melrose
buy
improve
sell
melrose industries plc
annual report  
for the year ended 31 december 2014 a year of improvement 
throughout 2014 we have focused on 
improving performance across the group 
elster businesses continue to perform  
strongly with profits increased by twothirds  
in the two full years of ownership
transformational growth 
the management team has a successful track record in creating  
substantial value for shareholders as shown below this has been  
delivered over a number of deals since 2003
cautionary statement
the strategic report has been prepared  
solely to provide additional information  
to shareholders to assess the company’s 
strategies and the potential for those  
strategies to succeed
the strategic report contains certain 
forwardlooking statements these statements 
are made by the directors in good faith based 
on the information available to them up to the 
time of their approval of this report and such 
statements should be treated with caution due 
to the inherent uncertainties including both 
economic and business risk factors underlying 
any such forwardlooking information
£13m 
listed on  
aim 2003
£170m
net shareholder 
investment as  
at 4 march 2015
2003 2015 2015
melrose industries plc
£30bn 
market capitalisation  
as at 4 march 2015
improving shareholder value 
more information p02
chairman’s statement 
more information p12
download the latest annual report at 
wwwmelroseplcnetinvestorsreports 13 to authorise the audit committee to determine the 
remuneration of the auditor of the company
14 that in accordance with section 551 of the companies act 
2006 the “act” the directors of the company the “directors”
be and are generally and unconditionally authorised to allot 
shares in the company or to grant rights to subscribe for or to 
convert any security into shares in the company “rights”
a up to an aggregate nominal amount of £422209 and
b comprising equity securities as defined in section 560 of 
the act up to an aggregate nominal amount of £844418 
such amount to be reduced by the aggregate nominal 
amount of any allotments or grants made under paragraph 
a of this resolution in connection with an offer by way of 
rights issue
i to ordinary shareholders in proportion as nearly as 
may be practicable to their existing holdings and
ii to holders of other equity securities as required by  
the rights of those securities or subject to such rights 
as the directors otherwise consider necessary 
and so that the directors may impose any limits or 
restrictions and make any arrangements which they 
consider necessary or appropriate to deal with treasury 
shares fractional entitlements record dates legal 
regulatory or practical problems in or under the laws  
of any territory or any other matter 
such authorities to expire at the conclusion of the company’s 
next annual general meeting after this resolution is passed or if 
earlier at the close of business on 30 june 2016 but in each 
case so that the company may make offers or agreements 
before the authority expires which would or might require 
shares to be allotted or rights to be granted after the authority 
expires and so that the directors may allot shares or grant 
rights in pursuance of any such offer or agreement 
notwithstanding that the authority conferred by this resolution 
has expired 
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 
manager solicitor accountant fund manager 
or other independent financial adviser 
authorised under the financial services and 
markets act 2000 if you are resident in the 
united kingdom or if not another 
appropriately authorised independent 
financial adviser
if you have sold or otherwise transferred all of your shares in 
melrose industries plc the “company” you should send this 
document as soon as possible to the purchaser or transferee or  
to the stockbroker bank or other agent through whom the sale or 
transfer was effected for delivery to the purchaser or transferee
notice is given that the annual general meeting of the company will 
be held at barbersurgeons’ hall monkwell square wood street 
london ec2y 5bl at 1 100 am on 14 may 2015 for the following 
purposes resolutions 1 to 14 inclusive will be proposed as ordinary 
resolutions and resolutions 15 to 17 inclusive as special resolutions
ordinary resolutions
1 to receive the company’s audited financial statements for  
the financial year ended 31 december 2014 together with  
the directors’ report strategic report and the auditor’s report  
on those financial statements
2 to approve the directors’ remuneration report other than the 
part containing the directors’ remuneration policy for the year 
ended 31 december 2014 as set out on pages 78 to 95 save 
for pages 88 to 95 of the company’s 2014 annual report
3 to declare a final dividend of 53p per ordinary share for the 
year ended 31 december 2014
4 to reelect christopher miller as a director of the company
5 to reelect david roper as a director of the company
6 to reelect simon peckham as a director of the company
7 to reelect geoffrey martin as a director of the company
8 to reelect perry crosthwaite as a director of the company
9 to reelect john grant as a director of the company
10 to reelect justin dowley as a director of the company
11 to reelect liz hewitt 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
notice of annual general meeting  
156 melrose industries plc annual report 2014 shareholder information
contents 
strategic report 
02
performance  
review 
26
governance 
58
financials 
97
shareholder  
information 
156
improving shareholder value 02
performance summary 04
business at a glance 06
market overview 08
chairman’s statement 12
chief executive’s review 14
our strategy 16
key performance indicators 24
financial contents 97
independent auditor’s report to the members 
of melrose industries plc 98
consolidated income statement 102
consolidated statement of  
comprehensive income 103
consolidated statement of cash flows 104
consolidated balance sheet 105
consolidated statement of changes in equity 106
notes to the financial statements  107
company balance sheet for  
melrose industries plc  151
notes to the company balance sheet  152
notice of annual general meeting  156
company and shareholder information  162
governance overview 60
board of directors 62
directors’ report 64
corporate governance report 68
audit committee report 72
nomination committee report 76
directors’ remuneration report 78
statement of directors’ responsibilities 96
business review  
 elster gas 28 
 elster electricity 30 
 elster water 32 
 energy 34
risk management 36
risks and uncertainties 38
finance director’s review 42
corporate social responsibility 50
notice of agm 
more information p156
01
 melrose industries plc
annual report 2014
strategic report performance review governance financials shareholder information improving shareholder value
delivering  
transformational growth
melrose has achieved an average annual return 
on equity investment of 23 since making our 
first investment in 2005 and an increase in 
operating margins of 5 to 7 percentage points 
across the businesses we owned
see the melrose timeline of key events  
at wwwmelroseplcnetaboutushistory
£28bn 
of shareholder  
value created
x 4 
shareholder  
value
02
 melrose industries plc
annual report 2014
strategic report total shareholder return 
versus public benchmarks 
source datastream
since acquisition of mckechnie and dynacast
since acquisition of fki
outperformed 
ftse 350 benchmark by
x 40
outperformed 
ftse 350 benchmark by
x 45
track record for a shareholder
for £1 invested in melrose
since the rst deal in 2005
10 years
£1
£381
irr 23
 we are very pleased with the track 
record which we have achieved over 
the first 11 years of our history and 
remain confident that melrose is 
wellpositioned to create superior 
shareholder value going forward
23
average annual return  
on investment
£02bn
net shareholder investment  
at 4 march 2015
£30bn
market capitalisation  
at 4 march 2015
strategic report
03
 melrose industries plc
annual report 2014
strategic report 2013
2014
  £14664m
  £13775m
2013
2014
  £2400m
  £2460m
  164
  179
2013
2014
performance summary
headline
2
 operating profit 
£2460m
headline
2
 operating  
profit margin
179
revenue 
£13775m
financial
1
headline
2
 profit before tax of £213 million up 21 11 at actual 
currency and headline
2
 proforma
3
 earnings per share of 153p 
elster profits up by two thirds circa £80 million in the two full 
years of ownership 
elster now delivering revenue and order intake growth  
up 9 and 6 respectively in the second half of 2014 
all three elster divisions achieved profit growth in 2014  
gas 13 electricity 23 and water 11 
brush revenue 3 and profit 7 suffering from a tough oem 
original equipment manufacturer generator end market 
in november 2014 bridon sold for £365 million doubling 
shareholders’ original investment 
return of capital of £200 million 187p per share to be paid  
on 16 march 2015 alongside a 13 for 14 share consolidation 
ifrs profit after tax
4
 of £87 million 2013 £102 million 
net debt at 31 december 2014 of £501 million equal to 18x 
ebitda
5
 adjusting for the return of capital in march 2015 
proforma leverage equal to 25x ebitda
5
 
final proposed dividend of 53p per share 2013 50p full year 
dividend increased by 5 to 81p per share 2013 775p
in common with many 
companies that trade 
internationally the movement 
in exchange rates in 2014 has 
caused a headwind to profits 
of around 8 for ease of 
comparison unless stated 
otherwise the yearonyear 
variances in these financial 
highlights are stated using 
constant currency
1 continuing businesses only and at constant currency unless otherwise stated
2 before exceptional costs exceptional income and intangible asset amortisation 
3  calculated using the diluted number of shares in issue following the related return of capital and the associated share consolidation
4 after exceptional costs exceptional income and intangible asset amortisation
5 headline
2
 operating profit before depreciation and amortisation
04
 melrose industries plc
annual report 2014
strategic report sell improve buy
sell improve buy
sell improve buy
operational
sale of bridon 
•  the enterprise value was £365 million 
on a debt and cash free basis
•  as part of the transaction melrose 
contributed £67 million into the bridon 
group 2013 pension scheme which 
remained with bridon on disposal
•  melrose used the net proceeds of the 
disposal to return £200 million in cash  
to shareholders the balance was used  
to pay down borrowings
£200m 
returned to 
shareholders
acquisition of eclipse inc
elster gas acquired eclipse inc ‘eclipse’  
a manufacturer of gas combustion 
components and systems for industrial 
heating and drying applications 
headquartered in rockford illinois usa  
for a consideration of us 158 million 
corporate social 
responsibility
melrose believes good corporate 
social responsibility is not only 
desirable in its own right but also 
makes good business sense  
group companies work closely 
with their local communities 
engaging with them and building 
relationships with charities and 
environmental organisations 
employee investment 
consultation and development 
the group attaches great importance 
to good labour relations employee 
engagement and employee 
development the diverse nature  
of the group’s activities places the 
responsibility for the implementation 
and management of employment 
practices with local management in a 
manner appropriate to each business
health and safety 
the directors of the company are 
committed to minimising the health 
and safety risks that each of the 
group’s employees is exposed to  
by promoting the effective use and 
management of businessspecific 
policies and procedures
detailed health and safety plans  
are set by businesses each year  
to determine annual targets and 
improvement initiatives
our strategy 
more information p16
corporate social responsibility 
more information p50
05
 melrose industries plc
annual report 2014
strategic report
strategic report returns to  
shareholders
melrose
group
prot generated
 
melrose management  
team own a substantial 
shareholding in  
the company
proﬁt made by improved
acquisition performance
melrose aims to create significant gains by increasing  
the value of the businesses currently owned through 
substantial investment and by seeking to make suitable 
acquisitions which have attractive potential rewards
business at a glance
executive board
melrose is led by a management  
team which has a strong track record  
in the successful implementation of  
a disciplined strategy
melrose 
industries  
plc
melrose buys good 
manufacturing businesses 
with strong fundamentals 
whose performance can be 
improved melrose finances  
its acquisitions using a low 
level of leverage improves 
the businesses by a mixture 
of investment and changed 
management focus sells  
them and returns the 
proceeds to shareholders
strategic 
acquisitions
elster gas
elster gas meters systems and 
process heat control technology 
are deployed all over the world 
elster gas is the world number  
one in gas metering and the joint 
world number one in gas safety 
control equipment
elster electricity
elster electricity meters 
communications and energy 
management platforms are 
engineered for residential 
commercial and industrial  
markets and interchange  
metering applications
elster water
elster water engineers  
awardwinning metering and 
communication systems for  
water utilities and industries  
to meet the demands of an 
expanding and increasingly 
connected global community 
energy
world number one independent 
supplier of turbogenerators and leading 
supplier of other electricity generating 
machinery switchgear transformers 
power infrastructure equipment 
aftermarket and product support 
services for the power generation 
industrial oil  gas and offshore sectors
the board of directors remains committed to maintaining the  
high standards of corporate governance required to ensure the 
company can continue to deliver its longterm strategic goals  
for shareholders
melrose believes good corporate social responsibility makes  
good business sense through supporting the development  
of employees developing and maintaining close ties with 
stakeholders and minimising waste 
board of directors 
more information p62
governance 
more information p58
corporate social responsibility
more information p50
our strategy 
more information p16
06
 melrose industries plc
annual report 2014
strategic report returns to  
shareholders
melrose
group
prot generated
 
melrose management  
team own a substantial 
shareholding in  
the company
proﬁt made by improved
acquisition performance
1
2
3
4
1 elster gas
   £6870m
2 elster electricity
   £2157m
3 elster water
   £1475m
4 energy
   £3273m
1
2
3
4
1
2
3
4
1
3
2
4
1
2
3
4
melrose is not a passive investor in the businesses it acquires  
our directors and senior management team have a handson 
relationship with each acquired company and work closely with 
them to develop the longterm strategic plans of the business
2014 group revenue
£6870m
revenue by geographical 
destination
year ended 31 december 2014
revenue by geographical 
destination
year ended 31 december 2014
£2157m
revenue by geographical 
destination
year ended 31 december 2014
£1475m
£3273m
revenue by geographical 
destination
year ended 31 december 2014
1 europe  53
2 north america  31
3 asia  14
4 row  2
1 europe  27
2 north america  44
3 asia  10
4 row  19
1 europe  50
2 north america  7
3 asia  8
4 row  35
1 europe  52
2 north america  28
3 asia  10
4 row  10
performance review
more information p26
gas
electricity
water
energy
07
 melrose industries plc
annual report 2014
strategic report
strategic report market overview
businesses within the melrose group operate in diverse 
markets around the world in this section current market 
trends and external factors affecting the growth of each 
melrose business are considered together with individual 
business responses to these trends and factors 
melrose group global market
  manufacturing locations around the world
elster water a leader in water 
metering products and solutions
08
 melrose industries plc
annual report 2014
strategic report elster gas
elster gas is a world leader in the 
design and manufacture of gas 
measurement process heat control 
and gas safety control equipment 
supplying a global customer base  
in more than 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 globally 
its complete range of endtoend 
solutions enables customers to 
efficiently manage and control 
natural gas resources
current market trends
global energy consumption continues  
to increase with a growing share for 
natural gas away from coal and oil  
that is forecast to continue in the long 
term this share growth reflects the 
environmental advantages of gas  
when compared with other fossil  
fuels however in addition supply  
side growth particularly from new 
sources of gas such as shale gas  
in the us and some demand side 
weakness from the global economy  
are helping to reduce the price of  
natural gas further enhancing its 
attractiveness within the energy mix
external factors  
competition and regulation
in europe the eu 202020 mandatory 
environmental targets remain in force 
targeting an improvement in the following 
areas 20 improvement in energy efficiency 
against 1990 levels 20 reduction in carbon 
emissions 20 of energy to be from 
renewable sources in addition to the 
environmental drivers the global economic 
situation is increasing competition and 
pricing pressure and changing buying 
behaviour within key markets 
recent international tensions are also 
increasing concerns over energy security 
prompting changes to infrastructure 
investment strategies 
china accounts for almost 50 of global steel 
production and there is international pressure 
for china to adopt iso global standards in 
terms of safety and environmental efficiency
business response
the effect of these factors is being seen  
in the six strategic market sectors in which 
elster gas operates as set out below
the european gas meter market driven  
by eu environmental legislation is in the 
process of replacing existing standard gas 
meters with smart meters elster is actively 
involved in major residential pilot projects  
in several countries each with its own 
technical requirements 
the integrated gas metering station market 
is driven by increasing gas consumption 
creating a demand to expand the gas 
pipelines and infrastructure to connect the 
gas reserves with the ultimate consumers 
this fuels investment in infrastructure 
associated with extraction production grid 
injection and transmission of shale gas and 
biogas including liquefied natural gas 
“lng” terminals and grid injection plants 
elster supplies the full scope of energy 
measurement solutions including ultrasonic 
meters flow computers and gas quality 
measurement devices 
these solutions are deployed worldwide 
with a strong focus on asia the middle 
east and the us together with a growing 
biogas sector in northern europe 
the us residential and commercial 
metering market is driven by new housing 
meter replacement programmes and 
smart grid deployments the downstream 
distribution market surged with 
governmentfunded projects focused on 
infrastructure improvement and integrity 
management elster’s ability to provide  
a “main to meter” solution has generated 
strong demand which is anticipated to  
last for the next three to five years
the midstream pipeline and power 
markets are driven by the transition from 
coalburning power plants to natural gas 
and by the rapid growth of shale gas with  
its associated infrastructure for export as 
lng increased investment in the us high 
pressure transmission network is also 
expected to drive growth accordingly  
elster has invested resources in high 
pressure metering and energy measurement 
gas chromatograph systems to capitalise 
on the expected growth
the residential heating market is 
dominated by targets set by the eu  
for the use of energy in home heating  
it will be mandatory from 2015 to install 
condensing boilers with high efficiency  
for a 10–15 energy saving elster 
supplies solutions for heat generation 
safety combustion technology and 
heat management comfort controls  
to the european heating market
the process heat market depends  
heavily on global capacity levels in the 
steel aluminium and nonferrous metal 
industries elster kromschröder has 
developed specific solutions for process 
heat and heating applications sales and 
application skills of the engineering team 
are key factors for high level products and 
solutions and their “added value thinking” 
is an important market differentiator
75 million 
elster gas metering devices 
have been deployed globally
130 countries 
use elster gas measurement 
and safety control equipment
business review 
more information p28
09
 melrose industries plc
annual report 2014
strategic report
strategic report market overview
continued
elsewhere legislation on water quality  
and co
2
 reduction continues to drive the 
adoption of polymerbodied water meters  
in both developed and developing markets 
utilities are also seeking water meters with 
extended accuracy ranges in order to 
maximise water measurement and help 
detect leaks
“ smart metering is driving 
growth in electronic water 
meters equipped with 
standard communication 
interfaces for connection  
to smart networks”
elster electricity
elster electricity is one of the  
largest international smart metering 
solutions providers for residential 
commercial industrial transmission 
and distribution markets
current market trends
elster electricity’s primary markets  
are the eu us south america the 
middle east and africa in the eu  
elster electricity saw several gains of 
major customers and continued growth 
is expected following calls for the 
europeanwide roll out of smart meter 
solutions by 2022 further significant 
growth is anticipated good growth  
has also been seen in the middle east 
which is expected to continue over the 
coming years in south america there  
is a controlled change from standard 
metering towards smart metering
external factors  
competition and regulation
the global market will continue to see  
a shift from “traditional” metering to 
smart meter solutions while the north 
american markets are expected to 
remain relatively constant at existing  
sales volumes other markets are 
expected to see growth in latin america 
europe and the middle east further 
projects are starting and a significant 
level of tender activity is anticipated
business response
new metering and software solutions 
products and technologies have been 
developed and successfully launched  
the new evolution of meter data 
collection has been released recently 
and during 2015 further investment  
will be made to secure further world  
class partnerships with smart grid 
application providers
elster water
elster water is recognised globally as  
a leading supplier of water meters with 
sales revenue derived from more than 
100 countries
current market trends
the global water industry continues to seek 
innovative metering solutions to support  
the objectives of water providers including 
water conservation customer service and 
resource efficiency in developed markets 
revenue growth is driven by a continued 
increase in the adoption of communicating 
meters for smart metering projects 
particularly in europe the middle east  
and north america 
this smart metering trend is also driving 
growth in electronic water meters equipped 
with standard communication interfaces for 
connection to smart networks these solid 
state electronic meters often called “static” 
meters allow extended meter life in harsh 
water quality conditions
business review 
more information p30
“ the global market will continue 
to see a shift from ‘traditional’ 
electricity metering to smart  
meter solutions”
precision engineering and 
quality control are a vital 
element of our world class 
manufacturing processes
10
 melrose industries plc
annual report 2014
strategic report external factors  
competition and regulation
regulations governing water meter 
specifications are both regional and 
national with most markets adopting 
international standards into their regulatory 
environment usually with some adaptation 
to suit local needs the competitive 
environment in elster water’s main 
markets comprises a few large suppliers 
based in europe and north america 
together with many regional companies 
the trends in smart water metering are 
attracting new software providers to 
support advanced metering infrastructure 
projects including those from the it sector 
it is expected that there will be increasing 
numbers of projects requiring partners 
working together to deliver these smart 
water services to utilities 
business response
in response to the above trends elster 
water remains focused on the delivery  
of innovative value added products in 
market segments that are responsive  
to higher performing metering products 
and solutions recent innovations by 
elster include extending the range of 
award winning polymerbodied residential 
meters the launch of the h5000 
commercial and industrial meter and the 
integration and connectivity of leading 
smart communication technologies
elster water continues to work with key 
water industry partners in several regions  
to address local requirements strong 
customer relationships remain important 
helping to ensure that elster water 
continues to develop water metering 
products and solutions tailored to 
customer needs 
“ brush’s product development of very 
large aircooled generators will position 
the business well in future years”
energy
brush turbogenerators is the world’s 
largest independent manufacturer of 
electricity generating equipment for  
the power generation industrial oil  
 gas and offshore sectors 
current market trends
slow growth in the global economy is 
driving a modest market growth in power 
generation advances in technology are 
resulting in the development of larger  
more efficient turbines in excess of sizes 
traditionally supplied by brush
exceptionally low oil  gas prices have  
had a negative impact on oil  gas 
investment projects predominantly  
in the upstream sector of the industry  
to which brush has exposure 
external factors  
competition and regulation
some brush businesses have strong uk 
revenue streams principally transformers 
and switchgear customers of which are 
regulated by ofgem office of gas and 
electricity markets
in china the “energy action plan” was 
released in november 2014 by the new 
chinese government which endorsed 
the distributed energy installation targets 
set out in the 12th ‘5 year plan’ this  
will underpin the switch from coal fired 
generation to gas fired generation which 
will require generators such as those  
to be manufactured by brush china
business response
in 2014 brush started to supply 
generators to its chinese customers  
from its european factories the newly
constructed factory in china is expected 
to deliver its first generator in the first 
quarter of 2016 
brush’s product development of very 
large aircooled generators will position 
the business well in future years
business review 
more information p32
business review 
more information p34
product development 
continues to be an 
integral part of brush’s 
business strategy
11
 melrose industries plc
annual report 2014
strategic report
strategic report chairman’s statement
christopher miller
chairman
i am pleased to report our 12th 
set of annual results since 
flotation in 2003
2014 has been another successful 
year elster our gas electricity 
and water metering company 
acquired in 2012 continues to 
demonstrate the benefits of our 
management model
in november 2014 we sold bridon our 
wire rope maker principally for the mining 
and oil  gas sectors for an enterprise 
value of £365 million in line with our 
strategy we have announced a capital 
repayment of £200 million which will be 
paid on 16 march 2015 with only brush 
remaining from our fki acquisition in  
2008 this nearly completes that 
acquisition cycle 
since making our first investment in 2005 
melrose has achieved an annual return on 
equity investment of 23 and an increase 
in operating margins of 5 to 7 percentage 
points across each of the businesses we 
have owned total shareholder return  
over the same period has been 421 
compared to 104 for the ftse 350
by implementing our strategy following  
the return of capital we will have created 
approximately £2782 million of shareholder 
value with a net shareholder investment  
of £170 million
as ever i would like to thank all our 
employees for their efforts in helping  
to produce this outstanding performance
results for the group
revenue from continuing businesses  
for the year was £13775 million  
2013 £14664 million and headline  
profit before tax before exceptional  
costs exceptional income and intangible 
asset amortisation was £2125 million 
2013 £1915 million 
further details of these results are 
contained in the finance director’s review 
on pages 42 to 49
trading
elster continues to perform strongly  
in all three divisions with orders and  
sales in gas the largest division in 
particular showing pleasing increases  
in constant currency terms whilst the  
bulk of restructuring and product 
rationalisation is behind us there is 
nevertheless an ongoing programme  
of efficiency gains which we expect  
will add to the substantial improvements 
already achieved in operating margins 
investment in all divisions continues and 
the purchase of eclipse on 31 october 
2014 for us 158 million is an exciting 
addition to elster gas which will make  
a good contribution in its first full year
in our energy division brush continues  
to experience difficult end markets with its 
oem business while it is pleasing to note 
that independent market research shows 
brush has more than maintained its market 
share nevertheless the forces at play 
holding down oem demand do not appear 
to be dissipating in the near term in the 
medium and long term however we have 
full confidence that this market will recover 
in the meantime the aftermarket and 
switchgear divisions are performing well 
£30 billion 
market capitalisation from  
£13 million in 11 years
£28 billion
of shareholder value created
23
average annual return  
on investment
12
 melrose industries plc
annual report 2014
strategic report “ our strategy is working for a net shareholder 
investment of £170 million and with a current 
market capitalisation of £30 billion we have 
created £28 billion of shareholder value”
we encountered foreign exchange 
headwinds in 2014 and while these have 
abated somewhat in recent months as 
regards the us dollar the further 
weakness in the euro and the rouble 
suggest a further 5 headwind in 2015 
based on current exchange rates
further discussion of trading appears  
in the chief executive’s review on page 14
dividend
the board proposes to pay a final dividend 
of 53p per share 2013 50p this will be 
paid on 18 may 2015 to those shareholders 
on the register at 17 april 2015 subject to 
approval at the agm on 14 may 2015 this 
gives a total for the year of 81p per share 
2013 775p
we continue to pursue a progressive 
dividend policy
strategy
since melrose’s flotation in 2003 and the 
introduction of our “buy improve sell” 
strategy we have seen many changes in 
economic and stock market conditions 
nevertheless through all this returns to 
shareholders have been extremely good 
and we see no reason to diverge from  
our proven strategy we continue to see 
situations which are candidates for our 
management and investment methods  
and we are confident we will identify  
a suitable opportunity in due course  
in the meantime we will continue to  
improve our existing businesses and will 
make disposals at the appropriate time
outlook
the world economy continues to be 
geographically patchy strength in the  
usa is mirrored by weakness in most  
of continental and central europe – a 
situation which seems unlikely to change  
in the near future adjusting for currency 
effects our group is trading in line with 
management expectations for 2015 
despite the expected downturn in the 
performance at brush in our elster 
businesses we see the potential for  
good demand and growth prospects  
as indeed we have seen in the second half  
of 2014 this together with the opportunity 
for further margin enhancement and the 
possibility of a value creating acquisition 
gives us confidence for the balance of 
2015 and beyond
christopher miller
chairman
4 march 2015
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 calculated using the businesses in existence at the year 
end using the diluted number of shares in issue following 
the return of capital and related share consolidation
headline
1
 proforma
2
 diluted 
earnings per share
dividend per share
153p 
81p 5
governance 
the board remains committed to maintaining high standards  
of corporate governance
governance overview p60
corporate governance report p68
board of directors 
more information p62
13
 melrose industries plc
annual report 2014
strategic report
strategic report elster gas
elster water
energy
elster 
electricity
simon peckham
chief executive
acquiring good quality 
manufacturing businesses 
making operational 
improvements realising 
shareholder value at the 
appropriate time and then 
returning this value to 
shareholders continue to 
be the components of the 
“buy improve sell” business 
strategy that melrose has 
followed since being founded  
in 2003 
the group now consists of brush the  
last remaining business from the fki 
acquisition and the businesses which 
comprise elster continued improvement  
of all these businesses is as ever a key 
objective for 2015 
acquisitions and disposals during  
the year
2014 has been another highly successful 
year for melrose in october 2014 elster 
gas completed the acquisition of eclipse  
a usbased manufacturer of gas 
combustion components and systems for 
industrial heating and drying applications 
combining this with our existing elster gas 
business gives us a great opportunity to 
create significant shareholder value in the  
following month melrose completed the 
disposal of bridon for a total enterprise  
value of £365 million representing the  
latest step in realising value from the fki 
businesses acquired by melrose in 2008
outlook
overall market conditions remain 
challenging but we have in elster a 
business that is well positioned for growth  
in 2015 at current exchange rates we face 
further currency headwinds this year and 
the order intake pattern suggests a more 
pronounced weighting of results to the 
second half of the year as said previously 
we believe we will see further progress in 
our elster businesses but end market 
conditions mean that brush will have a 
more difficult 2015 overall adjusting for 
the adverse currency movements which 
are outside our control we believe that the 
group will be in line with management 
expectations for 2015 
simon peckham
chief executive
4 march 2015
chief executive’s review
to find out more about  
our performance please  
see the following pages
more information p28
more information p34
more information p30
more information p32
14
 melrose industries plc
annual report 2014
strategic report “ 2014 has been another 
highly successful year 
for melrose”
an elster smart residential 
gas meter destined for the 
uk market is subjected to 
automated leak testing in 
lotte germany 
15
 melrose industries plc
annual report 2014
strategic report
strategic report sell improve buy sell improve buy
our strategy
melrose buys good manufacturing businesses with 
strong fundamentals whose performance can be 
improved melrose finances its acquisitions using a low 
level of leverage improves the businesses by a mixture  
of investment and changed management focus sells  
them and returns the proceeds to shareholders
•  good manufacturing 
businesses whose  
performance can be improved
•  use low public market 
leverage
progress
the acquisition of eclipse a usbased 
specialist in the complementary field of 
lowtemperature combustion technology 
has created an opportunity to strengthen 
the elster gas business and enhance 
shareholder value   
the business is already performing 
ahead of expectations
priorities 
to identify and acquire strong 
manufacturing businesses whose 
performance can be improved  
using low public market leverage
key risks
global economic and financial conditions 
may impact the timing of acquisitions 
assets may underperform or require  
more investment and resources than 
originally anticipated
progress
the year on year operating margins  
of the continuing group businesses have 
increased from 164 to 179 with the 
elster group increasing operating 
margins from 17 4 to 196 operational 
improvement projects are returning 
efficiency gains in each elster business
priorities 
to drive operational improvements  
invest in businesses and focus on  
cash generation
key risks
the group may not succeed in driving 
strategic operational improvements to 
generate value post acquisition in the 
acquired business
buy
•  set strategy and targets  
and sign off investments
•  drive operational improvements
•   invest in the business 
•  change management  
focus incentivise well
•  focus on operating  
cash generation
improve
key performance 
indicators
headline
1
 proforma
2 
diluted earnings per share
dividend per share headline
1
  
operating profit
153p 81p £2460m
1 before exceptional costs exceptional income and intangible asset amortisation
2 calculated using the number of shares in issue following the return of capital and the related share consolidation
3 calculated using average exchange rates for the year
4 headline
1
 operating profit before depreciation and amortisation of computer software and development costs
key performance 
indicators
more information p24
16
 melrose industries plc
annual report 2014
strategic report sell improve buy
progress
in november 2014 the group completed 
the sale of bridon for an enterprise value  
of £365 million meaning that the original 
equity investment by melrose more  
than doubled
priorities 
to identify the optimal time to  
divest the group’s businesses  
and to return value to shareholders  
from significant disposals
key risks
due to the group’s global operations 
disposals may be significantly impacted  
by political and macroeconomic factors  
there may be longterm liabilities which 
may be retained by the group and 
insufficient allowance for indemnities  
and warranties given at disposal may  
affect the group’s financial position
•  identify the optimal time  
to sell often between three  
to five years but flexible
•  return value to shareholders 
from significant disposals
sell
cash conversion interest cover net debt
3
 to headline
1
 
ebitda
4
headline
1
 operating 
profit margin
179 153x 17x 90 
17
 melrose industries plc
annual report 2014
strategic report
strategic report eclipse and elster 
in october 2014 the elster 
gas business acquired 
eclipse inc a manufacturer 
of gas combustion 
components and systems for 
industrial heating and drying 
applications headquartered  
in rockford illinois usa  
acquisition  
of eclipse inc
the total consideration  
was us 158 million the 
transaction was on a debt  
and cash free basis and  
was funded within the  
existing debt facilities  
of the melrose group 
eclipse’s long established 
expertise in lowtemperature 
industrial gas combustion 
complements elster’s 
expertise in hightemperature 
industrial gas combustion 
applications in europe
a more comprehensive offering  
for our customers
eclipse high temperature 
ser burners providing 
even temperature 
distribution in a metals 
industry furnace
18
 melrose industries plc
annual report 2014
strategic report
18 us 158m 
total consideration  
paid for eclipse
19
 melrose industries plc
annual report 2014
strategic report
strategic report
19 continual improvement  
across elster
margins improve in elster businesses
since their acquisition in 2012 
the improvement programmes 
implemented within the elster 
businesses have increased 
elster profits by twothirds 
operating margins continue  
to improve in each of the  
three businesses of gas 
electricity and water with the 
combined elster operating 
margin having grown from 
128 to 196 during the 
period of melrose ownership 
whilst the bulk of 
restructuring and product 
rationalisation is behind us 
ongoing programmes of 
efficiency gains are expected 
to add to the substantial 
improvements already 
achieved in these businesses
automated housing 
production with doubled 
capacity for residential 
smart gas meters  
in lotte germany
20
 melrose industries plc
annual report 2014
strategic report elster profits 
increased by  
twothirds since 
acquisition in 2012
elster operating 
margin grown 
from 128 to 
196 during the 
period of melrose 
ownership
21
 melrose industries plc
annual report 2014
strategic report
strategic report creating value  
in the sale of bridon
highlights
in november 2014 melrose 
completed the disposal of  
the bridon business for an 
enterprise value of £365 
million the board used  
part of the net proceeds  
to return £200 million in  
cash to shareholders  
using the balance to  
pay down borrowings 
“bridon is an excellent 
example of the melrose  
‘buy improve sell’ model  
at work it demonstrates our 
ability to create substantial 
value for shareholders by 
investing heavily in our 
businesses and improving 
operational performance 
since the acquisition of fki  
in 2008 we have successfully 
grown and developed the 
bridon business into a  
premier supplier of critical 
highperformance ropes  
for energy mining and 
industrial applications”
simon peckham  
chief executive 
our “buy improve sell” model in action
22
 melrose industries plc
annual report 2014
strategic report
22 £365m
enterprise value
x2 
original equity 
investment by 
melrose more 
than doubled
strategic report
23
 melrose industries plc
annual report 2014
strategic report  144p
 150p
 153p
2012
6
2013
2014
  76p
  775p
  81p
2012
2013
2014
  £1135m proforma
6
 £1895m
  £2400m
  £2460m
2012
4
2013
4
2014
  91x
  118x
  153x
2012
2013
2014
  26×
  05× 
  17x
2012
5
2013
2014
  92
  96
  90
2012
4
2013
4
2014
in order to support the group’s strategy and to monitor performance 
the board uses a number of financial and nonfinancial key performance 
indicators ‘kpis’ details of a selection of the kpis are shown below 
additional business level kpis are also used which are relevant  
to their particular circumstances 
key performance indicators
financial  
kpis
headline
1
 proforma
2
 diluted 
earnings per share 
dividend per share  
 
headline
1
 operating profit  
153p 
81p 
£2460m
method of calculation
group headline
1
 profit after tax attributable  
to owners of the parent of businesses in 
existence at each year end divided by the 
diluted number of shares in issue following 
related share consolidations
strategic objective
to create consistent and longterm value  
for shareholders
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 for the  
continuing group
strategic objective
to improve profitability of group operations
1 before exceptional costs exceptional income and intangible asset amortisation
2 calculated using the businesses in existence at each year end using the diluted number of shares in issue following the related return of capital and associated share consolidation
3 headline
1
 operating profit before depreciation and amortisation of computer software and development costs
4 restated to include the results of bridon within discontinued operations
5 based on 1 january 2012 to 31 december 2012 ebitda
3
 for all continuing businesses elster pre acquisition ebitda
3
 has been adjusted to estimate the impact of the transition  
to melrose accounting policies under ifrs
6 assuming a full year’s ownership of elster in 2012
cash conversion net debt to headline
1
  
ebitda
3
 
interest cover 
90 17x 153x
method of calculation
percentage of headline
1
 ebitda
3
  
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
method of calculation
net debt at average exchange rates divided by 
headline
1
 ebitda
3
 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
calculated as headline
1
 ebitda
3
 as a  
multiple of interest payable on bank loans and 
overdrafts for the full group during each year
strategic objective
to ensure the group has suitable amounts of 
debt and remains within its banking covenants
24
 melrose industries plc
annual report 2014
strategic report   145 proforma
6
 128
  164
  179
2012
4
2013
4
2014
headline
1
 operating profit 
margin 
179
method of calculation
headline
1
 operating profit as a percentage  
of revenue for the continuing group
strategic objective
to improve profitability of group operations
nonfinancial  
kpis
other nonfinancial  
kpis
health and safety
environment  
and energy usage
 
method of calculation
a variety of different health and safety kpis  
are used by each of the businesses within the 
group which are specific to the exact nature  
of the business and its associated risks 
strategic objective
the company has an objective to stop all 
preventable accidents
performance
as each business uses its own health  
and safety kpis performance in 2014 
when compared to 2013 will vary further 
information in relation to the various health  
and safety initiatives undertaken by the  
group’s businesses during 2014 can  
be found within the corporate social 
responsibility report on pages 50 to 57
method of calculation
environmental kpis used within the group and 
their method of calculation vary by business  
unit and depend on the specific nature of the 
operation a range of environmental measures 
are used including energy consumption  
co
2
 emissions water consumption water 
contamination and waste disposal
strategic objective
each of the group’s businesses is committed to 
ensuring that their operations have a minimum 
possible adverse effect on the environment 
particular relevance has been placed on the 
control of energy consumption
performance
investment was provided by the group for 
several environmental improvement initiatives 
during 2014 the group is required to disclose 
greenhouse gas emissions data in relation to 
the 2014 financial year further information  
can be found within the corporate social 
responsibility report on pages 50 to 57 
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 corporate social 
responsibility report on pages 50 to 57  
and the directors’ report on pages 64 to 67
25
 melrose industries plc
annual report 2014
strategic report
strategic report 26
 melrose industries plc
annual report 2014
performance review business review  
 elster gas 28 
 elster electricity 30 
 elster water 32 
 energy 34
risk management 36
risks and uncertainties 38
finance director’s review 42
corporate social responsibility 50
performance 
review
27
 melrose industries plc
annual report 2014
performance review
performance review financials shareholder information governance strategic report 2013 £1524m
6
2
13
2
1
2
3
4
business review
elster gas
in 2014 the new semi
automatic production line 
in lotte germany produced 
15 million commercial and 
residential meters
wwwelstergascom 
enindex
revenue by geographical 
destination
year ended 31 december 2014
headline
1
 operating profit
year ended 31 december 2014
total revenue
year ended 31 december 2014
 
£6870m 
£1614m 
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 calculated at constant currency
key strengths
with proven excellence in 
engineering sales and operational 
capability and a “best in class” 
approach to everything it does 
elster gas is well positioned to 
exploit growth opportunities and 
to succeed as technology shifts 
towards smart meter solutions in 
parallel elster gas is expanding 
its global service network winning 
customer loyalty across the world
elster gas is a world leader 
in gas measurement and gas 
safety control equipment 
supplying a global customer 
base in more than 130 
countries with one of the 
most extensive installed utility 
measurement bases in the 
world and more than 75 million 
gas metering devices deployed 
globally elster gas products 
enable customers to efficiently 
measure manage and control 
natural gas resources across  
the complete gas value chain
from its four lead plants in europe  
and the usa coupled with sizeable 
subsidiary operations in china malaysia 
russia and mexico elster gas designs 
and manufactures gas meters and related 
products for residential commercial and 
industrial customers in 2014 five million  
gas meters were manufactured in elster’s 
major factories 
global revenues increased by 6 in  
2014 operating profit increased by  
13 compared to 2013 driven by sales 
growth and management’s strategy of 
strong operational control coupled with 
rationalisation of the business footprint 
during the year there were significant 
performance improvements in both north 
america and germany overall there was  
a continued improvement in gross margin 
and when coupled with a further reduction 
in fixed costs there was an encouraging 
15 improvement this year in the return  
on sales 
in october 2014 elster gas completed  
the acquisition of eclipse a usbased 
manufacturer of gas combustion 
components and systems for industrial 
heating and drying applications eclipse  
will be merged with the elster gas control 
equipment business sold under the 
kromschröder brand to create a market 
leading global thermal solutions division 
which will offer industrial customers a 
comprehensive range of gas combustion 
and safety control systems this business 
is now approximately a third of the sales  
of elster gas and a good contribution is 
expected from eclipse during 2015
elster are also involved in both residential 
smart gas meter programmes and 
commercial and industrial smart meter 
rollouts in europe while overall progress 
1 europe  53
2 north america  31
3 asia  14
4 row  2
2013 £6889m
28
 melrose industries plc
annual report 2014
performance review on the former is slow due to delays by  
the relevant authorities in their mass rollout  
of smart meters volumes are slowly 
increasing in the foundation phase  
in 2014 elster gas sold 29000 smart 
residential gas meters by contrast good 
progress has been made in the smart 
commercial and industrial sector  
in addition to the 24000 smart commercial 
and industrial gas meters sold in 2014 
elster gas announced that british gas 
business the uk’s largest nonresidential 
gas supplier has selected elster to supply 
up to 100000 smart commercial and 
industrial gas meters over the next three 
years to a significant proportion of its  
uk customer base
in may 2014 elster gas announced  
major changes in the global footprint  
of its integrated metering solutions ims 
business which builds gas metering 
stations for the upstream production and 
shipment of gas production will move  
from western europe to saudi arabia and 
malaysia with the latter becoming the 
centre of excellence for these products 
this shift moves production closer to the 
major gas metering station markets with 
completion planned for the end of 2015 
outlook
the main elster gas end markets remain 
healthy and order input in 2014 was 
higher than in 2013 we expect the  
recent decline in the oil price to have  
an effect on the timing of some gas 
metering station projects throughout 
2015 however the high demand 
projected in the elster conventional  
gas meter markets will more than 
compensate for any weakness in  
this area
when coupled with further planned 
operational improvements and the 
integration of eclipse into the existing 
business elster gas should enjoy another 
strong performance in 2015 whilst still 
very early in the year order books going 
into 2015 give us encouragement for  
the next 12 months
universal device for volume 
conversion billing and system 
monitoring with optional gsm 
global system for mobile 
communicationgprs general 
packet radio services modem 
– used in diaphragmturbine or 
rotary meters
rotary gas meter rabo for 
high measuring rates compact 
dimensions and high accuracy
encal 3000 gas chromotograph 
for biogas analysis applications
chekker mechanical index for 
diaphragm gas meters with 
checksum generation to cross
check data for accurate billing
75 million
gas metering devices have been 
deployed globally
market overview 
 
global energy consumption continues 
to increase with a growing share for 
natural gas that is forecast to continue 
in the long term in addition supply  
side growth and some demand side 
weakness are helping to reduce the 
price of natural gas enhancing its 
attractiveness within the energy mix
external factors 
in the eu mandatory environmental 
targets remain in force targeting 
improvements in energy efficiency 
reductions in carbon emissions and 
increased use of energy from renewable 
sources the global economic situation  
is increasing competition and pricing 
pressure and changing buying 
behaviour within key markets 
business response 
elster gas is actively involved in projects 
driven by eu environmental legislation 
and the demands of the us residential 
and commercial metering market 
elster supplies the full scope of energy 
measurement solutions required for gas 
pipelines and infrastructure connecting 
gas reserves with the enduser
products 
efficient and reliable helium leak 
detection in lotte germany 
two million residential and 
industrial gas meters have been 
tested this way
market overview 
more information p09
29
 melrose industries plc
annual report 2014
performance review
performance review 2013 £2475m
2013 £215m
4
2
23
2
1
2
3
4
business review continued
elster electricity
wwwelstercom 
enelectricity
revenue by geographical 
destination
year ended 31 december 2014
headline
1
 operating profit
year ended 31 december 2014
total revenue
year ended 31 december 2014
 
£2157m 
£228m 
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 calculated at constant currency
key strengths
endtoend solution provider for 
the smart grid covering the entire 
energy distribution value chain
delivering complete smart grid and 
energy management solutions that 
drive energy efficiency operational 
improvements and cost savings
driving interoperability and open 
standards through strategic 
collaboration with customers  
and partners
leading on privacy enhancement 
technology and security
reputation for quality reliability 
accuracy and innovation
for the future smart grid 
elster electricity is investing 
to secure world class 
partnerships and has recently 
introduced the new enhanced 
open and secure software 
offering connexo
®

elster electricity is one of the 
largest international metering 
solutions providers supplying 
both traditional and smart meter 
equipment including applications 
for residential commercial 
industrial transmission and 
distribution markets 
the product range includes distribution 
and control monitoring equipment 
advanced smart metering demand 
response networking and software 
solutions including mdc meter data 
collection with open api application 
programme interface connecting third 
party applications together with several 
other communication products and 
services elster electricity has key 
production facilities located in europe 
north america and south america and 
operates in most global markets through 
its own offices or agents 
north america is served through factories 
and sales offices and offers smart metering 
solutions to commercial industrial and 
residential markets elster has one of the 
largest installed ami advanced meter 
infrastructure meter bases most utilities  
in the usa have started deploying smart 
meter solutions with around 50 of all 
households equipped with smart meters 
following the end of the smart grid 
investment grant awards as part of the 
american reinvestment and recovery  
act the north american market saw a 
revenue decrease compared to previous 
years growth however is expected in 
mexico where a regulatory framework is  
in place to accelerate further deployment
europe the middle east and africa with 
the biggest market being the european 
union have seen significant growth over 
the last year and with the third energy 
package calling for a europeanwide roll 
out of smart meter solutions through to 
2022 further growth is expected over the 
coming years elster electricity is well 
positioned with a broad range of products 
and solutions and with recent wins and 
pilot projects elster electricity expects  
to capture its fair share of the market 
1 europe  27
2 north america  44
3 asia  10
4 row  19
30
 melrose industries plc
annual report 2014
performance review operating profit improved as a result  
of consolidation activities and process 
improvement actions taken in previous 
years the move of production in north 
america to san luis potosi in mexico has 
now been completed and supply chain 
and assembly for a part of the european 
operation has now been consolidated in 
timisoara in romania focus on solutions 
selling and subsequent service revenue 
also contributed to the overall profit 
improvement the supply chain both in 
north america and europe has been 
consolidated around tier 1 oem suppliers 
resulting in improved quality 2014 saw 
another focus on vave value added  
value engineering across all product  
lines resulting in improved margins
in 2015 a key focus will be on introducing 
the new enhanced open software offering 
connexo starting in north america 
followed by europe new product features 
will be launched reflecting the market 
demand for new communication protocols 
and data encryption features a move to  
a new facility in timisoara in romania is 
planned for the fourth quarter
outlook
following last year’s tender activities for 
smart metering in europe and the middle 
east a number of projects have been 
secured that will see pilot projects in 2015 
and subsequent mass roll out in the years 
to follow in south america including 
mexico utilities are expected to continue 
the focus on reducing wastage of electricity 
through accelerated roll out of integrated 
metering solutions these developments 
mean that elster electricity is well positioned 
for an exciting future although the precise 
timing of smart meter roll out remains 
unpredictable
complete endtoend product 
range covering every aspect  
of the value chain
innovative advanced and  
modular electricity meters for  
both residential commercial  
and industrial markets
providing new concepts and 
technologies in data collection  
and communication
full range of services  
delivering business solutions
5 million
elster electricity has deployed more 
than 5 million smart residential 
meters over the last six years
market overview 
 
elster electricity’s primary markets are the 
eu us south america the middle east 
and africa in the eu elster electricity  
saw several gains of major customers 
continued growth is expected good 
growth has also been seen in the middle 
east which is expected to continue over 
the coming years
external factors 
the global market will continue to see  
a shift from “traditional” metering to 
smart meter solutions while the north 
american markets are expected to 
remain relatively constant at existing 
sales volumes other markets are 
expected to see growth 
business response 
new metering and software solutions 
products and technologies have been 
developed and successfully launched 
the new evolution of meter data 
collection has been released recently 
and during 2015 further investment  
will be made to secure further world 
class partnerships with smart grid 
application providers
products 
market overview 
more information p10
from traditional to smart  
a visible shift from “traditional” 
metering to smart meter solutions 
is occurring globally and is 
expected to gain momentum over 
the coming years
31
 melrose industries plc
annual report 2014
performance review
performance review 2013 £1799m
2013 £230m
12
2
11
2
1
3
2
4
elster water
wwwelstercom 
enwater
revenue by geographical 
destination
year ended 31 december 2014
headline
1
 operating profit
year ended 31 december 2014
total revenue
year ended 31 december 2014
 
£1475m
£234m
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 calculated at constant currency
key strengths
130 year reputation for quality 
reliability accuracy and innovation 
within the water industry 
global market presence in  
more than 100 countries  
offering all major water 
measurement technologies
leading position in many of  
the world’s best markets for  
water metering 
an industry leader with innovative 
product development and 
technology choice for customers
strong longterm customer 
relationships and strategic 
partnerships 
elster water rd is delivering 
innovative new products 
that address key customer 
needs state of the art product 
validation testing is employed 
throughout the new product 
introduction process
business review continued
elster water designs 
manufactures and provides a 
comprehensive range of water 
metering solutions including 
high accuracy mechanical 
meters fully electronic meters 
and smart metering solutions  
for residential commercial  
and industrial sectors
headline operating profits continued to 
improve in 2014 following the restructuring 
activity in 2012 and 2013 restructuring 
operations during this period led to the 
cessation of manufacture of mechanical 
meters for the north american market  
and rationalisation of product lines which 
resulted in the closure of sites in europe  
to consolidate production operating 
margins have improved compared with 
2013 due to the impact of improved 
operating efficiency wellcontrolled raw 
material costs and a continued focus  
on overhead control working capital 
controls also improved with a yearonyear 
reduction ensuring strong cash conversion
revenues in 2014 were approximately 12 
lower compared with 2013 largely due to 
the remaining effect of the exit from low 
margin business in north america and in 
germany this action has led to an overall 
improvement in the quality of earnings 
delivering a return on sales of nearly 16 
in the year 2013 128 revenue in the 
middle east was lower than expected due 
to the level of customer activity however 
this was offset by strong growth in africa 
sales in the rest of europe were lower than 
in 2013 reflecting our strategy of exiting 
lower margin products
1 europe  50
2 north america  7
3 asia  8
4 row  35
32
 melrose industries plc
annual report 2014
performance review new product launches in 2014 included 
extending the range of polymerbodied 
volumetric meters by adding high 
metrological performance variants and new 
registers to increase the options for system 
connectivity for the submeter portfolio  
a connection kit was launched to allow 
independent radio providers to adapt their 
products to work with elster submeters 
whilst gaining regulatory approval for more 
installation options for latin america a  
new residential multijet m170 meter was 
launched with improved metrological 
performance offering an extended accurate 
operating range for the commercial and 
industrial sector the range of the new 
h5000 meter has been extended offering 
new data communication options and 
alternative meter body configurations  
a strong pipeline of new products  
continues to provide global business  
growth opportunities
elster water’s continual focus on their 
customers was recognised by the institute 
of mechanical engineers’ manufacturing 
excellence awards 2014 with ukbased 
elster water metering winning the coveted 
manufacturing excellence award for 
customer focus
outlook
the focus in 2015 will be to maintain 
industryleading operating margins and 
achieve revenue growth above industry 
growth rates elster water is well 
positioned to penetrate new and existing 
markets offering a leading portfolio of 
water measurement products 
broad range of class leading 
mechanical water meters  
preequipped for smart metering
advanced electronic water  
meters for both residential  
and commercial customers
innovative smart metering 
solutions and services
large portfolio of advanced 
commercial and industrial meters 
connectivity and integration  
of leading water measurement 
communication technologies
h5000
commercial and industrial water 
meter with class leading 
measuring range
market overview 
 
the global water industry continues  
to seek innovative metering solutions  
to support the objectives of water 
providers including water conservation 
customer service and resource efficiency 
in developed markets revenue growth  
is driven by a continued increase in the 
adoption of communicating meters for 
smart metering projects
external factors 
regulations governing water meter 
specifications are both regional and 
national with most markets adopting 
international standards into their 
regulatory environment the competitive 
environment in our main markets 
comprises a few large suppliers based  
in europe and north america the 
trends in smart water metering are 
attracting new software providers 
including those from the it sector 
business response 
elster water remains focused on the 
delivery of innovative valueadded 
products in market segments that  
are responsive to higher performing 
metering products and solutions 
products 
market overview 
more information p10
world class manufacturing 
techniques including statistical 
process control are key to 
maintaining the highest quality
33
 melrose industries plc
annual report 2014
performance review
performance review 2013 £3501m
2013 £731m
3
2
7
2
1
2
3
4
energy
wwwbrusheu
revenue by geographical 
destination
year ended 31 december 2014
headline
1 
operating profit
year ended 31 december 2014
total revenue
year ended 31 december 2014
 
£3273m
£654m
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 calculated at constant currency
key strengths
expertise in the design and 
manufacture of an extensive range of 
high quality  2 and 4 pole high voltage 
generators and electric motors
innovative design and 
developments
comprehensive and integrated 
aftermarket support tailored  
to meet customers’ needs 
throughout operating life
switchgear and transformer 
products in service with all uk  
and certain overseas energy  
supply authorities
hydropower generators to produce 
environmentally green energy
generators and electric motors  
for marine power
strategically located around  
the world
business review continued
brush provides energy 
solutions for the global 
power industry focusing 
on outstanding product 
performance and 
manufacturing excellence
brush turbogenerators 
“turbogenerators” is the 
world’s largest independent 
manufacturer of electricity 
generating equipment for the 
power generation industrial  
oil  gas and offshore sectors 
from its four plants in the uk czech 
republic netherlands and us and  
with a newlybuilt china generator plant 
coming into production in 2015 brush 
designs manufactures and services 
turbogenerators principally in the 10  
mva to 300 mva range for both gas  
and steam turbine applications and 
supplies a globally diverse customer base
in addition brush designs and manufactures 
systems and power transformers under  
the brand name brush transformers 
“transformers” and also produces a  
wide range of indoor and outdoor medium 
voltage acdc switchgear under the  
hawker siddeley switchgear “hss”  
brand name brush also has a strong 
presence in power control systems 
harrington generators international “hgi”  
is a specialist ukbased small generator 
manufacturer supplying the construction 
military telecoms and rail sectors
during 2014 brush experienced a 
challenging market again particularly in  
new build generators this was mitigated  
by another strong year from aftermarket 
sales and hss significant investment  
was made in the year to fund new product 
development new routes to market and 
the china project and thus future growth 
the performance was supported by 
operational efficiency gains and the 
benefits from capital investments 
201 4 saw the commencement of the 
construction of the brush greenfield generator 
manufacturing plant near shanghai china 
this £30 million capital investment will produce 
generators primarily for the china market and 
is in support of several of brush’s international 
turbine customers factory construction  
is nearly complete and manufacturing 
equipment is now being installed and 
commissioned with the factory expected to 
deliver its first generator in january 2016 the 
first orders have now been received for this 
factory as it moves towards being operational 
brush has already been supplying generators 
in 2014 from europe against the six year 
longterm purchase agreement with huadian 
ge aero gas t urbine equipment co ltd 
“hdge” which will continue until the new 
factory is operational 
1 europe  52
2 north america  28
3 asia  10
4 row  10
34
 melrose industries plc
annual report 2014
performance review the separation of the aftermarket business 
into one unit in 2013 has helped it to grow 
strongly in 2014 late 2014 saw the launch 
of the “vf” range an initiative to provide 
premium replacement rotors in seven 
weeks and selected complete generators 
in 10 weeks industry leading timescales 
this gives end users a critically important 
replacement service as an alternative to 
repair and significantly widens the available 
market to brush for both brush and 
nonbrush legacy machine replacement 
during 2015 this offer will be extended  
to third party nonbrush manufactured 
generators as well as 4 pole generators
the aftermarket business in the usa had 
another strong growth year investment has 
commenced on a new large rotor balancing 
facility in pittsburgh which will significantly 
enhance its capabilities and lead to further 
growth the new global structure of service 
engineers resulted in brush aftermarket 
being able to manage the power outage 
spike in demand in the usa utilising its  
own engineers rather than subcontractors 
overall aftermarket sales were well ahead 
of a strong 2013 
the transformer business had a slow  
sales year in 2014 as a result of it being  
the last year of the current five year ofgem 
the uk government’s office of gas and 
electricity markets cycle orders have  
now improved into 2015 as the period has 
ended the capital expenditure programme 
to reorganise the transformers production 
process and value engineer the product 
was completed and resulted in significant 
margin improvement
the hss business had a satisfactory year 
whilst sales were 8 behind the previous 
year mainly due to project delays as a 
result of efficiency savings profit was 3 
ahead during the year investment in rd 
significantly increased which positions the 
business well for the future with a pipeline  
of unique products 
quality products and service
power generation equipment  
from 10 mva to 300 mva
synchronous motors induction 
motors submersible and  
traction motors
power management and  
excitation systems
medium voltage ac and dc 
switchgear
power and system transformers
aftermarket servicingsupport
spareslifetime extension
£30m
capital investment to construct  
a new generator plant in china
market overview 
 
slow growth in the global economy is 
driving a modest market growth in power 
generation advances in technology are 
resulting in the development of larger 
more efficient turbines often in excess  
of sizes traditionally supplied by brush
external factors 
some of brush businesses have  
strong uk revenue streams principally 
transformers and switchgear which 
are regulated by ofgem
in china the “energy action plan”  
will underpin the switch from coal  
fired generation to gas fired generation 
business response 
the newlyconstructed factory in china 
is expected to deliver its first generator 
in the first quarter of 2016 
brush’s product development of very 
large aircooled generators will position 
the business well in future years
products 
outlook
the medium and longterm growth in 
power and in particular the aeroderivative 
gas turbine market where brush has such 
a strong position remain positive and with 
the additional growth from china a strong 
new product development pipeline across 
all business units coupled with continued 
operational improvements means the 
business is well positioned for the future 
however the overall market dynamics 
remain difficult in the short term profits  
are expected to decline significantly  
in 2015 despite the efforts of brush’s 
management and continued improvements  
in its aftermarket transformers and 
switchgear businesses
market overview 
more information p11
35
 melrose industries plc
annual report 2014
performance review
performance review identiﬁcation
evaluation
analysis
mitigation
risk management
melrose operates in a variety of sectors and countries and  
is exposed to a wide range of risks and uncertainties from a 
strategic operational compliance and financial perspective
risk management framework
the objectives of the directors and senior 
management are to safeguard and increase 
the value of the business and assets of the 
group achievement of these objectives 
requires the development of policies and 
appropriate internal control frameworks to 
ensure the group’s resources are managed 
properly and any key risks are identified  
and mitigated where possible
the board recognises that it is ultimately 
responsible for determining the nature and 
extent of the principal risks it is willing to take 
in achieving its strategic objectives it also 
recognises the need to maintain sound risk 
management and internal control systems
the audit committee monitors the 
effectiveness of the internal control processes 
implemented across the group through  
a review of the key findings presented by  
the external and internal auditors and 
discussions with senior management  
the board is responsible for considering  
audit committee recommendations and 
ensuring implementation by management  
of those recommendations it deems 
appropriate for the business
the group operates on a decentralised 
basis and the board has established an 
organisational structure with clear reporting 
procedures lines of responsibility and 
delegated authority as depicted in the 
diagram opposite
a summary of the principal risks and 
uncertainties that could impact on the 
group’s performance is shown on pages 
38 to 41 further information detailing  
the internal control and risk management 
policies and procedures operated within  
the group is shown on page 71 of the 
corporate governance report
2014 risk management review
in 2014 the board initiated a root and 
branch audit and review of the risk 
management framework and underlying 
processes in operation in every business 
across the melrose group the exercise 
was led by the company secretary and 
supported by risk consultants bdo llp  
audit meetings were conducted by  
the company secretary with senior 
management from each business unit  
the review focused on the degree to  
which risk management arrangements  
are guided by strategic direction and the 
extent to which appropriate processes  
are in place for the identification 
evaluation prioritisation recording 
monitoring and reporting of risk within  
the businesses the results of this audit 
exercise were presented to the board  
and an action plan detailing the key risk 
management priorities was agreed
identification
financial and  
nonfinancial risks  
recorded in controlled  
risk registers
evaluation
risk exposure  
reviewed and  
risks prioritised
mitigation
risk owners  
identified and action  
plans implemented
robust mitigation strategy  
subject to regular and  
rigorous review
analysis
risks analysed  
for impact  
and probability  
to determine  
gross exposure
risk management framework
risk management priorities  
for 2015
the board recognises that operating in a 
dynamic and rapidly evolving commercial 
environment requires a pragmatic flexible 
and responsive risk management framework 
that changes with the business and provides 
management with a comprehensive view  
of the group’s risk profile at any given time 
following the 2014 risk management audit 
bdo llp have been engaged to support 
the board in developing an enhanced  
risk management framework and in 
implementing a programme to promote 
and embed a more riskaware culture 
across the organisation specific  
priorities for the group in 2015 include
• reviewing the board’s risk appetite and 
where appropriate updating the melrose 
risk policy and strategy
• developing and implementing an 
enhanced and more consistent risk 
management governance framework 
across the group this will define the 
melrose principles for risk management 
and set the standards for the 
identification evaluation prioritisation 
recording review and reporting of risks 
and their management or mitigation 
throughout the organisation
• rolling out a groupwide education  
and training programme designed to  
instill and embed a culture of effective  
risk management against a consistently 
applied framework 
• embedding the risk management 
programme through a series of risk 
workshops these will be attended by 
risk champions from each business  
unit and will provide a forum for sharing 
learning and refining risk tools and 
processes and 
• reviewing and improving our processes 
around the assessment of principal risks 
and the monitoring and reporting of the 
group’s risk management performance 
invariably this may require slight revisions 
to the priorities attached to the principal 
risks already identified in this report
36
 melrose industries plc
annual report 2014
performance review divisional senior managers
elster  
gas
elster 
electricity
elster 
water
energy
board
overall responsibility for risk management
audit committee
monitors the effectiveness of the group’s internal control processes
operational managers and financial controllers
the board
the board has approved a formalised but pragmatic group risk management framework
identifying risks
the identification and management of risks across the group are integral to the group’s strategic objectives  
they are vital in helping protect the group’s businesses its people and its reputation
risks and uncertainties 
more information p38
governance overview
more information p60
37
 melrose industries plc
annual report 2014
performance review
performance review risks and uncertainties
the table below lists the principal risks and uncertainties that may affect the group and highlights the mitigating actions that are being 
taken and the opportunities that the group aims to exploit the content of the table however is not intended to be an exhaustive list of 
all the risks and uncertainties that may arise
a risk management and internal controls framework is in place within the group to ensure that such risks and uncertainties can be 
identified and where possible managed suitably each group business maintains a risk register which is reviewed regularly
key risk description and impact mitigation responsibility risk trend strategic priorities
strategic risk
acquisition of new 
businesses and  
improvement strategies
as per the group’s strategy to buy and improve good underperforming manufacturing businesses 
there is a risk that the group will not succeed in driving strategic operational improvements to 
generate value post acquisition in making acquisitions there is a risk of unforeseen liabilities being 
discovered which are not known at the time of the due diligence process but which arose in  
the business before it was acquired the success of the group’s acquisition strategy depends  
on identifying targets obtaining authorisations and having the necessary financing even if an 
acquisition is completed the acquired products and technologies may not be successful or may 
require significantly greater resources and investment than anticipated if anticipated benefits  
are not realised or trading by acquired businesses falls below expectations it may be necessary  
to impair the carrying value of these assets the group’s return on capital employed may fall if 
acquisition hurdle rates are not met the group’s financial performance may suffer from goodwill  
or other acquisitionrelated impairment charges or from the identification of additional liabilities  
not known at the time of the acquisition
• structured and focused due diligence undertaken
• focus on acquisition targets that have strong headline 
fundamentals – high quality products leading market  
share but are underperforming their potential and ability  
to generate sustainable cash flows and profit growth
• handson role taken by directors and other senior 
employees of the group development of strategic  
plans restructuring opportunities capital expenditure  
and working capital management
executive 
management
1
sell improve buy
timing of disposals in line with our strategy and depending where the group is within the buy improve and sell 
strategic cycle the expected timing of disposal of companies is considered as a principal risk which 
could have a material impact on the group strategy further due to the group’s global operations 
there may be a significant impact on timing of disposal due to political and macroeconomic factors 
depending on the timings of disposals and nature of companies’ operations there may be longterm 
liabilities which could be retained by the group insufficient allowance for retained liabilities may also 
affect the group’s financial position
• directors are experienced in judging and regularly reviewing  
the appropriate time in a business cycle for disposal to realise 
maximum value for shareholders
• each disposal is assessed on its merits with a key focus on  
a clean disposal
executive 
management
1
sell improve buy
operational risk
economic and  
political risk
the group operates through manufacturing andor sales facilities in over 50 countries and  
is affected by global economic conditions particularly in the us and europe businesses are  
also affected by government spending priorities and the willingness of governments to commit 
substantial resources current global economic and financial market conditions and the potential 
for a significant and prolonged global recession may materially and adversely affect the group’s 
operational performance financial condition and could have significant impact on timing of 
acquisitions and disposals 
a recession may also materially affect customers suppliers and other parties with which the 
group does business adverse economic and financial market conditions may cause customers 
to terminate existing orders to reduce their purchases from the group or to be unable to meet 
their obligations to pay outstanding debts to the group these market conditions may also cause 
our suppliers to be unable to meet their commitments to the group or to change the credit terms 
they extend to group businesses
• diverse range of companies operating within the group within  
a variety of different industries and countries which reduces 
macroeconomic and political risks
• regular monitoring of order books and other leading indicators 
to ensure the group and each of its businesses can respond 
quickly to any adverse trading conditions this includes the 
identification of cost reduction and efficiency measures
executive 
management
1
sell improve buy
loss of key management the success of the group is built upon strong management teams as a result the loss of key 
personnel can have a significant impact on performance at least for a time the loss of key 
personnel or the failure to plan adequately for succession or develop new talent may impact  
the reputation of the group or lead to a disruption in the leadership of the business competition  
for personnel is intense and the group may not be successful in attracting or retaining qualified 
personnel particularly engineering professionals the loss of key employees the group’s 
inability to attract new and adequately trained employees or a delay in hiring key personnel 
could seriously harm the group’s business over time the group’s competitive advantage is 
defined by the quality of its people should the group fail to attract develop and retain key talent 
in time the competitive advantage will erode leading to weaker growth potential or returns in 
particular with significant restructuring activities undertaken to improve the acquired businesses
• succession planning within the group and its various businesses 
is coordinated via the nomination committee in conjunction  
with the board and includes all directors and senior employees
• the company recognises that as with most businesses 
particularly those operating within a technical field it is 
dependent on directors and employees with particular 
managerial engineering or technical skills appropriate 
remuneration packages and longterm incentive arrangements  
are offered in an effort to retain such individuals
executive 
management
1
sell improve buy
38
 melrose industries plc
annual report 2014
performance review risk trend      increasing         constant         decreasing
key risk description and impact mitigation responsibility risk trend strategic priorities
strategic risk
acquisition of new 
businesses and  
improvement strategies
as per the group’s strategy to buy and improve good underperforming manufacturing businesses 
there is a risk that the group will not succeed in driving strategic operational improvements to 
generate value post acquisition in making acquisitions there is a risk of unforeseen liabilities being 
discovered which are not known at the time of the due diligence process but which arose in  
the business before it was acquired the success of the group’s acquisition strategy depends  
on identifying targets obtaining authorisations and having the necessary financing even if an 
acquisition is completed the acquired products and technologies may not be successful or may 
require significantly greater resources and investment than anticipated if anticipated benefits  
are not realised or trading by acquired businesses falls below expectations it may be necessary  
to impair the carrying value of these assets the group’s return on capital employed may fall if 
acquisition hurdle rates are not met the group’s financial performance may suffer from goodwill  
or other acquisitionrelated impairment charges or from the identification of additional liabilities  
not known at the time of the acquisition
• structured and focused due diligence undertaken
• focus on acquisition targets that have strong headline 
fundamentals – high quality products leading market  
share but are underperforming their potential and ability  
to generate sustainable cash flows and profit growth
• handson role taken by directors and other senior 
employees of the group development of strategic  
plans restructuring opportunities capital expenditure  
and working capital management
executive 
management
1
sell improve buy
timing of disposals in line with our strategy and depending where the group is within the buy improve and sell 
strategic cycle the expected timing of disposal of companies is considered as a principal risk which 
could have a material impact on the group strategy further due to the group’s global operations 
there may be a significant impact on timing of disposal due to political and macroeconomic factors 
depending on the timings of disposals and nature of companies’ operations there may be longterm 
liabilities which could be retained by the group insufficient allowance for retained liabilities may also 
affect the group’s financial position
• directors are experienced in judging and regularly reviewing  
the appropriate time in a business cycle for disposal to realise 
maximum value for shareholders
• each disposal is assessed on its merits with a key focus on  
a clean disposal
executive 
management
1
sell improve buy
operational risk
economic and  
political risk
the group operates through manufacturing andor sales facilities in over 50 countries and  
is affected by global economic conditions particularly in the us and europe businesses are  
also affected by government spending priorities and the willingness of governments to commit 
substantial resources current global economic and financial market conditions and the potential 
for a significant and prolonged global recession may materially and adversely affect the group’s 
operational performance financial condition and could have significant impact on timing of 
acquisitions and disposals 
a recession may also materially affect customers suppliers and other parties with which the 
group does business adverse economic and financial market conditions may cause customers 
to terminate existing orders to reduce their purchases from the group or to be unable to meet 
their obligations to pay outstanding debts to the group these market conditions may also cause 
our suppliers to be unable to meet their commitments to the group or to change the credit terms 
they extend to group businesses
• diverse range of companies operating within the group within  
a variety of different industries and countries which reduces 
macroeconomic and political risks
• regular monitoring of order books and other leading indicators 
to ensure the group and each of its businesses can respond 
quickly to any adverse trading conditions this includes the 
identification of cost reduction and efficiency measures
executive 
management
1
sell improve buy
loss of key management the success of the group is built upon strong management teams as a result the loss of key 
personnel can have a significant impact on performance at least for a time the loss of key 
personnel or the failure to plan adequately for succession or develop new talent may impact  
the reputation of the group or lead to a disruption in the leadership of the business competition  
for personnel is intense and the group may not be successful in attracting or retaining qualified 
personnel particularly engineering professionals the loss of key employees the group’s 
inability to attract new and adequately trained employees or a delay in hiring key personnel 
could seriously harm the group’s business over time the group’s competitive advantage is 
defined by the quality of its people should the group fail to attract develop and retain key talent 
in time the competitive advantage will erode leading to weaker growth potential or returns in 
particular with significant restructuring activities undertaken to improve the acquired businesses
• succession planning within the group and its various businesses 
is coordinated via the nomination committee in conjunction  
with the board and includes all directors and senior employees
• the company recognises that as with most businesses 
particularly those operating within a technical field it is 
dependent on directors and employees with particular 
managerial engineering or technical skills appropriate 
remuneration packages and longterm incentive arrangements  
are offered in an effort to retain such individuals
executive 
management
1
sell improve buy
1 comprises executive directors and melrose senior management 
39
 melrose industries plc
annual report 2014
performance review
performance review risks and uncertainties continued
key risk description and impact mitigation responsibility risk trend strategic priorities
compliance and ethical risk
legal regulatory and 
intellectual property “ip”
there is a risk that the group may not always be in complete compliance with laws regulations  
or permits for example concerning environmental or safety requirements the group could  
be held responsible for liabilities and consequences arising from past or future environmental 
damage including potentially significant remedial costs there can also be no assurance that  
any provisions for expected environmental liabilities and remediation costs will adequately  
cover these liabilities or costs
the group operates in highly regulated sectors in addition new legislation regulations or 
certification requirements may require additional expense restrict commercial flexibility and 
business strategies or introduce additional liabilities for the company or directors should a 
regulator’s approval process take a particularly long time our products may be delayed in getting  
to market which could lead to a loss of revenue or benefit a competitor with a similar product 
failure to comply with certain regulations may result in significant financial penalties debarment 
from government contracts andor reputational damage and impact our business strategy
• regular monitoring of legal and regulatory matters at both a 
group and business unit level consultation with external  
advisers where necessary
• development of suitable corporate governance and compliance 
procedures both at a group and business unit level
• protection of rights over trademarks copyright patents  
designs and trade secrets where necessary
executive 
management
1
sell improve buy
financial risk
foreign exchange rate due to the global nature of operations and volatility in the foreign exchange market exchange  
rate fluctuations have and could continue to have a material impact on the reported results  
the group is exposed to three types of currency risk transaction risk translation risk and risk 
that when a business that is predominantly based in a foreign currency is sold it is sold in that  
foreign currency the group’s reported results will fluctuate as average exchange rates change 
the group’s reported net assets will fluctuate as the yearend exchange rate changes
• the group policy is to protect against the majority of foreign 
exchange risk which affects cash by hedging such risks with 
financial instruments
• protection against specific transaction risks is taken by the  
board on a casebycase basis
executive 
management
1
sell improve buy
pensions as at 31 december 2014 the group has legacy defined benefit pension plans with aggregate  
net liabilities of £2185 million on an accounting basis changes in discount rates inflation  
asset values or mortality assumptions could lead to a materially higher deficit for example  
the cost of a buyout on a discontinued basis uses more conservative assumptions and is likely  
to be significantly higher than the accounting deficit in addition there is a risk that the plan’s 
assets such as investments in equity and debt securities will not be sufficient to cover the  
value of those benefits the implications of a higher pension deficit include a direct impact on 
valuation credit rating and potential additional funding requirements at subsequent triennial 
reviews in the event of a major disposal that generates significant cash proceeds which are 
returned to the shareholders the group may be required to make additional cash payments  
to the plans or provide additional security
• each of the group’s key funded pension plans are now closed  
to new entrants and future service accrual longterm funding 
arrangements are agreed with each of these plans and reviewed 
following completion of actuarial valuations other pension plans 
exist within the group but these are largely unfunded plans 
whereby funding plans are not required and benefit obligations 
are paid when due
• active management of pension plan assets
executive 
management
1
sell improve buy
liquidity the group has £5718 million of gross debt as at 31 december 2014 the ability to refinance  
its borrowings in the bank or capital markets is dependent on market conditions and the proper 
functioning of financial markets furthermore in line with the group’s strategy investment is  
made in the businesses capital expenditure in excess of depreciation and there is a requirement 
to assess liquidity and headroom when new businesses are acquired and the group may be 
unable to refinance its debt when it falls due
• ensure the company has adequate resources to meet its 
liabilities by reviewing its quarterly forecasts ensuring there  
is sufficient headroom within committed bank facilities to  
cope with market volatility
executive 
management
1
sell improve buy
40
 melrose industries plc
annual report 2014
performance review risk trend      increasing         constant         decreasing
key risk description and impact mitigation responsibility risk trend strategic priorities
compliance and ethical risk
legal regulatory and 
intellectual property “ip”
there is a risk that the group may not always be in complete compliance with laws regulations  
or permits for example concerning environmental or safety requirements the group could  
be held responsible for liabilities and consequences arising from past or future environmental 
damage including potentially significant remedial costs there can also be no assurance that  
any provisions for expected environmental liabilities and remediation costs will adequately  
cover these liabilities or costs
the group operates in highly regulated sectors in addition new legislation regulations or 
certification requirements may require additional expense restrict commercial flexibility and 
business strategies or introduce additional liabilities for the company or directors should a 
regulator’s approval process take a particularly long time our products may be delayed in getting  
to market which could lead to a loss of revenue or benefit a competitor with a similar product 
failure to comply with certain regulations may result in significant financial penalties debarment 
from government contracts andor reputational damage and impact our business strategy
• regular monitoring of legal and regulatory matters at both a 
group and business unit level consultation with external  
advisers where necessary
• development of suitable corporate governance and compliance 
procedures both at a group and business unit level
• protection of rights over trademarks copyright patents  
designs and trade secrets where necessary
executive 
management
1
sell improve buy
financial risk
foreign exchange rate due to the global nature of operations and volatility in the foreign exchange market exchange  
rate fluctuations have and could continue to have a material impact on the reported results  
the group is exposed to three types of currency risk transaction risk translation risk and risk 
that when a business that is predominantly based in a foreign currency is sold it is sold in that  
foreign currency the group’s reported results will fluctuate as average exchange rates change 
the group’s reported net assets will fluctuate as the yearend exchange rate changes
• the group policy is to protect against the majority of foreign 
exchange risk which affects cash by hedging such risks with 
financial instruments
• protection against specific transaction risks is taken by the  
board on a casebycase basis
executive 
management
1
sell improve buy
pensions as at 31 december 2014 the group has legacy defined benefit pension plans with aggregate  
net liabilities of £2185 million on an accounting basis changes in discount rates inflation  
asset values or mortality assumptions could lead to a materially higher deficit for example  
the cost of a buyout on a discontinued basis uses more conservative assumptions and is likely  
to be significantly higher than the accounting deficit in addition there is a risk that the plan’s 
assets such as investments in equity and debt securities will not be sufficient to cover the  
value of those benefits the implications of a higher pension deficit include a direct impact on 
valuation credit rating and potential additional funding requirements at subsequent triennial 
reviews in the event of a major disposal that generates significant cash proceeds which are 
returned to the shareholders the group may be required to make additional cash payments  
to the plans or provide additional security
• each of the group’s key funded pension plans are now closed  
to new entrants and future service accrual longterm funding 
arrangements are agreed with each of these plans and reviewed 
following completion of actuarial valuations other pension plans 
exist within the group but these are largely unfunded plans 
whereby funding plans are not required and benefit obligations 
are paid when due
• active management of pension plan assets
executive 
management
1
sell improve buy
liquidity the group has £5718 million of gross debt as at 31 december 2014 the ability to refinance  
its borrowings in the bank or capital markets is dependent on market conditions and the proper 
functioning of financial markets furthermore in line with the group’s strategy investment is  
made in the businesses capital expenditure in excess of depreciation and there is a requirement 
to assess liquidity and headroom when new businesses are acquired and the group may be 
unable to refinance its debt when it falls due
• ensure the company has adequate resources to meet its 
liabilities by reviewing its quarterly forecasts ensuring there  
is sufficient headroom within committed bank facilities to  
cope with market volatility
executive 
management
1
sell improve buy
1 comprises executive directors and melrose senior management 
41
 melrose industries plc
annual report 2014
performance review
performance review finance director’s review
geoffrey martin
group finance director
the year to 31 december 2014 included the 
disposal of bridon the remaining business 
in the lifting division which in the prior year 
contributed 15 towards continuing group 
revenue and 12 to continuing group headline 
operating profit consequently in accordance 
with ifrs 5 the trading results of bridon up 
to the date of disposal have been shown as 
discontinued in both years 
the remaining continuing operations consist of the three elster 
businesses gas electricity and water and the only remaining  
fki business brush which is shown within the energy division 
the discontinued operations in 2013 also include the results  
up until the date of their disposal of the marelli business 
previously shown within the energy division the crosby and  
acco businesses previously shown within the lifting division  
and the truth and harris businesses previously shown within  
the other industrial division 
group trading results  continuing operations
to help understand the results of the continuing operations the 
term ‘headline’ has been used this refers to results calculated 
before exceptional costs exceptional income and intangible  
asset amortisation as this is considered by the melrose board  
to be the best measure of performance
for the year ended 31 december 2014 the group achieved 
revenue from continuing operations of £13775 million 2013 
£14664 million flat at constant currency and headline operating 
profit of £2460 million 2013 £2400 million an increase of 11  
at constant currency the group results have been adversely 
impacted by movements in foreign exchange rates due to the 
strengthening of sterling compared to many foreign currencies  
at actual exchange rates group revenue was down 6 whilst 
group headline operating profit was up 3 the group headline 
operating profit margin defined as the percentage of headline 
operating profit to revenue increased from 164 in 2013  
to 179 in 2014 
after exceptional costs exceptional income and intangible  
asset amortisation group operating profit was £1624 million 
2013 £1925 million and profit before tax was £1289 million 
2013 £1440 million
trading results by division–continuing operations
a split of revenue headline operating profit and headline operating 
profit margin for 2014 and 2013 is as follows
2014
revenue
£m
2014
headline
operating
profit
loss
£m
2014
headline
operating
profit 
margin

2013
revenue
£m
2013
headline
operating
profit
loss
£m
2013 
headline
operating
profit 
margin

elster 10502 2055 196 11163 1942 174
energy 3273 654 200 3501 731 209
central  
corporate – 139 na – 143 na
central  
ltips
1
– 110 na – 130 na
continuing 
group 13775 2460 179 14664 2400 164
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 £139 million 2013 £143 million of 
melrose corporate costs and a long term incentive plan “ltip” 
accrual of £110 million 2013 £130 million the ltip accrual 
includes an amount of £40 million in respect of the melrose 
sharebased incentive plan 2013 £40 million and a charge  
of £70 million 2013 £90 million for the cashbased divisional 
management incentive plans the disposals of crosby late in 
2013 and bridon in 2014 contributed to the reduced divisional 
ltip charge in the year
return of capital
consistent with the group strategy of returning to shareholders  
a large part of any proceeds from the disposal of businesses 
£5953 million was returned to shareholders on 28 february 2014 
following the sale of crosby a few months earlier this return  
was made via a redeemable share scheme alongside a share 
consolidation which reduced the number of ordinary shares by  
a factor of 11 for 13 or 15 from 12666 million to 10718 million
in addition melrose announced on 3 february 2015 a further 
return of capital of £2004 million following the disposal of 
bridon this was subsequently approved by shareholders on  
20 february 2015 this return will be made on 16 march 2015  
via a redeemable share scheme alongside a share consolidation 
which will reduce the number of shares by a factor of 13 for 14  
or 7 from 10718 million to 9952 million
42
 melrose industries plc
annual report 2014
performance review 2013
2014
174
196
2013
2014
164
2
179
“ since acquiring fki for just under £1 billion in  
2008 the fki businesses have generated £2 billion  
of cash from trading and disposal proceeds  
brush the largest of the fki businesses is still  
owned by the melrose group”
finance costs and income
the net finance cost in 2014 was £335 million 2013 £485 million
prior to the return of capital made on 28 february 2014 and 
following the disposal of bridon on 12 november 2014 the 
group’s net debt and bank leverage were lower than usual levels 
this along with the renegotiation of the group’s financing facilities 
on 11 july 2014 discussed later in this review contributed to net 
interest on external bank loans overdrafts and cash balances 
being lower in the year at £203 million 2013 £343 million in 
2014 the group had a blended interest rate of 24 2013 31
melrose uses interest rate swaps to fix the majority of the interest 
rate exposure on its debt more detail on these swaps is given  
in the finance cost risk management section of this review 
also included in net finance cost is a £40 million 2013 £47 
million amortisation charge relating to the arrangement costs  
of raising the bank facility a net interest cost on net pension 
liabilities of £78 million 2013 £89 million and a charge for the 
unwinding of discounts on longterm provisions of £14 million 
2013 £06 million 
tax
the headline income statement tax rate was 270 2013 264 
the headline tax rate for the group is lower than the weighted 
blend of the statutory tax rates around the world because of the 
recognition of deferred tax assets that were not previously thought 
to be recoverable there is also a small benefit from the release  
of provisions previously held against potential overseas tax audits 
which have been successfully resolved
the tax rate after exceptional items and intangible asset 
amortisation is 324 2013 289 the main reason for this 
being higher than the headline rate is the £39 million 2013  
£81 million exceptional tax charge on group reorganisations
the cash tax rate on headline continuing operations of 165 
2013 225 is below the headline income statement rate  
due to the utilisation of preexisting melrose group tax losses  
and other deferred tax assets 
the deferred tax liability in respect of intangible assets  
of £2598 million 2013 £2874 million is not expected to 
represent a future cash tax payment and will unwind as the 
customer relationship brand name and intellectual property 
intangible assets are amortised
elster – headline
1
 operating profit margin
196
group – headline
1
 operating profit margin
179
1 before exceptional costs exceptional income and 
intangible asset amortisation
2 restated to include the results of bridon within 
discontinued operations
43
 melrose industries plc
annual report 2014
performance review
performance review finance director’s review continued
the total amount of tax losses in the group has decreased during 
the year due to their utilisation against taxable profits and also as a 
result of some utilisation against tax audits in respect of prior years 
the total gross tax losses within the group are shown below
tax  
losses
recognised 
£m
unrecognised 
£m
total
£m
uk 140 1151 1291
germany 200 – 200
rest of world 69 276 345
total 2014 409 1427 1836
total 2013 420 1751 2171
exceptional items and amortisation of intangible assets
in the year ended 31 december 2014 the continuing group 
incurred exceptional costs of £343 million 2013 £193 million 
these included £306 million 2013 £188 million of restructuring 
costs which mainly relate to the elster businesses notably in gas 
where the most significant proportion of restructuring cost relates  
to the closure of the essen plant in belgium and relocation of its 
integrated metering solutions business which builds gas metering 
stations to saudi arabia and malaysia this decision was taken  
so as to move production closer to the major gas metering station 
markets and it is also expected to deliver cost savings in the future 
as a result additionally restructuring projects were undertaken in 
the gas business in mainz to move research and development and 
the production of ultrasonic meters to the german plant in the year 
also within the gas business following the acquisition of eclipse 
inc “eclipse” late in 2014 immediate severance programmes 
were announced in the us business as part of  
the planned synergies 
the restructuring costs incurred in 2013 were proportionally 
weighted to the elster electricity and water businesses some 
restructuring costs have been incurred within these businesses  
in 2014 within the european operations following the large 
restructure programmes performed in the north america 
businesses in 2012 and 2013
in addition £37 million 2013 £05 million of acquisition and 
disposal costs were incurred mostly relating to the acquisition  
of eclipse 
the group benefited from exceptional income of £54 million 
2013 £289 million as a result of the release of a surplus 
provision following the successful resolution of a property  
lease dispute the exceptional income in 2013 related to the 
successful resolution of a number of warranty issues inherited  
with the acquisition of elster for less expense than expected 
in addition intangible asset amortisation of £547 million  
2013 £571 million was charged a net tax credit on these 
exceptional costs exceptional income and intangible asset 
amortisation of £195 million 2013 £170 million and an 
exceptional tax charge of £39 million 2013 £81 million  
has been taken in the year
overall the net exceptional items and intangible asset 
amortisation after tax shows a net expense of £680 million 
2013 £386 million
earnings per share “eps” 
the melrose board considers that headline diluted eps 
calculated using the headline continuing profit attributable  
to shareholders and the number of shares in issue following  
the return of capital in march 2015 best demonstrates  
the performance in 2014 because it matches the size of  
the continuing group with the ongoing number of shares  
on this basis the eps in 2014 was 153p
in accordance with ias 33 two sets of basic and diluted eps 
numbers are disclosed on the face of the income statement  
one for continuing operations and one that also includes 
discontinued operations in the year ended 31 december 2014  
the diluted eps for continuing operations was 7 8p 2013 7 8p  
for continuing and discontinued operations the diluted eps for 
2014 was 175p 2013 437p
acquisition during the year
on 31 october 2014 elster gas acquired eclipse a manufacturer 
of gas combustion components and systems for industrial heating 
and drying applications headquartered in rockford illinois usa 
for cash consideration of £97 6 million the acquisition was funded 
through the existing group debt facilities and in the two months  
of ownership eclipse has contributed £122 million to revenue and 
£14 million to headline operating profit
disposal during the year
on 12 november 2014 the disposal of bridon was completed for  
a gross cash consideration of £3748 million less £99 million of 
costs the profit on disposal of this business was £969 million 
bridon was acquired with fki in july 2008 and contributed  
£2080 million of revenue and £226 million of headline operating 
profit up to the date it was disposed in 2014 and is shown within 
discontinued operations 
since acquiring fki for just under £1 billion in 2008 the fki 
businesses have generated £2 billion of cash from trading and 
disposal proceeds brush the largest of the fki businesses  
is still owned by the melrose group
44
 melrose industries plc
annual report 2014
performance review cash generation and management
the cash generation performance in 2014 and the movement  
in net debt are summarised as follows
2014  
£m
headline operating profit 2460 
depreciation and amortisation of computer software  
and development costs 318 
working capital movement 285
headline operating cash flow pre capex 2493 
headline ebitda conversion to cash pre capex  90
net capital expenditure 583
net interest and net tax paid 593
defined benefit pension contributions 311
other including discontinued operations 302
cash inflow from trading after all costs including tax 704 
the conversion of headline operating profit before depreciation 
and amortisation into cash was 90 in 2014 2013 96 within 
this strong level of cash generation elster achieved 94 and 
brush 83
the movement in net debt in the year is reconciled as follows
2014 
£m
opening net debt 1408
cash inflow from trading after all costs including tax 704 
net cash flow from acquisitions and disposals
1
2533 
amounts paid to shareholders return of capital  
and dividends 6789
foreign exchange and other 53
closing net debt 5013
1  gross disposal proceeds of £3748 million less costs paid of £85 million and cash  
disposed of £146 million net of acquisition of subsidiaries of £976 million cash  
acquired of £15 million and costs of acquisition of £23 million
the balance sheet leverage calculated as net debt divided  
by continuing headline operating profit before depreciation and 
amortisation was 18x at 31 december 2014 31 december 2013 
04x net debt will increase in march 2015 following the recently 
approved return of capital of £2004 million allowing for this the 
proforma leverage at 31 december 2014 would have been 25x 
which is considered to be a better reflection of the ongoing 
leverage level for the group
capital expenditure
by business the net capital expenditure and depreciation  
in the year was as follows
elster energy central total
net capital expenditure £m 281 300 02 583
depreciation £m 246 63 09 318
net capital expenditure to 
depreciation ratio full year 11x 48x 02x 18x
melrose 10 year 2005–2014 
average annual multiple 13x
the net capital spend to depreciation ratio was 18x in 2014 2013 
11x within this the ratio in the brush business was 48x 2013 
28x which included the continuation of the significant investment 
in a new factory in the shanghai area of china the net capital 
spend to depreciation ratio in elster was 11x 2013 07x elster  
is inherently a less capital intensive business than energy
assets and liabilities
the summary of melrose group assets and liabilities are  
shown below
2014 
£m
2013 
£m
fixed assets including computer 
software and development costs 2242 2653 
intangible assets 8598 9859 
goodwill 15209 16020 
net working capital 1064 1269 
retirement benefit obligations 2185 2193
provisions 1770 1778
deferred tax and current tax 2474 2729
other
1
66 186 
total 20750 23287 
1 includes interests in joint ventures and derivative financial instruments 
these assets and liabilities are funded by
2014 
£m
2013 
£m
net debt 5013 1408
equity 15737 21879
total 20750 23287
the movements in net debt and equity primarily relate to the 
return of £5953 million to shareholders and the disposal of  
bridon in the year
45
 melrose industries plc
annual report 2014
performance review
performance review goodwill intangible assets and impairment review
the total value of goodwill as at 31 december 2014 was £15209 
million 31 december 2013 £16020 million and intangible  
assets was £8598 million 31 december 2013 £9859 million 
these balances reduced as a result of the disposal of bridon in 
the year and the split is as follows
elster  
£m
energy  
£m 
total  
£m 
goodwill 13192 2017 15209 
intangible assets 7762 836 8598 
total goodwill  
and intangible assets 20954 2853 23807 
the goodwill and intangible assets have been tested for 
impairment as at 31 december 2014 the board is comfortable 
that no impairment is required 
provisions
total provisions at 31 december 2014 were £1770 million  
31 december 2013 £1778 million in total £496 million  
of cash was spent on the utilisation of provisions of which  
£387 million related to restructuring and warranty the  
following table details the movement in provisions in the year
total  
£m
at 31 december 2013 1778 
cash spent on the utilisation of provisions 496
acquisition of eclipse 92 
net charge to headline operating profit 150 
net charge to exceptional items 262 
disposal of bridon 14
other including foreign exchange 02
at 31 december 2014 1770 
the net charge to headline operating profit in the year was £150 
million which included the £70 million divisional ltip charge along 
with £78 million of normal net warranty expenses in the year 
the net charge to exceptional items of £262 million included 
£316 million relating to restructuring projects most of which is 
expected to be spent in 2015 this amount has been partly offset 
by the exceptional income release of £54 million relating to the 
successful resolution of a historical property lease dispute 
the other movements on provisions in the period relate to the net 
effect of the unwind of discounting on longterm provisions and 
the relevant foreign exchange impact
finance director’s review continued
pensions
the group has a number of defined benefit and defined 
contribution pension plans
at 31 december 2014 the fki uk pension plans which comprise 
two separate independent plans the fki uk pension plan and the 
brush group 2013 pension plan are significant in size and had  
a combined net deficit at 31 december 2014 of £827 million  
31 december 2013 £1002 million plan assets were £6956 
million 31 december 2013 £6195 million and plan liabilities  
were £7783 million 31 december 2013 £7197 million 
the other uk defined benefit pension plan of significant size in  
the group is the mckechnie uk pension plan with an accounting 
surplus at 31 december 2014 of £16 million 31 december 2013 
deficit of £05 million the plan assets at 31 december 2014 were 
£2099 million 31 december 2013 £1825 million and liabilities 
were £2083 million 31 december 2013 £1830 million 
these three uk plans are closed both to new members and 
current members’ future service 
a us defined benefit plan for fki also exists at 31 december 
2014 the fki us plan had assets of £1765 million 31 december 
2013 £1776 million liabilities of £1952 million 31 december 
2013 £1830 million and consequently a net deficit of £187 
million 31 december 2013 £54 million this plan is closed to 
new members and to current members’ future service
during the year a decision was made to offer lump sums to 
terminated vested participants of the fki us plan whose benefit 
had a current lump sum of us 65000 or less approximately 
60 of those offered accepted resulting in a reduction in gross 
liabilities of £23 million and a benefit of £35 million to the overall 
pension charge for the year shown within central costs
the elster businesses also operate a number of defined benefit 
plans most of which are unfunded with a net accounting deficit 
at 31 december 2014 of £1187 million 31 december 2013 
£1015 million within this 79 or £943 million 31 december 
2013 82 related to unfunded german defined benefit plans 
and early retirement programmes
during the year the group terminated certain elster us unfunded 
retiree medical and welfare plans reducing gross liabilities by  
£43 million which benefited the overall pension charge in the  
year within the gas division
46
 melrose industries plc
annual report 2014
performance review a summary of key assumptions used for all of the uk plans is 
shown below
2014 assumptions  

2013 assumptions  

discount rate 350 440
inflation 210 340
for the most significant plans the fki uk pension plans  
a male aged 65 in 2014 is expected to live for a further 219 years 
31 december 2013 219 years whilst a woman aged 65 would  
live for a further 242 years 31 december 2013 241 years  
this is assumed to increase by 13 years 6 for a male and  
15 years 6 for a female aged 65 in 2034
it is noted that a 01 percentage point decrease in the discount 
rate would increase the pension liabilities on the uk pension  
plans by £156 million or 2 and a 01 percentage point increase 
to inflation would increase the liabilities on these plans by  
£111 million or 1 furthermore an increase by one year in  
the expected life of a 65 year old member would increase the  
pension liabilities on these plans by £362 million or 4
the longterm strategy for the uk plans is to concentrate on the 
cash flows required to fund the liabilities as they fall due whether 
that is within the timescales of melrose ownership or beyond  
the pension plan cash flows extend many years into the future 
and the ultimate objective is that the total pool of assets derived 
from future company contributions and the investment strategy 
allow each cash payment to members to be made when due  
in 2014 the melrose group made annual contributions of £185 
million in total 2013 £185 million to the two remaining uk plans 
within the fki businesses and £52 million 2013 £52 million to 
the mckechnie uk pension plan in addition £81 million was  
paid into the disposed bridon group 2013 pension plan
in 2015 the group expects to contribute £200 million to the fki 
uk plans and £52 million to the mckechnie uk pension plan
the melrose board recognises that pension plan liabilities need  
to exit the group as businesses are sold however this can be 
done at a time which is commercially sensible
risk management
the financial risks the group faces have been considered and 
policies have been implemented to best deal with each risk  
the most significant financial risks are considered to be liquidity 
risk finance cost risk exchange rate risk contract and warranty 
risk and commodity cost risk these are discussed in turn below
liquidity risk management
the group’s net debt position at 31 december 2014 was £5013 
million compared to £1408 million a year earlier the level of net 
debt and leverage at both year ends was lower than the normal 
level because disposals had been completed during the year but 
the associated returns to shareholders did not occur until after  
the year end 
on 11 july 2014 the group’s financing facilities were renegotiated 
to improve the existing terms and to extend the maturity date from 
29 june 2017 to 11 july 2019
the group previously had a committed term loan held in two 
tranches of £180 million and us 290 million as part of the 
renegotiation the us 290 million term loan tranche was 
converted into a revolving credit facility and now exists along  
with the £7415 million and €300 million revolving credit facilities 
that were already in place the remaining sterling term loan is 
subject to mandatory 5 repayments on 11 july 2017  11 july 
2018 and 11 january 2019
the banking facility continues to have two financial covenants  
a net debt to headline ebitda covenant debt cover covenant 
and an interest cover covenant both of which are tested half 
yearly at june and december and both of which afforded 
comfortable headroom at 31 december 2014 
the first of these covenants which calculates net debt at average 
rates during the year is set at 35x leverage or lower for each of 
the half yearly measurement dates for the remainder of the term 
at 31 december 2014 it was 17x 31 december 2013 05x but  
it would have been 25x on a proforma basis when allowing for  
the return of capital that will occur in march 2015
the interest cover covenant is unchanged at 40x or higher 
throughout the life of the facility at 31 december 2014 it was 
153x 31 december 2013 118x
the drawdown of the facilities are made in the core currencies  
of the group being us dollar euro and sterling and in 
proportions to protect the group as efficiently as possible  
from currency fluctuations on net assets and profit
in addition there are a number of uncommitted overdraft 
guarantee and borrowing facilities made available to the group 
these uncommitted facilities are lightly used
cash deposits and marketable securities amounted to £705 
million at 31 december 2014 31 december 2013 £2004 million 
and are offset against gross debt of £5718 million 31 december 
2013 £3412 million to arrive at the net debt position of £5013 
million 31 december 2013 £1408 million the combination of 
this cash and the size of the debt facilities allows the directors  
to consider that the group has sufficient access to liquidity for  
its current needs
the board considers carefully its counterparty risk with banks 
when deciding where to place the cash on deposit held within  
the melrose group 
47
 melrose industries plc
annual report 2014
performance review
performance review finance cost risk management
the group remained in a net debt position at 31 december 2014 
drawdowns under the amended facilities bear interest at 
interbank rates of interest plus a margin the margin ranges 
between 075 and 190 previously 140 to 265 
determined by reference to the group’s debt cover ratio 
at the beginning of 2014 the group protected just under 80  
of gross borrowings from exposure to changes in interest rates  
by holding a number of interest rate swaps to fix the cost on  
us 2468 million £3368 million and €2000 million of debt 
during the year following the disposal of bridon a €500 million 
interest rate swap arrangement was closed out this left swap 
arrangements in place fixing the interest rate cost on us 2468 
million £3368 million and €1500 million of gross borrowings at  
31 december 2014
subsequent to the balance sheet date to ensure that the group 
protected between 70 and 80 of gross borrowings from 
exposure to changes in interest rates following the return of 
capital in march 2015 further swap arrangements have been 
closed out and new arrangements placed the new swap 
arrangements provide protection through to july 2019 and require 
the group to pay annually in arrears a weighted blended fixed 
finance cost of 092 31 december 2013 070 for us dollar 
swaps 006 31 december 2013 072 on euro swaps and 
105 31 december 2013 091 on sterling swaps plus the 
relevant bank margin which is currently 130 31 december 
2013 225 
exchange rate risk management
the group trades in various countries around the world and is 
exposed to many different foreign currencies the group therefore 
carries an exchange rate risk that can be categorised into three 
types as described below the board policy is designed to protect 
against the majority of the cash risks but not the noncash risks 
the most common cash risk is the transaction risk the group 
takes when it invoices a sale in a different currency to the one  
in which its cost of sale is incurred this is addressed by taking 
out forward cover against approximately 60 to 80 of the 
anticipated cash flows over the following 12 months placed on  
a rolling quarterly basis and for 100 of each material contract 
this does not eliminate the cash risk but does bring some 
certainty to it
exchange rates used in the year
us dollar
12 month  
average rate
closing  
rate
2014 165 156
2013 156 166
euro
2014 124 129
2013 118 120
the effect on the key headline numbers in 2014 for the continuing 
group due to the translation movement of exchange rates from 
2013 to 2014 is shown below the table illustrates the translation 
movement in revenue and headline operating profit if the 2013 
average exchange rates had been used to calculate the 2014 
results rather than the 2014 average exchange rates in particular 
the table illustrates an 8 headwind to headline operating profit  
in the year from the movement in foreign exchange rates
the translation difference in 2014 £m
revenue decrease 904
headline operating profit decrease 195
given the group’s largest exchange rate exposure is to the euro 
which makes up 40 of group profits in 2014 current exchange 
rates including the recent weakness of the euro mean there is  
a 5 headwind from currency into 2015
for reference in respect of the enlarged group an indication  
of the shortterm exchange rate risk which shows both translation 
exchange risk and unhedged transaction exchange rate risk  
is as follows
sensitivity of profit to translation  
and unhedged transaction exchange risk
increase in headline 
operating profit  
£m
for every 10 cent strengthening of the us dollar 
against sterling 62
for every 10 cent strengthening of the euro 
against sterling 81
the longterm exchange rate risk which ignores any hedging 
instruments is as follows
sensitivity of profit to translation  
and full transaction exchange rate risk
increase in headline 
operating profit  
£m
for every 10 cent strengthening of the us dollar 
against sterling 84
for every 10 cent strengthening of the euro 
against sterling 43
finance director’s review continued
48
 melrose industries plc
annual report 2014
performance review no specific exchange instruments are used to protect against  
the 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 potentially the most significant exchange risk that the 
group has arises when a business that is predominantly based  
in a foreign currency is sold the proceeds for those businesses 
may be received in a foreign currency and therefore an exchange 
risk might arise if foreign currency proceeds are converted  
back to sterling for instance to pay a dividend to shareholders 
protection against this risk is considered on a casebycase basis 
contract and warranty risk management
the financial risks connected with contracts and warranties 
which include the consideration of warranty terms duration and 
any other commercial or legal terms are considered carefully by 
melrose before being entered into
commodity cost risk management
as melrose owns engineering businesses across various  
sectors the cumulative expenditure on commodities is important  
the group addresses the risk of base commodity costs 
increasing by wherever possible passing on the cost increases  
to customers or by having suitable purchase agreements with  
its suppliers which sometimes fix the price over some months  
into the future 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
going concern
the group’s business activities together with the factors likely  
to affect its future development performance and position are  
set out in the strategic report and performance review sections  
of the annual report in addition the consolidated financial 
statements and in particular notes 19 and 24 include details of 
the group’s borrowing facilities and hedging activities along with 
the processes for managing its exposures to credit risk capital 
risk liquidity risk interest risk foreign currency risk and 
commodity cost risk 
the group has considerable financial resources and a breadth  
of end markets both by sector and geographically giving  
some balance to the various market and economic cycle risks 
furthermore the group has a consistent cash generation record 
and as a consequence the directors believe that the group is  
well placed to manage its business risks successfully despite  
the current uncertain economic outlook
after making enquiries the directors have a reasonable 
expectation that the group has adequate resources to continue  
in operational existence for the foreseeable future for this reason 
they continue to adopt the going concern basis in preparing the 
financial statements
geoffrey martin
group finance director
4 march 2015
49
 melrose industries plc
annual report 2014
performance review
performance review corporate social responsibility
internal communication 
initiatives foster a culture  
of openness
1 employment policies
2 employee involvement consultation and development
3 employee initiatives
4 gender diversity
5 health and safety
6 health and safety initiatives
7  the environment
8 environmental initiatives
9 greenhouse gas emissions
10 energy savings opportunity scheme
1 1 supply chain assurance
12 human rights and ethical standards
contents
50
 melrose industries plc
annual report 2014
performance review
50 24 
of melrose group employees  
are women 
1 employment policies
the group recognises its responsibilities  
for the fair treatment of all its current and 
potential employees in accordance with 
legislation applicable to the territories  
within which it operates together with 
relevant guidance on good practice where 
appropriate due to the diverse nature of the 
group’s activities businesses are required  
to manage their employment matters on a 
decentralised basis therefore responsibility 
for the adoption of employment policies and 
practices sits at a local business unit level 
this position ensures that rigorous and 
targeted policies and procedures are 
implemented that meet both site and local 
regulatory requirements taking into account 
the size and nature of the businesses
as part of this decentralised approach 
each business is responsible for setting  
and measuring its own employment and 
employeerelated kpis and as such these 
vary throughout the group however  
such measurements will generally include 
absenteeism punctuality headcount and 
employee relations issues
any concerns or adverse trends are 
responded to in a timely manner 
furthermore as a groupwide policy  
and so far as particular disabilities permit 
the company and each of its businesses 
will where practicable give employees 
disabled during their period of employment 
continued employment in the same job  
or a suitable alternative job together with 
appropriate training andor retraining
equal opportunities for appropriate 
training career development and 
promotion are also available to all 
employees within the group regardless  
of any physical disability gender religion 
race nationality sexual orientation or age
applications for employment by disabled 
persons are always fully and fairly 
considered by the group and are 
considered on merit with regard only  
to the jobspecific requirements and the 
relevant applicant’s aptitude and ability  
to carry out the role where reasonable  
to do so arrangements wll be made to 
enable disabled persons to carry out a 
specific role 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 melrose is proud to be a 
member of the business disability forum  
a notforprofit member organisation that 
works with the business community to 
understand the changes required in the 
workplace in order that disabled people  
are treated fairly so that they can 
contribute to business success to  
society and to economic growth
the group regards employee training and 
advancement as an essential element of 
industrial relations 
2 employee involvement  
consultation and development 
the group attaches great importance  
to good labour relations employee 
engagement and employee development 
the diverse nature of the group’s  
activities places the responsibility for  
the implementation and management  
of employment practices with local 
management in a manner appropriate  
to each business
a culture of clear communication and 
employee consultation and engagement  
is inherent in the group’s businesses 
employee briefing sessions with employee 
representatives are held on a regular basis 
to communicate strategy key changes 
financial results achievements and other 
important issues to employees and 
receive feedback from them on these 
issues regular appraisals employee 
surveys notice boards team meetings 
suggestion boxes and newsletters are  
world class manufacturing 
facilities and engineering
also used to communicate and engage 
with employees and to solicit their 
feedback on issues of concern to them  
as employees
extensive training is available to all staff 
and is actively encouraged to ensure  
that a high standard of skill is maintained 
across the group crosstraining 
programmes are also in place at a number  
of the group’s businesses the importance 
of training extends beyond onthejob 
training and also focuses on enhancing 
personal development apprenticeship 
programmes are in place which help  
to assist with succession planning in 
locations where there is an ageing 
workforce employees are encouraged  
to think in an innovative manner across  
the group and have regard for both 
financial and economic factors affecting  
the group
51
 melrose industries plc
annual report 2014
performance review
performance review • in 2014 brush uk launched a new 
graduate scheme illustrating its 
commitment to recruiting bright minds  
and fresh talent for the future the twoyear 
graduate programme includes an  
overseas placement so that the graduates 
gain international experience within the 
organisation preparing them for a 
successful future with brush to ensure  
the success of this programme brush 
representatives attended a number of  
job fairs to promote the programme  
and discuss it with potential graduates 
this included the graduate engineer  
and science show in london brush has  
also been active in the local community 
attending careers fairs at local schools 
encouraging young people to consider 
engineering and manufacturing as a  
career choice such events also promote 
the employer branding of brush in a wider 
sphere as an employer of choice
• brush continues to value the contribution 
that apprentices bring to the organisation 
and another 10 apprentices joined brush 
uk in 2014 bringing the total current 
number of apprentices to 56 at various 
stages of their four year apprenticeship 
the apprentice scheme is continually 
developing and evolving to bring together 
a blend of technical training academic 
learning and personal development to 
create a future talent pipeline for brush
• brush takes the health and wellbeing  
of its employees very seriously and has 
continued to develop and enhance its 
occupational health service which is 
available to employees five days a week 
the service can make referrals to 
doctors physiotherapists or counselling 
services as required to ensure that the 
business supports its employees through 
any periods of absence or illness health 
promotion is a key feature of the service 
that is continually developing through 
awareness campaigns which in turn has 
a positive impact on both the employee 
and the business
• elster electricity introduced new internal 
communication initiatives in 2014 a further 
step in fostering a culture of clear and 
open communication in september 2014 
the first global webcast electricitylive 
took place hosted by the global 
management team the first global 
newsletter electricitycurrentaffairs 
containing contributions from employees 
worldwide was distributed in december 
2014 specialised newsletters are also 
issued bimonthly providing employees 
with important business facts and news  
regarding the software business
• elster electricity’s 2014 global leadership 
development programme involved  
two strategy workshops two training 
sessions on change management and  
a fourday training session on leadership 
for 42 employees
• two elster gas leadership conferences 
were held in 2014 these were attended 
by senior management managing 
directors and other executives from  
across the elster gas businesses  
the conferences involved knowledge 
sharing and discussions on business 
priorities and strategic targets
• elster gas conducted their first international 
employee engagement survey in 2014 
covering the major parts of the business 
teams were set up to work on the analysis 
and evaluation of the survey results and  
the development of action plans in order  
to improve employee engagement
• elster water launched an improved 
performance management system in 
2014 to ensure that all employees are 
aware of the business objectives and  
how they individually contribute to the 
success of the business
3 employee initiatives
during 2014 the group’s businesses 
implemented a range of employeerelated 
initiatives some of these are listed below
• recognising that leadership is critical to 
the success of its business brush uk 
has developed and implemented a 
leadership development programme 
which has external accreditation to the 
institute of leadership  management  
it is structured to allow talent to develop 
and grow within the business the 
programme has been designed to  
reflect the development needs of the 
organisation and through the problem 
solving module participants identify a 
business improvement opportunity which 
creates a return on investment in the 
company participants present their 
opportunities to the brush executive  
to underline how they have applied their 
learning in the operational environment
• the brush group launched a customer 
connection programme in 2014 
supporting its global vision statement 
‘the vital few’ the objective of the 
programme is to develop the employees’ 
ability to exceed the expectations of both 
the internal and external customers and 
maximise these relationships during  
the programme employees identify a 
customer innovation project which 
delivers a return on investment in the 
company and is presented to the brush 
executive at the end of the programme
operators in lotte germany 
assembling precision electronic 
measurement devices for elster  
smart gas meters
corporate social responsibility  
continued
52
 melrose industries plc
annual report 2014
performance review 1 male  6672
2 female  2090
 
 
total group employees
1 male  8
2 female  0
 
 
senior managers
1
1 male  7
2 female  1
 
 
melrose industries plc board
1 male  6657
2 female  2089
 
 
other employees
4 gender diversity
the charts below show the total number  
of males and females working within the 
group as at 31 december 2014
1  defined as senior head office employees of 
melrose industries plc located in the london 
birmingham and atlanta offices
5 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 
quarterly board meetings of the company
each business is responsible for setting  
its own detailed arrangements concerning 
health and safety policies and procedures 
in accordance with local health and safety 
legislation as a general rule businesses 
strive to achieve best practice in terms of 
what is suitable and practical for the size 
and nature of their operations defined and 
business specific health and safety key 
performance indicators are also used 
within the group’s businesses
reports detailing business unit 
performances in relation to three  
health and safety kpis major accident 
frequency rate accident frequency  
rate and accident severity rate are 
presented to the board and reviewed  
at each quarterly board meeting  
there were no issues or concerns 
identified by the melrose board during 
2014 while no corrective measures were 
deemed necessary the board as always 
encourages business unit management  
to remain vigilant where employee and  
third party safety is concerned
many manufacturing locations within the 
group hold iso 18001 certification the 
internationally recognised assessment 
standard for occupational health and 
safety management systems 
divisional managers within each business 
unit have responsibility to ensure that 
health and safety remains a key focus  
and to ensure that active procedures  
and monitoring systems are in place 
detailed health and safety plans are set  
by businesses each year to determine 
annual targets and improvement initiatives
all businesses have health and safety 
committees “hs committees” which 
meet on a regular basis and are made up  
of representatives from both management 
and shop floor level personnel each of  
the hs committees has wideranging 
responsibilities which vary from business to 
business and include the review of reported 
incidents and the monitoring of incident 
trends these hs committees are also 
responsible for ensuring that corrective 
measures are implemented when accidents 
occur and that all incidents whether or not 
they are deemed reportable under local 
legislation are given due attention
health safety and 
sustainability are integral 
to our business
53
 melrose industries plc
annual report 2014
performance review
performance review corporate social responsibility  
continued
6 health and safety initiatives
during 2014 many of the group’s 
businesses implemented a range of  
health and safety initiatives some of  
these are listed below
• during 2014 brush uk implemented  
a behavioural safety programme to 
continue to evolve the very strong  
health and safety culture within the 
business the programme focuses  
on developing a proactive approach 
among brush employees so that they 
increase their responsibility and 
accountability for their own and their 
working group’s actions while ensuring 
they intervene at the earliest opportunity 
to stop an unsafe act or correct an 
unsafe condition
• the business has recognised the 
following benefits
 – a 100 reduction in reportable 
accidents to the health and safety 
executive
 – an engaged workforce in matters 
relating to health and safety 
 – a clear demonstration of the brush 
management’s intentions to 
continually improve the standard  
of health and safety within the 
business and
 – a recognition that a strong health  
and safety culture can have a positive 
impact on the growth and brand 
value of the business 
• elster electricity carried out numerous 
health and safety initiatives in various 
countries in 2014 this included an 
initiative at elster electricity uk which 
provided training and awareness in key 
areas including fire marshalling first aid  
manual handling safety management 
and risk control 
• in brazil personal safety procedures for 
risk areas were implemented and weekly 
five minute health and safety talks were 
held with all production employees at 
elster electricity’s mexican site in the  
us safety audits were conducted by  
an external third party to provide a safer 
working environment for all employees 
• following the highly successful 
implementation and external audit  
of the ohsas 18001 system in  
romania in october 2014 and to 
support elster electricity’s increased 
commitment to occupational health  
and safety ohs ohsas 18001 will  
be further implemented within emea 
and externally audited throughout 2015 
this initiative demonstrates elster 
electricity’s continued commitment  
to employee wellbeing 
• it is a policy of elster gas that all major 
manufacturing plants are certified to 
ohsas 18001 to promote world class 
health and safety practices several  
major plants are now accident free 
• during the year the accident frequency 
rate for the global elster gas business 
was reduced by 30 when compared 
with 2013 at the same time the 
accident severity rate saw a 50 
reduction the improvement in both 
metrics demonstrates the leadership’s 
commitment to improving the welfare  
of all elster gas employees worldwide 
• elster water’s 2013 comprehensive ohs 
review and improvement initiative was 
completed in h1 2014 elster water sites 
with assembly andor test processes 
were reaudited after completion of 
minor improvements and confirmed 
compliant to national and international 
ohs standards
• all operational processes are subject  
to continuous review by senior site 
management to confirm compliance to 
ohs standards elster water applies a 
“norisk” tolerance in order to provide a 
safe and clean work environment for all 
its employees
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 divisional board 
meeting to ensure that issues are resolved 
additionally operations are audited by  
the hs committee at least annually and 
reports of performance and recommended 
improvements are prepared and circulated 
to the divisional senior management 
teams divisional managers are provided 
with detailed health and safety reports on  
a frequent basis to ensure that such 
matters are given high visibility and that 
improvements are authorised and 
implemented quickly
“ divisional managers are 
provided with detailed 
health and safety reports 
on a frequent basis”
54
 melrose industries plc
annual report 2014
performance review 8 environmental initiatives
during 2014 many of the group’s 
businesses implemented a range of 
environmental improvement initiatives 
some of these are listed below
• brush uk focused on making further 
energy savings savings were  
made in gas consumption 19 saving 
from 2013 and electricity consumption 
05 saving from 2013 lighting initiatives 
across the loughborough site have 
generated savings in certain working 
facilities of between 47 and 72
• to increase awareness of environmental 
management and to complement the 
existing iso 14001 certifications at the 
operations in romania the uk and 
russia standardised processes are 
being implemented across elster 
electricity to ensure best practice and 
transparency these new processes will 
continue to be aligned with iso 14001 
and will be externally audited 
• elster electricity constantly increases 
product features while optimising its power 
consumption having a positive impact  
on energy saving energy distribution  
costs and energy management features  
elster energyict a unit within elster 
electricity offers utilitygrade energy 
management software solutions  
these help to reduce their clients’  
energy consumption by up to 30 
• at elster electricity in mexico a “tree day” 
was held in 2014 which involved the 
donation of trees for reforestation
• it is a policy of elster gas that all major 
manufacturing plants are certified to 
ohsas 14001 to promote world class 
environmental behaviour in several 
countries the 2013 certifications were 
renewed following audit approvals in  
the first quarter of 2014 both facilities  
in germany were certified
• a comprehensive environmental 
measurement and reporting system was 
introduced for all elster gas manufacturing 
operations which tracks six key kpis as 
part of the monthly operations review the 
kpis measure electricity consumption gas 
consumption and hence together co
2
 
water consumption solid waste generation 
and  recycled liquid waste generation 
and volatile organic compounds vocs 
emissions performance against these 
kpis improved in 2014 
• elster water meters and radio equipment 
contain lithium batteries these batteries 
are defined as dangerous goods under 
the ‘un recommendations on the 
transport of dangerous goods’ elster 
water together with its logistics partners 
have implemented appropriate processes 
to ensure compliance with these  
un recommendations
7 the environment
the melrose board fully understands the 
importance of the group’s environmental 
responsibilities each of the company’s 
businesses is committed to ensuring that 
their operations have a minimum possible 
adverse effect on the environment
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 using kpis in order that  
each of the businesses can plan for 
ongoing 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
55
 melrose industries plc
annual report 2014
performance review
performance review corporate social responsibility  
continued
global ghg emissions data for period 1 january – 31 december 2014 
tonnes co
2
e
1
 unless stated
 
emissions sources 2014 2013
2
change
combustion of fuel and operation of facilities 18985 23237 18
electricity heat and steam purchased for own use 9380 12036 22
overseas electricity
3
26741 29642 10
company’s chosen intensity measurement  
emissions reported above normalised to tonnes per £1000 turnover 0040 0044 9
 1  c o
2
e – carbon dioxide equivalent this figure includes greenhouse gases in addition to carbon dioxide
2 excluding bridon emissions
3  the emissions associated with overseas electricity are presented in tonnes carbon dioxide only as per the defra guidance
all material emissions from within the 
organisational and operational scope and 
boundaries of the group are reported  
the emissions from owned vehicle 
transport ie group owned cars and  
vans lorries and fork lift trucks and the 
emissions associated with refrigeration 
have been excluded from the report on  
a de minimis basis the ghg emissions 
from these sources have been estimated  
to account for less than 1 of the total 
melrose emissions reported on an 
individual basis and as a combined total  
to account for less than 2 of the total 
melrose ghg emissions reported
the financial reporting year of 2013  
was the first year in which the company 
had been required to disclose its ghg 
emissions data within the annual report 
and represents the baseline against which 
the subsequent emission data sets will  
be based the main change in the data 
compared to the baseline data as 
presented in the table above is due to  
the divestment of the bridon business  
unit in 2014 the bridon group represented 
approximately 45 of the total ghg 
emissions reported in 2013 other smaller 
changes have resulted from the closure 
and relocation of activities from some  
sites and general efficiency savings and 
improvements at a number of other sites
given that the melrose business model  
is to acquire and divest businesses over  
a 35 year timeframe there may be 
significant year on year changes in the 
reported emissions data which may not 
reflect the underlying ghg performance  
of the group’s businesses
10 energy savings  
opportunity scheme
the energy savings opportunity scheme 
“esos” regulations 2014 which 
transpose article 8 of eu directive 
201227eu on energy efficiency and  
came into force on 17 july 2014 are 
intended to help deliver part of the eu’s 
20 improvement in energy efficiency  
the esos regulations require qualifying 
organisations to measure energy 
consumption evaluate energy efficiency 
identify management opportunities store 
data and notify the environment agency  
by 5 december 2015 that an esos 
compliance audit has been completed
melrose is working with environmental  
and energy efficiency specialists cmr 
consultants to ensure that the group 
meets its esos compliance obligations 
9 greenhouse gas emissions
this greenhouse gas ghg report has  
been prepared for the reporting period  
of 1 january 2014 to 31 december 2014 
the data has been prepared in 
accordance with the principles and 
requirements of the greenhouse gas 
protocol revised edition iso 14064  
part 1 and defra department for 
environment food  rural affairs 
guidance on how to measure and report  
on greenhouse gas emissions 2013
we have reported on all of the emission 
sources required under the companies 
act 2006 strategic report and directors’ 
reports regulations 43 see companies 
act 2006 strategic report and directors’ 
reports regulations 2013 paragraph 18
these sources fall within our consolidated 
statement we do not have responsibility 
for any emission sources that are not 
included in our consolidated statement 
we have used the ghg protocol 
corporate accounting and reporting 
standard revised edition data gathered  
in accordance with our ghg reporting 
procedure and emission factors from  
uk government’s ghg conversion 
factors for company reporting 2014
the reported emissions cover all entities 
over which the organisation had financial 
control for a period of at least one year as of 
31 december 2014 emissions from entities 
acquired or disposed of during the reporting 
period ie disposed of before 31 december 
2014 or acquired after 1 january 2014 are 
not accounted for in the report therefore 
the data from the bridon business unit has 
not been included within the reported ghg 
data as this business was divested during 
2014 one business was acquired during 
the reporting period eclipse and the 
emissions from this business unit will  
be included in the 2015 report
56
 melrose industries plc
annual report 2014
performance review the strategic report and 
performance review as set  
out on pages 02 to 57  have 
been approved by the board
on behalf of the board
simon peckham
chief executive 
4 march 2015
11 supply chain assurance
owing to the geographical and operational 
diversity of the group’s businesses and 
therefore its supplier base there is no single 
overarching group policy currently in use  
in relation to suppliers however the security 
assurance and ethical compliance of 
business supply chains is very important  
to melrose responsibility for the 
implementation and management of all 
supplierrelated policies rests with local 
management in each business such 
policies are used in a manner appropriate  
to the size and complexity of each business 
and also take into account the nature and 
geographical representation of key suppliers 
a supplier approval process exists within the 
businesses which is linked to specific and 
tailored supplier assessments and due 
diligence requirements
12 human rights and ethical 
standards
as is stated within the employee policies 
and supply chain assurance sections 
above the decentralised nature of the 
group means there is no single over
arching policy currently in place with  
regard to human rights however sound 
business ethics and integrity are core to  
the group’s values and each business 
places a high importance on its dealings 
with all employees customers suppliers 
and other stakeholders and is committed 
to good practice in respect of human 
rights employees within each group 
business are required at all times to 
exhibit the highest ievels of integrity and  
to maintain the highest ethical standards  
in business affairs
each of the group’s businesses will  
have their own code of ethics dealing  
with matters such as human rights  
all employee policies are also prepared  
locally within each business in order to 
ensure compliance with local laws and 
standards as a minimum responsibility  
for the communication and implementation 
of such policies rests with the relevant 
senior divisional managers
the brush group has been involved  
in high class engineering and 
manufacturing for more than 125 years
57
 melrose industries plc
annual report 2014
performance review
performance review 58
 melrose industries plc
annual report 2014
governance governance overview 60
board of directors 62
directors’ report 64
corporate governance report 68
audit committee report 72
nomination committee report 76
directors’ remuneration report 78
statement of directors’ responsibilities 96
governance
59
 melrose industries plc
annual report 2014
governance
governance strategic report financials shareholder information performance review christopher miller
chairman
governance overview
introduction  
from the chairman 
previously dated september 2012 and was 
updated by the frc in september 2014 
although the updated version of the uk 
code only applies to financial periods 
beginning on or after 1 october 2014 
melrose welcomes the changes to the uk 
code and therefore will be seeking to comply 
with them earlier than formally expected
in support of this commitment the board 
carried out a number of actions during 2014 
designed to ensure that melrose remains 
compliant with the provisions of the uk 
code and also to enable continuous 
improvement in line with best practice 
corporate governance guidelines
risk management 
in 2014 the board initiated a root and 
branch audit of the risk management 
framework and underlying processes  
in operation in every business in the 
melrose group following on from this 
audit external risk consultants bdo llp 
have been engaged to support the  
group in developing an enhanced risk 
framework and in implementing a 
programme to promote and embed  
a more riskaware culture across the 
organisation as part of this programme  
the group’s risk strategy and the  
board’s risk appetite will be reviewed  
and if deemed appropriate refreshed 
further details on this can be found on 
pages 36 to 41 of the annual report
remuneration
the revised uk code provides that greater 
emphasis should be placed on ensuring 
that remuneration policies are designed 
with the longterm success of the 
company in mind this is a belief that  
the melrose board has always held  
our remuneration philosophy is that 
executive remuneration should be simple 
and transparent support the delivery  
of the business strategy and pay for 
performance this belief is reflected in  
our remuneration structure base salaries 
are set at the lower end of a competitive 
range the annual bonus is deliberately 
positioned below the median maximum 
opportunity for comparable companies 
and payments under the single longterm 
board  
structure
christopher miller 
executive chairman
david roper 
executive  
vicechairman
simon peckham 
chief executive
geoffrey martin 
group finance 
director
perry crosthwaite
1
 
senior nonexecutive 
director
audit committee nomination committee
john grant  
chairman
perry crosthwaite
justin dowley
liz hewitt
liz hewitt
2
 
chairman
perry crosthwaite
justin dowley
john grant
christopher miller
the board remains committed to 
maintaining the high standards 
of corporate governance 
required to ensure that the 
company can continue to deliver 
on its strategic goals and to 
achieve longterm success for 
the benefit of its shareholders
as part of this approach the board 
supports applies and complies with the 
main principles the supporting principles 
and the respective related provisions of 
corporate governance contained in the  
uk corporate governance code the “uk 
code” issued by the financial reporting 
council the “frc” and available to view  
on the frc’s website at httpswwwfrcorg
ukourworkcodesstandardscorporate
governanceaspx the uk code was 
60
 melrose industries plc
annual report 2014
governance executive chairman
executive directors
nonexecutive 
directors
1
3
4
 
 
board composition
1
3
4
finance
industry
6
2
 
 
industry background
6
2
male
female
7
1
 
 
board diversity
1
7
 
incentive arrangement are entirely 
dependent upon shareholder value 
generated over a five year period rather 
than successive one year ltip schemes 
we believe that a five year scheme is 
preferable in that it is closer to a typical 
ownership cycle for an acquired business 
we believe that this remuneration strategy 
has directly driven melrose’s historical 
outperformance of the market supported 
the company’s success and clearly led  
to increased shareholder value 
a further change to the uk code provides 
that companies should put in place 
arrangements that will enable the recovery  
or withholding of variable pay malus
1
 has 
always applied to the melrose longterm 
incentive plan and the annual bonus 
scheme the company will introduce a 
clawback provision for the annual bonus 
scheme with effect from the 2014 annual 
bonus in addition clawback will apply to 
any new longterm incentive arrangements 
awarded to executive directors of melrose 
in line with best practice 
main responsibilities of  
the board 
effectively manage and control the company 
via a formal schedule of matters reserved for 
its decision
determine and review company strategy  
and policy
consider acquisitions disposals and asset 
requests for major capital expenditure
review trading performance
ensure that adequate funding and personnel 
are in place
maintain sound internal control systems
report to shareholders and give consideration 
to all other significant financial matters
agree board succession plans and consider 
the evaluation of the board’s performance 
over the preceding year
review the group’s risk management and 
internal control systems and
agree the group’s governance framework 
and approve the standards of business 
conduct and other group policies
john grant  
nonexecutive 
director
justin dowley 
nonexecutive 
director
liz hewitt  
nonexecutive 
director
remuneration committee
justin dowley
3
 
chairman
perry crosthwaite
john grant 
liz hewitt
engagement with shareholders
during the second half of 2014 and 
continuing into 2015 the company has 
launched a programme of engagement  
with major investors and the governance 
bodies in respect of our remuneration policy 
and incentive arrangements the board is 
pleased with the support and constructive 
feedback throughout these discussions  
and it is our intention to continue this 
programme for the foreseeable future 
christopher miller
executive chairman
4 march 2015
1  malus is defined in the cebs committee of european 
banking supervisors guidelines on remuneration  
policies and practices as “an arrangement that permits  
the institution to prevent vesting of all or part of the  
amount of a deferred remuneration award in relation  
to risk outcomes or performance”
1  perry crosthwaite assumed the position of senior nonexecutive 
director at the conclusion of the 2014 agm following the 
retirement of miles templeman
2  liz hewitt became chairman of the nomination committee at  
the conclusion of the 2014 agm following the retirement of  
miles templeman
3  justin dowley replaced perry crosthwaite as chairman of the 
remuneration committee at the conclusion of the 2014 agm
audit committee report 
more information p72
nomination committee report 
more information p76
directors’ remuneration report 
more information p78
61
 melrose industries plc
annual report 2014
governance
governance board of directors
christopher miller
executive chairman
year appointed 
appointed as executive chairman on 
29 may 2003
skills and experience 
christopher brings to the board a wealth of experience gained from  
his involvement in manufacturing industries and private investment 
a chartered accountant christopher qualified with coopers  lybrand 
following which he was an associate director of hanson plc in 
september 1988 christopher joined the board of wassall plc as its 
chief executive between october 2000 and may 2003 christopher 
was involved in private investment activities
board meetings attended 
44 
other appointments 
–
committee membership 
nomination 
independent 
not applicable
simon peckham
chief executive
year appointed 
appointed as chief executive on 9 may 2012  
having previously served as chief operating 
officer from may 2003
skills and experience 
simon provides expertise in equity finance corporate transactions and 
management of manufacturing industries 
simon qualified as a solicitor in 1986 following which in 1990 he 
joined wassall plc where he became an executive director in 1999 
from october 2000 until may 2003 simon worked for the equity 
finance division of the royal bank of scotland and was also involved  
in several high profile transactions
board meetings attended 
44 
other appointments 
–
committee membership 
–
independent 
not applicable
david roper
executive vicechairman
year appointed 
appointed as executive vicechairman on 
9 may 2012 having previously been chief 
executive from may 2003
skills and experience 
david provides experience gained from his roles in corporate finance 
management of manufacturing industries and private investment 
a chartered accountant david qualified 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 
david was appointed to the board of wassall plc and became its 
deputy chief executive in 1993 between october 2000 and may  
2003 david was involved in private investment activities and served  
as a nonexecutive director on the boards of two companies
board meetings attended 
44 
other appointments 
–
committee membership 
–
independent 
not applicable
geoffrey martin
group finance director
year appointed 
appointed as group finance director on  
7 july 2005
skills and experience 
geoffrey provides expertise in corporate finance management and 
corporate restructuring 
a chartered accountant geoffrey qualified with coopers  lybrand 
where he worked within the corporate finance and audit departments
in 1996 geoffrey 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
board meetings attended 
44 
other appointments 
–
committee membership 
–
independent 
not applicable
62
 melrose industries plc
annual report 2014
governance 1 perry crosthwaite assumed the position of senior nonexecutive director at the conclusion of the 2014 agm and resigned as chairman of the remuneration committee
2 justin dowley became chairman of the remuneration committee at the conclusion of the 2014 agm
3 liz hewitt became chairman of the nomination committee at the conclusion of the 2014 agm
perry crosthwaite
senior nonexecutive director
1
year appointed 
appointed as a nonexecutive director on  
26 july 2005
skills and experience 
perry has financial expertise gained through a distinguished career in 
investment banking with over 30 years’ experience as a director in the 
city of london 
perry was a founding director of henderson crosthwaite institutional 
brokers limited serving on the board until its acquisition by investec 
bank in 1998 he became a director of investec bank uk limited and 
chairman of the investment banking division until his retirement in 2004
board meetings attended 
44 
other appointments 
chairman of jupiter green investment trust plc
nonexecutive director of investec limited and investec plc
committee membership 
audit 
nomination
remuneration
1
independent 
yes
justin dowley
nonexecutive director
year appointed 
appointed as a nonexecutive director on  
1 september 2011
skills and experience 
justin has extensive experience within the banking investment and 
asset management sector 
a chartered accountant justin qualified with price waterhouse 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
board meetings attended 
44 
other appointments 
chairman of intermediate capital group plc a specialist investment 
and asset management company
nonexecutive director of a number of private companies including 
ascot authority holdings limited
nonexecutive director of the national crime agency
committee membership 
audit
nomination 
remuneration chairman
2
independent 
yes
john grant
nonexecutive director
year appointed 
appointed as a nonexecutive director on  
1 august 2006
skills and experience 
john brings financial expertise and global executive experience gained  
from a variety of senior roles within the automotive industry and other 
engineering businesses 
john was chief executive of ascot plc between 1997 and 2000 
prior to that he was group finance director of lucas industries plc 
subsequently lucasvarity plc between 1992 and 1996 he also 
previously held several senior strategy and finance positions with  
ford motor company in europe and the us
board meetings attended 
44 
other appointments 
nonexecutive director of mhp sa and pace plc
chairman of the british racing drivers’ club limited
committee membership 
audit chairman
nomination 
remuneration 
independent 
yes
liz hewitt
nonexecutive director
year appointed 
appointed as a nonexecutive director on  
8 october 2013
skills and experience 
liz has extensive business and financial experience gained from senior 
roles in international companies
a chartered accountant liz qualified with arthur andersen  co 
following which she held a variety of senior positions within gartmore 
investment management cvc and 3i group plc between 2004  
and 2011 she was group director of corporate affairs for smith  
 nephew plc 
board meetings attended 
44
other appointments 
nonexecutive director of novo nordisk as and savills plc
committee membership 
audit 
nomination chairman
3
remuneration 
independent 
yes
63
 melrose industries plc
annual report 2014
governance
governance directors’ report
the directors of melrose industries plc 
the “company” present their annual 
report and audited financial statements  
of the group for the year ended  
31 december 2014
the corporate governance report set out on pages 68 to 71  
the finance director’s review on pages 42 to 49 and the corporate 
and social responsibility section of the performance review  
on pages 50 to 57  are each incorporated by reference into this 
directors’ report disclosures elsewhere in the annual report  
are crossreferenced where appropriate taken together they  
fulfil the combined requirements of the companies act 2006  
the “act” and of the disclosure and transparency rules the 
“dtrs” and the listing rules of the financial conduct authority
details of significant events since the balance sheet date are 
contained in note 29 to the financial statements an indication  
of likely future developments in group businesses is included 
within the performance review
directors
the directors of the company as at the date of this report together 
with their biographical details are given on pages 62 and 63 
changes to the board during the year are set out in the corporate 
governance report on pages 68 to 71 details of directors’ service 
contracts are set out in the directors’ remuneration report on 
page 93
the statement of directors’ responsibilities in relation to the 
consolidated financial statements is set out on page 96
appointment and removal of directors and their powers
the company’s articles of association “articles” give the 
directors the power to appoint and replace other directors  
under the terms of reference of the nomination committee  
any appointment must be recommended by the nomination 
committee for approval by the board 
with effect from the 2012 annual general meeting “agm”  
the board determined that all directors of the company should 
stand for reelection on an annual basis in compliance with the 
provisions of the uk corporate governance code and this 
requirement is contained in the articles therefore all directors 
will offer themselves for reelection at the agm to be held on  
14 may 2015 
the directors are responsible for managing the business of the 
company and exercise their powers in accordance with the 
articles directions given by special resolution and any relevant 
statutes and regulations specific powers relating to the allotment 
and issuance of shares and the ability of the company to 
purchase its own shares are also included within the articles  
and such authorities are submitted for approval by the 
shareholders at the agm each year 
pursuant to sections 693 and 701 of the act and a special 
resolution passed at the agm in 2014 the company was 
authorised to purchase its own shares limited to an aggregate 
maximum number equal to 10 of the issued share capital of  
the company the company did not purchase any ordinary 
shares pursuant to this authority the resolutions being proposed 
at this year’s agm include a resolution to renew this authority
insurance and indemnities
the directors have the benefit of an indemnity from the company 
in respect of their liabilities incurred as a result of their office this 
indemnity is provided under the company’s articles and satisfies 
the indemnity provisions of the act
the company has taken out an insurance policy in respect of 
those liabilities for which the directors may not be indemnified 
neither the indemnity nor the insurance provides cover in the 
event that a director is proved to have acted dishonestly or 
fraudulently 
agm
the agm of the company will be held at barbersurgeons’  
hall monkwell square wood street london ec2y 5bl at  
1100 am on 14 may 2015 the notice convening the meeting  
is shown on pages 156 to 161 and includes full details of the 
resolutions to be proposed together with explanatory notes  
in relation to such resolutions
post balance sheet events
in november 2014 the company completed the disposal of  
its bridon business for an enterprise value of £365 million see  
note 9 to the financial statements for further details representing 
the latest step in realising value for the fki businesses acquired  
by melrose in 2008 in accordance with its strategy the board 
decided to use part of the net proceeds of the disposal to return 
£200 million in cash to shareholders the “return of capital”  
at the time of such decision this return was equivalent to 187 
pence per existing ordinary share of 13110 pence nominal  
value each in the capital of the company in issue at that time  
the “existing ordinary shares”
the return of capital was approved by shareholders at a general 
meeting of the company held on 20 february 2015 using a 
redeemable share scheme in this case involving b shares andor  
c shares and was structured with the objective of enabling 
shareholders subject to restrictions in respect of certain  
overseas shareholders to elect to receive their cash proceeds  
of 187 pence per existing ordinary share as
• an income payment the ‘‘income option’’ or
• a capital payment the ‘‘capital option’’ collectively the  
“share alternatives”
shareholders were also offered a mix and match facility such  
that they could choose to receive the cash proceeds through  
a combination of the share alternatives
only shareholders who were on the register of members at  
500 pm on 20 february 2015 the “bc share record date”  
were entitled to participate in the return of capital and the 
deadline for shareholders making their elections in respect  
of the share alternatives was 430 pm on 27 february 2015 
64
 melrose industries plc
annual report 2014
governance further details of the share alternatives are listed in the table below together with details of the number of existing ordinary shares in 
respect of which each share alternative was chosen by shareholders
share alternative details of share alternative
number of existing 
ordinary shares  
in respect of which 
share alternative 
chosen
1
income option relevant shareholders received one c share with a nominal value of 000001 pence for every 
existing ordinary share held at the bc share record date and a single c share dividend  
of 187 pence per c share held the single c share dividend became due and payable on  
2 march 2015 and thereafter the c shares were automatically converted into c deferred 
shares with a nominal value of 000001 pence each proceeds in respect of the income  
option will be paid to relevant shareholders and the c deferred shares will be automatically 
redeemed by the company on 16 march 2015
687 786937
capital option relevant shareholders received one b share with a nominal value of 187 pence for every 
existing ordinary share held at the bc share record date and had such b shares redeemed 
by the company on 2 march 2015 proceeds in respect of the capital option will be paid to 
relevant shareholders on 16 march 2015
383974411
1  the capital option was not made available to any shareholders with a registered address in or who were resident or located in australia canada japan new zealand the republic of south 
africa united states and any other territory where the invitation to participate in the return of capital proposals and any election for the capital option in respect of all or some of such 
shareholder’s entitlement to the return of capital would violate the laws of that jurisdiction or would require the registration of the b shares c shares andor c deferred shares and all such 
shareholders were automatically deemed to have elected for the income option
associated with the return of capital an ordinary share capital 
consolidation was approved by shareholders at the general 
meeting of the company held on 20 february 2015 in the ratio  
of 13 for 14 the “share capital consolidation” and the record 
date for the share capital consolidation was 600 pm on the 
same day the “share capital consolidation record date”
the aim of the share capital consolidation was to ensure so  
far as possible that the market price of an ordinary share 
remained approximately the same before and after the return  
of capital and so far as possible to maintain comparability of 
historical and future per share data
the share capital consolidation was effected by the subdivision  
of every existing ordinary share into 13 shares of 1110 pence 
each in the capital of the company and forthwith upon such 
subdivision the consolidation of every 14 shares of 1110  
pence each in the capital of the company resulting from such 
subdivision into one new ordinary share of 755 pence in the 
capital of the company the “new ordinary shares” 
details of the structure of the company’s share capital both 
before and after the share capital consolidation together with  
the rights attached to each of the share classes in issue as at  
31 december 2013 31 december 2014 and immediately following 
the share capital consolidation on 20 february 2015 are set  
out within the sections below shareholders continued to own 
approximately the same proportion of the company after the 
share capital consolidation as they did before subject to 
fractional entitlements
capital structure
the table below shows details of the company’s issued share 
capital as at 31 december 2013 31 december 2014 and 
immediately following the share capital consolidation becoming 
effective on 23 february 2015
share class
31 december 
2013
31 december 
2014
23 february 
2015 post the 
share capital 
consolidation
former ordinary  
shares of 01  
pence each
1266627036 nil nil
existing ordinary  
shares of 13110  
pence each
nil 1071761339
1
nil
new ordinary  
shares of 755  
pence each
nil nil 995206966
2
1 fractional entitlements resulting from the share capital consolidation effective on  
10 february 2014 were aggregated and sold in the market on shareholders’ behalf in order  
to ensure that the aggregate of all fractional entitlements to be sold in the market added up  
to a whole number of new ordinary shares between the bc share record date and the 
share capital consolidation record date one ordinary share was allotted fully paid up for 
cash to investec bank plc at a price which was equal to the closing middlemarket price of  
an existing ordinary share on 7 february 2014 less 47 pence this ordinary share was  
not entitled to participate in the return of capital but was subject to the share capital 
consolidation in the ratio of 11 for 13 approved by shareholders at the general meeting  
of the company held on 7 february 2014
2  fractional entitlements resulting from the share capital consolidation effective on  
23 february 2015 were aggregated and sold in the market the aggregated proceeds of  
sale net of commission were donated to a charity nominated by the board the rainbow 
trust in order to ensure that the aggregate of all fractional entitlements to be sold in the 
market added up to a whole number of new ordinary shares nine existing ordinary shares 
were allotted and issued to investec bank plc on 3 february 2015 at 2668 pence per share 
being the closing middlemarket price of an existing ordinary share on 2 february 2015 
these ordinary shares were subject to the share capital consolidation and were entitled  
to participate in the return of capital 
only the new ordinary shares are traded on the london  
stock exchange
the company is not aware of any agreements between 
shareholders that restrict the transfer of new ordinary shares  
or that restrict voting rights attached to the new ordinary shares
details of the 2012 incentive share plan are set out on pages  
81 to 82 of the directors’ remuneration report and note 22 to  
the financial statements
65
 melrose industries plc
annual report 2014
governance
governance directors’ report
continued
shareholders’ voting rights
only the new ordinary shares have voting rights attached in  
a general meeting of the company subject to the provisions of 
the current articles and to any special rights or restrictions as to 
voting attached to any other class of shares in the company from 
time to time
• on a show of hands every member who is present in person  
or by proxy shall have one vote and
• on a poll every member who is present in person or by proxy 
shall have one vote for every share they hold
if any call or other sum payable by a holder of new ordinary 
shares remains unpaid they shall not be entitled to vote at a 
general meeting or class meeting in respect of any shares held  
by them currently all new ordinary shares are fully paid
articles of association
the company’s articles were amended pursuant to a special 
resolution approved at the general meeting of the company  
held on 20 february 2015 in order to reflect the rights and 
restrictions attaching to the b shares the c shares and the  
c deferred shares and certain other changes required in relation 
to the share capital consolidation the rights and restrictions 
attaching to the new ordinary shares following the share capital 
consolidation remained exactly the same as those attaching to 
the existing ordinary shares immediately prior to the share 
capital consolidation
substantial shareholdings
as at 31 december 2014 the following voting interests in the 
ordinary share capital of the company disclosable under dtr 5 
had been notified to the directors
shareholder shareholding
 of ordinary  
share capital
blackrock inc 104103286 971
schroders plc 59672074 557
legal  general group plc 53881949 502
aberdeen asset managers limited 53456498 499
between 1 january 2015 and 3 march 2015 the following voting 
interests in the ordinary share capital disclosable under dtr 5 
were notified to the directors
shareholder shareholding
 of ordinary  
share capital
schroders plc 46308210 432
shareholder dividend
the directors are pleased to recommend the payment of a final 
dividend of 53p per share 2013 50p on 18 may 2015 to 
ordinary shareholders on the register of members of the 
company at the close of business on 17 april 2015 this dividend 
recommendation will be put to shareholders at the forthcoming 
agm of the company to be held on 14 may 2015 subject to 
shareholder approval being obtained at the agm for the final 
dividend this will mean a full year 2014 dividend of 81p per share 
2013 775p
in november 2014 the company completed the disposal of  
its bridon business for an enterprise value of £365 million see  
note 9 to the financial statements for further details representing 
the latest step in realising value for the fki businesses acquired  
by melrose in 2008 in accordance with its strategy the board 
decided to use part of the net proceeds of the disposal to return 
£200 million in cash to shareholders by way of the return of 
capital proposals described earlier in this directors’ report the 
return of capital was approved by shareholders at the general 
meeting of the company held on 20 february 2015 this return  
to shareholders is not included in the full year dividend figure 
stated above 
it is the intention of the board to continue to pursue a progressive 
dividend policy where appropriate 
the company offers a dividend reinvestment plan “drip” which 
gives shareholders the opportunity to use their dividend payments 
to purchase further ordinary shares in melrose industries plc 
further details about the drip and its terms and conditions can 
be found within the investors section on the company’s website 
at wwwmelroseplcnet to the extent that shareholders chose 
the income option in respect of all or some of their entitlement to 
the return of capital the drip could not be used in relation to the 
single c share dividend paid to such shareholders in respect of 
their holdings of such c shares
financial instruments
the disclosures required in relation to the use of financial 
instruments by the company including the financial risk 
management objectives and policies of the company and  
the exposure of the company to credit risk liquidity risk cash  
flow risk exchange rate risk contract and warranty risk and 
commodity cost risk can be found in the finance director’s 
review on pages 42 to 49 which is incorporated by reference into 
this directors’ report and in note 24 to the financial statements
research and development activities
melrose group businesses are encouraged to focus on research 
and development and to ensure that new and innovative product 
lines continue to be developed during 2014 investment 
continued and several new product launches were either realised 
during 2014 or planned for 2015 this group strategy helps  
to ensure that each business can remain at the forefront of 
technological advances within defined market sectors and be  
able to meet specific customer demands some examples of  
the types of new products being launched within the various 
markets are discussed within the business reviews on pages  
28 to 35 of the performance review
66
 melrose industries plc
annual report 2014
governance employees
further details in relation to employment policies employee 
involvement consultation and development together with details of 
some of the human resource improvement initiatives implemented 
during 2014 are shown on pages 51 and 52 of the corporate social 
responsibility section of the performance review which is 
incorporated by reference into this directors’ report
environmental
the directors of the company fully understand the importance of 
the group’s environmental responsibilities each of the company’s 
businesses is committed to ensuring that their operations have  
a minimum adverse effect on the environment and that ongoing 
reductions in both energy usage and co
2
 emissions are achieved 
wherever practicable 
further details in relation to the various environmental initiatives 
that are ongoing within some of the group’s businesses and 
statistics showing greenhouse gas emissions data are shown  
on pages 55 and 56 of the corporate social responsibility 
section of the performance review which is incorporated by 
reference into this directors’ report 
political donations
the company’s policy is not to make any political donations and 
there were no political donations made during the year ended  
31 december 2014 2013 nil
disclosures required under listing rule 984r
no information is required to be disclosed by the company in 
respect of listing rules 984r 1 to 14
significant agreements and change of control
with the exception of the group’s banking facilities the 2012 
incentive plan including the options over 2012 incentive shares 
and the divisional management longterm incentive plans there are 
no other agreements that would have a significant effect upon a 
change of control of melrose industries plc as at 4 march 2015
in june 2012 as part of the process to acquire elster the group 
agreed a £15 billion five year multicurrency committed bank 
facility which was subsequently amended in july 2014 and 
extended for five years from that date this states that in the event 
of a change of control of the company following a takeover bid 
the company and lenders under this facility are obliged to enter 
into negotiations to determine whether and if so how to continue 
with the facility there is no obligation for the lenders to continue 
to make the facility available for more than 30 days beyond any 
change of control failure to reach agreement with parties on 
revised terms could require an acquirer to put in place 
replacement facilities
in the event of a takeover of the company options over the 2012 
incentive shares would be exercised and any 2012 incentive 
shares resulting from such exercise or that have previously been 
issued would convert into ordinary shares of 755 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 noncash element 
having been advised by an investment bank of repute that such 
valuation is fair and reasonable
auditor
so far as each director is aware there is no relevant audit 
information of which the company’s auditor is unaware and the 
directors have taken all the steps which they ought to have taken 
as directors to make themselves aware of any relevant audit 
information and to establish that the company’s auditor is aware 
of that information this confirmation is given and should be 
interpreted in accordance with the provisions of section 418  
of the companies act 2006
on behalf of the board the audit committee has reviewed the 
effectiveness performance independence and objectivity of  
the existing external auditor deloitte llp for the year ended  
31 december 2014 and concluded that the external auditor was  
in all respects effective deloitte llp has expressed its willingness  
to continue in office as auditor accordingly resolutions will be 
proposed at the agm of the company to reappoint deloitte llp 
as auditor of the company and to authorise the audit committee 
to determine their remuneration 
approved by the board of directors and signed on its behalf by
adam westley
company secretary
4 march 2015
67
 melrose industries plc
annual report 2014
governance
governance corporate governance report
statement of compliance
the company is required to make certain statements relating  
to the way it is governed as laid down in the uk code the 
remainder of this corporate governance report describes the  
way in which the company has applied and complied with the 
main principles the supporting principles and the respective 
related provisions of governance set out in the uk code
the board is accountable to the company’s shareholders for 
good governance throughout the year ended 31 december 
2014 the company applied and complied with the main 
principles the supporting principles and the respective related 
provisions of the uk code with the exception of a specific 
element of schedule a which recommends that grants under 
executive share options and longterm incentive plans should 
normally be phased rather than awarded in one block under  
the 2012 incentive plan details of which are provided on pages  
81 and 82 of the directors’ remuneration report entitlements  
to executive directors were awarded in one block rather than 
phased the 2012 incentive plan was recommended as being  
in the best interests of shareholders as a whole by the board  
of directors and was approved by shareholders at a general 
meeting held on 11 april 2012 with regard to all other aspects  
of executive directors’ remuneration the company’s policies  
fully comply with the provisions of schedule a of the uk code
the audit committee report nomination committee report and 
directors’ remuneration report also form part of this corporate 
governance report
main principle a leadership
the board
details of the structure of the board and its key responsibilities  
are shown on pages 60 and 61
board responsibilities are discharged in conjunction with senior 
management who in turn are responsible for the daytoday 
conduct of the group’s operations and for reporting to the board 
on items of significance and progress against objectives the 
board meets regularly during the year as well as on an adhoc 
basis as required by timecritical business needs 
there were four formally scheduled board meetings held during 
the year and the attendance of each director at these meetings  
is shown on page 70 in addition a number of unscheduled board 
meetings were held during the year in connection with corporate 
transactions for example business acquisitions and divestments 
and since the year end the return of capital to shareholders and 
associated share capital consolidation
a pack of briefing papers and an agenda are provided to each 
director in advance of each board committee or business review 
meeting the directors are able to seek further clarification and 
information on any matter from any other director the company 
secretary or any other employee of the group whenever 
necessary decisions are taken by the board in conjunction with 
the recommendations of its committees and advice from external 
consultants advisers and senior management
the board has a fully encrypted electronic board portal system 
enabling board and committee papers to be delivered securely  
to directors this facilitates a faster and more secure distribution 
of information accessed using electronic tablets and reduced 
resource usage
the company secretary is responsible for advising and 
supporting the chairman and the board on corporate governance 
matters as well as ensuring a smooth flow of information to enable 
effective decision making all directors have access to the advice 
and services of the company secretary and through him have 
access to independent professional advice in respect of their 
duties at the company’s expense the company secretary acts 
as secretary to the board the audit committee the nomination 
committee and the remuneration committee
in addition business review meetings are held between 
scheduled board meetings these meetings are critical to 
providing the directors with a comprehensive understanding  
of the current performance and the key issues affecting group 
businesses without the formality or rigidity of a board meeting 
chief executives and other senior management from the melrose 
businesses are periodically invited to attend and present to these 
meetings providing the directors with an opportunity to meet  
and engage with existing and emerging talent from across  
the organisation
in accordance with its articles and in compliance with the 
companies act 2006 the company has granted a qualifying  
third party indemnity to each director the company also 
maintains directors’ and officers’ liability insurance
chairman vicechairman and chief executive
the roles of chairman and vicechairman are and will remain 
separate to that of the chief executive of the company  
in accordance with best practice and board policy
the chairman with the assistance of the vicechairman is 
responsible for leadership of the board the chairman sets  
the board agenda and ensures that adequate time is given to  
the discussion of issues particularly those of a strategic nature 
responsibility for ensuring effective communications with 
shareholders rests with the chairman vicechairman and the  
two other executive directors 
during 2014 the nonexecutive directors led by the current 
senior nonexecutive director perry crosthwaite held meetings 
to discuss and appraise the performance of the chairman
the chief executive is responsible for strategic direction and 
decisions involving the daytoday management of the company
main principle b effectiveness
board composition
as at 4 march 2015 the board comprised an executive chairman 
three other executive directors and four nonexecutive directors  
all of whom the board considers to be independent the board 
believes that the directors possess diverse business experience  
in areas complementary to the activities of the company 
biographies of the directors are shown on pages 62 and 63 and  
on the company’s corporate website at wwwmelroseplcnet 
these biographies identify any other appointments held by the 
nonexecutive directors none of the executive directors hold 
nonexecutive positions outside the company
nonexecutive director independence
in accordance with the provisions of the uk code consideration 
has been given to the independence of all nonexecutive 
directors the board considers all of the nonexecutive directors  
to be independent
68
 melrose industries plc
annual report 2014
governance the board notes that perry crosthwaite who was appointed  
as a nonexecutive director on the melrose board in july 2005  
and first elected at the 2006 agm will have served three terms 
totalling nine years at the time of the 2015 agm however  
the board is of the opinion that due to his invaluable experience  
in financial and other corporate matters perry crosthwaite 
continues to maintain both his effectiveness and his 
independence the board will continue to monitor this  
position but feels at the present time that perry crosthwaite 
continues to make an important contribution to the company
the nonexecutive directors are not entitled to any cash bonus  
or shares under the 2012 incentive plan
board induction training and support
a full and formal induction programme tailored to the needs  
of individual directors is provided for new directors joining  
the board the primary aim of the induction programme is  
to introduce new directors to and educate new directors  
about the group’s businesses its operations and its governance 
arrangements individual induction requirements are monitored  
by the chairman and the company secretary to ensure that new 
directors gain sufficient knowledge to enable them to contribute  
to the board’s deliberations as quickly as possible
one of the outputs from the 2013 board evaluation exercise  
see below was a desire for the board as a whole to gain greater 
visibility of and connection with the group’s business operations 
following this feedback a visit was organised to the elster gas 
operations in germany see below 
board visit
in october 2014 the board visited elster gas in lotte near 
osnabrück germany which in 2012 had received the german 
global excellence in operations award meetings were held  
with senior management from across the elster gas business  
and a tour of the production facility was complemented by 
presentations covering 
• the history of elster gas the scope of its operations and the 
global product range
• the business transformation postacquisition by melrose 
• the future strategy of elster gas and
• human resource management across the business unit
board evaluation 
evaluation approach and process
during 2014 the chairman held meetings with each of the 
directors including the senior nonexecutive director perry 
crosthwaite to discuss the performance of individual executive 
directors and the board as a whole following positive feedback 
from directors over the process adopted for the 2013 evaluation 
exercise the board decided once again to engage lintstock 
limited to undertake an independent evaluation of board and 
board committee performance and to identify areas where 
performance and procedures might be further improved 
lintstock is a specialist corporate governance consultancy  
and other than supporting the audit committee in its assessment  
of the effectiveness of the external auditor has no commercial 
dealings or other connection with the melrose group
the first stage of the evaluation involved a review by the board of 
what had been delivered in 2014 against the outputs and actions 
agreed from the 2013 evaluation exercise
actions agreed from  
the 2013 evaluation
what we delivered  
in 2014
to incorporate into the board 
schedule visits to major 
operating businesses and 
periodic sessions with senior 
management from those 
business units
in october 2014 the board visited  
the award winningclass leading elster  
gas factory in osnabrück germany 
see above 
to increase the frequency of 
management presentations  
to the board
in addition to a series of presentations 
delivered by the elster gas management 
team during the board’s site visit to 
osnabrück the board also received a 
comprehensive business briefing from  
the leadership team of elster electricity 
to devote further board 
time to discussions on talent 
management and executive 
and nonexecutive director 
succession planning
executive and nonexecutive director 
succession planning talent management 
and senior executive career planning were 
considered by the board at a dedicated 
session held in december 2014 it is 
intended that these issues remain a core  
focus for the board and that they be 
reviewed on an annual basis
to further enhance the  
board’s understanding  
of risk identification and 
management
at the board’s instruction an audit was 
undertaken of the risk management 
processes in operation across the 
group following this audit a new 
risk management framework is being 
developed and will be implemented 
throughout the group during 2015 
see pages 36 to 37 
the second stage of the 2014 evaluation involved lintstock 
engaging with the chairman and the company secretary to 
discuss and agree the scope of the proposed evaluation and  
to develop a series of questionnaires tailored to the specific 
circumstances of melrose 
the board was requested to complete online questionnaires 
addressing the composition and performance of the board and  
its committees and the performance of the chairman and the 
senior nonexecutive director the anonymity of all respondents 
was ensured throughout the process in order to promote the 
open and frank exchange of views 
69
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annual report 2014
governance
governance corporate governance report
continued
lintstock subsequently produced a report which addressed the 
following areas
• the composition of the board its expertise and dynamics
• the performance of the board since the last evaluation exercise 
• the board’s time management the annual cycle of work and the 
support afforded to the board
• the performance of the board committees and of the chairman 
and senior nonexecutive director
• the board’s oversight of strategy its understanding of the 
company’s performance relative to its competitors and the key 
strategic issues facing the group over the next three to five years
• the board’s oversight and management of risk and internal 
control and
• the succession planning for the executive directors and for 
senior management at the level below the board and the board’s 
visibility of potential successors from within the business
at a dedicated board session a report of the findings of the 
evaluation and its recommendations was discussed and specific 
actions agreed
outputs of the evaluation
the board recognises the benefits of a thorough board  
and committee evaluation process overall the evaluation 
demonstrated that the composition and performance of  
the board and its committees and the performance of the 
chairman and the senior nonexecutive director continued  
to be very effective 
as a result of the review amongst other things the board agreed
• on the importance of planning for executive director succession 
and managing the succession of nonexecutive directors
• to continue its focus on risk management and internal control 
and to clearly delineate accountabilities for risk management 
between the board and the audit committee
• that it should continue with its visits to major operating units  
to ensure that it develops and maintains a sound knowledge of 
the businesses is visible to the operations and has access to  
a broad group of executives and employees
• to increase the frequency of management presentations so  
that the chief executive of each business reports to the board 
annually and
• that the format and content of the management information 
provided to the board should be reviewed increased market 
information and intelligence was also requested 
in accordance with the provisions of the uk code it is anticipated 
that externally facilitated board evaluations will be carried out 
every three years in years when an external evaluation is not 
carried out the board will continue to complete internal 
performancebased questionnaires with the process managed 
by the company secretary the scope for each subsequent 
evaluation will be designed to build upon learning gained in the 
previous year to ensure that the recommendations agreed in the 
evaluations are implemented and that yearonyear progress is 
measured and reported upon
annual reelection of directors
in accordance with the provisions of the uk code all of the directors 
stood for reelection at the 2014 annual general meeting the 
articles of the company require the directors to stand for annual 
reelection thus ensuring continued compliance with the uk code 
as such all directors will offer themselves for reelection at the 2015 
annual general meeting to be held on 14 may 2015 
following the formal performance evaluations of each of the 
directors and having carefully considered the commitments 
required and the contribution made by each director the chairman  
is of the opinion that each director’s performance continues to be 
effective and continues to demonstrate commitment to the role
attendance of directors at meetings
the following table shows the attendance of each of the directors at 
the scheduled meetings of the board and its committees held during 
the year the quorum necessary for the transaction of business by  
the board and each of its committees is two briefing papers and 
meeting agendas are provided to each director in advance of each 
meeting decisions are taken by the board in conjunction with the 
recommendations of its committees and advice from external advisers 
and senior management as appropriate the representations of any 
director who is unable to attend a meeting of the board or a standing 
committee are duly considered by those directors in attendance
the table also shows attendance at business review meetings 
held between scheduled board meetings
attendance of directors
board audit nomination remuneration
business
review
number of meetings
1
 4 3 2 3 3
christopher miller 4 – 2 – 3
david roper 4 – – – 3
simon peckham 4 – – – 3
geoffrey martin 4 3
2
– – 3
perry crosthwaite 4 3 1 3 3
john grant 4 3 2 3 3
justin dowley 4 3 2 3 2
liz hewitt 4 3 2 3 2
miles templeman
3
1 1 – 2 2
1  in addition adhoc meetings are held from time to time 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 retired from the board at the conclusion of the agm on 13 may 2014
main principle c accountability
objectives and policy
the objectives of the directors and senior management are to 
safeguard and increase the value of the business and assets of  
the group for the benefit of its shareholders achievement of their 
objectives requires the development of policies and appropriate internal 
control frameworks to ensure the group’s resources are managed 
properly and any key risks are identified and mitigated where possible
the board is ultimately responsible for the development of the 
group’s overall risk management policies and system of internal 
control frameworks and for reviewing their respective effectiveness 
while the role of management is to implement these policies and 
frameworks across the group’s business operations the directors 
recognise that the systems and processes established by the 
board are designed to manage rather than eliminate the risk of 
failure to achieve business objectives and cannot provide absolute 
assurance against material financial misstatement or loss
70
 melrose industries plc
annual report 2014
governance 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 2014 financial year 
and up to the date of approval of this annual report
a separate audit committee report is set out on pages 72 to 75 
and provides details of the role and activities of the committee 
and its relationship with the internal and external auditors
managing and controlling risk
the group has policies and internal control frameworks which 
address a number of key business risks including strategic 
operational compliance ethical and financial risks a summary  
of the principal risks and uncertainties that could impact upon  
the group’s performance is set out on pages 38 to 41
the group’s financial risk management objectives and policies are 
also described in the finance director’s review on pages 42 to 49 
the group operates on a decentralised basis and the board  
has established an organisational structure with clear reporting 
procedures lines of responsibility and delegated authority 
divisional senior management operational managers and financial 
controllers have been delegated responsibility by the board for  
the establishment and implementation of detailed control systems 
as appropriate for their business 
an established programme of regular review is in place at  
the businesses and a culture of continuous improvement is 
encouraged by the board through regular meetings with senior 
management review of operating performance and progress 
against business plans the ongoing process of review provides 
assurance that the control environment is operating as intended
the audit committee also monitors the effectiveness of the 
internal control process implemented across the group through  
a review of the key findings presented by the external and internal 
auditors management is responsible for ensuring that the audit 
committee’s recommendations in respect of internal controls  
and risk management are implemented
internal financial controls and reporting
the group has a comprehensive system for assessing the 
effectiveness of the group’s internal controls including strategic 
business planning and regular monitoring and reporting of financial 
performance a detailed annual budget is prepared by senior 
management and thereafter is reviewed and formally adopted by  
the board the budget and other targets are regularly updated via  
a rolling forecast process and regular business review meetings are 
held involving senior management to assess performance the results 
of these reviews are in turn reported to and discussed by the board  
at each meeting as discussed in the audit committee report on 
pages 72 to 75 bm howarth is the group’s internal auditor they also 
assumed internal audit responsibility for the elster businesses from 
acquisition in august 2012 onwards a total of 37 internal audit visits 
covering 43 of group turnover were completed during 2014 
these visits include 30 elster reporting units which combined with 
the visits completed in 2013 and the planned visits for the first quarter 
of 2015 will ensure that 93 of the continuing elster units will have 
been visited by internal audit since the acquisition the directors are 
pleased to report that there were no material deficiencies the majority 
of the recommendations presented in the internal audit reports have 
now been or are in the process of being implemented of the 37 
sites visited in 2014 four sites have been chosen for “revisits” in 2015 
to ensure that the agreed improvements to systems and processes 
have been implemented during 2014 initial fair value audit visits were 
also completed on all eclipse sites acquired during the year
the board confirms that from the review of internal controls it 
has not determined any significant failings or weaknesses that it 
considers require remedial action the board also confirms that it 
has not been advised of any material weaknesses in the internal 
control systems that relate to financial reporting
whistleblowing antibribery and corruption policies
the company takes very seriously its responsibilities under the 
bribery act 2010 and has in place appropriate measures to 
ensure compliance policies in place within each business apply 
to all directors employees whether permanent fixedterm or 
temporary pension trustees consultants and other business 
advisers contractors trainees volunteers business agents 
distributors joint venture partners or any other person working for 
or performing a service on behalf of the company its subsidiaries 
and associated companies in which it has a majority interest
during 2014 the company updated its compliance policies and 
these are now in the process of being implemented across the 
group as part of these ongoing improvements navex global 
was engaged to provide an externally facilitated whistleblowing 
hotline which is being made available during 2015 
main principle d remuneration 
following changes to the companies act 2006 and in line with 
new regulations which came into effect on 1 october 2013 details 
around directors’ remuneration both generally and as it relates to 
the uk code are set out in the directors’ remuneration report and 
are now presented in the following three sections
• the annual statement from the chairman of the remuneration 
committee which can be found on pages 78 to 80 
• the annual report on remuneration which can be found on 
pages 81 to 88 and
• a summary of the directors’ remuneration policy which can be 
found on pages 88 to 95
main principle e relations with shareholders
the company seeks to build on a mutual understanding of 
objectives with its institutional shareholders via the executive 
directors through regular meetings and presentations following 
announcements of its annual and interim results the 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
the board welcomes the attendance of shareholders at the 
annual general meeting the results of the voting on each of the 
resolutions proposed will be announced shortly after the annual 
general meeting has concluded via the melrose corporate 
website at wwwmelroseplcnet
71
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annual report 2014
governance
governance audit committee report
the board has delegated to the audit 
committee responsibility for overseeing 
the financial reporting and internal control 
review and reporting and for making 
recommendations to the board in relation 
to the appointment of the company’s 
internal and external auditors 
member no of meetings
john grant chairman 33
perry crosthwaite 33
justin dowley 33
liz hewitt 33
miles templeman
1
11
john grant
audit committee chairman
composition
each member of the committee is deemed to be independent by 
the company and brings recent and relevant financial experience 
from senior executive and nonexecutive positions as described in 
their biographies on pages 62 and 63
miles templeman stepped down from the committee following  
his retirement from the board at the conclusion of the agm on  
13 may 2014 
the company secretary acts as secretary to the committee
the committee invites the group finance director the head of 
financial reporting and senior representatives of the external and 
internal auditors to attend meetings where appropriate to the 
business being considered the committee has the right to invite 
any other directors andor employees to attend meetings where 
this is considered appropriate in addition the committee meets 
at least once per year with both the external and internal auditors 
without management present
summary of meetings in the year
the committee is expected to meet not less than three times  
a year in 2014 the committee met in march august and 
november the scheduling of these meetings is designed to be 
aligned with the financial reporting timetable thereby enabling the 
committee to review the annual report and financial statements 
the interim financial report and the audit plan ahead of the year 
end audit and maintaining a view of the internal controls and 
processes throughout the year 
the attendance of its members at these meetings is shown above
significant issues related to the financial statements
in discharging its duties under its terms of reference the 
committee undertook the following recurring activities that receive 
annual scrutiny
• reviewed the annual report and financial statements and interim 
financial report as part of this review the committee received a 
report from the external auditor on their audit of the annual report 
and the financial statements and review of the interim report
• considered the processes in place to generate forecasts of  
cash flows and accounting valuation information including  
the reasonableness and consistent use of assumptions
• reviewed the effectiveness of the group’s internal controls and 
disclosures made in the annual report and financial statements 
on this matter 
• considered the annual report and financial statements in the 
context of being fair balanced and understandable and reviewed 
the content of a paper prepared by management with regard to 
this principle in relation to the 2014 annual report and financial 
statements advised the board that in its view the 2014 annual 
report and financial statements when taken as a whole is fair 
balanced and understandable and provides the information 
necessary for shareholders to assess the group’s performance 
business model and strategy and 
• reviewed and agreed the scope of the audit work to be 
undertaken by the auditor
role and responsibilities
the audit committee’s the “committee” role and responsibilities are 
set out in its terms of reference these were updated in august 2014 in 
line with best practice and are available on the company’s website and 
from the company secretary at the registered office in discharging 
its duties the committee embraces its role of protecting the interests 
of shareholders with respect to the integrity of financial information 
published by the company and the effectiveness of the audit 
specifically the committee is responsible for
• reviewing and monitoring the integrity of the financial statements 
of the group including the annual report and interim report
• keeping under review the effectiveness of the group’s financial 
reporting internal audit and controls risk management systems 
and compliance controls
• focusing and challenging the consistency of accounting policies 
methods used to account for significant or unusual transactions 
and compliance with accounting standards
• reviewing the group’s arrangements for its employees to raise 
concerns in confidence about possible wrongdoing in financial 
reporting in accordance with the company’s whistleblowing policy
• developing implementing and monitoring the group’s policy on 
external audit and for overseeing the objectivity and effectiveness 
of the auditor and
• reviewing and considering the annual report and financial 
statements to ensure that it is fair balanced and understandable 
and advising the board that it can state that this is the case
1 retired from the board at the conclusion of the agm on 13 may 2014
72
 melrose industries plc
annual report 2014
governance the audit committee’s activities during 2014
significant issue considered by the audit committee how the issue was addressed by the audit committee
provisions for legal and environmental claims and other 
provisions
the level of provisioning for legal and environmental claims and  
other provisions require significant judgement 
although provisions are reviewed on a regular basis and adjusted  
for management’s best current estimates the judgemental nature of  
these items means that future amounts settled may be different from  
those provided
refer to notes 3 and 20
the committee considered management’s proposed provisioning in 
respect of these legal and environmental claims and other provisions 
including the key judgements made and relevant legal advice
the external auditor also reported on all material provisions to  
the committee
having considered the matter and sought guidance from the external 
auditor the committee concluded that management’s proposed 
provisioning and the associated disclosures in the annual report 
were appropriate
classification of exceptional items 
the reporting classification and consistency of exceptional items 
specifically restructuring were an area of focus for the committee
refer to note 6
the committee considered the nature classification and consistency 
of exceptional items these items were detailed in the external 
auditor’s paper to the committee the committee considered this 
issue and concluded that these exceptional items were appropriately 
captured and disclosed
taxation risks and recognition of deferred tax assets
judgement is required in determining the group’s provision for income 
taxes including estimating tax provisions where additional current  
tax may become payable in the future following the audit by the tax 
authorities of previously filed tax returns judgement is also required  
as to whether a deferred tax asset should be recognised based on  
the availability of future taxable profits 
refer to notes 3 8 and 21
management’s taxation judgements accounting treatment and the 
appropriateness of tax disclosures have been reviewed by the committee 
the committee considered whether from an accounting perspective 
an update was required to the tax provisions previously recorded in 
respect of specific exposures identified in addition the committee 
reviewed the tax implications of corporate transactions undertaken 
during the year the committee debated whether additional deferred  
tax assets should be brought onto the balance sheet as a consequence 
of for example the expected timing of future corporate transactions
having taken input from the external auditor the committee agreed with 
management’s proposed treatment of tax risks and deferred tax assets
impairment of goodwill intangible assets and other fixed assets
the judgements in relation to goodwill impairment testing relate  
to the assumptions applied in calculating the value in use of the 
cashgenerating units being tested for impairment the key  
assumptions applied in the calculation relate to the future  
performance expectations of the cashgenerating units 
the committee has also considered the related disclosures  
within the financial statements
refer to notes 3 and 12
business plans prepared by management supporting future 
performance expectations used in the calculation were approved  
by the board the committee received a detailed report on the 
outcome of the impairment review performed by management  
the impairment review was also an area of focus for the external 
auditor who reported their findings to the committee
the committee considered management’s approach the 
assumptions applied in relation to the impairment of goodwill 
intangible assets and other fixed assets and related disclosures  
and having taken input from the external auditor agreed with 
management’s assessment that there were no indicators of 
impairment for any of the group’s business units during the year
external auditor rotation
the group is required to comply with developing regulatory 
requirements in respect of external auditor rotation
as noted below the external auditor is required to rotate the  
audit signing partner every five years the group’s current audit  
signing partner is due to be replaced in the financial year ending  
31 december 2015
the committee considered papers which highlighted the developing 
regulatory and governance framework and which highlighted the 
expected timeline and relevant impact on the group 
during 2014 the committee considered a number of potential 
candidates for the role of new audit signing partner a suitable candidate 
was selected and was formally introduced to the committee the new 
audit signing partner will take office following the conclusion of the audit 
process in respect of the financial year ended 31 december 2014
nonaudit fees
with effect from the 2017 financial year the group will be required to 
comply with new rules governing the level of nonaudit services that 
may be awarded to the external auditor 
the committee considered papers detailing the new rules and 
highlighting the impact on the group a policy on the engagement  
of the external auditor for the supply of nonaudit services is in place 
and in line with best practice is subject to regular review the 
company is committed to complying with the rules and regulations 
governing the payment of nonaudit fees 
in addition to these matters the committee considered the following significant issues in relation to the financial statements during the year
73
 melrose industries plc
annual report 2014
governance
governance audit committee report
continued
external audit
appointment reappointment and assessment  
of effectiveness
the committee reviews and makes recommendations with regard 
to the reappointment of the external auditors in making these 
recommendations the committee considers auditor effectiveness 
and independence partner rotation and any other factors which 
may impact the external auditor’s reappointment
the external auditor is required to rotate the audit signing partner 
every five years the group’s audit signing partner changed as 
part of that rotation process in 2010 and therefore partner rotation 
is due in the financial year ending 31 december 2015
the committee has reviewed the external auditor’s performance 
and effectiveness for 2014 the company engaged the services  
of lintstock limited an independent corporate governance 
specialist to support the assessment of deloitte llp’s 
effectiveness and performance lintstock worked with the 
chairman of the committee and the company secretary to 
develop a series of questions covering the key areas of the  
audit process that the committee is expected to have an  
opinion over including
• the calibre continuity experience resources and technical  
and industry knowledge of the external audit team
• the planning and execution of the audit process
• the quality and timeliness of communications from the  
external auditor
• the support provided to the committee by the external audit 
partner and
• the external auditor’s independence and objectivity 
the committee along with relevant members of the management 
team were requested to complete an online questionnaire 
containing these questions lintstock subsequently produced  
a report summarising the responses based on this report  
the committee concluded that the quality of the external audit 
team remains very high the external audit process is operating 
effectively and deloitte llp continues to prove effective in its  
role as external auditor as detailed below the committee 
regularly monitors the objectivity and independence of the 
external auditor 
deloitte llp was appointed in 2003 when the company 
commenced trading and the external audit has not been  
formally tendered since then the committee is satisfied that the 
effectiveness and independence of the external auditor is not 
impaired in any way there are no legal or contractual obligations 
that restrict the group’s capacity to recommend a particular firm 
for appointment as auditor and therefore a resolution proposing 
the reappointment of deloitte llp as external auditors will be  
put to the shareholders at the 2015 annual general meeting
audit tendering
the committee is mindful of the recommendations of the uk 
corporate governance code that the external audit should be  
put out to tender every 10 years the company intends to comply 
with the order issued by the competition  markets authority 
relating to the statutory audit market for ftse 350 companies 
which came into effect on 1 january 2015 and will apply to 
financial years commencing on or after 1 january 2015 the 
current audit engagement partner’s rotation is due in the year 
ending 31 december 2015 it is the committee’s understanding 
that under the eu rules a formal tender process will be required 
to be held no later than two years from the end of the current 
rotation and that a rotation of external audit firm will be required  
by 2023 this matter will be kept under review
nonaudit services
under new eu and competition commission rules effective from 
the 2017 financial year the level of nonaudit services awarded to 
the external auditor will need to be capped at 70 of the average 
audit fee for the previous three years 
the company is committed to complying with the rules and 
regulations governing nonaudit services a policy on  
the engagement of the external auditor for the supply of nonaudit 
services is in place to ensure that the provision of nonaudit 
services does not impair the external auditor’s independence  
or objectivity in accordance with best practice frc guidelines 
the company policy in relation to nonaudit services is kept under 
regular review it was reexamined during 2014 the policy outlines 
which nonaudit services are preapproved being those which 
are routine in nature with a fee that is not significant in the context 
of the audit or auditrelated services which services require the 
prior approval of the committee and which services the auditor  
is excluded from providing the general principle is that the audit 
firm should not be requested to carry out nonaudit services on 
any activity of the company where they may in the future be 
required to give an audit opinion
during 2014 the main nonaudit services provided by deloitte 
llp were in relation to taxation advisory compliance and  
planning services
an analysis of the fees earned by the external auditors for audit 
and nonaudit services can be found in note 7 to the consolidated 
financial statements
74
 melrose industries plc
annual report 2014
governance auditor objectivity and independence
the committee carries out regular reviews to ensure that  
auditor objectivity and independence is maintained at all times  
a different senior partner oversees the taxation audit of the 
company compared to those working on the nonaudit  
taxation services 
no fees were paid to deloitte llp on a contingent basis based 
on these strict procedures the committee remains confident that 
auditor objectivity and independence have been maintained but 
accepts that nonaudit work should be controlled to ensure that  
it does not compromise the auditor’s position
at each year end deloitte llp submits a letter setting out how it 
believes its independence and objectivity have been maintained 
as noted above they are also required to rotate the audit partner 
responsible for the group audit every five years and significant 
subsidiary audits every seven years 
internal audit
due to the size and complexity of the group it is appropriate for 
an internal audit programme to be used within the business bm 
howarth an external firm provides internal audit services to the 
group a rotation programme is in place such that every business 
unit will have an internal audit at least once every three years with 
the largest sites being reviewed at least once every two years  
the rotation programme allows divisional management’s actions 
and responses to be followed up on a timely basis the internal 
audit programme of planned visits is discussed and agreed with 
the committee during the year
the internal auditor’s remit includes assessment of the 
effectiveness of internal control systems compliance with  
the group’s policies and procedures manual and a review  
of the businesses’ balance sheets a report of key findings  
and recommendations is presented to the group finance  
director the head of financial reporting and where considered 
necessary the group operations controller followed by  
a meeting to discuss these key findings and to agree on  
resulting actions
bm howarth present their key findings to the committee twice 
during the year these presentations include details of the site 
coverage for the previous year and an outline of the planned visits 
for the current year a review of the internal audit process and 
scope of work covered by the internal auditor is the responsibility  
of the committee to ensure their objectives level of authority  
and resources are appropriate for the nature of the businesses 
under review the committee also reviews bm howarth’s 
performance against the agreed internal audit programme  
a report of significant findings is presented by the internal  
auditor to the committee at each meeting and implementation  
of recommendations by the board is followed up at the 
subsequent committee meeting
john grant
chairman audit committee
4 march 2015
75
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report 
more information p78
nomination committee report
committee responsibilities
the nomination committee the “committee” discharges these 
responsibilities through 
• regular review of the size structure and composition of the board 
and by providing recommendations to the board of any 
adjustments that may be necessary from time to time
• giving full consideration to succession planning in order to ensure 
an optimum balance of executive and nonexecutive directors in 
terms of skills experience and diversity
• keeping under review the leadership needs of the business and
• keeping up to date and fully informed about strategic issues and 
commercial changes affecting the company and the markets in 
which it operates
the committee is expected to meet not less than twice a year 
and during 2014 the committee met twice the attendance of its 
members at these committee meetings is shown above
the committee’s terms of reference were reviewed and revised  
in august 2014 full terms of reference are available to view on  
the company’s website at wwwmelroseplcnetaboutus
governancenominationcommittee
further details regarding the composition diversity policy and the 
2014 activities of the committee are shown below
composition
in compliance with the uk corporate governance code the 
majority of the members of the committee were independent 
nonexecutive directors throughout 2014 the committee was 
chaired by miles templeman until his retirement from the board 
following the conclusion of the 2014 agm on 13 may 2014 miles 
templeman was succeeded as chairman by liz hewitt perry 
crosthwaite john grant and justin dowley also served on the 
committee throughout the year christopher miller executive 
chairman of the board was also a member of the committee 
throughout the year
the company secretary acts as secretary to the committee  
on occasion the committee invites the chief executive the 
vicechairman and the group finance director to attend 
discussions where their input is required 
the nomination committee has  
overall responsibility for making 
recommendations to the board on  
all new appointments to the board  
and for ensuring that the board and  
its committees have the appropriate 
balance of skills experience 
independence diversity and knowledge 
of the company to enable them to 
discharge their respective duties and 
responsibilities effectively 
member no of meetings
liz hewitt chairman
1
22
perry crosthwaite 12
justin dowley 22
john grant 22
christopher miller 22
miles templeman
2
–
1 appointed chairman with effect from the conclusion of the agm on 13 may 2014
2 retired as chairman with effect from the conclusion of the agm on 13 may 2014
liz hewitt
nomination committee chairman
“ melrose is a meritocracy and individual  
performance is the key determinant  
in any appointment irrespective of 
ethnicity gender or other characteristic 
trait or orientation”
76
 melrose industries plc
annual report 2014
governance diversity
melrose is a meritocracy and individual performance is the  
key determinant in any appointment irrespective of ethnicity 
gender or other characteristic trait or orientation the board 
recognises the importance of diversity throughout the workforce 
be it geographical cultural or market aligned and encompassing 
gender race sexual orientation and disability and it is committed  
to equality of opportunity for all employees for example melrose is 
proud to support the business disability forum a body committed  
to understanding the changes required in the workplace so that 
disabled people are treated fairly and they can contribute to 
business success to society and to economic growth 
the committee currently takes into account a variety of factors 
before recommending any new appointments to the board 
including relevant skills to perform the role experience 
knowledge ethnicity and gender the most important priority  
of the committee however has been and will continue to be 
ensuring that the best candidate is selected to join the board  
and this approach will remain in place going forward
the committee will endeavour to pursue diversity including 
gender diversity throughout the melrose group and notes  
the recommendations of lord davies’ review “women  
on boards” however given the company’s strategic business 
model and the frequent turnover of businesses the committee 
does not think that setting and committing to specific diversity 
targets in relation to the composition of the board and the 
workforce in the wider businesses within the group is correct  
for melrose
what the committee did in 2014
the principal focus of the committee during 2014 has been to 
consider the items set out below
• the committee considered the composition and balance of  
the board and the timing of future board changes and reviewed 
the succession plans in place in respect of key executives  
in conjunction with the provisions of the uk corporate 
governance code 
• the existing time commitment of melrose nonexecutive 
directors was reviewed and confirmed as appropriate
• the committee membership was reviewed and a 
recommendation made to the board that no changes should be 
made in 2015
• the independence of each nonexecutive director was reviewed 
and a recommendation made to the board supporting the 
board’s determination of nonexecutive director independence
• consideration was given to the reappointment of the directors 
before making a recommendation to the board regarding each 
director’s reelection at the 2015 agm
• a review of the leadership requirements of melrose both 
executive and nonexecutive was undertaken and this 
confirmed that the existing management team is appropriate  
for the group this review also demonstrated that appropriate 
and effective leadership is in place within the business units  
and that processes are in place to ensure that performance  
is reviewed regularly against operational and financial criteria
• the committee examined the career planning and talent 
management programmes in operation across the group  
and concluded that these were appropriate for the needs  
of the business
• the committee reviewed and reaffirmed the principles 
underlying the company’s diversity policy and
• the committee’s terms of reference were revised during the  
year to ensure that these remain in line with best practice
liz hewitt
chairman nomination committee
4 march 2015
77
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report
dear shareholder 
on behalf of the board i am pleased to present our report on 
directors’ remuneration being my first report as chairman of the 
remuneration committee the directors’ remuneration report sets 
out the amounts earned in respect of the year ended 31 december 
2014 and the remuneration policy for the directors of melrose 
as with the directors’ remuneration report for the year ended  
31 december 2013 this report is presented in two sections the 
annual report on remuneration and the directors’ remuneration 
policy the annual report on remuneration provides details on the 
amounts earned in respect of the year ended 31 december 2014 
and how the directors’ remuneration policy will be applied in 2015 
the annual report on remuneration will be subject to an advisory 
vote at the agm the directors’ remuneration policy sets out the 
policy that was approved by shareholders at the 2014 agm and 
took binding effect from the conclusion of that meeting in line with 
the regulations on the presentation and disclosure of directors’ 
remuneration which came into effect from october 2013 except 
that as noted on page 88 we have not included the “illustrations  
of the application of remuneration policy” the approval of the 
directors’ remuneration policy is valid for three years provided the 
company does not intend to make changes to the policy within 
this period and therefore shareholder approval of the policy is not 
required at the agm scheduled for 14 may 2015 a key element of 
the melrose remuneration framework is the longterm incentive 
plan which had already been approved by special resolution of 
shareholders at a general meeting held in april 2012 
our remuneration structure for executive directors
melrose’s remuneration philosophy is that executive remuneration 
should be simple and transparent support the delivery of the 
business strategy and pay for performance this philosophy is 
reflected in our remuneration structure 
the remuneration committee feels strongly that rewards should be 
linked to generation and delivery of real returns to shareholders
• base salary base salaries are paid at the lower end of a market 
competitive range compared to companies of similar size and 
complexity since flotation in 2003 all current executive directors 
have received the same annual increases to base salary in the 
last five years these increases have averaged 3
• pension pension contributionssalary supplements for executive 
directors are payable at the level of 15 of base salary which is 
considered modest for a business of the size and complexity of 
melrose no executive director participates in or has ever 
participated in any melrose defined benefit pension scheme
“ melrose’s remuneration philosophy  
is that executive remuneration should  
be simple and transparent support  
the delivery of the business strategy  
and pay for performance”
the board has delegated to the 
remuneration committee responsibility 
for overseeing the remuneration of  
the company’s directors company 
secretary and other senior employees 
member no of meetings
justin dowley chairman
1
33
perry crosthwaite
1
33
miles templeman
2
22
john grant 33
liz hewitt 33
1  justin dowley was appointed chairman of the remuneration committee with effect  
from the close of the 2014 agm on 13 may 2014 perry crosthwaite was chairman of  
the remuneration committee from 1 january 2014 until the close of the 2014 agm
2  miles templeman retired as a nonexecutive director of the company with effect  
from the close of the 2014 agm on 13 may 2014 
justin dowley
remuneration committee chairman
board of directors 
more information p62
78
 melrose industries plc
annual report 2014
governance • annual bonus the maximum bonus payable is set at 100  
of base salary all directors who participate in the annual bonus 
scheme receive the same percentage bonus in the last five 
years the average percentage of base salary payable has been 
81 the maximum opportunity is deliberately positioned below 
the median maximum opportunity for ftse 250 companies and  
is a percentage of salaries that are paid at the lower end of a 
market competitive range compared to companies of similar  
size and complexity
• longterm incentives the only longterm incentive 
arrangement in which the executive directors participate is the 
2012 incentive plan which was approved by shareholders by 
special resolution in a general meeting held on 11 april 2012  
the “ltip” entitlements under the 2012 incentive plan details  
of which are provided on page 85 were awarded in april 2012 
any payment made will be dependent upon shareholder value 
generated over a five year time period
rather than successive one year ltip arrangements we believe 
that a five year arrangement is preferable given that it is closer to 
a typical ownership cycle for an acquired business by its nature 
this means that any payment under the ltip is only made once 
every five years and so the payment in that fifth year should not  
be regarded as an annual payment
the ltip arrangements are intended to directly align our executive 
directors’ incentive arrangements with those of shareholders by 
linking remuneration specifically to shareholder value the ltip 
structure is designed to ensure that only once shareholders have 
received a compound annual cash return in excess of rpi plus 
2 does the ltip have any value whatsoever this means that  
the melrose ltip has a minimum growth requirement effectively  
a charge which requires the initial invested capital to be inflated  
by rpi  2 per annum the value payable to management  
under the ltip comprises 75 of value created in excess of  
this minimum the ltip is then paid out to participants in pre
determined proportions either in ordinary shares or and only  
in certain circumstances which are within the complete control  
of the remuneration committee as a cash dividend with the total 
being equal in value to 75 reduced from 10 in the equivalent 
2009 plan of the increase in shareholder value in excess of the 
minimum growth requirement from the date of grant to 31 may 
2017 the formula by which growth is calculated as set out in  
the company’s articles of association takes account of every 
change to the capital structure and dividend payment in this  
way the participants will only receive a share of returns over  
and above that adjusted level under the 2012 incentive plan  
the initial invested shareholder capital needs to grow by rpi 2 
per annum before ltip participants receive anything at all after 
that return shareholders will also receive 925 of any total value 
gain we have included on pages 81 to 82 further information in 
relation to the 2012 incentive plan including an illustration of how 
any increase in value would be shared between shareholders and 
participants in the plan 
the remuneration committee strongly believes that this simple  
and transparent incentive framework is aligned with the 
company’s strategy for growth we believe that this remuneration 
strategy has also directly driven historical outperformance  
when compared with our competitors supported the company’s 
success and has clearly led to increased shareholder value  
in this regard our remuneration arrangements are tailored to  
the culture and strategy of the company and provide a strong 
platform for the ongoing longterm success of the company
together with their own purchase of shares the remuneration 
policy has also enabled the executive directors to build up  
and retain significant shareholdings in the company as at  
31 december 2014 the chairman and chief executive held  
92 and 51 times their base salary respectively in melrose shares 
further detail is given on pages 84 to 85 however the table  
below shows the number of ordinary shares held by the 
executive directors as at 31 december 2014 and the value of 
each executive director’s shareholding at that date as a multiple  
of his 2014 base salary
executive director
number of  
shares held as at  
31 december 2014
value of  
shares held at  
31 december 2014
1
value of shares 
held at  
31 december 2014 
as a multiple of 
2014 base salary
christopher miller 14934282
2
£39844644 92
david roper 8110074 £21637677 50
simon peckham 8373288 £22339932 51
geoffrey martin 4026674 £10743166 31
1  for these purposes the value of a share is 2668 pence being the closing midmarket price 
on 31 december 2014 
2  as at 31 december 2014 the interest of christopher miller included 5719999 ordinary 
shares held by harris  sheldon investments limited a company which is connected  
with christopher miller within the meaning of section 252 of the companies act 2006
as noted on page 85 internal company rules on shareholdings  
are extended to senior melrose management in addition to the  
executive directors in order that appropriate remuneration 
principles are applied to senior management on a similar basis  
to executive directors 
79
 melrose industries plc
annual report 2014
governance
governance our remuneration structure for nonexecutive directors
a simple remuneration structure is applied for our nonexecutive 
directors nonexecutive directors are paid fees to reflect market 
conditions and attract individuals with appropriate knowledge and 
expertise fees for nonexecutive directors are determined by  
the executive directors and our nonexecutive directors do not 
participate in our pension arrangements the annual bonus or  
our longterm incentive arrangement 
2014 key decisions and incentive payouts
the remuneration committee remains committed to a responsible 
approach to executive pay as described in the strategic report 
and performance review sections of this annual report the 
company delivered strong financial and operational results in 2014 
the executive directors’ remuneration rewards that performance 
annual bonuses for executive directors are calculated using  
two elements 80 being based on diluted earnings per share 
growth and 20 on a strategic element having listened to  
our investors and a number of corporate governance advisers  
and in the interests of transparency greater levels of detail are 
included on the objectives and deliverables and on how the 
remuneration committee determined the level of award under 
the 2014 annual bonus
in line with increases in previous years an inflationary increase  
of 3 was made to the executive directors’ salaries with effect 
from 1 january 2014 this is consistent with the salary rises 
awarded to the wider head office population nonexecutive 
directors’ basic fees increased by 3 with effect from january 
2014 and with effect from the 2014 agm the additional fees 
payable to the committee chairmen and senior nonexecutive 
director which had been unchanged since 2006 were increased 
as disclosed in last year’s directors’ remuneration report
awards under the 2012 incentive plan were made in april 2012 and 
are due to crystallise in may 2017 accordingly no executive director 
received any payout under a longterm incentive plan in 2014
business unit longterm incentive plans
longterm incentive plans are in place for the leadership of the 
business units with payouts based on the performance of their 
respective businesses
approach to directors’ remuneration for 2015
the directors’ remuneration policy as approved by shareholders 
at the 2014 agm is set out in the policy report on pages 88 to 95 
details of how the policy will be applied in practice for 2015 are set 
out in the annual report on remuneration on page 87 executive 
directors’ base salaries have been increased by 3 with effect 
from january 2015 the same as for other head office employees 
other than where other such employees’ salaries have been 
increased on a different basis to reflect individual circumstances 
such as promotions nonexecutive directors’ basic fees for 2015 
have also been increased by 3 
the overall framework for the executive directors’ annual bonus 
arrangements for 2015 will remain the same as in 2014 with a 
maximum bonus opportunity of 100 of salary 80 of which  
is based on financial performance metrics and 20 of which is 
based on strategic performance metrics
directors’ remuneration report 
continued
the remuneration committee has considered the application  
of malus and clawback to the executive directors’ variable 
remuneration opportunities taking into account the views of our 
investors and the corporate governance advisory agencies and 
the recent changes to the uk corporate governance code the 
annual bonus arrangement is a discretionary arrangement and 
therefore any annual bonus opportunity is effectively subject to  
a “malus” provision over the course of the relevant year annual 
bonus awards for 2014 and future years will also be subject to a 
clawback arrangement giving the remuneration committee the 
ability to require repayment of some or all of any bonus earned  
in the event of 1 material misstatement of financial results 2 
miscalculation of any performance measure on which the bonus 
earned was calculated and 3 serious misconduct by the relevant 
participant the remuneration committee will have discretion to 
apply clawback at any time up until the annual general meeting 
held in the second year following the payment of the bonus –  
for example clawback may be applied in respect of any bonus 
earned in respect of performance in 2014 at any time up until the 
annual general meeting in 2017 the malus provisions applied to 
the 2012 incentive plan are referred to on page 82 clawback of 
some form will apply to the new longterm incentive arrangements 
which will replace in 2017  the existing ltip approved by special 
resolution of the shareholders in 2012 
no other changes have been made to the structure of our 
executive director remuneration for the coming year 
shareholder engagement
we remain committed to maintaining an open and transparent 
engagement with our investors we believe that a key objective  
of the directors’ remuneration report is to communicate clearly 
how much our executive directors are earning and how this is 
clearly linked to performance members of the remuneration 
committee are engaged in an ongoing dialogue with investors  
in order to understand more fully their views on melrose’s 
approach to executive remuneration
justin dowley
chairman remuneration committee 
4 march 2015
80
 melrose industries plc
annual report 2014
governance as set out in the company’s articles of association takes account 
of every change to the capital structure and dividend payment in 
this way the participants will only receive a share of returns over 
and above that adjusted level in the table above we have shown 
an illustrative calculation of the increase in the value relevant for 
the purposes of the 2012 incentive plan calculated in accordance 
with the principles in the company’s articles of association but 
assuming a trigger date of 1 january 2015
the 2012 incentive plan
in the interests of transparency and to illustrate how the 2012 
incentive plan may operate we have set out above an illustration  
of how the growth in value of the company over the period from  
the start of that plan in march 2012 might translate into value earned  
by participants in that plan it is important to note that the following 
illustration is theoretical only and the value derived under the 2012 
incentive plan will be entirely determined by reference to the value 
that will be delivered to shareholders over the period to crystallisation
importantly and as referred to in the remuneration policy on 
page 90 the calculation of the growth in value of the company  
for the purposes of the 2012 incentive plan shall be determined  
in accordance with the formula set out in the company’s articles  
of association those articles provide that participants in the plan 
are entitled to 75 of the value created in excess of a minimum 
growth threshold being the initial invested capital increased by 
rpi  2 per annum the formula by which growth is calculated 
annual report on remuneration
introduction
melrose’s remuneration philosophy is that executive 
remuneration should be simple and transparent support  
the delivery of the business strategy and pay for performance 
which is reflected in our remuneration structure
• fixed elements of remuneration salary and pension are 
positioned at the lower end of a market competitive range 
• annual incentive remuneration annual bonus is positioned 
below the median maximum opportunity for ftse 250 
companies and
• longterm incentive remuneration the 2012 incentive plan  
is intended to directly align executive directors’ remuneration 
with that of shareholders by connecting remuneration 
specifically to shareholder value 
the remuneration committee strongly believes that this  
simple and transparent incentive framework is aligned with  
the company’s strategy for growth and that our remuneration 
arrangements are tailored to the culture and strategy of  
the company 
the annual report on remuneration sets out the amounts 
earned by directors in 2014 as a result of the application of our 
remuneration philosophy and in accordance with the directors’ 
remuneration policy approved by shareholders at the 2014 
agm and how that philosophy will be applied in 2015
invested  
capital post return 
initial 
invested 
capital
march  
2012
1
dividend
may  
2012
new share 
issue
august  
2012
dividend 
october 
2012
dividend 
may  
2013
dividend 
october 
2013
capital 
return
february 
2014
dividend 
may  
2014
dividend 
october 
2014 total
net shareholder investment  
non adjusted £
1518492691 32840728 1199073594 32932303 63331352 34832243 595314707 53588067 30009317 1874717568
net shareholder investment  
inflated at rpi 2 per 
annum to december 2014 £
1721596172 36720329 1336267485 36270842 67513836 36483382 617749004 54674978 30146774 2178304512
implied index adjustment 1134x 1118x 1114x 1101x 1066x 1047x 1038x 1020x 1005x
1  represents the £1518492691 deemed net shareholder investment on an adjusted basis as at 22 march 2012
2012 
invested capital from and including  
march 2012 up to and including december 2014  
see line 1 in box below
 £1874717568
index adjustmentminimum return £303586944
indexed capital £2178304512
2014
number of issued ordinary shares on  
31 december 2014
1071761339
average price of an ordinary share for  
40 business days prior to 31 december 2014
£258905
deemed market capitalisation of melrose based  
on average price of an ordinary share for  
40 business days prior to 31 december 2014
£2774843695
overall increase in value for shareholders  
since 22 march 2012
£596539183
theoretical value to management and shareholder dilution 
calculated at 31 december 2014 illustrative only 
75 of increase in value £44740439
theoretical total number of new shares issued  
under ltip
1
  
17280639
theoretical dilution to shareholders due to ltip 16
1  the number of shares to be issued in accordance with this calculation differs to the diluted 
number of shares of 137 million disclosed in note 11 the difference arises due to the 
requirements of ias 33 which stipulate that unrecognised future service costs for ltips 
calculated in accordance with ifrs 2 should be deducted from the calculation of diluted 
shares for the purposes of earnings per share calculations
theoretical value under the ltip if crystallised on 
31 december 2014 rather than on the 2017 scheduled 
payment date
81
 melrose industries plc
annual report 2014
governance
governance 2012 incentive plan
 value delivered to shareholders
index adjustment
minimum return
 value delivered to participants
£551798744
£596539183
overall increase 
in value for 
shareholders since 
22 march 2012
£303586944
 £44740439
£2774843695
£1874717568
directors’ remuneration report 
continued
the chart below represents how the illustrative calculation of  
the increase in the value relevant for the purposes of the 2012 
incentive plan as referred to above is shared between  
participants in the 2012 incentive plan and shareholders 
based on this illustration if the entitlements under the 2012 
incentive plan were to have been settled in ordinary shares of 
13110 pence each being the nominal value of ordinary shares  
on 1 january 2015 this would have resulted in the issue to the 
participants of 17 280639 ordinary shares ie £44740439 
£258905 while it is the remuneration committee’s intention  
that entitlements under the 2012 incentive plan shall be settled in 
ordinary shares the entitlements can be settled in alternative ways 
as set out in the company’s articles of association and as referred 
to in the remuneration policy on page 90 in any event the number 
of ordinary shares issued to satisfy entitlements under the 2012 
incentive plan shall not exceed 5 of the aggregate number of 
shares in issue on 22 march 2012 plus 5 of any additional shares 
issued by the company after that date as described in more detail 
in the remuneration policy on page 90 
malus has applied to awards granted under the 2012 incentive plan 
since its inception the rules of the plan provide for compulsory 
return at nominal value of incentive shares held by bad leavers 
defined as any person who ceases to be a director or employee 
other than by reason of death permanent ill health or disability or  
as a result of a change of control at the remuneration committee’s 
discretion in addition the company’s articles of association 
provide the remuneration committee with the discretion to adjust 
the calculation of the amount to which holders of incentive shares 
and options shall be entitled in certain circumstances 
single total figure of remuneration audited information
year ended 31 december 2014 
total salary  
and fees 
£’000
taxable  
benefits  
£’000
annual  
bonus  
£’000
longterm  
incentives
1
  
£’000
pension related 
benefits
2
  
£’000
total  
£’000
christopher miller 435 9 – – 65 509
david roper 435 19 – – 65 519
simon peckham 435 21 252 – 65 773
geoffrey martin 348 46 202 – 52 648
miles templeman
3
23 – – – – 23
perry crosthwaite
4
67 – – – – 67
john grant
5
70 – – – – 70
justin dowley
6
68 – – – – 68
liz hewitt
7
64 – – – – 64
total 1945 95 454 – 247 2741
1  the company’s longterm incentive arrangement for directors is the 2012 incentive plan this five year plan is scheduled to crystallise in 2017 and accordingly no value vested to participants  
in respect of the year to 31 december 2014 
2  of the £247836 attributable to pension contributions £195660 was paid as a supplement to base salary in lieu of pension arrangements the balance of £52176 was paid into the individual 
directors’ nominated private pension plans
3  miles templeman stood down as a nonexecutive director of the company with effect from the agm on 13 may 2014 and the fees referred to above reflect his fees for the period from  
1 january 2014 to 13 may 2014 
4  perry crosthwaite was chairman of the remuneration committee up to the close of the 2014 agm on 13 may 2014 but was then replaced by justin dowley perry crosthwaite received  
an amount of £1822 in recognition of his chairmanship of the remuneration committee from 1 january 2014 to 13 may 2014 perry crosthwaite was senior nonexecutive director from  
13 may 2014 and received an amount of £3178 in recognition of his holding that position 
5 includes £8181 in recognition of chairmanship of the audit committee
6  justin dowley became chairman of the remuneration committee following the close of the 2014 agm on 13 may 2014 in place of perry crosthwaite in recognition of justin dowley’s 
chairmanship of this committee from 13 may 2014 to 31 december 2014 an amount of £6365 was paid 
7 includes £1586 in recognition of chairmanship of the nomination committee from the close of the 2014 agm on 13 may 2014 to 31 december 2014 
82
 melrose industries plc
annual report 2014
governance year ended 31 december 2013 
total salary  
and fees  
£’000
taxable  
benefits  
£’000
annual  
bonus  
£’000
longterm  
incentives
1
  
£’000
pension related 
benefits
2
  
£’000
total  
£’000
christopher miller 422 19 – – 63 504
david roper 422 19 – – 63 504
simon peckham 422 20 422 – 63 927
geoffrey martin 338 56 338 – 51 783
miles templeman 60 – – – – 60
perry crosthwaite
3
65 – – – – 65
john grant
5
65 – – – – 65
justin dowley
6
60 – – – – 60
liz hewitt
7
14 – – – – 14
total 1868 114 760 – 240 2982
1  the company’s longterm incentive arrangement for directors is the 2012 incentive plan this five year plan is scheduled to crystallise in 2017 and accordingly no value vested to participants  
in respect of the year to 31 december 2013 
2  of the £240598 attributable to pension contributions £159298 was paid as a supplement to base salary in lieu of pension arrangements the balance of £81300 was paid into the individual 
directors’ nominated private pension plans
3  includes £5000 per annum in recognition of chairmanship of the remuneration committee
4 includes £5000 per annum in recognition of chairmanship of the audit committee
5 liz hewitt was appointed as a nonexecutive director of the company on 8 october 2013
base salary
salaries are fixed at a level which is at or below the lower end of a market competitive range compared to companies of similar size and 
complexity to reflect participation in the 2012 incentive plan each executive director received an inflationary increase in base salary  
of approximately 3 effective from january 2014 
benefits
the range of benefits provided to directors has not changed since the inception of melrose and there is no intention to widen the range 
of benefits directors may receive all of the executive directors received taxable benefits during 2014 being a company car allowance 
private fuel allowance and private medical insurance geoffrey martin also received paid train travel to and from london and 
accommodation whilst working in london 
bonus
the maximum bonus opportunity is set below the maximum median annual bonus opportunity for ftse 250 companies to reflect  
the participation of the executive directors in the 2012 incentive plan for the year ended 31 december 2014 simon peckham’s and 
geoffrey martin’s being the only executive directors participating in the annual bonus plan maximum bonus opportunity was equal  
to 100 of base salary and bonuses earned were equal to 58 of base salary 
83
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report 
continued
executive director
performance 
measure weighting target performance level of award
simon peckham 
geoffrey martin
each of these 
executive 
directors 
participated  
in the annual 
bonus plan on  
the same basis
growth in  
diluted earnings 
per share
for these 
purposes 
earnings per 
share is 
adjusted for  
the impact  
of transactions
80 the percentage  
of this element  
of the bonus  
which is earned  
is calculated by 
reference to eps 
growth and subject 
to a five x multiple 
capped at 80  
of salary 
for 2014 growth in earnings per share as adjusted for the 
purposes of the annual bonus for the impact of the disposal of 
bridon was 12 applying the multiple of five results in a figure  
of 60 accordingly 48 of salary was earned for this 
element
48 of salary 
60 of the 
maximum for 
this element  
of the bonus
strategic  
element  
subject to 
metrics 
determined  
at the start  
of the year
20 determined to the 
extent assessed  
by the 
remuneration 
committee 
between 0 and 
20 of salary 
based on a range 
of financial and 
nonfinancial 
metrics
the factors taken into account for the purposes of the 2014 
bonus and the performance in respect of them and resulting 
bonus outcome are set out below 
10 of salary  
50 of the 
maximum for 
this element  
of the bonus
metric weighting
extent to which the metric was 
determined to be satisfied by 
the remuneration committee
“buy” – identify and 
secure the acquisition 
of a business to 
enhance the existing 
elster gas utilisation 
operation
13 met in part reflecting  
the acquisition of eclipse  
in october 2014 for  
£98 million creating an 
opportunity to strengthen  
the elster gas business and 
enhance shareholder value
“improve” – improve 
the margins of the 
continuing group 
businesses year  
on year
13 met in part reflecting  
the fact that the margins of 
the three elster businesses 
have been enhanced with 
only a marginal decrease  
at the brush operation
“sell” – successfully  
divest bridon for 
appropriate value
13 met in part reflecting the 
disposal of bridon in 
november 2014 
scheme interests awarded during the year
no awards were granted to directors in the year under any 
longterm incentive plan
payments to past directors
no payments were made in the year to any former director of  
the company
payments for loss of office
no payments for loss of office were made in the year to any director
statement of directors’ shareholding and share interests 
audited information
as disclosed at the time of the crystallisation of the 2009 incentive 
share plan the executive directors considered it appropriate  
that they together with their immediate families would hold at 
least half of the shares acquired pursuant to that crystallisation 
after making adequate provision for any tax liability arising in 
connection with that crystallisation for the foreseeable future 
accordingly the remuneration committee has adopted the 
following guidelines in relation to the holding of ordinary shares 
by executive directors who participated in the 2009 incentive 
share plan and who participate in the 2012 incentive plan 
reinforcing the executive directors’ longterm stewardship of the 
company and longterm investment in the company’s shares  
no executive director may dispose of any such ordinary shares 
without the consent of the remuneration committee which will 
not normally be withheld provided the executive director holds at 
least the “minimum number of ordinary shares” referred to below 
executive director
minimum number 
of ordinary shares 
to be held by the 
executive 
directors
number of ordinary 
shares held as at  
31 december 2014
value of ordinary 
shares held as at 
31 december 2014 
as a multiple of 
salary for the  
year ended 31 
december 2014
2
christopher miller 1749756 14934282
1
92
david roper 1649756 8110074 50
simon peckham 1874878 8373288 51
geoffrey martin 1054619 4026674 31
1  as at 31 december 2014 the interest of christopher miller included 5719999 ordinary 
shares held by harris  sheldon investments limited a company which is connected with 
christopher miller within the meaning of section 252 of the companies act 2006
2 for these purposes the value of a share is 2668 pence being the closing midmarket price 
on 31 december 2014
as at 31 december 2014 each executive director held 
significantly more than the minimum number of ordinary shares 
and so satisfied the guideline
84
 melrose industries plc
annual report 2014
governance performance graph
900
800
700
600
500
400
300
200
100
0
dec 09 dec 08 jun 09 jun 10 dec 10 jun 11 dec 11 jun 12 dec 12 jun 13 dec 13 jun 14 dec 14 
 melrose ftse 100 ftse 250 ftse all share
performance graph
the total shareholder return graph below shows the value as at 31 december 2014 of £100 invested in the company on 31 december 
2008 compared with £100 invested in the ftse 100 index the ftse 250 index or the ftse all share index the remuneration 
committee considers the ftse 100 index the ftse 250 index and the ftse all share index to be appropriate indices for the purposes of 
this comparison because of the comparable size of the companies which comprise the ftse 100 index and the ftse 250 index and the 
broad nature of companies which comprise the ftse all share index the source data for the graph below assumes that all cash returns 
to shareholders made by the company during this period are reinvested in ordinary shares
internal company rules on shareholdings are extended to senior management in addition to the executive directors in order that 
appropriate remuneration principles are applied to senior management on a similar basis to executive directors 
director
4
type
ordinary shares held as  
at 31 december 2014
1
vested interests  
under share schemes
unvested interests under share schemes
subject to  
performance conditions
not subject to  
performance conditions
christopher miller
ordinary shares 14934282
2
na na na
option
3
na na 8500 na
david roper
ordinary shares 8110074 na na na
option
3
na na 8500 na
simon peckham
ordinary shares 8373288 na na na
option
3
na na 8500 na
geoffrey martin
ordinary shares 4026674 na na na
option
3
na na 8500 na
perry crosthwaite ordinary shares 188165 na na na
john grant ordinary shares 296431 na na na
justin dowley ordinary shares 471769 na na na
liz hewitt ordinary shares 6550 na na na
1  the directors’ holdings in ordinary shares were adjusted in the share consolidation in february 2015 in the same manner as other shareholders accordingly following the consolidation christopher 
miller held 13867545 ordinary shares including 5311426 ordinary shares held by harris  sheldon investments limited a company which is connected with christopher miller within the meaning  
of section 252 of the companies act 2006 david roper held 7530783 ordinary shares simon peckham held 7775196 ordinary shares geoffrey martin held 3739054 ordinary shares perry 
crosthwaite held 174724 ordinary shares john grant held 275257 ordinary shares justin dowley held 438071 ordinary shares and liz hewitt held 6082 ordinary shares 
2  as at 31 december 2014 the interest of christopher miller included 5719999 ordinary shares held by harris  sheldon investments limited a company which is connected with christopher 
miller within the meaning of section 252 of the companies act 2006
3  each of these options is over 2012 incentive shares although the option can be exercised at any time the value which may be derived from the shares acquired on exercise will be determined  
at the relevant “trigger date” as discussed on page 90 2012 incentive shares acquired on or before the trigger date may be forfeited in accordance with the company’s articles of association 
the option exercise price is £1 per share which is equal to the nominal value of those shares 
4  miles templeman retired from the board at the close of the company’s agm on 13 may 2014 at that date he held 585828 ordinary shares and had no interests in shares under any share schemes
85
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report 
continued
chief executive officer remuneration for previous six years
in accordance with the regulations governing the reporting of directors’ remuneration which came into effect in october 2013 the 
total figure of remuneration set out in the table below includes the value of longterm incentive vesting in respect of the financial year 
this means that the full value of the crystallisation of the 2009 incentive share plan on 11 april 2012 is shown for the year ending  
31 december 2012 and no value will be reflected in the total figure of remuneration for the 2012 incentive plan until the trigger date 
which will be may 2017 or an earlier trigger date determined in accordance with the arrangements
the value of the 2009 incentive share plan was earned over a period of approximately five years therefore in the view of the 
remuneration committee inclusion of this value in respect of the year ended 31 december 2012 does not give a fair representation 
of the chief executive officer’s yearly remuneration over each of the previous five years therefore an additional column has been 
added to the table below to show total remuneration excluding the value received on the maturity in april 2012 of the 2009 incentive 
share plan no other longterm incentive plan vested in favour of any executive director in any of the other years 
the amount of that value shown in respect of david roper and simon peckham for 2012 reflects the proportion of 2012 for which 
each was the chief executive officer 
financial year chief executive officer
total remuneration 
 £
total remuneration 
excluding the longterm 
incentive value  
£
annual bonus as a 
percentage of maximum 
opportunity
longterm incentives as a 
percentage of maximum 
opportunity
year ended 
31 december 2014
 simon peckham 773167 773167 58 –
year ended
31 december 2013
simon peckham 927276 927276 100 –
year ended
31 december 2012
1
simon peckham 20280584
3
489372 64 na
2
david roper 10915846
3
259040 64 na
2
year ended 
31 december 2011
david roper 811152 811152 84 –
year ended
31 december 2010
david roper 849341 849341 100 –
year ended  
31 december 2009
david roper 712372 712372 70 –
1  in the year ending 31 december 2012 david roper was chief executive officer for the period from 1 january 2012 until 9 may 2012 and simon peckham was chief executive officer for the 
period from 9 may 2012 onwards in the table above
    i  the “total remuneration” figure shows in respect of david roper his total remuneration in respect of his service in the period 1 january 2012 to 9 may 2012 and in respect of simon peckham 
his total remuneration in respect of his service in the period from 9 may 2012 to 31 december 2012 included in this figure for each of david roper and simon peckham is the value of the 
longterm incentives vesting in the year prorated to reflect the portion of the year for which he was chief executive officer and
    ii  the “total remuneration excluding the longterm incentive value” shows in respect of each of david roper and simon peckham total remuneration in respect of the period for which he was 
chief executive officer excluding any value received on the maturity in april 2012 of the 2009 incentive share plan 
2  on the crystallisation in april 2012 of the 2009 incentive shares awarded in 2009 participants in the 2009 incentive share plan as a whole were entitled to 10 of the increase in shareholder 
value from 18 july 2007 to 23 march 2012 because the value derived on the crystallisation of the 2009 incentive shares depended upon the shareholder value created over the relevant period  
it is not possible to express the value derived as a percentage of the maximum opportunity the crystallisation of the 2009 incentive shares was satisfied by the conversion of those shares into 
ordinary shares 
3  the value derived in 2012 from the 2009 incentive shares represents the chief executive’s share determined in accordance with the terms of those shares of the shareholder value created over 
a period of circa five years 
percentage change in chief executive officer’s remuneration
the table below sets out in relation to salary taxable benefits and 
annual bonus the percentage increase in pay for the company’s 
chief executive officer compared to the average increase for a 
group consisting of the company’s senior head office employees 
managing directors and finance directors of group businesses 
and direct senior reports of those managing directors and 
finance directors the percentages shown below relate to the 
financial year ended 2014 as a percentage comparison to the 
financial year ended 2013 this group of senior management was 
considered an appropriate comparator group because of their 
level of seniority and the structure of their remuneration package 
the spread of the company’s operations across various countries 
and industries means that remuneration policies vary to take 
account of geography and industry such that the remuneration 
committee considers that selecting a wider group of employees 
would not provide a meaningful comparison 
element of 
remuneration
chief executive 
officer 
percentage 
change
company’s senior head office 
employees managing directors and 
finance directors of group businesses 
and direct senior reports of those 
managing directors and finance 
directors average percentage change
basic salary 3 5
benefits
1
6 4
annual bonus 40 28
1 company car allowance private fuel allowance and private medical insurance
86
 melrose industries plc
annual report 2014
governance relative importance of spend on pay
the following table sets out the percentage change in  
dividends and the overall expenditure on pay as a whole  
across the organisation
expenditure
year ended  
31 december 2013
year ended  
31 december 2014
percentage 
change
remuneration paid 
to all employees 
£4714 million
1
£4030 million
1
155
distributions to 
shareholders by 
way of dividend 
and share buy back
£981 million
2
£6789 million
3
6920
1 the figure for the year ended 31 december 2013 is the year end 31 december 2013 total  
staff costs as stated in note 7 on page 123 of the 2014 annual report and financial 
statements and the figure for the year ended 31 december 2014 is the year end 31 december 
2014 total staff costs as stated in note 7 on page 123 this comparison has been affected by 
the sale of bridon in november 2014 in the light of the company’s business model of buy 
sell improve and return of capital to shareholders your board does not consider that the 
table is meaningful in the context of the group’s remuneration structure which provides  
a strong alignment with shareholder interests
2 the figure for year ended 2013 does not include the return of capital to shareholders  
in february 2014 
3 the figure for year ended 2014 includes the return of capital to shareholders in  
february 2014
implementation of directors’ remuneration policy for the 
financial year commencing on 1 january 2015
the remuneration committee strongly believes that its 
remuneration framework is aligned with the company’s strategy for 
growth and no structural changes to the directors’ remuneration 
arrangements are proposed for 2015 
executive directors’ salaries have increased by 3 with effect 
from january 2015 the same as for other head office employees 
other than where other such employees’ salaries have been 
increased on a different basis to reflect individual circumstances 
such as promotions as shown in the following table 
executive director
2014 salary  
£’000
2015 salary  
£’000
percentage 
increase
christopher miller 435 448 3
david roper 435 448 3
simon peckham 435 448 3
geoffrey martin 348 358 3
the overall framework for the executive directors’ annual bonus 
arrangements for 2015 will remain the same as in 2014 with a 
maximum bonus opportunity of 100 of salary based on financial 
performance metrics as regards 80 of the opportunity and 
strategic performance metrics as regards the balance the 
remuneration committee considers that the strategic performance 
measures are commercially sensitive but will disclose the nature of 
those measures on a retrospective basis on a similar basis to the 
disclosure on page 84 in respect of the annual bonus for the year 
ending 31 december 2014 as noted on page 80 annual bonus 
awards for 2015 as well as payments in respect of the 2014 annual 
bonus will be subject to a clawback arrangement giving the 
remuneration committee the ability to require repayment of some or 
all of any bonus earned in the event of 1 material misstatement of 
financial results 2 miscalculation of any performance measure on 
which the bonus earned was calculated and 3 serious misconduct 
by the relevant participant the remuneration committee will have 
discretion to apply clawback to any bonus earned for 2015 at any 
time up until the 2018 annual general meeting
nonexecutive directors’ basic fees have been increased by 3 
with effect from january 2015 the nonexecutive director fee 
levels for 2014 and 2015 are set out in the table below 
fee element previous fee
fee with effect 
from january 
2015
basic nonexecutive  
director fee
£61900 with effect 
from january 2014
£63800
additional fee for holding  
the chairmanship of the 
remuneration committee
£10000 with effect 
from the 2014 agm
£10000
additional fee for holding  
the chairmanship of the  
audit committee
£10000 with effect 
from the 2014 agm
£10000
additional fee for holding  
the chairmanship of the 
nomination committee
£2500 with effect 
from the 2014 agm
£2500
additional fee for holding  
the position of senior  
nonexecutive director
£5000 with effect 
from the 2014 agm
£5000
consideration by the directors of matters relating to  
directors’ remuneration
the responsibilities of the remuneration committee
the remuneration committee is responsible for
• considering and making recommendations to the board on the 
framework for the remuneration of the company’s executive 
directors the company secretary and other senior employees
• ensuring that the executive directors and senior employees are 
provided with appropriate annual incentives to encourage 
enhanced performance and that they are rewarded for their 
individual contributions to the success of the company noting 
any major changes in employee benefit structures throughout  
the group and ensuring that executive director remuneration 
practice is consistent with any such changes 
• approving the structure of and determining targets for any 
longterm incentive plans operated by the company and
• reviewing on an annual basis remuneration trends across  
the group and obtaining reliable and uptodate information 
about the remuneration of directors and senior employees  
in other companies
full details can be found in the terms of reference available in  
the investor section of our website at wwwmelroseplcnet
fees for nonexecutive directors are determined by the  
executive directors 
87
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report 
continued
the members of the remuneration committee
the members of the remuneration committee during the year 
were perry crosthwaite committee chairman from 1 january 2014 
until the close of the 2014 agm on 13 may 2014 justin dowley 
committee chairman with effect from 13 may 2014 john grant 
and liz hewitt miles templeman was a member of the 
remuneration committee from 1 january 2014 until his retirement 
from the board following the conclusion of the 2014 agm on 13 
may 2014 the company regards all members of the remuneration 
committee as independent nonexecutive directors the 
composition of the remuneration committee is therefore in 
accordance with the uk corporate governance code during  
the year the remuneration committee met three times 
advisers to the remuneration committee
during the year the remuneration committee received advice  
on the remuneration reporting regulations and preparation of the 
directors’ remuneration report from deloitte llp  deloitte llp  
was appointed by the company secretary on behalf of the 
remuneration committee deloitte llp’s fees for this advice  
were £12500 which were charged on a timecost basis deloitte 
llp is external auditor to the company and provides certain  
other services as described on page 74 of the annual report  
and financial statements 
the remuneration committee is satisfied that the advice provided by 
deloitte llp in relation to the remuneration reporting regulations and 
the directors’ remuneration report is objective and independent
statement of voting at general meeting
the company remains committed to ongoing shareholder 
dialogue and takes an active interest in voting outcomes the 
following table sets out actual voting in respect of the resolution  
to approve the directors’ remuneration report at the company’s 
annual general meeting on 13 may 2014
votes for the 
resolution
percentage of  
votes cast for the 
resolution
votes against the 
resolution
percentage of votes 
cast against the 
resolution total votes cast votes withheld
resolution to approve the directors’ 
remuneration report for the year 
ended 31 december 2013
678912088 9578 29894346 422 708806434 25276317
resolution to approve the directors’ 
remuneration policy
528635478 7739 154418839 2261 683054317 51028433
the remuneration committee noted the strong support given by shareholders to the directors’ remuneration report taking into 
account the level of votes cast against the directors’ remuneration policy the remuneration committee will consider the comments 
given by shareholders in relation to the company’s longterm incentive structure prior to the introduction of a new scheme in 2017 
members of the remuneration committee are engaged in an ongoing dialogue with investors in order to understand more fully their 
views on melrose’s approach to executive remuneration
directors’ remuneration policy
this part of the report sets out the company’s directors’ remuneration policy which was approved by shareholders at the 2014 annual 
general meeting and took binding effect from the conclusion of that meeting save that 1 the illustrations of the application of the 
remuneration policy included in the directors’ remuneration report for the year ended 31 december 2013 have not been repeated in this 
year’s report because in accordance with the reporting regulations they illustrated the application of the remuneration policy in the first 
year to which the remuneration policy applied 2014 and we have included an alternative illustration of the potential ltip value on pages 
81 to 82 and 2 to provide consistency with the remainder of this report cross references have been updated where necessary 
executive directors
component of 
remuneration
purpose and link  
to strategy operation opportunity performance metrics
base salary core element  
of fixed 
remuneration 
reflecting the  
size and scope  
of the role 
purpose is to 
attract and retain 
directors of the 
calibre required 
for the business 
normally reviewed annually and 
usually fixed for 12 months from  
1 january although salaries may 
be reviewed more frequently or  
at different times of the year if  
the remuneration committee 
determines this is appropriate
salary is paid in cash and levels are 
determined by the remuneration 
committee taking into account a 
range of factors including
• role experience and performance 
• prevailing market conditions 
• external benchmarks for similar roles 
at comparable companies and
• salary increases awarded for other 
employees in the group
to avoid setting expectations of 
executive directors and other 
employees no maximum has been 
set under the remuneration policy 
increases may be made to salary 
levels in certain circumstances as 
required for example to reflect
• increase in scope of role or 
responsibility and
• performance in role
salary increases will take into 
account the average increase 
awarded to other employees  
in the worldwide group 
not applicable although the 
individual’s contribution and overall 
performance is one of the 
considerations in determining  
the level of any salary increase 
88
 melrose industries plc
annual report 2014
governance executive directors
component of 
remuneration
purpose and link  
to strategy operation opportunity performance metrics
annual bonus rewards 
performance 
against annual 
targets which 
support the 
strategic 
direction of  
the company 
financial targets are set annually 
and payout is determined by the 
remuneration committee after the 
yearend based on performance 
against those targets the 
remuneration committee has 
discretion to vary the bonus 
payout upwards or downwards 
should any formulaic output not 
produce a fair result for either the 
individual executive director or the 
company taking account of 
overall business performance
the treatment of a “leaver’s”  
bonus participation is described 
on page 94 
for executive directors 
participating in the company’s 
2012 incentive plan the maximum 
annual bonus opportunity is 100 
of base salary 
the remuneration committee  
will have regard to various 
performance metrics which will be 
determined by the remuneration 
committee measured over the 
relevant financial year when 
determining bonuses 
at least 50 of the award will be 
based on financial measures and 
the balance of the award will be 
determined at the discretion of  
the remuneration committee
financial metrics
the element of the bonus subject 
to a financial metric will be 
determined between 0 and 
100 for performance between 
“threshold” performance the 
minimum level of performance that 
results in any level of payout and 
“maximum” performance 
discretionary element
the discretionary element of  
an award will be determined to  
the extent assessed by the 
remuneration committee between 
0 and 100 based on the 
remuneration committee’s 
assessment of a range of financial 
and nonfinancial metrics 
benefits ensures the 
overall package 
is competitive 
purpose is to 
recruit and retain 
directors of the 
calibre required 
for the business
executive directors receive 
benefits in line with market 
practice and these include a 
company car allowance fuel 
allowance private medical 
insurance life insurance and 
group income protection 
other benefits may be provided 
based on individual circumstances 
such benefits may include but are 
not limited to travel costs to and 
from london and accommodation 
in london for executive directors 
who are not based in london but 
who are required to work there 
and relocation allowances 
whilst the remuneration committee 
has not set an absolute maximum 
on the level of benefits executive 
directors may receive the value of 
benefits is set at a level which the 
remuneration committee considers 
appropriate against the market and 
to support the ongoing strategy of 
the company 
not applicable
89
 melrose industries plc
annual report 2014
governance
governance executive directors
component of 
remuneration
purpose and link  
to strategy operation opportunity performance metrics
2012 incentive 
plan
incentivises 
executive 
directors over 
the longer term 
and aligns their 
interests with 
those of 
shareholders by 
linking the level 
of reward to the 
value delivered 
to shareholders
this plan was 
approved by a 
special resolution 
of shareholders 
on 11 april 2012 
and has been 
unchanged 
since 
options are granted over a 
separate class of shares known as 
the “2012 incentive shares” the 
options have an exercise price per 
share equal to the nominal value  
of a 2012 incentive share the 
rights attaching to the 2012 
incentive shares are set out in the 
company’s articles of association 
options may be exercised at any 
time up to 31 may 2017 the 
“trigger date” and will be 
automatically exercised prior to  
the trigger date if not already 
exercised in the event of a change 
of control or winding up of the 
company the trigger date may  
be a date before 31 may 2017 
on the trigger date the holders of 
the 2012 incentive shares shall be 
entitled to 75 of the increase in 
value of the company from and 
including 22 march 2012 to the 
trigger date this value may be 
delivered in the form of a dividend 
andor the conversion of the  
2012 incentive shares into an 
appropriate number of ordinary 
shares or in certain other ways 
permitted under the company’s 
articles of association
the calculation of the growth in 
value of the company shall be 
determined in accordance with  
the formula set out in the 
company’s articles of association
the treatment of an executive 
director’s participation in the 2012 
incentive plan if he becomes a 
“leaver” is described on page 94 
the value that may be delivered 
under the 2012 incentive plan is 
linked to the shareholder value 
created over the period from  
and including 22 march 2012 to 
crystallisation accordingly it is  
not possible to express the 
maximum opportunity as a  
multiple of salary options may  
be granted over in aggregate 
50000 2012 incentive shares 
the options held by the executive 
directors over 2012 incentive 
shares as at 31 december 2014 
are set out on page 85
the maximum aggregate value 
that may be realised under the 
2012 incentive shares shall be 
75 of the increase in shareholder 
value from and including 22 march 
2012 to and including the trigger 
date as determined in accordance 
with the company’s articles  
of association 
the maximum number of new 
ordinary shares in the company 
that may be issued is 5 of the 
aggregate number of ordinary 
shares in melrose plc in issue  
on 22 march 2012 plus 5 of any 
additional ordinary shares issued 
or created by melrose plc after 
that date and prior to 27 november 
2012 or by the company after 27 
november 2012 
the value that may be delivered 
under the 2012 incentive plan will 
be determined by reference to the 
growth in value of the company 
from and including 22 march 2012 
to and including the trigger date 
calculated in accordance with the 
company’s articles of association
retirement 
benefits
purpose is to 
recruit and retain 
directors of the 
calibre required 
for the business 
provides market 
competitive 
postemployment 
benefits or cash 
equivalent 
directors may elect to receive  
a company contribution to an 
individual defined contribution 
pension arrangement or a 
supplement to base salary in  
lieu of a pension arrangement
for participants in the 2012 
incentive plan 15 of base salary
not applicable 
although neither clawback nor malus applies to any element of the remuneration package the company’s articles of association give 
the remuneration committee discretion to adjust the calculation of the amount to which holders of 2012 incentive shares and of 
options over such shares shall be entitled in certain circumstances as referred to on page 94
1 
directors’ remuneration report 
continued
1 further information on the remuneration committee’s approach to malus and clawback is set out on page 80 
90
 melrose industries plc
annual report 2014
governance nonexecutive directors
component of 
remuneration
purpose and link  
to strategy operation opportunity performance metrics
nonexecutive 
director fees
set at a level that 
reflects market 
conditions and  
is sufficient to 
attract individuals 
with appropriate 
knowledge and 
expertise 
fees are reviewed periodically  
and amended to reflect market 
positioning and any change in 
responsibilities fees for  
nonexecutive directors are 
determined by the executive 
directors 
fees are based on the level of fees 
paid to nonexecutive directors 
serving on boards of similarsized 
uklisted companies and the  
time commitment and contribution 
expected for the role
nonexecutive directors receive  
a basic fee and a further fee for  
the chairmanship of a board 
committee or for holding the office 
of senior nonexecutive director
nonexecutive directors may be 
eligible to benefits such as use of 
secretarial support reimbursement 
of travel costs and other benefits 
that may be appropriate 
not applicable 
explanation of performance metrics chosen
performance measures are chosen which are aligned to the company’s strategy 
annual bonus
stretching performance targets are set each year for the annual bonus to reflect the key financial and strategic objectives of the 
company and reward for delivery against these targets when setting the targets the remuneration committee will take into account  
a number of different reference points including its plans and strategy and the market environment
2012 incentive plan
value delivered under the 2012 incentive plan is determined by reference to the growth in the value of the company such that the 
performance metric is the level of such growth that is delivered to shareholders this arrangement was considered appropriate by  
the remuneration committee which considers that the previous and similar incentive shares arrangements introduced in 2009  
and which crystallised in 2012 have been very effective in incentivising management to deliver real value to shareholders over the 
applicable performance period
the company’s articles of association provide that the remuneration committee may make adjustments to the calculation of the 
amount to which the holders of the 2012 incentive shares shall be entitled in certain circumstances these circumstances include  
but are not limited to the company’s articles of association or a change in the capital structure of the company otherwise producing  
an anomalous result any such adjustment shall be such as the remuneration committee considers fair and reasonable and as an 
investment bank shall have confirmed is fair and reasonable so far as the ordinary shareholders are concerned 
differences between the company’s policy on directors’ remuneration and its policy on remuneration for other employees
remuneration arrangements throughout the group are determined based on the same principle that reward should be sufficient as  
is necessary to attract and retain high calibre talent without paying more than is necessary and should be achieved for delivery of the 
company’s strategy
the company has operations in various countries and across various industries with group employees of differing levels of seniority 
accordingly though based on the overarching principle above reward policies vary to take account of these factors 
on the introduction of the 2012 incentive plan the remuneration committee considered it appropriate to recognise the required growth 
of the senior management team beyond the executive directors necessary to further develop the business and participation includes 
certain nondirector employees
the company has also implemented divisional longterm incentive plans for senior managers of certain businesses within the group  
to incentivise them to create value for the company and its shareholders
91
 melrose industries plc
annual report 2014
governance
governance directors’ remuneration report 
continued
recruitment remuneration policy
when agreeing a remuneration package for the appointment of a new executive director the remuneration committee will apply the 
following principles
• the package will be sufficient to attract the calibre of director required to deliver the company’s strategy 
• the remuneration committee will seek to ensure that no more is paid than is necessary and
• in the next annual report on remuneration after an appointment the remuneration committee will explain to shareholders the rationale 
for the arrangements implemented 
in addition to the policy elements set out in the table on pages 88 to 91 the remuneration committee retains discretion to make 
appropriate remuneration decisions outside the standard policy to meet the individual circumstances of the recruitment including 
discretion to include any other remuneration component or award the remuneration committee does not intend to use this discretion 
to make a nonperformance related incentive payment for example a “golden hello” in this regard elements that the remuneration 
committee may consider for the purposes of a remuneration package for the recruitment of a new executive director include but are 
not limited to the following 
element approach
incentive remuneration 
opportunity
the remuneration committee’s intention is that a new executive director’s incentive remuneration opportunity will 
consist of
• an annual bonus up to a maximum of 100 of salary ie as applies for existing executive directors and
• an award of options over 2012 incentive shares with the number of such shares awarded being equal to 
the number of such shares over which an existing executive director was granted an option in april 2012  
as reduced to take into account the proportion of the 2012 incentive plan’s life that has elapsed at the time 
of the new executive director’s appointment 
the remuneration committee’s intention is that a new executive director would only participate in the 2012 incentive 
plan on this basis if heshe had a similar level of experience and responsibility as the existing executive directors 
if a new executive director did not participate in the 2012 incentive plan the remuneration committee may award  
a maximum annual bonus opportunity of up to 300 of salary until such time as a new longterm incentive 
arrangement is put in place for the executive directors in which that new executive director could participate 
compensation for forfeited 
remuneration arrangements
whilst considered unlikely the remuneration committee may make awards on hiring an external candidate to buy out 
remuneration arrangements forfeited on leaving a previous employer in doing so the remuneration committee will 
have regard to relevant factors including any performance conditions attached to such arrangements the form of 
those awards eg cash or shares and the timeframe of such awards while such awards are excluded from the 
maximum level of variable remuneration referred to below the remuneration committee’s intention is that the value 
awarded as determined by the remuneration committee on a fair and reasonable basis would be no higher than  
the expected value of the forfeited arrangements where considered appropriate buyout awards will be subject to 
forfeiture or clawback on early departure 
notice period the notice period will be the same as the company’s ordinary policy of 12 months 
relocation costs where necessary the company will pay appropriate relocation costs the remuneration committee will seek  
to ensure that no more is paid than is necessary 
retirement benefits the maximum contribution of 15 of salary referred to in the policy table on page 90 will apply to any new executive 
director however the remuneration committee reserves the right to pay the contribution into any pension 
arrangement or to pay the amount as a supplement to base salary in lieu of a pension arrangement
92
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annual report 2014
governance under the new reporting regulations the company is required to set out the maximum level of variable remuneration that may be 
granted when agreeing the components of a remuneration package for the appointment of directors excluding any remuneration 
constituting compensation for the forfeiture of any variable remuneration award with a previous employer in order to provide sufficient 
flexibility in recruitment scenarios and to reflect the fact that the value of participation in the 2012 incentive plan depends on 
shareholder value created and so cannot be expressed as a multiple of salary the remuneration committee has set this level as 
maximum variable remuneration of
• if the director participates in the 2012 incentive plan
•  one times salary plus
• an award of options over a number of 2012 incentive shares equal to the number of such shares over which an existing executive 
director was granted an option in april 2012 as reduced to take into account the proportion of the 2012 incentive plan’s life that  
has elapsed at the time of the new executive director’s appointment and
• if the director does not participate in the 2012 incentive plan three times salary
while longterm incentive awards and “buy out” awards may be granted under the 2012 incentive plan if necessary and subject  
where relevant to the limits referred to above awards may be granted outside this plan as permitted under the listing rules which 
allow for the grant of awards to facilitate in unusual circumstances the recruitment of a director 
where a position is filled internally any ongoing remuneration obligations or outstanding variable pay elements shall be allowed to 
continue according to their subsisting terms 
the remuneration package for a newly appointed nonexecutive director would normally be in line with the structure set out in the policy 
table for nonexecutive directors 
service contracts and policy on payment for loss of office
the company’s policy is for executive directors to be employed on the terms of service agreements which may be terminated by either 
the director or the company on the giving of not less than 12 months’ written notice subject to certain exceptions 
each of the executive directors had entered into a service agreement with melrose plc which was novated on exactly the same terms 
to the company with effect from 27 november 2012 when the company became the new parent company of the group details of the 
executive directors’ original appointment dates and notice periods are set out below 
executive directors
date of original appointment as an 
executive director of melrose plc
date of appointment as an  
executive director of the company notice period
christopher miller 29 may 2003
1
8 october 2012 12 months
david roper 29 may 2003
1
8 october 2012 12 months
simon peckham 29 may 2003 8 october 2012 12 months
geoffrey martin 7 july 2005 8 october 2012 12 months
1 both christopher miller and david roper resigned as directors of melrose plc on 27 november 2012
each of the nonexecutive directors other than liz hewitt entered into new letters of appointment with the company with effect from  
8 october 2012 liz hewitt entered into a letter of appointment with the company with effect from 8 october 2013 details of the 
nonexecutive directors’ appointment dates and duration are shown below 
nonexecutive directors
date of original appointment as a  
nonexecutive director of melrose plc
date of appointment as a  
nonexecutive director of the company end of appointment period
miles templeman 8 october 2003 8 october 2012 conclusion of the 2015 agm 
unless extended or renewed
1
perry crosthwaite 26 july 2005 8 october 2012 conclusion of the 2015 agm 
unless extended or renewed
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
liz hewitt na 8 october 2013 conclusion of the 2016 agm 
unless extended or renewed
2
1 miles templeman retired at the conclusion of the 2014 agm
2 assuming reelection at the 2015 agm
93
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annual report 2014
governance
governance directors’ remuneration report 
continued
the principles on which the determination of payments for loss of office will be approached are summarised below
provision treatment upon loss of office
payment in lieu of notice if the company terminates an executive director’s employment with immediate effect a payment in lieu of notice may 
be made this may include base salary pension contributions and benefits
annual bonus this will be at the discretion of the remuneration committee on an individual basis and the decision whether or not 
to award a bonus in full or in part will be dependent upon a number of factors including the circumstances of the 
executive director’s departure and their contribution to the business during the bonus period in question typically 
bonus amounts will be prorated for time in service to termination
2012 incentive plan if an executive director holding 2012 incentive shares ceases employment in circumstances in which he is a “good 
leaver” the remuneration committee may other than if he is a good leaver as a result of his resignation in connection 
with a change of control of the company require that he transfer some or all of the “unvested proportion” of his  
2012 incentive shares for their nominal value an executive director who is a good leaver will be entitled to retain  
any 2012 incentive shares which he is not required to transfer for these purposes the “unvested proportion” shall  
be the proportion of his 2012 incentive shares equal to the unexpired proportion of the period from 11 april 2012  
to 31 may 2017 calculated on a full month basis 
if an executive director holding an option over 2012 incentive shares ceases employment in circumstances in which 
he is a “good leaver” at the discretion of the remuneration committee some or all of his unexercised options shall 
lapse the number of options which shall lapse shall not exceed the number equal to the “unvested portion” of the 
executive director’s 2012 incentive shares had the executive director’s options been exercised immediately before 
the executive director became a good leaver the executive director will be entitled to retain any options which do 
not lapse 
for these purposes an executive director shall be a “good leaver” if he leaves because of death permanent ill health 
permanent disability resignation in connection with a change of control or termination by the company without cause 
other payments the remuneration committee reserves the right to make additional exit payments where such payments are made in 
good faith in discharge of an existing legal obligation or by way of damages for breach of such an obligation or by way 
of settlement or compromise of any claim arising in connection with the termination of a director’s office or employment 
in appropriate circumstances payments may also be made in respect of legal fees
the overall amount of any payment made in respect of a loss of office will not exceed the aggregate of any payment 
in lieu of notice and any payment made in respect of annual bonus as referred to above entitlements under the 2012 
incentive plan will be dealt with in accordance with the terms of that plan and were the company to make an award 
on recruitment of an executive director to buy out remuneration arrangements forfeited on leaving a previous 
employer then the leaver provisions for that award would be determined at the time of grant 
on a change of control or windingup of the company the 2012 incentive shares will crystallise early in the event of a change of 
control the date of the change of control shall be the “trigger date” for the purposes of determining the number of ordinary shares  
into which the 2012 incentive shares shall convert or the dividend amount to be paid in the event of a winding up the 2012 incentive 
shares shall be treated as if they had converted into ordinary shares immediately prior to the windingup and the holders of the 2012 
incentive shares shall be entitled to a sum equal to the amount to which they would have been entitled on a return of capital on a 
windingup if they had held those ordinary shares 
statement of consideration of employment conditions elsewhere in the company
salary benefits and performance related reward provided to employees is taken into account when setting policy for executive 
directors’ remuneration there is no consultation with employees on director remuneration 
statement of consideration of shareholder views
the company is committed to ongoing engagement and seeks the views of major shareholders in advance of amending its 
remuneration policies the policies are set to reflect the company’s commercial strategy and the 2012 incentive plan was approved  
by a special resolution of shareholders in 2012
94
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annual report 2014
governance payments outside the policy in this report
the remuneration committee retains discretion to make any 
remuneration payments and payments for loss of office outside 
the policy in this report
• where the terms of the payment were agreed before the policy 
came into effect
• where the terms of the payment were agreed at a time when the 
relevant individual was not a director of the company and in the 
opinion of the remuneration committee the payment was not  
in consideration of the individual becoming a director of the 
company or
• to satisfy contractual commitments under legacy remuneration 
arrangements
for these purposes “payments” includes the satisfaction of 
awards of variable remuneration and in relation to an award over 
shares the terms of the payment are “agreed” at the time the 
award is granted 
this report was approved by the board on 4 march 2015 and 
signed on its behalf by
justin dowley
chairman remuneration committee 
4 march 2015
95
 melrose industries plc
annual report 2014
governance
governance statement of directors’ 
responsibilities
the directors are responsible for preparing the annual report  
and financial statements in accordance with applicable law 
and regulations
company law requires the directors to prepare financial 
statements for each financial year under that law the directors  
are required to prepare the group financial statements in 
accordance with international financial reporting standards 
ifrss as adopted by the european union and article 4 of the  
ias regulation and have elected to prepare the parent company 
financial statements in accordance with united kingdom 
generally accepted accounting practice united kingdom 
accounting standards and applicable law under company  
law the directors must not approve the financial statements 
unless they are satisfied that they give a true and fair view of  
the state of affairs of the company and of the profit or loss  
of the company for that period 
in preparing the parent company financial statements the 
directors are required to
• select suitable accounting policies and then apply them 
consistently
•  make judgements and accounting estimates that are reasonable 
and prudent
• state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the financial statements and
• prepare the financial statements on the going concern basis 
unless it is inappropriate to presume that the company will 
continue in business
in preparing the group financial statements international 
accounting standard 1 requires that directors
• properly select and apply accounting policies
• present information including accounting policies in a  
manner that provides relevant reliable comparable and 
understandable information 
• provide additional disclosures when compliance with the  
specific requirements in ifrss are insufficient to enable users  
to understand the impact of particular transactions other events 
and conditions on the entity’s financial position and financial 
performance and
• make an assessment of the company’s ability to continue  
as a going concern
the directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time 
the financial position of the company and enable them to ensure 
that the financial statements comply with the companies act 
2006 they are also responsible for safeguarding the assets  
of the company and hence for taking reasonable steps for  
the prevention and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity  
of the corporate and financial information included on the 
company’s website legislation in the united kingdom governing 
the preparation and dissemination of financial statements may 
differ from legislation in other jurisdictions
directors’ responsibility statement 
we confirm that to the best of our knowledge
•  the financial statements prepared in accordance with the 
relevant financial reporting framework give a true and fair  
view of the assets liabilities financial position and profit or  
loss of the company and the undertakings included in the 
consolidation taken as a whole 
•  the strategic report includes a fair review of the development  
and performance of the business and the position of the 
company and the undertakings included in the consolidation 
taken as a whole together with a description of the principal  
risks and uncertainties that they face and
• the annual report and financial statements taken as a  
whole are fair balanced and understandable and provide  
the information necessary for shareholders to assess the 
company’s performance business model and strategy
by order of the board
geoffrey martin                      simon peckham
group finance director         chief executive
4 march 2015                            4 march 2015
96
 melrose industries plc
annual report 2014
governance financial  
contents
consolidated statements
independent auditor’s report 98
consolidated income statement 102
consolidated statement of comprehensive income 103
consolidated statement of cash flows 104
consolidated balance sheet 105
consolidated statement of changes in equity 106
notes to the financial statements
note
1 corporate information 107
2 summary of significant accounting policies 108
3 critical accounting judgements and key sources 
 of estimation uncertainty 116
4 revenue 118
5 segment information 118
6 exceptional costs and income 121
7 revenues and expenses 122
8 tax 124
9 discontinued operations 125
10 dividends 126
11 earnings per share 127
12 goodwill and other intangible assets 128
13 property plant and equipment 132
14 interests in joint ventures 133
15 inventories 133
16 trade and other receivables 134
17 cash and cash equivalents  135
18 trade and other payables  135
19 interestbearing loans and borrowings  136
20 provisions  137
21 deferred tax  138
22 sharebased payments  138
23 retirement benefit obligations  139
24 financial instruments and risk management  143
25 issued capital and reserves  147
26 cash flow statement  148
27 commitments and contingencies  149
28 related parties  150
29 post balance sheet events  150
30 contingent liabilities  150
company statements
company balance sheet for melrose industries plc  151
notes to the company balance sheet
note
1 significant accounting policies  152
2 profit for the period  152
3 investment in subsidiaries  153
4 creditors  154
5 issued share capital  154
6 reserves  154
7 reconciliation of movements in shareholders’ funds  155
8 related party transactions  155
9 post balance sheet events 155
financials
97
 melrose industries plc
annual report 2014
financials opinion on financial statements of melrose industries plc
in our opinion
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 december 2014 
and of the group’s profit for the year then ended
• the group financial statements have been properly prepared in accordance with international financial reporting standards ifrss  
as adopted by the european union
• the parent company financial statements have been properly prepared in accordance with united kingdom generally accepted 
accounting practice and
• the financial statements have been prepared in accordance with the requirements of the companies act 2006 and as regards the 
group financial statements article 4 of the ias regulation
the financial statements comprise the consolidated income statement the consolidated statement of comprehensive income the 
consolidated and the company balance sheets the consolidated statement of cash flows the consolidated statement of changes in 
equity the related notes 1 to 30 to the consolidated financial statements and the related notes 1 to 9 to the company financial statements 
the financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and ifrss as 
adopted by the european union the financial reporting framework that has been applied in the preparation of the parent company financial 
statements is applicable law and united kingdom accounting standards united kingdom generally accepted accounting practice
going concern
as required by the listing rules we have reviewed the directors’ statement on page 49 that the group is a going concern we confirm that
• we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is 
appropriate and
• we have not identified any material uncertainties that may cast significant doubt on the group’s ability to continue as a going concern
however because not all future events or conditions can be predicted this statement is not a guarantee as to the group’s ability to 
continue as a going concern
our assessment of risks of material misstatement
the assessed risks of material misstatement described below which are the same risks identified in the prior year are those that had the 
greatest effect on our audit strategy the allocation of resources in the audit and directing the efforts of the engagement team
risk how the scope of our audit responded to the risk
provisions
legal environmental restructuring property and warranty 
provisions as at 31 december 2014 totalled £1770 million the 
recognition and valuation of the expected outcome of these 
provisions requires the exercise of management judgement  
and the use of estimates giving rise to inherent subjectivity  
in the amounts recorded in the financial statements
note 3 includes this as one of the significant accounting 
judgements and key sources of estimation uncertainty  
and note 20 includes further details on the provisions
we challenged the assumptions underlying the recognition and valuation of 
provisions through checking and verifying the inputs used to calculate the 
provisions including review of the nature and timings of formal restructuring 
plans review of third party correspondence discussion with the group’s 
lawyers applicability of relevant laws and regulations and review of agreements 
further we assessed the level of historical warranty claims and obtained the 
specific warranty terms and conditions provided in order to ascertain whether 
the warranty provisions held were sufficient to cover all obligations in existence at 
the yearend in light of known claims and standard warranty periods provided
exceptional items
the presentation and consistency of costs and income within 
exceptional items is a key determinant in the assessment of the 
quality of the group’s underlying earnings the exceptional 
operating costs and exceptional operating income for the year 
ended 31 december 2014 are £343 million and £54 million 
respectively and are therefore significant to the statutory net  
profit for the year
note 2 includes the group’s accounting policy for exceptional 
items and note 6 include further details on the exceptional items
a sample of exceptional items including all material items has been agreed  
to source documentation and evaluated by the component and group audit 
teams as to their nature in order to assess whether they are in line with the 
group’s accounting policy and also to assess consistency of management’s 
application of the policy with previous accounting periods in particular we 
evaluated the reversal of any items originally booked as exceptional and 
confirmed that the reversal of any fair value items recorded on acquisition  
is appropriately classified as exceptional items
we also assessed whether the disclosures within the financial statements 
provide sufficient detail for the reader to understand the nature of these items
independent auditor’s report to the 
members of melrose industries plc 
98
 melrose industries plc
annual report 2014
financials risk how the scope of our audit responded to the risk
goodwill and intangibles
the carrying value of goodwill and intangible assets as at  
31 december 2014 is £24053 million the assumptions include 
future projected cash flows the perpetual growth rate and the 
appropriate discount rate
this is included in note 3 as one of the significant accounting 
judgements and key sources of estimation uncertainty and  
note 12 includes more details on goodwill and intangibles
we assessed the assumptions used in the impairment model for goodwill  
and intangible assets specifically including the cash flow projections  
discount rates perpetuity growth rates and the sensitivities applied
our procedures included reviewing forecast cash flows with reference to 
historical trading performance consulting with our valuation specialists and 
benchmarking assumptions such as the perpetual growth rate and discount 
rate to external macroeconomic and market data having ascertained the 
extent of change in those assumptions that either individually or collectively 
would be required for the assets to be impaired by performing sensitivity 
analysis on the key assumptions we considered the likelihood of such a 
movement in those assumptions arising
recognition of deferred tax assets and  
accounting for uncertain tax positions
recognition of deferred tax assets is based on management’s 
judgements of the availability of future taxable profits
in addition the value of the tax provisions recorded in respect  
of a number of uncertain tax positions requires judgements in  
respect of the likely outcome of negotiations with and enquiries 
from various tax authorities 
accordingly tax provisioning is included in note 3 as one of  
the significant accounting judgements and key sources of 
estimation uncertainty and note 21 includes details of the  
deferred tax assets recognised
we tested the appropriateness of the assumptions and estimates in relation to 
the likelihood of generating future taxable profits to support the recognition of 
deferred tax assets we considered those assumptions including the expected 
timing of business disposals and supporting forecasts and estimates as well 
as the appropriateness of the tax disclosures
we worked with our tax audit specialists in relation to the recognition of 
deferred tax assets and to appraise the likely outcome of technical tax 
treatments including the review of correspondence with the revenue 
authorities to assess the reasonableness of the provisions made 
the description of risks above should be read in conjunction with the significant issues considered by the audit committee discussed on 
page 73
our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole and not  
to express an opinion on individual accounts or disclosures our opinion on the financial statements is not modified with respect to any  
of the risks described above and we do not express an opinion on these individual matters
our application of materiality
we define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions  
of a reasonably knowledgeable person would be changed or influenced we use materiality both in planning the scope of our audit work 
and in evaluating the results of our work
we determined materiality for the group to be £11 million 2013 £13 million which is 52 2013 57 of headline profit before tax and 
below 1 of equity we use headline profit before tax to provide a stable basis for materiality that reflects the focus of the users of the 
financial statements this excludes the effect of separately disclosed exceptional items as these can be volatile and the amortisation  
of acquired intangibles as excluding the relatively high amortisation charge given the acquisitive nature of the group provides a more 
comparable measure with similar organisations and is consistent with the profit measure most relevant to analysts and investors
we agreed with the audit committee that we would report to the committee all audit differences in excess of £250000 2013 £250000 
as well as differences below that threshold that in our view warranted reporting on qualitative grounds we also report to the audit 
committee on disclosure matters that we identified when assessing the overall presentation of the financial statements
99
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annual report 2014
financials
financials an overview of the scope of our audit
our group audit was scoped by obtaining an understanding of the group and its environment including groupwide controls and 
assessing the risks of material misstatement at the group level 
the group’s 66 2013 72 locations are organised into the 4 2013 5 continuing divisions described in the business review on pages  
28 to 35 of this annual report our group audit scope focused primarily on audit work at 29 2013 25 locations the difference to last 
year is due to changes in composition of the group
23 of these were subject to a full audit 2013 18 whilst the remaining 6 2013 7 were subject to full scope audit procedures where the 
extent of our testing was based on our assessment of the risks of material misstatement and on the materiality of the group’s business 
operations at those locations the 23 locations subject to full audit represent business units within each of the group’s continuing 
reportable segments and accounted for 64 2013 63 of the continuing group’s revenue 69 2013 70 of the total operating 
segments’ continuing headline operating profit ie before central costs the 6 locations subject to full audit procedures account for 23 
2013 24 of the continuing group’s revenue and 23 2013 21 of the continuing group’s headline operating profit ie before central 
costs full audit or full audit procedures undertaken at the 29 locations or performed centrally by the group audit team accounted for 94 
2013 94 of the group’s net assets the locations subject to full audit or specified audit procedures were selected to provide an 
appropriate basis for undertaking audit work to address the risks of material misstatement identified above 
our audit work and audit procedures at the 29 locations were performed at lower levels of materiality determined by reference to the 
relative scale of the business division concerned and no higher than £52 million 
the senior statutory auditor or other senior members of the group audit team visited 12 of the largest locations for the audit 2013 12 the 
group audit team met with the management teams including managing directors and finance directors of all the continuing businesses 
during the year end audit the senior statutory auditor also held audit close meetings with all of the 4 continuing businesses which cover 
all locations in years when we do not visit a component within our group audit scope we will include the component audit team in our 
team briefing discuss their risk assessment and review documentation of the findings from their work
at the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that 
there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject  
to audit or audit of specified account balances
opinion on other matters prescribed by the companies act 2006
in our opinion
• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the companies act 2006 and
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are 
prepared is consistent with the financial statements
matters on which we are required to report by exception
adequacy of explanations received and accounting records
under the companies act 2006 we are required to report to you if in our opinion
• we have not received all the information and explanations we require for our audit or
• adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been received 
from branches not visited by us or
• the parent company financial statements are not in agreement with the accounting records and returns
we have nothing to report in respect of these matters
directors’ remuneration
under the companies act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been 
made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns we have 
nothing to report arising from these matters
corporate governance statement
under the listing rules we are also required to review the part of the corporate governance statement relating to the company’s 
compliance with ten provisions of the uk corporate governance code we have nothing to report arising from our review
independent auditor’s report to the  
members of melrose industries plc continued
100
 melrose industries plc
annual report 2014
financials our duty to read other information in the annual report
under international standards on auditing uk and ireland we are required to report to you if in our opinion information in the annual 
report is
• materially inconsistent with the information in the audited financial statements or
• apparently materially incorrect based on or materially inconsistent with our knowledge of the group acquired in the course of 
performing our audit or
• otherwise misleading
in particular we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit 
and the directors’ statement that they consider the annual report is fair balanced and understandable and whether the annual report 
appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed  
we confirm that we have not identified any such inconsistencies or misleading statements
respective responsibilities of directors and auditor
as explained more fully in the statement of directors’ responsibilities the directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view our responsibility is to audit and express an opinion on the financial 
statements in accordance with applicable law and international standards on auditing uk and ireland those standards require us to 
comply with the auditing practices board’s ethical standards for auditors we also comply with international standard on quality control 1 
uk and ireland our audit methodology and tools aim to ensure that our quality control procedures are effective understood and applied 
our quality controls and systems include our dedicated professional standards review team and independent partner reviews
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 2006 
our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in 
an auditor’s report and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility to anyone 
other than the company and the company’s members as a body for our audit work for this report or for the opinions we have formed
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance 
that the financial statements are free from material misstatement whether caused by fraud or error this includes an assessment of 
whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently 
applied and adequately disclosed the reasonableness of significant accounting estimates made by the directors and the overall 
presentation of the financial statements in addition we read all the financial and nonfinancial information in the annual report to identify 
material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based 
on or materially inconsistent with the knowledge acquired by us in the course of performing the audit if we become aware of any 
apparent material misstatements or inconsistencies we consider the implications for our report
nigel mercer aca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london uk
4 march 2015
101
 melrose industries plc
annual report 2014
financials
financials consolidated  
income statement
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
continuing operations
revenue 45 13775 14664
cost of sales 8750 9520
gross profit 5025 5144
headline
2
 operating expenses 2597 2772
share of headline
2
 results of joint ventures 14 32 28
intangible asset amortisation 547 571
exceptional operating costs 6 343 193
exceptional operating income 6 54 289
total net operating expenses 7 3401 3219
operating profit 1624 1925
headline
2
 operating profit 5 2460 2400
finance costs 7 482 702
finance income 7 147 217
profit before tax 1289 1440
headline
2
 profit before tax 2125 1915
headline
2
 tax 574 505
exceptional tax
3
 156 89
total tax 8 418 416
profit for the year from continuing operations 871 1024
headline
2
 profit for the year from continuing operations 1551 1410
discontinued operations
profit for the year from discontinued operations 9 1076 4622
profit for the year 1947 5646
attributable to
owners of the parent 1939 5627
noncontrolling interests 08 19
1947 5646
earnings per share
from continuing operations
– basic 11 79 79
– diluted 11 78 78
from continuing and discontinued operations
– basic 11 178 444
– diluted 11 175 437
1 restated to include the results of bridon within discontinued operations note 9
2 before exceptional costs exceptional income and intangible asset amortisation 
3 includes exceptional tax and tax on exceptional items and intangible asset amortisation
102
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annual report 2014
financials consolidated statement  
of comprehensive income
notes
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
profit for the year 1947 5646
items that will not be reclassified subsequently to the income statement
net remeasurement lossgain on retirement benefit obligations 23 355 201
income tax creditcharge relating to items that will not be reclassified 8 87 06
268 195
items that may be reclassified subsequently to the income statement
currency translation on net investments 932 259
currency translation on noncontrolling interests – 03
transfer to income statement from equity of cumulative translation differences
 on disposal of foreign operations 9 76 121
lossesgains on cash flow hedges 119 100
transfer to income statement on cash flow hedges 56 30
income tax credit relating to items that may be reclassified 8 – 06
1071 247
other comprehensive expense after tax 1339 52
total comprehensive income for the year 608 5594
attributable to
owners of the parent 600 5578
noncontrolling interests 08 16
608 5594
103
 melrose industries plc
annual report 2014
financials
financials consolidated statement  
of cash flows
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
net cash from operating activities from continuing operations 26 1114 536
net cash from operating activities from discontinued operations 26 51 824
net cash from operating activities 1165 1360
investing activities
disposal of businesses 9 3748 9504
disposal costs 85 250
net cash disposed 9 146 372
purchase of property plant and equipment 543 385
proceeds from disposal of property plant and equipment 39 62
purchase of computer software and development costs 79 37
dividends received from joint ventures 14 33 27
interest received 147 217
acquisition of businesses and noncontrolling interests 12 976 128
cash acquired on acquisition of businesses 12 15 – 
dividends paid to noncontrolling interests 04 63
net cash from investing activities from continuing operations 2149 8575
net cash used in investing activities from discontinued operations 26 41 202
net cash from investing activities 2108 8373
financing activities
return of capital 5953 –
movement in borrowings 2261 8340
costs of amending borrowing facilities  36 –
dividends paid 10 836 981
net cash used in financing activities from continuing operations 4564 9321
net cash used in financing activities from discontinued operations 26 – – 
net cash used in financing activities 4564 9321
net decreaseincrease in cash and cash equivalents 1291 412
cash and cash equivalents at the beginning of the year 26 2004 1565
effect of foreign exchange rate changes 26 08 27
cash and cash equivalents at the end of the year 1726 705 2004
1 restated to include the cash flows of bridon within discontinued operations note 9
as at 31 december 2014 the group’s net debt was £5013 million 31 december 2013 £1408 million a reconciliation of the movement in 
net debt is shown in note 26 
104
 melrose industries plc
annual report 2014
financials consolidated  
balance sheet
notes
31 december
2014
£m
31 december
2013
£m 
noncurrent assets
goodwill and other intangible assets 12 24053 26120
property plant and equipment 13 1996 2412
interests in joint ventures 14 118 126
deferred tax assets 21 687 703
derivative financial assets 24 12 81
trade and other receivables 16 33 03
26899 29445
current assets
inventories 15 1665 2345
trade and other receivables 16 2575 2928
derivative financial assets 24 39 51
cash and cash equivalents 17 705 2004
4984 7328
total assets 5 31883 36773
current liabilities
trade and other payables 18 3205 3992
interestbearing loans and borrowings 19 09 –
derivative financial liabilities 24 101 72
current tax liabilities 488 436
provisions 20 717 744
4520 5244
net current assets 464 2084
noncurrent liabilities
trade and other payables 18 04 15
interestbearing loans and borrowings 19 5709 3412
derivative financial liabilities 24 02 –
deferred tax liabilities 21 2673 2996
retirement benefit obligations 23 2185 2193
provisions 20 1053 1034
11626 9650
total liabilities 5 16146 14894
net assets 15737 21879
equity 
issued share capital 25 13 13
merger reserve 5953 11906
capital redemption reserve 5953 –
other reserves 7571 7571
hedging reserve 05 58 
translation reserve 1307 299
retained earnings 12675 17753 
equity attributable to owners of the parent 15711 21860 
noncontrolling interests 26 19 
total equity 15737 21879 
the financial statements were approved and authorised for issue by the board of directors on 4 march 2015 and were signed on its behalf by
geoffrey martin     simon peckham 
group finance director   chief executive 
105
 melrose industries plc
annual report 2014
financials
financials consolidated statement 
of changes in equity
issued 
share
 capital
£m
merger 
reserve
£m
capital 
redemption
reserve
£m
other 
reserves
£m
hedging 
reserve
£m
translation
 reserve
£m
retained
 earnings
£m
equity 
attributable 
to owners 
of the 
parent
£m
non
controlling 
interests
£m
total 
equity
£m
at 1 january 2013 13 11906 – 7571 77 80 12995 17346 71 17417 
profit for the year – – – – – – 5627 5627 19 5646
other comprehensive incomeexpense – – – – 135 379 195 49 03 52
total comprehensive incomeexpense – – – – 135 379 5822 5578 16 5594
dividends paid – – – – – – 981 981 63 1044
credit to equity for equitysettled   
 sharebased payments – – – – – – 40 40 – 40
purchase of noncontrolling interests – – – – – – 123 123 05 128
at 31 december 2013 13 11906 – 7571 58 299 17753 21860 19 21879 
profit for the year – – – – – – 1939 1939 08 1947
other comprehensive expense – – – – 63 1008 268 1339 – 1339
total comprehensive expenseincome – – – – 63 1008 1671 600 08 608
return of capital
1
– 5953 5953 – – – 5953 5953 – 5953
dividends paid – – – – – – 836 836 04   840
 credit to equity for equitysettled   
      sharebased payments – – – – – – 40 40 – 40
acquisition of noncontrolling interests – – – – – – – – 03 03
at 31 december 2014 13 5953 5953 7571 05 1307 12675 15711 26 15737
1  on 7 february 2014 following the approval by shareholders of a return of capital of 47 pence per share ‘b’ and ‘c’ shares with a total value of £5953 million were created resulting  
in a corresponding reduction in the merger reserve following the capital return payments these ‘b’ and ‘c’ shares were redeemed and £5953 million was transferred to the  
capital redemption reserve note 25 
106
 melrose industries plc
annual report 2014
financials notes to the 
financial statements
1 corporate information
melrose industries plc “the company” is a company incorporated in the united kingdom under the companies act 2006 the address 
of the registered office is given on the back cover the nature of the group’s operations and its principal activities are set out in note 5 and 
in the business review sections on pages 28 to 35
the consolidated financial statements of the group for the year ended 31 december 2014 were authorised in accordance with a resolution 
of the directors of melrose industries plc on 4 march 2015
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 2013 in these financial statements has been restated to include the results 
and cash flows of bridon within discontinued operations and exclude them from continuing operations bridon was previously disclosed 
within the lifting segment
11 new standards and interpretations affecting amounts presentation or disclosure reported in the current year 
in the current financial year the group has adopted a number of new or revised standards and interpretations none of which significantly 
affected the amounts reported in these financial statements details of the standards and interpretations that were adopted are set out in 
section 12 
12  new standards and interpretations adopted with no significant effect on financial statements
the following new and revised standards and interpretations have been adopted in the current year their adoption has not had  
any significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions  
and arrangements
ifrs 10 consolidated financial statements 
ifrs 11 joint arrangements
ifrs 12 disclosure of interests in other entities 
ias 27 revised separate financial statements 
ias 28 revised investments in associates and joint ventures 2011 
amendments to ias 32 offsetting financial assets and financial liabilities
amendments to ias 39 novation of derivatives and continuation of hedge accounting
amendments to ifrs 10 ifrs 12 and ias 27 investment entities
13  new standards and interpretations in issue but not yet effective
at the date of authorisation of these financial statements the following standards and interpretations are in issue but not yet effective  
and in some cases have not been adopted by the eu
ifrs 9 financial instruments
amendments to ifrs 11 accounting for acquisitions of interests in joint operations
ifrs 14 regulatory deferral accounts
ifrs 15 revenue from contracts with customers
amendments to ias 16 and ias 38 clarification of acceptable methods of depreciation and amortisation
amendments to ias 19 defined benefit plans employee contributions
amendments to ias 27 equity method in separate financial statements
amendments to ifrs 10 and ias 28 sale or contribution of assets between an investor and its associate or joint venture
annual improvements to ifrss 2012–14 cycle
the directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the 
group in future periods except that ifrs 9 will impact both the measurement and disclosures of financial instruments and ifrs 15 may 
have an impact on revenue recognition and related disclosures beyond the information above it is not practicable to provide a reasonable 
estimate of the effect of ifrs 9 and ifrs 15 until a detailed review has been completed
107
 melrose industries plc
annual report 2014
financials
financials 2 summary of significant accounting policies
basis of accounting
the consolidated financial statements have been prepared in accordance with international financial reporting standards “ifrss”  
the consolidated financial statements have also been prepared in accordance with ifrss adopted for use in the european union and 
therefore comply with article 4 of the eu ias regulation
the consolidated financial statements have been prepared on an historical cost basis except for the revaluation of certain financial 
instruments which are recognised at fair value at the end of each reporting period historical cost is generally based on the fair value of the 
consideration given in exchange for assets the principal accounting policies adopted are consistent with the prior year and are set out below 
basis of consolidation
the group financial statements include the results of the parent undertaking and all of its subsidiary undertakings the results of 
businesses acquired during the period are included from the effective date of acquisition and for those sold during the period to the 
effective date of disposal where necessary adjustments are made to the financial statements of subsidiaries to bring the accounting 
policies used into line with those used by the group all intragroup balances and transactions including unrealised profits arising from 
intragroup transactions have been eliminated in full
noncontrolling interests in subsidiaries are identified separately from the group’s equity therein the interest of noncontrolling 
shareholders is initially measured at the noncontrolling interests’ proportion of the share of the fair value of the acquiree’s identifiable net 
assets subsequent to acquisition the carrying amount of noncontrolling interests is the amount of those interests at initial recognition 
plus the noncontrolling interests’ share of subsequent changes in equity total comprehensive income is attributed to noncontrolling 
interests even if this results in the noncontrolling interests having a deficit balance
going concern
the directors have at the time of approving the financial statements a reasonable expectation that the company and the group have 
adequate resources to continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis  
of accounting in preparing the financial statements further detail is contained on page 49 of the finance director’s review
business combinations and goodwill
the acquisition of subsidiaries is accounted for using the acquisition method the cost of acquisition is measured at the fair value of assets 
transferred the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the group in exchange 
for control of the acquiree control is achieved where the company has the power to govern the financial and operating policies of an 
investee entity so as to obtain benefits from its activities costs directly attributable to business combinations are recognised as an 
expense in the income statement as incurred 
the acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific 
guidance is provided by ifrss noncurrent assets and directly attributable liabilities that are classified as held for sale in accordance with 
ifrs 5 “noncurrent assets held for sale and discontinued operations” are recognised and measured at fair value less costs to sell also 
deferred tax assets and liabilities are recognised and measured in accordance with ias 12 “income taxes” liabilities and assets related to 
employee benefit arrangements are recognised and measured in accordance with ias 19 revised “employee benefits” and liabilities or 
equity instruments related to the replacement by the group of an acquiree’s sharebased payments awards are measured in accordance 
with ifrs 2 “sharebased payment” any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is 
recognised as goodwill 
if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the 
group reports provisional amounts where appropriate those provisional amounts are adjusted during the measurement period or 
additional assets or liabilities recognised to reflect new information obtained about facts and circumstances that existed as of the 
acquisition date that if known would have affected the amounts recognised at that date
the measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and 
circumstances that existed as of the acquisition date and is subject to a maximum period of one year
goodwill on acquisition is initially measured at cost being the excess of the sum of the consideration transferred the amount of any 
noncontrolling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree over the acquirer’s 
interest in the net fair value of the identifiable assets liabilities and contingent liabilities following initial recognition goodwill is measured  
at cost less any accumulated impairment losses goodwill is reviewed for impairment annually or more frequently if events or changes in 
circumstances indicate that the carrying value may be impaired
if after reassessment the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration 
transferred the amount of any noncontrolling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in 
the acquiree the excess is recognised immediately in profit or loss as a bargain purchase gain
notes to the 
financial statements continued
108
 melrose industries plc
annual report 2014
financials as at the acquisition date any goodwill acquired is allocated to each of the cashgenerating units acquired impairment is determined  
by assessing the recoverable amount of the cashgenerating unit to which goodwill relates where the recoverable amount of the cash
generating unit is less than the carrying amount an impairment loss is recognised in the income statement and is not subsequently 
reversed when there is a disposal of a cashgenerating unit goodwill relating to the operation disposed of is taken into account in 
determining the gain or loss on disposal of that operation the amount of goodwill allocated to a partial disposal is measured on the  
basis of the relative values of the operation disposed of and the operation retained
joint ventures
a joint venture is an entity which is not a subsidiary undertaking but the interest of the group is that of a partner in a business over which the 
group exercises joint control the results assets and liabilities of joint ventures are accounted for using the equity method of accounting
revenue
revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and 
services provided in the normal course of business net of discounts customs duties and sales related taxes revenue is reduced for 
estimated customer returns rebates and other similar allowances the nature of agreements into which the group enters means that
• the contracts usually contain discrete elements each of which transfers risks and rewards to the customer where such discrete 
elements are present revenue is recognised on each element in accordance with the policy on the sale of goods 
• the service element of the contract is usually insignificant in relation to the total contract value and is often provided on a shortterm or 
oneoff basis where this is the case revenue is recognised when the service is complete
• aftermarket activities generally relate to the provision of spare parts repairs and the rebuild of equipment revenue on the provision of 
parts is recognised in accordance with the policy on the sale of goods and revenue for repairs and rebuild is recognised upon 
completion of the activity
the significant majority of the group’s revenue is recognised on a sale of goods basis 
the specific methods used to recognise the different forms of revenue earned by the group are as follows 
sale of goods
revenue is recognised when all of the following conditions are satisfied
• the group has transferred to the buyer the significant risks and rewards of ownership of the goods
• the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over 
the goods
• the amount of revenue can be measured reliably
• it is probable that the economic benefits associated with the transaction will flow to the group and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably
transfers of risks and rewards vary depending on the nature of the products sold and the individual terms of the contract of sale sales 
made under internationally accepted trade terms are recognised as revenue when the group has completed the primary duties required  
to transfer risks as stipulated in those terms sales made outside such terms are generally recognised on delivery to the customer  
no revenue is recognised where recovery of the consideration is not probable or there are significant uncertainties regarding associated 
costs or the possible return of goods
provision of services
as noted above because revenue from the rendering of services is usually not significant in relation to the total contract value and is 
generally provided on a shortterm or oneoff basis revenue is usually recognised when the service is complete 
construction contracts
as noted above customer contracts usually contain discrete elements separately transferring risks and rewards to the customer  
where such discrete elements are present revenue is recognised on each element in accordance with the policy on the sale of goods 
where such discrete elements are not in place revenue from significant contracts is recognised in proportion to the stage of completion  
of the contract by reference to the specific contract terms and the costs incurred on the contract at the balance sheet date in comparison 
to the total forecast costs of the contract this is normally measured by the proportion that contract costs incurred for work performed  
to date bear to the estimated total contract costs except where this would not be representative of the stage of completion
109
 melrose industries plc
annual report 2014
financials
financials 2 summary of significant accounting policies continued
variations in contract work claims and incentive payments are included in revenue from construction contracts when the amount can  
be measured reliably and its receipt is considered probable variations are included when the customer has agreed to the variation or 
acknowledged liability for the variation in principle claims are included when negotiations with the customer have reached an advanced 
stage such that it is probable that the customer will accept the claim incentive payments are included when a contract is sufficiently 
advanced that it is probable that the performance standards triggering the incentive will be achieved
profit attributable to contract activity is recognised if the final outcome of such contracts can be reliably assessed where this is not the 
case contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recovered when it is probable 
that total contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately
interest income
interest income is recognised when it is probable that the economic benefits will flow to the group and the amount of revenue can be measured 
reliably interest income is accrued on a time basis by reference to the principal outstanding and the effective interest rate applicable
exceptional costsincome
exceptional costsincome are those costsincome of a significant and nonrecurring nature or those associated with significant 
restructuring programmes acquisitions or disposals which warrant separate additional disclosure in the financial statements in order  
to fully understand the underlying performance of the group
headline operating profit
headline operating profit is stated before exceptional operating costs exceptional operating income and intangible asset amortisation 
headline operating profit is considered by the directors to be the best measure of performance 
borrowing costs
borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily 
take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the 
assets are substantially ready for their intended use or sale 
investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted 
from the borrowing costs eligible for capitalisation
all other borrowing costs are recognised in the income statement in the period in which they are incurred
issue costs of loans
the finance cost recognised in the income statement in respect of the issue costs of borrowings is allocated to periods over the terms  
of the instrument using the effective interest rate method
property plant and equipment
property plant and equipment are stated at cost less accumulated depreciation and any impairment in value
the initial cost of an asset comprises its purchase price or construction cost and any costs directly attributable to bring the asset into 
operation the purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to 
acquire the asset 
depreciation is calculated on a straightline basis over the estimated useful life of the asset as follows
freehold land nil 
freehold buildings and long leasehold property over expected economic life not exceeding 50 years
short leasehold property over the term of the lease
plant and equipment 312 years
the estimated useful lives of property plant and equipment are reviewed on an annual basis and if necessary changes in useful lives are 
accounted for prospectively
notes to the 
financial statements continued
110
 melrose industries plc
annual report 2014
financials the carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that 
the carrying value may not be recoverable if any such indication exists an impairment review is performed and where the carrying values 
exceed the estimated recoverable amount the assets are written down to their recoverable amount the recoverable amount of property 
plant and equipment is the greater of net selling price and value in use in assessing value in use the estimated future cash flows are 
discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and  
the risks specific to the asset for an asset that does not generate largely independent cash inflows the recoverable amount is determined 
for the cashgenerating unit to which the asset belongs 
an item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from 
the continued use of the asset any gain or loss arising on derecognition of the asset calculated as the difference between the net disposal 
proceeds or costs and the carrying amount of the item is included in the income statement in the year that the item is derecognised
intangible assets
intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses
on acquisition of businesses separately identifiable intangible assets are initially recorded at their fair value at the acquisition date
access to the use of brands and intellectual property are valued using a “relief from royalty” method which determines the net present 
value of future additional cash flows arising from the use of the intangible asset
customer relationships are valued on the basis of the net present value of the future additional cash flows arising from customer 
relationships with appropriate allowance for attrition of customers
amortisation is calculated on a straightline basis over the estimated useful lives of the asset as follows
customer relationships 20 years or less
brands and intellectual property 20 years or less
computer software 5 years or less
development costs 5 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
intangible assets are tested for impairment annually or more frequently whenever events or changes in circumstances indicate that the 
carrying value may not be recoverable impairment losses are measured on a similar basis to property plant and equipment useful lives 
are also examined on an annual basis and adjustments where applicable are made on a prospective basis
research and development costs
research costs are expensed as incurred
costs relating to clearly defined and identifiable development projects are capitalised when there is a technical degree of exploitation 
adequacy of resources and a potential market or development possibility in the undertaking that are recognisable and where it is the 
intention to produce market or execute the project a correlation must also exist between the costs incurred and future benefits and  
those costs can be measured reliably capitalised costs are expensed on a straightline basis over their useful lives of five years or less 
costs not meeting such criteria are expensed as incurred
inventories
inventories are valued at the lower of cost and net realisable value and measured using a first in first out basis cost includes all direct 
expenditure and appropriate production overhead expenditure incurred in bringing goods to their current state under normal operating 
conditions net realisable value is based on estimated selling price less costs expected to be incurred to completion and disposal 
provisions are made for obsolescence or other expected losses where necessary
trade and other receivables
trade receivables and other receivables are measured and carried at amortised cost using the effective interest method less any 
impairment the carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded in the income 
statement for trade receivables the carrying amount is reduced through the use of an allowance account subsequent recoveries  
of amounts previously written off are credited against the allowance account and changes in the carrying amount of the allowance  
account are recognised in the income statement
111
 melrose industries plc
annual report 2014
financials
financials 2 summary of significant accounting policies continued
trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis objective 
evidence of impairment for a portfolio of receivables could include the group’s past experience of collecting receipts an increase in the 
number of delayed receipts in the portfolio past the average credit period as well as observable changes in national or local economic 
conditions that correlate with default on receivables 
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in hand current balances with banks and similar institutions and short
term 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
other financial liabilities 
other financial liabilities are initially measured at fair value net of transaction costs other financial liabilities are subsequently measured  
at amortised cost using the effective interest method with interest expense recognised on an effective yield basis the effective interest 
method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant periods  
the effective interest rate is the rate that discounts estimated future cash payments throughout the expected life of the financial liability  
or where appropriate a shorter period to the net carrying amount on initial recognition the group derecognises financial liabilities when 
the group’s obligations are discharged cancelled or they expire
derivative financial instruments and hedging
the group uses derivative financial instruments to manage its exposure to interest rate foreign exchange rate and commodity risks arising 
from operating and financing activities the group does not hold or issue derivative financial instruments for trading purposes details of 
derivative financial instruments are disclosed in note 24 of the financial statements
derivative financial instruments are recognised and stated at fair value their fair value is recalculated at each reporting date the 
accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for hedge accounting
where derivatives do not meet the criteria to qualify for hedge accounting any gains or losses on the revaluation to fair value at the period 
end are recognised immediately in the income statement where derivatives do meet the criteria to qualify for hedge accounting 
recognition of any resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged
derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the balance sheet 
hedge accounting
in order to qualify for hedge accounting the group is required to document from inception the relationship between the item being hedged 
and the hedging instrument and to show that the hedge will be highly effective on an ongoing basis this effectiveness testing is performed 
at each period end to ensure that the hedge remains highly effective
notes to the 
financial statements continued
112
 melrose industries plc
annual report 2014
financials hedge accounting is discontinued when the group revokes the hedging relationship the hedge instrument expires or is sold terminated 
exercised or no longer qualifies for hedge accounting 
the group designates certain hedging instruments as either fair value hedges cash flow hedges or hedges of net investments in  
foreign operations
fair value hedge
derivative financial instruments are classified as fair value hedges when they hedge the group’s exposure to changes in the fair value of  
a recognised asset or liability changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in 
the income statement immediately together with any changes in the fair value of the hedged item that is attributable to the hedged risk 
cash flow hedge
derivative financial instruments are classified as cash flow hedges when they hedge the group’s exposure to the variability in cash flows 
that are either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecasted cash flow 
the effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the statement of comprehensive 
income and accumulated in equity the gain or loss relating to the ineffective portion is recognised immediately in the income statement 
amounts previously recognised in the statement of comprehensive income and accumulated in equity are recycled to the income 
statement in the periods when the hedged item is recognised in the income statement or when the forecast transaction is no longer 
expected to occur however when the forecast transaction that is hedged results in the recognition of a nonfinancial asset or a non
financial 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 when the hedge is no longer expected to occur
provisions
provisions are recognised when the group has a present obligation legal or constructive as a result of a past event it is probable that  
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the 
amount of the obligation if the effect of the time value of money is material provisions are determined by discounting the expected future 
cash flows at a rate that reflects the current market assessment of the time value of money and where appropriate the risks specific to  
the liability where discounting is used the increase in the provision due to the passage of time is recognised as a finance cost
restructurings
a restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a valid 
expectation in those affected that it will carry out the restructuring by either starting to implement the plan or by announcing its main 
features to those affected by it the measurement of a restructuring provision includes only the direct expenditures arising from the 
restructuring which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing 
activities of the entity
warranties
provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the 
relevant products at the directors’ best estimate of the expenditure required to settle the group’s obligation
onerous contracts
present obligations arising under onerous contracts are recognised and measured as provisions an onerous contract is considered  
to exist where the group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the 
economic benefits expected to be received under it
 
environmental liabilities
liabilities for environmental costs are recognised when environmental assessments or cleanups are probable and the associated  
costs can be reasonably estimated generally the timing of these provisions coincides with the commitment to a formal plan of action  
the amount recognised is the best estimate of the expenditure required where the liability will not be settled for a number of years the 
amount recognised is the present value of the estimated future expenditure
113
 melrose industries plc
annual report 2014
financials
financials 2 summary of significant accounting policies continued
employee benefits
wages salaries bonuses social security contributions paid annual leave and sick leave are accrued in the year in which the associated 
services are rendered by employees of the group the accounting policy for pensions and other retirement benefits is described below
the group also operates longterm incentive plans ltips for directors and certain employees the expected settlement costs of these 
plans are expensed on a straightline basis over the life of the plans
pensions and other retirement benefits
the group operates defined benefit pension plans and defined contribution plans some of which require contributions to be made  
to administered funds separate from the group
for the defined benefit pension and retirement benefit plans plan assets are measured at fair value and plan liabilities are measured on  
an actuarial basis and discounted at an interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent 
currency and term to the plan liabilities any assets resulting from this calculation are limited to past service cost plus the present value  
of available refunds and reductions in future contributions to the plan the present value of the defined benefit obligation and the related 
current service cost and past service cost are measured using the projected unit credit method
the service cost of providing pension and other retirement benefits to employees for the period is charged to the income statement
net interest expense on net defined benefit obligations is determined by applying discount rates used to measure defined benefit 
obligations at the beginning of the year to net defined benefit obligations at the beginning of the year net interest expense is recognised 
within finance costs
remeasurement gains and losses comprise actuarial gains and losses the effect of the asset ceiling if applicable and the return on  
plan assets excluding interest remeasurement gains and losses and taxation thereon are recognised in full in the statement of 
comprehensive income in the period in which they occur and are not subsequently recycled
actuarial gains and losses may result from differences between the actuarial assumptions underlying the plan obligations and actual 
experience during the period or changes in the actuarial assumptions used in the valuation of the plan obligations 
for defined contribution plans contributions payable are charged to the income statement as an operating expense when employees 
have rendered services entitling them to the contributions
foreign currencies
the individual financial statements of each group company are presented in the currency of the primary economic environment in which  
it operates its functional currency for the purpose of the consolidated financial statements the results and financial position of each 
group company are expressed in pounds sterling which is the functional currency of the company and the presentation currency for  
the consolidated financial statements
in preparing the financial statements of the individual companies transactions in currencies other than the entity’s functional currency 
foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions at each balance sheet date 
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date 
nonmonetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when 
the fair value was determined nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated
exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in the income 
statement for the period exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in the 
income statement for the period except for differences arising on the retranslation of nonmonetary items in respect of which gains and 
losses are recognised directly in equity for such nonmonetary items any exchange component of that gain or loss is also recognised 
directly in equity
for the purpose of presenting consolidated financial statements the assets and liabilities of the group’s foreign operations are translated  
at exchange rates prevailing on the balance sheet date income and expense items are translated at the average exchange rates for the 
period unless exchange rates fluctuate significantly during that period in which case the exchange rates at the date of transactions are 
used exchange differences arising if any are recognised in the statement of comprehensive income and accumulated in equity 
attributed to noncontrolling interests as appropriate such translation differences are recognised as income or as expenses in the period 
in which the related operation is disposed of any exchange differences that have previously been attributed to noncontrolling interests  
are derecognised but they are not reclassified to the income statement
goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and 
translated at the rate prevailing at the balance sheet date
notes to the 
financial statements continued
114
 melrose industries plc
annual report 2014
financials 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
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
deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities 
and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and 
liabilities on a net basis 
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 payment” 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
115
 melrose industries plc
annual report 2014
financials
financials 2 summary of significant accounting policies continued
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 the application of the group’s accounting policies which are described in note 2 the directors are required to make judgements 
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources  
the estimates and associated assumptions are based on historical experiences and other factors that are considered to be relevant 
actual results may differ from these estimates 
the estimates and underlying assumptions are reviewed on an ongoing basis revisions to accounting estimates are recognised in the 
period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision 
affects both current and future periods 
in applying the group’s accounting policies as set out in note 2 management has made critical accounting judgements regarding the  
fair value of assets acquired and liabilities assumed at acquisition the valuation of intangibles the impairment of noncurrent assets  
the quantification of provisions the valuation of retirement benefit obligations and in respect of taxation 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 eclipse inc “eclipse” management has made judgements regarding the fair value of assets acquired and 
liabilities assumed particularly in relation to provisions and intangible assets the fair value of these assets and liabilities are shown in note 12 
valuation of intangibles 
in accordance with ifrs 3 “business combinations” intangible assets acquired in a business combination are recognised at fair value 
these fair values have been estimated using income based valuation methods these valuation methods estimate the price that an asset 
could be sold for in an arm’s length transaction on the basis of the asset’s expected future income stream these estimates are based 
upon market data in order to reconstruct the measurement process a typical market participant would implement
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 brands and 
intellectual property requires management to estimate future cash flows using a “relief from royalty” model
notes to the 
financial statements continued
116
 melrose industries plc
annual report 2014
financials impairment of noncurrent assets
goodwill and intangible assets are tested for impairment whenever events or circumstances indicate that their carrying amounts might be 
impaired and at least annually such events and circumstances include the effects of restructuring initiated by management 
to determine whether goodwill and intangible assets are impaired requires an estimation of the value in use of the cashgenerating units  
to which goodwill and other intangible assets have been allocated the value in use calculation requires management to estimate the future 
cash flows expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate the net present value such 
calculations require judgement relating to the appropriate discount factors and longterm growth prevalent in a particular market as well as 
short and mediumterm business plans management draw upon experience as well as external resources in making these judgements
the carrying amount of goodwill and other intangible assets not including computer software and development costs at the balance 
sheet date was £23807 million 31 december 2013 £2587 9 million at 31 december 2014 and 2013 the group recognised no 
impairment loss in respect of these assets 
provisions
the quantification of certain liabilities within provisions environmental remediation obligations and future costs and settlements in relation 
to certain legal claims have been estimated using the best information available however such liabilities depend on the actions of third 
parties and on the specific circumstances pertaining to each obligation neither of which is controlled by the group although provisions 
are reviewed on a regular basis and adjusted for management’s best current estimates the judgemental nature of these items means that 
future amounts settled may be different from those provided further details are set out in note 20
retirement benefit obligations
retirement benefits are accounted for under ias 19 revised “employee benefits” for defined benefit plans obligations are measured  
at the discounted present value whilst plan assets are recorded at fair value because of changing market and economic conditions the 
expenses and liabilities actually arising under the plans in the future may differ materially from the estimates made on the basis of these 
actuarial assumptions therefore declining returns on equity markets and markets for fixedincome instruments could necessitate 
additional contributions to the plans in order to cover future pension obligations also higher or lower withdrawal rates or longer or shorter 
life of participants may have an impact on the amount of pension income or expense recorded in the future
the discount rate used to discount retirement benefit obligations to present value is derived from the yields of senior highquality corporate 
bonds at the balance sheet date these generally include aarated securities the discount rate is based on the market yield of a portfolio 
of bonds whose weighted residual maturities approximately correspond to the duration necessary to cover the entire benefit obligation
pension and other retirement benefits are inherently longterm and future experience may differ from the actuarial assumptions used  
to determine the net charge for retirement benefit obligations note 23 to these consolidated financial statements describes the principal 
discount rate earnings increase and pension retirement benefit obligation assumptions that have been used to determine the net charge 
for retirement benefit obligations in accordance with ias 19 revised “employee benefits” the calculation of any charge relating to 
retirement benefit obligations is clearly dependent on the assumptions used which reflects the exercise of judgement the assumptions 
adopted are based on prior experience market conditions and the advice of plan actuaries
at 31 december 2014 the group’s retirement benefit obligation deficit was £2185 million 31 december 2013 £2193 million 
taxation
the group is subject to income tax in most of the jurisdictions in which it operates management is required to exercise judgement in 
determining the group’s provision for income taxes management’s judgement is required in estimating tax provisions where additional 
current tax may become payable in the future following the audit by the tax authorities of previously filed tax returns management’s 
judgement is also required as to whether a deferred tax asset should be recognised based on the availability of future taxable profits  
while the group aims to ensure that the estimates recorded are accurate the actual amounts could be different from those expected
117
 melrose industries plc
annual report 2014
financials
financials 4 revenue
an analysis of the group’s revenue as defined by ias 18 “revenue” is as follows
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
continuing operations
revenue from the sale of goods 12968 13792
revenue recognised on longterm contracts 55 06
revenue from the provision of services 752 866
revenue 5 13775 14664
finance income 7 147 217
total revenue from continuing operations as defined by ias 18 13922 14881
discontinued operations
revenue from the sale of goods 2034 6475
revenue recognised on longterm contracts 03 59
revenue from the provision of services 43 58
revenue 5 9 2080 6592
finance income – 01
total revenue from discontinued operations as defined by ias 18 2080 6593
total revenue as defined by ias 18 16002 21474
1 restated to include the results of bridon within discontinued operations note 9
5 segment information
segment information is presented in accordance with ifrs 8 “operating segments” which requires operating segments to be identified on 
the basis of internal reports about components of the group that are regularly reported to the group’s board in order to allocate resources 
to the segments and assess their performance the group’s reportable operating segments under ifrs 8 are categorised as follows
• energy segment
• elster segments
 – gas
 – electricity
 – water
 – elster central 
the energy segment consists of the brush business a specialist supplier of energy industrial products to the global market  
elster comprises the gas electricity and water segments along with their associated central costs these businesses serve  
residential and industrial metering and utilisation markets whilst providing related communications networking and software solutions
there are two central cost centres which are also separately reported to the board
• central – corporate 
• central – ltips
1 
1
 long term incentive plans
the central corporate cost centre contains the melrose group head office costs the central ltips cost centre contains the costs 
associated with the five year melrose incentive plan granted on 11 april 2012 and the divisional management ltips that are in operation 
across the group
following the disposal of bridon the lifting segment has ceased to exist and the results of this business have been included within 
discontinued operations
the discontinued segment comprises the bridon truth marelli crosby acco and harris businesses in 2013 and bridon in 2014
transfer prices between business units are set on an arm’s length basis in a manner similar to transactions with third parties
notes to the 
financial statements continued
118
 melrose industries plc
annual report 2014
financials 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 2014 and the comparative year note 6 gives details of exceptional costs and income
segment revenues and results
segment revenue from external customers
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
continuing operations
energy 3273 3501
gas 6870 6889
electricity 2157 2475
water 1475 1799
elster total 10502 11163
total continuing operations 4 13775 14664
discontinued operations 4 9 2080 6592
total revenue 15855 21256
1 restated to include the revenues of bridon within discontinued operations note 9
segment result
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
continuing operations
energy headline
2
 operating profit 654 731 
gas 1614 1524 
electricity 228 215 
water 234 230 
elster central 21 27
elster headline
2
 operating profit 2055 1942 
central – corporate 139 143
central – ltips
3
110 130
headline
2
 operating profit 2460 2400 
intangible asset amortisation 547 571
exceptional operating costs 6 343 193
exceptional operating income 6 54 289 
operating profit 1624 1925 
finance costs 7 482 702
finance income 7 147 217 
profit before tax 1289 1440 
tax 8 418 416
profit for the year from discontinued operations 9 1076 4622 
profit for the year 1947 5646 
1 restated to include the results of bridon within discontinued operations note 9
2 as defined on the income statement
3 long term incentive plans
119
 melrose industries plc
annual report 2014
financials
financials 5 segment information continued
total assets total liabilities
31 december
2014
£m
restated
1
31 december
2013
£m
31 december
2014
£m
restated
1
31 december
2013
£m
continuing operations
energy 5025 4977 1363 1465
gas 20548 20387 5061 4703
electricity 3371 3430 1078 1177
water 1837 2016 841 926
elster central 53 63 528 605
elster total 25809 25896 7508 7411
central – corporate 1049 2494 7009 4887
central – ltips
2
– – 266 216
total continuing operations 31883 33367 16146 13979
discontinued operations – 3406 – 915
total 31883 36773 16146 14894
1  restated to include the total assets and total liabilities of bridon within discontinued operations note 9
2 long term incentive plans
capital expenditure
1
depreciation
1
year ended
31 december
2014
£m
restated
2
year ended
31 december
2013
£m
year ended
31 december
2014
£m
restated
2
year ended
31 december
2013
£m 
continuing operations
energy 301 168 63 59
gas 169 141 154 154
electricity 111 69 58 67
water 39 37 33 45
elster central – 03 01 –
elster total 319 250 246 266
central – corporate 02 06 09 07
total continuing operations 622 424 318 332
discontinued operations 41 189 68 152
total 663 613 386 484
1 including computer software and development costs
2 restated to include the capital expenditure1 and depreciation1 of bridon within discontinued operations note 9
geographical information
the group operates in various geographical areas around the world the group’s country of domicile is the uk and the group’s revenues 
and noncurrent assets in europe and north america are also considered to be material
the group’s revenue from external customers and information about its segment assets noncurrent assets excluding interests in joint ventures 
deferred tax assets derivative financial assets and noncurrent trade and other receivables by geographical location are detailed below
notes to the 
financial statements continued
120
 melrose industries plc
annual report 2014
financials revenue
1
 from external customers noncurrent assets
year ended
31 december
2014
£m
restated
2
year ended
31 december
 2013
£m
31 december
2014
£m
restated
2
31 december
 2013
£m
continuing operations
uk 1592 1899 2397 2769
europe 5079 5098 13998 15224
north america 4084 4617 8591 7067
other 3020 3050 1063 1098
total continuing operations 13775 14664 26049 26158
discontinued operations 2080 6592 – 2374
total 15855 21256 26049 28532
1 revenue is presented by destination
2 restated to include the revenue and noncurrent assets of bridon within discontinued operations note 9
6 exceptional costs and income
exceptional costs
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
continuing operations
restructuring costs 306 188
acquisition and disposal costs 37 05
total exceptional costs 343 193
during 2014 the continuing group incurred £306 million 2013 £188 million of costs relating to restructuring programmes which are 
expected to deliver cost savings in the future 
the costs in both years were weighted towards the recently acquired elster businesses notably towards gas in 2014 the most significant 
proportion of restructuring within the gas business relates to the major closure of the essen plant in belgium and relocation of its integrated 
metering solutions business which builds metering stations to saudi arabia and malaysia in addition as a consequence of the closure of 
essen research and development and the production of ultrasonic meters was moved to mainz germany in the year initial restructuring 
costs following the acquisition of eclipse were also incurred in 2014 
the restructuring costs incurred in 2013 were proportionally weighted to the elster electricity and water businesses and whilst 
restructuring costs have been incurred within these businesses in 2014 they are focused on european operations rather than the large 
restructures in the north america businesses incurred in previous years 
the group also incurred £37 million 2013 £05 million of expenses on acquisition and disposal related activities during the year 
exceptional income
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
continuing operations
release of surplus leasehold property cost provision 54 –
release of items previously booked as fair value adjustments – 289
total exceptional income 54 289
during the year a historical onerous lease dispute was successfully resolved for less than expected resulting in the release of £54 million 
from provisions as exceptional income 
during 2013 certain warranty and legal issues inherited with the acquisition of elster were successfully resolved for less than expected 
resulting in the release of £289 million of provisions as exceptional income 
121
 melrose industries plc
annual report 2014
financials
financials 7 revenues and expenses
continuing operations discontinued operations total
net operating expenses comprise
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
selling and distribution costs 1051 1141 283 570 1334 1711
administration expenses 2093 2202 234 618 2327 2820
share of headline
2
 results of joint ventures note 14 32 28 – – 32 28 
other operating costs – exceptional note 6 343 193 18 07 361 200
other operating income – exceptional note 6 54 289 – – 54 289 
total net operating expenses 3401 3219 535 1195 3936 4414
1 restated to include the results of bridon within discontinued operations note 9
2 as defined on the income statement
continuing operations discontinued operations total
operating profit is stated  
after chargingcrediting
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
depreciation and impairment 272 304 67 153 339 457 
cost of inventories 8750 9520 1400 4398 10150 13918 
amortisation of customer relationships brands and 
 intellectual property note 12 547 571 63 138 610 709 
amortisation and impairment of computer software  
 and development costs note 12 73 52 01 03 74 55 
operating lease expense 65 70 41 68 106 138 
staff costs
2
3501 3825 529 889 4030 4714 
research and development costs
2
195 187 01 05 196 192 
profit on disposal of property plant and equipment 02 11 – – 02 11
impairment recognised on trade receivables 16 27 – 06 16 33 
1 restated to include the results of bridon within discontinued operations note 9 
2 staff costs include £336 million 2013 £363 million of research and development related costs in continuing operations
the analysis of auditor’s remuneration is as follows
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
fees payable to the company’s auditor for the audit of the company’s annual accounts 14 14
fees payable to the auditor for the audit of the eclipse acquisition balance sheet 01 –
total fees payable for the audit of the company’s annual accounts 15 14
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 13 14
total audit fees 28 28
auditrelated assurance services
review of the half year interim statement 01 02
nonstatutory audit of certain of the company’s businesses 06 10
total auditrelated assurance services 07 12
total audit and auditrelated assurance services 35 40
taxation compliance services 02 01
other taxation advisory services 05 09
corporate finance services 03 –
other services 01 03
total audit and nonaudit fees 46 53
details of the company’s policy on the use of auditors for nonaudit services and how auditor’s independence and objectivity were 
safeguarded are set out in the audit committee report on pages 74 and 75 no services were provided pursuant to contingent  
fee arrangements
notes to the 
financial statements continued
122
 melrose industries plc
annual report 2014
financials year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
staff costs during the year including executive directors
wages and salaries 2796 2972
social security costs 504 621
pension costs note 23
– defined benefit plans 22 34
– defined contribution plans 69 68
ltips
2
110 130
total continuing staff costs 3501 3825
discontinued staff costs
3
529 889
total staff costs 4030 4714
1 restated to include the results of bridon within discontinued operations note 9 
2 long term incentive plans
3 includes £19 million 2013 £79 million of defined contribution pension costs
year ended
31 december
2014
number
restated
1
year ended
31 december
2013
number 
average monthly number of persons employed including executive directors
energy 2594 2691
gas 3699 3827
electricity 1395 1391
water 985 1104
central – corporate 34 35
total continuing operations 8707 9048
discontinued operations 1529 4695
total average number of persons employed 10236 13743
1 restated to include the employees of bridon within discontinued operations note 9
notes
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
finance costs and income
interest on bank loans and overdrafts 350 560
amortisation of costs of raising finance 40 47
net interest cost on pensions 78 89
unwind of discount on provisions 20 14 06
total finance costs 482 702
finance income 147 217 
total continuing operations 335 485
discontinued operations
2
9 04 04
total net finance costs 339 489
1  restated to include the results of bridon within discontinued operations note 9 
2 includes £04 million 2013 £03 million net interest cost in relation to pensions
123
 melrose industries plc
annual report 2014
financials
financials 8 tax
continuing operations discontinued operations total
analysis of chargecredit in year
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
current tax 462 339 46 431 508 770 
deferred tax note 21 44 77 12 51 56 26 
total income tax charge 418 416 34 380 452 796 
tax charge on headline
2
 profit before tax 574 505 55 420 629 925 
exceptional tax charge 39 81 – – 39 81 
tax creditcharge on net exceptional items 36 37 05 – 41 37 
tax credit in respect of intangible asset amortisation 159 207 16 40 175 247
total income tax charge 418 416 34 380 452 796 
1 restated to include the results of bridon within discontinued operations note 9
2 as defined on the income statement
the tax charge for the year ended 31 december 2014 includes an exceptional tax charge of £39 million 2013 £81 million predominantly 
relating to the tax costs arising on an internal reorganisation of the electricity business 2013 internal reorganisation of the water business 
the charge for the year can be reconciled to the profit per the income statement as follows
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
profit on ordinary activities before tax
continuing operations 1289 1440 
discontinued operations note 9 141 995 
1430 2435 
tax on profit on ordinary activities at weighted average rate 2849 2013 2989 407 728 
tax effect of
net permanent differencesnondeductible items 13 58 
effect of rate change on deferred tax liabilities on intangible assets – 39
temporary differences not recognised in deferred tax 37 22
tax credits withholding taxes and other rate differences 15 14 
prior year tax adjustments 29 24
exceptional tax charge 39 81 
total tax charge for the year 452 796 
1 restated to include the results of bridon within discontinued operations note 9
the reconciliation has been performed at a blended group tax rate of 2849 2013 2989 which represents the weighted average  
of the tax rates applying to taxable profits in the jurisdictions in which those profits arose 
in addition to the amount charged to the income statement a tax credit of £87 million 2013 £nil has been recognised directly in the 
consolidated statement of comprehensive income this represents a tax credit of £87 million 2013 £06 million charge in respect  
of retirement benefit obligations and a tax charge of £nil 2013 £06 million credit in respect of movements on cash flow hedges 
notes to the 
financial statements continued
124
 melrose industries plc
annual report 2014
financials 9 discontinued operations
disposal of businesses
on 12 november 2014 the group completed the disposal of bridon which was acquired as part of the fki acquisition in 2008 for gross  
cash consideration of £3748 million the costs charged during the year associated with the disposal were £99 million the profit on 
disposal was £969 million after the recycling of cumulative translation differences of £7 6 million the bridon business was previously 
classified within the lifting segment and is now shown within discontinued operations in both years 
discontinued operations in 2013 also contain the results and cash flows of the crosby and acco businesses which were disposed of on 
22 november 2013 the marelli business disposed of on 1 august 2013 the truth business disposed of on 3 july 2013 and the harris 
business disposed of on 31 december 2013 
financial performance of discontinued operations
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
revenue 2080 6592 
operating costs 1854 5448
headline
2
 operating profit 226 1144 
intangible asset amortisation 63 138
exceptional items 18 07
net finance costs 04 04
profit before tax 141 995 
headline
2
 tax 55 420
exceptional tax
3
 21 40 
profit after tax 107 615 
cumulative translation differences recycled on disposals 76 121 
gain on disposal of net assets of discontinued operations 893 3886 
profit for the year from discontinued operations 1076 4622 
attributable to
owners of the parent 1076 4622 
noncontrolling interests – – 
 1076 4622 
1 restated to include the results of bridon within discontinued operations
2 as defined on the income statement
3 includes exceptional tax and tax on exceptional items and intangible asset amortisation 
125
 melrose industries plc
annual report 2014
financials
financials 9 discontinued operations continued
the major classes of assets and liabilities disposed of within this business were as follows
lifting
£m
goodwill and other intangible assets 1671
property plant and equipment 623
inventories 547
trade and other receivables 518
cash and cash equivalents 146
total assets 3505
trade and other payables 441
retirement benefit obligations 36
provisions 14
tax and deferred tax 258
total liabilities 749
net assets 2756
cash consideration net of costs
1
3649
cumulative translation difference recycled on disposals 76
profit on disposal of businesses 969
1 net of £99 million of disposal costs
10 dividends
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
final dividend for the year ended 31 december 2012 paid of 50p – 633
interim dividend for the year ended 31 december 2013 paid of 275p – 348
final dividend for the year ended 31 december 2013 paid of 50p 536 –
interim dividend for the year ended 31 december 2014 paid of 28p 300 –
836 981
proposed final dividend for the year ended 31 december 2014 of 53 pence per share 2013 50 pence per share totalling £527 million 2013 
£536 million
the final dividend of 53 pence was proposed by the board on 4 march 2015 and in accordance with ias 10 “events after the reporting 
period” has not been included as a liability in these financial statements
notes to the 
financial statements continued
126
 melrose industries plc
annual report 2014
financials 11 earnings per share
earnings attributable to owners of the parent
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m 
profit for the purposes of earnings per share 1939 5627 
less profit for the year from discontinued operations note 9 1076 4622
earnings for basis of earnings per share from continuing operations 863 1005
1 restated to include the results of bridon within discontinued operations note 9
year ended
31 december
2014
number
year ended
31 december
2013
number
weighted average number of ordinary shares for the purposes of basic earnings per share million 10920 12666
further shares for the purposes of diluted earnings per share million 137 201
weighted average number of ordinary shares for the purposes of diluted earnings per share million 11057 12867
on 7 february 2014 the number of ordinary shares was consolidated in a ratio of 11 to 13 which reduced the number of ordinary shares 
in issue from 12666 million to 10718 million
earnings per share
year ended
31 december
2014
pence
restated
1
year ended
31 december
2013
pence
basic earnings per share
from continuing and discontinued operations 178 444
from continuing operations 79 79
from discontinued operations 99 365
diluted earnings per share
from continuing and discontinued operations 175 437
from continuing operations 78 78
from discontinued operations 97 359
1 restated to include the results of bridon within discontinued operations note 9
headline
1
 proforma
2
 diluted earnings per share
following the disposals in 2013 and 2014 and the related returns of capital and associated share consolidations headline
1
 proforma
2
 
diluted earnings per share is calculated using the headline
1
 profit after tax of businesses in existence at each year end attributable to the 
owners of the parent and the number of shares in issue following the related share consolidation 
year ended
31 december
2014
£m
year ended
31 december
2013
£m 
headline
1
 profit after tax of businesses in existence at each year end attributable to owners of the parent
3
1543 1642
1 before exceptional costs exceptional income and intangible asset amortisation
2  calculated using the businesses in existence at each year end using the diluted number of shares in issue following the related return of capital and associated share consolidation 
3 includes £251 million of headline1 profit after tax in respect of bridon in the year ended 31 december 2013 
year ended
31 december
2014
year ended
31 december
2013
number of shares in issue following the return of capital million 9952 10718
further shares for the purpose of diluted earnings per share million 137 201
number of shares for the purpose of diluted headline
1
 proforma
2
 earnings per share million 10089 10919
headline
1
 proforma
2
 diluted earnings per share pence 153 150
1 before exceptional costs exceptional income and intangible asset amortisation
2  calculated using the businesses in existence at each year end using the diluted number of shares in issue following the related return of capital and associated share consolidation 
127
 melrose industries plc
annual report 2014
financials
financials 12 goodwill and other intangible assets
goodwill
£m
customer 
relationships
£m
brands and 
intellectual 
property
£m
computer
software and 
development
costs
£m
total
£m
cost
at 1 january 2013 18662 8775 3993 290 31720 
additions – – – 39 39
disposal of businesses 2591 90 1344 38 4063
exchange adjustments 51 10 32 01 30
at 31 december 2013 16020 8675 2681 290 27666 
additions – – – 79 79
acquisition of businesses 646 271 240 03 1160
disposals – – – 14 14
disposal of businesses 866 207 1067 23 2163
exchange adjustments 591 370 37 02 996
at 31 december 2014 15209 8369 1817 337 25732
amortisation
at 1 january 2013 – 410 795 27 1232
charge for the year – 514 195 55 764
disposal of businesses – 44 360 33 437
exchange adjustments – 17 04 – 13 
at 31 december 2013 – 863 634 49 1546
charge for the year – 482 128 53 663
impairments
1
– – – 21 21
disposals – – – 14 14
disposal of businesses – 131 340 21 492
exchange adjustments – 38 10 03 45
at 31 december 2014 – 1176 412 91 1679
net book value
at 31 december 2014 15209 7193 1405 246 24053
at 31 december 2013 16020 7812 2047 241 26120 
at 1 january 2013 18662 8365 3198 263 30488 
1 the impairment of computer software and development costs comprises £21 million 2013 £nil in relation to the gas segment 
the most significant identified intangible asset is included within the gas segment is in relation to customer relationships has a carrying 
amount as at 31 december 2014 of £5828 million 31 december 2013 £647 5 million and has a remaining amortisation period of 17 years 
and 8 months
the goodwill generated as a result of major acquisitions represents the premium paid in excess of the fair value of all net assets including 
intangible assets identified at the point of acquisition the carrying value of goodwill represents the initial value that the directors believed 
could be added to the acquired businesses through the application of their specialist turnaround experience
the goodwill arising on bolt on acquisitions is attributable to the anticipated profitability and cash flows arising from the businesses 
acquired synergies as a result of the complementary nature of the business with existing melrose businesses the assembled workforce 
technical expertise knowhow market share and geographical advantages afforded to the group
notes to the 
financial statements continued
128
 melrose industries plc
annual report 2014
financials the future improvements applied to the acquired businesses achieved through a combination of revised strategic direction operational 
improvements and investment are expected to result in improved profitability of the acquired businesses during the period of ownership 
and are also expected to result in enhanced disposal proceeds when the acquired businesses are ultimately disposed the combined 
value achieved from these improvements is expected to be in excess of the value of goodwill acquired
goodwill has been allocated to the businesses each of which comprises several cashgenerating units as follows
31 december
2014
£m
restated
1
31 december
2013
£m
continuing operations
energy 2017 2074
gas 10882 10720
electricity 1560 1579
water 750 785
elster total 13192 13084
total continuing operations 15209 15158
discontinued operations – 862
15209 16020
1 restated to include the goodwill of bridon within discontinued operations note 9
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired value in use 
calculations are used to determine the recoverable amount of goodwill allocated to each group of cashgenerating units cgus and use the 
latest approved forecasts extrapolated to perpetuity using growth rates shown below which do not exceed the longterm growth rate for the 
relevant market no impairment was identified the basis of these impairment tests and the key assumptions are set out in the table below
31 december 2014
group of cgus
basis of 
valuation
carrying 
value of 
goodwill
£m
pretax 
discount 
rates
1
period of 
forecast
key assumptions applied in the
forecast cash flow projections
2
longterm 
growth 
rates
3
energy value in use 2017 103 4 years revenue growth operating margins 24
gas value in use 10882 98 5 years revenue growth operating margins 22
electricity value in use 1560 99 3 years revenue growth operating margins 24
water value in use 750 98 3 years revenue growth operating margins 25
31 december 2013
group of cgus
basis of 
valuation
carrying 
value of 
goodwill
£m
pretax 
discount 
rates
1
period of 
forecast
key assumptions applied in the
forecast cash flow projections
2
longterm 
growth 
rates
3
energy value in use 2074 104 4 years revenue growth operating margins 25
gas value in use 10720 98 4 years revenue growth operating margins 25
electricity value in use 1579 98 4 years revenue growth operating margins 29
water value in use 785 100 3 years revenue growth operating margins 25
1 pretax risk adjusted discount rates
cash flows are discounted using a pretax discount rate specific to each cgu discount rates reflect the current market assessments of 
the time value of money and are based on the estimated cost of capital of each cgu in determining the cost of equity the capital asset 
pricing model capm has been used under capm the cost of equity is determined by adding a risk premium to the risk free rate to 
reflect the additional risk associated with investing outside of lending to a country eg the purchase of uk gilts the premium is based  
on an industry adjustment ‘beta’ to the expected return of the equity market above the risk free return the relative risk adjustment  
reflects the risk inherent in each cgu relative to all other sectors and geographies on average 
129
 melrose industries plc
annual report 2014
financials
financials 12 goodwill and other intangible assets continued
2 assumptions applied in financial forecasts
the group prepares cash flow forecasts derived from financial budgets and midterm plans approved by management the key 
assumptions used in forecasting pretax cash flows relate to future budgeted revenue and operating margins likely to be achieved and  
the likely rates of longterm growth by market sector underlying factors in determining the values assigned to each key assumption by 
cgu are shown below
revenue growth and operating margins 
revenue growth assumptions in the forecast period are based on financial budgets and midterm plans approved by management taking 
into account industry growth rates and management of each division’s historical experience in the context of wider industry and economic 
conditions projected sales are built up with reference to markets and product categories they incorporate past performance historical 
growth rates projections of developments in key markets secured orders and orders likely to be achieved in the short to mediumterm 
given trends in the relevant market sector
operating margins have been forecast based on historical levels considering the likely impact of changing economic environments and 
competitive landscapes on volumes and revenues and the impact of management actions on costs projected margins reflect the impact 
of all initiated projects to improve operational efficiency and leverage scale the projections do not include the impact of future restructuring 
projects to which the group is not yet committed forecasts for other operating costs are based on inflation forecasts and supply and 
demand factors
energy 
brush is a supplier of turbogenerators for the power generation industrial oil  gas and offshore sectors and a leading supplier  
of switchgear transformers and other power infrastructure equipment the key drivers for revenues and operating margins are  
i original equipment investments in the global power market both new capacity mainly emerging markets and replacement capacity 
mainly in mature markets ii growth in service requirements of a growing installed base and iii new product introduction independent 
forecasts of growth in these power generation markets have been used to derive revenue growth assumptions forecasts for other 
operating costs are based on inflation forecasts and supply and demand factors 
elster
elster gas designs and manufactures gas measurement process heat control and gas safety control equipment the key drivers for 
revenues and operating margins are i global energy consumption and the growing share for natural gas ii international legislation aimed  
at driving down emission levels and increasing efficiency which in turn stimulates demand for smart meters and process heat applications 
independent forecasts of the growth in these end markets have been used to derive revenue growth assumptions forecasts for other 
operating costs are based on inflation forecasts and supply and demand factors 
elster electricity is an international metering solution provider supplying both traditional and smart meter equipment including applications 
for residential commercial industrial transmission and distribution markets the key drivers for revenues and operating margins are  
i global demand for electricity metering requirements both traditional and smart and ii market developments in meter data software 
solutions independent forecasts of the growth in the meter hardware and related meter software end markets have been used to derive 
revenue growth assumptions as well as management’s best estimates of the impact of residential smart meter rollouts in the eu 
forecasts for other operating costs are based on inflation forecasts and supply and demand factors 
elster water designs and manufactures a comprehensive range of water metering solutions the key driver for revenues and operating 
margins is the global demand for water meters both traditional and smart revenue growth assumptions have been built up with reference  
to past performance historical growth rates and projections of developments in key markets forecasts for other operating costs are 
based on inflation forecasts and supply and demand factors 
3 longterm growth rates
longterm growth rates are based on longterm economic forecasts for growth in the manufacturing sector in the geography in which the 
cgu operates longterm growth rates are determined using a blend of publicly available historical data and a longterm growth rate forecast 
published by external analysts and further take into account the international presence and the markets in which each business operates
notes to the 
financial statements continued
130
 melrose industries plc
annual report 2014
financials sensitivity analysis
a reasonable possible change in the assumptions applied would not result in any impairment base case forecasts show significant 
headroom above the carrying value for each group of cgus sensitivity analysis has been undertaken for each group of cgus to assess 
the impact of any reasonable possible change in key assumptions there is no reasonable possible change that would cause the carrying 
values to exceed recoverable amounts
acquisition of businesses
on 31 october 2014 the group acquired 100 of the issued share capital and obtained control of eclipse inc “eclipse” for cash 
consideration of £97 6 million
eclipse is a long established manufacturer of lowtemperature industrial gas combustion equipment which complements elster gas’ 
expertise in hightemperature industrial gas combustion applications 
the amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below fair values are 
provisional as of 31 december 2014 and are based on the information held to date
fair value
£m
eclipse
property plant and equipment 55
intangible assets computer software and development costs 514
inventories 54
trade and other receivables 135
cash and cash equivalents 15
trade and other payables 172
provisions 92 
deferred tax 122
retirement benefit obligations 46
current tax 08
noncontrolling interests 03
net assets 330
goodwill 646
total consideration 976
satisfied by
cash consideration 976
acquisition related costs included in exceptional operating costs amount to £23 million
the fair value of financial assets include gross trade and other receivables of £143 million the best estimate at acquisition date of the 
contractual cash flows not to be collected is £08 million 
eclipse contributed £122 million to revenue and £14 million to headline operating profit for the two month period between the date of 
acquisition and the balance sheet date
if the acquisition of eclipse had been completed on the first day of the financial year group revenues would have been approximately 
£1441 million and group headline operating profit would have been approximately £249 million 
the goodwill arising on acquisition of eclipse is attributable to the anticipated profitability and cash flows arising from the businesses 
acquired synergies as a result of the complementary nature of the business with elster gas the assembled workforce technical expertise 
knowhow market share and geographical advantages afforded to the group none of the goodwill is expected to be deductible for 
income tax purposes 
contingent liabilities of £45 million have been acquired in respect of warranty and legal claims and recognised within provisions  
the majority of expenditure is expected to be incurred over the next five years 
the noncontrolling interests acquired are measured on the proportion of the fair value of their net assets 
131
 melrose industries plc
annual report 2014
financials
financials 13  property plant and equipment
land and 
buildings
£m
plant and
equipment
£m
total
£m
cost
at 1 january 2013 1296 2843 4139 
additions 45 529 574 
disposals 11 57 68
disposal of businesses 366 919 1285
exchange adjustments 13 19 32
at 31 december 2013 951 2377 3328 
additions 152 432 584
acquisition of businesses 31 24 55
disposals 29 96 125
disposal of businesses 217 762 979
exchange adjustments 23 56 79
at 31 december 2014 865 1919 2784
accumulated depreciation and impairment
at 1 january 2013 122 829 951
charge for the year 46 383 429
impairments
1
– 28 28
disposals – 17 17 
disposal of businesses 52 405 457 
exchange adjustments 01 17 18 
at 31 december 2013 115 801 916
charge for the year 41 292 333
impairments
1
– 06 06
disposals 26 62 88
disposal of businesses 30 326 356
exchange adjustments 04 19 23
at 31 december 2014 96 692 788
net book value
at 31 december 2014 769 1227 1996
at 31 december 2013 836 1576 2412
at 1 january 2013 1174 2014 3188 
1  the impairment of plant and equipment comprises £06 million 2013 £nil in relation to the electricity segment £nil 2013 £18 million in relation to the water segment  
£nil 2013 £06 million in relation to the energy segment and £nil 2013 £04 million in relation to discontinued operations 
notes to the 
financial statements continued
132
 melrose industries plc
annual report 2014
financials 14  interests in joint ventures
31 december
2014
£m
31 december
2013
£m
aggregated amounts relating to joint ventures
share of assets 236 240 
share of liabilities 118 114
interests in joint ventures 118 126 
share of joint venture revenues 336 366 
share of headline
1
 results of joint ventures 32 28 
dividends received from joint ventures 33 27
1 as defined on the income statement
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
2014
£m
31 december
2013
£m
raw materials 634 751
work in progress 570 892
finished goods 461 702
1665 2345
the directors consider that there is no material difference between the balance sheet value of inventories and their replacement cost
the expense of writing down inventory to net realisable value during the year totalled £55 million 2013 £87 million whilst reversals of 
previous write downs of inventory amounted to £41 million 2013 £53 million
construction contracts
31 december
2014
£m
31 december
2013
£m
contracts in progress at the balance sheet date
amounts due from contract customers included in other receivables 43 47 
43 47 
contract costs incurred plus recognised profit less recognised losses to date 43 148 
less progress billings – 101
43 47 
the average life of contracts is 12 years 31 december 2013 12 years
133
 melrose industries plc
annual report 2014
financials
financials 16 trade and other receivables
current
31 december
2014
£m
31 december
2013
£m
trade receivables 2309 2572 
allowance for doubtful receivables 74 82
amounts due from joint ventures – 10 
other receivables 246 275 
prepayments 94 153 
 2575 2928 
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
2014
£m
31 december
2013
£m
other receivables 33 03
an allowance has been made for estimated irrecoverable amounts with reference to past default experience and management’s 
assessment of credit worthiness an analysis of which is as follows
energy
£m
elster
£m
central
£m
restated
1
 discontinued
£m
total
£m
at 1 january 2013 03 95 01 27 126 
disposal of businesses – – – 26 26
income statement charge 06 21 – 06 33 
utilised 01 48 01 02 52
exchange differences – 01 – – 01 
at 31 december 2013 08 69 – 05 82 
disposal of businesses – – – 05 05
acquisition of businesses – 08 – – 08
income statement creditcharge 04 20 – – 16
utilised 02 23 – – 25
exchange differences – 02 – – 02
at 31 december 2014 02 72 – – 74
1 restated to include the results of bridon within discontinued operations note 9
the concentration of credit risk is limited due to the large number of customers and because they are unrelated to each other  
credit control procedures are implemented to ensure that sales are only made to organisations that are willing and able to pay for them  
such procedures include the establishment and review of customer credit limits and terms the group does not hold any collateral or  
any other credit enhancements over any of its trade receivables nor does it have a legal right of offset against any amounts owed by the 
group to the counterparty
the ageing of impaired trade receivables past due is as follows
ageing of impaired trade receivables past due
31 december
2014
£m
31 december
2013
£m
0 – 30 days 12 04
31 – 60 days – 02
60 days 62 76
74 82
included in the group’s trade receivables balance are overdue trade receivables with a carrying amount of £354 million  
31 december 2013 £427 million against which an appropriate provision of £7 4 million 31 december 2013 £82 million is held
notes to the 
financial statements continued
134
 melrose industries plc
annual report 2014
financials the balance deemed recoverable of £280 million 31 december 2013 £345 million is past due as follows
31 december
2014
£m
31 december
2013
£m
0 – 30 days 216 239
31 – 60 days 47 72
60 days 17 34
280 345
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
2014
£m
31 december
2013
£m
cash and cash equivalents 705 2004
cash and cash equivalents comprises cash at bank and in hand which earns interest at floating rates based on daily bank deposit rates 
and shortterm deposits which are made for varying periods of between one day and one month and earn interest at the respective 
shortterm deposit rates the carrying amount of these assets is considered to be equal to their fair value
18 trade and other payables
current
31 december
2014
£m
31 december
2013
£m
trade payables 1530 1953
other payables 919 1118
other taxes and social security 115 130
deferred government grants 01 22
accruals 640 769
3205 3992
trade payables are non interestbearing normal settlement terms vary by country and the average credit period taken for trade purchases 
is 88 days 2013 100 days other payables are non interestbearing and have an average term of approximately 60 days
noncurrent
31 december
2014
£m
31 december
2013
£m
other payables 01 11
accruals 03 04
04 15
the directors consider that the carrying amount of trade and other payables approximates to their fair value
135
 melrose industries plc
annual report 2014
financials
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
2014
£m
31 december
2013
£m
31 december
2014
£m
31 december
2013
£m
31 december
2014
£m
31 december
2013
£m 
floating rate obligations
bank borrowings – us dollar loan
1
– – 2445 1751 2445 1751 
bank borrowings – euro loan
2
– – 1507 – 1507 – 
bank borrowings – sterling loan
3
– – 1910 1800 1910 1800 
bank borrowings – brazilian real 09 – 06 24 15 24 
09 – 5868 3575 5877 3575 
unamortised finance costs – – 159 163 159 163
total interestbearing loans and borrowings 09 – 5709 3412 5718 3412
1 interest rate libor 130 final maturity july 2019 31 december 2013 interest rate libor 225 final maturity june 2017
2 interest rate euribor 130 final maturity july 2019 31 december 2013 interest rate euribor 225 final maturity june 2017
3 interest rate libor 130 final maturity july 2019 31 december 2013 interest rate libor 225 final maturity june 2017
as at 1 january 2014 the group held a five year multicurrency facility split between a £355 million term loan and a £989 million revolving 
credit facility these facilities were due to mature on 29 june 2017  on 11 july 2014 the existing facility was “amended and extended” 
resulting in lower margins greater flexibility and the facility being extended by two years maturing on 11 july 2019
as at 1 january 2014 the term loan was split into two tranches of £180 million and us 290 million as part of the amend and extend 
exercise the us 290 million term loan was converted into a us dollar denominated revolving credit facility the sterling denominated term 
loan is subject to mandatory repayments of 5 on july 2017  july 2018 and january 2019 adjusted for any term loan repayments made 
prior to these dates
as at 1 january 2014 the revolving credit facility was split between a £7415 million sterling denominated multicurrency facility and a  
€300 million euro denominated facility at 31 december 2014 the sterling and euro denominated facilities remain unchanged and exist 
along with the us 290 million facility which was converted from a term loan to a revolving credit facility during the year
the £180 million term loan facility was fully drawn at 31 december 2014 the drawdowns under the revolving credit facility as of this date 
were £11 million us 381 million and €194 million
throughout the year the group remained compliant with all covenants under the facilities disclosed above a number of companies 
continue to be guarantors under the bank facilities 
drawdowns under the existing facility bear interest at interbank rates of interest plus a margin determined by reference to the group’s 
performance under its debt cover covenant ratio and ranges between 075 and 190 31 december 2013 range between 140  
to 265 the margin as at 31 december 2014 was 130 31 december 2013 225
notes to the 
financial statements continued
136
 melrose industries plc
annual report 2014
financials maturity of financial liabilities
the maturity profile of anticipated future cash flows including interest in relation to the group’s financial liabilities on an undiscounted basis 
and which therefore differs from both the carrying value and fair value is shown in the table below interest on floating rate debt is based 
on the relevant libor curve for us dollar and sterling balances and the euribor curve for euro balances interest on hedging interest 
rate swaps is based on the relevant forward libor curves for us dollar and sterling amounts and euribor curve for euro amounts and 
is illustrated as a net cash flow
interestbearing
 loans and
 borrowings
£m
derivative 
financial
liabilities
£m
other
 financial 
liabilities
£m
total 
financial 
liabilities
£m
within one year 106 101 3089 3296
in one to two years 130 02 04 136
in two to five years 6257 – – 6257
effect of financing rates 775 – – 775
31 december 2014 5718 103 3093 8914
within one year 96 72 3840 4008 
in one to two years 220 – 15 235 
in two to five years 3688 – – 3688 
effect of financing rates 592 – – 592
31 december 2013 3412 72 3855 7339 
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 2013 212 541 216 561 248 1778 
acquisition of businesses 04 33 – 55 – 92
utilised 50 29 30 176 211 496
net charge to headline
1
 operating profit – 01 70 78 01 150
net charge to exceptional items
2
54 – – – 316 262
disposal of businesses 02 – – – 12 14
unwind of discount note 7 03 01 10 – – 14
exchange differences 02 05 – 05 08 16
at 31 december 2014 115 542 266 513 334 1770
current 27 60 110 202 318 717
noncurrent 88 482 156 311 16 1053
115 542 266 513 334 1770
1 as defined on the income statement
2 net of £316 million of exceptional costs relating to restructuring and a £54 million surplus leasehold property costs provision released to exceptional income
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 four 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 longterm incentive plans for divisional senior management expected to result in cash 
expenditure in the next three years
the provision for warranty related costs represents the best estimate of the expenditure required to settle the group’s obligations warranty 
terms are on average between one and five years
other provisions relate primarily to costs that will be incurred in respect of restructuring programmes usually resulting in cash spend within 
one year
where appropriate provisions have been discounted using a discount rate of 3 31 december 2013 3
137
 melrose industries plc
annual report 2014
financials
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 2013 1503 640 3472 4112 2609
chargecredit to income 8 641 368 247 615 26
chargecredit to other comprehensive income 06 06 – 06 –
disposal of businesses 158 144 362 506 348 
exchange differences 05 – 11 11 06
at 31 december 2013 703 122 2874 2996 2293
chargecredit to income 8 155 36 175 211 56
credit to other comprehensive income 87 – – – 87
disposal of businesses – 11 200 211 211
acquisition of businesses 12 57 – 179 179 122
exchange differences 05 – 80 80 75
at 31 december 2014 687 75 2598 2673 1986
as at 31 december 2014 the group had gross unused losses of £1836 million 31 december 2013 £217 1 million available for offset 
against future profits at 31 december 2014 a £104 million deferred tax asset 31 december 2013 £97 million in respect of £409 million 
31 december 2013 £420 million of these gross losses was recognised in the balance sheet no asset was recognised in respect of the 
remaining losses due to the divisional and geographic split of anticipated future profit streams and the effect of possible disposals in future 
years the majority of these losses may be carried forward indefinitely subject to certain continuity of business requirements 
a deferred tax asset of £247 million 31 december 2013 £256 million was recognised on group retirement benefit obligations being the 
extent to which they are expected to generate tax deductions against foreseeable taxable profits 
the remaining asset of £336 million 31 december 2013 £350 million relates to other temporary differences 
as at 31 december 2014 the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries was £474 
million 31 december 2013 £364 million on which deferred tax liabilities not recognised were £43 million 31 december 2013 £33 million 
no liability was recognised in respect of these differences because the group is in a position to control the timing of the reversal of the 
temporary differences and it is probable that such differences will not reverse in the foreseeable future
22 sharebased payments
melrose incentive plan
the company has 50000 options 31 december 2013 50000 options in issue which enable the holder of these options to subscribe for 
2012 incentive shares these options are held by directors and senior employees further details of the 2012 melrose incentive plan are 
provided in the remuneration report on pages 78 to 95
the estimated value of the 2012 incentive shares at 31 december 2014 was £447 million 31 december 2013 £730 million using a black 
scholes option pricing model the estimated fair value attributable to this plan at 31 may 2017  is £634 million 31 december 2013 £1017 million 
the inputs into the black scholes model that were used to fair value the plan when it was originally established in 2012 were as follows
valuation 
assumptions
weighted average share price £227
weighted average exercise price £285
expected volatility 30
expected life as at inception 50 years
risk free interest 10
expected volatility was determined by calculating the historical volatility of the company’s share price 
the group recognised an ifrs 2 charge of £40 million 2013 £40 million in the year ended 31 december 2014 in relation to the equity
settled 2012 melrose incentive plan
notes to the 
financial statements continued
138
 melrose industries plc
annual report 2014
financials 23 retirement benefit obligations
defined contribution plans
the group operates defined contribution plans for qualifying employees across several jurisdictions the assets of the plans are held 
separately from those of the group in funds under the control of trustees
the total costs charged in relation to the continuing businesses during the year of £69 million 2013 £68 million represent contributions 
payable to these plans by the group at rates specified in the rules of the plans
defined benefit plans
the group sponsors defined benefit plans for qualifying employees of certain subsidiaries the funded defined benefit plans are 
administered by a separate fund that is legally separated from the group the trustees of the funds are required by law to act in the interest 
of the fund and of all relevant stakeholders in the plans the trustees of the pension funds are responsible for the investment policy with 
regard to the assets of the fund
the most significant defined benefit pension plans are
• the fki uk pension plans which comprise two separate independent plans the fki uk pension plan and the brush group 2013 
pension plan are defined benefit in type and are funded plans the plans are closed to new members and the accrual of future benefits 
for existing members at 31 december 2013 the fki uk pension plans also contained the bridon group 2013 pension plan which was 
disposed with bridon on 12 november 2014
• the mckechnie uk pension plan which is defined benefit in type and is a funded plan other than £50 million of unfunded liabilities  
the plan is closed to new members and the accrual of future benefits for existing members
• the fki us pension plan which is defined benefit in type and is a funded plan the plan is closed to new members and the accrual of 
future benefits for existing members during the year certain vested participants accepted lump sum offers resulting in an adjustment to 
past service cost of £35 million
other plans include a number of funded and unfunded defined benefit arrangements across europe north america and the rest of the 
world the group also operates unfunded retiree medical and welfare benefit plans principally in the us during the year the group 
terminated certain elster us unfunded retiree medical and welfare plans reducing gross liabilities by £43 million 
the costs of the group’s defined benefit plans are determined in accordance with ias 19 revised “employee benefits” with the advice of 
independent professionally qualified actuaries on the basis of formal actuarial valuations using the projected unit credit method in line with 
normal practice these valuations are undertaken triennially in the uk and annually in the us
valuations of the fki uk pension plans are based on full actuarial valuations as of 31 december 2013 and updated at 31 december 2014  
by independent actuaries the mckechnie uk pension plan valuation is based on a full valuation at 31 december 2011 updated at  
31 december 2014 by independent actuaries the fki us pension plan valuation is based on the us full actuarial valuation as of  
31 december 2013 updated at 31 december 2014 by independent actuaries 
the group contributed £266 million 2013 £200 million to the fki uk pension plans which included £81 million 2013 £06 million to the 
disposed bridon group 2013 pension plan and contributed £52 million 2013 £52 million to the mckechnie uk pension plan in the year 
ended 31 december 2014 in 2015 the group expects to contribute £200 million to the fki uk pension plans and £52 million to the 
mckechnie uk pension plan
in total the group expects to contribute approximately £314 million to its defined benefit plans in the year ended 31 december 2015
actuarial assumptions
the major weighted average assumptions used by the actuaries in calculating the group’s pension liabilities are as set out below
31 december 2014
fki uk 
plans
 pa
mckechnie
uk plan
 pa
fki us 
plan 
 pa
us plans
 pa
european
plans
 pa
other plans
 pa
rate of increase in salaries na na na na 230 300
rate of increase in pensions in payment 300 300 na na 150 na
discount rate 350 350 390 390 190 390
rpi inflation assumption 210 210 na na 150 225
139
 melrose industries plc
annual report 2014
financials
financials 23 retirement benefit obligations continued
31 december 2013
fki uk 
plans
 pa
mckechnie
uk plan
 pa
fki us 
plan 
 pa
us plans
 pa
european
plans
 pa
other plans
 pa
rate of increase in salaries na 390
1
na 400 275 300
rate of increase in pensions in payment 320 320 na na 190 na
discount rate 440 440 470 470 350 470
rpi inflation assumption 340 340 na na 190 225
1 closed to the accrual of future benefits but active members’ benefits linked to current salaries 
mortality
fki uk pension plans 
mortality assumptions for the most significant plans in the group the fki uk plans as at 31 december 2014 are based on the self 
administered pension scheme “saps” “s1” base tables with scaling factors of 110 and 105 for deferred members and pensioners 
respectively which reflect the results of a mortality analysis carried out on the plan’s membership future improvements are in line with the 
continuous mortality investigation “cmi” improvement model with a longterm rate of improvement of 125 pa for both males and females 
the assumptions are that a member currently aged 65 will live on average for a further 219 years 31 december 2013 219 years if they 
are male and for a further 242 years 31 december 2013 241 years if they are female for a member who retires in 2034 at age 65 the 
assumptions are that they will live for a further 232 years 31 december 2013 233 years after retirement if they are male and for a further 
257 years 31 december 2013 256 years after retirement if they are female
the mortality assumptions are consistent with those adopted for the full valuation as at 31 december 2013
other plans
the mortality assumptions adopted as at 31 december 2014 have been set to reflect the group’s best estimate view of life expectancies  
of members of each individual pension arrangement these mortality assumptions vary by arrangement each assumption reflecting the 
characteristics of the membership of that arrangement
balance sheet disclosures
the amount recognised in the balance sheet arising from net liabilities in respect of defined benefit plans is as follows
31 december
2014
£m
31 december
2013
£m
present value of funded defined benefit obligations 12310 11876
fair value of plan assets 11252 10708 
funded status 1058 1168
present value of unfunded defined benefit obligations 1127 1025
net liabilities 2185 2193
the plan liabilities and assets at 31 december 2014 were split by plan as follows
fki uk 
plans
1
£m
mckechnie
uk plan
£m
fki us 
plan 
£m
us plans
£m
european
plans
£m
other plans
£m
total
£m
plan liabilities 7783 2083 1952 484 1107 28 13437
plan assets 6956 2099 1765 308 100 24 11252
net liabilitiesassets 827 16 187 176 1007 04 2185
1  the fki uk plans comprise two separate plans the fki uk pension plan and the brush group 2013 pension plan the net liabilities of these plans are £543 million 31 december 2013 £708 
million and £284 million 31 december 2013 £294 million respectively at 31 december 2013 the fki uk plans also contained the bridon group 2013 pension plan the net liabilities of this plan 
at that date were £90 million 
notes to the 
financial statements continued
140
 melrose industries plc
annual report 2014
financials the major categories and fair values of plan assets at the end of the reporting period for each category are as follows
31 december
2014
£m
31 december
2013
£m
equities 3807 3816
government bonds 3152 2158
corporate bonds 3379 3186
property 218 185
insurance contracts 119 135
other 577 1228
total 11252 10708
the assets are well diversified and the majority of plan assets have quoted prices in active markets all government bonds are issued by 
reputable governments and are generally aa rated or higher interest rate and inflation rate swaps are also employed to complement the 
role of fixed and indexlinked bond holdings for liability risk management
the trustees continually review whether the chosen investment strategy is appropriate with a view to providing the pension benefits and to 
ensure appropriate matching of risk and return profiles the main strategic policies include maintaining an appropriate asset mix managing 
interest rate sensitivity and maintaining an appropriate equity buffer investment results are regularly reviewed
there is no self investment other than in relevant tracker funds either in the group’s own financial instruments or property or other assets 
used by the group
movements in the present value of defined benefit obligations during the year
year ended
31 december
2014
£m
year ended
31 december
2013
£m
at beginning of year 12901 13046 
acquisition of businesses 46 – 
disposal of businesses 684 356
current service cost 22 34 
past service cost 35 – 
losses on curtailments – 07 
interest cost on obligations 550 542 
terminations 43 –
remeasurement lossesgains – demographic 144 185
remeasurement losses – financial 1516 29 
remeasurement gainslosses – experience 297 352 
benefits paid out of plan assets 718 541
benefits paid out of group assets for unfunded plans 44 47
currency translation differences 79 20 
at end of year 13437 12901 
the defined benefit plan liabilities are 5 31 december 2013 5 in respect of active plan participants 41 31 december 2013 44  
in respect of deferred plan participants and 54 31 december 2013 51 in respect of pensioners
the weighted average duration of the defined benefit plan liabilities at 31 december 2014 is 155 years 31 december 2013 153 years
141
 melrose industries plc
annual report 2014
financials
financials 23 retirement benefit obligations continued
movements in the fair value of plan assets during the year
year ended
31 december
2014
£m
year ended
31 december
2013
£m
at beginning of year 10708 10433 
disposal of businesses 648 254
interest income on plan assets 468 450 
return on plan assets excluding interest income 1008 397 
contributions 348 289 
benefits paid out of plan assets 718 541
plan administrative costs 36 28
currency translation differences 122 38
at end of year 11252 10708
the actual return on plan assets was a gain of £147 6 million 2013 £847 million
income statement disclosures
amounts recognised in the income statement in respect of these defined benefit plans are as follows
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
continuing operations
included within headline
2
 operating profit
– current service cost 22 34 
– past service cost 35 – 
– plan administrative costs 33 28 
– terminations 43 –
included within net finance costs
– interest cost on obligations 526 522 
– interest income on plan assets 448 433
 
discontinued operations
included within headline
2
 operating profit
– plan administrative costs 03 – 
included within net finance costs
– interest cost on obligations 24 20 
– interest income on plan assets 20 17
included within exceptional items
– curtailment loss – 07 
1 restated to include the results of bridon within discontinued operations note 9
2 as defined on the income statement 
statement of comprehensive income disclosures
amounts recognised in the statement of comprehensive income in respect of these defined benefit plans are as follows
year ended
31 december
2014
£m
year ended
31 december
2013
£m
return on plan assets excluding amounts included in net interest expense 1008 397 
actuarial lossesgains arising from changes in demographic assumptions 144 185 
actuarial losses arising from changes in financial assumptions 1516 29
actuarial gainslosses arising from experience adjustments 297 352
net remeasurement lossgain on retirement benefit obligations 355 201
notes to the 
financial statements continued
142
 melrose industries plc
annual report 2014
financials risks and sensitivities 
the defined benefit plans expose the group to actuarial risks such as longevity risk currency risk salary risk interest rate risk and market 
investment risk the group is not exposed to any unusual entity specific or plan specific risks
a sensitivity analysis on the principal assumptions used to measure the plan liabilities at the year end is as follows
change in
assumption
decrease
increase to
plan liabilities
£m
increase
decrease to 
profit before tax
£m
discount rate increase by 010 193 05
decrease by 010 199 05
rpi inflation assumption
1
increase by 010 122 na
decrease by 010 118 na
assumed life expectancy at age 65 rate of mortality increase by 1 year 446 na
decrease by 1 year 446 na
1 the rpi inflation sensitivity encompasses the impact on pension increases where applicable
the sensitivity analysis above has been determined based on reasonable possible changes to the respective assumptions while holding  
all other assumptions constant there has been no change in the methods and assumptions used in preparing the sensitivity analysis from 
prior years
the sensitivities are based on the relevant assumptions and membership profile as at 31 december 2014 and are applied to the obligations 
at the end of the reporting period whilst the analysis does not take account of the full distribution of cash flows expected it does provide 
an approximation to the sensitivity of the assumptions shown extrapolation of these results beyond the sensitivity figures shown may not 
be appropriate and the sensitivity analysis presented may not be representative of the actual change in the defined benefit obligation as it  
is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated 
24 financial instruments and risk management
the table below sets out the group’s accounting classification of each category of financial assets and liabilities and their fair values at  
31 december 2014 and 31 december 2013
energy 
£m
elster
£m
restated
1
central
£m
restated
1
discontinued
£m
total
£m
31 december 2014
financial assets
cash and cash equivalents – – 705 – 705
net trade receivables 673 1561 01 – 2235
derivative financial assets 03 24 24 – 51
financial liabilities
interestbearing loans and borrowings – 15 5703 – 5718
derivative financial liabilities 39 19 45 – 103
other financial liabilities 724 2166 203 – 3093
31 december 2013
financial assets
cash and cash equivalents – – 2004 – 2004 
net trade receivables 646 1413 01 430 2490 
derivative financial assets 11 09 97 15 132 
financial liabilities
interestbearing loans and borrowings – 24 3388 – 3412
derivative financial liabilities 34 11 25 02 72
other financial liabilities 824 2284 313 434 3855
1 restated to include the financial assets and financial liabilities of bridon within discontinued operations note 9
143
 melrose industries plc
annual report 2014
financials
financials 24 financial instruments and risk management continued
credit risk
the group considers its maximum exposure to credit risk to be as follows
energy 
£m
elster
£m
central
£m
restated
1
discontinued
£m
total
£m
31 december 2014
financial assets
cash and cash equivalents – – 705 – 705
net trade receivables 673 1561 01 – 2235
derivative financial assets 03 24 24 – 51
31 december 2013
financial assets
cash and cash equivalents – – 2004 – 2004
net trade receivables 646 1413 01 430 2490
derivative financial assets 11 09 97 15 132
1 restated to include the financial assets of bridon within discontinued operations note 9
the group’s principal financial assets are cash and cash equivalents trade receivables and derivative financial assets which represent the 
group’s maximum exposure to credit risk in relation to financial assets
the group’s credit risk on cash and cash equivalents and derivative financial assets is limited because the counterparties are banks with 
strong creditratings assigned by international creditrating agencies the group’s credit risk is primarily attributable to its trade receivables 
the amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables estimated by the group’s 
management based on prior experience and their assessment of the current economic environment note 16 provides further details 
regarding the recovery of trade receivables
capital risk
the group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return 
to stakeholders through the optimisation of the group’s net debt and equity balance
the capital structure of the group consists of net debt which includes the borrowings disclosed in note 19 after deducting cash and cash 
equivalents and equity attributable to equity holders of the parent comprising issued share capital reserves and retained earnings as 
disclosed in the consolidated statement of changes in equity 
liquidity risk
the group’s policy for managing liquidity rate risk is set out in the finance director’s review
fair values
the directors consider that the financial assets and liabilities have fair values not materially different to the carrying values
notes to the 
financial statements continued
144
 melrose industries plc
annual report 2014
financials foreign exchange contracts
as at 31 december 2014 the group held foreign exchange forward contracts to mitigate expected exchange rate fluctuations on cash 
flows on sales to customers and purchases from suppliers these instruments operate as cash flow hedges unless the amounts involved 
are small the terms of the material currency pairs with total principals in excess of sterling £10 million equivalent are as follows 
31 december
2014
selling currency
millions
31 december
2014
average hedged
rate
31 december
2013
selling currency
millions
31 december
2013
average hedged
rate
sell australian dollarbuy sterling – – aud 19 gbpaud 176
sell brazilian realbuy us dollar brl 42 usdbrl 260 brl 43 usdbrl 233
sell canadian dollarbuy us dollar cad 620 usdcad 113 cad 18 usdcad 105
sell czech korunabuy euro czk 781 eurczk 2764 czk 770 eurczk 2584
sell czech korunabuy sterling – – czk 1883 gbpczk 3269
sell eurobuy czech koruna eur 106 eurczk 2748 eur 91 eurczk 2610
sell eurobuy romanian leu eur 22 eurron 449 – –
sell eurobuy russian rouble eur 39 eurrub 6207 eur 55 eurrub 4521
sell eurobuy sterling eur 84 gbpeur 122 eur 330 gbpeur 118
sell eurobuy us dollar eur 27 eurusd 128 eur 15 eurusd 134
sell norwegian kronebuy sterling – – nok 549 gbpnok 959
sell russian roublebuy euro rub 2379 eurrub 6147 rub 700 eurrub 4476
sell south african randbuy euro – – zar 228 eurzar 1380
sell south african randbuy sterling zar 204 gbpzar 1851 zar 233 gbpzar 1667
sell sterlingbuy czech koruna gbp 345 gbpczk 3327 gbp 431 gbpczk 3093
sell sterlingbuy euro gbp 419 gbpeur 125 gbp 535 gbpeur 118
sell sterlingbuy singapore dollar – – gbp 19 gbpsgd 197
sell sterlingbuy us dollar gbp 54 gbpusd 164 gbp 115 gbpusd 157
sell us dollarbuy czech koruna – – usd 42 usdczk 1938
sell us dollarbuy euro usd 43 eurusd 130 usd 61 eurusd 134
sell us dollarbuy mexican peso usd 88 usdmxn 1373 – –
sell us dollarbuy sterling usd 328 gbpusd 164 usd 615 gbpusd 158
the foreign exchange contracts all mature between january 2015 and may 2016
the fair value of the contracts at 31 december 2014 was a net liability of £43 million 31 december 2013 net asset of £04 million
hedge of net investments in foreign entities
included in interestbearing loans at 31 december 2014 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
2014
£m
31 december
2013
£m
us dollar 1572 1449
euro
1
1507 – 
1 at 31 december 2013 there were no borrowings in euros due to disposal proceeds received being used to temporarily pay down debt prior to the return of capital in february 2014
145
 melrose industries plc
annual report 2014
financials
financials 24 financial instruments and risk management continued
interest rate sensitivity analysis
a one percentage point rise in market interest rates for all currencies would increasedecrease profit before tax by the following amounts 
assuming the net debt as at the balance sheet date was outstanding for the whole year at 31 december 2014 the group had a temporary 
excess position on sterling interest rate swaps as a result of paying down debt under the revolving credit facilities from the proceeds of 
the disposal that occurred in the year this position was reversed following the capital return in march 2015 adjusting for the capital return 
the sensitivity would decrease profit after tax by £02 million for sterling £14 million for us dollar and £01 million for euros
year ended
31 december
2014
£m
year ended
31 december
2013
£m
sterling 13 27 
us dollar 08 01
euro 02 18 
03 44 
interest rate risk management
the group’s policy for managing interest rate risk is set out in the finance director’s review
following the return of capital in february 2014 the group protected 78 of its gross debt against interest rate fluctuations through fixing 
the interest expense on us 2468 million £3368 million and €2000 million of debt with the use of interest rate swaps
as a result of the “amend and extend” exercise the group completed in july 2014 and the impact of the disposal of bridon the group 
closed out all euro and sterling interest rate swaps in order to hedge up to 75 of interest rate exposure on the gross debt post the 
return of capital in march 2015 the group took out new euro sterling and additional us dollar swaps the fixed finance cost is 006 
31 december 2013 072 on euro swaps 105 31 december 2013 091 on sterling swaps and the weighted blended fixed rate  
for us dollar swaps is 092 31 december 2013 070 plus the bank margin of 130 
the interest rate swaps are designated as cash flow hedges and were highly effective throughout 2014 the fair value of the contracts  
at 31 december 2014 was a net liability of £09 million 31 december 2013 net asset of £56 million
foreign currency risk
the group’s policy for managing foreign currency risk is set out in the finance director’s review on page 48
foreign currency sensitivity analysis
currency risks are defined by ifrs 7 “financial instruments disclosures” as the risk that the fair value or future cash flows of a financial 
asset or liability will fluctuate because of changes in foreign exchange rates
the following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and liabilities  
at the balance sheet date illustrating the decreaseincrease in group operating profit caused by a 10 cent strengthening of the  
us dollar and euro against sterling and a 10 strengthening of the canadian dollar 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 notable impact are noted here 
year ended
31 december
2014
£m
year ended
31 december
2013
£m
us dollar 15 08
euro 24 05 
canadian dollar 10 –
notes to the 
financial statements continued
146
 melrose industries plc
annual report 2014
financials the following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance 
sheet date illustrating the increasedecrease in group equity caused by a 10 cent strengthening of the us dollar and euro against 
sterling and a 10 strengthening of the canadian dollar against sterling the analysis assumes that all other variables in particular other 
foreign currency exchange rates remain constant 
the 2013 high sensitivity on euro was due to a currency swap for €235 million that was put in place ahead of the 2013 year end to 
temporarily repay euro debt with a proportion of the disposal proceeds in that year until the debt was redrawn ahead of the capital return 
on 28 february 2014 adjusting for the currency swap the sensitivity on euro at 31 december 2013 was £30 million the group operates 
in a range of different currencies and those with a notable impact are noted here
31 december 
2014
£m
31 december
2013
£m
us dollar 22 15 
euro 37 208 
canadian dollar 04 04
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 £108 million 31 december 2013 £93 million and £127 million 31 december 
2013 £nil 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
interest rate swap contracts are measured using yield curves derived from quoted interest rates 
the following table sets out the group’s assets and liabilities that are measured and recognised at fair value 
recurring fair value measurements
31 december
2014
current
£m
31 december
2014
noncurrent
£m
31 december
2014
total
£m
31 december
2013
current
£m
31 december
2013
noncurrent
£m
31 december
2013
total
£m
derivative financial assets
foreign currency forward contracts 39 – 39 51 – 51 
interest rate swaps – 12 12 – 81 81 
total recurring financial assets 39 12 51 51 81 132 
derivative financial liabilities
foreign currency forward contracts 80 02 82 47 – 47
interest rate swaps 21 – 21 25 – 25
total recurring financial liabilities 101 02 103 72 – 72
the fair value of these financial instruments are derived from inputs other than quoted prices that are observable for the asset or liability either 
directly ie as prices or indirectly ie derived from prices and they are therefore categorised within level 2 of the fair value hierarchy set out 
in ifrs 13 “fair value measurement” the group’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the 
date the event or change in circumstances that caused the transfer to occur there have been no transfers between levels in the year
25 issued capital and reserves
share capital
31 december
2014
£m
31 december
2013
£m
allotted calledup and fully paid 
1071761339 31 december 2013 1266627036 ordinary shares of 13110p each 31 december 2013 01p each 13 13
13 13
the rights of each class of share are described in the directors’ report
on 7 february 2014 at a general meeting of the company shareholders approved a resolution to return £5953 million to shareholders
147
 melrose industries plc
annual report 2014
financials
financials 25  issued capital and reserves continued 
the return of capital took place by increasing the authorised share capital by £5953 million through the issue of 509123150 ‘b’ shares 
and 757 503886 ‘c’ shares of 47 0 pence each and capitalising £5953 million of the merger reserve to pay up in full the ‘b’ and ‘c’ shares
shareholders had the option to receive the cash value inherent in the ‘b’ and ‘c’ shares by way of income or the choice of two capital 
options as a result of the elections made by shareholders in respect of the return of capital
• 493363270 ‘b’ shares were redeemed and subsequently cancelled with immediate effect from 17 february 2014
• 15759880 ‘b’ shares were redeemed on 30 april 2014 and subsequently cancelled
• 757 503886 ‘c’ shares were paid a dividend on 28 february 2014 and these ‘c’ shares were subsequently cancelled
in conjunction with the return of capital on 7 february 2014 the number of ordinary shares in issue was consolidated in a ratio of 11 for 
13 in order to maintain comparability of the company’s share price before and after the return of capital on 7 february 2014 the number 
of ordinary shares in issue became 1071761339 each with a nominal value of 13110 pence
translation reserve 
the translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other than sterling and 
exchange gains or losses on the translation of liabilities that hedge the company’s net investment in foreign subsidiaries
hedging reserve
the hedging reserve represents the cumulative fair value gains and losses on derivative financial instruments for which cash flow hedge 
accounting has been applied
merger reserve capital redemption reserve and other reserves
the merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition of 
subsidiaries the capital redemption reserve arises upon the redemption of the company’s own shares other reserves comprise 
accumulated adjustments in respect of group reconstructions
26  cash flow statement
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
reconciliation of headline
2
 operating profit to cash generated by continuing operations
headline
2
 operating profit from continuing operations 2460 2400 
adjustments for
depreciation of property plant and equipment 266 280
amortisation of computer software and development costs 52 52 
restructuring costs paid and movements in other provisions 305 662
operating cash flows before movements in working capital 2473 2070 
decrease in inventories 209 263 
increasedecrease in receivables 138 07
decrease in payables 356 375
cash generated by operations 2188 1965
tax paid 351 431
interest paid 389 531
acquisition costs 23 114
defined benefit pension contributions paid 311 319
incentive scheme payments – 34
net cash from operating activities from continuing operations 1114 536 
1 restated to include the results of bridon within discontinued operations note 9
2 as defined on the income statement
notes to the 
financial statements continued
148
 melrose industries plc
annual report 2014
financials cash flow from discontinued operations
year ended
31 december
2014
£m
restated
1
year ended
31 december
2013
£m
cash generated from discontinued operations 174 1019 
tax paid 42 177
interest paid – 01
defined benefit pension contributions paid 81 17
net cash from operating activities from discontinued operations 51 824 
purchase of property plant and equipment 39 201
purchase of computer software and development costs 02 02
interest received – 01 
net cash used in investing activities from discontinued operations 41 202
net cash used in financing activities from discontinued operations – – 
1 restated to include the results of bridon within discontinued operations note 9
net debt reconciliation
 
31 december 
2013
£m
cash flow
£m
acquisitions
£m
disposals
£m
other 
noncash
movements
£m
foreign 
exchange 
difference
£m
31 december
2014
£m
cash 2004 3824 984 3517 – 08 705
debt due within one year –  – – – 09 – 09
debt due after one year 3412 2261 – – 05 41 5709
net debt 1408 6085 984 3517 04 49 5013
27 commitments and contingencies
future total minimum rentals payable under noncancellable operating leases were as follows
31 december
2014
£m
31 december
2013
£m
amounts payable
within one year 69 93
after one year but within five years 93 201
over five years 26 284
188 578
the group leases properties plant machinery and vehicles for operational purposes property leases vary in length up to a period of  
25 years plant machinery and vehicle leases typically run for periods of up to five years the reduction in minimum rentals payable under 
noncancellable operating leases during the year was primarily as a result of the disposal of bridon 
capital commitments
at 31 december 2014 there were commitments of £192 million 31 december 2013 £138 million relating to the acquisition of new plant 
and machinery
149
 melrose industries plc
annual report 2014
financials
financials 28 related parties
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not 
disclosed in this note
the group did not enter into any significant transactions in the ordinary course of business with joint ventures during the current or prior year
sales to and purchases from group companies are priced on an arm’s length basis and generally are settled on 30 day terms 
remuneration of key management personnel
the remuneration of the directors who are the key management personnel of the group is set out below in aggregate for each of the 
categories specified in ias 24 “related party disclosures” further information about the remuneration of individual directors is provided  
in the audited part of the directors’ remuneration report on pages 82 and 83
year ended
31 december
2014
£m
year ended
31 december
2013
£m
shortterm employee benefits 27 30
sharebased payments 27 27
54 57
29 post balance sheet events
at a general meeting of the company held on 20 february 2015 shareholders approved a return of capital of 187 pence per ordinary 
share totalling £2004 million
‘b’ and ‘c’ shares with a total value of £2004 million have been created resulting in a corresponding reduction in the merger reserve 
when the capital return payments are made on 16 march 2015 the ‘b’ and ‘c’ shares will be redeemed and £2004 million will be 
transferred to the capital redemption reserve
as a result of the approval of the capital return on 20 february 2015 the number of ordinary shares in issue was consolidated in a ratio  
of 13 for 14 in order to maintain comparability of the company’s share price before and after the capital return on 20 february 2015 the 
number of ordinary shares in issue became 995206966 each with a nominal value of 755 pence
further details of the capital return are provided on pages 64 and 65 in the directors’ report
30 contingent liabilities
as a result of acquisitions made by the group certain contingent legal environmental warranty and tax liabilities were identified either  
at the time of acquisition or as part of the completion of the acquisition accounting whilst it is difficult to reasonably estimate the ultimate 
outcome of these claims the directors’ best estimate has been included in the balance sheet where they existed at the time of acquisition 
and hence were recognised in accordance with ifrs 3 “business combinations” where a provision has been recognised information 
regarding the different categories of such liabilities and the amount and timing of outflows is included within note 20
the group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of 
trading subsidiaries no losses are anticipated to arise on these contingent liabilities the group does not have any other significant 
contingent liabilities 
notes to the 
financial statements continued
150
 melrose industries plc
annual report 2014
financials company balance sheet for  
melrose industries plc
notes
31 december
2014
£m
31 december
2013
£m
fixed assets
investment in subsidiaries 3 27131 27119
27131 27119
creditors amounts falling due within one year
creditors 4 7877 1008
net current liabilities 7877 1008
net assets 19254 26111
capital and reserves 
issued share capital 5 13 13
merger reserve 6 5953 11906
capital redemption reserve 6 5953 –
retained earnings 6 7335 14192
shareholders’ funds 7 19254 26111
the financial statements were approved by the board of directors on 4 march 2015 and were signed on its behalf by
geoffrey martin     simon peckham 
group finance director   chief executive 
registered number 8243706
151
 melrose industries plc
annual report 2014
financials
financials notes to the company  
balance sheet
1 significant accounting policies
basis of accounting 
the separate financial statements of melrose industries plc “the company” are presented as required by the companies act 2006  
they have been prepared under the historical cost convention and in accordance with applicable united kingdom generally accepted 
accounting practice “uk gaap” and law
the principal accounting policies are summarised below they have all been applied consistently throughout the current and prior year 
going concern
the directors have at the time of approving the financial statements a reasonable expectation that the company has adequate resources  
to continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis of accounting in 
preparing the financial statements further detail is contained in the directors’ statement of going concern on page 49 of the finance 
director’s review
investments
fixed asset investments in subsidiaries are shown at cost less provision for impairment
for investments in subsidiaries acquired for consideration including the issue of shares qualifying for merger relief cost is measured  
at the fair value of the consideration paid any premium is ignored
sharebased payments
the company has applied the requirements of frs 20 “sharebased payment” the company issues equitysettled sharebased 
payments to certain employees equitysettled sharebased payments are measured at fair value excluding the effect of 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
where equitysettled sharebased payments are made available to employees of the company’s subsidiaries these are treated as 
increases in equity over the vesting period of the award with a corresponding increase in the company’s investment in subsidiaries
cash flow statement
the company has taken advantage of the exemption from preparing a cash flow statement under the terms of frs 1 revised “cash 
flow statements” because it prepares a consolidated cash flow statement which is shown on page 104 of the group financial statements
taxation
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates 
and laws that have been enacted or substantively enacted by the balance sheet date
deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where 
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the 
balance sheet date timing differences are differences between the company’s taxable profits and its results as stated in the financial 
statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are 
recognised in the financial statements
2 profit for the period
as permitted by section 408 of the companies act 2006 the company has elected not to present its own profit and loss account for  
the year melrose industries plc reported a loss for the financial year ended 31 december 2014 of £108 million 2013 £51 million
the auditor’s remuneration for audit services to the company is disclosed in note 7 to the group consolidated financial statements
152
 melrose industries plc
annual report 2014
financials 3 investment in subsidiaries
£m
at 1 january 2014 27119
additions – sharebased payments 12
at 31 december 2014 27131
the company has investments in the following subsidiaries which principally affected the profits and net assets of the group 
 
the following subsidiary is directly owned by melrose industries plc
subsidiary country of incorporation principal activity holding 
melrose plc great britain holding company 100
significant indirectly owned subsidiaries of the group are
subsidiaries country of incorporation principal activity equity interest 
energy
brush electrical machines limited great britain engineering company 100
brush hma bv netherlands engineering company 100
brush sem sro czech republic engineering company 100
brush transformers limited great britain engineering company 100
harrington generators international limited great britain engineering company 100
hawker siddeley switchgear limited great britain engineering company 100
generator and motor services of pennsylvania llc usa engineering company 100
elster
elster american meter company llc usa engineering company 100
elster perfection corporation usa engineering company 100
elster nv belgium engineering company 100
elster gmbh germany engineering company 100
elster sas france engineering company 100
ooo elster gaselectronica russia engineering company 100
elster metering limited great britain engineering company 100
hauck manufacturing company inc usa engineering company 100
eclipse inc usa engineering company 100
elster solutions llc usa engineering company 100
elster solutions gmbh germany engineering company 100
elster medicao de energia ltda brazil engineering company 100
elster amco water llc usa engineering company 100
elster metering pty ltd australia engineering company 100
elster messtechnik gmbh germany engineering company 100
elster sro slovakia engineering company 100
elster group se germany holding company 100
elster holdings netherlands bv netherlands holding company 100
elster holdings us inc usa holding company 100
elster solutions limited great britain holding company 100
elster water metering holdings limited great britain holding company 100
group
fki limited great britain holding company 100
fki engineering limited great britain holding company 100
precision house management services limited great britain management services company 100
153
 melrose industries plc
annual report 2014
financials
financials notes to the company  
balance sheet continued
4 creditors 
31 december
2014
£m
31 december
2013
£m
amounts falling due within one year
amounts owed to group undertakings 7870 1000
accruals and other payables 07 08
7877 1008
the directors consider that amounts owed to group undertakings approximate to their fair value
5 issued share capital
share capital
31 december
2014
£m
31 december
2013
£m
allotted called up and fully paid 
1071761339 31 december 2013 1266627036 ordinary shares of 13110p each 31 december 2013 01p each 13 13
13 13
on 7 february 2014 at a general meeting of the company shareholders approved a resolution to return £5953 million to shareholders
the return of capital took place by increasing the authorised share capital by £5953 million through the issue of 509123150 ‘b’ shares 
and 757 503886 ‘c’ shares of 47 0 pence each and capitalising £5953 million of the merger reserve to pay up in full the ‘b’ and ‘c’ shares
shareholders had the option to receive the cash value inherent in the ‘b’ and ‘c’ shares by way of income or the choice of two capital 
options as a result of the elections made by shareholders in respect of the return of capital
• 493363270 ‘b’ shares were redeemed and subsequently cancelled with immediate effect from 17 february 2014
• 15759880 ‘b’ shares were redeemed on 30 april 2014 and subsequently cancelled
• 757 503886 ‘c’ shares were paid a dividend on 28 february 2014 and these ‘c’ shares were subsequently cancelled
in conjunction with the return of capital on 7 february 2014 the number of ordinary shares in issue was consolidated in a ratio of 11 for 
13 in order to maintain comparability of the company’s share price before and after the return of capital on 7 february 2014 the number 
of ordinary shares in issue became 1071761339 each with a nominal value of 13110 pence
6 reserves
reserves
issued share  
capital
£m
merger 
reserve
£m
capital  
redemption  
reserve
£m
retained 
earnings
£m
at 1 january 2013 13 11906 – 15184 
dividends paid – – – 981
loss for the year – – – 51
credit to equity for equitysettled sharebased payments – – – 40
at 31 december 2013 13 11906 – 14192 
return of capital – 5953 5953 5953
dividends paid – – – 836
loss for the year – – – 108
credit to equity for equitysettled sharebased payments – – – 40 
at 31 december 2014 13 5953 5953 7335
details of sharebased payments are given in note 22 to the group consolidated financial statements
154
 melrose industries plc
annual report 2014
financials 7 reconciliation of movements in shareholders’ funds
£m
at 1 january 2013 27103
dividends paid 981
loss for the year 51
credit to equity for equitysettled sharebased payments 40
at 31 december 2013 26111
return of capital 5953
dividends paid 836
loss for the year 108
credit to equity for equitysettled sharebased payments 40
at 31 december 2014 19254
8 related party transactions
the company has taken the exemption in frs 8 “related party disclosures” not to disclose intercompany balances and transactions  
in the period with fully owned subsidiary undertakings
9 post balance sheet events
at a general meeting of the company held on 20 february 2015 shareholders approved a return of capital of 187 pence per ordinary 
share totalling £2004 million
‘b’ and ‘c’ shares with a total value of £2004 million have been created resulting in a corresponding reduction in the merger reserve 
when the capital return payments are made on 16 march 2015 the ‘b’ and ‘c’ shares will be redeemed and £2004 million will be 
transferred to the capital redemption reserve
as a result of the approval of the capital return on 20 february 2015 the number of ordinary shares in issue was consolidated in a ratio  
of 13 for 14 in order to maintain comparability of the company’s share price before and after the capital return on 20 february 2015 the 
number of ordinary shares in issue became 995206966 each with a nominal value of 755 pence
further details of the capital return are provided on pages 64 and 65 in the directors’ report
155
 melrose industries plc
annual report 2014
financials
financials 13 to authorise the audit committee to determine the 
remuneration of the auditor of the company
14 that in accordance with section 551 of the companies act 
2006 the “act” the directors of the company the “directors”
be and are generally and unconditionally authorised to allot 
shares in the company or to grant rights to subscribe for or  
to convert any security into shares in the company “rights”
a up to an aggregate nominal amount of £422209 and
b comprising equity securities as defined in section 560 of 
the act up to an aggregate nominal amount of £844418 
such amount to be reduced by the aggregate nominal 
amount of any allotments or grants made under paragraph 
a of this resolution in connection with an offer by way  
of rights issue
i to ordinary shareholders in proportion as nearly as 
may be practicable to their existing holdings and
ii to holders of other equity securities as required by  
the rights of those securities or subject to such  
rights as the directors otherwise consider necessary 
and so that the directors may impose any limits or 
restrictions and make any arrangements which they 
consider necessary or appropriate to deal with treasury 
shares fractional entitlements record dates legal 
regulatory or practical problems in or under the laws  
of any territory or any other matter 
such authorities to expire at the conclusion of the company’s 
next annual general meeting after this resolution is passed or  
if earlier at the close of business on 30 june 2016 but in each 
case so that the company may make offers or agreements 
before the authority expires which would or might require 
shares to be allotted or rights to be granted after the authority 
expires and so that the directors may allot shares or grant 
rights in pursuance of any such offer or agreement 
notwithstanding that the authority conferred by this  
resolution has expired 
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 
manager solicitor accountant fund manager 
or other independent financial adviser 
authorised under the financial services  
and markets act 2000 if you are resident  
in the united kingdom or if not another 
appropriately authorised independent 
financial adviser
if you have sold or otherwise transferred all of your shares in 
melrose industries plc the “company” you should send this 
document as soon as possible to the purchaser or transferee or  
to the stockbroker bank or other agent through whom the sale or 
transfer was effected for delivery to the purchaser or transferee
notice is given that the annual general meeting of the company will 
be held at barbersurgeons’ hall monkwell square wood street 
london ec2y 5bl at 1 100 am on 14 may 2015 for the following 
purposes resolutions 1 to 14 inclusive will be proposed as ordinary 
resolutions and resolutions 15 to 17 inclusive as special resolutions
ordinary resolutions
1 to receive the company’s audited financial statements for  
the financial year ended 31 december 2014 together with  
the directors’ report strategic report and the auditor’s report  
on those financial statements
2 to approve the directors’ remuneration report other than the 
part containing the directors’ remuneration policy for the year 
ended 31 december 2014 as set out on pages 78 to 95 save 
for pages 88 to 95 of the company’s 2014 annual report
3 to declare a final dividend of 53p per ordinary share for the 
year ended 31 december 2014
4 to reelect christopher miller as a director of the company
5 to reelect david roper as a director of the company
6 to reelect simon peckham as a director of the company
7 to reelect geoffrey martin as a director of the company
8 to reelect perry crosthwaite as a director of the company
9 to reelect john grant as a director of the company
10 to reelect justin dowley as a director of the company
11 to reelect liz hewitt 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
notice of annual general meeting  
156
 melrose industries plc
annual report 2014
shareholder information shareholder information
special resolutions
15 that subject to the passing of resolution 14 in accordance with 
sections 570 and 573 of the act the directors be and are generally 
empowered to allot equity securities as defined in section 560 of 
the act for cash pursuant to the authorities granted by resolution 
14 as if section 561 of the act did not apply to any such allotment 
provided that this power shall be limited
a to the allotment of equity securities in connection with an 
offer of equity securities but in the case of an allotment 
pursuant to the authority granted under paragraph b of 
resolution 14 such power shall be limited to the allotment  
of equity securities in connection with an offer by way of 
rights issue only
i to ordinary shareholders in proportion as nearly as 
may be practicable to their existing holdings and
ii to holders of other equity securities as required by 
the rights of those securities or subject to such rights 
as the directors otherwise consider necessary
and so that the directors may impose any limits or 
restrictions and make any arrangements which they 
consider necessary or appropriate to deal with treasury 
shares fractional entitlements record dates legal 
regulatory or practical problems in or under the laws  
of any territory or any other matter and
b to the allotment otherwise than in the circumstances set  
out in paragraph a of this resolution of equity securities 
pursuant to the authority granted by paragraph a of resolution 
14 up to an aggregate nominal amount of £126662 
such power to expire at the conclusion of the company’s next 
annual general meeting after this resolution is passed or if 
earlier at the close of business on 30 june 2016 but so that  
the company may make offers or agreements before the  
power expires which would or might require equity securities  
to be allotted after the power expires and so that the directors 
may allot equity securities in pursuance of any such offer or 
agreement notwithstanding that the power conferred by this 
authority has expired 
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 99520696
b the minimum price which may be paid for an ordinary  
share is the nominal value of an ordinary share at the  
time of such purchase
c the maximum price which may be paid for an ordinary 
share is not more than the higher of
i 105 of the average of the middle market quotation 
for an ordinary share as derived from the daily official 
list of the london stock exchange for the five 
business days immediately preceding the day on 
which the ordinary share is purchased and
ii the higher of the price of the last independent trade 
and the highest current independent bid on the 
trading venue where the purchase is carried out 
in each case exclusive of expenses
d this authority shall expire at the conclusion of the 
company’s next annual general meeting after this 
resolution is passed or if earlier at the close of business  
on 30 june 2016
e the company may make a contract of purchase of ordinary 
shares under this authority which would or might be 
executed wholly or partly after the expiry of this authority 
and may make a purchase of ordinary shares in pursuance 
of any such contract and
f any ordinary shares purchased pursuant to this authority 
may either be held as treasury shares or cancelled by  
the company depending on which course of action is 
considered by the directors to be in the best interests  
of shareholders at the time
17 that a general meeting other than an annual general meeting 
may be called on not less than 14 clear days’ notice
recommendation
the board believes that each of the resolutions to be proposed  
at the annual general meeting is in the best interests of the 
company and its shareholders as a whole accordingly the 
directors unanimously recommend that ordinary shareholders  
vote in favour of all of the resolutions proposed as the directors 
intend to do in respect of their own beneficial holdings
by order of the board
adam westley
company secretary
2 april 2015
registered office 
11th floor colmore plaza
20 colmore circus queensway
birmingham
west midlands
b4 6at
157
 melrose industries plc
annual report 2014
shareholder information
shareholder information explanatory notes to the proposed resolutions
resolutions 1 to 14 inclusive are proposed as ordinary  
resolutions which means that for each of those resolutions  
to be passed more than half the votes cast must be cast in  
favour of the resolution resolutions 15 to 17 inclusive are 
proposed as special resolutions which means that for each  
of those resolutions to be passed at least threequarters of  
the votes cast must be cast in favour of the resolution
resolution 1 – receipt of 2014 annual report and  
financial statements
the directors are required to lay the company’s financial 
statements the strategic report and the directors’ and auditor’s 
reports on those financial statements collectively the “annual 
report” before shareholders each year at the annual general 
meeting “agm” 
resolution 2 – approval of directors’ remuneration report 
following changes to the act and in line with new regulations which 
came into effect on 1 october 2013 the directors’ remuneration 
report the “directors’ remuneration report” is now presented in 
three sections
• the annual statement from the chairman of the  
remuneration committee 
• the annual report on remuneration and
• the directors’ remuneration policy
the annual statement from the chairman of the remuneration 
committee set out on pages 78 to 80 of the 2014 annual report 
summarises for the year ended 31 december 2014 the major 
decisions taken on directors’ remuneration any substantial 
changes relating to directors’ remuneration made during the year 
and the context in which those changes occurred and decisions 
that have been taken
the annual report on remuneration set out on pages 81 to 88  
of the 2014 annual report provides details of the remuneration 
paid to directors in respect of the year ended 31 december 2014 
including base salary taxable benefits shortterm incentives 
including percentage deferred longterm incentives vested in  
the year pensionrelated benefits any other items in the nature  
of remuneration and any sums recovered or withheld during the 
year in respect of amounts paid in earlier years 
the directors’ remuneration policy set out on pages 88 to 95 of the 
2014 annual report provides details of the company’s policy on 
directors’ remuneration including the policy on payments for loss  
of office this policy was approved by shareholders at the agm  
on13 may 2014 the approval being valid for three years from that 
date as the policy is unchanged shareholder approval of the  
policy is not required at this agm all remuneration payments and 
payments for loss of office made by the company to the current 
and any former directors must be consistent with the directors’ 
remuneration policy or if inconsistent with the directors’ 
remuneration policy must have been separately approved by  
way of an ordinary resolution of the shareholders in accordance 
with the relevant provisions of the act approval would also be 
sought from shareholders if at any time in the next two years  
the company wished to make any changes to the policy
the directors’ remuneration report other than the part containing 
the directors’ remuneration policy is subject to an annual advisory 
shareholder vote by way of an ordinary resolution resolution 2 is to 
approve the directors’ remuneration report other than the part 
containing the directors’ remuneration policy
resolution 3 – declaration of final dividend
the board is recommending and the shareholders are being asked 
to approve the declaration of a final dividend of 53 pence per 
ordinary share for the year ended 31 december 2014 the final 
dividend will subject to shareholder approval be paid on 18 may 
2015 to the holders of ordinary shares whose names are recorded 
on the register of members of the company at the close of 
business on 17 april 2015 
resolutions 4 to 11 inclusive – reelection of directors
in accordance with the uk corporate governance code the 
“code” and the company’s articles of association the “articles” 
every director will stand for reelection at the agm biographical 
details of each director can be found on pages 62 and 63 of the 
2014 annual report all of the nonexecutive directors standing  
for reelection are considered independent under the code 
resolution 12 – reappointment of auditor 
the company is required to appoint auditors at each general 
meeting at which accounts are laid before shareholders to hold 
office until the next such meeting 
the audit committee has reviewed the effectiveness performance 
independence and objectivity of the existing external auditor 
deloitte llp  on behalf of the board and concluded that the 
external auditor was in all respects effective
this resolution proposes the reappointment of deloitte llp until 
the conclusion of the next agm
resolution 13 – authority to agree auditor’s remuneration
this resolution seeks authority for the audit committee to 
determine the level of the auditor’s remuneration 
resolution 14 – authority to allot shares
this resolution seeks shareholder approval to grant the directors 
the authority to allot shares in the company or to grant rights to 
subscribe for or convert any securities into shares in the company 
“rights” pursuant to section 551 of the act the “section 551 
authority” the authority contained in paragraph a of the 
resolution will be limited to an aggregate nominal amount of 
£422209 being approximately onethird of the company’s issued 
ordinary share capital as at 2 april 2015 
in line with guidance issued by the association of british insurers 
paragraph b of this resolution would give the directors authority  
to allot shares in the company or grant rights in connection with  
a rights issue up to aggregate nominal amount of £844418 
representing approximately twothirds of the company’s issued 
ordinary share capital as at 2 april 2015 as reduced by the 
aggregate nominal amount of any allotments or grants under 
paragraph a of this resolution
the company does not hold any shares in treasury
notice of annual general meeting  
continued
158
 melrose industries plc
annual report 2014
shareholder information shareholder information
if approved the section 551 authority shall unless renewed 
revoked or varied by the company expire at the end of the 
company’s next agm after the resolution is passed or if earlier  
at the close of business on 30 june 2016 the exception to this  
is that the directors may allot shares or grant rights after the 
authority has expired in connection with an offer or agreement 
made or entered into before the authority expired the directors 
have no present intention to exercise the section 551 authority
resolution 15 – partial disapplication of preemption rights
this resolution seeks shareholder approval to grant the directors 
the power to allot equity securities of the company pursuant to 
sections 570 and 573 of the act the “section 570 and 573 power” 
without first offering them to existing shareholders in proportion to 
their existing shareholdings
the power is limited to allotments for cash in connection with 
preemptive offers subject to any arrangements that the directors 
consider appropriate to deal with fractions and overseas 
requirements and otherwise for cash up to a maximum nominal 
value of £126662 representing approximately 10 of the 
company’s issued ordinary share capital as at 2 april 2015
the directors intend to adhere to the guidelines set out in the 
preemption group’s statement of principles as updated in march 
2015 and not to allot shares for cash on a nonpreemptive basis 
pursuant to the authority in resolution 15 b
• in excess of an amount equal to 5 of the company’s issued 
ordinary share capital or
• in excess of an amount equal to 7 5 of the company’s issued 
ordinary share capital in a rolling threeyear period
in each case other than in connection with an acquisition  
or specified capital investment which is announced 
contemporaneously with the allotment or which has taken  
place in the preceding sixmonth period and is disclosed in  
the announcement of the allotment
if approved the section 570 and 573 power shall apply until the 
end of the company’s next agm after the resolution is passed or  
if earlier until the close of business on 30 june 2016 the exception 
to this is that the directors may allot equity securities after the 
power has expired in connection with an offer or agreement made 
or entered into before the power expired the directors have no 
present intention to exercise the section 570 and 573 power
resolution 16 – authority to purchase own shares
this resolution seeks shareholder approval to grant the company 
the authority to purchase its own shares pursuant to sections 693 
and 701 of the act 
this authority is limited to an aggregate maximum number of 
99520696 ordinary shares representing 10 of the company’s 
issued ordinary share capital as at 2 april 2015 
the maximum price which may be paid for an ordinary share will 
be an amount which is not more than the higher of i 5 above the 
average of the middle market quotation for an ordinary share as 
derived from the daily official list of the london stock exchange 
for the five business days immediately preceding the day on which 
the ordinary share is purchased and ii the higher of the price of 
the last independent trade and the highest current independent bid 
on the trading venue where the purchase is carried out in each 
case exclusive of expenses 
if approved the authority shall unless varied revoked or renewed 
expire at the end of the company’s next agm after the resolution is 
passed or if earlier at the close of business on 30 june 2016 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 – notice period for general meetings other 
than agms
this resolution seeks shareholder approval to allow the company  
to continue to call general meetings other than agms on 14 clear 
days’ notice in accordance with the companies shareholders’ 
rights regulations 2009 the notice period required for general 
meetings of the company is 21 days unless shareholders approve a 
shorter notice period subject to a minimum period of 14 clear days 
agms will continue to be held on at least 21 clear days’ notice
the approval will be effective until the company’s next agm  
when it is intended that a similar resolution will be proposed  
in accordance with the act the company must make a means  
of electronic voting available to all shareholders for that meeting  
in order to be able to call a general meeting on less than 21 clear 
days’ notice
159
 melrose industries plc
annual report 2014
shareholder information
shareholder information explanatory notes as to the proxy voting and attendance 
procedures at the annual general meeting agm
1 the holders of ordinary shares in the company are entitled to 
attend the agm and are entitled to vote a member entitled to 
attend and vote may appoint a proxy to exercise all or any of 
their rights to attend speak and vote at a general meeting of  
the company such a member may appoint more than one 
proxy provided that each proxy is appointed to exercise the 
rights attached to different shares a proxy need not be a 
member of the company
2 a form of proxy is enclosed with this notice to be effective a 
form of proxy must be completed and returned together with 
any power of attorney or authority under which it is completed 
or a certified copy of such power or authority so that it is 
received by the company’s registrars at the address specified 
on the form of proxy not less than 48 hours excluding any part 
of a day that is not a working day before the stated time for 
holding the meeting returning a completed form of proxy will 
not preclude a member from attending the meeting and voting 
in person
3 any person to whom this notice is sent who is a person 
nominated under section 146 of the act to enjoy information 
rights a “nominated person” may under an agreement 
between him and the shareholder by whom he was nominated 
have a right to be appointed or to have someone else 
appointed as a proxy for the agm 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 agm 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 12 may 2015  
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 2 april 2015 the company’s issued share capital consists 
of 995206966 ordinary shares of 755 pence 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
7 in order for a proxy appointment or instruction made using the 
crest service to be valid the appropriate crest message  
a “crest proxy instruction” must be properly authenticated  
in accordance with euroclear uk  ireland limited’s 
specifications and must contain the information required  
for such instruction as described in the crest manual 
available via wwweuroclearcom the message regardless 
of whether it constitutes the appointment of a proxy or is an 
amendment to the instruction given to a previously appointed 
proxy must in order to be valid be transmitted so as to be 
received by the issuer’s agent id ra19 by 1100 am on  
12 may 2015 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 
uncertified securities regulations 2001
10 any corporation which is a member can appoint one or more 
corporate representatives who may exercise on its behalf all  
of its powers as a member provided that they do not do so  
in relation to the same shares
notice of annual general meeting  
continued
160
 melrose industries plc
annual report 2014
shareholder information shareholder information
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 agm 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 voting at the agm will be by poll the chairman will invite each 
shareholder corporate representative and proxy present at  
the meeting to complete a poll card indicating how they wish  
to cast their votes in respect of each resolution in addition  
the chairman will cast the votes for which he has been 
appointed as proxy poll cards will be collected at the end  
of the meeting once the results have been verified by the 
company’s registrar equiniti they will be notified to the uk 
listing authority announced through a regulatory information 
service and will be available to view on the company’s website 
14 a copy of this notice and other information required by section 
311a of the act can be found at wwwmelroseplcnet
15 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
16 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
17 you may register your vote online by visiting equiniti’s website  
at wwwsharevotecouk in order to register your vote online  
you will need to enter the task id together with your voting id  
and shareholder reference number which are set out on the 
enclosed proxy form the return of the proxy form by post or 
registering your vote online will not prevent you from attending  
the annual general meeting and voting in person should you 
wish alternatively shareholders who have already registered  
with equiniti’s online portfolio service shareview can appoint 
their proxy electronically by logging on to their portfolio  
at wwwshareviewcouk and click on the link to vote  
the onscreen instructions give details on how to complete  
the appointment process a proxy appointment made 
electronically will not be valid if sent to any address other  
than those provided or if received after 1100 am on  
12 may 2015
adoption of financial reporting standard frs 101 
– reduced disclosure framework
following the publication of frs 100 application of  
financial reporting requirements by the financial  
reporting council melrose industries plc is required  
to change its accounting framework for its entity financial 
statements which is currently uk gaap  for its financial  
year which commenced on 1 january 2015 the board 
considers that it is in the best interests of the group for 
melrose industries plc to adopt frs 101 reduced 
disclosure framework no disclosures in the current uk 
gaap financial statements would be omitted on adoption  
of frs 101 a shareholder or shareholders holding in 
aggregate 5 or more of the total allotted shares in  
melrose industries plc may serve objections to the use  
of the disclosure exemptions on melrose industries plc  
in writing to its registered office 11th floor colmore plaza  
20 colmore circus queensway birmingham west midlands 
b4 6at not later than 30 june 2015
161
 melrose industries plc
annual report 2014
shareholder information
shareholder information company and  
shareholder information
as at 31 december 2014 there were 9828 holders of ordinary shares of 13110 pence each in the capital of the company  
their shareholdings are analysed below and show shareholding numbers as at 31 december 2014
shareholder analysis
range of holdings
number of  
holdings
percentage of  
total shareholders
number of  
ordinary shares
percentage of  
ordinary shares in issue
15000 8058 820 9765985 09
500150000 1228 125 15741004 15
50001500000 310 31 52274483 49
over 500000 232 24 993979867 927
total 9828 1000 1071761339
1
1000
held by
individuals 5852 595 35231306 33
institutions 3976 405 1036530033 967 
total 9828 1000 1071761339
1
1000
1  following the return of capital to shareholders and the subsequent share capital consolidation details of which can be found on pages 64 and 65 of the directors’ report the total number of 
issued ordinary shares in the capital of the company was 995206966 with a nominal value of 755 pence each shareholders continued to own approximately the same proportion of the 
company after the share capital consolidation as they did before subject to fractional entitlements
financial calendar 2015
exdividend date for final dividend 16 april 2015
record date for final dividend 17 april 2015
annual general meeting 14 may 2015
payment date of final dividend 18 may 2015
announcement of interim results august 2015
intended payment of interim dividend october 2015
preliminary announcement of 2015 results march 2016
registrar
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
tel 0871 384 2030
or 44 0 121 415 7047  
from outside uk
 c alls to this number are charged at  
8 pence per minute excluding vat  
plus network extras lines are open  
from 830am to 530pm monday to  
friday excluding uk public holidays
brokers
investec
2 gresham street
london
ec2v 7qp
jp  morgan cazenove
25 bank street
london
e14 5jp
legal advisers
simpson thacher  bartlett llp  
citypoint
one ropemaker street
london
ec2y 9hu
bankers
barclays bank plc
commerzbank ag
hsbc bank plc
jp  morgan limited
lloyds tsb bank plc
royal bank of canada
the royal bank of scotland plc
bayernlb
fifth third bank
icbc
mizuho
santander uk plc
unicredit
wells fargo bank international
a range of shareholder information is available at equiniti’s website wwwshareviewcouk where you can also register for a shareview portfolio 
to access information about your holding and undertake a number of activities including changing a dividend mandate and updating your address  
to register you will need your 1 1 digit shareholder reference number srn which can be found on your proxy form or dividend voucher
gifting your shares
if you have a small number of shares and the dealing costs or minimum fee make it uneconomical to sell them you may like to donate them  
to benefit charities through sharegift a registered charity further information is available on the sharegift website at wwwsharegiftorg 
or call 44 0 207 930 3737 
share fraud warning
many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning 
investment matters fraudsters use persuasive and highpressure tactics to lure investors into scams they may offer to sell shares that  
turn out to be worthless or nonexistent or to buy shares at an inflated price in return for an upfront payment for more detailed information  
on this kind of activity or to report a scam please call the financial conduct authority’s consumer helpline on 0800 111 6768 or visit  
wwwfcaorgukconsumersscams
162
 melrose industries plc
annual report 2014
shareholder information notes
163
 melrose industries plc
annual report 2014
shareholder information
shareholder information notes
164
 melrose industries plc
annual report 2014
shareholder information printed at pureprint group 
both the manufacturing mill and the printer are registered to the environmental management 
system iso 14001 and are forest stewardship council
®
 fsc chainofcustody certified
designed and produced by sampsonmay 
telephone 020 7403 4099 wwwsampsonmaycom melrose
buy
improve
sell
registered office
11th floor colmore plaza 
20 colmore circus queensway 
birmingham 
west midlands  
b4 6at
tel 44 0 121 296 2800 
fax 44 0 121 296 2839
registered number 08243706
head office
leconfield house 
curzon street 
london 
w1j 5ja
tel 44 0 20 7647 4500 
fax 44 0 20 7647 4501
north america office
gateway center building one 
2077 convention center concourse  
suite 175  
college park  
atlanta 
ga 30337 
usa
tel 1 404 941 2100 
fax 1 404 941 2772
wwwmelroseplcnet
london stock exchange
code mro 
sedol bv9fyx3
melrose industries plc


Summary:
 elster gas
elster water
energy
elster 
electricity
simon peckham
chief executive
acquiring good quality 
manufacturing businesses 
making operational 
improvements realising 
shareholder value at the 
appropriate time and then 
returning this value to 
shareholders continue to 
be the components of the 
“buy improve sell” business 
strategy that melrose has 
followed since being founded  
in 2003 
the group now consists of brush the  
last remaining business from the fki 
acquisition and the businesses which 
comprise elster continued improvement  
of all these businesses is as ever a key 
objective for 2015 
acquisitions and disposals during  
the year
2014 has been another highly successful 
year for melrose in october 2014 elster 
gas completed the acquisition of eclipse  
a usbased manufacturer of gas 
combustion components and systems for 
industrial heating and drying applications 
combining this with our existing elster gas 
business gives us a great opportunity to 
create significant shareholder value in the  
following month melrose completed the 
disposal of bridon for a total enterprise  
value of £365 million representing the  
latest step in realising value from the fki 
businesses acquired by melrose in 2008
outlook
overall market conditions remain 
challenging but we have in elster a 
business that is well positioned for growth  
in 2015 at current exchange rates we face 
further currency headwinds this year and 
the order intake pattern suggests a more 
pronounced weighting of results to the 
second half of the year as said previously 
we believe we will see further progress in 
our elster businesses but end market 
conditions mean that brush will have a 
more difficult 2015 overall adjusting for 
the adverse currency movements which 
are outside our control we believe that the 
group will be in line with management 
expectations for 2015 
simon peckham
chief executive
4 march 2015
chief executive’s review
to find out more about  
our performance please  
see the following pages
more information p28
more information p34
more information p30
more information p32
14
 melrose industries plc
annual report 2014
strategic report “ 2014 has been another 
highly successful year 
for melrose”
an elster smart residential 
gas meter destined for the 
uk market is subjected to 
automated leak testing in 
lotte germany 
15
 melrose industries plc
annual report 2014
strategic report
strategic report