43  chairman’s introduction
4445 board of directors
4650 corporate governance report
5153 audit committee report
54 nominations committee report
5575 directors’ remuneration report
7679 directors’ report 
 
meggitt plc          report and accounts 2014
93987p4245indd   42 11032015   1034 corporate governance report
supplementary information financial statements governance reports strategic report 43
chairman’s introduction
throughout the financial year ended 31 december 2014 and to 
the date of this report we have complied with the provisions set 
out in the uk corporate governance code 2012 the code 
published by the financial reporting council frc the 
company has applied the main and supporting principles set out 
in the code an explanation of how the main principles have been 
applied is set out in this report and in the audit committee 
report the nominations committee report including a report 
from the chairman succession subcommittee and in the 
directors’ remuneration report the frc published a revised uk 
corporate governance code on 17 september 2014 applicable to 
reporting periods beginning on or after 1 october 2014 the 2014 
code although the board has adopted some of the new 
provisions in the 2014 code earlier than required
the board is committed to maintaining high standards of 
corporate governance which are fundamental to discharging our 
responsibilities as chairman i encourage open and transparent 
discussion and constructive challenge it is my responsibility to 
ensure that meggitt is governed and managed in the best 
interests of shareholders and wider stakeholders in this report 
we set out our governance framework and explain how sound 
and effective corporate governance practices support our 
strategy of creating longterm sustainable shareholder value
leadership
at our agm in may 2014 i announced my intention to retire 
following the appointment of a suitable successor having had the 
privilege of chairing the board of directors for nearly 11 years 
i have thoroughly enjoyed my time as the chairman of meggitt 
and am delighted to hand over to sir nigel rudd a highly 
experienced and successful director and chairman with his 
prior role as a nonexecutive director of bae systems and 
current exposure to the industry at bba aviation sir nigel has 
exceptional knowledge of the aerospace sector i know that his 
experience across a wide range of businesses will be of 
significant benefit to the group
in terms of other board changes in may 2014 david robins 
retired from the board and in october 2014 we appointed alison 
goligher as a nonexecutive director alison introduces specific 
oil and gas experience to our board which will be of great value 
to meggitt’s energy businesses at the same time her technology 
management expertise and experience running a wide range of 
functions within globally significant corporations will benefit the 
group as a whole
in december 2014 we announced that as a result of the 
additional time commitments required for his new appointment 
as nonexecutive director and chairman designate of drax group 
plc phil cox had decided to resign as a nonexecutive director 
with effect from 31 january 2015 on behalf of the board i would 
like to thank david and phil for their significant contributions to 
the board and to wish them well for the future
effectiveness
as reported last year the main findings from our 2013 internal 
evaluation were to enhance our strategy reviews and risk 
management process and continue to improve the annual board 
schedule in 2014 the board engaged in additional strategy 
presentations and discussions and we continued to enhance our 
risk management process we have since conducted our 2014 
internal evaluation and a report is included on page 49
accountability
the board considered the 2014 code and assessed our current 
processes and reporting of risk management and internal 
control against the associated guidance issued by the financial 
reporting council in september 2014 in 2015 we will start 
preparing for the new longterm viability statement which is first 
required for our 2015 annual report our shareholders can read 
about our most significant risks and uncertainties and our risk 
management process on pages 24 to 26
the board have confirmed that this annual report is fair 
balanced and understandable and you will find an explanation of 
the process we have used to make this determination on page 51
remuneration
at our agm in 2014 we received 9895 votes in favour of our 
remuneration policy shareholders also overwhelmingly 
approved our directors’ remuneration report and a new 
longterm incentive plan the directors’ remuneration report 
pages 55 to 75 provides a detailed review of the remuneration 
committee’s 2014 activities and bonus and share scheme 
performance in 2014 for ease of reference we have also 
included the remuneration policy approved at our agm in 2014 
which is valid until the agm held in 2017  
sir colin terry
chairman of the board of directors
23 february 2015
93987p4245indd   43 04032015   1700 board of directors
44 meggitt plc          report and accounts 2014
meggitt’s board is characterised by 
worldclass experience of uk 
mainland european and north 
american businesses spanning 
multiple sectors—many with  
global reach 
philip green 
stephen young alison goligher
guy berruyer sir colin terry 
sir colin terry kbe cb dl freng
nonexecutive chairman   § 
appointed 2004    nationality british
retiring at the conclusion of the 2015 agm
skills and experience
chartered engineer with extensive civil and military 
aerospace logistics and industrial experience 
qualified military and civilian pilot
current appointments
chairman of the uk military aviation authority 
safety advisory committee nonexecutive director 
and chairman of the audit committee of fox 
marble holdings plc nonexecutive chairman of 
aviamedia tech limited and nonexecutive director 
and chairman of the remuneration committee 
of aveillant limited
president of soldiers sailors airmen and families 
association in buckinghamshire of which he is 
deputy lieutenant
previous appointments
37 years in royal air force reaching rank of 
air marshal where he was chief engineer raf 
a commander in chief and the air force board 
member for logistics since retiring from the 
regular raf was group managing director of inflite 
engineering services chairman of the engineering 
council uk president of the royal aeronautical 
society and the council of european aerospace 
societies served for several years as an raf 
volunteer reserve pilot
alison goligher obe
nonexecutive director    ‡ 
appointed 2014    nationality british
skills and experience
meng petroleum engineering brings specific oil and 
gas experience to the board including technology 
management expertise and experience running 
diverse functions and businesses within globally 
significant energy corporations
current appointments
joined royal dutch shell in 2006 appointed 
executive vice president upstream international 
unconventionals in 2013
previous appointments
17 years at schlumberger a leading supplier of 
technology integrated project management and 
information solutions to oil and gas customers 
worldwide 
philip green
group corporate affairs director  § ◊ 
appointed 2001    nationality british
skills and experience
fellow of the institute of chartered secretaries  
and administrators with significant legal and 
compliance experience 
current appointments
member of the gc100 and the dorset employment 
and skills board to be appointed as nonexecutive 
director of poole hospital nhs foundation trust 
from 25 april 2015
previous appointments
meggitt’s company secretary from 1994 to 2006 
after 14 years at british aerospace in company 
secretarial roles
stephen young
chief executive   § ◊
appointed 2013    nationality british
appointed to the board as group finance director 
in 2004 prior to appointment as chief executive
skills and experience
chartered management accountant with wide 
experience in all financial disciplines gained from 
national and multinational businesses across 
multiple sectors
current appointments
nonexecutive director audit committee chairman 
and member of risk and remuneration committees 
of derwent london plc
previous appointments
senior financial positions held previously include 
group finance director thistle hotels plc and 
group finance director of the automobile 
association
guy berruyer
nonexecutive director    ‡
appointed 2012    nationality french
skills and experience
trained as electrical engineer at the école 
polytechnique fédérale de lausanne and holds 
harvard business school mba brings significant 
experience to the board as a recently serving 
ftse100 chief executive 
current appointments
none 
previous appointments
group chief executive of the sage group plc until  
5 november 2014 chief executive of sage group 
plc’s europe and asia division early career spent 
with software and hardware vendors in french  
and european management roles
board of directors
committee membership
  audit committee
  nominations committee
‡  remuneration committee
§  ethics and trade compliance committee
◊ finance committee
44 meggitt plc          report and accounts 2014
93987p4245indd   44 11032015   1034 supplementary information financial statements governance reports strategic report 45
sir nigel rudd
doug webb 
david williams brenda reichelderfer 
paul heiden 
paul heiden
nonexecutive director    ‡
appointed 2010    nationality british
skills and experience
chartered accountant with considerable experience 
in senior executive and financial roles in aerospace 
current appointments
nonexecutive director and chairman of the audit 
committee of london stock exchange group plc 
and chairman of intelligent energy holdings plc
previous appointments
chief executive of fki plc from 2003 to 2008 senior 
positions including director industrial business 
and finance director of rollsroyce plc and senior 
financial positions with peat marwick mitchell and 
co hanson plc and mercury communications 
nonexecutive director of uu plc bunzl plc 
essentra plc formerly filtrona plc and 
chairman of talaris topco limited
brenda reichelderfer
nonexecutive director    ‡ §
appointed 2011    nationality american
skills and experience
skilled engineer and business leader 
with considerable us aerospace and 
industrial experience 
current appointments
senior vice president and managing director 
of private equity sector consulting firm trivista 
and nonexecutive director of federal 
signal corporation
previous appointments
senior roles at itt industries corporation including 
senior vice president director of engineering 
chief technology officer and group president 
of two operating divisions nonexecutive director 
of wencor aerospace
doug webb 
chief financial officer  § ◊
appointed 2013    nationality british
skills and experience 
chartered accountant who has held senior 
international financial positions in defence 
aerospace engineering technology and 
financial services
current appointments
nonexecutive director of segro plc and 
chairman of their audit committee and member 
of the hundred group of financial directors
previous appointments
chief financial officer london stock exchange 
group plc chief financial officer qinetiq group plc 
and various senior financial roles in the uk and us 
for logica now cgi
david williams
nonexecutive director    ‡ 
senior independent director
appointed 2006    nationality british
skills and experience
chartered accountant with significant experience  
in senior financial roles 
current appointments
joint chairman of mondi plc and mondi limited
previous appointments
senior financial roles including 15 years as finance 
director of bunzl plc nonexecutive director and 
audit committee chairman of tullow oil plc until 
may 2012 nonexecutive director and audit 
committee chairman of dp world limited until 
his retirement in april 2014 
sir nigel rudd dl
to be appointed as nonexecutive director and 
deputy chairman on 1 march 2015
assuming the role of nonexecutive chairman 
at the conclusion of the agm on 23 april 2015    
nationality british
skills and experience
chartered accountant with extensive board 
experience spanning multiple sectors including 
aerospace retail and financial services
current appointments
nonexecutive chairman of bba aviation plc and 
heathrow airport holdings limited chairman of 
aquarius platinum ltd nonexecutive director of 
sappi limited and chancellor of loughborough 
university
previous appointments
chief executive of williams holdings plc chairman 
of kidde plc baa limited the boots company 
pilkington plc pendragon plc and invensys plc 
deputy chairman of barclays plc and  
nonexecutive director of bae systems plc
93987p4245indd   45 10032015   1651 46 meggitt plc          report and accounts 2014
corporate governance report continued
leadership
our governance framework as at 31 december 2014
board of directors
sir colin terry chairman
three executive directors
six independent nonexecutive directors
creating and delivering  
sustainable shareholder value
board committees
remuneration 
six independent  
nonexecutive directors
determines the reward strategy for the 
executive directors and senior 
management to align their interests with 
those of the shareholders
audit
six independent  
nonexecutive directors
monitors the integrity of the group’s 
financial statements and the effectiveness 
of the external and internal auditors
nominations 
chairman chief executive and six 
independent nonexecutive directors
ensures the board and senior management 
team have the appropriate skills knowledge 
and experience to operate effectively and to 
deliver the group’s strategy
ethics and trade compliance
chairman one nonexecutive director  
and three executive directors
ensures the implementation and application 
of the ethics and business conduct and 
trade compliance policies and programmes
management committees
executive board
three executive directors the chief 
operating officer and four senior 
functional executives
assists the chief executive with the 
development and implementation of the 
group’s strategy the management of the 
business and the discharge of 
responsibilities delegated by the board
operations board
the chief operating officer  
and five divisional presidents
assists the chief operating officer to 
manage the group’s operations and 
discharge the responsibilities delegated 
by the executive board
commercial committee
three executive directors chief 
operating officer and two executive 
board members
reviewsapproves bids and proposals  
and any other commercial activity
finance
three executive directors
and chief operating officer
approves treasuryrelated activity 
insurance and other matters delegated to 
it by the board
chairman succession
this committee existed during 2014 
but not at the year end
independent nonexecutive directors
select and interview candidates and 
recommend candidate to the board
93987p4654indd   46 04032015   1702 supplementary information financial statements governance reports strategic report 47
executive directors the chairman holds meetings with other 
nonexecutive directors without executive directors present
•	 the chairman is responsible for ensuring directors receive 
accurate timely and clear information and is satisfied that 
effective communication principally by the chief executive  
and chief financial officer is undertaken with shareholders 
•	 the chairman agrees a personalised approach to the training 
and development of each director and reviews this regularly
senior independent director
the role of mr williams as senior independent director is to
•	 make himself available to shareholders if they have concerns 
that cannot be resolved through normal channels
•	 chair the nominations committee when it is considering the 
chairman of the board’s succession however mr williams 
did not chair the nominations committee for the recent 
chairman succession process because he was a candidate 
for the role the chairman selection process employed in 2014 
is outlined in more detail on page 54 and
•	 meet with the nonexecutive directors at least once a year  
to appraise the chairman’s performance
nonexecutive directors
•	  the nonexecutive directors play a full part by challenging 
executive management and contributing to the development 
of the group’s strategy 
•	 the nonexecutive directors scrutinise the performance 
of executive management and monitor the reporting of the 
group’s performance the integrity of financial information  
and the effectiveness of financial controls and risk 
management systems
•	 the nonexecutive directors are responsible for determining 
appropriate levels of remuneration for executive directors and 
participating in the selection and recruitment of new directors 
and succession planning
•	  the terms and conditions of appointment of nonexecutive 
directors are available for inspection at the company’s 
registered office during normal business hours 
company secretary
the appointment and removal of the company secretary 
is a matter for the board 
the work of the board in 2014
the board approved the appointment of ms goligher as a non
executive director and sir nigel rudd as nonexecutive director 
and deputy chairman to become chairman at the conclusion of 
the agm on 23 april 2015 the board visited several facilities 
and received regular reports from executive management on 
strategy and business performance financial performance 
including treasury activity and corporate affairs including 
risk legal and compliance 
the board implemented enhancements to its 2014 
programme as a result of the evaluation of the board 
undertaken in 2013 including
•	 an update and board discussion on group strategy focusing 
on technology aftermarket and operations
the role of the board 
the board retains full and effective control of the group and  
is collectively responsible for its success it sets the group’s 
strategy ensures appropriate resources are in place to achieve 
the group’s objectives and reviews performance regularly
the board is responsible for setting the group’s values and 
standards and for ensuring obligations to shareholders 
employees and other stakeholders are met 
a schedule of matters reserved for the board updated in 2012 
sets out the matters on which the board must make the final 
decisions these include for example changes to the group’s 
capital structure and capital allocation policy acquisitions and 
disposals above a certain threshold and approval of results 
announcements annual reports and dividends if a decision is 
not reserved for the board authority lies in accordance with 
authorisation policies and terms of reference with a board 
committee a management committee the chief executive or 
other executive director chief operating officer divisional 
president or site director
board membership and attendance during 2014
the board met eight times in 2014 attendance for which is 
shown in the table below 
name title
meetings  
eligible  
to attend
meetings  
attended
sir colin terry chairman 8 8
mr g s berruyer nonexecutive director 8 8
mr p g cox
1
nonexecutive director 8 8
ms a j p goligher
2
nonexecutive director 2 2
mr p e green corporate affairs director 8 8
mr p heiden nonexecutive director 8 8
ms b l reichelderfer nonexecutive director 8 8
mr d a robins
3
nonexecutive director 2 2
mr d r webb chief financial officer 8 8
mr d m williams nonexecutive director 8 8
mr s g young chief executive 8 8
 
1
  resigned 31 january 2015
2
  appointed 30 october 2014 
3
  resigned 7 may 2014
chairman
•	 sir colin terry met the independence criteria on appointment 
as chairman on 1 july 2004 sir nigel rudd will join the board 
on 1 march 2015 initially as a nonexecutive director and 
deputy chairman becoming chairman at the end of the 
annual general meeting agm on 23 april 2015 upon sir colin 
terry’s retirement from the board and as chairman sir nigel 
rudd will meet the independence criteria on appointment 
as chairman
•	 the roles of the chairman and chief executive are separate 
and a clear division of responsibilities has been approved 
and agreed in writing by the board these were reviewed 
and updated by the board in 2013
•	 the chairman is responsible for i setting the board’s 
agenda ii ensuring that adequate time is available for 
discussion of agenda items including strategic issues 
iii leading the board and iv ensuring its effectiveness
•	 the chairman facilitates the contribution of nonexecutive 
directors and oversees the relationship between them and the  
93987p4654indd   47 04032015   1702 48 meggitt plc          report and accounts 2014
corporate governance report continued
each of these committees’ written terms of reference were 
reviewed and updated in 2014 by the board these are available 
on our website all committee chairmen report orally on the 
proceedings of their committees at the next meeting of the 
board where appropriate the committee chairmen make 
recommendations to the board on appropriate matters for 
example the fairness balance and understandability of the 
annual report further details of the composition and operation 
of these committees are set out in the audit committee 
nominations committee and directors’ remuneration reports 
appointments to the board
there is a formal rigorous and transparent procedure for the 
appointment of new directors full details of the process for 
appointments made during the year are available in the 
nominations committee report set out on page 54 
commitment
the letters of appointment for the chairman and nonexecutive 
directors set out the expected time commitment required of 
them and are available for inspection during normal business 
hours at the company’s registered office and at the agm 
other significant commitments of the chairman and non
executive directors are disclosed on appointment and 
require approval thereafter
in 2014 the chairman became a nonexecutive director of 
aveillant limited sir colin confirmed that he continues to have 
sufficient time to discharge his role as chairman of the board 
mr philip cox was appointed as nonexecutive director and 
chairman designate of drax group plc with effect from 1 january 
2015 and as a result of the additional time commitments 
required resigned as a nonexecutive director of the company 
with effect from 31 january 2015
development
the board is supplied with the information it needs to discharge 
its duties 
in 2014 ms alison goligher joined the board and has since had 
meetings with other directors senior management auditors 
brokers and other professional advisors as well as site visits and 
a comprehensive induction pack sir nigel rudd will commence a 
similar induction process in march 2015 following his 
appointment to the board the board will continue to enhance 
the induction process as feedback is received and incorporated 
from the recently recruited directors the company secretary 
facilitates the induction of new directors and assists with 
professional development where required
directors are encouraged to update their skills regularly and 
their training needs are assessed as part of the board evaluation 
process their knowledge and familiarity with the group is 
facilitated by access to senior management reports on the 
business and site visits resources are available to all directors 
for the purposes of developing and updating their knowledge 
and capabilities
information and support
the chairman is responsible for ensuring the directors receive 
accurate timely and clear information the company secretary 
is responsible for ensuring good information flows within the 
board and committees and between senior management and 
nonexecutive directors the board members have regular 
•	 greater focus on risk including a session to review and 
approve the group’s risk appetite
the board received and discussed
•	 the group’s budget for 2015 
•	 business unit and functional updates and presentations 
on senior executive succession operations it security 
and investor relations
•	 reports on internal control risk management and 
going concern and
•	  reports on the activities of its committees
the board reviewed and approved
•	 the 2013 annual report and accounts the 2013 fullyear 
results announcement and the 2014 interim results 
announcement
•	 interim management statements released in may 
and november 2014
•	 recommendations to shareholders on the final dividend 
payment for the year ended 31 december 2013 and  
approved the interim dividend payment for the year 
ended 31 december 2014
•	 the group’s risk appetite and risk register 
•	 the appointment of a second corporate broker
•	 the decision to commence a share buyback programme
•	 fees payable to the group’s auditors and a recommendation 
to shareholders on their reappointment 
•	 amended terms of reference for all board committees and
•	 revisions to the group’s share dealing rules health and 
safety and trade compliance policies
since the yearend up to the date of the annual report the 
board has approved the 2014 annual report and accounts 
the 2014 fullyear results announcement and the proposed 
final dividend for the year ended 31 december 2014
during the year no unresolved concerns were recorded in the 
board’s minutes
effectiveness
composition
the board considers it has a good balance of executive  
and nonexecutive directors is of an appropriate size and 
includes the independence skills experience and knowledge  
to enable the directors to discharge their respective duties and 
responsibilities effectively all nonexecutive directors  
are considered independent under the code
all nonexecutive directors other than the chairman are 
members of the audit and remuneration committees on 
appointment all nonexecutive directors are asked to join the 
nominations committee on appointment chairmanship of 
committees is considered during discussions on composition and 
succession no one other than committee chairmen and 
members are entitled to attend the meetings although others can 
be invited committee chairmen members and regular meeting 
invitees are noted in the respective committee reports below 
93987p4654indd   48 04032015   1702 supplementary information financial statements governance reports strategic report 49
•	 process controls—for example financial controls including 
the group financial policies and procedures manual bid 
approvals programme management and execution 
it security and risk management the risk management 
process enables the group to identify evaluate and manage 
the principal risks faced by the group and this process was 
in place for 2014 and up to the date of approval of the annual 
report and has been regularly reviewed by the board and
•	 the forecasting budget and strategic plan processes
the group has programmes for insurance and business 
continuity which form part of the risk management and 
internal control framework 
the following features of the internal control framework allow 
the group to monitor the effective implementation of policy and 
process controls by business units
•	 a business performance review process including financial 
operational and compliance performance
•	 annual business unit and divisional signoff of compliance 
with group policies and processes
•	 compliance programmes and external audits including trade 
compliance ethics anticorruption health safety and 
environmental
•	  an effective internal audit function which primarily performs 
business unit reviews by rotation including finance it hr 
ethics and the bid process and
•	 a whistleblowing line to enable employees to raise concerns
the board and audit committee applied the following 
processes in 2014 and up to the date of approval of the annual 
report in order to review the effectiveness of the system 
of internal controls
•	 reviews of the risk management process risk register 
and risk appetite
•	  written and verbal reports to the audit committee from 
internal and external audit on progress with internal 
control activities including
 – reviews of business processes and activities including 
action plans to address any identified control weaknesses 
and recommendations for improvements to controls 
or processes
 – the results of internal audits
 – internal control recommendations made by the 
external auditors and 
 – followup actions from previous internal control 
recommendations 
•	 regular compliance reports from the corporate affairs 
director regular reports on the state of the business 
from the chief executive and chief financial officer
•	  a presentation on it security activities and plans
•	  strategy reviews review of the ten year financial plan 
and review and approval of the 2015 budget
•	  written report to the ethics and trade compliance committee 
on the effectiveness of whistleblowing procedures and
•	 reports on insurance coverage and uninsured risks
discussions about their information and support requirements 
and are involved in setting the annual board schedule
the board and its committees have been provided with sufficient 
resources to undertake their duties all directors have had 
access to the advice and services of the company secretary  
who is responsible to the board for advising on all governance 
matters the board allows all directors to take external 
independent professional advice at the group’s expense
board performance evaluation
in 2014 the board evaluated its own effectiveness together  
with the effectiveness of the chairman individual directors its 
committees auditors and remuneration advisers and agreed  
its objectives for 2015 the effectiveness reviews covered 
strategy risk management the annual board schedule 
composition succession the appointment process diversity 
remuneration audit and open channels of communication
the 2014 evaluation of the board and its committees was 
undertaken internally using questionnaires and group and 
individual discussions the board continues to be thoroughly 
engaged with the review process and the main findings and 
recommendations of the 2014 evaluation relate to further 
developing our succession planning and administrative matters 
relating to the issue of papers the board noted that progress 
had been made in areas selected for improvement in 2013 
it is anticipated that the 2015 evaluation will be 
externally facilitated
accountability 
financial and business reporting
the financial statements contain an explanation of the directors’ 
responsibilities in preparing the annual report and the financial 
statements pages 78 to 79 and a statement by the auditors 
concerning their responsibilities page 84 the directors also 
report that the business is a going concern page 37 and detail 
how the group generates and preserves value over the longer 
term the business model and the group’s strategy for delivering 
its objectives in the strategic report pages 1 to 41
risk management and internal control
the board is responsible for the group’s system of internal 
control and for maintaining and reviewing its financial and 
operational effectiveness the board has taken into account the 
guidance provided by the frc on risk management internal 
control and related financial and business reporting in 2014 in 
reviewing the effectiveness of the group’s risk management and 
internal control systems the system of internal control is 
designed to manage but not to eliminate the risk of failure to 
achieve business objectives and to provide reasonable but not 
absolute assurance against material misstatement or loss 
the group’s functions are responsible for determining group 
policies and processes and businesses are responsible for 
implementing them with internal andor external audits to 
confirm business unit compliance the key features of the risk 
management and internal control system are described below 
including those relating to the financial reporting process as 
required under the disclosure and transparency rules
•	 group policies—key policies are approved by the board and 
most other policies are approved by group functions
93987p4654indd   49 04032015   1702 50 meggitt plc          report and accounts 2014
corporate governance report continued
constructive use of the annual general meeting
the board uses the agm to communicate with its shareholders
proxy appointment forms for each resolution provide 
shareholders with the option to direct their proxy to vote for or 
against resolutions or to withhold their vote all proxy votes for 
against and withheld are counted by the company’s registrars 
and the level of voting for against and withheld on each 
resolution is made available after the meeting and on the group’s 
website the proxy form and the voting results announcement 
make it clear that a vote withheld is not a vote in law and will not 
be counted in the calculation of the proportion of votes for and 
against the resolution
separate resolutions are proposed at the agm on substantially 
separate issues and there is a resolution relating to the financial 
statements the notice of agm and related papers are sent to 
shareholders at least 20 working days before the meeting
meggitt encourages shareholders to vote at the agm and 
provides a facility for electronic proxy voting shareholders who 
are not crest members can vote online on resolutions proposed 
at the agm via our website after voting has opened proxy cards 
contain further details on how and when to vote and further 
information for crest members 
the respective chairmen of the audit remuneration and 
nominations committees are available at the agm to respond  
to questions it is usual for all other directors to also attend
at the agm to be held on 23 april 2015 shareholders’ consent  
will be sought on the following item of special business in 
addition to the routine business on the authority to convene 
general meetings on 14 clear days’ notice in accordance with the 
articles on the terms set out in the notice of meeting
all directors are subject to election by shareholders at the first 
agm after their appointment and have been subject to reelection 
annually since 2012 in compliance with the code all directors in 
office at the date of the agm 23 april 2015 will be subject to 
election or reelection except for sir colin terry who will retire 
from the board as chairman and nonexecutive director at the 
conclusion of the agm 
by order of the board
 
m l thomas
company secretary
23 february 2015
the risk management and internal control systems have been in 
place for the year under review and up to the date of approval of 
the annual report and are regularly reviewed by the board 
the board monitors executive management’s action plans to 
implement improvements in internal controls that have been 
identified following the abovementioned reviews and reports 
the board confirms that it has not been advised of any significant 
failings or weaknesses in the group’s internal controls
remuneration
the directors’ remuneration report is set out on pages 55 to 75 
and provides details of our remuneration policy which was 
approved at our agm in 2014 and how it has been implemented 
in 2014 together with the activities of the remuneration 
committee 
relations with shareholders
the group values its dialogue with institutional and private 
investors 
the board communicates with private investors via direct 
communication with our group head of investor relations and 
the company secretary material distributed or made available 
on the investor relations section of our website and at the agm 
see below
effective communication with fund managers institutional 
investors and analysts about the group’s strategy performance 
and policies is promoted by meetings involving principally the 
chief executive and chief financial officer the board receives  
reports from the chief executive and chief financial officer  
and the head of investor relations on the views of shareholders 
which are discussed
the chairman and other nonexecutive directors are available  
to attend meetings with shareholders and a specific letter was 
issued to major shareholders after the agm in 2014 offering a 
meeting with the chairman and senior independent director a 
number of such meetings on corporate governance took place in 
2014 we also received a number of requests from shareholders 
to have meetings with the chairman succession subcommittee 
which were held before and after the announcement of our 
chosen candidate 
directors’ understanding of major shareholders’ views is 
enhanced by reports from the head of investor relations our 
brokers and attending analysts’ briefings analysts’ notes on the 
group are made available to all directors
we provide annual reports and other documents to shareholders 
in their elected format under the electronic communications 
provisions which were approved by shareholders at our agm in 
2007 electronic copies of this annual report and accounts 2014 
and the notice of agm will be posted on our website where our 
announcements press releases and other investor information 
are also available an analysis of ordinary shareholders by size of 
holdings and shareholder type is also available on our website 
93987p4654indd   50 04032015   1702 supplementary information financial statements governance reports strategic report 51
audit committee report
policies and the methods used to account for significant or 
unusual transactions ii whether appropriate accounting 
standards have been followed iii whether appropriate 
estimates and judgements have been made taking into 
account the views of the external auditor and iv the clarity 
and completeness of disclosure in the group’s financial 
reports and the context in which the statements are made
•	 reviewing the content of the annual report and advising the 
board on whether taken as a whole it is fair balanced and 
understandable
•	 reviewing the adequacy and effectiveness of the group’s 
internal financial controls and financial risk management 
system reviewing and approving the statements to be 
included in the annual report concerning internal financial 
controls and financial risk management and reviewing the 
group’s procedures for detecting fraud
•	 overseeing the internal audit function including assessing 
the annual work plan receiving reports on a periodic basis 
and monitoring the effectiveness of the internal audit function
•	 overseeing the relationship with the external auditor 
including the decision to tender external audit services the 
approval of fees paid to external auditors and their terms of 
engagement and recommending to the board to be put to 
shareholders for approval at the agm the appointment 
reappointment and removal of the external auditor and
•	 reviewing the committee’s own effectiveness
work of the committee
the audit committee reviewed
•	  the financial information contained in the 2013 annual report 
and 2013 fullyear and 2014 interim results announcements 
and recommended them to the board for approval
•	 2014 external audit fees and recommended them to the 
board for approval
•	 the external audit strategy memorandum and interim audit 
clearance report for 2014
•	 the independence effectiveness and reappointment of the 
external auditors 
•	 the internal audit plan for 2015 and regular update reports
•	 their own terms of reference and agreed to transfer the 
responsibility for reviewing whistleblowing procedures to the 
ethics and trade compliance committee
•	 technical accounting and governance updates provided by 
the group financial controller company secretary and the 
external auditors
•	 a treasury update from the head of tax and treasury and
•	 the effectiveness of the committee and internal audit
since the year end the committee has approved the 2014 annual 
report and accounts and fullyear results announcement and 
recommended them to the board for approval and provided advice 
to the board that the 2014 annual report and accounts taken as 
a whole is fair balanced and understandable the committee 
provided this advice having approved and monitored an enhanced 
review and verification process of the annual report undertaken 
by management and provided confirmation to the board that this 
process was both followed and effective 
chairman’s introduction
i am pleased to present the report of the audit committee for 2014 
i chair the audit committee and as a fellow of the icaew former 
audit committee chairman of dp world limited and finance 
director at bunzl plc i bring recent and relevant financial 
experience to the committee my fellow committee members 
throughout 2014 were guy berruyer philip cox paul heiden and 
brenda reichelderfer who attended all three committee meetings 
during the year alison goligher joined the committee for her first 
meeting in december 2014 which was the last meeting for philip 
cox before stepping down from the board in january 2015 by 
invitation there were a number of other regular attendees 
including the chief financial officer the group financial controller 
and the internal and external auditors the chairman of the board 
the chief executive the corporate affairs director and david 
robins for the february 2014 meeting also attended by invitation 
the key role of the audit committee is to provide confidence in 
the integrity of our processes and procedures relating to internal 
financial control and corporate reporting the board relies on 
the committee to review financial reporting and to appoint and 
oversee the work of the internal and external auditors 
the work of the committee in 2014 is described below in detail 
and included providing advice to the board on whether these 
accounts are fair balanced and understandable
committee membership and attendance
name
meetings  
eligible to attend
meetings  
attended
mr d m williams committee chairman 3 3
mr g s berruyer 3 3
mr p g cox 3 3
ms a j p goligher 1 1
mr p heiden 3 3
ms b l reichelderfer 3 3
 
terms of reference
the committee operates within agreed terms of reference which 
were updated in 2014 and are available on our website
responsibilities
the responsibilities of the audit committee include
•	 monitoring the integrity of the financial statements of the 
group including its annual and halfyearly reports and any 
other formal announcement relating to its financial 
performance reviewing and reporting to the board on 
significant financial reporting issues and judgements having 
regard to matters communicated to it by the external auditor
•	 reviewing and challenging where necessary i the 
consistency of and any changes to significant accounting 
93987p4654indd   51 04032015   1702 52 meggitt plc          report and accounts 2014
audit committee report continued
significant judgements relating to the financial statements
the table below summarises the significant judgements reviewed by the committee in respect of the group’s financial statements
significant judgements action
goodwill and other  
intangible assets arising  
on an acquisition
the principal judgements are management’s determination of the level at which impairment testing 
should be performed the achievability of cgu business plans and therefore future cash flows and 
the appropriateness of the discount rates applied to future cash flows the committee addressed 
this through consideration of a report from management setting out the basis for the assumptions 
confirmation that the cash flows used were derived from the 2015 budget and strategic plan which 
in their role as members of the board committee members had previously reviewed a sensitivity 
analysis on key assumptions and an analysis of the headroom for each cgu the committee agreed 
the assumptions made by management were appropriate and that no impairment was required
development costs  
and programme  
participation costs
the committee considered the method of testing for potential impairment used by management the 
reasonableness of assumptions used on specific programmes with limited headroom the aggregation 
of related intangible assets at an aircraft platform level and the appropriateness of the estimated 
useful lives assigned to the assets the committee addressed this through consideration of a report 
from management covering these areas exposure to different platforms and a sensitivity analysis 
on specific programmes the committee concluded that the assumptions made by management were 
reasonable and the carrying value and estimated useful lives of the assets appropriate
provision for environmental  
matters relating to 
historic sites
the committee considered a report from management setting out the basis for the judgements 
made and the extent to which these were supported by third party specialist advice the committee 
discussed with management the sensitivity of the estimates to increases in cost estimates 
and changes in discount rates applied to future cash flows the committee agreed with the 
judgements made by management 
provision for onerous  
contracts and other matters
the key areas reviewed by the committee were the provision held for the supply from a vendor of 
nonconforming raw material identified in the prior year judgements made by management relating 
to selling prices product quantities and unit costs on a small number of onerous production contracts 
and the impact of heatric’s local content provider in brazil having filed for creditor protection 
the committee considered a report from management setting out the bases for the judgements 
made on each of these items the committee agreed with the accounting treatment adopted 
retirement benefit  
obligations
assumptions on mortality inflation and the rates at which scheme liabilities are discounted can have 
a significant impact on the value at which retirement benefit obligations are included in the financial 
statements the committee considered a report from management setting out the basis on which 
the 2014 assumptions had been determined including the revised mortality tables used for the 
group’s us schemes additionally the committee reviewed a benchmarking they had requested of 
the group’s assumptions used in the 2013 consolidated financial statements against those disclosed 
by other large corporate entities the committee concluded that the assumptions recommended 
which were supported by third party actuarial advice were appropriate
income taxes judgements have to be made by management on the tax treatment of a number of transactions in 
advance of the ultimate tax determination being known in determining the appropriateness of the 
estimates made the committee considered a report from management setting out the basis for 
the judgements the committee concluded that the position taken was appropriate
contract accounting revenue the committee considered a report from management setting out the key judgements made 
by management in recognising revenue under contract accounting principles focusing on the 
process by which amounts recognised were determined using estimates of total contract costs 
and the historical reliability of such estimates the committee concluded that the basis of revenue 
recognition was appropriate 
treatment of exceptional 
operating items
the committee discussed the treatment and disclosure of items included within exceptional operating 
items the committee noted items were treated appropriately and consistently year on year 
 
the committee also discussed each of the above judgements with the external auditors in reaching their conclusions
93987p4654indd   52 04032015   1702 supplementary information financial statements governance reports strategic report 53
on balance the committee is satisfied that the overall levels of 
auditrelated and nonaudit fees are not material relative to the 
income of the office of pwc conducting the audit or pwc as a 
whole and therefore the objectivity and independence of the 
external auditors was not compromised
internal audit
the committee agrees the annual internal audit plan which is 
developed according to a risk assessment process and ensures 
that adequate resources are available to execute the plan 
in 2014 the risk assessment process was reviewed it was 
agreed that businesses would be split into three tiers based on 
their significance to the group’s results prior year audit findings 
a selfassessment questionnaire and discussions with key 
stakeholders throughout the group tier 1 businesses are visited 
annually with tier 2 businesses visited every other year and 
tier 3 every third year 
at each meeting the committee receives a status update on the 
audit programme and reviews discusses and challenges any 
significant issues arising and monitors implementation by the 
business of the recommendations made in 2014 internal audits 
were carried out at a number of group sites including postsap 
implementation audits and the annual audit of the finance shared 
service centres 
it was added to the scope of internal audit in 2014 using the 
services of grant thornton uk llp the 2014 it audit scope 
included reviews of it strategy and risk management it security 
a data centre which has been established in the uk and the 
global template utilised on sap our erp system 
the committee routinely meet internal audit without executive 
management present no concerns were raised at the meeting 
and it was confirmed that internal audit had been able to carry 
out their work and offer constructive challenge to executive 
management during the year the committee considered 
the effectiveness of internal audit and confirmed that they 
were satisfied 
whistleblowing
during the year the committee transferred responsibility 
for reviewing the process for handling allegations from 
whistleblowers to the ethics and trade compliance committee 
in january 2015 the ethics and trade compliance committee 
confirmed that it was satisfied with the group’s process for 
handling whistleblowing allegations whistleblowing is covered 
under our ethics and business conduct policy and code of 
conduct which are available on our website the group sponsors 
an independently operated and monitored ethics line enabling 
employees to report concerns about possible misconduct with 
proportionate and independent investigation and appropriate 
followup action whistleblowing reports are reviewed regularly 
by the ethics and trade compliance committee of the board 
on behalf of the audit committee
david williams
chairman of the audit committee
23 february 2015
key areas of oversight
external audit
the external auditors are pricewaterhousecoopers llp pwc 
who were appointed as group auditors for the financial year 
commencing 1 january 2003 on 2 october 2003 after a 
competitive tender there are no contractual obligations 
restricting the committee’s choice of external auditors
the lead audit partner is mr paynter whose appointment in 
this role commenced with the audit for the financial year ended 
31 december 2013 mr paynter has had no previous involvement 
with the group in any capacity
the committee assessed the effectiveness of pwc and 
the external audit process using a questionnaire and 
a committee discussion on the responses to the questionnaire 
the committee was satisfied with pwc’s performance 
and the external audit process and that they had employed 
an appropriate level of professional challenge in fulfilling 
their role the committee has determined on the basis 
of the satisfactory outcome of the evaluation that the 
external audit will not be subject to tender in 2015 it has 
recommended that the board submit the reappointment 
of pwc to shareholders for approval at the agm in 2015 
the committee has reviewed the tendering and rotation 
provisions from the eu competition and markets authority 
cma and those contained in the uk corporate governance 
code the committee does not expect to put the external audit 
services out for tender before the end of the current audit 
partner rotation period ie after the audit for the financial year 
ending 31 december 2017 this is subject to i any clarifications 
or changes issued by the cma relating to their transitional 
provisions ii the detailed implementation of the eu auditor 
rotation rules in uk law scheduled for later in 2015 iii any other 
changes to the regulatory regime and iv the committee 
continuing to be satisfied with the effectiveness of the auditors 
which is considered annually
the committee routinely meet with pwc without executive 
management present and there were no concerns raised at that 
meeting it was confirmed that the external auditors had been 
able to offer rigorous and constructive challenge to executive 
management during the year
nonaudit services
the group places great importance on the independence of its 
external auditors and is careful to ensure their objectivity is not 
compromised the committee agrees the fees paid to external 
auditors for their services as auditors and is required to approve in 
advance any fees to the external auditors for nonaudit services in 
excess of £01 million 
details of the fees paid for audit services auditrelated services  
and nonaudit services can be found in note 7 to the financial 
statements the fees paid for nonaudit services in 2014 were less 
than £01 million nil of the total audit fee and the average fees 
paid for nonaudit services for the last three years to 2014 was  
£01 million 4 of the total audit fee over that period fees paid  
in prior years related to services permitted to be provided by  
pwc under the group’s policy on nonaudit services 
the group’s policy on nonaudit services covers which services 
can be provided and which generally cannot be provided for 
example internal audit services and tax planning the full policy 
is disclosed on our website
93987p4654indd   53 04032015   1702 54 meggitt plc          report and accounts 2014
nominations committee report
subcommittee of the board be formed for the purpose of 
running the chairman selection process sir colin terry was not 
involved in the selection of his successor and ms reichelderfer 
chaired the subcommittee which was formed entirely of 
nonexecutive directors advisers including russell reynolds 
associates acting as search adviser the chief executive and 
other executive directors were consulted during the process
the role of chairman was defined in writing and approved by the 
board the selection process for the role included consideration 
of prior successful ftse 100 chair experience solid experience 
in aerospace and defence or engineeringindustrial as well as 
broad international experience time availability and preferably 
previous experience of being a chief executive just over 30 
candidate profiles were initially reviewed in the long list from 
which a short list was identified and around ten candidates 
including external and internal were interviewed 
taking into account the requirements of the role and the 
structure size and composition including the skills knowledge 
experience and diversity of the board the chairman succession 
subcommittee decided to recommend to the board that  
sir nigel rudd be appointed as chairman it was the view of the 
board who approved his appointment that meggitt would benefit 
from the counsel and governance of sir nigel rudd a seasoned 
chairman with extensive international business experience 
spanning many industries including aerospace
board diversity
the board confirms a strong commitment to diversity including 
but not limited to gender diversity at all levels of the group the 
board’s policy on diversity commits meggitt to
•	 ensuring the selection and appointment process for 
employees and directors includes a diverse range of 
candidates
•	 disclosing statistics on gender diversity in every annual 
report see page 41 and
•	 reviewing this policy from time to time and continuing to 
disclose this policy in the annual report
based on the current size and composition of the board and 
taking into account current succession plans the board has 
determined that there should be a minimum of two female 
directors which is currently the case for gender diversity 
statistics see page 41 the board remains committed to 
ensuring that the directors bring a wide range of skills 
knowledge experience backgrounds and perspectives our 
directors are from the uk us and france and have a range of 
different skills and experience from energy to aerospace 
financial and technology backgrounds to an electrical engineer 
external search consultancies
during 2014 the committee used russell reynolds associates  
to assist in the search for the chairman and assist the group 
with searches for other senior management posts from time to 
time zygos associates were used to assist in the search for the 
nonexecutive director neither russell reynolds associates nor 
zygos associates have any other connection with the group 
on behalf of the nominations committee
sir colin terry
chairman of the nominations committee 
23 february 2015
chairman’s introduction
the nominations committee plays a leading role in assessing 
the balance of skills and experience on the board and the 
group’s principal committees the committee identifies the 
roles and capabilities required to meet the demands of the 
business and with due regard to diversity ensures that a 
succession plan is in place candidates continue to be considered 
on merit against specific criteria determined by the committee
david robins retired from the board at the end of the 2014 agm 
following a rigorous search process using search firm zygos 
associates a number of candidates for the position of non
executive director were interviewed by the board the 
nominations committee recommended the appointment of  
ms alison goligher as a nonexecutive director as her career in 
the energy sector in a wide range of functional and operational 
roles would be of great value to meggitt’s energy businesses 
in december 2014 we announced the appointment of sir nigel 
rudd as a nonexecutive director and deputy chairman effective 
from 1 march 2015 becoming chairman at the conclusion of the 
agm in april 2015 he is a highly experienced and successful 
director and chairman and with his prior role as a nonexecutive 
director of bae systems and current exposure to the industry at 
bba aviation sir nigel has exceptional knowledge of the 
aerospace sector his experience across a wide range of 
businesses and expertise will be of significant benefit to the 
group and make him ideally positioned to be the next chairman 
of meggitt plc 
we announced in december 2014 that mr philip cox has resigned 
from the board to concentrate on his new role as nonexecutive 
director and chairman designate of drax group plc
in 2015 the committee will continue to review the composition of 
the board and succession plans for executive and nonexecutive 
directors and is considering succession plans for mr david 
williams as he approaches his ninth year as a nonexecutive 
director during 2016
committee membership and attendance during 2014
name
me e ti n g s  
eligible to attend
me e ti n g s  
attended
sir colin terry chairman 3 3
mr s g young 3 3
mr g s berruyer 3 3
mr p g cox 3 3
ms a j p goligher 1 1
mr p heiden 3 3
ms b l reichelderfer 3 3
mr d m williams 3 3
 
terms of reference
the committee operates within agreed terms of reference 
which were reviewed and updated in 2014 and are on our website
responsibilities
the committee reviews the structure size and composition 
including the skills knowledge experience and diversity of the 
board and in consultation with the directors makes 
recommendations to the board on any proposed changes 
decisions on board changes are taken by the board as a whole 
in performing its duties the committee has access to the 
services of the company secretary and may seek external 
professional advice at the group’s expense
chairman succession subcommittee of the board
in 2014 after a number of internal applications were received for 
the role of chairman it was agreed that a chairman succession 
93987p4654indd   54 04032015   1702 directors’ remuneration report
supplementary information financial statements governance reports strategic report 55
chairman’s introduction and annual statement
it is my pleasure to present the directors’ remuneration report for the year ended  
31 december 2014 
pay philosophy
executive remuneration packages at meggitt are designed to attract motivate and retain 
directors of a high calibre to recognise the international nature of the group’s business and to 
reward the directors for delivering value to shareholders the package targets fixed pay at 
market competitive levels to companies of a similar size and with similar operating 
characteristics supplemented by performancerelated annual bonuses and an equitybased 
long term incentive plan designed to reward and incentivise growth and provide a strong link 
to group and individual performance 
2014 activity
in 2014 we finalised the review of the remuneration package which commenced last year and 
was extensively reported on in our 2013 report and submitted the directors’ remuneration 
report and remuneration policy policy to shareholders for approval at our agm 9895 of 
those shareholders who voted at the agm approved our policy and 9979 voted for the 
directors’ remuneration report
we also finalised the effectiveness review of the committee and kepler associates kepler 
our advisers which was carried out using questionnaires and committee discussion overall 
the ratings for the committee and kepler were satisfactory there was a valuable discussion 
about effectiveness but no significant areas highlighted for improvement 
since may we have approved awards under the new shareholderapproved long term 
incentive plan ltip updated our terms of reference to reflect the new remuneration 
reporting and policy regime and confirmed the equity participation plan epp vesting 
outcome see page 67 we also discussed performance targets for 2015 and agreed the fees 
for sir nigel rudd who will become chairman at the conclusion of the agm on 23 april 2015 
the intended remuneration arrangements for 2015 outlined in this report are in line with the 
policy approved by shareholders at our 2014 agm
2014 performance
civil original equipment revenue enjoyed another year of strong growth and the civil 
aftermarket gained momentum through the year resulting in full year organic growth in civil 
aerospace of 6 however this was offset by declines in military and energy resulting in flat 
organic group revenue for the year underlying organic profit before tax declined by 11 
reflecting adverse product mix and increased investment in new product introduction costs 
with a 14 decline in underlying eps reflecting also adverse movements in foreign exchange 
and the disposal of noncore businesses this has resulted in the earnings per share eps 
and cash elements of the awards granted in 2012 under the executive share option scheme 
esos and epp failing to meet their performance conditions the total shareholder return 
outcome on the epp will be confirmed at the vesting date under our short term incentive 
plan stip we did not hit our financial targets which account for two thirds of the award but 
the targets for personal performance objectives were met and vesting outcomes for 2014 are 
as a result of this personal performance element with growing order intake and building 
aftermarket momentum we anticipate a return to organic growth in 2015
this directors’ remuneration report has been prepared in accordance with the provisions of 
the companies act 2006 and schedule 8 of the large and medium sized companies and 
groups accounts and reports amendment regulations 2013 
the report meets the requirements of the uk listing authority’s listing rules and  
the disclosure and transparency rules in this report we describe how the principles relating 
to directors’ remuneration as set out in the uk corporate governance code 2012 the code 
are applied in practice the frc published a revised uk corporate governance code on  
17 september 2014 applicable to reporting periods beginning on or after 1 october 2014  
the 2014 code although the board has adopted some of the new provisions in the  
2014 code earlier than required
 
 
 
 
paul heiden
chairman of the remuneration committee
93987p5575indd   55 04032015   1706 directors’ remuneration report continued
56 meggitt plc          report and accounts 2014
the policy report
this section of the report sets out the policy for the directors which shareholders approved at the 2014 agm and is effective for a 
period of three years from the date of the 2014 agm the only amendments to the policy from the version approved by shareholders 
are to update the data used in the payforperformance scenario analysis from 2014 to 2015 and to remove references to future 
approval of the long term incentive plan which was approved at the agm in 2014  
executive director remuneration policy table
base salary
function to attract and retain talent by ensuring base salaries are competitive in the relevant talent market
operation salary will be reviewed by the committee annually in february with changes effective from 1 april of that year 
salaries for the year under review are disclosed in the annual report on remuneration
in deciding salary levels the committee considers personal performance including how the individual has helped 
to support the strategic objectives of the group the committee will also consider employment conditions and 
salary levels across the group and prevailing market conditions
salaries are paid to existing directors in gbp however the committee reserves the right to pay future and 
existing directors in any other currency converted at the prevailing market rate when a change is agreed 
opportunity it is not anticipated that percentage salary increases for executive directors will exceed those of the wider 
workforce over the period this policy will apply where increases are awarded in excess of the wider employee 
population for example if there is a material change in the responsibility size or complexity of the role the 
committee will provide the rationale in the relevant year’s annual report on remuneration
performance 
metrics
none explicitly but salaries are independently benchmarked periodically against ftse companies in similar 
industries and those with similar market capitalisation personal performance is also taken into account when 
considering salary increases
 
pension
function to provide postretirement benefits for executive directors in a costefficient manner
operation the pension plans operated by the group which executive directors are or could be members of are 
—meggitt pension plan defined benefit pension plan closed to new members 
—meggitt workplace savings plan defined contribution personal pension scheme open to new members 
salary is the only element of remuneration that is pensionable there are no unfunded pension promises or 
similar arrangements for directors
opportunity from 2013 it has been our policy that new executive director external appointments are eligible for a pension 
allowance of 25 of salary payable either as pension contribution up to any limit set in current regulations or above 
such limits in cash where agreements have been made prior to the approval of this policy which entitle an 
executive to receive a pension allowance higher than 25 of salary pension allowances up to a maximum of 50 of 
salary will be paid mr young and mr green had agreements prior to the approval of this policy which entitle them to 
receive a pension allowance of 50 of salary and this arrangement will continue for these directors 
performance 
metrics
none
93987p5575indd   56 04032015   1706 supplementary information financial statements governance reports strategic report 57
benefits
function to provide noncash benefits which are competitive in the market in which the executive director is employed 
operation the group may provide benefits including but not limited to a company car or car allowance private medical 
insurance permanent health insurance life assurance a fuel allowance a mobile phone relocation costs and 
any other future benefits made available either to all employees globally or all employees in the region in which 
the executive director is employed 
opportunity benefits vary by role and individual circumstances eligibility and cost is reviewed periodically benefits in respect 
of the year under review are disclosed in the annual report on remuneration it is not anticipated that the costs of 
benefits provided will increase significantly in the financial years over which this policy will apply although the 
committee retains discretion to approve a higher cost in exceptional circumstances eg to facilitate recruitment 
relocation expatriation etc or in circumstances where factors outside the group’s control have changed 
materially eg market increases in insurance costs
performance 
metrics
none
annual bonus short term incentive plan—stip
function to incentivise executive directors on delivering annual financial and personal targets
operation performance measures targets and weightings are set at the start of the year
the performance period of the stip is a financial year after the end of the financial year to the extent that the 
performance criteria have been met 75 of the stip award is paid in cash to the director the remaining 25  
of the award will be deferred into shares and released with no further performance conditions attached and  
no matching shares provided after a further period of two years
under the stip 2014 rules as approved by the committee the committee may decide to apply malus andor 
clawback to stip awards and deferred stip awards to reduce the vesting of awards andor require repayment  
of awards in the event of a review of the conduct capability or performance of the director where there has been 
misconduct by the director or material misstatement of the company’s or a group members financial results  
for any period 
deferred stip awards may lapse in certain leaver circumstances see page 62
opportunity the stip provides for a maximum award opportunity of up to 150 of salary in normal circumstances with an 
ontarget opportunity of 100 of salary and an opportunity of 50 of salary at threshold 
the committee has discretion to make a stip award of up to 200 of salary in exceptional circumstances eg  
a substantial contract win which has a significant positive financial impact in the long term but which has no or 
negative short term financial impact dividends accrue on unvested deferred stip awards over the vesting 
period and are released on the vesting date
performance 
metrics
stip awards are based on the achievement of financial and personal performance targets for the executive 
directors twothirds of the stip will be weighted to financial performance with the remainder subject to 
personal performance the relative weightings of the financial and personal elements for any stip period and 
the measures used to assess financial and nonfinancial performance will be set by the committee in its 
absolute discretion to align with the group’s operating and strategic priorities for that year
the award for performance under each element of the stip will be calculated independently the committee will 
have discretion to review the consistency of the payout of the financial and personal elements and adjust the 
total up or down within the levels specified above if it does not consider this to be a fair reflection of the 
underlying performance of the group or the individual 
the personal performance element will typically be based on three to five objectives relevant to the  
executive’s role
details of the measures weightings and targets applicable to the stip for each year including a description of 
how they were chosen and whether they were met will be disclosed retrospectively in the annual report on 
remuneration for the following year subject to commercial sensitivity
93987p5575indd   57 04032015   1706 directors’ remuneration report continued
58 meggitt plc          report and accounts 2014
long term incentive plan ltip
function to align the interests of executive directors with shareholders in growing the value of the group over the long 
term
operation the ltip replaced the esos and epp in 2014 under the ltip executive directors are eligible to receive annual 
awards over meggitt shares vesting after three years subject to the achievement of stretching performance 
targets 
whilst it is the current intention that ltip awards will be in the form of nil cost options the ltip provides at the 
absolute discretion of the committee for awards over conditional shares market value share options and 
phantom awards
under the ltip 2014 rules as approved by shareholders at the agm in 2014 the committee may decide to apply 
malus andor clawback to awards to reduce the vesting of awards andor require repayment of awards in the 
event of a review of the conduct capability or performance of the director where there has been misconduct by 
the director or material misstatement of the company’s or a group members financial results for any period
opportunity executive directors will normally be eligible for annual ltip awards of 220 of salary awards up to a maximum 
of 300 of salary may be granted in exceptional circumstances eg to support the recruitment of a key executive 
or to recognise exceptional individual performance
30 of an award will vest if performance against each performance condition is at threshold and 100 if it is at 
maximum with straight line vesting in between
dividends accrue on unvested ltip awards over the vesting period and are released to the extent the ltip award 
vests on the vestingexercise date
performance 
metrics
vesting of ltip awards is subject to continued employment and performance against three measures which are 
intended to be as follows
•	 e ar ni n g s 	p er	s h ar e 	e p s  
•	 re t u r n 	on	tr ading 	a s s et s	r ot a 	w hic h 	is	un d e r ly i n g 	o p er a ti n g 	pr o fi t 	a f te r	tax	d i v ide d	by 	n et	t r a d in g	a s s et s 	
measured at constant currency net trading assets are adjusted to exclude goodwill and other intangible assets 
arising on the acquisition of a business derivative financial instruments retirement benefit obligations 
deferred tax and net debt and
•	 s tr a te g ic 	g o al s 	t y p ic al l y	to	be	ba se d	on	th r e e	s tr a te g ic 	p r io r i t ie s	a r o un d 	exe c u t i on  	gr o w t h	an d 	i n n o v at i o n
the way these measures link to our kpis can be seen on pages 27 to 30 it is the current intention that the 
weighting of the measures will be equal ie one third each but that the committee will consider and adjust if 
deemed appropriate the weighting at the start of each ltip cycle any commerciallysensitive information on 
measures targets and performance will be disclosed retrospectively
awards made under the ltip will have a performance period of three financial years starting from 1 january of 
the year in which the award is made and ending on 31 december of the third year if no entitlement has been 
earned at the end of the relevant performance period awards will lapse 
vesting of the strategic element will also be subject to a discretionary assessment by the committee of the extent 
to which achievement of the strategic objectives is consistent with the underlying financial performance over the 
threeyear period 
the measures and targets in operation for grants made under the ltip in the current year and which are not 
deemed commercially sensitive are disclosed in the annual report on remuneration
sharesave scheme and share incentive plan sip
function to align the interests of employees and shareholders by encouraging all employees to own meggitt shares
operation sharesave scheme—all employee scheme under which all uk employees including executive directors may 
save up to the maximum monthly savings limit as determined by legislation over a period of three or five years 
options under the sharesave scheme are granted at a discount of up to 20 to the market value of shares at the 
date of grant
sip—all employee scheme under which i all uk employees including executive directors may contribute up to 
the monthly maximum as determined by legislation to purchase shares monthly from pretax pay and ii all uk 
employees including executive directors may receive free shares up to the annual maximum value as 
determined by legislation
opportunity savings contributions and free shares are capped at the prevailing legislative limit at the time uk employees are 
invited to participate
performance 
metrics
none
93987p5575indd   58 04032015   1706 supplementary information financial statements governance reports strategic report 59
notes to the policy table
the committee is satisfied that the above policy is in the best interests of shareholders and does not promote excessive risktaking 
the committee retains discretion to make minor nonsignificant changes to the policy without reverting to shareholders
payments from outstanding awards
outstanding awards are currently held by the directors under the epp and the esos the group’s long term incentives operated  
prior to the introduction of the ltip in 2014 these awards will continue to vest subject to performance conditions being met and  
be capable of exercise during the period over which this policy applies the tables on pages 74 to 75 highlight outstanding and  
vested awards
approach to target setting and performance measure selection
targets applying to the stip and ltip are reviewed annually based on a number of internal and external reference points including 
the group’s strategic plan analyst forecasts for meggitt and its sector comparators historical growth achieved by meggitt and its 
sector comparators and external expectations for growth in meggitt’s markets 
stip
the performance measures used under the stip reflect financial targets for the year and nonfinancial performance objectives the 
policy provides the committee with flexibility to select appropriate measures on an annual basis
stip performance targets are set to be stretching but achievable with regard to the particular personal performance objectives and 
the economic environment in a given year for financial measures ‘target’ is based around the annual budget approved by the board 
prior to the start of the financial year the committee sets an appropriate performance range around target which it considers 
provides an appropriate degree of ‘stretch’ challenge and an incentive to outperform
ltip
the vesting of ltip awards is linked to eps rota and the achievement of longterm strategic goals
eps is considered by the board to be the most important measure of meggitt’s financial performance it is highly visible internally  
is regularly monitored and reported and is strongly motivational for participants eps targets will continue to be set on a nominal 
cumulative pence basis to incentivise consistent performance and reflect the fact that meggitt’s profits are generated to a large 
degree outside the uk and not significantly influenced by uk retail price inflation
rota helps to balance the achievement of growth and returns the committee believes rota is a good internal proxy for total 
shareholder return tsr which focuses executives on managing the balance sheet and meggitt’s operational performance whilst 
also being less remote for participants below board level the definition of net trading assets for rota excludes goodwill and other 
intangible assets arising when a business is acquired to reflect that acquisitions are not within the control of the majority of 
participants in order to safeguard against poor acquisitions the committee has overall discretion to reduce the outcome under the 
rota element if in its opinion the outcome does not reflect the underlying financial performance of the group the performance of 
acquisitions against board approved targets is also monitored separately 
the committee believes that the strategic goals component will help reinforce the realisation of group strategy and the achievement 
of key nonfinancial and strategic goals over long product cycles which drive longterm value at meggitt the element will typically 
comprise a scorecard of threeyear targets across a maximum of three core strategic areas for the group the committee believes 
that this approach will enable it to reflect the group’s longterm nature and shifting strategic priorities in the ltip to ensure 
executives’ interests remain closely aligned with those of our shareholders over time specific measures and targets for each area 
will be developed and clearly defined at the start of each threeyear cycle to balance leading and lagging indicators of performance 
vesting of this element is subject to a discretionary assessment by the committee of the extent to which achievement of the strategic 
objectives is consistent with meggitt’s underlying financial performance over the performance period
remuneration policy for other employees
the remuneration policy for other employees is based on broadly consistent principles as that for executive directors annual salary 
reviews take into account group performance local pay and market conditions and salary levels for similar roles in comparable 
companies some employees below executive level are eligible to participate in annual bonus schemes opportunities and 
performance measures vary by organisational level geographical region and an individual’s role senior executives are eligible for 
ltip on similar terms as the executive directors although award opportunities are lower and vary by organisational level all uk 
employees are eligible to participate in the sharesave scheme and sip on identical terms
share ownership guidelines
in 2013 the committee increased the minimum shareholding guidelines for executive directors from 100 to 300 of base salary for 
the chief executive and from 100 to 200 of base salary for each of the other executive directors there is no set time frame within 
which directors have to meet the guideline however until they meet the guideline they are not permitted to sell more than 50 of the 
aftertax value of a vested share award the shareholding requirement ceases when a director leaves the group further information 
on the shareholding requirement is in the annual remuneration report see page 73
93987p5575indd   59 04032015   1706 directors’ remuneration report continued
60 meggitt plc          report and accounts 2014
payforperformance scenario analysis
the charts below provide an estimate of the potential future reward opportunities for the executive directors and the potential split 
between the different elements of remuneration under three different performance scenarios ‘maximum’ ‘ontarget’ and ‘minimum’ 
maximum
s g young £’000
£3546
ontarget £2164
minimum £1040
100
salary and beneﬁts
stip
pension
ltip
48 31 21
29 29 42
  
maximum
d r webb £’000
£2236
ontarget £1320
minimum £575
100
44 34 22
26 30 44
 
48
maximum
p e green £’000
£1892
ontarget £1155
minimum £556
31 21
29 42 29
100
potential reward opportunities are based on the policy applied to 2015 base salaries and 2015 incentive opportunities note that the 
ltip awards granted in a year will not normally vest until the third anniversary of the date of grant and the projected value excludes 
the impact of share price movement or dividend accrual
the ‘maximum’ scenario reflects fixed remuneration salary and benefits and pension plus maximum payout under all incentives 
150 of salary under the stip and full vesting of ltip awards
the ‘ontarget’ scenario reflects fixed remuneration as above plus target stip based on twothirds of maximum opportunity and 
ltip threshold vesting 30 vesting 
the ‘minimum’ scenario reflects fixed remuneration only being the only elements of the executive directors’ remuneration package 
not linked to performance
nonexecutive directors’—remuneration policy table
nonexecutive directors are submitted for reelection annually do not have a contract of service and are not eligible to join the 
group’s pension or share schemes details of the policy on fees paid to our nonexecutive directors are set out in the table below
fees
function to attract and retain nonexecutive directors of the highest calibre with broad commercial and other experience 
relevant to the group
operation fee levels are reviewed annually with any adjustments effective 1 april each year the fees paid to the chairman 
of the board are determined by the committee while the fees for all other nonexecutive directors are reviewed 
by a committee of the board formed of executive directors fees for the year under review and for the current 
year are disclosed in the annual report on remuneration
additional fees are paid to the chairmen of the remuneration and audit committee and to the senior independent 
director to reflect the additional time commitment of these roles
in deciding fee increases the committees consider employment conditions and salary increases across the 
group and prevailing market conditions
currently all fees are paid in gbp however the committees reserve the right to pay future and existing non
executive directors in any other currency converted at the prevailing market rate when a change is agreed 
opportunity fee increases will be applied taking into account the outcome of the annual review the maximum aggregate 
annual fee for all nonexecutive directors including the chairman as provided in the company’s articles of 
association is £1000000
performance 
metrics
none
93987p5575indd   60 04032015   1706 supplementary information financial statements governance reports strategic report 61
recruitment
external appointments
in cases of hiring or appointing a new executive director from outside the group the committee may make use of all existing 
components of remuneration as follows
component approach
maximum annual 
grant value
base salary the base salaries of new appointees will be determined based on the experience and skills 
of the individual internal comparisons employment conditions and salary levels across 
the group and prevailing market conditions initial salaries may be set below market and 
consideration given to phasing any increases over two or three years subject to 
development in the role
na
pension in line with the policy new appointees will be entitled to become members of the meggitt 
workplace savings plan defined contribution plan or receive a cash pension allowance of 
25 of salary in lieu
na
benefits
sharesavesip
new appointees will be eligible to receive benefits in line with the policy and will be 
eligible to participate in allemployee share schemes 
na
stip the structure described in the policy table will apply to new appointees with the relevant 
maximum being prorated to reflect the proportion of employment over the year targets 
for the personal element will be tailored to the appointee
150 of salary  
200 in exceptional 
circumstances
ltip new appointees will be granted awards under the ltip on similar terms as other executive 
directors as described in the policy table
220 of salary 
300 in exceptional 
circumstances
in determining the appropriate remuneration structure and levels the committee will take into consideration all relevant factors to 
ensure that arrangements are in the best interests of meggitt and its shareholders the committee may make an award in respect of 
a new appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer ie over and above the approach 
outlined in the table above any such compensatory awards will be made under existing share schemes where appropriate and will 
be subject to the normal performance conditions of those schemes 
the committee may also consider it appropriate to structure ‘buyout’ awards differently to the structure described in the policy 
table exercising the discretion available under ukla listing rule 942 r where necessary to make a oneoff award to an executive 
director in the context of recruitment in doing so the committee will consider relevant factors including any performance conditions 
attached to these awards the likelihood of those conditions being met and the proportion of the vesting period remaining the value 
of any such ‘buyout’ will be fully disclosed
internal promotion
where a new executive director is appointed by way of internal promotion the policy will be consistent with that for external 
appointees as detailed above any commitments made prior to an individual’s promotion will continue to be honoured even if they 
would not otherwise be consistent with the policy prevailing when the commitment is fulfilled although the group may where 
appropriate seek to revise an individual’s existing service contract on promotion to ensure it aligns with other executive directors 
and prevailing market best practice
disclosure on the remuneration structure of any new executive director including details of any exceptional payments will be 
disclosed in the ris notification made at the time of appointment and in the annual report on remuneration for the year in which the 
recruitment occurred
nonexecutive directors
in recruiting a new nonexecutive director the committee will use the policy as set out in the table on page 60
93987p5575indd   61 04032015   1706 directors’ remuneration report continued
62 meggitt plc          report and accounts 2014
service contracts and exit payment policy
executive director service contracts including arrangements for early termination are carefully considered by the committee and 
are designed to recruit retain and motivate directors of the quality required to manage the group
the committee’s policy is that executive directors’ service contracts should be terminable on no more than 12 months’ notice the 
committee’s approach to payments in the event of termination of employment of an executive director is to take account of the 
particular circumstances including the reasons for termination individual performance contractual obligations and the rules of the 
group’s applicable incentive plans which apply to share awards held by the executive directors
•	 	 c o m p en s a ti o n 	 fo r 	 lo s s 	 of 	 of fi ce 	 in 	 s er v ice 	 co ntr ac t s 
except as set out in the table on page 63 under the terms of their service contracts the executive directors may be required to work 
during their notice period or may if the group decides be paid in lieu of notice if not required to work the full notice period payment in 
lieu of notice will be equal to base salary plus the cost to the group of providing the contractual benefits pensions allowance health 
insurance and company car or car allowance that would otherwise have been paid or provided during the notice period payments will 
be in equal monthly instalments and will be subject to mitigation such that payments will either reduce or stop completely if the 
executive director obtains alternative employment 
  an executive director’s employment can be terminated by the company without notice or payment in lieu of notice in specific 
circumstances including summary dismissal bankruptcy or resignation 
•	 	 t r e a tm ent	of 	s t ip 
executive directors have no automatic entitlement to any bonus on termination of employment under the stip but the committee 
may use its discretion to award a bonus normally prorated 
  where any bonus is deferred into shares the award will normally lapse if an executive director’s employment terminates unless 
the executive director leaves for specified ‘good leaver’ reasons the ‘good leaver’ reasons are death redundancy retirement 
injury disability the business or company which employs the executive director ceasing to be part of the group any other 
circumstances in which the committee exercises discretion to treat the executive director as a ‘good leaver’ or on a change of 
control if the executive director is a ‘good leaver’ their award will vest on the normal vesting date or earlier on a change of control 
and would not be subject to prorating
•	 	 t r e a tm ent 	of 	lo n g 	te r m	i n centi v e	p l an	a w ar d s 
the treatment of awards under the esos epp and ltip is governed by the rules of the plans which have been approved by 
shareholders and is described below
  awards will normally lapse if an executive director’s employment terminates unless the executive director leaves for specified 
‘good leaver’ reasons the ‘good leaver’ reasons are the same as described above if the executive director is a ‘good leaver’ 
awards will vest to the extent that the attached performance conditions are met but on a time prorated basis with committee 
discretion to allow early vesting under the epp and esos awards vest as soon as practicable after an employee has left under 
the ltip awards vest on the normal vesting date
93987p5575indd   62 04032015   1706 supplementary information financial statements governance reports strategic report 63
a summary of the key terms of the executive directors’ service contracts on termination of employment or change of control is set out 
below
name position
notice period 
from employer 
notice period 
from employee compensation payable on termination of employment or change of control
mr s g young 
service contract 
dated 1 may 2013
chief executive 12 months 6 months as set out in the policy but service contract includes an 
obligation for the committee to allow mr young to exercise 
awards under the group’s share plans that have already 
vested at the point of termination 
no change of control provisions
mr d r webb  
service contract  
dated 6 june 2013
chief financial  
officer
12 months 6 months as set out in the policy 
no change of control provisions 
mr p e green  
service contract  
dated 26 february 
2001
group corporate 
affairs director
12 months 6 months mr green’s service contract was entered into before 27 june 
2012 and has not been modified or renewed after that date as 
such remuneration or payments for loss of office that are 
required to be made under mr green’s service contract are 
not required to be consistent with the policy 
payments to mr green under his service contract differ from 
the policy in the following respects 
on termination of employment mr green is entitled to a 
liquidated damages payment equal to his salary and the value 
of his contractual benefits bonus pension allowance 
insurance and company car or car allowance at the date of 
termination prorated to the remaining notice period less an 
amount equal to 5 of the aggregate sum and the committee 
shall exercise its discretion under the group’s share plans to 
treat mr green as a ‘good leaver’ 
on change of control mr green may give notice to terminate 
his employment within six months of the event and upon such 
termination he shall become entitled to the liquidated 
damages payment summarised above 
external appointments held by executive directors
the board believes that the group can benefit from experience gained when executive directors hold external nonexecutive 
directorships executive directors are allowed to hold external appointments and to receive payment provided such appointments are 
agreed by the board or committee in advance there are no conflicts of interests and the appointment does not lead to deterioration 
in the individual’s performance details of external appointments and the associated fees received are included in the annual report 
on remuneration on page 72
consideration of conditions elsewhere in the company 
the committee does not consult with employees specifically on executive remuneration policy and framework but does seek to 
promote and maintain good relations with employee representative bodies—including trade unions and works councils—as part of its 
broader employee engagement strategy and consults on matters affecting employees and business performance as required in each 
case by law and regulation in the jurisdictions in which the group operates salary increases made elsewhere in the group are 
amongst the data that the committee considers in determining salaries for executive directors 
consideration of shareholder views 
the committee considers shareholder views received during the year and at the agm each year as well as guidance from 
shareholder representative bodies more broadly the majority of shareholders continue to express support of remuneration 
arrangements at meggitt 
93987p5575indd   63 04032015   1706 directors’ remuneration report continued
64 meggitt plc          report and accounts 2014
annual report on remuneration
the following report provides details of how our policy was implemented during the year ended 31 december 2014
remuneration committee—2014 membership and attendance
   meetings  
   eligible  meetings 
name   to attend attended
mr p heiden chairman  3 3
mr g s berruyer   3 3
mr p g cox   3 3
ms a j p goligher   1 1
ms b l reichelderfer   3 3
mr d m williams   3 3
mr cox resigned from the committee on 31 january 2015 on his departure from the board there was one meeting between the end 
of the financial year and the date of signing of this report on 16 february 2015 which all current members of the committee attended 
the committee operates within agreed terms of reference which are available on our website and were updated in 2014 the 
committee is responsible for determining the remuneration policy and packages for all executive directors and executive board 
members covering five of the next most senior executives across the group and for agreeing the fees for the chairman the 
chairman chief executive and organisational development director attend meetings of the committee by invitation they are absent 
when their own remuneration is under consideration
none of the nonexecutive directors has or has had any personal financial interests or conflicts of interest arising from cross
directorships or daytoday involvement in running the business 
advisers to the committee
during the year the committee’s independent remuneration advisor was kepler associates kepler kepler appointed in 2010 was 
selected by the committee as a result of a competitive tender process the committee evaluates the support provided by kepler 
annually and is comfortable that they provide independent remuneration advice to the committee kepler provide guidance on 
remuneration matters at board level and below kepler do not have any other connection with the group kepler is a member of the 
remuneration consultants group and adheres to its code of conduct wwwremunerationconsultantsgroupcom their total fees in 
2014 were £88000 2013 £87000
2014 agm voting 
the following table shows the results of the agm votes on the 2013 directors’ remuneration policy and directors’ remuneration 
report at the 2014 agm
resolution text votes for
 of votes  
cast for votes against
 of votes 
 cast against total votes cast
            votes withheld        
               abstentions
1
approval of directors’ remuneration policy
approval of directors’ remuneration report
623092269
654155733
9895
9979
6598635
1368456
105
021
629690904
655524189
30502072  
4668787
1
  a withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution
 v otes withheld        
               abstentions
1
93987p5575indd   64 04032015   1706 supplementary information financial statements governance reports strategic report 65
single total figure of remuneration for executive directors audited 
the table below sets out a single figure for the total remuneration received by each executive director for the year ended  
 31 december 2014 and the prior year
mr s g young
1
mr d r webb
1
mr p e green
2014
£’000
2013
£’000
2014
£’000
2013
£’000
2014
£’000
2013
£’000
base salary 658 554 436 240 339 325
taxable benefits
2
24 21 14 8 14 14
pension 329 277 118 57 170 163
stip
3
221 250 198 93 166 126
epp basic
4
– 136 – – – 106
epp matching
4
– 96 – – – 74
esos
5
– 244 – – – 190
total 1232 1578 766 398 689 998
1
 mr young was promoted to chief executive on 1 may 2013 mr webb was appointed on 6 june 2013
2
 taxable benefits consist primarily of company car or car allowance fuel allowance and private health care insurance 
3
 stip paid for performance over the relevant financial year further details of the 2014 stip including performance measures actual performance and 
bonus payouts can be found on page 66
4
 epp is calculated as the number of shares vesting based on performance measures substantially completed during the year valued at the market 
value of the shares for 2014 the figure represents the actual vesting outcome of the eps and cash elements of the 2012 award the performance 
period ended on 31 december 2014 and an estimate of the outcome of the tsr element of the 2012 award the performance period of which will end in 
august 2015 based on performance to 31 december 2014 the market value of vested shares is based on the average share price over the last quarter 
of 2014 of 47407 pence the valuation of the 2012 award will be amended for the actual vesting outcome of the tsr element in august 2015 and the 
share price on the date of vesting 22 august 2015 in next year’s annual report on remuneration for 2013 the figure represents the actual vesting 
outcome of the 2011 award which has been trued up compared to that reported last year to reflect the final vesting outcome of the tsr element 
nil and the share price on the date of vesting 46780p further details on performance criteria achievement and resulting vesting levels can be 
found on page 67
5
 esos is calculated as the number of shares vesting based on performance measures substantially completed during the year valued at the difference 
between the market value of the shares and the exercise price of the award for 2014 the figure represents the actual vesting outcome of the 2012 
award the market value of vested shares is based on the average share price over the last quarter of 2014 of 47407 pence and an exercise price of 
39720p for 2013 the figure represents the actual vesting outcome of the 2011 award trued up compared to that reported last year to reflect the 
embedded gain based on the actual share price at vesting 50400p further details on performance criteria achievement and resulting vesting levels 
can be found on page 67
single total figure of remuneration for nonexecutive directors audited 
the table below sets out a single figure for the total remuneration received by each nonexecutive director for the year ended  
31 december 2014 and the prior year
2014
£’000
2013
£’000
sir colin terry 175 170
mr d m williams 74 72
mr g s berruyer 53 52
mr p g cox 53 52
ms a j p goligher
1
9 –
mr p heiden 63 62
ms b l reichelderfer 53 52
mr d a robins
2
18 52
1
 appointed on 30 october 2014 
2
  retired on 7 may 2014
93987p5575indd   65 04032015   1706 directors’ remuneration report continued
66 meggitt plc          report and accounts 2014
incentive outcomes for the year ended 31 december 2014
stip in respect of 2014 performance
the board set stretching financial and strategic targets for the stip at the start of the 2014 financial year these targets and our 
performance against these are summarised in the table below
performance targets
actual 
performance measure threshold target stretch
underlying profit before tax weighting onethird of the award £370m £390m £410m below 
threshold
free cash flow
1 
weighting onethird of the award £195m £228m £260m below 
threshold
personal performance
2 
weighting one third of the award
mr s g young 2 3 4 target
mr d r webb 2 3 4 between 
target and 
stretch
mr p e green 2 3 4 at stretch
1
  adjusted to exclude capital expenditure 
2
  individual personal performance is measured on a scale of 1 to 5 the average of all ratings drives the stip outcome where 2 indicates expectations 
are partially met 3 is fully met and 4 exceeds expectations details of the personal performance measures are provided below 
it is the view of the committee that notwithstanding that 2014 has been a challenging year and that the stip financial targets have not 
been met the personal performance objectives of the executive directors have been satisfied to the extent shown above and stip awards 
should vest on this basis
a full listing of personal performance objectives has not been provided owing to commercial sensitivity however the following is a 
summary of the conditions applying to each executive director mr young’s personal performance objectives related to transforming 
execution capability eg through successful implementation of the meggitt production system shaping the business for competitive 
advantage positioning for future growth eg progressing technology projects and ensuring best practice governance eg health and 
safety improvements at sites mr webb’s personal objectives related to assessing the group’s strategic financial planning and capital 
allocation priorities delivering sustainable cost improvements implementing a midlife erp effectiveness programme delivering a 
cybersecurity risk reduction programme and shaping the business for competitive advantage mr green’s personal objectives related to 
continued enhancement of the risk management programme continued improvement of health safety and environment standards 
implementation of the us department of state’s consent agreement and enhancing the import compliance and ethics programmes 
the following stip awards were received by directors in respect of 2014 performance
 salary £’000
mr s g young 33 221
mr d r webb 45 198
mr p e green 48 166
 
stip—deferral into shares
as a result of the 2014 performance stip vesting outcome described above 25 of the stip bonus will be deferred into shares and 
released with no further performance conditions attached after a further period of two years per the policy
93987p5575indd   66 04032015   1706 supplementary information financial statements governance reports strategic report 67
2012 epp  
the epp award made in august 2012 vests 50 on cumulative underlying eps performance 25 on cash conversion over three 
financial years and 25 on the group’s relative tsr performance over a threeyear period commencing on the date of grant as 
follows
measure weighting  period ending vesting schedule outcome vesting 
eps 50 311214 0 vesting below 110p
30 vesting for 110p per share
100 vesting for 122p or more
straight line vesting between these points
below 110p nil
cash conversion 25 311214 0 vesting below 87
30 vesting at 87
100 vesting at 95 and above
straight line vesting between these points
below 87 nil
tsr 25 220815 0 vesting for performance below median tsr
30 vesting for performance in line with median tsr
100 vesting for outperformance of median tsr 
by 8 per annum
straight line vesting between these points
na
1
na
1
1 
  the vesting outcome will be confirmed at the end of the threeyear performance period ending on 22 august 2015 for the purposes of the single figure 
of remuneration table the estimated vesting of this element of the 2012 award is nil based on meggitt’s relative tsr performance to 31 december 
2014 
 
2012 esos
the esos award made in april 2012 did not vest based on threeyear cumulative underlying eps performance to 31 december 2014 
measure weighting  period ending vesting schedule outcome vesting 
eps 100 311214 0 vesting below 110p 
30 vesting for 110p per share 
100 vesting for 122p or more 
straight line vesting between these points
below 110p 0
2011 epp 
as disclosed in the 2013 annual report on remuneration the committee determined that 50 of the 2011 epp award subject to the 
threeyear cumulative underlying eps performance condition and the 25 subject to the cash conversion performance condition vested 
in full based on performance to 31 december 2013 the remaining 25 of the award was dependent on the group’s tsr performance 
compared to a group of 17 international aerospace and defence companies over the threeyear period to 17 august 2014 tsr for all 
comparator companies is measured on a common currency basis 
measure weighting  period ending vesting schedule outcome vesting 
tsr 25 170814 0 vesting for performance below median tsr
30 vesting for performance in line with median tsr
100 vesting for outperformance of median tsr 
by 8 per annum
straight line vesting between these points
below median 
tsr
0
following confirmation of the vesting outcome of the tsr element the overall vesting outcome for the 2011 epp award taking into 
consideration the outcome of both the eps and tsr elements was 38 of maximum
to allow for comparability going forward the committee has elected to capture the vesting of the entire 2011 epp award in the 
financial year ending 31 december 2013 for the purposes of the single figure as follows
executive
interests 
held vesting 
interests 
 vested
date  
vested
market price  
at vesting
value 
£’000
mr s g young
basic award 76663 38 29131 170814 46780p £136
matching award 53768 38 20431 170814 46780p £96
mr p e green
basic award 59719 38 22693 170814 46780p £106
matching award 41884 38 15915 170814 46780p £74
93987p5575indd   67 04032015   1706 directors’ remuneration report continued
68 meggitt plc          report and accounts 2014
scheme interests awarded in the year ended 31 december 2014 audited
2014 ltip 
executive form of award date of grant
shares over which 
awards granted award price
face value
date of vesting
1
£’000  of salary
1
mr s g young nil cost option 220514 312443 46754p £1460 220 220517
mr d r webb nil cost option 220514 207041 46754p £968 220 220517
mr p e green nil cost option 220514 161868 46754p £757 220 220517
1
  the award price is the average of the last five days close prices before the award date the face value has been calculated using the award price for  
each award 
2
 based on 2014 salary at the date of award
vesting is dependent on the achievement of threeyear targets based on the following performance measures
weighting measure threshold midpoint stretch
333 underlying eps pence threeyear aggregate equivalent to cagr range of 5 to 10 1240 1305 1370
333 rota average over three years 330 345 360
333
strategic measures
1
 
average over three years 
execution
quality  sites on target
2
  570 710 860
delivery  sites on target
2
  430 570 710
meggitt production 
system
average status  
per schedule
20 30 40
growth
organic revenue 
growth
 organic revenue 
growth cagr over 
three years
50 65 80
programme 
management
average status  
per reviews
20 30 40
innovation schedule average status  
per schedule
20 30 40
1
  performance against each strategic measure will be assessed at the end of the threeyear period against a scale of
	•		 10	 —thr eshold	objectiv e	not	met
	•		 20—thr eshold	met
	•		 30—on	t ar get
	•		 40—s tr et ch	objectiv e	met
	•		 50—s tr et ch	objectiv e	e x c eeded	
2
 the targets for quality and delivery are for year 1 of the 2014 ltip award please refer to the 2015 ltip award performance measures for the targets 
which also apply to year 2 of the 2014 ltip award
93987p5575indd   68 04032015   1706 supplementary information financial statements governance reports strategic report 69
total pension entitlements audited 
the table below sets out details of the pension entitlements under the meggitt pension plan mpp for mr young and mr green 
under the mpp mr young and mr green accrued defined benefits at 3 of salary per annum up to the scheme cap and were entitled 
to a cash supplement equivalent to 50 of salary above the scheme cap since reaching the government’s lifetime allowance in 
april 2012 mr young and mr green ceased accruing further benefit under the mpp and received a 50 pension allowance on their full 
salary mr young and mr green’s dependants remain eligible for dependants’ pensions and the payment of a lump sum on death in 
service
mr webb receives a pension allowance of 25 of base salary but is not a member of any defined benefit or defined contribution 
pension scheme operated by the group 
the pension allowance payments made in 2014 are included in the single total figure of remuneration table
                       mr s g young
1
               mr p e green
2
2014
£’000
2013
£’000
2014
£’000
2013
£’000
accrued benefit 27 27 75 73
date benefit receivable 05042012 05042012 26102018 26102018
total value of additional benefit if director retires early left mpp
and taken
benefits
left mpp 
and taken
benefits
nil early  
retirement factors 
cost neutral
nil early 
 retirement factors  
cost neutral
1
 mr young opted to leave the mpp and take his pension benefits with effect from 5 april 2012
2
 mr green opted to leave the mpp with effect from 31 march 2012 he has not drawn his pension 
percentage change in ceo cash remuneration  
the table below shows the percentage change in ceo remuneration from the prior year compared to the average percentage change 
in remuneration for all executive employees we have selected our executive population around 300 people for this comparison 
because it is considered to be the most relevant due to the structure of total remuneration most of our senior executives receive 
benefits under the same stip and ltip structure as our ceo
2014
1
 £’000
2013
1
 £’000
ceo  
 change  
20132014
executive 
employees 
change  
20132014
base salary 658 647 17 35
2
taxable benefits 24 24 nil 20
3
stip 221 244 94 nil
4
total 903 915 13 30
1 
the ceo’s remuneration includes base salary taxable benefits and stip for 2013 the figures comprise elements paid to mr t twigger before his 
retirement from the board in may 2013 and payments made to mr s g young from his appointment as ceo since may 2013 
2
 the base salary for executive employees is calculated using the increase in the earnings of fulltime executive employees using a consistent set of 
employees
3
 for benefits this information is not collected for the executive employee population and is therefore estimated from a sample of executive employees 
using a consistent set of employees
4
 for stip the increase is estimated as at 13 february 2015 as the validation processes for personal performance ratings for executive employees below 
the level of the board and executiveoperations boards is not yet complete to the extent there is a significant variation between the actual outcome 
and the estimate this will be declared in the 2015 directors’ remuneration report 
93987p5575indd   69 04032015   1706 directors’ remuneration report continued
70 meggitt plc          report and accounts 2014
relative importance of spend on pay
the table below shows shareholder distributions ie dividends and share buybacks and total employee expenditure for 2014 and the 
prior year along with the percentage change in both 
2014  
£’m
2013 
£’m
 change  
20132014
shareholder distributions—dividends
1
1104 1014 89
shareholder distributions—buybacks
1
337 – na
total employee expenditure
2
4613 4751 29
1
  see notes 16 and 40 respectively of the group consolidated financial statements
2 
 comprises wages and salaries and retirement benefit costs see note 9 of the group consolidated financial statements
exit payments made in the year
no exit payments have been made in 2014 
payments to past directors audited
there were no payments to past directors in 2014 a de minimis of £10000 applies to all disclosures under this note
review of past performance
the remuneration package is structured to help ensure alignment with shareholders there is no direct correlation between share 
price movement and the change in the value of the pay package in any one year as the remuneration package comprises several 
components some fixed and others based on nonfinancial measures the graph and table below show how the ceo’s pay has been 
sensitive to the share price over the last six years 
this graph illustrates the group’s performance compared to the ftse100 index which is considered the most appropriate broad 
equity market index against which the group’s performance should be measured performance as required by legislation is 
measured by tsr over the sixyear period from 1 january 2009 to 31 december 2014
100
200
350
300
450
50
150
250
400
31 dec
2008
31 dec
2009
31 dec
2010
year
£
31 dec
2011
31 dec
2012
31 dec
2013
31 dec
2014
value of £100 invested on 31 december 2008
meggitt
ftse 100
 
the table below details the ceo’s single total figure of remuneration over the same period 
2009 2010 2011 2012 2013
2
2014
mr s g young 
single total figure of remuneration £’000 – – – – 1296 1232
stip outcome
1 
 of maximum – – – – 39 33
epp vesting
1 
 of maximum – – – – 38 0
esos vesting
1 
 of maximum – – – – 76 0
mr t twigger
single total figure of remuneration £’000 1758 2947 4252 3812 1845
stip outcome
1 
 of maximum 86 86 100 80 35
epp vesting
1 
 of maximum 0 50 69 88 56
esos vesting
1 
 of maximum 100 100 100 100 98
1
  the outcomes are for those awards which are included in the single figure of remuneration for that year for 2014 this represents the outcome of   
esos and epp awards vesting in 2015 the final vesting of the epp award will not be confirmed until the vesting date in 2015 because of the tsr 
performance condition
2
  figures are provided for mr t twigger for the period up to 1 may 2013 and mr s g young for the period from his appointment as ceo on 1 may 2013  
93987p5575indd   70 04032015   1706 supplementary information financial statements governance reports strategic report 71
implementation of remuneration policy for 2015
base salary
base salaries are reviewed taking into account personal performance employment conditions and salary levels across the group 
and prevailing market conditions base salaries were reviewed in early 2015 and effective 1 april 2015 will be as follows for the 
executive directors
2015
 
£’000  change
2014
 
£’000
mr s g young 677 20 664
mr d r webb 449 20 440
mr p e green 361 50 344
for context salary adjustments across the group vary from region to region according to local salary inflation in the uk and the us 
the average salary adjustment will be 2 mr green assumes additional responsibilities in 2015 including for the commercial 
contracts function the committee therefore agreed to increase his salary by 5 in recognition of this change in role and in view of 
his salary continuing to be below competitive levels 
pension and benefits
there were no changes in pension contribution rates or benefit provision
2015 stip measures
stip measures for 2015 are based on underlying operating profit one third free cash flow one third and personal performance 
one third the definition of profit for the purposes of this target has been changed for 2015 from underlying profit before tax to 
underlying operating profit because it is considered by the committee to be more aligned to the metrics used to monitor our business 
units and therefore more relevant to stip participants the stip targets for 2015 together with details of whether they have been 
met will be disclosed subject to commercial sensitivity in the 2015 directors’ remuneration report the opportunity is in line with 
the policy disclosed on page 57
2015 ltip measures
the executive directors will be granted awards under the ltip in 2015 the vesting of which will be subject to the measures and 
targets set out in the table below a number of the strategic measures have agreed annual schedules and to ensure that the ltip 
targets for these measures remain relevant and stretching over the entire threeyear performance period targets for these 
measures will be set as three sets of annual targets ie at the start of each year and measured over a 12month period therefore 
the quality and delivery targets shown below are effective for year 1 of the 2015 ltip award and also for year 2 of the 2014 ltip 
award in determining the final vesting outcome at the end of each ltip cycle the committee will consider performance over the 
threeyear performance period for each strategic measure
vesting of the ltip awards will be subject to the following measures and targets
weighting measure threshold midpoint stretch
333 underlying eps pence threeyear aggregate equivalent to cagr range of 55 to 10 1083 1136 1191
333 rota average over three years 234 254 274
333
strategic measures
1
 
average over three years 
execution
quality  sites on target
2
  570 710 860
delivery  sites on target
2
  360 500 650
meggitt production 
system
average status  
per schedule
20 30 40
growth
organic revenue 
growth
 organic revenue 
growth cagr over 3 
years
50 65 80
programme 
management
average status  
per reviews
20 30 40
innovation schedule average status  
per schedule
20 30 40
1
  performance aga inst each strategic measure will be assessed at the end of the threeyear period against a scale of
	 •		 1 0 	 — t hr e sh o l d 	o b j e c ti v e 	n ot	m et
	 •		 2  0 — t hr e sh o l d	m et
	 •		 30 — o n	t a r g et
	 •		 4  0 — s t r e tc h	o b j e c ti v e 	m et
	 •		 5  0 — s t r e tc h	o b j e c ti v e 	e xc eed ed	
2
  the targets set out above on quality and delivery apply to year 1 of the 2015 ltip award and year 2 of the 2014 ltip award
93987p5575indd   71 04032015   1706 directors’ remuneration report continued
72 meggitt plc          report and accounts 2014
chairman and nonexecutive director fees
the remuneration of the chairman and nonexecutive directors has been in line with our policy in 2014
2015
1
 
£’000
2014
1
£’000
chairman fee
2
350 176
nonexecutive director base fee 55 54
additional fee for chairing audit or remuneration committee 11 10
additional fee for senior independent director 11 10
1   
fees shown here are effective for a year from 1 april
2   
on 23 april 2015 sir nigel rudd will assume the role of chairman as part of the selection process the chairman’s fee was reviewed and it was 
agreed that it would be appropriate to review the fee against a benchmark based on chairman fees at other ftse 100 companies and for the fee 
to reflect sir nigel rudd’s extensive experience at board level across multiple industries with his prior role as a nonexecutive director of bae 
systems and current exposure to the industry at bba aviation sir nigel has exceptional knowledge of the aerospace sector his experience 
across a wide range of businesses and expertise will be of significant benefit to the group and make him ideally positioned to be the next 
chairman it was also agreed that sir nigel rudd will receive additional benefits of £20000 per annum for secretarial and car services needed for 
business purposes
directors’ beneficial interests audited 
the beneficial interests of the directors and their connected persons in the ordinary shares of the company at 31 december 2014 as 
notified under the disclosure and transparency rules of the financial conduct authority dtr including shares held beneficially in 
the share incentive plan by executive directors were as follows
  shareholding
  ordinary shares of 5p each
  2014 2013
sir colin terry  12274 12041 
mr s g young  431501 413351
mr g s berruyer  3000 3000
mr p g cox
1
  6162 6824
ms a j p goligher
2
  3000 –
mr p e green   558928 557978
mr p heiden  6008 5841
ms b l reichelderfer  6000 6000
mr d a robins
3
  – 73008
mr d r webb
4
  26488 25648
mr d m williams  5000 5000
1
 resigned on 31 january 2015
2
 appointed on 30 october 2014 
3
 retired on 7 may 2014 
4
 appointed on 6 june 2013
between 1 january 2015 and 13 february 2015 the only changes to the beneficial interests of the directors in the ordinary shares  
of the company are that mr young mr webb and mr green each acquired 47 shares through the meggitt plc share incentive plan
external appointments held by executive directors 
executive director company role
 fees retained
2014
£’000
mr s g young derwent london plc nonexecutive director 40
chairman of audit committee 9
member of remuneration committee 4
total 53
mr d r webb segro plc nonexecutive director 53
chairman of audit committee 10
total 63
93987p5575indd   72 04032015   1706 supplementary information financial statements governance reports strategic report 73
directors’ shareholding requirements audited 
shares which are included within the shareholding requirement are
source of shares description
esos epp and ltip share awards exercised and retained
investment shares shares purchased as investment shares in respect of matching awards held under the epp
deferred bonus shares released and retained after the twoyear deferral period
ordinary shares shares purchased directly in the market
share dividend plan shares acquired through the share dividend plan
sip shares acquired via the sip 
sharesave scheme shares exercised and retained
the table below shows the shareholding of each executive director against their respective shareholding requirement as at  
31 december 2014 
 name
shareholding 
guideline  
 2014  
salary
shares owned 
outright
1
current 
shareholding 
 2014 
salary
2
guideline 
met
mr s g young 300 431501 337 met
mr d r webb 200 26488 31 building
mr p e green 200 558928 843 met
1
  includes shares invested to be eligible for outstanding epp matching awards
2
  assessment of shareholding is based on a share price of 51900 pence the value of a meggitt share on 31 december 2014
93987p5575indd   73 04032015   1706 directors’ remuneration report continued
74 meggitt plc          report and accounts 2014
directors’ interests in share schemes audited 
all of the esos epp and ltip awards have performance conditions attached as detailed in the directors remuneration report in the 
year of grant and in this report for those awards made in 2014
•	 the awards made up to and including 2011 have already vested to the extent detailed in this and previous reports and the figures 
shown in the table below for those years are the vested share award amounts 
•	 the awards made in 2012 2013 and 2014 were unvested as at 31 december 2014
sharesave awards are not subject to performance conditions
date of award
number of shares under award
 exercise 
 price
 market price 
 at date of 
 exercise
 date 
 exercisable 
 from
 expiry 
 date 
 at 1 jan  
 2014 
 awarded 
 exercised 
 lapsed
 at 31 dec 
 2014
mr s g young
1996 esos no1 options 010404 17200 17200 – 17440p 44950p 010407 310314
esos 2005 part b stock sars 101005 186615 – 186615 27865p – 101008 091015
270906 210871 – 210871 26367p – 270909 260916
290307 192642 – 192642 29900p – 290310 280317
250308 285149 – 285149 25250p – 250311 240318
300409 297345 – 297345 16950p – 300412 290419
120310 251660 – 251660 28610p – 120313 110320
020311 210975 50634 160341 35170p – 020314 010321
100412 288520 – 288520 39720p – 100415 090422
050913 243114 – 243114 52650p – 050916 040923
epp—basic nil cost options 050809 115418 – 115418 – – 210812 040819
210411 77729 – 77729 – – 210813 200421
170811 76663 47532 29131 – – 170814 160821
220812 73236 – 73236 – – 220815 210822
180313 114556 – 114556 – – 180316 170323
epp—match nil cost options 120809 64359 – 64359 – – 210812 040819
210411 57630 – 57630 – – 210813 200421
170811 53768 33337 20431 – – 170814 160821
220812 47547 – 47547 – – 220815 210822
180313 66946 – 66946 – – 180316 170323
ltip nil cost options 220514 – 312443 312443 – – 220517 210519
sharesave options 120914 – 2405 2405 37419p – 011117 010518
total  2931943 166145 3098088    
93987p5575indd   74 04032015   1706 supplementary information financial statements governance reports strategic report 75
 
date of award
number of shares under award
 exercise 
 price
 market price 
 at date of 
 exercise
 date 
 exercisable 
 from
 expiry 
 date 
 at 1 jan  
 2014 
 awarded 
 exercised 
 lapsed
 at 31 dec 
 2014
mr p e green
esos 2005 part a options 290307 2759 – 2759 29900p – 290310 280317
300409 12832 – 12832 16950p – 300412 290419
esos 2005 part b stock sars 101005 20662 – 20662 27865p – 101008 091015
270906 23365 – 23365 26367p – 270909 260916
250308 217822 – 217822 25250p – 250311 240318
300409 214306 – 214306 16950p – 300412 290419
120310 192240 – 192240 28610p – 120313 110320
020311 164345 39443 124902 35170p – 020314 010321
100412 233384 – 233384 39720p – 100415 090422
050913 123456 – 123456 52650p – 050916 040923
epp – basic nil cost options 050809 88167 – 88167 – – 210812 040819
210411 59377 – 59377 – – 210813 200421
170811 59719 37026 22693 – – 170814 160821
220812 59240 – 59240 – – 220815 210822
180313 58173 – 58173 – – 180316 170323
epp – match nil cost options 120809 49163 – 49163 – 210812 040819
210411 44022 – 44022 – – 210813 200421
170811 41884 25969 15915 – – 170814 160821
220812 38461 – 38461 – – 220815 210822
180313 33996 – 33996 – – 180316 170323
ltip nil cost options 220514 – 161868 161868 – – 220517 210519
sharesave options 060910 1389 – 1389 22235p – 011115 010516
140912 1835 – 1835 32694p – 011117 010518
120914 – 1619 1619 37419p – 011119 010520
total 1740597 61049 1801646    
date of award
number of shares under award
 exercise 
 price
 market price 
 at date of 
 exercise
 date 
 exercisable 
 from
 expiry 
 date 
 at 1 jan  
 2014 
 awarded 
 exercised 
 lapsed
 at 31 dec 
 2014
mr d r webb
esos 2005 part a options 050913 5698 – 5698 52650p – 050916 040923
esos 2005 part b stock sars 050913 155745 – 155745 52650p – 050916 040923
eppbasic nil cost options 050913 60281 – 60281 52650p – 050916 040923
eppmatch nil cost options 050913 39868 – 39868 52650p – 050916 040923
ltip nil cost options 220514 – 207041 207041 – – 220517 210519
sharesave options 130913 3517 – 3517 42640p – 011118 010519
total  265109 207041 472150    
by order of the board
paul heiden
chairman remuneration committee
23 february 2015
93987p5575indd   75 04032015   1706 76 meggitt plc          report and accounts 2014
directors’ report
incorporation by reference
certain laws and regulations require that specific information 
should be included in the directors’ report the table below 
shows the items which are incorporated into this directors’ 
report by reference
the directors present their report together with the audited 
consolidated financial statements of the group prepared in 
accordance with international financial reporting standards 
ifrss as adopted by the european union and the companies  
act 2006 and company audited financial statements prepared 
in accordance with uk generally accepted accounting practice  
uk gaap and the companies act 2006 for the year ended  
31 december 2014 
there are no significant events affecting the group since the  
end of the year requiring disclosure
information incorporated into the directors’ report by reference location and page
likely future developments in the group’s business strategic report page 1 to 41
the corporate governance report board of directors and corporate governance report  
pages 43 to 50
research and development activities note 8 of the group’s consolidated financial statements  
page 102 and chief financial officer’s review page 34
policies on financial risk management including the extent to which financial  
instruments are utilised to mitigate any significant risks to which the group is exposed
note 3 of the group’s consolidated financial statements page 
95
greenhouse gas emissions corporate responsibility report page 39
employee information
employee involvement
employment of disabled persons
corporate responsibility report page 41
independent auditors—disclosure of relevant audit information statement of directors responsibilities page 79
statement of the amount of interest capitalised by the group during the year with an 
indication of the amount and treatment of any related tax relief
note 19 of the group’s consolidated financial statements  
page 109
details of long term incentive plans directors’ remuneration report pages 58 to 59
details of any arrangements under which a director of the company has waived or agreed 
to waive any emoluments from the company or any subsidiary undertaking
nothing to disclose
details of allotments for cash of ordinary shares made during the period under review note 34 of the group’s consolidated financial statements  
page 125
contracts of significance to which the company is a party and in which a director is 
materially interested
nothing to disclose
contracts of significance between a company and a controlling shareholder not applicable as the company does not have a controlling 
shareholder
contracts for the provision of services to the company by a controlling shareholder not applicable as the company does not have a controlling 
shareholder
details of any arrangement under which a shareholder has waived or agreed to waive 
dividends
nothing to disclose
agreements related to controlling shareholder requirements under lr 922 a not applicable as the company does not have a controlling 
shareholder
statement of directors interests directors’ remuneration report page 72
interests disclosed by shareholders under dtr 5 substantial shareholdings page 78
going concern disclosure chief financial officer’s review page 37
details of shareholder authority for the purchase of the company’s own shares share capital and control page 77
a statement of how the company has complied with the code and details of any non
compliance
corporate governance report page 43
details of directors service contracts share capital and control page 78 and directors’ remuneration 
report pages 62 to 63
share buyback disclosures chief financial officer’s review page 35
93987p7679indd   76 04032015   1707 supplementary information financial statements governance reports strategic report 77
conflicts of interest
the company has a procedure for the disclosure review 
authorisation and management of directors’ conflicts of interest 
and potential conflicts of interest in accordance with the 
provisions of the companies act 2006 in deciding whether to 
authorise a conflict or potential conflict the directors must have 
regard to their general duties under the companies act 2006 
the authorisation of any conflict matter and the terms of 
authorisation are regularly reviewed by the board
political donations
no political donations were made during the year 2013 none
share capital and control 
the issued share capital of the company at 31 december 2014 
and details of shares issued and cancelled during the financial 
year are shown in note 34 of the group’s consolidated financial 
statements on 31 december 2014 there were 802330037 
ordinary shares in issue a further 2916114 ordinary shares 
were bought back and cancelled between 1 january 2015 and 13 
february 2015 with an aggregate amount paid of £152m all of 
which were cancelled as a result of the share buyback 
programme and 1031 shares have been allotted under the 
sharesave scheme the ordinary shares are listed on the 
london stock exchange
the rights and obligations attaching to the company’s ordinary 
shares are set out in the articles a copy of the articles is 
available for inspection at the registered office the holders of 
ordinary shares are entitled to receive the company’s report  
and accounts to attend and speak at general meetings of the 
company to appoint proxies to exercise full voting rights and  
to participate in any distribution of income or capital
there are no restrictions on transfer or limitations on holding 
ordinary shares and no requirements for prior approval of any 
transfers there are no known arrangements under which 
financial rights are held by persons other than holders of the 
shares and no known agreements or restrictions on share 
transfers or on voting rights shares acquired through company 
share plans rank pari passu on an equal footing with the 
shares in issue and have no special rights 
rules about the appointment and replacement of company 
directors are contained in the articles which provide that  
a director may be appointed by ordinary resolution of the 
shareholders or by the existing directors either to fill a vacancy  
or as an additional director changes to the articles must be 
submitted to the shareholders for approval by way of special 
resolution the directors may exercise all the powers of the 
company subject to the provisions of relevant legislation the 
articles and any directions given by the company in general 
meeting 
the powers of the directors include those in relation to the issue 
and buyback of shares at each agm the shareholders are 
requested to renew the directors’ powers to allot securities in the 
company up to the value specified in the notice of meeting and to 
renew the directors’ powers to allot securities without the 
application of preemption rights up to the value specified in the 
notice of meeting in accordance with the articles the company 
can seek authority from the shareholders at the agm to purchase 
its own shares
dividends
the directors recommend the payment of a final dividend of 
950p net per ordinary 5p share 2013 880p to be paid on 8 may 
2015 to those members on the register at close of business on  
20 march 2015 an interim dividend of 425p 2013 395p was 
paid on 3 october 2014 if the final dividend as recommended  
is approved the total ordinary dividend for the year will amount  
to 1375p net per ordinary 5p share 2013 1275p
dividends are paid to shareholders net of a nonrefundable tax 
credit of 10 shareholders liable to higher rates of income tax 
will have additional tax to pay 
share dividend plan
during 2014 the company made a share dividend plan available 
for the dividends paid in may 2014 the final dividend for 2013 
and in october 2014 the interim dividend for 2014 the cash 
dividend necessary to give an entitlement to one new ordinary 
share was fixed at 45454p and 46740p respectively 
a share buyback programme was announced on 5 november 
2014 consistent with introducing a share buyback programme 
the board determined that a dividend reinvestment plan would 
be offered instead of a scrip dividend in 2015 further details of 
the share buyback programme are contained in the chief 
financial officer’s review page 35
directors
the directors of the company who were in office during the year 
and up to the date of signing the financial statements were  
sir colin terry chairman mr s g young chief executive  
mr g s berruyer mr p g cox resigned 31 january 2015  
ms a j p goligher appointed 30 october 2014 mr p e green  
mr p heiden ms b l reichelderfer mr d a robins retired 7 may 
2014 mr d r webb and mr d m williams senior independent 
director since the year end and up to the date of this directors’ 
report mr philip cox resigned as a director on 31 january 2015 
additionally the board announced in december 2014 that on  
1 march 2015 sir nigel rudd will join the board initially as a 
nonexecutive director and deputy chairman and then as 
nonexecutive chairman at the conclusion of the annual 
general meeting agm being held on 23 april 2015 following  
the retirement of sir colin terry 
all directors will be submitted for election or reelection at the 
agm except sir colin terry who is due to retire at its conclusion 
details of any unexpired terms of the directors’ service 
contracts are in the directors’ remuneration report 
membership of committees and biographical information is 
disclosed on pages 44 to 45 and in the notice of agm
the directors have the benefit of qualifying thirdparty 
indemnity provisions for the purposes of section 236 of the 
companies act 2006 pursuant to the articles which were in 
effect throughout the financial year and up to the date of this 
directors’ report the company also purchased and maintained 
throughout the year directors’ and officers’ liability insurance 
no indemnity is provided for the company’s auditors 
93987p7679indd   77 04032015   1707 78 meggitt plc          report and accounts 2014
directors’ report continued
substantial shareholdings
at 13 february 2015 the company had been notified under the 
disclosure and transparency rules dtr of the following 
substantial interests in the issued ordinary shares of the 
company requiring disclosure
 direct voting 
rights m
 indirect voting 
rights m
percentage of total 
v oting r ights  
attaching to the  
is sued or dinary  
share capital of  
the company
the capital group 
companies inc
– 1208 1511
harris associates lp – 413 516
fmr llc – 406 507
standard life 
investments ltd 
222 38 324
legal  general group plc 237 – 297
one voting right per ordinary share
these holdings are published on a regulatory information 
service and on the company’s website
statement of directors’ responsibilities
the directors are responsible for preparing the annual report 
the directors’ remuneration report and the financial statements 
in accordance with applicable law and regulations
company law requires the directors to prepare financial 
statements for each financial year under that law the directors 
have prepared the group financial statements in accordance 
with international financial reporting standards ifrss as 
adopted by the european union and the parent company 
financial statements in accordance with united kingdom 
generally accepted accounting practice united kingdom 
accounting standards and applicable law  
share capital and control continued
the group has significant financing agreements which include 
change of control provisions which should there be a change 
of ownership of the company could result in renegotiation 
withdrawal or early repayment of these financing agreements 
these are a usd 900 million revolving credit agreement dated 
september 2014 a usd 600 million note purchase agreement 
dated june 2010 and a usd 250 million note purchase 
agreement dated june 2003 
there are a number of other longterm commercial 
agreements that may alter or terminate upon a change of 
control of the company following a successful takeover bid 
these arrangements are commercially confidential and their 
disclosure could be seriously prejudicial to the company 
agreements with the company’s directors or employees 
providing compensation in the event of a takeover bid
director contractual entitlement
mr s g young none except that provisions in the company’s 
share plans may cause options andor awards 
granted to employees under such plans to vest  
on a takeover
mr d r webb none except that provisions in the company’s 
share plans may cause options andor awards 
granted to employees under such plans to vest  
on a takeover
mr p e green mr green may terminate his employment 
within six months and would be entitled to 
compensation from the company for loss of 
office the compensation would be annual 
remuneration plus the value of benefits for the 
unexpired notice period less 5 in addition 
provisions in the company’s share plans may 
cause options andor awards granted to 
employees under such plans to vest on  
a takeover
nonexecutive 
directors
none
all other 
employees
there are no agreements that would provide 
compensation for loss of employment resulting 
from a takeover except that provisions in the 
company’s share plans may cause options 
andor awards granted to employees under 
such plans to vest on a takeover
93987p7679indd   78 04032015   1707 supplementary information financial statements governance reports strategic report 79
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 group and the company and 
of the profit or loss of the group for that period  
in preparing these financial statements the directors are 
required to
•	  select suitable accounting policies and apply them 
consistently
•	  make judgements and accounting estimates that are 
reasonable and prudent and
•	 state whether ifrss as adopted by the european union and 
applicable uk accounting standards have been followed 
subject to any material departures disclosed and explained in 
the group and parent company financial statements 
respectively
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 the group and enable 
them to ensure that the financial statements and the directors’ 
remuneration report comply with the companies act 2006 and 
as regards the group financial statements article 4 of the ias 
regulation they are also responsible for safeguarding the 
assets of the company and the group and hence for taking 
reasonable steps for the prevention and detection of fraud and 
other irregularities the directors are also responsible for the 
maintenance and integrity of the company’s website legislation 
in the united kingdom governing the preparation and 
dissemination of financial statements may differ from legislation 
in other jurisdictions 
each of the directors whose names and functions are listed in 
the board of directors on page 44 to 45 confirm that to the best 
of their knowledge 
•	 the group financial statements which have been prepared in 
accordance with ifrss as adopted by the eu give a true and 
fair view of the assets liabilities financial position and profit  
of the group and
•	 the strategic report and this directors’ report include a fair 
review of the development and performance of the business 
and the position of the group together with a description of 
the principal risks and uncertainties that it faces
each of the persons who is a director as at the date of this report 
confirms that
•	 so far as the director is aware there is no relevant audit 
information of which the company’s auditors are unaware 
and
•	 the director has taken all the necessary steps in order to 
make himself or herself aware of any relevant audit 
information and to establish that the company’s auditors are 
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
fair balanced and understandable
the directors as at the date of this report consider that the 
annual report and accounts 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 the board has made this assessment on the 
basis of a review of the accounts process a discussion on the 
content of the annual report assessing its fairness balance and 
understandability together with the confirmation from executive 
management that the report is fair balanced and 
understandable
by order of the board
 
 
m l thomas
company secretary
23 february 2015
 
93987p7679indd   79 04032015   1707 80 meggitt plc          report and accounts 2014
our audit approach
overview
materiality •	 overall group materiality £11m which 
represents approximately 5 of profit before tax
audit scope •	 we conducted audit work at 17 reporting units
•	 business units where we performed audit work 
accounted for 100 of group profit before tax 
and 77 of group net assets
areas of focus •	 goodwill and intangible asset impairment 
assessments
•	 environmental and contractual provisions
•	 revenue recognition under long term contract 
accounting primarily in the group’s energy 
business
•	 retirement benefit obligation liability
•	 provision for uncertain tax positions
the scope of our audit and our areas of focus
we conducted our audit in accordance with international 
standards on auditing uk and ireland “isas uk  ireland”
we designed our audit by determining materiality and 
assessing the risks of material misstatement in the financial 
statements in particular we looked at where the directors 
made subjective judgements for example in respect of 
significant accounting estimates that involved making 
assumptions and considering future events that are inherently 
uncertain as in all of our audits we also addressed the risk of 
management override of internal controls including 
evaluating whether there was evidence of bias by the directors 
that represented a risk of material misstatement due to fraud 
the risks of material misstatement that had the greatest effect 
on our audit including the allocation of our resources and effort 
are identified as ‘areas of focus’ in the table below we have also 
set out how we tailored our audit to address these specific areas in 
order to provide an opinion on the financial statements as a whole 
and any comments we make on the results of our procedures should 
be read in this context each of the areas of focus below is also 
referred to in the audit committee report on page 52 and in the 
critical accounting estimates and judgements on pages 96 to 98 this 
is not a complete list of all risks identified by our audit 
report on the group financial statements
our opinion 
in our opinion meggitt plc’s group financial statements the 
“financial statements”
•	 give a true and fair view of the state of the group’s affairs as 
at 31 december 2014 and of its profit and cash flows for the 
year then ended
•	 have been properly prepared in accordance with 
international financial reporting standards “ifrss” as 
adopted by the european union and
•	 have been prepared in accordance with the requirements of 
the companies act 2006 and article 4 of the ias regulation
what we have audited
meggitt plc’s financial statements comprise
•	 the consolidated balance sheet as at 31 december 2014
•	 the consolidated income statement and consolidated 
statement of comprehensive income for the year then 
ended
•	 the consolidated cash flow statement for the year then 
ended
•	 the consolidated statement of changes in equity for the 
year then ended and
•	 the notes to the financial statements which include a 
summary of significant accounting policies and other 
explanatory information
certain required disclosures have been presented elsewhere 
in the annual report and accounts the ‘annual report’ 
rather than in the notes to the financial statements these are 
crossreferenced from the financial statements and are 
identified as audited
the financial reporting framework that has been applied in the 
preparation of the financial statements is applicable law and 
ifrss as adopted by the european union
independent auditors’ report to the  
members of meggitt plc
93987p8084indd   80 04032015   1736 supplementary information financial statements governance reports strategic report 81
area of focus how the scope of our audit addressed the area of focus
goodwill and intangible asset impairment assessments
refer also to notes 18 19 and 20 pages 107 to 110
the group holds significant amounts of goodwill 
£15bn acquired intangibles £07bn 
development costs £03bn and programme 
participation costs £02bn on the balance sheet 
we focused on the risk that certain of these 
balances could be overstated
we focused in particular on the estimated value in 
use of the meggitt sensing systems business as it 
has the lowest percentage headroom of estimated 
value in use over book value headroom £534m 
and also the meggitt aircraft braking systems 
business as it has the highest net book value of 
goodwill and intangibles at £15bn and has the 
second lowest percentage headroom of estimated 
value in use over net book value headroom 
£3136m
we evaluated and challenged the directors’ future cash flow forecasts and the process by 
which they were drawn up and tested the underlying value in use calculations we 
compared the directors’ forecast to the latest board approved five year plans and assessed 
the actual performance in the year against the prior year budgets to evaluate budgeting 
accuracy
the key assumption in the sensing systems business forecast is the planned level of 
profitability following a significant decline in profits during 2014 in assessing this assumption 
we evaluated in particular the likelihood of the factors that drove the decline in profits during 
2014 impacting the business over the 5 year forecast period 
the key assumption in the braking systems business forecast is the assumed level of 
growth in assessing this assumption the factors we considered included the expected 
growth in the number of aircraft on which the braking business has its equipment based on 
third party forecasts during the forecast period in particular the aftermarket size and 
whether a sole source supplier position is held 
in respect of both forecasts we also challenged 
•	 the directors’ assumptions for terminal growth rates in the forecasts by comparing them 
to economic and industry forecasts and
•	 the discount rate by assessing the cost of capital for the company and comparable 
organisations 
we performed sensitivity analysis in respect of the assumptions noted above to ascertain 
the extent of change in those assumptions which either individually or collectively would be 
required for the goodwill and intangible assets to be impaired and we assessed the 
likelihood of these changes in assumption arising 
although uncertainties exist in any long term forecasting exercise based on the work 
performed we reached the view that the cash flows required to support the carrying values 
are achievable
environmental and contractual provisions
refer also to note 31 page 119
the group has liabilities of £1330m relating to 
environmental matters and £426m relating to 
other matters we focused on these areas 
because certain of these provisions include 
significant subjective judgements as set out 
below
the environmental matters which primarily 
relate to site remediation and clean up liabilities 
at legacy manufacturing sites in the us are 
based on judgements as to the estimated 
cleanup cost and also the length of time that 
operation and monitoring of the site is required
in addition the group has contract related and 
other provisions based for example on 
estimates of the potential cost of settling any 
claims for damages by customers and where 
appropriate the cost of any new equipment or 
rework required under the contract
our work on the valuation of environmental liabilities comprised the following
•	 we obtained the cost estimates and reports prepared by the group’s external 
environmental consultants for the most significant sites and discussed these with the 
group’s internal legal counsel we agreed the provisions recorded to the cost estimates 
included in these reports in addition we assessed the consistency of the cost estimates 
year on year and the level of costs incurred compared to the prior year estimates
•	 we assessed the competence of the external environmental consultants including 
reviewing their qualifications and we assessed the level of historical accuracy of the 
estimates produced by these consultants and inhouse legal experts by comparing them 
to the actual costs or settlements
•	 we assessed the extent of insurance coverage against the known exposures including 
obtaining evidence of the insurers’ financial position to assess their ability to meet the 
commitments in these policies 
we found no material exceptions in these tests
our work on contract related and other provisions included obtaining corroborating 
evidence for the directors’ cost estimates including looking at the historical level of actual 
costs incurred against the estimated costs and comparing the future cost estimates to the 
current actual costs we also read legal and other correspondence with customers for 
evidence regarding claims outstanding or provided for at year end in addition where 
insurance exists in respect of an exposure we read the correspondence with the insurers 
we found no material exceptions in these tests
we performed sensitivity analysis in respect of the cost estimates of contractual disputes 
including estimated costs of settlement and the expected cost of production of new 
equipment or rework to ascertain the extent of change in those estimates that either 
individually or collectively would be required for the provisions to be materially misstated 
we discussed the likelihood of such a change in these estimates with the directors and 
agreed with their conclusion that this was unlikely
independent auditors’ report to the  
members of meggitt plc continued
93987p8084indd   81 04032015   1736 82 meggitt plc          report and accounts 2014
area of focus how the scope of our audit addressed the area of focus
revenue recognition under long term contract accounting primarily in the group’s energy business
refer also to note 5 page 98
we focused on the recognition of revenue because 
where long term contract accounting is used 
estimates and judgements are made in 
determining the amount of revenue to be recorded 
the group’s long term contract accounting is 
primarily concentrated in its energy business 
which contracts to manufacture printed circuit 
heat exchangers these comprise the majority of 
the group contract accounting revenue of £983m 
the recognition of revenue is largely dependent on 
the estimated stage of completion of each contract 
which is determined based on the proportion of 
contract costs incurred for work performed to date 
compared to the estimated total contract costs
as these contracts sometimes span a number of 
reporting periods changes in the estimate of total 
contract costs or the inappropriate recording of 
costs around the year end could result in material 
amounts of revenue being recorded in the 
incorrect period
 we tested revenue recognised under long term contract accounting as follows
•	 tested the calculation of stage of completion including testing the costs incurred and 
recorded against the contract for occurrence and accuracy assessing the basis for 
determining the total contract cost and reperforming the percentage of completion 
calculation
•	 agreed that the revenue recognised was consistent with the calculated stage of 
completion
•	 tested whether the work allocated to contracts had been carried out in the period in 
which the revenue had been recognised
•	 for raw materials in stock at year end and allocated to contracts tested to confirm that 
these were made specifically for the contract and therefore that revenue was recorded 
in the appropriate period
•	 assessed the estimates of costs to complete for major contracts and also assessed the 
historical accuracy of the estimates of total contract costs
•	 examined any loss making contracts to determine the level of provisioning required and 
also assessed the actual profit or loss achieved on contracts that completed in the year 
compared to the forecast position in the prior year
we found no instances of inappropriate revenue recognition
retirement benefit obligation liability
refer also to note 33 pages 121 to 125
the group has retirement benefit obligations with 
gross liabilities of £10789m which are significant 
in the context of the overall balance sheet of the 
group
the valuation of retirement benefit obligations 
requires significant levels of judgement and 
technical expertise in choosing appropriate 
assumptions small changes in a number of the 
key assumptions including salary increases 
inflation discount rates and mortality can have a 
material impact on the calculation of the liability 
we evaluated the assumptions made in relation to the valuation of the liabilities in 
particular
•	 we compared assumed mortality rates to national and industry averages
•	 we assessed the assumption for salary increases against the group’s historic trend and 
expected future outlook
•	 we agreed the discount and inflation rates used to our internally developed benchmarks
•	 we validated the census data used by the group’s actuaries to the underlying data held 
by the group and scheme administrators 
we found no material exceptions in these tests
provisions for uncertain tax positions
refer also to note 14 page 105
judgements have to be made by management on 
the tax treatment of a number of transactions in 
advance of the ultimate tax determination being 
known these uncertain tax outcomes result 
from the complexity of the group’s legal 
structure including multiple legal entities and 
the multiple tax jurisdictions primarily the uk 
and us and the changing tax environment in 
which the group operates in addition uncertainty 
arises from the level of tax credits claimed and 
the level of intergroup transactions that are 
recorded 
we evaluated the process by which management have calculated each exposure and we 
challenged the estimates made by management in arriving at the provision for uncertain tax 
positions we also calculated our own range of outcomes in respect of each of the significant 
tax exposures in addition we considered any tax opinions or other tax reports the group had 
received from its tax advisors in relation to the exposures identified to determine if the 
treatment is consistent with the advice obtained we also tested the underlying calculation 
of the provision for uncertain tax positions we found that the assumptions management 
have used in developing the estimated exposure provided a reasonable basis for 
provisioning
how we tailored the audit scope
we tailored the scope of our audit to ensure that we performed 
enough work to be able to give an opinion on the financial 
statements as a whole taking into account the geographic 
structure of the group the accounting processes and controls 
and the industry in which the group operates 
the group’s accounting process is structured around a local 
finance function in each of the group’s reporting units these 
functions maintain their own accounting records and controls 
although transactional processing and certain controls for 
some reporting units are performed at the group’s shared 
service centres and report to the head office finance team 
through an integrated consolidation system
in establishing the overall group audit strategy and plan we 
determined the type of work that needed to be performed at 
the reporting units by the group engagement team and by 
independent auditors’ report to the  
members of meggitt plc continued
93987p8084indd   82 04032015   1736 supplementary information financial statements governance reports strategic report 83
statements using the going concern basis of accounting the 
going concern basis presumes that the group has adequate 
resources to remain in operation and that the directors intend it 
to do so for at least one year from the date the financial 
statements were signed as part of our audit we have concluded 
that the directors’ use of the going concern basis is appropriate
however because not all future events or conditions can be 
predicted these statements are not a guarantee as to the group’s 
ability to continue as a going concern
other required reporting
consistency of other information
companies act 2006 opinion
in our opinion 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
isas uk  ireland reporting 
under isas uk  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
 – is otherwise misleading
we have no 
exceptions to 
report arising from  
this responsibility
•	 the statement given by the directors on page 
79 in accordance with provision c11 of the 
uk corporate governance code “the 
code” that they consider the annual report 
taken as a whole to be fair balanced and 
understandable and provides the 
information necessary for members to 
assess the group’s performance business 
model and strategy is materially inconsistent 
with our knowledge of the group acquired in 
the course of performing our audit
we have no 
exceptions to 
report arising from 
this responsibility 
•	 	 the	section	of	the	annual	report	on	page	51	
as required by provision c38 of the code 
describing the work of the audit committee 
does not appropriately address matters 
communicated by us to the audit committee
we have no 
exceptions to 
report arising from 
this responsibility
adequacy of information and explanations received
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 we have no 
exceptions to report arising from this responsibility
component auditors from other pwc network firms or by our 
shared service centre teams where the work was performed 
by component auditors or our shared service centre teams we 
determined the level of involvement we needed to have in the 
audit work at those reporting units so as to be able to conclude 
whether sufficient appropriate audit evidence had been 
obtained as a basis for our opinion on the group financial 
statements as a whole
for each reporting unit we determined whether we required 
an audit of their complete financial information or whether 
specified procedures addressing parts of their financial 
information would be sufficient those where a complete audit 
was required included the largest reporting unit meggitt 
aircraft braking systems akron because this makes up more 
than 15 of the group’s revenue and profits we included a 
further 9 reporting units in 4 countries based on their size or 
risk and performed specified procedures on a further 7 
reporting units in respect of specific balances 
the group consolidation financial statement disclosures and a 
number of complex items were audited by the group 
engagement team at the head office these included derivative 
financial instruments hedge accounting defined benefit 
pension schemes share based payments and goodwill the 
group engagement team also visited 10 businesses in 3 
countries uk usa and switzerland to review the work 
undertaken by component auditors and to assess the findings 
together these 17 reporting units accounted for 100 of group 
profit before tax and 77 of net assets this gave us the 
evidence we needed for our opinion on the financial statements 
as a whole
materiality
the scope of our audit is influenced by our application of 
materiality we set certain quantitative thresholds for 
materiality these together with qualitative considerations 
helped us to determine the scope of our audit and the nature 
timing and extent of our audit procedures and to evaluate the 
effect of misstatements both individually and on the financial 
statements as a whole 
based on our professional judgement we determined 
materiality for the financial statements as a whole as follows
overall group materiality £11m 2013 £14m
how we determined it approximately 5 of profit before tax
rationale for benchmark 
applied
consistent with last year we applied this 
benchmark a generally accepted 
auditing practice in the absence of 
indicators that an alternative benchmark 
would be more appropriate
we agreed with the audit committee that we would report to them 
misstatements identified during our audit above £500000 2013 
£500000 as well as misstatements below that amount that in our 
view warranted reporting for qualitative reasons
going concern
under the listing rules we are required to review the directors’ 
statement set out on page 37 in relation to going concern we 
have nothing to report having performed our review
as noted in the directors’ statement the directors have 
concluded that it is appropriate to prepare the financial 
93987p8084indd   83 04032015   1736 84 meggitt plc          report and accounts 2014
we test and examine information using sampling and other 
auditing techniques to the extent we consider necessary to 
provide a reasonable basis for us to draw conclusions we 
obtain audit evidence through testing the effectiveness of 
controls substantive procedures or a combination of both
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
other matter 
we have reported separately on the company financial 
statements of meggitt plc for the year ended 31 december 
2014 and on the information in the directors’ remuneration 
report that is described as having been audited
 
andrew paynter senior statutory auditor
for and on behalf of pricewaterhousecoopers llp chartered 
accountants and statutory auditors 
london
23 february 2015
directors’ remuneration
under the companies act 2006 we are required to report to 
you if in our opinion certain disclosures of directors’ 
remuneration specified by law are not made we have no 
exceptions to report arising from this responsibility 
corporate governance statement
under the listing rules we are required to review the part of the 
corporate governance statement relating to the company’s 
compliance with ten provisions of the uk corporate governance 
code we have nothing to report having performed our review 
responsibilities for the financial statements and 
the audit
our responsibilities and those of the directors
as explained more fully in the statement of directors’ 
responsibilities set out on pages 78 to 79 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 isas 
uk  ireland those standards require us to comply with the 
auditing practices board’s ethical standards for auditors
this report including the opinions has been prepared for and 
only for the company’s members as a body in accordance with 
chapter 3 of part 16 of the companies act 2006 and for no other 
purpose we do not in giving these opinions accept or assume 
responsibility for any other purpose or to any other person to 
whom this report is shown or into whose hands it may come save 
where expressly agreed by our prior consent in writing
what an audit of financial statements involves
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free 
from material misstatement whether caused by fraud or 
error this includes an assessment of 
•	 whether the accounting policies are appropriate to the 
group’s circumstances and have been consistently applied 
and adequately disclosed 
•	 the reasonableness of significant accounting estimates 
made by the directors and 
•	 the overall presentation of the financial statements 
we primarily focus our work in these areas by assessing the 
directors’ judgements against available evidence forming our 
own judgements and evaluating the disclosures in the 
financial statements
93987p8084indd   84 04032015   1736 supplementary information financial statements governance reports strategic report 85
consolidated income statement
for the year ended 31 december 2014
 notes
 2014 
 £’m
 2013 
 £’m
revenue 5 15537 16373
cost of sales 9359 9811
gross profit 6178 6562
net operating costs 3816 3559
operating profit
1
6 2362 3003
finance income 12 12 03
finance costs 13 285 312
net finance costs 273 309
profit before tax
2
2089 2694
tax 14 319 371
profit for the year attributable to equity owners of the company 1770 2323
earnings per share
basic
3
15 220p 294p
diluted
4
15 217p 289p
1
  underlying operating profit 10 3460 3972
2
  underlying profit before tax 10 3287 3778
3
  underlying basic earnings per share 15 324p 375p
4
  underlying diluted earnings per share 15 319p 369p
93987p8589indd   85 04032015   1711 86 meggitt plc          report and accounts 2014
consolidated statement of comprehensive income
for the year ended 31 december 2014
 notes
 2014 
 £’m
 2013 
 £’m
profit for the year attributable to equity owners of the company 1770 2323
items that may be reclassified to the income statement in subsequent periods
currency translation differences 372 774
cash flow hedge movements 08 19
tax effect 14 02 01
 764 352
items that will not be reclassified to the income statement in subsequent periods
remeasurement of retirement benefit obligations 33 977 468
tax effect 14 242 216
 735 252
    
other comprehensive incomeexpense for the year 29 100
    
total comprehensive income for the year attributable to equity owners of the company 1799 2223
93987p8589indd   86 04032015   1711 supplementary information financial statements governance reports strategic report 87
 notes
 2014 
 £’m
 2013 
 £’m
noncurrent assets
goodwill 18 15411 14571
development costs 19 3429 2705
programme participation costs 19 2424 2106
other intangible assets 20 6730 7073
property plant and equipment 21 2511 2455
trade and other receivables 23 934 899
derivative financial instruments 30 296 355
deferred tax assets 32 09 91
  31744 30255
current assets
inventories 22 3272 2992
trade and other receivables 23 3319 3289
derivative financial instruments 30 11 112
current tax recoverable 33 28
cash and cash equivalents 24 1055 1161
  7690 7582
total assets 6 39434 37837
current liabilities
trade and other payables 25 3585 3291
derivative financial instruments 30 96 07
current tax liabilities 365 406
obligations under finance leases 27 01 24
bank and other borrowings 28 589 72
provisions 31 451 443
  5087 4243
net current assets 2603 3339
noncurrent liabilities
trade and other payables 26 59 52
derivative financial instruments 30 29 01
deferred tax liabilities 32 2148 2193
obligations under finance leases 27 53 51
bank and other borrowings 28 6167 6660
provisions 31 1305 1492
retirement benefit obligations 33 3178 2381
  12939 12830
total liabilities 18026 17073
net assets 21408 20764
equity
share capital 34 401 399
share premium 12189 11663
other reserves 144 141
hedging and translation reserves 1591 827
retained earnings 7083 7734
total equity attributable to owners of the company 21408 20764
the financial statements on pages 85 to 132 were approved by the board of directors on 23 february 2015 and signed on its behalf by 
 
s g young d r webb 
director director
as at 31 december 2014
consolidated balance sheet
93987p8589indd   87 04032015   1711 88 meggitt plc          report and accounts 2014
for the year ended 31 december 2014
consolidated statement of changes in equity
equity attributable to owners of the company
 notes
  
 share 
 capital  
 
 £’m
 share 
 premium 
 
 £’m
 other  
 reserves 
 
 £’m
 hedging and 
 translation 
 reserves 
 £’m
 retained 
 earnings 
  
 £’m
 total 
 equity  
   
 £’m
at 1 january 2013 393 11439 141 1179 5902 19054
profit for the year – – – – 2323 2323
other comprehensive income for the year
currency translation differences 
 arising in the year – – – 319 – 319
 transferred to income statement – – – 53 – 53
cash flow hedge movements
 movement in fair value – – – 16 – 16
 transferred to income statement – – – 03 – 03
remeasurement of retirement benefit obligations 33 – – – – 468 468
other comprehensive expenseincome before tax – – – 353 468 115
tax effect 14 – – – 01 216 215
other comprehensive expenseincome for the year – – – 352 252 100
total comprehensive expenseincome for the year – – – 352 2575 2223
employee share schemes
 value of services provided – – – – 218 218
 issue of equity share capital 04 26 – – 05 25
dividends 16 02 198 – – 956 756
at 31 december 2013 399 11663 141 827 7734 20764
profit for the year – – – – 1770 1770
other comprehensive income for the year
currency translation differences 
 arising in the year – – – 774 – 774
cash flow hedge movements
 movement in fair value – – – 16 – 16
 transferred to income statement – – – 08 – 08
remeasurement of retirement benefit obligations 33 – – – – 977  977
other comprehensive incomeexpense before tax – – – 766 977 211
tax effect 14 – – – 02 242 240 
other comprehensive incomeexpense for the year – – – 764 735 29 
total comprehensive income for the year – – – 764 1035 1799
employee share schemes
 value of services provided – – – – 11 11
 purchase of own shares – – – – 116 116
 issue of equity share capital – 01 – – – 01
share buyback – purchased in year 03 – 03 – 337 337
share buyback – close period commitment – – – – 200 200
dividends 16 05 525 – – 1044 514 
at 31 december 2014  401 12189 144 1591 7083 21408 
  other reserves relate to capital reserves of £141 million 2013 £141 million arising on the acquisition of businesses in 1985 and 1986 where   
 merger accounting was applied and a capital redemption reserve of £03 million 2013 £nil million created as a result of the share buyback   
 programme commenced during 2014
  hedging and translation reserves at 31 december 2014 comprise a credit balance on the hedging reserve of £25 million 2013 £32 million and 
a credit balance on the translation reserve of £1566 million 2013 £795 million amounts recycled from the hedging reserve to the income 
statement in respect of cash flow hedge movements have been recorded in net finance costs amounts recycled from the translation reserve 
to the income statement in 2013 in respect of the disposal of foreign subsidiaries have been recorded in net operating costs
93987p8589indd   88 04032015   1711 supplementary information financial statements governance reports strategic report 89
for the year ended 31 december 2014
consolidated cash flow statement
 notes
 2014 
 £’m
 2013 
 £’m
cash inflow from operations before exceptional operating items 3640 3619
cash outflow from exceptional operating items 11 171 162
cash inflow from operations 39 3469 3457
interest received 03 03
interest paid 163 197
tax paid 187 440
cash inflow from operating activities 3122 2823
businesses acquired 42 286 265
businesses disposed – 533
capitalised development costs 19 777 702
capitalised programme participation costs 19 460 357
purchase of intangible assets 20 120 184
purchase of property plant and equipment 330 524
proceeds from disposal of property plant and equipment 28 39
cash outflow from investing activities 1945 1460
dividends paid to company’s shareholders 16 514 756
purchase of own shares 116 –
issue of equity share capital 01 25
share buyback – purchased in year 34 337 –
proceeds from borrowings 2183 1815
debt issue costs 28 –
repayments of borrowings 2499 2314
cash outflow from financing activities 1310 1230
net decreaseincrease in cash and cash equivalents 133 133
cash and cash equivalents at start of the year 1161 1049
exchange gainslosses on cash and cash equivalents 27 21
cash and cash equivalents at end of the year 24 1055 1161
93987p8589indd   89 04032015   1711 90 meggitt plc          report and accounts 2014
notes to the consolidated financial statements
when a foreign subsidiary is disposed the cumulative exchange 
differences relating to the retranslation of the net investment in the 
foreign subsidiary are recognised in the income statement as part of 
the gain or loss on disposal this applies only to exchange differences 
recorded in equity after 1 january 2004 exchange differences arising 
prior to 1 january 2004 remain in equity on disposal as permitted by 
ifrs 1 ‘first time adoption of international financial reporting 
standards’ 
transactions between and balances with group companies are 
eliminated together with unrealised gains on intergroup transactions 
unrealised losses are eliminated to the extent the asset transferred is 
not impaired the accounting policies of acquired businesses are 
changed where necessary to be consistent with those of the group
the following items in respect of the acquisition and disposal of 
subsidiaries are excluded from the underlying profit measures used by 
the board to monitor and measure the underlying performance of the 
group see note 10
•	 a n y	a m o u nt s 	by	w hi c h 	th e	f a ir 	v a lu e 	of	n et 	a s s et s	of	an	a c q u ir e d		
 subsidiary exceed the cost of acquisition 
•	 c o s t s	di r e c t ly 	a t tr i b u t ab le	to	th e	a c qu i s i ti o n 	an d	in te gr a t i o n	of		
 a subsidiary  
•	 a n y	g a in 	or	lo s s 	a r i s in g	f r om	th e	di s p o s a l 	of	a	s u b s i di a r y 	an d 
•	 a d j u s tm en t s 	to	th e	f a ir 	v a lu e 	of	c o nt i n g e nt 	co n si d e r a t io n 	p a y ab le 	in		
 respect of the acquisition of a subsidiary or receivable in respect of  
 the disposal of a subsidiary 
 
foreign currencies
functional and presentational currency
the group’s consolidated financial statements are presented in pounds 
sterling items included in the financial statements of each of the 
group’s subsidiaries are measured using the functional currency of the 
primary economic environment in which the subsidiary operates
transactions and balances
transactions in foreign currencies are recorded at exchange rates 
prevailing on the dates of the transactions monetary assets and 
liabilities denominated in foreign currencies are reported at exchange 
rates prevailing at the balance sheet date exchange differences on 
retranslating monetary assets and liabilities are recognised in the 
income statement except where they relate to qualifying cash flow 
hedges or net investment hedges in which case exchange differences 
are recognised in hedging and translation reserves within other 
comprehensive income 
foreign subsidiaries
the results of foreign subsidiaries are translated at average exchange 
rates for the period assets and liabilities of foreign subsidiaries are 
translated at exchange rates prevailing at the balance sheet date 
exchange differences arising from the retranslation of the results and 
opening net assets of foreign subsidiaries are recognised as a separate 
component of equity in hedging and translation reserves exchange 
differences on borrowings designated as net investment hedges of 
foreign subsidiaries are also recognised in hedging and translation 
reserves 
g o o d w il l	an d	f a ir 	v a lu e 	a d j u s tm en t s	a r i s in g 	f r om	th e	a c qu i s i ti o n 	of	 
a foreign subsidiary are treated as assets and liabilities of the  
subsidiary and are retranslated at exchange rates prevailing at the 
balance sheet date
1 basis of preparation
m e g gi t t 	p lc	is 	a	p ub l i c 	l i m i te d 	co mp a n y 	l i s te d	on 	th e	l on don 	s to c k 	
exchange domiciled in the united kingdom and incorporated in 
england and wales with the registered number 432989 its registered 
of fi c e 	is	at 	a t l an tic	h ous e 	a v ia t io n 	p ar k 	west 	b ou r ne m ou t h	
i n ter n a ti o n al 	a ir p o r t 	c h r i s tch u r ch  	d o r s et  	bh 2 3 	6 e w
m e g gi t t 	p lc	is 	th e	p ar ent 	co mp a n y 	of 	a	gr ou p	w h os e 	p r in c ip a l 	
activities during the year were the design and manufacture of high 
performance components and subsystems for aerospace defence 
an d 	o th er 	sp e c ia l i s t	m a r ke t s 	in c lu d in g 	en er g y  	m e d ic al 	i n du s tr i al  	
test and automotive 
the consolidated financial statements of the group have been prepared 
in accordance with international financial reporting standards 
‘ i f r s s ’ 	as 	adop te d 	by	th e	eu r o p e a n 	u ni o n 	an d 	th e	c o mp a n ie s 	ac t	
2 0 06	ap p l ic ab le 	to	co mp a n ie s 	r ep o r ti n g 	un d e r 	if r s  	t he 	c o n s ol id a te d 	
financial statements have been prepared on a going concern basis and 
under the historical cost convention as modified by the revaluation of 
certain financial assets and financial liabilities including derivative 
instruments at fair value
2 summary of significant accounting policies
the principal accounting policies adopted by the group in the 
preparation of the consolidated financial statements are set out below 
these policies have been applied consistently to all periods presented 
unless stated otherwise 
 
basis of consolidation
the group financial statements consolidate the financial statements of 
th e	c om p a ny	an d	al l	of 	it s	s u b si d ia r ie s  	a	s u b si d ia r y 	is	an 	en ti t y 	o v er	
which the group has control the group has control over an entity 
where the group is exposed to or has the rights to variable returns 
from its involvement with the entity and it has the power over the entity 
to affect those returns the results of subsidiaries acquired are fully 
consolidated from the date on which control transfers to the group 
the results of subsidiaries disposed are fully consolidated up to the 
date on which control transfers from the group 
the cost of an acquisition is the fair value of consideration provided 
including the fair value of any contingent consideration as measured at 
the acquisition date subsequent changes to the fair value of contingent 
consideration are recorded in the income statement identifiable 
assets and liabilities of an acquired business meeting the conditions 
for recognition under ifrs 3 are recognised at fair value at the date of 
acquisition to the extent the cost of an acquisition exceeds the fair 
value of net assets acquired the difference is recorded as goodwill to 
the extent the fair value of net assets acquired exceeds the cost of an 
acquisition the difference is recorded immediately in the income 
s t a tem en t  	c os t s	di r e c t ly	a t tr i b u t ab le 	to 	an 	a c qu i s i ti o n 	ar e 	r ec o g n i s ed	
in the income statement as incurred
when a subsidiary is acquired the fair value of its identifiable assets 
and liabilities are finalised within 12 months of the acquisition date all 
f a ir	v a lu e 	a d j u s tm ent s 	ar e 	r ec o r d ed	w i th 	ef f e c t	f r om 	th e	d a te 	of	
acquisition and consequently may result in the restatement of 
previously reported financial results
when a subsidiary is disposed the difference between the fair 
value of consideration received or receivable and the value at which  
net assets of the subsidiary were recorded immediately prior  
to disposal is recognised in the income statement any contingent 
consideration receivable is measured at fair value at the date of 
di s p o s a l 	in	d e te r m in in g 	th e	g a in	or 	lo s s 	to 	be	r ec o g n i s ed 	c o nt i n g e nt 	
consideration is measured at fair value at each subsequent  
balance sheet date with any changes in fair value recorded in  
the income statement
93987p90132indd   90 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 91
revenue from services
revenue is recognised by reference to the stage of completion of the 
contract for ‘costplus fixed fee’ contracts revenue is recognised 
equal to the costs incurred plus an appropriate proportion of the fee 
agreed with the customer for other contracts the stage of completion 
is typically measured by reference to contractual milestones achieved 
number of aircraft flying hours or number of aircraft landings
revenue from funded research and development
revenue is recognised according to the stage of completion of the 
contract the stage of completion is typically measured by reference  
to contractual milestones achieved
exceptional operating items
items which are significant by virtue of their size or nature which are 
considered nonrecurring and which are excluded from the underlying 
profit measures used by the board to monitor and measure the 
underlying performance of the group see note 10 are classified as 
exceptional operating items they include for instance gains or losses 
mad e	on	th e	di s p o s a l 	or	cl o su r e 	of	a	b us i ne s s  	a d j u s tm ent s	to 	th e	f a ir	
value of contingent consideration payable in respect of an acquired 
business or receivable in respect of a disposed business costs directly 
attributable to the acquisition and integration of a business and 
significant site consolidation and other restructuring costs 
additionally in 2013 given its significance and nonrecurring nature 
the raw material supply issue described in note 11 was treated as an 
exceptional operating item exceptional operating items are included 
within the appropriate consolidated income statement category but are 
highlighted separately in the notes to the financial statements 
 
intangible assets
goodwill 
goodwill represents the excess of the cost of an acquisition over the fair 
value of the group’s share of identifiable assets acquired and liabilities 
and contingent liabilities assumed goodwill is tested annually for 
impairment and also whenever events or changes in circumstances 
indicate the carrying value may not be recoverable goodwill is carried 
at cost less amortisation charged prior to 1 january 2004 less 
accumulated impairment losses in the event the subsidiary to which 
goodwill relates is disposed its attributable goodwill is included in the 
determination of the gain or loss on disposal
research and development
research expenditure is recognised as an expense in the income 
s t a tem en t 	as 	in c ur r e d  	d e v e l o pme nt 	co s t s 	in c ur r e d	on 	p r o je c t s	w h er e 	
the related expenditure is separately identifiable measurable and 
management are satisfied as to the ultimate technical and commercial 
v i a b il i t y	of	th e	p r o je c t 	an d	t h at 	th e	a s s et 	w il l	g en er a te 	f u t ur e 	e c o n o mic	
benefit based on all relevant available information are recognised as 
an	in t a n g ib l e	a s s et  	c ap i t al i s e d 	d e v e l o pme nt 	co s t s 	ar e 	c arrie d 	at	co s t	
less accumulated amortisation and impairment losses amortisation is 
charged over the periods expected to benefit commencing with the 
l a u nch	of	th e	p r o du c t  	d ur in g 	th e	yea r 	th e	p er i o d	o v er 	w hi c h	
amortisation is charged was reassessed and as a result the 
maximum life extended from 10 years to 15 years the impact of this 
change which has been applied prospectively was to reduce the 
charge to the income statement in 2014 by approximately £70 million 
d e v e l o pme nt 	co s t s 	n ot	me e t i ng 	th e	cri teria	fo r	c ap i t al i s a ti o n 	ar e 	
expensed as incurred
2 summary of significant accounting policies continued
segment reporting
operating segments are those segments for which results are 
r e v ie w e d	by	th e	gr ou p’ s 	chi e f	o p er a ti n g 	d e c i sio n	m aker	‘c o d m ’ 	to	
a ss e ss	p er f o r m an ce 	an d 	m a ke 	d e c i sio n s 	ab o u t	r es o ur c es 	to	be	
a l l oc a ted  	t he 	c o dm 	ha s 	bee n 	i d enti fi e d 	as	th e	b o ar d 	s e e 	p a ge 	46	of	
th e	c or p or a te	g o v er n an ce 	r e p o r t  	t he 	gr ou p	ha s 	d e ter mi n e d 	t h at	it s 	
s e g m e nt s 	ar e 	m e g gi t t 	a i r c r af t	b r a k in g 	s y s te m s 	m e g gi t t	c o nt r o l 	
s y s te m s  	m e g gi t t 	pol y m e r s		c o mp o si te s  	m e g gi t t	s e n s in g 	s y s te m s 	
and the meggitt equipment group on 7 may 2014 the group 
announced that the divisional structure had been realigned to reflect 
the following changes
•	 t he	fir e 	p r o te c t i o n	b us i ne s s 	ha s 	mo v e d 	f r om	m e g gi t t	equ i p m en t		
	 gr ou p	to 	m e g gi t t 	c o nt r o l	s y s te m s 	an d
•	 t he	p o w er 	b u s in es s es 	ha v e 	mo v e d 	f r om 	m e g gi t t	equ i p m en t	gr ou p		
 to meggitt sensing systems
prior period comparatives have been restated to reflect this new 
divisional structure
t he	p r in c ip a l 	pr ofi t 	me as u r e	r e v ie w e d 	by	th e	c o dm	is	‘ un d e r l y in g 	
operating profit’ as defined in note 10 a segmental analysis of 
underlying operating profit is accordingly provided in the notes to the 
financial statements 
segmental information on assets is provided in the notes to the 
financial statements in respect of ‘trading assets’ which are defined to 
excl u d e	f r om 	to t a l 	a s s et s	a m o u nt s 	w hi c h 	th e	c o dm 	do e s 	n ot	r e v ie w	at	
a segmental level excluded assets comprise centrally managed 
trading assets goodwill other intangible assets excluding software 
assets derivative financial instruments deferred tax assets current 
tax recoverable and cash and cash equivalents
no segmental information on liabilities is provided in the notes to the 
fi n a nci a l 	s t a tem ent s 	as	no	s uch 	me as u r e	is	r e v ie w e d	by	th e	c o dm  	 
 
revenue recognition
revenue represents the fair value of consideration received or 
receivable in respect of goods and services provided in the normal 
course of business to external customers net of trade discounts 
returns and sales related taxes 
sale of goods
re v enu e	is	r ec o g n i s ed 	w h en 	th e	s i g n i fi c a nt 	r i sk s 	an d	r e w ar d s 	of	
ownership have transferred to the customer managerial involvement 
and control of the goods is not retained by the group the revenue and 
costs associated with the sale can be measured reliably and the 
c o l le c ti o n	of 	r e l a te d 	r e cei v ab le s	is	p r o b ab le 	in	th e	ma j or i t y	of	
instances these conditions are met when delivery to the customer 
t a ke s	p l a ce 	in	a	m in o r i t y 	of 	i n s t an ce s	‘ b il l 	an d	h ol d ’ 	ar r an g em en t s	
exist whereby revenue is recorded prior to delivery but only when the 
customer has accepted title to the goods the goods are separately 
identifiable and available for delivery on terms agreed with the 
customer and normal credit terms apply
contract accounting revenue
the group is usually able to reliably estimate the outcome of a contract 
at inception and accordingly recognises revenue and cost of sales by 
reference to the stage of completion of the contract revenue is 
typically measured by applying to total contract revenue the 
p r op or t i on	co s t s 	in c ur r e d 	fo r 	w or k 	pe r f o r m ed	in 	th e	p er i o d	b e ar	to	
total estimated contract costs where it is not possible to reliably 
estimate the outcome of a contract revenue is recognised equal to 
costs incurred provided recovery of such costs is probable if total 
contract costs are forecast to exceed total contract revenue then the 
expected loss is recorded immediately in the income statement
93987p90132indd   91 04032015   1711 92 meggitt plc          report and accounts 2014
borrowing costs
borrowing costs directly attributable to the construction or production 
of qualifying assets are capitalised as part of the cost of those assets 
until such time as the assets are substantially ready for their intended 
u s e	q u a l i f y in g	a s s et s	ar e 	th o s e	t h at	n e ce s s ar i l y	t a ke	a	s u b s t anti al 	
period of time to get ready for their intended use which would generally 
be at least 12 months all other borrowing costs are recognised in the 
income statement as incurred
taxation
tax payable is based on taxable profit for the period calculated using 
tax rates enacted or substantively enacted at the balance sheet date
def e r r ed 	tax	is	p r o v i de d 	in 	f ul l 	u s in g 	th e	li a b ili t y	me t ho d	on 	tem p o r ar y 	
differences between the tax bases of assets and liabilities and their 
co r r e sp o n d i n g 	b o ok	v a lu e s 	as 	r ec o r d ed 	in 	th e	gr ou p’ s 	fi n a nci a l 	
s t a tem en t s  	def e r r ed 	tax	is	p r o v i de d 	on	u nr emi t te d	e a r n in g s	of	f o r e i gn 	
subsidiaries except where the group can control the remittance and it 
is probable that the earnings will not be remitted in the foreseeable 
f u t ur e  	def e r r ed 	tax	a s s et s	ar e 	r ec o g n i s ed	o n ly	to	th e	e x te n t 	it	is 	
probable that taxable profits will be available against which deductible 
tem p o r ar y 	d i f f er en ce s	c an	be	u t ili se d  	def e r r ed 	tax	is	c a l c u l a te d	u s in g 	
tax rates enacted or substantively enacted at the balance sheet date
c u r r e nt 	tax	an d	d ef e r r e d 	tax	ar e 	r ec o g n i s ed	in 	th e	in c o m e 	s t a tem ent  	
other comprehensive income or directly in equity depending on where 
the item to which they relate has been recognised
impairment of noncurrent nonfinancial assets
assets are reviewed for impairment annually and also whenever events 
or changes in circumstances indicate their carrying value may not be 
recoverable to the extent the carrying value exceeds the recoverable 
amount the difference is recorded as an expense in the income 
statement the recoverable amount used for impairment testing is the 
higher of the value in use and fair value less costs of disposal for the 
purpose of impairment testing assets are grouped at the lowest level 
for which there are separately identifiable cash inflows which are 
largely independent of cash inflows from other assets or groups of 
assets at each balance sheet date previously recorded impairment 
losses other than any relating to goodwill are reviewed and if  
no longer required reversed with a corresponding credit to the  
income statement
inventories
inventories are recorded at the lower of cost and net realisable value 
c os t 	r ep r e s en t s 	m a ter i al s  	d ir e c t 	l abour 	o th er 	d ir e c t 	co s t s 	an d 	r e l a te d	
production overheads based on normal operating capacity and is 
determined using the firstin firstout fifo method net realisable 
value is based on estimated selling price less further costs expected 
to be incurred to completion and disposal 
when a subsidiary is acquired finished goods are valued at fair value 
which is typically estimated selling price less costs of disposal and a 
r e a s o n ab le	pr ofi t 	a l l o w an ce 	fo r 	th e	se l li n g 	ef f o r t  	wo r k 	in	p ro gr es s 	is 	
also valued at fair value at acquisition which is typically estimated 
selling price less costs to complete costs of disposal and a reasonable 
pr ofi t 	a l l o w an ce 	fo r 	w or k	n ot	y et	co mp l e te d  	w h en	t hi s	i nv e ntor y 	is	
subsequently disposed post acquisition the fair value is charged to the 
income statement the difference between the fair value of the 
inventory disposed and its actual cost of manufacture is excluded from 
the underlying profit measures used by the board to monitor and 
measure the underlying performance of the group see note 10
provision is made for obsolete slow moving or defective items  
where appropriate and for unrealised profits on items of  
intergroup manufacture 
2 summary of significant accounting policies continued
programme participation costs
programme participation costs consist of incentives given to original 
equipment manufacturers in connection with their selection of the 
group’s products for installation onto new aircraft where the group 
has obtained principal supplier status these incentives comprise cash 
payments andor the supply of initial manufactured parts on a free of 
charge or deeply discounted basis programme participation costs are 
recognised as an intangible asset and carried at cost less accumulated 
amortisation and impairment losses for manufactured parts supplied 
on a free of charge or deeply discounted basis cost represents the cost 
of manufacture transferred from inventory less the value of any 
revenue received or receivable amortisation is charged over the 
periods expected to benefit from receiving the status of principal 
supplier through the sale of replacement parts typically up to  
15 years 
other intangible assets
a intangible assets acquired as part of a business combination
for acquisitions the group recognises intangible assets separately 
from goodwill provided they are separable or arise from contractual or 
other legal rights and their fair value can be measured reliably 
intangible assets are initially recognised at fair value which is 
regarded as their cost intangible assets are subsequently held at cost 
less accumulated amortisation and impairment losses where 
intangible assets have finite lives their cost is amortised on a 
straightline basis over those lives the nature of intangible assets 
recognised and their estimated useful lives are as follows
c us tom e r	r el a t i o n s hi p s  up to 25 years
technology   up to 25 years
tr ade 	n am e s	an d	tr a d em ar k s  up to 25 years
o r d er	b a c kl o g s  o v er	p er i o d 	of	b a c kl o g 	 
                                                                          typically up to 3 years
amortisation of intangible assets acquired as part of a business 
combination is excluded from the underlying profit measures used by 
the board to monitor and measure the underlying performance of the 
group see note 10
b other purchased intangible assets
p ur c h a s e d	l icen ce s  	tr a d em ar k s  	p a te n t s 	an d 	s of t w a r e	ar e 	c arrie d 	at	
cost less accumulated amortisation and impairment losses 
amortisation is charged on a straightline basis over their estimated 
useful economic life typically over periods up to 10 years 
property plant and equipment 
property plant and equipment is recorded at cost less accumulated 
depreciation and impairment losses except for land which is recorded 
at	co s t 	le s s 	a c c u m u l a te d 	im p a ir m e n t 	l o s s es 	c os t	in c lu d e s 	
expenditure directly attributable to the acquisition of the asset 
d ep r e c i a ti o n	is 	c a l c u l a te d	on 	a	s t r a i gh t  l in e 	b a si s	o v er 	th e 	est im ate d 	
useful lives of the assets as follows
freehold buildings  up to 50 years  
leasehold property  over period of lease
plant and machinery  3 to 10 years
furnaces  up to 20 years
fixtures and fittings  3 to 10 years
motor vehicles 4 to 5 years
re s i du al	v a lu e s 	an d	u s ef u l	l i ve s	ar e 	r e v ie w e d 	an nu al l y 	an d	ad j us te d	if	
appropriate
when property plant and equipment is disposed the difference 
between sale proceeds net of related costs and the carrying value of 
the asset is recognised in the income statement
notes to the consolidated financial statements continued
93987p90132indd   92 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 93
provisions
provision is made for environmental liabilities onerous contracts 
product warranty claims and other liabilities when the group has a 
p r e s e nt 	ob l i g a t i on 	as 	a	r e s ult	of	p as t 	e v e nt s  	it	is	m or e 	l i kely 	th an	n ot 	
that an outflow of economic benefits will be required to settle the 
obligation and the amount can be reliably estimated provisions are 
discounted to present value where the impact is significant using a 
p r e tax 	r a te 	t he	d i s c o u nt	r a te	us e d	is	ba se d	on	c u r r e nt 	m a r ke t	
as s e s s me nt s 	of	th e	t im e 	v a lu e 	of	m one y 	ad j us te d 	to 	r e flec t 	an y 	r i sk s	
specific to the obligation which have not been reflected in the 
undiscounted provision the impact of the unwinding of discounting  
is recognised in the income statement within net finance costs
retirement benefit schemes
for defined benefit schemes pension costs and the costs of providing 
other postretirement benefits principally healthcare are charged to 
the income statement in accordance with the advice of qualified 
independent actuaries 
past service credits and costs are recognised immediately in the 
income statement
retirement benefit obligations represent for each scheme the 
difference between the fair value of the schemes’ assets and the 
present value of the schemes’ defined benefit obligations measured at 
the balance sheet date the defined benefit obligation is calculated 
a n n u al ly	by	i n d ep en d en t 	ac tu a r i e s 	u s in g 	th e	p r o j ec ted 	un i t 	c r e di t 	
method the present value of the defined benefit obligation is 
determined by discounting the defined benefit obligations using 
interest rates of high quality corporate bonds denominated in the 
currency in which the benefits will be paid and with terms to maturity 
comparable with the terms of the related defined benefit obligations 
where the group has a statutory or contractual minimum funding 
r e qu i r em en t	to	m a ke 	c o ntr i b u ti o n s 	to	a	s c h em e	in	r e s pec t 	of	p as t	
service and any such contributions are not available to the group once 
paid either as a reduction in future contributions or as a refund during 
the life of the scheme or when the scheme liabilities are settled to 
which the group has an irrevocable right an additional liability for 
such amounts is recognised
remeasurement gains and losses are recognised in the period in 
which they arise in other comprehensive income
for defined contribution schemes payments are recognised in the 
income statement when they fall due the group has no further 
obligations once the contributions have been paid
sharebased compensation
the group operates a number of equitysettled and cashsettled 
sharebased compensation schemes
for equitysettled schemes the fair value of an award is measured at 
th e 	d a te	of	g r a nt 	an d	r e flec t s 	an y	ma r ke t b a s e d	v est in g	co n d i t io n s 	
no n	ma r ke t b a s e d	v est in g	co n d i t io n s 	ar e 	excl u d e d	f r om	th e	f a ir	v a lu e	
of the award at the date of grant the group estimates the number of 
a w ar d s 	e xpec ted	to	v est 	as 	a	r e s ult	of	n on 	ma r ke t b a s e d 	v est in g	
conditions and the fair value of this estimated number of awards is 
recognised as an expense in the income statement on a straightline 
basis over the period for which services are received at each balance 
sheet date the group revises its estimate of the number of awards 
e xpec ted	to	v est 	as 	a	r e s ult	of	n on 	ma r ke t b a s e d	v est in g	co n d i t io n s	
an d 	ad j us t s 	th e	a m o u nt	r ec o g n i s ed	c u m ul a t i v ely 	in	th e	in c o m e 	
statement to reflect the revised estimate when awards are exercised 
an d 	th e	c om p a ny	is su e s	ne w	s h a re s	th e	p r oc eed s 	r e cei v e d  	n et 	of	an y 	
directly attributable transaction costs are credited to share capital 
nominal value and share premium
for cashsettled schemes the total amount recognised is based on the 
fair value of the liability incurred the fair value of the liability is 
remeasured at each balance sheet date with changes in fair value 
recognised in the income statement for the period
2 summary of significant accounting policies continued
trade receivables
trade receivables are initially recognised at fair value and 
subsequently measured at amortised cost less any impairment losses 
an impairment is recognised in the income statement when there is 
o b j e c ti v e	e v i d en ce 	th e	gr ou p 	w il l	n ot	be	ab le 	to	c o l le c t 	al l 	a m o u nt s	du e 	
according to the original terms of the receivables the impairment 
recorded is the difference between the carrying value of the receivable 
and its estimated future cash flows discounted where appropriate 
cash and cash equivalents
c a sh	an d	c a sh 	e qu i v alen t s 	in c lu d e 	c a sh 	in	h an d	an d	d ep o s i t s 	he ld 	at	 
c al l	w i th	b an k s 	b an k 	o v e r d r af t s 	ar e 	d is cl o s e d	as 	c u r r e nt 	l i ab i l i ti e s  	
w i t h in	b an k	an d 	o th er	b or r o w i n gs  	e xcep t 	w h er e	th e	gr ou p	p ar tic i p a te s 	
in	of f s et	ar r an g em ent s	w i th 	cer t a i n	b an k s 	w h er eb y 	c a sh	an d	o v e r d r af t	
amounts are offset against each other
trade payables
trade payables are initially recognised at fair value and subsequently 
measured at amortised cost trade payables are not interest bearing
leases
l e as e s	w h er e	th e	gr ou p 	ha s 	s u b s t an ti al l y	al l	th e 	r i sk s	an d	r e w ar d s 	 
of ownership are classified as finance leases finance leases are 
capitalised at commencement of the lease at the lower of fair value of 
the leased asset and present value of the minimum lease payments 
each lease payment is allocated between the liability and finance 
charges so as to achieve a constant rate on the finance balance 
outstanding the corresponding lease obligations net of finance 
charges are included in liabilities assets acquired under finance 
leases are depreciated on a straightline basis over the shorter of the 
useful life of the asset or the lease term
l e as e s	in	w hi c h 	a	s i g n i fi c a nt 	p or t i on	of 	th e	r i sk s	an d	r e w ar d s 	of	
ownership are retained by the lessor are classified as operating 
leases payments made under operating leases net of any incentives 
received from the lessor are charged to the income statement on a 
straightline basis over the period of the lease 
dividends
interim dividends are recognised as liabilities when they are approved 
by the board final dividends are recognised as liabilities when they 
are approved by the shareholders
borrowings
borrowings are initially recognised at fair value being proceeds 
received less directly attributable transaction costs incurred 
borrowings are generally subsequently measured at amortised cost 
with any transaction costs amortised to the income statement over the 
p er i o d	of	th e	b or r o w i n gs 	u s in g 	th e	ef f e c t i v e	inte r est 	me t ho d 	c e r t a in 	
borrowings however are designated as fair value through profit and 
loss at inception if the group has interest rate derivatives in place 
which have the economic effect of converting fixed rate borrowings into 
floating rate borrowings such borrowings are measured at fair value 
at each balance sheet date with any movement in fair value recorded in 
the income statement within net operating costs movements in fair 
value are excluded from the underlying profit measures used by the 
board to monitor and measure the underlying performance of the 
group see note 10
any related interest accruals are included within borrowings 
borrowings are classified as current liabilities unless the group has an 
unconditional right to defer settlement of the liability for at least 12 
months after the balance sheet date
93987p90132indd   93 04032015   1711 94 meggitt plc          report and accounts 2014
derivatives not meeting the criteria for hedge accounting
where derivatives do not meet the criteria for hedge accounting 
changes in fair value are recognised immediately in the income 
statement the group utilises a large number of foreign currency 
forward contracts to mitigate against currency fluctuations  
the group has determined the additional costs of meeting the 
extensive documentation requirements in order to apply hedge 
accounting under ias 39 ‘financial instruments recognition and 
measurement’ are not merited gains and losses arising from 
measuring these contracts at fair value are excluded from the 
underlying profit measures used by the board to monitor and  
measure the underlying performance of the group see note 10 
share capital
ordinary shares are classified as equity incremental costs directly 
attributable to the issue of new shares are deducted from the proceeds 
recorded in equity 
o wn	s h ar e s 	r ep r e s en t 	s h ar e s 	in 	th e	c om p a ny	t h at	ar e 	he ld	by 	an 	
independently managed employee share ownership plan 
c o n s i d er a ti o n 	p ai d	fo r 	ow n 	s h a re s	in c lu d in g 	an y	i n c r em ent al	di r e c t ly 	
attributable costs is recorded as a deduction from retained earnings 
share buyback
on 5 november 2014 the group announced the intention to commence 
a	s h ar e	b uyb a ck 	p r o g r am m e 	t he	to t a l 	co n si d e r a t io n 	p a y ab le 	fo r 	
shares purchased is deducted from retained earnings the shares 
when purchased are cancelled and the nominal value of the cancelled 
shares is transferred from share capital to a separate capital 
redemption reserve where the group has entered into an irrevocable 
nondiscretionary contract to purchase for cancellation shares on its 
behalf during a close period the obligation to purchase shares is 
recognised in full at the inception of the contract even when the 
obligation is conditional on the share price the obligation is 
remeasured at each balance sheet date with changes recognised in the 
income statement
adoption of new and revised accounting standards
d ur in g 	th e	yea r 	no 	ne w	a c c o un t in g 	s t an d ar d s 	bec a m e	ef f e c t i v e 	w hi c h	
had a significant impact on the group’s consolidated financial 
statements
recent accounting developments
a number of new standards and amendments and revisions to existing 
standards have been published and are mandatory for the group’s 
future accounting periods they have not been adopted early in these 
consolidated financial statements none of these are expected to have 
a significant impact on the consolidated financial statements when they 
are adopted except as disclosed below
•	 i f r s	9	‘ f i n an c i al 	in s t r um e n t s ’ 	t he	m a in 	ch a n ge 	is	e xpec ted 	to 		
 relate to the way in which movements in the fair value of the group’s  
 fixed rate borrowings attributable to changes in the group’s own  
	 c r e di t 	r i sk 	ar e 	a c c o u n te d 	for	t he	gr ou p	is	y et	to	a ss e ss	th e	f ul l		
 impact of ifrs 9 which becomes effective for accounting periods  
	 b e g in n in g 	on	or	a f te r 	1	j anu ar y	2 018  	t hi s	s t an d ar d 	is 	s ub j e c t 	to 		
 endorsement by the european union
•	 i f r s	15  	‘ re v enu e 	f r om	c o nt r a c t s 	w i th	c us tom e r s’  	t hi s 	s t an d ar d 		
 establishes principles for reporting the nature amount and timing of  
 revenue arising from an entity’s contracts with customers the  
 group is yet to assess the full impact of ifrs 15 which becomes  
 effective for accounting periods beginning on or after 1 january  
	 2 01 7 	t hi s	s t an d ar d 	is	s ub j e c t	to	en d o r s em en t 	by	th e	eu r o p e a n 		
 union
2 summary of significant accounting policies continued
derivative financial instruments and hedging
the group uses derivative financial instruments to hedge its exposure 
to	inte r est	r a te	r i sk 	an d 	f o r e i gn 	c ur r e n c y 	tr an s a c ti o n a l 	r i sk 	d er i v a ti v e 	
financial instruments are initially recognised at fair value on the date 
the derivative contract is entered into and are subsequently 
remeasured at fair value at each balance sheet date using values 
determined indirectly from quoted prices that are observable for the 
asset or liability 
the method by which any gain or loss arising from remeasurement  
is recognised depends on whether the instrument is designated as  
a hedging instrument and if so the nature of the item hedged the 
group recognises an instrument as a hedging instrument by 
documenting at inception of the instrument the relationship between 
th e	in s t r um e n t	an d	th e	h ed g ed	i te m 	an d 	th e	o b j e c ti v e s 	an d	s t r a te g y	fo r 	
un d e r t a k in g	th e	h e dg i ng	tr an s a c ti o n  	to 	be	d e s i g n a te d	as 	a	h e dg i ng 	
instrument an instrument must also be assessed at inception and on 
an ongoing basis to be highly effective in offsetting changes in fair 
values or cash flows of hedged items 
to the extent the maturity of the financial instrument is more than 12 
months from the balance sheet date the fair value is reported as a 
noncurrent asset or noncurrent liability all other derivative financial 
instruments are reported as current assets or current liabilities 
fair value hedges
ch a n g e s	in	f a ir 	v a lu e	of 	d er i v a ti v e	fi n an c i al 	in s t r um e n t s  	t h at	ar e 	
designated and qualify as fair value hedges are recognised in the 
income statement within net operating costs together with changes in 
fair value of the hedged item any difference between the movement in 
fair value of the derivatives and the hedged item is excluded from the 
underlying profit measures used by the board to monitor and measure 
the underlying performance of the group see note 10 the group 
currently only applies fair value hedge accounting to the hedging of 
fi xe d 	inte r est 	r a te	r i sk 	on 	b or r o w i n gs 
cash flow hedges
ch a n g e s	in	f a ir 	v a lu e	of 	th e	ef f e c t i v e	p or t i on	of 	d er i v a ti v e 	fi n an c i al 	
instruments that are designated and qualify as cash flow hedges are 
i ni t i a l ly 	r ec o g n i s ed 	in	o th er	co mp r e h e n si v e 	in c o m e  	ch a n g e s	in 	f a ir 	
value of any ineffective portion are recognised immediately in the 
income statement within net operating costs 
to the extent changes in fair value are recognised in other 
comprehensive income they are recycled to the income statement in 
the periods in which the hedged item affects the income statement 
the group currently only applies cash flow hedge accounting to the 
h e dg i ng 	of	fl o at i n g 	inte r est 	r a te	r i sk 	on 	b or r o w i n gs 
if the forecast transaction to which the cash flow hedge relates is  
no longer expected to occur the cumulative gain or loss previously 
recognised in other comprehensive income is transferred to the income 
statement immediately if the hedging instrument is sold expires or no 
longer meets the criteria for hedge accounting the cumulative gain or 
loss previously recognised in other comprehensive income is 
transferred to the income statement when the forecast transaction is 
recognised in the income statement
net investment hedges
hedges of net investments of foreign subsidiaries are accounted for in 
a	s i mi l ar 	w ay	to 	c a sh 	flo w 	h e d g es	ch a n g e s 	in	f a ir	v a lu e 	of	th e	ef f e c t i v e 	
portion of any hedge are recognised in other comprehensive income 
ch a n g e s	in	f a ir 	v a lu e	of 	an y 	in e f fe c t i v e 	p or t i on	ar e 	r ec o g n i s ed 	
immediately in the income statement within net operating costs 
cu mu l a t i v e 	g a in s 	an d 	lo s s e s 	p r e v i ous l y 	r ec o g n i s ed 	in	o th er 	
comprehensive income are transferred to the income statement if the 
foreign subsidiary to which they relate is disposed
notes to the consolidated financial statements continued
93987p90132indd   94 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 95
3 financial risk management
financial risk factors
t he	gr ou p’ s 	o p er a ti o n s 	ex p o s e 	it 	to 	a	nu m b er 	of	fi n an c i al 	r i sk s	in c lu d in g 	m a r ke t 	r i sk	 p r in c ip a l l y	f o r e i gn 	e xch a n ge 	r i sk	an d	inte r est	r a te	r is k  	
c r e di t	r i sk	an d 	l i q ui di t y 	r i sk  	t he s e	r i sk s 	ar e 	ma nag e d 	by	a	centr a l i s e d 	t r e a s ur y	d ep ar tm en t 	in 	a c c o r d an ce 	w i th	b o ar d 	a ppr o v e d 	o b j e c ti v e s  	
p o l ic i e s	an d 	au th o r i ti e s 	s e e	al s o	p a ge s	35 	to 	37	of	th e	chi e f 	f i n a nci a l 	o f fi cer ’ s 	r e v i ew	re gu l ar	r ep o r t s 	m on i tor	ex p o su r e s 	an d 	a s si s t	in	
ma nag i n g 	th e	a s s oc i a ted 	r i sk s  	
market risk
foreign exchange risk
t he	gr ou p	o p e r a te s	i nter n a ti o n al l y	an d 	is	s ub j e c t	to	f o r e i gn 	e xch a n ge 	r i sk s	on	f u t ur e	co mm e r c ia l 	tr an s a c ti o n s	an d 	th e 	r e tr an s l a ti o n	of	th e	r e s ult s 	
of and net investments in foreign subsidiaries the principal exposure arises with respect to the us dollar against the pound sterling to mitigate 
r i sk s	a s s oc i a ted 	w i th 	f u t ur e 	co mm e r c ia l 	tr an s a c ti o n s  	th e	gr ou p	p o l ic y	is	to	h e d ge 	k no w n	an d	cer t a i n 	fo r e c a s t 	tr an s a c ti o n 	ex p o su r e	ba se d 	on 	
h i s to r ic al 	e x p er i en ce 	an d 	p r o je c t io n s  	t he 	gr ou p 	h e d ge s	at	le a s t 	70  	of	th e	n ex t	12 	mo nt hs	antic i p a te d 	ex p o su r e	an d	c an 	h e d ge	up 	to 	fi ve 	yea r s	
a he ad  	d et a i l s	of 	h e d ge s	in	p l a ce 	ar e 	p r o v i de d	in 	n o te 	3 0	t he	gr ou p	do e s 	n ot	c u r r e nt l y 	h e d ge 	ex p o su r e	a r i s in g 	f r om	th e	r e tr an s l a ti o n 	of	th e	
results of foreign subsidiaries the group uses borrowings denominated in the relevant currencies to hedge its net investments in foreign 
subsidiaries
interest rate risk
the group has borrowings issued at both fixed and floating rates of interest borrowings issued at fixed rates expose the group to fair value 
inte r est	r a te	r i sk  	w h er e a s 	b or r o w i n gs 	is su e d	at	fl o at i n g 	r a te s	ex p o s e 	th e	gr ou p	to	c a sh	flo w 	inte r est 	r a te	r i sk  	t he	gr ou p’ s	p o l ic y	is	to 	m a in t a in 	
at	le a s t	2 5	of 	it s	n et	d e bt	at 	fi xe d 	r ates	t he 	gr ou p	mi ti g a te s 	inte r est	r a te	r i sk s	t h r o u gh 	inte r est	r a te	d er i v a ti v e s 	w hi c h 	ha v e 	th e	e c o n o mic	ef f e c t	
of	c o n v er ti n g 	fi xe d 	r a te	b or r o w i n gs 	i n to 	fl o at i n g 	r a te	b or r o w i n gs	an d	fl o at i n g 	r a te	b or r o w i n gs	i n to	fi xe d 	r a te	b or r o w i n gs 	d et a i l s 	of	h e d ge s 	in	
place are provided in note 30
credit risk
t he	gr ou p	is	n ot	s ub j e c t 	to 	s i g n i fi c a nt 	c o n centr a ti o n 	of	c r e di t	r i sk	w i th	ex p o su r e	sp r e a d	a cr o s s	a	l ar g e	nu m b er 	of	c us tom e r s	a cr o s s 	th e	w or ld  	in	
addition many of the group’s principal customers are either government departments or large multinationals policies are maintained to ensure 
th e	gr ou p	m a ke s	s ale s	to 	c us tom e r s	w i th 	an	a ppr o pr i a te 	c r e di t	h i s t o r y 	l e t te r s 	of	c r e di t  	or	o th er 	a ppr o pr i a te 	in s t r um e n t s  	ar e 	pu t	in	p l a ce 	to 	
r e du ce	c r e di t 	r i sk 	w h er e 	co n si d e r e d 	n e ce s s ar y	t he	gr ou p	is	al s o 	s ub j e c t	to	c r e di t 	r i sk	on	th e	c o u nter p ar ti e s 	to	it s	o th er 	fi n an c i al 	in s t r um e n t s 	
which it controls through only dealing with highly rated counterparties and netting transactions on settlement wherever possible
liquidity risk
t he	gr ou p	m a in t a in s 	s u f fi c i e nt 	co mm i t te d 	f a c il i t i e s 	to	m e et 	p r o j ec ted 	b o r r o w in g 	r e qu i r em en t s	ba se d	on	c a sh	flo w 	f o r e c a st s	a d d i ti o n al	
headroom is maintained to protect against the variability of cash flows and to accommodate small bolton acquisitions key ratios are monitored 
to ensure continued compliance with covenants contained in the group’s principal credit agreements the following table analyses the group’s 
nonderivative financial liabilities and derivative assets and liabilities at the balance sheet date the amounts disclosed in the table are the 
contractual undiscounted cash flows
 
2014
 less than 
 1 year 
 £’m
 12 years 
 
 £’m
 25 years 
 
 £’m
greater than 
 5 years 
 £’m
 total 
 
 £’m
trade and other payables 3501 15 27 17 3560
bank	and	other	borr o wings 495 01 3439 2568 6503
interest payments on borrowings 205 190 452 173 1020
obligations under finance leases see note 27 11 10 30 124 175
deriv ativ e	financial	ins truments
inflows 91 90 228 98 507
outflows 08 08 12 – 28 
total 4129 134 3732 2784 10779 
 
2013
 less than 
 1 year 
 £’m
 12 years 
 
 £’m
 25 years 
 
 £’m
greater than 
 5 years 
 £’m
 total 
 
 £’m
trade and other payables 3166 12 22 18 3218
bank	and	other	borr o wings 41 424 3704 2419 6588
interest payments on borrowings 206 191 482 286 1165
obligations under finance leases see note 27 34 10 28 127 199
deriv ativ e	financial	ins truments
inflows 82 85 235 158 560
outflows 07 07 19 – 33
total 3372 559 4020 2692 10643
  excludes social security and other taxes of £84 million 2013 £125 million see note 25
 assumes no change in interest rates from those prevailing at year end
93987p90132indd   95 04032015   1711 96 meggitt plc          report and accounts 2014
3 financial risk management continued
sensitivity analysis
t he	gr ou p’ s 	p r in c ip a l	ex p o su r e 	in	r e l at i o n 	to 	m a r ke t	r i sk s 	ar e 	to	ch a n ge s	in 	th e	e xch a n ge 	r a te	bet w ee n	th e	us	d o l l ar	an d	p o un d	s te r l i n g	an d 	to 	
ch a n ge s	in	us	inte r est	r ates	t he 	t ab le 	b el o w	il lu st r ates 	th e	s e ns it i v it y 	of	th e	gr ou p’ s 	r e s ult s	to	ch a n ge s	in 	th e s e	ke y	v ar i ab le s	at	th e 	b a l an ce 	
sheet date the analysis covers only financial assets and liabilities held at the balance sheet date and is made on the basis of the hedge 
designations in place on those dates and assuming no hedge ineffectiveness 
 2014 2013
 
 income 
 statement 
 £’m
 equity 
 
 £’m
 income 
 statement 
 £’m
 equity 
 
 £’m
usdgbp	e x change	rate 		10 283 441 252 361
us	yield	curv e		1 46 33 46 41
t he	im p a c t	on	e q ui t y 	f r om 	m o v em ent s 	in	th e	e xch a n ge 	r a te	co mp r i s e s	£ 5 3 2 	m il l i o n	 2 0 13 	£ 4 6 3	m i l l i o n	in 	r e s pec t 	of	us	d o l l ar	n et	d e bt  	of f s et 	by 	
£91 million 2013 £102 million in respect of other financial assets and liabilities however as all us dollar debt is designated as a net investment 
h e d g e 	t hi s	e lem en t 	of 	th e	im p a c t 	is	e n t i r ely 	of f s et 	by	th e	r e tr an s l a ti o n 	of	f o r e i gn 	s u b si d ia r ie s  	t he	im p a c t	of	a	1	m o v em en t 	in 	th e	us	y i el d 	c ur v e 	
includes the effect on the group’s forward foreign exchange contracts as well as other financial assets and liabilities
capital risk management
t he	gr ou p’ s 	o b j e c ti v e	w h en 	ma nag i n g 	it s	c ap i t al 	s t r u c t ur e 	is	to	m in im i s e 	th e	co s t 	of	c ap i t al 	w h il s t 	m a in t a in in g	a de q ua te 	c ap i t al 	to	p r o te c t 	a g a in s t 	
volatility in earnings and net asset values the strategy is designed to maximise shareholder return over the longterm the group’s current 
p o s t tax	a v er a g e	co s t 	of 	c ap i t al 	is	a p p r ox i m a tely 	8	 2 0 13	8 	an d	it s 	c ap i t al 	s t r u c t ur e 	at	31	d e cem b er	is	as 	f o l l o w s 	
 
 2014 
 £’m
 2013 
 £’m
net debt see note 40 5755 5646
total equity 21408 20764
debtequity  269 272
t he	b o ar d	b el i e v e s 	t h at	in	m a in t a in in g 	an	e f fi c i e nt 	b al an ce	s h e et  	a	n et 	d e bt  e b i t d a 	r at i o 	of	bet w ee n	1 5 x 	an d	2  5x 	is	a ppr o pr i a te  	w h il s t	r e t a in in g 	
th e	fle xi b i l i t y 	to 	mo v e 	o u t si d e 	th e	r an g e 	if 	a ppr o pr i a te  	f u r th er 	d et a i l s 	on	th e	s h ar e	b uyb a ck 	pr o g r a m me 	an n o u n ce d 	as 	p ar t	of	th e	gr ou p’ s 	
s t r a te g y	fo r 	d e l i v e r in g 	n et	d e bt  e b i t d a	in	t hi s 	r an g e 	c an	be	f o un d	on	p a ge 	35	of	th e	chi e f 	f i n an c i al	o f fi cer ’ s 	r e v i e w 	w hi c h 	al s o 	in c lu d e s 	d et a i l s	
on how the group has complied with the two principle financial covenant requirements contained in its committed credit facilities for the year 
en d e d	31	d e cem b er	2 0 14 
4 critical accounting estimates and judgements
in	a ppl y i ng 	th e	gr ou p’ s 	a c c o un t in g 	p o l ic i e s 	s et	ou t 	in	n o te 	2	th e	gr ou p	is	r eq u i r ed 	to	m a ke 	cer t a i n 	est im ates 	an d	j udg e me nt s	c o n cer n i n g	th e	
f u t ur e  	t he s e	est im ates	an d 	j udg e me nt s 	ar e 	r e g ul a r ly 	r e v ie w e d 	an d	r e v is e d 	as 	n e ce s s ar y 	t he	est im ates 	an d	j udg e me nt s	t h at	ha v e	th e	m os t	
significant effect on the amounts included in these financial statements are as described below further consideration of these critical estimates 
an d 	j udg e me nt s 	c an	be	f o un d 	in	th e	a u di t 	c o m m i t te e	r ep o r t	on	p a ge 	52 
goodwill
each year the group carries out impairment tests of goodwill which require estimates to be made of the value in use of its cash generating units 
‘c g u s ’  	t he s e	v a lu e	in	us e	c al c u l a ti o n s 	ar e 	d ep en d ent 	on	est im ates 	of	f u t ur e	c a sh	flo w s  	l o ng te r m 	gr o w t h 	r a te s	an d	a ppr o pr i a te	d i s c o u nt 	r a te s	
to	be 	a ppl i e d 	to	f u t ur e 	c a sh 	flo w s 	of 	th e	c g us 	f u r th er	d et a i l s 	on	th e s e	est im ates 	an d	s en s i ti v i ti e s 	of	th e	c a r r y in g 	v a lu e 	of	g o o d w il l 	to 	th e s e	
estimates are provided in note 18
fair value of intangible assets acquired in a business combination
on the acquisition of a business it is necessary to attribute fair values to any intangible assets acquired provided they meet the criteria to be 
recognised the fair values of these assets are dependent on estimates of attributable future revenues margins cash flows and appropriate 
d i s c o u nt 	r a te s	to	be	a ppl i e d	to 	f u t ur e 	c a sh 	flo w s  	t he 	gr ou p 	t a ke s	a d v ice	f r om	t h ir d	p ar ti e s 	in 	d e te r m in in g 	f a ir 	v a lu e s 	an d	th e	est im ate d	u s ef u l 	
l i ve s 	of	in t a n g ib l e 	a s s et s	a r i s in g 	on 	s i g n i fi c a nt 	a c qu i s i ti o n s  	i nt an g i b le	a s s et s	ar e 	s ub j e c t	to	im p a ir m e n t	test in g	at	le a s t 	a n n u al ly	or	if	e v e nt s 	or 	
changes in circumstances indicate their carrying value may not be recoverable estimates of remaining useful lives of assets are also reviewed at 
least annually and revised if appropriate see note 20 for further details
notes to the consolidated financial statements continued
93987p90132indd   96 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 97
4 critical accounting estimates and judgements continued
development costs
t he	ma j or i t y 	of 	c ap i t al i s e d 	d e v e l o pme nt	co s t s 	r e l a te	to	te c hn o lo g y 	d e v e l o ped 	fo r 	a er o s p a ce	p ro gr a m m es 	in	s uch 	c as e s 	co s t s 	ar e 	t y p ic al l y 	n ot 	
capitalised until a contract to develop the technology is awarded by a customer as prior to this date it is generally not possible to reliably 
estimate the point at which research activities conclude and development activities commence absent a contract the group also does not believe 
there is generally sufficient certainty over the future economic benefits that will be generated from the technology to allow capitalisation of those 
costs post contract award the group will capitalise development costs provided it retains the intellectual property in the technology throughout 
th e	l i fe	of	th e	a i r c r af t	or 	e n g in e 	an d 	it 	is	p r o b ab le	t h at	f u t ur e	e c o n o mic 	b en e fi t s 	w il l	flo w 	to	th e	gr ou p 	in	m a k in g 	a	j udg e me nt	as 	to 	w h e th er 	
e c o n o mic	b en e fi t s 	w il l	ar i s e 	th e	gr ou p	w il l	m a ke 	est im ates 	of	a i r c r af t 	or	e n g in e	v o lum e s 	t a k i n g 	i n to	a c c o u nt 	th e	e x te n t 	to	w hi c h	th e	gr ou p	ha s	 
a	s o le  s o u r ce	p o si t io n  	a f ter m ar ke t 	r e v enu e s	w hi c h 	ar e 	d ep en d en t 	on	a i r c r af t 	u ti l i s a ti o n 	fleet 	l i ve s	an d	op e r a tor	s er v ice	r ou t i ne s 	co s t s 	of	
manufacture and costs to complete the development activity
c ap i t al i s e d 	d e v e l o pme nt	co s t s 	ar e 	s ub j e c t 	to 	im p a ir m e n t	test in g	at	le a s t 	an nu al l y 	a nd	w h er e	he ad r o om	is	l i m i te d 	or	if	e v e nt s 	or 	ch a n ge s	in	
circumstances indicate the carrying value may not be recoverable more frequently estimates of remaining useful lives of assets are also 
reviewed at least annually and revised if appropriate
at	31	d e cem b er	2 0 14 	th e	pr o g r a m me 	w i th 	th e	l a r g est	c ap i t al i s e d 	d e v e l o pme nt 	b al an ce	ha s	a	n et 	b o ok	v a lu e 	of	£ 4 4 5 	m il l i o n  	f l e et	v o lum e s	
w ou ld	n eed	to 	r e du ce	by	a p p r ox i m a tely 	6 0 	f r om 	m an a g em en t	est im ates  	w i th o u t	an y	mi ti g a ti o n 	a c ti o n s 	t aken 	by	th e	gr ou p 	b ef o r e 	an y 	
impairment would need to be recognised
programme participation costs
a p p r ox i m a tely	8 0 	of 	c a p i t a li se d	pr o g r a m me	p ar tic i p a ti o n 	co s t s 	r e l a te	to	f r ee	of	ch a r ge 	or	d e e p ly 	d i s c o u n te d	m anu f a c t u r e d 	p ar t s	‘ f o c ’ 	w i th	
th e	b al an ce	r e l at i n g 	to 	c a sh 	p a ym ents 	a ll	a m o u nt s 	r e l a te	to	a er o s p a ce	p ro gr a m m es 	fo c	co s t s 	ar e 	t y p ic al l y 	in c ur r e d 	ju s t	p r io r	to 	i n d i v i du al	
a i r c r af t 	enter i n g	s er v ice	an d 	o n ly 	w h er e 	th e	gr ou p	is	s at i s fi e d 	th e	i n c r em en t al 	a f ter m ar ke t 	r e v enu e s 	t h at	w il l	be	g en er a te d	o v er 	th e	l i fe 	of	th e	
p ar t	ar e	s u f fi c i e nt  	w il l	a m o u nt s 	be	c a p i t a li se d 	in	m a k in g 	t hi s 	j udg e me nt  	th e	gr ou p	m a ke s 	est im ates 	of	a i r c r af t 	u ti l i s a ti o n 	r a te s	an d 	fleet 	 
l i ve s 	an d	op e r a tor 	s er v ice	ro u t in es	t he 	c ap i t al i s a ti o n	of	c a sh	p a ym ents 	is	s ub j e c t	to	s i mi l ar	j udg e me nt s	to	th o s e	de s cr i b e d	in	d e v e l o pme nt 	 
costs above
c ap i t al i s e d	pr o g r a m me 	p ar tic i p a ti o n 	co s t s 	ar e 	s ub j e c t	to	im p a ir m e n t	test in g	at	le a s t 	an nu al l y 	a nd	w h er e	he ad r o om	is	l i m i te d 	or 	if	e v e nt s 	or 	
changes in circumstances indicate the carrying value may not be recoverable more frequently estimates of remaining useful lives of assets are 
also reviewed at least annually and revised if appropriate 
at	31	d e cem b er	2 0 14 	th e	pr o g r a m me 	w i th 	th e	l a r g est 	c ap i t al i s e d	pr o g r a m me 	p ar tic i p a ti o n 	b a l an ce 	ha s	a	n et 	b o ok	v a lu e	of	£ 2 90 	m il l i o n  	 
no reasonably foreseeable change in assumptions would cause an impairment to be recognised
environmental matters
the group is involved in the investigation and remediation of certain sites for which it has been identified as a potentially responsible party under 
us law advice is received by the group from its environmental consultants and legal advisors to assist in the determination of the timing and 
estimation of the costs the group may incur in respect of such claims and appropriate provisions are made the group has extensive insurance 
arrangements in place to mitigate the impact of historical environmental events on the group to the extent estimates in respect of claims change 
as 	m or e 	i nf or ma t i on	bec o m e s	a v a i l ab le 	a d j u s tm en t s 	ar e 	mad e	to	th e	c a r r y in g 	v a lu e 	of	th e s e	p r o v i sio n s	a nd	if	th e	co s t s 	ar e	d e ter mi n e d 	to 	be	
covered by insurance to the amounts recoverable from insurers however actual losses incurred could differ from the original estimates see 
note 31 for further details
onerous contracts
t he	gr ou p	m a ke s	p r o v i sio n 	fo r 	an y 	e xpec ted 	lo s s e s 	a r i s in g	f r om	one r ous	c o nt r a c t s 	w hi c h 	re q u ire 	est im ates 	to	be	mad e 	of	f u t ur e 	c o nt r a c t	
revenues margins potential claims from third parties and cash flows these estimates are dependent on a number of factors including 
anticipated sales volumes future pricing production costs and the outcome of negotiations with third parties to the extent these estimates 
ch a n ge 	as	m or e 	i nf or ma t i on 	bec o m e s	a v a i l ab le	a d j u s tm en t s	ar e 	mad e	to	th e	c a r r y in g 	v a lu e 	of	th e s e	p r o v i sio n s  	however 	ac tu a l 	lo s s e s	in c ur r e d 	
could differ from the original estimates see note 31 for further details
legal regulatory and other similar matters
t he	gr ou p	is	s ub j e c t 	to 	le g al	p r oc eed i n g s 	an d	o th er 	c l a im s	a r i s in g 	in 	th e	or d i na r y	c o ur s e 	of	b us i ne s s  	t he	gr ou p	is	r eq u i r ed	to 	a ss e ss 	th e	
l ike l ih o o d 	of 	an y 	a d v er s e 	j udg e me nt s 	or 	ou tc om e s  	as 	w el l 	as 	p o ten ti a l 	r an g e s 	of	p r o b ab le 	l o s s es	a	d e ter mi n a ti o n 	of	an y	p r o v i sio n s 	r eq u i r ed	an d 	
any impairment of related receivables for these matters is based on a careful analysis of each individual issue with the assistance of outside legal 
counsel however actual losses incurred could differ from the original estimates see note 31 for further details
93987p90132indd   97 04032015   1711 98 meggitt plc          report and accounts 2014
4 critical accounting estimates and judgements continued
retirement benefit obligations
the liability recognised in respect of retirement benefit obligations is dependent on a number of estimates including those relating to mortality 
i n fl at i o n  	s al ar y	i ncr e a s e s 	an d 	th e	r a te	at 	w hi c h 	l i ab i l i ti e s 	ar e 	d i s c o u n te d 	e x ter n al 	a c t u ar i al	a d v ice	is	t aken 	w i th	r e g ar d 	to	th e	m os t 	a ppr o pr i a te	
a s s um pt i o n s	to 	u s e 	d ur in g 	2 0 14 	a	nu m b er 	of 	ne w	mo r t a l it y 	t ab le s 	w er e	pu bl i s h e d 	in 	th e	us  	a d v ice 	w as	t aken	f r om	th e	gr ou p’ s 	t h ir d 	p ar t y 	us	
actuary as to the most appropriate tables to use to reflect current and future improvements in life expectancy for each of the group’s us 
schemes further details on these estimates and sensitivities of the retirement benefit obligations to these estimates are provided in note 33
contract accounting revenue
in	d e te r m in in g 	a m o u nt s	to 	be	r ec o g n i s ed 	as	r e v enu e 	un d e r	l o ng te r m 	c o nt r a c t s 	th e	gr ou p	m a ke s 	an	as s e s s me nt 	of	th e	s t a ge 	of	co mp l e t io n 	of	
e a ch 	c o nt r a c t 	an d	it s	e xpec ted 	pr ofi t 	at 	co mp l e t io n 	ba se d	on	an	est im ate 	of	to t a l 	c o nt r a c t	c o st s	c o nt r a c t	co s t 	est im ates 	ar e 	ba se d	on 	an 	i nter n al	
e v al u a ti o n 	t a k in g 	i n to 	a c c o u nt 	th e	s pec i fic 	n at u r e 	of 	th e	c o nt r a c t  	in c lu d in g 	it s	l e v el 	of	te c h n ic al 	r i sk 	to g e th er 	w i th	th e	h i s to r ic al	ac c u r ac y 	of	
previous contract estimates estimates are reviewed and updated regularly throughout the life of the contract which typically will span more 
than one accounting period the total amount of revenue recognised under longterm contracts in the year is disclosed in note 5
income taxes
in	d e te r m in in g 	th e	gr ou p’ s 	p r o v i sio n s 	fo r 	in c o m e 	tax 	an d	d ef e r r e d 	tax 	it	is	n e ce s s ar y 	to	co n si d e r	tr an s a c ti o n s 	in 	a	s m al l 	nu m b er 	of	ke y 	tax	
jur i s d i c t i o n s 	fo r 	w hi c h 	th e	ult i m a te	tax 	d e ter mi n a ti o n	is	un c e r t a in  	to	th e	e x te n t 	th e	fi n al 	ou tc om e 	d i f fe r s 	f r om	th e	tax	t h at 	ha s	bee n 	pr o v i d e d	
a d j u s tm ent s	w il l 	be	mad e	to 	in c o m e 	tax 	an d 	d ef e r r e d	tax	b al an ce s	he ld 	in 	th e	p er i o d	th e	d e ter mi n a ti o n 	is	mad e 	if	th e	ac tu a l 	ou tc om e	of	e v e nt s 	
d i f fe r e d 	by	10  	f r om	th e	est im ates 	mad e	at 	31 	d e cem b er 	2 0 14  	th e	im p a c t	on	th e	tax	ch a r ge 	w ou ld	be	a p p r ox i m a tely 	£ 5 0	m il l i o n 	j udg e me nt s 	
also need to be made as to the extent to which deferred tax assets and liabilities can be offset against one another see note 32 for further details
5 revenue
the group’s revenue is analysed as follows
 
 2014 
 £’m
 2013 
 £’m
sale of goods 13517 14288
contr act	ac c ounting	r e v enue 983 1101
revenue from services 750 739
revenue from funded research and development 287 245
total 15537 16373
6 segmental analysis 
analysis by operating segment 
t he	gr ou p	ma nag e s	it s	b us i ne s s e s 	un d e r 	th e	ke y 	s e g m e nt s	of	m e g gi t t	a i r c r af t 	b r a k in g	s y s te m s  	m e g gi t t	c o nt r o l	s y s te m s  	m e g gi t t	pol y m e r s 		
c o mp o si te s 	m e g gi t t 	s e n s in g 	s y s te m s	an d 	th e	m e g gi t t 	equ i p m en t 	gr ou p 	on	7	ma y	2 0 14  	th e	gr ou p	an n o u n ce d 	t h at	th e	di v i s i o n al 	s t r u c t ur e 	had 	
been realigned to reflect the following changes
•	 t h e	fir e 	p r o te c t i o n 	b us i ne s s 	ha s 	mo v e d 	f r om 	m e g gi t t 	equ i p m en t	gr ou p	to	m e g gi t t	c o nt r o l	s y s t e m s 	an d
•	 t h e	p o w er 	b u s in es s es 	ha v e 	mo v e d 	f r om 	m e g gi t t 	equ i p m en t	gr ou p	to	m e g gi t t	s e n s in g 	s y ste m s
prior year comparatives have been restated to reflect this new divisional structure
d et a i l s 	of	th e	gr ou p’ s 	d i v i sio n s 	c an 	be	f o un d 	on 	p a ge s 	13	to	17	of	th e	s tr a te g ic	r ep o r t  
notes to the consolidated financial statements continued
93987p90132indd   98 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 99
6 segmental analysis continued
year ended 31 december 2014
the	k ey 	perf ormanc e	measur e	r e vie w ed	by	the	codm	is	underl ying	oper ating	pr ofit	a	det ail ed	r ec onciliation	of	oper ating	pr ofit	to 	underl ying	oper ating	
profit is provided in note 10
  
 meggitt 
  aircraft 
 braking 
 systems 
 £’m
 meggitt 
  control 
 systems 
 
 £’m
 meggitt 
  polymers  
 composites 
 
 £’m
 meggitt 
  sensing 
 systems 
 
 £’m
 meggitt 
  equipment 
 group 
 
 £’m
 total 
 
 
 
 £’m
gross segment revenue 3271 3497 1632 4024 3201 15625
intersegment revenue 01 10 09 42 26	 88 
revenue from external customers 3270 3487 1623 3982 3175 15537
underlying operating profit see note 10 1275 918 202 584 481 3460
items not affecting underlying operating profit see note 10      1098 
operating profit see note 10 2362
finance income see note 12 12
finance costs see note 13      285 
net finance costs 273
profit before tax 2089
tax see note 14      319 
profit for the year      1770 
exceptional operating items see note 11 05 30 03 69 18 125
amortisation of intangible assets see notes 19 and 20 709 122 64 150 81 1126
impairment loss see note 19 – 40 – 31 09 80
depr eciation	see	not e	21 67	 61 33 90 61	 312 
	 	 c entr al	co s t s 	ar e 	a l l oc a ted 	u s in g 	a	v a r i et y 	of	ba se s 	d e s i gn e d 	to	r e flec t 	th e	b en e fi c i al 	r el a t i o n s hi p 	bet w ee n	th e	co s t s 	an d	th e	s e g m e nt s  	 
bases include headcount payroll costs gross assets and revenue
 of the total amortisation in the year £445 million has been charged to underlying operating profit as defined in note 10
 of the total depreciation in the year £311 million has been charged to underlying operating profit as defined in note 10 
t he	gr ou p’ s	l a r g est 	c us tom e r 	a c c o u nt s 	fo r 	6 2 	of	r e v enu e 	 £ 96  3 	m i l l i o n 	re v enu e	f r om	t hi s	c us tom e r 	ar i s e s 	a cr o s s	al l 	s e g m e nt s 
  
 meggitt 
  aircraft 
 braking 
 systems 
 £’m
 meggitt 
  control 
 systems 
 
 £’m
 meggitt 
  polymers  
 composites 
 
 £’m
 meggitt 
  sensing 
 systems 
 
 £’m
 meggitt 
  equipment 
 group 
 
 £’m
 total 
 
 
 
 £’m
additions to noncurrent assets
de v el opment	c os ts	see	not e	19 301 165 41 217 53 777
programme participation costs see note 19 404 56 – – – 460
other purchased intangible assets 03 13 05 11 10 42
property plant and equipment 61	 45 59 91 77 333 
total 769 279 105 319 140 1612 
				 re l a t e	to 	th o s e 	no n  cu r r e nt	a s s et s	in c lu d e d 	w i t h in 	s e g m en t al 	t r a d in g	a s s et s	r e v ie w e d	by	th e	c o dm 
93987p90132indd   99 04032015   1711 100 meggitt plc          report and accounts 2014
6 segmental analysis continued
as at 31 december 2014
  
 total 
 £’m
meggitt air cr aft	br aking	sys t ems 5683
meggitt contr ol	sys t ems 2950
meggitt p ol ymer s		composit es 940
meggitt sensing systems 3252
meggitt equipment group 2006	
total segmental trading assets 14831
centr all y	managed	tr ading	as sets 1814
goodwill see note 18 15411
other intangible assets 5974
deriv ativ e	financial	ins truments	–	noncurr ent	see	not e	30 296
def err ed	tax	as sets	see	not e	32 09
deriv ativ e	financial	ins truments	–	curr ent	see	not e	30 11
curr ent	tax	r ec o v er abl e 33
cash	and	c ash	equiv al ents	see	not e	24 1055 
total assets  39434 
	 c entr al l y 	ma n ag e d	t r a d in g 	a s s et s	p r in c ip a l l y 	in c lu d e 	a m o u nt s	r e c o v er ab le 	f r om	in s ur e r s 	in 	r e s pec t 	of	en v i r o n m en t al 	is su e s	r e l at i n g	to 	fo r m e r 		
 sites other receivables and property plant and equipment of central companies 
year ended 31 december 2013 restated
t he	ke y 	p er f o r m an ce	me as u r e	r e v ie w e d 	by	th e	c o dm 	is 	un d e r l y in g 	o p er a ti n g	pr ofi t  	a	d et a i l e d	r e co n c i l ia t io n	of	o p er a ti n g	pr ofi t 	to	un d e r l y in g 	
operating profit is provided in note 10
 
 meggitt 
  aircraft 
	 br aking 
 systems 
 £’m
 meggitt 
  contr ol 
 systems 
 
 £’m
 meggitt 
  polymers  
	 composit es 
 
 £’m
 meggitt 
  sensing 
 systems 
 
 £’m
 meggitt 
  equipment 
 group 
 
 £’m
 total 
 
 
 £’m
gross segment revenue 3304 3652 1829 3995 3652 16432
intersegment revenue – 09 19 20 11 59
revenue from external customers 3304 3643 1810 3975 3641 16373
underlying operating profit see note 10 1224 1077 302 699 670 3972
items not affecting underlying operating profit see note 10     969
operating profit see note 10 3003
finance income see note 12 03
finance costs see note 13     312
net finance costs 309
profit before tax 2694
tax see note 14     371
profit for the year     2323
exceptional operating items see note 11 15 86 – 89 94 284
amortisation of intangible assets see notes 19 and 20 745 134 67 163 123 1232
impairment loss see note 19 – 32 – – – 32
depr eciation	see	not e	21 81 48 32 94 67 322
	 	 c entr al 	co s t s	ar e 	a l l oc a ted 	u s in g 	a	v a r i et y 	of 	ba se s	d e s i gn e d 	to	r e flec t 	th e	b en e fi c i al 	r el a t i o n s hi p 	bet w ee n	th e	co s t s 	an d	th e	s e g m e nt s  	 
bases include headcount payroll costs gross assets and revenue
 of the total amortisation in the year £475 million has been charged to underlying operating profit as defined in note 10
 of the total depreciation in the year £314 million has been charged to underlying operating profit as defined in note 10
t he	gr ou p’ s 	l a r g est	c us tom e r 	a c c o u nt s 	fo r 	6  6	of 	r e v enu e	 £10 8  3 	m i l l i o n 	re v enu e	f r om	t hi s 	c us tom e r 	ar i s e s 	a cr o s s	al l 	s e g m e nt s 
notes to the consolidated financial statements continued
93987p90132indd   100 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 101
6 segmental analysis continued
 
 meggitt 
  aircraft 
	 br aking 
 systems 
 £’m
 meggitt 
  contr ol 
 systems 
 
 £’m
 meggitt 
  polymers  
	 composit es 
 
 £’m
 meggitt 
  sensing 
 systems 
 
 £’m
 meggitt 
  equipment 
 group 
 
 £’m
 total 
 
 
 £’m
additions to noncurrent assets
de v el opment	c os ts	see	not e	19 248 168 25 214 47 702
programme participation costs see note 19 315 32 – 10 – 357
other purchased intangible assets 04 51 08 23 09 95
property plant and equipment 40 144 27 186	 102 499
total 607 395 60 433 158 1653
	 		 re l a t e 	to 	th o s e 	no n  cu r r e nt 	a s s et s	in c lu d e d	w i t h in 	s e g m en t al 	t r a d in g	a s s et s	r e v ie w e d	by	th e	c o dm 
as at 31 december 2013 restated
  
 total 
 £’m
meggitt air cr aft	br aking	sys t ems 5022
meggitt contr ol	sys t ems 2419
meggitt p ol ymer s		composit es 878
meggitt sensing systems 3145
meggitt equipment group 1949
total segmental trading assets 13413
centr all y	managed	tr ading	as sets 1765
goodwill see note 18 14571
other intangible assets 6341
deriv ativ e	financial	ins truments	–	noncurr ent	see	not e	30 355
def err ed	tax	as sets	see	not e	32 91
deriv ativ e	financial	ins truments	–	curr ent	see	not e	30 112
curr ent	tax	r ec o v er abl e 28
cash	and	c ash	equiv al ents	see	not e	24 1161
total assets 37837
	 c entr al l y 	ma n ag e d	t r a d in g 	a s s et s	p r in c ip a l l y 	in c lu d e 	a m o u nt s	r e c o v er ab le 	f r om	in s ur e r s 	in 	r e s pec t 	of	en v i r o n m en t al 	is su e s	r e l at i n g 	to 	fo r m e r 		
 sites other receivables and property plant and equipment of central companies 
analysis by geography
 
 2014 
 £’m
 2013 
 £’m
revenue
uk 1524 1658
rest of europe 3381 3651
united states of america 7711 8117
rest of world 2921 2947
total 15537 16373
revenue is based on the location of the customer 
 
 2014 
 £’m
 2013 
 £’m
noncurrent assets
uk 6020 7144
rest of europe 2036 2156
united states of america 22354 19530
rest of world 95 80
total 30505 28910
segmental noncurrent assets are based on the location of the assets they exclude trade and other receivables derivative financial instruments 
and deferred tax
93987p90132indd   101 04032015   1711 102 meggitt plc          report and accounts 2014
7 auditor’s remuneration
payable to pricewaterhousecoopers llp and its associates
 
 2014 
 £’m
 2013 
 £’m
for 	the	audit	of	the	company	and	c onsolidat ed	financial	s t at ements	in	r espect	of	the	curr ent	y ear 07 08
for 	the	audit	of	the	company	and	c onsolidat ed	financial	s t at ements	in	r espect	of	the	prior	y ear – 01
	 for 	the	audit	of	the	ac c ounts	of	any	subsidiary	of	the	company	in	r espect	of	the	curr ent	y ear 07 06
for audit related assurance services – 01
total 14 16
8 operating profit
operating profit is stated after chargingcrediting
 
 2014 
 £’m
 2013 
 £’m
raw materials and consumables used 4232 4506
changes	in	inv ent ories	of	finished	goods	and	w ork	in	pr ogr es s 134 59
employee costs see note 9 5418 5661
research and development costs 706 647
amortisation of capitalised development costs see note 19 88 137
amortisation of programme participation costs see note 19 249 254
amortisation of other purchased intangible assets see note 20 108 98
amortisation of intangible assets acquired in business combinations see note 10 681 743
impairment loss on capitalised development costs see note 19 80 32
depr eciation	see	not e	21 312 322
lossgain on disposal of property plant and equipment 04 11
exceptional operating items see note 11 125 284
financial instruments see note 10 292 61
net foreign exchange loss 06 21
operating lease rentals 153 143
other operating income 31 46
 total research and development expenditure in the year was £1483 million 2013 £1349 million of which £289 million 2013 £245 million was  
   charged to cost of sales £417 million 2013 £402 million was charged to net operating costs and £777 million 2013 £702 million was   
   capitalised as development costs see note 19
9 employee information 
 
 2014 
 £’m
 2013 
 £’m
employee costs including executive directors
wages and salaries 4347 4410
social security costs 788 791
retirement benefit costs see note 33 266 341
sharebased payment expense see note 35 17 119
total 5418 5661
d et a i l s 	of	d i r e c t o r s’	r em u n er a ti o n 	is	p r o v i de d 	in	th e	d i r e c t o r s’ 	r em u n er a ti o n	r ep o r t	on	p a ge s	55 	to	7 5	w hi c h 	fo r m s	p ar t	of	th e s e	fi n an c i al 	
statements
 
 2014 
 
 number
 2013 
       restated 
 number
average monthly number of persons employed including executive directors
meggitt air cr aft	br aking	sys t ems 1228 1191
meggitt contr ol	sys t ems 1811 1804
meggitt p ol ymer s		composit es		 1876 1979
meggitt sensing systems 3138 3078
meggitt equipment group 1975 2402
corpor at e	including	shar ed	servic es	and	c entr es	of	e x c ell enc e 657 581
total 10685 11035
p r io r 	yea r	c o m p ar a ti v e s	ha v e 	bee n 	r est ate d 	to 	r e flec t 	th e	ne w	d i v i sio n a l	s t r u c t ur e 	s e e 	n o te 	6 
notes to the consolidated financial statements continued
93987p90132indd   102 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 103
10 reconciliations between profit and underlying profit
underlying profit is used by the board to monitor and measure the underlying trading performance of the group it excludes certain items as 
described below 
 note
 2014 
 £’m
 2013 
 £’m
operating profit 2362 3003
exceptional operating items see note 11 125 284
amortisation of intangible assets acquired in business combinations a 681 743
disposal	of	inv ent ory	r e v alued	in	busines s	c ombinations – 03
financial instruments b 292 61
adjus tments	to 	oper ating	pr ofit 1098 	969
underlying operating profit 3460 3972
profit before tax 2089 2694
adjus tments	to 	oper ating	pr ofit	per	above 1098 969
net interest expense on retirement benefit obligations see note 33 100 115
adjus tments	to 	pr ofit	bef or e	tax 1198 1084
underlying profit before tax 3287 3778
profit for the year 1770 2323
adjus tments	to 	pr ofit	bef or e	tax 	per	above 1198 1084
tax	eff ect	of	adjus tments	to	pr ofit	bef or e	tax  366 438
adjus tments	to 	pr ofit	for 	the	y ear  832 646
underlying profit for the year 2602 2969
	 	 of	th e	a d j u s tm ent s 	to 	o p er a ti n g 	pr ofi t  	£ 5 5 	m il l i o n	 2 0 13 	£ 2 8 8	m i l l i o n	r e l at i n g	to	e xcep ti o n a l	o p er a ti n g	i te m s	an d	£ n il	 2 0 13	£ 0 3 	m i l l i o n 	
relating to the disposal of inventory revalued in business combinations has been charged to cost of sales with the balance of £1043 million 
 2 0 13	£678 	m i l l i o n	in c lu d e d 	w i t h in 	n et	o p er a ti n g 	c o st s
a the group excludes from its underlying profit figures the amortisation of intangible assets acquired in business combinations 
 
 2014 
 £’m
 2013 
 £’m
amortisation of other intangible assets see note 20 789 841
less amortisation of other purchased intangible assets see note 20 108 98
amortisation of intangible assets acquired in business combinations 681 743
b  although the group uses foreign currency forward contracts to hedge against foreign currency exposures it has decided that the costs of 
meeting the extensive documentation requirements to be able to apply hedge accounting under ias 39 ‘financial instruments recognition and 
measurement’ are not merited the group’s underlying profit figures exclude amounts which would not have been recorded if hedge accounting 
had been applied 
  where interest rate derivatives do not qualify to be hedge accounted movements in the fair value of the derivatives are excluded from 
underlying profit where interest rate derivatives do qualify to be hedge accounted any difference between the movement in the fair value of 
derivatives and in the fair value of fixed rate borrowings is excluded from underlying profit 
 
 2014 
 £’m
 2013 
 £’m
movement in the fair value of foreign currency forward contracts 311 120
impact of retranslating net foreign currency assets and liabilities at spot rate 19 08
movement in the fair value of interest rate derivatives 42 186
movement in the fair value of fixed rate borrowings 42 135
financial instruments – lossgain 292 61
93987p90132indd   103 04032015   1711 104 meggitt plc          report and accounts 2014
11 exceptional operating items 
income statement cash expenditure
 note
  
 2014 
 £’m
 2013 
 £’m
 2014 
 £’m
 2013 
 £’m
site consolidations a 75 82 75 64
lossgain on disposal or closure of businesses b 29 90 05 05
raw material supply issue c – 200 47 31
cos ts	r elat ed	to 	acquisition	and	int egr ation	of	busines ses 21 79 44 50
other – 13 – 12
exceptional operating items 125 284 171 162
a t hi s	p r in c ip a l l y	r e l a te s 	to 	th e	co n s o l i d a t io n 	of 	th e	gr ou p’ s	t wo 	n o r th	a m er ic an	se n so r	b us i ne s s e s 	o n to	a	s in g l e	ne w	s i te	in 	c a l i fo r ni a 	us a	an d 		
 the movement of production to the group’s low cost manufacturing locations 
b the charge in 2014 relates to the closure of a business in the us in the prior year the group disposed of the shares of meggitt addison inc   
	 r e a l i s in g 	a	pr ofi t 	of 	£1 4 9 	m il l i o n 	an d 	th e	s h ar e s 	of 	th e	s u n b ank	fami l y	of	c o mp a n ie s	l l c	r e a l i s in g 	a	lo s s 	of	£ 5 9 	m il l i o n 	c a sh	ex p e n d i tu r e 			
 relates to business disposal expenses proceeds from the disposal of businesses are reported separately as part of cash outflow from   
 investing activities
c in 2013 the group announced it had identified an issue relating to the supply from a vendor of nonconforming raw material in one of our   
 businesses a provision of £200 million was made for the estimated cost of this issue including where necessary the replacement of the   
 relevant parts over the next few years no amounts were recorded in the income statement in respect of this issue in 2014
the tax credit in respect of exceptional operating items was £41 million 2013 £107 million
12 finance income
 
 2014 
 £’m
 2013 
 £’m
int er es t	on	bank	deposits 01 01
unwinding of interest on other receivables 09 –
other finance income 02 02
finance income 12 03
13 finance costs
 
 2014 
 £’m
 2013 
 £’m
int er es t	on	bank	borr o wings 27 35
interest on senior notes 127 154
interest on obligations under finance leases 09 11
unwinding of discount on provisions see note 31 11 –
net interest expense on retirement benefit obligations see note 33 100 115
amortisation of debt issue costs 31 12
less amounts capitalised in the cost of qualifying assets see note 19 20  15
finance costs 285 312
	 	 an	ad d i t i ona l	ch a r ge	of 	£1 8 	m il l i o n 	w as	r ec o r d ed	in	2 0 14 	f o l l o w in g 	th e	e a r ly 	r e fi n a nci n g 	of	th e	gr ou p’ s 	co mm i t te d 	s y n d i c a te d 	b an k 	f a c il i t i es	
notes to the consolidated financial statements continued
93987p90132indd   104 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 105
14 tax
 
 2014 
 £’m
 2013 
 £’m
curr ent	tax	–	curr ent	y ear 204 380
curr ent	tax	–	adjus tment	in	r espect	of	prior	years 02 65
def err ed	tax	–	origination	and	r eversal 	of	t empor ary	diff er enc es 172 127
def err ed	tax	–	eff ects	of	changes	in	tax 	r at es – 54
def err ed	tax	–	adjus tment	in	r espect	of	prior	years 59 17
total taxation 319 371
t he	f i n an ce	ac t 	2 0 13 	in c lu d e d 	le g i s l a ti o n 	to 	r e du ce 	th e	m a in 	r a te	of	c or p or a t i on	tax	in 	th e	uk	f r om	2 3	to	21	w i th	ef f e c t 	f r om	1	a p r il	2 0 14	an d 	
to	2 0	w i th	ef f e c t	f r om	1	a p r il	2 015  	as	th e s e	ch a n ge s	w er e	s u b s t a n t i v ely 	e n a c te d 	d ur in g	2 0 13  	th e y 	w er e	r e flec ted 	in 	th e	tax	ch a r ge 	fo r 	t h at	yea r  	
reconciliation of total tax charge
a reconciliation of the notional tax charge based on average standard rates of tax weighted in proportion to accounting profits to the actual tax 
charge is as follows
 
 2014 
 £’m
 2013 
 £’m
pr ofit	on	or dinary	activities	bef or e	tax 	at	uk	c orpor ation	tax 	rate	of	215	2013	2325 449 626
effects of 
diff er ent	tax 	r at es	of	subsidiaries	oper ating	in	other	jurisdictions 125 141
permanent differences 160 201
temporary differences 06 15
changes	in	s t atut ory	tax 	r at es – 54
tax credits and incentives 32 44
curr ent	tax	–	adjus tment	in	r espect	of	prior	years 02 65
def err ed	tax	–	adjus tment	in	r espect	of	prior	years 59 17
total taxation 319 371
  the sensitivity of the tax charge to changes in the tax rate is such that a one percentage point increase or reduction in the tax rate would cause 
the total taxation charge for 2014 to increase or reduce respectively by approximately £21 million
tax relating to components of other comprehensive income
2014 2013
 
 before 
 tax 
 £’m
 tax credit 
 charge 
 £’m
 after 
 tax 
 £’m
 before 
 tax 
 £’m
 tax credit 
 charge 
 £’m
 after 
 tax 
 £’m
curr ent	tax	–	curr ency	tr anslation	mo v ements 770 03 767 319 02 317
def err ed	tax	–	curr ency	tr anslation	mo v ements 04 – 04 53 02 51
def err ed	tax	–	r emeasur ement	of	r etir ement	benefit	obligations 977 242 735 468 216 252
def err ed	tax	–	c ash	flow 	hedge	mo v ements 08 01 07 19 03 16
other comprehensive income 211 240 29 115 215 100
curr ent	tax 03 02 
def err ed	tax 243   217 
total 240   215 
tax relating to items recognised directly in equity
 
 2014 
 £’m
 2014 
 £’m
curr ent	tax	cr edit	r elating	to	shar ebased	payment	e xpense 12 53
def err ed	tax	char gecr edit	r elating	to 	shar ebased	payment	e xpense 18 33
total 06 86
93987p90132indd   105 04032015   1711 106 meggitt plc          report and accounts 2014
15 earnings per ordinary share
e a r n in g s 	p er 	or d i na r y 	s h ar e 	‘ e p s ’ 	is	c a l c u l a te d 	by	di v i di n g	th e	pr ofi t 	a t tr i b u t ab le 	to	o w n er s	of	th e	c om p a ny	by	th e	w e i g h te d 	a v er a g e 	nu m b er 	of	
shares in issue during the year the weighted average number of shares used excludes any shares bought by the group and held during the year 
by	an	i n d ep en d en t l y	ma nag e d	e mp lo y e e	s h ar e 	o w n e r s h ip 	p l an	tr us t	s e e 	n o te 	3 6  	t he	w e i g h te d 	a v er a g e	nu m b er 	of	ow n 	s h ar e s 	excl u d e d	w as	 
01 	m il l i o n 	s h ar e s	 2 0 13	nil  	t he 	c al c u l a ti o n 	of 	d i l u te d	ep s 	ad j us t s 	th e	w e i g h te d 	a v er a g e	nu m b er 	of	s h ar e s 	to	r e flec t 	th e	a s s um pt i o n	t h at	al l	
potentially dilutive ordinary shares convert for the group this means assuming all share awards in issue are exercised 
 
 2014 
 profit 
 £’m
 2014 
 shares  
 number ‘m
 2014 
 eps 
 pence
 2013 
 profit 
 £’m
 2013 
 shares 
 number ‘m
 2013 
 eps 
 pence
basic eps 1770 8041 220 2323 7911 294
potential effect of dilutive ordinary shares –  110 03 – 131 05
diluted eps 1770 8151 217 2323 8042 289
	 p r o fi t	fo r 	th e	yea r 	a t tr i b u t ab le 	to 	e q ui t y 	o w n er s 	of 	th e	c om p a ny
underlying eps is based on underlying profit for the year see note 10 and the same number of shares as is used in the calculation of basic eps it 
is reconciled to basic eps below
 
 2014 
 pence
 2013 
 pence
basic eps 220 294
adjus t	for 	eff ects	of
exceptional operating items 11 22
amortisation of intangible assets acquired in business combinations 55 56
financial instruments 29 07
net interest expense on retirement benefit obligations 09 10
underlying basic eps 324 375
d i l u te d 	un d e r l y in g	ep s 	is based on underlying profit for the year see note 10 and the same number of shares used in the calculation of diluted 
ep s 	d i l u te d	un d e r l y in g 	ep s 	fo r 	th e	yea r	w as	31 9 	p en ce	 2 0 13 	3 6 9 	p en ce 
16 dividends
 
 2014 
 £’m
 2013 
 £’m
in respect of earlier years – 644
in respect of 2013
 interim of 395p per share – 312
 final of 880p per share 702 –
in respect of 2014
 interim of 425p per share 342 –
dividends	paid	 1044 956
less paid as scrip dividend see note 41 530 200
dividends paid in cash 514 756
a	fi n al 	di v i d e n d 	in	r e s pec t	of 	2 0 14	of 	95 0 p 	p er	s h ar e 	 2 0 13 	8  8 0 p  	a m o un t in g	to	an	est im ate d 	to t a l 	fi n al 	di v i d e n d	of	£ 76  2 	m il l i o n	 
2013 £702 million is to be proposed at the annual general meeting on 23 april 2015 this dividend is not reflected in these  
financial statements as it is has not been approved by the shareholders at the balance sheet date
notes to the consolidated financial statements continued
93987p90132indd   106 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 107
17 related party transactions
t r an s a c ti o n s	be t w ee n 	th e	c om p a ny	an d 	it s	s u b si d ia r ie s 	ha v e 	bee n	e l im in a te d 	on	co n s o l i d a t io n  	t he	r em u n er a ti o n 	of	ke y	m an a g em ent	p e r s on ne l	
of the group which is defined for 2014 as members of the board the executive board and the operations board is set out below prior year 
c o m p ar a ti v e s 	ha v e 	n ot	bee n 	r est ate d 	to 	r e flec t 	ch a n ge s	to	th e	d efi n i t io n 	of	ke y	m an a g em en t	p e r s on ne l 	d ur in g	th e	c u r r e nt 	yea r  	 
 
 2014 
 £’m
 2013 
 £’m
salaries and other shortterm employee benefits 73 68
retirement benefit expense 03 04
sharebased payment expense 06 32
total 82 104
inte r est s	of 	ke y 	m an a g em ent 	p e r s on ne l  	in c lu d in g 	e xe c ut i ve 	d ire c to r s 	in 	s h ar e	s c h em e s 	o pe r ated 	by	th e	gr ou p	at	th e	b al an ce 	s h e et 	d a te	ar e 	s et 	
out below
 
 2014 
 average 
 exercise 
 price 
 pence
 2014 
 number 
 outstanding 
 
  ‘m
 2013 
 average 
 exercise 
 price 
 pence
 2013 
 number 
 outstanding 
 
 ‘m
share options 39300 01 34866 01
share appreciation rights – equitysettled 35971 51 35323 57
equity participation plan shares – 25 – 28
meggitt long term incentive plan 2014 – 15 – –
fu l l 	d et a i l s 	of 	al l	e lem ent s	in	th e	r em u n er a ti o n	p a ck a ge 	of	e a ch	dir ec tor	to g e th er 	w i th	d i r e c t o r s’	s h ar e	inte r est s	an d	s h ar e	a w ar d s  	ar e 	gi v e n	in	
th e	d i r e c t o r s’ 	r em u n er a ti o n 	r ep o r t	on 	p a ge s 	55 	to	75 	w hi c h 	fo r m s	p ar t	of	th e s e	fi n an c i al 	s t a tem en t s 
18 goodwill
 
 2014 
 £’m
 2013 
 £’m
cost at 1 january 14571 14942
ex change	rate	adjus tments 641 196
businesses acquired see note 42 199 90
businesses disposed – 265
cost at 31 december 15411 14571
goodwill is tested for impairment annually or more frequently if there is any indication of impairment no impairment charge was required in the 
year 2013 £nil and the cumulative impairment charge recognised to date is £nil 2013 £nil the total amount of goodwill and other intangible 
a s s et s 	a c q u ir e d 	as	p ar t	of 	th e	a c qu i s i ti o n 	of 	p r e c i sio n	e n g in e 	c o nt r o l s	c or p or a t i on	s e e 	n o te 	4 2 	t h at	ar e 	e xpec ted 	to	be	d e du c ti b le 	fo r 	tax	
purposes will be assessed during 2015
fo r	th e	p ur p o s e 	of 	im p a ir m e n t 	test in g  	g o o d w il l	is	a l l oc ated 	to	th e	gr ou p’ s 	c a sh	g en er a ti n g 	un i t s 	 ‘c g u s’ 	w hi c h 	p r in c ip a l l y 	co mp r i s e 	it s 	i n d i v i du al	
b us i ne s s	o p er a ti o n s 	g o o d w il l	is	i ni t i a l ly 	a l l oc ated 	in 	th e	yea r 	a	b u s in e s s 	is	a c q u ir e d 	to	c g us	e xpec ted	to	b en e fi t 	f r om	th e 	a c qu i s i ti o n  	
s u b s e qu ent 	a d j u s tm ent s 	ar e 	mad e	to 	t hi s 	a l lo c a t io n 	to	th e	e x te n t 	o p er a ti o n s 	to	w hi c h 	g o o d w il l 	r e l a te s 	ar e 	tr an s f er r e d 	bet w ee n	c g us 	
an	an al y s i s 	of 	g o o d w il l 	by	p r in c ip a l 	c gu 	is	sh o w n	b e lo w
 
 2014 
 £’m
 2013 
 £’m
meggitt	air cr aft	br aking	sys t ems	‘mabs’ 6999 6653
meggitt north hollywood inc 1880 1772
meggitt safety systems incpacific scientific htl 1377 1296
meggitt sensing systems ‘mss’ 819 829
meggitt	rockmart	inc 728 686
meggitt training systems inc 668 629
other 2940 2706
total 15411 14571
	 d ur in g 	2 0 14 	th e	gr ou p	an n o u n ce d 	th e	di v i s i o n al 	s t r u c t ur e 	had	bee n	r e a l i gn e d 	an d	th e	p o w er	b us i ne s s e s 	ha v e 	mo v e d	f r om 	m e g gi t t 
 equipment group to meggitt sensing systems s e e 	n o te 	6 for the purpose of impairment testing the power businesses currently continue to 
	 be	co n si d e r e d 	as	i n d i v i du al 	c g us  	an d 	ar e 	excl u d e d	f r om	th e	ms s	c gu	sh o w n 	ab o v e
93987p90132indd   107 04032015   1711 108 meggitt plc          report and accounts 2014
18 goodwill continued 
fo r	e a ch 	c g u	th e	gr ou p	ha s 	d e ter mi n e d 	it s	r e c o v er ab le 	a m o u nt	f r om	v a lu e 	in 	us e	c al c u l a ti o n s  	t he	v a lu e 	in 	us e	c al c ul a t i o n s 	ar e 	ba se d	on 	c a sh 	
flo w 	fo r e c a s t s	d er i v e d	f r om 	th e	m os t	r e cent	budg e t s	an d	p l an s	fo r 	th e	n ex t	fi ve 	yea r s 	as 	a ppr o v e d	by	m an a g em en t	in 	d e cem b er	2 0 14  	c a sh	flo w s 	
for periods beyond five years are extrapolated using estimated growth rates the resultant cash flows are discounted using a pretax discount 
r a te	a ppr o pr i a te 	fo r 	th e	r e le v ant	c g u	t he	ke y 	a s s um pt i o n s	fo r 	th e	v a lu e 	in 	us e	c al c ul a t i o n s 	ar e 	sh o w n 	b e lo w
•	 	 s ale s	v o lum e s 	se l li n g 	p r ice s	an d 	co s t 	i ncr e a s e s 	o v er 	th e	fi ve 	yea r s 	c o v er e d 	by	m an a g em en t ’ s 	d et a i l e d 	p l an s  	s ale s 	v o lum e s 	ar e	ba se d 	on 	
i n du s tr y 	fo r e c a s t s	an d 	m an a g em ent 	est im ates 	fo r 	th e	b us i ne s s e s 	in 	w hi c h 	e a ch	c gu	o p e r a te s 	in c lu d in g 	fo r e c a s t s 	fo r 	oe m 	d el i v e r i e s	of	l ar g e 	
j et s  	r e g i ona l	a i r c r af t	an d 	b u s in e s s 	j et s 	a ir 	t r af fi c 	gr o w t h 	an d	mi l i t ar y	s p e nd i ng 	by	th e	us	d od	an d	o th er 	ma j or	g o v er n m en t s  	s e l l in g	p r ice s 	
an d 	co s t	i ncr e a s e s 	ar e 	ba se d	on 	p as t 	e x p er i en ce	an d 	m an a g em en t	e xpec t at i o n s 	of	f u t ur e	ch a n ge s	in 	th e	m a r ke t  	o v er al l 	a	c au ti o u s 	a ppr o a c h	
to	v o lum e	l e v el s 	se l li n g 	p r ice s	an d 	co s t 	i ncr e a s e s 	ha s 	bee n	t aken 	gi v e n	th e	c o nti nu e d 	gl o b a l 	e c o n o mic 	un c e r t a in t y 	t he	e x te n t 	to	w hi c h	th e s e	
a s s um pt i o n s	af f e c t 	e a ch 	p r in c ip a l 	c gu 	w i th 	a	s i g n i fi c a nt 	l e v el 	of	g o o d w il l 	ar e 	de s cr i b e d 	b e l o w
  mabs meggitt north hollywood inc meggitt safety systems incpacific scientific htl and mss are broadly spread across both civil aerospace 
and military platforms with meggitt north hollywood inc and mss also operating in the energy sector mabs is a leading supplier of wheels 
b r a ke s	an d	b r a ke	c o nt r o l 	s y s te m s  	p ar tic u l ar l y 	fo r 	r e g i ona l	a i r c r af t  	b us i ne s s 	j et s	an d	mi l i t ar y	a i r c r af t  	meggitt	north	holl yw ood	inc	d e s i gn s 	
an d 	m anu f a c t u r e s	fl ui d 	c o nt r o l 	d e v ice s	an d 	s y s te m s	fo r 	m os t 	a i r c r af t 	t y pe s	an d	ha s 	a	h i gh e r 	c o nt e nt 	on	l ar g e	j et s  	meggitt	saf ety	sys t ems	inc
pacific scientific htl designs and manufactures fire protection and control systems for large regional business and military aircraft mss is a 
leading provider of highperformance sensing and conditionmonitoring solutions for highvalue rotating machinery and other assets and 
w i t h in	th e	a er o s p a ce 	sec tor 	ha s 	a	h i gh e r 	c o nt e nt 	on 	l ar g e	j et s  	a ll	f o ur	c g us	ha v e 	s i g n i fi c a nt 	oe m 	an d	a f ter m ar ke t 	r e v enu e 	d er i v e d	f r om	
s o le  s o u r ce 	p o si t io n s 	w i th 	th e	a f ter m ar ke t  	w h er e 	p l at f o r m 	l i ve s	c an	be	up	to	t h ir t y 	yea r s 	fo r 	c i v il 	a i r c r af t 	an d	l o n g er 	fo r 	mi l i t ar y 	r ep r e s enti n g 	
th e	g r e a te r 	p r op or t i on 	of 	r e v enu e 	e xcep t 	fo r 	ms s 	w hi c h	ha s	a	h i gh e r 	oe m 	c o nt e nt  	meggitt	rockmart	inc	an d	m e g gi t t	t r a in in g 	s y s te m s  	in c  	
b ot h	o p e r a te	m ai n ly	in	mi l i t ar y 	m a r ke t s  	t he 	p r in c ip a l 	c us tom e r 	of	meggitt	rockmart	inc	is 	th e	us	d od	to	w h om	meggitt	rockmart	inc	ar e 	a	
l e a d in g 	s u ppl i e r	of 	fle xi b l e 	f u el 	t an k s  	m e g gi t t 	t r a in in g 	s y s te m s  	in c  	s u ppl i e s	i n te g r a te d 	l i ve 	an d	v ir t u a l 	t r a in in g	p a ck a ge s 	fo r 	ar m e d	fo r c e s 	an d 	
law enforcement agencies across the world 
		 in	c i v il	a er o s p a ce	c ap a c i t y 	me as u r e d 	in	a v a i l ab le 	s e at	k i l o m et r e s 	 a s k s	is	fo r e c a s t 	to	gr o w	in 	l in e	w i th	th e	l o ng te r m 	tr en d	r a te	of	5	w hi c h 	
to g e th er 	w i th 	th e	gr ou p’ s 	gr o w in g 	fleet 	an d 	p r ice	i ncr e a s e s  	s h ou ld 	dr i v e	an	i ncr e a s e 	in 	a f ter m ar ke t 	r e v enu e 	of	8	to 	9	p er	an nu m	o v er 	th e	
m e d ium 	te r m  	t he	gr ou p’ s 	c o n t in u in g 	c o n fi d en ce 	in	a ir 	p a s s en g er 	t r af fi c 	gr o w t h 	is	s u p p o r te d	by	th e	sus t a i n e d 	h i gh	l e v el s	of	o r d er	i n t a ke	at	
b o e in g	an d	a ir b u s  	l ar g e 	j et 	d el i v e r i e s	i ncr e a s e d 	by	8	in 	2 0 14  	an d	th e	gr ou p	e xpec t s	go o d	d el i v e r y	gr o w t h 	o v er	th e	n ex t	fi ve 	yea r s 	
un d e r p in n e d	by 	c o nti nu e d 	st ro n g	o r d er 	i n t a ke	an d 	a	b a c kl o g 	at	b o e in g	an d	a ir b u s 	w hi c h 	e q u a te s 	to	o v er	s e v en	yea r s 	of	d el i v e r i e s	at	th e	c u r r e nt 	
p r o du c ti o n 	r a te 	d el i v e r i e s 	of 	r e g i ona l 	a i r c r af t	i ncr e a s e d	by	2 	in 	2 0 14  	w i th	m o d est	gr o w t h 	antic i p a te d 	o v er	th e	n ex t	fi ve 	yea r s 	dr i v e n 	
p r in c ip a l l y 	by	d em an d	fo r 	7 0 9 0 	s e at 	a i r c r af t  	on 	w hi c h	th e	gr ou p	ha s 	a	st ro n g 	s h i p s et 	c o nt e nt  	tot al 	b us i ne s s 	j et	d el i v e r i e s	i ncr e a s e d	by 	6 	in	
2 0 14 	bu t	d el i v e r i e s	of 	s u p er  mi d s i z e 	an d 	l o ng r a ng e 	a i r c r af t  	w h er e	th e	gr ou p	b en e fi t s 	f r om	p ar tic u l ar l y 	st ro n g 	m a r ke t 	p o si t io n s 	gr e w	m or e 	
s t r o n gly 	f u r th er	gr o w t h 	is	an tic i p a te d 	in	t hi s 	m a r ke t	o v er	th e	n ex t	fi ve 	yea r s 	dr i v e n 	by	in c r e a s in g 	i nter n a ti o n al i s a ti o n	of	th e	c us tom e r 	ba se	
an d 	th e	on go i n g	i m p r o v em ent 	in	th e	us	e c on om y 	m il i t a r y 	m a r ke t s 	lo o k 	to	be	en ter i n g	a	m or e	b e n i gn 	ph as e 	w i th	l o w er 	r a te s	of	d e c l in e	th an	
ha v e	bee n 	s e en 	in	r e cent	yea r s 	an d 	e v en 	s om e 	s ugg e s t i o n	of	gr o w t h 	in 	th e	al l 	i m p o r t a nt 	us	budg e t	f r om	2 016  	t he	t h r e at	of	s e qu e s tr a ti o n	
re m a in s 	al th o u g h	th e	l ike l ih o o d  	t im in g 	an d 	im p a c t 	ar e 	un k n o w n 	at	t hi s	s t a g e 	however 	th e	gr ou p	ha s	ke y	p o si t io n s 	on	f u t ur e	gr o w t h 	
platforms and in the absence of any clarity on if or where sequestration cuts will ultimately fall continues to anticipate average compound 
o r g an ic 	mi l i t ar y	gr o w t h 	of 	a r o un d 	2	p er	an nu m 	in	th e	m e d ium 	te r m 
•	 	 g r o w th	r a te s	us e d	fo r 	p er i o d s 	b eyo n d	th o s e 	c o v er e d 	by	m an a g em en t ’ s 	d et a i l e d 	budg e t s 	an d	p l an s  	g r o w th	r a te s	ar e 	d er i v e d	f r om	
m an a g em en t ’ s	est im ates 	w hi c h 	t a ke 	i n to 	a c c o u nt 	th e	l o ng te r m 	n at u r e	of	th e	i n du s tr y 	in 	w hi c h 	e a ch	c gu	o p e r a te s  	e x ter n al 	i n du s tr y 	fo r e c a s t s 	
of	l o ng te r m 	gr o w t h 	in	th e	a er o s p a ce 	an d 	d e f en ce	s e c to r s  	th e	e x te n t 	to	w hi c h 	a	c gu	ha s	s o le  s o u r ce	p o si t io n 	on	p l at f o r m s 	w h er e 	it	is	ab le 	to 	
s h ar e	in	a	c o n t in u in g 	s tr e am 	of 	hi g h ly 	pr ofi t a bl e 	a f ter m ar ke t 	r e v enu e s  	th e	m at u r i t y 	of	th e	p l at f o r m s 	s u ppl i e d 	by	th e	c gu	an d	th e	te c h n o l o g ic al	
c o nt e nt 	of	th e	c g u ’s 	p ro d u c t s 	fo r 	th e	p ur p o s e 	of 	im p a ir m e n t 	test in g 	a	c o n s er v a ti v e 	a ppr o a c h 	ha s	bee n	us e d	an d	w h er e	th e	d er i v e d	r a te	is	
h i gh e r 	th an	th e	l o ng te r m 	gd p 	gr o w t h 	r a te s	fo r 	th e	co u nt r ie s	in 	w hi c h 	th e	c gu	o p e r a te s 	u k 	2 3  	 2 0 13 	2  4   	u s	2  4 	 2 0 13	2  4   	th e	
latter has been used
•	 	 dis c o u nt 	r a te s	a ppl i e d	to 	f u t ur e	c a sh 	flo w s  	t he 	gr ou p’ s 	p r e tax 	w e i g h te d 	a v er a g e	co s t 	of	c ap i t al 	 wa c c	w as	us e d	as 	th e	f ou n d a t i on 	fo r 	
d e te r m in in g 	th e	d i s c o u nt 	r a te s	to 	be	a ppl i e d	t he 	wacc 	w as	th en 	ad j us te d	to	r e flec t 	r i sk s	s pec i fic 	to	th e 	c gu	n ot	al r e a d y	r e flec ted 	in	th e	f u t ur e 	
c a sh	flo w s 	fo r 	t h at	c g u	t he	d i s c o u nt 	r a te s	us e d	w er e	as 	f o l l o w s 	m a bs	10  2  	 2 0 13 	10  3   	meggitt	north	holl yw ood	inc	1 0 9  	 2 0 13	
110  	meggitt	saf ety	sys t ems	incp acific	scientific	htl	109	2013	108	mss 	101	2013	97	meggitt	rockmart	inc	10  4 	 2 0 13	
1 0 7   	an d 	m e g gi t t 	t r a in in g 	s y s te m s  	in c 	9 8  	 2 0 13 	1 0 9   	t he	d i s c o u nt	r a te s	us e d	fo r 	‘o th er ’ 	c g us	r an g e d	bet w ee n	8 3  	to	110 	 2 0 13	
9 3  	to	1 0 9  
a	s e ns it i v it y 	an al y s i s 	w as	c arrie d 	ou t 	fo r 	e a ch 	c gu 	to 	d e ter mi n e 	th e	e x te n t 	to	w hi c h 	it s	a s s um pt i o n s 	w ou ld	n eed	to	ch a n ge 	fo r 	th e	c a l c u l a te d 	
r e c o v er ab le	a m o u nt s	f r om	v a lu e 	in	u s e	to 	f al l 	b el o w	th e	c a r r y in g 	v a lu e 	of	g o o d w il l 	of	th e	c g u	m an a g em en t 	ha s	c o nc l u de d	t h at	no	r e a s ona b l y 	
f o r e s e e ab le 	ch a n ge 	in	th e	ke y 	a s s um pt i o n s 	us e d	in	th e	im p a ir m e n t	m o d el	w ou ld	r e s ult	in 	a	s i g n i fi c a nt 	im p a ir m e n t	ch a r ge 	b e in g	r ec o r d ed	in	th e	
fi n a nci a l 	s t a tem en t s  	t he 	c gu 	w i th 	th e	le a s t 	he ad r o om	in 	p er cent a g e 	te r m s	is	ms s	fo l l o w e d 	by	m a b s 	‘o th er ’ 	g o o d w il l 	of	£ 2 94  0 	m il l i o n 	 2 0 13	
£ 2 7 0 6 	m i l l i o n 	r e l a te s 	to 	a p p r ox i m a tely 	10	i n d i v i du al 	c g us  	al l 	of	w hi c h 	ha v e 	he ad r o om	in 	p er cent a g e 	te r m s	g r e a te r	th an 	t h at	of	mab s	an d 	m s s	
to require an impairment in the group financial statements one of the following would be required
  mabs mss
reduction in estimates of cash flows more than 18 14
reduction of longterm growth rates more than 62 100
increase in the discount rate applied to future cash flows more than 14 14
headroom £3136m £534m
notes to the consolidated financial statements continued
93987p90132indd   108 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 109
19 development costs and programme participation costs
 
 development 
 costs 
 
 £’m
 programme 
 participation 
 costs 
 £’m
at 1 january 2013
cos t 2760 3269
accumulated amortisation 545 1233
net	book	amount 2215 2036
year ended 31 december 2013
opening	net	book	amount 2215 2036
ex change	rate	adjus tments 38 33
additions    – internal development costs 702 –
– free of chargedeeply discounted manufactured parts – 304
 –	cash	payments – 53
disposals 20 –
interest capitalised 15 –
impairment loss 32 –
amortisation 137 254
net	book	amount 2705 2106
at 31 december 2013
cos t 3407 3560
accumulated amortisation 702 1454
net	book	amount 2705 2106
year ended 31 december 2014
opening	net	book	amount 2705 2106
ex change	rate	adjus tments 95 107
additions    – internal development costs 777 –
– free of chargedeeply discounted manufactured parts – 433
 –	cash	payments – 27
interest capitalised 20 –
impairment loss 80 –
amortisation 88 249
net book amount 3429 2424 
at 31 december 2014
cos t 4312 4192
accumulated amortisation 883 1768	
net book amount 3429 2424 
	 ch a r g e d 	to 	n et	o p er a ti n g 	co s t s 	in	r e s pec t	of	d e v e l o pme nt 	co s t s 	an d	to	co s t 	of	s ale s	in 	r e s pec t 	of	pr o g r a m me 	p ar tic i p a ti o n	c o st s 	
inte r est	ha s 	bee n 	c ap i t al i s e d 	u s in g 	th e	a v er a g e	r a te	p a y ab le 	on	th e	gr ou p’ s 	fl o at i n g 	r a te	b or r o w i n gs	of	1 5  	 2 0 13 	1 6
t he	n et 	b o ok	a m o u nt 	of 	d e v e l o pme nt	co s t s 	in c lu d e s 	£12 5  5 	m il l i o n	 2 0 13 	£ 911	m i l l i o n	in 	r e s pec t 	of	m e g gi t t	a i r c r af t 	b r a k in g 	s y s te m s 	w hi c h	ha v e	
an	est im ate d 	w e i g h te d 	a v er a g e 	r e m a in in g 	l i fe 	of	14  2 	yea r s 	 2 0 13 	9 1	yea r s 	t he	n et 	b o ok	a m o u nt	of	pr o g r a m me 	p ar tic i p a ti o n	co s t s 	in c lu d e s 	
£ 2 2 8 6 	m il l i o n	 2 0 13	£ 2 0 2 7	m i l l i o n	in	r e s pec t	of	m e g gi t t	a i r c r af t 	b r a k in g	s y s te m s 	w hi c h 	ha v e 	an	est im ate d 	w e i g h te d 	a v er a g e 	r e m a in in g 	l i fe 	of	
90 years 2013 84 years
93987p90132indd   109 04032015   1711 110 meggitt plc          report and accounts 2014
20 other intangible assets
 
 customer 
 relationships 
 
                     
 £’m
 technology 
 
 
                     
 £’m
 order 
 backlogs 
 
                     
 £’m
 trade 
 names and 
 trademarks 
                     
 £’m
 other 
 purchased 
 
                   
 £’m
 total 
 
 
 
 £’m
at 1 january 2013
cos t 8321 2405 112 299 984 12121
accumulated amortisation 2798 939 109 182 304 4332
net	book	amount 5523 1466 03 117 680 7789
year ended 31 december 2013
opening	net	book	amount 5523 1466 03 117 680 7789
ex change	rate	adjus tments 58 14 – – 04 76
business acquired 100 56 01 – 01 158
businesses disposed 95 11 – 06 – 112
additions – – – – 155 155
amortisation – net operating costs see note 10 547 170 03 23 98 841
net	book	amount 4923 1327 01 88 734 7073
at 31 december 2013
cos t 8079 2388 109 279 1108 11963
accumulated amortisation 3156 1061 108 191 374 4890
net	book	amount 4923 1327 01 88 734 7073
year ended 31 december 2014
opening	net	book	amount 4923 1327 01 88 734 7073
ex change	rate	adjus tments 220 53 – 04 09 286
businesses acquired see note 42 17 – – – 23 40
additions – – – – 120 120
amortisation – net operating costs see note 10 507 153 01 20 108 789 
net book amount 4653 1227 – 72 778 6730 
at 31 december 2014
cos t 8485 2496 – 290 1264 12535
accumulated amortisation 3832 1269	 – 218 486 5805 
net book amount 4653 1227 – 72 778 6730 
  acquired in business combinations amortisation of these items is excluded from the group’s underlying profit figures see note 10 
  principally relates to software costs amortisation of £nil 2013 £14 million has been charged to exceptional operating items and is   
  excluded from the group’s underlying profit figures see note 10
d ur in g	2 0 14 	co s t	an d 	a c c u m u l a te d	am o r ti s a ti o n 	r e l at i n g	to	co mp l e te d 	o r d er 	b a c kl o g s	w er e	e l im in a te d 
t he	n et 	b o ok 	a m o u nt	of 	c us tom e r 	r el a t i o n s hi p s	in c lu d e s 	£ 3 3 2 1 	m il l i o n	 2 0 13 	£ 3 5 0 2 	m i l l i o n 	in 	r e s pec t 	of	m e g gi t t	a i r c r af t 	b r a k in g	s y s te m s 	an d 	
£557 million 2013 £598 million in respect of meggitt sensing systems which have an estimated weighted average remaining life of 90 years 
 2 0 13 	1 00 	yea r s	an d 	10  2 	yea r s 	 2 0 13	11 2	yea r s 	r e s p e c t i v ely	t he	n et 	b o ok	a m o u nt	of	te c hn o lo g y 	in c lu d e s 	£6 6 4 	m il l i o n	 2 0 13 	£ 7 0 2	m i l l i o n 	in	
r e s pec t	of	m e g gi t t 	a i r c r af t	b r a k in g 	s y s te m s	an d 	£19 4	m il l i o n 	 2 0 13 	£ 2 2 0	m i l l i o n 	in 	r e s pec t 	of	m e g gi t t	s e n s in g 	s y s te m s 	w hi c h 	ha v e	an 	
est im ate d 	w e i g h te d	a v er a g e 	r e m a in in g 	l i fe 	of 	90	yea r s 	 2 0 13 	1 00	yea r s	an d	6 9	yea r s 	 2 0 13 	79 	yea r s	r e s p e c t i v ely 	m e g gi t t	s e n s in g 	s y s te m s 	
c o m p ar a ti v e s 	fo r 	2 0 13	ha v e 	bee n 	r est ate d 	to 	r e flec t 	th e	im p a c t	of	th e	ch a n ge 	in 	d i v i sio n a l 	s t r u c t ur e 	de s cr i b e d 	in 	n o te 	6
notes to the consolidated financial statements continued
93987p90132indd   110 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 111
21 property plant and equipment
 
 land and 
 buildings 
 
 £’m
 plant 
 equipment 
and vehicles 
 £’m
 total 
 
 
 £’m
at 1 january 2013
cos t 1692 3807 5499
accumulated depreciation 550 2627 3177
net	book	amount 1142 1180 2322
year ended 31 december 2013
opening	net	book	amount 1142 1180 2322
ex change	rate	adjus tments 08 11 19
business acquired – 07 07
businesses disposed 01 40 41
additions 219 296 515
disposals 01 06 07
depr eciation 65 257 322
net	book	amount 1286 1169 2455
at 31 december 2013
cos t 1859 3850 5709
accumulated depreciation 573 2681 3254
net	book	amount 1286 1169 2455
year ended 31 december 2014
opening	net	book	amount 1286 1169 2455
ex change	rate	adjus tments 13 27 40
businesses acquired see note 42 01 05 06
additions 36 316 352
disposals 18 12 30
reclassification 24 24 –
depr eciation 63	 249 312 
net book amount 1231 1280 2511 
at 31 december 2014
cos t 1796 4138 5934
accumulated depreciation 565	 2858 3423 
net book amount 1231 1280 2511 
	 d ep r e c i a ti o n 	of 	£ 01 	m il l i o n	 2 0 13	£ 0 8	m i l l i o n	ha s	bee n	ch a r ge d	to	e xcep ti o n al 	o p er a ti n g	i te m s	an d	is	excl u d e d	f r om	th e 	gr ou p’ s 	un d e r l y in g			
 profit figures see note 10
the group’s obligations under finance leases see note 27 are secured by the lessors’ title to the leased assets which have a carrying amount of 
£44 million included within land and buildings 2013 £44 million and £01 million 2013 £02 million included within plant equipment and 
vehicles 
22 inventories
 
 2014 
 £’m
 2013 
 £’m
contr act	c os ts	incurr ed	 93 108
less progress billings – 30
net contract costs 93 78
raw materials and boughtin components 1211 1151
manuf acturing	w ork	in	pr ogr es s 1410 1279
finished goods and goods for resale 558 484
total 3272 2992
t he	co s t 	of 	i nv e ntor i e s	r ec o g n i s ed 	as	an 	e xpe n s e 	an d	in c lu d e d 	in 	co s t 	of	s ale s	w as	£8 976 	m il l i o n	 2 0 13 	£ 9 2 3 7 	m i l l i o n 	t he	co s t	of	i nv e ntor i e s 	
r ec o g n i s ed 	as	an 	e xpe n s e 	in c lu d e s 	£6 4	m il l i o n	 2 0 13 	£ 2 3	m i l l i o n	in 	r e s pec t 	of	w r ite  d o w ns 	of	i nv e ntor y 	to	n et 	r e al i s ab le	v a lu e 	an d 	ha s	bee n	
reduced by £30 million 2013 £74 million in respect of the reversal of writedowns made in previous years
93987p90132indd   111 04032015   1711 112 meggitt plc          report and accounts 2014
23 trade and other receivables
 
 2014 
 £’m
 2013 
 £’m
trade receivables 2323 2446
amounts recoverable on contracts 551 359
prepayments and accrued income 145 122
other receivables 1234 1261
total 4253 4188
less noncurrent portion
other receivables 934 899
noncurrent portion 934 899
current portion 3319 3289
other receivables includes £955 million 2013 £959 million in respect of insurance receivables arising on environmental issues relating to 
b us i ne s s e s	s ol d	by	w h i t t aker 	c or p or a t i on	p r io r 	to 	it s	a c qu i s i ti o n 	by	th e	gr ou p	s e e 	n o te 	31	of	w hi c h 	£11 1 	m il l i o n	 2 0 13 	£10  5	m i l l i o n 	is 	sh o w n 	 
as current
trade receivables are stated after a provision for impairment of £37 million 2013 £41 million other balances within trade and other receivables 
do	n ot	c o nt a i n 	im p a ir e d 	a s s et s  	t he 	p r o v i sio n 	fo r 	im p a ir m e n t	a g a in s t	tr a d e	r e cei v ab le s 	is	ba se d	on	a	s pec i fic 	r i sk	as s e s s me nt 	t a k in g	i n to	a c c o u nt	
past default experience and is analysed as follows
 
 2014 
 £’m
 2013 
 £’m
at 1 january 41 66
ex change	rate	adjus tments 01 01
businesses disposed – 05
cr edit	to	inc ome	s t at ement	–	net	oper ating	c os ts 05 21
at 31 december 37 41
at	31	d e cem b er	2 0 14 	tr a d e	r e cei v ab le s 	an d 	a m o u nt s 	r e c o v er ab le 	on	c o nt r a c t s 	of	£675 	m il l i o n	 2 0 13 	£61 8	m i l l i o n 	w er e	p as t 	du e 	bu t 	n ot 	
impaired these relate to a number of independent customers for whom there is no recent history of default the ageing analysis of these trade 
and other receivables is as follows
 
 2014 
 £’m
 2013 
 £’m
up to 3 months overdue 415 532
over 3 months overdue 260 86
total 675 618
t he	m a x im um	ex p o su r e	to 	c r e di t 	r i sk 	at 	th e	b al an ce 	s h e et	d a te	is	th e	f a ir 	v a lu e 	of	e a ch	cl a s s 	of	r e cei v ab le 	r e p o r te d 	ab o v e	t he	gr ou p	do e s	n ot 	
hold any collateral as security
trade and other receivables are denominated in the following currencies
 
 2014 
 £’m
 2013 
 £’m
sterling 879 792
us dollar 2959 2893
euro 286 417
other 129 86
total 4253 4188
notes to the consolidated financial statements continued
93987p90132indd   112 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 113
24 cash and cash equivalents
 
 2014 
 £’m
 2013 
 £’m
cash	at	bank	and	on	hand 954 1010
shortt erm	bank	deposits 101 151
total 1055 1161
c a sh 	an d	c a sh 	e qu i v alen t s 	ar e 	s ub j e c t 	to 	inte r est 	at	fl o at i n g 	r ates 	the credit quality of cash and cash equivalents is as follows
 
 2014 
 £’m
 2013 
 £’m
spmoody’s rating
aaa 03 07
aa 255 290
a 774 817
bbb 23 47
total 1055 1161
25 trade and other payables – current
 
 2014 
 £’m
 2013 
 £’m
payments received on account 315 422
trade payables 1273 1282
social security and other taxes 84 125
accrued expenses 526 478
shar e	buyback		cl ose	period	c ommitment 200 –
other payables 1187 984
total 3585 3291
26 trade and other payables – noncurrent
 
 2014 
 £’m
 2013 
 £’m
def err ed	c onsider ation	r elating	to	acquir ed	busines ses 30 29
other payables 29 23
total 59 52
27 obligations under finance leases
minimum  
lease payments 
present value  
of minimum  
lease payments
 
 2014 
 £’m
 2013 
 £’m
 2014 
 £’m
 2013 
 £’m
amounts payable under finance leases
in one year or less 11 34 01 24
in more than one year but not more than five years 40 38 02 13
in more than five years 124 127 51 38
total 175 199 54 75
less future finance charges 121  124
present value of lease obligations 54 75
less noncurrent portion 53 51 
current portion 01 24
obligations under finance leases are principally us dollar denominated the weighted average period to maturity is 154 years 2013 110 years 
an d 	th e	w e i g h te d 	a v er a g e 	inte r est 	r a te	is	18  0 	 2 0 13 	1 3 9  
93987p90132indd   113 04032015   1711 114 meggitt plc          report and accounts 2014
28 bank and other borrowings
 
 2014 
 £’m
 2013 
 £’m
current
bank	l oans 108 39
other loans 481 33
total current 589 72
noncurrent
bank	l oans 2126 2458
other loans 4041 4202
total noncurrent 6167 6660
   
total 6756 6732
anal ysis	of	bank	and	other	borr o wings	r epay abl e
in one year or less 589 72
in more than one year but not more than five years 3444 4137
in more than five years 2723 2523
total 6756 6732
anal ysis	of	bank	and	other	borr o wings
dr awn	under	c ommitt ed	f acilities 6449 6532
less unamortised debt issue costs 36 39
f air	v alue	adjus tment	to	fix ed	rate 	borr o wings 195 153
dr awn	under	unc ommitt ed	f acilities 116 56
interest accruals 32 30
total 6756 6732
d e bt 	is su e 	co s t s	ar e	am o r ti s e d	o v er 	th e	p er i o d 	of 	th e	f a c il i t y 	to	w hi c h 	th e y 	r e l a te 	t he	gr ou p	ha s	no 	s ec u r ed	b or r o w i n gs	 2 0 13 	£ n i l 	
the group has the following committed facilities
2014 2013
 
 drawn 
 £’m
 undrawn 
 £’m
 total 
 £’m
	 dr awn 
 £’m
 undrawn 
 £’m
 total 
 £’m
senior	not es	usd	700	million 449 – 449 423 – 423
senior	not es	usd	6000	million 3848 – 3848 3623 – 3623
syndic at ed	cr edit	f acility	usd	7000	million – – – 1864 2361 4225
syndic at ed	cr edit	f acility	usd	4000	million – – – 622 1793 2415
syndic at ed	cr edit	f acility	usd	9000	million 2152 3620 5772 – – –
total 6449 3620  10069 6532 4154 10686
t he	gr ou p	is su e d 	u sd 	7 00 	m il l i o n	of 	l o an 	n o te s	to 	p r i v a te	p l a cem en t 	i nv e s tor s	in 	2 0 0 3 	t he	n o te s 	c ar r y	an	inte r est 	r a te	of	5  4 6	an d 	ar e 	du e 	fo r 	
repayment in 2015
t he	gr ou p	is su e d 	u sd 	6 0 0 0	m il l i o n	of 	l o an 	n o te s	to 	p r i v a te	p l a cem en t 	i nv e s tor s	in 	2 010  	t he	n o te s 	ar e 	in 	f o ur	tr an c h e s 	as 	f o l l o w s 	 
u sd 	2 0 00 	m il l i o n	c ar r y 	an	inte r est 	r a te	of 	4  62  	an d 	ar e	du e 	fo r 	r ep a y m en t	in 	2 01 7 	u sd	12 5  0 	m il l i o n	c ar r y	an	inte r est	r a te	of	5 0 2  	an d 	 
ar e 	du e	fo r 	r ep a y m ent	in	20 20 	u sd 	15 0  0 	m il l i o n	c ar r y	an	inte r est 	r a te	of	51 7  	an d	ar e 	al s o 	du e 	fo r 	r ep a y m en t	in 	20 20	an d	u sd	12 5  0 	m il l i o n	
c ar r y	an	inte r est 	r a te	of 	512  	an d 	ar e 	du e	fo r 	r ep a y m ent	in 	20 22  	
d ur in g	2 0 14 	th e	gr ou p 	s ec u r ed	a	ne w	fi ve 	yea r	u sd 	9 0 00	m il l i o n	s y n d i c a te d 	r evo l v i n g 	c r e di t 	f a c il i t y 	w hi c h 	m at u r e s	in 	2 019	to	r ep l a ce	th e	ex is t i n g	
u sd 	7 0 00 	m il l i o n	an d 	u sd 	4 0 00 	m il l i o n	s y n d i c a te d	r evo l v i n g 	c r e di t 	f a c il i t i e s 	w hi c h 	w er e	du e 	to	m at u r e 	in 	2 016	an d	2 017	r e s p e c t i v ely 	t he	ne w	
f a c il i t y 	in c lu d e s 	one  y e a r 	e x te n sio n 	op t i on s	at 	th e	en d 	of	th e	fir s t 	an d	s e co n d 	yea r s 	at	31	d e cem b er	2 0 14  	th e	a m o u nt s	dr a w n 	un d e r	r evo l v i n g 	
c r e di t	f a c il i t i e s 	w er e	£ 215  2 	m il l i o n 	 2 0 13	£ 2 4 8 6	m i l l i o n	r ep r e s en te d 	by	b or r o w i n gs	d en o mi n a te d 	in 	us	d o l l ar s	of	£14 2  5 	m il l i o n	 2 0 13 	 
£970 	m i l l i o n 	in	eu r o s 	of 	£ 5 0 4	m il l i o n	 2 0 13	£ 62  3 	m i l l i o n  	in 	s w is s 	f r an c s 	of	£10  3 	m il l i o n	 2 0 13 	£ 7 8 3 	m i l l i o n 	an d	in 	s te r l i n g	of	£12  0	m il l i o n	
 2 0 13 	£110 	m i l l i o n  	b or r o w i n gs 	un d e r 	th e	f a c il i t i e s 	ar e	s ub j e c t	to	inte r est	at	fl o at i n g 	r ates 	
notes to the consolidated financial statements continued
93987p90132indd   114 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 115
28 bank and other borrowings continued
the committed facilities available at each balance sheet date expire as follows
2014 2013
 
 drawn 
 £’m
 undrawn 
 £’m
 total 
 £’m
	 dr awn 
 £’m
 undrawn 
 £’m
 total 
 £’m
in one year or less 449 – 449 – – –
in more than one year but not more than five years 3435 3620 7055 4117 4154 8271
in more than five years 2565 – 2565 2415 – 2415
total 6449 3620  10069 6532 4154 10686
t he	gr ou p	al s o	ha s 	v a r i ous	u n co mm i t te d 	f a c il i t i e s 	w i th	it s 	r el a t i o n s hi p 	b an k s 
t he	f a ir	v a lu e 	of 	b an k 	an d 	o th er	b or r o w i n gs 	is	as 	f o l l o w s
 2014 2013
 
 book  
 value 
 £’m
 fair  
 value 
 £’m
	 book	 
  value 
 £’m
 fair  
  value 
 £’m
curr ent 589 616 72 72
noncurrent 6167 6257 6660 6763
total 6756  6873 6732 6835
a f te r 	t a k in g	a c c o u nt 	of 	fi n an c i al 	d er i v a ti v e s	t h at 	alte r 	th e	inte r est	b a si s	of	th e	fi n an c i al 	l i ab i l i ti e s	en ter e d 	i n to	by	th e	gr ou p	th e	inte r est	r a te	
ex p o su r e	on 	gr o s s	b an k 	an d 	o th er	b or r o w i n gs 	i s 	 
as at 31 december 2014 fixed rate borrowings
 
 floating 
 
 £’m
 fixed 
 
 £’m
 noninterest 
 bearing 
 £’m
 total 
 
 £’m
 weighted 
 average 
 interest rate 
 
 
 
 weighted 
 average 
 period 
 for which 
 rate is fixed 
 years
us dollar 3176 2774 – 5950 37 33
swiss franc 148 – – 148
euro 504 – 09 513
sterling 181 – – 181 
gr os s	bank	and	other	borr o wings 4009 2774 09 6792
less unamortised debt issue costs 28 08  – 36 
bank and other borrowings 3981 2766 09 6756 
 
as at 31 december 2013
fixed rate borrowings
 
 floating 
 
 £’m
 fixed 
 
 £’m
 noninterest 
 bearing 
 £’m
 total 
 
 £’m
 weighted 
 average 
 interest rate 
 
 
	 
 weighted 
 average 
 period 
 for which 
 rate is fixed 
 years
us dollar 2627 2596 – 5223 42 43
swiss franc 796 – – 796
euro 623 03 16 642 07 31
sterling 110 – – 110
gr os s	bank	and	other	borr o wings 4156 2599 16 6771
less unamortised debt issue costs 32 07 – 39
bank	and	other	borr o wings 4124 2592 16 6732
the weighted average interest rate reflects the relative impact of interest rates based on both principal amounts and duration of borrowings  
the weighted average period to maturity for noninterest bearing borrowings is 44 years 2013 35 years
93987p90132indd   115 04032015   1711 116 meggitt plc          report and accounts 2014
29 financial instruments
as at 31 december 2014
held at fair value held at amortised cost
 
 through 
 profit 
  loss 
 £’m
 derivatives 
 used for 
 hedging 
 £’m
 loans  
 receivables 
 
 £’m
 liabilities 
  
 
 £’m
 total 
 book 
 value 
 £’m
 total 
 fair 
 value 
 £’m
noncurrent
trade and other receivables see note 23 – – 934 – 934 934
deriv ativ e	financial	ins truments	see	not e	30 283 13 – – 296 296
curr ent
trade and other receivables – – 3174 – 3174 3174
deriv ativ e	financial	ins truments	see	not e	30 11 – – – 11 11
cash	and	c ash	equiv al ents	see	not e	24 – – 1055 – 1055 1055 
financial assets 294 13 5163 – 5470 5470 
curr ent
trade and other payables – – – 3501 3501 3501
deriv ativ e	financial	ins truments	see	not e	30 96 – – – 96 96
obligations under finance leases see note 27 – – – 01 01 01
bank	and	other	borr o wings	see	not e	28 – – – 589 589 616
noncurrent
t r ade	and	other	pay abl es	see	not e	26 – – – 59 59 59
deriv ativ e	financial	ins truments	see	not e	30 29 – – – 29 29
obligations under finance leases see note 27 – – – 53 53 53
bank	and	other	borr o wings	see	not e	28 2769 – – 3398  6167 6257 
financial liabilities 2894 – – 7601 10495 10612 
total 2600 13 5163 7601 5025 5142 
as at 31 december 2013
held at fair value held at amortised cost
 
 through 
 profit 
  loss 
 £’m
	 deriv ativ es 
 used for 
 hedging 
 £’m
 loans  
 receivables 
 
 £’m
 liabilities 
  
 
 £’m
 total 
	 book 
 value 
 £’m
 total 
 fair 
 value 
 £’m
noncurrent
trade and other receivables see note 23 – – 899 – 899 899
deriv ativ e	financial	ins truments	see	not e	30 334 21 – – 355 355
curr ent
trade and other receivables – – 3167 – 3167 3167
deriv ativ e	financial	ins truments	see	not e	30 112 – – – 112 112
cash	and	c ash	equiv al ents	see	not e	24 – – 1161 – 1161 1161
financial assets 446 21 5227 – 5694 5694
curr ent
trade and other payables – – – 3166 3166 3166
deriv ativ e	financial	ins truments	see	not e	30 07 – – – 07 07
obligations under finance leases see note 27 – – – 24 24 24
bank	and	other	borr o wings	see	not e	28 – – – 72 72 72
noncurrent
t r ade	and	other	pay abl es	see	not e	26 – – – 52 52 52
deriv ativ e	financial	ins truments	see	not e	30 01 – – – 01 01
obligations under finance leases see note 27 – – – 51 51 51
bank	and	other	borr o wings	see	not e	28 2568 – – 4092 6660 6763
financial liabilities 2576 – – 7457 10033 10136
total 2130 21 5227 7457 4339 4442
   excludes prepayments and accrued income of £145 million 2013 £122 million see note 23
 excludes social security and other taxes of £84 million 2013 £125 million see note 25
notes to the consolidated financial statements continued
93987p90132indd   116 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 117
29 financial instruments continued
fair value measurement and hierarchy
for trade and other receivables cash and cash equivalents trade and other payables obligations under finance leases and the current element 
of	fl o at i n g 	r a te	b an k 	an d 	o th er	b or r o w i n gs  	f a ir 	v a lu e s 	a ppr ox i m a te	to	b o ok	v a lu e s 	du e 	to	th e	sh o r t	m at u r i t y	p er i o d s 	of	th e s e	fi n an c i al 	
in s t r um e n t s  	fo r 	tr a d e 	an d 	o th er	r e cei v ab le s  	al l o w an ce s	ar e 	mad e	w i t h in 	b o ok	v a lu e 	fo r 	c r e di t 	r i sk 	
d er i v a ti v e 	fi n an c i al 	in s t r um e n t s	me as u r e d 	at 	f a ir	v al u e 	ar e 	c l a s si fi e d 	as 	l e v el 	2	in	th e	f a ir 	v a lu e 	me as u r e me nt 	h i er ar c h y 	as 	th e y 	ha v e	bee n	
d e ter mi n e d	u s in g 	s i g n i fi c a nt 	in p u t s 	ba se d	on 	o b s er v ab le 	m a r ke t 	d at a  	t he	f a ir 	v a lu e s 	of	f o r e i gn 	c ur r e n c y 	fo r w a r d 	c o nt r a c t s	ha v e	bee n	d er i v e d 	
from forward exchange rates observable at the balance sheet date together with the contractual forward rates the fair values of interest rate 
derivatives have been derived from forward interest rates based on yield curves observable at the balance sheet date together with the 
contractual interest rates
t he	no n  cu r r e nt 	p or t i on	of 	b an k 	an d 	o th er	b or r o w i n gs 	me as u r e d	at	f a ir 	v al u e 	is	c l a s si fi e d 	as 	l e v el 	3	in	th e	f a ir 	v a lu e 	me as u r e me nt 	h i er ar c h y 	as 	
it	ha s	bee n 	d e ter mi n e d 	u s in g 	s i g n i fi c a nt 	in p u t s 	w hi c h 	ar e 	a	m i x t ur e 	of	th o s e	ba se d	on	o b s er v ab le 	m a r ke t 	d at a 	inte r est 	r a te 	r i sk 	an d 	th o s e	n ot 	
ba se d 	on	o b s er v ab le 	m a r ke t	d at a 	c r e d i t 	r i s k  	t he	f a ir 	v a lu e 	a t tr i b u t ab le 	to	inte r est 	r a te	r i sk	ha s	bee n	d er i v e d	f r om	fo r w a r d	inte r est	r a te s	ba se d 	
on	y i el d	c ur v e s 	o b s er v ab le 	at 	th e	b al an ce 	s h e et	d a te 	to g e th er 	w i th	th e 	c o ntr a c t u al	inte r est	r a te s	an d	w i th	th e	c r e di t 	r i sk	m a r g in	ke p t	c o n s t a nt  	
t he	f a ir	v a lu e	a t tr i b u t ab le 	to 	c r e di t 	r i sk 	ha s 	bee n 	d er i v e d	f r om	q u o te s	f r om	len d er s 	fo r 	b or r o w i n gs	of	s i mi l ar	a m o u nt s	an d	m at u r i t y 	p er i o d s  	 
t he	s am e	me t ho d s	of 	v al u a ti o n 	ha v e 	bee n 	us e d	to	d er i v e	th e	f a ir 	v a lu e 	of	th e	c u r r e nt 	e lem en t 	of	fi xe d 	r a te	b an k 	an d	o th er 	b or r o w i n gs 	an d 	th e	
no n  cu r r e nt	e lem ent	of 	b an k 	an d 	o th er	b or r o w i n gs	w hi c h 	ar e 	he ld 	at	am o r ti s e d 	co s t 	bu t 	fo r 	w hi c h 	f a ir 	v a lu e s 	ar e 	p r o v i de d 	in	th e	t ab le 	a bov e 
there were no transfers of assets or liabilities between levels of the fair value hierarchy during the year
financial liabilities designated as fair value through profit or loss
cu mu l a t i v e	u n r e a li se d 	ch a n ge s 	in	th e	f a ir 	v a lu e 	of	th e	no n  cu r r e nt 	p or t i on	of	b an k 	an d	o th er 	b or r o w i n gs	a r i s in g 	f r om	ch a n ge s 	in	c r e di t 	r i sk	ar e 	
as follows 
 
 2014 
 £’m
 2013 
 £’m
fair value at 1 january 70 100
cr edit edchar ged	to	net	oper ating	c os ts 07 30
fair value at 31 december 77 70
t he	d i f f er en ce	be t w ee n 	th e	f a ir	v a lu e	an d 	c o ntr a c t u al 	a m o u nt	at	m at u r i t y 	of	th e	no n  cu r r e nt 	p or t i on	of	b ank	an d	o th er 	b or r o w i n gs 	is	as 	f o l l o w s 
 
 2014  
 £’m
 2013  
 £’m
fair value 2769 2568
diff er enc e	between fair value and contractual amount at maturity 195 153
contractual amount payable at maturity 2574 2415
 
financial liabilities classified as level 3 in the hierarchy
ch a n g e s	in	f a ir 	v a lu e 	ar e 	as	f o l l o w s 
 
 
 2014 
 £’m
 2013 
 £’m
bank	and	other	borr o wings	at	f air	v alue	thr ough	pr ofit	or	l os s
at 1 january 2568 2749
ex change	rate	adjus tments 161 44
lossgain recognised in net operating costs 40 137 
at 31 december 2769 2568
the largest movement in credit spread seen in a six month period since inception of the borrowings is 70 basis points a 70 basis point movement 
in	th e	c r e di t	sp r e a d 	us e d	as	an 	in p u t 	in	d e te r m in in g 	th e	f a ir 	v a lu e 	at	31	d e cem b er	2 0 14  	w ou ld	im p a c t	pr ofi t 	b ef o r e	tax	by	a p p r ox i m a tely 	 
£90 million 
93987p90132indd   117 04032015   1711 118 meggitt plc          report and accounts 2014
30 derivative financial instruments
as at 31 december 2014
contract or underlying 
principal amount
fair value 
 
 assets 
 £’m
 liabilities 
 £’m
 assets 
 £’m
 liabilities 
 £’m
interest rate swaps – cash flow hedges 1026 – 13 –
interest rate swaps – fair value hedges 2565 – 270 –
foreign currency forward contracts – not hedge accounted 1343 2843 24 125 
total 4934 2843 307 125 
less noncurrent portion
interest rate swaps – cash flow hedges 1026 – 13 –
interest rate swaps – fair value hedges 2565 – 270 –
foreign currency forward contracts – not hedge accounted 720 1312 13 29 
noncurrent portion 4311 1312 296 29 
current portion 623 1531 11 96 
as at 31 december 2013
contr act	or	underl ying 
principal amount
fair value 
 
 assets 
 £’m
 liabilities 
 £’m
 assets 
 £’m
 liabilities 
 £’m
interest rate swaps – cash flow hedges 966 – 21 –
interest rate swaps – fair value hedges 2415 – 228 –
foreign currency forward contracts – not hedge accounted 3445 124 218 08
total 6826 124 467 08
less noncurrent portion
interest rate swaps – cash flow hedges 966 – 21 –
interest rate swaps – fair value hedges 2415 – 228 –
foreign currency forward contracts – not hedge accounted 1706 16 106 01
noncurrent portion 5087 16 355 01
curr ent	portion 1739 108 112 07
interest rate swaps
t he	to t a l 	n o ti o n al	p r in c ip a l 	a m o u nt 	of 	o u t s t a nd i ng 	inte r est 	r a te	s w ap	c o nt r a c t s 	at	31	d e cem b er	2 0 14 	is	£ 3 59 1 	m il l i o n	 2 0 13 	£ 3 3 8 1 	m i l l i o n 	of	
w hi c h 	£6 4 1 	m il l i o n 	w il l	e x p ir e	in	2 01 7 	£10 2  6 	m il l i o n 	w il l	e x p ir e 	in 	2 018  	£112  2 	m il l i o n	w il l	e x p ir e 	in 	20 20	an d	£ 8 0 2 	m il l i o n	w il l	e x p ir e 	in	20 22 	t he	
c o nt r a c t s 	ar e 	al l 	d en o mi n a te d	in	u s d 	of	th e	n o ti o n al 	p r in c ip a l	a m o u nt	o u t s t a nd i ng 	£10 2  6	m il l i o n	 2 0 13 	£ 96  6 	m i l l i o n	ha s	th e	e c o n o mic 	ef f e c t	of	
c o n v er ti n g	fl o at i n g 	r a te	us	d o l l ar 	b or r o w i n gs 	i n to 	fi xe d 	r a te	us	d o l l ar	b or r o w i n gs	an d	£ 2 5 6 5 	m il l i o n	 2 0 13 	£ 2 41  5	m i l l i o n 	ha s 	th e	e c o n o mic	
effect of converting fixed rate us dollar borrowings into floating rate us dollar borrowings to the extent they meet the criteria for hedge 
accounting the floating rate to fixed rate swap contracts are accounted for as cash flow hedges and the fixed rate to floating rate swap contracts 
as fair value hedges 
foreign currency forward contracts
although the group uses foreign currency forward contracts to hedge against foreign currency exposures it has decided that the costs of 
meeting the extensive documentation requirements to be able to apply hedge accounting under ias 39 ‘financial instruments recognition and 
measurement’ are not merited 
 
 2014 
 assets 
 £’m
 2014 
 liabilities 
 £’m
 2013 
 assets 
 £’m
 2013 
 liabilities 
 £’m
fair value
us	dollar	f orwar d	sal es	usd£ 23 38 174 –
forward sales denominated in other currencies 01 87 44 08
total 24 125 218 08
notes to the consolidated financial statements continued
93987p90132indd   118 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 119
30 derivative financial instruments continued
credit quality of derivative financial assets
the credit quality of derivative financial assets is as follows 
 
 2014 
 £’m
 2013 
 £’m
spmoody’s rating
aa 40 72
a 267 338
bbb – 57
total 307 467
31 provisions 
 
 environmental 
a 
 
 £’m
 onerous 
contracts  
b 
 £’m
 warranty 
 costs 
 c 
 £’m
 other 
 d 
 
 £’m
 total 
 
  
£’m
at 1 january 2014 1204 402 126 203 1935
ex change	rate	adjus tments 76 08 03 04 91
business acquired see note 42 – – 01 – 01
additional provision in year – cost of sales – 25 81 – 106
additional provision in year – net operating costs 252 – – 36 288
unused amounts reversed – cost of sales – 75 02 24 101
unused amounts reversed – net operating costs 86 40 – 99 225
char ge	to	inc ome	s t at ement – net finance costs see note 13 11 – – – 11
utilised 127 97 79 47 350 
at 31 december 2014 1330 223 130 73 1756 
 
 2014 
 £’m
 2013 
 £’m
curr ent 451 443
noncurrent 1305 1492
at 31 december 2014 1756 1935
a 	 	 p r o v i sio n 	ha s 	bee n 	mad e	fo r 	k no w n 	ex p o su r e s	a r i s in g 	f r om	en v i r o n m en t a l	r em e d i a ti o n 	in 	a	nu m b er 	of	b u s in es s es	t he	gr ou p’ s	o p er a ti o n s	
an d 	f a c il i t i e s 	ar e 	s ub j e c t 	to 	l aw s 	an d 	r e gu l a ti o n s 	t h at	g o v er n 	th e	d i s ch a r ge 	of	p o l l u t a nt s 	an d	haz a r dous 	s u b s t an ce s 	i n to 	th e	gr o un d  	a ir 	an d 	
water as well as the handling storage and disposal of such materials and other environmental matters failure to comply with its obligations 
potentially exposes the group to serious consequences including fines other sanctions and limitations on operations the group is involved in 
the investigation and remediation of current and former sites for which it has been identified as a potentially responsible party under us law 
provision has been made for the expected costs arising from these sites based on information currently available the provisions are expected 
to be substantially utilised over the next fifteen years and are discounted where appropriate using an appropriate discount rate a receivable 
has been established to the extent these costs are recoverable under the group’s environmental insurance policies or from other parties see 
n o te	2 3 	t he 	n et	ch a r ge 	to 	n et	o p er a ti n g 	co s t s 	of	£16  6	m il l i o n	w as	p a r t ly	of f s et 	by	a	c r e di t	to	n et 	o p er a ti n g	co s t s 	of	£ 97 	m il l i o n  	r ec o g n i s ed	in	
respect of an increase in the year in amounts recoverable under these insurance policies and from other parties 
b  onerous contracts include lease obligations and trading contracts provision has been made for the estimated rental shortfall in respect of 
properties with onerous lease obligations these will be utilised over the lease terms typically up to five years and are discounted where 
appropriate using a discount rate appropriate to each provision provision has also been made for estimated losses under certain trading 
contracts as described in note 11 during 2013 the group was made aware of an issue relating to the supply from a vendor of nonconforming 
raw material in one of our businesses provision has been made for the estimated future costs associated with this matter which include the 
provision of a number of free of charge replacement parts to customers over a period of several years there are a number of uncertainties 
regarding the ultimate amounts that will be payable including the extent to which replacement parts will be required however the directors 
believe based on the information currently available that the ultimate outcome will not be significantly different from that recognised onerous 
trading contract provisions are expected to be substantially utilised over the next ten years and are discounted where appropriate using a 
discount rate appropriate to each provision
c  provision has been made for product warranty claims these provisions are expected to be utilised over the next three years 
d  a number of asbestosrelated claims have been made against subsidiary companies of the group to date the amount connected with such 
claims in any year has not been material and many claims are covered fully or partly by existing insurance and indemnities there is a provision 
fo r 	c l a im s 	w hi c h 	c a n n ot 	be	r ec o v e r ed	f r om	in s ur e r s  	d ur in g 	2 0 13  	an	a d mi n i s tr a ti v e 	s e t t lem en t 	w as	r e a ch e d 	w i th	th e	us 	g o v er n m ent 	f o l l o w in g 	
its investigation of alleged violations of us export control laws by certain subsidiaries of the group under the terms of the 30month consent 
a g r e em ent  	m e gg i t t u s a 	in c 	w as	a s se s se d 	a	c i v il 	p en al t y 	of	u sd	25 	m il l i o n 	of	w hi c h 	u sd	22	m il l i o n	w as	s u s pe n d ed 	on	co n d i t io n	th e	
government approves certain past or future remedial costs incurred or to be incurred by the group’s us subsidiaries in addition the group is 
required to implement additional future compliance measures no provision is held for the suspended penalty as it is not considered probable 
that such amounts will be payable the provisions are expected to be substantially utilised over the next ten years and are discounted where 
appropriate using a discount rate appropriate to each provision
93987p90132indd   119 04032015   1711 120 meggitt plc          report and accounts 2014
32 deferred tax 
m o v em ent s 	in	d ef e r r e d 	tax 	a s s et s	an d 	l i ab i l i ti e s 	d ur in g 	th e	yea r 	w i th o u t	t a k in g	i n to	co n si d e r a t io n	th e	of f s et t i n g	of	b al an ce s  	ar e 	as	f o l l o w s 
deferred tax assets
 
 retirement 
 benefit 
 obligations 
 £’m
 other 
 
 
 £’m
 total 
 
 
 £’m
at 1 january 2013 943 210 1153
ex change	rate	adjus tments 01 01 –
business acquired – 01 01
businesses disposed – 46 46
reclassifications – 06 06
char ge	to	inc ome	s t at ement	see	not e	14 45 134 179
char ge	to	other	c ompr ehensiv e	inc ome	see	not e	14 216 01 217
cr edit	to	equity	see	not e	14 – 33 33
at 31 december 2013 681 160 841
ex change	rate	adjus tments 27 03 30
reclassifications – 37 37
char gecr edit	to 	inc ome	s t at ement	see	not e	14 73 21 52
cr edit	to	other	c ompr ehensiv e	inc ome	see	not e	14 242 02 244
char ge	to	equity	see	not e	14 – 18 18 
at 31 december 2014 877 131 1008 
deferred tax liabilities
 
 accelerated 
 tax 
 depreciation 
 £’m
 intangible 
 assets 
                     
 £’m
 total 
 
 
 £’m
at 1 january 2013 165 2881 3046
ex change	rate	adjus tments 03 40 43
businesses disposed – 60 60
reclassifications 03 – 03
char gecr edit	to 	inc ome	s t at ement	see	not e	14 28 151 123
at 31 december 2013 193 2750 2943
ex change	rate	adjus tments 09 141 150
reclassifications 01 09 08
char ge	to	inc ome	s t at ement	see	not e	14 18 43 61	
char ge	to	other	c ompr ehensiv e	inc ome	see	not e	14 – 01 01 
at 31 december 2014 221 2926 3147 
 acquired in business combinations
def e r r ed	tax 	a s s et s 	an d 	l i ab i l i ti e s 	ar e 	of f s et 	w h er e 	th er e	is	a	le g al l y 	en f o r ce ab le	r i g ht 	to	of f s et	c u r r e nt 	tax	a s s et s	a g a in s t	c u r r e nt 	tax	l i ab i l i ti e s 	
and when the deferred income taxes relate to the same tax authority the balances after allowing for such offsets are as follows
 
 2014 
 £’m
 2013 
 £’m
def err ed	tax	as sets 09 91
def err ed	tax	liabilities 2148 2193
net balance at 31 december 2139 2102
def e r r ed	tax 	a s s et s 	ar e 	an al y s e d	as	f o l l o w s
 
 2014 
 £’m
 2013 
 £’m
to be recovered within one year 02 02
to be recovered after more than one year 07 89
total 09 91
def e r r ed	tax 	l i ab i l i ti e s	ar e 	an al y s e d	as	f o l l o w s
 
 2014 
 £’m
 2013 
 £’m
due	within	one	y ear – 03
due	aft er	mor e	than	one	y ear 2148 2190
total 2148 2193
t he	gr ou p	ha s	un r e c o gn i s e d 	tax 	lo s s e s 	of 	£ 2 3 5	m il l i o n	 2 0 13 	£ 25 2	m i l l i o n 	fo r 	w hi c h 	no 	d ef e r r e d	tax	a s s et 	ha s	bee n	r ec o g n i s ed  	def e r r ed	tax	
a s s et s 	ha v e	n ot 	bee n	r ec o g n i s ed	in	r e s pec t 	of 	th e s e	lo s s e s  	as 	it	is	n ot	r e ga r de d	as 	m or e	l i kely	th an	n ot	t h at	th e y 	w il l	be	r ec o v e r ed 	def e r r ed	tax	
assets not recognised would be recoverable in the event they reverse and suitable taxable profits are available there are no unremitted earnings 
in foreign subsidiaries that would give rise to a tax liability in the event of those subsidiaries remitting their earnings
notes to the consolidated financial statements continued
93987p90132indd   120 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 121
33 retirement benefit obligations
pension schemes
the group operates a number of pension schemes for the benefit of its employees the nature of each scheme which has a significant impact on 
the financial statements is as follows 
•	 	 in	th e	uk 	th e	gr ou p	o p e r a te s 	a	f un d e d	d efi n e d 	b en e fi t 	s c h em e	w hi c h 	is	c lo s e d	to	ne w	m em b er s 	bu t 	o p en	to	f u t ur e	a c cr ua l 	fo r 	ex is t i n g	
members
•	 	 in 	 th e 	 u s 	 th e 	 gr ou p 	 o p e r a te s 	 fi ve 	 d efi n e d 	 b en e fi t 	 s c h em e s  	 al l 	 of 	 w hi c h 	 ar e 	 c lo s e d 	 to 	 ne w 	 m em b er s  	 w i th 	t wo 	 e x cep ti o n s  	 th e s e 	 s c h em e s 	 ar e 	
open to future accrual for existing members the schemes are a mixture of funded and unfunded schemes and
•	 	 in	s w i t z er l an d 	th e	gr ou p	o p e r a te s 	a	f un d e d	d efi n e d 	b en e fi t 	s c h em e 	w hi c h 	is	o p en	to	ne w	m em b er s 	an d	to	f u t ur e	a c cr ua l  	
the uk and us schemes provide benefits to members in the form of a guaranteed level of pension payable for life the benefits provided depend on a 
m em b er ’ s 	 len g th 	 of 	 s er v ice 	 fo r 	 th e 	 ma j or i t y 	 of 	 s c h em e s  	 th e 	 b en e fi t s 	 ar e 	 al s o 	 d ep en d ent 	 on 	 s al ar y 	 at 	 r e ti r em ent 	 or 	 a v er a g e 	 s al ar y 	 o v er 	
employment in the final years leading up to retirement in the us one scheme provides a fixed benefit for each year of service the swiss scheme 
has many of the characteristics of a defined contribution scheme but provides for certain minimum benefits to be guaranteed to members 
for all funded schemes benefit payments are made from funds administered by third parties unrelated to the group the assets of such schemes 
are held in trust funds or their equivalent separate from the group’s finances
t he 	 uk 	 s c h em e 	 is 	 a 	 r egi s ter ed 	 s c h em e 	 an d 	 s ub j e c t 	 to 	 th e 	 s t a t u to r y 	s c h e m e  s pec i fic 	 f un d in g 	 r e qu i r em ent s 	 ou t l ine d 	 in 	 uk 	 le g i s l ati o n  	 in c lu d in g 	 th e 	
payment of levies to the pension protection fund it is established under trust and the responsibility for its governance lies with the trustees who 
also agree funding arrangements with the group
t he 	 f un d e d 	us 	 s c h em e s 	 ar e 	t a x qu al i fi e d 	p e n sio n 	s c h em e s 	r eg u l ated 	by	th e	p e n sio n 	p r o te c t i o n 	ac t	2 0 06 	an d	ar e 	in s ur e d 	by 	th e	p e n sio n 	b en e fi t 	
g u ar an te e	c or p or a t i on	up 	to 	cer t a i n	l im i t s  	t he y 	ar e 	est a b l i s h e d 	under	an d	go v e r ne d	b y	th e	us	e mp lo y e e	re ti r em en t 	in c o m e 	s e c ur i t y 	ac t	1 9 74  	
meggitt is a named fiduciary with the authority to manage the operation of the us schemes
for all unfunded schemes benefit payments are made by the group as obligations fall due the group also operates a number of defined 
contribution schemes under which the group has no further obligations once the contributions have been paid
healthcare schemes
the group has two principal other postretirement benefit schemes providing medical and life assurance benefits to certain employees and 
fo r m e r 	e mp lo y e e s  	of 	m e g gi t t 	a i r c r af t	b r a k in g	s y s te m s 	c or p or a t i on	an d	m e g gi t t	roc km a r t   	in c  	t he s e	s c h em e s 	ar e 	un f un d e d 
amounts recognised in the income statement 
 
 2014 
 £’m
 2013 
    £’m
total charge in respect of defined contribution pension schemes 217 192
defined	benefit	pension	schemes
 service cost 119 127
 past service cost 11 07
 net interest expense on retirement benefit obligations 78 95
total charge in respect of defined benefit pension schemes 208 229
healthcare schemes
 service cost 08 15
 past service credit 89 –
 net interest expense on retirement benefit obligations 22 20
total creditcharge in respect of healthcare schemes 59 35
total charge 366 456
 
	 	 d ur in g 	th e	yea r 	th e	gr ou p	mad e	ch a n ge s 	to	th e	w ay 	in 	w hi c h 	m e d ic al 	b en e fi t s 	ar e 	pr o v i d e d 	t he s e	ch a n ge s 	f o l l o w in g 	w hi c h 	th e	gr ou p	
continues to provide comparable benefits resulted in a past service credit being recognised of £84 million 2013 nil which is included within 
the amounts shown in the table 
of	th e	to t a l	c h ar g e	£ 26  6 	m il l i o n	 2 0 13	£ 3 4 1 	m i l l i o n 	ha s 	bee n	ch a r ge d	to	o p er a ti n g	pr ofi t 	s e e 	n o te 	9 	of	w hi c h 	£195	m il l i o n	 2 0 13	£1 8 9 	m i l l i o n 	
has been included in cost of sales and £71 million 2013 £152 million in net operating costs the remaining £100 million 2013 £115 million is 
included in finance costs see note 13
93987p90132indd   121 04032015   1711 122 meggitt plc          report and accounts 2014
33 retirement benefit obligations continued 
amounts recognised in the balance sheet
2014
 
 uk 
 pension 
 scheme 
 £’m
 overseas 
 pension 
 schemes 
 £’m
 overseas 
 healthcare 
 schemes 
 £’m
 total 
 
 
 £’m
present value of scheme liabilities 6814 3507 468 10789 
fair value of scheme assets 5014 2597 – 7611
retirement benefit obligations 1800 910 468 3178 
2013
 
 uk 
 pension 
 scheme 
 £’m
 overseas 
 pension 
 schemes 
 £’m
 overseas 
 healthcare 
 schemes 
 £’m
 total 
 
 
 £’m
present value of scheme liabilities 5734 3048 483 	9265
fair value of scheme assets 4499 2385 – 6884
retirement benefit obligations 1235 663 483 2381
of	th e	to t a l 	de fi ci t 	of 	£ 31 78	m il l i o n	 2 0 13	£ 2 3 8 1 	m i l l i o n  	£ 6 3 8 	m il l i o n	 2 0 13 	£610	m i l l i o n 	is	in 	r e s pec t 	of	un f un d e d	s c h e m es
changes in the present value of retirement benefit obligations 
 2014 2013
 
 liabilities 
                     
 £’m
 assets 
                   
 £’m
 total 
 
 £’m
 liabilities 
                      
 £’m
 assets 
                    
 £’m
 total 
 
 £’m
at 1 january 9265 6884 2381 9344 6347 2997
ex change	rate	adjus tments 156 79 77 40 31 09
service cost 127 – 127 142 – 142
past service creditcost 78 – 78 07 – 07
interest expenseincome see note 13 389 289 100 364 249 115
contributions	–	gr oup – 420 420 – 416 416
contributions	–	member s 32 32 – 36 36 –
benefits paid 388 388 – 375 375 –
remeasurement of retirement benefit obligations
 lossgain from change in demographic assumptions 108 – 108 69 – 69
 lossgain from change in financial assumptions 1178 – 1178 144 – 144
  return on schemes’ assets excluding amounts included  
in interest income – 309 309 – 255 255
total remeasurement lossgain 1286 309 977 213 255 468
administrative expenses borne directly by schemes   – 14 14 – 13 13
at 31 december 10789 7611 3178 9265 6884 2381
   present value of schemes’ liabilities
   fair value of schemes’ assets
notes to the consolidated financial statements continued
93987p90132indd   122 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 123
33 retirement benefit obligations continued
analysis of pension scheme assets
 2014 2013
 quoted unquoted total quoted unquoted total
 £’m £’m £’m  £’m £’m £’m 
equities 1460 – 1460 291 1994 04 1998 444
government bonds 1966 19 1985 396 1327 19 1346 299
corpor at e	bonds 801 189 990 198 427 264 691 154
cash 357 – 357 71 223 – 223 50
other assets 82 140 222 44 146 95 241 53
uk pension scheme 4666 348 5014 1000 4117 382 4499 1000
equities 580 – 580 223 1126 – 1126 472
government bonds 675 – 675 260 228 – 228 96
corpor at e	bonds 852 – 852 328 659 – 659 276
property 89 135 224 87 99 115 214 90
cash 22 – 22 08 106 – 106 44
other assets 244 – 244 94 52 – 52 22
overseas pension schemes 2462 135 2597 1000 2270 115 2385 1000
equities 2040 – 2040 268 3120 04 3124 454
government bonds 2641 19 2660 349 1555 19 1574 228
corpor at e	bonds 1653 189 1842 242 1086 264 1350 196
property 89 135 224 30 99 115 214 31
cash 379 – 379 50 329 – 329 48
other assets 326 140 466 61 198 95 293 43
total pension schemes’ assets 7128 483 7611 1000 6387 497 6884 1000
other assets include hedge funds commodities and derivatives the schemes have no investments in any assets of the group 
financial assumptions used to calculate scheme liabilities 
 2014 2013
 
 uk 
 pension 
 scheme
 overseas 
 pension 
 schemes
 overseas 
 healthcare 
 schemes
 uk 
 pension 
 scheme
 overseas 
 pension 
 schemes
 overseas 
 healthcare 
 schemes
disc ount	rate 360 385 385 460 455 455
inflation rate 310 na na 340 na na
increases to deferred benefits during deferment 210 na na 260 na na
increases to pensions in payment 300 na na 330 na na
salary increases 410 474 na 440 476 na
 to the extent not overridden by specific scheme rules
in	d e te r m in in g 	th e	f a ir 	v a lu e	of 	s c h em e 	l i ab i l i ti e s  	th e	gr ou p	us e s 	mo r t a l it y 	a s s um pt i o n s 	w hi c h 	ar e 	ba se d	on	pu bl i s h e d 	mo r t a l it y 	t ab le s 	ad j us te d 	
to reflect the characteristics of the scheme populations the group’s mortality assumptions in the uk are based on recent mortality 
i n v e s ti g a ti o n s 	of 	s el f 	a dm in i s te r e d	p e n sio n 	s c h em e s 	ad j us te d	to	r e flec t 	th e	pr ofil e 	of	th e	m em b er s h i p	of	th e	s c h em e 	w hi c h 	in c lu d e	th e	r e s ult s 	of	
a postcode analysis of members used to support the 2012 triennial uk actuarial valuation allowance has been made for rates of mortality to 
c o n ti nu e	to 	f al l 	at 	th e	r a te	of 	1 25 	p er	an nu m 
in	th e	u s 	mo r t a l it y 	a s s um pt i o n s 	w er e 	p r e v i ous l y	ba se d	on	th e	rp 2 000 	ir s 	r pa	t ab le s  	d ur in g 	2 0 14  	ne w	mo r t a l it y 	t ab le s 	ha v e	bee n	adop te d 	an d 	
th e	a s s um pt i o n s	ar e 	no w	ba se d	on 	th e	r p h 2 01 4 	he ad c ou nt	w e i g h te d 	t ab le 	fo r 	s c h em e s 	w h er e	b en e fi t s 	ar e 	n ot	s al ar y  l i n ke d 	an d 	th e	r p 2 01 4 	
t ab le	fo r 	o th er	s c h em e s 	w i th 	b ot h 	t ab le s	pr o j e c t i ng 	r a te s	of	mo r t a l it y 	to	f al l 	u s in g 	th e	s o c i al 	s e c ur i t y 	a d mi n i s tr a ti o n ’ s 	p r o je c t io n	s c ale	 
‘scale ssa’
93987p90132indd   123 04032015   1711 124 meggitt plc          report and accounts 2014
33 retirement benefit obligations continued
 2014 2013
 
 uk 
 scheme 
 years
 overseas 
 schemes 
 years
 uk 
 scheme 
 years
 overseas 
 schemes 
 years
member	age	45	lif e	e xpect ancy	at	age	65	–	mal e 236253 216222 235252 193
member	age	45	lif e	e xpect ancy	at	age	65	–	f emal e 264280 234237 263279 211
member	age	65	curr ent	lif e	e xpect ancy	–	mal e 219236 203209 218236 193
member	age	65	curr ent	lif e	e xpect ancy	–	f emal e 245261 223225 243260 211
d et a i l s 	on	th e	s e ns it i v it y	of 	s c h em e 	l i ab i l i ti e s 	to 	ch a n ge s	in 	a s s um pt i o n s 	ar e 	p r o v i de d 	b e lo w
•	 	 t he	im p a c t 	of	a	10 	b a si s	p o i nt 	r e du c ti o n 	in	d i s c o u nt 	r a te	w ou ld	c au s e	s c h em e 	l i ab i l i ti e s	at	31	d e cem b er	2 0 14 	to	i ncr e a s e 	by	a p p r ox i m a tely	 
£183 million
•	 	 t he	im p a c t	of	a	10	b a si s	p o i nt 	i ncr e a s e 	in	i n fl at i o n 	an d	s al ar y 	i n fl at i o n 	r a te s	w ou ld	c au s e	s c h em e 	l i ab i l i ti e s	at	31	d e cem b er	2 0 14	to 	i ncr e a s e 	by 	
approximately £135 million
•	 	 t he	im p a c t	of	a s s um in g 	e v er y 	s c h em e 	m em b er 	w er e	to	l i ve 	fo r 	an	ad d i t i ona l	yea r 	w ou ld	c au s e	s c h em e 	l i ab i l i ti e s	at	31	d e cem b er	2 0 14	to 	
increase by approximately £275 million
t he	a bov e 	s e ns it i v it y 	an al y s e s 	ar e 	ba se d	on 	a	ch a n ge 	in 	a	s in g l e	a s s um pt i o n 	w h il e	ke e p i n g	al l 	o th er 	a s s um pt i o n s 	c o n s t a nt  	in	p r a c tice	t hi s	is	
un l ike l y 	to	occur 	an d 	ch a n ge s 	in	s om e 	a s s um pt i o n s 	ma y	be	c o r r e l a te d  	w h en	c al c u l a ti n g	th e	s e ns it i v it y 	of	th e	d efi n e d 	b en e fi t 	ob l i g a t i on 	to 	
significant actuarial assumptions the same method of calculating the defined benefit obligation has been used as when calculating the 
retirement benefit obligations recognised in the balance sheet the methods and types of assumptions used in preparing the sensitivity analysis 
are consistent with the previous year  
risks
t he	gr ou p	is 	e xp o s ed	to 	a	nu m b er 	of 	r i sk s 	a r i s in g 	f r om	o p er a ti n g	it s 	d efi n e d 	b en e fi t 	p e n sio n 	an d	h e al th c ar e	s c h em e s  	th e	m os t 	s i g n i fi c a nt 	of	
which are detailed below except as discussed below th e 	gr ou p	ha s	n ot	ch a n ge d	th e	p ro c es s es	us e d	to	ma nag e 	d efi n e d 	b en e fi t 	s c h em e	r i sk s	
during the year 
asset volatility 
in determining the present value of schemes’ defined benefit obligations liabilities are discounted using interest rates of high quality corporate 
bonds to the extent the actual return on schemes’ assets is below this yield the retirement benefit obligations recognised in the consolidated 
fi n a nci a l 	s t a tem en t s	w ou ld	i ncr e a s e  	t hi s 	r i sk 	is	p a r t ly 	mi ti g a te d 	by	f un d e d	s c h em e s 	in v e s t in g 	in 	m a tc h i n g	c or p or a te	b on ds  	s uch 	t h at	ch a n ge s	in	
asset values are offset by similar changes in the value of scheme liabilities however the group also invests in other asset types such as equities 
property hedge funds commodities and derivatives where movements in asset values may be uncorrelated to movements in the yields on high 
quality corporate bonds the group believes that due to the longterm nature of its scheme liabilities it is appropriate to invest in assets which 
are expected to outperform corporate bonds over this timeframe scheme assets are well diversified such that the failure of any single 
i n v e s tm ent	w ou ld 	n ot	ha v e	a	m a ter i al	im p a c t 	on 	th e	o v er al l 	l e v el 	of	a s s et s  	d ur in g 	th e	yea r 	p ar t	of	th e	e q ui t y 	p o r t fo l i o 	he ld 	by	th e	uk	an d 	us	
schemes was disinvested the amounts disinvested totalled approximately £100 million the proceeds were used to purchase structured 
investments consisting of high quality government bonds together with equity derivatives the structured investments enable the schemes to 
b en e fi t 	f r om 	e q u i t y  l i ke	ret ur n s 	s ub j e c t 	to 	cer t a i n	c ap s 	on	th e	a m o u nt s	in v este d 	w h il s t 	pr o v i d i ng 	an	e lem en t 	of	p r o te c t i o n	a g a in s t	f al l s	in	e q ui t y 	
m a r ke t s 	t he	gr ou p	a c t i v ely 	m on i tor s	ho w	th e	du r a ti o n 	an d	e xpec ted 	y i el d	of	s c h em e 	a s s et s	ar e 	m a tc h i n g	th e	e xpec ted	c a sh	ou t fl o w s 	a r i s in g 	
from the pension obligations for each funded scheme there is a ‘glidepath’ in place which provides to the extent the funding position improves 
fo r 	a s s et 	v o l at i l i t y	to 	be	r e du ce d	by	i ncr e a s e d 	i n v e s tm ent	in 	l o ng te r m 	in d e x	l i n ke d	s e c ur i t i e s	w i th	m at u r i t i e s 	t h at	m a tc h 	th e	b en e fi t 	p a ym ents 	as 	
they fall due
interest risk
in determining the present value of schemes’ defined benefit obligations liabilities are discounted using interest rates of high quality corporate 
b on ds 	if	th e s e	y i e lds	f al l 	th e	r e ti r em ent 	b en e fi t 	obl i g a t i on s	r ec o g n i s ed	in 	th e	c o n s ol id a te d 	fi n an c i al 	s t a tem en t s 	w ou ld	i ncr e a s e  	t hi s	r i sk	is 	
partly mitigated through the funded schemes investing in matching assets as described above 
inflation risk
in determining the present value of schemes’ defined benefit obligations estimates are made as to levels of salary inflation inflation increases 
that will apply to deferred benefits during deferment and pensions in payment and healthcare cost inflation to the extent actual inflation exceeds 
th e s e	est im ates  	th e	r e ti r em ent 	b en e fi t 	ob l i g a t i on s 	r ec o g n i s ed	in 	th e	c o n s ol id a te d 	fi n an c i al 	s t a tem en t s 	w ou ld	i ncr e a s e  	s al ar y	i n fl at i o n 	r i sk	is	
p a r t ly	mi ti g a te d 	in	b ot h 	th e	uk 	an d 	us	s c h em e s	by	l in k in g	b en e fi t s 	in 	r e s pec t 	of	f u t ur e	s er v ice 	to	a v er a g e	s al ar i e s	o v er	a	p er i o d	of	em p l o y m ent	
r a th er	th an	fi n al 	s al ar y	at 	r e ti r em ent 	b en e fi t s 	in	r e s pec t	of	cer t a i n 	p er i o d s 	of	p as t 	s er v ice 	ar e 	s t il l	l i n ke d	to	fi n al 	s al ar y 	at	r e ti r em ent  	in	th e	uk  	
i n fl at i o n 	r i sk	in	r e s pec t 	of 	d ef e r r e d	b en e fi t s 	an d 	p e n sio n s	in 	p a y m e nt 	is	mi ti g a te d 	by	c ap s	on	th e	l e v el s	of	i n fl at i o n 	un d e r	th e	s c h em e	r ul es 	in	th e	
us and switzerland the schemes provide for no inflation to be applied to benefits in deferment or retirement exposure to inflation on us 
healthcare costs has been mitigated by freezing group contributions to medical costs at 2011 cost levels 
notes to the consolidated financial statements continued
93987p90132indd   124 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 125
33 retirement benefit obligations continued 
longevity risk
in determining the present value of schemes’ defined benefit obligations assumptions are made as to the life expectancy of members during 
employment and in retirement to the extent life expectancy exceeds this estimate the retirement benefit obligations recognised in the 
c o n s ol id a te d 	fi n an c i al 	s t a tem ent s 	w ou ld	i ncr e a s e  	t hi s	r i sk	is	m or e	s i g n i fi c a nt 	in 	th e	uk	p l an 	w h er e	i n fl a ti o n ar y 	i ncr e a s e s	r e s ult 	in	h i gh e r	
s e ns it i v it y 	to 	ch a n ge s 	in	l i fe 	e xpec t a n c y 	t he 	gr ou p	c u r r e nt l y 	do e s 	n ot	us e	d er i v a ti v e s  	s uch 	as 	lo n g e v i t y	s w ap s 	to	mi ti g a te 	t hi s	r i sk 
other information 
in the uk the last triennial valuation was in 2012 following which the group agreed with the trustees to increase deficit reduction payments with 
the aim being to eliminate the deficit by 2024 under the agreement with the trustees deficit payments in 2015 will be £214 million and will 
i ncr e a s e	by	a p p r ox i m a tely 	5 	p er	an nu m 	u nt i l	2 0 24 	a l t ho ug h	th e	p r e s e nt 	v a lu e 	of	f u t ur e	de fi ci t 	p a ym ents 	a g r eed	as 	p ar t 	of	th e	2 012 	a c t u ar i al	
v al u a ti o n	e xc eed	th e	s c h em e 	de fi ci t 	at 	31 	d e cem b er	2 0 14  	s uch 	a m o u nt s	w ou ld	be	r e c o v er ab le 	by	th e	gr ou p	un d e r	th e	s c h em e 	r ul e s	o n ce	th e	l as t	
member has died and accordingly no additional minimum funding liability arises
in	th e	u s 	de fi ci t 	r e du c ti o n 	p a ym ents 	ar e 	dr i v e n 	by	r e gu l a ti o n s 	an d	p r o v i de	fo r 	de fi ci t s 	to	be	e l im in a te d 	o v er	p er i o d s 	up	to	15	yea r s  	de fic i t 	
payments in 2015 are expected to be £44 million and absent any changes in legislation will reduce over the following two years before increasing 
to	£6 7 	m il l i o n	by	2 019	t h er e a f ter 	annu al	p a ym ents 	ar e 	e xpec ted 	to	r e m a in 	r el a t i v ely	s t ab le 	fo r 	th e	r em a i n d er 	of	th e	r e c o v er y 	p er i o d  	t he	p r e s e nt 	
v a lu e	of	de fi ci t 	p a ym ents 	du e	un d e r 	le g i s l a ti o n	do	n ot	e xc eed 	th e	s c h e m e s’ 	de fi ci t s 	at	31	d e cem b er	2 0 14	an d	a c c o r di n gly	no	ad d i t i ona l	m in im um	
funding liability arises
there is no significant deficit in the swiss scheme
the estimated total group contributions expected to be paid to the schemes during 2015 are £431 million
t he	w e i g h te d	a v er a g e 	du r a ti o n 	of 	th e	uk	s c h e m e s’	d efi n e d 	b en e fi t 	ob l i g a t i on 	is	196	yea r s 	t he	w e i g h te d 	a v er a g e	du r a ti o n	of	th e	o ve r s ea s 	
s c h e m e s’ 	d efi n e d 	b en e fi t 	ob l i g a t i on 	is	115	yea r s  	t he	e xpec ted 	m at u r i t y 	of	un d i s c o un te d	p e n sio n 	an d	h e al th c ar e	b en e fi t s 	at	31 	d e cem b er 	2 0 14	is	
as follows
   
 pension 
 schemes 
 £’m
 healthcare 
  schemes 
 £’m
 total 
 £’m
less than a year 358 34 392
between 12 years 366 32 398
between 25 years 1121 97 1218
between 510 years 1997 154 2151
between 1015 years 2463 125 2588
between 1520 years 2576 98 2674
between 2025 years 2528 76 2604
over 25 years  6965	 145 7110 
total  18374 761 19135 
34 share capital and share schemes
issued share capital
 
 ordinary 
 shares of 
 5p each 
 number ‘m
 nominal 
  value 
 
 £’m
 net 
 consideration 
 
 £’m
allotted and fully paid
at 1 january 2013 7850 393 
issued on exercise of executive share awards 72 03 05
issued on exercise of sharesave awards 11 01 20
scrip dividends 38 02 200
at	31	dec ember	2013 7971 399 
issued on exercise of executive share awards 04 – 01
shar e	buyback	–	pur chased	in	y ear 68 03 337
scrip dividends 116	 05 530 
at 31 december 2014 8023 401  
 
93987p90132indd   125 04032015   1711 126 meggitt plc          report and accounts 2014
34 share capital and share schemes continued
share options
year of grant 
 number of  
 ordinary shares 
 under award
 exercise 
 price 
 per share
exercise period
from to 
meggitt 2008 sharesave scheme 
2008 65963 17140p 011115 300416
2010 430711 22235p 011115 300416
2010 50781 22235p 011117 300418
2012 682810 32694p 011115 300416
2012 369802 32694p 011117 300418
2013 398515 42640p 011116 300417
2013 136635 42640p 011118 300419
2014 578493 37419p 011117 300418
2014 382956 37419p 011119 300420
meggitt executive share option scheme 2005 part a
2005 51759 27865p 101008 091015
2006 9384 26367p 270909 260916
2007 7459 29900p 290310 280317
2008 990 25250p 250311 240318
2009 30531 16950p 300412 290419
2010 8686 28610p 120313 110320
2011 48031 35170p 020314 010321
2012 211862 39720p 100415 090422
2013 217649 52650p 050916 040923
2013 5504 54500p 090916 080923
all the above awards which were granted for nil consideration may in certain circumstances be exercised earlier than the dates given  
the weighted average remaining contractual life of outstanding awards is 34 years 2013 42 years 
share appreciation rights – equitysettled
year of grant
 indicative  
 number of shares 
 to be released 
 number of  
 ordinary shares 
 under award
 exercise 
 price 
 per share
exercise period
from to 
meggitt executive share option scheme 2005 part b 
2005 146630 316625 27865p 101008 091015
2006 202199 411002 26367p 270909 260916
2007 175934 415045 29900p 290310 280317
2007 32533 73332 28875p 170810 160817
2008 459613 895082 25250p 250311 240318
2008 156656 258109 20400p 070811 060818
2009 811243 1204679 16950p 300412 290419
2010 719939 1604329 28610p 120313 110320
2011 511432 1586569 35170p 020314 010321
2011 70519 210948 34550p 170814 160821
2012 1038807 4426443 39720p 100415 090422
2013 – 3688877 52650p 050916 040923
2013 – 11679 54500p 090916	 080923 
	 b a s e d	on	an	i n d ic a ti v e	s h ar e 	p r ice	of 	5190 0 p 	th e	s h ar e	p r ice 	at	31	d e cem b er	2 0 14 
all the above share appreciation rights which were granted for nil consideration may in certain circumstances be exercised earlier than the 
d a te s	gi v e n 	t he	w e i g h te d	a v er a g e 	r e m a in in g 	c o nt r ac tu a l 	l i fe 	of	o u t s t a nd i ng	a w ar d s 	is	6 3	yea r s 	 2 0 13 	7 1 	yea r s 	
35 sharebased payment
the group operates a number of share schemes for the benefit of its employees the total expense recorded in the income statement in respect  
of such schemes was £17 million 2013 £119 million see note 9 the nature of each scheme which has a significant impact on the expense 
recorded in the income statement is set out below 
meggitt long term incentive plan 2014 
equitysettled
under the meggitt long term incentive plan 2014 an annual award of shares may be made to certain senior executives for awards made in 2014 
the number of shares if any that an executive ultimately receives depends on three performance conditions
•	 	 an	e a r n in g s 	p er	s h ar e 	e p s  	me as u r e	3 3  	of 	th e	a w a r d  	
•	 	 a	r et u r n	on	t r a d in g 	a s s et s	r o ta 	me as u r e	3 3  	of 	th e	a w a r d  	an d
	 •	 a	s tr a te g ic 	g o al s 	me as u r e	3 3  	of 	th e	a w a r d 
notes to the consolidated financial statements continued
93987p90132indd   126 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 127
35 sharebased payment continued
each of the conditions is measured over a three year performance period an expense of £17 million 2013 £nil was recorded in the year awards 
are made as nil cost options an employee is generally entitled to a payment at the end of the vesting period equivalent to dividends that would 
ha v e	bee n	p ai d	d ur in g 	th e	v est in g	p er i o d  	on 	an y	s h ar e s 	t h at	ve s t 	t he	f a ir 	v a lu e 	of	th e	a w ar d 	mad e 	in 	2 0 14 	ha s	bee n	est im ate d	at	th e	m a r ke t	p r ice 	
of	th e	s h ar e	on 	th e	d a te 	of 	g r a nt  	w hi c h 	w as	4 675 4	p en ce 	m o v em en t s	in 	th e	nu m b er 	of	o u t s t a nd i ng	s h ar e s 	t h at	ma y 	p o tenti al l y 	be	r el e a s e d 	to 	
employees are as follows
  
 2014 
 number of 
 shares 
 under award 
 outstanding 
 ‘m
at 1 january –
awarded  42
at 31 december   42
at	31	d e cem b er	2 0 14 	n one 	of 	th e	s h ar e s 	un d e r 	a w ar d 	ar e 	el i gi b l e	fo r 	r e le a s e
meggitt executive share option scheme 2005 
equitysettled
awards are no longer made under this scheme share awards under the scheme were granted to certain senior executives at an exercise price 
e qu al	to	th e	m a r ke t	p r ice	of 	th e	s h ar e s 	on 	th e	da y	b ef o r e	th e	g r a nt	w as	mad e  	t he	a w ar d s 	ar e 	g en er al l y 	e xer c i s ab le 	at	th e	e a r l i est 	th r e e 	yea r s	
after the grant date awards can only be exercised if the group meets an earnings per share performance condition the group has no obligation 
legal or constructive to settle the awards in cash awards under part a of the scheme provide for the executive on exercise to be entitled on 
payment of the exercise price to the number of shares under award awards under part b of the scheme are in the form of equitysettled share 
appreciation rights sar’s and provide for the executive on exercise to be entitled to receive equity equivalent to the gain in value between the 
exe r c is e 	p r ice	an d 	th e	m a r ke t	p r ice	on 	th e	d a te	of	e xer c i s e 	awards may be exercised at any point between the vesting date and ten years after the 
date the award was made
a credit of £09 million 2013 £25 million expense was recorded in the year movements in the number of outstanding awards and their related 
weighted average exercise prices are as follows
 
 2014 
 average 
 exercise 
 price 
 pence
 2014 
 number of 
 awards 
 outstanding 
  ‘m
 2013 
 average 
 exercise 
 price 
 pence
 2013 
 number of 
 awards 
 outstanding 
  ‘m
at 1 january 36049 211 30435 245
granted – – 52658 41
lapsed 37143 20 36526 05
modified from cashsettled – – 26204 34
exercised 29276 34 26242 104
at 31 december  37389 157 36049 211
at	31	d e cem b er	2 0 14 	of 	th e	to t a l	nu m b er 	of 	a w ar d s	o u t s t a nd i ng 	7 1 	m il l i o n	ar e 	e xer c i s ab le 	at	an	a v er a g e	exe r c is e 	p r ice 	of	2 74  5 9 	p en ce 	 2 0 13	 
72	m il l i o n	at 	an	a v er a g e 	exe r c is e	p r ice	of 	24 5 5 0 	p en ce  	t he	f a ir 	v a lu e s 	of	th e	a w ar d s 	mad e 	in 	2 0 13 	w er e	d e ter mi n e d 	u s in g	th e	bl a c k  s c h o le s	
option pricing model the significant assumptions used in the model and the fair values determined were
  
 2013 
 award in 
 september 
 2013 
 modification 
 in april 
share price at date of grantmodification pence 52650 46860
exercise price pence 52650 35170
vesting period years 30 10
expected volatility 35 27
expected life of award years 50 30
risk	fr ee	rate 156 073
expected dividend yield 324 265
fair value at date of award pence  12137 12054
expected volatility figures were based on volatility over the last five years measured using a statistical analysis of daily share prices 
93987p90132indd   127 04032015   1711 128 meggitt plc          report and accounts 2014
35 sharebased payment continued
cashsettled
awards are no longer made under this scheme under the scheme the group was able to grant cashsettled sars to certain overseas employees 
the group is required to pay the intrinsic value of the sars to the employee at the date of exercise awards can only be exercised if the group 
meets an earnings per share performance condition awards may be exercised at any point between the vesting date and ten years after the date 
the award was made
an expense of £nil 2013 £31 million was recorded in the year the group has recorded a liability at the balance sheet date of £01 million 2013 
£07 million the total intrinsic value at the balance sheet date was £01 million 2013 £09 million movements in the number of outstanding 
awards and their related weighted average exercise prices are as follows
 
 2014 
 average 
 exercise 
 price 
 pence
 2014 
 number of 
 awards 
 outstanding 
  ‘m
 2013 
 average 
 exercise 
 price 
 pence
 2013 
 number of 
 awards 
 outstanding 
  ‘m
at 1 january 35405 06 26774 48
granted – – 52650 01
lapsed 32604 01 38507 01
modified to equitysettled – – 26204 34
exercised 26418  02 24259 08
at 31 december  43622 03 35405 06
at	31	d e cem b er	2 0 14 	of 	th e	to t a l	nu m b er 	of 	a w ar d s 	o u t s t a nd i ng  	n il 	m il l i o n	ar e 	e xer c i s ab le 	 2 0 13 	0 2 	m il l i o n	at	an	a v er a g e	exe r c is e	p r ice 	of	
20524 pence as a cashsettled award the fair value of outstanding awards is remeasured at each balance sheet date 
meggitt equity participation plan 2005 
awards are no longer made under this scheme under the meggitt equity participation plan 2005 an annual award of shares could be made  
to certain senior executives for awards made under the plan the number of shares an executive ultimately receives depends on three 
performance conditions
•	 	 an	e a r n in g s 	p er 	s h ar e 	e p s  	me as u r e	5 0 	of 	th e	a w a r d  	
•	 	 a	c a sh	flo w 	me as u r e	2 5  	of 	th e	a w a r d 	an d
	 •	 tot al 	s h ar eh o l d er	re t u r n 	 t s r 	a c hi e v e d 	by	th e	gr ou p 	as 	me as u r e d	a g a in s t	a	co mp a r a to r 	gr o up 	s e l ec ted 	by	th e	rem u n er a ti o n	c o m m i t te e	 2 5 	
of the award
each of the conditions is measured over a three year performance period an expense of £03 million 2013 £54 million was recorded in the year 
movements in the number of outstanding shares that may potentially be released to employees are as follows
 
 2014 
 number of 
 shares 
 under award 
 outstanding 
 ‘m
 2013  
 number of 
 shares 
 under award 
 outstanding 
 ‘m
at 1 january 77 78
awarded – 21
lapsed 15 06
released to employees 11 16
at 31 december  51 77
at	31	d e cem b er	2 0 14 	of 	th e	to t a l	nu m b er 	of 	s h ar e s 	un d e r 	a w ar d 	o u t s t a nd i ng 	11	m il l i o n	ar e 	el i gi b l e	fo r 	r el e a s e 	 2 0 13 	1 5 	m i l l i o n 	
t he	f a ir	v a lu e 	of	th e	a w ar d 	mad e	in	2 0 13 	s ub j e c t 	to 	th e	ep s	an d	c a sh	flo w 	p er f o r m an ce 	co n d i t io n s  	w as	47 8  0 0 	p en ce  	t he	f a ir 	v a lu e	of	th e	a w ar d 	
mad e	in	2 0 13  	s ub j e c t	to 	th e	t sr 	p er f o r m an ce 	co n d i t io n  	w as	d e ter mi n e d 	u s in g 	a	monte	c ar l o 	m o d el 	t he	s i g n i fi c a nt 	a s s um pt i o n s 	us e d	in	th e	
model and the fair value determined were
   
 2013 
 award in 
 march 
share price at date of grant pence 47800
vesting period years 30
expected volatility 26
expected life of award years 30
risk	fr ee	rate 026
fair value at date of award pence  24800
notes to the consolidated financial statements continued
93987p90132indd   128 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 129
36 own shares
o wn	s h ar e s	r ep r e s ent	s h ar e s 	in	th e	c om p a ny	t h at	ar e 	he ld 	by	an	i n d ep en d en t l y 	ma nag e d	e mp lo y e e	s h ar e 	o w n e r s h ip 	p l an	tr us t	‘ t h e 	t r u s t ’
fo r m e d 	to	a c q u ir e 	s h ar e s 	to 	be	us e d	to 	s at i s f y	s h ar e	op t i on s	an d	a w ar d s 	un d e r	th e	e mp lo y e e	s h ar e	s c h em e s 	as 	de s cr i b e d	in	th e	d i r e c t o r s’	
r em u n er a ti o n 	r ep o r t	on 	p a ge s 	55	to 	7 5	at	31 	d e cem b er 	2 0 14  	th e	tr u s t 	he ld 	337 6 64	or d i na r y	s h ar e s 	 2 0 13 	n il  	of	w hi c h 	2 81 6 3 8 	w er e 	
u n a l l oc a ted  	b e in g 	r et a i n e d	by	th e	tr u s t	fo r 	f u t ur e	u s e	t he	b al an ce	of	5 6  0 26 	s h ar e s 	w er e	he ld 	in 	v este d 	s h ar e	a c c o u nt s	to	s at i s f y 	p ar tic u l ar 	
awards which have fully vested in employees all shares whether or not allocated are held for the benefit of employees the shares were 
pu r c h as e d 	d ur in g 	th e	yea r	an d 	ha v e	a	co s t 	of 	£1 7 	m il l i o n	at	31	d e cem b er	2 0 14  	t he	m a r ke t 	v a lu e 	of	th e	s h ar e s 	at	31	d e cem b er	2 0 14	w as	 
£1 8 	m il l i o n	r ep r e s enti n g 	00 4 	of 	th e	is su e d 	s h ar e	c ap i t al 	of	th e	c om p a ny	
37 contingent liabilities
t he	c om p a ny	ha s 	gi v e n 	gu ar an te e s	in	r e s pec t	of	c r e di t 	f a c il i t i e s	fo r 	cer t a i n 	of	it s	s u b si d ia r ie s  	s om e	p r o p er t y 	le a s e s  	o th er	l e as i ng 	ar r an g em ent s 	
and the performance by some current and former subsidiaries of certain contracts also there are similar guarantees given by certain other 
group companies the directors do not believe that the effect of giving these guarantees will have a material adverse effect upon the group’s 
financial position 
t he	c om p a ny	an d 	v a r i ous	of 	it s	s u b si d ia r ie s 	ar e 	f r om	t im e	to	ti m e	p ar ti e s 	to	l e g al 	p r oc eed i n g s	an d	c l a im s	w hi c h 	ar i s e 	in	th e	or d i na r y 	c o ur s e 	of	
business the directors do not anticipate that the outcome of these proceedings actions and claims either individually or in aggregate will have  
a material adverse effect upon the group’s financial position
38 contractual commitments
capital commitments
 
 2014 
 £’m
 2013 
 £’m
contr act ed	for	but	not	incurr ed	
intangible assets 09 14
property plant and equipment 110 75
total 119 89
operating lease commitments
the group leases various factories warehouses and offices under noncancellable operating leases these leases have various lease periods 
escalation clauses and renewal rights none of these terms represent unusual arrangements or create material onerous or beneficial rights or 
obligations additionally the group leases various items of plant and machinery under both cancellable and noncancellable operating leases 
expenditure on operating leases is charged to the income statement as incurred and is disclosed in note 8
the future aggregate minimum lease payments under non–cancellable operating leases are as follows
 
 2014 
 £’m
 2013 
 £’m
in one year or less 127 130
in more than one year but not more than five years 372 382
in more than five years 241 257
total 740 769
other financial commitments
the group enters into longterm arrangements with aircraft and original equipment manufacturers to design develop and supply products to 
them for the life of the aircraft this represents a significant longterm financial commitment for the group and requires the consideration of a 
number of uncertainties including the feasibility of the product and the ultimate commercial viability over a period which can extend over 40 years 
the directors are satisfied that at this time there are no significant contingent liabilities arising from these commitments based on latest oe 
delivery forecasts from external agencies the future estimated expenditure under contractual commitments to incur development costs and 
pr o g r a m me	p ar tic i p a ti o n 	co s t s 	at 	31 	d e cem b er 	2 0 14  	w hi c h 	ar e 	e xpec ted 	to	be	r ec o g n i s ed	as 	in t a n g ib l e	a s s et s	w h en 	in c ur r e d	ar e 	as 	f o l l o w s 
 
 development 
 costs 
 £’m
 programme 
 participation 
 costs 
 £’m
in one year or less 620 401
in more than one year but not more than five years 192 2205
in more than five years 27 7324
total 839 9930
93987p90132indd   129 04032015   1711 130 meggitt plc          report and accounts 2014
39 cash inflow from operations
 
 2014 
 £’m
 2013 
 £’m
profit for the year 1770 2323
adjus tments	f or
 finance income see note 12 12 03
 finance costs see note 13 285 312
 tax see note 14 319 371
	 depr eciation	see	not e	21 312 322
 amortisation see notes 19 and 20 1126 1232
 impairment loss see note 19 80 32
 lossgain on disposal of property plant and equipment 04 11
 lossgain on disposal or closure of businesses see note 11 29 90
 financial instruments see note 10 292 61
 retirement benefit obligation deficit payments 293 274
 sharebased payment expense see note 35 17 119
changes	in	w orking	c apit al
 inventories 177 164
 trade and other receivables 98 246
 trade and other payables 101 131
 provisions 280 274
cash inflow from operations 3469 3457
40 movements in net debt
 
 2014 
 £’m
 2013 
 £’m
at 1 january 5646 6425
free cash inflow 1468 1104
businesses acquired see note 42 286 265
business acquisition expenses – 04
businesses disposed – 533
business disposal expenses see note 11 05 05
dividends	paid	to	company’ s	shar eholder s	see	not e	16 514 756
purchase of own shares 116 –
issue of equity share capital 01 25
shar e	buyback		pur chased	in	y ear 337 –
net cash generated – inflow 211 632
debt	acquir ed	with	busines ses – 03
ex change	rate	adjus tments 247 27
other noncash movements 73 123
at 31 december 5755 5646
analysed as
 
 2014 
 £’m
 2013 
 £’m
bank	and	other	borr o wings	–	curr ent	see	not e	28 589 72
bank	and	other	borr o wings	–	noncurr ent	see	not e	28 6167 6660
obligations under finance leases – current see note 27 01 24
obligations under finance leases – noncurrent see note 27 53 51
cash	and	c ash	equiv al ents	see	not e	24 1055 1161
total 5755 5646
notes to the consolidated financial statements continued
93987p90132indd   130 04032015   1711 supplementary information f inan ci al 	s tat em en t s g o v e r nan ce 	r e p or t s 	 s tr ateg i c 	r e p or t 131
41 major noncash transactions
d ur in g	th e	yea r 	th e	c om p a ny	is su e d 	116	m il l i o n	s h ar e s 	w o r th 	£ 5 30	m il l i o n	in 	r e s pec t 	of	s c r ip 	di v i d e n d s	 2 0 13 	3 8 	m il l i o n	s h ar e s 	w o r th 	 
£ 2 00	m i l l i o n	s e e	n o te s 	16 	an d 	3 4 
42 business combinations 
on 	31	d e cem b er	2 0 14 	th e	gr ou p 	a c q u ir e d 	10 0  	of	th e	v ot i n g	r i g ht s 	of	p r e c i sio n	e n g in e 	c o nt r o l s	c or p or a t i on	‘ p e c c ’  	p ec c	is	a	l e a d in g	s u ppl i e r 	
of actuation systems and fuel metering valves to manufacturers of smallframe gas turbines used predominantly in the oil and gas and power 
g en er a ti o n 	in d u st r i es 	p e c c ’s 	p r o du c t s	ar e 	c o m p lem en t ar y 	to	m e g g it t’ s 	ex is t i n g	v alv e 	te c hn o lo g y 	in 	th e	a er o  d er i v a ti v e	ga s 	t ur b in e 	m a r ke t	an d 	
expand our range of actuation capabilities 
t he	a s s et s 	an d 	l i ab i l i ti e s 	of 	p ec c at the date of acquisition including the goodwill arising on consolidation were as follows 
   
 net assets 
 £’m
goodwill see note 18 199
other intangible assets 39
property plant and equipment 04
inventories 30
trade and other receivables  current 14
trade and other payables  current 06
provisions  noncurrent see note 31  01 
net assets 279 
consider ation	satisfied	in	c ash 283
les s	amounts	r ec o v er abl e	under	w orking	c apit al	mechanism  04 
total consideration payable  279 
d ue	to	th e	p r ox i m i t y 	of 	th e	a c qu i s i ti o n 	to 	th e	b al an ce	s h e et 	d a te  	th e	d i f f er en ce 	bet w ee n	th e	b o ok	v a lu e 	of	a c q u ir e d	n et 	a s s et s	an d 	co n si d e r a t io n	
p a y ab le	ha s 	bee n 	p r o v i sio n a l l y 	r ec o g n i s ed	as	g o o d w il l  	d ur in g 	2 015 	th e	gr ou p	w il l	d e ter mi n e 	th e	f a ir 	v a lu e 	of	th e	i d en ti fi ab le 	a s s et s 	a c q u ir e d	an d 	
l i ab i l i ti e s 	an d 	c o nt i n g e nt 	l i ab i l i ti e s 	as s u me d 	w i th 	an y	co r r e sp o n d i n g 	a d j u s tm en t 	n e ce s s ar y 	b e in g	mad e	to	th e	v a lu e 	of	g o o d w il l 	r ec o g n i s ed  	c os t s	
related to the acquisition were £05 million the impact of the acquired business on the results of the group for the period since acquisition is not 
significant and would not have been significant had it been acquired on 1 january 2014
total consideration paid in respect of acquisitions during the year is as follows
 
 2014 
 £’m
 2013 
 £’m
cash	paid	in	r espect	of	pecc 283 –
cash	paid	in	r espect	of	piezot ech – 265
cash	paid	in	r espect	of	other	acquisitions	 03 –
total 286 265
 on 10 september 2014 the group acquired a small business which included the acquisition of other intangible assets of £01 million and   
 property plant and equipment of £02 million
93987p90132indd   131 04032015   1711 132 meggitt plc          report and accounts 2014
43 group companies 
t he	f o l l o w in g 	i n f or ma t i on 	is	n ot	a	co mp l e te 	l i s t in g 	of 	al l	s u b si d ia r y 	co mp a n ie s	at	31	d e cem b er	2 0 14 	an d	r e l a te s 	o n ly	to	th o s e	s u b si d ia r ie s	
principally affecting the revenues profits or assets of the group
united kingdom
meggitt aerospace limited meggitt uk limited
meggitt finance limited ‡ 
continental europe
artus sas – france meggitt sa – switzerland 
 
north america
l in e a r 	mo t i on	l l c	 m e g gi t t	n o r t h 	hol l y w o o d	i n c 	 
m e g gi t t 	a i r c r af t	b r a k in g 	s y s te m s	c or p or a t i on	 m e g gi t t	o r a n g e	c o u nt y   	in c 
m e g gi t t 	d ef e n s e	s y s te m s  	i n c 	 m e g gi t t	roc km a r t   	in c 
m e g gi t t 	gp	in c 	‡	 o e c o	l lc
m e g gi t t 	o r e gon  	i n c 	 p a ci fi c 	s c i en ti fi c 	c om p a ny
meggitt safety systems inc securaplane technologies inc
m e g gi t t 	t r a in in g	s y s te m s  	i n c 	 w h i t t aker 	c or p or a t i on	‡
meggitt usa inc ‡ 
 
rest of world
meggitt aerospace asia pacific pte limited – singapore meggitt brasil soluçeos de engenharia limited – brazil
a  united kingdom companies listed above are incorporated and registered in england and wales north american companies listed above  
are incorporated and registered in the united states of america other companies listed above are incorporated in the country named
b 	 	 t he	or d i na r y	s h ar e s	of 	al l	s u b si d ia r ie s 	w er e 	10 0  	o w ne d 	by	th e	c om p a ny 	ei th er	di r e c t ly 	or	in d ir e c t l y  	at	31	d e cem b er	2 0 14 
c all companies listed above are included in the consolidation
d 	 	 c o mp a n ie s 	m a r ke d 	‡	ar e 	m an a g em ent 	co mp a n ie s  	o th er w i s e	al l 	co mp a n ie s	ar e 	o p er a ti n g	co mp a n ie s	e n ga ge d	in 	th e	gr ou p’ s 	p r in c ip a l	
activities as described in note 1 
a	f ul l 	l is t 	of	s u b si d ia r y 	co mp a n ie s 	w il l	be	ann e xe d 	to 	th e	n ex t	an nu a l	r et u r n 	to	th e	re g i s tr ar	of	c o mp a n ie s 
notes to the consolidated financial statements continued
93987p90132indd   132 04032015   1711 supplementary information financial statements governance reports strategic report 133
other companies act 2006 reporting
under the companies act 2006 we are required to report to you if 
in our opinion certain disclosures of directors’ remuneration 
specified by law are not made we have no exceptions to report 
arising from this responsibility 
responsibilities for the financial statements and the audit
our responsibilities and those of the directors
as explained more fully in the statement of directors’ responsibilities 
set out on pages 78 to 79 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 isas uk  
ireland those standards require us to comply with the auditing 
practices board’s ethical standards for auditors
this report including the opinions has been prepared for and only 
for the company’s members as a body in accordance with chapter 3 
of part 16 of the companies act 2006 and for no other purpose we do 
not in giving these opinions accept or assume responsibility for any 
other purpose or to any other person to whom this report is shown or 
into whose hands it may come save where expressly agreed by our 
prior consent in writing
what an audit of financial statements involves
we conducted our audit in accordance with isas uk  ireland an 
audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free from 
material misstatement whether caused by fraud or error this 
includes an assessment of 
•	 whether the accounting policies are appropriate to the 
company’s circumstances and have been consistently applied 
and adequately disclosed 
•	 the reasonableness of significant accounting estimates made 
by the directors and 
•	 	 th e	ov e r a ll	p r e s e nt a t i o n 	of	th e	fi na nci a l 	s t a tem en t s  	
we primarily focus our work in these areas by assessing the 
directors’ judgements against available evidence forming our 
own judgements and evaluating the disclosures in the financial 
statements
we test and examine information using sampling and other 
auditing techniques to the extent we consider necessary to 
provide a reasonable basis for us to draw conclusions we obtain 
audit evidence through testing the effectiveness of controls 
substantive procedures or a combination of both 
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
other matter
we have reported separately on the group financial statements of 
meggitt plc for the year ended 31 december 2014
 
andrew paynter senior statutory auditor
for and on behalf of pricewaterhousecoopers llp
chartered accountants and statutory auditors
london
23 february 2015
report on the company financial statements
our opinion
in our opinion meggitt plc’s company financial statements the 
‘financial statements’
•	 give a true and fair view of the state of the company’s affairs as 
at 31 december 2014
•	 have been properly prepared in accordance with united 
kingdom generally accepted accounting practice and
•	 have been prepared in accordance with the requirements of the 
companies act 2006
what we have audited
meggitt plc’s financial statements comprise
•	 the company balance sheet as at 31 december 2014 and
•	 the notes to the financial statements which include a summary of 
significant accounting policies and other explanatory information
certain required disclosures have been presented elsewhere in the 
annual report and accounts the ‘annual report’ rather than in the 
notes to the financial statements these are crossreferenced from 
the financial statements and are identified as audited
the financial reporting framework that has been applied in the 
preparation of the financial statements is applicable law and united 
kingdom accounting standards united kingdom generally accepted 
accounting practice
other required reporting
consistency of other information
companies act 2006 opinion
in our opinion 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
isas uk  ireland reporting
under international standards on auditing uk and ireland ‘isas 
uk  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 company acquired in 
the course of performing our audit or
•	 is otherwise misleading
we have no exceptions to report arising from this responsibility
adequacy of accounting records and information and 
explanations received
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 
company or returns adequate for our audit have not been 
received from branches not visited by us or
•	 the financial statements and the part of the directors’ 
remuneration report to be audited are not in agreement with 
the accounting records and returns
we have no exceptions to report arising from this responsibility
directors’ remuneration
directors’ remuneration report  companies act 2006 
opinion
in our opinion the part of the directors’ remuneration report to be 
audited has been properly prepared in accordance with the 
companies act 2006
independent auditors’ report to the  
members of meggitt plc
93987p133indd   133 04032015   1737 134 meggitt plc          report and accounts 2014
 notes
 2014 
 £’m
 2013 
 £’m
fixed assets
tangible fixed assets 3 345 311
derivative financial instruments 9 306 355
investments 4 20701 20699
  21352 21365
current assets
debtors 5 9970 9400
derivative financial instruments 9 66 114
cash at bank and in hand 38 170
  10074 9684
creditors – amounts falling due within one year 6 2122 795
derivative financial instruments 9 104 93
net current assets 7848 8796
total assets less current liabilities 29200 30161
creditors – amounts falling due after more than one year 7 4033 6645
provision for liabilities and charges 8 28 17
derivative financial instruments 9 31 102
net assets 25108 23397
capital and reserves
calledup share capital 12 401 399
share premium account 13 12189 11663
capital redemption reserve 13 03 
other reserves 13 175 175
profit and loss reserve 13 12340 11160
total shareholders’ funds 13 25108 23397
the financial statements on pages 134 to 140 were approved by the board of directors on 23 february 2015 and signed on its behalf by 
 
 
s g young d r webb 
director director
company balance sheet
as at 31 december 2014
93987p134indd   134 04032015   1714 supplementary information financial statements governance reports strategic report 135
foreign currencies
transactions in foreign currencies are recorded at exchange rates 
prevailing at the dates of the transactions monetary assets and 
liabilities denominated in foreign currencies at the balance sheet date 
are reported at exchange rates prevailing at that date exchange 
differences on retranslating monetary assets and liabilities are 
recognised in the profit and loss account except where they relate to 
qualifying cash flow hedges in which case the exchange differences are 
recognised in equity 
pension scheme arrangements
as the company is unable to identify its share of the underlying assets 
and liabilities of the meggitt pension plan on a consistent and 
reasonable basis the company accounts for the scheme as though it 
were a defined contribution scheme accordingly the amount charged 
to the profit and loss account is the contribution payable in the period 
differences between contributions payable in the period and 
contributions paid are shown as accruals or prepayments in the 
balance sheet 
sharebased compensation
the fair value of services received from employees is recognised as  
an expense in the profit and loss account over the period for which 
services are received ‘the vesting period’ 
awards made to employees of the company are equitysettled the fair 
value of an award is measured at the date of grant and reflects any 
marketbased vesting conditions non marketbased vesting 
conditions are excluded from the fair value of the award at the date of 
grant the company estimates the number of awards expected to vest 
as a result of non marketbased vesting conditions and the fair value of 
this estimated number of awards is recognised as an expense in the 
profit and loss account on a straightline basis over the vesting period 
at each balance sheet date the company revises its estimate of the 
number of awards expected to vest as a result of non marketbased 
vesting conditions and adjusts the amount recognised cumulatively in 
the profit and loss account to reflect the revised estimate proceeds 
received net of directly attributable transaction costs are credited to 
share capital nominal value and share premium
the grant by the company of options over its equity instruments to 
employees of subsidiary undertakings is treated as a capital 
contribution the fair value of the awards made is recognised over the 
vesting period as an increase in investment in subsidiary 
undertakings with a corresponding credit to the profit and loss 
reserve
shares in the company are held by an independently managed 
employee share ownership trust ‘esop trust’ to meet future 
obligations in respect of the company’s employee share schemes  
the cost of own shares held by the esop trust is deducted from 
shareholders’ funds
1 basis of preparation
these financial statements have been prepared on a going concern 
basis and under the historical cost accounting convention as modified 
by the revaluation of certain financial assets and financial liabilities 
including derivative financial instruments at fair value in accordance 
with the companies act 2006 the company continues to prepare its 
financial statements in accordance with uk generally accepted 
accounting practice uk gaap 
2 summary of significant accounting policies
the principal accounting policies adopted by the company in the 
preparation of the financial statements are set out below these 
policies have been applied consistently to all periods presented unless 
stated otherwise
investments
investments in subsidiaries are stated at cost less provision for 
impairment in value except for investments acquired before 1 january 
1988 where section 612 merger relief has been taken and investments 
are stated at the nominal value of the shares issued in consideration
tangible fixed assets
tangible fixed assets are stated at cost net of depreciation and any 
impairment losses cost includes the original purchase price of the 
asset and costs attributable to bringing the asset into use 
depreciation is not provided on freehold land on other assets it is 
provided in equal annual instalments over their estimated useful lives  
as follows
land and buildings  over period of lease
plant and equipment  3 to 10 years
motor vehicles 5 years
operating leases
rental costs under operating leases are charged to the profit and loss 
account on a straightline basis over the lease term even if the 
payments are not made on this basis
taxation
the charge for taxation is based on the profit for the period and takes 
into account taxation deferred because of timing differences between 
the treatment of certain items for taxation and accounting purposes
deferred taxation is provided in full without discounting on timing 
differences that result in an obligation at the balance sheet date to pay 
more tax or a right to pay less tax at a future date at rates expected  
to apply when they crystallise based on current tax rates and law 
deferred taxation assets are recognised to the extent it is regarded as 
more likely than not that they will be recovered
deferred taxation is not provided on timing differences arising from  
the sale or revaluation of fixed assets unless at the balance sheet date 
a binding commitment to sell the asset has been entered into and it is 
unlikely that any gain will qualify for rollover relief
notes to the financial statements of the company
93987p135140indd   135 04032015   1715 136 meggitt plc          report and accounts 2014
notes to the financial statements of the company continued
loans
loans are initially stated at proceeds received less directly attributable 
transaction costs incurred transaction costs are amortised to the 
profit and loss account over the period of the loans fixed interest rate 
borrowings are held at fair value where a hedge relationship is in 
place any related interest accruals are included within the value at 
which loans are recorded loans are classified as current liabilities 
unless the company has an unconditional right to defer settlement of 
the liability for at least 12 months after the balance sheet date 
capital instruments 
ordinary shares are classified as equity incremental costs directly 
attributable to the issue of new shares are deducted from the proceeds 
recorded in equity other instruments are classified as liabilities if they 
contain an obligation to transfer economic benefits otherwise they are 
included in shareholders’ funds
dividends
interim dividends are recognised when they are approved by the board 
final dividends are recognised when they are approved by the 
company’s shareholders
profit and recognised gains and losses of the company
the company has taken advantage of the legal dispensation contained 
in section 408 of the companies act 2006 allowing it not to publish a 
separate profit and loss account and related notes the company has 
also taken advantage of the legal dispensation contained in section 408 
of the companies act 2006 allowing it not to publish a separate 
statement of recognised gains and losses
related party transactions
the company has taken advantage of the exemption contained in frs 8 
from the requirement to disclose related party transactions within  
the group
share buyback
on 5 november 2014 the company announced the intention to 
commence a share buyback programme the total consideration 
payable for shares purchased is deducted from the profit and loss 
reserve the shares when purchased are cancelled and the nominal 
value of the cancelled shares is transferred from share capital to a 
separate capital redemption reserve where the company has entered 
into an irrevocable nondiscretionary contract to purchase for 
cancellation shares on its behalf during a close period the obligation 
to purchase shares is recognised in full at the inception of the contract 
even when that obligation is conditional on the share price the 
obligation is remeasured at each balance sheet date with changes 
recognised in the profit and loss account
2 summary of significant accounting policies continued
derivative financial instruments and hedging
derivative financial instruments are recognised at fair value on the 
date the derivative contract is entered into and are subsequently 
remeasured at fair value at each balance sheet date to the extent the 
maturity of the financial instrument is more than 12 months from the 
balance sheet date the fair value is reported as a noncurrent asset or 
liability derivative financial instruments with maturities of less than  
12 months from the balance sheet are shown as current assets or 
liabilities the method by which any gain or loss is recognised depends 
on the designation of the derivative financial instrument
fair value hedges
fair value hedges are hedges of the fair value of recognised assets or 
liabilities or a firm commitment interest rate swaps that change fixed 
rate interest to variable rate interest are treated as fair value hedges 
provided they meet the hedge criteria changes in the fair value of 
derivative financial instruments designated as fair value hedges are 
recognised in the profit and loss account together with changes in the 
fair value of the hedged item 
cash flow hedges
cash flow hedges are hedges of highly probable forecast transactions 
interest rate swaps that change variable rate interest to fixed rate 
interest are treated by the company as cash flow hedges provided they 
meet the hedge criteria changes in fair value of the effective portion of 
derivative financial instruments designated as cash flow hedges are 
initially recorded within equity to the extent changes in fair value are 
recorded in equity they are recycled to the profit and loss account in 
the periods in which the hedged item affects the profit and loss 
account however when the transaction to which the hedge relates 
results in the recognition of a nonmonetary asset or a liability then 
gains and losses previously recognised in equity are included in the 
initial measurement of the cost of the nonmonetary asset or liability
if the forecast transaction to which the cash flow hedge relates is no 
longer expected to occur the cumulative gain or loss previously 
recognised in equity is transferred to the profit and loss account 
immediately if the hedging instrument is sold expires or no longer 
meets the criteria for hedge accounting the cumulative gain or loss 
previously recognised in equity is transferred to the profit and loss 
account when the forecast transaction is recognised in the profit and 
loss account
derivatives that do not meet the criteria for hedge accounting 
where derivatives do not meet the criteria for hedge accounting 
changes in fair value are recognised immediately in the profit and loss 
account the company utilises a number of foreign currency forward 
contracts to mitigate against currency fluctuations the company has 
determined that the additional costs of meeting the extensive 
documentation requirements for the company’s large number of 
foreign currency contracts are not merited accordingly gains and 
losses arising from measuring the contracts at fair value are recorded 
immediately in the profit and loss account
93987p135140indd   136 04032015   1715 supplementary information financial statements governance reports strategic report 137
3 tangible fixed assets
 
 land and 
 buildings 
 
 £’m
 plant 
 equipment  
 and vehicles 
 £’m
 total 
 
 
 £’m
cost at 1 january 2014 07 390 397
additions – 75 75
disposals 01 02 03
cost at 31 december 2014 06 463 469
accumulated depreciation at 1 january 2014 04 82 86
charge for year – 40 40
disposals 01 01 02
accumulated depreciation at 31 december 2014 03 121 124
    
net book amount at 31 december 2014 03 342 345
net book amount at 31 december 2013 03 308 311
 
 2014 
 £’m
 2013 
 £’m
net book amount of land and buildings
short leasehold 03 03
total 03 03
4 investments
 
 2014 
 £’m
 2013 
 £’m
shares in subsidiaries
at 1 january 20699 20607
capital contributions see note 13 12 92
less contributions from subsidiary companies 10 –
at 31 december 20701 20699
the directors believe the carrying value of investments is supported by their underlying assets a list of principal subsidiaries is included in note 
43 of the group accounts
5 debtors
 
 2014 
 £’m
 2013 
 £’m
amounts falling due within one year
amounts owed by subsidiary undertakings 9934 9363
other debtors 03 12
prepayments and accrued income 33 25
total 9970 9400
6 creditors – amounts falling due within one year
 
 2014 
 £’m
 2013 
 £’m
bank loans and overdrafts 61 01
other loans 480 29
trade creditors 14 28
amounts owed to subsidiary undertakings 1156 455
uk corporation tax payable 131 162
taxation and social security 27 56
other creditors 17 19
share buyback – close period commitment 200 –
accruals 36 45
total 2122 795
bank loans and overdrafts other loans and amounts owed to subsidiary undertakings are unsecured
93987p135140indd   137 04032015   1715 138 meggitt plc          report and accounts 2014
7 creditors – amounts falling due after more than one year
 
 2014 
 £’m
 2013 
 £’m
bank loans – 2458
other loans 4033 4187
total 4033 6645
bank loans and other loans are unsecured
 
 2014 
 £’m
 2013 
 £’m
analysis of bank loans and overdrafts repayable
in one year or less 61 01
in more than one year but not more than five years – 2458
total 61 2459
 
 2014 
 £’m
 2013 
 £’m
analysis of other loans repayable
in one year or less 480 29
in more than one year but not more than five years 1313 1668
in more than five years 2720 2519
total 4513 4216
amounts repayable in more than five years mature in 2020 and 2022
8 provision for liabilities and charges
movements in the deferred tax provision are analysed as follows
 
 2014 
 £’m
 2013 
 £’m
at 1 january 17 18
chargecredit to profit and loss account 13 02
creditcharge to profit and loss reserve 02 01
at 31 december 28 17
the deferred tax provision is analysed as follows
 
 2014 
 £’m
 2013 
 £’m
accelerated capital allowances 29 17
other shortterm timing differences 01 –
total 28 17
notes to the financial statements of the company continued
93987p135140indd   138 04032015   1715 supplementary information financial statements governance reports strategic report 139
9 derivative financial instruments
 
 2014 
 assets 
 £’m
 2014 
 liabilities 
 £’m
 2013 
 assets 
 £’m
 2013 
 liabilities 
 £’m
interest rate swaps 283 – 249 –
foreign currency forward contracts 89 135 220 195
total 372 135 469 195
less noncurrent portion
interest rate swaps 283 – 249 –
foreign currency forward contracts 23 31 106 102
noncurrent portion 306 31 355 102
current portion 66 104 114 93
the company is exempt from the frs 29 disclosures as the consolidated financial statements of the group give the disclosures required by ifrs 
7 see group accounts notes 29 and 30 
10 commitments
capital commitments
 
 2014 
 £’m
 2013 
 £’m
contracted for but not incurred
plant equipment and vehicles 02 01
total 02 01
operating lease commitments
annual commitments under noncancellable operating leases all of which relate to land and buildings expire as follows
 
 2014 
 £’m
 2013 
 £’m
later than five years 01 01
total 01 01
11 pensions
the directors believe the frs 17 deficit for the scheme in which the company participates would be consistent with the ias 19 deficit reported in 
note 33 to the group accounts in respect of the uk scheme at 31 december 2014 an amount of £01 million 2013 £01 million relating to 
contributions payable in respect of the defined contribution scheme were outstanding
12 calledup share capital
 
 ordinary 
 shares of 
 5p each 
 number ‘m
 nominal 
 value 
 
 £’m
 net 
 consideration 
 
 £’m
allotted and fully paid
at 1 january 2014 7971 399
issued on exercise of executive share awards 04 – 01
share buyback – purchased in year 68 03 337
scrip dividends 116 05 530
at 31 december 2014 8023 401 
93987p135140indd   139 04032015   1715 140 meggitt plc          report and accounts 2014
13 reconciliation of movements in shareholders’ funds 
 
 calledup 
 share 
 capital 
 £’m
 share 
 premium  
 account 
 £’m
 capital 
 redemption  
 reserve 
 £’m
 other 
 reserves 
 
 £’m
 profit and 
 loss 
 reserve 
 £’m
 total 
 2014 
 
 £’m
 total 
 2013 
 
 £’m
at 1 january 2014 399 11663 – 175 11160 23397 23093
profit for the financial year – – – – 2865 2865 903
dividends – – – – 1044 1044 956
cash flow hedge movements – – – – 06 06 16
currency translation differences – – – – 01 01 02
employee share option schemes
 value of subsidiary employee services see note 4 – – – – 12 12 92
 value of services provided – – – – 05 05 22
 purchase of own shares – – – – 116 116 –
 shares issued – 01 – – – 01 25
share buyback  purchased in year 03 – 03 – 337 337 –
share buyback  close period commitment – – – – 200 200 –
scrip dividends 05 525 – – – 530 200
at 31 december 2014 401 12189 03 175 12340 25108 23397
details of the group’s employee share schemes are included in note 35 of the group accounts
notes to the financial statements of the company continued
93987p135140indd   140 04032015   1715 supplementary information financial statements governance reports strategic report 141
fiveyear record
 
 2014 
 £’m
 2013 
 £’m
 2012 
 £’m
 2011 
 £’m
 2010 
 £’m
revenue and profit
revenue 15537 16373 16058 14553 11620
underlying profit before tax 3287 3778 3660 3253 2637
exceptional operating items 125 284 133 203 157
amortisation of intangible assets acquired in business combinations 681 743 806 751 647
disposal of inventory revalued in business combinations – 03 02 113 –
financial instruments 292 61 234 97 32
net interest expense on retirement benefit obligations 100 115 140 121 153
profit before tax 2089 2694 2813 2162 1648
earnings and dividends
earnings per share – basic 220p 294p 301p 231p 193p
earnings per share – underlying 324p 375p 365p 321p 286p
dividends per ordinary share paid or proposed in respect of the year 1375p 1275p 1180p 1050p 920p
gearing ratio
year end net debt as a percentage of capital employed 269 272 337 440 502
93987p141indd   141 04032015   1717 142 meggitt plc          report and accounts 2014
contacts
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e investorsmeggittcom
information on meggitt plc including the latest share price wwwmeggittcom
shareholder enquiries
registrar 
computershare investor  
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the pavilions  
bridgwater road  
bristol bs99 6zz
t 0870 703 6210  
e wwwinvestorcentrecoukcontactus
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other information
dividends
t he 	 p r op os e d 	2 014 	 fi n al 	 di v i d e n d 	 of 	950p 	 p er 	 or dina r y 	 s h ar e 	 if 	 a ppr o v e d 	 w il l 	 be 	 p ai d 	 on 	 8 	 ma y 	2 015 	 to 	
s h ar eh o l d er s 	 on 	 th e 	 r e g i s te r 	 on 	20 	 ma r ch 	2 015 	 t he 	 e xpec ted 	 p a y m e nt 	 d ate 	 fo r 	 th e 	2 015 	 in t e r im 	 di v i d e n d 	 
is 	 2 	 oc to ber 	2 015
2015 provisional financial calendar 
fullyear results for year ended 31 december 2014 24 february 
f in a l	di v i d e n d 	ex d i v id e n d 	d a t e	 19	ma r ch 
final dividend record date 20 march 
re p o r t 	an d	a c c o u nt s 	fo r 	yea r	 
en d e d	31	d e cem b er	2 0 14 	de s p a tch e d	 20	ma r ch 
d e ad l i ne	fo r 	r e c e ipt	of 	di v i d e n d 	r ei n v e s tm ent	p l an 	e le c ti o n s	 16	a p r il 
agm and trading statement 23 april 
2 0 14 	f in a l 	di v i d e n d	p a y m e nt 	d a t e	 8	ma y 
interim results for period ended 30 june 201 4 august 
i n te r i m 	di v i d e n d 	ex d i v id e n d 	d a t e	 3	s ep tem b er 
i n te r i m 	di v i d e n d 	r e co r d 	d a t e	 4	s ep tem b er 
d e ad l i ne	fo r 	r e c e ipt	of 	di v i d e n d 	r ei n v e s tm ent	p l an 	e le c ti o n s	 1 1 	s ep tem b er 
2 015 	i n te r i m 	di v i d e n d 	p a y m e nt 	d a t e	 	2	oc to be r 
key dates 2015 
february
24
f ully ear
results
april
23
ag m 	  	 int erim
management 
statement
august
4
interim
 results
investor information
93987p142indd   142 04032015   1719
5 supplementary information financial statements governance reports strategic report 143
frc    financial reporting council
frs    financial reporting standard
ftse share index of companies listed on the london 
stock exchange
gaap generally accepted accounting practice
gbp    british pound or pound sterling
gc 100    association of general counsel  company 
secretaries of ftse100 companies  
gdp    gross domestic product
ghg    greenhouse gas
group    meggitt plc and its subsidiaries
hmrc    hm revenue  customs
hse   health safety and environment
ias    international accounting standards
idiq indefinite delivery indefinite quantity
ied improvised explosive device
ifric   international financial reporting interpretations 
committee
ifrs   international financial reporting standards
installed base the sum total of the meggitt products and sub
systems installed on customers’ equipment
irs    internal revenue services
isa    international standards on auditing
kpi    key performance indicator
large jets commercial aircraft with greater than 100 seats
libor    london interbank offered rate
ltip    longterm incentive plan
lng    liquefied natural gas
maap    meggitt aerospace asia pacific the group’s 
maintenance repair and overhaul hub in 
singapore
mabs    meggitt aircraft braking systems
ma mergers and acquisitions
mcs meggitt control systems
meg meggitt equipment group
meggitt production our single global approach to continuous 
system mps     improvement using tools and processes tailored 
for the group and extending from the factory 
floor into every function
mix the impact on performance of revenue streams 
with higher or lower profitability growing at 
differing rates
mod    uk ministry of defence 
mpc meggitt polymers  composites
mpp meggitt pension plan
mro    maintenance repair and overhaul
aftermarket   spares and repairs
agm   annual general meeting
alm additive layer manufacturing  
ask    available seat kilometres
ata air transport association chapter numbers 
represent an industrywide approach to 
commercial aircraft system numbering and 
documentation meggitt offers full  ata chapter 
26 fire protection and is expanding its ata 32 
landing gear system offering
board    board of directors
book to bill the ratio of orders received to revenue 
recognised in a specific period
cagr compound annual growth rate
capability    expertise in technology and manufacturing 
cgu    cash generating unit
co
2
    carbon dioxide
code    uk corporate governance code
codm    chief operating decisionmaker
company    meggitt plc
conditionmonitoring monitoring the condition of aerospace and land
based turbines and supporting equipment to 
predict wear and tear promoting safety uptime  
and planned maintenance
continuing resolution appropriations legislation restricting 
modification from prioryear funding patterns
decc department of energy  climate change
defra  department for environment food  rural 
affairs
dod    united states department of defense
dppm defective parts per million
drip    dividend reinvestment plan
dtr disclosure and transparency rules
ebitda earnings before interest tax depreciation and 
amortisation
esop    employee share ownership plan
eu    european union
executive board board which assists the chief executive with  
the development and implementation of the 
group’s strategy the management of the 
business and the discharge of responsibilities 
delegated by the board
facility    factory
faa    federal aviation administration
fca   financial conduct authority
fifo    firstin firstout
flng floating liquefied natural gas
foc free of charge
fpso floating production storage and offload
glossary
93987p143144indd   143 11032015   1301 144 meggitt plc          report and accounts 2014
scrip   share dividend plan
sip    share incentive plan
shipset    total value of the components and subsystems 
installed on a single aircraft or ground vehicle 
type
smart engineering what meggitt specialises in longlife highly 
for extreme  reliable often missioncritical products 
environments that must operate effectively in the harsh   
 conditions of aeroengines oil and gas and 
  power generation environments and combat
sequestration    us government defence budget cuts
srn    shareholder reference number
stem    science technology engineering and 
mathematics
stip  short term incentive plan
tri   total reportable injuries
tsr    total shareholder return
uav    unmanned aerial vehicle 
usd    united states dollar
wacc    weighted average cost of capital
mss    meggitt sensing systems
m
4 
meggitt modular modifiable manufacturing an 
advanced manufacturing engineering concept 
that will underpin the more efficient aerospace 
factories of the future they will continue to  
accommodate low volumes of largely handmade 
products but those products will become 
increasingly complex and often involve new 
manufacturing technologies requiring new kinds 
of factory operators and managers and new 
standards of traceability
organic growth  growth excluding the impact of currency and 
acquisitions and disposal of businesses
oe    original equipment
oecd    organisation for economic cooperation  
and development
oem    original equipment manufacturer
operations board  assists the chief operating officer to   
manage the group’s operations and   
discharge the responsibilities delegated 
by the executive board
operations excellence  a system of tools and processes that 
embraces the way in which every aspect  
of meggitt is managed from the factory floor to 
all functions and every level of leadership from 
supervisors to the executive board 
orb the group’s obsolescence review board
otd   ontime delivery
pbt profit before tax
pche printed circuit heat exchanger – a block of flat 
diffusionbonded plates on to which fluid flow 
channels have been chemically milled
pecc precision engine controls corporation
platform    aircraft or ground vehicle model incorporating 
meggitt products 
ppc programme participation cost
programme    the production and utilisation lifecycle of an 
aircraft model or ground vehicle  
pwc pricewaterhousecoopers llp
rd    research and development
reach    registration evaluation and authorisation  
of chemicals
regional aircraft  commercial aircraft with fewer than 100 seats
registrar    computershare investor services plc
riddor the reporting of injuries diseases and 
dangerous occurrences regulations
rota return on trading assets
rpa    retirement protection act
sap the group’s selected enterprise management 
system
sars    share appreciation rights
saye sharesave scheme
glossary continued
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printed by pureprint
the papers used for the production of this report are 
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download the 2014 meggitt plc annual report  
and accounts from wwwmeggittcom
quick reference contents
what is meggitt 
 
 
 
 02
how did we 
perform in 2014 
 
 04
 31
how do we 
manage risk 
 
 24
what are our key 
performance 
indicators 
 27 
how do we 
perform as 
corporate 
citizens
 38
what is our 
strategy and 
business model 
 06
 08
what are our 
markets and  
what drives  
them
 10
who runs meggitt 
and how do we 
reward them 
 44
 55
0141  strategic report
01  introduction
02  group overview
03  capabilities
04  financial highlights
05  chairman’s statement
0607 chief executive’s review
0809 group strategy
1012  market review
1317 meggitt divisions
1819 the meggitt production system 
2021 talent 
2223 technology
2426 principal risks and uncertainties
2730  key performance indicators
3137 chief financial officer’s review
3841 corporate responsibility
4279 governance reports
43  chairman’s introduction
4445 board of directors
4650 corporate governance report
5153 audit committee report
54 nominations committee report
5575 directors’ remuneration report
7679 directors’ report 
80140 financial statements
 group financial statements
8084  independent auditors’ report to the members  
of meggitt plc
85 consolidated income statement
86  consolidated statement of comprehensive income
87  consolidated balance sheet
88  consolidated statement of changes in equity
89 consolidated cash flow statement
90132  notes to the consolidated financial statements
 company financial statements
133  independent auditors’ report to the members  
of meggitt plc
134  company balance sheet
135140  notes to the financial statements of the company
141144 supplementary information
141 fiveyear record
142  investor information
143144  glossary
smart engineering is second nature to us
high pressure air travelling through the 
geometry of bleed air valves cast or 
machined in the traditional way is 
extremely noisy something that will be 
familiar to those who live near airports 
in future air could flow more quietly 
through a radical new concept from 
meggitt based on a fircone design an 
organic structure made possible through 
additive layer manufacturing the bold use 
of innovative processes forms part of 
meggitt’s centrally coordinated and highly 
focused technology strategy
93987coverindd   2 04032015   1610 meggitt plc   annual report and accounts  2014
company information 
meggitt plc
atlantic house
aviation park west
bournemouth international airport
christchurch
dorset bh23 6ew
united kingdom
t 44 0 1202 597 597
f 44 0 1202 597 555
wwwmeggittcom
registered in england and wales
company number 432989
annual report and 
accounts 2014
smart engineering is second nature to us
93987coverindd   1 04032015   1610


Summary:
 “
”
6 meggitt plc          report and accounts 2014
superior performance 
defined by quality cost 
and ontime delivery is 
key to realising our 
growth potential and we 
are determined to make 
operations excellence  
a core competitive 
strength
group strategy
meggitt aims to be a leading provider  
of smart engineering for extreme 
environments we invest in developing 
hightechnology components and sub
systems which play mission or safety
critical roles over long operating lives 
we seek to improve our operational 
performance continuously to offer 
industryleading levels of quality 
ontime delivery and competitiveness 
enabling us to reinvest in new capabilities 
and technologies while generating 
attractive returns for shareholders
technology 
we focus on targeted investment to 
drive future growth we seek to grow 
organically by investing in the product 
and manufacturing technologies 
that count across a broad range of 
platforms and customers to secure 
positions on specific platforms we 
align our development focus with our 
customers’ technology roadmaps 
we look to supplement organic growth 
with acquisitions that enhance our 
capabilities and routes to market 
in 2014 we continued to refine our 
complete ata26 fire protection 
systems for aircraft as we progressed 
our development of innovative 
environmentallysound suppression 
technology we continued to invest in fluid 
control and thermal management products 
capable of operating at the everhigher 
temperatures required to enable the latest 
generation of jet engines to deliver the 
efficiencies demanded by their operators 
to deliver these and many other 
capabilities competitively we maintained 
our investment in cuttingedge 
manufacturing technologies such as 
additive layer manufacturing which we 
now employ in the production of some 
inservice components and meggitt 
modular modifiable manufacturing m
4
 
our pioneering approach to the factories 
of the future m
4
 is designed to enable 
operators to manufacture a broader 
range of lowvolume highly complex 
components through greater deployment 
of technology through the factory this 
includes the realtime monitoring of  
key parameters including product weight 
and touchtime and the provision of 
instantaccess support to the operator 
if required the result is greater 
optimisation of all aspects of the 
manufacturing process from machining 
and assembly to machine utilisation and 
traceability enabling our businesses to 
invest in stateoftheart equipment in 
the knowledge that it will be fully utilised 
in ‘smart’ facilities 
our acquisition of precision engine 
controls corporation pecc in december 
2014 exemplifies targeted valueadded 
portfolio enhancement pecc now 
a meggitt control systems product range 
builds on our existing thermal management 
and fluid control capabilities in the 
aeroderivative gas turbine market 
broadening our reach into smallframe 
gas turbines in the 130mw power range 
and widening our actuation technology 
offering for the combined customer base 
operations excellence
superior performance defined by quality 
cost and ontime delivery is another key 
to realising our growth potential and we 
are determined to make operations 
excellence a core competitive strength 
with meaningful improvements in 
operating performance such as defective 
parts per million down 84 and ontime 
delivery up 10 the meggitt production 
system—our single global approach to 
continuous improvement—has progressed 
well since its inception we have launched 
the system across two thirds of our 
manufacturing estate and expect to see 
it adopted at all primary sites by the end of 
2015 several sites have entered the second 
phase in the sixphase programme 
extending the reach of the system beyond 
the factory floor and supply chain into 
functions and leadership 
we have undertaken considerable work 
optimising our manufacturing footprint 
over the last few years consolidating six 
sites into three and investing in lowcost 
manufacturing centres in china vietnam 
and mexico in 2014 we made good 
progress in enhancing the level of 
manufacturing capability of our facility 
in querétaro mexico with the start of 
a substantial transfer of product lines 
from our control systems businesses 
in north america in china we increased 
the scope of our xiamen facility 
responding to customers’ global sourcing 
requirements with the successful 
replication of a hightech process from 
one of our european facilities involving 
the printing of sensors onto printed 
circuit boards we will continue to evolve 
our manufacturing estate in response to 
the requirements of our customer base
chief executive’s review
93987p0607indd   6 04032015   1652 supplementary information financial statements governance reports strategic report 7
renewing our customer focus
making ourselves easy to do business 
with while responding to the dynamic 
markets in which we operate is core to 
our business philosophy for original 
equipment oe and aftermarket 
customers alike to enhance our 
customer focus we have recently 
appointed two senior executives 
dedicated to the requirements of our  
oe customers and the aftermarket 
respectively 
the manufacturers of aircraft and 
engines will see a renewed focus on their 
interests as we strengthen key account 
relationship management and bring 
together crossgroup product packages 
that simplify their supply chains 
the aftermarket is central to the meggitt 
business model we will improve service 
through the meggitt production system 
and focus on the development of innovative 
support solutions for our oe customers 
as they seek to maintain more of their 
products in service 
cradletograve programme 
management underpins original 
equipment manufacturer oem and 
aftermarket relationships we are 
strengthening this function shortening 
the lines of communication between 
oems and operators championing their 
interests inside meggitt and allowing 
closer collaboration than ever before 
this is how we will achieve specific 
programme success insights into 
customer’s technology aspirations over 
the longer term and opportunities to 
create better products from our  
existing portfolio 
performance in 2014
performance in our endmarkets was 
mixed good growth in civil aerospace 
was driven by a rise in aircraft deliveries 
from the major manufacturers greater 
meggitt content on newer platforms 
and a continued recovery in 
aftermarket revenues
there were however challenges in our 
military market particularly during the 
first half of the year the effect of the us 
military drawdown from afghanistan was 
compounded by the completion of two 
large retrofit contracts in the first half 
of the prior year both issues constituted 
a significant headwind to military 
aftermarket performance although our 
overall military revenues stabilised on an 
organic basis in the second half of 2014 
in energy we continued to make good 
progress on the issue highlighted in 2013 
concerning the lack of availability of 
tourmaline a key raw material this is 
now behind us—we have migrated a 
number of customers onto alternative 
inhouse materials and we are receiving 
positive customer feedback on product 
performance energy performance in the 
second half was hampered by lower 
revenues at heatric our printed circuit 
heat exchanger business its local content 
provider in brazil is experiencing financial 
challenges causing revenue to be 
deferred from 2014 
against this background we have 
delivered flat organic revenues in 2014 
with a decrease in underlying earnings 
per share of 51p to 324p reflecting 
currency movements business mix 
disposals and the investment being made 
in new aircraft programmes net debt to 
ebitda at the end of the year was 12x 
in november we announced a share 
buyback with the intention of increasing 
this ratio to 15x by the end of 2015 to 
maintain an efficient balance sheet 
outlook
the outlook for our civil aerospace 
markets remains encouraging 
production rates of large jets are 
expected to continue to grow and the 
relatively high shipset values we enjoy 
on the latest generation of widebody 
aircraft together with our positions on 
the reengined narrowbodies should 
underpin organic civil oe revenue growth 
of 7 to 8 over the medium term 
reflecting recent inventory build at 
aircraft manufacturers ahead of new 
product launches and production rate 
increases 2015 will be moderately 
below this level 
available seat kilometres the key driver 
of our large and regional jet aftermarket 
are growing at above the longterm trend 
and lower oil prices should see this 
continue however we are seeing 
monthtomonth volatility in revenues 
and a continuing impact from surplus 
parts we therefore expect civil 
aftermarket growth in midsingle 
digits for 2015
in the military market we look to be 
entering a more benign phase with 
military budgets seeing lower rates of 
decline than in recent years and even 
some suggestion of growth in the 
allimportant us budget from 2016 
order intake in 2014 has been strong with 
book to bill of 103 covering a number of 
shortterm and multiyear contracts 
on this basis we expect a return to 
modest growth in 2015 driven by good 
growth in military training partially 
offset by a decline in mabs following the 
completion of the b1b and taiwanese 
upgrade programmes we maintain our 
mediumterm expectation of an average 
of 2 growth per annum excluding the 
effects of sequestration 
our energy businesses driven by 
heightened demand for our printed circuit 
heat exchangers and increasing market 
share in conditionmonitoring equipment 
should continue to deliver revenue growth 
averaging greater than 10 over the 
medium term however in 2015 we expect 
good organic growth in energy control 
valves and condition monitoring to be 
largely offset by a decline at heatric 
reflecting the impact of capital 
expenditure deferrals by our major 
oil and gas customers 
on the basis of the above the 
group continues to expect organic 
revenue growth in 2015 of low to 
midsingle digit percentage points 
in line with the guidance given in our 
interim management statement in 
november 2014
stephen young chief executive
93987p0607indd   7 04032015   1652