melrose industries plc
annual report 
for the year ended 31 december 2012
buy
improve
sell melrose industries plc
pictured above
bridon supplied a variety of cable products for the olympic stadium in 
london suspension cables and tension ring cables including spiral strand 
cables and walkway cables were used within the construction of the 
stadium roof
cover pictures clockwise l–r
 smart meter test bench at elster electricity
 high accuracy plastic measuring chambers being moulded at elster water 
for use in both smart and mechanical residential water meters
 intermittent shuttle kiln which has a furnace temperature of approximately 
1000°c this equipment is used in the process of manufacturing technical 
ceramics such as isolators elster’s gas control equipment business 
supplied eight burners together with burner control units and gas 
regulators
 tubular stranding machine in bridon’s new stateoftheart manufacturing 
facility at neptune energy park newcastle upon tyne uk the stranding 
machine is used in the manufacture of steel wire strands and is equipped 
with the world’s largest strand compaction units
 a generator stator in the process of construction at the brush facility in the 
czech republic
melrose’s strategy is to acquire manufacturing businesses in sectors 
it understands enhance their performance and realise signiﬁcant 
value often within a three to ﬁve year time frame the company is 
fully committed to investing within the businesses it acquires in order 
to exploit their operational and strategic strengths
the group is made up of four distinct operating divisions 
energy lifting other industrial and elster wwwmelroseplcnet
stock code mro 1
business performance governance financials shareholder information
contents
business performance
2 timeline of major events
3 financial highlights
4 the melrose strategy
6 group operations
8 group overview
12 chairman’s statement
14 chief executive’s review
16 energy business review
19 lifting business review
22 other industrial business review
24 elster business review
27 finance director’s review
37 risks and uncertainties
40 key performance indicators
42 board of directors
44 directors’ report
governance
56 corporate governance report
62 remuneration report
68 statement of directors’ responsibilities
financials
69 financial contents
70 independent auditor’s report — consolidated statements
71 consolidated income statement
72 consolidated statement of comprehensive income
73 consolidated statement of cash flows
74 consolidated balance sheet
75 consolidated statement of changes in equity
76 notes to the ﬁnancial statements
119 independent auditor’s report — company statements
120 company balance sheet for melrose industries plc
121 notes to the company balance sheet
shareholder information
125 notice of annual general meeting
128 company and shareholder information
“since inception less than 10 years 
ago melrose has created over 
£2 billion of shareholder value 
we are very pleased with elster 
and are already one year ahead of 
our improvement plan increasing 
margins faster than expected 
existing melrose businesses 
have performed well and elster 
is proving to be another great 
opportunity to create more value 
for melrose shareholders”
christopher miller
executive chairman
for more information about melrose industries plc 
view our website at wwwmelroseplcnet melrose industries plc
annual report 2012 2
timeline of major events
melrose was listed on aim in october 2003 the timeline of key 
strategic events below shows how the group has gone from 
strength to strength
listed on aim – £13 million
acquired mckechnie and dynacast 
for £429 million from private equity group 
cinven raised £244 million in equity
listed on london’s main exchange
sold the mckechnie aerospace business 
for £428 million and the psm business for 
£30 million acquisition debt repaid
completed the acquisition of fki plc for a 
total consideration including debt for an 
enterprise value of just under £1 billion
completed the acquisition of elster group se
for an enterprise value of approximately
£18 billion
returned £373 million to shareholders 
virtually all of the equity raised from 
shareholders at that time returned
sold dynacast for £367 million generating 
4× original equity investment nearly £1 billion 
in cash generated from mckechnie and 
dynacast acquisition
shareholders received a capital 
return of £220 million
sold logistex for £50 million
disposal of the mckechnie plastic components 
business for £31 million this sale concluded the 
disposal of all mckechniedynacast businesses 
from the group giving a return on initial equity 
of approximately 325×
sold brush traction logistex uk 
and madico for £18 million
august 2012
june 2012
august 2011
july 2011
february 2011
juneaugust 
2009
july 2008
august 2007
may 2007
december 2005
may 2005
october 2003 wwwmelroseplcnet
stock code mro 3
business performance governance financials shareholder information
financial highlights
1
 acquisition of elster on 23 august 2012 
for an enterprise value of £18 billion 
improvement plan is one year ahead of 
schedule
 headline
2
 results 
 – revenue of £15514 million 2011 
£10804 million
 – proﬁt before tax of £2143 million 2011 
£1547 million
 – melrose businesses excluding elster 
increased revenue by 7 and operating 
proﬁt by 9 at constant currency
 – elster operating margin increased by 
19 percentage points to 141 
operating proﬁt was up 11 with 
revenue 2 lower at constant currency
 – headline
2
 diluted earnings per share of 
161p
3
 2011 158p
35

 results after exceptional items and 
intangible asset amortisation 
 – proﬁt after tax of £429 million 2011 
£1101 million
 – diluted earnings per share of 43p 
2011 129p
 net debt of £9977 million net debt 
equal to 26x ebitda
4
 
 final dividend increased by 4 to 50p 
per share 2011 48p
5

 full year dividend of 76p per share 
2011 74p
5

 since inception less than 10 years ago 
melrose has created over £2 billion of 
shareholder value
1
 continuing operations only unless otherwise stated
2
 before exceptional costs exceptional income and intangible asset amortisation
3
  calculated using continuing and discontinued operations before the proﬁt on 
disposal of businesses and the diluted weighted average number of shares for 
the year adjusted to remove mpc
4
  headline
2
 operating proﬁt before depreciation and amortisation of computer 
software and development costs including elster for eight months preownership
5
 adjusted to include the effects of the rights issue
6
 relates to existing melrose for the year ended 31 december 2012
7
 relates to elster for the four month period from acquisition to 31 december 2012
revenue
2012 2012 2010
£9868m
2011
£10804m
£11403m
6
£4111m
7
£15514m
 
headline
2
 proﬁt before tax
£2143m
 
2012 2010
£1433m
2011
£1547m
£2143m
headline
2
 diluted earnings per share
3
161p
 
2012 2010 2011
135p
5
158p
5
161p melrose industries plc
annual report 2012 4
the melrose strategy
the melrose strategy is to acquire good manufacturing businesses underperforming their potential 
improve them by a mixture of investment operational improvements and changed management 
focus then commercially choose the right time to sell often within a three to five year time frame 
but this is flexible the value from significant disposals is then returned to shareholders
melrose recently entered the next phase of its growth strategy via the acquisition of elster for  
an enterprise value of £18 billion
buy
use public 
 
market leverage
good 
manufacturing 
businesses 
underperforming 
their potential
melrose 
management 
are substantial 
equity 
investors
set strategy 
and targets
 focus on 
operating 
cash generation
drive operational 
improvements
invest in the businesses
capex in excess of 
depreciation
 
change 
management 
focus 
incentivise well
sell
 
 
commercially choose the 
right time to sell 
often between three to ﬁve 
years but ﬂexible
return value to 
shareholders 
from signiﬁcant 
disposals
improve wwwmelroseplcnet
stock code mro 5
business performance governance financials shareholder information
strategy in action
 in august 2012 melrose acquired elster group se representing the largest 
acquisition in melrose’s history to date elster is a world leader in the provision of 
gas control equipment and related products gas electricity and water meters 
networking and software solutions
 the elster division is split into three distinct businesses of gas electricity and 
water they have manufacturing facilities throughout the world and employ nearly 
7000 people in more than 30 countries a map showing elster’s key worldwide 
manufacturing locations can be seen on page 11 since acquistion several 
restructuring projects have already been completed within the elster businesses 
with others currently underway
improve
 melrose acquired fki plc in july 2008 for an enterprise value of approximately 
£1 billion which included bridon brush crosby marelli truth and harris fki 
was a major international diversiﬁed engineering group but operating under 
certain ﬁnancial constraints 
 since the acquisition melrose has identiﬁed a number of opportunities to improve 
these businesses principally through an increased focus on improved proﬁtability 
and cash generation
 the group will continue with its investment strategy in these businesses as well as 
consider acquisitions and organic growth into new markets where appropriate
sell
 the sale of dynacast and mckechnie has resulted in our initial equity investment 
from shareholders of £244 million increasing to cash for shareholders of nearly 
£800 million and thus has been highly successful 
 the most recent disposals have included mckechnie plastic components sold 
for £307 million in june 2012 and the dynacast business in july 2011 for 
an enterprise value of £377 million consistent with the melrose strategy the 
disposal of the dynacast business provided a return of capital to shareholders of 
approximately £373 million in august 2011
 prior to this the mckechnie aerospace business was sold for £428 million in may 
2007 two years after the initial acquisition this resulted in acquisition debt being 
repaid and a return of capital to shareholders of £220 million 
buy
pictured manufacture of high accuracy plastic injection moulded measuring chambers take place at 
the elster site in luton uk which are used for both smart and mechanical residential water meters
pictured new rope making machinery at bridon’s £20 million facility at neptune energy park 
newcastle upon tyne uk designed to feed wire rope cores into the stranding machine the deepwater 
portside location of this new site which opened in november 2012 will allow bridon to use innovative 
loading solutions to reduce delivery timescales and order lead times for customers
pictured production of automotive components at mckechnie plastic components melrose industries plc
annual report 2012 6
group operations
group revenue
melrose operates internationally and this has been further enhanced 
by the acquisition of elster in august 2012 elster has its key 
manufacturing facilities in europe north america and south america 
together with a presence in the far east south africa and australia
maps showing the group’s key worldwide locations can be seen on 
pages 8 to 11
the melrose group is split into four distinct divisions energy lifting 
other industrial and elster revenue by division during the last three 
years is shown in the graphs below
2012 2012 2010
£9868m
1
2011
£10804m
1
£11403m
3
£4111m
2
revenue 
group
2012 2010 2011
£4275m
£4616m
£4868m
revenue from 
energy
£4868m
2012 2010 2011
£4227m
£4844m
£5244m
2012 2010 2011
na
na
£4111m
2
revenue from 
lifting
£5244m
2012 2010 2011
£1366m
1
£1344m
1
£1291m
revenue from 
other industrial
£1291m
£15514m
revenue from 
elster 4 months
£4111m
2
1
 restated to include the results of mpc within discontinued operations
2
 relates to elster for the four month period from acquisition to 31 december 2012
3
 relates to existing melrose for the year ended 31 december 2012 wwwmelroseplcnet
stock code mro 7
business performance governance financials shareholder information
areas of operation
 the gas business operates from key manufacturing facilities in europe 
and the us but also has sizeable subsidiary operations in china 
russia and mexico further progress has been made in rationalising 
the european manufacturing footprint since the acquisition a number 
of products previously manufactured in western europe have been 
transferred to the newly extended plant in slovakia
 the electricity business has key production facilities located in europe 
north america and south america since the acquisition actions have 
already been taken to streamline the us business which includes the 
relocation of all remaining production at the raleigh us facility to 
mexico
 within the water business key manufacturing sites are located within the 
uk slovakia and brazil under melrose ownership various enhancements 
were made to the restructuring projects that had originally been announced 
by elster in 2011 these include the closure of underperforming parts of 
the business in poland colombia and italy the cessation of manufacturing 
mechanical meters in north america and the exit from a significant number 
of lower margin product lines in germany 
pictured smart electricity meters in the process of being quality assured in accordance 
with the measurement instruments directive mid at elster’ s site in stafford uk this 
includes veriﬁcation of the functionality of the electricity meter and communications module
 brush turbogenerators has european facilities based in the uk the 
netherlands and the czech republic this business also has key 
manufacturing locations in the us hawker siddeley switchgear 
manufacture its products in south wales uk and also has smaller scale 
operations in australia
 marelli has a presence in seven countries including its key 
manufacturing facilities in italy and malaysia and international sales 
service and distribution centres based in italy germany malaysia uk 
usa and south africa as well as a branch in spain  
energy
pictured generator rotor on an ‘overspeed’ test within the upgrade balance tunnel at 
the brush facility in the czech republic
 truth operates from its facilities based in minnesota us and ontario 
canada
 harris is based in georgia us and the uk
other industrial
pictured a harris bsh301223 b4 guillotine shear purchased by a customer in 
alabama us the equipment is used for processing miscellaneous steel scrap pipe 
and selected sections of freight rail cars and ship scrap
 bridon’s european manufacturing facilities are based in the uk and 
germany a total of £20 million has also recently been invested in a 
new stateoftheart manufacturing facility near newcastle upon tyne 
uk which became operational in november 2012 bridon also has 
manufacturing facilities in the us and new zealand as well as the far 
east in indonesia and china plus distribution service centres in brazil 
singapore hong kong and dubai
 crosby’s key us manufacturing locations are based in oklahoma texas 
and arkansas with a further site in ontario canada it also has facilities 
in europe principally at its factories in belgium and the uk
 both crosby and bridon have growth opportunities within south america 
sales offices distribution and service centres and training facilities have 
recently been established in order to exploit these opportunities
 acco has facilities within the us
lifting
pictured bridon manufactured over 100 tonnes of stainless steel dyform cable 
assemblies for the new doha international airport qatar bridon’s products were used 
for a variety of structures within the airport and helped to form the sail shade design 
which limit the effects of the intense summer temperatures
elster melrose industries plc
annual report 2012 8
group overview
key strengths major customers 
 expertise to design and manufacture an extensive range of high quality 
multipole low medium and high voltage generators and electric motors
 comprehensive and integrated aftermarket support tailored to meet 
customers’ needs throughout operating life
 switchgear and transformer products in service with all uk energy   
supply authorities
 hydropower generators to produce environmentally green energy
 generators and electric motors for ship power
 strategically located around the world
products
 power generation equipment with 10 kw to 250 mw electric generators
 synchronous motors induction motors submersible and traction motors
 power management and excitation systems
 medium voltage ac and dc switchgear
 power and system transformers
 aftermarket servicing
 gas and steam turbine manufacturers and packagers
 major oil companies
 uk distribution network operators
 engineering construction companies
 independent power producers
energy
world number one independent 
supplier of turbogenerators 
and leading supplier of other 
electricity generating machinery 
switchgear transformers and power 
infrastucture equipment strong 
aftermarket service capabilities 
   to see more information on the energy division go to  
pages 16 to 18 or visit our website at wwwmelroseplcnetenergyhtml
1 europe 56
2 north america 26
3 asia 12
4 row 6
3
4
1
2
£4868m
revenue by 
geographical 
destination
year ended 31 december 2012
key
energy — key sites
 
  wwwmelroseplcnet
stock code mro 9
business performance governance financials shareholder information
 global crane oems and mining oems
 major oil companies
 global oil ﬁeld exploration and drilling contractors 
 construction companies
 lifting products distributors
key strengths
products
major customers 
 comprehensive and competitive range of solutions in steel wire  
 wire and ﬁbre rope and strand
 technical expertise to support customers’ demanding applications  
 training installation and testing
 world’s leading supplier of accessories used in lifting and material  
 handling applications
 strategically located around the world with stateoftheart facilities
 wire rope ﬁbre rope and wire
 hooks shackles blocks sheaves clamps and links
 material handling products 
 monorail systems
 chain hoists
 industrial carts and trailers
lifting
leading supplier worldwide of 
lifting fittings blocks and custom 
engineered material handling 
products and top three supplier 
worldwide for wire and wire rope 
1 europe 22
2 north america 50
3 asia 17
4 row 11
£5244m
4
2
3
1
revenue by 
geographical 
destination
year ended 31 december 2012
key
lifting — key sites
 
  to see more information on the liﬁting division go to  
pages 19 to 21 or visit our website at wwwmelroseplcnetliftinghtml melrose industries plc
annual report 2012 10
group overview continued
key strengths
products
major customers 
 market leading design development and engineering capabilities
 leading innovative product development and technology choice for  
 customers
 trusted long standing quality brand names
 indepth aftermarket service supply capabilities
 window and door hardware
 balers shears waste compactors and auto shredders
 sealing products
 us hardware industry oems
 waste and scrap processors
other industrial
market leading manufacturers 
across the housing construction 
and scrap processing sectors
£00000m
1 europe 6
2 north america 92
3 asia 1
4 row 1
1
2
£1291m
34
revenue by 
geographical 
destination
year ended 31 december 2012
key
other industrial — key sites
 
  to see more information on the other industrial division go to  
pages 22 and 23 or visit our website at 
wwwmelroseplcnetotherindustrialhtml wwwmelroseplcnet
stock code mro 11
business performance governance financials shareholder information
 customers in all segments along the gas stream
 major furnace and boiler oems distributors and resellers
 global utilty service companies
key strengths products
major customers 
 strong longterm customer relationships and strategic partnerships
 trusted brand name based on high accuracy innovation and reliabilty 
of meters
 market leading position in gas electricity and water metering and 
measurement products 
 number one solution provider in the ﬁeld of thermo process applications
 at the forefront of developing the next generation of smart metering 
technology
 world leader in polymer and high accuracy metering technology
 strategically located around the world
 unrivalled gas regulating and metering for upstream midstream and 
distribution markets
 best in class gas adaptive solutions for the leading boiler 
manufacturers
 broad range of gas and water mechanical meters preequipped for 
smart metering
 advanced electronic meters for both residential and commercial 
customers
 innovative smart metering solutions
 endtoend smart grid solution portfolio from the meter all the way 
through to meter data management data analytics software and 
standalone components
elster
a world leading engineering 
business and one of the 
world’s largest providers of gas 
control equipment and related 
communications gas electricity 
and water meters networking and 
software solutions
  to see more information on the elster division go to  
pages 24 to 26 or visit our website at wwwmelroseplcnetelsterhtml
1 europe 47
2 north america 35
3 asia 8
4 row 10
£4111m
1
2
3
4
revenue by 
geographical 
destination
four months ended
31 december 2012
key
elster — key sites
elster electricity metering sites
  melrose industries plc
annual report 2012 12
chairman’s statement
2012 2010 2011
135p
3
158p
3
161p
headline
1
 diluted 
earnings per share
2
161p
up 2
2012 2010 2011
63p
3
74p
3
76p
dividend per share
76p
up 3
i am pleased to report melrose’s tenth set of annual results since 
ﬂotation in 2003 
this has been a busy and successful year for your company on 23 
august we completed the acquisition of elster group se “elster” for 
an enterprise value of £18 billion the acquisition was ﬁnanced by a 
£12 billion rights issue and a new £15 billion ﬁve year banking facility
elster is a world leader in metering products with special strength in 
gas meters it has nearly 7000 employees in more than 30 countries 
and turnover in the four months of our ownership in 2012 was £4111 
million it is described in more detail in the chief executive’s review
it is still early in the integration process but we are already very  
pleased with the business and the potential for improvement over the 
next few years
shareholders’ investment in melrose net of dividends and returns of 
capital since 2003 amounts to approximately £11 billion our market 
capitalisation at the current share price amounts to £33 billion 
meaning that over £2 billion of value has been created over this period 
we continue to work hard to maintain this successful track record our 
employees throughout the group are to be thanked for their contribution 
to this
results for the group
these ﬁnancial statements report the results for the group for the year 
to 31 december 2012 and comparatives for the previous year the 
results for elster have been included from 23 august 2012
revenue from continuing businesses for the year was £15514 million 
2011 £10804 million and headline proﬁt before tax before exceptional 
costs exceptional income and intangible asset amortisation was £2143 
million 2011 £1547 million headline diluted earnings per share “eps” 
on continuing and discontinued businesses was 163p 2011 164p 
adjusting for the disposal of mpc headline diluted eps was 161p 
christopher miller
“shareholders’ investment in melrose 
net of dividends and returns of capital 
since 2003 amounts to approximately 
£11 billion our market capitalisation at 
the current share price amounts to 
£33 billion meaning that over £2 billion 
of value has been created”
1
 before exceptional costs exceptional income and intangible asset amortisation
2
  calculated using continuing and discontinued operations before the proﬁt on disposal 
of businesses adjusted to remove mpc
3
 restated for the effects of the rights issue wwwmelroseplcnet
stock code mro 13
business performance governance financials shareholder information
2011 158p an increase of 2 diluted eps before exceptional costs 
exceptional income and intangible asset amortisation on continuing 
businesses was 43p 2011 129p 
further details of these results are contained in the finance director’s 
review
dividends
the board intends to pay a ﬁnal dividend of 50p per share 2011 48p 
which represents a 4 increase this will be paid on 13 may 2013 to 
those shareholders on the register at 19 april 2013 subject to approval 
at the agm on 8 may 2013 this gives a total for the year of 76p per 
share 2011 74p
these numbers and the comparatives have been affected by the rights 
issue referred to above and adjusted accordingly
your board continues to pursue a progressive dividend policy
trading
2012 was another excellent year for our businesses with headline 
operating proﬁt increases in all three divisions of existing melrose group 
headline operating margins at 157 suffered only a small decline even 
allowing for the inclusion of elster whose margins at this stage are lower 
than average for the group without the effect of elster group operating 
margins in 2012 increased again
we continue to see excellent opportunities for investing in our 
businesses and in 2012 capital expenditure increased again to over 
twice depreciation within the three divisions of existing melrose 2013 is 
likely to be another year of high investment net debt after the additional 
debt taken on for elster was £9977 million at 31 december 2012 
working capital management and cash generation remain a major focus 
for melrose and 2012 was another year of good performance
further details on trading are included in the chief executive’s review
strategy and outlook
i said last year that we were optimistic about identifying a suitable 
acquisition to continue the excellent growth of the group we ﬁrmly 
believe that elster represents such an opportunity in addition to these 
occasional acquisitions however our strategy also comprises selling 
existing businesses at the appropriate time when we believe we have 
achieved the bulk of improvement in performance with subsequent 
related returns of capital we are naturally fully focused on improving 
the performance of elster at present but this will not deﬂect us from this 
other equally important part of our strategy
we signalled in our interim management statement in november that 
order books in certain of our businesses principally the energy division 
had weakened somewhat although this continues to be the case we are 
conﬁdent of the outlook and therefore we expect further progress in 2013
economic recovery is not yet in sight in europe nor completely 
established in the us but our mix of businesses with their strong 
positions in good end markets and opportunities for improvement gives 
us conﬁdence for the future
christopher miller
chairman
6 march 2013
“we continue to see excellent opportunities 
for investing in our businesses and in 2012 
capital expenditure increased again to over 
twice depreciation within the three divisions 
of existing melrose working capital 
management and cash generation remain 
a major focus for melrose and 2012 was 
another year of good performance”
pictured
crosby’s 800 metric tonne ‘wide body’ shackles were used as part of the overall lifting 
system to lift a 1250 metric tonne tower into place on the new san franciscooakland 
bay bridge in the us which is due to open later this year  melrose industries plc
annual report 2012 14
chief executive’s review
2012 2012 2010
£9868m
1
2011
£10804m
1
£11403m
3
£4111m
4
revenue
£15514m
 
2012 2010 2011
£1432m
1
£1742m
1
£578m
4
£1853m
3
headline
2
 operating
proﬁt
£2431m
 
2012 has been a good year for melrose with continued progress from 
our businesses and two important ma events 
in june 2012 melrose sold mckechnie plastic components for £307 
million whilst not in itself sizeable in the context of the group this 
company was the last business acquired in the mckechniedynacast 
acquisition made in may 2005 and thus completed the ﬁnal part of our 
“buy improve sell” business model for melrose’s ﬁrst acquisition this 
acquisition has resulted in our initial equity investment from shareholders 
of £244 million increasing to cash for shareholders of nearly £800 million 
and thus has been highly successful
secondly during 2012 we embarked on the next phase in the “buy” 
element of our strategy by acquiring the elster group for an enterprise 
value of £18 billion
we are at the time of writing just over six months into our post
acquisition programme much has been achieved in that relatively short 
time as is set out in this review and we would draw your attention in 
particular to the following key actions
 the gas and electricity businesses have been reorganised into global 
operations
 the old elster head ofﬁce has been completely restructured
 extensive restructuring has been announced at several of the key 
businesses and
 rd expenditure has been maintained but has been far better 
targeted on the growth areas of the businesses
these and a number of other projects and opportunities create the 
basis for “improving” elster and make us conﬁdent that elster will be a 
better business in the melrose group for the beneﬁt of shareholders and 
the employees customers and suppliers of elster
simon peckham
“during 2012 we embarked on the 
next phase in the ‘buy’ element of our 
strategy by acquiring the elster group 
for an enterprise value of £18 billion 
the improvement plan is one year ahead 
of schedule”
1
  restated to include the mpc results within discontinued operations
2
 before exceptional costs exceptional income and intangible asset amortisation
3
 relates to existing melrose for the year ended 31 december 2012
4
 relates to elster for the four month period from acquisition to 31 december 2012 wwwmelroseplcnet
stock code mro 15
business performance governance financials shareholder information
we would like to thank our shareholders and lending banks for their 
support in the elster acquisition it is not something we take in any way 
for granted on behalf of our shareholders i would also like to thank the 
employees of elster who have welcomed and assisted in the changes 
that have needed to be made
elster is a very high quality business with strong market shares in its key 
markets 2013 will be a year of substantial change and i believe these 
developments will enable elster to achieve its full future potential in an 
exciting marketplace
in the rest of the group 2012 has been a year of substantial investment 
we have invested approximately £45 million this year in a number of 
exciting projects the largest single project was bridon’s new factory in 
newcastle upon tyne which opened in autumn 2012 we are conﬁdent 
that these investments will position our businesses well for the future 
and will continue to improve their value
the energy division had a successful year in 2012 whilst order intake 
for turbogenerators in 2012 has been lower the success in growing 
the aftermarket business has been very pleasing the division has 
also made very good progress in the restructuring of two of the brush 
subsidiaries hma and hawker siddeley switchgear “hss” the 
medium and long term dynamics of the marketplace are likely to be very 
beneﬁcial for brush
marelli has had an outstanding year the business strategy of increasing 
the size of its generator products and continuing to focus on niche 
markets has succeeded beyond our expectations marelli entered the new 
ﬁnancial year with high order books and a very strong market position
in the lifting division bridon has had a good year revenue proﬁt and 
orders have all increased the new factory at newcastle upon tyne has 
been delivered on time and on budget 
crosby has had an outstanding year with sales and proﬁts signiﬁcantly 
up on 2011 we are also pleased to have invested to increase its 
forging capacity over the next 1218 months and to have improved the 
european business by restructuring its operations crosby continues 
to grow its worldwide sales and offers exciting opportunities for future 
development
in the other industrial division it is pleasing that the us housing market 
recovery appears to be well underway this has beneﬁted truth in 
2012 and positions it well for 2013 and beyond harris also performed 
creditably in a difﬁcult market
outlook
conditions in the overall world economy are still very hard to predict with 
any certainty the us appears to be recovering subject to uncertainties 
about the “fiscal cliff” but europe is still in a very difﬁcult position 
we are likely to see volatility in the uk caused by rapidly changing 
currency markets as a result of these factors we are expecting a year 
in which growth may be challenging but our exposure to good markets 
opportunities for improvement at elster and the fruits of recent investment 
should still position us well to improve the group’s performance
simon peckham
chief executive
6 march 2013
1 energy 57
2 oil  gas 10
3 mining 3
4 industrials 11
5 water 9
6 hardware 4
7 other 6
3
4
5
6
7
1
2
revenue by end 
market
year ended 
31 december 2012
strong
end markets
70 energy oil  gas and mining
“in the rest of the group 2012 has been 
a year of substantial investment we have 
invested approximately £45 million this year 
in a number of exciting projects we are 
conﬁdent that these investments will position 
our businesses well for the future and will 
continue to improve their value” melrose industries plc
annual report 2012 16
divisional review
energy review
market leading manufacturers of 
electricity generating equipment 
switchgear and transformers
wwwbrusheu
wwwbrushgmscom
wwwhssltdcom
wwwhgigeneratorscom
wwwmarellimotoricom
revenue
year ended 31 december 2012 
£4868m
headline
1
 operating proﬁt
year ended 31 december 2012 
£934m
1 energy  72
2 oil  gas 9
3 industrials 11
4 other 8
3
4
1
2
revenue by end market
year ended 31 december 2012
energy 
81 energy and oil  gas
1
 before exceptional costs exceptional income and intangible asset amortisation
pictured
the upgraded electrical coil manufacturing shop within brush’s facility in the czech 
republic where a substantial investment has been made in changing the physical layout 
of the manufacturing areas this has helped to improve product quality and reduce 
generator product lead times for customers wwwmelroseplcnet
stock code mro 17
business performance governance financials shareholder information
brush
brush turbogenerators “turbogenerators” is the world’s largest 
independent manufacturer of electricity generating equipment for the 
power generation industrial oil  gas and offshore sectors from its 
four plants in the uk czech republic netherlands and usa it designs 
manufactures and services turbogenerators principally in the 10 mw 
to 250 mw range for both gas and steam turbine applications and 
supplies a globally diverse customer base in addition brush designs and 
manufactures systems and power transformers under the brand name 
brush transformers “transformers” and also produces a wide range of 
indoor and outdoor medium voltage acdc switchgear under the hawker 
siddeley switchgear brand name harrington generators international 
“hgi” is a specialist uk based small generator manufacturer supplying 
the construction military telecoms and rail sectors
during 2012 brush continued the trend of year on year improvement 
post acquisition in 2008 revenue increased by approximately 6 per 
cent and this again translated to strong cash generation
orders in 2012 for new build turbogenerators in value terms were down 
year on year primarily as a result of a trend during the year towards 
smaller turbogenerators on shorter leadtimes for gas turbine aero
derivative applications orders for large turbogenerators primarily for 
steam turbine applications were delayed as ﬁnancial closure of projects 
reduced due to the prevailing economic conditions the product 
development strategy of increasing the product range into higher 
power outputs has been successful with the ﬁrst sales of 187 mw air 
cooled turbogenerators and the ﬁrst order for a 200 mw air cooled 
turbogenerator these are the largest air cooled turbogenerators ever 
built by brush and mark an important development for future growth 
aftermarket orders within the turbogenerators business were up 20 per 
cent year on year with strong us growth though european aftermarkets 
were more subdued as the utility sector in particular reduced 
maintenance spend 
continued progress has been made in improving factory performance 
and productivity within turbogenerators the restructuring of the 
turbogenerator manufacturing plant in the netherlands was largely carried 
out during the year and the full beneﬁts of this will be seen in 2013 
hss had a very good year with the strong order intake seen in the ﬁrst 
half continuing throughout although revenue was 8 per cent down 
year on year as a series of larger contracts were completed in 2011 
operating margins improved signiﬁcantly this was hss’s ﬁrst full year 
of integration as part of brush the full beneﬁt of sales and marketing 
synergies and operational efﬁciencies will only be seen in 2013 the 
australian division of hss continued to perform well during the year
brush transformers had a successful year thus continuing the progress 
made since integration into brush in 2010 demand continued to recover in 
the third of the current 5 year ofgem cycle and revenue ﬁnished higher than 
the previous year operating margins have improved signiﬁcantly as a result of 
the management focus placed on the development of a new manufacturing 
strategy a value engineered product line and aftermarket sales
despite a challenging uk market hgi generators had a satisfactory 
year with both revenue and operating margins up against the previous 
year one of the highlights of 2012 for hgi was the supply of standby 
power to the emergency services ahead of the london olympics
outlook
the prospects for medium and long term growth in power generation and 
in particular the aeroderivative gas turbine sector in which turbogenerators 
has a leading position are well publicised and this combined with the 
investment being made means brush is very well positioned for future 
growth however in the short term the trend towards smaller generators 
and the overall ﬁnancial conditions are likely to impact sales of brush’ s larger 
2 pole oem generator product during 2013 brush should however be able 
to mitigate this due to continued growth in its aftermarket activities and 
further improved efﬁciencies after a difﬁcult 2012 due to market conditions 
the prospects for the smaller 4 pole generators are more encouraging 
particularly in the oil  gas and geothermal markets
brush
a bdax7193 generator going through the winding process to 
connect electrical coils at the brush turbogenerators site at 
loughborough uk the machine was manufactured for a ﬂoating 
liquid natural gas project on behalf of a major exploration company
more information about brush is available at 
wwwbrusheu melrose industries plc
annual report 2012 18
turbogenerators has over two thirds of its 2013 budgeted new build 
sales covered by orders this is broadly consistent with the experience 
from previous years
following the encouraging increase in order intake and investment  
in resources through 2012 aftermarket is well positioned for growth  
in 2013
continued capital investment and full year beneﬁts from restructuring 
programmes both at brush facilities in the netherlands and hss gives 
us conﬁdence that brush can improve further
marelli
marelli motori “marelli” based in italy is one of the world’s leading 
manufacturers of industrial electrical motors and generators with 
a product portfolio of motors and generators ranging respectively 
from 012 kw to 64 mw and from 15 kva to 90 mva including low 
medium and high voltage marelli serves worldwide markets for power 
generation marine oil  gas and industrial manufacturing through its 
production sites in italy and malaysia and further sales service and 
distribution ofﬁces based in germany uk spain usa and south africa
following the increase in revenue in 2011 of around 20 per cent a 
further increase of about 125 per cent was achieved in 2012 as 
in the prior year this was mainly due to the recovery of the marine 
hydroelectric and oil  gas sectors which explains why the mix of sales 
continues to be focused on large and special machines rather than 
smaller standard products order intake is currently around 19  
per cent above last year and this makes marelli’s management conﬁdent 
of further growth for this year 
bespoke innovative power solutions played an important role within 
marelli’s results new products included customised hydroelectric 
generators large cogeneration alternators for both 50 and 60 hz usage 
medium voltage marine motors and generators together with special 
motors and generators for the oil  gas industries due to enhanced 
testing capabilities customers and end users now have the opportunity 
to verify that products meet or exceed contractual performance the 
lead times for standard products were also improved due to the new 
factory layout at marelli’s malaysian facility and the implementation of 
lean methodologies
during 2012 marelli’s facility in malaysia which is fully dedicated to the 
production of standard speciﬁcation machines achieved its planned 
production volumes of up to 1200 units each month signiﬁcant capital 
investment has been made in marelli’s main manufacturing centre 
at arzignano italy this includes a new large milling machine and a 
balancing machine for the increased sizes of motors and generators 
being manufactured all these investments follow marelli’s strategy 
to focus production within its italian facility on large and customised 
machines
outlook
marelli had a strong order book at year end which represents 35  
per cent of the projected 2013 turnover marelli also aims to increase its 
global presence worldwide through new sales ofﬁces and to concentrate 
its efforts in developing new products for its strategic markets of marine 
hydro cogeneration and oil  gas which look to remain stable the 
further development of exports and opportunities to grow sales with 
existing key customers gives us the conﬁdence that 2013 will be another 
year of progress for marelli
divisional review continued
marelli
rotor balancing of a 900 frame size generator at marelli’s 
production facility in italy this generator was supplied by 
marelli to the pianarucci hydro power plant italy and has a 
rotor weight of 11600kg and produces 3300 kva of power
more information about marelli is available at 
wwwmarellimotoricom wwwmelroseplcnet
stock code mro 19
business performance governance financials shareholder information
lifting review
wwwbridoncom
wwwthecrosbygroupcom
wwwaccomhscom
world leading suppliers of wire 
wire rope products lifting ﬁttings 
and blocks
revenue
year ended 31 december 2012 
£5244m
headline
1
 operating proﬁt
year ended 31 december 2012 
£952m
1
 before exceptional costs exceptional income and intangible asset amortisation
1 energy  5
2 oil  gas 35
3 mining 14
4 industrials 38
5 other 8
4
5
2
3
1
revenue by end market
year ended 31 december 2012
lifting 
54 energy oil  gas and mining
pictured
bridon supplies the oil industry with various rope products which are at the forefront 
of technology this includes the dyform bristar drill line rope a cross section of which 
is pictured above which has high strength strands and an engineered polymer core 
designed to signiﬁcantly improve service life and reduce costly rig downtime melrose industries plc
annual report 2012 20
divisional review continued
bridon
bridon designs and manufactures a comprehensive range of lifting and 
stabilising solutions for applications in wire rope ﬁbre rope steel wire 
and strand the business services global customers in the oil  gas 
mining industrial marine and infrastructure sectors 
bridon demonstrated further progress in trading as revenue operating 
proﬁt orders and margin increased when compared against the prior year 
this reﬂects the continued strength in bridon’s core markets as well as 
its focus on operational improvements working capital control remained 
strong but cash conversion was somewhat impacted by the slippage of 
sales of several large oil  gas projects into the last quarter of the year 
demand for onshore oil  gas ropes was subdued in the ﬁrst half 
reﬂecting a weak drilling market due to low gas prices and poor drilling 
conditions in canada the offshore sector by contrast was strong 
as global production companies invested in new ships and platforms 
demand was strong in the north sea brazil and parts of asia and 
africa production continued to expand in the gulf of mexico after 
a signiﬁcant hiatus in response to the growth of deepwater drilling 
in latin america bridon opened a new facility and service centre in 
macae brazil in december 2012 this facility will provide wire rope and 
inspection services to rig operators in this fast growing oil  gas market
the expansion in exploration and drilling also offered bridon the chance 
to compete for some signiﬁcant contracts for bespoke anchor lines 
single point mooring systems and offshore crane ropes among the 
biggest awards was the quad project one of the largest deepwater 
mooring systems for offshore production ever made the mining market 
was also strong for bridon in 2012 and bridon continued to expand its 
global customer footprint expanding sales for shovel ropes and shaft 
ropes in russia poland china and south africa in north america 
sales to mining machine oems and specialist distributors grew over 30 
per cent despite a relatively weak us coal market and is focused on the 
large opportunities within this area
the commercial construction markets in europe and the middle east 
remained subdued while crane rope sales showed moderate growth in 
north america reﬂecting bridon’s premier position with oems demand 
for crane and mining ropes continued to be solid in china but the 
volatile levels of industrial production in asia have led to variable demand 
for industrial ropes bridon’s chinese operation based in hangzhou 
continued to make progress both in domestic and local export markets
bridon has continued to upgrade its operations via targeted investment 
and through progress in programmes to drive quality efﬁciency and 
health and safety 
in keeping with bridon’s strategy to be the global technology leader for 
demanding rope applications bridon formally opened a new factory 
in newcastle upon tyne uk in november 2012 the neptune quay 
facility is capable of producing the world’s largest and most complex 
ropes and is equipped to load them directly onto vessels at the deep
water port for export in addition a new technology centre was built 
adjacent to the doncaster production facility providing highly advanced 
product design development and testing facilities in all melrose 
invested in excess of £20 million in the expansion and improvement of 
bridon’s operations and technological capabilities during the year
bridon developed a number of new products and completed ﬁve 
technology development projects during 2012 highlights include 
extending the high performance hydra product range with advanced 
multistrand rope designs to take full advantage of the new 
manufacturing facility at neptune quay these products offer high 
strength ropes for offshore oil  gas market applications such as 
ultradeep abandonment and recovery with improved performance 
characteristics in the surface mining market a tiger blue shovel hoist 
rope was developed with an improved plastic extrusion coating and 
a proprietary antiwear sleeve that combats bend fatigue and rock
impact damage for customers in canada and usa within america 
bridon developed the dyform 8 max an improved product for active 
mobile industrial boom hoist crane applications delivering improved 
strength crush resistance and fatigue life for use in structures bridon 
successfully developed a sheathed fulllocked coil rope assembly that 
provides corrosion protection and reduces installation time in bridge 
applications longer term research projects continue to advance 
bridon’s technological understanding of its ﬁbre and wire rope products 
with further progress being made in rope technology developments in 
materials and nondestructive evaluation of rope condition
outlook
the ﬁnancial issues in the eurozone and the ongoing negotiations 
around the “fiscal cliff” in the us have created uncertainty in a number 
of markets as a result of this some customers are cautious of making 
ﬁnancial commitments despite this bridon expects demand for oil  
gas and minerals to remain solid in 2013 
bridon
cross section through bridon’s zebra rope which has a 
protective optima sleeve around it this product is used as 
a shovel hoist rope within the surface mining industry the 
optima sleeve design protects from external impact and 
abrasion such as falling rocks and debris
more information about bridon is available at 
wwwbridoncom wwwmelroseplcnet
stock code mro 21
business performance governance financials shareholder information
crosby
crosby is a world leader in the design manufacture and marketing of 
lifting ﬁttings blocks and sheaves to the oil  gas construction and 
mining industries serviced primarily through a global network of value
added specialty distributors
following the outstanding performance achieved by crosby during both 
2010 and 2011 the business had another very successful year in 2012 
revenue for the year was up nearly 13 per cent with operating proﬁt up 
by over 20 per cent while european and north american construction 
markets remained slow this was more than offset by demand in oil  
gas markets and combined with growth in emerging markets helped 
crosby to achieve this record performance
crosby continued its focus on supporting its traditional worldwide 
distributor base by achieving record levels of training nearly 1000 
seminars reached over 25000 end users of crosby product during the 
year that focus helped to reinforce the technical expertise and application 
knowledge that exists within crosby and also resulted in greater market 
share and brand loyalty additionally several new distributors were 
established in asia where crosby continues to grow at an average of 
three times the overall market growth rates within these territories
further growth also came from several innovative new product launches 
crosby introduced its easyloc® bolt retention system a patented 
design which eliminates the need for the traditional threaded bolt 
nut and cotter pin resulting in easier and more efﬁcient operation for 
the enduser while maintaining all of the safety attributes required 
for demanding applications crosby also introduced new hoist rings 
designed for greater versatility in the extreme and abrasive material 
handling environments of subsea and saltwater applications lastly the 
patentpending mckissick tubing grab® for use on oil rig tubing lift 
projects has been designed with a quick easy and efﬁcient attachment 
for ‘well servicing’ applications
during 2012 crosby continued to invest in its global facilities an 
ongoing programme to optimise crosby’s european manufacturing 
footprint culminated in the announcement to close the facility in 
nouzonville france several production equipment moves are also 
ongoing designed to create centres of excellence in forging and 
machining to support growth in europe the middle east and africa 
additionally the premier stampings facility in the uk acquired additional 
land and is currently in the process of building a heat treatment facility to 
allow for greater ﬂexibility and independence in its supply chain 
in asia crosby’s manufacturing location in hangzhou china nearly 
doubled its sales as a result of gaining its api q18c certiﬁcation which 
is necessary in order to manufacture monogrammed products to sell to 
equipment end users within the oilﬁeld industry by having this capability 
at the chinese facility crosby has begun to service crane oem 
customers in china with locally manufactured blocks and sheaves 
north america also enjoyed continued investment a modernised 
galvanizing facility was completed during the year to increase capacity 
and reduce cost two additional forging hammers multiple induction 
heaters and a stateoftheart electric upsetter were also added to 
improve efﬁciencies quality and throughput in the four north american 
facilities however one of the most anticipated investments will not 
commence production until early 2014 when crosby plans to unveil 
a recently delivered 35000lb hammer once operational it will be one 
of the largest operating in the lifting industry and allow crosby to forge 
larger shackles of up to 400 tonnes the manufacture of which would 
previously have been outsourced these larger products will be used 
to supply the major oil companies within the offshore industry overall 
production equipment acquired during 2012 alone will when fully 
operational increase crosby’s forging capacity in north america by 
more than 15 per cent
outlook
the outlook for crosby in 2013 remains positive and follows three 
strong years of growth since 2009 oil prices have remained high 
and natural gas prices have continued to edge upwards enough to 
warrant additional investment by the industry crosby is well placed 
to take advantage of additional growth opportunities if these price 
trends continue although revenue growth is not expected to be at 
the same level as 2012 crosby’s unrelenting focus on continuous 
improvement innovative new products and market expansion gives the 
business conﬁdence to expect another solid year of market share and 
performance improvement
acco
acco the supplier of material handling equipment including cranes 
monorails hoists carts and trailers performed well with revenue 
increasing by over 20 per cent against the prior year operating proﬁt 
for the year produced a return on sales of approximately 17 per cent a 
move to more niche products has resulted in dramatic improvement in 
the results of this business
capital investment was also made in the business which included a 
replacement conveyor system in the monorail plant various upgrades 
and other equipment rebuilds designed to increase the useful and 
productive life of existing equipment
outlook
it will be difﬁcult to repeat 2012 but acco is wellpositioned in its 
marketplace and optimism remains high for a further improvement in 
performance in 2013 melrose industries plc
annual report 2012 22
other industrial review
wwwtruthcom
wwwharrisequipcom
wwwprelokcom
market leading manufacturers 
across the housing construction 
and scrap processing sectors
revenue
year ended 31 december 2012 
£1291m
headline
1
 operating proﬁt
year ended 31 december 2012 
£170m
1
 before exceptional costs exceptional income and intangible asset amortisation
divisional review continued
£00000m
1 hardware  62
2 scrap processing 34
3 other 4
1
2
3
revenue by end market
year ended 31 december 2012
other industrial 
pictured
a harris multipurpose baler used in the nonferrous scrap metal recovered ﬁbre 
recovered plastics and solid waste industries with a ram force of 137 tons this product 
has been the top selling narrow box ram baler in north america for the past six years wwwmelroseplcnet
stock code mro 23
business performance governance financials shareholder information
truth
truth is the north american market leader in the engineering design 
and manufacture of hardware products used to serve the fenestration 
market which includes windows patio doors and skylights truth’s 
channel to market is through the large well known north american 
fenestration oems
the main manufacturing facility of truth is in minnesota usa where its 
engineering research and development die casting metal stamping 
component fabrications and assembly manufacturing takes place 
truth also has a separate facility in toronto canada which serves as a 
competency centre for machining technology
during the year both revenue and operating proﬁt increased when 
compared to 2011 revenue was up by approximately 5 per cent as 
the north american housing market continued its recovery operating 
proﬁt increased signiﬁcantly due to a variety of factors which included a 
successful continuous improvement project as well as labour efﬁciency 
measures and enhanced management of the global supply chain 
designed to eliminate unnecessary logistics costs
the manufacture of truth’s product is carried out by a combination of in
house manufacturing together with third party sourcing of lower margin 
product
 
during the year focus was placed on initiatives for continuous 
improvement which included greater cost control product quality 
scrap reduction inventory analysis and delivery times various capital 
investments were also made during the year to include robotic 
automation in certain parts of the manufacturing process and new 
die casting equipment these operational improvements and capital 
investments place truth in a good position to capitalise on future market 
growth 
outlook 
truth remains conﬁdent about market growth prospects within the north 
american housing market during 2013 all current signs support further 
recovery in this market and additional sales should result in a further 
improvement in performance
in addition to the positive market outlook truth is conﬁdent about 
gaining further market share as a result of widening its product portfolio 
the current and future product development pipeline includes both 
new products and enhancements to existing products for all product 
categories including windows patio doors and commercial product
harris
harris is a wellrespected leader in the scrap and waste recycling 
industries operating from two manufacturing plants in georgia usa 
the business designs manufactures and services a full range of size 
reduction equipment solutions for the scrap metal ﬁbre recycling and 
waste industries 
harris saw revenue decrease by around 15 per cent as demand for 
scrap recycling machines declined with orders decreasing by around 
the same level this contributed to a substantial fall in operating proﬁt 
when compared to the prior year
during 2012 harris continued with its strategy to further improve 
the quality and reliability of its existing product ranges engineering 
resources were focused on making further improvements to products 
launched in 2010 and 2011 such as the centurion ehd baler designed 
for the nonferrous market and side compressor shears designed for 
the ferrous market strategically important product launches will occur 
in 2013 to include equipment for both the ferrous and nonferrous 
processing markets
harris continued to focus on key customerfacing strategies designed 
to strengthen its position in the scrap and waste recycling industries 
harris further expanded its presence in latin america to fully participate 
in the rapidly growing recycling industries in that region it also made 
efforts to strengthen relationships with the largest scrap and waste 
processors as consolidation in these industries continues additionally 
harris remains focused on maximising aftermarket sales opportunities
outlook
harris expects little sales growth in 2013 due to overall market 
conditions notwithstanding this harris expects to further improve 
its internal efﬁciency and execute key strategies which will place the 
company in a stronger position going forward 
truth
truth’s bifold hardware system allows both homeowners 
and businesses to take advantage of moveable glass walls 
that allows indoor and outdoor space to combine the 
product has been engineered to take advantage of truth’s 
award winning multipoint hardware system
more information about truth is available at 
wwwtruthcom melrose industries plc
annual report 2012 24
elster review
a world leading engineering 
business and one of the 
world’s largest providers of gas 
control equipment and related 
communications gas electricity 
and water meters networking 
and software solutions
revenue
four months
2
 ended 31 december 2012 
£4111m
headline
1
 operating proﬁt
four months ended 31 december 2012 
£578m
1
 before exceptional costs exceptional income and intangible asset amortisation
2
 revenue stated for elster relates only to the four month period postacquisition 
trading within elster is affected by seasonality so the revenue stated does not 
represent a true run rate for the full year
divisional review continued
1 energy  84
2 water 16
1
2
revenue by end market
four months ended 31 december 2012
elster 
84 energy
pictured
roller hearth kiln which has a maximum temperature of 1200°c and is used in the 
manufacture of ﬁne ceramics and tiles elster’s gas control equipment business supplied 
150 burners as well as automatic burner control units solenoid valves and gear motors
wwwelstercom wwwmelroseplcnet
stock code mro 25
business performance governance financials shareholder information
elster group se was acquired by melrose in august 2012 for an enterprise 
value of £18 billion the ﬁgures given for each of the businesses are only for 
the four months post acquisition and are affected by seasonality therefore 
they are not an accurate indication of a run rate for 2013 
although it is still early days we are very pleased with the progress 
that has been made so far restructuring projects aimed at achieving 
our plan for the business have either already been completed or are at 
least well underway part of this restructuring has been to reduce the 
number of reporting businesses from ﬁve to three the elster division has 
now been split into three distinct global businesses of gas water and 
electricity further detail about each of these businesses is given below
gas
2012 –
4 months
post
acquisition
£m 
total revenue 2369
headline
1
 operating profit 467
1
 before exceptional costs exceptional income and intangible asset amortisation
elster gas is a world leader in the design and manufacture of gas 
measurement process heat control and gas safety control equipment 
supplying a global customer base in more than 130 countries it has 
one of the most extensively installed utility measurement bases in the 
world with more than 75 million gas metering devices deployed over the 
last 10 years alone its complete range of endtoend solutions enables 
customers to efﬁciently manage and control natural gas resources
from its four lead plants in europe and the usa coupled with sizeable 
subsidiary operations in china russia and mexico elster gas supplies gas 
meters for both residential and commercialindustrial customers in addition 
the elster gas control equipment range of products is used extensively by 
global customers in both the upstream and midstream gas market sectors 
despite continued delays in the anticipated roll out of smart gas meters 
in europe and a sluggish process heat control equipment market 
particularly in china elster gas full year revenues recovered in the 
last four months of the year to end up ﬂat when compared to 2011 
revenue within the european market declined but this was more than 
offset by an increase in the us market
operating proﬁt for the four month period post acquisition improved 
over the same period in 2011 largely as a result of operating efﬁciency 
improvements which were implemented after the acquisition
in the four months since acquisition many changes and initiatives 
have taken place in order to better position the business to exploit the 
projected longterm growth in its end markets
a new uniﬁed global organisation has been created to replace the 
previously separate us business and disparate european operations 
clear lines of responsibility and accountability have been established and 
there is now a highly motivated and performance driven management 
team in place working together towards a demanding set of longterm 
goals and objectives at the same time a new and focused operations 
review process has been introduced to improve manufacturing and 
procurement performance
further progress has also been made in rationalising the european 
manufacturing footprint where the production of a number of products 
previously manufactured in western europe has been transferred to 
the newly extended plant in slovakia this strategy will continue to be 
executed throughout 2013 and 2014
the extensive product portfolio within elster gas has been reviewed and is 
in the process of rationalisation to eliminate low margin products this will 
also enable a more focused and value driven research and development 
strategy to be implemented the next few years will be key years in the 
roll out of smart gas meters in europe and signiﬁcant work has been 
undertaken to ensure that the business is ready for this major opportunity
outlook
elster gas end markets remain healthy order input in 2012 increased 
by 2 per cent against the prior year giving a book to bill ratio of 100 per 
cent when coupled with the full year effect of postacquisition efﬁciency 
improvements and additional planned activities in the year ahead elster 
gas should enjoy a strong performance in 2013
electricity
2012 –
4 months
post
acquisition
£m 
total revenue 1068
headline
1
 operating profit 126
1
 before exceptional costs exceptional income and intangible asset amortisation
elster electricity is one of the world’s largest international metering 
solution providers supplying both traditional and smart meter 
equipment including applications for residential commercial industrial 
transmission and distribution markets 
production of gas meters at the elster facility in osnabrück 
germany this site was honoured with the german global 
excellence in operations geo award for 2012 due to 
its recognised manufacturing and assembly processes for 
residential and commercial gas meters
more information about elster is available at 
wwwelstercom melrose industries plc
annual report 2012 26
divisional review continued
the product range includes distribution and control monitoring 
equipment advanced smart metering demand response networking 
and software solutions together with several other communication 
products and services elster electricity has key production facilities 
located in europe north america and south america
revenue within elster electricity was impacted by the delayed roll out of 
smart metering in europe plus slower than expected growth in asian 
markets the north american market continued to be strong and this 
growth was primarily driven by energy axis elster electricity’s smart 
solution for north america
operating proﬁt was also affected by the delayed smart metering roll out 
in europe ongoing investment in the smart meter product portfolio and 
organisational changes further impacted on the operating proﬁt of the 
business
postacquisition the businesses of elster north america and elster 
international were consolidated into one electricity business this 
was done to create efﬁciencies and establish a highly motivated 
organisation with a clear focus and responsibility since acquisition 
actions have also already been taken to streamline the us business via 
the reorganisation of certain sales product management research and 
development departments and the relocation of all remaining production 
at the raleigh us facility to mexico consolidation of the european 
manufacturing footprint is ongoing which includes the development 
of romanian facilities to act as a central european manufacturing and 
development centre the closure of the hungarian operation and the 
downsizing of some german and british operations
during 2013 focus will be on the expected roll out of smart meters in 
europe which will be supported by investments in both new and existing 
smart meter product platforms and solutions this will have a positive 
contribution on future revenues completion of the european manufacturing 
footprint will also continue to be a focus for the management team together 
with further operational proﬁtability improvements in north america
outlook
the global electricity metering business will remain challenging in 2013 
but there are strong signs it is moving in a very positive direction over the 
medium term in europe targets are in place to roll out smart meters to 
80 per cent of customers by 2020 and 100 per cent by 2022 this means 
that member states of the eu will provide a commitment to develop smart 
metering on a large scale basis although it is inevitable that not all national 
governments will develop their plans at the same pace 
further growth opportunities in europe come from the evolution of 
smart meter functionality to grid applications such as outage voltage 
conversion loss detection load control and demand response this is 
already a reality in north american markets and elster electricity will be 
well placed to use its experience gained from the american market
water
2012 –
4 months
post
acquisition
£m 
total revenue 674
headline
1
 operating profit 14
1
 before exceptional costs exceptional income and intangible asset amortisation
elster water designs and manufactures a comprehensive range of water 
metering solutions which includes high accuracy mechanical meters 
fully electronic water meters and smart metering solutions for residential 
commercial and industrial sectors
following acquisition a greater focus has been placed on the 
acceleration of various restructuring projects proﬁtability of sales and 
simpliﬁcation of the business structure it is clear that supplying certain 
unproﬁtable markets and products was adversely affecting the ﬁnancial 
performance of this business 
under melrose ownership various enhancements were made to the 
restructuring projects that had originally been announced by elster 
in 2011 these include the closure of underperforming parts of the 
business in poland colombia and italy moving from an operations 
to a distribution market approach the cessation of manufacturing 
mechanical meters in north america and the exit from a signiﬁcant 
number of lower margin product lines made in germany enables a 
signiﬁcant restructuring of operations in those markets although this 
only delivered a small operating margin improvement in 2012 these 
projects are expected to deliver signiﬁcant beneﬁt from 2013 onwards 
in total since acquisition the closure and restructuring of ﬁve facilities in 
this business have been announced and are well underway
the business has been successful in managing its overhead base 
which contributed to the operating proﬁt improvement during the year 
south america produced strong results as both revenue and operating 
proﬁt increased following a market sales price recovery after a 
challenging 2011 continued economic growth in the brazilian market 
is helping to increase meter penetration and elster water continues to 
capture signiﬁcant sales with several major customers
new product launches in 2012 included the s150 single jet meter with 
improved accuracy range ht8 and epico hybrid amr submeters with 
integrated radio communication and further extensions of the polymer 
bodied v200 volumetric meter range enhancements to the emeris 
smart metering solutions include erm2 route management software 
updates and the new emeris waternet data management system 
developed in conjunction with elster electricity
globally sales of polymer bodied meters grew by over 38 per cent 
compared to 2011 this is an area of substantial opportunity for elster 
the award winning polymer meters are helping customers achieve their 
co 2 reduction targets as well as providing lead free alternatives to 
traditional brass and bronze products
outlook
the elster water business will continue with its restructuring plans 
throughout 2013 signiﬁcant operating proﬁt improvement will be achieved 
from the closure or restructuring of low operating margin businesses 
and the cessation of poorly performing product lines market conditions 
continue to be affected by ongoing austerity measures in several regions 
and competition remains strong in many segments however we are 
conﬁdent that with a revised business model for elster water which will 
focus on its strengths and a continued emphasis on advanced metering 
solutions proﬁts within elster water will increase in 2013 wwwmelroseplcnet
stock code mro 27
business performance governance financials shareholder information
finance director’s review
the year to 31 december 2012 was a signiﬁcant year for melrose 
industries plc “melrose” with the achievement of many key events 
this report summarises the ﬁnancial details of those events and also 
the ﬁnancial results for the year
new group holding company
following shareholder approval on 5 november 2012 a scheme 
of arrangement was sanctioned by the high court of england and 
wales on 26 november 2012 pursuant to which a new listed holding 
company was introduced for the melrose group of companies the 
scheme of arrangement became effective on 27 november 2012 and 
melrose industries plc became the new holding company of melrose 
plc and its subsidiaries the subsequent reduction of share capital 
by this new holding company created signiﬁcant distributable reserves 
to assist the group to return the proceeds of future disposals to 
shareholders efﬁciently
acquisition during the year
on 23 august 2012 melrose completed the acquisition of elster group 
se “elster” for an enterprise value of £18 billion the total costs of 
acquiring elster were £73 million of which £31 million related to the 
raising of equity and were offset against share premium and £23 
million related to bank facility arrangement fees which have been 
included within net debt these are being amortised over the ﬁve year 
life of the facility the remaining £19 million of costs are included within 
exceptional items
the acquisition and associated expenses have been funded through a 
combination of new debt and equity on 1 august 2012 a 2 for 1 fully 
underwritten rights issue was completed and subsequently 8444 
million new melrose ordinary shares were issued raising £12 billion 
this took the number of shares in issue to 12666 million the diluted 
weighted average number of shares in issue for 2012 was 9607 million
geoffrey martin
“the year to 31 december 2012 was 
a signiﬁcant year for melrose with the 
achievement of many key events on 
23 august 2012 melrose completed the 
acquisition of elster for an enterprise 
value of £18 billion after a successful 
£12 billion rights issue and a 
reﬁnancing of debt”
2012 2010 2011
£1432m
2
£1742m
2
£578m
4
£1853m
3
headline
1
 operating proﬁt
 £2431m
2012 2010 2011
10×
17×
17×
net capital expenditure to 
depreciation
 17×
1
 before exceptional costs exceptional income and intangible asset amortisation
2
  restated to include the results of mpc within discontinued operations
3
 relates to existing melrose for the year ended 31 december 2012
4
 relates to elster for the four month period from acquisition to 31 december 2012 melrose industries plc
annual report 2012 28
in addition a new ﬁve year facility has been agreed totalling £15 billion 
split into a £05 billion multicurrency term loan and a £10 billion multi
currency revolving credit facility agreement the details of this facility are 
included in the liquidity risk management section and reﬁnancing section 
of this report
disposal during the year
on 25 june 2012 the mckechnie plastic components “mpc” 
business previously held within the other industrial division was 
sold gross cash proceeds were £307 million with costs of disposal 
of £31 million net assets disposed were £282 million resulting in an 
accounting loss on disposal of £06 million mpc contributed revenue 
of £735 million and headline operating proﬁt of £66 million in the year 
ended 31 december 2011
this disposal brought to a conclusion the successful investment in 
dynacast and mckechnie which were acquired in may 2005 for a net 
equity investment of £244 million and sold for a total equity value of 
nearly £800 million of cash giving a return on equity of approximately 
325 times
refinancing
in january 2012 the new ﬁve year committed £600 million multicurrency 
revolving credit facility agreed in december 2011 was partially drawn 
replacing the committed £750 million syndicated term loan and revolving 
credit facility which was fully repaid 
on 23 august 2012 this facility was repaid and a new £15 billion multi
currency bank facility was partially drawn down to accommodate the 
acquisition of elster split into a £05 billion term loan and a £10 billion 
multicurrency revolving credit facility agreement this facility was signed 
in june 2012 and expires in june 2017 the term loan was partly used 
to fund the acquisition with the remaining amounts used to reﬁnance 
where necessary the existing indebtedness of both melrose and elster 
and to ﬁnance the enlarged group’s working capital requirements
the new facility was drawn in the group’s core currencies namely us 
dollars euros and sterling in the most suitable proportion to protect as 
effectively as possible against exchange rate volatility within the group
as at the year end the term loan was fully drawn and split into two 
tranches of £180 million and us 500 million the revolving credit facility 
is split into multicurrency sterling based tranches totalling £760 million 
and a €300 million tranche
long term incentive plan
on 11 april 2012 at a melrose general meeting shareholders voted in 
favour of the early crystallisation of the previous melrose incentive plan 
bringing forward the maturity date from 31 may 2012 to 22 march 2012 
on crystallisation the incentive shares were converted into 312 million 
melrose ordinary shares and as a result the total number of ordinary 
shares in the company increased from 3910 million to 4222 million
at the same meeting a new ﬁve year sharebased 2012 melrose 
incentive plan was approved by shareholders which mirrors the previous 
melrose incentive plan in most respects except that under this new 
plan the potential reward has been reduced from 10 to 75 of the 
increase in shareholder value creation in addition a 5 dilution cap has 
been included in the new plan rules this new plan has an end date of 
31 may 2017
the charge to headline operating proﬁt for the 2012 melrose incentive 
plan will be £40 million per annum previous melrose incentive plan 
£18 million per annum
segmental split of divisions
as a consequence of the elster acquisition and the disposal of mpc 
during 2012 the segmental split of the group has been altered
continuing operations
the continuing operations at 31 december 2012 now consist of four 
divisions namely energy lifting other industrial and a new elster 
division containing the businesses of gas electricity and water
discontinued operations
the discontinued operations in 2012 include the results of the mpc 
business previously shown within the other industrial division in 
accordance with ifrs 5 the trading results of mpc are shown as 
discontinued in both years the discontinued operations in 2011 also 
include the dynacast brush traction logistex uk madico and weber 
knapp businesses
group trading results — continuing operations
t o help understand the results of the continuing operations the term ‘headline’ 
has been used this refers to results calculated before exceptional costs 
exceptional income and intangible asset amortisation as this is considered by 
the melrose board to be the best measure of performance
for the year ended 31 december 2012 the group achieved revenue 
from continuing operations of £15514 million 2011 £10804 million 
headline operating proﬁt in the year ended 31 december 2012 was 
£2431 million 2011 £1742 million and the headline operating proﬁt 
margin deﬁned as the percentage of headline operating proﬁt to 
revenue decreased from 161 in 2011 to 157 in 2012 within this 
the existing continuing melrose businesses increased their headline 
operating margin by 02 percentage points to 163 in 2012
after exceptional costs exceptional income and intangible asset amortisation 
group operating proﬁt was £1371 million 2011 £1105 million
in accordance with ifrs 3 “business combinations” the impact on 
the group results if the acquisition had been made at the start of the 
year has been estimated despite the results of elster being calculated 
under us gaap for the ﬁrst thirty three weeks of the year this shows 
that melrose continuing revenue would have been approximately £2271 
million and headline operating proﬁt approximately £330 million in the 
year to 31 december 2012
finance director’s review continued wwwmelroseplcnet
stock code mro 29
business performance governance financials shareholder information
trading results by division  continuing operations
a split of revenue headline operating proﬁt and headline operating proﬁt margin for 2012 and 2011 is as follows
 
2012
revenue
 £m
2012
headline
operating
profit
loss
 £m
2012
headline
operating 
profit
margin
 
 
2011
revenue
 £m
2011
headline 
operating
profit
loss
 £m
2011
headline
operating
profit
margin
 
energy 4868 934  192 4616 911  197
lifting 5244 952  182 4844 826  171
other industrial 1291 170  132 1344 165  123
elster 4111 578  141 ——  —
central — corporate — 118 — — 92 —
central — ltips
¹
— 85 — — 68 —
continuing group 15514 2431  157 10804 1742  161
1
 long term incentive plans
the performance of each of the trading divisions is discussed in detail in the chief executive’s review
central costs comprise £118 million 2011 £92 million of melrose 
corporate costs which increased towards the end of the year as 
expected following the acquisition of elster and a long term incentive 
plan “ltip” accrual of £85 million 2011 £68 million the ltip accrual 
includes an amount of £08 million 2011 £18 million in respect of the 
previous melrose incentive plan which matured on 22 march 2012 
and an accrual of £27 million 2011 £nil in respect of the new ﬁve year 
melrose 2012 sharebased incentive plan which commenced on  
11 april 2012 the annual accrual for the new ﬁve year plan was 
calculated in accordance with ifrs 2 “share based payments” 
using a standard pricing model and will be constant until the date of 
crystallisation 
in addition there was a charge of £50 million 2011 £50 million for the 
cashbased divisional management incentive plans these plans are for 
senior operational management within the businesses and are designed to 
reward improvement in business performance usually over a ﬁve year period
finance costs and income
the net headline ﬁnance cost in 2012 was £288 million 2011 £195 
million
net interest on external bank loans overdrafts and cash balances was 
£219 million 2011 £156 million melrose uses interest rate swaps to 
ﬁx the majority of the interest rate exposure on its drawn debt following 
the reﬁnancing in january a new set of ﬁve year interest rate swaps was 
entered into and the existing ones were closed following the acquisition 
of elster another layer of swaps were added to ensure the group’s 
interest exposure was suitably protected more detail on these swaps is 
given in the ﬁnance cost risk management section of this review 
in 2012 the group had a blended interest rate of 27 2011 31
also included in the net headline ﬁnance cost is a £24 million 2011 
£25 million amortisation charge relating to a proportion of the 
arrangement costs of raising the £600 million bank facility and the new 
£15 billion bank facility a net interest cost on pension liabilities in excess 
of the expected return on their assets of £36 million 2011 £03 million 
and a charge for the unwinding of discounts on long term provisions of 
£09 million 2011 £11 million the introduction of ias 19 revised in 
2013 is expected to increase the net pension charge to headline proﬁt 
before tax by approximately £10 million
tax
as expected following the acquisition of elster the headline income 
statement tax rate increased slightly to 27 2011 26 the 27 
headline tax rate is expected to increase further in 2013 as a full year of 
2013 elster results are included
the group has chosen to reconcile the actual tax charge for the year 
to the weighted average tax charge because the weighted average 
rate better reﬂects the group’s economic operating conditions the 
main reason the headline rate is lower than the weighted average rate is 
the release of provisions previously held against potential overseas tax 
audits which have now been cleared 
 
the tax rate after exceptional items and intangible asset amortisation 
is 53 2011 credit of 21 the reasons for the high rate in the year 
include the nondeductibility for tax purposes of many of the exceptional 
costs incurred during the year indeed the tax credit on the exceptional 
costs including intangible asset amortisation was only 7 and the re
evaluation of the group’s deferred tax liability on intangible assets
the cash tax rate on headline continuing operations of 23 2011 
15 is again below the headline rate due to the beneﬁt arising from the 
utilisation of preexisting melrose group tax losses and other deferred tax 
assets the rate is higher than in previous years due to the settlement of 
tax audits commenced prior to our ownership of fki and the relative lack 
of similar deferred tax beneﬁts being available to the elster businesses
the group’s current tax creditor has increased by £24 million in the year 
primarily as a result of the acquisition of the elster businesses the net 
deferred tax liability has increased more signiﬁcantly by £208 million 
to £266 million the net liability includes a gross deferred tax liability 
of £263 million in respect of brand names and customer relationships 
acquired with the elster businesses  melrose industries plc
annual report 2012 30
finance director’s review continued
the deferred tax liability on existing intangible assets decreased during 
the year as a result of the normal amortisation of those assets but 
increased by the same amount as a result of the decision to amend 
their calculation to be consistent with the method used for the elster 
intangible assets the deferred tax liability in respect of intangible assets 
is not expected to represent a future cash tax payment and will unwind 
as the brand names and customer relationships are amortised
the total amount of tax losses in the group has increased in the year 
mainly due to the acquisition of elster the total gross tax losses within 
the group are shown below
 
tax losses
recognised
 £m
unrecognised
 £m
total
 £m
uk 161 1706 1867
north america 12 — 12
rest of world 182 445 627
total 2012 355 2151 2506
total 2011 350 1664 2014 
exceptional items 
in the year ended 31 december 2012 the group incurred exceptional 
operating costs of £739 million 2011 £400 million and received 
exceptional income of £70 million 2011 £nil in addition intangible 
asset amortisation of £391 million 2011 £237 million was charged 
a net tax credit on these exceptional costs exceptional income and 
intangible asset amortisation of £145 million 2011 £207 million and 
an exceptional tax charge of £58 million 2011 credit of £381 million 
has been taken in the year
the table below summarises the exceptional items in 2012
total
£m
intangible asset amortisation 391
exceptional operating costs
elster head office closures 91
other restructuring costs 453
acquisitions and disposals of businesses 195
total exceptional operating costs 739
exceptional operating income curtailment gain on us
 retirement plans 70 
exceptional finance costs 163
net tax credit on exceptional items 145 
exceptional tax charge 58
total exceptional tax and tax on exceptional costs 87 
exceptional items and intangible asset
 amortisation after tax 1136
overall the net exceptional items and intangible asset amortisation after 
tax shows a net expense of £1136 million 2011 £49 million
the elster head ofﬁce closure and elster restructuring costs discussed 
further in the chief executive’s review will deliver signiﬁcant cost savings 
in the future other restructuring costs include restructuring in the lifting 
division along with the costs associated with the establishment of the 
new holding company the acquisition and disposal costs primarily 
relate to the acquisition of elster along with smaller disposal activity 
within the melrose group
in addition £163 million of exceptional ﬁnance costs have been 
incurred which relate to the breaking of swaps on previous ﬁnancing 
arrangements the acceleration of the amortisation of banking fees 
previously capitalised and a proportion of the make whole premium 
charged on the repayment of elster’s eurobond
the exceptional operating income arises as a result of changes made to 
beneﬁts in respect of elster retirement health and life plans 
earnings per share eps 
in the 2011 annual report it was explained that the best measure 
of year on year growth in headline diluted eps was by comparing 
the headline diluted eps of continuing and discontinued businesses 
before the proﬁt on disposal of businesses and using the weighted 
average number of shares for the year this was because dynacast 
was such a signiﬁcant part of the group and the disposal proceeds 
were used to buy back shares which impacted the weighted average 
share calculation excluding the dynacast results from the 2011 eps 
calculation would therefore have been misrepresentative of year on year 
performance this gave a diluted headline eps of 288p in 2011 
in these ﬁnancial statements in accordance with ias 33 all eps numbers 
have been restated to apply a bonus factor of 57 to reﬂect the impact of 
the rights issue this restates the 288p discussed above to 164p
using the same measure the diluted headline eps for 2012 was 163p 
which shows a slight decrease year on year however this number has 
been impacted by the dilutive effect of the disposal of mpc a relatively 
small business within the group where the proceeds were not used to 
repurchase shares removing mpc from both years’ calculations would 
result in a 2011 eps of 158p and a 2012 eps of 161p showing a 
2 increase year on year in addition there has been a negative impact 
year on year in respect of foreign exchange movements particularly in 
relation to the euro and the czech koruna using constant currency and 
adjusting for mpc the diluted eps has grown by 4 year on year
in addition there was a period of time between issuing shares to buy 
elster and actually owning elster on 23 august 2012 if the weighted 
average number of shares were adjusted for this period then this would 
increase the 2012 eps by an additional 06p adjusting for these factors 
results in underlying year on year growth of 8 wwwmelroseplcnet
stock code mro 31
business performance governance financials shareholder information
in accordance with ias 33 two further sets of basic and diluted eps 
numbers post exceptional items are disclosed on the face of the 
income statement one for continuing operations and one that also 
includes discontinued operations in the year ended 31 december 2012 
the diluted eps for continuing operations was 43p 2011 129p and 
for both continuing and discontinued operations was 44p 2011 336p 
the decrease in the 2012 nonheadline eps is due to exceptional costs 
primarily restructuring acquisition and reﬁnancing related whereas 2011 
beneﬁted from the proﬁt on disposal of dynacast
cash generation and management
within the existing melrose businesses the period of signiﬁcant 
investment continued with a resulting net capital expenditure to 
depreciation ratio of these businesses being 21x for the year 2011 
17x consequently it is appropriate to look at the operating cash 
generated post working capital movements but prior to capital 
expenditure as a percentage of headline ebitda deﬁned as headline 
operating proﬁt before depreciation and amortisation to gauge cash 
performance in the year the percentage in 2012 for the continuing 
group was 84 and indeed within this it was 86 for the existing 
melrose businesses 2011 90 a good conversion considering the 
continued 6 growth in revenue for these businesses
for the nineteen weeks of ownership of elster the net capital 
expenditure to depreciation ratio was 09x and the pre capital 
expenditure cash conversion was 79
the cash generation performance in 2012 is summarised as follows
movement in net debt
2012
£m
opening net debt 2896
acquired net debt with elster 3063
cash flow from trading after all costs including tax 10
increase in net debt to fund the elster acquisition 3906
net cash flow from disposals including net cash
 disposed 271 
amounts paid to shareholders 668
foreign exchange and other noncash movements 295 
closing net debt 9977
the detail of the cash ﬂow from trading and the net cash ﬂow of 
acquisitions is shown below
cash flow from trading after all costs
 including tax
2012
£m
headline operating profit 2431 
depreciation and amortisation of computer software
 and development costs 305 
working capital movement 440
headline operating cash flow pre capex 2296 
headline ebitda conversion to cash pre capex  84
net capital expenditure 529
net interest and net tax paid 812
defined benefit pension contributions 337
other including discontinued operations 628
cash outflow from trading after all costs
 including tax 10
increase in net debt arising from acquisitions
2012
£m
net proceeds on issue of shares 11681 
cash payment for acquisitions including costs 15256
exceptional finance costs in raising and settling finance 331
increase in net debt to fund acquisitions 3906
the balance sheet leverage calculated as net debt divided by headline 
operating proﬁt before depreciation and amortisation was approximately 
26x at 31 december 2012 31 december 2011 14x this includes the 
results of the elster businesses under previous ownership adjusted to 
approximate the impact of the transition to ifrs and the impact of the 
fair value review in this period melrose industries plc
annual report 2012 32
finance director’s review continued
capital expenditure
improving businesses by investing in capital projects is a key part of the melrose strategy the group continued to authorise net capital expenditure 
in excess of depreciation for the existing businesses and for the elster businesses net capital expenditure was slightly less than depreciation in the 
four month period of ownership whilst the board assessed strategies for these businesses by division the net capital expenditure in the year was as 
follows
energy lifting
other
industrial elster central total
net capital expenditure £m 102  300  38  80  09  529 
depreciation £m 75  99  34  91  06  305 
net capital expenditure to depreciation ratio 
 full year 14x 30x 11x 09x 15x 17x
melrose eight year 20052012 average 
 annual multiple 13x
the net capital spend to depreciation ratio was 17x in 2012 being 21x 
in existing melrose and 09x in elster equal to the 17x ratio in 2011 
demonstrating the continued investment phase that the group is going 
through in its key businesses the eight year melrose average annual net 
capital spend remains in excess of depreciation at 13x
the largest investment was made in the bridon business within the 
lifting division and in particular the development of a new factory on 
neptune quay in newcastle upon tyne to produce the largest ropes in 
the world more details on this investment and others are included in the 
chief executive’s review
fair value exercise 
following the acquisition of elster melrose has undergone an extensive 
review of the elster assets liabilities and accounting policies this along 
with the change from reporting under us gaap to reporting under ifrs 
and from us dollars to sterling has resulted in a signiﬁcant amount of 
fair value adjustments in the elster businesses
in addition to a fair value review of all the elster assets and liabilities at 
the acquisition date and a review of the accounting policies melrose has 
undertaken signiﬁcant actions to improve the operational and ﬁnancial 
nature of the elster group to achieve this a number of exceptional 
costs have been incurred as described in the exceptional items section 
of this review
assets and liabilities
the summary melrose group assets and liabilities are shown below
2012
£m
2011
£m
fixed assets including computer
  software and development costs 3452  2181 
intangible assets 11563  3348 
goodwill 18369  5685 
net working capital 2185  1448 
retirement benefit obligations 2613 1177
provisions 2543 1206
deferred tax and current tax 3071 748
other
¹
52  151
total 27394  9380 
1
 includes interests in joint ventures net derivative liabilities and for 2011 only a £11 
million liability relating to the redeemable preference c shares redeemed on 30 april 
2012
these assets and liabilities are funded by
2012
£m
2011
£m
net debt 9977 2896
equity 17417 6484
total 27394 9380
the increase in total equity is primarily related to the rights issue and 
the increase in net debt as a result of the acquisition of elster wwwmelroseplcnet
stock code mro 33
business performance governance financials shareholder information
goodwill intangible assets and impairment review
the total value of goodwill as at 31 december 2012 was £18369 million 31 december 2011 £5685 million and intangible assets was £11563 
million 31 december 2011 £3348 million these items are split by division as follows
energy
£m
lifting
£m
other
industrial 
£m
elster
£m
total
£m
goodwill 2442  2897  183  12847  18369 
intangible assets 1068  1806  161  8528  11563 
deferred tax on intangible assets 296 503 45 2628 3472
other net assets 810  1429  250  615 1874 
total carrying value 4024  5629  549  18132  28334 
the goodwill and intangible assets have been tested for impairment as at 31 december 2012 the board is comfortable that no impairment is 
required
provisions
total provisions at 31 december 2012 were £2543 million 31 december 
2011 £1206 million a signiﬁcant increase from the previous year the 
following table details the movement in provisions in the year the increase 
being virtually all related to the acquisition of elster
total
£m
at 31 december 2011 1206 
acquisition of businesses 1430 
utilised — cash spend  658
net charge to headline operating profit 85 
net charge to exceptional costs 483 
other including foreign exchange 03
at 31 december 2012 2543 
included within the cash spend on provisions in 2012 was the resolution 
of the litigation case involving bridon details of which were included in the 
2011 annual report on 23 may 2012 bridon noble and certex agreed a 
conﬁdential settlement of the litigation and all claims have been dismissed 
with prejudice the settlement sum was paid by bridon in the year and 
including legal costs and current contributions from insurers the settlement 
was in line with the £258 million provision held at the 2011 year end
in addition to this the other signiﬁcant cash payments against provisions 
have been £106 million in respect of reorganisation provisions originally 
charged through exceptional items in 2011 and £138 million cash 
spend to date against the elster reorganisation provisions which were 
either inherited in the opening balance sheet of elster or created 
through exceptional items in 2012
of the remaining £156 million cash spend on provisions during 2012 
£53 million related to provisions previously charged through operating 
proﬁt with the remaining £103 million relating to provisions either 
acquired with businesses or created through exceptional items in 
previous years
the net charge to headline operating proﬁt in 2012 in respect of 
provisions was £85 million mostly relating to the charge of £50 million 
in respect of the divisional ltip plans 
the other movements on provisions in the year relate to the net effect 
of the unwind on long term provisions foreign exchange and the 
movement as a result of the disposal of mpc
pensions
the group has a number of deﬁned beneﬁt and deﬁned contribution 
pension plans brought forward from 2011 in addition elster provides 
retirement beneﬁts for most of its employees either directly or by 
contributions to pension funds managed by third parties
the acquisition of elster has almost doubled the ias 19 deﬁcit in the 
consolidated balance sheet as at 31 december 2012 with £1152 million 
of the £2613 million deﬁcit 44 relating to the acquired businesses 
however unlike the incumbent fki and mckechnie pension plans the 
elster plans are mainly unfunded with total liabilities at 31 december 2012 
of £1528 million and total assets of £376 million the elster plan liabilities 
acquired are much smaller than the existing melrose funded plans 
the fki uk pension plan remains the most signiﬁcant pension plan in 
the group the net accounting deﬁcit on this plan was £1000 million at 
31 december 2012 31 december 2011 £794 million this plan had 
assets at 31 december 2012 of £6302 million 31 december 2011 
£6003 million and liabilities of £7302 million 31 december 2011 
£6797 million
the assumptions used to calculate the ias 19 deﬁcit of the pension 
plans within the melrose group are considered carefully by the board 
of directors for the fki uk pension plan a male aged 65 in 2012 is 
expected to live for a further 221 years 31 december 2011 203 years 
this is assumed to increase by 14 years 6 for a male aged 65 in 2032 
a summary of the key assumptions of the uk plans are shown below
2012
assumptions

2011
assumptions

discount rate 450 490
inflation 300 310 melrose industries plc
annual report 2012 34
finance director’s review continued
it is noted that a 01 percentage point decrease in the discount rate 
would increase the pension liabilities on the main fki uk pension 
plan by £141 million or 2 and a 01 percentage point increase to 
inﬂation would increase the liabilities on this plan by £68 million or 1 
furthermore an increase by one year in the expected life of a 65 year 
old male member would increase the pension liabilities on this plan by 
£250 million or 3
the fki uk pension plan is closed to new members and to current 
members’ future service
the other uk deﬁned beneﬁt pension plan of signiﬁcant size in the group 
namely the mckechnie uk pension plan was in deﬁcit of £82 million at 
31 december 2012 31 december 2011 surplus of £30 million this plan 
had assets at 31 december 2012 of £1708 million 31 december 2011 
£1575 million and liabilities of £1790 million 31 december 2011 £1545 
million
the mckechnie uk pension plan is closed both to new members and 
current members’ future service 
the long term strategy for the uk plans is to concentrate on the cash 
ﬂows required to fund the liabilities as they fall due whether that is within 
the timescales of melrose ownership or beyond the melrose board 
recognise that as businesses are bought and sold eventually pension 
plan liabilities need to exit the group however this can be done at a 
time which is commercially sensible
the pension plan cash ﬂows extend many years into the future and the 
ultimate objective is that the total pool of assets derived from future 
company contributions and the investment strategy allows each cash 
payment to members to be made when due the melrose group made 
annual contributions of £185 million in 2012 2011 £185 million to 
the fki uk pension plan and £46 million 2011 £46 million to the 
mckechnie uk pension plan in addition in 2012 a oneoff contribution 
of £60 million was made to the mckechnie uk pension plan following 
the disposal of the mpc business
in addition a us deﬁned beneﬁt plan for fki exists at 31 december 
2012 this had assets of £1983 million 31 december 2011 £1952 
million liabilities of £2284 million 31 december 2011 £2287 million 
and consequently a deﬁcit of £301 million 31 december 2011 £335 
million this plan is closed to new members and to current members’ 
future service
the net deﬁcit on the elster acquired plans at 31 december 2012 
was £1152 million included in this amount is £896 million 78 
relating to unfunded german deﬁned beneﬁt plans and early retirement 
programmes the remaining plans in the elster division are smaller in 
size with £192 million of the deﬁcit 17 relating to us deﬁned beneﬁt 
and retirement healthcare and life insurance beneﬁts
risk management
the ﬁnancial risks the group faces have been considered and re
evaluated following the acquisition of elster and policies have been 
implemented to best deal with each risk the most signiﬁcant ﬁnancial 
risks are considered to be liquidity risk ﬁnance cost risk exchange rate 
risk contract and warranty risk and commodity cost risk these are 
discussed in turn below
liquidity risk management
the group’s net debt position at 31 december 2012 was £9977 million 
compared to £2896 million a year earlier the increase in debt resulted 
from the acquisition of elster where £3906 million has been used in 
addition to the net rights issue proceeds to purchase the shares of elster 
and pay acquisition costs and reﬁnancing fees net debt of £3063 million 
was also acquired with elster subsequent to the acquisition melrose 
reﬁnanced all of the signiﬁcant elster debt facilities which consisted of a 
seven year 625 eurobond with a principal value of €250 million which 
was due to mature in april 2018 in addition to a committed €450 million 
multicurrency revolving credit facility and a €140 million committed 
multicurrency guarantee facility both of which were due to mature in april 
2016 on 28 november 2012 the elster eurobond was repaid together 
with the applicable redemption premium and accrued interest resulting in 
a repayment including principal of €2833 million
the new £05 billion term loan is subject to mandatory repayments of 5 
per cent on 30 june 2015 30 june 2016 and 31 december 2016
as with previous facilities the new facility has two ﬁnancial covenants 
a net debt to headline ebitda headline operating proﬁt before 
depreciation and amortisation covenant and an interest cover covenant 
both of which are tested half yearly each june and december
the ﬁrst covenant which calculates net debt at average exchange rates 
during the period is set at 35x at december 2012 and reduces to 
325x at 31 december 2013 before further reducing to 30x at 
30 june 2015 for the year ended 31 december 2012 it was 
approximately 26x 31 december 2011 14x after adjusting the 
ﬁrst thirty three weeks of elster ebitda from us gaap to ifrs 
and reﬂecting fair value adjustments showing signiﬁcant headroom 
compared to the covenant test the ebitda used in this calculation 
includes elster central costs at a level prior to the actions taken following 
the acquisition 
the interest cover covenant remains at 40x throughout the life of the 
facility at 31 december 2012 it was 91x 31 december 2011 117x 
which also affords comfortable headroom compared to the covenant test 
the initial drawdown of the new facility has been made in the core 
currencies of the group being us dollars euro and sterling and in 
proportions to protect the group as efﬁciently as possible from currency 
ﬂuctuations on net assets and proﬁt
 
in addition there are a number of uncommitted overdraft guarantee and 
borrowing facilities made available to the group these uncommitted 
facilities are lightly used wwwmelroseplcnet
stock code mro 35
business performance governance financials shareholder information
cash deposits and marketable securities amounted to £1565 million at 
31 december 2012 31 december 2011 £1956 million and are offset 
against gross debt of £11542 million 31 december 2011 £4852 
million to arrive at the net debt position of £9977 million 31 december 
2011 £2896 million the combination of this cash and the size of 
the new facilities allows the directors to consider that the group has 
sufﬁcient access to liquidity for its current needs
the board takes careful consideration of counterparty risk with banks 
when deciding where to place melrose’s cash on deposit 
in accordance with the reporting requirements on going concern issued 
by the financial reporting council the directors acknowledge that by 
its very nature the economic environment causes uncertainty as to 
the trading outcome for 2013 and beyond the group has committed 
borrowing facilities until june 2017 in addition the breadth of the end 
markets that the melrose group companies trade in both by sector and 
geographically gives some balance to various market and economic 
cycle risks furthermore the group has a consistent cash generation 
record and as a consequence the directors believe that the group 
can manage its business risks successfully and accordingly the group 
ﬁnancial statements have been prepared on a going concern basis 
finance cost risk management
the group remained in a net debt position at 31 december 2012 
which signiﬁcantly increased following the acquisition of elster the new 
melrose facility carries a cost of libor plus a margin which depends 
on the leverage which ranges from 140 to 265 and as at 31 
december 2012 the margin was 200 
the group entered 2012 protecting 78 of its gross debt from 
exposure to changes in interest rates by holding a number of interest 
rate swaps to ﬁx £3801 million us 5460 million and €333 million 
of drawn debt under the terms of these swaps the group ﬁxed the 
underlying interest rate at 21 for us dollars and 26 for the euro 
plus the bank margin which was 135 through to early 2013 
in february 2012 the group closed out these swap arrangements 
and replaced them with new arrangements to ﬁx the interest rate on 
a proportion of the new facility drawn down on 31 january 2012 the 
new ﬁve year swap arrangements ﬁxed the ﬁnance cost on us 2310 
million £1050 million and €420 million of debt under the terms of 
these swap arrangements the group will pay annually in arrears 10 
for us dollar swaps 11 for euro swaps and 11 for sterling swaps 
plus the bank margin which was 15 at that time these arrangements 
protected approximately 70 of the group’s exposure to interest rate 
ﬂuctuations for the term of the new facility
in september 2012 the group entered into another layer of interest 
rate swaps following the acquisition of elster the new ﬁve year swap 
arrangements ﬁx the ﬁnance cost on us 3290 million £2318 million 
and €2500 million of drawn borrowings under the terms of these swap 
arrangements the group will pay annually in arrears 069 for us 
dollar swaps 072 for euro swaps and 080 for sterling swaps plus 
the bank margin which is currently 200 these swaps have also been 
structured to maintain the ratio of ﬁxed interest rate cover over the ﬁve 
year term allowing for group proﬁt generation
this ﬁxes the interest rate cost on us 5600 million £3368 million and 
€2920 million of debt 79 of gross borrowings at 31 december 2012 
the weighted blended ﬁxed ﬁnance cost are therefore 084 on us 
dollar swaps 078 on euro swaps and 091 on sterling swaps plus 
the bank margin of 200
exchange rate risk management
the enlarged group trades in various countries around the world and 
is exposed to many different foreign currencies the group therefore 
carries an exchange rate risk that can be categorised into three types 
as described below the board policy is designed to protect against the 
majority of the cash risks but not the noncash risks the most common 
cash risk is the transaction risk the group takes when it invoices a sale 
in a different currency to the one in which its cost of sale is incurred this 
is addressed by taking out forward cover against approximately 60 
to 80 of the anticipated cash ﬂows over the following twelve months 
placed on a rolling quarterly basis or for 100 of each material contract 
this does not eliminate the cash risk but does bring some certainty to it
exchange rates used in the period
us dollar
twelve 
month 
average rate
nineteen 
week
average rate
elster 
businesses 
closing
 rate
2012 159  161  162
2011 160 na  155
euro
2012 123 124  123
2011 115 na  120
the effect on the key headline numbers in 2012 for the continuing 
group due to the translation movement of exchange rates from 2011 
to 2012 is shown below the table illustrates the translation movement 
in revenue and headline operating proﬁt if the 2011 average exchange 
rates had been used to calculate the 2012 results rather than the 2012 
average exchange rate melrose industries plc
annual report 2012 36
finance director’s review continued
the translation difference in 2012 £m
revenue increase 286
headline operating profit increase 74
for reference in respect of the enlarged group an indication of the short 
term exchange rate risk which shows both translation exchange risk 
and unhedged transaction exchange rate risk is as follows
sensitivity of profit to translation and unhedged  
 transaction exchange risk
increase in
 headline
operating 
profit
£m
for every 10 cent strengthening of the us dollar
 against sterling 75
for every 10 cent strengthening of the euro against
 sterling 123
the long term exchange rate risk which ignores any hedging 
instruments is as follows
sensitivity of profit to translation and full  
 transaction exchange rate risk
increase in
 headline
operating 
profit
£m
for every 10 cent strengthening of the us dollar
 against sterling 105
for every 10 cent strengthening of the euro against
 sterling 109
no speciﬁc exchange instruments are used to protect against this 
translation risk because it is a noncash risk to the group however 
when the group has net debt the hedge of having a multicurrency 
debt facility funding these foreign currency trading units protects against 
some of the balance sheet and banking covenant translation risk
lastly and potentially the most signiﬁcant exchange risk that the group 
has arises when a business that is predominantly based in a foreign 
currency is sold the proceeds for those businesses may be received in 
a foreign currency and therefore an exchange risk might arise if foreign 
currency proceeds are converted back to sterling for instance to pay a 
dividend to shareholders protection against this risk is considered on a 
casebycase basis 
contract and warranty risk
there are a number of contracts within the melrose group and these 
have increased signiﬁcantly following the acquisition of elster the 
ﬁnancial risks connected with these contracts which include the 
consideration of warranty terms duration and any other commercial or 
legal terms are considered carefully by melrose before being entered 
into
commodity cost risk management
as melrose owns engineering businesses across various sectors 
the cumulative expenditure on commodities is important the group 
addresses the risk of base commodity costs increasing by wherever 
possible passing on the cost increases to customers or by having 
suitable purchase agreements with its suppliers which sometimes ﬁx the 
price over some months into the future on occasions melrose does 
enter into ﬁnancial instruments on commodities when this is considered 
to be the most efﬁcient way of protecting against movements the 
acquisition of elster increased the group’s exposure to ﬂuctuations in 
market prices of commodities especially brass steel and aluminium 
these risks are minimised through sourcing policies including the use 
of multiple sources where possible and procurement contracts where 
prices are agreed for up to one year to limit exposure to price volatility
geoffrey martin
group finance director
6 march 2013 wwwmelroseplcnet
stock code mro 37
business performance governance financials shareholder information
risks and uncertainties
melrose operates in a wide variety of sectors and countries and is exposed to a range of risks and uncertainties from a strategic operational 
compliance ethical and ﬁnancial perspective detailed below are risks and uncertainties that could impact on the company’s performance a risk 
management and internal controls framework is in place within the group to ensure that such risks and uncertainties can be identiﬁed and where 
possible managed suitably
strategic risk nature of risk mitigating factors
acquisition of new businesses 
and improvement strategies
 discovery of unforeseen liabilities following 
acquisition
 value generation post acquisition does not meet 
expectations
 need for a greater amount of capital expenditure 
and working capital to grow the acquired 
business than originally forecast
 ability to integrate newly acquired businesses into 
an enlarged group
 structured and focused due diligence undertaken
 focus on acquisition targets that have strong 
headline fundamentals  high quality products 
leading market share but are underperforming 
their potential and ability to generate sustainable 
cash ﬂows and proﬁt growth
 handson role taken by directors and other 
senior employees of the group development of 
strategic plans restructuring opportunities capital 
expenditure and working capital management
disposals
 timing of disposal of companies
 long term liabilities retained by the group post 
disposal
 directors are experienced in judging and regularly 
reviewing the appropriate time in a business 
cycle for disposal to realise maximum value for 
shareholders
 each disposal is assessed on its merits along 
with the extent to which indemnities warranties 
and guarantees are provided
operational risk nature of risk mitigating factors
economic and political risk
 difﬁcult macroeconomic conditions changing 
pattern of global demand and political uncertainty
 diverse range of companies operating within the 
group within a variety of different industries and 
countries which reduces macroeconomic and 
political risks
 regular monitoring of order books and other 
leading indicators to ensure the group and 
each of its businesses can respond quickly to 
any adverse trading conditions this includes 
the identiﬁcation of cost reduction and efﬁciency 
measures
customers
 concentration of customers in certain markets 
andor countries around the world
 financial viability of key customers
 major customers may not buy into product 
concepts that are at the forefront of technology  
or delay placing orders for such products
 pricing pressures from major customers and 
industry sectors
 operational problems at key customers leading to 
delays in future orders being placed and existing 
orders being received
 diverse portfolio of businesses serving different 
customers and markets no reliance on any one 
customer or group of customers at a business 
unit level performance could be materially 
affected by the loss of a key customer and regular 
monitoring is undertaken to reduce such risks
 active credit management and development of 
customer relations at a business level
 monitoring of key markets for early warning of 
negative commercial trends melrose industries plc
annual report 2012 38
operational risk nature of risk mitigating factors
suppliers
 over reliance on a small number of suppliers 
leading to a lack of availability
 production volatility and supply chain disruption
 fluctuations in cost of raw materials
 diverse portfolio of suppliers the company is not 
reliant on any one supplier or group of suppliers
 ongoing assessment of suppliers including the 
monitoring of their ﬁnancial viability
 if commercially suitable contract prices are 
agreed with raw material suppliers to reduce the 
effect of short term price ﬂuctuations risks are 
further reduced by the use of escalation clauses 
surcharges and price increases when negotiating 
contracts together with the use of matching 
hedging arrangements
product quality
 reputational risks from product quality issues
 product liabilities regarding defective products 
 investment made available to allow for product 
improvements and efﬁcient production processes
 well deﬁned testing procedures together with 
suitable research and development facilities at key 
manufacturing locations
 maintenance of insurance policies to cover 
product related liabilities
production delays
 delays in the manufacture of products due to 
equipment failure ﬁre natural disaster war or civil 
unrest and cyber attacks
 maintenance of insurance policies to cover certain 
losses and ensure recovery of production
 diverse range of companies operating in the 
group within a variety of different industries and 
countries
competitive markets
 increased level of competition leading to loss 
of market share andor reducing operational 
margins
 substantial investment in research and 
development funds made available for both 
the development of new products and to meet 
changing customer demands
 ongoing monitoring of competing markets and 
products to ensure that potential threats are 
identiﬁed quickly
 development of close customer relationships 
understanding of customer needs and rigorous 
focus on costs
information technology 
 failure of it systems leading to severe operational 
issues
 different it systems used in each business 
regular review of it policies and procedures 
within each business to include disaster recovery 
planning 
loss of key management
 over reliance on small number of directors and 
other senior managers within both the group and 
individual businesses
 competition to recruit and retain highly qualiﬁed 
management and technical personnel
 succession planning within the group is  
coordinated via the nominations committee 
in conjunction with the board and includes all 
directors and senior employees
 the company recognises that as with most 
businesses particularly those operating within 
a technical ﬁeld it is dependent on directors 
and employees with particular managerial 
engineering or technical skills appropriate 
remuneration packages and long term incentive 
arrangements are offered in an effort to retain 
such individuals
risks and uncertainties continued wwwmelroseplcnet
stock code mro 39
business performance governance financials shareholder information
compliance and ethical risk nature of risk mitigating factors
legal regulatory and  
intellectual property “ip”
 ongoing changes to legal andor regulatory 
requirements that may substantially differ from 
country to country
 litigation from third parties
 infringement or other inappropriate use of the 
group’s ip rights by a third party leading to 
reputational issues and potential loss of sales
 infringement of anticorruption and economic 
sanctions
 regular monitoring of legal and regulatory 
matters at both a group and business unit 
level consultation with external advisers where 
necessary
 development of suitable corporate governance 
and compliance procedures both at a group and 
business unit level
 protection of rights over trademarks copyright 
patents designs and trade secrets where 
necessary
business conduct
 reputational risk caused by ethical breach groupwide policies are in place to ensure ethical 
standards are adhered to within the businesses 
which include antibribery and whistleblowing 
procedures
health safety and 
environmental
 potential risk of injury or damage to employees 
or third parties if policies and procedures are not 
adhered to
 breach of legal andor regulatory requirements
 strong approach to managing health and safety 
employee suggestions actively encouraged
 groupwide health and safety kpis within the 
lifting energy and other industrial divisions 
designed to overlay the well established business 
speciﬁc kpis the elster businesses will start 
to report under these group health and safety 
kpis during 2013 review of health safety and 
environmental matters at both group board 
meetings and business level meetings together 
with the completion of risk control surveys
financial risk nature of risk mitigating factors
liquidity
 inability of the group to meet its ﬁnancial 
obligations
 ensure the company has adequate resources to 
meet its liabilities by reviewing its rolling forecasts 
ensuring there is sufﬁcient headroom within 
committed bank facilities to cope with market 
volatility
finance cost
 material ﬂuctuations of interest rates the company enters into a suitable amount of 
interest rate protection to limit this exposure
exchange rate
 exposure to ﬂuctuations in foreign currency 
values
 transaction risk when a business is acquired
disposed and amounts paidreceived in a foreign 
currency
 the company policy is to protect against the 
majority of foreign exchange risk which affects 
cash
 protection against speciﬁc transaction risks are 
taken by the board on a casebycase basis
pensions
 pension deﬁcit levels are affected by changes in 
asset values discount rates inﬂation and  
mortality assumptions
 higher deﬁcit levels may increase requirement on 
the group to fund the deﬁcit
 each of the group’s key funded pension plans are 
now closed to new entrants and future service 
accrual long term funding arrangements are 
agreed with each of these plans and reviewed 
following completion of actuarial valuations other 
pension plans exist within the group but these are 
largely unfunded schemes whereby funding plans 
are not required and beneﬁt obligations are paid 
when due
 active management of pension plan assets 
further information regarding the key pension 
plans can be found on pages 50 and 51 of the 
directors’ report
further details in relation to the ﬁnancial risks are shown within the finance director’s review on pages 34 to 36 melrose industries plc
annual report 2012 40
key performance indicators
financial kpis
in order to support the group’s strategy and to monitor performance the board use a number of ﬁnancial and nonﬁnancial key performance 
indicators “kpis” details of a selection of the kpis are shown below additional business level kpis are also used which are relevant to their 
particular circumstances
method of calculation
group headline
1
 profit after tax excluding the profit on disposal of 
businesses from continuing and discontinued operations as reported 
in this 2012 annual report excluding the results of mpc divided by 
the diluted weighted average number of ordinary shares in issue
strategic objective
to create consistent and long term value for shareholders
method of calculation
headline
1
 operating profit for the continuing group
strategic objective
to improve profitability of group operations
method of calculation
amount declared as payable by way of dividends in terms of pence 
per share
strategic objective
to operate a progressive dividend policy whenever the financial 
position of the company in the opinion of the board justifies the 
payment
method of calculation
headline
1
 operating profit as a percentage of revenue for the 
continuing group
strategic objective
to improve profitability of group operations
further information in relation to the key ﬁnancial performance indicators can be found within the finance director’s review on pages 27 to 36
1
 before exceptional costs exceptional income and intangible asset amortisation
2
 headline
1
 operating proﬁt before depreciation and amortisation of computer software and development costs
3
 calculated under previous banking covenants as required by banking facilities in place at that time 
4
 restated to include the results of mpc within discontinued operations
5
  restated to include the effects of the 2 for 1 rights issue that concluded in august 2012 resulting in the issue of 844418024 new ordinary shares in the capital of melrose 
plc raising approximately £12 billion in relation to the purchase of elster
6
  based on 1 january 2012 to 31 december 2012 ebitda
2
 for all continuing businesses elster pre acquisition ebitda
2
 has been adjusted to estimate the impact of the 
transition to melrose accounting policies under ifrs
7
 relates to existing melrose for the year ended 31 december 2012
8
 relates to elster for the four month period from acquisition to 31 december 2012
2012 2010 2011
135p
5
158p
5
161p
headline
1
 diluted earnings 
per share pence 
161p
2012 2010 2011
63p
5
74p
5
76p
dividend per share pence 
76p
2012 2010 2011
£1432m
4
£1742m
4
£578m
8
£1853m
7
headline
1
 operating proﬁt £m 
£2431m
2010 2011
145
4
161
4
existing melrose 163
7
2012
elster 141
8
headline
1
 operating 
proﬁt margin 
163
existing melrose
elster
141 wwwmelroseplcnet
stock code mro 41
business performance governance financials shareholder information
financial kpis continued nonfinancial kpis
health and safety
method of calculation
a variety of different health and safety kpis are used by each of the 
businesses within the group which are specific to the exact nature 
of the business and its associated risks three overall group kpis 
are also used by the board in relation to the lifting energy and 
other industrial divisions which are major accident frequency rate 
accidents that result in an employee having more than three days 
off work due to a work related injury per 200000 working hours 
accident frequency rate accidents that result in an employee having 
one or more days off work due to a work related injury per 200000 
working hours to take account of both major and minor accidents 
and accident severity rate average number of lost working days per 
work related accident
within elster different health and safety kpis are in use during 2013 
the elster businesses will start to report under the group’s existing 
health and safety kpi structure 
strategic objective
the company has an objective to stop all preventable accidents
performance
during 2012 two of the kpis improved when compared against 
2011 with the other remaining constant further information in 
relation to the various health and safety initiatives undertaken by the 
group’s businesses during 2012 can be found within the directors’ 
report on page 52 
method of calculation
calculated as headline
1
 ebitda
2
 as a multiple of interest payable on 
bank loans and overdrafts for the full group during each year
strategic objective
to ensure the group has suitable amounts of debt and remains within 
its banking covenants
method of calculation
net debt at average exchange rates divided by headline
1
 ebitda
2
 
for existing businesses at each year end
strategic objective
to ensure the group has suitable amounts of debt and remains within 
its banking covenants
method of calculation
percentage of headline
1
 ebitda
2
 conversion to cash for continuing 
businesses pre capital expenditure
strategic objective
to ensure businesses are suitably cash generative in order to have 
adequate cash reserves for the effective running of the company and 
for significant capital investment where required
environmental and energy usage
method of calculation
environmental kpis used within the group and their method of 
calculation vary by business unit which depends on the specific 
nature of the operation a range of environmental measures are used 
including energy consumption co 2 emissions water consumption 
water contamination and waste disposal
strategic objective
each of the group’s businesses are committed to ensuring that their 
operations have a minimum adverse effect on the environment and 
that ongoing reductions are achieved where practicable particular 
relevance has been placed on the reduction of energy consumption 
and co 2 emissions
performance
investment was provided by the group for several environmental 
improvement initiatives during 2012 details of these can be found 
in the directors’ report on page 53 in addition to this the company 
is currently in the process of understanding the implications of the 
greenhouse gas emissions directors’ reports regulations 2013 
which at the time of writing this report have not been finalised the 
company will be working to develop appropriate internal group 
systems to ensure that over a period of time group statistics can be 
collected and reported on greenhouse gas usage and future target 
reductions  
other nonﬁnancial
due to the diverse nature of the group each business uses a range of 
its own specific nonfinancial kpis which are used to drive business 
performance and assist in managing risk this helps to ensure that 
the kpis used are relevant to each business and take into account 
specific operational and reporting requirements such kpis cover 
operational quality commercial and human resource measures 
further information regarding some of the group’s recent initiatives 
can be found within the directors’ report on pages 49 and 50
2012 2010 2011
97×
3
117×
3
91×
interest cover
91×
2012 2010 2011
13×
3
14×
3
26×
6
net debt to headline
1
 ebitda
2
26×
6
2012 2010 2011
104
4
90
4
84
cash conversion 
84 melrose industries plc
annual report 2012 42
board of directors
christopher miller  executive chairman
age 61 he qualiﬁed as a chartered accountant with coopers  
lybrand following which he was an associate director of hanson plc 
in september 1988 he joined the board of wassall plc as its chief 
executive between october 2000 and may 2003 he was involved in 
private investment activities mr miller was appointed as an executive 
director of melrose on 29 may 2003 
david roper  executive vicechairman
age 62 he qualiﬁed as a chartered accountant with peat marwick 
mitchell following which he worked in the corporate ﬁnance divisions 
of sg warburg  co limited bzw and dillon read in september 
1988 he was appointed to the board of wassall plc and became 
its deputy chief executive in 1993 between october 2000 and may 
2003 he was involved in private investment activities and served as 
a nonexecutive director on the boards of two companies mr roper 
was appointed as an executive director of melrose on 29 may 2003
simon peckham  chief executive
age 50 he qualiﬁed as a solicitor in 1986 in 1990 he joined wassall 
plc and became an executive director of wassall plc in 1999 from 
october 2000 until may 2003 he worked for the equity ﬁnance division 
of the royal bank of scotland and was involved in several high proﬁle 
transactions mr peckham was appointed as an executive director of 
melrose on 29 may 2003
geoffrey martin  group finance director
age 45 he qualiﬁed as a chartered accountant with coopers  
lybrand where he worked within the corporate ﬁnance and audit 
departments in 1996 he joined royal doulton plc and was group 
finance director from october 2000 until june 2005 which was a 
period of signiﬁcant restructuring for the company mr martin joined 
melrose on 7 july 2005 when he was appointed to the board as 
group finance director wwwmelroseplcnet
stock code mro 43
business performance governance financials shareholder information
audit committee 
john grant chairman  
perry crosthwaite  
justin dowley  
miles templeman
during 2012 the audit committee 
met three times
remuneration committee 
perry crosthwaite chairman  
miles templeman  
john grant 
justin dowley
during 2012 the remuneration committee  
met four times
nomination committee 
miles templeman chairman 
perry crosthwaite  
john grant 
justin dowley 
christopher miller
during 2012 the nomination committee 
met twice
miles templeman  senior nonexecutive director
age 65 he has been a director of several consumer goods and retailing 
companies he was managing director of threshers offlicences 
between 1985 and 1988 and managing director of whitbread beer 
company between 1990 and 2001 mr templeman was chief executive 
ofﬁcer of hp bulmer holdings plc from january 2003 to july 2003 and 
nonexecutive chairman of restaurant chain yo sushi between 2003 and 
2008 he has also held a number of other nonexecutive directorships and 
was appointed as a nonexecutive director of melrose on 8 october 2003
between october 2004 and october 2011 mr templeman also occupied 
the position of director general of the institute of directors he is currently 
the nonexecutive chairman of shepherd neame chairman of aspria and 
a nonexecutive director of the rugby football union
perry crosthwaite  nonexecutive director
age 64 he has over 30 years’ experience as a director in the city 
of london he was a founding director of henderson crosthwaite 
institutional brokers limited serving on the board until its acquisition 
by investec bank in 1998 he became a director of investec bank 
uk limited and chairman of the investment banking division until his 
retirement in 2004 mr crosthwaite was appointed as a nonexecutive 
director of melrose on 26 july 2005 he is currently chairman of 
jupiter green investment trust plc and a nonexecutive director of 
investec limited and investec plc
john grant  nonexecutive director
age 67 mr grant spent his executive career in a variety of senior 
international roles within the automotive industry and other engineering 
businesses he was chief executive of ascot plc between 1997 and 
2000 prior to that mr grant was group finance director of lucas 
industries plc subsequently lucasvarity plc between 1992 and 1996 
he previously held several senior strategy and ﬁnance positions with 
ford motor company in europe and the usa mr grant was appointed 
as a nonexecutive director of melrose on 1 august 2006 he is 
currently nonexecutive director of mhp sa pace plc and wolfson 
microelectronics plc
justin dowley  nonexecutive director
age 57 he has extensive experience within the banking investment 
and asset management sector and was latterly vice chairman of 
emea investment banking a division of nomura international plc he 
was also a founder partner of tricorn partners head of investment 
banking at merrill lynch europe and a director of morgan grenfell  
mr dowley was appointed as a nonexecutive director of melrose on  
1 september 2011 he is also currently chairman of intermediate 
capital group plc a specialist investment and asset management 
company and is also a director of a number of private companies 
including ascot authority holdings limited melrose industries plc
annual report 2012 44
directors’ report
the directors of melrose industries plc present their annual report and 
audited ﬁnancial statements of the group for the year ended 
31 december 2012
on 12 october 2012 melrose plc announced its intention to 
implement a corporate reorganisation by way of a courtapproved 
scheme of arrangement pursuant to which a new listed holding 
company was to be introduced for the melrose group of companies 
following the approval by melrose plc’s shareholders of the proposed 
scheme of arrangement on 5 november 2012 and subsequently the 
court’s sanction of the proposed scheme of arrangement on 
26 november 2012 the scheme of arrangement became effective 
on 27 november 2012 and melrose industries plc became the new 
holding company of melrose plc and its subsidiaries 
 
in this directors’ report and also the corporate governance report and 
remuneration report unless explicitly stated otherwise references to 
the “company” and to “melrose” are references to melrose plc up 
to but excluding 27 november 2012 and to melrose industries plc 
from 27 november 2012 onwards references to the “board” to the 
“directors” and to board positions are references to the board to the 
directors and to board positions of the relevant company for those 
periods
strategy
melrose has a buy improve sell strategy to acquire manufacturing 
businesses improve performance and realise their value in the medium 
term shareholders’ investment in melrose net of dividends and returns 
of capital since 2003 amounts to approximately £11 billion our market 
capitalisation at the current share price amounts to £33 billion 
meaning that over £2 billion of value has been created over this period 
further details of each part of the strategy are shown below additional 
information is also shown on pages 4 and 5
melrose aims to acquire good manufacturing businesses that in the 
opinion of the directors are currently underperforming their potential 
businesses are targeted that have strong headline fundamentals such 
as high quality products andor a leading market share so as to enable 
melrose to generate sustainable cash ﬂows achieve proﬁt growth and 
create value for shareholders
the executive directors have extensive experience of identifying and 
evaluating such acquisition opportunities in both quoted and unquoted 
companies within the uk and overseas the company funds the 
acquisition of such companies through a mixture of debt and equity 
whilst maintaining prudent leverage levels
in august 2012 the company acquired elster group se “elster” for 
an enterprise value of approximately £18 billion representing the largest 
acquisition in melrose’s history to date elster is a world leader in the 
provision of gas control equipment and related products gas electricity 
and water meters networking and software solutions the purchase of 
elster approximately doubled the size of the melrose group
prior to this the most signiﬁcant acquisition was that of fki plc in july 
2008 for an enterprise value of approximately £1 billion
the company is not a passive investor in the businesses that it 
acquires the directors and senior management team have a hands
on relationship with each acquired business by working closely with 
their divisional senior management teams in developing the long term 
strategic plans of the businesses as well as having regular input 
on restructuring decisions capital expenditure and working capital 
management a natural part of this process involves the disposal of  
noncore businesses
the company is fully committed to investing within the businesses it 
acquires in order to fully exploit their operational and strategic strengths 
and in 2012 capital expenditure increased to over twice depreciation in 
the lifting energy and other industrial divisions
even though the acquisition of elster was only completed in late august 
2012 the directors and senior management are very pleased with 
the progress that has been made to date many projects have either 
been completed or are currently under way including realigning the 
divisions into three global businesses of gas electricity and water and 
the acceleration and broadening of the existing restructuring plan this 
represents the ﬁrst steps in the improvement programmes for the elster 
businesses further details can be found in the chief executive’s review 
on pages 14 and 15
the company has a proven track record in enhancing value within the 
businesses it purchases a few examples of which are shown below
 dynacast
  melrose acquired dynacast in may 2005 and sold this business in july 
2011 during the six years of ownership and as a result of a variety of 
improvement initiatives and investments made by melrose the equity 
value increased fourfold melrose successfully steered dynacast 
through the global slowdown and cost savings made during the 
downturn were retained as sales recovered
 mckechnie aerospace
  melrose acquired the mckechnie group in may 2005 part of this 
purchase included the mckechnie aerospace and aftermarkets 
business which were ultimately sold in may 2007 for £428 million 
during the two year period of ownership within the group revenues 
grew by 35 per cent ebitda grew by approximately 75 per cent  
with margins increasing by 6 percentage points
 existing businesses
  with regard to the current melrose businesses that were purchased 
as part of the fki transaction in july 2008 headline operating proﬁt 
margins have improved from 10 per cent at acquisition to over 16  
per cent currently with further improvements anticipated
further details showing the types of investment that were carried out 
within some of the group’s businesses during 2012 can be seen in the 
“divisional reviews’’ section across wwwmelroseplcnet
stock code mro 45
business performance governance financials shareholder information
at the appropriate time each business will be disposed of in order to 
return to shareholders the value that has been created the directors 
are experienced in being able to recognise the appropriate time for 
disposal 
in june 2012 the mckechnie plastic components “mpc” business 
was sold for £307 million which coupled with the sale of dynacast 
in 2011 and the sale of mckechnie aerospace in 2007 represents a 
complete sale of the dynacast and mckechnie businesses 
these sales have resulted in approximately £800 million in cash being 
returned to shareholders in comparison to their equity contribution of 
£244 million to the original purchase price of the businesses in 2005  
principal activities
the company reports according to four distinct trading divisions energy 
lifting other industrial and elster within each division the company’s 
businesses operate autonomously under the supervision of directors and 
senior management on a global scale having manufacturing locations 
throughout the world as shown on the world maps on pages 8 to 11 
this approach has also been adopted for elster following its acquisition 
in august 2012 further details regarding the principal activities of each 
of the company’s businesses can be found within the chief executive’s 
review on pages 14 and 15 and divisional reviews on pages 16 to 26 
a summary of the key strengths products and major customers of each 
group business is shown within the ‘group overview’ section of this 
annual report on pages 8 to 11
divisional reviews
the company remains committed to investing in its various businesses 
and some recent examples of this can be seen below
bridon 
 a new £20 million stateoftheart manufacturing facility on the 
waterfront at neptune energy park newcastle upon tyne uk 
opened in november 2012 as a result of this investment bridon 
is now capable of producing some of the world’s largest and most 
complex ropes for loading directly onto vessels
 development of a new technology centre at bridon’s doncaster 
factory this is a new production design development and testing 
facility which will help to maintain bridon’s worldwide reputation for 
product development and quality
crosby
 the reorganisation of crosby’s manufacturing footprint in order to 
create centres of excellence in forging and machining products this 
will also assist crosby to grow their business in europe the middle 
east and africa
 purchase and installation of a 35000 lb hammer which will allow 
crosby to forge shackles of up to 400 tonnes some of the largest 
in the world this new machinery will go through an indepth testing 
process prior to being used in production which is estimated to be 
sometime during 2014
 completion of a modernised galvanising facility during 2012 designed 
to increase capacity and reduce costs
brush
 the restructuring of the generator manufacturing plant in the 
netherlands
 further enhancements to various facilities designed to improve factory 
performance and productivity
 the ﬁrst full year impact of hawker siddeley switchgear’s “hss” 
absorption into the turbogenerators business was realised during 
2012
marelli
 signiﬁcant capital investment has been made in marelli’s italian 
production facility this includes a new milling and balancing machine 
and an extension and upgrade to the world class testing facility in 
each case to enable it to cater for the increase in size and volume of 
the larger motors and generators
 the shift of two further medium generator production lines from its 
italian facility to its malaysian production facility in order to access 
cost beneﬁts and improve both ﬂexibility and their manufacturing 
footprint
elster
 each of the elster businesses are cooperating on a joint software 
development initiative to address new opportunities in the data 
analytics markets
 now that we have realigned the division into three global businesses 
a number of initiatives have been implemented including
 ■ gas
 closure and outsourcing of the die casting facility in nebraska 
us and the restructure of the perfection business in ohio us 
and the hauck business in pennsylvania us
 ■ electricity
the relocation of the manufacturing assembly in raleigh us 
to san luis potosi in mexico and the reorganisation of the 
brazilian and argentinian operations
 ■ water
closure of the facilities in italy poland lampertheim in 
germany and ocala in the us
the company actively encourages focused ongoing research and 
development within each of its businesses during 2012 investment 
continued in the development of new and innovative product lines in the 
majority of the group’s businesses with several product launches in the 
pipeline this strategy helps to ensure that each business can remain 
at the forefront of technological advances within deﬁned market sectors 
and be able to meet speciﬁc customer demands some examples of the 
types of new products being launched within the various markets are 
discussed within the divisional reviews on pages 16 to 26 during 2012 
development costs totaling £12 million 2011 £nil were capitalised in 
line with group accounting policies melrose industries plc
annual report 2012 46
directors’ report continued
financial results
the group’s proﬁt for the ﬁnancial year attributable to ordinary 
shareholders was £425 million 2011 £2864 million including proﬁt from 
discontinued operations of £1717 million in addition there were gains 
attributable to noncontrolling interests of £17 million 2011 £01 million
the results of the group are set out in detail in the ﬁnancial statements 
on pages 71 to 75 and in the accompanying notes
the company is required by the companies act 2006 to set out in this 
report a fair review of the development and performance of the group 
during the year the position of the group at the end of the year and a 
description of the principal risks and uncertainties facing the group the 
information that fulﬁls these requirements can be found within the chief 
executive’s review divisional reviews finance director’s review and in 
this directors’ report 
details of the main key performance and risk indicators used by the 
group can be seen on pages 37 to 41
the subsidiary undertakings principally affecting the proﬁts or net assets 
of the group in the year are listed in note 3 to the melrose industries 
plc uk company accounts on page 122
shareholder dividend
the directors are pleased to recommend the payment of a ﬁnal dividend 
of 50p 2011 48p adjusted to include the effects of the rights issue 
on 13 may 2013 to ordinary shareholders on the register at the close of 
business on 19 april 2013 this dividend recommendation will be put to 
shareholders at the forthcoming annual general meeting “agm” of the 
company to be held on 8 may 2013 subject to shareholder approval 
being obtained at the agm for the ﬁnal dividend this will mean a full year 
2012 dividend of 76p per share 2011 74p adjusted to include the 
effects of the rights issue
it is the intention of the board to continue to pursue a progressive 
dividend policy where appropriate the company offers a dividend 
reinvestment plan which gives shareholders the opportunity to use their 
dividend payments to purchase further melrose industries plc shares 
further details about the dividend reinvestment plan and its terms and 
conditions can be found within the investors section on the company’s 
website at wwwmelroseplcnet
directors’ appointment and powers
the directors of the company as at the date of this report together with 
their biographical details are given on pages 42 and 43 further details 
regarding the executive directors’ service agreements and the non
executive directors’ letters of appointment can be found on page 64 of 
the remuneration report 
the company’s articles of association “articles” give the directors 
power to appoint and replace directors under the terms of reference of 
the nomination committee any appointment must be recommended by 
the nomination committee for approval by the board the articles also 
require directors to retire and resubmit themselves for election at the 
ﬁrst agm following their appointment with effect from the 2012 agm 
the board determined that all directors of the company should stand for 
reelection on an annual basis in compliance with the provisions of the 
uk corporate governance code and this requirement is now contained 
in the articles 
the directors are responsible for managing the business of the 
company and exercise their powers in accordance with the articles 
directions given by special resolution and any relevant statutes speciﬁc 
powers relating to the issuing of shares and the ability of the company 
to purchase its own shares are also included within the articles and 
such authorities are submitted for approval by the shareholders at the 
agm each year the resolutions being proposed at the agm on 8 may 
2013 include resolutions to renew these authorities
directors’ interests and remuneration
information on directors’ beneﬁcial interests including those of 
connected persons within the meaning of section 252 of the 
companies act 2006 in the shares of melrose is shown in the 
remuneration report on page 65
no director had a material interest at any time during the year in any 
contract with the company or any of its subsidiary undertakings other 
than a service contract
directors’ indemnities
the directors have the beneﬁt of an indemnity from the company in 
respect of liabilities incurred as a result of their ofﬁce this indemnity is 
provided under the articles and satisﬁes the indemnity provisions of the 
companies act 2006 
the group has taken out an insurance policy in respect of those 
liabilities for which the directors may not be indemniﬁed neither the 
indemnity nor the insurance provides cover in the event that a director is 
proved to have acted dishonestly or fraudulently
directors’ responsibilities
the statement of directors’ responsibilities in relation to the 
consolidated ﬁnancial statements is set out on page 68
share capital
during the ﬁnancial year ended 31 december 2012 the following 
corporate actions took place which impacted on the number of ordinary 
shares in issue
 the creation of new ordinary shares in the capital of melrose plc 
following crystallisation of the 2009 incentive share plan in april 
2012
 a 2 for 1 rights issue that concluded in august 2012 raising 
approximately £12 billion to fund the purchase of elster and
 as part of the scheme of arrangement which became effective on  
27 november 2012 the ordinary shares in the capital of melrose plc 
were cancelled and shareholders were issued with the same number 
of new ordinary shares in melrose industries plc with a nominal 
value of 120 pence per share so that melrose plc became a direct 
subsidiary of melrose industries plc on 29 november 2012 the 
nominal value of each new ordinary share in melrose industries plc 
was reduced to 01 pence in order to create approximately 
£15 billion of distributable reserves wwwmelroseplcnet
stock code mro 47
business performance governance financials shareholder information
further details showing the movements in issued ordinary shares of melrose industries plc and melrose plc can be seen in the table below
 
number of 
ordinary
 shares of 
melrose plc 
in issue as at 
31 december
 2011
ordinary
 shares
 created as
 part of 2009
 incentive
 share plan
crystallisation
new ordinary
 shares issued
 as part of 
2 for 1 rights
 issue for
 acquisition 
of elster
scheme of 
arrangement 1 
ordinary share 
in melrose 
industries plc 
issued for every 1 
ordinary share in 
melrose plc and 
reduction in share 
capital
number of 
ordinary
 shares of
 melrose
 industries plc 
in issue as at
 31 december
 2012
ordinary shares in melrose plc with a nominal
 value of 1455 pence 390961043 31247969 844418024
ordinary shares in melrose industries plc with
 a nominal value of 01 pence 1266627036 1266627036
incentive shares
further details in relation to both the crystallisation of the 2009 incentive 
share plan and the creation of options over 2012 incentive shares 
are set out on pages 63 to 65 and 67 of the remuneration report in 
summary the 2009 incentive share plan was crystallised in april 2012 
and the 2009 incentive shares were converted into ordinary shares 
following shareholder approval at a general meeting held on 11 april 
2012 at the same time the 2012 incentive share plan was established 
and options were granted over 2012 incentive shares
further rights and obligations attaching to shares
the following summary is based on the articles of melrose industries 
plc which were adopted on 11 october 2012 and based on 
the articles of association of melrose plc at that date with the 
amendments described in the prospectus dated 12 october 2012 
published in relation to the listing of melrose industries plc’s ordinary 
shares
voting
only ordinary shares of 01 pence have voting rights attached in a 
general meeting of the company subject to the provisions of the current 
articles and to any special rights or restrictions as to voting attached to 
any other class of shares in the company of which there are currently 
none
 on a show of hands every member who is present in person or by 
proxy shall have one vote and
 on a poll every member who is present in person or by proxy shall 
have one vote for every share of which he is the holder
if any call or other sum payable by a holder of ordinary shares remains 
unpaid they shall not be entitled to vote at any general meeting or class 
meeting in respect of any shares held by them currently all issued 
ordinary shares are fully paid
deadlines for voting rights
full details of the deadlines for exercising voting rights in respect of the 
resolutions to be considered at the agm to be held on 8 may 2013 are 
set out in the notice of agm on pages 125 to 127
dividends and distributions
subject to the provisions of the companies act 2006 the company 
may by ordinary resolution declare a dividend to be paid to the 
holders of ordinary shares but no dividend shall exceed the amount 
recommended by the board the board may pay interim dividends 
and also any ﬁxed rate dividend whenever the ﬁnancial position of the 
company in the opinion of the board justiﬁes its payment all dividends 
shall be apportioned and paid pro rata according to the amounts paid 
up on the shares
the board may deduct from a dividend or other amounts payable 
to a person in respect of their shares amounts due from him to the 
company on account of a call or otherwise in relation to such shares
liquidation
under the current articles if the company is in liquidation the liquidator 
may on obtaining any sanction required by law
 divide amongst the shareholders in kind the whole or any part of the 
assets of the company or
 vest the whole or any part of the assets in trust for the beneﬁt of 
shareholders as the liquidator shall determine
transfer of shares
subject to the articles any member may transfer all or any of his shares 
in any form which the board may approve and the transfer shall be 
executed by or on behalf of the transferor subject to the articles and 
the requirements of any relevant investment exchange the board 
may in its absolute discretion refuse to register a transfer of a share 
which is not a fully paid share or on which the company has a lien the 
board may also decline to register a transfer unless the transfer is i in 
respect of only one class of shares ii in favour of not more than four 
joint transferees or renouncees iii duly stamped if required and iv 
delivered for registration to the registered ofﬁce or such other place as 
the board may decide accompanied by the certiﬁcate for the shares to 
which it relates and such other evidence as the board may reasonably 
require to prove the title of the transferor melrose industries plc
annual report 2012 48
directors’ report continued
substantial shareholdings
as at 6 march 2013 the company has been advised of the following substantial interests in the ordinary share capital of melrose industries plc 
shareholder holding 
blackrock inc 213641488 1686
threadneedle asset management ltd 88024456 694
legal  general investment management ltd 72291307 570
aviva investors 56815045 448
scottish widows investment partnership 69654645 549
schroder investment management ltd 57203034 451
artemis investment management 51544983 406
corporate governance
the corporate governance report is included as a separate report on 
pages 56 to 61
risks and uncertainties
the group operates a variety of risk management processes designed 
to take into account the identiﬁcation management and mitigation of 
business risk where both short term and long term considerations 
are monitored a review of the effectiveness of the company’s risk 
management and internal control systems is carried out on a regular 
basis and at least annually in accordance with the provisions of the 
uk corporate governance code a summary of the material strategic 
operational compliance ethical and ﬁnancial risks and uncertainties that 
could impact on the group’s performance is shown on pages 37 to 39 
internal control and risk management is also discussed further within 
the finance director’s review on pages 27 to 36 and the corporate 
governance report on pages 56 to 61 further accounting judgements 
and key sources of estimation uncertainty are included in note 3 to the 
consolidated ﬁnancial statements additionally key commercial and 
economic risks are covered in the chief executive’s review on pages  
14 to 26
significant agreements and change of control
with the exception of the group’s banking facilities the 2012 incentive 
share plan including the options over 2012 incentive shares and the 
divisional management long term incentive plans there are no other 
agreements that would have a signiﬁcant effect upon a change of 
control of melrose industries plc on 6 march 2013
as part of the process to acquire elster the group agreed a new 
£15 billion ﬁve year multicurrency committed bank facility which has 
substantially the same change of control provisions as the previous 
£600 million facility that it replaced these provisions state that in the 
event of a change of control of the company following a takeover bid 
the company and lenders under this facility are obliged to enter into 
negotiations to determine whether and if so how to continue with the 
facility there is no obligation for the lenders to continue to make the 
facility available for more than 30 days beyond any change of control 
failure to reach agreement with parties on revised terms could require 
an acquirer to put in place replacement facilities
 
in the event of a takeover of the company options over the 2012 
incentive shares would be exercised and any 2012 incentive shares 
resulting from such exercise or that have previously been issued 
would convert into ordinary shares of 01 pence or an entitlement to a 
dividend paid in cash the rate of conversion being based upon the offer 
price of the company’s ordinary shares as calculated on the date of the 
change of control of the company if part or the entire offer price is not in 
cash the remuneration committee will determine the value of the non
cash element having been advised by an investment bank of repute that 
such valuation is fair and reasonable
product and employer’s liability claims
the group seeks to assess its ongoing risks in relation to potential 
future liabilities arising from insurance claims by using external actuarial 
projections to measure material exposures historic claims experience 
data is used to analyse risks in relation to less signiﬁcant exposures 
actuarial projections and claims history experience are regularly analysed 
by management and key issues trends and statistics are also discussed 
at board level
risks within the group relate to potential future liabilities arising from 
product industrial disease including asbestos employer’s liability and 
workers’ compensation claims provisions in relation to such risks are 
recognised in the group’s balance sheet where appropriate note 30 to 
the consolidated ﬁnancial statements provides further information with 
regard to contingent product liabilities 
a number of businesses have various iso certiﬁcations which include 
iso 9001 and iso 16949 for their quality management systems this 
helps to ensure their products and processes are of a recognised quality 
reducing the risk of product claims some businesses within the group 
are also certiﬁed to international health and safety standards via iso 
18001 which helps to further ensure that risks in relation to employer’s 
liability claims are kept to a minimum
within many of the group’s businesses the design and production of 
their products also conform with international and industry speciﬁc 
accreditations for example crosby and bridon products are certiﬁed 
to speciﬁcation standards used within the petroleum petrochemical and 
natural gas industries which amongst other things involves the audit of 
processes procedures and product standards by third parties wwwmelroseplcnet
stock code mro 49
business performance governance financials shareholder information
payments to suppliers
historically the company has not utilised standard protocols in respect 
of payments to suppliers given the international nature of the group’s 
operations the company intends to maintain this approach for the 
ﬁnancial year ending 31 december 2013 it is the responsibility of 
each business to agree the exact terms and conditions of transactions 
with their suppliers including as to the settlement of payments and 
these arrangements are adhered to provided that suppliers meet their 
contractual commitments the company as a holding company did not 
have any amounts owing to trade creditors at 31 december 2012
intellectual property
the company and each of its businesses recognise the value and 
importance of its intellectual property “ip” and where appropriate will 
seek to protect and enforce its rights over ip  due to the varying types of 
ip rights held or licensed within the group each business is responsible 
for the management and enforcement of these on a decentralised basis 
through the use of external advisers and the support of the company 
employment policies
the group recognises its responsibilities for the fair treatment of 
all its employees in accordance with legislation applicable to the 
territories within which it operates due to the diverse nature of the 
group businesses are required to manage their employment matters 
on a decentralised basis therefore responsibility for the adoption of 
employment policies and practices sits at a local business unit level  
this position ensures that policies and procedures meet both site and 
local regulatory requirements taking into account the size and nature of 
the businesses
as part of this decentralised approach each business is responsible for 
setting and measuring its own kpis and as such these vary throughout 
the group however such measurements will generally include 
absenteeism punctuality headcount and employee relations issues 
any concerns or adverse trends are responded to in a timely manner 
further as a groupwide policy and so far as particular disabilities 
permit the company and each of its businesses will give employees 
disabled during their period of employment continued employment in 
the same job or if this is not practicable a suitable alternative job 
equal opportunities for appropriate training career development 
and promotion are also available to all employees within the group 
regardless of any physical disability gender religion race nationality 
sexual orientation or age
applications for employment by disabled persons are always fully 
and fairly considered by the group taking into account job speciﬁc 
requirements and applicant aptitude it is the policy of the group that in 
recruitment training career development and promotion the treatment 
of disabled persons should as far as possible be identical to that of 
other employees
the group regards employee training and advancement as an essential 
element of industrial relations disputes and days lost through strike 
action are negligible
employee involvement consultation and 
development
the group attaches great importance to good labour relations 
employee involvement and employee development the nature of the 
group’s activities places the responsibility for employment practices with 
local management in a manner appropriate to each business
a culture of clear communication and employee consultation is inherent 
in the group’s businesses employee brieﬁng sessions are held on a 
regular basis to communicate strategy key changes ﬁnancial results 
achievements and other important issues regular appraisals employee 
surveys notice boards intranet sites team meetings suggestion boxes 
and newsletters are also used to communicate with employees
extensive training is available to all staff and is actively encouraged 
to ensure a high standard of skill is maintained across the group 
crosstraining programmes are also in place at a number of the 
group’s businesses the importance of training extends beyond on
thejob training and also focuses on enhancing personal development 
apprenticeship programmes are in place at the majority of sites which 
help to assist with succession planning in locations where there is an 
ageing workforce employees are encouraged to think in an innovative 
manner across the group
human resource initiatives
during 2012 many of the group’s businesses implemented a range of 
employeerelated initiatives some of these are listed below
 within bridon several key hr improvement areas had been identiﬁed 
via an employee opinion survey which was carried out in 2011 
during 2012 focus was placed on the areas identiﬁed within this 
survey which had been conducted in partnership with the corporate 
leadership council the results varied by country and so during the 
course of 2012 a variety of different initiatives have been ongoing 
in the countries where bridon has operations for example within 
bridon america focus has been placed on internal communication 
and improving leadership skills within bridon uk the focus has also 
been on internal communication initiatives and employee recognition 
a second survey has been planned for 2013 in order to check 
progress and maintain visibility of this initiative within their worldwide 
operations
 employee ‘road shows’ have also been used within bridon during 
2012 to help set a strong culture of values which are also used as 
a foundation during recruitment performance management and 
leadership development
 bridon continues to place importance on its two year apprenticeship 
programme which is designed to develop the rope makers engineers 
and designers of the future the practice of providing educational 
support enables employees at all levels to acquire enhanced skills 
industry knowledge and recognised qualiﬁcations which the business 
will be able to beneﬁt from in years to come  melrose industries plc
annual report 2012 50
directors’ report continued
 during 2012 the brush turbogenerators business in the czech 
republic launched the ﬁrst phase of their advanced employee 
evaluation programme this is designed to identify both positive 
aspects and areas for improvement within the middle management 
structure of the business plans are being ﬁnalised to follow this 
initiative up with a talent academy in 2013 which will provide 
managers with practical knowledge tailored training programmes and 
coaching all designed to further enhance performance and drive a 
culture of continuous improvement
 towards the end of 2012 the brush turbogenerators business 
in the uk gained its engineering technical development scheme 
accreditation from the institution of mechanical engineers by 
recognising the quality of mechanical courses offered by the 
brush academy the newly accredited training scheme will allow 
both students and apprentices to become registered engineering 
technicians upon successful completion
 marelli introduced several strategic hr initiatives in 2012 designed 
to improve ﬂexibility within its business and enable quicker responses  
to market changes as part of this approach an organisational 
development project has been implemented based on a lean 
approach and this has led to a value stream analysis a new 
organisational structure is also being evolved together with additional 
staff training and employee competence mapping
 within parts of the elster businesses an initiative has been established 
to invite both new employees and those who have particular health 
concerns to attend wellness sessions and health checks 
a signiﬁcant number of employees are members of unions and some 
businesses operate works councils both of which are used for 
consultation and dissemination of information as appropriate
the executive directors have monthly meetings with divisional senior 
management and visit the sites on an ad hoc basis to communicate 
with the wider group financial results of the company for the half 
year and full year are discussed with the group’s senior management 
team group developments are communicated to the businesses as 
appropriate employee involvement in and commitment to the group’s 
proﬁtability is encouraged through appropriate bonus plans
pensions
companies within the group operate various deﬁned beneﬁt and 
deﬁned contribution pension plans around the world which it regularly 
reviews to reduce volatility where possible the long term strategy for 
the uk pension plans is to concentrate on the cash ﬂows required to 
fund the liabilities as they fall due whether that is within the timescales of 
melrose ownership or beyond the board recognise that as businesses 
are bought and sold eventually pension plan liabilities need to exit the 
group however this can be done at a time which is commercially 
sensible the table below shows the deﬁned beneﬁt plans that are 
material to the group
deﬁned beneﬁts pension plans material to the group
as at 31 december 2012
name of plan status assets £m liabilities £m
number of 
members
fki uk pension plan
closed to new members in october 2001 closed to future service 
accrual on 28 february 2011
6302 
2011 6003
7302 
2011 6797
10415 
2011 10639
mckechnie uk pension 
plan
closed to new members in 2003 closed to future service accrual in 
2005
1708 
2011 1575
1790 
2011 1545
3388
1
 
2011 3217
fki us pension plan
closed to new members in april 2003 closed to future service 
accrual in 2009
1983 
2011 1952
2284 
2011 2287
8009 
2011 8194
1
  this ﬁgure includes 276 members with beneﬁts partially insured with prudential which have now been identiﬁed this explains why the number of members has increased during the year 
erica gateley pictured above works as a metallurgist at 
bridon’s facility in doncaster uk she has recently been 
awarded with the honour of technician of the year for 2012 
by the institute of materials minerals and mining bridon 
is currently sponsoring erica to study for her engineering 
degree which she is due to complete next year
more information about bridon is available at 
wwwbridoncom
bridon wwwmelroseplcnet
stock code mro 51
business performance governance financials shareholder information
the fki uk pension plan “fki uk plan” is a uk deﬁned beneﬁt pension 
plan with fki limited as its principal employer the primary liability for 
funding rests with the participating employers which currently pay £200 
million annually into the fki uk plan increased from £185 million on 1 
december 2012 the contribution levels were last formally assessed 
as at 31 december 2008 the company’s contribution level at that 
time £185 million per annum was expected to remove the funding 
deﬁcit by 31 december 2022 a formal actuarial valuation of the fki uk 
plan which will record the funding position as at 31 december 2011 
is in its ﬁnal stages and this has recently led to the increase in annual 
contributions to £200 million the fki uk plan closed to the accrual of 
future beneﬁts for existing members on 28 february 2011 and this is 
expected to lead to the funding deﬁcit being removed earlier than would 
otherwise have been the case
the mckechnie uk pension plan “mckechnie uk plan” is a uk 
deﬁned beneﬁt pension plan the principal employer was changed 
from mckechnie limited to mckechnie employee services limited 
following the sale of the mpc business in june 2012 the primary 
liability for funding now rests with the principal employer the company 
and trustees reviewed the funding of the mckechnie uk plan as part of 
the actuarial valuation as at 31 december 2008 and it was agreed that 
the participating employers would contribute £46 million annually into 
the mckechnie uk plan melrose plc guaranteed the funding of the 
mckechnie uk plan on an ongoing basis a formal actuarial valuation of 
the mckechnie uk plan is currently in its latter stages of being completed 
which will record the funding position as at 31 december 2011
the fki us pension plan is a deﬁned beneﬁt pension plan covering 
several of fki’s us businesses the primary liability for funding the fki 
us pension plan rests with the participating employers the company 
and trustees of the plan reviewed the funding requirements of the fki 
us pension plan based on its 1 january 2012 actuarial valuation 
and no contributions will need to be made during 2013 unlike the uk 
pension plans deferred member liabilities do not increase by inﬂation 
each year
elster provides retirement beneﬁts for most of its employees either 
directly or by contributions to its pension funds managed by third 
parties most elster plans are unfunded and are not of a signiﬁcant size 
or material nature with the largest being an unfunded german deﬁned 
beneﬁt plan further reference is made to the pension plans acquired 
with the elster business on page 33 of the finance director’s review
health and safety
the directors of the company are committed to minimising the health 
and safety risks that each of the group’s employees are exposed to 
by promoting the effective use and management of business speciﬁc 
policies and procedures
the group has a policy to ensure that the directors are made aware 
of any serious health and safety incidents wherever they occur in the 
world without delay to ensure that suitable investigations and corrective 
action can be organised current events and issues relating to health 
and safety matters are also discussed within the group at every 
quarterly board meeting of the company
each of the group’s businesses use deﬁned health and safety kpis 
which are speciﬁc to the exact nature of their business and allow for 
focus analysis and improvement at local business levels often on a 
location by location basis several of the group’s businesses already 
hold iso 18001 certiﬁcation the internationally recognised assessment 
standard for occupational health and safety management systems this 
certiﬁcation includes several of the major manufacturing locations within 
the group with other sites also currently going through the accreditation 
process 
to supplement the business speciﬁc kpis groupwide health and safety 
kpis are in use this allows the directors to review group statistics on 
a regular and consistent basis it also ensures they have greater visibility 
of the key group health and safety trends in order to help them to make 
decisions on where future focus should be placed
the group health and safety kpis that are actively being used for the 
businesses of lifting energy and other industrial divisions are major 
accident frequency rate deﬁned as an accident that resulted in an 
employee having more than three days off work due to a workrelated 
injury per 200000 working hours accident frequency rate deﬁned 
as an accident that resulted in an employee having at least one day 
off work due to a workrelated injury per 200000 working hours and 
accident severity rate which calculates the average number of lost 
working days per accident such statistics are collected quarterly on a 
sitebysite basis aggregating the three aforementioned divisions two 
of these kpis had improved during 2012 when compared to 2011 with 
the third kpi remaining constant elster uses different health and safety 
kpis during 2013 the elster businesses will start to report under the 
group’s existing health and safety kpi structure
each business is responsible for setting its own detailed arrangements 
concerning health and safety policies and procedures in accordance 
with local health and safety legislation as a general rule businesses 
strive to achieve best practice in terms of what is suitable and practical 
for the size and nature of their operations  melrose industries plc
annual report 2012 52
directors’ report continued
divisional managers within each business unit have responsibilities 
to ensure that health and safety remains a key focus and to ensure 
that active procedures and monitoring systems are in place to provide 
substance to written policies detailed health and safety plans are set 
by businesses each year to determine annual targets and improvement 
initiatives
all businesses have health and safety committees “hs committees” 
such committees meet on a regular basis and are made up of 
representatives from both management and shop ﬂoor level personnel 
each of the hs committees has wideranging responsibilities which 
vary from business to business and include the review of reported 
incidents and the monitoring of incident trends these hs committees 
are also responsible for ensuring that corrective measures are 
implemented when accidents occur and that all incidents whether or 
not they are deemed reportable under local legislation are given due 
attention
one of the key responsibilities for these hs committees is to carry 
out regular tours of the premises in which they work in order to 
ensure compliance with local policies and procedures these tours 
also identify potential hazards for which countermeasures can be 
identiﬁed to prevent accidents from happening each hs committee 
recommendation is followed up at the next committee meeting to 
ensure that issues are resolved additionally operations are audited 
by the hs committees at least annually and reports of performance 
and recommended improvements are prepared and circulated to the 
divisional senior management teams divisional managers are provided 
with detailed health and safety reports on a frequent basis to ensure 
that such matters are given high visibility and that improvements are 
authorised and implemented quickly
health and safety initiatives
during 2012 many of the group’s businesses implemented a range of 
initiatives aimed at improving health and safety performance as part of 
the group’s goal of achieving zero preventable accidents some of these 
are listed below
 within several of the usbased businesses there has been an initiative 
to prevent back injuries during the course of 2012 this includes the 
introduction of stretching activities in both the preshift period and 
during breaks together with the provision of suitable lifting equipment 
and ﬂoor mats in certain production areas designed to ease back 
strain training sessions on correct lifting techniques have also been 
provided to certain employees
 at bridon health and safety bulletins are now issued for all signiﬁcant 
events to prevent reoccurrences in other parts of the business 
monthly global management health and safety reviews also enable 
bridon’s worldwide facilities to jointly review performance and drive 
corrective learning this also allows for best practice ideas to spread 
and this contributed to a signiﬁcant reduction in worldwide lost time 
injuries during 2012
 marelli continued with the rollout of their risk perception training 
programme in 2012 this has been designed to develop the 
capabilities of all employees to identify dangers evaluate risks and 
encourage safe working processes during all stages of the production 
process
 brush have focused their attention on improving the way in 
which data is stored around the use of chemicals onsite via the 
introduction of ichemistry software this allows an electronic log to be 
created for all chemicals onsite suitable risk assessments can then 
be carried out which are accessible by all shop ﬂoor employees to 
read and print out the new system also helps to ensure compliance 
with coshh legislation as well as helping to meet iso 9001 14001 
and 18001 standards
 during 2013 brush are making plans to introduce a new behavioral 
safety programme designed to focus on promoting a positive health 
and safety culture and achieve a continued reduction in workplace 
accidents and occupational health illnesses
the environment
the company’s main impact on the environment is through its energy 
use and associated carbon dioxide co 2 emissions and waste the 
directors fully understand the importance of the group’s environmental 
responsibilities each of the company’s businesses are committed to 
ensuring that their operations have a minimum adverse effect on the 
environment and that ongoing reductions in both energy usage and co 2 
emissions are achieved wherever practicable
many of the group’s businesses are developing environmental policies 
and procedures in line with best practice guidelines via ongoing 
improvements to local processes to reduce the impact of their activities 
a number of the businesses have achieved or are currently in the 
process of achieving the high standards required to obtain iso 14001 
environmental management systems certiﬁcation 
although there are no standardised environmental kpis currently 
used within the group each business understands the importance 
of monitoring the impact of its operations on the environment a 
range of kpis are used as environmental measures including energy 
consumption co 2 emissions water consumption water contamination 
waste disposal solid and liquid waste generation recycling and volatile 
organic compound emissions environmental performance is measured 
via the use of kpis in order that each of the businesses can plan for 
ongoing reductions
the company is currently in the process of evaluating the potential 
implications of the greenhouse gas emissions directors’ reports 
regulations 2013 which at the time of writing this report have not been 
ﬁnalised the company will be working to develop appropriate internal 
group systems to ensure that over a period of time group statistics can 
be collected and reported on greenhouse gas usage and future target 
reductions 
during the year the company continued to comply with the ongoing 
annual reporting requirements of the uk’s carbon reduction 
commitment energy efﬁciency scheme each of the group’s businesses 
will also continue to actively look for ways to further reduce energy 
consumption wherever possible wwwmelroseplcnet
stock code mro 53
business performance governance financials shareholder information
environmental initiatives
in terms of environmental initiatives that have either been completed in 
2012 or are ongoing for 2013 there are a variety of examples from the 
group’s businesses and some of these include
 various initiatives have taken place at crosby following a review of all 
its facilities to identify energy consumption reduction opportunities 
these include the installation of a new air handlingcompressor 
system at the brampton location in canada which is substantially 
more efﬁcient than the previous equipment at the tulsa facility in 
the us ﬂow and heat measurement systems were installed during 
the year to reduce the amount of gas required for heating sheaves 
used within the forging process work started in 2012 at the texas 
operation to upgrade the gas furnace heating systems to induction 
heaters which are estimated to be considerably more efﬁcient and  
will signiﬁcantly reduce the local carbon footprint at this site
 truth is in the process of introducing a recycled water programme at 
its us facility whereby water used for cooling within its diecasting 
process is piped into holding tanks this recycled water is then used 
as part of the ‘ecoat’ painting system and barrel plating process 
this is helping to signiﬁcantly reduce water consumption within this 
process
 marelli has reduced the amount of unrecyclable waste created from 
its production processes at its italian facility in arzignano this has 
been achieved via an improved waste separation process other 
improvements at this facility include the upgrade of lighting which has 
not only helped to reduce electricity consumption but also improved 
the overall level of lighting for employees working in these areas
 within each of the three elster businesses a focus has been placed 
on the development of smart metering products this provides 
both domestic and commercial energy consumers with the tools to 
understand and reduce their energy usage going forward elster has 
also played a vital role in delivering energy industry improvements by 
supporting the uk’s department of energy and climate change to 
develop smart meter standards elster was also a founding member 
of the smart speciﬁcation working group which involves key 
industry participants working together to create interchangeable and 
interoperable smart meter networks
 elster’s volumetric polymer water meters have a carbon footprint 
of approximately onethird of their old brass counterparts and are 
purchased by anglian water for all of their new build replacement 
and refurbishment projects in march 2012 elster announced that 
it had shipped its one millionth polymer bodied water meter for the 
european utility market to anglian water working closely with elster 
has enabled anglian water to lower its carbon footprint throughout 
the supply chain 
 at the elster facility in stafford uk which serves both the electricity 
and gas divisions they decided to introduce the cemars scheme 
for carbon measuring and reduction towards the end of last year 
cemars is the world’s ﬁrst internationally accredited greenhouse gas 
certiﬁcation scheme to iso 14065 they are currently working with an 
external consultant to acquire accreditation which will include a ﬁve 
year carbon reduction plan
 
environmental liabilities
the directors seek to ensure that all environmental risks are closely 
managed by external environmental specialists in conjunction with 
internal management the environmental laws of certain jurisdictions 
impose obligations to remediate contaminated sites in relation to sites 
both currently and previously owned by the group
the company secretary is made aware of all major environmental 
liabilities that may occur within any of the group’s businesses the 
board are also regularly updated on such matters all costs incurred by 
the group with regard to environmental liabilities are monitored  
with provisions being made as appropriate
corporate social responsibility
due to the heavy industrial nature of some of the group’s activities 
the directors recognise that its operations will potentially impact on 
a wide variety of stakeholders in terms of social environmental and 
ethical matters including employees customers suppliers and local 
communities
many of the group’s businesses have social and ethical policies with 
responsibility for communication and implementation resting with 
relevant senior divisional managers such policies apply and extend to 
local laws and standards and as a minimum include equal opportunities 
and antidiscrimination policies
the majority of the businesses provided community support during 
the year with efforts ranging from charitable donations to voluntary 
assistance and fund raising
the company is committed to continuing to invest in its businesses 
during its ownership thus enhancing their reputation within the markets 
and communities in which they operate
charitable and political donations
the group paid £59000 2011 £50000 to charities during the year 
there were no political donations made during the year 2011 £nil melrose industries plc
annual report 2012 54
directors’ report continued
auditor
so far as each director is aware there is no relevant audit information of 
which the auditor is unaware and the directors have taken all the steps 
which they ought to have taken as directors to make themselves aware 
of any relevant audit information and to establish that the company’s 
auditor is aware of that information this conﬁrmation is given and 
should be interpreted in accordance with the provisions of section 418 
of the companies act 2006
deloitte llp have expressed their willingness to continue in ofﬁce as 
auditor accordingly resolutions will be proposed at the agm of the 
company to reappoint deloitte llp as auditor of the company and to 
authorise the directors to determine their remuneration
going concern
the group’s business activities together with the factors likely to 
affect its future development performance and position are set out in 
the divisional reviews on pages 16 to 26 the ﬁnancial position of the 
group its cash ﬂows liquidity position borrowing facilities and various 
other ﬁnancial and commercial risks are described in the finance 
director’s review on pages 27 to 36 in addition notes 19 and 24 to 
the consolidated ﬁnancial statements include the group’s policies 
and processes for managing its capital exposures to liquidity risk and 
ﬁnancial risk management objectives as well as details of its ﬁnancial 
instruments and hedging strategies credit risk exposure is discussed in 
notes 16 and 24 to the consolidated ﬁnancial statements
the group prepares regular business forecasts and monitors projected 
facility headroom and compliance with its banking covenants which 
are reviewed by the board forecasts are then adjusted for possible 
sensitivities which address the principal risks to which the group is 
exposed such as ﬂuctuations in exchange rates and best estimates of 
the possible impact of the macroeconomic environment on the group’s 
underlying trading results consideration is then given to the potential 
actions available to management to mitigate the impact of one or more 
of the sensitivities
taking all this into consideration the group should be able to operate 
within the level of its current banking facilities and remain covenant 
compliant for the foreseeable future being a period of at least 
12 months from the date of approval of these ﬁnancial statements
after making appropriate enquiries the directors have a reasonable 
expectation that the company and the group have adequate resources 
to continue in operational existence for the foreseeable future 
accordingly they continue to adopt the going concern basis in preparing 
the annual report and ﬁnancial statements
agm
the agm of the company will be held at barbersurgeons’ hall 
monkwell square wood street london ec2y 5bl at 1100 am  
on 8 may 2013
in accordance with the uk corporate governance code and the 
articles all directors will offer themselves for reelection at this year’s 
agm as per resolutions 4 to 11 of the notice of meeting shown on 
pages 125 to 127 
resolutions dealing with the following special business will be proposed 
at the agm
resolution 14 will seek shareholder approval to renew the directors’ 
authority to allot shares or grant rights to subscribe for or convert any 
securities into shares pursuant to section 551 of the companies act 
2006 the “section 551 authority” the authority contained in paragraph 
a of the resolution will be limited to an aggregate nominal value 
representing £422209 being approximately onethird of the company’s 
issued ordinary share capital as at 6 march 2013
in line with guidance issued by the association of british insurers 
paragraph b of this resolution would give the directors authority to 
allot shares or grant rights to subscribe for or convert any securities 
into shares in connection with a rights issue up to an aggregate 
nominal value of £844418 representing approximately twothirds of 
the company’s issued ordinary share capital as at 6 march 2013 as 
reduced by the nominal amount of any shares issued under paragraph 
a of this resolution
the company does not hold any treasury shares
resolution 15 will seek to renew the authority conferred on the board 
to allot equity securities of the company or sell any shares which the 
company may elect to hold in treasury for cash pursuant to section 
570 of the companies act 2006 the “section 570 authority” without 
ﬁrst offering them to existing shareholders in proportion to their existing 
shareholdings
the authority is limited to allotments or sales in connection with pre
emptive offers subject to any arrangements that the directors consider 
appropriate to deal with fractions and overseas requirements and 
otherwise up to a maximum nominal value of £63331 representing 
approximately 5 per cent of the company’s issued ordinary share 
capital as at 6 march 2013 which is in accordance with the relevant 
guidelines for the company  wwwmelroseplcnet
stock code mro 55
business performance governance financials shareholder information
if approved the section 551 authority and the section 570 authority will 
expire at the conclusion of next year’s agm or if earlier at the close of 
business on 30 june 2014 the directors have no present intention of 
exercising the section 551 authority or the section 570 authority
resolution 16 will seek to renew the authority conferred on the 
company to purchase its own shares pursuant to sections 693 and 701 
of the companies act 2006 this authority is limited to an aggregate 
maximum number of 126662703 ordinary shares representing 10 
per cent of the company’s issued ordinary share capital as at 6 march 
2013 this power will expire at the conclusion of next year’s agm or if 
earlier at the close of business on 30 june 2014 the maximum price 
which may be paid for an ordinary share will be an amount which is not 
more than 5 per cent above the average of the middle market quotation 
for an ordinary share as derived from the london stock exchange plc’s 
daily ofﬁcial list for the ﬁve business days immediately preceding the 
day on which the ordinary share is purchased the directors have no 
present intention of exercising all or any of the powers conferred by this 
resolution and will only exercise their authority if it is in the interests of 
shareholders generally
resolution 17 will seek shareholder approval to allow the company 
to continue to call general meetings other than agms on 14 clear 
days’ notice in accordance with the companies shareholders’ rights 
regulations 2009 the notice period required for general meetings of 
the company is 21 days unless shareholders approve a shorter notice 
period subject to a minimum period of 14 clear days agms will 
continue to be held on at least 21 clear days’ notice 
the approval will be effective until the company’s next agm when it 
is intended that a similar resolution will be proposed in accordance 
with the companies act 2006 the company must make a means of 
electronic voting available to all shareholders for that meeting in order to 
be able to call a general meeting on less than 21 clear days’ notice
recommendations
the board believes that each of the resolutions to be proposed at the 
agm is in the best interests of the company and its  shareholders as a 
whole accordingly the directors unanimously recommend that ordinary 
shareholders vote in favour of all of the resolutions proposed as they 
intend to do in respect of their own beneﬁcial holdings
disclosures in the directors’ report
the corporate governance report divisional reviews and finance 
director’s review form part of the directors’ report
approved by the board of directors and signed on its behalf by
joff crawford
company secretary
6 march 2013 melrose industries plc
annual report 2012 56
corporate governance report
statement of compliance
the board of directors remains committed to maintaining the high 
standards of corporate governance required to ensure the company 
can continue to deliver its long term strategic goals for shareholders as 
part of this approach the board supports the principles of the 2010 uk 
corporate governance code the “uk code” as it applied to the year 
ended 31 december 2012
the board is accountable to the company’s shareholders for good 
governance throughout the year ended 31 december 2012 the 
company complied with the provisions of the uk code with the 
exception of a speciﬁc element of schedule a which recommends that 
grants under executive share options and long term incentive plans 
should normally be phased rather than awarded in one block under 
the 2012 incentive share plan details of which are provided on pages 
63 and 64 of the remuneration report entitlements to the executive 
directors were awarded in one block rather than phased the 2012 
incentive share plan was recommended as being in the best interests 
of shareholders as a whole by the board of directors and was approved 
by shareholders in a general meeting held on 11 april 2012 with regard 
to all other aspects of executive directors’ remuneration the company’s 
policies fully comply with the provisions of schedule a of the uk code
the statements below describe how the company has applied the 
principles identiﬁed in the uk code to the governance arrangements 
that have been adopted
the board
members christopher miller executive chairman
 david roper executive vicechairman from 9 may 
2012 previously chief executive
 simon peckham chief executive from 9 may 2012 
previously chief operating ofﬁcer
 geoffrey martin group finance director
 miles templeman senior nonexecutive director
 perry crosthwaite nonexecutive director
 justin dowley nonexecutive director
 john grant nonexecutive director
all of the above directors were appointed to the board of melrose 
industries plc with effect from 8 october 2012 and all of the above 
directors save for simon peckham and geoffrey martin resigned from 
the board of melrose plc with effect from 27 november 2012
the main responsibilities
 effectively manage and control the company via a formal schedule of 
matters reserved for its decision
 determine and review company strategy and policy
 consider acquisitions disposals and asset requests for major capital 
expenditure
 review trading performance
 ensure that adequate funding and personnel are in place
 maintain sound internal control systems and
 report to shareholders and give consideration to all other signiﬁcant 
ﬁnancial matters
board responsibilities are undertaken in conjunction with senior 
management who in turn are responsible for the daytoday conduct 
of the group’s operations and for reporting to the board on items of 
signiﬁcance and progress against objectives the board meets regularly 
during the year as well as on an ad hoc basis as required by time critical 
business needs there were four scheduled board meetings held during 
the year and the attendance of each of the directors is shown on page 
60 several board meetings were also held during the year in relation 
to corporate matters such as the crystallisation of the 2009 incentive 
shares and creation of the 2012 incentive share plan the acquisition of 
elster group se and the scheme of arrangement 
board balance independence and performance
the board believes that the directors possess diverse business experience 
in areas complementary to the activities of the company biographies of 
the directors are shown on pages 42 and 43 these biographies identify 
any other appointments held by the directors the only executive director 
to have held a nonexecutive director appointment elsewhere during the 
ﬁnancial year ended 31 december 2012 is christopher miller who was a 
nonexecutive director of tmo renewables limited mr miller resigned 
from this position on 31 august 2012 and he was allowed to retain the 
remuneration he received from that appointment
in accordance with the provisions of the uk code consideration has 
been given to the independence of all the nonexecutive directors the 
board considers all the nonexecutive directors to be independent 
miles t empleman was appointed as a nonexecutive director of melrose 
in october 2003 even though he has now served as a nonexecutive 
director for more than nine years the board is of the opinion that due 
to his invaluable experience in ﬁnancial and other corporate matters mr 
t empleman continues to maintain both his effectiveness and independence 
the board will continue to monitor this position but feel at the present time 
mr t empleman continues to make an important contribution in his position 
as the senior independent nonexecutive director
the nonexecutive directors are not entitled to any bonus or shares 
under the 2012 incentive share plan  
performance of the board and each committee is evaluated annually 
in accordance with the uk code  as part of the performance appraisal 
process both the executive and nonexecutive directors are required to 
complete performance questionnaires on an annual basis in relation to 
the board its committees and their fellow directors all responses are 
reviewed and collated by the company secretary before further action 
is taken as necessary this process also helps to determine if any of the 
directors have any speciﬁc training requirements
the chairman has held meetings with the directors including the senior 
independent nonexecutive director miles templeman to discuss the 
performance of individual executive directors and the board as a whole 
it was considered that the individual directors and the board as a whole 
are operating effectively the nonexecutive directors led by miles 
templeman the senior nonexecutive director also met during the year 
to discuss the performance of the chairman and as part of this process 
also took account of the views of the executive directors
the board is aware that within the provisions of the uk code there is a 
requirement to carry out externally facilitated board evaluations at least 
every three years and these will be carried out in 2013 
the nomination committee currently takes into account a variety of factors 
before recommending any new appointments to the board including 
relevant skills to perform the role experience knowledge ethnicity and 
gender the most important priority of the nomination committee has been 
and will continue to be ensuring that the best candidate is selected to join 
the board and this approach will remain in place going forward wwwmelroseplcnet
stock code mro 57
financials shareholder information business performance governance
1
 david roper became executive vicechairman with effect from 9 may 2012 prior to this he held the position of chief executive
2
 simon peckham became chief executive with effect from 9 may 2012 prior to this he held the position of chief operating ofﬁcer
3
 john grant became chairman of the audit committee on 6 march 2012 prior to this the chairman was miles templeman
the board
christopher miller – executive chairman
david roper
1
 – executive vicechairman
simon peckham
2
 – chief executive
geoffrey martin – group finance director
miles templeman – senior nonexecutive director
perry crosthwaite – nonexecutive director
justin dowley – nonexecutive director
john grant – nonexecutive director
audit committee
john grant
3
 – chairman
perry crosthwaite
justin dowley
miles templeman
remuneration committee
perry crosthwaite – chairman
justin dowley
john grant
miles templeman
nomination committee
miles templeman – chairman
perry crosthwaite
justin dowley
john grant
christopher miller
new directors joining the board receive a full formal and tailored 
induction shortly after their appointment directors are advised that they 
have access to the advice and services of the company secretary who 
is responsible for ensuring that board procedures are followed and that 
applicable rules and regulations are complied with the board may seek 
independent legal and ﬁnancial advice in the furtherance of its duties at 
the company’s expense
a pack of brieﬁng papers and an agenda are provided to each director 
in advance of each scheduled board or standing committee meeting 
the directors are able to seek further clariﬁcation and information 
on any matter from any other director or employee of the group 
whenever necessary decisions are taken by the board in conjunction 
with the recommendations of its committees and advice from external 
consultants advisers and senior management
director terms and conditions
the terms and conditions of the executive directors’ service contracts 
and the nonexecutive directors’ appointments are available for 
inspection at the company’s registered ofﬁce the nonexecutive 
directors’ appointment letters are also available on the company’s 
website wwwmelroseplcnet executive directors’ service contracts 
and nonexecutive directors’ appointment letters will also be available to 
view immediately prior to and during the company’s agm to be held on 
8 may 2013
the service agreements of all executive directors were novated from 
melrose plc to melrose industries plc in november 2012 as part of 
the scheme of arrangement to insert a new holding company into the 
group structure all of the nonexecutive directors were also issued 
with letters of appointment in relation to their directorships of melrose 
industries plc as part of the scheme of arrangement
annual reelection of directors
in accordance with the provisions of the uk code all of the directors 
stood for reelection at the 2012 agm the articles adopted in october 
2012 require the directors to stand for annual reelection ensuring 
continued compliance with the uk code as such all directors will offer 
themselves for reelection at the 2013 agm to be held on 8 may 2013 
the board and nomination committee have carefully considered the 
time commitments required and the contribution made by each director 
both the nomination committee and the board are of the belief that the 
performance of each executive and nonexecutive director continues 
to be effective and that each director demonstrates commitment to his 
role
chairman vicechairman and chief executive
on 9 may 2012 david roper was appointed as executive vice
chairman of melrose simon peckham was appointed as chief 
executive on the same date christopher miller remains in his position  
as executive chairman
the roles of the chairman and the vicechairman are and will remain 
separate to that of the chief executive of the company in accordance 
with best practice and board policy
the chairman with the assistance of the vicechairman are together 
responsible for leadership of the board the chairman sets the board 
agenda and ensures that adequate time is given to the discussion of 
issues particularly those of a strategic nature responsibility for ensuring 
effective communications with shareholders rests with the chairman 
vicechairman and the two other executive directors the chief 
executive is responsible for strategic direction and decisions involving 
the daytoday management of the company  melrose industries plc
annual report 2012 58
corporate governance report continued
committees of the board
in accordance with the provisions of the uk code the board has 
three standing committees the audit remuneration and nomination 
committees each of these includes the four independent nonexecutive 
directors the duties of the committees are set out in formal terms of 
reference these are available from the company secretary and on the 
company’s website wwwmelroseplcnet the company secretary acts 
as secretary to each of the committees
audit committee
members  john grant chairman from 6 march 2012
perry crosthwaite
justin dowley
miles templeman chairman to 6 march 2012
main responsibilities
 review and monitor the integrity of the ﬁnancial statements of the 
group including its interim accounts the annual report interim 
management and preliminary statements and any other formal 
announcements relating to the ﬁnancial performance of the group
 keep under review the effectiveness of the group’s ﬁnancial reporting 
internal audit and controls risk management systems and compliance 
controls
 focus and challenge the consistency of accounting policies 
methods used to account for signiﬁcant or unusual transactions and 
compliance with accounting standards
 review the group’s arrangements for its employees to raise concerns 
in conﬁdence about possible wrongdoing in ﬁnancial reporting in 
accordance with the company’s whistleblowing policy and
 develop implement and monitor the group’s policy on external audit 
and for overseeing the objectivity and effectiveness of the auditor
the following actions have been taken by the audit committee during 
the year ending 31 december 2012 to discharge its duties
 review of the annual report and ﬁnancial statements the halfyearly 
ﬁnancial report and the interim management statements issued in may 
and november 2012 as part of this review the committee received 
a report from the external auditor on their audit of the annual report 
and the ﬁnancial statements and review of the halfyearly report
 considered the processes in place to generate forecasts of cash 
ﬂows and accounting valuation information including the choice and 
consistent use of assumptions
 considered the output from groupwide processes used to identify 
evaluate and mitigate risk
 reviewed the effectiveness of the group’s internal controls and 
disclosures made in the annual report and ﬁnancial statements on 
this matter and
 reviewed and agreed the scope of the audit work to be undertaken by 
the auditor
each member of the audit committee brings recent relevant ﬁnancial 
experience from senior executive and nonexecutive positions as 
described in their biographies on pages 42 and 43
the audit committee invites the group finance director the head 
of financial reporting and senior representatives of the external and 
internal auditors to attend meetings as appropriate to the business 
being considered the audit committee has the right to invite any other 
directors andor employees to attend meetings where this is considered 
appropriate in addition the audit committee meets at least once per 
year with both the external and internal auditors without management 
present
the audit committee is expected to meet not less than three times 
a year and the audit committee met three times during 2012 the 
attendance of its members along with the group finance director is 
shown in the table on page 60
group auditor
the group’s external auditor is recommended for reappointment by the 
audit committee which also assesses the appropriateness of the scope 
of audit work performed and provides recommendations in respect of 
their remuneration and terms of engagement the audit committee 
receives regular reports from the group’s external auditor
the audit committee has a policy on the engagement of the external 
auditor for the supply of nonaudit services during 2012 the audit 
committee requested a detailed analysis to be carried out of the non
audit services performed for the group over recent years by deloitte 
llp  to include an appropriate benchmarking exercise results of the 
analysis were presented to the audit committee who concluded that 
they were satisﬁed with the continued independence of the group’s 
external auditor they also concluded that other external advisers were 
being retained for certain services previously undertaken by deloitte llp 
but noted that deloitte llp would continue to be a key provider of non
audit services to the group where best placed to do so
in accordance with best practice frc guidelines the company policy 
in relation to nonaudit services is kept under regular review the policy 
outlines which nonaudit services are preapproved which services 
require the prior approval of the audit committee and which services the 
auditor is excluded from providing
during 2012 the main nonaudit services provided by deloitte llp were 
in relation to taxation compliance tax planning corporate pensions 
advice and corporate ﬁnance which included due diligence and 
reporting accountants work in respect of the acquisition of elster and 
reporting accountants work for the new holding company of the group 
further information regarding nonaudit fees can be found in note 7 to 
the consolidated ﬁnancial statements
the audit committee carries out regular reviews to ensure that auditor 
objectivity and independence is maintained at all times a different senior 
partner carries out the taxation audit of the company compared to 
those working on the nonaudit taxation services with regard to due 
diligence services a separate team which was independent from the 
audit team was used within deloitte llp to carry out this work other 
corporate ﬁnance services were reviewed by an independent transaction 
services specialist partner within the audit ﬁrm no fees were paid to 
deloitte llp on a contingent basis based on these strict procedures 
the audit committee remains conﬁdent that auditor objectivity and 
independence has been maintained but accepts that nonaudit work 
should be controlled to ensure that it does not compromise the auditor’s 
position wwwmelroseplcnet
stock code mro 59
financials shareholder information business performance governance
deloitte llp was appointed in 2003 at each year end deloitte llp 
submits a letter setting out how it believes its independence and 
objectivity have been maintained they are also required to rotate the 
audit partner responsible for the group and subsidiary audits every ﬁve 
years the group’s audit signing partner changed as part of that rotation 
process in 2010 there are no contractual obligations that restrict the 
group’s capacity to recommend a particular ﬁrm for appointment as 
auditor
following the acquisition of elster in august 2012 deloitte llp were 
appointed as auditor of elster group se and the vast majority of 
its trading entities for the year ended 31 december 2012 deloitte 
llp replaced kpmg as group auditor and as auditors of key elster 
subsidiaries for the year ended 31 december 2012 kpmg remained 
as local statutory auditors with regard to the accounts of the german 
statutory entities and reported to deloitte llp for the purposes of the 
group audit
internal audit programme
due to the size and complexity of the group it is appropriate for an 
internal audit programme to be used within the business bm howarth 
an external ﬁrm provides internal audit services to the group a rotation 
programme is in place such that every business unit will have an 
internal audit at least once every three years with the largest sites being 
reviewed at least once every two years the rotation programme allows 
divisional management’s actions and responses to be followed up on a 
timely basis
following the acquisition of elster during 2012 bm howarth have visited 
the majority of elster sites to undertake fair value reviews and as a result 
have been able to risk assess the elster businesses and bring them into 
the internal audit rotation programme from 2013 onwards
the internal auditor’s remit includes assessment of the effectiveness 
of internal control systems compliance with the group’s policies and 
procedures manual and a review of the businesses’ balance sheets  
a report of key ﬁndings and recommendations is presented to the  
group finance director head of financial reporting and group 
operations controller followed by a meeting to discuss these key 
ﬁndings and resulting in action points
bm howarth present their key ﬁndings to the audit committee twice 
during the year a review of the internal audit process and scope of 
work covered by the internal auditor is the responsibility of the audit 
committee to ensure their objectives level of authority and resources 
are appropriate for the nature of the businesses under review a report of 
signiﬁcant ﬁndings is presented by the internal auditor to the committee 
at each meeting and implementation of recommendations by the board 
are followed up at the subsequent committee meeting
remuneration committee
members     perry crosthwaite chairman
justin dowley
john grant
miles templeman
main responsibilities
 annually review remuneration trends across the group and obtain 
reliable and uptodate information about the remuneration of 
directors and senior employees in other companies
 consider and make recommendations to the board on the framework 
for the remuneration of the company’s executive directors the 
company secretary and other senior employees
 ensure the executive directors and senior employees are provided 
with appropriate annual incentives to encourage enhanced 
performance and that they are rewarded for their individual 
contributions to the success of the company and
 approve the structure of and determine targets for any long term 
incentive plans operated by the company
in developing its recommendations the committee has given due 
consideration to schedule 8 of part 15 of the companies act 2006
the remuneration committee is expected to meet not less than twice a 
year and during 2012 the remuneration committee met four times 
the attendance of its members is shown in the table on page 60 the 
report to shareholders on how directors are remunerated together 
with details of individual directors’ remuneration is shown in the 
remuneration report on pages 62 to 67
nomination committee
members miles templeman chairman
 perry crosthwaite
justin dowley
john grant
christopher miller
main responsibilities
 keep the size structure and composition of the board under regular 
review and recommend to the board any adjustments as may be 
necessary from time to time
 give full consideration to succession planning to ensure an optimum 
balance of executive and nonexecutive directors in terms of skills 
experience and diversity
 keep under review the leadership needs of the business and
 keep up to date and fully informed about strategic issues and 
commercial changes affecting the company and the markets in which 
it operates
the nomination committee is expected to meet not less than twice 
a year and during 2012 the nomination committee met twice the 
attendance of its members is shown in the table on page 60
the nomination committee uses external search consultants as 
appropriate melrose industries plc
annual report 2012 60
corporate governance report continued
attendance at meetings
the table below shows the attendance of each of the directors at the scheduled and signiﬁcant meetings of the board and its standing committees 
held during the year the quorum necessary for the transaction of business by the board and each of its standing committees is two brieﬁng 
papers and meeting agendas are provided to each director in advance of each meeting decisions are taken by the board in conjunction with the 
recommendations of its committees and advice from external advisers and senior management as appropriate the representations of any director 
who is unable to attend a meeting of the board or a standing committee are duly considered by those directors in attendance
board
3
audit
3
remuneration
3
nomination
3
number of meetings
1
 4342
christopher miller 4 2
david roper 4
simon peckham 4 1
4

geoffrey martin 4  3
2

miles templeman 3231
perry crosthwaite 3231
john grant 4342
justin dowley 433 2
1
 in addition adhoc meetings are held from timetotime which are attended by a quorum of directors and are convened to deal with speciﬁc items of business
2
 geoffrey martin attends by invitation
3
  all meetings relate to the board and committees of melrose plc before the scheme of arrangement became effective on 27 november 2012 with the exception of one meeting 
for each of the board and committees of melrose industries plc that were held in december 2012
4
 simon peckham attended by invitation
internal control and risk management
objectives and policy
the objectives of the directors and senior management are to safeguard 
and increase the value of the business and assets of the group 
achievement of their objectives requires the development of policies and 
appropriate internal control frameworks to ensure the group’s resources 
are managed properly and any key risks are identiﬁed and mitigated 
where possible
the board is ultimately responsible for the group’s overall system of 
internal control and for reviewing its effectiveness while the role of 
management is to implement the policies set by the board in respect 
of risk management and controls the directors recognise that the 
systems and processes established by the board are designed to 
manage rather than eliminate the risk of failure to achieve business 
objectives and cannot provide absolute assurance against material 
ﬁnancial misstatement or loss
the board is committed to satisfying the internal control guidance for 
directors set out in the revised version of the turnbull guidance on 
internal control in accordance with this guidance there is an ongoing 
process regularly reviewed by the directors for identifying evaluating 
managing and mitigating where possible the signiﬁcant risks faced by 
the group this process for reviewing the group’s internal controls is 
consistent with prior years and has been in place throughout the 2012 
ﬁnancial year and up to the date of approval of this annual report
managing and controlling risk
the group has policies which address a number of key business 
risks including strategic operational compliance ethical and ﬁnancial 
risks a summary of some of the strategic and operational risks and 
uncertainties that could impact on the company’s performance is set 
out on pages 37 to 39
the group’s ﬁnancial risk management objectives and policies are also 
described in the finance director’s review on pages 27 to 36 further 
information can also be found in the chief executive’s review on pages 
14 to 26 and the directors’ report on pages 44 to 55
the group operates on a decentralised basis and the board 
has established an organisational structure with clear reporting 
procedures lines of responsibility and delegated authority divisional 
senior management plant managers and ﬁnancial controllers have 
been delegated responsibility by the board for the establishment and 
implementation of detailed control systems as appropriate for their 
business
an established programme of regular review is in place at the 
businesses and a culture of continuous improvement is encouraged 
by the board through regular meetings with senior management 
review of operating performance and progress against business plans 
the ongoing process of review provides assurance that the control 
environment is operating as intended 
the audit committee also monitors the effectiveness of the internal 
control processes implemented across the group through a review of 
the key ﬁndings presented by the external and internal auditors and 
discussions with senior management on an ad hoc basis the board 
is responsible for considering audit committee recommendations 
in respect of internal controls and risk management and ensuring 
implementation by management of those recommendations it deems 
appropriate for the business
following the acquisition of elster in august 2012 the company has 
been working hard to ensure the successful integration of this business 
into melrose reporting and governance frameworks in order to ensure a 
consistent approach is maintained throughout the group going forward wwwmelroseplcnet
stock code mro 61
financials shareholder information business performance governance
internal ﬁnancial controls
the group has a comprehensive system for assessing the effectiveness 
of the group’s internal ﬁnancial controls including strategic business 
planning and regular monitoring and reporting of ﬁnancial performance 
a detailed annual budget is prepared by senior management and 
thereafter is reviewed and formally adopted by the board the budget 
and other targets are regularly updated via a rolling forecast process and 
regular business review meetings are held involving senior management 
to assess performance the results of these reviews are in turn reported 
to and discussed by the board at each meeting  as discussed in 
the audit committee section on pages 58 and 59 of this report bm 
howarth is the group’s internal auditor and they have also recently taken 
internal audit responsibility for the elster businesses
a total of 11 businesses have been visited for the purposes of internal 
audits during 2012 all in the ﬁrst half of the year during the second 
half of 2012 the focus has been on the opening balance sheets of 
elster and the internal auditor assisted with this process by visiting 35 
sites the directors are pleased to report that there were no material 
deﬁciencies the majority of the recommendations presented in the 
internal auditor reports have now been or are in the process of being 
implemented during 2013 the elster businesses will be included in the 
internal audit visit plan and 37 businesses are planned for review this 
year including 10 audits in relation to the elster business 
the board conﬁrms that from the review of internal controls it has 
not determined any signiﬁcant failings or weaknesses that it considers 
require remedial action the board also conﬁrms that it has not been 
advised of any material weaknesses in the internal control systems that 
relate to ﬁnancial reporting
whistleblowing antibribery and corruption 
policies
the company takes very seriously its responsibilities under the bribery 
act 2010 and has in place appropriate measures to ensure compliance 
following the introduction of updated internal procedures in 2011 
each business within the energy lifting and other industrial divisions 
is required to provide an annual conﬁrmation to the company that it 
has fully complied with the group’s antibribery and corruption policy 
gift hospitality and charitable donation registers also continue to be 
maintained throughout the year and form part of the group’s anti
corruption procedures no areas of concern were identiﬁed whilst elster 
already maintain a comprehensive and robust compliance programme 
during 2013 they will also start to report under the group’s existing 
compliance reporting procedures
the group’s antibribery and corruption policy applies to all directors 
employees whether permanent ﬁxedterm or temporary pension 
trustees consultants and other business advisers contractors trainees 
volunteers business agents distributors joint venture partners or 
any other person working for or performing a service on behalf of the 
company its subsidiaries and associated companies in which it has a 
majority interest
responsibility for anticorruption policies and procedures rests with 
the board of directors it is tasked with ensuring that adequate internal 
ﬁnancial controls and record keeping is in place within the group in 
order to minimise the risk of bribery and corruption 
as a result of the increased size of the group following the acquisition 
of elster the company is currently in the process of increasing its 
resources within the area of compliance both at group and business 
unit level in order to ensure that continuous improvements can be made 
to existing policies and procedures
the company also operates a whistleblowing policy as part of its 
antibribery and corruption procedures  this enables individuals 
to make protected disclosures to their divisional human resources 
manager company secretary or the senior nonexecutive director if 
they have concerns about possible improprieties in ﬁnancial reporting 
or other malpractices within their business within the elster business 
all employees have access to an independent whistleblowing helpline if 
they wish to raise any concerns about the business 
communications with shareholders
the company seeks to build on a mutual understanding of objectives 
with its institutional shareholders via the executive directors through 
regular meetings and presentations following announcements of its 
annual and interim results the nonexecutive directors are available 
to meet institutional shareholders should there be unresolved matters 
they wish to bring to their attention the views of key analysts and 
shareholders generally are fed back to the board directly by individual 
directors or via the company’s brokers this helps to ensure that all 
members of the board develop an understanding of the views of major 
shareholders corporate information is available on the company’s 
website wwwmelroseplcnet
as part of the process to agree the early crystallisation of the 2009 
incentive shares and creation of the 2012 incentive share plan 
during march and april 2012 discussions took place with key 
institutional investors in order to ensure their views were incorporated 
into the process perry crosthwaite in his capacity as chairman 
of the remuneration committee led these discussions and acted 
independently from the executive directors 
the board welcomes the attendance of shareholders at the agm the 
number of votes cast for and against each of the resolutions proposed 
will be announced shortly after the agm has concluded via the melrose 
website at wwwmelroseplcnet
by order of the board
joff crawford
company secretary
6 march 2013 melrose industries plc
annual report 2012 62
remuneration report
introduction and compliance 
the directors’ remuneration report has been prepared by the 
remuneration committee and approved by the board it has been 
drawn up in accordance with relevant sections of the 2010 uk 
corporate governance code the “uk code” as it applies to the year 
ended 31 december 2012 the large and mediumsized companies 
and groups accounts and reports regulations 2008 the companies 
act 2006 and the uk listing authority listing rules
a resolution inviting shareholders to approve the remuneration report 
will be put to the annual general meeting on 8 may 2013
the remuneration report is divided into two parts the ﬁrst part contains 
commentary on remuneration policy which is not required to be audited 
the second part contains details of the directors’ remuneration 
which has been audited in accordance with the relevant statutory 
requirements
biographies of the directors are shown on pages 42 and 43 these 
biographies identify any other signiﬁcant appointments held by the 
directors
unaudited information
remuneration committee
the remuneration committee is chaired by perry crosthwaite an 
independent nonexecutive director miles templeman john grant and 
justin dowley the other three independent nonexecutive directors 
complete the committee
the terms of reference of the remuneration committee are posted 
on the corporate governance section of the company’s website 
wwwmelroseplcnet and are also available from the company 
secretary at the registered ofﬁce address page 59 of the corporate 
governance report sets out the functions of the remuneration 
committee
remuneration policy
remuneration packages are reviewed regularly and changes are effective 
from 1 january each year the remuneration committee and its advisers 
use a number of third party remuneration surveys from which to obtain 
remuneration data in order to carry out benchmarking exercises
the remuneration package for all executive directors comprises base 
salary and beneﬁts annual bonus long term incentive arrangements 
and pension contributions as described within this report some senior 
employees of the group are also entitled to bonuses and long term 
incentive arrangements as noted below
executive directors and other senior employees
the board establishes the remuneration policy based on the 
recommendations of the remuneration committee having regard to 
best practice guidance provided by the uk code the remuneration 
policy adopted by the company requires the package offered to any 
executive director or senior employee to be sufﬁcient to attract retain 
and motivate management of a suitable quality but not to be more 
than is necessary for this purpose a signiﬁcant proportion of the total 
remuneration package of the executive directors is linked to both the 
melrose group and individual director performance
in designing the performancerelated element of the total remuneration 
package due regard was given to the provisions of schedule a to 
the uk code however the remuneration committee deemed it 
appropriate to derogate from the recommendation in schedule a that 
grants under executive share options and long term incentive plans 
should normally be phased rather than awarded in one block under the 
2012 melrose incentive plan details of which are provided on pages 
63 and 64 entitlements of the executive directors were awarded in 
one block rather than phased the 2012 melrose incentive plan was 
recommended as being in the best interests of shareholders as a whole 
by the board of directors and was approved by shareholders in a 
general meeting held on 11 april 2012 
nonexecutive directors
the executive directors are responsible for proposing the nonexecutive 
directors’ fees in proposing such fees they take account of fees paid 
to nonexecutive directors of similar sized listed companies within 
the company’s listing sector as well as the time commitment and 
responsibility of the role any decisions regarding fee changes are taken 
by the executive directors as a whole and nonexecutive directors do 
not take part in discussions on their own remuneration nonexecutive 
directors do not receive other taxable beneﬁts or pension contributions 
from the group
consistent with best practice guidance provided by the uk code 
and as part of the company’s ongoing commitment to ensuring the 
independence of the nonexecutive directors the nonexecutive 
directors’ remuneration does not include any share options or 
performancerelated element
base salary and benefits
the remuneration committee gives consideration to both the 
performance of the individual during the period of review and of current 
market salaries for equivalent roles based on independently sourced 
market information
the salaries of all executive directors and the senior management team 
are reviewed by the remuneration committee prior to the beginning 
of each year the remuneration committee also consults with the 
executive chairman executive vicechairman and the chief executive 
about its proposals for remuneration for the coming ﬁnancial year 
base salaries for 2012 were reviewed in december 2011 in january 
2012 each of the executive and nonexecutive directors received an 
inﬂationary increase of 3 per cent in addition a further inﬂationary 
increase of 3 per cent was awarded in december 2012 effective from 
january 2013
the executive directors also receive a company car allowance fuel 
allowance private medical insurance life insurance and permanent 
health insurance cover mr martin also receives paid train travel to and 
from london and accommodation whilst working in london
annual bonuses
bonus scheme arrangements are in place for executive directors 
and senior management and are consistent with the best practice 
guidance provided in schedule a to the uk code the maximum bonus 
payable is 100 per cent of base salary the annual bonus scheme 
has two components up to 80 per cent of base salary is payable 
based on diluted earnings per share growth and the remaining 20  wwwmelroseplcnet
stock code mro 63
financials shareholder information business performance governance
per cent is discretionary the discretionary element is payable based 
on the remuneration committee considering a range of ﬁnancial and 
nonﬁnancial factors including working capital management and cash 
generation overhead cost control liability management health and 
safety improvements and any other factors which the remuneration 
committee consider to be relevant the executive chairman does 
not participate in the annual bonus plan  david roper will receive his 
2012 cash bonus on a pro rata basis for the period in which he held 
the position of chief executive he will not receive a cash bonus for the 
period from 9 may 2012 which is the date he became executive vice
chairman
long term incentives
long term incentives are granted to directors and other senior 
employees in order to promote the success of the company the long 
term incentive arrangements currently in place are structured to ensure 
that participants are only rewarded for growth in the underlying value of 
the business in order to align the interests of the directors with those of 
the company’s shareholders 
during 2012 the group operated the following long term incentive plans
 2009 incentive share plan crystallised april 2012 with a maturity date 
of 22 march 2012
 2012 incentive share plan with effect from 23 march 2012 and
 divisional long term incentive plans
further details in relation to these plans are shown below
2009 incentive share plan
participants in the 2009 incentive share plan were entitled to either a 
cash dividend or at the company’s choice a number of ordinary shares 
in melrose plc equal to 10 per cent of the increase in shareholder value 
during the period between 18 july 2007 and 31 may 2012 at a general 
meeting on 11 april 2012 shareholder approval was given for the early 
crystallisation of the 2009 share incentive plan which resulted in an 
early maturity date of 22 march 2012 the “maturity date” this maturity 
date was moved forward by approximately 10 weeks to ensure that the 
group could continue to explore signiﬁcant acquisition opportunities 
and was in a position to pursue these opportunities as they arose whilst 
continuing to ensure that appropriate incentive arrangements were in 
place for the company’s directors and senior management team
during the term of the 2009 incentive share plan the directors and 
senior management team were successful in generating real returns for 
shareholders as can be seen below
 market capitalisation just prior to the maturity date was £165 billion 
against a net shareholder investment of approximately £14 million and 
approximately £15 billion of shareholder value was created
 headline eps increased by 120 per cent
 dividends to shareholders increased by 93 per cent and 
 total shareholder return was 197 per cent against a return of 15  
per cent for the ftse 350
upon crystallisation the remuneration committee determined that it 
would be in the group’s best interests to convert the 2009 incentive 
shares into ordinary shares of melrose plc rather than pay a cash 
dividend to all participants this decision was based on the potential 
cash cost and the impact on the level of distributable reserves if a cash 
dividend were to be paid out 
the value of the 2009 incentive share plan as at 22 march 2012 was 
calculated as £121367100 representing 10 per cent of the increase 
in shareholder value since 18 july 2007 as calculated in accordance 
with the articles of the company in force at the time participants in the 
2009 incentive share plan received 31247969 new ordinary shares in 
melrose plc on 12 april 2012 the table on page 65 shows the number 
of ordinary shares received in the company by each of the directors 
following crystallisation of the 2009 incentive share plan
the ﬁnancial growth statistics shown above conﬁrm that the 2009 
incentive share plan was very effective in incentivising the directors and 
certain senior managers to deliver real value to shareholders therefore 
upon the maturity of the 2009 incentive share plan shareholder approval 
was sought for the creation of the 2012 incentive share plan details of 
which are shown below
2012 incentive share plan
the 2012 incentive share plan was approved by shareholders in a 
general meeting on 11 april 2012 the new plan is based on the 
same economic principles as the 2009 incentive share plan for the 
period between 22 march 2012 and 31 may 2017 but is subject to the 
following key modiﬁcations
 reduction of the potential reward to 75 per cent of the increase in 
shareholder value rather than 10 per cent as was the case for the 
2009 incentive share plan
 change to the initial invested capital calculation from the net 
shareholder investment to the deemed market capitalisation of the 
company based on the average share price for the 40 business days 
up to 21 march 2012 this ensured that the increase in shareholder 
value prior to 21 march 2012 is fully excluded from the 2012 incentive 
share plan
 creation of a dilution cap of 5 per cent of the number of ordinary 
shares in issue on 11 april 2012 plus 5 per cent of any new ordinary 
shares issued or created prior to the maturity of the 2012 incentive 
share plan
 changes to the “good leaver” provisions to provide that a participant 
in the 2012 incentive share plan retiring at normal retirement age 
will not be deemed to be a “good leaver” and to introduce the ability 
of the remuneration committee at its discretion to require “good 
leavers” other than on a “good leaver’s” resignation on a change of 
control to transfer their unvested 2012 incentive shares or a portion 
thereof to an employee beneﬁt trust or otherwise at the discretion 
of the board in order to allow for new joiners to be appropriately 
incentivised and
 the executive directors have a 68 per cent participation within 
the 2012 incentive share plan compared with an 87 per cent 
participation in the 2009 incentive share plan this has been done to 
recognise the growth of the team beyond board level which will be 
necessary to develop the business further as at 31 december 2012 
95 per cent of options over 2012 incentive shares had been granted 
meaning that the remainder can be used for the beneﬁt of current 
and future employees as may be agreed by the remuneration 
committee
as part of the scheme of arrangement all options over 2012 incentive  melrose industries plc
annual report 2012 64
remuneration report continued
shares in melrose plc were cancelled and options over 2012 incentive 
shares in melrose industries plc were granted in their place based on 
the same terms
as at 31 december 2012 the projected value of the 2012 incentive 
share plan at the date of crystallisation in may 2017 using a black 
scholes option pricing model was £602 million details of the directors’ 
beneﬁcial interests in options over the 2012 incentive shares as at  
6 march 2013 are shown in the table of directors’ shareholdings later in 
this report
divisional long term incentive plans
divisional long term incentive plans have been implemented for senior 
managers of certain businesses within the group to incentivise them to 
create value for the company and our shareholders it is the intention of 
the board that depending on the amount of value created participants 
in such incentive plans will receive a cash payment on the sale of their 
respective business if a sale of the relevant business has not occurred 
within a certain period the incentive plan will crystallise and any 
payment to be made to participants will be based on the increase in 
value of the business during this period 
pension
no director is a member of any group pension arrangement the 
executive directors may elect to receive a company contribution to their 
individual pension arrangement or a supplement to base salary in lieu of 
a pension arrangement company contributions are calculated on base 
salary at a level of 15 per cent per annum and are reviewed annually by 
the remuneration committee
service contracts
consistent with the best practice guidance provided by the uk code the 
company’ s policy is for directors’ service contracts to be terminable on a 
maximum of one year’ s notice directors’ service contracts do not provide 
for predetermined compensation in the event of termination any payments 
made would be subject to normal contractual principles including mitigation 
as appropriate the length of service for any one executive director 
is not deﬁned and is subject to the requirement for annual reelection 
under both the uk code and the company’ s articles of association the 
nonexecutive directors do not have service contracts but have letters of 
appointment for an initial period of three years which may be renewed by 
mutual agreement generally a nonexecutive director may be appointed 
for one or two periods of three years after the initial three year period has 
expired miles t empleman has now been reappointed for a fourth period 
of three years having originally been appointed as a nonexecutive director 
of melrose in october 2003 the board considers that mr t empleman 
maintains his independence in this role as described in more detail within 
the corporate governance report on page 56 the terms of appointment 
do not contain any contractual provisions regarding a notice period or the 
right to receive compensation in the event of early termination
as part of the scheme of arrangement that was carried out towards the 
end of 2012 each of the directors in melrose plc was appointed as a 
director of melrose industries plc the new parent company of the group 
as part of this process the service agreements of each of the executive 
directors were novated on exactly the same terms to the new parent 
company with effect from when the scheme of arrangement became 
effective on 27 november 2012 details of the executive directors’ original 
appointment dates and notice periods are as set out below
executive directors
date of original appointment
as an executive director of
melrose plc
1
date of appointment
as an executive director of
melrose industries plc notice period
christopher miller 29 may 2003 8 october 2012 12 months
david roper 29 may 2003 8 october 2012 12 months
simon peckham 29 may 2003 8 october 2012 12 months
geoffrey martin 7 july 2005 8 october 2012 12 months
1
 service agreement novated from melrose plc to melrose industries plc on 27 november 2012
each of the nonexecutive directors entered into new letters of appointment with melrose industries plc with effect from when the scheme of 
arrangement became effective on 27 november 2012 which are on similar terms to their most recent letters of appointment with melrose plc 
details of the nonexecutive directors’ appointment dates and duration are shown below
nonexecutive directors
date of original appointment
as a nonexecutive director
of melrose plc
date of appointment
as a nonexecutive director
of melrose industries plc end of appointment period
1
miles templeman 8 october 2003 8 october 2012
conclusion of the 2015 agm unless 
extended or renewed
perry crosthwaite 26 july 2005 8 october 2012
conclusion of the 2015 agm unless 
extended or renewed
john grant 1 august 2006 8 october 2012
conclusion of the 2015 agm unless 
extended or renewed
justin dowley 1 september 2011 8 october 2012
conclusion of the 2015 agm unless 
extended or renewed
1
 subject also to reelection by shareholders at each agm wwwmelroseplcnet
stock code mro 65
financials shareholder information business performance governance
directors’ shareholdings
ordinary shares
the table below shows the number of shares held by each of the directors in the ordinary share capital of both melrose plc before the scheme of 
arrangement became effective on 27 november 2012 “old shares” and melrose industries plc after such time “new shares” 
  
none of the directors who held ofﬁce at the end of the ﬁnancial year had any beneﬁcial interest in the shares of other group companies 
directors
number of
old shares held
as at
1 january 2012
old shares 
received on
11 april 2012
following
 crystallisation of
the 2009
incentive share plan
old shares
sold as part of a
 placing immediately
 following 
crystallisation of 
2009
incentive share plan
old shares
issued pursuant
 to rights issue 
relating to the
 acquisition of elster
number of
new shares held 
as at
31 december
2012
christopher miller
1
4580507 7499512 4000000 6095325 14175344
david roper 2276158 7499512 4200000 4008963 9584633
simon peckham 1872124 7499512 3749756 4042188 9664068
geoffrey martin 659098 4687195 2577957 1990461 4758797
miles templeman 313331   319012 632343
perry crosthwaite 103125   119252 222377
john grant 145847   149970 295817
justin dowley 138000   276000 414000
total 10088190 27185731 14527713 17001171 39747379
1
  the interest of christopher miller includes 4000000 new shares 31 december 2011 2160714 old shares held by harris  sheldon investments limited a company which is 
connected with christopher miller within the meaning of section 252 of the companies act 2006
total shareholding return
the ordinary shares of melrose plc were admitted to the ofﬁcial list and to trading on the london stock exchange on 9 december 2005  
during the year ended 31 december 2012 the following corporate actions took place
 the creation of 31247969 new ordinary shares in the capital of melrose plc following crystallisation of the 2009 incentive share plan in  
april 2012
 a 2 for 1 rights issue that concluded in august 2012 resulting in the issue of 844418024 new ordinary shares in the capital of melrose 
plc raising approximately £12 billion in relation to the purchase of elster group se the new ordinary shares commenced trading on the 
main market of the london stock exchange at 800 am on 1 august 2012 this increased the total issued share capital of melrose plc to 
1266627036 ordinary shares and
 in november 2012 a scheme of arrangement was completed which created a new parent company melrose industries plc in order to create 
approximately £15 billion of distributable reserves on 27 november 2012 the ordinary shares in the capital of melrose plc were cancelled 
and shareholders were issued with the same number of new ordinary shares in melrose industries plc with a nominal value of 120 pence per 
share trading in these new ordinary shares commenced at 800 am on 27 november 2012 on the london stock exchange’s main market for 
listed securities on 29 november 2012 the nominal value of the new ordinary shares was reduced to 01 pence in order to create distributable 
reserves  melrose industries plc
annual report 2012 66
the total shareholder return graph below shows the value as at 31 december 2012 of £100 invested in the company on 31 december 2007 
compared with £100 invested in the ftse all share index
the source data for the graph below assumes that all cash returns to shareholders are reinvested in ordinary shares
400
300
200
150
100
50
0
dec 07 june 08 dec 08 june 09 dec 09 june 10 dec 10 june 11 dec 11 june 12
£
350
250
dec 12
— melrose return
— ftse all share index
audited information
directors’ remuneration and incentive shares
emoluments during 2012
directors
salaries
fees
 £
bonus
 £
taxable
 beneﬁts
 £
in lieu of
 pension
contributions
 £
1
2012
t otal
emoluments
£
pension
contributions
 £
1
2012
 t otal
remuneration
 £
2011
 t otal
remuneration
 £
christopher miller
2
409800 — 19454 61470 490724 — 490724 477649
david roper 409800 87424 19060 61470 577754 — 577754 811152
simon peckham 409800 262272 19338 17970 709380 43500 752880 811611
geoffrey martin 327900 209856 51069 11385 600210 37800 638010 686630
miles templeman
3
59235 — — — 59235 — 59235 61650
perry crosthwaite
4
63350 — — — 63350 — 63350 61650
john grant
5
 62465 — — — 62465 — 62465 56650
justin dowley
6
58350 — — — 58350 — 58350 18883
total 1800700 559552 108921 152295 2621468 81300 2702768 2985875
1
  of the £233595 attributable to pension contributions £152295 was paid as a supplement to base salary in lieu of pension arrangements the balance of £81300 was paid into the 
individual directors’ nominated private pension plans
2
  christopher miller was a nonexecutive director of tmo renewables limited but resigned from this position on 31 august 2012 his fees for the period from 1 january to 31 august 
2012 were £12500 this amount was retained by christopher miller and is therefore excluded from the table above
3
  miles templeman was chairman of the audit committee up to 6 march 2012 but was then replaced by john grant mr templeman received an amount of £885 in recognition of 
chairmanship of the audit committee from 1 january 2012 to 6 march 2012   
4
 includes £5000 per annum in recognition of chairmanship of the remuneration committee
5
  john grant became chairman of the audit committee on 6 march 2012 in place of miles templeman in recognition of mr grant’s chairmanship of this committee from 6 march 
2012 to 31 december 2012 an amount of £4115 was paid
6
  justin dowley was appointed as a nonexecutive director of the company on 1 september 2011 he was paid £18883 for the period from 1 september 2011 to 31 december 
2011 the fee paid to mr dowley for the year ended 31 december 2012 relates to the full year 
remuneration report continued wwwmelroseplcnet
stock code mro 67
financials shareholder information business performance governance
2009 and 2012 incentive shares
details of the directors’ holdings in both the 2009 incentive shares including the number of ordinary shares obtained by the directors upon 
crystallisation and options over 2012 incentive shares during the year are shown below
directors
number of
2009
incentive shares
number of
ordinary shares
arising upon
2009 incentive share 
crystallisation
1
number of
options over
2012
incentive shares
christopher miller 12000 7499512 8500
david roper 12000 7499512 8500
simon peckham 12000 7499512 8500
geoffrey martin 7500 4687195 8500
miles templeman nil nil nil
perry crosthwaite nil nil nil
john grant nil nil nil
justin dowley nil nil nil
1
  the market value of each ordinary share received on the crystallisation date of 11 april 2012 was 406 pence the total number of ordinary shares obtained by the directors 
following the crystallisation on 11 april 2012 was 27185731 representing a market value of £1104 million
the report was approved by the board on 6 march 2013 and signed on its behalf by
perry crosthwaite
chairman of the remuneration committee
6 march 2013 melrose industries plc
annual report 2012 68
statement of directors’ responsibilities
the directors are responsible for preparing the annual report and the 
ﬁnancial statements in accordance with applicable law and regulations
company law requires the directors to prepare ﬁnancial statements for 
each ﬁnancial year under that law the directors are required to prepare 
the group ﬁnancial statements in accordance with international financial 
reporting standards “ifrss” as adopted by the european union and 
article 4 of the ias regulation and have elected to prepare the parent 
company ﬁnancial statements in accordance with united kingdom 
generally accepted accounting practice united kingdom accounting 
standards and applicable law under company law the directors must 
not approve the accounts unless they are satisﬁed that they give a true 
and fair view of the state of affairs of the company and of the proﬁt or 
loss of the company for that period  
in preparing the parent company ﬁnancial statements the directors are 
required to
 select suitable accounting policies and then apply them consistently
 make judgements and accounting estimates that are reasonable and 
prudent
 state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and explained 
in the ﬁnancial statements and
 prepare the ﬁnancial statements on the going concern basis unless 
it is inappropriate to presume that the company will continue in 
business
in preparing the group ﬁnancial statements international accounting 
standard 1 requires that directors
 properly select and apply accounting policies
 present information including accounting policies in a manner 
that provides relevant reliable comparable and understandable 
information 
 provide additional disclosures when compliance with the speciﬁc 
requirements in ifrss are insufﬁcient to enable users to understand 
the impact of particular transactions other events and conditions on 
the entity’s ﬁnancial position and ﬁnancial performance and
 make an assessment of the company’s ability to continue as a going 
concern
the directors are responsible for keeping adequate accounting records 
that are sufﬁcient to show and explain the company’s transactions and 
disclose with reasonable accuracy at any time the ﬁnancial position of 
the company and enable them to ensure that the ﬁnancial statements 
comply with the companies act 2006 they are also responsible 
for safeguarding the assets of the company and hence for taking 
reasonable steps for the prevention and detection of fraud and other 
irregularities
the directors are responsible for the maintenance and integrity of the 
corporate and ﬁnancial information included on the company’s website 
legislation in the united kingdom governing the preparation and 
dissemination of ﬁnancial statements may differ from legislation in other 
jurisdictions
directors’ responsibility statement 
we conﬁrm that to the best of our knowledge
 the ﬁnancial statements prepared in accordance with the relevant 
ﬁnancial reporting framework give a true and fair view of the assets 
liabilities ﬁnancial position and proﬁt or loss of the company and the 
undertakings included in the consolidation taken as a whole and
 the chairman’s statement chief executive’s review finance director’s 
review and directors’ report include a fair review of the development 
and performance of the business and the position of the company 
and the undertakings included in the consolidation taken as a whole 
together with a description of the principal risks and uncertainties that 
they face
by order of the board
geoffery martin
group finance director
6 march 2013
simon peckham
chief executive
6 march 2013 wwwmelroseplcnet
stock code mro 69
governance shareholder information business performance financials
financial contents
consolidated statements
independent auditor’s report – consolidated statements 70
consolidated income statement 71
consolidated statement of comprehensive income 72
consolidated statement of cash flows 73
consolidated balance sheet 74
consolidated statement of changes in equity 75
notes to the ﬁnancial statements
note
1 corporate information 76
2 summary of signiﬁcant accounting policies 77
3 critical accounting judgements and key sources of 
 estimation uncertainty 84
4 revenue 86
5 segment information 86
6 exceptional costs and income 89
7 revenues and expenses 90
8 tax 92
9 discontinued operations 94
10 dividends 95
11 earnings per share 96
12 goodwill and other intangible assets 97
13 property plant and equipment 99
14 interests in joint ventures 100
15 inventories 100
16 trade and other receivables 101
17 cash and cash equivalents 102
18 trade and other payables 102
19 interestbearing loans and borrowings 103
20 provisions 104
21 deferred tax 105
22 sharebased payments 105
23 retirement beneﬁt obligations 106
24 financial instruments and risk management 111
25 issued capital and reserves 115
26 cash ﬂow statement 117
27 commitments and contingencies 118
28 related parties 118
29 post balance sheet events 118
30 contingent liabilities 118
company statements
independent auditor’s report — company statements 119
company balance sheet for melrose industries plc 120
notes to the company balance sheet
note
1 signiﬁcant accounting policies 121
2 proﬁt for the period 121
3 investment in subsidiaries 121
4 creditors 123
5 issued share capital 123
6 reserves 123
7 reconciliation of movements in shareholders funds 124
8 related party transactions 124 melrose industries plc
annual report 2012 70
independent auditor’s report
to the members of melrose industries plc
we have audited the consolidated ﬁnancial statements of melrose industries plc for the year ended 31 december 2012 which comprise 
the consolidated income statement the consolidated statement of comprehensive income the consolidated statement of cash flows the 
consolidated balance sheet the consolidated statement of changes in equity and the related notes 1 to 30 the ﬁnancial reporting framework that 
has been applied in their preparation is applicable law and international financial reporting standards ifrss as adopted by the european union
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 2006 our audit 
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report 
and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the company and 
the company’s members as a body for our audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the statement of directors’ responsibilities the directors are responsible for the preparation of the consolidated ﬁnancial 
statements and for being satisﬁed that they give a true and fair view our responsibility is to audit and express an opinion on the consolidated 
ﬁnancial statements in accordance with applicable law and international standards on auditing uk and ireland those standards require us to 
comply with the auditing practices board’s ethical standards for auditors
scope of the audit of the ﬁnancial statements
an audit involves obtaining evidence about the amounts and disclosures in the ﬁnancial statements sufﬁcient to give reasonable assurance that the 
ﬁnancial statements are free from material misstatement whether caused by fraud or error this includes an assessment of whether the accounting 
policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed the reasonableness of 
signiﬁcant accounting estimates made by the directors and the overall presentation of the ﬁnancial statements in addition we read all the ﬁnancial 
and nonﬁnancial information in the annual report to identify material inconsistencies with the audited ﬁnancial statements if we become aware of 
any apparent material misstatements or inconsistencies we consider the implications for our report
opinion on ﬁnancial statements
in our opinion the consolidated ﬁnancial statements
 give a true and fair view of the state of the group’s affairs as at 31 december 2012 and of its proﬁt for the year then ended
 have been properly prepared in accordance with ifrss as adopted by the european union and
 have been prepared in accordance with the requirements of the companies act 2006 and article 4 of the ias regulation
opinion on other matter prescribed by the companies act 2006
in our opinion the information given in the directors’ report for the ﬁnancial year for which the consolidated ﬁnancial statements are prepared is 
consistent with the consolidated ﬁnancial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if in our opinion
 certain disclosures of directors’ remuneration speciﬁed by law are not made or
 we have not received all the information and explanations we require for our audit
under the listing rules we are required to review
 the directors’ statement contained within the directors’ report in relation to going concern
 the part of the corporate governance statement relating to the company’s compliance with the nine provisions of the uk corporate governance 
code speciﬁed for our review and
 certain elements of the report to shareholders by the board on directors’ remuneration
other matter
we have reported separately on the company ﬁnancial statements of melrose industries plc for the year ended 31 december 2012 and on the 
information in the remuneration report that is described as having been audited
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
6 march 2013 wwwmelroseplcnet
stock code mro 71
governance shareholder information business performance financials
consolidated income statement
notes
year ended
31 december
2012
£m
restated
1
year ended
31 december
 2011
£m
continuing operations
revenue 45 15514  10804 
cost of sales 10679 7497
gross profit 4835  3307 
headline
2
 operating expenses 2412 1565
share of results of joint ventures 14 08  — 
intangible asset amortisation 391 237
exceptional operating costs 6 739 400
exceptional operating income 6 70  — 
total net operating expenses 7 3464 2202
operating profit 1371  1105 
headline
2
 operating profit 5 2431  1742 
headline
2
 finance costs 7 398 295
exceptional finance costs 67 163 — 
total finance costs 7 561 295
finance income 47 110  100 
profit before tax 920  910 
headline
2
 profit before tax 2143  1547 
headline
2
 tax 578 397
exceptional tax
3 
87  588 
total tax 8 491 191 
profit for the year from continuing operations 429  1101 
headline
2
 profit for the year from continuing operations 1565  1150  
discontinued operations
profit for the year from discontinued operations 9 13  1764 
profit for the year 442  2865 
attributable to
owners of the parent 425  2864 
noncontrolling interests 17  01 
442  2865 
earnings per share
4
from continuing operations
 basic 11 44p 138p
 diluted 11 43p 129p
 headline
2
 diluted 11 161p 135p
5
from continuing and discontinued operations
 basic 11 45p 358p
 diluted 11 44p 336p
 headline
2
 diluted 11 163p 164p
1
 restated to include the results of mpc within discontinued operations
2
 before exceptional costs exceptional income and intangible asset amortisation 
3
 includes exceptional tax and tax on exceptional items and intangible asset amortisation
4
 year ended 31 december 2011 restated for the effects of the rights issue note 11
5
  135p is the restated 2011 headline
2
 diluted earnings per share from continuing operations the board believe that 158p is a more appropriate measure to use for 2011 to compare 
against 2012 performance being the headline
2
 diluted earnings per share from continuing and discontinued operations adjusted to remove the earnings £48 million of the 
disposed business mpc melrose industries plc
annual report 2012 72
consolidated statement of comprehensive income
notes
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
profit for the year 442  2865 
currency translation on net investments 25 12 173
currency translation on noncontrolling interests 02  — 
transfer to income statement from equity of cumulative translation differences 
 on disposal of foreign operations 25 —  526
losses on cash flow hedges 25 62 01
transfer to income statement on cash flow hedges 25 119  51
actuarial loss on retirement benefit obligations 23 638 371
other comprehensive expense before tax 591 1122
tax relating to components of other comprehensive expense 8 27  168 
other comprehensive expense after tax 564 954
total comprehensive expenseincome for the year 122 1911 
attributable to
owners of the parent 141 1910 
noncontrolling interests 19  01 
122 1911  wwwmelroseplcnet
stock code mro 73
governance shareholder information business performance financials
consolidated statement of cash flows
notes
year ended
31 december
 2012
£m
restated
1
year ended
31 december
2011
£m
net cash from operating activities from continuing operations 26 408  708 
net cash from operating activities from discontinued operations 26 17  204 
net cash from operating activities 425  912 
investing activities
disposal of businesses 9 307  3744 
net cash disposed 9 12 05
acquisition and disposal costs 276 32
purchase of property plant and equipment 521 330
proceeds from disposal of property plant and equipment 14  03 
purchase of computer software 22 14
dividends received from joint ventures 14 03  — 
interest received 110  100
acquisition of subsidiaries 15004 — 
cash acquired on acquisition of elster 12 1056  — 
dividends paid to noncontrolling interests 01 — 
net cash used infrom investing activities from continuing operations 14346 3466 
net cash used in investing activities from discontinued operations 26 18 94
net cash used infrom investing activities 14364 3372 
financing activities
return of capital 10 11 3721
repayment of borrowings
2
11769 — 
net proceeds from rights issue 11681 — 
new bank loans raised
2
14671 — 
costs of raising and settling finance 331 — 
dividends paid 10 657 528
net cash fromused in financing activities from continuing operations 13584  4249
net cash used in financing activities from discontinued operations 26 —  03
net cash fromused in financing activities 13584  4252
net decreaseincrease in cash and cash equivalents 355 32 
cash and cash equivalents at the beginning of the year 26 1956  1957 
effect of foreign exchange rate changes 26 36 33
cash and cash equivalents at the end of the year 1726 1565  1956
1
 restated to include the cash ﬂows of mpc within discontinued operations
2
 relating to the repayment and drawdown of the group facilities reﬁnanced during the year note 19
as at 31 december 2012 the group’s net debt was £9977 million 31 december 2011 £2896 million a reconciliation of the movement in net debt 
is shown in note 26 melrose industries plc
annual report 2012 74
consolidated balance sheet
notes
31 december
 2012
£m
restated
1
31 december
 2011
£m
noncurrent assets
goodwill and other intangible assets 12 30195  9061 
property plant and equipment 13 3189  2153 
interests in joint ventures 14 124  —
deferred tax assets 21 1451  404 
trade and other receivables 16 03  03 
34962  11621 
current assets
inventories 15 3761  2058 
trade and other receivables 16 3841  2163 
derivative financial assets 24 33  17 
cash and cash equivalents 17 1565  1956 
9200  6194 
total assets 5 44162  17815 
current liabilities
trade and other payables 18 5394  2760 
interestbearing loans and borrowings 19 62  288 
derivative financial liabilities 24 70  141 
current tax liabilities 410  169 
provisions 20 984  582 
6920  3940 
net current assets 2280  2254 
noncurrent liabilities
trade and other payables 18 26  16 
interestbearing loans and borrowings 19 11480  4575 
derivative financial liabilities 24 35  16 
deferred tax liabilities 21 4112  983 
retirement benefit obligations 23 2613  1177 
provisions 20 1559  624 
19825  7391 
total liabilities 5 26745  11331 
net assets 17417  6484 
equity 
issued share capital 25 13  4949 
share premium account —  — 
merger reserve 11906  11906 
other reserves 7571 8744
capital redemption reserve —  268
hedging and translation reserves 25 03  26
retained earnings 12995  1334
equity attributable to owners of the parent 17346  6483 
noncontrolling interests 71  01 
total equity 17417  6484 
1
  in accordance with ifrs 3 the prior year issued share capital share premium account merger reserve other reserves and capital redemption reserve balances have been restated 
to reﬂect the nominal share capital and reserves position of the new parent company as if it had been the holding company during both periods presented the overall impact on net 
equity is £nil note 1 
the ﬁnancial statements were approved and authorised for issue by the board of directors on 6 march 2013 and were signed on its behalf by
geoffrey martin
group finance director
simon peckham
chief executive
  wwwmelroseplcnet
stock code mro 75
governance shareholder information business performance financials
consolidated statement of changes in equity
reserves
issued 
share 
capital
£m
share 
premium
account
£m
merger 
reserve
£m
other 
reserves
£m
capital 
redemption
reserve
£m
hedging 
and
translation
reserves
£m
retained 
earnings
£m
equity 
attributable 
to owners 
of the 
parent
£m
non
controlling 
interests
£m
total 
equity
£m
at 1 january 2011 
 as previously reported 11  2791  2851 — 2201  710  251  8815  14  8829 
restatement for the effects of 
 the new parent company
1
4681 1260 9055 8744 3732 ———— —
at 1 january 2011 restated
1
4692 1531 11906 8744 1531 710 251 8815 14 8829
profit for the year —   —  — — —  —  2864  2864  01  2865 
other comprehensive expense —  —  — — —  736 218 954 —  954
total comprehensive expense
 income —  —  — — —  736 2646  1910  01  1911 
issue of redeemable preference
  c shares 3721  1531 — — 2201 —  —  11 —  11
preference c shares redeemed 3464 —  — — 3464  —  —  —  —  — 
return of capital —  —  — — —  —  3721 3721 —  3721
dividends paid —  —  — — —  —  528 528 02 530
credit to equity for equity
 settled sharebased 
 payments —  —  — — —  —  18  18  —  18 
disposal of noncontrolling 
 interests —  —  — — —  —  —  —  12 12
at 31 december 2011 
 restated
1
4949  —  11906 8744 268 26 1334 6483  01  6484 
profit for the year —  —  — — —  —  425  425  17  442 
other comprehensive income
 expense —  —  — — —  29  595 566 02  564
total comprehensive income
 expense —  —  — — —  29  170 141 19  122
preference c shares redeemed 257 —  — — 268  —  11 —  —  — 
dividends paid —  —  — — —  —  657 657 01 658
credit to equity for equity
 settled sharebased 
 payments —  —  — — —  —  35  35  —  35 
issue of new shares 10508  —  — 1173 —  —  —  11681  —  11681 
acquisition of elster —  —  — — —  —  —  —  61  61 
purchase of elster non
 controlling interests —  —  — — —  —  55 55 09 64
capital reduction 15187 —  — — —  —  15187  —  —  — 
at 31 december 2012 13  —  11906 7571 —  03  12995 17346  71  17417 
1
  in accordance with ifrs 3 the prior year issued share capital share premium account merger reserve other reserves and capital redemption reserve balances have been restated 
to reﬂect the nominal share capital and reserves position of the new parent company as if it had been the holding company during both periods presented the overall impact on net 
equity is £nil note 1  melrose industries plc
annual report 2012 76
notes to the financial statements
1 corporate information
melrose industries plc “the company” is a company incorporated in the united kingdom under the companies act 2006 the address of the 
registered ofﬁce is given on page 128 the nature of the group’s operations and its principal activities are set out in note 5 and in the divisional 
review on pages 16 to 26
following shareholder approval on 5 november 2012 a scheme of arrangement was sanctioned by the high court of england and wales on  
26 november 2012 pursuant to which a new listed company was introduced for the melrose group of companies the scheme of arrangement 
became effective on 27 november 2012 and melrose industries plc became the new holding company of melrose plc and its subsidiaries by way 
of a share exchange
the scheme of arrangement resulting in melrose industries plc becoming the new holding company for the group has been accounted for in these 
consolidated ﬁnancial statements as a reverse asset acquisition using the principles of reverse acquisition accounting set out in ifrs 3 “business 
combinations” 
as a consequence of applying reverse acquisition accounting principles the consolidated results of melrose industries plc “the group” for the year 
ended 31 december 2012 comprise the results of melrose plc and its subsidiaries for the year ended 31 december 2012 consolidated with those 
of melrose industries plc from 27 november 2012 the comparative ﬁgures for the group are those of the group headed by melrose plc for the 
year ended 31 december 2011 except for the presentation of the issued share capital share premium account merger reserve other reserves and 
capital redemption reserve balances which have been restated to reﬂect the reserves position of the group as if melrose industries plc had been 
the parent company during both periods presented on 23 january 2013 melrose plc changed its name to melrose limited
the consolidated ﬁnancial statements of the group for the year ended 31 december 2012 were authorised in accordance with a resolution of the 
directors of melrose industries plc on 6 march 2013
these ﬁnancial statements are presented in pounds sterling which is the currency of the primary economic environment in which the company is 
based foreign operations are included in accordance with the policies set out in note 2
the comparative information for the year ended 31 december 2011 in these ﬁnancial statements has been restated to include the results and cash 
ﬂows of mpc previously disclosed within the other industrial segment within discontinued operations and exclude them from continuing operations
11 new standards and interpretations affecting amounts presentation or disclosure reported in the current period
during the period the group adopted two amended standards and interpretations neither of which signiﬁcantly affected the amounts reported in 
these ﬁnancial statements details of the standards and interpretations that were adopted are set out in section 12
12  new standards and interpretations adopted with no signiﬁcant effect on ﬁnancial statements
the following new and revised standards and interpretations have been adopted in the current year their adoption has not had any signiﬁcant 
impact on the amounts reported in these ﬁnancial statements but may impact the accounting for future transactions and arrangements
ifrs 7 amended financial instruments disclosures
ias 12 amended deferred tax – recovery of underlying assets
13  new standards and interpretations in issue but not yet effective
at the date of authorisation of these ﬁnancial statements the following standards and interpretations are in issue but not yet effective
ias 1 amended presentation of items of other comprehensive income
ias 32 amended offsetting ﬁnancial assets and ﬁnancial liabilities
ias 19 revised employee beneﬁts
ias 27 revised separate ﬁnancial statements 
ias 28 revised investments in associates and joint ventures 
ifrs 10 ifrs 12 and ias 27 amended investment entities
ifrs 1 amended government loans
ifrs 7 amended disclosures – offsetting ﬁnancial assets and ﬁnancial liabilities
ifrs 9 financial instruments
ifrs 10 consolidated ﬁnancial statements
ifrs 11 joint arrangements
ifrs 12 disclosure of interest in other entities
ifrs 13 fair value measurement
ifric 20 stripping costs in the production phase of a surface mine
annual improvements to ifrss 20092011 cycle wwwmelroseplcnet
stock code mro 77
governance shareholder information business performance financials
1 corporate information continued
the directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group’s ﬁnancial 
statements in the period of initial application except as follows
ias 19 revised will impact the measurement of the various components representing movements in the deﬁned beneﬁt pension obligation 
and associated disclosures but not the group’s total obligation following the adoption of ias 19 revised effective from 1 january 2013 
the net retirement beneﬁt obligation in the balance sheet will not be impacted but the net ﬁnance and operating costs of pensions within the 
income statement will increase this will reduce proﬁt before tax for the year by approximately £10 million but will accordingly increase other 
comprehensive income by the same amount the net effect on total comprehensive income for the year will be £nil
2 summary of signiﬁcant accounting policies
basis of accounting
the consolidated ﬁnancial statements have been prepared in accordance with international financial reporting standards “ifrss” the 
consolidated ﬁnancial statements have also been prepared in accordance with ifrss adopted for use in the european union and therefore comply 
with article 4 of the eu ias regulation
the consolidated ﬁnancial statements have been prepared on a historical cost basis except for the revaluation of certain ﬁnancial instruments which 
are recognised at fair value historical cost is generally based on the fair value of the consideration given in exchange for these assets the principal 
accounting policies adopted are consistent with the prior year and are set out below 
basis of consolidation
the group ﬁnancial statements include the results of the parent undertaking and all of its subsidiary undertakings the results of businesses acquired 
during the period are included from the effective date of acquisition and for those sold during the period to the effective date of disposal where 
necessary adjustments are made to the ﬁnancial statements of subsidiaries to bring the accounting policies used into line with those used by the 
group all intragroup balances and transactions including unrealised proﬁts arising from intragroup transactions have been eliminated in full
noncontrolling interests in subsidiaries are identiﬁed separately from the group’s equity therein the interest of noncontrolling shareholders is initially 
measured at the noncontrolling interests proportion of the share of the fair value of the acquiree’s identiﬁable net assets subsequent to acquisition 
the carrying amount of noncontrolling interests is the amount of those interests at initial recognition plus the noncontrolling interests’ share of 
subsequent changes in equity total comprehensive income is attributed to noncontrolling interests even if this results in the noncontrolling interests 
having a deﬁcit balance
going concern
the directors have at the time of approving the ﬁnancial statements a reasonable expectation that the company and the group have adequate 
resources to continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis of accounting in 
preparing the ﬁnancial statements further detail is contained in the directors’ statement of going concern on page 54 of the directors’ report
business combinations and goodwill
the acquisition of subsidiaries is accounted for using the purchase method the cost of acquisition is measured at the fair value of assets given the 
liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the group in exchange for control of the acquiree 
control is achieved where the company has the power to govern the ﬁnancial and operating policies of an investee entity so as to obtain beneﬁts 
from its activities costs directly attributable to business combinations are recognised as an expense in the income statement as incurred 
the acquired identiﬁable assets and liabilities are measured at their fair value at the date of acquisition except those where speciﬁc guidance is 
provided by ifrss noncurrent assets and directly attributable liabilities that are classiﬁed as held for sale in accordance with ifrs 5 “noncurrent 
assets held for sale and discontinued operations” are recognised and measured at fair value less costs to sell also deferred tax assets and 
liabilities are recognised and measured in accordance with ias 12 “income taxes” liabilities and assets related to employee beneﬁt arrangements 
are recognised and measured in accordance with ias 19 “employee beneﬁts” and liabilities or equity instruments related to the replacement by the 
group of an acquiree’s sharebased payments awards are measured in accordance with ifrs 2 “sharebased payments” any excess of the cost of 
the acquisition over the fair values of the identiﬁable net assets acquired is recognised as goodwill 
if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the group 
reports provisional amounts where appropriate those provisional amounts are adjusted during the measurement period or additional assets or 
liabilities recognised to reﬂect new information obtained about facts and circumstances that existed as of the acquisition date that if known would 
have affected the amounts recognised at that date
the measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and 
circumstances that existed as of the acquisition date and is subject to a maximum period of one year melrose industries plc
annual report 2012 78
notes to the financial statements continued
2 summary of signiﬁcant accounting policies continued
goodwill on acquisition is initially measured at cost being the excess of the sum of the consideration transferred the amount of any noncontrolling 
interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree over the acquirer’s interest in the net fair 
value of the identiﬁable assets liabilities and contingent liabilities following initial recognition goodwill is measured at cost less any accumulated 
impairment losses goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying 
value may be impaired
if after reassessment the group’s interest in the fair value of the acquiree’s identiﬁable net assets exceeds the sum of the consideration transferred 
the amount of any noncontrolling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree the 
excess is recognised immediately in proﬁt or loss as a bargain purchase gain
as at the acquisition date any goodwill acquired is allocated to each of the cashgenerating units acquired impairment is determined by assessing 
the recoverable amount of the cashgenerating unit to which goodwill relates where the recoverable amount of the cashgenerating unit is less 
than the carrying amount an impairment loss is recognised in the income statement and is not subsequently reversed when there is a disposal 
of a cashgenerating unit goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that 
operation the amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and the 
operation retained
joint ventures
a joint venture is an entity which is not a subsidiary undertaking but the interest of the group is that of a partner in a business over which the group 
exercises joint control the results assets and liabilities of joint ventures are accounted for using the equity method of accounting
revenue
revenue is recognised when the signiﬁcant risks and rewards of ownership of goods have passed to the buyer and can be reliably measured 
revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the 
normal course of business net of discounts customs duties and sales taxes
where percentage of completion accounting is applied and where the outcome of a construction contract can be estimated reliably revenue and 
costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date this is normally measured by the 
proportion that contract costs incurred for work performed to date bear to the estimated total contract costs except where this would not be 
representative of the stage of completion variations in contract work claims and incentive payments are included to the extent that they have been 
agreed with the customer
where the outcome of a construction contract cannot be estimated reliably contract revenue is recognised to the extent of contract costs incurred 
where it is probable they will be recoverable contract costs are recognised as expenses in the period in which they are incurred
when it is probable that total contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately 
interest income is recognised when it is probable that the economic beneﬁts will ﬂow to the group and the amount of revenue can be measured 
reliably interest income is accrued on a time basis by reference to the principal outstanding and the effective interest rate applicable
exceptional costsincome
exceptional costsincome are those costsincome of a signiﬁcant and nonrecurring nature or those associated with signiﬁcant restructuring 
programmes or acquisitions or disposals
operating proﬁt
operating proﬁt is stated after exceptional operating costs and income intangible asset amortisation and the group’s share of results of joint 
ventures but before ﬁnance income and ﬁnance costs
borrowing costs
borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily take 
a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are 
substantially ready for their intended use or sale 
investment income earned on the temporary investment of speciﬁc borrowings pending their expenditure on qualifying assets is deducted from the 
borrowing costs eligible for capitalisation
all other borrowing costs are recognised in the income statement in the period in which they are incurred wwwmelroseplcnet
stock code mro 79
governance shareholder information business performance financials
2 summary of signiﬁcant accounting policies continued
issue costs of loans
the ﬁnance cost recognised in the income statement in respect of the issue costs of borrowings is allocated to periods over the terms of the 
instrument using the effective interest rate method
property plant and equipment
property plant and equipment are stated at cost less accumulated depreciation and any impairment in value
the initial cost of an asset comprises its purchase price or construction cost and any costs directly attributable to bring the asset into operation 
the purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset 
depreciation is calculated on a straightline basis over the estimated useful life of the asset as follows
freehold land nil 
freehold buildings and long leasehold property over expected economic life not exceeding 50 years
short leasehold property over the term of the lease
plant and equipment 312 years
the estimated useful lives of property plant and equipment are reviewed on an annual basis and if necessary changes in useful lives are accounted 
for prospectively
the carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the 
carrying value may not be recoverable if any such indication exists an impairment review is performed and where the carrying values exceed the 
estimated recoverable amount the assets are written down to their recoverable amount the recoverable amount of property plant and equipment is 
the greater of net selling price and value in use in assessing value in use the estimated future cash ﬂows are discounted to their present value using 
a pretax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset for an asset that 
does not generate largely independent cash inﬂows the recoverable amount is determined for the cashgenerating unit to which the asset belongs 
an item of property plant and equipment is derecognised upon disposal or when no future economic beneﬁts are expected to arise from the 
continued use of the asset any gain or loss arising on derecognition of the asset calculated as the difference between the net disposal proceeds or 
costs and the carrying amount of the item is included in the income statement in the year that the item is derecognised
intangible assets
intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses
on acquisition of businesses separately identiﬁable intangible assets are determined in relation to the speciﬁc circumstances of the business 
acquired and are valued on an appropriate basis
access to the use of patented technology and trade names are valued using a “relief from royalty” method which determines the net present value of 
future additional cash ﬂows arising from the use of the intangible asset
customer relationships are valued on the basis of the net present value of the future additional cash ﬂows arising from customer relationships with 
appropriate allowance for attrition of customers
the estimated useful lives of intangible assets are
computer software 5 years or less
patented technology 5 years or less
customer relationships 20 years or less
trade names 20 years or less
computer software is initially recorded at cost where these assets have been acquired through a business combination this will be the fair value 
allocated in the acquisition accounting where these have been acquired other than through a business combination the initial cost is the aggregate 
amount paid and the fair value of any other consideration given to acquire the asset
computer software assets are amortised over their estimated useful lives on a straightline basis
intangible assets are tested for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying value 
may not be recoverable impairment losses are measured on a similar basis to property plant and equipment useful lives are also examined on an 
annual basis and adjustments where applicable are made on a prospective basis melrose industries plc
annual report 2012 80
notes to the financial statements continued
2 summary of signiﬁcant accounting policies continued
research and development costs
research costs are expensed as incurred
costs relating to clearly deﬁned and identiﬁable development projects are capitalised when there is a technical degree of exploitation adequacy of 
resources and a potential market or development possibility in the undertaking that are recognisable and where it is the intention to produce market 
or execute the project a correlation must also exist between the costs incurred and future beneﬁts and those costs can be measured reliably 
capitalised expenses are expensed on a straightline basis over their useful lives of ﬁve years or less costs not meeting such criteria are expensed 
as incurred
inventories
inventories are valued at the lower of cost and net realisable value cost includes all direct expenditure and appropriate production overhead 
expenditure incurred in bringing goods to their current state under normal operating conditions net realisable value is based on estimated selling 
price less costs expected to be incurred to completion and disposal provisions are made for obsolescence or other expected losses where 
necessary
trade and other receivables
trade receivables and other receivables are measured and carried at amortised cost using the effective interest method less any impairment 
the carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded in the income statement for trade 
receivables the carrying amount is reduced through the use of an allowance account subsequent recoveries of amounts previously written off are 
credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the income statement
trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis objective evidence of 
impairment for a portfolio of receivables could include the group’s past experience of collecting receipts an increase in the number of delayed 
receipts in the portfolio past the average credit period as well as observable changes in national or local economic conditions that correlate with 
default on receivables 
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in hand and current balances with banks and similar institutions and shortterm 
deposits which are readily convertible to cash which are subject to insigniﬁcant risks of changes in value
for the purpose of the consolidated cash flow statement cash and cash equivalents consist of cash and cash equivalents as deﬁned above 
net of outstanding bank overdrafts
interestbearing loans and borrowings
all loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowings
after initial recognition interestbearing loans and borrowings are subsequently measured at amortised cost using the effective interest method 
amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement
gains and losses are recognised in the income statement when the liabilities are derecognised or impaired as well as through the amortisation 
process
leases
finance leases which transfer to the group substantially all the risks and beneﬁts incidental to ownership of the leased item are capitalised at the 
inception of the lease at the fair value of the lease or if lower at the present value of the minimum lease payments the corresponding liability to the 
lessor is included in the balance sheet as a ﬁnance lease obligation lease payments are apportioned between the ﬁnance charges and reduction of 
the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability 
finance charges are charged directly against income capitalised leased assets are depreciated over the shorter of the estimated useful life of the 
asset or the lease term
operating lease payments are recognised as an expense in the income statement on a straightline basis over the lease term rental income from 
operating leases is recognised on a straightline basis over the term of the relevant lease wwwmelroseplcnet
stock code mro 81
governance shareholder information business performance financials
2 summary of signiﬁcant accounting policies continued
other ﬁnancial liabilities 
other ﬁnancial liabilities are initially measured at fair value net of transaction costs other ﬁnancial liabilities are subsequently measured at amortised 
cost using the effective interest method with interest expense recognised on an effective yield basis the effective interest method is a method of 
calculating the amortised cost of a ﬁnancial liability and of allocating interest expense over the relevant periods the effective interest rate is the rate 
that discounts estimated future cash payments throughout the expected life of the ﬁnancial liability or where appropriate a shorter period to the net 
carrying amount on initial recognition the group derecognises ﬁnancial liabilities when the group’s obligations are discharged cancelled or they 
expire
derivative ﬁnancial instruments and hedging
the group uses derivative ﬁnancial instruments to manage its exposure to interest rate foreign exchange rate and commodity risks arising from 
operating and ﬁnancing activities the group does not hold or issue derivative ﬁnancial instruments for trading purposes details of derivative 
ﬁnancial instruments are disclosed in note 24 of the ﬁnancial statements movements on the hedging reserve in equity are detailed in note 25
derivative ﬁnancial instruments are recognised and stated at fair value their fair value is recalculated at each reporting date the accounting 
treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for hedge accounting
where derivatives do not meet the criteria to qualify for hedge accounting any gains or losses on the revaluation to fair value at the period end are 
recognised immediately in the income statement where derivatives do meet the criteria to qualify for hedge accounting recognition of any resulting 
gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged
derivative ﬁnancial instruments with maturity dates of less than one year from the period end date are classiﬁed as current in the balance sheet 
hedge accounting
in order to qualify for hedge accounting the group is required to document from inception the relationship between the item being hedged and the 
hedging instrument and to show that the hedge will be highly effective on an ongoing basis this effectiveness testing is performed at each period 
end to ensure that the hedge remains highly effective
hedge accounting is discontinued when the group revokes the hedging relationship the hedge instrument expires or is sold terminated exercised 
or no longer qualiﬁes for hedge accounting 
the group designates certain hedging instruments as either fair value hedges cash ﬂow hedges or hedges of net investments in foreign operations
fair value hedge
 derivative ﬁnancial instruments are classiﬁed as fair value hedges when they hedge the group’s exposure to changes in the fair value of a recognised 
asset or liability changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement 
immediately together with any changes in the fair value of the hedged item that is attributable to the hedged risk  
cash ﬂow hedge
derivative ﬁnancial instruments are classiﬁed as cash ﬂow hedges when they hedge the group’s exposure to the variability in cash ﬂows that are 
either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecasted cash ﬂow 
the effective portion of any gain or loss from revaluing the derivative ﬁnancial instrument is recognised in the statement of comprehensive income 
and accumulated in equity the gain or loss relating to the ineffective portion is recognised immediately in the income statement  
 amounts previously recognised in the statement of comprehensive income and accumulated in equity are recycled to the income statement in 
the periods when the hedged item is recognised in the income statement or the hedged relationship is discontinued however when the forecast 
transaction that is hedged results in the recognition of a nonﬁnancial asset or a nonﬁnancial liability the gains and losses previously deferred in 
equity are transferred from equity and included in the initial measurement of the cost of the nonﬁnancial asset or nonﬁnancial liability
hedges of net investments in foreign operations
 derivative ﬁnancial instruments are classiﬁed as net investment hedges when they hedge the group’s net investment in foreign operations  the 
effective element of any foreign exchange gain or loss from revaluing the derivative at a reporting period end is recognised in the statement of 
comprehensive income any ineffective element is recognised immediately in the income statement
 gains and losses accumulated in equity are recognised immediately in the income statement when the foreign operation is disposed of or the 
hedged relationship is discontinued melrose industries plc
annual report 2012 82
notes to the financial statements continued
2 summary of signiﬁcant accounting policies continued
provisions
provisions are recognised when the group has a present obligation legal or constructive as a result of a past event it is probable that an outﬂow of 
resources embodying economic beneﬁts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation 
if the effect of the time value of money is material provisions are determined by discounting the expected future cash ﬂows at a rate that reﬂects 
the current market assessment of the time value of money and where appropriate the risks speciﬁc to the liability where discounting is used the 
increase in the provision due to the passage of time is recognised as a ﬁnance cost
restructurings
a restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a valid expectation 
in those affected that it will carry out the restructuring by either starting to implement the plan or by announcing its main features to those affected 
by it the measurement of a restructuring provision includes only the direct expenditures arising from the restructuring which are those amounts that 
are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity
warranties
provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant 
products at the directors’ best estimate of the expenditure required to settle the group’s obligation
onerous contracts
 present obligations arising under onerous contracts are recognised and measured as provisions an onerous contract is considered to exist where 
the group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic beneﬁts expected 
to be received under it
environmental liabilities
 liabilities for environmental costs are recognised when environmental assessments or cleanups are probable and the associated costs can be 
reasonably estimated generally the timing of these provisions coincides with the commitment to a formal plan of action the amount recognised is 
the best estimate of the expenditure required where the liability will not be settled for a number of years the amount recognised is the present value 
of the estimated future expenditure
employee beneﬁts
wages salaries bonuses social security contributions paid annual leave and sick leave are accrued in the year in which the associated services are 
rendered by employees of the group the accounting policy for pensions and other retirement beneﬁts is described below
the group also operates long term incentive plans ltips for directors and certain employees the expected settlement costs of these plans are 
expensed on a straightline basis over the life of the plans
pensions and other retirement beneﬁts
the group operates deﬁned beneﬁt pension plans and deﬁned contribution plans some of which require contributions to be made to administered 
funds separate from the group in some jurisdictions funds are not administered separately from the group but appropriate liabilities are recognised 
in the balance sheet
for the deﬁned beneﬁt pension and retirement beneﬁt plans plan assets are measured at fair value and plan liabilities are measured on an actuarial 
basis using the projected unit credit method and discounted at an interest rate equivalent to the current rate of return on a high quality corporate 
bond of equivalent currency and term to the plan liabilities any assets resulting from this calculation are limited to past service cost plus the present 
value of available refunds and reductions in future contributions to the plan
the service cost of providing pension and other retirement beneﬁts to employees for the period is charged to the income statement
a charge representing the unwinding of the discount on the plan liabilities during the period is included within ﬁnance costs
a credit representing the expected return on the plan assets during the period is included within ﬁnance costs this credit is based on the market 
value of the plan assets and expected rates of return at the beginning of the year
actuarial gains and losses may result from differences between the expected return and the actual return on plan assets differences between 
the actuarial assumptions underlying the plan liabilities and actual experience during the period or changes in the actuarial assumptions used in 
the valuation of the plan liabilities actuarial gains and losses and taxation thereon are recognised in full in the period in which they occur in the 
statement of comprehensive income
for deﬁned contribution plans contributions payable are charged to the income statement as they fall due as an operating expense wwwmelroseplcnet
stock code mro 83
governance shareholder information business performance financials
2 summary of signiﬁcant accounting policies continued
foreign currencies
the individual ﬁnancial statements of each group company are presented in the currency of the primary economic environment in which it operates 
its functional currency for the purpose of the consolidated ﬁnancial statements the results and ﬁnancial position of each group company are 
expressed in pounds sterling which is the functional currency of the company and the presentation currency for the consolidated ﬁnancial 
statements
in preparing the ﬁnancial statements of the individual companies transactions in currencies other than the entity’s functional currency foreign 
currencies are recorded at the rates of exchange prevailing on the dates of the transactions at each balance sheet date monetary assets and 
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date nonmonetary items carried 
at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined non
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated
exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in the income statement 
for the period exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in the income statement for 
the period except for differences arising on the retranslation of nonmonetary items in respect of which gains and losses are recognised directly in 
equity for such nonmonetary items any exchange component of that gain or loss is also recognised directly in equity
for the purpose of presenting consolidated ﬁnancial statements the assets and liabilities of the group’s foreign operations are translated at 
exchange rates prevailing on the balance sheet date income and expense items are translated at the average exchange rates for the period unless 
exchange rates ﬂuctuate signiﬁcantly during that period in which case the exchange rates at the date of transactions are used exchange differences 
arising if any are recognised in the statement of comprehensive income and accumulated in equity attributed to noncontrolling interests as 
appropriate such translation differences are recognised as income or as expenses in the period in which the related operation is disposed of any 
exchange differences that have previously been attributed to noncontrolling interests are derecognised but they are not reclassiﬁed to the income 
statement
goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated 
at the rate prevailing at the balance sheet date
taxation
the tax expense is based on the taxable proﬁts for the period and represents the sum of the tax paid or currently payable and deferred tax
taxable proﬁt differs from net proﬁt as reported in the income statement because it excludes items of income or expense that are taxable or 
deductible in other years and it further excludes items that are never taxable or deductible the group’s liability for current tax is calculated using tax 
rates that have been enacted or substantively enacted by the balance sheet date
deferred tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets and 
liabilities and their carrying amounts for ﬁnancial reporting purposes
deferred tax liabilities are recognised for all taxable temporary differences except
 where the deferred tax liability arises on the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination 
and at the time of the transaction affects neither the accounting proﬁt nor taxable proﬁt or loss and
 where the timing of the reversal of the temporary differences associated with investments in subsidiaries and interests in joint ventures can be 
controlled and it is probable that the temporary differences will not reverse in the foreseeable future
deferred tax assets are recognised for all deductible temporary differences carryforward of unused tax assets and unused tax losses to the extent 
that it is probable that taxable proﬁt will be available against which the deductible temporary differences and carryforward of unused tax assets and 
unused tax losses can be utilised except
 where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at 
the time of the transaction affects neither the accounting proﬁt nor taxable proﬁt or loss and
 in respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures deferred tax assets 
are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable proﬁt will be 
available against which the temporary differences can be utilised melrose industries plc
annual report 2012 84
notes to the financial statements continued
2 summary of signiﬁcant accounting policies continued
the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that 
sufﬁcient taxable proﬁt will be available to allow all or part of the deferred tax asset to be utilised
deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is 
settled based on tax rates and tax laws that have been enacted or substantively enacted at the relevant balance sheet date
tax relating to items recognised directly in other comprehensive income is recognised in the statement of comprehensive income and not in the 
income statement
revenues expenses and assets are recognised net of the amount of sales tax except
 where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority in which case the sales tax is 
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable and
 where receivables and payables are stated with the amount of sales tax included
the net amount of sales tax recoverable from or payable to the taxation authority is included as part of receivables or payables in the balance 
sheet
sharebased payments
the group has applied the requirements of ifrs 2 “sharebased payments” the group issues equitysettled sharebased payments to certain 
employees equitysettled sharebased payments are measured at fair value of the equity instrument excluding the effect of nonmarket based 
vesting conditions at the date of grant the fair value determined at the grant date of the equitysettled sharebased payments is expensed on a 
straightline basis over the vesting period based on the group’s estimate of shares that will eventually vest and adjusted for the effect of nonmarket 
based vesting conditions
fair value is measured by use of the black scholes pricing model the expected life used in the model has been adjusted based on the directors’ 
best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
government grants
government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attaching to them and that 
the grants will be received
government grants relating to property plant and equipment are treated as deferred income and released to proﬁt or loss over the expected useful 
lives of the assets concerned 
noncurrent assets and businesses held for sale
noncurrent assets and businesses classiﬁed as held for sale are measured at the lower of carrying amount and fair value less costs to sell
noncurrent assets and businesses are classiﬁed as held for sale if their carrying amount will be recovered principally through a sale transaction 
rather than through continuing use this condition is regarded as having been met only when the sale is highly probable and the asset or business is 
available for immediate sale in its present condition management must be committed to the sale which should be expected to qualify for recognition 
as a completed sale within one year from the date of classiﬁcation
3 critical accounting judgements and key sources of estimation uncertainty
in applying the group’s accounting policies as set out in note 2 management have made critical accounting judgements these include the 
quantiﬁcation of the fair value of assets and liabilities following the acquisition of elster along with the valuation of intangible assets also acquired in 
addition the impairment of noncurrent assets the quantiﬁcation of provisions and the valuation of retirement beneﬁt obligations and taxation require 
management judgements due to the inherent uncertainty involved in making assumptions and estimates actual outcomes may differ from those 
assumptions and estimates an analysis of the key sources of estimation uncertainty at the balance sheet date that have a signiﬁcant risk of causing 
a material adjustment to the carrying amount of assets and liabilities within the next ﬁnancial year is provided below
fair values at acquisition
following the acquisition of elster management have made judgements regarding the fair value of assets and liabilities acquired particularly in 
relation to provisions and intangible assets the fair value of these assets and liabilities are shown in note 12 wwwmelroseplcnet
stock code mro 85
governance shareholder information business performance financials
3 critical accounting judgements and key sources of estimation uncertainty continued
intangible assets
the valuation of intangible assets requires management to estimate the net present value of future cash ﬂows arising from customer relationships 
after estimating the attrition factor relevant to the customer relationship and other factors such as access to the workforce which are appropriate to 
the determination of the additional cash ﬂows the valuation of intangible assets in respect of brand names requires management to estimate future 
cash ﬂows using a relief from royalty model
impairment of noncurrent assets
goodwill and intangible assets are tested for impairment whenever events or circumstances indicate that their carrying amounts might be impaired 
and at least annually such events and circumstances include the effects of restructuring initiated by management 
to determine whether goodwill and intangible assets are impaired requires an estimation of the value in use of the cashgenerating units to which 
goodwill and other intangible assets has been allocated the value in use calculation requires management to estimate the future cash ﬂows 
expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate the net present value such calculations require 
judgement relating to the appropriate discount factors and long term growth prevalent in a particular market as well as short and medium term 
business plans management draw upon experience as well as external resources in making these judgements
the carrying amount of goodwill and other intangible assets including computer software and development costs at the balance sheet date was 
£30195 million 31 december 2011 £9061 million at 31 december 2012 and 2011 the group recognised no impairment loss in respect of these 
assets 
provisions
the quantiﬁcation of certain liabilities within provisions environmental remediation obligations and future costs and settlements in relation to certain 
legal claims have been estimated using the best information available however such liabilities depend on the actions of third parties and on the 
speciﬁc circumstances pertaining to each obligation neither of which is controlled by the group although provisions are reviewed on a regular basis 
and adjusted for management’s best current estimates the judgemental nature of these items means that future amounts settled may be different 
from those provided further details are set out in note 20
retirement beneﬁt obligations
retirement beneﬁts are accounted for under ias 19 “employee beneﬁts” for deﬁned beneﬁt plans obligations are measured at discounted present 
value whilst plan assets are recorded at fair value because of changing market and economic conditions the expenses and liabilities actually arising 
under the plans in the future may differ materially from the estimates made on the basis of these actuarial assumptions therefore declining returns 
on equity markets and markets for ﬁxedincome instruments could necessitate additional contributions to the plans in order to cover future pension 
obligations also higher or lower withdrawal rates or longer or shorter life of participants may have an impact on the amount of pension income or 
expense recorded in the future
the discount rate used to discount retirement beneﬁt obligations to present value is derived from the yields of senior highquality corporate bonds 
at the balance sheet date these generally include aarated securities the discount rate is based on the market yield of a portfolio of bonds whose 
weighted residual maturities approximately correspond to the duration necessary to cover the entire beneﬁt obligation
pension and other retirement beneﬁts are inherently long term and future experience may differ from the actuarial assumptions used to determine 
the net charge for retirement beneﬁt obligations note 23 to these consolidated ﬁnancial statements describes the principal discount rate earnings 
increase and pension retirement beneﬁt obligation assumptions that have been used to determine the net charge for retirement beneﬁt obligations in 
accordance with ias 19 the calculation of any charge relating to retirement beneﬁt obligations is clearly dependent on the assumptions used which 
reﬂects the exercise of judgement the assumptions adopted are based on prior experience market conditions and the advice of plan actuaries
at 31 december 2012 the group’s retirement beneﬁt obligation deﬁcit was £2613 million 31 december 2011 £1177 million further details on the 
sensitivities and assumptions are discussed in the finance director’s review on pages 33 and 34
taxation
the group is subject to income tax in most of the jurisdictions in which it operates management is required to exercise judgement in determining 
the group’s provision for income taxes management’s judgement is required in estimating tax provisions where additional current tax may become 
payable in the future following the audit by the tax authorities of previously ﬁled tax returns management’s judgement is also required as to whether 
a deferred tax asset should be recognised based on the availability of future taxable proﬁts while the group aims to ensure that the estimates 
recorded are accurate the actual amounts could be different from those expected melrose industries plc
annual report 2012 86
notes to the financial statements continued
4 revenue
an analysis of the group’s revenue as deﬁned by ias 18 is as follows
notes
year ended 
31 december 
2012
£m
restated
1
year ended 
31 december 
2011
£m
continuing operations
revenue from the sale of goods 15422 10489
revenue recognised on longterm contracts 92 315
revenue 5 15514 10804
finance income 7 110 100
total revenue from continuing operations as defined by ias 18 15624 10904
discontinued operations
revenue from the sale of goods 359 2509
revenue recognised on longterm contracts — 04
revenue 59 359 2513
finance income — 05
total revenue from discontinued operations as defined by ias 18 359 2518
total revenue as defined by ias 18 15983 13422
1
 restated to include the results of mpc within discontinued operations
5 segment information
segment information is presented in accordance with ifrs 8 “operating segments” which requires operating segments to be identiﬁed on the basis 
of internal reports about components of the group that are regularly reported to the group’s board in order to allocate resources to the segments 
and assess their performance the group’s reportable operating segments under ifrs 8 are as follows
 energy
 lifting
 other industrial
 elster gas electricity water
the energy segment incorporates the brush and marelli business units specialist suppliers of energy industrial products to the global market the 
lifting segment consists of the businesses of bridon crosby and acco serving oil  gas production mining petrochemical alternative energy and 
general construction markets the other industrial segment consists primarily of the businesses of truth and harris serving the housing and steel 
recycling markets during the year elster was acquired as detailed in note 12 this has resulted in additional elster segments being recognised 
of gas electricity and water along with their associated central costs these businesses serve residential and industrial metering and utilisation 
markets whilst providing related communications networking and software solutions
there are two central cost centres which are also separately reported to the board
 central — corporate
 central — ltips
1
1
 long term incentive plans
the central corporate cost centre contains the melrose group head ofﬁce costs whilst the central ltips cost centre contains the costs associated 
with the previous melrose incentive plan crystallised on 22 march 2012 the new ﬁve year melrose incentive plan granted on 11 april 2012 and the 
divisional management ltips that are in operation across the group
the discontinued segment incorporates the dynacast brush traction logistex uk madico weber knapp and mpc businesses in 2011 and mpc 
in 2012
transfer prices between business units are set on an arm’s length basis in a manner similar to transactions with third parties wwwmelroseplcnet
stock code mro 87
governance shareholder information business performance financials
5 segment information continued
the group’s geographical segments are determined by the location of the group’s noncurrent assets and for revenue the location of external 
customers intersegment sales are not material and have not been included in the analysis below
the following tables present revenue proﬁt and certain asset and liability information regarding the group’s operating segments for the year ended 
31 december 2012 and the comparative period note 6 gives details of exceptional costs and income 
segment revenue from external customers
notes
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
continuing operations
energy 4868 4616
lifting 5244 4844
other industrial 1291 1344
elster
2
4111 — 
total continuing operations 4 15514 10804
discontinued operations 49 359 2513
total revenue 15873 13317
1
 restated to include the revenues of mpc within discontinued operations
2
 elster revenue comprises gas £2369 million electricity £1068 million and water £674 million
segment result
notes
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
continuing operations
energy 934  911 
lifting 952  826 
other industrial 170  165 
elster
2
578  —  
central — corporate 118 92
central — ltips
3
85 68
headline
4
 operating profit 2431  1742 
intangible asset amortisation 391 237
exceptional operating costs 6 739 400
exceptional operating income 6 70  —  
operating profit 1371  1105 
finance costs — headline
4
 7 398 295
finance costs — exceptional 67 163 —  
finance income 7 110  100 
profit before tax 920  910 
tax 8 491 191 
profit for the year from discontinued operations 9 13  1764 
profit for the year 442  2865 
1
 restated to include the results of mpc within discontinued operations
2
 elster headline
4
 operating proﬁt comprises gas £467 million electricity £126 million water £14 million and elster central costs £29 million
3
 long term incentive plans
4
 as deﬁned on the income statement
segment revenues and results melrose industries plc
annual report 2012 88
notes to the financial statements continued
5 segment information continued
total assets total liabilities
31 december
 2012
£m
restated
1
31 december
 2011
£m
31 december
 2012
£m
restated
1
31 december
 2011
£m
energy 6303 6410 2279 2316
lifting 7696 7673 2067 2123
other industrial 782 791 233 248
elster
2
27282 — 9150 —
central — corporate 2099 2517 12813 6322
central — ltips
3
— — 203 153
total continuing operations 44162 17391 26745 11162
discontinued operations — 424 — 169
total 44162 17815 26745 11331
1
 restated to include the total assets and total liabilities of mpc within discontinued operations
2
  elster total assets comprises gas £21275 million electricity £3356 million water £2401 million and elster central £250 million elster total liabilities comprises gas 
£5944 million electricity £1181 million water £1547 million and elster central £478 million
3
 long term incentive plans
capital expenditure
1
depreciation
1
year ended 
31 december
2012
£m
restated
2
year ended
31 december
 2011
£m
year ended 
31 december 
2012
£m
restated
2
year ended
31 december
 2011
£m
continuing operations
energy 109 114 75 79
lifting 304 213 99 88
other industrial 38 20 34 43
elster
3
90 — 91 —
central — corporate 09 — 06 06
total continuing operations 550 347 305 216
discontinued operations 17 81 09 56
total 567 428 314 272
1
 including computer software and development costs
2
 restated to include the capital expenditure
1
 and depreciation
1
 of mpc within discontinued operations
3
  elster capital expenditure comprises gas £55 million electricity £15 million and water £20 million elster depreciation comprises gas £51 million electricity £20 million and 
water £20 million
geographical information
the group operates in various geographical areas around the world the group’s country of domicile is the uk and the group’s revenues and non
current assets in europe and north america are also considered to be material
the group’s revenue from external customers and information about its segment assets noncurrent assets excluding interests in joint ventures 
deferred tax assets and noncurrent trade and other receivables by geographical location are detailed below
revenue
1
 from 
external customers noncurrent assets
year ended
31 december
2012
£m
restated
2
year ended
31 december
2011
£m
31 december
 2012
£m
restated
2
31 december
 2011
£m
uk 1434 1293 4142 3489
europe 4458 2808 17245 3217
north america 6514 4632 11184 4222
other 3108 2071 813 105
total continuing operations 15514 10804 33384 11033
discontinued operations 359 2513 — 181
total 15873 13317 33384 11214
1
 revenue is presented by destination
2
 restated to include the revenue and noncurrent assets of mpc within discontinued operations wwwmelroseplcnet
stock code mro 89
governance shareholder information business performance financials
6 exceptional costs and income
exceptional costs
year ended
31 december
2012
£m
restated
1
year ended
31 december
 2011
£m
continuing operations
restructuring costs 544 159
acquisition disposal and financing costs
 — operating 195 31
 — financing 163 — 
increase in legal provision —  210
total exceptional costs 902 400
total exceptional costs — operating 739 400
total exceptional costs — financing 163 — 
total exceptional costs 902 400
1
 restated to include the results of mpc within discontinued operations
during 2012 the group incurred £544 million 2011 £159 million of costs relating to restructuring programmes of which £525 million occurred 
in the second half of the year these costs include £91 million relating to the closure of the old elster head ofﬁce along with £279 million of other 
restructuring costs occurring within several of the key elster businesses these include reorganising the gas and electricity businesses into global 
operations and the closure of underperforming parts of the water business in addition £111 million of surplus leasehold property costs have been 
identiﬁed during the year and £63 million of restructuring costs have been incurred in the old melrose businesses in particular within the lifting 
division and the corporate restructure in respect of the new holding company the 2011 restructuring costs of £159 million related to programmes 
within the energy and lifting divisions
operating acquisition and disposal costs relate primarily to the costs incurred in acquiring elster in 2011 costs associated with acquisitions and 
disposals consisted predominantly of the expenses arising during an aborted acquisition process and the costs associated with the return of capital 
following the disposal of dynacast
financing exceptional costs relate to the debt reﬁnancing performed in january 2012 and subsequently in august 2012 where the amortisation of 
capitalised debt ﬁnance costs were accelerated and interest rate swaps were closed out early in addition these costs also include a proportion of 
the make whole premium charged upon the redemption of the eurobond inherited on the acquisition of elster
the increase in the legal provision in 2011 related to a product liability claim involving bridon this was settled in 2012
exceptional income
year ended
31 december
2012
£m
year ended
31 december
2011
£m
continuing operations
pension curtailment gain 70 —
total exceptional income 70 —
during 2012 a number of amendments were made to elster retirement medical beneﬁts and retirement life insurance beneﬁts in the us these 
removed £70 million of liabilities resulting in a curtailment gain on these plans melrose industries plc
annual report 2012 90
notes to the financial statements continued
7 revenues and expenses
continuing operations discontinued operations total
net operating expenses comprise
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
selling and distribution costs 1131 767 15 80 1146 847
administration expenses 1672 1035 09 141 1681 1176
share of results of joint ventures note 14 08  —  —  —  08  — 
other operating costs — exceptional note 6 739 400 —  01 739 401
other operating income — exceptional note 6 70  —  —  —  70  — 
total net operating expenses 3464 2202 24 222 3488 2424
1
 restated to include the results of mpc within discontinued operations
continuing operations discontinued operations total
operating profit is stated after charging
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
depreciation and impairment 290  228 09 54 299  282
cost of inventories 10679  7497 310 1966 10989  9463
amortisation of other intangible assets note 12 391  237 — 14 391  251
amortisation of computer software and 
 development costs note 12 24  06 — 02 24 08
operating lease expense 107  77 04 29 111  106
staff costs
2
3543  2772 55 585 3598  3357
research and development costs
2
76  20 — — 76  20
profit on disposal of property plant and 
 equipment 01 — — — 01 —
impairment recognised on trade receivables 08  07 — 01 08  08
1
 restated to include the results of mpc within discontinued operations
2
 staff costs include £127 million of research and development related costs in continuing operations
the analysis of auditor’s remuneration is as follows
year ended
31 december
 2012
£m
year ended
31 december
 2011
£m
fees payable to the company’s auditor for the audit of the company’s annual accounts 13 08
fees payable to the auditor for the audit of the elster acquisition balance sheet 04  — 
fees payable to the previous auditor of elster 02  — 
total fees payable for the audit of the company’s annual accounts 19  08
fees payable to the company’s auditor and their associates for other audit services to the group
 — the audit of the company’s subsidiaries pursuant to legislation 15 06
total audit fees 34 14 wwwmelroseplcnet
stock code mro 91
governance shareholder information business performance financials
7 revenues and expenses continued
year ended
31 december
 2012
£m
year ended
31 december
 2011
£m
auditrelated assurance services 05 01
taxation compliance services 02 04
other taxation advisory services 03 05
corporate finance services 17 17
other services 02 01
total nonaudit fees 29 28
 
fees for the audit of the company’s annual accounts represent fees payable to deloitte llp in respect of the audit of the company’s individual 
ﬁnancial statements the group’s consolidated ﬁnancial statements and the audit of the acquisition balance sheets of elster corporate ﬁnance 
services include due diligence and other transaction related services auditrelated assurance services relate to the review of the half year interim 
statements and assurance services related to investment circulars issued for the acquisition of elster and the new parent company
year ended
31 december
 2012
£m
restated
1
year ended
31 december
 2011
£m
staff costs during the year including executive directors
wages and salaries 2865 2256
social security costs 450 342
pension costs
 — defined benefit plans 12 04
 — defined contribution plans 131 102
ltips
2
85 68
total continuing staff costs 3543 2772
discontinued staff costs
3
55 585
total staff costs 3598 3357
1
 restated to include the results of mpc within discontinued operations
2
 long term incentive plans
3
 includes £nil million 2011 £02 million of deﬁned beneﬁt pension costs and £01 million 2011 £07 million of deﬁned contribution pension costs
year ended
31 december
 2012
number
restated
1
year ended
31 december
 2011
number
average monthly number of persons employed including executive directors
energy 3320 3341
lifting 3220 3079
other industrial 1001 1076
elster
2
6857 —
central — corporate 33 33
total continuing operations 14431 7529
discontinued operations 342 2478
total average number of persons employed 14773 10007
1
 restated to include the employees of mpc within discontinued operations
2
 elster average monthly number of persons employed comprises gas 4017 electricity 1530 and water 1310 melrose industries plc
annual report 2012 92
notes to the financial statements continued
7 revenues and expenses continued
notes
year ended
31 december
 2012
£m
   restated
1
year ended
31 december
 2011
£m
finance costs and income
interest on bank loans and overdrafts 329 256
amortisation of costs of raising finance 24 25
net finance cost of pensions 36 03
unwind of discount on provisions 20 09 11
headline
2
 finance costs 398 295
exceptional finance costs 6 163 — 
total finance costs 561 295
finance income 4 110  100 
total continuing operations 451 195
discontinued operations
3 
9 —  02 
total net finance costs 451 193
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement
3
 includes £nil 2011 £02 million net ﬁnance cost of pensions
the ﬁnance cost of pensions in the continuing group is the interest cost on beneﬁt obligations of £514 million net of the expected return on plan 
assets of £478 million 2011 £526 million and £523 million respectively
the interest cost on discontinued deﬁned beneﬁt obligations was £nil and the expected return on plan assets for discontinued businesses was  
£nil 2011 £02 million and £nil respectively
8 tax
continuing operations discontinued operations total
analysis of chargecredit in year
year ended 
31 december 
2012 
£m
restated
1
year ended
31 december
2011
£m
year ended 
31 december 
2012 
£m
restated
1
year ended
31 december
2011
£m
year ended 
31 december 
2012 
£m
year ended 
31 december 
2011 
£m
current tax 433  76 06 89  439  13 
deferred tax note 21 58  115 — 02 58  117
total income tax chargecredit 491  191 06 87  497  104
tax charge on headline
2
 profit before tax 578  397  06 95  584  492 
exceptional tax chargecredit 58  381 — —  58  381
tax credit on net exceptional items 131 76 — —  131 76
tax credit in respect of intangible 
 asset amortisation  14 131 — 08 14 139
total income tax chargecredit 491  191 06 87  497  104
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement
the tax charge for the year ended 31 december 2012 credit for the year ended 31 december 2011 includes an exceptional tax charge of £58 
million 2011 credit of £381 million of this charge £42 million relates to restructuring that took place during the year and £16 million relates to 
businesses previously disposed in 2011 a credit of £286 million related to the change in the company’s expectation of the outcome of overseas 
tax audits inherited on the acquisition of fki and a credit of £95 million related to the recognition of a previously unrecognised deferred tax asset 
during the period that was considered to be recoverable  wwwmelroseplcnet
stock code mro 93
governance shareholder information business performance financials
8 tax continued
the charge 2011 credit for the year can be reconciled to the proﬁt per the income statement as follows
year ended 
31 december 
2012
£m
restated
1
year ended
31 december
2011
£m
profit on ordinary activities before tax
continuing operations 920  910 
discontinued operations note 9 25  327 
945  1237 
tax on profit on ordinary activities at weighted average rate 2833 2011 2762 268  342 
tax effect of
net permanent differencesnondeductible items 69  17 
change to calculation of deferred tax liability on intangible asset 98  — 
effect of rate change on deferred tax liability on intangible asset —  72
temporary differences not recognised in deferred tax 44  06 
tax credits withholding taxes and other rate differences 16  23 
prior year tax adjustments 56 39
exceptional tax chargecredit 58  381
total tax chargecredit for the year 497  104
1
 restated to include the results of mpc within discontinued operations
the reconciliation has been performed at a blended group tax rate of 2833 2011 2762 which represents the weighted average of the tax 
rates applying to taxable proﬁts in the jurisdictions in which those proﬁts arose this blended rate has increased in 2012 following the acquisition of 
the elster businesses
in addition to the amount charged to the income statement a tax credit of £27 million 2011 £168 million has been recognised directly in the 
consolidated statement of comprehensive income this represents a tax credit of £49 million 2011 £120 million in respect of retirement beneﬁt 
obligations a tax charge of £16 million 2011 credit of £15 million in respect of movements on cash ﬂow hedges and a tax charge of £06 million 
2011 credit of £33 million in respect of the use of losses on items taken directly to reserves in prior years melrose industries plc
annual report 2012 94
notes to the financial statements continued
9 discontinued operations
disposal of businesses
on 25 june 2012 the group disposed of mpc a business acquired as part of the mckechnie acquisition in 2005 for cash consideration of £307 
million the costs charged during the year associated with the disposal were £31 million and the loss on disposal in the year was £06 million there 
were no cumulative translation differences associated with this business to recycle upon disposal this business was previously classiﬁed within the 
“other industrial” segment and is now shown within discontinued operations
financial performance of discontinued operations
year ended 
31 december 
2012 
£m
restated
1
year ended
31 december
2011
£m
revenue 359  2513 
operating costs 334 2173
headline
2
 operating profit 25  340 
intangible asset amortisation —  14
exceptional items
3
—  01
net finance income —  02 
profit before tax 25  327 
headline
2
 tax 06 95
tax on intangible asset amortisation —  08 
profit after tax 19  240 
cumulative translation differences recycled on disposals —  526 
lossgain on disposal of net assets of discontinued operations 06 998 
profit for the period from discontinued operations 13  1764 
attributable to
owners of the parent 13  1763 
noncontrolling interests —  01 
13  1764 
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement
3
 costs relating to the disposal of mpc incurred in 2011
during the year up until its sale on 25 june 2012 the mpc business contributed £359 million of revenue and £25 million of headline operating 
proﬁt
the comparative information for the year ended 31 december 2011 has been restated to exclude the results and cashﬂows of mpc from continuing 
operations and include them as discontinued operations
discontinued operations in 2011 also contain the results and cashﬂows of the dynacast brush traction logistex uk weber knapp and madico 
businesses wwwmelroseplcnet
stock code mro 95
governance shareholder information business performance financials
9 discontinued operations continued
the major classes of assets and liabilities disposed of with the mpc business were as follows
discontinued 
operations
£m
goodwill and other intangible assets 38
property plant and equipment 151
inventories 76
trade and other receivables 198
cash and cash equivalents 12
total assets disposed 475
trade and other payables 180
retirement benefit obligations 07
tax 06
total liabilities disposed 193
net assets disposed 282
cash consideration net of costs
1
276
loss on disposal of businesses 06
1
 includes £31 million of disposal costs
10 dividends
year ended 
31 december 
2012 
£m
year ended 
31 december 
2011 
£m
final dividend for the year ended 31 december 2010 paid of 70p 40p
1
— 348
interim dividend for the year ended 31 december 2011 paid of 46p 26p
1
— 180
final dividend for the year ended 31 december 2011 paid of 84p 48p
1
328 —
interim dividend for the year ended 31 december 2012 paid of 26p 329 —
657 528
1
 adjusted to include the effects of the rights issue note 11
proposed ﬁnal dividend for the year ended 31 december 2012 of 50p per share 2011 48p per share
1
 totalling £633 million 
2011 £328 million
the ﬁnal dividend of 50p was proposed by the board on 6 march 2013 and in accordance with ias 10 has not been included as a liability in these 
ﬁnancial statements
in addition to dividends paid shareholders approved a £3732 million return of capital on 8 august 2011 of which £3721 million was paid on 
19 august 2011 and £11 million was paid on 30 april 2012 melrose industries plc
annual report 2012 96
notes to the financial statements continued
11 earnings per share
earnings attributable to owners of the parent
year ended 
31 december 
2012 
£m
restated
1
year ended
31 december
2011
£m
profit for the purposes of earnings per share 425  2864 
less profit for the year from discontinued operations note 9 13 1763
earnings for basis of earnings per share from continuing operations 412  1101 
continuing operations
intangible asset amortisation 391  237 
exceptional costs note 6 — operating 739  400 
exceptional income note 6 — operating 70 — 
exceptional costs note 6 — financing 163  — 
exceptional tax
2
 87 588
earnings for basis of headline
2
 earnings per share from continuing operations 1548  1150 
discontinued operations
profit for the period from discontinued operations note 9 13  1763 
lossprofit on disposal of businesses 06  1524
intangible asset amortisation —  14 
exceptional items note 9 —  01 
tax on intangible asset amortisation —  08
earnings for basis of headline
2
 earnings per share from continuing and discontinued operations 1567  1396 
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement
number number
weighted average number of ordinary shares for the purposes of basic earnings per share including the effects of 
the rights issue
1
 million 9454 7989
further shares for the purposes of diluted earnings per share
2
 including the effects of the rights issue
1
 million 153 528
weighted average number of ordinary shares for the purposes of diluted earnings per share million 9607 8517
1
  on 1 august 2012 a 2 for 1 fully underwritten rights issue was completed by melrose plc and subsequently 8444 million new melrose ordinary shares were issued raising £12 
billion to part fund the acquisition of elster group se in accordance with ias 33 a bonus factor associated with the issue of the new share capital of 57 has been applied to the 
number of ordinary shares including comparative periods presented for the purpose of earnings per share calculations
2
 relating to the 2012 melrose incentive plan and the previous melrose incentive plan
earnings per share
year ended 
31 december 
2012 
pence
restated
1
year ended
31 december
2011
pence
basic earnings per share
from continuing and discontinued operations 45 358
from continuing operations 44 138
from discontinued operations 01 220
diluted earnings per share
from continuing and discontinued operations 44 336
from continuing operations 43 129
from discontinued operations 01 207
headline
2
 basic earnings per share
from continuing and discontinued operations 166 175
from continuing operations 164 144
headline
2
 diluted earnings per share
from continuing and discontinued operations 163 164
from continuing operations 161 135
3
1
 restated to include the results of mpc within discontinued operations and to include the effects of the rights issue
2
 as deﬁned on the income statement
3
  135p is the restated 2011 headline
2
 diluted earnings per share from continuing operations the board believe that 158p is a more appropriate measure to use for 2011 to compare 
against 2012 performance being the headline
2
 diluted earnings per share from continuing and discontinued operations adjusted to remove the earnings £48 million of the 
disposed business mpc wwwmelroseplcnet
stock code mro 97
governance shareholder information business performance financials
12 goodwill and other intangible assets 
goodwill 
£m
other 
intangible 
assets 
£m
computer 
software and 
development 
costs 
£m
total 
£m
cost
at 1 january 2011 7981  4547  30  12558 
additions —  —  16  16 
disposal of businesses 2208 340 14 2562
exchange adjustments 88 24 01 113
at 31 december 2011 5685  4183  31  9899 
acquisitions 12778  8626 241 21645 
additions —  —  22  22 
disposal of businesses 32 —  06 38
exchange adjustments 62 41 02  101
at 31 december 2012 18369  12768  290  31427 
amortisation
at 1 january 2011 —  736 06 742
charge for period —  251 08 259
disposal of businesses —  150  10  160 
exchange adjustments —  02  01  03 
at 31 december 2011 —  835 03 838
charge for the period —  391 24 415
exchange adjustments —  21  —  21 
at 31 december 2012 —  1205 27 1232
net book value
at 31 december 2012 18369  11563  263  30195 
at 31 december 2011 5685  3348  28  9061 
at 1 january 2011 7981  3811  24  11816
the net book value of other intangible assets at 31 december 2012 includes customer relationships of £8365 million 31 december 2011 £390 
million and brand names of £3198 million 31 december 2011 £2958 million as a result of the acquisition of elster on 23 august 2012 other 
intangible assets of £8626 million were identiﬁed
goodwill has been allocated to the business segments each of which comprises several cashgenerating units as follows
31 december
 2012
£m
restated
1
31 december
 2011
£m
energy 2442 2473
lifting 2897 2988
other industrial 183 192
elster
2
12847 —
discontinued — 32
18369 5685
1
 restated to include the goodwill of mpc within discontinued operations
2
 elster goodwill comprises gas £10626 million electricity £1567 million and water £654 million melrose industries plc
annual report 2012 98
notes to the financial statements continued
12 goodwill and other intangible assets continued 
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired
the recoverable amounts of the cashgenerating units are determined from value in use calculations the key assumptions for the value in use 
calculations are those regarding the discount rates growth rates and expected changes to selling prices and direct costs during the period the 
group estimates discount rates using pretax rates that reﬂect current market assessments of the time value of money and the risks speciﬁc to each 
cashgenerating unit the growth rates are based on a prudent estimate of long term industry growth forecasts changes in selling prices and direct 
costs are based on past practices and expectations of future changes in the market
the group prepares cash ﬂow forecasts derived from ﬁnancial budgets approved by management and extrapolates pretax cash ﬂows based on 
estimated growth rates of 3 2011 between 2 and 3 this rate does not exceed the average long term growth rate for the relevant markets 
the pretax discount rate applied is between 8 and 10 2011 9 and 10 depending on the risk elements associated with each cash
generating unit the key assumptions used in forecasting pretax cash ﬂows relate to future budgeted revenue and operating margins likely to be 
achieved and likely rates of longterm growth by market sector budgeted revenue and operating margins are based on views on past performance 
secured orders and orders likely to be achieved in the short to mediumterm given trends in the relevant market sector no impairment was 
identiﬁed and a reasonable possible change in the assumptions applied would not result in any impairment
acquisition of subsidiaries
in line with the group’s strategy to acquire good manufacturing businesses with potential for improvements on 23 august 2012 the group acquired 
9935 of the issued share capital and obtained control of elster group se for cash consideration of £14698 million subsequently a further 
045 of the remaining 065 share capital was purchased on various dates in 2012 for total consideration of £64 million elster is a world 
leading engineering company and one of the world’s largest providers of gas electricity and water meters gas utilisation products and related 
communications networking and software solutions 
in addition in september 2012 £242 million was paid in respect of deferred consideration relating to the acquisition of energyict a business 
acquired by elster in 2009
the amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed are as set out in the table below fair values are 
provisional as at 31 december 2012 and are based on the information held to date
fair value 
£m
elster
property plant and equipment 1003 
intangible assets computer software and development costs 8867 
derivative financial assets 03 
interests in joint ventures 98 
inventories 1762 
trade and other receivables 1826 
cash and cash equivalents 1056 
trade and other payables 3560
provisions 1430
deferred tax 2060
retirement benefit obligation 1173
current tax 292
interestbearing loans and borrowings 4119
noncontrolling interests 49
net assets 1932 
noncontrolling interests elster shares 12
goodwill 12778 
total consideration 14698 
satisfied by
cash consideration 14698 wwwmelroseplcnet
stock code mro 99
governance shareholder information business performance financials
12 goodwill and other intangible assets continued 
acquisition related costs included in exceptional operating costs amount to £192 million
the fair value of the ﬁnancial assets include gross trade and other receivables of £1928 million the best estimate at acquisition date of the 
contractual cash ﬂows not to be collected are £102 million
elster contributed £4111 million to revenue and £578 million to headline operating proﬁt for the period between the date of acquisition and the 
balance sheet date
the elster results were prepared under us gaap for the ﬁrst thirty three weeks of the year adjusting to estimate the impact of the transition to 
melrose accounting policies under ifrs and assuming elster had been acquired on the ﬁrst day of the ﬁnancial year group revenues for the period 
would have been approximately £2271 million and group headline operating proﬁt would have been approximately £330 million
the goodwill arising on acquisition of the elster group is attributable to the anticipated proﬁtability and cash ﬂows arising from the businesses 
acquired none of the goodwill is expected to be deductible for income tax purposes 
contingent liabilities of £95 million have been acquired in respect of warranty and legal claims and recognised within provisions we expect that the 
majority of expenditure will be incurred over the next ﬁve years
the noncontrolling interests acquired are measured based on the proportion of the fair value of their net assets
13 property plant and equipment
land 
and 
buildings
 £m
plant 
and 
equipment 
£m
total 
£m
cost
at 1 january 2011 1175  2501  3676 
additions 36  376  412 
disposals 01 21 22
disposal of businesses 164 926 1090
exchange adjustments 17 23 40
at 31 december 2011 1029  1907  2936 
acquisitions 273  730  1003 
additions 75  470  545 
disposals 03 26 29
disposal of businesses 58 190 248
exchange adjustments 20 47 67
at 31 december 2012 1296  2844  4140 
accumulated depreciation and impairment
at 1 january 2011 101 1038 1139
charge for the period 33 231 264
impairments 14 04 18
disposals 01  18  19 
disposal of businesses 47  566  613 
exchange adjustments —  06  06 
at 31 december 2011 100 683 783
charge for the period 33 257 290
impairments —  09 09
disposals —  16  16 
disposal of businesses 09  88  97 
exchange adjustments 02  16  18 
at 31 december 2012 122 829 951
net book value
at 31 december 2012 1174  2015  3189 
at 31 december 2011 929  1224  2153 
at 1 january 2011 1074  1463  2537  melrose industries plc
annual report 2012 100
notes to the financial statements continued
14 interests in joint ventures
31 december
 2012
£m
31 december
 2011
£m
aggregated amounts relating to joint ventures
total assets 224  39 
total liabilities 100 43
interests in joint ventures 124  04
share of joint venture revenues 114  32 
share of results of joint ventures 08  — 
dividends received from joint ventures 03 —
interests in joint ventures in 2011 were in a net liability position and were therefore recognised within current liabilities
a list of all the signiﬁcant investments in subsidiaries including the name country of incorporation and proportion of ownership interest is given in 
note 3 to the company’s separate ﬁnancial statements
15 inventories
31 december
 2012
£m
31 december
2011
£m
raw materials 1148 533
work in progress 1569 779
finished goods 1044 746
3761 2058
the directors consider that there is no material difference between the balance sheet value of inventories and their replacement cost
construction contracts
31 december
 2012
£m
31 december
2011
£m
contracts in progress at the balance sheet date
amounts due from contract customers included in other receivables 30  29 
amounts due to contract customers included in other payables —  — 
30  29 
contract costs incurred plus recognised profit less recognised losses to date 94  190 
less progress billings 64 161
30  29 
the average life of contracts is 1–2 years 31 december 2011 1–2 years wwwmelroseplcnet
stock code mro 101
governance shareholder information business performance financials
16 trade and other receivables
current
31 december
 2012
£m
31 december
2011
£m
trade receivables 3341  1959 
allowance for doubtful receivables 126 32
amounts due from joint ventures 13  — 
other receivables 422  91 
prepayments 191  145 
3841  2163 
trade receivables are non interestbearing credit terms offered to customers vary upon the country of operation but are generally between 30 and 
90 days 
noncurrent
31 december
 2012
£m
31 december
2011
£m
other receivables 03 03
an allowance has been made for estimated irrecoverable amounts made with reference to past default experience and management’s assessment 
of creditworthiness an analysis of which is as follows
energy 
£m
lifting 
£m
other
 
industrial
1
 
£m
elster 
£m
central 
£m
discontinued
1
 
£m
total 
£m
at 1 january 2011 22  11  06  —  02  25  66 
disposal of businesses —  —  —  —  —  21 21
income statement charge 03  04  —  —  —  01  08 
utilised 10 06 01 —  01 02 20
exchange differences 01 —  —  —  —  —  01
at 31 december 2011 14  09  05  —  01  03  32 
acquired with business —  —  —  102  —  —  102 
disposal of businesses —  —  —  —  —  03 03
income statement charge 03  03  —  02  —  —  08 
utilised 02 01 01 09 —  —  13
exchange differences 01 01 02  —  —  —  — 
at 31 december 2012 14  10  06  95  01  —  126 
1
 restated to include the results of mpc within discontinued operations
the concentration of credit risk is limited due to the large number of customers and because they are unrelated to each other credit control 
procedures are implemented to ensure that sales are only made to organisations that are willing and able to pay for them such procedures include 
the establishment and review of customer credit limits and terms the group does not hold any collateral or any other credit enhancements over any 
of its trade receivables nor does it have a legal right of offset against any amounts owed by the group to the counterparty melrose industries plc
annual report 2012 102
notes to the financial statements continued
16 trade and other receivables continued
the ageing of impaired trade receivables past due is as follows
ageing of impaired trade receivables past due
31 december
 2012
£m
31 december
2011
£m
0 – 30 days 19 04
31 – 60 days 04 03
60 days 103 25
126 32
included in the group’s trade receivables balance are overdue trade receivables with a carrying amount of £880 million 31 december 2011 £373 
million against which an appropriate provision of £126 million 31 december 2011 £32 million is held
the balance deemed recoverable of £754 million 31 december 2011 £341 million is past due as follows
31 december
 2012
£m
31 december
2011
£m
0 – 30 days 581 233
31 – 60 days 79 58
60 days 94 50
754 341
the directors consider that the carrying amount of trade and other receivables including amounts not past due and not impaired approximates to 
their fair value 
17 cash and cash equivalents
31 december
 2012
£m
31 december
2011
£m
cash and cash equivalents 1565 1956
cash and cash equivalents comprises cash at bank and in hand which earns interest at ﬂoating rates based on daily bank deposit rates and short
term deposits which are made for varying periods of between one day and one month and earn interest at the respective shortterm deposit rates 
the carrying amount of these assets is considered to be equal to their fair value
18 trade and other payables
current
31 december
 2012
£m
31 december
2011
£m
trade payables 2534 1440
other payables 1686 544
other taxes and social security 165 74
deferred government grants 24 —
accruals 985 702
5394 2760
trade payables are non interestbearing normal settlement terms vary by country and the average credit period taken for trade purchases is 98 
days 2011 91 days other payables are non interestbearing and have an average term of approximately 60 days
noncurrent
31 december
 2012
£m
31 december
2011
£m
other payables 09 –
accruals 17 16
26 16
the directors consider that the carrying amount of trade and other payables approximates to their fair value wwwmelroseplcnet
stock code mro 103
governance shareholder information business performance financials
19 interestbearing loans and borrowings
this note provides information about the contractual terms of the group’s interestbearing loans and borrowings details of the group’s exposure to 
credit liquidity interest rate and foreign currency risk are included in note 24
current noncurrent total
31 december 
2012 
£m
31 december 
2011 
£m
31 december 
2012 
£m
31 december 
2011 
£m
31 december 
2012 
£m
31 december 
2011 
£m
fixed rate obligations
bank borrowings — brazilian real 62 — — — 62  —
62 — — — 62  —
floating rate obligations
bank borrowings — us dollar loan
1
—  — 4233  3901  4233  3901 
bank borrowings — euro loan
2
—  — 2982  486  2982  486 
bank borrowings — sterling loan
3
—  277 4475  223  4475  500 
—  277 11690  4610  11690  4887 
redeemable preference c shares —  11 —  —  —  11 
unamortised finance costs —  — 210 35 210 35
total interestbearing loans and borrowings 62 288 11480  4575  11542 4863
1
 interest rate libor 200 ﬁnal maturity june 2017 31 december 2011 interest rate libor 135 ﬁnal maturity april 2013
2
 interest rate euribor 200 ﬁnal maturity june 2017 31 december 2011 interest rate euribor 135 ﬁnal maturity april 2013 
3
 interest rate libor 200 ﬁnal maturity june 2017 31 december 2011 interest rate libor 135 ﬁnal maturity april 2013
from 1 january 2012 to 31 january 2012 the group utilised a £750 million multicurrency committed facility which was due to expire on 22 april 
2013 on 31 january 2012 all amounts outstanding on this facility were repaid using surplus cash in the group at that time and by partially utilising a 
replacement facility which was a £600 million committed multicurrency revolving credit facility subsequently to part ﬁnance the acquisition of elster 
a new ﬁve year £15 billion agreement was signed on 29 june 2012 split into a £05 billion multicurrency term loan and a £10 billion multicurrency 
revolving credit facility following the successful tender offer to the shareholders of elster this facility was part drawn on 23 august 2012 in order to 
repay the drawings under the aforementioned £600 million facility and pay a proportion of the consideration for the elster shares
in addition the new £15 billion facility has been part used to reﬁnance where necessary the existing indebtedness of elster this included a seven 
year eurobond with a principal value of €250 million due to mature in april 2018 a committed €450 million multicurrency revolving credit facility and 
a €140 million committed multicurrency guarantee facility both of which were due to mature in april 2016 the €450 million revolving credit facility 
was repaid on 28 september 2012 on 29 september 2012 the majority of the bank guarantees issued under the elster €140 million guarantee 
facility were assumed under the new £15 billion facility on 28 november 2012 the elster eurobond was repaid together with the applicable 
redemption premium and accrued interest resulting in a repayment including principal of €2833 million 
as at 31 december 2012 the new £05 billion term loan was fully drawn and split into two tranches of £180 million and us 500 million the 
revolving credit facility is split into multicurrency sterling based tranches totalling £760 million and a €300 million tranche both of which were 
partially drawn
throughout the year the group remained compliant with all covenants under the facilities disclosed above a number of companies have been 
or continue to be guarantors under the bank facilities disclosed herein in addition until elster group se becomes a wholly owned subsidiary of 
melrose industries plc currently 998 owned and has been converted into a german limited liability company a pledge has been given over the 
shares of elster group se
drawdowns under the new facility bear interest at interbank rates of interest plus a margin determined by reference to the group’s performance 
under its debt cover covenant ratio and ranges between 140 and 265 the margin as at 31 december 2012 was 200 31 december 2011 
135
the new £05 billion term loan is subject to mandatory repayments of 5 per cent of the original tranches on june 2015 june 2016 and 31 
december 2016 melrose industries plc
annual report 2012 104
notes to the financial statements continued
19 interestbearing loans and borrowings continued
maturity of ﬁnancial liabilities
the maturity proﬁle of anticipated future cash ﬂows including interest in relation to the group’s ﬁnancial liabilities on an undiscounted basis and 
which therefore differs from both the carrying value and fair value is shown in the table below interest on ﬂoating rate debt is based on the relevant 
libor curve for us dollar and sterling balances and the euribor curve for euro balances interest on hedging interest rate swaps is based on the 
relevant forward libor curves for us dollar and sterling amounts and euribor curve for euro amounts and is illustrated as a net cash ﬂow
interestbearing 
loans and 
borrowings
£m
derivative 
financial 
liabilities
£m
other 
financial 
liabilities 
£m
total
 financial 
liabilities
£m
within one year 333  70  5205 5608 
in one to two years 282  38  26 346 
in two to five years 12529  03 — 12526 
effect of financing rates 1602 —  — 1602
31 december 2012 11542  105  5231 16878 
within one year 387  141  2686 3214 
in one to two years 4642  16  16 4674 
effect of financing rates 166 —  — 166
31 december 2011 4863  157  2702 7722
20 provisions
surplus 
leasehold 
property 
costs 
£m
environmental 
and legal 
costs 
£m
incentive 
plan 
related 
£m
warranty 
related 
costs 
£m
other 
£m
total 
£m
at 31 december 2011 197  637  153  11  208  1206 
acquisition of businesses 59  174  — 884  313  1430 
utilised
1
51 329 — 42 263 685
arising in the year
2
111  05  50 50  386  602 
unwind of discount note 7 04  05  — —  —  09 
exchange differences 05 10 — 01  05 19
at 31 december 2012 315  482  203 904  639  2543 
current 76  98  — 227  583  984 
noncurrent 239  384  203 677  56  1559 
315  482  203 904  639  2543
1
 includes £658 million of provisions utilised by cash and £27 million through headline
3
 operating proﬁt 
2
  includes £483 million of provisions arising in the year through exceptional costs and £112 million of provisions arising in the year through headline
3
 operating proﬁt and £07 million 
arising as a result of the disposal of a subsidiary
3
 as deﬁned on the income statement
the provision for surplus leasehold property costs represents the estimated net payments payable over the term of these leases together with any 
dilapidation costs this is expected to result in cash expenditure over the next one to six years
environmental and legal costs provisions relate to the estimated remediation costs of pollution soil and groundwater contamination at certain sites 
and estimated future costs and settlements in relation to legal claims due to their nature it is not possible to predict precisely when these provisions 
will be utilised 
incentive plan related provisions are in respect of long term incentive plans for divisional senior management expected to result in cash expenditure 
in the next four years
the provision for warranty related costs represents the best estimate of the expenditure required to settle the group’s obligations warranty terms 
are on average between one and ﬁve years
other provisions relate primarily to costs that will be incurred in respect of restructuring programmes and contractual obligations 
where appropriate provisions have been discounted using a discount rate of 3 31 december 2011 3 wwwmelroseplcnet
stock code mro 105
governance shareholder information business performance financials
21 deferred tax
the following are the major deferred tax assets and liabilities recognised by the group and movements thereon during the current and prior reporting 
period
deferred tax 
assets deferred tax liabilities
notes 
tax losses  
and other 
assets
£m
accelerated 
capital 
allowances 
and other 
liabilities
£m
deferred tax 
on intangible 
assets
£m
total deferred 
tax liabilities
£m
total net
deferred tax
£m
at 1 january 2011 330 121 1028 1149 819
creditcharge to income 8 21 43 139  96  117 
credit to other comprehensive income 120  15  —  15  135 
disposal of businesses 66 02  47  49  17
exchange differences 01 —  06  06  05 
at 31 december 2011 404 147 836 983 579
chargecredit to income 8 30 42 14  28 58
creditcharge to other comprehensive income 49  16 —  16 33 
acquisition of businesses 12 1038 434 2664 3098 2060
exchange differences 10 01 14  13  03 
at 31 december 2012 1451 640 3472 4112 2661
as at 31 december 2012 the group has gross unused losses of £2506 million 31 december 2011 £2014 million available for offset against future 
proﬁts at 31 december 2012 a £91 million deferred tax asset 31 december 2011 £89 million in respect of £355 million 31 december 2011 
£350 million of these gross losses has been recognised in the balance sheet no asset has been recognised in respect of the remaining losses due 
to the divisional and geographic split of anticipated future proﬁt streams and the effect of possible disposals in future years the majority of these 
losses may be carried forward indeﬁnitely subject to certain continuity of business requirements 
a signiﬁcant part of the retirement beneﬁt obligations recognised in the group ﬁnancial statements relates to the fki uk pension plan the 
mckechnie uk pension plan and the fki us pension plan a deferred tax asset of £183 million 31 december 2011 £184 million has been 
recognised on these obligations being the extent to which they are expected to generate tax deductions against foreseeable taxable proﬁts 
an asset of £195 million has also been recognised on elster pension obligations
the remaining asset of £982 million 31 december 2011 £131 million relates to other temporary differences the signiﬁcant increase arises 
on the acquisition of elster during the period
as at 31 december 2012 the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which 
deferred tax liabilities have not been recognised was £66 million 31 december 2011 £34 million no liability has been recognised in respect of 
these differences because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such 
differences will not reverse in the foreseeable future
22 sharebased payments
melrose incentive plans
on 11 april 2012 at a melrose general meeting shareholders voted in favour of the early crystallisation of the previous melrose incentive plan 
bringing forward the maturity date from 31 may 2012 to 22 march 2012 on crystallisation the incentive shares were converted into 312 million 
melrose ordinary shares as a result the total number of ordinary shares in the company increased from 3910 million to 4222 million
at the same meeting a new ﬁve year sharebased 2012 melrose incentive plan was approved by shareholders which mirrors the previous melrose 
incentive plan in most respects except that under this new plan the potential reward has been reduced from 10 to 75 of the increase in 
shareholder value creation in addition a 5 dilution cap has been included in the new plan rules this new plan has an end date of 31 may 2017
the estimated value of the 2012 incentive shares at 31 december 2012 was £86 million using a black scholes option pricing model the projected 
value of this plan in over four years time at 31 may 2017 will be £602 million  melrose industries plc
annual report 2012 106
notes to the financial statements continued
22 sharebased payments continued
the inputs into the black scholes model that were used to fair value the plan were as follows
valuation 
assumptions
1 
2012
weighted average share price £227
weighted average exercise price £285
expected volatility 300
expected life as at inception 50yrs
risk free interest 10
1
 calculated using the share price adjusted for the rights issue in august 2012 
expected volatility was determined by calculating the historical volatility of the company’s share price 
the group recognised an ifrs 2 charge of £35 million 2011 £18 million in the year ended 31 december 2012 £27 million in relation to the 
equitysettled 2012 melrose incentive plan and £08 million in relation to the previous melrose incentive plan
23 retirement beneﬁt obligations
melrose holds several pension plans covering many of its employees operating in several jurisdictions
the most signiﬁcant deﬁned beneﬁt pension plans are
  the fki uk pension plan which is deﬁned beneﬁt in type and is a funded plan where the future liabilities for members’ beneﬁts are provided for 
by the accumulation of assets held externally to the group in separate trustee administered funds the plan is closed to new members and the 
accrual of future beneﬁts for existing members
  the mckechnie uk pension plan which is deﬁned beneﬁt in type and is a funded plan other than £41 million of unfunded liabilities where 
the future liabilities for members’ beneﬁts are provided for by the accumulation of assets held externally to the group in separate trustee 
administered funds the plan is closed to new members and the accrual of future beneﬁts for existing members
  the fki us pension plan which is deﬁned beneﬁt in type and is a funded plan where the future liabilities for members’ beneﬁts are provided for 
by the accumulation of assets held externally to the group in separate trustee administered funds the plan is closed to new members and the 
accrual of future beneﬁts for existing members
further details of the status of the signiﬁcant plans are disclosed in the directors’ report on pages 50 and 51
other plans include a number of funded and unfunded deﬁned beneﬁt arrangements across europe north america and the rest of the world 
during the year a number of additional plans were acquired as part of the acquisition of the elster division the net deﬁcit on the elster acquired 
plans at 31 december 2012 was £1152 million included in this amount is £896 million 78 relating to unfunded german deﬁned beneﬁt plans 
and early retirement programmes designed to create an incentive within a certain age group to retire early the remaining plans in the elster division 
are not signiﬁcant in size with £192 million 17 of the deﬁcit relating to us deﬁned beneﬁt and retirement healthcare and life insurance beneﬁts
the cost of the group’s deﬁned beneﬁt plans are determined in accordance with ias 19 with the advice of independent professionally qualiﬁed 
actuaries on the basis of formal actuarial valuations using the projected unit credit method in line with normal practice these valuations are 
undertaken triennially in the uk and annually in the us
the fki uk and mckechnie uk pension plan valuations are based on the uk full actuarial valuations as of 31 december 2011 updated at 31 
december 2012 by independent actuaries and the fki us pension plan valuation is based on the us full actuarial valuation as of 31 december 2011 
updated at 31 december 2012 by independent actuaries the latest uk full actuarial valuations are due to be signed during march 2013
the group also operates unfunded retiree medical and welfare beneﬁt plans principally in the us 
the group contributed £185 million 2011 £185 million to the fki uk pension plan and £46 million 2011 £46 million to the mckechnie uk 
pension plan in the year ended 31 december 2012 the group also contributed £60 million to the mckechnie uk pension plan following the 
disposal of the mpc business contributions to the fki uk pension plan in 2013 will be £200 million
in addition to this there are a number of deﬁned contribution plans across the group contributions by continuing businesses during the year were 
£131 million 2011 £102 million wwwmelroseplcnet
stock code mro 107
governance shareholder information business performance financials
23 retirement beneﬁt obligations continued
actuarial assumptions
the major weighted average assumptions used by the actuaries in calculating the group’s pension plan assets and liabilities are as set out below
31 december 2012
fki 
uk plan 
 pa
mckechnie 
uk plan 
 pa
fki 
us plan 
 pa
us plans 
 pa
european 
plans 
 pa
other 
plans 
 pa
rate of increase in salaries na 350
1
na 400 275 300
rate of increase in pensions in payment 290 300 na na 190 na
discount rate 450 450 390 390 290 390
rpi inflation assumption 300 300 na na 190 290
1
 closed to the accrual of future beneﬁts but active members’ beneﬁts are still linked to current salaries
31 december 2011
fki 
uk plan 
 pa
mckechnie 
uk plan 
 pa
fki 
us plan 
 pa
us plans 
 pa
other 
plans 
 pa
rate of increase in salaries na 360
1
na na na
rate of increase in pensions in payment 300 310   na na na
discount rate 490 490   430 400 460
rpi inflation assumption 310 310   na na 250
1
 closed to the accrual of future beneﬁts but active members’ beneﬁts are still linked to current salaries 
mortality
fki uk pension plan 
mortality assumptions for the most signiﬁcant plan in the group the fki uk plan as at 31 december 2012 are based on the self administered 
pension scheme “saps” “s1” base tables with scaling factors of 110 and 105 for deferred members and pensioners respectively which reﬂect 
the results of a mortality analysis carried out on the plan’s membership future improvements are in line with the continuous mortality investigation 
improvement model with a longterm rate of improvement of 125 pa for both males and females 
the assumptions are that a member currently aged 65 will live on average for a further 221 years if they are male and for a further 242 years if they 
are female for a member who retires in 2032 at age 65 the assumptions are that they will live for a further 235 years after retirement if they are 
male and for a further 258 years after retirement if they are female
the mortality assumptions are in line with those adopted for the triennial valuation results as at 31 december 2011
sensitivities
sensitivities around movements in the principal assumptions of the discount rate inﬂation rate and mortality are discussed in the finance director’s 
review on pages 33 and 34
balance sheet disclosures
the amount recognised in the balance sheet arising from net liabilities in respect of deﬁned beneﬁt plans is as follows
31 december 
2012 
£m
31 december 
2011 
£m
31 december 
2010 
£m
31 december 
2009 
£m
31 december 
2008 
£m
plan liabilities 13046 10767 10394 10335 9397
plan assets 10433  9590  9198  8644  8105 
limit on pension plan surplus —  —  —  —  141
net liabilities 2613 1177 1196 1691 1433 melrose industries plc
annual report 2012 108
notes to the financial statements continued
23 retirement beneﬁt obligations continued
the ﬁve year history of experience adjustments is as follows
31 december 
2012 
£m
31 december 
2011 
£m
31 december 
2010 
£m
31 december 
2009 
£m
31 december 
2008 
£m
experience adjustments on plan liabilities 901 724 238 1309 707 
experience adjustments on plan assets 263  353  376  410  789
the plan liabilities and assets at 31 december 2012 were split by plan as follows
fki 
uk plan 
£m
mckechnie 
uk plan 
£m
fki 
us plan 
£m
us plans 
£m
european 
plans 
£m
other 
plans 
£m
total
£m
plan liabilities 7302 1790 2284 464 1110 96 13046
plan assets 6302  1708  1983  266  97  77  10433 
net liabilities 1000 82 301 198 1013 19 2613
this amount is presented in the balance sheet
31 december 
2012 
£m
31 december 
2011 
£m
31 december 
2010 
£m
31 december 
2009 
£m
31 december 
2008 
£m
net liabilities
 — unfunded plans 1180 112 210 242 452
 — funded plans 1433 1065 986 1449 840
limit on pension plan surplus — — — — 141
2613 1177 1196 1691 1433
expected returns and fair value of assets
expected rates of return fair value of assets
31 december 
2012 

31 december 
2011 

31 december 
2012
£m
31 december 
2011 
£m
equity instruments 70 70 4107 3487
debt instruments 38 38 5343 5142
other assets 53 44 983 961
weighted averagetotal 52 50 10433 9590
the expected return on plan assets at 31 december 2012 is based on market expectations at 1 january 2013 for returns on assets over the entire 
life of the obligation
there is no self investment other than in relevant tracker funds either in the group’s own ﬁnancial instruments or property or other assets used by 
the group wwwmelroseplcnet
stock code mro 109
governance shareholder information business performance financials
23 retirement beneﬁt obligations continued
movements in the present value of deﬁned beneﬁt obligations during the year
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
at beginning of year 10767  10394 
acquisition of business 1551  — 
disposal of businesses 07 411
current service cost 12  06 
past service cost 09 — 
interest cost 514  528 
actuarial losses 901  724 
benefits paid out of plan assets 499 477
benefits paid out of group assets for unfunded plans 18 — 
plan curtailments 70 08
currency gainslosses 96 11 
at end of year 13046  10767 
movements in the fair value of plan assets during the year
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
at beginning of year 9590  9198 
acquisition of business 378  — 
disposal of businesses —  305
expected return on assets 478  523 
actuarial gains 263  353 
contributions 319  288 
benefits paid out of plan assets 499 477
currency lossesgains 96 10 
at end of year 10433  9590 
the actual return on plan assets was a gain of £741 million 2011 £876 million  melrose industries plc
annual report 2012 110
notes to the financial statements continued
23 retirement beneﬁt obligations continued
income statement disclosures
amounts recognised in the income statement in respect of these deﬁned beneﬁt plans are as follows
year ended 
31 december
 2012
£m
restated
1 
year ended 
31 december
2011
£m
continuing operations
included within headline
2
 operating profit
 — current service cost 12  04 
 — past service cost 09 — 
 — curtailment gain —  08
included within net finance costs
 — interest cost 514  526 
 — expected return on assets 478 523
included within exceptional items
 — curtailment gain 70 — 
discontinued operations
included within headline
2
 operating profit
 — current service cost —  02 
included within net finance costs
 — interest cost —  02
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement 
statement of comprehensive income disclosures
the amount recognised in the statement of comprehensive income is as follows
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
actuarial losses on plan liabilities 901 724
actuarial gains on plan assets 263  353 
638 371
the cumulative amount of actuarial gains and losses recognised in the statement of comprehensive income is a total loss of £1783 million 
2011 £1145 million wwwmelroseplcnet
stock code mro 111
governance shareholder information business performance financials
24 financial instruments and risk management
the table below sets out the group’s accounting classiﬁcation of each category of ﬁnancial assets and liabilities and their fair values at 31 december 
2012 and 31 december 2011
energy 
£m
lifting 
£m
other 
industrial
1
 
£m
central 
£m
elster 
£m
discontinued
1 
£m
total 
£m
31 december 2012
financial assets
cash and cash equivalents —  —  —  1565  —  —  1565 
net trade receivables 930  782  83  01  1419  —  3215 
derivative financial assets 22  08  —  01  02  —  33 
financial liabilities
interestbearing loans and 
 borrowings —  —  —  11480 62 —  11542
derivative financial liabilities 14 07 —  82 02 —  105
other financial liabilities 1143 786 171 335 2796 —  5231
31 december 2011
financial assets
cash and cash equivalents —  —  —  1956  —  —  1956 
net trade receivables 940  746  88  01  —  152  1927 
derivative financial assets 04  09  —  04  —  —  17 
financial liabilities
interestbearing loans and
 borrowings —  —  —  4863 —  —  4863
derivative financial liabilities 86 10 01 58 —  02  157
other financial liabilities 1168 837 201 335 —  161  2702
1
 restated to include the ﬁnancial assets and ﬁnancial liabilities of mpc within discontinued operations
credit risk
the group considers its maximum exposure to credit risk to be as follows
energy 
£m
lifting 
£m
other 
industrial
1
£m
central 
£m
elster 
£m
discontinued
1 
£m
total 
£m
31 december 2012
financial assets
cash and cash equivalents — — — 1565 — — 1565
trade receivables 930 782 83 01 1419 — 3215
derivative financial assets 22 08 — 01 02 — 33
31 december 2011
financial assets
cash and cash equivalents — — — 1956 —  —  1956
trade receivables 940 746 88 01 —  152 1927
derivative financial assets 04 09 — 04 —  —  17
1
 restated to include the ﬁnancial assets of mpc within discontinued operations
the group’s principal ﬁnancial assets are cash and cash equivalents trade receivables and derivative ﬁnancial assets which represent the group’s 
maximum exposure to credit risk in relation to ﬁnancial assets
the group’s credit risk on cash and cash equivalents and derivative ﬁnancial instruments is limited because the counterparties are banks with 
strong creditratings assigned by international creditrating agencies the group’s credit risk is primarily attributable to its trade receivables the 
amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables estimated by the group’s management based 
on prior experience and their assessment of the current economic environment note 16 provides further details regarding the recovery of trade 
receivables melrose industries plc
annual report 2012 112
notes to the financial statements continued
24 financial instruments and risk management continued
capital risk
the group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to 
stakeholders through the optimisation of the group’s net debt and equity balance
the capital structure of the group consists of net debt which includes the borrowings disclosed in note 19 after deducting cash and cash 
equivalents and equity attributable to equity holders of the parent comprising issued share capital reserves and retained earnings as disclosed 
in the consolidated statement of changes in equity 
liquidity risk
the group’s policy for managing liquidity risk is set out in the finance director’s review
fair values
the directors consider that the ﬁnancial assets and liabilities have fair values not materially different to the carrying values
foreign exchange contracts
as at 31 december 2012 the group held foreign exchange forward contracts to mitigate expected exchange ﬂuctuations on cash ﬂows on sales to 
customers and purchases from suppliers these instruments operate as cash ﬂow hedges unless the amounts involved are small the terms of the 
material currency pairs with total principals in excess of sterling £1 million equivalent are as follows 
31 december 
2012 
selling currency 
millions
31 december 
2012 
average hedged 
rate
31 december 
2011 
selling currency 
millions
31 december 
2011 
average hedged 
rate
sell australian dollarbuy euro aud 47 euraud 127 ——
sell australian dollarbuy sterling aud 43 gbpaud 158 aud 43 gbpaud 160
sell canadian dollarbuy sterling —— cad 43 gbpcad 160
sell canadian dollarbuy us dollar cad 17 usdcad 100 cad 19 usdcad 099
sell chinese renminbibuy us dollar —— cny 103 usdcny 643
sell czech korunabuy us dollar czk 339 usdczk 2024 ——
sell eurobuy chinese renminbi —— eur 23 eurcny 874
sell eurobuy czech koruna eur 71 eurczk 2520 eur 168 eurczk 2459
sell eurobuy mexican peso eur 41 eurmxn 1701 ——
sell eurobuy polish zloty eur 18 eurplz 409 ——
sell eurobuy sterling eur 374 gbpeur 124 eur 244 gbpeur 115
sell eurobuy us dollar eur 27 eurusd 128 eur 28 eurusd 138
sell hong kong dollarbuy sterling hkd 169 gbphkd 1241 hkd 217 gbphkd 1211
sell malaysian ringgitbuy euro myr 58 eurmyr 400 ——
sell malaysian ringgitbuy us dollar myr 56 usdmyr 311 ——
sell norwegian kronebuy euro —— nok 281 eurnok 786
sell norwegian kronebuy sterling nok 923 gbpnok 930 nok 569 gbpnok 913
sell singapore dollarbuy sterling sgd 21 gbpsgd 198 ——
sell south african randbuy euro zar 211 eurzar 1060 zar 347 eurzar 1051
sell south african randbuy sterling zar 293 gbpzar 1421 ——
sell sterlingbuy czech koruna gbp 621 gbpczk 3058 gbp 871 gbpczk 2855
sell sterlingbuy euro gbp 370 gbpeur 122 gbp 355 gbpeur 115
sell sterlingbuy us dollar gbp 31 gbpusd 161 gbp 11 gbpusd 158
sell uae dirhambuy sterling aed 68 gbpaed 590 ——
sell us dollarbuy canadian dollar usd 37 usdcad 100 usd 49 usdcad 099
sell us dollarbuy chinese renminbi —— usd 16 usdcny 643
sell us dollarbuy czech koruna —— usd 42 usdczk 1850
sell us dollarbuy euro usd 56 eurusd 122 usd 64 eurusd 138
sell us dollarbuy sterling usd 845 gbpusd 159 usd 798 gbpusd 159
the foreign exchange contracts all mature between january 2013 and august 2014
the fair value of the contracts at 31 december 2012 was a net asset of £08 million 31 december 2011 net liability of £83 million wwwmelroseplcnet
stock code mro 113
governance shareholder information business performance financials
24 financial instruments and risk management continued
commodity swap contracts
as at 31 december 2012 the group held a number of copper swap contracts that were designated as cash ﬂow hedges these swap contracts 
lock the group into ﬁxed copper prices to protect against ﬂuctuations in the market price of copper the terms of the contracts are
commodity swaps commodity total quantity maturity pricing us dollar
group pays copper 130 tonnes 4 february 2013 7538 per tonne
group receives copper 130 tonnes 4 february 2013 average lme price for the month
group pays copper 170 tonnes 4 march 2013 7698 per tonne
group receives copper 170 tonnes 4 march 2013 average lme price for the month
group pays copper 190 tonnes 3 april 2013 7405 per tonne
group receives copper 190 tonnes 3 april 2013 average lme price for the month
group pays copper 120 tonnes 2 may 2013 7395 per tonne
group receives copper 120 tonnes 2 may 2013 average lme price for the month
group pays copper 80 tonnes 4 june 2013 7323 per tonne
group receives copper 80 tonnes 4 june 2013 average lme price for the month
group pays copper 70 tonnes 2 july 2013 7327 per tonne
group receives copper 70 tonnes 2 july 2013 average lme price for the month
group pays copper 50 tonnes 2 august 2013 7330 per tonne
group receives copper 50 tonnes 2 august 2013 average lme price for the month
the fair value of the contracts at 31 december 2012 was a net asset of £01 million 31 december 2011 £nil
hedge of net investments in foreign entities
included in interestbearing loans at 31 december 2012 were the following amounts which were designated as hedges of net investments in the 
group’s subsidiaries in europe and the usa and were being used to reduce the exposure to foreign exchange risks 
borrowings in local currency
31 december
 2012
£m
31 december
2011
£m
us dollar 3078 3901
euro 2819 486
interest rate sensitivity analysis
a one percentage point rise in market interest rates for all currencies would decreaseincrease proﬁt before tax by the following amounts assuming 
the net debt as at the balance sheet date was outstanding for the whole year
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
sterling 10 04 
us dollar 05 03
euro 06 02
21 01 melrose industries plc
annual report 2012 114
notes to the financial statements continued
24 financial instruments and risk management continued
interest rate risk management
the group’s policy for managing interest rate risk is set out in the finance director’s review
the group entered 2012 protecting 78 of its gross debt from exposure to changes in interest rates by holding a number of interest rate swaps to 
ﬁx £3801 million us 5460 million and €333 million of drawn debt under the terms of these swaps the group ﬁxed the underlying interest rate at 
21 for us dollars and 26 for the euro plus the bank margin which was 135 at that time 
in february 2012 the group closed out these swap arrangements and replaced them with new swap arrangements to ﬁx the interest rate on a 
proportion of the new facility drawn down on 31 january 2012 the new ﬁve year swap arrangements ﬁxed the ﬁnance cost on us 2310 million 
£1050 million and €420 million of debt under the terms of these new swap arrangements the group will pay annually in arrears 10 for us 
dollar swaps 11 for euro swaps and 11 for sterling swaps plus the bank margin which was 15 at that time this arrangement protected 
approximately 70 of the group’s exposure to interest rate ﬂuctuations for the term of the new facility
in september 2012 the group entered into another layer of interest rate swaps following the acquisition of elster the new ﬁve year swap 
arrangements ﬁxed the ﬁnance cost on us 3290 million £2318 million and €2500 million of drawn borrowings under the terms of the new swap 
arrangements the group will pay annually in arrears 069 for us dollar swaps 072 for euro swaps and 080 for sterling swaps plus the 
current bank margin which is 200 these swaps have also been structured to maintain the ratio of ﬁxed interest rate cover over the ﬁve year term 
allowing for group proﬁt generation
this ﬁxes the interest rate cost on us 5600 million £3368 million and €2920 million of debt 79 of gross borrowings as at 31 december 2012 
the weighted blended ﬁxed ﬁnance cost is therefore 084 on us dollar swaps 078 on euro swaps and 091 on sterling swaps plus the bank 
margin of 200
these interest rate swaps have been designated as cash ﬂow hedges and were highly effective throughout 2012 the fair value of the contracts at 
31 december 2012 was a net liability of £81 million 31 december 2011 £57 million
foreign currency risk
the group’s policy for managing foreign currency risk is set out in the finance director’s review on pages 35 and 36
foreign currency sensitivity analysis
currency risks are deﬁned by ifrs 7 as the risk that the fair value or future cash ﬂows of a ﬁnancial asset or liability will ﬂuctuate because of changes 
in foreign exchange rates
the following table details the transactional impact of hypothetical changes in foreign exchange rates on ﬁnancial assets and liabilities at the balance 
sheet date illustrating the decreaseincrease in group operating proﬁt caused by a 10 cent strengthening of the us dollar and euro against 
sterling and a 10 strengthening of the czech koruna against sterling compared to the year end spot rate the analysis assumes that all other 
variables in particular other foreign currency exchange rates remain constant the group operates in a range of different currencies and those with 
a material impact are noted here 
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
us dollar 07 04
euro 04  05 
czech koruna 02  20 
the following table details the impact of hypothetical changes in foreign exchange rates on ﬁnancial assets and liabilities at the balance sheet 
date illustrating the increasedecrease in group equity caused by a 10 cent strengthening of the us dollar and euro against sterling and a 10 
strengthening of the czech koruna against sterling the analysis assumes that all other variables in particular other foreign currency exchange rates 
remain constant the group operates in a range of different currencies and those with a material impact are noted here
31 december
 2012
£m
31 december
2011
£m
us dollar 16 07
euro 17 23 
czech koruna — 01  wwwmelroseplcnet
stock code mro 115
governance shareholder information business performance financials
24 financial instruments and risk management continued
in addition the change in equity due to a 10 cent strengthening of the us dollar and euro against sterling for the translation of net investment 
hedging instruments would be a decrease of £202 million 31 december 2011 £268 million and £249 million 31 december 2011 £44 million 
respectively however there would be no overall effect on equity because there would be an offset in the currency translation of the foreign 
operation
fair value measurements recognised in the balance sheet 
foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching 
the maturities of the contracts
commodity swaps are measured using quoted forward commodity prices
interest rate swap contracts are measured using yield curves derived from quoted interest rates 
the fair values are shown below 
31 december 
2012 
current 
£m
31 december 
2012 
noncurrent 
£m
31 december 
2012 
total 
£m
31 december 
2011 
current 
£m
31 december 
2011 
noncurrent 
£m
31 december 
2011 
total 
£m
derivative financial assets
foreign currency forward contracts 32  —  32  16  —  16 
commodity swaps 01  —  01  01  —  01 
33  —  33  17  —  17 
derivative financial liabilities
foreign currency forward contracts 24 —  24 87 12 99
commodity swaps —  —  —  01 —  01
interest rate swaps 46 35 81 53 04 57
70 35 105 141 16 157
the fair value of these are derived from inputs other than quoted prices that are observable for the asset or liability either directly ie as prices or 
indirectly ie derived from prices and they therefore are categorised within level 2 of the fair value hierarchy set out in ifrs 7
25 issued capital and reserves
share capital
31 december
 2012
£m
restated
1 
31 december
2011
£m
allotted calledup and fully paid 
1266627036 31 december 2011 390961043 ordinary shares of 01p each 31 december 2011 120p each 13 4691
nil 31 december 2011 34331656 c deferred shares of 750p each — 257
nil 31 december 2011 50000 incentive shares of £1 each — 01
13 4949
1
  in accordance with ifrs 3 the prior year issued share capital share premium account merger reserve other reserves and capital redemption reserve balances have been restated 
to reﬂect the nominal share capital and reserves position of the new parent company as if it had been the holding company during both periods presented the overall impact on net 
equity is £nil note 1 
the rights of each class of share are described in the directors’ report
on 12 april 2012 following approval at a general meeting of the shareholders the former melrose incentive plan was crystallised this resulted in 
the conversion of 50000 £1 melrose incentive shares into 31247969 ordinary shares of melrose plc
on 30 april 2012 the remaining 34331656 c deferred shares were redeemed resulting in a £257 million transfer from issued share capital into the 
capital redemption reserve in addition the 1392194 c shares were redeemed and cancelled on 30 april 2012 at a value of £11 million which was 
also transferred to the capital redemption reserve
on 1 august 2012 a 2 for 1 fully underwritten rights issue was completed by melrose plc and 844418024 melrose plc ordinary shares were 
issued raising £12 billion to part fund the acquisition of elster melrose industries plc
annual report 2012 116
notes to the financial statements continued
25 issued capital and reserves continued
following the rights issue the total number of 1455p melrose plc ordinary shares in issue was 1266627036
on 27 november 2012 a scheme of arrangement approved by the high court of england and wales became effective and resulted in melrose 
industries plc becoming the new holding company of melrose plc and its subsidiaries the arrangement resulted in the issue of 1 new 120p 
melrose industries plc ordinary share for each 1455p melrose plc ordinary share melrose industries plc consequently issued 1266627036 
ordinary shares
as explained in note 1 ordinary share capital at 31 december 2011 has been restated to reﬂect the nominal value of the ordinary shares of 
melrose industries plc at the date on which melrose industries plc became the new holding company the nominal value of each ordinary share 
in issue at 31 december 2011 has therefore been restated from 1455p to 120p
on 28 november 2012 the nominal value of each ordinary share of melrose industries plc was reduced from 120p to 01p and resulted in a 
transfer of £15187 million to retained earnings
own shares
the trustee of the melrose plc employee beneﬁt trust “ebt” holds no shares in melrose industries plc at 31 december 2012 at 31 december 
2011 the ebt held 500 melrose incentive shares and 19862 ordinary shares of 1455p in melrose plc
the fki ebt holds no shares in melrose industries plc at 31 december 2012 at 31 december 2011 the fki ebt held 124232 ordinary shares of 
1455p in melrose plc
hedging and translation reserves
the hedging and translation reserve is used to record exchange differences arising from the translation of the ﬁnancial statements of foreign 
subsidiaries it is also used to record the foreign exchange movements of instruments designated as net investment hedges and cash ﬂow hedges
hedging and translation reserves
hedging
reserve 
£m
translation 
reserve 
£m
total 
£m
at 1 january 2011 86 796  710 
currency translation on net investments 04  177 173
losses on cash flow hedges 01 —  01
taxation adjustments to equity 15  —  15 
transfer to income statement on cash flow hedges 51 —  51
transfer to income statement on disposal of foreign operations —  526 526
at 31 december 2011 119 93  26
currency translation on net investments 01  13 12
losses on cash flow hedges 62 —  62
taxation adjustments to equity 16 —  16
transfer to income statement on cash flow hedges 119  —  119 
at 31 december 2012 77 80  03 wwwmelroseplcnet
stock code mro 117
governance shareholder information business performance financials
26 cash ﬂow statement
year ended 
31 december
 2012
£m
restated
1 
year ended 
31 december
2011
£m
reconciliation of headline
2
 operating profit to cash generated by continuing operations
headline
2
 operating profit from continuing operations 2431  1742 
adjustments for
depreciation of property plant and equipment 281  210 
amortisation of computer software and development costs 24  06 
restructuring costs paid and movements in other provisions 629 322
operating cash flows before movements in working capital 2107  1636 
increase in inventories 35 175
increase in receivables 77 145
decreaseincrease in payables 328 130 
cash generated by operations 1667  1446 
tax paid 494 229
interest paid 428 260
defined benefit pension contributions paid 337 249
net cash from operating activities from continuing operations 408  708 
1
 restated to include the results of mpc within discontinued operations
2
 as deﬁned on the income statement
cash flow from discontinued operations
year ended 
31 december
 2012
£m
restated
1 
year ended 
31 december
2011
£m
cash generated from discontinued operations 17  281
tax paid —  38
defined benefit pension contributions paid —  39
net cash from operating activities from discontinued operations 17  204
purchase of property plant and equipment 18 95
purchase of computer software —  02
interest received —  05
dividends paid to noncontrolling interests —  02
net cash used in investing activities from discontinued operations 18 94
net movement in borrowings —  03
net cash used in financing activities from discontinued operations —  03
1
 restated to include the results of mpc within discontinued operations
net debt reconciliation
at 31 
december 
2011
£m
cash flow
£m
acquisitions
£m
disposals
£m
other 
noncash 
movements
£m
foreign 
exchange 
difference
£m
at 31 
december 
2012
£m
cash 1956  2224  2850 271 — 36 1565 
debt due within one year 277 278  65 — — 02  62
debt due after one year 4575 3180 4054 — 156 173  11480
net debt 2896 678 6969 271 156 139  9977 melrose industries plc
annual report 2012 118
27 commitments and contingencies
future total minimum rentals payable under noncancellable operating leases were as follows
31 december
 2012
£m
31 december
2011
£m
amounts payable
within one year 163 77
after one year but within five years 330 168
over five years 309 103
802 348
capital commitments
at 31 december 2012 there were commitments of £168 million 31 december 2011 £189 million relating to the acquisition of new plant and 
machinery
28 related parties
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in 
this note
the group did not enter into any signiﬁcant transactions in the ordinary course of business with joint ventures during the current or prior year
sales to and purchases from group companies are priced as arm’s length transactions and generally are settled on 30 day terms 
remuneration of key management personnel
the remuneration of the directors who are the key management personnel of the group is set out below in aggregate for each of the categories 
speciﬁed in ias 24 “related party disclosures” further information about the remuneration of individual directors is provided in the audited part of 
the directors’ remuneration report on pages 66 and 67 
year ended
31 december
 2012
£m
year ended
31 december
2011
£m
shortterm employee benefits 27 30
sharebased payments 25 16
52 46
29 post balance sheet events
there are no post balance sheet events which require disclosure
30 contingent liabilities
as a result of the acquisitions of the fki and elster businesses certain contingent legal environmental warranty and tax liabilities were identiﬁed 
whilst it is difﬁcult to reasonably estimate the ultimate outcome of these claims the directors’ best estimate has been included in the balance sheet
the group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of trading 
subsidiaries no losses are anticipated to arise on these contingent liabilities
notes to the financial statements continued wwwmelroseplcnet
stock code mro 119
governance shareholder information business performance financials
we have audited the company ﬁnancial statements of melrose industries plc for the period from incorporation on 8 october 2012 to 31 december 
2012 which comprises the balance sheet and the related notes 1 to 8 the ﬁnancial reporting framework that has been applied in their preparation is 
applicable law and united kingdom accounting standards united kingdom generally accepted accounting practice
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 2006 our audit 
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report 
and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the company and 
the company’s members as a body for our audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the statement of directors’ responsibilities the directors are responsible for the preparation of the company ﬁnancial 
statements and for being satisﬁed that they give a true and fair view our responsibility is to audit and express an opinion on the company ﬁnancial 
statements in accordance with applicable law and international standards on auditing uk and ireland those standards require us to comply with 
the auditing practices board’s ethical standards for auditors
scope of the audit of the ﬁnancial statements
an audit involves obtaining evidence about the amounts and disclosures in the ﬁnancial statements sufﬁcient to give reasonable assurance that the 
ﬁnancial statements are free from material misstatement whether caused by fraud or error this includes an assessment of whether the accounting 
policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed the reasonableness of 
signiﬁcant accounting estimates made by the directors the overall presentation of the 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 in 
addition we read all the ﬁnancial and nonﬁnancial information in the annual report to identify material inconsistencies with the audited ﬁnancial 
statements if we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report
opinion on ﬁnancial statements
in our opinion the company ﬁnancial statements
 give a true and fair view of the state of the company’s affairs as at 31 december 2012
 have been properly prepared in accordance with united kingdom generally accepted accounting practice and
 have been prepared in accordance with the requirements of the companies act 2006
opinion on other matters prescribed by the companies act 2006
in our opinion
 the part of the remuneration report to be audited has been properly prepared in accordance with the companies act 2006 and
 the information given in the directors’ report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the company 
ﬁnancial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters where the companies act 2006 requires us to report to you if in our opinion
 adequate accounting records have not been kept by the company or returns adequate for our audit have not been received from branches not 
visited by us or
 the company ﬁnancial statements and the part of the remuneration report to be audited are not in agreement with the accounting records and 
returns or
 certain disclosures of directors’ remuneration speciﬁed by law are not made or
 we have not received all the information and explanations we require for our audit
other matter
we have reported separately on the group ﬁnancial statements of melrose industries plc for the year ended 31 december 2012
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
6 march 2013
independent auditor’s report 
to the members of melrose industries plc melrose industries plc
annual report 2012 120
company balance sheet for melrose industries plc
notes
31 december 
2012
 £m
fixed assets
investment in subsidiaries 3 27106
27106
creditors amounts falling due within one year
creditors 4 03
net current liabilities 03
net assets 27103
capital and reserves 
issued share capital 5 13
merger reserve 6 11906
retained earnings 6 15184
shareholders’ funds 7 27103
the ﬁnancial statements were approved by the board of directors on 6 march 2013 and were signed on its behalf by
geoffrey martin
group finance director
registered number 8243706
simon peckham
chief executive wwwmelroseplcnet
stock code mro 121
governance shareholder information business performance financials
notes to the company balance sheet
1 signiﬁcant accounting policies
melrose industries plc “the company” was incorporated on 8 october 2012 and submitted to the london stock exchange as the new listed 
holding company of melrose plc and its subsidiaries “the melrose group” on 27 november 2012
basis of accounting 
the separate ﬁnancial statements of the company are presented as required by the companies act 2006 they have been prepared under the 
historical cost convention and in accordance with applicable united kingdom generally accepted accounting practice “uk gaap” and law
the principal accounting policies are summarised below they have all been applied consistently throughout the period 
going concern
the directors have at the time of approving the ﬁnancial statements a reasonable expectation that the company has adequate resources to continue 
in operational existence for the foreseeable future thus they continue to adopt the going concern basis of accounting in preparing the ﬁnancial 
statements further detail is contained in the directors’ statement of going concern on page 54 of the directors’ report
investments
fixed asset investments in subsidiaries are shown at cost less provision for impairment
for investments in subsidiaries acquired for consideration including the issue of shares qualifying for merger relief cost is measured at the fair value of 
the consideration paid any premium is ignored
sharebased payments
the company has applied the requirements of frs 20 “sharebased payments” the company issues equitysettled sharebased payments to 
certain employees equitysettled sharebased payments are measured at fair value excluding the effect of nonmarket based vesting conditions at 
the date of grant the fair value determined at the grant date of the equitysettled sharebased payments is expensed on a straightline basis over 
the vesting period based on the company’s estimate of the shares that will eventually vest and adjusted for the effect of nonmarket based vesting 
conditions
fair value is measured by use of the black scholes pricing model the expected life used in the model has been adjusted based on the directors’ 
best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
cash flow statement
the company has taken advantage of the exemption from preparing a cash flow statement under the terms of frs 1 revised “cash flow 
statements” because it prepares a consolidated cash flow statement which is shown on page 73 of the group ﬁnancial statements
taxation
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates and laws that 
have been enacted or substantively enacted by the balance sheet date
deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or 
events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date  timing 
differences are differences between the company’s taxable proﬁts and its results as stated in the ﬁnancial statements that arise from the inclusion of 
gains and losses in tax assessments in periods different from those in which they are recognised in the ﬁnancial statements
2 proﬁt for the period
as permitted by section 408 of the companies act 2006 the company has elected not to present its own proﬁt and loss account for the period 
melrose industries plc reported a loss for the ﬁnancial period ended 31 december 2012 of £06 million
the auditor’s remuneration for audit services to the company is disclosed in note 7 to the group consolidated ﬁnancial statements
3 investment in subsidiaries
£m
at beginning of period —
additions 27106
at 31 december 2012 27106
melrose limited formerly melrose plc was acquired by way of a share exchange on 27 november 2012 note 6
the company has investments in the following subsidiaries which principally affected the proﬁts and net assets of the group  melrose industries plc
annual report 2012 122
3 investment in subsidiaries continued
the following subsidiary is directly owned by melrose industries plc
subsidiary country of incorporation principal activity holding 
melrose limited

¹

great britain holding company 100
1
 formerly melrose plc
other signiﬁcant indirectly owned subsidiaries of the group are
subsidiaries country of incorporation principal activity
equity 
interest 
energy
brush electrical machines limited great britain engineering company 100
brush hma bv netherlands engineering company 100
brush sem sro czech republic engineering company 100
brush transformers limited great britain engineering company 100
harrington generators international limited great britain engineering company 100
hawker siddeley switchgear limited great britain engineering company 100
marelli motori spa italy engineering company 100
generator and motor services of pennsylvania llc usa engineering company 100
lifting
bridonamerican corporation usa engineering company 100
bridon international gmbh germany engineering company 100
bridon international limited great britain engineering company 100
bridon new zealand limited new zealand engineering company 100
crosby canada inc canada engineering company 100
crosby europe nv belgium engineering company 100
the crosby group llc usa engineering company 100
other industrial
the harris waste management group inc usa engineering company 100
truth hardware corporation usa engineering company 100
elster

¹

elster group se germany holding company 100
elster solutions llc usa engineering company 100
elster american meter company llc usa engineering company 100
elster gmbh germany engineering company 100
elster perfection corporation usa engineering company 100
elster nv belgium engineering company 100
elster finance bv netherlands finance subsidiary 100
elster holdings netherlands bv netherlands holding company 100
elster holdings us inc usa holding company 100
elster sro slovakia engineering company 100
elster holdings uk limited great britain holding company 100
group
fki limited great britain holding company 100
fki engineering limited great britain holding company 100
fki industries inc usa holding company 100
precision house management services limited

²

great britain management services company 100
1
 melrose industries plc indirectly owns 998 of elster group se and its subsidiaries further details are disclosed in note 12 of the group consolidated ﬁnancial statements
2
 formerly mckechnie management services limited
notes to the company balance sheet continued wwwmelroseplcnet
stock code mro 123
governance shareholder information business performance financials
4 creditors 
31 december 
2012
 £m
amounts falling due within one year
amounts owed to group undertakings 03
03
the directors consider that amounts owed to group undertakings approximate to their fair value
5 issued share capital
share capital
31 december 
2012
 £m
allotted called up and fully paid
1266627036 ordinary shares of 01p each 13
13
6 reserves
issued share 
capital
£m
merger 
reserve
£m
retained 
earnings
£m
at beginning of period ——— 
issue of share capital 15200 11906 — 
capital reduction 15187 — 15187 
loss for the period — — 06
credit to equity for equitysettled sharebased payments — — 03 
at 31 december 2012 13 11906 15184 
on 27 november 2012 a scheme of arrangement approved by the high court of england and wales became effective and resulted in melrose 
industries plc becoming the new holding company of melrose plc and its subsidiaries this resulted in the issue of 1 new 120 pence melrose 
industries plc ordinary share in exchange for each 1455 pence melrose plc ordinary share melrose industries plc consequently issued 
1266627036 ordinary shares with a total nominal value of £15200 million the market capitalisation of the melrose group at that date was 
£27106 million the difference between the market capitalisation and the total nominal value of shares issued of £11906 million has been taken to 
the merger reserve
on 28 november 2012 melrose industries plc received court conﬁrmation of the reduction in its share capital pursuant to which the nominal value 
of each ordinary share was reduced from 120 pence to 01 pence each this resulted in issued share capital decreasing by £15187 million and 
retained earnings increasing by an equivalent amount
details of sharebased payments are given in note 22 to the group consolidated ﬁnancial statements melrose industries plc
annual report 2012 124
7 reconciliation of movements in shareholders’ funds
£m
at beginning of period —
issue of share capital note 6 27106
loss for the period 06
credit to equity for equitysettled sharebased payments 03
at 31 december 2012 27103
8 related party transactions
the company has taken the exemption in frs 8 “related party transactions” not to disclose intercompany balances and transactions in the period 
with fully owned subsidiary undertakings
notes to the company balance sheet continued wwwmelroseplcnet
stock code mro 125
governance financials business performance shareholder information
notice of annual general meeting
this document is important and requires your 
immediate attention if you are in any doubt as to  
the action you should take you should consult  
your stockbroker bank solicitor accountant  
fund manager or other appropriate independent 
financial adviser
if you have sold or otherwise transferred all of your shares in melrose 
industries plc you should send this document as soon as possible 
to the purchaser or transferee or to the stockbroker bank or other 
agent through whom the sale or transfer was effected for delivery  
to the purchaser or transferee
notice is given that the annual general meeting of the company  
will be held at barbersurgeons’ hall monkwell square wood  
street london ec2y 5bl at 1100 am on 8 may 2013 for the 
following purposes resolutions 1 to 14 will be proposed as  
ordinary resolutions and resolutions 15 to 17 as special resolutions
ordinary resolutions
1  to receive the company’s audited ﬁnancial statements for the 
ﬁnancial year ended 31 december 2012 together with the directors’ 
report and the auditor’s report on those ﬁnancial statements
2  to approve the directors’ remuneration report contained in the 
company’s annual report and ﬁnancial statements for the year 
ended 31 december 2012
3  to declare a ﬁnal dividend of 5p per ordinary share for the year 
ended 31 december 2012
4  to reelect mr christopher miller as a director of the company
5  to reelect mr david roper as a director of the company
6  to reelect mr simon peckham as a director of the company
7  to reelect mr geoffrey martin as a director of the company
8  to reelect mr miles templeman as a director of the company
9  to reelect mr perry crosthwaite as a director of the company
10  to reelect mr john grant as a director of the company
11 to reelect mr justin dowley as a director of the company
12 to reappoint deloitte llp as auditor of the company to hold ofﬁce 
from the conclusion of this meeting until the conclusion of the next 
annual general meeting of the company at which accounts are laid
13 to authorise the directors to determine the remuneration of the 
auditor of the company
14 that in substitution for all existing authorities the directors be 
and are generally and unconditionally authorised to exercise all the 
powers of the company to allot shares in the company or grant 
rights to subscribe for or to convert any security into shares in the 
company
a up to an aggregate nominal amount of £422209 and
b comprising equity securities as deﬁned in section 5601 of the 
companies act 2006 the “act” up to an aggregate nominal 
amount of £844418 such amount to be reduced by the 
aggregate nominal amount of any allotments or grants made 
under paragraph a of this resolution in connection with an 
offer by way of a rights issue
i to ordinary shareholders in proportion as nearly as may be 
practicable to their existing holdings and 
ii to holders of other equity securities as required by the 
rights of those securities or subject to such rights as the 
directors otherwise consider necessary 
and so that the directors may impose any limits or restrictions 
and make any arrangements which they consider necessary or 
appropriate to deal with treasury shares fractional entitlements 
record dates legal regulatory or practical problems in or under 
the laws of any territory or any other matter
such authorities to apply until the end of the company’s next annual 
general meeting after this resolution is passed or if earlier until 
the close of business on 30 june 2014 but in each case so that 
the company may make offers and enter into agreements before 
the authority expires which would or might require shares to be 
allotted or rights to subscribe for or convert securities into shares to 
be granted after the authority expires and so that the directors may 
allot shares or grant rights under any such offer or agreement as if 
the authority had not expired
special resolutions
15 that in substitution for all existing powers and subject to the 
passing of resolution 14 the directors be and are generally 
empowered to allot equity securities as deﬁned in the act for cash 
pursuant to the authority granted by resolution 14 andor to sell 
ordinary shares in the capital of the company held by the company 
as treasury shares for cash in each case free of the restriction in 
section 5611 of the act such power to be limited
a to the allotment of equity securities and sale of treasury shares 
for cash in connection with an offer of equity securities but in 
the case of an allotment pursuant to the authority granted by 
paragraph b of resolution 14 such power shall be limited to 
the allotment of equity securities in connection with an offer by 
way of a rights issue only 
i to ordinary shareholders in proportion as nearly as may be 
practicable to their existing holdings and 
ii to holders of other equity securities as required by the 
rights of those securities or subject to such rights as the 
directors otherwise consider necessary
and so that the directors may impose any limits or restrictions  
and make any arrangements which they consider necessary or 
appropriate to deal with treasury shares fractional entitlements 
record dates legal regulatory or practical problems in or under 
the laws of any territory or any other matter and 
b to the allotment otherwise than in the circumstances set out in 
paragraph a of this resolution of equity securities pursuant to 
the authority granted by paragraph a of resolution 14 andor 
the sale of treasury shares for cash up to a nominal amount of 
£63331
such power to apply until the end of the company’s next annual 
general meeting after this resolution is passed or if earlier until the 
close of business on 30 june 2014 but so that the company may 
make offers and enter into agreements before the power expires 
which would or might require equity securities to be allotted or 
treasury shares to be sold after the power expires and so that the 
directors may allot equity securities and sell treasury shares under 
any such offer or agreement as if the power had not expired melrose industries plc
annual report 2012 126
16 that the company be and is generally and unconditionally 
authorised to make one or more market purchases within the 
meaning of section 693 of the act of ordinary shares in the capital 
of the company provided that
a the maximum aggregate number of ordinary shares authorised 
to be purchased is 126662703
b the minimum price which may be paid for an ordinary share 
shall not be less than the nominal value of an ordinary share at 
the time of such purchase
c the maximum price which may be paid for an ordinary share is 
not more than the higher of
i 105 per cent of the average of the middle market quotation 
for an ordinary share as derived from the london stock 
exchange plc’s daily ofﬁcial list for the ﬁve business days 
immediately preceding the day on which the ordinary share 
is purchased and
ii the higher of the price of the last independent trade and the 
highest current independent bid on the trading venue where 
the purchase is carried out
in each case exclusive of expenses
d this authority will expire at the end of the next annual general 
meeting of the company following the passing of this resolution 
or if earlier at the close of business on 30 june 2014
e the company may make a contract to purchase ordinary 
shares under this authority before expiry of the authority which 
will or may be executed wholly or partly after the expiry of 
that authority and may make a purchase of ordinary shares in 
pursuance of any such contract and
f any ordinary shares purchased pursuant to this authority may 
either be held as treasury shares or cancelled by the company 
depending on which course of action is considered by the 
directors to be in the best interests of shareholders at the time
17 that a general meeting other than an annual general meeting may 
be called on not less than 14 clear days’ notice
registered ofﬁce
precision house
arden road
alcester
warwickshire
b49 6hn
joff crawford
company secretary
4 april 2013
notes
1  the holders of ordinary shares in the company are entitled to attend 
the annual general meeting and are entitled to vote a member 
entitled to attend and vote may appoint a proxy to exercise all or 
any of their rights to attend speak and vote at a general meeting 
of the company such a member may appoint more than one 
proxy provided that each proxy is appointed to exercise the rights 
attached to different shares a proxy need not be a member of the 
company
2  a form of proxy is enclosed with this notice to be effective a 
form of proxy must be completed and returned together with any 
power of attorney or authority under which it is completed or a 
certiﬁed copy of such power or authority so that it is received by 
the company’s registrars at the address speciﬁed on the form of 
proxy not less than 48 hours excluding any part of a day that is not 
a working day before the time for holding the meeting returning a 
completed form of proxy will not preclude a member from attending 
the meeting and voting in person
3  any person to whom this notice is sent who is a person nominated 
under section 146 of the act to enjoy information rights a 
“nominated person” may under an agreement between him and 
the shareholder by whom he was nominated have a right to be 
appointed or to have someone else appointed as a proxy for the 
annual general meeting if a nominated person has no such proxy 
appointment right or does not wish to exercise it he may under any 
such agreement have a right to give instructions to the shareholder 
as to the exercise of voting rights the statement of the rights of 
shareholders in relation to the appointment of proxies in paragraphs 
1 and 2 above does not apply to nominated persons the rights 
described in paragraphs 1 and 2 can only be exercised by ordinary 
shareholders of the company
4  to be entitled to attend and vote at the annual general meeting 
and for the purposes of the determination by the company of the 
number of votes they may cast members must be entered on 
the company’s register of members by 600 pm on 6 may 2013 
or in the event of an adjournment on the date which is two days 
before the time of the adjourned meeting changes to entries 
on the register of members after this time shall be disregarded 
in determining the rights of any person to attend or vote at the 
meeting
5  as at 4 april 2013 the company’s issued share capital consists 
of 1266627036 ordinary shares of 01p each carrying one vote 
each
6  crest members who wish to appoint a proxy or proxies through 
the crest electronic proxy appointment service may do so by 
using the procedures described in the crest manual crest 
personal members or other crest sponsored members and those 
crest members who have appointed a service providers should 
refer to their crest sponsor or voting service providers who will 
be able to take the appropriate action on their behalf
 
notice of annual general meeting continued wwwmelroseplcnet
stock code mro 127
governance financials business performance shareholder information
7  in order for a proxy appointment or instruction made using the 
crest service to be valid the appropriate crest message a 
“crest proxy instruction” must be properly authenticated in 
accordance with euroclear uk  ireland limited’s speciﬁcations 
and must contain the information required for such instruction 
as described in the crest manual available via wwweuroclear
comcrest the message regardless of whether it constitutes 
the appointment of a proxy or is an amendment to the instruction 
given to a previously appointed proxy must in order to be valid be 
transmitted so as to be received by the issuer’s agent id ra19 by 
1100 am on 6 may 2013 for this purpose the time of receipt will 
be taken to be the time as determined by the time stamp applied 
to the message by the crest application host from which the 
issuer’s agent is able to retrieve the message by enquiry to crest 
in the manner prescribed by crest after this time any change 
of instructions to proxies appointed through crest should be 
communicated to the appointee through other means
8  crest members and where applicable their crest sponsors 
or voting service providers should note that euroclear uk  ireland 
limited does not make available special procedures in crest for 
any particular message normal system timings and limitations will 
therefore apply in relation to the input of crest proxy instructions 
it is the responsibility of the crest member concerned to take or 
if the crest member is a crest personal member or sponsored 
member or has appointed a voting service provider to procure 
that his crest sponsor or voting service providers takes such 
action as shall be necessary to ensure that a message is transmitted 
by means of the crest system by any particular time in this 
connection crest members and where applicable their crest 
sponsors or voting system providers are referred in particular to 
those sections of the crest manual concerning practical limitations 
of the crest system and timings
9  the company may treat as invalid a crest proxy instruction in the 
circumstances set out in regulation 355 a of the uncertiﬁcated 
securities regulations 2001 
10 any corporation which is a member can appoint one or more 
corporate representatives who may exercise on its behalf all of its 
powers as a member provided that they do not do so in relation to 
the same shares
 
11 under section 527 of the act members meeting the threshold 
requirements set out in that section have the right to require the 
company to publish on a website a statement setting out any 
matter relating to i the audit of the company’s accounts including 
the auditor’s report and the conduct of the audit that are to be 
laid before the annual general meeting or ii any circumstance 
connected with an auditor of the company ceasing to hold ofﬁce 
since the previous meeting at which annual accounts and reports 
were laid in accordance with section 437 of the act the company 
may not require the shareholders requesting any such website 
publication to pay its expenses in complying with sections 527 or 
528 of the act where the company is required to place a statement 
on a website under section 527 of the act it must forward the 
statement to the company’s auditor not later than the time when it 
makes the statement available on the website the business which 
may be dealt with at the annual general meeting includes any 
statement that the company has been required under section 527 
of the act to publish on a website
12 any member holding ordinary shares attending the meeting has 
the right to ask questions the company must answer any such 
questions relating to the business being dealt with at the meeting 
but no such answer need be given if a to do so would interfere 
unduly with the preparation for the meeting or involve the disclosure 
of conﬁdential information b the answer has already been given 
on a website in the form of an answer to a question or c it is 
undesirable in the interests of the company or the good order of the 
meeting that the question be answered
 
13 a copy of this notice and other information required by section 
311a of the act can be found at wwwmelroseplcnet 
14 you may not use an electronic address provided in either this notice 
of annual general meeting or any related documents including the 
proxy form to communicate with the company for any purposes 
other than those expressly stated
 
15 the following documents will be available for inspection at the 
company’s registered ofﬁce during normal business hours 
saturdays sundays and public holidays excepted from the date 
of this notice until the date of the annual general meeting and at 
the place of the annual general meeting for 15 minutes prior to and 
during the meeting
a copies of all service agreements under which directors of the 
company are employed by the company or any subsidiaries 
and
b a copy of the terms of appointment of the nonexecutive 
directors of the company
 
16 you may register your vote online by visiting equiniti’s website at 
wwwsharevotecouk in order to register your vote online you 
will need to enter the task id together with your voting id and 
shareholder reference number which are set out on the enclosed 
proxy form the return of the proxy form by post or registering your 
vote online will not prevent you from attending the annual general 
meeting and voting in person should you wish alternatively 
shareholders who have already registered with equiniti’s online 
portfolio service shareview can appoint their proxy electronically 
by logging on to their portfolio at wwwshareviewcouk and then 
clicking on the link to vote under their melrose industries plc 
holding details the onscreen instructions give details on how to 
complete the appointment process a proxy appointment made 
electronically will not be valid if sent to any address other than those 
provided or if received after 1100 am on 6 may 2013 melrose industries plc
annual report 2012 128
as at 31 december 2012 there were 8847 holders of ordinary shares in the company their shareholdings are analysed as follows
size of shareholding
number of 
shareholders
percentage 
of total 
number of 
shareholders
number of 
ordinary 
shareholders
percentage of
 ordinary 
shares
1–5000 7082 8005 8057323 064
5001–50000 1207 1364 16058149 127
50001–100000 108 122 7973239 063
100001–500000 215 243 52932291 418
over 500000 235 266 1181606034 9328
total 8847 10000 1266627036 10000
financial calendar 2013
exdividend date for final dividend 17 april 2013
record date for final dividend 19 april 2013
annual general meeting 8 may 2013
payment of final dividend 13 may 2013
announcement of interim results august 2013
intended payment of interim dividend november 2013
preliminary announcement of 2013 results march 2014
directors registered ofﬁce legal advisers
christopher miller precision house simpson thacher  bartlett llp
david roper arden road citypoint
simon peckham alcester one ropemaker street
geoffrey martin warwickshire london
miles templeman b49 6hn ec2y 9hu
perry crosthwaite
john grant tel  44 0 1789 761020 brokers
justin dowley fax  44 0 1789 761057 investec
2 gresham street
company secretary registered number london
joff crawford 08243706 ec2v 7qp
head ofﬁce bankers jp  morgan cazenove
leconﬁeld house barclays bank plc 25 bank street
curzon street bayernlb london
london commerzbank ag e14 5jp
w1j 5ja hsbc bank plc
jp  morgan plc registrars
tel 44 0 20 7647 4500 lloyds tsb bank plc equiniti
fax44 0 20 7647 4501 royal bank of canada aspect house
wwwmelroseplcnet the royal bank of scotland plc spencer road
dbs bank lancing
auditor fifth third bank west sussex
deloitte llp icbc bn99 6da
2 new street square mizuho
london santander uk plc
ec4a 3bz unicredit
wells fargo bank international
shareholders can view up to date information about their shareholding by visiting the shareholders’ website at wwwshareviewcouk
the shareholder helpline number is 0871 384 2030 calls cost 8p per minute plus network extras if calling from overseas 44 0121 415 7047 
lines are open 830 am to 530 pm monday to friday
company and shareholder information  melrose industries plc
precision house
arden road
alcester
warwickshire
b49 6hn
telephone  44 0 1789 761020
facsimile  44 0 1789 761057
wwwmelroseplcnet
stock code mro


Summary:
 melrose industries plc
annual report 2012 14
chief executive’s review
2012 2012 2010
£9868m
1
2011
£10804m
1
£11403m
3
£4111m
4
revenue
£15514m
 
2012 2010 2011
£1432m
1
£1742m
1
£578m
4
£1853m
3
headline
2
 operating
proﬁt
£2431m
 
2012 has been a good year for melrose with continued progress from 
our businesses and two important ma events 
in june 2012 melrose sold mckechnie plastic components for £307 
million whilst not in itself sizeable in the context of the group this 
company was the last business acquired in the mckechniedynacast 
acquisition made in may 2005 and thus completed the ﬁnal part of our 
“buy improve sell” business model for melrose’s ﬁrst acquisition this 
acquisition has resulted in our initial equity investment from shareholders 
of £244 million increasing to cash for shareholders of nearly £800 million 
and thus has been highly successful
secondly during 2012 we embarked on the next phase in the “buy” 
element of our strategy by acquiring the elster group for an enterprise 
value of £18 billion
we are at the time of writing just over six months into our post
acquisition programme much has been achieved in that relatively short 
time as is set out in this review and we would draw your attention in 
particular to the following key actions
 the gas and electricity businesses have been reorganised into global 
operations
 the old elster head ofﬁce has been completely restructured
 extensive restructuring has been announced at several of the key 
businesses and
 rd expenditure has been maintained but has been far better 
targeted on the growth areas of the businesses
these and a number of other projects and opportunities create the 
basis for “improving” elster and make us conﬁdent that elster will be a 
better business in the melrose group for the beneﬁt of shareholders and 
the employees customers and suppliers of elster
simon peckham
“during 2012 we embarked on the 
next phase in the ‘buy’ element of our 
strategy by acquiring the elster group 
for an enterprise value of £18 billion 
the improvement plan is one year ahead 
of schedule”
1
  restated to include the mpc results within discontinued operations
2
 before exceptional costs exceptional income and intangible asset amortisation
3
 relates to existing melrose for the year ended 31 december 2012
4
 relates to elster for the four month period from acquisition to 31 december 2012 wwwmelroseplcnet
stock code mro 15
business performance governance financials shareholder information
we would like to thank our shareholders and lending banks for their 
support in the elster acquisition it is not something we take in any way 
for granted on behalf of our shareholders i would also like to thank the 
employees of elster who have welcomed and assisted in the changes 
that have needed to be made
elster is a very high quality business with strong market shares in its key 
markets 2013 will be a year of substantial change and i believe these 
developments will enable elster to achieve its full future potential in an 
exciting marketplace
in the rest of the group 2012 has been a year of substantial investment 
we have invested approximately £45 million this year in a number of 
exciting projects the largest single project was bridon’s new factory in 
newcastle upon tyne which opened in autumn 2012 we are conﬁdent 
that these investments will position our businesses well for the future 
and will continue to improve their value
the energy division had a successful year in 2012 whilst order intake 
for turbogenerators in 2012 has been lower the success in growing 
the aftermarket business has been very pleasing the division has 
also made very good progress in the restructuring of two of the brush 
subsidiaries hma and hawker siddeley switchgear “hss” the 
medium and long term dynamics of the marketplace are likely to be very 
beneﬁcial for brush
marelli has had an outstanding year the business strategy of increasing 
the size of its generator products and continuing to focus on niche 
markets has succeeded beyond our expectations marelli entered the new 
ﬁnancial year with high order books and a very strong market position
in the lifting division bridon has had a good year revenue proﬁt and 
orders have all increased the new factory at newcastle upon tyne has 
been delivered on time and on budget 
crosby has had an outstanding year with sales and proﬁts signiﬁcantly 
up on 2011 we are also pleased to have invested to increase its 
forging capacity over the next 1218 months and to have improved the 
european business by restructuring its operations crosby continues 
to grow its worldwide sales and offers exciting opportunities for future 
development
in the other industrial division it is pleasing that the us housing market 
recovery appears to be well underway this has beneﬁted truth in 
2012 and positions it well for 2013 and beyond harris also performed 
creditably in a difﬁcult market
outlook
conditions in the overall world economy are still very hard to predict with 
any certainty the us appears to be recovering subject to uncertainties 
about the “fiscal cliff” but europe is still in a very difﬁcult position 
we are likely to see volatility in the uk caused by rapidly changing 
currency markets as a result of these factors we are expecting a year 
in which growth may be challenging but our exposure to good markets 
opportunities for improvement at elster and the fruits of recent investment 
should still position us well to improve the group’s performance
simon peckham
chief executive
6 march 2013
1 energy 57
2 oil  gas 10
3 mining 3
4 industrials 11
5 water 9
6 hardware 4
7 other 6
3
4
5
6
7
1
2
revenue by end 
market
year ended 
31 december 2012
strong
end markets
70 energy oil  gas and mining
“in the rest of the group 2012 has been 
a year of substantial investment we have 
invested approximately £45 million this year 
in a number of exciting projects we are 
conﬁdent that these investments will position 
our businesses well for the future and will 
continue to improve their value”