melrose plc  annual report 2009
melrose plc
annual report 2009
making acquisitions
driving performance
realising value
wwwmelroseplcnet melrose plc annual report 2009
contents
01	 financial highlights
02	 	 group at a glance
06	 	 chairman’s statement
08	 	 chief executive’s review
	 10 	 	 energy business review
	 12 	 	 lifting business review
	 14 	 	 dynacast business review
	 16 	 	 other industrial business review
19	 	 finance director’s review
26	 	 board of directors
28	 	 directors’ report 
36	 	 corporate governance report
40	 	 remuneration report
44	 	 	 statement of directors’ 
responsibilities
	
45	 	 financial contents
46	 	 	 independent auditors’ report – 
consolidated statements
47	 	 consolidated income statement
48	 	 	 consolidated statement 
of comprehensive income
49	 	 	 consolidated statement 
of cash flows
50	 	 consolidated balance sheet
51	 	 	 consolidated statement of changes 
in equity
52	 	 notes to the accounts
90	 	 	 independent auditors’ report – 
company statements
91	 	 	 company balance sheet for 
melrose plc
92	 	 	 notes to the company 
balance sheet 
99	 	 notice of annual general meeting
103	 	 	 company and shareholder 
information
business	 performance
governance
shareholder	 information
financials
£1 2985m
revenue
year ended 31 december 2009
166p
headline
1
	 basic	 earnings	 per	 share
year ended 31 december 2009
£1497m
headline
1
	 operating	 profit
year ended 31 december 2009
revenue	 by	 geographic	 location

1	 	 europe 60
2	 	 north	 america 31
3	 	 asia 7
4	 	 rest	 of	 world 2
net	 debt
£m
all information presented above relates to the group’s 
continuing business
1  before exceptional costs exceptional income and 
intangible asset amortisation
2  the ratio of net debt to headline operating profit 
before depreciation and amortisation
2
1
3
4
31 dec
2008
30 june
2009
31 dec
2009
543
416
322
265x 2 13x 1 76x
leverage
2
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melrose plc annual report 2009 01 melrose plc annual report 2009
business performance governance financials shareholder information
financial highlights
melrose’s strategy is to acquire businesses it understands improve 
them by a mixture of investment and changed management focus  
and in a three to five year time frame realise the value created and 
return it to shareholders in the most efficient way possible
	
	 headline
2
 2009 profit before tax of 
£1186 million 2008 £731 million
3
 
	
	 headline
2
 2009 earnings per share of 
166p 2008 161p
3
	 	
basic earnings per share after exceptional 
items and intangible asset amortisation  
of 110p 2008 41p
3
	
	 profit before tax of £820 million 
2008 £235 million
3
	
	 headline
2
 operating profit margins in 
the second half of 2009 of 13
	
	 excellent cash generation at constant 
exchange rates net working capital  
reduced by £1483 million over half  
since fki acquisition
	
	 net debt of £3217 million 2008 
£5431 million reduced by £2214 million 
net debt is now 176 x ebitda
4
	
	 proposed second interim dividend of 48p 
per share 2008 final dividend of 425p 
payable on 1 april 2010 to shareholders  
on the register on 19 march 2010 in lieu  
of the final dividend for this year together 
with the previous interim dividend of 29p 
2008 275p this gives a full year dividend 
of 7 7p 2008 7 0p up 100
 
 
1
 
continuing operations only unless otherwise stated
 
2 before exceptional costs exceptional income and intangible asset amortisation
 
3  restated to include logistex europe sold on 28 august 2009 within 
discontinued operations
 
4 headline operating profit before depreciation and amortisation
how we performed financial highlights
1
“ our first full year of ownership of fki has 
exceeded our expectations with margin 
improvements debt reduction and cash 
generation being the highlights in a very 
difficult year these results illustrate the  
quality of our businesses
  across the group sales in our early 
cycle businesses are now beginning to 
increase and in our later cycle businesses 
order books are reviving for the moment 
it appears recovery which has been 
noticeable for several months in the east 
may be on the way to the west
  we continue to believe that market and 
economic conditions favour acquisitions  
over disposals at present and so we 
continue to look for the right opportunity 
fortunately the strong growth potential of 
our existing businesses over the next few 
years gives us the ability to be patient”
  
 christopher miller 
 chairman 02 melrose plc annual report 2009
group at a glance
business description
world number one independent supplier of turbogenerators and leading supplier  
of other electricity generating machinery transformers and power infrastructure 
equipment including aftermarket service capabilities
key strengths
  expertise to design and manufacture an extensive range of high quality medium 
to high voltage generators 
  comprehensive and integrated aftermarket support to ensure individual packages 
are tailored to meet customers’ needs and requirements throughout the operating 
life of their equipment 
  longstanding relationships with uk and overseas electricity supply authorities 
global oil companies and deep coal mine companies 
  transformer products in service with all uk energy supply authorities
  strategically located around the world
sectors served
power generation plants oil and gas utilities industrial marine rail 
telecommunications construction commercial military and aftermarket
products
power generation equipment including hydrogencooled generators 4 and 2 pole 
turbogenerators combined cooled turbogenerators synchronous motors induction 
motors submersible and traction motors power management systems excitation 
systems generator control and protection panels generator terminal cubicles 
medium voltage and transit switchgear power system and distribution transformers 
and aftermarket servicing 
major customers
general electric pratt  whitney rollsroyce scottish  southern electricity edf 
saudi aramco major oil and mining companies and other uk and overseas electricity 
distribution network operators “dnos”
energy businesses
brush turbogenerators 
wwwbrusheu
marelli motori 
wwwmarellimotoricom
brush transformers 
wwwbrushtransformerscom
hawker siddeley switchgear hss 
wwwhssltdcom
harrington generators 
wwwharringtoninternationalcouk
energy
winding specialist inserting copper coils into the stator  
assembly of a brush electrical turbogenerator
revenue
year ended 31 december 2009
£4183m
average number of employees
year ended 31 december 2009
3558
headline
1
 operating profit
year ended 31 december 2009
£610m
revenue by geographic location

1  europe 95
2  north	america 3
3  asia 1
4  rest	of	world 1
1  before exceptional costs exceptional income 
and intangible asset amortisation
see page 10 for energy business review
1  utilities 45
2  aftermarket 16
3  oil	and	gas 14
4  industrials 14 
5  marine 6
6  other 5
revenue by end market

2
1
3
4
1
2
3
4
5
6 03 melrose plc annual report 2009
business performance governance financials shareholder information
revenue
year ended 31 december 2009
£4190m
average number of employees
year ended 31 december 2009
2886
headline
1
 operating profit
year ended 31 december 2009
£625m
revenue by geographic location

1  north	america 45 
2  europe 44
3  asia 6
4  rest	of	world 5
1  before exceptional costs exceptional income 
and intangible asset amortisation
see page 12 for lifting business review
1  energy 41
2  industrials 36
3  mining 10
4  infrastructure 5
5  wire 4
6  marine 4
business description
top three supplier worldwide for wire and wire rope and leading supplier worldwide  
of lifting fittings and blocks and custom engineered material handling products
key strengths
  comprehensive and competitive range of solutions in steel wire wire and fibre 
rope and strand
  technical expertise to support customers in demanding applications training 
installation and testing
  world’s leading supplier of accessories used in lifting and material handling 
applications
  strategically located around the world
sectors served
onshore and offshore oil and gas deep shaft and surface mining petrochemical 
alternative energy general industrial and construction markets fishing and marine 
infrastructure eg bridges and sports stadia and material handling industries
products
wire rope fibre rope wire lifting hooks connectors clamps hoist rings blocks 
sheaves material handling products monorail systems chain hoists and industrial 
carts and trailers 
major customers
global crane original equipment manufacturers “oems” mining oems major oil 
companies global oilfield exploration and construction contractors construction 
companies and lifting products distributors 
lifting businesses
bridon
wwwbridoncom
crosby
wwwthecrosbygroupcom
acco
wwwaccomhscom
lifting
new kurilpa pedestrian bridge 
in brisbane australia
revenue by end market

2
1
3
4
1
2
3
4
5
6 04 melrose plc annual report 2009
group at a glance
continued
business description
global designer and manufacturer of precision engineered diecast metal components 
and assemblies
key strengths
 precision engineered diecast zinc aluminium and magnesium alloy components
 full service capability
 concept and design engineering
 rapid prototyping
 machine building capability
sectors served
automotive telecommunications consumer electronics computing healthcare  
and construction
products
automotive components telecommunications and electronic components  
consumer products and diecasting machines
major customers
procter  gamble valeo autoliv trw bosch apple motorola and sony
dynacast businesses
dynacast
wwwdynacastcom
fishercast
wwwfishercastcouk
techmire
wwwtechmirecom
optical pickup component  
manufactured for bluray players
dynacast
revenue
year ended 31 december 2009
£2087m
average number of employees
year ended 31 december 2009
2141
headline
1
 operating profit
year ended 31 december 2009
£213m
revenue by geographic location

1  europe 38
2  north	america 34
3  asia 28
1
  
before exceptional costs exceptional income 
and intangible asset amortisation
see page 14 for dynacast business review
revenue by end market

1  automotive 36
2   electronics	and	
communications 27
3  healthcare 11 
4 hardware 8
5  tooling 5
6  other 13
2
1
3
1
2
3
4
5
6 05 melrose plc annual report 2009
business performance governance financials shareholder information
revenue
year ended 31 december 2009
£2525m
average number of employees
year ended 31 december 2009
2415
headline
1
 operating profit
year ended 31 december 2009
£206m
1  europe 44
2  north	america 55
3  asia 1
1  before exceptional costs exceptional income 
and intangible asset amortisation
see page 16 for other industrial business review
1  hardware 37
2  rail 13
3  automotive 9
4  industrials 9
5  aftermarket 8
6  other 24
business description
truth  us market leader in design and manufacture of residential and 
commercial window storm and screen door hardware
harris  market leader in scrap processing waste reduction and recycling 
equipment design engineering manufacture and servicing 
brush designs manufactures and refurbishes rail locomotives propulsion 
traction systems coaches and freight vehicles
mpc  designs and manufactures engineered plastic injectionmoulded 
and extruded components and metal pressings
logistex uk designs and manufactures automated material handling solutions
weber us number one designer and manufacturer of highend concealed
knapp   appliance hinge mechanisms spring loaded mechanisms and custom 
electrical enclosures for ergonomic office furniture solutions
key strengths
 market leading design and engineering capabilities 
 in depth aftermarket service supply capabilities 
 leading innovative product development and technology choice for customers
 trusted longstanding quality brand names
sectors served
businesses serve a diverse range of sectors including housing construction retail scrap 
processing fibre recycling rail automotive consumer packaging brewing food distribution 
power tools industrial medical office furniture storage distribution and general engineering
products
window and door hardware balers shears waste compactors and auto shredders  
rail vehicle and component manufacture and refurbishment automotive trims and 
mouldings food packaging containers and transit trolleys widgets for bottles and cans  
and sealing products ergonomic office and desk equipment and sortation distribution  
and warehouse control systems
major customers
us hardware industry oems waste and scrap processors airports postal distribution 
facilities libraries manufacturers and distributors in various industries and retailers
other 
industrial
eurotunnel shuttle locomotive wheelsets  
overhauled by brush traction
other industrial businesses
truth wwwtruthcom
harris wwwharriswastecom
brush traction wwwbrushtractioncom
mpc wwwmckechnieplasticscouk
logistex uk wwwlogistexcom
weber knapp wwwweberknappcom
prelok wwwprelokcom
madico wwwmadicoinccom
revenue by geographic location

revenue by end market

2
1
3
1
2
3
4
5
6 06 melrose plc annual report 2009
chairman’s  
statement
i am pleased to report melrose’s seventh set of annual results 
since flotation in 2003
results for the group
these accounts report the results for the group for the year  
to 31 december 2009 and comparatives for the previous year  
fki plc was acquired on 1 july 2008 and these accounts include 
its first full year contribution
revenue for the year was £12985 million 2008 £8953 million 
headline profit before tax before exceptional costs exceptional 
income and intangible asset amortisation was £1186 million 
2008 £731 million and headline basic earnings per share were 
166p 2008 161p profit before tax was £820 million 2008 
£235 million and the basic earnings per share were 110p  
2008 41p
further explanation of these results is provided in the finance 
director’s review
fki plc
our first full year of ownership of fki has exceeded our expectations 
the quality of its major businesses has been demonstrated in  
their resilience during the severe downturn in 2009 changes  
in management and strategies as well as targeted capital 
expenditure have reaped early rewards the geographic and 
sector spread of these businesses when added to their inherent 
strengths gives us confidence that there is more to come over  
the next few years at the same time continued focus by our 
management teams on permanent cash generation has  
produced excellent results 
headline profit before tax
£1186m
total 2009 dividend
7 7p
headline
 
basic eps
166p
“ our first full year of ownership  
of fki has exceeded our 
expectations the quality of  
its major businesses has been 
demonstrated in their resilience 
during the severe downturn  
in 2009” 07 melrose plc annual report 2009
business performance governance financials shareholder information
outlook
across the group sales are now beginning to increase and order 
books are reviving for the moment it appears recovery which has 
been noticeable for several months in the east may be on the way 
to the west – although caution must be the watchword until this 
becomes established government debt reduction programmes 
which need to be carried out in many countries have not yet been 
implemented and it is very difficult to prejudge the timing and the 
effects of these
in the mean time we are confident of the short and longterm 
prospects of our businesses and satisfied that the actions we 
have taken in the downturn have left them very well placed for  
the incipient recovery
christopher miller
10 march 2010
2009 was an extraordinarily difficult year the severe downturn 
which started in autumn 2008 was the starting point for substantial 
cost reductions in nearly all our businesses across the world  
our management teams are to be congratulated on their speed  
of reaction and the accuracy of their targeting the result can be 
seen in improved group profit margins even in the face of lower 
sales employees too must be thanked for their willingness to 
embrace sometimes painful change brought on by economic 
circumstances
operational cash generation always a focus for melrose has again 
been exceptionally strong at the group level after all items including 
exchange movements and disposals net debt has been reduced 
by £221 million to £322 million an extremely satisfying performance
capital expenditure held back in 2009 in the face of the uncertain 
outlook will rise again in 2010 it is also likely that the initial strong 
improvement in fki’s net working capital levels will now stabilise 
as an appropriate level is reached these two factors will mean 
that 2010 is more normalised for cash generation although we still 
fully expect a strong performance at the operating level
a more detailed review of melrose’s businesses and financial 
position is contained in the reviews of the chief executive and 
finance director on the following pages
dividends
the board intends to pay a second interim dividend of 48p per 
share 2008 final dividend of 425p on 1 april 2010 to shareholders 
on the register on 19 march 2010 in lieu of a final dividend this 
gives a total for the year of 77p 2008 70p an increase of 10 
reflecting the board’s confidence in the future
strategy
melrose’s strategy is by now well understood we continue to look 
for businesses where our combination of increased management 
focus and strong but selective investment is likely to produce above 
average returns for investors this strategy will include the sale of 
these businesses at the appropriate time normally in a three to 
five year period with proceeds being returned to shareholders in 
the most efficient way possible
we continue to believe that market and economic conditions favour 
acquisitions over disposals at present and so we continue to look 
for the right opportunity fortunately the strong growth potential 
of our existing businesses over the next few years gives us the 
ability to be patient and we will exercise our customary caution  
in our selection process 08 melrose plc annual report 2009
melrose owns a group of businesses with strong market positions 
serving different sectors and operating in different parts of the 
world which has provided the group with a considerable degree 
of protection from the economic downturn
during the year there have been many positive operational 
achievements in the group but the highlight has been the 
excellent cash generation although this was achieved partly  
on the back of lower capital expenditure in the year it was largely 
as a result of profit and greatly reduced levels of working capital 
indeed during the year 149 of headline operating profit was 
converted into cash resulting in net debt at the year end of  
£3217 million compared with £5431 million at the beginning of 
the year net working capital of the group was 88 of sales at  
31 december 2009 compared with over 16 for the fki group 
prior to its acquisition by melrose this has been achieved as a 
result of the consistent application of focused cash management 
disciplines throughout the year rather than by the use of temporary 
period end squeezes on working capital
chief  
executive’s  
review
“ during the year there have  
been many positive operational 
achievements in the group  
but the highlight has been the 
excellent cash generation”
headline operating profit 
conversion to cash
149
annualised payroll savings
£80m
headline operating profit 
margin second half
13 09 melrose plc annual report 2009
business performance governance financials shareholder information
outlook
the fragile signs of global economic recovery that emerged in the 
second half of 2009 have continued to build and as we enter the 
new year there is undoubtedly a much improved feeling of confidence 
albeit tinged with some caution
in our early cycle businesses this upturn has already been reflected 
in higher sales whilst in our later cycle businesses order books 
have been improving which will translate into higher sales as 
appropriate on the back of operational efficiency gains in our 
manufacturing plants and lower costs this should feed through 
strongly into better performance
barring any unforeseen events we are very positive about the 
potential of the group for this year
david roper
10 march 2010
in addition timely action by operating management to reduce 
costs in their businesses greatly limited the impact of the downturn 
in sales on profit since the downturn began in excess of  
£80 million of payroll related costs on an annualised basis have 
been taken out of the businesses it is estimated by management 
that approximately 70 of these costs are volume related and  
will therefore return as sales recover with the remaining 30 
being of a more permanent nature
the energy division as a whole had a very satisfactory year 
although sales in the year at brush turbogenerators were down 
on the previous year profit was maintained this was achieved by 
substantial operational efficiency gains at the three manufacturing 
plants cost reductions and an increasing proportion of higher 
margin aftermarket sales with signs of a gradual upturn in orders 
in this business going into the new year and with a lower and more 
efficient cost base we are confident that 2010 will be a good year
in the lifting division although bridon had a record profit year in 
2009 crosby had a difficult year bridon benefited from a very 
strong opening order book with a good mix of high margin offshore 
oil and gas sales although this line of business is projected to 
decline in 2010 it will be counterbalanced by higher levels of 
activity in other sectors such as the bridge and stadia business 
on the back of the continuing improvements in operational 
efficiency bridon is well positioned to grow strongly as the upturn 
in the global economy develops crosby suffered a significant 
decline in sales in 2009 on the back of the fall in the gas price in 
late 2008 yet still managed to achieve a return on sales in excess 
of 10 reflecting the intrinsic quality of the business on the back 
of a significantly lower cost base and with signs of the distributors 
restocking 2010 should see an improvement in the trading result
as another of melrose’s early cycle businesses dynacast was 
quick to feel the effect of the economic downturn and as a result 
sales were significantly lower in 2009 than in the previous year 
however actions to reduce costs limited the impact on profit  
with positive signs of dynacast’s markets improving there is 
confidence that 2010 will be a year of recovery 10 melrose plc annual report 2009
energy review
£4183m
revenue
£610m
headline operating profit
1 at vero eos et accusamus et iusto odio 
dignissimos ducimus qui blanditiis praesentium 
voluptatum qui blanditiis
brush 
turbogenerators
brush turbogenerators’ winding  
specialist inserting copper coils into  
the stator assembly of a brush frame 7 
turbogenerator designed to encompass 
the 1085 mw range destined for the 
american market this type of medium
range aircooled generator is ideal for 
embedded generation where power 
stations usually gas turbine based  
are built close to the load centres that 
they serve
brush 
transformers
this 33 kv transformer has been 
designed to meet the specific demands 
of the uk distribution network 
operators brush transformers  
provides approximately 80 of the  
33 kv transformers supplied across  
the uk’s utility providers
harrington
harrington’s 125 kva generators 
are being used to power the mobile 
guinness
®
 football viewing centres 
vans specially equipped with giant  
led screens and sound systems will 
tour nigeria to broadcast the 2010 
world cup
market leading manufacturers  
of electricity generating equipment 
switchgear and transformers 11 melrose plc annual report 2009
business performance governance financials shareholder information
hawker siddeley switchgear “hss”
hss produces a wide range of indoor and outdoor electrical 
distribution equipment principally electrical switchgear and  
sells into global markets 
hss’s results for the year ended 31 december 2009 were excellent 
on slightly lower sales compared to the previous year profit more  
than doubled in addition tight control of working capital in the period 
resulted in good conversion of profit into cash hss continued to 
focus on business process improvements further refining its supply 
chain and applying lean principles throughout the company 
both the uk and australian operations had healthy sales in the year 
this was underpinned by robust demand in the power distribution 
market and growth in orders in the mass transit markets in the uk and 
overseas where the company secured business on a number of high 
profile infrastructure projects
the china facility in shanghai commenced component manufacture in 
the latter part of the year and is set to play a key role in progressing the 
company’s strategy for south east asia this business is well positioned 
in what should be a growing market over the next few years
outlook
hss entered 2010 with an order book equivalent to seven months’ 
sales this together with the ongoing operational improvements in the 
business and promising developments in new markets gives us 
confidence that hss will have another good year in 2010
brush transformers
brush transformers manufactures midrange power transformers for 
the uk electrical utilities and the oil and gas sector principally in the 
middle east
brush transformers reported a good set of results for the year ended 
31 december 2009 with profit significantly higher than in 2008 on 
similar sales in addition excellent cash management during the year 
resulted in very strong profit conversion into cash
the uk business in loughborough succeeded in retaining its key 
utility contracts with uk dnos going into the next five year ofgem 
review period starting in 2010 although ofgem has indicated that the 
dno spend on the network will be higher than in the previous five year 
period it is expected that year one will be slow
the increase in profitability of the company during the year was largely 
as a result of a continuing focus on operational efficiency improvements
the joint venture in abu dhabi brush transformers holds 49 which 
serves the local utilities and oil markets had good sales and profit growth 
in its second year of operation the factory continues to receive formal 
supply approval from local customers which is most encouraging
approval was granted during the year for a £1 million project to establish 
a manufacturing operation in beijing to supply the local mining industry 
it is expected that the factory will be operational in early 2011
outlook
although uk demand for power transformers is expected to dip  
in 2010 for the reasons explained above the requirements from the 
oil and utility sectors in the middle east remain positive with ten 
months order book cover brush transformers starts 2010 with  
a degree of confidence
generators
brush turbogenerators is the world’s largest independent manufacturer 
of electricity generating equipment for industrial marine oil and gas  
and offshore applications with three plants in the uk holland and the 
czech republic it designs manufactures and services generators 
ranging from 10 mw to 250 mw for both steam and gas turbine 
applications and supplies a globally diverse customer base
marelli motori based in italy is one of the world’s leading manufacturers of 
industrial electrical motors and generators with a product portfolio 
ranging from 12 kw to 45 mw 
harrington is a specialised uk based generator manufacturer servicing 
the rail telecommunications construction and military markets
the global power generation market softened in 2009 as economic 
activity declined and brush turbogenerators’ newbuild sales reduced 
by 14 over 2008 however management’s strategy to focus on the 
more profitable generator aftermarket whilst at the same time 
aggressively controlling operating costs proved highly successful 
aftermarket sales increased by 20 in the period and at the year  
end represented 25 of the business since the year end brush 
turbogenerators has acquired generator and motor services “gms” 
a us 10 million sales aftermarket business based in pittsburgh usa 
with an installed base of over 1300 brush machines operating in the 
americas gms will provide a good local platform from which to exploit 
the exciting market potential of this sector 
it is particularly pleasing to note the progress made in the year in the 
czech operation brush sem this follows the capital expenditure 
programme initiated post acquisition to invest in new machinery to 
alleviate capacity bottlenecks and improve productivity added to the 
cost reduction programme in 2009 this has resulted in a significant 
improvement in operating margins in 2009
a new management structure was put in place at brush hma brush 
turbogenerators’ business in holland during 2009 this again has 
resulted in a more focused business operating on a more efficient  
and lower cost base 
whilst still early in the process a focused sales strategy is now delivering 
results at turbogenerators when coupled with the decision to extend 
the product range into higher output machines it expands the customer 
and geographic base of the business
the result of all these changes since acquisition is a more efficient 
cost base which is better aligned with market opportunities and thus 
able to exploit the growth potential more profitably
after a record year in 2008 marelli recorded lower sales in 2009 
reflecting weaker conditions in its market management were swift to 
act and reduced costs and headcount management continued to 
focus on increasing the sales of larger and more profitable generators 
and motors in the year capital investment was directed at developing 
new products with more specialised and higher power applications 
such as the new 800 frame alternator and electric motor in high voltage
harrington’s sales fell by 30 in 2009 as a result of a very weak uk 
market management responded quickly to cut costs and accelerated the 
transition of the business to more specialised applications where the 
company has developed market leading expertise
outlook
although demand in brush turbogenerators’ market has been soft in 
2009 the year ended with an order book of £225 million representing 
well over 50 of its budgeted sales and there are preliminary signs of 
a gradual upturn going into 2010 we are hopeful that any such increase 
in sales on the back of the lower and more efficient cost base of the 
business together with the exciting opportunities in the aftermarket 
business will result in a good year 12 melrose plc annual report 2009
lifting review
1 at vero eos et accusamus et iusto odio 
dignissimos ducimus qui blanditiis praesentium 
voluptatum qui blanditiis
bridon
bridon manufactured installed and 
tensioned in excess of six kilometres 
of cable used to support the new 
kurilpa pedestrian bridge in brisbane 
australia the bridge was designed 
utilising an engineering principle called 
“tensegrity” tensegrity balances the 
tension resistant ability of bridon’s high 
strength cables with the compressive 
strength of struts to produce  
a lightweight solution for this new 
crossing of the brisbane river
crosby
crosby is working together with a us 
manufacturer in the development of 
a lifting system for the new f35 joint 
strike fighters four customdesigned 
hoist rings are utilised on each aircraft 
to lift the aircraft off an airfield or an 
aircraft deck for maintenance or in 
the event of an accident the project 
includes orders from the uk canada 
australia italy and the netherlands
£4190m
revenue
£625m
headline operating profit
world leading suppliers of wire  
wire rope products lifting fittings 
and blocks 13 melrose plc annual report 2009
business performance governance financials shareholder information
bridon’s mining business positively affecting activity levels in the 
canadian tar sands as well as the overall demand for coal as a 
result of bridon’s broad product range and global presence the 
business is well positioned to take advantage of the improving 
conditions in both of these key market sectors
crosby
crosby is a world leader in the manufacture and sale of fittings 
and blocks to the oil and gas construction and mining sectors 
primarily through a global network of specialist distributors 
as signalled in last year’s annual report crosby has faced very 
difficult market conditions in 2009 despite a drop in revenue of 
over 25 this business has still produced a double digit return on 
sales which is a testament to its quality
with its greater exposure to the onshore gas markets – in contrast 
to bridon – where projects tend to be smaller and customers have 
been more affected by the global credit squeeze crosby’s sales 
responded sharply to the fall in the gas price in late 2008 as a 
result early action was taken to cut costs which has included a 
large reduction in headcount the elimination of overtime inventory 
reductions and continued emphasis on lean manufacturing at all 
manufacturing locations
with a fall in demand from the oem crane business crosby has 
witnessed a return to its longterm historical product mix of lifting 
fittings sold through its traditional distributor base in recognition 
of this management has redoubled its efforts to gain market 
share by working closer with its distributors focusing on more 
technical training improving customer service support and 
building further on the relationships with these key customers 
in addition during the year there was an increased emphasis  
on building on the strength of the crosby name overseas through 
a focus on the growth opportunities in europe asia pacific 
especially china and latin america in 2009 crane block and 
sheave manufacturing centres were brought on line in belgium 
and china establishing these two operations closer to their end 
markets greatly reduces lead times and will enable crosby to 
better service its customers
crosby has built its business in europe through a series of 
acquisitions of different companies over the years and these 
businesses have operated to a large degree independently of 
each other during the year a restructuring of these operations 
was undertaken in order to rationalise and coordinate the 
manufacturing and sales functions which has resulted in a 
considerably leaner and more efficient business 
outlook
although crosby’s markets remain difficult demand has stabilised 
and there are signs of distributors restocking although it is too 
early to tell whether this is sustainable being ultimately dependent 
on final customer demand it is nevertheless a reassuring and 
necessary first step in any recovery
crosby is a first class business and with the steps taken to reduce 
costs and improve efficiency during the year it is very well positioned 
to recover strongly as the global recovery takes hold
bridon
bridon designs and manufactures a comprehensive range of lifting 
and stabilising solutions for applications in wire rope fibre rope 
steel wire and strand serving global customers in oil and gas 
mining industrial marine and infrastructure 
bridon reported a record operating profit in 2009 although sales  
in the year were marginally down in volume terms over the previous 
year profit was significantly higher resulting in an impressive return 
on sales for the year bridon did benefit however from favourable 
movements in exchange rates during the year as sales in us 
dollars and euros increased in sterling terms
cash generation was very strong in the year with 137 of headline 
operating profit being turned into cash although part of this reflects 
some advance payments received during the year in respect of 
contracts won in the structures business mostly stadia and  
bridge projects
a record opening order book combined with solid activity in 
offshore oil and gas and energyrelated coal mining were major 
factors behind these results bridon also benefited from a 
significant increase in demand related to global infrastructure 
construction securing contracts for a major new bridge project  
in norway and several new stadia to be built in 2010
bridon’s highperformance crane and industrial business was 
hardest hit by the recession suffering a significant decline in sales 
as commercial construction and industrial production slowed 
dramatically in the wake of the global financial crisis
product development efforts have been focused on seeking to 
meet customers’ increasing specification requirements for 
demanding applications in addition to a number of product 
enhancements during the year tiger duracore was introduced 
into the market this is the next generation of shovel hoist ropes 
for use in surface mining made with a combination of wire rope 
strands and polymer cores and outer covering which are capable 
of withstanding extreme operating conditions
during the year an investment of approximately £3 million to 
increase bridon’s manufacturing capability for large multistrand 
ropes in its german factory was approved along with significant 
upgrades in its north american ropery and uk based testing 
facilities in addition work has continued to improve the factory  
in hangzhou china to ensure bridon quality standards and it is 
expected that sales will increase both domestically and for export 
the programme to upgrade the wire mill in doncaster is on schedule
outlook
while an improving global economy will help to stimulate modest 
growth in construction and industrial production it is expected 
that market conditions in bridon’s highperformance crane and 
industrial business will remain subdued in 2010 particularly in 
north america however bridon should benefit from the various 
stadia and bridge contracts secured in 2009 and also expects to 
see improvements in its efforts to further penetrate developing 
markets such as china south east asia and brazil
against the backdrop of a global economy that is struggling to  
find its feet bridon enters 2010 with cautious optimism with oil 
prices back up to the us 70 – 80 per barrel range offshore  
and landbased oilfield activity is expected to increase gradually 
through the year the firmer oil price is also expected to benefit  14 melrose plc annual report 2009
dynacast review
1 at vero eos et accusamus et iusto odio 
dignissimos ducimus qui blanditiis praesentium 
voluptatum qui blanditiis
bluray
dynacast is a leading manufacturer  
of the optical pickup the laser 
readhead found in all bluray cd and 
dvd players the part is produced in 
zinc or magnesium which is unique  
to dynacast casting needs to be 
extremely precise as laser and mirror 
guides are directly bonded to the cast 
surface during assembly dynacast 
creates value when producing this part 
by eliminating the need for expensive 
cnc machining after the part is cast
mp3
dynacast manufactures midframes  
or mounting chassis for a wide variety  
of electronic handheld devices including 
mp3 players customers come to dynacast 
as the company has the ability to cast 
superthinwall geometry ie less than 
05mm thick in aluminium magnesium 
and zinc this unique technology gives 
customers the freedom to design their 
midframes with complex geometry not 
available in competing manufacturing 
processes like metal stamping
phone
one of dynacast’s telecommunications 
customers developed a very small 
“slider” mobile phone the challenge  
for dynacast was to diecast an overall 
1mm thin component with partly smaller 
sections of 04mm with the support  
of advanced flow analysis modelling 
techniques and the new sis multislide 
magnesium diecasting machine the 
engineering team in germany successfully 
managed to produce a high quality 
product for a demanding market 
£2087m
revenue
£213m
headline operating profit
global designer and manufacturer  
of precision engineered diecast 
metal components and assemblies 15 melrose plc annual report 2009
business performance governance financials shareholder information
north america was the worst affected region with underlying 
revenue down approximately 40 in the period continued turmoil 
in the automotive sector coupled with the global recession hit this 
region very hard here cost reduction plans were implemented 
swiftly fishercast canada produced very good results in 2009 
with margins well ahead of expectations
underlying revenue in asia fared better in 2009 falling approximately 
15 compared with 2008 growth in the sales of electronics 
components into the chinese market was a factor in limiting the sales 
decline dynacast opened its new 4500 square metre factory in 
dongguan south china in july and it is performing in line with plan 
management remain encouraged by the prospects in this region
dynacast continues to assess its manufacturing capacity against 
regional demand and growth prospects the sales decline in north 
america has led to overcapacity in that market accordingly the 
decision was taken in late 2009 to close the montreal diecasting 
facility and transfer its production to other north american plants 
this is budgeted to cost £68 million and will reduce operating 
costs while retaining sufficient capacity for future growth
outlook
the stabilisation in dynacast’s markets noted at the time of the 
interim results has progressed into a general improvement in 
demand although some of the costs taken out of the business 
will reverse on the back of increasing volumes it is expected that 
some efficiency gains will be retained and that these will have  
a beneficial impact on profit as sales increase
dynacast
dynacast is a global manufacturer of precision engineered 
diecast metal components and assemblies the products are 
manufactured using proprietary diecasting technology and are 
supplied to a wide range of end markets including automotive 
healthcare telecommunications consumer electronics and 
computer hardware and peripherals
dynacast’s results for 2009 in common with a lot of other 
engineering businesses reflect a very tough year trading in the 
first half was particularly difficult with underlying sales about a 
third below the comparable period in 2008 as reported in the 
interim statement early and decisive cost cutting by management 
mitigated the impact of the fall in sales on profit trading conditions 
improved slowly in the second half of the year such that for the 
year as a whole the underlying fall in sales over 2008 reduced to 
25 it is notable however that despite this dynacast has still 
produced operating margins of over 10 this year
the profit in 2009 includes a foreign exchange gain on translation 
of just over £2 million reflecting the general weakness of sterling 
in the period and a significantly improved contribution from 
fishercast which was acquired in august 2008
the price of zinc dynacast’s primary raw material rose steadily  
in 2009 mirroring its fall in 2008 though the average lme cost in 
2009 fell to us 1658 compared to us 1869 in 2008 average 
aluminium alloy prices also declined in 2009 and the combined 
effect of this accounts for approximately £10 million of the fall in 
revenue from 2008 to 2009 dynacast benefits from the ability to 
pass on its metal costs as a result of which these price 
movements have no significant impact on profit
a very focused approach to the management of cash resulted  
in an excellent 181 conversion of profit into cash in 2009
sales in europe after adjusting for metal prices and exchange 
rates were down over 30 in 2009 compared to 2008 although 
decisive and radical steps were taken to reduce costs the legal 
and social framework in europe makes it more difficult to 
implement such programmes expeditiously as a consequence 
full implementation of the cost reduction actions was not 
completed until the end of may 16 melrose plc annual report 2009
other industrial review
1 at vero eos et accusamus et iusto odio 
dignissimos ducimus qui blanditiis praesentium 
voluptatum qui blanditiis
brush traction
since the eurotunnel shuttle locomotives 
were built in the 1990s the bogies 
chassis have been overhauled by the 
brush traction site in loughborough 
uk new wheels and overhauled 
gearbox are shown assembled at  
the brush traction site in kilmarnock 
scotland ready for fitment at 
loughborough
harris
the high performance horizontal 
balers are production machines used 
for medium to large tonnage recycling 
operations these balers are capable 
of producing bale weights that meet 
or exceed maximum container weight 
capacities so that containers will  
weigh out before they cube out
mpc
this fully automated battery box cell  
is manufactured for the ford fiesta  
it incorporates moulding insert loading 
metal bending welding and final auto 
stillage packing
£2525m
revenue
£206m
headline operating profit
market leading manufacturers 
across the housing construction 
automotive scrap processing  
and other industrial sectors 17 melrose plc annual report 2009
business performance governance financials shareholder information
truth
truth designs and manufactures operating hardware hinges  
and locks for north american producers of windows patio doors 
and skylights utilised in both the new construction and the repair 
and remodel residential markets most of truth’s products are 
manufactured in its plants in minnesota usa and ontario canada
truth has staged an excellent recovery in the year ended  
31 december 2009 as one of melrose’s early cycle businesses 
sales particularly in the repair and remodel market in contrast  
to the new build sector began to see a pick up in the second 
quarter of the year although revenue in the year was some  
10 lower than in the previous year profit more than doubled 
reflecting the changes made by the new senior management 
appointed in june 2009
new housing starts in the usa to which truth’s performance is 
broadly correlated were more than 50 lower in 2009 than at their 
recent peak in 20052006 it is against this market background that 
the truth performance in 2009 should be judged
in addition an aggressive and targeted sales and marketing 
campaign allied to new product introductions resulted in significant 
market share gains this was assisted by a pickup in truth’s 
canadian new build market in the year
a major strategic initiative was undertaken in the year to outsource 
the manufacturing of lower margin products to china this will 
have the effect of freeing up valuable space in truth’s minnesota 
plant to focus on the production of higher margin casement units 
thereby reducing overtime spend and permitting a more evenly 
balanced manufacturing schedule over the year taking account  
of the seasonality of truth’s sales management estimate that 
once fully implemented this outsourcing programme will add 
some 20 to truth’s capacity in this plant
outlook
although there are signs of recovery in the canadian north
eastern and southcentral us builders’ markets as a result  
of the continuation of the policy of shedding lower margin sales  
it is not expected that truth’s top line will grow significantly in 
2010 nevertheless the improvement in market sentiment together 
with the substantial operational efficiency gains and cost reductions 
give confidence for further profit improvement in 2010
harris
harris is a leader in scrap and waste reduction equipment design 
engineering manufacturing and servicing it operates out of two 
plants in georgia usa and has full service capability and serves 
the scrap metal and fibre recycling industries
harris performed well in 2009 considering the extraordinary global 
economic and financial conditions and the capital intensive nature 
of its business sales declined by nearly 30 in the year compared 
to 2008 but the impact on profit for the year was mitigated by a 
significant cost reduction programme resulting in a headcount 
decline of 36 in the year as a result harris achieved a creditable 
return on sales in the period of over 10
the weakness in the global economy and the shortage in the 
availability of credit reduced the prices of scrap metal and fibre  
in 2009 – key determinants in the activity levels in this industry 
recyclers reduced demand for capital equipment in the year 
resulting in a decline in harris’ order intake during the year of 
nearly 60
harris continued its commitment to invest in design and 
engineering capability to provide highly engineered solutions for 
customised applications through its new product development 
group in 2009 harris expects that up to one quarter of its orders 
for 2010 could be for newlylaunched products
harris’ continued push into the parts and services business has 
progressed well during the year with aftermarket sales representing 
about 30 of harris’ sales in 2009 compared to approximately 20 
in 2008
outlook
a healthy increase in fourth quarter 2009 orders and a good start 
to the new year together with positive trends in steel and scrap 
pricing indicate that conditions in harris’ markets are showing signs 
of recovery harris is well positioned to meet the opportunities and 
challenges in 2010 – with new products coming on stream the 
increasing higher margin aftermarket sales and the lower more 
efficient cost base give confidence of a satisfactory outcome 18 melrose plc annual report 2009
mpc
mpc manufactures engineered plastic injectionmoulded and 
extruded components and metal pressings for sectors including 
food and beverage packaging automotive construction  
and industrial 
revenue and profit were significantly lower in the year ended  
31 december 2009 due to the general economic downturn  
which particularly affected the uk automotive and building 
markets however as signalled in the interim report mpc 
recovered strongly in the second half of 2009 after trading near 
breakeven in the first half despite these poor trading conditions 
mpc delivered a resilient performance reflecting the intrinsic 
quality of the business with its highly specialised engineering  
skills together with stringent cost control and efficiency measures
most importantly throughout this year major efforts were  
made to focus on mpc’s core skills to maintain its proven levels  
of technical differentiation during the year this has proved  
highly successful with orders for the design development and 
manufacture of new products for key customers such as marks  
 spencer makita jaguar land rover and wavin a number  
of these wins are linked to a move into a manufacturing niche 
using new materials and technologies building on mpc’s core 
engineering skills
outlook
mpc currently enjoys its largest ever new business order book 
the majority of which will go ‘live’ in 2011 the forecasts for 2010 
reflect not only a modest recovery in general trading but a number 
of good margin new product introductions as the economy 
begins to recover and competitors continue to struggle mpc  
is well positioned to capitalise on market opportunities and  
benefit at the same time from weaker sterling we look forward 
with confidence to a successful 2010
other industrial
continued
brush traction “traction”
traction specialises in the refurbishment and reengineering  
of railway locomotives and components from its two sites at 
loughborough and kilmarnock
although the trading result was lower in 2009 than in the previous 
year reflecting the scheduled ending of the major high speed 
train “hst” contract it was nevertheless a satisfactory outcome
during the year the major activities at loughborough derived from 
a contract to overhaul eurotunnel shuttle locomotives and smaller 
continuation contracts to repower other operators’ hst power 
cars with the new mtu diesel engine and associated equipment 
kilmarnock completed a contract to refurbish catering vehicles for 
first great western together with other vehicle and overhaul work
the rail vehicle industry is generally late cycle particularly at the 
heavier end where contracts can take months if not years to be 
awarded and similar timescales to fulfil thus apart from the 
wheel overhaul business at kilmarnock which was adversely 
affected in 2009 sales and output for the group were not 
seriously affected by the recession in 2009
outlook
as a result of this lagged effect it is expected that 2010 will be  
a more difficult year for traction although with signs of economic 
recovery the wheelset overhaul business is showing signs of 
picking up in 2010 with continuing steps to reduce costs and 
improve operational efficiencies we are hopeful of a satisfactory 
outturn in 2010 19 melrose plc annual report 2009
business performance governance financials shareholder information
“ it is pleasing to see that the 
group’s headline operating 
profit return on revenue 
percentage improved from 
108 in 2008 to 115 in 
2009 indeed in the second 
half of 2009 it increased 
further to 130”
the year to 31 december 2009 was the first full year since the 
acquisition of fki plc on 1 july 2008 which increased the size of 
the melrose group by approximately six times consequently the 
results shown for the year ended 31 december 2009 cannot 
easily be compared to the results for the year ended 31 december 
2008 in a meaningful way
in compliance with ifrs 5 the comparative results for the year  
to 31 december 2008 have been restated to include the logistex 
europe business which was sold on 28 august 2009 within 
discontinued operations
group trading results – continuing operations
the continuing operations at 31 december 2009 include  
four trading divisions namely energy lifting dynacast and  
other industrial 
to help understand the results of the continuing operations  
the term “headline” has been used this refers to results that  
are calculated before exceptional costs exceptional income  
and intangible asset amortisation as this is considered by the 
melrose plc board to give the best illustration of performance
for the year ended 31 december 2009 the group achieved revenue 
from continuing operations of £12985 million 2008 £8953 million 
headline operating profit of £1497 million 2008 £966 million and 
operating profit of £1131 million 2008 £701 million headline 
profit before tax was £1186 million 2008 £731 million and profit 
before tax was £820 million 2008 £235 million 
the most comparable measure of performance year on year is 
headline earnings per share “eps” in 2009 headline basic eps 
was 166p 2008 161p representing a 3 increase on 2008 
after exceptional costs exceptional income and intangible asset 
amortisation the eps was 110p 2008 41p
finance
director’s 
review
cashflow from 
headline trading
£1545m
net debt to  
headline ebitda
176	times
working capital
88	of	sales 20 melrose plc annual report 2009
finance director’s review
continued
a profit for the year from discontinued operations of £246 million 
2008 loss of £612 million has been included in the income 
statement consisting of the following items
discontinued   £m
operating profit of discontinued businesses  152 
profit on disposal of businesses   97 
other   54 
tax on discontinued businesses   57
total   246	
finance costs and income
the headline net finance cost in 2009 was £311 million 2008 
£235 million prior to the fki acquisition on 1 july 2008 the 
group was in a net cash in hand position and consequently  
for the first half of 2008 the group had net finance income
net interest on external bank loans overdrafts and cash balances 
was £203 million 2008 £183 million which is protected from 
interest rate changes by a number of interest rate swaps which  
fix the interest rate on £3665 million us 5460 million and  
€333 million of term debt more detail on these swaps is given 
in the finance cost risk management section of this review in 2009 
the group had a blended interest rate of 35
also included in the net finance cost is a £21 million 2008  
£14 million amortisation charge for the initial costs of raising  
the £750 million term loan facility a net interest cost on pension 
plans in excess of their expected return on assets of £66 million 
2008 £18 million unwinding of discounts on longterm 
provisions of £16 million 2008 £08 million and other finance 
costs of £05 million 2008 £12 million
earnings per share and the number of shares in issue
in accordance with ias 33 two basic earnings per share eps 
numbers are disclosed on the face of the income statement one 
for continuing operations which is 110p 2008 41p and one that 
also includes discontinued operations which is 160p 2008 loss 
of 153p in addition two fully diluted eps calculations are shown 
which allow for the potential number of shares to be awarded using 
the current value of the melrose plc ltip  this currently shows a 2 
dilution on the continuing eps
the performance of each of these trading divisions is discussed  
in detail in the chief executive’s review from page 10 to 18 it is 
pleasing to see that the group’s headline operating profit return  
on revenue percentage improved from 108 in 2008 to 115  
in 2009 indeed in the second half of 2009 it increased further  
to 130 this was driven by strong performances in the energy 
and other industrial divisions and a full year contribution from  
the higher margin energy and lifting divisions
central costs comprise £89 million 2008 £106 million of 
melrose plc corporate costs and a long term incentive plan 
“ltip” charge of £68 million 2008 £62 million the ltip  
cost includes a charge for the melrose plc ltip of £18 million  
2008 £20 million and a charge for the ltip schemes for 
divisional management of £50 million 2008 £42 million  
this latter amount in 2009 relates to a charge for cashbased 
incentive schemes to reward improvements in business 
performance over the period to 2014
discontinued operations
all three businesses which were shown as “held for sale” within 
discontinued operations in 2008 have been sold within 2009
on 22 june 2009 melrose sold logistex north america to 
intelligrated inc for sales proceeds of £246 million less disposal 
costs of £13 million and a cumulative exchange movement 
recycled through the income statement of £64 million logistex 
north america had net assets of £220 million resulting in a profit 
on disposal of £77 million 
the welland business was sold on 10 june 2009 for net proceeds 
of £08 million and rhombus was sold on 3 april for net proceeds 
of £15 million a cumulative exchange movement of £14 million 
was recycled through the income statement these two businesses 
had combined net assets of £55 million resulting in a loss of  
£03 million and £15 million respectively
in addition to the businesses held for sale last year the logistex 
europe business was also sold on 28 august 2009 to beumer 
group for sales proceeds of £261 million less disposal costs  
of £25 million and a cumulative exchange movement recycled 
through the income statement of £36 million logistex europe 
had net assets of £234 million giving a profit on disposal of  
£38 million
trading results by division – continuing operations
a split of revenue and headline operating profit by division is as follows
 
      2009   
      headline   
   2009   operating profit   
   headline 2009 2008 loss before 2009 2008
  2009 operating return on return on depreciation and return on return on
  revenue profitloss revenue revenue
1
 amortisation revenue revenue
1
  £m £m   £m  
energy  4183		 610		 146 135 685		 164 151
lifting  4190		 625		 149 154 717		 171 173
dynacast  2087		 213		 102 136 301		 144 167
other industrial  2525		 206		 82 72 280		 111 93
central – corporate  –	 89	 na na 82	 na na
central – ltips
2
  –	 68	 na na 68	 na na
group  12985		 1497		 115 108 1833		 141 131
1 melrose ownership period only
2 long term incentive plans 21 melrose plc annual report 2009
business performance governance financials shareholder information
cash generation and management
melrose has a strong track record of generating cash from  
its businesses a key performance measure for melrose is the 
percentage of profit conversion to cash this represents the 
amount of cash post working capital movement and capital 
expenditure that is generated from headline operating profit  
in the year to 31 december 2009 149 2008 166 of headline 
operating profit has been converted to cash this means that  
the longterm melrose headline operating profit conversion to  
cash from 2003 to 2009 is now 132
the cash generation has been achieved across all divisions as 
shown in the table at the bottom of the page
this excellent cash generation has enabled melrose to generate 
£1545 million of cash from trading after all costs including tax in 
the year to 31 december 2009 importantly since the acquisition 
of fki on 1 july 2008 £2450 million of cash has been generated 
from trading after all costs including tax in addition £486 million 
of net cash has been generated from disposals and £567 million 
has been paid to shareholders this has meant that at constant 
exchange rates net debt has reduced by £2370 million 51 
since the acquisition of fki on 1 july 2008 
   since fki 
  2009 acquisition
  full year 1 july 2008
movement in net debt  £m £m
opening net debtcash  5431 223 
acquired net debt  – 4717
net cash flow of acquisitions  – 112
net cashflow from disposals 	 486	 486 
cash flow from trading  
 after all costs including tax  1545	 2450 
amount paid to shareholders  356 567
foreign exchange movement  560	 981
other noncash movement  21 01 
closing net debt  3217 3217
importantly a headline basic eps number is shown the melrose 
board believes that this gives a better reflection of the performance 
in the year as it strips out the impact of exceptional costs exceptional 
income and intangible asset amortisation the headline eps for 
the year to 31 december 2009 is 166p 2008 161p which 
represents a 3 increase
as a consequence of the equity issue for the fki acquisition  
on 1 july 2008 the number of shares in issue increased from 
1337 million to 4976 million consequently the weighted average 
number of shares in 2008 was 3156 million as the equity issue 
occurred halfway through the year in 2009 there were no further 
equity issues and so the weighted average was 4976 million
exceptional costs and income
melrose has continued to undertake significant action to improve 
the operational and financial performance of the group to achieve 
this exceptional costs and exceptional income have been incurred 
and along with intangible asset amortisation these have been 
highlighted on the face of the income statement exceptional 
operating costs amounted to £239 million 2008 £129 million 
exceptional income to £140 million 2008 nil and intangible asset 
amortisation to £267 million 2008 £136 million exceptional 
operating costs and income consist of the following items
    total
exceptional operating costs   £m
labour related oneoff costs    154 
restructuring costs    85 
total   239	
   total
exceptional operating income   £m
us retiree benefit plan closures   90 
release of fair value provisions   50 
total  	 140	
the group incurred £154 million of labour related oneoff costs 
relating primarily to headcount reductions in response to the 
economic downturn in addition the group incurred £85 million  
of costs relating to restructuring programmes which include plant 
closures and relocations 
during the year certain us retiree benefit plans have been closed 
resulting in a release of an accrual for the future retirement benefit 
obligation for continuing operations of £90 million in addition due 
to management actions in 2009 £50 million of surplus provisions 
have been released to exceptional income so as not to distort 
headline results
cash generation and management
 
    other  total   
£m energy lifting dynacast industrial central continuing discontinued total
headline operating profitloss 610 625 213 206 157 1497 152 1649
headline operating cash  
 generation post capex 922 926 386 283 111 2406 55 2461
headline profitloss conversion  
 to cash 151 148 181 137 71 161 36 149 22 melrose plc annual report 2009
finance director’s review
continued
during melrose’s ownership of fki the cash generated from working 
capital at constant exchange rates has been £1483 million which 
represents a 56 reduction in net working capital a further 
measure of improvement is that the percentage of net working 
capital to sales for the melrose group has reduced to 88 at  
31 december 2009 compared to over 16 for the fki group prior 
to its acquisition importantly these improvements to working 
capital have been achieved without an artificial squeeze to 
working capital at the financial period end
tax
as expected the headline income statement tax rate in 2009 was 
30 2008 30
this is broadly in line with the group’s natural tax rate based on 
the mix of 2009 contributions of profit by country and the standard 
statutory tax rate in those countries the overall effect on the 
group of higher rates in north america and certain european 
countries is offset by the benefit that continues to arise from  
lower tax rates in the far east and other european countries
the rate after exceptional items and intangible asset amortisation 
is 33 2008 43 which is higher than the headline rate 
because certain exceptional costs are not expected to give rise  
to tax deductions 
the headline cash tax rate of 3 2008 22 is particularly low 
due to benefits arising from the utilisation of prior year losses and 
other deferred tax assets a £98 million refund was received in 
the us in respect of losses carried back against profits of earlier 
years in the longer term the headline cash tax rate is expected  
to trend toward the headline income statement tax rate as 
available losses and other deferred tax assets are used up 
the total amount of tax losses in the group has decreased mainly 
as a result of utilisation against current year profits and to settle 
tax authority enquiries at no cash tax cost deferred tax has been 
recognised on losses and other tax assets only to the extent that  
it is probable that future taxable profits will be available against 
which the assets can be utilised the division between recognised 
and unrecognised losses is as follows
 recognised unrecognised total
tax losses £m £m £m
uk 136 2093 2229
north america – – –
rest of world – 285 285
total 2009 136	 2378	 2514
total 2008 535 3390 3925
the group’s net deferred tax liability is £1032 million 2008 
£1064 million a £1129 million 2008 £1277 million deferred  
tax liability is provided in respect of brand names and customer 
relationships acquired this liability does not represent a future 
cash tax payment and will unwind as the brand names and 
customer relationships are amortised 
the detail of the cash flow from trading and the net cash flow of 
acquisitions is shown below
   since fki
  2009 acquisition
cashflow from trading
  full year 1 july 2008
including discontinued operations £m £m
headline operating profit   1649	 2437
depreciation and computer  
 software amortisation  360  550 
working capital movement  691	 1483 
net capital expenditure  239 504
headline operating cash flow post capex 2461	 3966 
headline profit conversion to cash  149	 163
net interest and net tax paid  129 540
pension contributions  321 481
other including restructuring costs  466 495
cash inflow from trading  1545	 2450 
melrose had a balance sheet leverage of 176x net debt to 
headline operating profit before depreciation and amortisation  
at 31 december 2009 due to excellent cash generation this 
represents a significant reduction in the leverage for the group 
compared to the start of 2009 when the leverage was 265x
capital expenditure
the pay back on capital projects is a key part of the melrose 
strategy to improve operational performance inevitably during 
2009 capital expenditure opportunities were reduced due to the 
economic environment and the group spent 07x depreciation 
by division the capital expenditure in the year was as follows
     other   
  energy lifting dynacast industrial central total
net capital  
 expenditure £m  95  60  33  40  –  228 
depreciation £m  75  92  88  74  07 336 
net capital expenditure  
 to depreciation ratio  13x 07x 04x 05x –  07x
melrose five year  
 20052009 average  
 annual multiple       13x
the net capital spend to depreciation ratio is expected to increase 
in 2010 the five year melrose average annual net capital spend is 
comfortably in excess of depreciation at 13x
working capital management
the melrose board is focused on achieving the correct amount  
of working capital to allow each division to have the most suitable 
balance between commercial and financial efficiency to ensure 
this happens working capital days cover targets are set for each 
business unit for inventory trade receivables and trade payables 23 melrose plc annual report 2009
business performance governance financials shareholder information
in addition a us defined benefit plan for fki exists at 31 december 
2009 this had assets of £1744 million 2008 £1829 million 
liabilities of £1914 million 2008 £2109 million and consequently 
a deficit of £170 million 2008 £280 million 
the assumptions used to calculate the ias 19 deficit of the 
pension plans within the melrose group are considered carefully 
by the board of directors for the fki uk plans a male aged  
65 in 2009 is expected to live for a further 201 years this is 
assumed to increase by 16 years 8 for a male aged 65 in 
2024 a summary of the key assumptions of the uk plans are 
shown below
  2009 2008
  assumption assumption
   
discount rate  575 630
inflation  345 275
salary increases  395 325
it is noted that a 01 percentage point decrease in the discount 
rate would increase the pension liability on the main uk fki 
defined benefit plan by £94 million and a 01 percentage point 
increase to inflation would increase the liability on this plan by  
£50 million furthermore an increase by one year in the expected 
life of a 65 year old male member would increase the pension 
liability on this plan by £173 million 28
the melrose group contributes £180 million to the fki uk defined 
benefit plan and £61 million cash to the mckechnie uk defined 
benefit plan per annum both plans are being formally valued 
again based on the position as at 31 december 2008 and new 
cash contribution agreements will be signed in due course as  
a result
the longterm strategy for the uk plans is to concentrate on the 
cash flows required to fund the liabilities as they fall due these 
cash flows extend many years into the future and the ultimate 
objective is that the total pool of assets derived from future 
company contributions and the investment strategy allows each 
cash payment to members to be made when due in addition  
the strategy includes reducing the volatility of liabilities wherever 
commercially viable and ensuring that employees have a market 
competitive pension benefit and are treated fairly
the mckechnie uk defined benefit plan is closed both to new 
members and current members’ future service the fki uk 
defined benefit plan is closed to new members during 2009  
the fki us defined benefit plan was closed to future service  
and retirement benefits were terminated on the majority of the  
us retiree benefit plans in total these latter two actions reduced 
liabilities by £219 million in 2009
assets and liabilities
the summary melrose group assets and liabilities are shown below
 31 december 31 december
 2009 2008
1
 £m £m
fixed assets  
 including computer software  2543  2939 
intangible assets   4031	 4560 
goodwill  7792	 8294 
net working capital  1143	 2169 
retirement benefit obligations  1691 1433
provisions  1442 1589
deferred tax and current tax  1525 1400
net assets held for sale  – 204 
other  01 221
total  10850	 13523 
1 restated to reflect the finalisation of the acquisition accounting of fki plc
these assets and liabilities are funded by
 31 december 31 december
 2009 2008
 £m £m
net debt  3217 5448
1
equity  7633 8075 
total  10850 13523 
1 excludes net cash in hand of £17m shown in net assets held for sale
goodwill intangible assets and impairment review
the total value of goodwill as at 31 december 2009 is £7792 
million 2008 £8294 million and intangible assets £4031 million 
2008 £4560 million these items are split by division as follows
    other 
 energy lifting dynacast industrial total 
 £m £m £m £m £m
goodwill 2451 2926 2035 380  7792
intangible assets 1398 2212 228 193  4031
net other assets 227 409 155 27  818
total carrying value 4076	 5547	 2418	 600 		12641
the noncurrent assets have been tested for impairment as at  
31 december 2009 the melrose plc board is comfortable no 
impairment is required
pensions
the group has a number of defined benefit and defined contribution 
pension plans
the current market value of the assets of the uk pension plans 
namely the fki and the mckechnie uk defined benefit plans  
the “uk plans” are insufficient to satisfy the liabilities to members 
when they are valued on a basis consistent with ias 19 the net 
accounting deficit on these plans was £1292 million at 31 december 
2009 2008 £693 million these plans had assets at 31 december 
2009 of £6716 million 2008 £6107 million of which £141 million 
was unrecognised in accordance with ias 19 to stop the deficit 
being smaller than the amount of the committed payments and 
liabilities of £8008 million 2008 £6659 million the strategy to 
fund this deficit is discussed later in this section 24 melrose plc annual report 2009
finance director’s review
continued
in accordance with the reporting requirements on going concern 
issued by the financial reporting council the directors acknowledge 
that the economic environment causes uncertainty as to the 
trading outcome for 2010 the group has committed borrowing 
facilities until april 2013 in addition the breadth of the end 
markets that the melrose group companies fall into both by 
sector and geographically gives some balance to various market 
and economic cycle risks furthermore as a result of the excellent 
cash generation record which has allowed net debt at constant 
exchange rates to halve in the last eighteen months the financial 
headroom has significantly improved the group’s forecasts take 
into account reasonable possible changes to trading performances 
as a consequence the directors believe that the group can manage 
its business risks successfully and accordingly the group financial 
statements have been prepared on a going concern basis
finance cost risk management
the group maintained a net debt position throughout 2009  
in early 2009 the group sought protection from exposure to 
changes in interest rates by entering into a number of interest rate 
swaps to fix £3665 million us 5460 million and €333 million 
of term debt under the terms of these swaps the group has  
fixed the underlying interest rate at 21 for us dollars and 26 
for the euro through to early 2013 at 31 december 2009 this 
produced a blended interest rate of 35 on the £750 million 
facility calculated after inclusion of the current 175 margin but 
before amortisation of arrangement fees and nonutilisation fees
exchange rate risk management
the group trades in various countries around the world and 
hence the group is exposed to many different foreign currencies 
the group therefore carries an exchange risk that can be categorised 
into three types as described below the board’s policy is designed 
to protect against some of the cash risks but not the noncash 
risks the most common cash risk is the transaction risk the 
group takes when it invoices a sale in a different currency to  
the one in which its cost of sale is incurred this is addressed by 
taking out forward cover against approximately 60 to 80 of the 
anticipated cash flows over the following twelve months placed 
on a rolling quarterly basis or for 100 of each material contract 
this does not eliminate the cash risk but does bring some 
certainty to it
exchange rates used in the period  average rate closing rate
us dollar
2009	 	 157		 162
2008  174
1
 146
euro  
2009	 	 112		 113
2008  123
1
 105
1 average rate for the six months post fki acquisition 1 july 2008 to 31 december 2008
risk management
the financial risks the group faces have been considered and 
policies have been implemented to best deal with each risk the 
four most significant financial risks are considered to be liquidity 
risk finance cost risk exchange rate risk and commodity cost 
risk these are discussed in turn
liquidity risk management
the group’s net debt position improved significantly during the 
year ending 31 december 2009 at £3217 million compared with 
£5431 million a year earlier this decrease in net debt resulted 
from strong operational cash generation business disposals  
and favourable exchange rate translation of foreign currency 
denominated net debt 
the group derives its debt from a £750 million syndicated term 
loan and revolving credit facility which matures in april 2013 the 
£500 million term loan component of this facility is subject to a 
15 repayment amortisation that progressively takes place 
between april 2011 and april 2013 with allowance made for any 
repayments made before this period the £250 million revolving 
credit component of the facility is not subject to any such repayments
the £500 million term loan portion of this facility was converted 
into currency loans comprising us 6860 million €583 million 
and £500 million during 2009 the group used disposal proceeds 
to repay us 800 million of the us dollar loans leaving us 
6060 million €583 million and £500 million outstanding at 
31 december 2009 consequently using the exchange rates as at 
31 december 2009 the facility is now equivalent to £4757 million
undrawn facility headroom at 31 december 2009 was £2249 million 
compared with £1086 million a year earlier the facility has two 
financial covenants a net debt to headline ebitda headline 
operating profit before depreciation and amortisation covenant 
and an interest cover covenant the first covenant which now 
calculates net debt at average exchange rates during the period 
is set at 325x for december 2009 reducing by 025x each year 
until 2013 at these exchange rates the net debt to headline 
ebitda at 31 december 2009 was 183x allowing significant 
headroom compared to the covenant test the interest cover 
covenant remains at 35x throughout the life of the facility at  
31 december 2009 the actual interest cover was 61x which also 
affords comfortable headroom compared to the covenant test 
covenant tests are performed each june and december
in addition there are a number of small uncommitted overdraft 
and borrowing facilities made available to the group these 
uncommitted facilities are lightly used
cash deposits and marketable securities amounted to £1475 
million at 31 december 2009 2008 £1677 million and are offset 
against gross debt of £4692 million 2008 £7108 million to arrive 
at the net debt position of £3217 million 2008 £5431 million  
in combination with the undrawn committed facility headroom of 
£2249 million 2008 £1086 million the directors consider that 
the group has sufficient access to liquidity for its current needs 25 melrose plc annual report 2009
business performance governance financials shareholder information
commodity cost risk management
as melrose owns engineering businesses across various sectors 
the cumulative expenditure on commodities is significant to the 
group results the group addresses the risk of base commodity 
costs increasing by wherever possible passing on the cost 
increases to customers or by having suitable purchase 
agreements with its suppliers which sometimes fix the price over 
some months into the future on occasions melrose does enter 
into financial instruments on commodities when this is considered 
to be the most efficient way of protecting against movements 
geoffrey martin
10 march 2010
the effect on the key headline numbers in 2009 for the continuing 
group due to the translation movement of exchange rates from 
2008 to 2009 is shown below the table illustrates the translation 
movement in revenue and headline operating profit if the 2008 
average exchange rates had been used to calculate the 2009 
results rather than the 2009 average exchange rate
the translation difference in 2009    £m
revenue decrease   741
headline operating profit decrease   85
for reference guidelines to show the net translation exchange 
risks that the group currently carries and an indication of the 
unhedged transaction risk are shown below
sensitivity of profit to translation 
  increase in headline
and unhedged transaction exchange risk operating profit
for every 10 cent strengthening of the  
 us dollar against sterling   £4 million
for every 10 cent strengthening of the  
 euro against sterling   £4 million
as the translation risk is not a cash cost no exchange instruments 
are used to protect against this risk 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 this risk
the most significant exchange risk that the group takes arises 
when a division that is predominantly based in a foreign currency 
is sold the proceeds for those divisions will most likely be 
received in a foreign currency and therefore an exchange risk 
arises if these proceeds are converted back to sterling for 
instance to pay a dividend to shareholders protection against  
this risk is taken on a casebycase basis  26 melrose plc annual report 2009
board of directors
1
2
3
4
christopher miller
executive chairman
age 58 he qualified as a chartered accountant with coopers  
lybrand following which he was an associate director of hanson 
plc in september 1988 he joined the board of wassall plc as its 
chief executive between october 2000 and may 2003 he was 
involved in private investment activities mr miller was appointed 
as an executive director of melrose on 29 may 2003 he is 
currently chairman of tmo renewables limited
david roper
chief executive
age 59 he qualified as a chartered accountant with peat marwick 
mitchell following which he worked in the corporate finance 
divisions of sg warburg  co limited bzw and dillon read  
in september 1988 he was appointed to the board of wassall plc 
and became its deputy chief executive in 1993 between  
october 2000 and may 2003 he was involved in private 
investment activities and served as a nonexecutive director  
on the boards of two companies mr roper was appointed  
as an executive director of melrose on 29 may 2003
simon peckham
chief operating officer
age 47 he qualified as a solicitor in 1986 in 1990 he joined 
wassall plc and became an executive director of wassall plc  
in 1999 from october 2000 until may 2003 he worked for the 
equity finance division of the royal bank of scotland and was 
involved in several high profile transactions mr peckham was 
appointed as an executive director of melrose on 29 may 2003
geoffrey martin
group finance director
age 42 he qualified as a chartered accountant with coopers  
lybrand where he worked within the corporate finance and audit 
departments in 1996 he joined royal doulton plc and was 
group finance director from october 2000 until june 2005 
during this time he was involved in projects including raising public 
equity debt refinancings and the restructuring and outsourcing  
of the manufacturing and supply chain mr martin was appointed 
as an executive director of melrose on 7 july 2005 27 melrose plc annual report 2009
business performance governance financials shareholder information
5
6
7
miles templeman chairman
perry crosthwaite
john grant
during 2009 the audit  
committee met three times
for more information see page 37 and 38
audit committee
perry crosthwaite chairman
miles templeman
john grant
during 2009 the remuneration  
committee met three times
for more information see page 38
remuneration committee
miles templeman chairman
perry crosthwaite
john grant
christopher miller
during 2009 the nomination  
committee met three times
for more information see page 38
nomination committee
miles templeman
nonexecutive director
age 62 he has been a director of several consumer goods and 
retailing companies he was managing director of threshers 
offlicences between 1985 and 1988 and managing director of 
whitbread beer company between 1990 and 2001 mr templeman 
was chief executive officer of hp bulmer holdings plc from 
january 2003 to july 2003 and nonexecutive chairman of 
restaurant chain yo sushi between 2003 and 2008 he has  
also held a number of other nonexecutive directorships and was 
appointed as a nonexecutive director of melrose on 8 october 
2003 since october 2004 mr templeman has held the position 
of director general of the institute of directors he is currently 
nonexecutive chairman of shepherd neame the kentish  
family brewer
perry crosthwaite
nonexecutive director
age 61 he has over 30 years’ experience as a director in the city  
of london he was a founding director of henderson crosthwaite 
institutional brokers limited serving on the board until its 
acquisition by investec group uk plc in 1998 he became  
a director of investec bank uk limited and chairman of  
the investment banking division until his retirement in 2004  
mr crosthwaite was appointed as a nonexecutive director of 
melrose on 26 july 2005 he is currently chairman of jupiter green 
investment trust plc and a nonexecutive director of toluna plc 
john grant
nonexecutive director
age 64 he spent his executive career in a variety of senior 
international roles within the automotive industry and other 
engineering businesses he was chief executive of ascot plc 
between 1997 and 2000 prior to that mr grant was group finance 
director of lucas industries plc subsequently lucasvarity plc 
between 1992 and 1996 he previously held several senior 
strategy and finance positions with ford motor company  
in europe and the usa mr grant was appointed as a non
executive director of melrose on 1 august 2006 he is currently 
chairman of gas turbine efficiency plc surion energy limited 
and torotrak plc and nonexecutive director of mhp sa  
pace plc and the royal automobile club limited  28 melrose plc annual report 2009
the directors of melrose plc present their report and the  
audited financial statements of the group for the year ended 
31 december 2009
principal activities and business review 
melrose plc’s stated strategy is to acquire companies and 
businesses whose operational performance the directors believe 
can be improved to create shareholder value the executive 
directors have extensive experience of identifying and evaluating 
acquisition opportunities quoted and unquoted both in the uk 
and overseas as well as recognising the appropriate time in the 
business cycle for disposal in order to provide funding for future 
acquisitions and return funds to investors as appropriate 
the company has already achieved results for shareholders  
under this strategy with the successful acquisitions and restructures 
of the mckechnie and dynacast groups may 2005 and fki plc 
july 2008 two of the mckechnie divisions mckechnie aerospace 
and psm fasteners were separately disposed of two years after 
their acquisition in may 2007 the company used the combined 
proceeds from the two disposals of £458 million aerospace 
£428 million psm fasteners £30 million to return £220 million  
to shareholders and repay £173 million of the company’s debt
following the sale of 100 of the equity of mckechnie vehicle 
components for us 1 on 26 november 2008 25 million of 
cash was loaned to the business of which us 20 million was 
repaid during the year as full and final settlement in exchange  
for early repayment 
the acquisition of fki plc for a total consideration of £9704 million 
increased the size of the melrose group by approximately six 
times there has been significant ongoing restructuring since 
acquisition including the disposal of several noncore businesses 
on 22 june 2009 the company sold its north american operations 
of the logistex division for us 40 million and on 28 august 2009 
the european operations of the logistex division were also sold for 
€30 million rhombus and welland forge two smaller businesses 
were also disposed of during the first six months of 2009
actions were taken during the year to mitigate the impact of 
economic conditions on the group’s profitability cost bases 
across all businesses were reviewed and subsequent initiatives 
implemented to deliver substantial reductions in operating costs 
in addition fki’s senior management team was reviewed and 
changes to key positions have been made 
now that the key restructuring projects are largely complete and 
noncore businesses disposed of the directors’ efforts are focused 
on identifying the next acquisition opportunity
the chairman’s statement on pages 6 and 7 together with the 
chief executive’s review on pages 8 and 9 business reviews on 
pages 10 to 18 and finance director’s review on pages 19 to 25 
describe the principal activities operations financial performance 
financial position and likely future prospects of the group the 
results of the group are set out in detail in the financial statements 
on pages 47 to 51 and in the accompanying notes
the company is required by the companies act 2006 to set out 
in this report a fair review of the development and performance of 
the group during the year the position of the group at the end of 
the year and a description of the principal risks and uncertainties 
facing the group the information that fulfils these requirements 
can be found within the chief executive’s review business reviews 
finance director’s review and in this directors’ report the finance 
director’s review also discusses the key performance indicators 
that management use
the subsidiary undertakings principally affecting the profits or  
net assets of the group in the year are listed in note 3 to the 
melrose plc uk company accounts
financial results and dividend 
the group’s profit for the financial year attributable to members 
was £795 million 2008 loss of £483 million in addition there were 
minority interest losses of £02 million 2008 profit of £05 million 
the directors are pleased to recommend the payment of a second 
interim dividend of 48p on 1 april 2010 to ordinary shareholders on 
the register at the close of business on 19 march 2010 there will be 
no final dividend
it is the intention of the board to maintain a progressive dividend 
policy where appropriate going forward
directors’ appointment and powers
the directors of the company as at the date of this report together 
with their biographical details are given on pages 26 and 27 there 
were no changes to the board during the year
the company’s articles of association the “articles” give the 
directors power to appoint and replace directors under the terms 
of reference of the nomination committee any appointment must 
be recommended by the nomination committee for approval by the 
board the articles also require directors to retire and resubmit 
themselves for election at the first annual general meeting 
“agm” following their appointment furthermore at each agm 
onethird of the directors are subject to retirement by rotation and 
must therefore submit themselves for reelection
the directors are responsible for managing the business of the 
company and may exercise all the power of the company subject 
to the provisions of relevant statutes to any directions given by 
special resolution and to the company’s articles powers relating 
to the issuing of shares and powers to purchase the company’s 
own shares are also included in the current articles and such 
authorities are submitted for approval by the shareholders at the 
agm each year
pursuant to section 693 and 701 of the companies act 2006 and 
a special resolution passed at the agm in 2009 the company is 
authorised to purchase its own shares limited to an aggregate 
maximum number of 49758677 ordinary shares the company 
has not purchased any ordinary shares pursuant to this authority 
the resolutions being proposed at the agm include a resolution to 
renew this authority
directors’ interests and remuneration
information on directors’ beneficial interests including those  
of connected persons within the meaning of section 252 of the 
companies act 2006 in the shares of the company is shown  
in the remuneration report on pages 40 to 43
directors’ report 29 melrose plc annual report 2009
business performance governance financials shareholder information
no director had a material interest at any time during the year  
in any contract other than a service contract with the company 
or any of its subsidiary undertakings
directors’ indemnities
the directors have the benefit of an indemnity from the company in 
respect of liabilities incurred as a result of their office this indemnity 
is provided under the articles and satisfies the indemnity provisions 
of the companies act 2006
the company has taken out an insurance policy in respect of those 
liabilities for which the directors may not be indemnified neither  
the indemnity nor the insurance provides cover in the event that  
a director is proved to have acted dishonestly or fraudulently
directors’ responsibilities
the statement of directors’ responsibilities in relation to the group  
consolidated financial statements and the melrose plc uk 
company accounts is set out on page 44
share capital
details of the structure of the company’s share capital and rights 
attached to the company’s shares are set out on pages 29 and 
30 in compliance with the requirements of section 992 of the 
companies act 2006
changes to the share capital of the company in issue during the 
year are detailed below
  2007 2009 
 ordinary  incentive incentive 
 shares shares shares
1 january 2009 497586779 50000 –
repurchased from 2007  
 incentive shareholders  – 50000 –
issued to 2009  
 incentive shareholders – – 50000
31 december 2009 497586779 – 50000
the ordinary shares and 2009 incentive shares represent  
952 and 48 respectively of the total nominal value of all 
shares in issue
ordinary shares
the total number of ordinary shares in issue on 1 january and 
31 december 2009 at a nominal value of 02p was 497586779 
the ordinary shares are traded on the london stock exchange 
incentive shares
on 14 august 2007 a share incentive scheme was approved  
the “2007 incentive scheme” which was due to expire on  
31 may 2012 on 14 may 2009 pursuant to a shareholder 
resolution passed at a general meeting on that date the 2007 
incentive shares of £1 each were repurchased at their nominal 
value and each holder of 2007 incentive shares subscribed for 
the same number of 2009 incentive shares at the same nominal 
value the rights attaching to the 2009 incentive shares are 
identical to those attaching to the 2007 incentive shares with 
the exception that the company may pay a dividend on the 2009 
incentive shares as an alternative to converting them into ordinary 
shares and the holders may not request early conversion in 2010 
andor 2011 the 2009 incentive shares were issued to directors 
senior management and ogier employee benefit trustee limited 
as trustee of the melrose employee benefit trust 
consistent with the 2007 incentive shares the 2009 incentive 
shares do not confer a right to be paid a dividend or the right to 
vote at a general meeting on winding up the holders are entitled 
to participate in the company’s assets equal to an amount to 
which they would have been entitled if their 2009 incentive shares 
had crystallised as at the date of winding up further details of the 
2009 incentive shares can be found in the remuneration report 
on pages 40 to 43
at a meeting of the remuneration committee on 9 december 
2008 2007 incentive shares totalling 1250 were awarded by 
the remuneration committee but the incentive shares were 
not allocated to individual employees these incentive shares 
were allocated to three senior managers on 14 may 2009 as 
2009 incentive shares on 27 august 2009 the remuneration 
committee approved the allocation of a further 1250 of the 2009 
incentive shares to the same three senior managers 
further rights and obligations attaching to shares
the following summary is based on the company’s current 
articles as adopted at the agm on 7 may 2008 and amended  
at the general meeting on 14 may 2009 shareholders should 
refer to the explanatory notes attached to the notice of agm  
on page 102 for a summary of the changes proposed to be  
made at this year’s agm 
voting
only 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 class of shares in the company of which there 
are currently none
  on a show of hands every member present in person or by 
proxy shall have one vote and
 on a poll every member who is present in person or by proxy 
shall have one vote for every share of which he is the holder
no member shall be entitled to vote at any general meeting or 
class meeting in respect of any shares held by him if any call or 
other sum then payable by him in respect of that share remains  
unpaid currently all issued shares are fully paid the melrose plc  
employee benefit trustee holds 25279 ordinary shares at a 
nominal value of 02p per share resulting from the crystallisation  
of the original incentive scheme in august 2007 the fki plc 
employee benefit trust holds a further 158114 ordinary shares 
at a nominal value of 02p per share arising from the melrose 
acquisition of fki plc the remuneration committee may direct 
how the voting rights of those shares are exercised 
deadlines for voting rights 
full details of the deadlines for exercising voting rights in respect 
of the resolutions to be considered at the agm to be held on 
13 may 2010 are set out in the notice of agm on pages 99 to 102
dividends and distributions 
subject to the provisions of the companies act 2006 the company 
may by ordinary resolution declare a dividend to be paid to the 
members but no dividend shall exceed the amount recommended 
by the board the board may pay interim dividends and also any 
fixed rate dividend whenever the financial position of the company 
in the opinion of the board justifies its payment all dividends shall 
be apportioned and paid pro rata according to the amounts paid up 
on the shares  30 melrose plc annual report 2009
directors’ report
continued
the board may deduct from a dividend or other amounts payable 
to a person in respect of their shares amounts due from him  
to the company on account of a call or otherwise in relation to 
such shares
liquidation 
under the current articles if the company is in liquidation  
the liquidator may on obtaining any sanction required by law
 divide amongst the members in kind the whole or any part 
of the assets of the company or
 vest the whole or any part of the assets in trust for the benefit 
of members as the liquidator shall determine
transfer of shares
subject to the articles any member may transfer all or any of  
his shares in any form which the board may approve and the 
transfer shall be executed by or on behalf of the transferor  
subject to the articles and the requirements of any relevant 
investment exchange the board may in its absolute discretion 
refuse to register a transfer of a share which is not a fully paid 
share or on which the company has a lien the board may also 
decline to register a transfer unless the transfer is i in respect  
of only one class of shares ii in favour of not more than four joint 
transferees or renouncees iii duly stamped if required and  
iv delivered for registration to the registered office or such other 
place as the board may decide accompanied by the certificate 
for the shares to which it relates and such other evidence as the 
board may reasonably require to prove the title of the transferor
substantial shareholdings 
as at 10 march 2010 the company has been advised of the following 
substantial interests in the ordinary share capital of the company
shareholder direct holding indirect holding 
blackrock investment  
 management  – 49381108 992
standard life investments  27076114 16457571 875
ameriprise financial  – 38609973 776
artemis investment  
 management  36392468 – 731
aviva plc  its subsidiaries 15126892 15392892 613
lloyds banking group plc  2719814  26277830  583 
corporate governance
the corporate governance report is included as a separate report 
on pages 36 to 39
risks and uncertainties
the nature of the group’s portfolio of businesses which operate 
across a wide range of specialised engineering markets diversifies 
the group’s risks across a range of customers suppliers labour 
markets and economic conditions the geographical spread of the 
businesses also protects against the risk of adverse changes to 
local economic conditions in any one location 
financial risks affecting the group include liquidity risk finance 
cost risk exchange rate risk and commodity cost risk the 
financial risk management objectives and policies in relation  
to the use of financial instruments are described in the finance 
director’s review on pages 19 to 25 the procedures in place 
for internal control and risk management are explained in the 
corporate governance report on pages 36 to 39 this directors’ 
report describes the group’s management of health and safety 
environmental and intellectual property risks additionally any  
key commercial and economic risks are covered in the business 
reviews on pages 10 to 18 
significant agreements and change of control
with the exception of the group’s banking facilities and the 2009 
incentive share scheme there are no other agreements that take 
effect alter or terminate upon a change of control of the company 
following a takeover bid that are considered to be significant in 
terms of their potential impact on the business of the group as a 
whole on 10 march 2010
upon the acquisition of fki plc the group arranged a syndicated 
£750 million facility comprising a term loan and revolving credit 
facility maturing in april 2013 in the event of a change of control 
of the company following a takeover bid the company and 
lenders under this facility are obliged to enter into negotiations 
to determine whether and if so how to continue with the facility 
there is no obligation for the lenders to continue to make the 
facility available for more than 30 days beyond any change of 
control failure to reach agreement with parties on revised terms 
could require an acquirer to put in place replacement facilities
in the event of a takeover of the company the 2009 incentive 
shares convert into ordinary shares or an entitlement to a dividend 
paid in cash the 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
product and employer’s liability claims
ongoing risks in relation to potential future liabilities arising from 
product disease including asbestos employer’s liability and 
workers’ compensation claims have been assessed using external 
actuarial projections for material exposures and historic claims 
experience analysis for less significant exposures actuarial 
projections and claims history experience are analysed by 
management and key points are discussed with the board 
provisions are recognised in the group’s balance sheet where 
appropriate
a number of businesses have iso 9001 and iso 16949 certifications 
for their quality management systems which also helps to ensure 
their products and processes are of a recognised quality reducing 
the risk of product claims 31 melrose plc annual report 2009
business performance governance financials shareholder information
key customers
a review of key customers has been conducted across the group 
the loss of any one key customer would not have a material effect 
on the group’s results however the loss of a key customer could 
be material to an individual business
payments to suppliers 
given the international nature of the group’s operations there 
is no standard protocol for the group in respect of payments to 
suppliers operating businesses are responsible for agreeing the 
terms and conditions of their transactions with suppliers these 
arrangements are adhered to provided that suppliers meet their 
contractual commitments the company as a holding company 
did not have any material amounts owing to trade creditors at  
31 december 2009
intellectual property
the company values intellectual property “ip” and where 
appropriate seeks protection and enforcement of its rights over ip  
due to the varying types of ip owned or licensed across the group 
each business is responsible for the protection and enforcement of 
its ip rights and this is managed on a decentralised basis through 
the use of external advisors and the support of the company  
the group conducts internal ip audits periodically
employment policies
the group is managed on a decentralised basis and each 
business is responsible for the adoption of employment policies 
and practices applicable to the size and nature of that business 
this is appropriate due to the diversified nature of the group’s 
businesses and allows the businesses to meet their own local 
regulatory requirements respond to changes in the environment 
in which they operate and to retain identity while benefiting from 
being part of a larger group 
the group recognises its responsibilities for the fair treatment  
of all its employees in accordance with legislation applicable to  
the territories within which it operates having regard to their  
skills and abilities the group gives full and fair consideration  
to applications for employment received from disabled persons 
further and so far as particular disabilities permit the group  
will give employees disabled during their period of employment 
continued employment in the same job or if this is not practicable 
a suitable alternative job equal opportunities for appropriate 
training career development and promotion are available to all 
employees regardless of any physical disability gender religion 
race nationality sexual orientation or age
employee involvement consultation and development
the directors attach great importance to good labour relations 
employee involvement and development the nature of the 
group’s activities places the responsibility for employment 
practices with local management in a manner appropriate  
to each business 
a culture of clear communication and employee consultation  
is inherent in all businesses employee briefing sessions are  
held on a regular basis at each unit to communicate strategy  
key changes financial results personnel achievements and  
other important issues affecting operations regular appraisals 
notice boards intranet sites and newsletters are also used  
to communicate with employees 
various key performance indicators “kpis” including 
absenteeism lateness and employee turnover are monitored  
on a regular basis by the businesses any concerns or adverse 
trends are responded to in a timely manner 
training is actively encouraged with extensive training available  
to all staff to ensure a high standard of skill is maintained across 
the group crosstraining programmes are also in place at  
a number of units the importance of training extends beyond on 
the job training and focuses on enhancing personal development 
for example the truth business subsidises further university 
education and master degree programmes and a number of 
businesses offer external after hours training courses on subject 
matters unrelated to current job requirements apprenticeship 
programmes are in place at the majority of sites assisting 
with succession planning where there is an ageing workforce 
innovative thinking is encouraged across the group and a number 
of the dynacast business units have established continuous 
improvement committees which recognise and reward 
employees for ideas which are realised and implemented  
to improve operations 
a range of social events are held across the businesses throughout 
the year in recognition of employees’ contributions and a number 
of broadranging wellbeing programmes are also in place 
a significant number of employees are members of unions and 
some businesses operate works councils both of which are used 
for consultation and dissemination of information as appropriate
the directors have monthly meetings with divisional senior 
management and visit the sites on an adhoc basis to communicate 
with the wider group financial results for the half year and full 
year are discussed with the group’s senior management team 
and group developments are communicated to the businesses  
as appropriate employee involvement in and commitment to  
the group’s profitability is encouraged through appropriate  
bonus schemes
pensions
companies within the group operate various pension schemes 
around the world the following defined benefit schemes are 
material to the group
 as at 31 december 2009
  assets liabilities number of 
name of scheme status £m £m members
fki uk closed to new members 5087 6188 10953
pension in october 2001 open 
scheme for future accrual on a final 
 salary basis
fki us closed to new members 1744 1914 8532 
pension plan in april 2003 and for future 
 accrual in january 2009 
mckechnie uk closed to new members  1281 1402 3362 
pension plan in may 2003 and for future  
 accrual in june 2005  32 melrose plc annual report 2009
directors’ report
continued
the fki uk pension scheme “fki uk scheme” is a uk defined 
benefit pension scheme with fki plc as its principal employer  
the primary liability for funding rests with the participating 
employers who currently pay £180 million annually into the  
fki uk scheme this was expected to remove the funding 
deficit by 31 december 2015 when the contribution levels were 
last formally assessed as at 31 december 2005 the company 
and trustees have reviewed the funding of the fki uk scheme 
as part of the actuarial valuation as at 31 december 2008 and 
discussions to finalise contributions are ongoing between the 
company and the trustees
the fki us pension plan “fki us plan” is a defined benefit 
pension scheme covering several of fki’s us business units  
the primary liability for funding the fki us plan rests with the 
participating employers the company and trustees have 
reviewed the funding requirements of the fki us plan based 
on the 1 january 2009 actuarial valuation and no pension 
contributions are required as it is expected that the deficit will  
be eliminated over time via excess asset returns unlike the  
uk pension plans deferred member liabilities do not increase  
by inflation each year
the mckechnie uk pension plan “mckechnie uk plan” is a uk 
defined benefit pension scheme with mckechnie limited as its 
principal employer the primary liability for funding rests with the 
participating employers which currently contribute £61 million 
annually into the mckechnie uk plan and have agreed to meet the 
reasonable administration expenses and the pension protection 
fund levy up to 30 april 2010 the company has guaranteed the 
funding of the mckechnie uk plan on an ongoing basis the 
company and trustees reviewed the funding of the mckechnie 
uk plan as part of the actuarial valuation as at 31 december 2008 
and discussions to finalise contributions are ongoing between the 
company and the trustees
health and safety
the directors seek to minimise health and safety risks to the 
group’s employees by promoting effective management of the 
group’s activities 
policies are set by each business in accordance with local health 
and safety legislation and most units strive to achieve best 
practice the turbogenerators business in the czech republic 
has iso 18001 certification for occupational health and safety 
and a number of operations are currently in the process of 
performing gap analysis of current processes to determine the 
changes required to obtain this certification
health and safety is a key focus for divisional management and 
there are active programmes in place to provide substance to 
the written policies detailed health and safety plans are set by 
businesses each year to determine annual targets and initiatives 
health and safety committees are established at all businesses 
which consist of both management and manufacturing personnel 
who meet on a monthly basis the committees are responsible 
for reviewing reported incidents monitoring incident trends and 
ensuring corrective measures are implemented when accidents 
occur or safety hazards are noted all incidents whether or not 
they are deemed reportable under local legislation are given due 
attention by the committee and divisional management require 
detailed reporting of all incidents and prompt reaction to issues 
a variety of kpis are measured by the various health and safety 
committees across the group with all businesses monitoring 
the number of incidents and lost time injuries at a minimum 
some expanding their kpis to determine frequency and severity 
of incidents the company is in the process of reviewing the 
data already collected across the group to assess appropriate 
standardised measures for the group as a whole
extensive work has been undertaken by the businesses to ensure 
high levels of health and safety standards are maintained across 
the group the businesses strive for continuous improvement and 
numerous projects have taken place throughout the year to further 
enhance the quality of the working environment for employees 
such that the majority of kpis have improved when compared to 
2008 initiatives include implementation of stretching programmes 
at truth and acco which have seen notable reductions in the 
frequency of back and other strain injuries health and safety 
assessments at bridon which identify training needs and ensure 
employees keep up to date with latest procedures improved 
use of notice boards to communicate incidents and promote 
awareness of specific hazards and risks increased use of 
automatic retractable cables rather than manually wound cables 
to reduce trips and falls and the installation of more automated 
lifting machines at a number of sites to reduce backrelated 
injuries businesses have further initiatives planned for 2010 
including improved analysis across many units of situations  
which could have resulted in an accident “near misses” and  
the introduction of wellbeing programmes by some units 
premises are toured on a monthly basis by the respective health 
and safety committees to ensure compliance with policies and to 
identify any potential hazards for which counter measures can be 
implemented recommendations are followed up as part of the 
agenda at the next committee meeting additionally operations 
are audited by both the safety committees and external auditors 
at least annually and reports of performance and recommended 
improvements are prepared the safety committee is responsible 
for ensuring recommendations are implemented and most 
businesses use the audit reports as a base for their annual health 
and safety plans
in order to ensure the policies in place are effective in promoting 
good health and safety all divisions are required to report to the 
board on health and safety matters on a monthly basis and to 
notify the board of any reportable incidents health and safety  
is also covered at every meeting of the board  33 melrose plc annual report 2009
business performance governance financials shareholder information
the environment
the group continues to recognise the importance of its 
environmental responsibilities and is committed to ensuring that 
its operations have minimum adverse effect upon the environment 
and that employees are aware of their role in safeguarding the 
future of the environment 
business units seek to actively improve their processes and  
local policies are designed to reduce any damage that might  
be caused by the group’s activities with many units implementing 
policies in line with best practice in seeking best practice 
standards a number of business units have achieved the 
high standards required to obtain iso 14001 environmental 
management systems certification and two further units are 
currently undergoing gap analysis to ensure certification in 2010 
policies and procedures at dynacast singapore and malaysia  
also meet the high standards required to be “green partners”  
for sony which are seen to be stricter than those applied by  
iso 14001 and truth was awarded the first annual green award 
from window and door magazine in addition the uk subsidiaries 
comply with the uk packaging waste regulations and reach 
registration evaluation authorisation and restriction  
of chemicals requirements as appropriate 
businesses understand the importance of monitoring the impact 
of their operations on the environment and measure a range 
of kpis including energy consumption carbon dioxide “co
2
” 
emissions water consumption waste disposal recycling and 
volatile organic compound emissions kpis are used to plan 
areas for improvement each year consistent with the ethos of 
continuous improvement across many facets of the group the 
businesses are pleased to have implemented further initiatives 
during the year to reduce energy and water consumption capital 
expenditure was invested in new energy efficient machinery and 
lighting automated lighting systems installation of water flow 
meters and automatic close valves and a number of businesses 
moved to using bore water rather than town water for some 
processes dynacast went a step further and its new factory in 
singapore was built with a transparent roof in order to significantly 
reduce the reliance on artificial lighting the company is expected  
to replicate this design for any new plants built in the asia pacific 
region 
looking forward to 2010 turbogenerators and acco are  
moving to replace solventbased paints with waterbased  
paints as already used by most other units bridon is assessing 
its current cleaning processes to reduce the levels of hydrochloric 
acid used and some of the dynacast businesses are replacing 
many of their traditional cleaning processes to dry cleaning methods 
such as shot blasting in order to reduce the use of chemicals 
and soap the group will continue its focus on recycling use of 
renewable energy and safe removal of hazardous waste across  
all operations 
the introduction of the crc energy efficiency scheme “crc”  
a new mandatory climate change and energy saving scheme 
introduced in the uk will also impact the group’s uk operations 
from 2010 crc is part of the uk’s strategy for improving energy 
efficiency and reducing co
2
 emissions as set out in the climate 
change act 2008 and requires uk companies to purchase 
carbon allowances based on their energy usage the company 
has been proactive during 2009 in preparing for the scheme’s 
implementation appointing external consultants as the group’s 
crc advisors a crc training workshop was held in september 
2009 for all uk businesses units to communicate the scheme’s 
requirements and the importance of crc to the group preparation 
for the registration process is well advanced and the group is 
ready for registration which commences in april 2010
environmental liabilities
the environmental laws of various jurisdictions impose obligations 
to remediate contaminated sites both currently and previously 
owned by the group all environmental risks are closely managed 
by external environmental specialists in conjunction with 
management and remediation is undertaken as appropriate 
environmental liabilities are required to be notified to the company 
secretary and the board are updated on environmental matters at 
each board meeting costs incurred in meeting these obligations 
are monitored and provisions are reviewed by the board and 
recognised as appropriate
research and development
using both internal expertise and external consultants the group 
continually invests in research and development for the design of 
new products processes and technology new products were 
launched across the group this year and continued investment in 
new technology realised significant cost savings from streamlining 
production due to the nature of the research and development 
that occurred in 2009 the associated costs were expensed during 
the year rather than being capitalised in line with the group’s 
accounting policies on page 55 the group will continue to invest 
in research and development that has a suitable return
social responsibility
the group recognises the importance of social environmental 
and ethical matters and the directors endeavour to take into 
account the interests of all stakeholders including investors 
employees customers suppliers and business partners when 
managing the businesses within the group
the group regards employee training and advancement as an 
essential element of industrial relations disputes and days lost 
through strike action are negligible many units have a social and 
ethical policy with a senior manager holding responsibility for 
communicating and implementing it such policies apply and 
extend local laws and standards which prohibit discrimination  
and exploitation
the majority of the businesses provided community support 
during the year with efforts ranging from charitable donations to 
voluntary assistance and fund raising support is given to local 
schools by offering traineeships and work experience to students 
the company will continue to invest in its businesses during its 
ownership enhancing their reputation within the markets and 
communities in which they operate
charitable and political donations
the group paid £8757 2008 £8750 to uk charities during the 
year principally to local charities serving the communities in which 
the group operates there were no political donations made 
during the year 2008 nil 34 melrose plc annual report 2009
directors’ report
continued
auditors
under the companies audit investigation and community 
enterprise act 2004 auditors have the right to access all 
information necessary for the performance of their duties as 
auditor and the duties of directors in this regard are clarified
so far as each director is aware there is no relevant audit 
information of which the auditors are 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 auditors are 
aware of that information
this confirmation is given and should be interpreted in accordance 
with the provisions of section 418 of the companies act 2006
deloitte llp have expressed their willingness to continue in office as 
auditors accordingly a resolution will be proposed at the agm of the 
company to reappoint deloitte llp as auditors of the company and 
to authorise the directors to determine their remuneration
going concern
the group’s business activities together with the factors  
likely to affect its future development performance and position 
are set out in the business reviews on pages 10 to 18 the financial 
position of the group its cash flows liquidity position and 
borrowing facilities are described in the finance director’s  
review on pages 19 to 25 in addition notes 19 and 24 to the 
consolidated financial statements include the group’s policies  
and processes for managing its capital exposures to liquidity  
risk and financial risk management objectives as well as details  
of its financial instruments and hedging credit risk exposure  
is discussed in note 16 and note 24 to the consolidated  
financial statements
the group prepares regular business forecasts and monitors 
projected facility headroom and compliance with its banking 
covenants which are reviewed by the board forecasts are then 
adjusted for sensitivities which address the principal risks to which 
the group is exposed such as fluctuations in exchange rates 
and best estimates of the possible impact of the macroeconomic 
environment on the group’s underlying trading results 
consideration is then given to the potential actions available  
to management to mitigate the impact of one or more of  
the sensitivities 
taking all this into consideration the group should be able to 
operate within the level of its current facility and remain covenant 
compliant for the foreseeable future being a period of at least 
twelve months from the date of approval of the annual report 
after making appropriate enquiries the directors have a reasonable 
expectation that the company and the group have adequate 
resources to continue in operational existence for the foreseeable 
future accordingly they continue to adopt the going concern 
basis in preparing the annual report and financial statements
annual general meeting
the agm of the company will be held at barbersurgeons’ hall 
monkwell square wood street london ec2y 5bl at 1100am 
on 13 may 2010
resolutions dealing with the following special business will be 
proposed at the agm
resolution 7 will seek shareholder approval to renew the directors’ 
authority to allot shares or grant rights to subscribe for or convert 
any securities into shares pursuant to section 551 of the companies 
act 2006 the “section 551 authority” the authority contained  
in paragraph a of the resolution will be limited to an aggregate 
nominal amount of £331724 representing approximately onethird 
of the company’s issued ordinary share capital as at 10 march 2010 
in line with guidance issued by the association of british insurers 
paragraph b of this resolution would give the directors authority 
to allot shares or grant rights to subscribe for or convert any securities 
into shares in connection with a rights issue up to an aggregate 
nominal amount equal to £663449 representing approximately 
twothirds of the company’s issued ordinary share capital as at 
10 march 2010 as reduced by the nominal amount of any shares 
issued under paragraph a of this resolution
the company does not hold any treasury shares
resolution 8 will seek to renew the authority conferred on the 
board to allot equity securities of the company or sell any  
shares which the company may elect to hold in treasury for  
cash pursuant to section 570 of the companies act 2006  
the “section 570 authority” without first offering them to existing 
shareholders in proportion to their existing shareholdings it is 
limited to allotments or sales in connection with preemptive 
offers subject to any arrangements that the directors consider 
appropriate to deal with fractions and overseas requirements  
and otherwise up to a maximum nominal value of £49758 
representing approximately 5 of the company’s issued ordinary 
share capital as at 10 march 2010 which is in accordance with  
the relevant guidelines for the company
if approved the section 551 authority and the section 570 
authority will expire at the conclusion of next year’s agm or  
if earlier at the close of business on 30 june 2011 the directors 
have no present intention of exercising the section 551 authority  
or the section 570 authority
resolution 9 will seek to renew the authority conferred on the 
company to purchase its own shares pursuant to sections 693 
and 701 of the companies act 2006 this authority is limited to 
an aggregate maximum number of 49758677 ordinary shares 
representing approximately 10 of the company’s issued ordinary 
share capital as at 10 march 2010 this power will expire at the 
conclusion of next year’s agm or if earlier at the close of business 
on 30 june 2011 the maximum price which may be paid for an 
ordinary share will be an amount which is not more than 5 
above the average of the middle market quotation for an ordinary 
share as derived from the london stock exchange daily official 
list 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 35 melrose plc annual report 2009
business performance governance financials shareholder information
resolution 10 will seek to adopt new articles of association 
the “new articles” in order to update the company’s current 
articles primarily to take account of the coming into force of 
the companies shareholders’ rights regulations 2009 the 
“shareholders’ rights regulations” the implementation of the 
last parts of the companies act 2006 and amendments to the 
uncertificated securities regulations 2001
the principal changes introduced in the new articles are 
summarised in the explanatory notes to the notice of agm on 
page 102 other changes which are of a minor technical or 
clarifying nature which merely reflect changes made by the 
companies act 2006 the shareholders’ rights regulations or the 
uncertificated securities regulations 2001 or which conform the 
language of the new articles with that used in the model articles 
for public companies produced by the department for business 
innovation and skills have not been noted in the explanatory 
notes a copy of the new articles showing all the changes to the 
current articles is available for inspection as noted on page 101  
of this document
resolution 11 will seek shareholder approval to allow the 
company to continue to call general meetings other than agms 
on 14 clear days’ notice changes made to the companies act 
2006 by the shareholders’ rights regulations have increased  
the notice period required for general meetings of the company 
to 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  
the changes to the companies act 2006 mean that in order  
to be able to call a general meeting on less than 21 clear days’ 
notice the company must make electronic voting available to  
all shareholders for that meeting
recommendations
the board believes that each of the resolutions to be proposed 
at the agm is in the best interests of the company and its 
shareholders as a whole accordingly the directors unanimously 
recommend that members vote in favour of all of the resolutions 
proposed as they intend to do in respect of their own beneficial 
holdings
disclosures in the directors’ report
the corporate governance report and business reviews and 
finance director’s review form part of the directors’ report
 
approved by the board of directors and signed on its behalf by
garry barnes
secretary 
10 march 2010  36 melrose plc annual report 2009
statement of compliance
the company supports the principles contained in the 2008 
combined code on corporate governance that was issued  
by the financial reporting council “the combined code”
the board is accountable to the company’s shareholders for 
good governance throughout the year ended 31 december 
2009 the company has complied with the provisions of section 
1 of the combined code and with the requirements of the new 
disclosure and transparency rules “dtr” on audit committees 
and corporate governance statements the statements below 
describe how the company has applied the principles identified  
in the combined code and dtr directives 
the board
as at 31 december 2009 the board comprised seven members 
who also served throughout the year the members of the board 
include the four executive directors christopher miller chairman 
david roper chief executive simon peckham chief operating 
officer and geoffrey martin group finance director and  
the three nonexecutive directors miles templeman senior  
nonexecutive director perry crosthwaite and john grant
the board is responsible to shareholders for the effective and 
proper management and control of the company and has a 
formal schedule of matters reserved for its decisions its primary 
roles are to determine and review company strategy and policy 
consider acquisitions and disposals assess requests for major 
capital expenditure review trading performance ensure adequate 
funding is available and appropriate personnel are in place 
maintain sound internal control systems report to shareholders 
and give consideration to all other significant financial matters 
this process is undertaken in conjunction with senior management 
who in turn are responsible for the daytoday conduct of the 
group’s operations and for reporting to the board on items of 
significance and the progress against objectives the board 
meets regularly during the year as well as on an adhoc basis 
as required by time critical business needs there were four 
scheduled board meetings held during the year and the 
attendance of each of the directors is shown on page 38 
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 26 
and 27 these biographies identify any other appointments held 
by the directors the only executive director to hold nonexecutive 
director appointments elsewhere is mr christopher miller who  
is chairman of tmo renewables limited and is allowed to retain 
the remuneration he receives from that appointment
the terms and conditions of the executive directors’ service 
contracts and the nonexecutive directors’ appointments are 
available for inspection at the company’s registered office  
the nonexecutive directors’ appointment letters are also  
available on the company’s website wwwmelroseplcnet
in accordance with the provisions of the combined code 
consideration has been given to the independence of all the  
nonexecutive directors and the board considers all the non
executive directors to be independent the nonexecutive 
directors are not entitled to any bonus or shares under the  
2009 incentive share scheme
performance of the board and each committee is evaluated 
annually the chairman has held meetings with the directors 
including the senior independent nonexecutive director mr miles 
templeman to discuss the performance of individual executive 
directors and the board as a whole it was considered that the 
individual directors and the board as a whole were operating 
effectively directors determine whether there are any training 
requirements by completing an evaluation questionnaire during 
the year that is designed to identify any failures in the performance 
of the board and each of its committees the findings of the 
evaluations were reviewed by the company secretary and 
feedback was provided to the board
in accordance with the company’s articles of association  
one third or the number nearest to but not less than one third  
of directors are required to retire and submit themselves for  
reelection at each annual general meeting of the company it is 
the policy of the board that nonexecutive directors are appointed 
for an initial term of three years following which their appointment 
will be reviewed
the directors proposed for reelection at the annual general 
meeting on 13 may 2010 are mr david roper mr miles 
templeman and mr john grant the board and nomination 
committee have carefully considered the time commitments 
required and the contribution made by each director both the 
nomination committee and the board are of the belief that the 
performance of each executive and nonexecutive director 
continues to be effective and that each director demonstrates 
commitment to his role 
all directors receive a formal and tailored induction shortly after 
their appointment directors are advised that they have access to 
the advice and services of the company secretary garry barnes 
who is responsible for ensuring that board procedures are followed 
and that applicable rules and regulations are complied with the 
board may seek independent legal and financial advice in the 
furtherance of its duties at the company’s expense 
a pack of briefing papers and an agenda are provided to each 
director in advance of each scheduled board or standing 
committee meeting the directors are able to seek further 
clarification and information on any matter from any other director 
or employee of the group whenever necessary decisions are 
taken by the board in conjunction with the recommendations of its 
committees and advice from external consultants advisors and 
senior management
chairman and chief executive
the roles and responsibilities of the chairman of the board and 
the chief executive of the company are segregated as required 
by board policy the chairman alone is responsible for the 
leadership of the board and for ensuring effective communication 
with shareholders together with the other executive directors the 
chief executive is responsible for strategic direction and decisions 
involving the daytoday management of the company these 
respective responsibilities are set out in writing and have been 
approved by the board who consider that the respective roles 
and responsibilities are clearly understood by both individuals and 
by the board as a whole 
corporate governance report 37 melrose plc annual report 2009
business performance governance financials shareholder information
committees of the board
in accordance with the provisions of the combined code the 
board has three standing committees the audit remuneration 
and nomination committees each of which includes the three 
independent nonexecutive directors the duties of the committees 
are set out in formal terms of reference these are available  
from the company secretary and on the company’s website  
wwwmelroseplcnet membership of the committees is shown 
above the company secretary acts as secretary to each of  
the committees
audit committee
the audit committee currently comprises the three independent 
nonexecutive directors and is chaired by mr miles templeman 
each member of the audit committee brings relevant financial 
experience from senior executive and nonexecutive positions as 
described in their biographies on pages 26 and 27
the audit committee invites the group finance director the head 
of financial reporting and senior representatives of the external 
and internal auditors to attend meetings as appropriate to the 
business being considered in addition the audit committee has 
the right to invite any other employees to attend meetings where 
this is considered appropriate the audit committee is expected 
to meet not less than three times a year and the audit committee 
met three times during 2009 the attendance of its members 
along with the group finance director is shown in the table on 
page 38
the function of the audit committee is to monitor and review 
the effectiveness of the group’s internal control systems 
accounting policies and practices financial reporting process 
risk management procedures and compliance controls integrity 
of the company’s financial statements is monitored through the 
review of the preliminary results interim statement and annual 
report by the committee before they are presented to the board 
for approval 
the audit committee is also responsible for the development 
implementation and monitoring of the company’s policy on  
external audit and for overseeing the objectivity and effectiveness 
of the auditors the company’s external auditors are recommended 
for appointment and reappointment by the audit committee 
which also assesses the appropriateness of the scope of audit 
work performed and provides recommendations in respect of 
their remuneration the audit committee receives regular reports 
from the group’s external auditors 
the audit committee has a policy on the engagement of the 
external auditor for the supply of nonaudit services and the 
committee is aware of the audit and nonaudit services including 
taxation advice which have been provided by deloitte llp during 
2009 a significant proportion of the nonaudit services related 
to nonrecurring work in connection with the provision of tax 
advisory services and the disposal of the logistex businesses 
the provision of nonaudit services was considered to be 
appropriate given the external auditors’ depth of knowledge of the 
affairs and financial practices of the group the audit committee 
is satisfied that notwithstanding nonaudit work deloitte llp 
have retained objectivity and independence during the year the 
audit committee will continue to monitor its policy in this regard 
and accepts that nonaudit work should be controlled to ensure 
that it does not compromise the independence of the auditors
deloitte llp were appointed in 2003 at each year end  
deloitte llp submits a letter setting out how they believe their 
independence and objectivity have been maintained and they  
are required to rotate the audit partners responsible for the group 
and subsidiary audits every 5 years the group’s audit signing 
partner will change as part of that rotation process in 2010  
there are no contractual obligations that restrict the group’s 
capacity to recommend a particular firm for appointment as auditor
the board
christopher miller executive chairman
david roper chief executive
simon peckham chief operating officer
geoffrey martin group finance director
miles templeman senior nonexecutive director
perry crosthwaite nonexecutive director
john grant nonexecutive director
remuneration committee
perry crosthwaite chairman
miles templeman
john grant
nomination committee
miles templeman chairman
perry crosthwaite
john grant
christopher miller
audit committee
miles templeman chairman
perry crosthwaite
john grant 38 melrose plc annual report 2009
corporate governance report
continued
following the acquisition of fki plc in july 2008 the size and 
complexity of the group is such that the implementation of an 
internal audit programme has been deemed appropriate bm 
howarth an external firm that provides internal audit services 
were appointed as the group’s internal auditors on 3 june 2009 
a rotation programme is in place such that every unit will have 
an internal audit at least once every three years with the largest 
sites reviewed at least once every two years the internal auditors’ 
remit includes assessment of the effectiveness of the internal 
control systems and review of the businesses’ balance sheets 
for compliance with the group’s accounting policies a report of 
key findings and recommendations is presented to the finance 
director head of financial reporting and operations controller 
who are responsible for monitoring divisional management’s 
response to these findings 
review of the internal audit process and scope of work 
covered by the internal auditors is the responsibility of the audit 
committee to ensure their objectives level of authority and 
resources are appropriate for the nature of the businesses under 
review a report of significant findings is presented by the internal 
auditors to the committee at each meeting and implementation of 
recommendations by the board is followed up at the subsequent 
committee meeting
remuneration committee
the remuneration committee currently comprises the three 
independent nonexecutive directors and is chaired by  
mr perry crosthwaite 
the function of the remuneration committee is to make 
recommendations to the board on the overall framework and 
policy for the remuneration of the executive directors and other 
senior management including performance related remuneration 
in developing its recommendations the committee considers 
schedule 8 of part 15 of the companies act 2006 
the remuneration committee is expected to meet not less than 
twice a year and during 2009 the remuneration committee 
met three times the attendance of its members is shown in the 
table on this page the report to shareholders on how directors 
are remunerated together with details of individual directors’ 
remuneration is shown in the remuneration report on pages  
40 to 43
nomination committee
the nomination committee currently comprises mr christopher 
miller and the three independent nonexecutive directors and is 
chaired by mr miles templeman 
the nomination committee reviews the structure size and 
composition of the board particularly in relation to its balance 
of skills experience and knowledge and seeks to ensure that 
both executive and nonexecutive directors have the necessary 
skills and attributes for the future success of the company the 
nomination committee reviews succession plans for the directors 
and makes recommendations to the board on membership of the 
board and of its committees the nomination committee retains 
external search consultants as appropriate
the nomination committee is expected to meet not less than 
twice a year and during 2009 the nomination committee met 
three times the attendance of its members is shown in the table 
on this page
attendance at meetings
the table below shows the attendance of each of the directors 
at the scheduled and significant meetings of the board and 
its standing committees held during the year the quorum 
necessary for the transaction of business by the board and 
each of its standing committees is two briefing papers and 
meeting agendas are provided to each director in advance of 
each meeting decisions are taken by the board in conjunction 
with the recommendations of its committees and advice from 
external advisors and senior management as appropriate the 
representations of any director who is unable to attend a meeting 
of the board or a standing committee are duly considered by 
those directors in attendance
 board audit remuneration nomination
number of meetings
1
 4	 3	 3	 3
christopher miller 4 na na 3
david roper  4 na na na
simon peckham 4 na na na
geoffrey martin 4 3
2
 na na
miles templeman 4 3 3 3
perry crosthwaite 3 3 3 3
john grant 4 3 3 3
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 mr martin attends by invitation 
internal control and risk management
objectives and policy
the objective of the directors and senior management is to 
safeguard and increase the value of the business and assets of 
the group achievement of this objective 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
the board is ultimately responsible for the group’s overall system 
of internal control and for reviewing its effectiveness while the role 
of management is to implement the policies set by the board in 
respect of risk management and controls the directors recognise 
that the systems and processes established by the board are 
designed to manage rather than eliminate the risk of failure  
to achieve business objectives and cannot provide absolute 
assurance against material financial misstatement or loss
the board is committed to satisfying the internal control guidance 
for directors set out in the revised version of the turnbull guidance 
on internal control in accordance with this guidance there is an 
ongoing process regularly reviewed by the directors for identifying 
evaluating managing and mitigating where possible the significant 
risks faced by the group this process for reviewing the group’s 
internal controls is consistent with prior years and has been in 
place throughout the 2009 financial year and up to the date of 
approval of the annual report 39 melrose plc annual report 2009
business performance governance financials shareholder information
the group has policies which address a number of key 
business risks including financial treasury health and safety 
and environmental risks the group’s financial risk management 
objectives and policies are described in the finance director’s 
review on pages 19 to 25 other key risks which could adversely 
affect the group are described in the chief executive’s review 
on pages 8 and 9 business reviews on pages 10 to 18 and 
directors’ report on pages 28 to 35 these policies and further 
detailed business unit specific policies are made available to 
employees through manuals and also via specific employee 
briefings and other communications as appropriate 
managing and controlling risk
the group operates on a decentralised basis and the directors 
have established an organisational structure with clear reporting 
procedures lines of responsibility and delegated authority 
divisional senior management plant managers and financial 
controllers have been delegated responsibility by the board  
for the establishment and implementation of detailed control 
systems as appropriate for their business 
an established programme of regular review is in place at the 
businesses and a culture of continuous improvement is encouraged 
by the directors through regular meetings with senior management 
review of operating performance and progress against business 
plans the ongoing process of review provides assurance that the 
control environment is operating as intended 
the audit committee also monitors the effectiveness of the 
internal control processes implemented across the group through 
review of the key findings presented by the external and internal 
auditors and discussions with senior management on an  
adhoc basis the board is responsible for considering the audit 
committee’s recommendations in respect of internal controls and 
risk management and ensuring implementation by management 
of those recommendations it deems appropriate for the business 
internal financial controls
the group has a comprehensive system for assessing the 
effectiveness of the group’s systems of internal financial controls 
including strategic business planning and regular monitoring and 
reporting of financial performance a detailed annual budget is 
prepared by senior management and thereafter is reviewed and 
formally adopted by the board the budget and other targets 
are regularly updated via a rolling forecast process and regular 
business review meetings are held involving senior management 
to assess the divisional and overall group performance the 
results of these reviews are in turn reported to and discussed by 
the board at each meeting
as discussed in the audit committee section on pages 37 and 38 
of this report bm howarth has been appointed as the group’s 
internal auditors fifteen business units have been visited during 
the year and the directors are pleased to report that there were no 
material deficiencies and the main recommendations presented in 
the internal auditors’ reports of key findings have now been or are 
in the process of being implemented a further nineteen business 
units are planned for review during 2010
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 and bribery and corruption policies
the group has a whistleblowing policy in place which enables 
individuals to make protected disclosures to their divisional  
human resources manager group company secretary or senior 
independent nonexecutive director if they have concerns about 
possible improprieties in financial reporting or other malpractices 
within their business
a bribery and corruption policy is also in place for the group  
that requires all employees to act with honesty integrity and 
transparency and conduct themselves in a lawful ethical and 
professional manner under the policy employees are not to offer 
or solicit any bribe or similar inducement and are required to 
report any offer of a bribe or unorthodox payment 
communications with shareholders
principally via the executive directors the company seeks to  
build on a mutual understanding of objectives with its institutional 
shareholders through regular meetings and presentations 
following announcements of annual and interim results the 
senior independent nonexecutive director mr miles templeman 
is available to meet institutional shareholders should there be 
unresolved matters they wish to bring to his attention the views 
of key analysts and major shareholders are communicated back 
to the board directly by individual directors and via the company’s 
brokers ensuring all members of the board develop an 
understanding of the views of major shareholders
corporate information is available on the company’s website 
wwwmelroseplcnet 
the board welcomes the attendance of shareholders at the agm 
and the attendance of all directors is required the number of proxy 
votes cast for and against each of the resolutions proposed is 
announced at the agm and a summary will be available shortly 
after the agm on the company’s website
 
by order of the board
garry barnes
secretary
10 march 2010 40 melrose plc annual report 2009
introduction and compliance
this report has been prepared by the remuneration committee 
on behalf of the board in accordance with the requirements of 
schedule 8 of part 15 of the companies act 2006 and the listing 
rules of the financial services authority a resolution inviting 
shareholders to approve the report will be put to the annual 
general meeting on 13 may 2010 
biographies of the directors are shown on pages 26 and 27 
these biographies identify any other significant appointments  
held by the directors 
unaudited information
remuneration committee
the company has established a remuneration committee which 
is chaired by mr perry crosthwaite an independent nonexecutive 
director mr miles templeman and mr john grant the other two 
independent nonexecutive directors complete the committee
the terms of reference of the remuneration committee are 
posted on the corporate governance section of the company’s 
website wwwmelroseplcnet and are also available from the 
company secretary page 38 of the corporate governance  
report sets out the function of the remuneration committee
remuneration policy 
the remuneration policy in place for the current and subsequent 
financial years is described below
executive directors
the board establishes the remuneration policy based on  
the recommendations of the remuneration committee  
the remuneration policy requires the package offered to be 
sufficient to attract retain and motivate executive directors and 
senior management of a suitable quality but not to be more than 
is necessary for this purpose it is intended that performance 
related pay should comprise a significant proportion of the total 
remuneration package 
nonexecutive directors
the executive directors are responsible for proposing the 
nonexecutive directors’ fees in proposing such fees they take 
account of fees paid to nonexecutive directors of similar sized 
listed companies within the company’s listing sector any decision 
on fee changes is taken by the executive directors as a whole and 
nonexecutive directors do not take part in discussions on their 
own remuneration nonexecutive directors do not receive other 
taxable benefits or pension contributions from the group
the remuneration package 
remuneration packages are reviewed annually generally effective 
from 1 january the remuneration committee and its advisors 
use a number of surveys of the employment market from which to 
obtain remuneration data
the remuneration package for all executive directors comprises 
base salary and benefits annual bonus long term incentive 
arrangements and pension contributions as described below 
some senior employees of the group are also entitled to bonuses 
under the arrangements as noted 
base salary and benefits
base salaries are determined with reference to the performance 
of the individual and consideration of current market salaries 
for an equivalent role based on independently sourced market 
information all executive directors’ base salaries are reviewed by 
the remuneration committee prior to the beginning of each year 
and when an individual changes position or responsibility base 
salaries for 2009 were reviewed in december 2008 when it was 
agreed that all executive directors’ base salaries would remain 
unchanged from the base salary levels which were in effect from 
1 july 2008 
the executive directors also receive a company car allowance 
fuel allowance private medical insurance life insurance and 
permanent health insurance cover mr martin also receives  
paid train travel to london and accommodation whilst working  
in london
annual bonuses
bonus scheme arrangements are in place for executive directors 
and senior management annual bonuses are awarded to the 
executive directors and senior management based on achievement 
of a number of challenging objectives including improvements in 
operating performance earnings per share eps improvements 
in working capital management generation of savings from cost 
control and the disposal of noncore businesses the maximum 
bonus payable is 100 of base salary the chairman does not 
participate in the annual bonus scheme
long term incentives 
the company’s policy is to grant long term incentives to directors 
and senior management that promote the success of the company 
the long term incentive plans in place are structured such that 
participants are only rewarded for growth in the underlying value 
of the businesses thus aligning interests with those of shareholders 
during 2009 the group operated the following long term incentive 
schemes
 2007 incentive share scheme
 2009 incentive share scheme
 divisional long term incentive plans
 fki cash long term incentive plan 
2007	 and	 2009	 incentive	 share	 schemes
a revised long term incentive plan the “2009 incentive share 
scheme” was approved by shareholders at a general meeting 
held on 14 may 2009 the 2009 incentive share scheme replaces 
the 2007 incentive share scheme in order to provide flexibility  
as to how the company delivers value to the holders of incentive 
shares whilst continuing to align the interests of management with 
those of shareholders by only rewarding participants if shareholder 
value is created
the 2007 incentive shares were repurchased from holders at their 
nominal value of £1 per share and each holder was issued the 
same number of 2009 incentive shares at the nominal value of 
£1 per share the executive directors and five senior employees 
are the only participants in the scheme amendments were 
made to the company’s articles to implement the new scheme 
however rights attaching to the 2009 incentive shares under the 
revised articles are identical to those attaching to the existing 
2007 incentive share scheme with the exception of the changes 
described on the following page
remuneration report 41 melrose plc annual report 2009
business performance governance financials shareholder information
participants of the 2009 incentive share scheme are entitled to 
either a cash dividend or a number of ordinary shares equal in 
value to 10 of the increase in shareholder value from 18 july 2007 
to 31 may 2012 or earlier upon a takeover of the company 
“trigger date” the increase in shareholder value is calculated  
as the difference between the market capitalisation on the trigger 
date determined by reference to the average market price of an 
ordinary share over 40 business days prior to the trigger date or 
the offer price as appropriate and the net invested capital in the 
company the net invested capital is the issued share capital at 
18 july 2007 plus any amounts paid up for the issue of new 
ordinary shares less all dividend payments or other distributions 
made by the company in respect of its ordinary shares as adjusted 
in line with the movement in the rpi plus 2 per annum 
the amended articles provide that the entitlement may be settled 
by payment of a dividend as an alternative to conversion to 
ordinary shares the amendments to the articles further provide 
that holders of the 2009 incentive shares will no longer have the 
ability to request early conversion of some of their 2009 incentive 
shares in 2010 andor 2011 
as at 31 december 2009 the fair value attributable to the 2009 
incentive shares including those held by the employee benefit 
trust was calculated as £210 million of which £183 million was 
attributable to the executive directors details of the directors’ 
beneficial interest in the 2009 incentive shares are shown in the 
table of directors’ shareholdings later in this report
the melrose employee benefit trust currently holds 500 of the 
2009 incentive shares and in due course may transfer these 
shares or grant options over them to executive directors andor 
senior employees in may and august 2009 a total of 2500 of the 
2009 incentive shares were transferred to senior employees 
divisional	 long	 term	 incentive	 plans	
divisional long term incentive plans have been implemented for 
certain divisional senior managers it is the intention of the board 
that participants will receive a cash payment upon the sale of a 
division or based upon financial performance as measured by 
growth in operating profit from the date of the fki acquisition 
1 july 2008 to december 2014 
fki	 cash	 long	 term	 incentive	 plan	
there is a cash long term incentive plan for fki senior management 
which operates over rolling three year performance periods 
ending on 31 march 2010 and 31 march 2011 this arrangement 
is entirely discretionary and is based on performance targets for 
the relevant business unit for each plan year 
pension contributions
no director is a member of any group pension arrangement the 
executive directors may elect to receive a company contribution 
to their individual pension arrangement or a supplement to base 
salary in lieu of a pension arrangement company contributions 
are calculated on base salary only
service contracts 
consistent with the best practice guidance provided by the 
combined code the company’s policy is for directors’ service 
contracts to be terminable on a maximum of one year’s notice 
directors’ service contracts do not provide for predetermined 
compensation in the event of termination any payments made 
would be subject to normal contractual principles including 
mitigation as appropriate the length of service for any one 
executive director is not defined and is subject to the requirements 
under the rotation rules of the companies act 2006 
the nonexecutive directors do not have service contracts but 
have letters of appointment for an initial period of three years 
which may be renewed by mutual agreement for a maximum of 
two further three year terms the terms of appointment do not 
contain any contractual provisions regarding a notice period or the 
right to receive compensation in the event of early termination
details of the directors’ contracts and letters of appointment are 
as set out below
executive directors date of contract  notice period
christopher miller 15 october 2003 12 months
david roper 15 october 2003 12 months
simon peckham 15 october 2003 12 months
geoffrey martin 5 december 2005 12 months
  end of appointment  
nonexecutive directors letter of appointment period
miles templeman 11 november 2009 27 october 2012
perry crosthwaite 18 june 2008 25 july 2011
john grant 27 august 2009 31 july 2012
directors’ shareholdings
ordinary shares
the directors’ beneficial interests including interests of connected 
persons within the meaning of section 252 of the companies act 
2006 in the ordinary shares of the company as at 31 december 
2009 are shown below none of the directors had any non
beneficial interest at any time in the financial year none of the 
directors who held office at the end of the financial year had any 
beneficial interest in the shares of other group companies
 number of ordinary shares of 02p of melrose plc
  purchased 
 1 january during 31 december 
director 2009 the year 2009
christopher miller
1
 5702464 – 5702464
david roper 2462292 – 2462292
simon peckham  1948067 – 1948067
geoffrey martin 711580 – 711580
miles templeman 214279 139843 354122
perry crosthwaite 131250 – 131250
john grant 153806 – 153806
total 11323738 139843 11463581
1 the interest of mr christopher miller includes 2750000 ordinary shares of 02p 
31 december 2008 2750000 held by harris  sheldon investments limited  
a company which is connected with mr christopher miller within the meaning  
of section 252 of the companies act 2006 42 melrose plc annual report 2009
remuneration report
continued
2007 and 2009 incentive shares
the directors also had beneficial interests in the company’s 2007 and 2009 incentive shares nominal value £1 at 31 december 2009  
as follows 
 number of melrose plc number of melrose plc 
 2007 incentive shares  2009 incentive shares
   1 january  repurchased 31 december 1 january issued 14 may 31 december
director   2009 14 may 2009 2009 2009 2009 2009
christopher miller   12000 12000 nil nil 12000 12000
david roper   12000 12000 nil nil 12000 12000
simon peckham    12000 12000 nil nil 12000 12000
geoffrey martin    7500 7500 nil nil 7500 7500
miles templeman    nil nil nil nil nil 	 nil
perry crosthwaite   nil nil nil nil nil nil
john grant   nil nil nil nil nil nil
there were no options over 2009 incentive shares outstanding as at 31 december 2009
total shareholder return 
the ordinary share capital of the company was admitted to the official list and to trading on the london stock exchange on 
9 december 2005 the performance of the company’s ordinary shares compared with the ftse all share index and the ftse 
industrial engineering index for the period since the company became fully listed on the london stock exchange is shown in the  
graph below
dec
05
dec
09
dec
08
jun
09
dec
07
dec
06
jun
06
jun
08
jun
07
melrose return
180
160
140
120
100
80
60
40
ftse all share index ftse industrial engineering index
the total shareholder return graph shows the value as at december 2009 of £100 invested in the company in december 2005 compared 
with £100 invested in the ftse all share index and the ftse industrial engineering index these are considered the most relevant  
indices given the company is part of the ftse all share index and the underlying businesses of the company operate in the industrial 
engineering sector
the source data for the above chart assumes that the £220 million of cash returned to shareholders in august 2007 following the 
mckechnie aerospace and psm fasteners disposals was reinvested to purchase shares in the company this results in an adjustment 
factor on the price and this factor is used in ongoing calculations of shareholder return for the company as ordinarily a return of capital 
would reduce the share price and an analysis of returns going forward would not reflect value already returned to shareholders the 
benefit of any cash distribution is therefore in melrose’s case reflected within the shareholder return performance of the company  43 melrose plc annual report 2009
business performance governance financials shareholder information
audited information 
directors’ remuneration 
 emoluments during 2009
    in lieu 2009  2009 2008
 salaries  taxable of pension total pension total total
directors fees bonus benefits contributions
1
 emoluments contributions
1
 remuneration remuneration
christopher miller
2
 375000 – 19335 56250	 450585 – 450585 413155
david roper 375000 262500 18622 56250 712372 – 712372 636915
simon peckham 375000 262500 18177 12750	 668427 43500	 711927 637227
geoffrey martin  300000 210000 30701 7200 547901 37800 585701 529852
miles templeman
3
 50000 – – –	 50000 – 50000 42500
perry crosthwaite
4
 50000 – – – 50000 – 50000 42500
john grant 45000 – – – 45000 – 45000 37500
total 1570000 735000 86835 132450 2524285 81300 2605585 2339649
1 of the £213750 attributable to pension contributions £132450 was paid as a supplement to base salary in lieu of pension arrangements the balance of £81300 is paid into the individual 
directors’ nominated private pension schemes
2 mr miller is a nonexecutive director of tmo renewables limited his fees for the year were £45600 this amount is retained by mr miller and therefore excluded from the table above
3 includes £5000 per annum in recognition of chairmanship of the audit and nomination committees
4 includes £5000 per annum in recognition of chairmanship of the remuneration committee
this report was approved by the board on 10 march 2010 and signed on its behalf by
perry crosthwaite
chairman of the remuneration committee
10 march 2010 44 melrose plc annual report 2009
the directors are responsible for preparing the annual report 
directors’ remuneration report and the financial statements in 
accordance with applicable law and regulations
company law requires the directors to prepare financial 
statements for each financial year the directors are required 
by the ias regulation to prepare the group financial statements 
under international financial reporting standards ifrss as 
adopted by the european union the group financial statements 
are also required by law to be properly prepared in accordance 
with the companies act 2006 and article 4 of the ias regulation 
international accounting standard 1 requires that that ifrs 
financial statements present fairly for each financial year the 
company’s financial position financial performance and cash 
flows this requires the faithful representation of the effects of 
transactions other events and conditions in accordance with the 
definitions and recognition criteria for assets liabilities income 
and expenses set out in the international accounting standards 
board’s ‘framework for the preparation and presentation 
of financial statements’ in virtually all circumstances a fair 
presentation will be achieved by compliance with all applicable 
ifrss however directors are also required to
 properly select and apply accounting policies
 present information including accounting policies in a manner 
that provides relevant reliable comparable and understandable 
information and
 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
the directors have elected to prepare the company financial 
statements in accordance with united kingdom generally 
accepted accounting practice united kingdom accounting 
standards and applicable law the company financial statements 
are required by law to give a true and fair view of the state of 
affairs of the company in preparing these 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 and
 state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the financial statements
the directors are responsible for keeping proper 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 company financial statements comply with the 
companies act 2006 they are also responsible for safeguarding 
the assets of the company and hence for taking reasonable steps 
for the prevention and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity 
of the corporate and financial information included on the 
company’s website legislation in the united kingdom governing 
the preparation and dissemination of financial statements may 
differ from legislation in other jurisdictions
directors’ responsibility statement 
the directors confirm to the best of their knowledge
 the financial statements prepared in accordance with the 
relevant financial reporting framework give a true and fair view 
of the assets liabilities financial position and profit or loss of the 
company and the undertakings included in the consolidation 
taken as a whole and
 the chairman’s statement chief executive’s review and 
finance director’s review which are incorporated into the 
directors’ report include a fair review of the development and 
performance of the business and the position of the company 
and the undertakings included in the consolidation taken as 
a whole together with a description of the principal risks and 
uncertainties that they face
 
by order of the board
 
geoffrey martin simon peckham
group finance director chief operating officer
10 march 2010
statement of directors’ responsibilities 45 melrose plc annual report 2009
business performance governance financials shareholder information
financial contents
consolidated statements
 independent auditors’ report – consolidated statements 46
consolidated income statement 47
consolidated statement of comprehensive income 48
consolidated statement of cash flows 49
consolidated balance sheet 50
consolidated statement of changes in equity 51
notes to the accounts
note
1  corporate information 52
2  summary of significant accounting policies 53
3  critical accounting judgements 58
4  revenue  59
5  segment information 59
6  exceptional costs and income 62
7  revenues and expenses 63
8  tax   65
9  discontinued operations 66
10 dividends 67
11  earnings per share 68
12 goodwill and other intangible assets 69
13 property plant and equipment 71
14  interests in joint ventures 72
15 inventories 72
16 trade and other receivables 73
17  cash and cash equivalents 74
18 trade and other payables 74
19 interestbearing loans and borrowings 75
20 provisions 76
21 deferred tax 77
22 sharebased payments 78
23 retirement benefit obligations 78
24 financial instruments and risk management 82
25 issued capital and reserves 86
26 cash flow statement 87
27 commitments and contingencies 88
28 related parties 89
29 post balance sheet events 89
30 contingent liabilities 89
 company statements
  independent auditors’ report – company statements 90
 company balance sheet for melrose plc 91
 
 
 
 
 notes to the company balance sheet
 note
 1 significant accounting policies 92
 2 profit for the year 93
 3 investment in subsidiaries 94
 4 tangible fixed assets 95
 5 derivative financial instruments 96
 6 debtors 96
 7 creditors 96
 8 bank loans 96
 9 provisions for liabilities and charges 97
 10 issued share capital 97
 11 reserves 98
 12 hedging reserve 98
 13 reconciliation of movements in shareholders’ funds 98
 14 related party transactions 98 46 melrose plc annual report 2009
independent auditors’ report – consolidated statements
independent auditors’ report to the members  
of melrose plc on the consolidated financial statements 
we have audited the consolidated financial statements of melrose 
plc for the year ended 31 december 2009 which comprise the 
consolidated income statement the consolidated balance sheet 
the consolidated statement of cash flows the consolidated 
statement of comprehensive income consolidated statement 
of changes in equity and the related notes 1 to 30 the financial 
reporting framework that has been applied in their preparation is 
applicable law and international financial reporting standards 
ifrss as adopted by the european union 
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might 
state to the company’s members those matters we are required 
to state to them in an auditors’ report and for no other purpose 
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and the 
company’s members as a body for our audit work for this report 
or for the opinions we have formed
respective responsibilities of directors and auditors
as explained more fully in the statement of directors’ responsibilities 
the directors are responsible for the preparation of the group 
financial statements and for being satisfied that they give a true 
and fair view our responsibility is to audit the group 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 apb’s ethical 
standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate 
to the group’s circumstances and have been consistently applied 
and adequately disclosed the reasonableness of significant 
accounting estimates made by the directors and the overall 
presentation of the financial statements
opinion on financial statements
in our opinion the group financial statements
 give a true and fair view of the state of the group’s affairs as 
at 31 december 2009 and of its profit for the year then ended
 have been properly prepared in accordance with ifrss as 
adopted by the european union and
 have been prepared in accordance with the requirements of 
the companies act 2006 and article 4 of the ias regulation
opinion on other matters prescribed by the  
companies act 2006
in our opinion the information given in the directors’ report for the 
financial year for which the financial statements are prepared is 
consistent with the group financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if 
in our opinion
 certain disclosures of directors’ remuneration specified by law 
are not made or
 we have not received all the information and explanations we 
require for our audit
under the listing rules we are required to review
 the directors’ statement contained within the directors’ report 
in relation to going concern and
 the part of the corporate governance statement relating to the 
company’s compliance with the nine provisions of the june 
2008 combined code specified for our review
other matters
we have reported separately on the company financial statements 
of melrose plc for the year ended and on the information in the 
directors’ remuneration report that is described as having  
been audited 
nicola mitchell senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditors 
london uk
10 march 2010 47 melrose plc annual report 2009
business performance governance financials shareholder information
consolidated income statement
      restated
2
 
    	 year ended year ended 
    	 31 december 31 december  
     2009 2008 
    notes £m £m
continuing operations
revenue     4 5 12985  8953
cost of sales      9703 6779
gross profit      3282  2174
headline
1
 operating expenses      1789 1207
share of results of joint ventures    14 04  01
intangible asset amortisation      267 136
exceptional costs     6 239 129
exceptional income     6 140  –
total net operating expenses     7 2151 1473
operating profit      1131	 701
headline
1
 operating profit     5 1497  966
headline
1
 finance costs     7 362 282
exceptional finance costs     6 –  231
total finance costs      362 513
finance income     4 7 51  47
profit before tax      820  235
headline
1
 profit before tax      1186  731
headline
1
 tax      361 218
tax on exceptional items and intangible asset amortisation     88  117
total tax     8 273 101
profit for the year from continuing operations      547  134
headline
1
 profit for the year from continuing operations      825  513
discontinued operations
profitloss for the year from discontinued operations    9 246  612
profitloss for the year	 	 	 	 	 793 	 	 478
 
attributable to
equity holders of the parent     795  483
minority interests     02 05 
     793	 	 478
earnings per share
from continuing operations
– basic    11 110p 41p
– fully diluted    11 108p 41p
– headline
1
 basic     11 166p 161p
– headline
1
 fully diluted     11 163p 161p
from continuing and discontinued operations
– basic    11 160p 153p
– fully diluted    11 156p 153p
1 before exceptional costs exceptional income and intangible asset amortisation 
2 restated to include the results of logistex europe within discontinued operations 48 melrose plc annual report 2009
      restated
1
 
     year ended year ended 
     31 december 31 december  
     2009 2008 
    notes £m £m
profitloss for the year	 	 	 	 	 793 	 	 478
currency translation on net investments    25 328 1230 
currency translation adjustments on minority interests     02 15
transfer to income statement from equity of cumulative translation differences 
 on disposal of foreign operations    9 25 114 89
gainslosses on cash flow hedges    25 59  198
transfer to income statement on cash flow hedges    25 118  11 
actuarial loss on net pension liabilities    23 899 82
limit on pension plan surplus    23 141  141
other comprehensive income before tax     1025 716 
tax relating to components of other comprehensive income    8 130  36 
other comprehensive income after tax	 	 	 	 	 895	 752 
total comprehensive income for the year     102 274 
attributable to
equity holders of the parent     98 284 
minority interests     04 10
     102 274 
1  the consolidated statement of comprehensive income replaces the consolidated statement of recognised income and expense the year ended 31 december 2008 has been restated  
to include £07 million of expense previously shown directly in equity 
consolidated statement of comprehensive income 49 melrose plc annual report 2009
business performance governance financials shareholder information
consolidated statement of cash flows
      restated
1
 
     year ended year ended 
     31 december 31 december  
     2009 2008 
    notes £m £m
net cash from operating activities from continuing operations    26 1768	 798 
net cash used infrom operating activities from discontinued operations   26 20 388 
net cash from operating activities	 	 	 	 	 1748 	 	 1186 
investing activities
disposal of businesses    9 492  15
net cash disposed    9 06 – 
purchase of property plant and equipment     229 303
proceeds on disposal of property plant and equipment     10  06 
purchase of computer software     09 05
dividends received from joint ventures    14 02  02 
dividends paid to minority interests     02 05
interest received     38  42 
acquisition of subsidiaries      –  2570
cash acquired on acquisition of subsidiaries     –  853 
net cash fromused in investing activities from continuing operations     296  1995
net cash used in investing activities from discontinued operations    26 13 38
net cash fromused in investing activities	 	 	 	 	 283 	 	 2033
financing activities
net proceeds on issue of shares     –	 2795 
disposal of financial instruments     –  171 
net movement on borrowings     1858 194
costs of raising finance     –  118
exceptional finance costs paid     –  179
repayment of obligations under finance leases     01 26
dividends paid    10 356 194
fki dividend paid     –  177
capital distribution     –  74
net cash used infrom financing activities from continuing operations     2215 2004 
net cash used in financing activities from discontinued operations    26 –  06
net cash used infrom financing activities	 	 	 	 	 2215	 1998	
net decreaseincrease in cash and cash equivalents	 	 	 	 	 184	 1151 
cash and cash equivalents at beginning of year    26 1677  464 
effect of foreign exchange rate changes    26 18  62 
cash and cash equivalents at end of year	 	 	 	 26	 1475 	 	 1677	
cash classified as held for sale     –  20
cash and cash equivalents in continuing group at end of year	 	 	 	 17	 1475 	 	 1657 
1 restated to include the results of logistex europe within discontinued operations 50 melrose plc annual report 2009
consolidated balance sheet 
     restated
1
 
    31 december 31 december 1 january
    2009 2008 2008
   notes £m £m £m
noncurrent assets
goodwill and other intangible assets   12 11843  12874  2074
property plant and equipment   13 2523  2919  607
interests in joint ventures   14 03  01  –
derivative financial assets   24 06  –  04
deferred tax assets   21 221  298  31
    14596  16092  2716
current assets
inventories   15 2226  3279  297
trade and other receivables   16 2130  3358  670
derivative financial assets   24 20  31  –
cash and cash equivalents   17 1475  1657  464
assets held for sale    – 929  –
    5851  9254  1431
total assets   5 20447  25346  4147
current liabilities
trade and other payables   18 3195  4437  779
interestbearing loans and borrowings   19 13  07  81
derivative financial liabilities   24 28  253  –
current tax liabilities    493  336  78
provisions   20 446  624  35
liabilities held for sale
2
    –  725  –
    4175  6382  973
net current assets	 	 	 	 1676 	 	 2872  458
noncurrent liabilities
trade and other payables   18 18  31  –
interestbearing loans and borrowings   19 4679  7098  131
derivative financial liabilities   24 02  –  –
deferred tax liabilities   21 1253  1362  81
retirement benefit obligations   23 1691  1433  252
provisions   20 996  965  35
    8639  10889  499
total liabilities   5 12814	 17271  1472
net assets    7633  8075  2675
equity
issued share capital   25 11  11  583
share premium account    2791  2791  –
merger reserve    2851  2851  370
capital redemption reserve    2201  2201  1546
hedging and translation reserves   25 716  1004  22
retained earnings    954 806 142
equity attributable to holders of the parent    7616  8052  2663
minority interests    17  23  12
total equity    7633  8075  2675 
1 restated to reflect the finalisation of the acquisition accounting of fki plc 
2 liabilities directly associated with assets classified as held for sale
the financial statements were approved and authorised for issue by the board of directors on 10 march 2010 and were signed on its behalf by
  
geoffrey martin    simon peckham
group finance director     chief operating officer 51 melrose plc annual report 2009
business performance governance financials shareholder information
consolidated statement of changes in equity
       hedging  equity  
   issued share  capital and  attributable  
   share premium merger redemption translation retained to holders of minority total
   capital account reserve reserve reserves earnings the parent interests equity
reserves  £m £m £m £m £m £m £m £m £m
at 1 january 2008 583  – 370  1546 22  142 2663  12  2675 
lossprofit for the year –  –  –  – –  483 483 05  478
other comprehensive income –  –  –  – 982  215 767  15 752
total comprehensive income –  –  –  – 982  698 284  10 274 
issue of “offer and placement” 
 ordinary shares 05  2791 –  – –  –  2796  –  2796 
acquisition of fki 03  –  2481 – –  –  2484  26  2510 
preference c shares redeemed 580 –  –  655 –  74 01  –  01 
dividend paid –  –  –  – –  194 194 05 199
credit to equity for equitysettled 
 sharebased payments –  –  –  – –  18  18  –  18 
at 31 december 2008 11  2791 2851  2201 1004  806 8052  23  8075 
profitloss for the year –  – – – – 795  795  02 793 
other comprehensive income –  – – – 288 605 893 02 895
 
total comprehensive income –  –  –  – 288 190  98  04 102
dividend paid –  – – – – 356 356 02 358
credit to equity for equitysettled 
 sharebased payments –  – – – – 18  18  –  18 
at 31 december 2009	 11 	 	 2791	 2851	 2201	 716 	 	 954	 7616 	 	 17	 7633	 52 melrose plc annual report 2009
1  corporate information
the consolidated financial statements of melrose plc “the group” 
for the year ended 31 december 2009 were authorised in accordance 
with a resolution of the directors of melrose plc on 10 march 2010
melrose plc “the company” is a company incorporated in the 
united kingdom under the companies act 2006 the address of 
the registered office is given on page 103 the nature of the group’s 
operations and its principal activities are set out in note 5
these financial statements are presented in pounds sterling which 
is the currency of the primary economic environment in which the 
company is based the income statement for the year ended  
31 december 2008 has been restated to include the results of 
logistex europe within discontinued operations and the balance 
sheet as at 31 december 2008 has been restated to reflect the 
finalisation of the acquisition accounting of fki plc foreign operations 
are included in accordance with the policies set out in note 2
11  new standards and interpretations affecting 
amounts presentation or disclosure reported in the 
current period
during the current period the group adopted the following new and 
revised standards and interpretations which affected the amounts 
reported in these financial statements details of other standards 
and interpretations adopted in these financial statements that had no 
significant impact on the amounts reported are set out in section 12
amendments to ifrs 7 financial instruments disclosures
the amendments to ifrs 7 expand the disclosures required in 
respect of fair value measurements and liquidity risk the group has 
elected not to provide comparative information for those expanded 
disclosures in the current year in accordance with the transitional 
reliefs offered in these amendments
revised ifrs 3 2008 business combinations early adopted
the company has early adopted ifrs 3 2008 during the year a 
£74 million deferred tax asset on retirement benefit obligations has 
been recognised in the statement of comprehensive income which 
would previously have resulted in an adjustment to goodwill
revised ias 1 2007 presentation of financial statements
ias 1 2007 introduced terminology changes and a number of 
changes to the format and content of the financial statements in 
addition the revised standard has required the presentation of a third 
balance sheet at 1 january 2008 because the group has restated 
comparative 31 december 2008 figures to reflect the finalisation of the 
acquisition accounting of fki plc as shown in note 12 no restatement 
was required to the balance sheet as at 1 january 2008
ifrs 8 operating segments
ifrs 8 is a disclosure standard that 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 this has not 
resulted in a change to the group’s reportable segments although 
certain geographical information is no longer required to be presented
12  new standards and interpretations adopted 
with no significant effect on financial statements
the following new and revised standards and interpretations have 
also been adopted in these financial statements 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
amendments to ifrs 2 share based payments vesting conditions 
and cancellations
amendments to ias 20 accounting for government grants  
and disclosure of government assistance
amendments to ias 32 financial instruments presentation and  
ias 1 presentation of financial statements puttable financial 
instruments and obligations arising on liquidation
amendments to ias 38 intangible assets
amendments to ias 39 financial instruments recognition and 
measurement – eligible hedged items
amendments to ias 39 and ifrs 7 recognition measurement  
and disclosure of financial assets
amendments to ias 40 investment property
revised ias 23 2007 borrowing costs
revised ias 27 consolidated and separate financial statements  
early adopted
amendments to ifric 9 reassessment of embedded derivatives  
and ias 39 financial instruments recognition and measurement  
embedded derivatives
ifric 13 customer loyalty programmes
ifric 15 agreements for construction of real estate
ifric 16 hedges of a net investment in a foreign operation
ifric 18 transfer of assets from customers  
improvements to ifrs’s 2008 and 2009
13  new standards and interpretations in issue  
but not yet effective
at the date of authorisation of these financial statements the following 
standards and interpretations are in issue but not yet effective
amendments to ifrs 1 and ias 27 cost of an investment in  
a subsidiary jointly controlled entity or associate
revised ias 17 leases
revised ias 28 investments in associates
ifric 17 distribution of noncash assets to owners
the directors do not anticipate that the adoption of these standards 
and interpretations will have a material impact on the group’s financial 
statements in the period of initial application 
notes to the accounts 53 melrose plc annual report 2009
business performance governance financials shareholder information
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 financial 
statements have also been prepared in accordance with ifrss 
adopted for use in the european union and therefore comply with 
article 4 of the eu ias regulation
the consolidated financial statements have been prepared on a historical 
cost basis except for the revaluation of certain financial instruments 
which are recognised at fair value historical cost is generally based on 
the fair value of the consideration given in exchange for these assets  
the principal accounting policies adopted are consistent with the prior 
year except as noted in note 1 and are set out below 
the comparative income statement for the year ended 31 december 
2008 has been restated to include the results of logistex europe 
within discontinued operations and the balance sheet as at  
31 december 2008 has been restated to reflect the finalisation  
of the acquisition accounting of fki plc
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
minority interests in subsidiaries are identified separately from the 
group’s equity therein the interest of minority shareholders is initially 
measured at the minority interests proportion of the share of the fair 
value of the acquiree’s identifiable net assets subsequent to acquisition 
the carrying amount of minority interests is the amount of those interests 
at initial recognition plus the minority interests’ share of subsequent 
changes in equity income and expense is attributed to minority interests 
even if this results in the minority interests having a deficit balance
where group accounting policies are not adopted in the financial 
statements of subsidiary undertakings appropriate adjustments  
are made in the group financial statements
all intergroup balances and transactions including unrealised profits 
arising from intragroup transactions have been eliminated in full
going concern
the directors have at the time of approving the financial statements 
a reasonable expectation that the company and the group have 
adequate resources to continue in operational existence for the 
foreseeable future thus they continue to adopt the going concern 
basis of accounting in preparing the financial statements further 
detail is contained in the directors’ statement of going concern  
on page 34 of the directors’ report
business combinations and goodwill
the acquisition of subsidiaries is accounted for using the purchase 
method the cost of acquisition is measured at the fair value of assets 
given the liabilities incurred or assumed at the date of exchange of 
control and equity instruments issued by the group in exchange for 
control of the acquiree due to the early adoption of ifrs 3 revised 
2008 “business combinations” from 1 january 2009 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 for 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” 
which are recognised and measured at fair value less costs to sell 
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  
see below 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 cost of the business combination 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
as at the acquisition date any goodwill acquired is allocated to each 
of the cashgenerating units acquired impairment is determined 
by assessing the recoverable amount of the cashgenerating unit 
to which goodwill relates where the recoverable amount of the 
cashgenerating unit is less than the carrying amount an impairment 
loss is recognised in the income statement and is not subsequently 
reversed when there is a disposal of a cashgenerating unit  
goodwill relating to the operation disposed of is taken into account  
in determining the gain or loss on disposal of that operation  
the amount of goodwill allocated to a partial disposal is measured  
on the basis of the relative values of the operation disposed of and  
the operation retained
joint ventures
a joint venture is an entity which is not a subsidiary undertaking  
but where 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 54 melrose plc annual report 2009
notes to the accounts
continued
2  summary of significant accounting 
policies continued
revenue
revenue is recognised when the significant risks and rewards of 
ownership of the goods have passed to the buyer and can be reliably 
measured revenue is measured at the fair value of the consideration 
received or receivable and represents amounts receivable for goods 
provided in the normal course of business net of discounts customs 
duties and sales taxes
where percentage of completion accounting is applied and where the 
outcome of a longterm contract can be estimated reliably revenue 
and costs are recognised by reference to the stage of completion 
of the contract activity at the balance sheet date this is normally 
measured by the proportion that contract costs incurred for work 
performed to date bear to the estimated total contract costs except 
where this would not be representative of the stage of completion 
variations in contract work claims and incentive payments are 
included to the extent that they have been agreed with the customer
where the outcome of a longterm contract cannot be estimated 
reliably contract revenue is recognised to the extent of contract costs 
incurred where it is probable they will be recoverable contract costs 
are recognised as expenses in the period in which they are incurred
when it is probable that total contract costs will exceed total contract 
revenue the expected loss is recognised as an expense immediately 
interest income is accrued on a time basis by reference to the 
principal outstanding and the effective interest applicable
exceptional costsincome
exceptional costsincome are those costsincome of a significant and 
nonrecurring nature or those associated with significant restructuring 
programmes
operating profit
operating profit is stated after exceptional operating costs and 
income intangible asset amortisation and the group’s share of results 
of joint ventures but before finance income and finance costs
borrowing costs
borrowing costs directly attributable to the acquisition construction or 
production of qualifying assets which are assets that necessarily take 
a substantial period of time to get ready for their intended use or sale 
are added to the cost of those assets until such time as the assets 
are substantially ready for their intended use or sale 
investment income earned on the temporary investment of specific 
borrowings pending their expenditure on qualifying assets is deducted 
from the borrowing costs eligible for capitalisation
all other borrowing costs are recognised in the income statement in 
the period in which they are incurred
issue costs of loans
the finance cost recognised in the income statement in respect 
of capital instruments 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 the capitalised value of a finance lease is 
also included within property plant and equipment
depreciation is calculated on a straightline basis over the estimated 
useful life of the asset as follows
freehold land nil 
freehold buildings and long  over expected economic life 
leasehold property not exceeding 50 years
short leasehold property over the term of the lease
plant and equipment 3–12 years
the estimated useful lives of property plant and equipment are 
reviewed on an annual basis and if necessary changes in useful lives 
are accounted for prospectively
the carrying values of property plant and equipment are reviewed 
for impairment when events or changes in circumstances indicate 
that the carrying value may not be recoverable if any such indication 
exists an impairment review is performed and where the carrying 
values exceed the estimated recoverable amount the assets are 
written down to their recoverable amount the recoverable amount 
of property plant and equipment is the greater of net selling price 
and value in use in assessing value in use the estimated future cash 
flows are discounted to their present value using a pretax discount 
rate that reflects current market assessments of the time value of 
money and the risks specific to the asset for an asset that does not 
generate largely independent cash inflows the recoverable amount is 
determined for the cashgenerating unit to which the asset belongs 
and allocated proportionately 
an item of property plant and equipment is derecognised upon disposal 
or when no future economic benefits are expected to arise from the 
continued use of the asset any gain or loss arising on derecognition 
of the asset calculated as the difference between the net disposal 
proceeds or costs and the carrying amount of the item is included in  
the income statement in the year that the item is derecognised
intangible assets
intangible assets are stated at cost less accumulated amortisation 
and accumulated impairment losses
on acquisition of businesses separately identifiable intangible 
assets are determined in relation to the specific circumstances of the 
business acquired and are valued on an appropriate basis
access to the use of patented technology and trade names are 
valued using a “relief from royalty” method which determines the net 
present value of future additional cash flows arising from the use of 
the intangible asset
customer relationships are valued on the basis of the net present 
value of the future additional cash flows arising from customer 
relationships with appropriate allowance for attrition of customers 55 melrose plc annual report 2009
business performance governance financials shareholder information
2  summary of significant accounting 
policies continued
the estimated useful lives of intangible assets are
patented technology 5 years or less
customer relationships 10 years or less
trade names 20 years or less
computer software is initially recorded at cost where these assets 
have been acquired through a business combination this will be the 
fair value allocated in the acquisition accounting where these have 
been acquired other than through a business combination the initial 
cost is the aggregate amount paid and the fair value of any other 
consideration given to acquire the asset
computer software assets are amortised over their estimated useful 
lives up to five years on a straightline basis
intangible assets are tested for impairment annually or more frequently 
whenever events or changes in circumstances indicate that the 
carrying value may not be recoverable impairment losses are 
measured on a similar basis to property plant and equipment  
useful lives are also examined on an annual basis and adjustments 
where applicable are made on a prospective basis
research and development costs
research costs are expensed as incurred
costs relating to clearly defined and identifiable development projects 
are capitalised when there is a technical degree of exploitation 
adequacy of resources and a potential market or development 
possibility in the undertaking that are recognisable and where it is 
the intention to produce market or execute the project a correlation 
also needs to exist between the costs incurred and future benefits 
and those costs need to be measured reliably capitalised expenses 
are expensed on a straightline basis over their useful lives costs not 
meeting such criteria are expensed as incurred
inventories
inventories are valued at the lower of cost and net realisable value 
cost includes all direct expenditure and appropriate production 
overhead expenditure incurred in bringing goods to their current 
state under normal operating conditions net realisable value is 
based on estimated selling price less costs expected to be incurred 
to completion and disposal provisions have been made for 
obsolescence or other expected losses where necessary
trade and other receivables
trade receivables are measured and carried at amortised cost using 
the effective interest method less any impairment an allowance is 
recorded in the income statement for the difference between the 
carrying amount and the estimated recoverable amount
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in 
hand and current balances with banks and similar institutions and 
shortterm deposits which are readily convertible to cash and are 
subject to insignificant risks of changes in value
for the purpose of the cash flow statement cash and cash 
equivalents consist of cash and cash equivalents as defined above 
net of outstanding bank overdrafts
interestbearing loans and borrowings
all loans and borrowings are initially recognised at fair value of the 
consideration received net of issue costs associated with the borrowings
after initial recognition interestbearing loans and borrowings are 
subsequently measured at amortised cost using the effective interest 
method amortised cost is calculated by taking into account any issue 
costs and any discount or premium on settlement
gains and losses are recognised in the income statement when 
the liabilities are derecognised or impaired as well as through the 
amortisation process
leases
finance leases which transfer to the group substantially all the risks 
and benefits incidental to ownership of the leased item are capitalised 
at the inception of the lease at the fair value of the lease or if lower  
at the present value of the minimum lease payments the corresponding 
liability to the lessor is included in the balance sheet as a finance 
lease obligation lease payments are apportioned between the 
finance charges and reduction of the lease liability so as to achieve  
a constant rate of interest on the remaining balance of the liability 
finance charges are charged directly against income capitalised 
leased assets are depreciated over the shorter of the estimated useful 
life of the asset or the lease term
operating lease payments are recognised as an expense in the 
income statement on a straightline basis over the lease term rental 
income from operating leases is recognised on a straightline basis 
over the term of the relevant lease
other financial liabilities 
other financial liabilities are initially measured at fair value net of 
transaction costs other financial liabilities are subsequently measured 
at amortised cost using the effective interest method with interest 
expense recognised on an effective yield basis the effective interest 
method is a method of calculating the amortised cost of a financial 
liability and of allocating interest expense over the relevant periods 
the effective interest rate is the rate that discounts estimated future 
cash payments throughout the expected life of the financial liability  
or where appropriate a shorter period
derivative financial instruments and hedging
the group uses derivative financial instruments to manage its 
exposure to interest rate foreign exchange rate and commodity risks 
arising from operating and financing activities the group does not 
hold or issue derivative financial instruments for trading purposes 
details of derivative financial instruments are disclosed in note 24 of 
the financial statements movements on the hedging reserve in equity 
are detailed in note 25
derivative financial instruments are recognised and stated at fair value 
their fair value is recalculated at each reporting date the accounting 
treatment for the resulting gain or loss will depend on whether the 
derivative meets the criteria to qualify for hedge accounting notes to the accounts
continued
56 melrose plc annual report 2009
2  summary of significant accounting 
policies continued
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 for an item to qualify for hedge accounting the group is 
required to document from inception the relationship between the 
item being hedged and the hedging instrument and to show that the 
hedge will be highly effective on an ongoing basis this effectiveness 
testing is performed at each period end to ensure that the hedge 
remains highly effective
hedge accounting is discontinued when the group revokes the 
hedging relationship the hedge instrument expires or is sold 
terminated exercised or no longer qualifies for hedge accounting 
the group designates certain hedging instruments as either fair  
value hedges cash flow hedges or hedges of net investments in  
foreign operations
fair value hedge
derivative financial instruments are classified as fair value hedges 
when they hedge the group’s exposure to changes in the fair value of 
a recognised asset or liability changes in the fair value of derivatives 
that are designated and qualify as fair value hedges are recorded in 
the income statement immediately together with any changes in the 
fair value of the hedged item that is attributable to the hedged risk 
cash flow hedge
derivative financial instruments are classified as cash flow hedges 
when they hedge the group’s exposure to the variability in cash 
flows that are either attributable to a particular risk associated with a 
recognised asset or liability or a highly probable forecasted cash flow 
the effective portion of any gain or loss from revaluing the derivative 
financial instrument is recognised in the statement of comprehensive 
income and accumulated in equity the gain or loss relating to the 
ineffective portion is recognised immediately in the income statement 
amounts previously recognised in the statement of comprehensive 
income and accumulated in equity are recycled to the income 
statement in the periods when the hedged item is recognised in 
the income statement or the hedged relationship is discontinued 
however when the forecast transaction that is hedged results in  
the recognition of a nonfinancial asset or a nonfinancial liability  
the gains and losses previously deferred in equity are transferred  
from equity and included in the initial measurement of the cost of  
the asset or liability
hedges of net investments in foreign operations
derivative financial instruments are classified as net investment 
hedges when they hedge the group’s net investment in foreign 
operations the effective element of any foreign exchange gain or loss 
from revaluing the derivative at a reporting period end is recognised in 
the statement of comprehensive income any ineffective element is 
recognised immediately in the income statement
gains and losses accumulated in equity are recognised immediately 
in the income statement when the foreign operation is disposed of or 
the hedged relationship is discontinued
provisions
provisions are recognised when the group has a present obligation 
legal or constructive as a result of a past event it is probable that an 
outflow of resources embodying economic benefits will be required 
to settle the obligation and a reliable estimate can be made of the 
amount of the obligation if the effect of the time value of money is 
material provisions are determined by discounting the expected 
future cash flows at a rate that reflects the current market assessment 
of the time value of money and where appropriate the risks specific 
to the liability where discounting is used the increase in the provision 
due to the passage of time is recognised as a finance cost
environmental liabilities
liabilities for environmental costs are recognised when environmental 
assessments or cleanups are probable and the associated costs can 
be reasonably estimated generally the timing of these provisions 
coincides with the commitment to a formal plan of action the amount 
recognised is the best estimate of the expenditure required where 
the liability will not be settled for a number of years the amount 
recognised is the present value of the estimated future expenditure
employee benefits
wages salaries bonuses social security contributions paid annual 
leave and sick leave are accrued in the year in which the associated 
services are rendered by employees of the group the accounting 
policy for pensions and other retirement benefits is described below
the group also operates long term incentive plans ltips for certain 
employees the expected settlement costs of these plans are 
expensed on a straightline basis over the life of the plans
pensions and other retirement benefits
the group operates defined benefit pension plans and defined 
contribution plans some of which require contributions to be made 
to administered funds separate from the group in some jurisdictions 
funds are not administered separately from the group but appropriate 
liabilities are recognised in the balance sheet
for the defined benefit pension and retirement benefit plans plan 
assets are measured at fair value and plan liabilities are measured 
on an actuarial basis using the projected unit credit method and 
discounted at an interest rate equivalent to the current rate of return 
on a high quality corporate bond of equivalent currency and term to 
the plan liabilities any assets resulting from this calculation are limited 
to past service cost plus the present value of available refunds and 
reductions in future contributions to the plan
the service cost of providing pension and other retirement benefits to 
employees for the period is charged to the income statement 57 melrose plc annual report 2009
business performance governance financials shareholder information
2  summary of significant accounting 
policies continued
a charge representing the unwinding of the discount on the plan 
liabilities during the period is included within finance costs
a credit representing the expected return on the plan assets during 
the period is included within finance costs this credit is based on the 
market value of the plan assets and expected rates of return at the 
beginning of the year
actuarial gains and losses may result from differences between the 
expected return and the actual return on plan assets differences 
between the actuarial assumptions underlying the plan liabilities 
and actual experience during the period or changes in the actuarial 
assumptions used in the valuation of the plan liabilities actuarial gains 
and losses and taxation thereon are recognised in the statement of 
comprehensive income
for defined contribution plans contributions payable are charged to 
the income statement as they fall due as an operating expense
foreign currencies
the individual financial statements of each group company are 
presented in the currency of the primary economic environment in 
which it operates its functional currency for the purpose of the 
consolidated financial statements the results and financial position of 
each group company are expressed in pounds sterling which is the 
functional currency of the company and the presentation currency for 
the consolidated financial statements
in preparing the financial statements of the individual companies 
transactions in currencies other than the entity’s functional currency 
foreign currencies are recorded at the rates of exchange prevailing 
on the dates of the transactions at each balance sheet date 
monetary assets and liabilities that are denominated in foreign 
currencies are retranslated at the rates prevailing on the balance 
sheet date 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 
minority 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 minority interests are derecognised but 
they are not reclassified to the income statement
goodwill and fair value adjustments arising on the acquisition of a 
foreign entity are treated as assets and liabilities of the foreign entity 
and translated at the rate prevailing at the balance sheet date
taxation
the tax expense is based on the taxable profits for the period  
and represents the sum of the tax paid or currently payable and 
deferred tax
taxable profit differs from net profit as reported in the income 
statement because it excludes items of income or expense that are 
taxable or deductible in other years and it further excludes items that 
are never taxable or deductible the group’s liability for current tax 
is calculated using tax rates that have been enacted or substantively 
enacted by the balance sheet date
deferred tax is provided using the liability method on all temporary 
differences at the balance sheet date between the tax bases of 
assets and liabilities and their carrying amounts for financial reporting 
purposes
deferred tax liabilities are recognised for all taxable temporary 
differences except
  where the deferred tax liability arises on goodwill that is not tax 
deductible or the initial recognition of an asset or liability in a 
transaction that is not a business combination and at the time of the 
transaction affects neither the accounting profit nor taxable profit or 
loss and
  where the timing of the reversal of the temporary differences 
associated with investments in subsidiaries and interests in joint 
ventures can be controlled and it is probable that the temporary 
differences will not reverse in the foreseeable future
deferred tax assets are recognised for all deductible temporary 
differences carryforward of unused tax assets and unused tax 
losses to the extent that it is probable that taxable profit will be 
available against which the deductible temporary differences and 
carryforward of unused tax assets and unused tax losses can be 
utilised except
  where the deferred tax asset arises from the initial recognition of an 
asset or liability in a transaction that is not a business combination 
and at the time of the transaction affects neither the accounting 
profit nor taxable profit or loss and
  in respect of deductible temporary differences associated with 
investments in subsidiaries and interests in joint ventures deferred 
tax assets are only recognised to the extent that it is probable that 
the temporary differences will reverse in the foreseeable future 
and taxable profit will be available against which the temporary 
differences can be utilised
the carrying amount of deferred tax assets is reviewed at each 
balance sheet date and reduced to the extent that it is no longer 
probable that sufficient taxable profit will be available to allow all or 
part of the deferred tax asset to be utilised notes to the accounts
continued
58 melrose plc annual report 2009
2  summary of significant accounting 
policies continued
deferred tax assets and liabilities are measured at the tax rates that 
are expected to apply to the year when the asset is realised or the 
liability is settled based on tax rates and tax laws that have been 
enacted or substantially enacted at the relevant balance sheet date
tax relating to items recognised directly in equity is recognised in 
equity and not in the income statement
revenues expenses and assets are recognised net of the amount of 
sales tax except
  where the sales tax incurred on a purchase of goods and services is 
not recoverable from the taxation authority in which case the sales 
tax is recognised as part of the cost of acquisition of the asset or as 
part of the expense item as applicable and
   where receivables and payables are stated with the amount of sales 
tax included
the net amount of sales tax recoverable from or payable to the 
taxation authority is included as part of receivables or payables in  
the balance sheet
sharebased payments
the group has applied the requirements of ifrs 2 “sharebased 
payments” the group issues equitysettled sharebased payments 
to certain employees equitysettled sharebased payments are 
measured at fair value 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 model  
the expected life used in the model has been adjusted based on 
management’s best estimate for the effects of nontransferability 
exercise restrictions and behavioural considerations
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
in applying the group’s accounting policies as set out in note 2 
management has made critical accounting judgements in the 
quantification of provisions the impairment of goodwill and intangible 
assets and the valuation of retirement benefit obligations and 
financial instruments due to the inherent uncertainty involved in 
making assumptions and estimates actual outcomes will differ from 
those assumptions and estimates an analysis of the key sources 
of estimation uncertainty at the balance sheet date that have a 
significant risk of causing a material adjustment to the carrying 
amount of assets and liabilities within the next financial year is 
provided below
provisions
the quantification of certain liabilities within provisions environmental 
remediation obligations and future legal costs in relation to certain 
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
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 in any event 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 has been allocated the value in use calculation 
requires management to estimate the future cash flows expected to 
arise from the cashgenerating unit and a suitable discount rate in 
order to calculate present value the carrying amount of goodwill and 
other intangible assets at the balance sheet date was £11843 million 
31 december 2008 £12874 million 1 january 2008 £2074 million 
at 31 december 2009 the group recognised no impairment loss in 
respect of these assets 
retirement benefit obligations
in assessing the group’s obligations relating to retirement benefits 
management makes key assumptions relating to current and future 
mortality discount rates and inflation
financial instruments
derivative financial instruments are recognised as assets and 
liabilities in the group’s balance sheet measured at their fair value 
at the balance sheet date the fair value of derivatives continually 
changes in response to changes in prevailing market conditions 
where permissible under ias 39 the group uses hedge accounting 
to mitigate the impact of changes in the fair value of derivatives on 
the income statement but the group’s results may be affected by 
changes in the fair values of derivatives where hedge accounting 
cannot be applied or due to hedge ineffectiveness 59 melrose plc annual report 2009
business performance governance financials shareholder information
4  revenue
an analysis of the group’s revenue as defined by ias 18 is as follows
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
    notes £m £m
continuing operations
revenue from the sale of goods     12656 8832
revenue recognised on longterm contracts     329 121
revenue    5 12985 8953
finance income    7 51 47
total revenue from continuing operations as defined by ias 18     13036 9000
discontinued operations
revenue from the sale of goods     838 1395
revenue recognised on longterm contracts     1018 540
revenue    5 9 1856 1935
finance income     – 02
total revenue from discontinued operations as defined by ias 18     1856 1937
total revenue as defined by ias 18     14892 10937
1 restated to include the results of logistex europe within discontinued operations
5  segment information
the group has adopted ifrs 8 “operating segments” with effect from 1 january 2009 ifrs 8 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 therefore the group’s reportable segments under ifrs 8 are as follows
 energy
 lifting
 dynacast
 other industrial
the energy segment incorporates the turbogenerators marelli transformers and switchgear business units all specialist suppliers of energy 
industrial products to the global market the lifting segment consists primarily of the businesses of bridon and crosby serving oil and gas 
production mining petrochemical alternative energy and general construction markets the dynacast segment only includes the dynacast 
business which is a supplier of diecast parts and components to a range of industries other industrial incorporates all other operating 
businesses details of the significant companies included within the other industrial segment are set out in the business review on pages 16 to 18
there are two central cost centres which are also separately reported to the board
 central – corporate
 central – ltips
1
1 long term incentive plans
the central corporate cost centre contains the melrose group head office costs whilst the central ltip cost centre contains the costs 
associated with the 2009 melrose incentive scheme and the divisional management ltip schemes that are in operation across the group
as a result of the disposal of logistex europe to the beumer group on 28 august 2009 the results of this business have been reclassified  
to be shown within discontinued operations
transfer prices between business units are set on an arm’s length basis in a manner similar to transactions with third parties
the group’s geographical segments are determined by the location of the group’s assets and operations intersegment sales are not material 
and have not been included in the analysis on page 60 notes to the accounts
continued
60 melrose plc annual report 2009
5  segment information continued
the following tables present revenue and profit information and certain asset and liability information regarding the group’s operating segments 
for the year ended 31 december 2009 and the comparative period note 6 gives details of exceptional costs and income
segment revenues and results
    segment revenue from external customers
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
    note £m £m
continuing operations
energy     4183 2294
lifting     4190 2323
dynacast     2087 2463
other industrial     2525 1873
total continuing operations      12985 8953
discontinued operations    9 1856 1935
total revenue     14841 10888
1 restated to include the results of logistex europe within discontinued operations
     segment result
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
    notes £m £m
continuing operations
energy     610  309 
lifting     625  357 
dynacast     213  334 
other industrial     206  134 
central – corporate     89 106
central – ltips
2
     68 62
total headline
3
 operating profit     1497  966 
intangible asset amortisation     267 136
exceptional costs     6 239 129
exceptional income     6 140  – 
operating profit     1131  701 
headline
3
 finance costs    7 362 282
exceptional finance costs    6 –	 231
finance income    7 51  47 
profit before tax     820  235 
tax    8 273 101
profitloss for the year from discontinued operations    9 246  612
profitloss for the year after tax and discontinued operations     793  478
1 restated to include the results of logistex europe within discontinued operations  
2 long term incentive plans 
3 as defined on the income statement business performance governance financials shareholder information
61 melrose plc annual report 2009
5  segment information continued
  total assets   total liabilities
  restated
1
   restated
1
 
 31 december 31 december 1 january 31 december 31 december 1 january
 2009 2008 2008 2009 2008 2008
 £m £m £m £m £m £m
continuing operations
energy 6497 7615 – 2421 3026 –
lifting 7302 8380 – 1755 2067 –
dynacast 3291 3491 3229 873 834 807
other industrial 1493 1720 315 893 958 111
central – corporate 1864 2558 279 6795 8890 422
central – ltips
2
 – – – 77 47 15
total continuing operations 20447 23764 3823 12814 15822 1355
discontinued operations  – 1582 324 – 1449 117
total 20447 25346 4147 12814 17271 1472
1 restated to reflect the finalisation of the acquisition accounting of fki plc and to include the assets and liabilities of logistex europe within discontinued operations  
2 long term incentive plans
   depreciation and computer
 capital expenditure  software amortisation
    restated
1
  restated
1
   year ended year ended year ended year ended
   31 december 31 december 31 december 31 december
   2009 2008 2009 2008
   £m £m £m £m
continuing operations
energy   96 85 75 38
lifting   63 50 92 45
dynacast   37 80 88 77
other industrial   41 79 74 41
central – corporate    01 09 07 04
total continuing operations    238 303 336 205
discontinued operations    13 40 24 42
total   251 343 360 247
1 restated to include the results of logistex europe within discontinued operations
 
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 revenue in the 
us is also considered to be material
the group’s revenue from external customers and information about its segment assets noncurrent assets excluding interests in joint 
ventures deferred tax assets and derivative financial assets by geographical location are detailed below
 revenue from external customers
1
 noncurrent assets
    restated
2
  restated
3
   year ended year ended year ended year ended
   31 december 31 december 31 december 31 december
   2009 2008 2009 2008
   £m £m £m £m
uk   4738 2744 3778 3892
us   3433 2350	 5319 6220
other   4814 3859 5269 5681
total   12985 8953 14366 15793
1 from continuing operations
2 restated to include the results of logistex europe within discontinued operations
3 restated to reflect the finalisation of the acquisition accounting of fki plc 62 melrose plc annual report 2009
notes to the accounts
continued
6  exceptional costs and income
     year ended year ended
     31 december 31 december
     2009 2008
exceptional costs     £m £m
continuing operations
labour related oneoff costs     154 –
restructuring costs     85 49
fki head office closure     – 80
total exceptional costs	 	 	 	 	 239	 129
during the year the group incurred £154 million of labour related oneoff costs relating primarily to headcount reductions in response to the 
economic downturn in addition the group incurred £85 million of costs relating to restructuring programmes which include plant closures  
and relocations
during 2008 £49 million of restructuring costs relating to the acquisition and integration of the fishercast businesses the restructuring of 
investment assets held in the captive insurance company and the disposal of certain assets and liabilities held within the lifting and other 
industrial segments were incurred
following the acquisition of fki in 2008 the company made the decision to close the fki head office resulting in a cost of £80 million 
     year ended year ended
     31 december 31 december
     2009 2008
exceptional income     £m £m
continuing operations
us retiree benefit plan closures     90 –
release of fair value provisions     50 –
total exceptional income	     140 –
during the year certain us retiree benefit plans have been closed resulting in a release of the future retirement benefit obligations relating to 
continuing operations of £90 million
a review of fair value provisions at the balance sheet date identified £50 million of liabilities in excess of the amount now deemed required  
note 20 
     year ended year ended
     31 december 31 december
     2009 2008
exceptional finance costs     £m £m
continuing operations
eurobond refinance     – 90
us private placements refinance     – 89
exceptional unwind of discount on provisions     – 52
total exceptional finance costs	 	 	 	 	 – 231
on 1 july 2008 the group assumed fki plc’s existing debt which consisted of us dollar denominated us private placements and bank debt 
plus a euro denominated eurobond during 2008 both the us private placements and the eurobond were redeemed and the existing bank 
debt was repaid and replaced
where material provisions within the group are discounted to net present value and the normal unwinding of the discount is shown within 
finance costs during 2008 there was a significant reduction in international interest rates which was reflected by the group in its discount  
rate and resulted in an additional exceptional discount charge of £52 million note 20 reflecting the movement in interest rates 63 melrose plc annual report 2009
business performance governance financials shareholder information
7  revenues and expenses
 continuing operations  discontinued operations total
  restated
1
  restated
1
 year ended year ended year ended year ended year ended year ended
 31 december 31 december 31 december 31 december 31 december 31 december
 2009 2008 2009 2008 2009 2008
net operating expenses comprise £m £m £m £m £m £m
selling and distribution costs 781 526 119 182 900 708
administration expenses 1275 817 102 137 1377 954
share of results of joint ventures note 14 04  01 –  –  04  01
other operating costs – exceptional note 6 239 129 19 231 258 360
other operating income – exceptional note 6 140  –  77  –  217  – 
total net operating expenses	 2151 1473 163 550 2314 2023
1 restated to include the results of logistex europe within discontinued operations
 continuing operations  discontinued operations total
  restated
1
  restated
1
 year ended year ended year ended year ended year ended year ended
 31 december 31 december 31 december 31 december 31 december 31 december
 2009 2008 2009 2008 2009 2008
operating profit is stated after charging £m £m £m £m £m £m
depreciation 327 200 24 42  351 242 
cost of inventories 9703 6779 1483 1661  11186 8440 
amortisation of other intangible assets 267 136 – 02  267 138 
amortisation of computer software 09 05 – –  09 05 
operating lease expense 86 44 07 15  93 59 
staff costs 3538 2303 340 471  3878 2774 
research and development costs 24 17 06 14  30 31 
loss on disposal of property plant and equipment 04 – – –  04 – 
1 restated to include the results of logistex europe within discontinued operations
 
the analysis of auditors’ remuneration is as follows
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
fees payable to the company’s auditors for the audit of the company’s annual accounts   06 11
fees payable to the company’s auditors and their associates for other services to the group  
– the audit of the company’s subsidiaries pursuant to legislation     08 05
total audit fees     14 16
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
tax services     16 14
corporate finance services     01 23
valuation and actuarial services     – 01
other     02 03
total nonaudit fees     19 41
fees for the audit of the company’s accounts represent fees payable to deloitte llp in respect of the audit of the company’s individual financial 
statements and the group’s consolidated financial statements corporate finance services in the prior year relate to the acquisition of fki plc 
and the sale of the logistex us division notes to the accounts
continued
64 melrose plc annual report 2009
7  revenues and expenses continued
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
staff costs during the year including directors
wages and salaries     2870 1859
social security costs     444 275
pension costs
– defined benefit plans note 23     73 52
– defined contribution plans note 23     151 117
total continuing staff costs     3538 2303
discontinued staff costs     340 471
total continuing and discontinued staff costs	 	 	 	 	 3878	 2774
1 restated to include the results of logistex europe within discontinued operations
 
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
     number number
average number of persons employed
energy     3558 3633
lifting     2886 3575
dynacast    	 2141 2647
other industrial     2415 3069
central – corporate     29 26
total continuing operations    	 11029 12950
discontinued operations     1473 2536
total continuing and discontinued operations	 	 	 	 	 12502	 15486
1 restated to include the results of logistex europe within discontinued operations
the table above for 2008 reflects the average number of employees as if fki plc were owned for the full year the average numbers based on 
six month ownership were 8105 for the continuing business and 1560 for the discontinued businesses 
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
finance costs and income
interest on bank loans and overdrafts     254 230
amortisation of costs of raising finance     21 14
interest on obligations under finance leases     01 02
fair value loss on financial instruments transferred from equity     04 04
net finance cost of pensions     66 18
unwinding of discount on provisions note 20     16 08
finance costs of redeemable preference c shares     –  02
other finance costs     –  04
total finance costs     362 282
finance income note 4     51  47 
exceptional finance costs note 6     –  231
total continuing operations     311 466
discontinued operations     04 11
total net finance cost	 	 	 	 	 315	 477
1 restated to include the results of logistex europe within discontinued operations
the finance cost of pensions is the interest cost on benefit obligations of £552 million net of the expected return on plan assets of £486 million 
2008 £334 million and £316 million respectively 65 melrose plc annual report 2009
business performance governance financials shareholder information
8  tax
 continuing operations  discontinued operations total
  restated
1
  restated
1
 year ended year ended year ended year ended year ended year ended
 31 december 31 december 31 december 31 december 31 december 31 december
 2009 2008 2009 2008 2009 2008
analysis of chargecredit in year £m £m £m £m £m £m
current tax 262  211  16 02 278  209 
deferred tax note 21 11	 110 41 72 52  182
total income tax chargecredit 273  101  57 74 330	 27 
tax charge on headline
2
 operating profit after 
 finance costs and income 361  218  22 02  383	 220 
tax on net exceptional operating costs 13 19 35 76 22	 95
tax on exceptional finance costs –  59 – –  –	 59
tax in respect of intangible asset amortisation 75 39 – – 	 75 39
total income tax chargecredit 273  101  57 74 330	 27 
1 restated to include the results of logistex europe within discontinued operations 
2 as defined on the income statement
of the total tax charge for the year £57 million 2008 credit of £74 million related to trading in the discontinued divisions which were disposed 
of during the year no tax charge or credit arose on the profit including the cumulative exchange movement recycled from equity of £97 million 
on the disposal of the relevant subsidiaries 
 
the tax for the current and prior year is higher than the average standard rate of corporation tax in the uk for the year of 280 2008 285 
the differences are explained in the following table
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
profitloss on ordinary activities before tax
continuing operations     820  235 
discontinued operations note 9     206  287
     1026  52
tax on profitloss on ordinary activities at uk corporate tax rate 280 2008 285   287  15
tax effect of
net permanent differences     20  01
non deductible exceptional items     12  36 
adjustment in respect of foreign tax rates     14  10
timing differences not previously recognised in deferred tax     58 26 
prior year tax adjustments     55  09
total	 tax	 charge	 for	 the	 year	 	 	 	 	 330 	 	 27 
1 restated to include the results of logistex europe within discontinued operations
in addition to the amount charged to the income statement a credit of £130 million 2008 £36 million has been recognised directly in 
the statement of comprehensive income this represents a tax credit of £153 million 2008 £08 million in respect of retirement benefit 
obligations and a tax charge of £23 million 2008 credit of £28 million in respect of movements on cash flow hedges notes to the accounts
continued
66 melrose plc annual report 2009
9  discontinued operations
during the year the group disposed of four trading operations acquired as part of the fki acquisition three of these businesses were 
previously classified as held for sale and shown within discontinued businesses – logistex us rhombus and welland forge these businesses 
were disposed of in the first half of 2009 for a net gain after the recycle of cumulative exchange differences of £59 million on 28 august 2009 
the group disposed of its interest in logistex europe for consideration net of costs of £236 million logistex europe was previously presented 
within the other industrial segment and is now reported within discontinued operations
details of net assets disposed of and disposal proceeds are as follows
     assets held
     for sale in year ended
    discontinued previous 31 december
    operations year 2009
    £m £m £m
intangible assets    01  01  02 
property plant and equipment    109  269  378	
inventories    66  185  251 
trade and other receivables    554  319  873 
derivative financial assets    29  –  29 
cash and cash equivalents    79  46  125 
gross assets disposed of    838  820  1658	
trade and other payables    485 433 918
retirement benefit obligations    –  18 18
tax    03 02 05
interestbearing loans and borrowings    116 03 119
provisions    –  89 89
gross liabilities disposed of    604 545 1149
net assets disposed of    234  275  509	
cumulative exchange translation difference recycled on disposals    36  78  114	
profitloss on disposal     02  19 17
consideration net of costs    236  256  492 
net borrowingscash disposed of    37  43 06
cash inflow from current year disposals    273  213  486	 67 melrose plc annual report 2009
business performance governance financials shareholder information
9  discontinued operations continued
financial performance of discontinued operations
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
    notes £m £m
revenue    4 1856  1935 
operating costs before exceptional items     1704 1978
headline
2
 operating profitloss     152  43
intangible asset amortisation     –  02
reported as exceptional items
labour related oneoff costs     19 – 
us retiree benefit plan closures     77  – 
logistex us costs of sale     –  15
hickory closure     –  208
rhombus restructuring     –	 08
net finance costs    7 04 11
profitloss before tax     206  287
tax chargecredit    8 57 74 
profitloss after tax      149	 213
cumulative exchange difference recycled on disposals    25 114	 89 
loss on disposal of net assets      17 488
profitloss for the year from discontinued operations	 	 	 	 	 246 	 	 612
1 restated to include the results of logistex europe within discontinued operations  
2 as defined on the income statement 
the prior year comparative includes the logistex us logistex europe rhombus and welland forge businesses disposed of during 2009 and 
the mvc business disposed of during 2008
10  dividends
     year ended year ended
     31 december 31 december
     2009 2008
     £m £m
final dividend for the year ended 31 december 2008 paid of 425p 2007 425p    211 57
interim dividend for the year ended 31 december 2009 paid of 290p 2008 275p    145 137
     356 194
proposed second interim dividend for year ended 31 december 2009 of 480p 2008 nil   239 –
proposed final dividend for the year ended 31 december 2009 of nil 2008 425p    – 211
a proposed second 2009 interim dividend of 48 per ordinary share was approved by the board on 9 march 2010 and in accordance with  
ias 10 has not been included as a liability in these financial statements notes to the accounts
continued
68 melrose plc annual report 2009
11  earnings per share
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
earnings    notes £m £m
profitloss for the purposes of basic earnings per share      795  483
less profitloss for the year from discontinued operations    9 246 612 
earnings for basis of earnings per share from continuing operations     549  129 
exceptional costs – operating    6 239  129 
exceptional income – operating    6 140 – 
exceptional costs – finance    6 –  231 
intangible asset amortisation     267  136 
tax on both exceptional items and intangible asset amortisation     88  117
earnings for basis of headline
2
 earnings per share from continuing operations	 	 	 827 	 508 
1 restated to include the results of logistex europe within discontinued operations 
2 as defined on the income statement 
     number number
weighted average number of ordinary shares for the purposes of basic earnings per share million   4976 3156
further shares for the purposes of fully diluted earnings per share million    104 –
      restated
1
     year ended year ended
     31 december 31 december
     2009 2008
earnings per share     pence pence
basic earnings per share
from continuing and discontinued operations     160 153
from continuing operations     110 41 
from discontinued operations     50 194
fully diluted earnings per share
from continuing and discontinued operations     156 153
from continuing operations     108 41 
from discontinued operations     48 194
headline
2 
basic earnings per share
from continuing operations     166 161 
headline
2
 fully diluted earnings per share
from continuing operations     163 161 
1 restated to include the results of logistex europe within discontinued operations 
2 as defined on the income statement 69 melrose plc annual report 2009
business performance governance financials shareholder information
12  goodwill and other intangible assets
    other intangible computer 
   goodwill assets software total
   £m £m £m £m
cost
at 1 january 2008   1835  288  13  2136 
additions   –  –  05  05 
acquisitions   5216  3756  14  8986 
disposal of businesses   213 15 01 229
exchange adjustments   1456  750  04  2210 
at 31 december 2008 restated
1
   8294  4779  35  13108 
additions   –  –  09  09 
disposals   –  –  07 07
disposal of businesses   –  –  13 13
exchange adjustments   502 281 01  782
at 31 december 2009	 	 	 7792 	 	 4498 	 	 25	 12315	
amortisation
at 1 january 2008   –  54 08 62
charge for period   –  138 05 143
disposal of businesses   –  10  01  11 
exchange adjustments   –  37 03 40
at 31 december 2008 restated
1
   –  219 15 234
charge for the period   –  267 09 276
disposals   –  –  07  07 
disposal of businesses   –  –  12  12 
exchange adjustments   –  19 –  19 
at 31 december 2009	 	 	 –	 	 467	 05	 472
net book value at  
31 december 2009	 	 	 7792 	 	 4031 	 	 20 	 	 11843	
at 31 december 2008 restated
1
   8294  4560  20  12874 
at 1 january 2008   1835  234  05   2074 
1 restated to reflect the finalisation of the acquisition accounting of fki plc
other intangible assets include patented technology customer relationships and trade names 
goodwill has been allocated to the business segments each of which comprises several cashgenerating units as follows
     restated
1
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
energy    2451 2534 –
lifting    2926 3135 –
dynacast    2035 2226 1645
other industrial    380 399 32
discontinued    – – 158
    7792 8294 1835
1 restated to reflect the finalisation of the acquisition accounting of fki plc notes to the accounts
continued
70 melrose plc annual report 2009
12  goodwill and other intangible assets continued
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired
the recoverable amounts of the cashgenerating units are determined from value in use calculations the key assumptions for the value in use 
calculations are those regarding the discount rates growth rates and expected changes to selling prices and direct costs during the period 
the company estimates discount rates using rates that reflect current market assessments of the time value of money and the risks specific to 
each cashgenerating unit the growth rates are based on a prudent estimate of longterm industry growth forecasts changes in selling prices 
and direct costs are based on past practices and expectations of future changes in the market
the group prepares cash flow forecasts derived from financial budgets approved by management and extrapolates cash flows based  
on estimated growth rates of between 2 and 3 this rate does not exceed the average longterm growth rate for the relevant markets  
the pretax discount rate applied is between 7 and 9 depending on the risk elements associated with each cashgenerating unit  
no impairment was identified and a reasonable possible change in the assumptions applied would not result in any impairment
acquisition of subsidiaries
on 1 july 2008 the group acquired 100 of the issued share capital of fki plc during 2009 the group finalised the acquisition accounting for 
items calculated on a provisional basis at 31 december 2008 and has recorded adjustments to the opening balance sheet of the fki group net 
assets acquired these adjustments are primarily in relation to the reduction of fixed assets and inventory values and additional liabilities which 
increase goodwill by £79 million
the following assets and liabilities were acquired
   original   
  acquiree’s fair value original fair subsequent revised fair
  carrying amount adjustments value adjustments value
  £m £m £m £m £m
fki
property plant and equipment  2191  219 1972  50 1922 
intangible assets and computer software  743  3027 3770  – 3770 
derivative financial assets  386  –  386  –  386 
associate investments  09  05 04  –  04 
inventories  1811  568  2379  14 2365 
trade and other receivables  3405  575 2830  –  2830 
cash and cash equivalents  853  –  853  – 853 
trade and other payables  3106 321 3427 44  3383
provisions  258 1046 1304 59 1363
deferred tax  224 864 1088 –  1088
retirement benefit obligations  206 751 957 –  957
current tax liabilities  330 191  139 –  139
interestbearing loans and borrowings  5972 84  5888 –  5888
assets held for sale  926  445 481  –  481 
  228  356 128 79 207
goodwill    5115  79  5194 
total consideration including directly attributable  
 acquisition costs of £136 million      4987 
satisfied by
shares issued      2484 
cash consideration including directly attributable  
 acquisition costs of £136 million      2503 
total	 	 	 	 	 	 4987	
on 22 august 2008 the group acquired the trade and assets of fishercast global operating in canada and the uk there have been no 
adjustments to the opening balance sheet in the current year
  71 melrose plc annual report 2009
business performance governance financials shareholder information
13  property plant and equipment
    land and plant and
    buidlings equipment total
    £m £m £m
cost
at 1 january 2008    164  730  894 
additions    31  304  335 
acquisitions    920  1021  1941 
disposal of businesses    51 250 301
disposals    03 27 30
exchange adjustments    172  512  684 
at 31 december 2008 restated
1
    1233  2290  3523 
additions    44  192  236 
disposal of businesses    84 37 121
disposals    04 47 51
exchange adjustments    63 140 203
at 31 december 2009	 	 	 	 1126 	 	 2258 	 	 3384	
depreciation
at 1 january 2008    18 269 287
charge for the period    19 188 207
charge for the period on disposals    –  20 20
disposal of businesses    07  62  69 
disposals    –  21  21 
exchange adjustments    08 172 180
at 31 december 2008 restated
1
    38 566 604
charge for the period    32 304 336
impairments    –  04 04
disposal of businesses    03  09  12 
disposals    –  37  37 
exchange adjustments    03  31  34 
at 31 december 2009	 	 	 	 64	 797	 861
net book value	 at 
31 december 2009	 	 	 	 1062 	 	 1461 	 	 2523	
at 31 december 2008 restated
1
    1195  1724  2919 
at 1 january 2008    146  461  607 
1 restated to reflect the finalisation of the acquisition accounting of fki plc
the net carrying amount of plant and equipment includes nil 31 december 2008 £04 million 1 january 2008 £15 million in respect of 
assets held under finance leases notes to the accounts
continued
72 melrose plc annual report 2009
14  interests in joint ventures
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
aggregated amounts relating to joint ventures
total assets    30  40  – 
total liabilities    27 39 – 
interests in joint ventures	 	 	 	 03 	 	 01  – 
share of joint venture revenues    37	 10  17
share of profitloss    04  01 02
dividends received    02 02 –
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
     restated
1
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
raw materials    542 872 113
work in progress    885 1388 83
finished goods    799 1019 101
    2226 3279 297
1 restated to reflect the finalisation of the acquisition accounting of fki plc
there is no material difference between the balance sheet value of inventories and their replacement cost
 
longterm contracts
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
contracts in progress at the balance sheet date
amounts due from contract customers included in trade and other receivables   41	 165  –
amounts due to contract customers included in trade and other payables   124 81 –
	 	 	 	 83	 84 	 –
contract costs incurred plus recognised profit less recognised losses to date   197  4680  –
less progress billings    280 4596 –
    83 84  –
the average life of longterm contracts is 2 – 3 years 73 melrose plc annual report 2009
business performance governance financials shareholder information
16  trade and other receivables
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
trade receivables   	 1976 	 2958  640 
allowance for doubtful receivables    81 111 31
other receivables    125  347   47 
prepayments   	 110  164   14 
    2130  3358  670 
trade receivables are noninterest bearing credit terms offered to customers vary upon the country of operation but are generally between  
30 and 90 days
 
an allowance has been made for estimated irrecoverable amounts made with reference to past default experience and management’s 
assessment of credit worthiness an analysis of which is as follows
    other
 energy lifting dynacast industrial central discontinued total
 £m £m £m £m £m £m £m
at 1 january 2008 –  –  22  06  –  03  31 
acquired 39  13  –  12  02  –  66 
income statement charge 08  09  08  07  02  –  34 
disposed –  –  –  – – 04 04
utilised 10 04 11 03 02 –  30
exchange differences 04  02  05  02  –  01  14 
at 31 december 2008 41  20  24  24  02  –  111 
income statement charge 04  06  06  05  –  –  21 
utilised 15 12 06 13 01 –  47
exchange differences 02 –  01 01 –  –  04
at 31 december 2009	 28	 	 14 	 	 23 	 	 15 	 	 01 	 	 –	 	 81	
the concentration of credit risk is limited due to the number of customers being high and because they are unrelated to each other 
    31 december 31 december 1 january
    2009 2008 2008
ageing of impaired trade receivables past due    £m £m £m
0 – 30 days    11 15 04
31 – 60 days    10 14 03
60 days    60 82 24
    81 111 31
included in the group’s trade receivables balance are overdue trade receivables with a carrying amount of £442 million 31 december 2008 
£816 million 1 january 2008 £157 million against which an appropriate provision of £81 million 31 december 2008 £111 million  
1 january 2008 £31 million is held notes to the accounts
continued
74 melrose plc annual report 2009
16  trade and other receivables continued
the balance deemed recoverable of £361 million 31 december 2008 £705 million 1 january 2008 £126 million is past due as follows
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
0 – 30 days    287 381 99
31 – 60 days    45 152 17
60 days    29 172 10
    361 705 126
the directors consider that the carrying amount of trade and other receivables including amounts not past due and not impaired is considered 
to be their fair value
17  cash and cash equivalents
    31 december 31 december 1 january
    2009 2008 2008
    £m £m £m
cash and cash equivalents     1475 1657 464
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
     restated
1
    31 december 31 december 1 january
    2009 2008 2008
current    £m £m £m
trade payables    1268 2227 433
other payables    961 1111 97
other taxes and social security    88 161 31
accruals    878 938 218
    3195 4437 779
1 restated to reflect the finalisation of the acquisition accounting of fki plc
trade payables are noninterest bearing normal settlement terms vary by country but are usually between 30 and 90 days other payables are 
noninterest bearing and have an average term of approximately 60 days
the directors consider that the carrying amount of trade payables approximates to their fair value
    31 december 31 december 1 january
    2009 2008 2008
noncurrent    £m £m £m
other payables    03 14 –
other taxes and social security    – 01 –
accruals    15 16 –
    18 31 – 75 melrose plc annual report 2009
business performance governance financials shareholder information
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 interest rate foreign currency and liquidity risk are included in note 24
  current   noncurrent   total 
  31 december 31 december 1 january 31 december 31 december 1 january 31 december 31 december 1 january
  2009 2008 2008 2009 2008 2008 2009 2008 2008
 £m £m £m £m £m £m £m £m £m
fixed rate obligations
euro loan austria
1
 03 06 05 05 09 13 08 15 18
redeemable preference  
 c shares
2
 – – 72 – – – – – 72
 03 06 77 05 09 13 08 15 90
floating rate obligations
bank borrowings – 
 us dollar loan
3
 – – – 3741 4698 – 3741 4698 –
bank borrowings – 
 euro loan
4
 – – – 516 1984 – 516 1984 –
bank borrowings – 
 sterling loan
5
 – – – 500 500 – 500 500 –
bank borrowings – 
 sterling loan
6
 – – – – – 110 – – 110
finance leases 10 01 04 – 11 08 10 12 12
 10 01 04 4757 7193 118 4767 7194 122
unamortised finance costs – – – 83 104 – 83 104 –
total interest bearing loans  
 and borrowings 13 07 81 4679 7098 131 4692 7105 212
1 interest rate 15 final maturity july 2011  
2 matured june 2008  
3 interest rate libor 175 final maturity april 2013  
4 interest rate euribor 175 final maturity april 2013  
5 interest rate libor 175 final maturity april 2013  
6 repaid july 2008
the group arranged a £750 million multicurrency committed bank facility on the acquisition of fki plc this provides term loan and revolving 
facilities through to 22 april 2013 a number of group companies act as guarantors to this facility drawdowns bear interest at interbank rates  
of interest plus a margin determined by reference to the group’s performance under its debt cover covenant ratio and ranges between 125 
and 235 the margin as at 31 december 2009 was 175
throughout the year the group remained compliant with all covenants under these facilities the term loan facility is fully drawn down having 
originally been set at £500 million during the year the group repaid and cancelled us 800 million of the term loan facility following the sale 
of the logistex businesses during 2009 all drawings under the £250 million revolving facility were repaid following strong operational cash 
generation in the group leaving only £251 million of this facility utilised for documentary credits at 31 december 2009 the undrawn amount  
of the revolving facility was £2249 million 31 december 2008 £1086 million 1 january 2008 £250 million
the interest rate repricing profile of financial liabilities after taking into account hedging interest rate derivatives is described in note 24
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 over the page interest on floating rate debt is based 
on a 1 month libor curve for each currency while interest on hedging interest rate swaps is based on the relevant forward libor curve
finance lease liabilities are secured by the assets leased are euro denominated and are a mix of floating and fixed interest rate debt with 
remaining repayment periods not exceeding one year notes to the accounts
continued
76 melrose plc annual report 2009
19  interestbearing loans and borrowings continued
    total    
  finance redeemable interestbearing other derivative total 
  lease preference c  loans and financial  financial  financial 
 bank loans obligations shares borrowings liabilities
1 
 liabilities liabilities
 £m £m £m £m £m £m £m
within one year 149  10  –  159  3195 28 3382 
in one to two years 201  –  –  201  18 01 220 
in two to three years 533  –  –  533  – – 533 
after three years 4564  –  –  4564  – 01 4565 
effect of financing rates 765 –  –  765 – – 765
31 december 2009	 4682	 	 10 	 	 –	 	 4692	 3213	 30	 7935	
within one year 191  01 – 192  4437 253 4882 
in one to two years 335  11 – 346  31 –  377 
in two to three years 334  –  – 334  –  –  334 
after three years 7762  –  – 7762  –  –  7762 
effect of financing rates 1529 –  – 1529 –  –  1529
31 december 2008 7093  12 – 7105 4468 253 11826 
within one year 11  04  74  89  779 –  868 
in one to two years 10  04  – 14  –  –  14 
in two to three years 117  04  – 121  –  –  121 
after three years 04  01  – 05  –  –  05 
effect of financing rates 14 01 02 17 –  –  17
1 january 2008 128  12  72  212  779 –  991 
1 restated to reflect the finalisation of the acquisition accounting of fki plc
20  provisions
  surplus environmental incentive fki
  leasehold and scheme captive 
  property costs legal costs related insurance other total
 notes £m £m £m £m £m £m
at 1 january 2008  11  06  15  –  38  70 
acquisition of businesses  222  509  –  223  413  1367 
disposal of businesses  –  –  –  –  20 20
utilised  14 17 41 –  280 352
arising in the year  05  03  64  57  194  323 
unwind of discount  7  05  03  –  –  –  08 
change of discount rate  6 08  44  –  –  –  52 
exchange differences  38  78  09  –  16  141 
at 31 december 2008 restated
1
  275  626  47  280  361   1589 
utilised  61 52 44 70 153 380
release unutilised
2
  –  –  –  08 42 50
arising in the year
3
  94  17  75  –  136  322 
unwind of discount  7 11  05  –  –  –  16 
exchange differences  15 30 01 –  09 55
at 31 december 2009	 	 304 	 	 566 	 	 77 	 	 202 	 	 293 	 	 1442	
current  77  130  –  52  187  446 
noncurrent  227  436  77  150  106  996 
  304	 	 566 	 	 77 	 	 202 	 	 293 	 	 1442 
1 restated to reflect the finalisation of the acquisition accounting of fki plc  
2 released to exceptional income note 6  
3  of the £322 million provisions arising in the year surplus leasehold property costs include £60 million reclassified from assets held for sale at 31 december 2008  
this property will be retained within the group for the foreseeable future in addition £17 million of liabilities have been reclassified from other payables 77 melrose plc annual report 2009
business performance governance financials shareholder information
20  provisions continued
the provision for surplus leasehold property costs is the estimated net rentals payable over the period of the leases together with any 
dilapidation costs 
environmental and legal 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
incentive scheme related provisions are in respect of long term incentive plans for divisional senior management
the fki captive insurance provision relates to known and actuarial assessments of future claims covered by the captive including but not 
limited to public and product liability employer’s liability in the uk workers’ compensation in the us and automotive claims in the uk and us 
other provisions relate primarily to onerous contracts and restructuring costs to be incurred 
where appropriate provisions have been discounted using a discount rate of 3 – 6 31 december 2008 3 – 6 1 january 2008 6
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
   accelerated capital deferred tax
  tax losses and allowances and on intangible total deferred total net
  other assets other liabilities assets tax liabillities deferred tax
 notes £m £m £m £m £m
at 1 january 2008  31  15 66 81 50
credit to income  8 107  36  39  75  182
chargecredit to equity  02 38  –  38  36
intercategory transfers  03  03 –  03 –
acquisitions  91  129 1050 1179 1088
exchange differences  68  12 200 212 144
at 31 december 2008  298  85 1277 1362 1064
chargecredit to income  8 107 20 75  55  52
creditcharge to equity  74  23 –  23 51 
disposal  20 –  –  –  20
exchange differences  24 04  73  77  53 
at 31 december 2009	 	 221	 	 124	 1129	 1253	 1032
as at 31 december 2009 the group has gross unused tax losses of £2514 million 2008 £3925 million available for offset against future 
profits a deferred tax asset of £38 million 2008 £186 million has been recognised in respect of losses of £136 million together with an  
asset of £183 million 2008 £112 million on other timing differences no deferred tax asset has been recognised in respect of the remaining  
£2378 million 2008 £3390 million due to the divisional and geographic split of anticipated future profit streams these losses may be  
carried forward indefinitely subject to certain continuity of business requirements
a significant part of the retirement benefit obligations recognised in the group accounts relates to the mckechnie uk plan the fki uk plans 
and the fki us pension plan a deferred tax asset of £74 million 2008 £10 million has been recognised on these obligations to the extent  
that they are expected to generate tax deductions against foreseeable profits
as at 31 december 2009 the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which 
deferred tax liabilities have not been recognised was £40 million 2008 £38 million no liability has been recognised in respect of these 
differences because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such 
differences will not reverse in the foreseeable future notes to the accounts
continued
78 melrose plc annual report 2009
22  sharebased payments
melrose 2009 incentive scheme
on 14 august 2007 a share incentive scheme was approved the “2007 incentive scheme” which was due to expire on 31 may 2012  
on 14 may 2009 pursuant to a shareholder resolution passed at a general meeting on that date the 2007 incentive shares of £1 each  
were repurchased at their nominal value and each holder of 2007 incentive shares subscribed for the same number of 2009 incentive shares  
at their nominal value the rights attaching to the 2009 incentive shares are identical to those attaching to the 2007 incentive shares with the
exception that the company may pay a dividend on the 2009 incentive shares as an alternative to converting them into ordinary shares and 
the holders may not request early conversion in 2010 andor 2011 this has not resulted in a change to fair value 
the 2009 incentive shares were issued to directors senior management and ogier employee benefit trustee limited as trustee of the melrose 
plc employee benefit trust 
the 2009 incentive shares do not confer a right to be paid an annual dividend nor the right to vote at a general meeting on winding up the 
holders are entitled to participate in the company’s assets equal to an amount to which they would have been entitled if their 2009 incentive 
shares had crystalised as at the date of winding up further details of the 2009 incentive shares can be found in the remuneration report  
on pages 40 to 43
the estimated fair value attributable to the 2009 incentive shares formerly the 2007 incentive shares using a black scholes option pricing 
model at 31 december 2009 was £210 million 31 december 2008 £10 million 1 january 2008 £37 million 
the inputs into the black scholes model used to fair value the scheme when it was originally established in 2007 were as follows
      valuation
	 	 	 	 	 	 assumptions
weighted average share price      £167
weighted average exercise price      £100
expected volatility      250
expected life as at inception      48yrs
risk free interest      20
expected dividend yield      32
expected volatility was determined by calculating the historical volatility of the company’s share price 
the group recognised total expenses of £18 million 2008 £20 million in relation to equitysettled sharebased payment transactions in 2009 
including national insurance charges of nil 2008 £02 million 
23  retirement benefit obligations
melrose holds several pension plans covering many of its employees and operating in several jurisdictions
the most significant defined benefit plans for continuing operations are
  the fki uk pension plans which include the fki uk pension plan the cleco plan and the bridon group senior executive plan these are 
defined benefit in type and are funded plans where the future liabilities for members’ benefits are provided for by the accumulation of assets 
held externally to the group in separate trustee administered funds
  the mckechnie uk pension plan this is defined benefit in type and is a funded plan other than £33 million of unfunded liabilities where 
the future liabilities for members’ benefits are provided for by the accumulation of assets held externally to the group in separate trustee 
administered funds
  the fki us pension plan this is defined benefit in type and is a funded plan where the future liabilities for members’ benefits are provided for 
by the accumulation of assets held externally to the group in separate trustee administered funds
other plans include the dynacast us defined plan and a number of funded and unfunded defined benefit arrangements across europe
further details of the status of the significant plans are disclosed in the directors’ report on pages 28 to 35
the cost of these plans is determined in accordance with ias 19 with the advice of independent professionally qualified actuaries on the basis 
of formal actuarial valuations using the projected unit credit method in line with normal practice these valuations are undertaken triennially in 
the uk and annually in the us
the valuations are based on the preliminary uk full actuarial valuations as of 31 december 2008 updated at 31 december 2009 by independent 
actuaries and us full actuarial valuations as of 1 january 2009 updated at 31 december 2009 by independent actuaries 79 melrose plc annual report 2009
business performance governance financials shareholder information
23  retirement benefit obligations continued
the group also operates unfunded retiree medical and welfare benefit plans principally in the us however during the year a number of these 
plans have been terminated
in addition to this there are a number of defined contribution plans across the group contributions during the year were £151 million  
2008 £117 million
the major weighted average assumptions used by the actuaries in calculating the group’s pension plan assets and liabilities are as set out below
	 	 	 	 31 december 2009	 	
    fki us us retiree 
  fki uk mckechnie pension benefit other
  plans uk plan plan plans plans
   pa  pa  pa  pa  pa
rate of increase in salaries  395 395 325 na 260
rate of increase in pensions in payment  330 345 na na na
discount rate  575 575 580 580 550
inflation assumption  345 345 275 na 260
    31 december 2008  
    fki us us retiree 
  fki uk mckechnie pension benefit other
  plans uk plan plan plans plans
   pa  pa  pa  pa  pa
rate of increase in salaries  325 325 325 na 300
rate of increase in pensions in payment  290 290 na na na
discount rate  630 630 625 625 560
inflation assumption  275 275 275 na 200
    31 december 2007
     mckechnie other
     uk plan plans
      pa  pa
rate of increase in salaries     380 300
rate of increase in pensions in payment     330 190
discount rate     570 590
inflation assumption     330 230
mortality
fki uk plan 
mortality assumptions for the most significant plan in the group the fki uk plan as at 31 december 2009 are based on 90 of the  
“heavy” self administered pension scheme saps tables reflecting the plan membership being largely employed in the industrial sector 
future improvements are in line with 80 60 for women of the long cohort subject to a minimum underpin of 1 pa
the assumptions are that a member currently aged 65 will live on average for a further 201 years if they are male and for a further 235 years  
if they are female for a member who retires in 2024 at age 65 the assumptions are that they will live for a further 217 years after retirement  
if they are male and for a further 249 years after retirement if they are female
the mortality assumptions are in line with those adopted for the draft triennial valuation results as at 31 december 2008
sensitivities
sensitivities around movements in the principal assumptions of the discount rate inflation rate and mortality are discussed in the finance 
director’s review notes to the accounts
continued
80 melrose plc annual report 2009
23  retirement benefit obligations continued
the amount recognised in the balance sheet arising from net liabilities in respect of defined benefit plans is as follows
  31 december 31 december 31 december 31 december 31 december
  2009 2008 2007 2006 2005
  £m £m £m £m £m
plan liabilities  10335 9397 1484 1479 1455
plan assets  8644	 8105  1232  925  850 
limit on pension plan surplus  –  141 – – –
net liabilities	 	 1691 1433 252 554 605
in the prior year in accordance with ias 19 the value of the assets held within the mckechnie uk plan were limited by £141 million to show a 
deficit on the plan equal to the remaining committed contributions this limit is no longer required at 31 december 2009 because the net deficit 
on the plan now exceeds the remaining committed contributions
 
the five year history of experience adjustments is as follows
  31 december 31 december 31 december 31 december 31 december
  2009 2008 2007 2006 2005
  £m £m £m £m £m
experience adjustments on plan liabilities  1309 707  12  05 55
experience adjustments on plan assets  410	 789 23  17  77 
 
the plan liabilities and assets at 31 december 2009 were split by plan as follows
   fki us us retiree 
 fki uk mckechnie pension benefit other
 plans uk plan plan plans plans total
 £m £m £m £m £m £m
plan liabilities 6606 1402 1914 47 366 10335
plan assets 5435  1281  1744  –  184  8644	
net liabilities 1171 121 170 47 182 1691
 
this amount is presented in the balance sheet
  31 december 31 december 31 december 31 december 31 december
  2009 2008 2007 2006 2005
  £m £m £m £m £m
net liabilities
– unfunded plans  242 452 41 109 87
– funded plans  1449 840 211 445 518
limit on pension plan surplus  – 141 – – –
  1691 1433 252 554 605
 
expected returns and fair value of assets
   expected return fair value of assets
   31 december 31 december 31 december 31 december
   2009 2008 2009 2008
     £m £m
equity instruments   85 83 3121 2301
debt instruments   48 53 4407 4735
other assets   61 64 1116 1069
weighted averagetotal   63 63 8644 8105
the expected return on plan assets at 31 december 2009 is based on market expectations at 1 january 2010 for returns on assets over the 
entire life of the obligation
there is no self investment other than in tracker funds either in the group’s own financial instruments or property or other assets used by the group 81 melrose plc annual report 2009
business performance governance financials shareholder information
23  retirement benefit obligations continued
amounts recognised in income in respect of these defined benefit plans are as follows
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
in arriving at operating profit included within cost of sales  
selling and distribution costs and administrative expenses
– current service cost     73	 52 
– effects of curtailments and settlements     34 – 
included within net finance costs
– interest cost     552  334 
– expected return on assets     486 316
included within exceptional income
– effects of curtailment and settlements     90 – 
included within profit from discontinued operations
– effects of curtailments and settlements     111 – 
the actual return on plan assets was a gain of £896 million 2008 loss of £473 million 
 
the amount recognised in the statement of comprehensive income is as follows
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
actuarial lossesgains on plan liabilities     1309 707 
actuarial gainslosses on plan assets     410	 789
     899 82
limit on pension plan surplus     141	 141
     758 223
the cumulative amount of actuarial gains and losses now recognised in the statement of comprehensive income is a total loss of £912 million 
2008 £154 million
 
movements in the present value of defined benefit obligations during the year
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
at beginning of year     9397  1484 
acquisition     –  7817 
disposals     18 24
current service cost     73	 52 
interest cost     552	 334 
actuarial lossgain     1309	 707
benefits paid     483 257
plan curtailments     235 – 
currency gainloss     260 698 
at end of year     10335	 9397  notes to the accounts
continued
82 melrose plc annual report 2009
23  retirement benefit obligations continued
movements in the fair value of plan assets during the year
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
at beginning of year     8105  1232 
acquisition     –  6860 
disposals     –  15
expected return on assets     486  316 
actuarial gainslosses     410  789
contributions     321  200 
benefits paid     483 257
currency lossgain     195 558 
at end of year     8644	 8105 
the company has guaranteed a schedule of contributions of £61 million per annum with the trustee of the mckechnie pension plan up  
until may 2010 in addition the company contributes £180 million per annum to the fki uk pension plan
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 2009 31 december 2008 and 1 january 2008
     other   total assets held 
  energy lifting dynacast industrial central mvc continuing for sale total
 £m £m £m £m £m £m £m £m £m
31 december 2009
financial assets
cash and cash equivalents –  –  –  –  1475  –  1475  –  1475 
trade receivables 720  600  341  230  04  –  1895  –  1895 
derivative financial assets 06  04  05  –  11  –  26  –  26 
financial liabilities          
bank loans –  –  08 –  4674 –  4682 –  4682
finance lease obligations –  10 –  –  –  –  10 – 10
derivative financial liabilities 14 11 02 –  03 –  30 –  30
other financial liabilities 1021 688 604 482 418 –  3213 –  3213
31 december 2008         
financial assets         
cash and cash equivalents –  –  –  –  1657  –  1657  20  1677 
trade receivables 1173  702  397  572  03  –  2847  273  3120 
derivative financial assets 05  04  01  21  –  –  31  –  31 
financial liabilities          
bank loans –  –  18 –  7075 –  7093 03 7096
finance lease obligations –  12 –  –  –  –  12 –  12
derivative financial liabilities 113 80 18 42 –  – 253 –  253
other financial liabilities
1
 1503 839 576 1248 302 –  4468 489 4957
1 january 2008
financial assets
cash and cash equivalents –  –  288  48  266 138 464  – 464 
trade receivables –  – 428  83  01 97  609  –  609 
derivative financial assets –  –  07  04 01 –  04  –  04 
financial liabilities
bank loans –  –  18 –  110 –  128 –  128
finance lease obligations –  – –  01 – 11 12 –  12
redeemable preference c shares –  –  – –  72 – 72 –  72
other financial liabilities –  –  562 107 24 86 779 –  779
1 restated to reflect the finalisation of the acquisition accounting of fki plc 83 melrose plc annual report 2009
business performance governance financials shareholder information
24  financial instruments and risk management continued
credit risk
the group considers its maximum exposure to credit risk to be as follows
     other   total assets held 
  energy lifting dynacast industrial central mvc continuing for sale total
 £m £m £m £m £m £m £m £m £m
31 december 2009
financial assets
cash and cash equivalents – – – – 1475 –  1475 – 1475
trade receivables 720 600 341 230 04 –  1895 – 1895
derivative financial assets 06 04 05 – 11 –  26 – 26
31 december 2008
financial assets
cash and cash equivalents – – – – 1657 –  1657 20 1677
trade receivables 1173 702 397 572 03 – 2847 273 3120
derivative financial assets  05 04 01 21 – – 31 – 31
1 january 2008         
financial assets
cash and cash equivalents – – 288 48  266 138 464 – 464
trade receivables – – 428 83  01 97  609 – 609
derivative financial assets – – 07 04 01 –  04 – 04
the group’s principal financial assets are cash and shortterm deposits 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 is primarily attributable to its trade receivables the amounts presented in the balance sheet are net of allowances 
for doubtful receivables estimated by the group’s management based on prior experience and their assessment of the current economic 
environment note 16 provides further details of the group’s policies regarding the recovery of trade receivables
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 accounts
continued
84 melrose plc annual report 2009
24  financial instruments and risk management continued
foreign exchange contracts
as at 31 december 2009 the group held foreign exchange forward contracts to mitigate expected exchange fluctuations on cash flows on 
sales to customers and purchases from suppliers these instruments operate as cash flow hedges unless the amounts involved are small  
the terms of the material currency pairs with total principals in excess of sterling £1 million equivalent are as follows 
  31 december  31 december 31 december 31 december
  2009  2009 2008 2008
  selling currency  average hedged selling currency average hedged
  millions  rate millions rate
sell australian dollarbuy sterling aud	 	 46	 gbpaud	 190  –  –
sell canadian dollarbuy us dollar cad	 	 57	 usdcad 	 	 109  –  –
sell czech korunabuy euro czk	 	 841	 eurczk 	 	 2790  –  –
sell eurobuy czech koruna eur	 	 525	 eurczk	 	 2637  –  –
sell eurobuy sterling eur	 	 340	 gbpeur 	 	 113 eur 145 gbpeur 136
sell norwegian kronebuy sterling nok	 	 159	 gbpnok	 	 957 nok  222 gbpnok 1045
sell polish zlotybuy sterling pln	 	 194	 gbppln 	 	 468  –  –
sell sterlingbuy czech koruna gbp	 	 196	 gbpczk 	 	 2971 gbp  202 gbpczk 2845
sell sterlingbuy euro gbp	 	 253	 gbpeur 	 	 111  –  –
sell sterling buy us dollar gbp	 	 241	 gbpusd 	 	 164  –  –
sell us dollarbuy euro usd	 	 62	 usdeur 	 	 068 usd  57 usdeur 069
sell us dollarbuy sterling usd	 	 646	 gbpusd 	 	 164 usd  1059 gbpusd 184
sell us dollarbuy singapore dollar usd	 	 114	 usdsgd 	 	 143 usd  358 usdsgd 140
sell us dollarbuy canadian dollar usd	 	 157	 usdcad 	 	 108 usd  372 usdcad 114
sell us dollarbuy chinese renminbi usd	 	 61	 usdrmb 	 	 677 usd  43 usdrmb 675
sell us dollarbuy korean won usd	 	 20	 usdkrw 	 	 118430  –  –
sell danish kronebuy sterling  –	 	 – dkk  279 gbpdkk 923
sell eurobuy danish krone  –	 	 – eur  542 eurdkk 748
sell hong kong dollarbuy danish krone  –	 	 – hkd  422 eurhkd 153
sell norwegian kronebuy danish krone  –	 	 – nok  497 dkknok 110
sell sterling buy danish krone  –	 	 – gbp  16 gbpdkk 977
sell uae dirhambuy sterling  –	 	 – aed  75 gbpaed 665
sell us dollarbuy danish krone  –	 	 – usd  351 usddkk 525
sell us dollarbuy malaysian ringgit  –	 	 – usd  47 usdmyr 332
the foreign exchange contracts all mature between january 2010 and november 2011 the fair value of the contracts at 31 december 2009 
was a net liability of £12 million 2008 £202 million
 
as at 31 december 2009 the group held a single copper swap contract that was designated as a cash flow hedge this swap contract locks 
the group into fixed copper prices to protect against fluctuations in the market price of copper the terms of the contract are
commodity swaps commodity total quantity maturity pricing
group pays copper 25 tonnes 28 february 2010 fixed price of us dollar 4613 per tonne
group receives copper 25 tonnes 28 february 2010 average lme price for the month
the fair value of the contract at 31 december 2009 was nil 2008 liability of £20 million
 
hedge of net investments in foreign entities
included in interestbearing loans at 31 december 2009 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 31 december
  	 	 2009 2008
  	 	 £m £m
us dollar     3741 4698
euro     516 1984 85 melrose plc annual report 2009
business performance governance financials shareholder information
24  financial instruments and risk management continued
interest rate sensitivity analysis
a one percentage point rise in market interest rates for all currencies would decrease profit before tax by the following amounts assuming the 
net debt as at the balance sheet date was outstanding for the whole year
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
sterling     01 05
us dollar     03 43
euro     02 19
	 	 	 	 	 06	 67
interest rate risk management
the group’s policy for managing interest rate risk is set out in the finance director’s review
in january 2009 the group entered into a number of interest rate swaps to hedge 5460 million of us dollar denominated bank debt into 
fixed rates of interest under the terms of these swaps the group will pay an average rate of 21 pa plus a 20 margin annually in arrears 
and receive 3 month us dollar libor plus 20 quarterly in arrears these swaps all mature in january 2013 these interest rate swaps were 
overlaid with a number of basis swaps in april 2009 under the terms of these basis swaps the group pays 3 month us dollar libor quarterly 
in arrears and receives 1 month us dollar libor plus 03 monthly in arrears 
in april 2009 the group also took out an interest rate swap to hedge €333 million of euro denominated debt into fixed rates of interest 
the swap is structured in a similar way to the us dollar interest rate swaps with the group paying 26 plus a 20 margin annually in arrears 
and receiving 3 month euribor plus 20 quarterly in arrears this swap matures in april 2013 a corresponding amount of debt drawn  
under the £750 million loan facility is matched with these swaps
these interest rate swaps have been designated as cash flow hedges and were highly effective throughout 2009 the fair value of the contracts 
at 31 december 2009 was a net asset of £08 million 2008 nil
foreign currency risk
the group’s policy for managing foreign currency risk is set out in the finance director’s review
foreign currency sensitivity analysis
currency risks are defined by ifrs 7 as the risk that the fair value or future cash flows of a financial asset or liability will fluctuate because  
of changes in foreign exchange rates
the following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance  
sheet date illustrating the increasedecrease in group operating profit caused by a 10 cent strengthening of the us dollar and euro against 
sterling and a 10 strengthening of the czech koruna against sterling compared to the year end spot rate the analysis assumes that all  
other variables in particular other foreign currency exchange rates remain constant the group operates in a range of different currencies  
and those with a material impact are noted here 
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
us dollar     16 04 
euro     12 24 
czech koruna     04 06
 
the following table details the decreaseincrease in group equity caused by a 10 cent strengthening of the us dollar and euro against sterling 
and a 10 strengthening of the czech koruna against sterling the analysis assumes that all other variables in particular other foreign currency 
exchange rates remain constant the group operates in a range of different currencies and those with a material impact are noted here
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
us dollar    	 04 06
euro     05 14
czech koruna     01	 04  notes to the accounts
continued
86 melrose plc annual report 2009
24  financial instruments and risk management continued
fair value measurements recognised in the balance sheet 
foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates 
matching the maturities of the contracts
commodity swaps are measured using quoted forward commodity prices
interest rate swap contracts are measured using yield curves derived from quoted interest rates the fair value is shown below interest rate 
swaps are shown as noncurrent due to maturity dates in 2013 basis swaps are shown as current due to having maturity dates in 2010
  31 december 31 december 31 december 31 december 31 december 31 december
  2009 2009 2009 2008 2008 2008
  current noncurrent total current noncurrent total
  £m £m £m	 £m £m £m
derivative financial assets
foreign currency forward contracts  17	 –	 17 31 – 31
interest rate swaps 03	 06	 09 – – –
 20	 06	 26 31 – 31
derivative financial liabilities
foreign currency forward contracts 28	 01	 29 233 – 233
commodity swaps –	 –	 – 20 – 20
interest rate swaps –	 01	 01 – – –
 28	 02	 30 253 – 253
in accordance with ifrs 7 all of the above are level 2 instruments defined by the degree to which the fair value is observable these are the 
only financial assets and liabilities measured at fair value within the group level 2 fair value measurements are those derived from quoted 
prices adjusted in active markets for identical assets or liabilities
25  issued capital and reserves
  	 	 31 december 31 december 1 january
  	 	 2009 2008 2008
share capital  	 	 £m £m £m
authorised
854999996 31 december 2008 754999996 1 january 2008 201000000 
 ordinary shares of 02p each    17 15 04
267330058 31 december 2008 267330058 1 january 2008 267330058 
 redeemabledeferred preference c shares of 823p each    2200 2200 2200
nil 31 december 2008 50000 1 january 2008 50000 
 2007 incentive shares of £1 each    – 01 01
50000 31 december 2008 nil 1 january 2008 nil 
 2009 incentive shares of £1 each    01 – –
    2218 2216 2205
  	 	 31 december 31 december 1 january
  	 	 2009 2008 2008
  	 	 £m £m £m
allotted calledup and fully paid
497586779 31 december 2008 497586779 1 january 2008 133665029 
 ordinary shares of 02p each    10 10 02
nil 31 december 2008 nil 1 january 2008 70489480 
 redeemabledeferred preference c shares of 823p each    – – 580
nil 31 december 2008 50000 1 january 2008 50000 
 2007 incentive shares of £1 each    – 01 01
50000 31 december 2008 nil 1 january 2008 nil 
 2009 incentive shares of £1 each    01 – –
    11 11 583
the rights of each class of share are described in the directors’ report 87 melrose plc annual report 2009
business performance governance financials shareholder information
25  issued capital and reserves continued
own shares
the trustee of the melrose plc employee benefit trust “ebt” holds 500 2009 incentive shares of £1 each 2008 3000 2007 incentive 
shares in melrose plc the melrose plc ebt also holds 25279 ordinary shares of 02p each in melrose plc 2008 25279 ordinary shares 
relating to unallocated shares following the crystallisation of the original incentive scheme in august 2007 the fki plc ebt holds 158114 
ordinary shares of 02p each in melrose plc 31 december 2008 158114 ordinary shares which arose upon disposal of its fki plc shares 
when fki plc was acquired by melrose plc
hedging and translation reserves
the foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements  
of foreign subsidiaries it is also used to record the foreign exchange movements of instruments designated as net investment hedges
  	 	 hedging translation
  	 	 reserve reserve total
hedging and translation reserves  	 	 £m £m £m
balance at 1 january 2008    04  18  22 
currency translation on net investments    –  1230  1230 
losses on cash flow hedges    198 –  198
taxation adjustments to equity    28  –  28 
transfer to income statement on cash flow hedges    11  –  11 
transfer to income statement on disposal of foreign operations    –  89 89
balance at 31 december 2008    155 1159  1004 
currency translation on net investments    –  328 328
gains on cash flow hedges    59  –  59 
taxation adjustments to equity    23 –  23
transfer to income statement on cash flow hedges    118  –  118 
transfer to income statement on disposal of foreign operations    – 114 114
balance at 31 december 2009	 	 	 	 01	 717 	 	 716
26  cash flow statement
      restated
1
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
reconciliation of operating profit to cash generated by continuing operations
headline
2
 operating profit from continuing operations     1497  966 
adjustments for
depreciation of property plant and equipment     327	 200 
amortisation of computer software     09  05 
restructuring costs paid and decrease in other provisions     334 42 
operating cash flows before movements in working capital     1499	 1213 
decreaseincrease in inventories     798	 221
decrease in receivables    	 661 	 265 
decreaseincrease in payables     658 249 
cash generated by operations     2300	 1506 
tax paid     34 161
interest paid     134 326
defined benefit pension contributions paid     320 198
incentive scheme payments     44 23
net cash from operating activities from continuing operations	 	 	 	 	 1768 	 798 
1 restated to include the results of logistex europe within discontinued operations  
2 as defined on the income statement notes to the accounts
continued
88 melrose plc annual report 2009
26  cash flow statement continued
      restated
1
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
cash flow from discontinued operations
cash generated from discontinued operations     20 395 
tax receivedpaid     01	 01
interest paid     –	 04
defined benefit pension contributions paid     01 02
net cash used infrom operating activities from discontinued operations    20 388 
investments in joint ventures     02 –
interest received     –	 02 
purchase of property plant and equipment     13 40
proceeds on disposal of property plant and equipment     02  –
net cash used in investing activities from discontinued operations    13 38
repayments of obligations under finance leases     – 06
net cash used in financing activities from discontinued operations    –	 06
1 restated to include the results of logistex europe within discontinued operations
 
net debt reconciliation
 at  foreign  other  at
 31 december  exchange  noncash 31 december
 2008 cash flow
1
 difference disposals movements 2009
 £m £m	 £m	 £m £m £m
cash 1677  676 18 492 – 1475	
debt due within one year 05 05 – – 03 03
debt due after one year 7091 1853 577 – 18	 4679
leases 12 01 01 – – 10
net debt 5431 1183 560 492 21 3217
1 includes £06 million of net cash disposed of within discontinued operations
27  commitments and contingencies
future total minimum lease payments under finance leases and hire purchase contracts were as follows
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
amounts payable
within one year     10 01
after one year but within five years     – 11
total minimum lease payments     10 12
less amounts representing finance charges     – –
     10 12 89 melrose plc annual report 2009
business performance governance financials shareholder information
27  commitments and contingencies continued
future total minimum rentals payable under noncancellable operating leases as at 31 december 2009 were as follows
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
amounts payable
within one year     96 167
after one year but within five years     229 428
over five years     175 128
     500 723
capital commitments
at 31 december 2009 there were commitments of £81 million 2008 £104 million relating to the acquisition of new plant and machinery
28  related parties
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not  
disclosed in this note
the group did not enter into any significant transactions in the ordinary course of business with joint ventures during the current or prior year
sales to and purchases from related parties are priced at arms length transactions and generally are settled on 30 day terms 
remuneration of key management personnel
the remuneration of the directors who are the key management personnel of the group is set out below in aggregate for each of the 
categories specified in ias 24 “related party disclosures” further information about the remuneration of individual directors is provided  
in the audited part of the directors’ remuneration report on page 43
     year ended year ended
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 £m £m
shortterm employee benefits     26 23
sharebased payments     16 17
     42 40
29  post balance sheet events
there are no post balance sheet events which require disclosure
30  contingent liabilities
as a result of the acquisition of the dynacast mckechnie and fki businesses certain contingent legal environmental and tax liabilities were 
identified whilst it is difficult to reasonably estimate the ultimate outcome of these claims the directors’ best estimate of the outcome of these 
claims has been included in the balance sheet
the group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of trading 
subsidiaries no losses are anticipated to arise on these contingent liabilities 90 melrose plc annual report 2009
independent auditors’ report – company statements
independent auditors’ report to the members of  
melrose plc on the company financial statements 
we have audited the company financial statements of melrose 
plc for the year ended 31 december 2009 which comprise 
the balance sheet and the related notes 1 to 14 the financial 
reporting framework that has been applied in their preparation  
is applicable law and united kingdom accounting standards 
united kingdom generally accepted accounting practice
this report is made solely to the company’s members as a body  
in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might 
state to the company’s members those matters we are required 
to state to them in an auditors’ report and for no other purpose 
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and the 
company’s members as a body for our audit work for this report 
or for the opinions we have formed
respective responsibilities of directors and auditors
as explained more fully in the statement of directors’ responsibilities 
the directors are responsible for the preparation of the company 
financial statements and for being satisfied that they give a true 
and fair view our responsibility is to audit the company financial 
statements in accordance with applicable law and international 
standards on auditing uk and ireland those standards require 
us to comply with the auditing practices board’s apb’s ethical 
standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate 
to the company’s circumstances and have been consistently 
applied and adequately disclosed the reasonableness of 
significant accounting estimates made by the directors and  
the overall presentation of the financial statements
opinion on financial statements
in our opinion the company financial statements
  give a true and fair view of the state of the company’s affairs as 
at 31 december 2009
   have been properly prepared in accordance with united kingdom 
generally accepted accounting practice and
   have been prepared in accordance with the requirements of the 
companies act 2006
opinion on other matters prescribed by the companies  
act 2006
in our opinion
   the part of the directors’ remuneration report to be audited has 
been properly prepared in accordance with the companies act 
2006 and
  the information given in the directors’ report for the financial year 
for which the financial statements are prepared is consistent 
with the company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters 
where the companies act 2006 requires us to report to you if  
in our opinion
  adequate accounting records have not been kept by the 
company or returns adequate for our audit have not been 
received from branches not visited by us or
   the company financial statements and the part of the directors’ 
remuneration report to be audited are not in agreement with  
the accounting records and returns or
   certain disclosures of directors’ remuneration specified by law 
are not made or
   we have not received all the information and explanations we 
require for our audit
other matters
we have reported separately on the group financial statements  
of melrose plc for the year ended 31 december 2009
nicola mitchell senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditors 
london uk
10 march 2010 91 melrose plc annual report 2009
business performance governance financials shareholder information
company balance sheet for melrose plc
  	 	 31 december 31 december
  	 	 2009 2008
  	 	 notes £m £m
fixed assets
investment in subsidiaries    3 8849 8849
tangible fixed assets    4 03 05
derivative financial instruments    5 06 –
     8858 8854
current assets
debtors    6 6441 8428
cash at bank and in hand     275 17
derivative financial instruments    5 02 –
     6718 8445
creditors amounts falling due within one year
creditors    7 2509 1902
     2509 1902
net current assets     4209 6543
total assets less current liabilities	 	 	 	 	 13067	 15397
creditors amounts falling due after more than one year
bank loans    7  8 4674 7078
provision for liabilities and charges     9 77 02
net assets	 	 	 	 	 8316 8317
capital and reserves
issued share capital    10 11 11
share premium account    11	 2791 2791
merger reserve    11 2851 2851
capital redemption reserve    11 2201 2201
retained earnings    11 454 463
hedging reserve    12 08 –
shareholders’ funds    13 8316 8317
the financial statements were approved by the board of directors on 10 march 2010 and were signed on its behalf by
  
geoffrey martin    simon peckham
group finance director     chief operating officer 92 melrose plc annual report 2009
notes to the company balance sheet
1  significant accounting policies
basis of accounting 
the separate financial statements of the company are presented 
as required by the companies act 2006 they have been prepared 
under the historical cost convention except for the revaluation of 
certain financial instruments which are recognised at fair value and 
in accordance with applicable united kingdom generally accepted 
accounting practice “uk gaap” and law
the company financial statements have been prepared on a going 
concern basis in accordance with the rationale set out in the directors’ 
statement of going concern on page 34 of the directors’ report
the principal accounting policies are summarised below they have all 
been applied consistently throughout the year and the preceding year 
investments
fixed asset investments in subsidiaries are shown at cost less 
provision for impairment
for investments in subsidiaries acquired for consideration including 
the issue of shares qualifying for merger relief cost is measured at  
the fair value of the consideration paid any premium is ignored
bank borrowings
interestbearing bank loans and overdrafts are recorded at the 
proceeds received net of direct issue costs finance charges 
including direct issue costs are accounted for on an accruals basis  
in the profit and loss account using the effective interest rate method 
and are added to the carrying amount of the investment to the extent 
that they are not settled in the period in which they arise
tangible fixed assets
tangible fixed assets are stated at cost less accumulated depreciation 
and any impairment in value the initial cost of an asset comprises 
its purchase price or construction cost and any costs directly 
attributable to bringing the asset into operation the purchase price or 
construction cost is the aggregate amount paid and the fair value of 
any other consideration given to acquire the asset
depreciation of fixtures and fittings is calculated on a straightline 
basis over the useful economic life of the assets being three to twelve 
years the estimated useful lives are reviewed on an annual basis and 
if necessary changes in useful lives are accounted for prospectively
the carrying values of tangible fixed assets are reviewed for 
impairment when events or changes in circumstances indicate the 
carrying value may not be recoverable if any such indication exists 
and where the carrying values exceed the estimated recoverable 
amount the assets of cashgenerating units are written down to 
their recoverable amount the recoverable amount of tangible fixed 
assets 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 and allocated proportionately
a tangible fixed asset is derecognised upon disposal or when no 
future economic benefits are expected to arise from the continued 
use of the asset any gain or loss arising on derecognition of the asset 
calculated as the difference between the net disposal proceeds and 
the carrying amount of the item is included in the profit and loss 
account in the year the item is derecognised
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash in 
hand and current balances with banks and similar institutions and 
shortterm deposits which are readily convertible to cash and are 
subject to insignificant risks of changes in value
derivative financial instruments and hedging
derivative financial instruments are initially recognised in the balance 
sheet at cost and subsequently remeasured to their fair value the 
method of recognising the resulting gain or loss is dependent on 
whether the derivative contract is designed to hedge a specific risk 
and qualifies for hedge accounting on the date a derivative contract 
is entered into the company designates derivatives which qualify as 
hedges for accounting purposes as either a a hedge of the fair value 
of a recognised asset or liability fair value hedge b a hedge of  
a forecast transaction or firm commitment cash flow hedge or  
c a hedge of a net investment in a foreign operation
changes in the fair value of derivatives which are fair value hedges 
and that are highly effective are recognised in the profit and loss 
account along with any changes in the fair value of the hedged asset 
or liability that is attributable to the hedged risk changes in the fair 
value of derivatives in cash flow hedges are recognised in equity 
where the forecasted transaction or firm commitment results in the 
recognition of an asset or liability the gains and losses previously 
included in equity are included in the initial measurement of the asset 
or liability otherwise amounts recorded in equity are transferred to 
the profit and loss account and classified as revenue or expense in 
the same period in which the forecasted transaction affects the profit 
and loss account
hedges of net investments in foreign operations are accounted for 
similarly to cash flow hedges the company hedges certain net 
investments in foreign operations with foreign currency borrowings  
all foreign exchange gains or losses arising on translation are 
recognised in equity and included in cumulative translation 
differences
certain derivative instruments while providing effective economic 
hedges under the company’s policies do not qualify for hedge 
accounting changes in the fair value of any derivative instruments 
that do not qualify for cash flow hedge accounting are recognised 
immediately in the profit and loss account 93 melrose plc annual report 2009
business performance governance financials shareholder information
1  significant accounting policies continued
sharebased payments
the company has applied the requirements of frs 20  
“sharebased payments” the company issues equitysettled  
sharebased payments to certain employees equitysettled share
based payments are measured at fair value 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 the shares that 
will eventually vest and adjusted for the effect of non marketbased 
vesting conditions
fair value is measured by use of the black scholes model the 
expected life used in the model has been adjusted based on 
management’s best estimate for the effects of nontransferability 
exercise restrictions and behavioural considerations
cash flow statement
the company has taken advantage of the exemption from preparing a 
cash flow statement under the terms of frs 1 revised “cash flow 
statements” because it prepares a consolidated statement of cash 
flows which is shown on page 49 of the group financial statements
taxation
current tax including uk corporation tax and foreign tax is provided 
at amounts expected to be paid or recovered using the tax rates and 
laws that have been enacted or substantively enacted by the balance 
sheet date
deferred tax is recognised in respect of all timing differences that 
have originated but not reversed at the balance sheet date where 
transactions or events that result in an obligation to pay more tax in 
the future or a right to pay less tax in the future have occurred at the 
balance sheet date timing differences are differences between the 
company’s taxable profits and its results as stated in the financial 
statements that arise from the inclusion of gains and losses in 
tax assessments in periods different from those in which they are 
recognised in the financial statements
foreign currencies
monetary assets and liabilities in foreign currencies are translated 
into sterling at the rates of exchange ruling at the year end or if 
appropriate at the forward contract rate transactions in foreign 
currencies are translated into sterling at the exchange rates ruling at 
the dates of the transactions or if hedged at the forward contract 
rate profits and losses on exchange arising in the normal course of 
trading and realised exchange differences arising on the conversion of 
foreign currency assets and liabilities are recognised within the profit 
and loss account 
2  profit for the year
as permitted by section 408 of the companies act 2006 the 
company has elected not to present its own profit and loss account 
for the year melrose plc reported a profit for the financial year 
ended 31 december 2009 of £329 million 2008 £476 million the 
company paid dividends of £356 million 2008 £194 million during 
the year
the company has unused tax losses of approximately £202 million 
2008 £202 million available to carry forward and offset against 
future profits no deferred tax asset has been recognised in respect 
of these losses due to uncertainty over future taxable profits arising in 
the foreseeable future 
the estimated value of the deferred tax asset not recognised at 28 
is £56 million 2008 £56 million
the auditors’ remuneration for audit services to the company is 
disclosed in note 7 to the consolidated financial statements 94 melrose plc annual report 2009
notes to the company balance sheet
continued
3  investment in subsidiaries
	 	 	 	 	 31 december 31 december
	 	 	 	 	 2009 2008
	 	 	 	 	 £m £m
subsidiaries     8849 8849
     8849 8849
the company has investments in the following subsidiaries which principally affected the profits and net assets of the group
 
the following subsidiaries are directly owned by melrose plc
 country	of	 	
subsidiaries incorporation	 principal	activity holding	
dynacast canada uk limited great britain holding company 100
dynacast holdings limited great britain holding company  100
dynacast international limited great britain holding company 100
fki plc great britain holding company 100
melrose management resources limited great britain dormant 100
melrose overseas holdings limited great britain holding company 100
melrose uk holdings limited great britain holding company 100
melrose uk1 limited great britain holding company 100
melrose uk2 limited great britain holding company 100
melrose uk3 limited great britain holding company 100
mozart jersey no 2 limited jersey  holding company 100 95 melrose plc annual report 2009
business performance governance financials shareholder information
3  investment in subsidiaries continued
other significant indirectly whollyowned subsidiaries of the company except as indicated are
 country	of	 	 equity
subsidiaries incorporation	 principal	activity interest	
energy
brush electrical machines limited great britain engineering company 100
brush hma bv netherlands engineering company 100
brush sem sro czech republic engineering company 100
brush transformers limited great britain engineering company 100
harrington generators international limited great britain engineering company 100
hawker siddeley switchgear limited great britain engineering company 100
marelli motori spa italy engineering company 100
lifting
bridonamerican corporation usa engineering company 100
bridon international limited great britain engineering company 100
bridon new zealand limited new zealand engineering company 100
crosby europe nv belgium engineering company 100
the crosby group inc usa engineering company 100
dynacast
dynacast singapore pte limited singapore engineering company 100
dynacast canada inc canada engineering company 100
dynacast deutschland gmbh and co kg germany engineering company 100
dynacast espana sa spain engineering company 97
dynacast inc usa engineering company 100
dynacast österreich gmbh austria engineering company 100
shanghai dynacast automotive casting co limited china engineering company 100
shanghai dynacast electronic components limited china engineering company 100
fishercast uk limited great britain engineering company 100
fishercast limited canada engineering company 100
other industrial
fki logistex limited great britain engineering company 100
mckechnie engineered plastics limited  great britain engineering company 100
mckechnie specialist products limited  great britain engineering company 100
the harris waste management group inc usa engineering company 100
truth hardware corporation usa engineering company 100
weberknapp company usa engineering company 100
group
fki engineering limited great britain holding company 100
fki industries canada limited canada holding company 100
fki industries inc usa holding company 100
west house insurance limited guernsey insurance company 100
mckechnie management services limited great britain management services company 100
4  tangible fixed assets
     fixtures and fittings
      £m
cost
at 1 january 2009 and 31 december 2009	 	 	 	 	 07
depreciation
at 1 january 2009      02
charge for the period      02
at 31 december 2009      04
net book value	 at 
31 december 2009	 	 	 	 	 	 03
at 31 december 2008      05 96 melrose plc annual report 2009
notes to the company balance sheet
continued
5  derivative financial instruments 
 31 december 31 december 31 december 31 december 31 december 31 december
 2009 2009 2009 2008 2008 2008
 current noncurrent total current noncurrent total
 £m £m £m £m £m £m
fair value of derivative financial instruments
interest rate swaps 02	 06	 08 – – –
 02	 06	 08 – – –
6  debtors 
 	 	 	 31 december 31 december
 	 	 	 2009 2008
 	 	 	 £m £m
amounts falling due within one year
amounts owed by group undertakings     6437 8423
prepayments     04 05
     6441 8428
7  creditors 
 	 	 	 31 december 31 december
 	 	 	 2009 2008
 	 	 	 £m £m
amounts falling due within one year
amounts owed to group undertakings    	 2346 1850
accruals and other payables     163 52
     2509 1902
amounts falling due after more than one year
bank loans      4674 7078
     4674 7078
8  bank loans
   effective  31 december 31 december
   interest rate final 2009 2008
    maturity £m £m
noncurrent bank loans
denominated in the following currencies
bank borrowings – us dollar loan  libor  175 april 2013 3741 4698
bank borrowings – euro loan  euribor  175 april 2013 516 1984
bank borrowings – sterling loan  libor  175 april 2013 500 500
     4757 7182
unamortised finance costs    	 83 104
    	 4674 7078
the bank borrowings are drawn under a five year multicurrency committed bank facility a number of group companies act as guarantors to 
this facility drawdowns bear interest at interbank rates of interest plus a margin of 175 as at 31 december 2009 this margin is determined 
by reference to the group’s performance under its debt cover ratio covenant and ranges between 125 and 235
the interest rate repricing profile of financial liabilities after taking into account hedging interest rate derivatives is described in note 24 of the 
group financial statements 97 melrose plc annual report 2009
business performance governance financials shareholder information
9  provisions for liabilities and charges
      incentive
      scheme
      related
      £m
at 1 january 2009      02
additional provision in the year      75
at 31 december 2009      77
included above is £75 million relating to cash incentive schemes and £02 million relating to national insurance on incentive schemes  
this provision is considered to be noncurrent
10  issued share capital
     31 december 31 december
     2009 2008
share capital     £m £m
authorised
854999996 2008 754999996 ordinary shares of 02p each     17 15
267330058 2008 267330058 redeemabledeferred c shares of 823p each    2200 2200
nil 2008 50000 2007 incentive shares of £1 each     – 01
50000 2008 nil 2009 incentive shares of £1 each     01 –
     2218 2216
allotted calledup and fully paid
497586779 2008 497586779 ordinary shares of 02p each     10 10
nil 2008 nil redeemabledeferred c shares of 823p each     – –
nil 2008 50000 2007 incentive shares of £1 each     – 01
50000 2008 nil 2009 incentive shares of £1 each     01 –
     11 11
the rights of each class of share in issue are described in the directors’ report on pages 28 to 35
own	 shares
the trustee of the melrose plc employee benefit trust “ebt” holds 500 2009 incentive shares of £1 each 2008 3000 2007 incentive 
shares in melrose plc the melrose plc ebt also holds 25279 ordinary shares of 02p each in melrose plc 2008 25279 ordinary shares 
relating to unallocated shares following the crystallisation of the 2007 incentive scheme in august 2007 the fki plc ebt holds 158114 ordinary 
shares of 02p each in melrose plc 2008 158114 ordinary shares which arose upon disposal of its fki plc shares when fki plc was 
acquired by melrose plc 98 melrose plc annual report 2009
notes to the company balance sheet
continued
11  reserves
   share  capital
   premium merger redemption retained
   account reserve reserve earnings
reserves   £m £m £m £m
at 1 january 2008   – 370 1546 237
issue of “offer and placement” ordinary shares   2791 – – –
acquisition of fki   – 2481 – –
preference c shares redeemed   – – 655 –
dividend paid   – – – 194
return of capital   – – – 74
profit for the year   – – – 476
credit to equity for equitysettled sharebased payments   – – – 18
at 31 december 2008   2791 2851 2201 463
dividend paid   – – – 356
profit for the year   – – – 329
credit to equity for equitysettled sharebased payments   – – – 18
at 31 december 2009	 	 	 2791	 2851	 2201	 454
details of sharebased payments are given in note 22 to the group accounts
12  hedging reserve
      £m
at 1 january 2008      02
transfer to income      02
at 31 december 2008      –
fair value of derivative financial instruments      08
at 31 december 2009	 	 	 	 	 	 08
13  reconciliation of movements in shareholders’ funds
      £m
at 1 january 2008      2738
dividends paid      194
issue of “offer and placement” ordinary shares      2797
acquisition of fki plc      2484
profit for the year      476
decrease in hedging reserve      02
credit to equity for equitysettled sharebased payments      18
at 31 december 2008      8317
dividends paid      356
profit for the year      329
increase in hedging reserve      08
credit to equity for equitysettled sharebased payments      18
at 31 december 2009	 	 	 	 	 	 8316
14  related party transactions
in accordance with frs 8 “related party transactions” the company has chosen not to disclose intercompany balances and transactions in  
the year 99 melrose plc annual report 2009
business performance governance financials shareholder information
notice of annual general meeting
if you have sold or otherwise transferred all of your shares in  
melrose plc you should send this document as soon as possible to 
the purchaser or transferee or to the stockbroker bank or other agent 
through whom the sale or transfer was effected for delivery to the 
purchaser or transferee
notice is hereby given that the seventh annual general meeting of the 
company will be held at barbersurgeons’ hall monkwell square 
wood street london ec2y 5bl at 1100am on 13 may 2010 for the 
following purposes resolutions 1 to 7 will be proposed as ordinary 
resolutions and resolutions 8 to 11 as special resolutions resolutions 
7 to 11 are special business as defined under the company’s articles 
of association
ordinary resolutions
1  to receive the company’s audited financial statements for the financial 
year ended 31 december 2009 together with the directors’ report 
and the auditors’ report on those financial statements
2  to approve the directors’ remuneration report contained in the 
company’s annual report and financial statements for the year 
ended 31 december 2009
3  to reelect mr david roper who retires by rotation as a director 
of the company
4  to elect mr miles templeman who has been reappointed as  
a director since the last annual general meeting as a director  
of the company
5  to elect mr john grant who has been reappointed as a director since 
the last annual general meeting as a director of the company
6  to reappoint deloitte llp as auditors of the company to hold 
office from the conclusion of this meeting until the conclusion  
of the next annual general meeting of the company at which 
accounts are laid and to authorise the directors to determine  
their remuneration
7  that in substitution for all existing authorities the directors  
be generally and unconditionally authorised to exercise all the 
powers of the company to allot shares in the company and grant 
rights to subscribe for or to convert any security into shares in  
 the company 
a up to an aggregate nominal amount of £331724 and 
b  comprising equity securities as defined in section 5601 of the 
companies act 2006 the “act” up to an aggregate nominal 
amount of £663449 such amount to be reduced by the 
aggregate nominal amount of any allotments or grants made 
under paragraph a of this resolution 7 in connection with an 
offer by way of a rights issue
i  to ordinary shareholders in proportion as nearly as may be 
practicable to their existing holdings and
ii   to holders of other equity securities as required by the rights 
of those securities or subject to such rights as the directors 
otherwise consider necessary
and so that the directors may impose any limits or restrictions 
and make any arrangements which they consider necessary or 
appropriate to deal with treasury shares fractional entitlements 
record dates legal regulatory or practical problems in or under 
the laws of any territory or any other matter 
such authorities to apply until the end of the company’s next 
annual general meeting after this resolution is passed or if 
earlier until the close of business on 30 june 2011 but in each 
case so that the company may make offers and enter into 
agreements before the authority expires which would or might 
require shares to be allotted or rights to subscribe for or convert 
securities into shares to be granted after the authority expires and 
the directors may allot shares or grant rights under any such offer 
or agreement as if the authority had not expired
special resolutions
8  that in substitution for all existing powers and subject to the 
passing of resolution 7 the directors be generally empowered to 
allot equity securities as defined in the act for cash pursuant to the 
authority granted by resolution 7 andor to sell ordinary shares of 
02 pence each in the capital of the company “ordinary shares” 
held by the company as treasury shares for cash in each case  
free of the restriction in section 5611 of the act such power to  
be limited 
a  to the allotment of equity securities and sale of treasury shares 
for cash in connection with an offer of equity securities but in 
the case of an allotment pursuant to the authority granted by 
paragraph b of resolution 7  such power shall be limited to the 
allotment of equity securities in connection with an offer by way  
of a rights issue only
i  to ordinary shareholders in proportion as nearly as may be 
practicable to their existing holdings and
ii  to holders of other equity securities as required by the rights 
of those securities or subject to such rights as the directors 
otherwise consider necessary 
and so that the directors may impose any limits or restrictions 
and make any arrangements which they consider necessary or 
appropriate to deal with treasury shares fractional entitlements 
record dates legal regulatory or practical problems in or under 
the laws of any territory or any other matter and
b  to the allotment otherwise than in the circumstances set out in 
paragraph a of this resolution 8 of equity securities pursuant 
to the authority granted by paragraph a of resolution 7 and
or the sale of treasury shares for cash up to a nominal amount 
of £49758
such power to apply until the end of the company’s next annual 
general meeting after this resolution is passed or if earlier until 
the close of business on 30 june 2011 but so that the company 
may make offers and enter into agreements before the power 
expires which would or might require equity securities to be 
allotted and treasury shares to be sold after the power expires 
and the directors may allot equity securities and sell treasury 
shares under any such offer or agreement as if the power had  
not expired 
this document is important and requires your immediate attention if you are in any doubt as to the 
action you should take you should consult your stockbroker bank solicitor accountant fund 
manager or other appropriate independent financial advisor 100 melrose plc annual report 2009
9  that the company be generally and unconditionally authorised 
to make one or more market purchases within the meaning of 
section 693 of the act of ordinary shares provided that
a  the maximum aggregate number of ordinary shares 
authorised to be purchased is 49758677 representing 10 of 
the issued ordinary share capital
b  the minimum price which may be paid for an ordinary share  
is 02 pence
c   the maximum price which may be paid for an ordinary share  
is not more than the higher of
i  105 per cent of the average of the middle market quotation 
for an ordinary share as derived from the london stock 
exchange plc’s daily official list for the five business days 
immediately preceding the day on which the ordinary share 
is purchased and
ii  the higher of the price of the last independent trade and the 
highest current independent bid on the trading venue where 
the purchase is carried out
in each case exclusive of expenses
d  this authority will expire at the end of the next annual general 
meeting of the company following the passing of this 
resolution or if earlier at the close of business on 30 june 
2011 
e  the company may make a contract to purchase ordinary 
shares under this authority before expiry of the authority which 
will or may be executed wholly or partly after the expiry of that 
authority and may make a purchase of ordinary shares in 
pursuance of any such contract and
f  any ordinary shares purchased pursuant to this authority may 
either be held as treasury shares or cancelled by the company 
depending on which course of action is considered by the 
directors to be in the best interests of shareholders at the time
10  that
a  the articles of association of the company be amended by 
deleting all the provisions of the company’s memorandum 
of association which by virtue of section 28 of the act are 
treated as provisions of the company’s articles of association 
and
b  the articles of association produced to the meeting and 
initialled by the chairman of the meeting for the purpose of 
identification be adopted as the articles of association of 
the company in substitution for and to the exclusion of the 
existing articles of association
11    that a general meeting other than an annual general meeting 
may be called on not less than 14 clear days’ notice
by order of the board  registered office 
 precision house 
garry barnes arden road
company secretary alcester
7 april 2010 b49 6hn
notes
1  the holders of ordinary shares and 2009 incentive shares in the 
company are entitled to attend the annual general meeting but 
only holders of ordinary shares are entitled to vote a member 
entitled to attend and vote may appoint a proxy to exercise all  
or any of its rights to attend speak and vote at a general meeting 
of the company such a member may appoint more than one 
proxy provided that each proxy is appointed to exercise the rights 
attached to different shares a proxy need not be a member of  
the company
2  a form of proxy is enclosed with this notice to be effective a 
form of proxy must be completed and returned together with 
any power of attorney or authority under which it is completed or 
a certified copy of such power or authority so that it is received 
by the company’s registrars at the address specified on the form 
of proxy not less than 48 hours excluding any part of a day that 
is not a working day before the time for holding the meeting 
returning a completed form of proxy will not preclude a member 
from attending the meeting and voting in person 
3  any person to whom this notice is sent who is a person 
nominated under section 146 of the companies act 2006 the 
“act” to enjoy information rights a “nominated person” may 
under an agreement between him and the shareholder by whom 
he was nominated have a right to be appointed or to have 
someone else appointed as a proxy for the annual general 
meeting if a nominated person has no such proxy appointment 
right or does not wish to exercise it he may under any such 
agreement have a right to give instructions to the shareholder 
as to the exercise of voting rights the statement of the rights of 
shareholders in relation to the appointment of proxies in notes 1 
and 2 above does not apply to nominated persons the rights 
described in notes 1 and 2 can only be exercised by shareholders 
of the company
4  to be entitled to attend and vote at the annual general meeting 
and for the purposes of the determination by the company of the 
number of votes they may cast members must be entered on 
the company’s register of members by 600pm on 11 may 2010 
or in the event of an adjournment on the date which is two days 
before the time of the adjourned meeting changes to entries 
on the register of members after this time shall be disregarded in 
determining the rights of any person to attend or vote at  
the meeting
5   as at 7 april 2010 being the last business day prior to the 
publication of this notice the company’s issued share capital 
consists of 497586779 ordinary shares carrying one vote each 
and 50000 2009 incentive shares which do not carry votes 
therefore the total voting rights in the company as at 7 april 2010 
are 497586779
6  crest members who wish to appoint a proxy or proxies through 
the crest electronic proxy appointment service may do so by 
using the procedures described in the crest manual crest 
personal members or other crest sponsored members and 
those crest members who have appointed a service providers 
should refer to their crest sponsor or voting service providers 
who will be able to take the appropriate action on their behalf
notice of annual general meeting  
continued 101 melrose plc annual report 2009
business performance governance financials shareholder information
7  in order for a proxy appointment or instruction made using the 
crest service to be valid the appropriate crest message a 
“crest proxy instruction” must be properly authenticated in 
accordance with euroclear uk  ireland limited’s specifications 
and must contain the information required for such instruction 
as described in the crest manual available via wwweuroclear
comcrest the message regardless of whether it constitutes 
the appointment of a proxy or is an amendment to the instruction 
given to a previously appointed proxy must in order to be valid be 
transmitted so as to be received by the issuer’s agent id ra19 by 
1100am on 11 may 2010 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 355a of the 
uncertificated securities regulations 2001
10  any corporation which is a member can appoint one or more 
corporate representatives who may exercise on its behalf all of its 
powers as a member provided that they do not do so in relation  
to the same shares
11  under section 527 of the act members meeting the threshold 
requirements set out in that section have the right to require 
the company to publish on a website a statement setting out 
any matter relating to i the audit of the company’s accounts 
including the auditor’s report and the conduct of the audit 
that are to be laid before the annual general meeting or ii 
any circumstance connected with an auditor of the company 
ceasing to hold office since the previous meeting at which annual 
accounts and reports were laid in accordance with section 437 
of the act the company may not require the shareholders 
requesting any such website publication to pay its expenses 
in complying with sections 527 or 528 of the act where the 
company is required to place a statement on a website under 
section 527 of the act it must forward the statement to the 
company’s auditor not later than the time when it makes the 
statement available on the website the business which may be 
dealt with at the annual general meeting includes any statement 
that the company has been required under section 527 of the act 
to publish on a website
12  any member attending the meeting has the right to ask 
questions the company must answer any such question 
relating to the business being dealt with at the meeting but no 
such answer need be given if a to do so would interfere unduly 
with the preparation for the meeting or involve the disclosure of 
confidential information b the answer has already been given 
on a website in the form of an answer to a question or c it is 
undesirable in the interests of the company or the good order  
of the meeting that the question be answered
13  a copy of this notice and other information required by section 
311a of the act can be found at wwwmelroseplcnet
14  you may not use any electronic address provided in either this 
notice of annual general meeting or any related documents 
including the proxy form to communicate with the company  
for any purposes other than those expressly stated
15  the following documents will be available for inspection at the 
company’s registered office during normal business hours 
saturdays sundays and public holidays excepted from the date 
of this notice until the date of the annual general meeting and at 
the place of the annual general meeting for 15 minutes prior to 
and during the meeting
a  copies of all service agreements under which directors of the 
company are employed by the company or any subsidiaries 
b  a copy of the terms of appointment of the nonexecutive 
directors of the company and
c  a copy of the proposed new articles of association of the 
company and a copy of the existing memorandum and 
articles marked to show the changes being proposed in 
resolution 10 102 melrose plc annual report 2009
explanatory notes on the principal changes to the company’s 
articles of association
1  the company’s objects
the provisions regulating the operations of the company are 
currently set out in the company’s memorandum and its current 
articles of association the “current articles” the company’s 
memorandum contains among other things the objects clause 
which sets out the wide scope of the activities the company is 
authorised to undertake 
the companies act 2006 significantly reduces the constitutional 
significance of a company’s memorandum and provides that 
a memorandum will record only the names of subscribers and 
the number of shares each subscriber has agreed to take in the 
company under the companies act 2006 for companies in 
existence at 1 october 2009 the objects clause and all other 
provisions which are contained in a company’s memorandum are 
deemed to be contained in the company’s articles of association 
the company can remove these provisions by special resolution
further the companies act 2006 states that unless a company’s 
articles provide otherwise its objects are unrestricted this 
abolishes the need for companies to have objects clauses  
for this reason the company is proposing to remove its objects 
clause together with all other provisions of its memorandum 
which by virtue of the companies act 2006 are treated as 
forming part of the company’s articles of association as of  
1 october 2009 resolution 10 a confirms the removal of  
these provisions for the company as the effect of this resolution 
will be to remove the statement currently in the company’s 
memorandum of association regarding limited liability the 
proposed new articles of association of the company the  
“new articles” contain an express statement regarding the  
limited liability of shareholders
2 articles which duplicate statutory provisions
provisions in the current articles which replicate provisions 
contained in the companies act 2006 are removed in the new 
articles or amended to bring them into line with the companies 
act 2006 
3  change of name
under the companies act 1985 a company could only change 
its name by special resolution under the companies act 2006 a 
company will be able to change its name by other means provided 
for by its articles to take advantage of this provision the new 
articles enable the directors to pass a resolution to change the 
company’s name
4  authorised share capital and unissued shares
the companies act 2006 abolishes the requirement for a 
company to have an authorised share capital and the new 
articles reflect this directors will still be limited as to the number 
of shares they can allot because shareholder authority to allot 
shares continues to be required under the companies act 2006 
save in respect of employee share schemes
5  redeemable shares
under the companies act 1985 if a company wished to issue 
redeemable shares it had to include in its articles the terms 
and manner of redemption the companies act 2006 enables 
directors to determine such matters instead provided they are 
so authorised by the articles the new articles contain such an 
authorisation the company has no plans to issue redeemable 
shares but if it did so the directors would need shareholders’ 
authority to issue new shares in the usual way
6  authority to purchase own shares consolidate and subdivide 
shares and reduce share capital
under the companies act 1985 a company required specific 
enabling provisions in its articles to purchase its own shares 
to consolidate or subdivide its shares and to reduce its share 
capital or other undistributable reserves as well as shareholder 
authority to undertake the relevant action the current articles 
include these enabling provisions under the companies act 
2006 a company will only require shareholder authority to do any 
of these things and it will no longer be necessary for articles to 
contain enabling provisions accordingly the relevant enabling 
provisions have been removed in the new articles
7  use of seals
under the companies act 1985 a company required authority 
in its articles to have an official seal for use abroad under the 
companies act 2006 such authority will no longer be required 
accordingly the relevant authorisation has been removed in the 
new articles
8  suspension of registration of share transfers
the current articles permit the directors to suspend the 
registration of transfers under the companies act 2006 share 
transfers must be registered as soon as practicable the power 
in the current articles to suspend the registration of transfers is 
inconsistent with this requirement accordingly this power has 
been removed in the new articles
9  voting by proxies on a show of hands
the shareholders’ rights regulations have amended the 
companies act 2006 so that it now provides that each proxy 
appointed by a member has one vote on a show of hands unless 
the proxy is appointed by more than one member in which case 
the proxy has one vote for and one vote against if the proxy 
has been instructed by one or more members to vote for the 
resolution and by one or more members to vote against the 
resolution the new articles reflect these changes
10 chairman’s casting vote
the current articles give the chairman a casting vote in the event 
of an equality of votes in a general meeting this is no longer 
permitted under the companies act 2006 and new articles  
reflect this
notice of annual general meeting  
continued company and shareholder information
as at 31 december 2009 there were 7898 holders of ordinary shares in the company their shareholdings are analysed as follows
     percentage of
   number of  total number  number of  percentage of
size of shareholding   shareholders  of shareholders  ordinary shares  ordinary shares
1 – 5000 7095 8983 5129633 103
5001 – 50000 459 581 5944521 119
50001 – 100000 56 071 4011549 081
100001 – 500000 145 184 38035052 764
over 500000 143 181 444466024 8933
total 7898	 10000	 497586779	 10000
financial calendar 2010
exdividend date for second interim dividend 17 march 2010
record date for second interim dividend 19 march 2010
payment of second interim dividend 1 april 2010
annual general meeting  13 may 2010
announcement of interim results  august 2010
intended payment of interim dividend november 2010
preliminary announcement of 2010 results  march 2011
directors registered office legal advisors
christopher miller precision house clifford chance llp 
david roper arden road 10 upper bank street
simon peckham alcester london e14 5jj
geoffrey martin warwickshire
miles templeman b49 6hn brokers
perry crosthwaite  investec
john grant tel 44 0 1789 761020 2 gresham street 
 fax 44 0 1789 761057 london ec2v 7qp
  jp morgan cazenove
company secretary registered number 20 moorgate
garry barnes 4763064 london ec2r 6da
  
head office bankers registrars
leconfield house lloyds tsb bank plc equiniti
curzon street barclays bank plc the causeway
london w1j 5ja commerzbank ag worthing
 hsbc bank plc west sussex
tel 44 0 20 7647 4500 jp morgan plc bn99 6da
fax 44 0 20 7647 4501 the royal bank of scotland plc
wwwmelroseplcnet 
 auditors
 deloitte llp
 2 new street square
 london ec4a 3bz
shareholders can view up to date 
information about their shareholding 
and register to receive future electronic 
communications from the company 
by visiting the shareholders’ website at 
wwwshareviewcouk
103 melrose plc annual report 2009
business performance governance financials shareholder information 104 melrose plc annual report 2009 104 melrose plc annual report 2009 melrose plc annual report 2009
contents
01	 financial highlights
02	 	 group at a glance
06	 	 chairman’s statement
08	 	 chief executive’s review
	 10 	 	 energy business review
	 12 	 	 lifting business review
	 14 	 	 dynacast business review
	 16 	 	 other industrial business review
19	 	 finance director’s review
26	 	 board of directors
28	 	 directors’ report 
36	 	 corporate governance report
40	 	 remuneration report
44	 	 	 statement of directors’ 
responsibilities
	
45	 	 financial contents
46	 	 	 independent auditors’ report – 
consolidated statements
47	 	 consolidated income statement
48	 	 	 consolidated statement 
of comprehensive income
49	 	 	 consolidated statement 
of cash flows
50	 	 consolidated balance sheet
51	 	 	 consolidated statement of changes 
in equity
52	 	 notes to the accounts
90	 	 	 independent auditors’ report – 
company statements
91	 	 	 company balance sheet for 
melrose plc
92	 	 	 notes to the company 
balance sheet 
99	 	 notice of annual general meeting
103	 	 	 company and shareholder 
information
business	 performance
governance
shareholder	 information
financials
£1 2985m
revenue
year ended 31 december 2009
166p
headline
1
	 basic	 earnings	 per	 share
year ended 31 december 2009
£1497m
headline
1
	 operating	 profit
year ended 31 december 2009
revenue	 by	 geographic	 location

1	 	 europe 60
2	 	 north	 america 31
3	 	 asia 7
4	 	 rest	 of	 world 2
net	 debt
£m
all information presented above relates to the group’s 
continuing business
1  before exceptional costs exceptional income and 
intangible asset amortisation
2  the ratio of net debt to headline operating profit 
before depreciation and amortisation
2
1
3
4
31 dec
2008
30 june
2009
31 dec
2009
543
416
322
265x 2 13x 1 76x
leverage
2
designed and produced by merchant
wwwmerchantcouk
printed by st ives westerham press
melrose plc annual report 2009 melrose plc  annual report 2009
melrose plc
annual report 2009
making acquisitions
driving performance
realising value
wwwmelroseplcnet


Summary:
 01 melrose plc annual report 2009
business performance governance financials shareholder information
financial highlights
melrose’s strategy is to acquire businesses it understands improve 
them by a mixture of investment and changed management focus  
and in a three to five year time frame realise the value created and 
return it to shareholders in the most efficient way possible
	
	 headline
2
 2009 profit before tax of 
£1186 million 2008 £731 million
3
 
	
	 headline
2
 2009 earnings per share of 
166p 2008 161p
3
	 	
basic earnings per share after exceptional 
items and intangible asset amortisation  
of 110p 2008 41p
3
	
	 profit before tax of £820 million 
2008 £235 million
3
	
	 headline
2
 operating profit margins in 
the second half of 2009 of 13
	
	 excellent cash generation at constant 
exchange rates net working capital  
reduced by £1483 million over half  
since fki acquisition
	
	 net debt of £3217 million 2008 
£5431 million reduced by £2214 million 
net debt is now 176 x ebitda
4
	
	 proposed second interim dividend of 48p 
per share 2008 final dividend of 425p 
payable on 1 april 2010 to shareholders  
on the register on 19 march 2010 in lieu  
of the final dividend for this year together 
with the previous interim dividend of 29p 
2008 275p this gives a full year dividend 
of 7 7p 2008 7 0p up 100
 
 
1
 
continuing operations only unless otherwise stated
 
2 before exceptional costs exceptional income and intangible asset amortisation
 
3  restated to include logistex europe sold on 28 august 2009 within 
discontinued operations
 
4 headline operating profit before depreciation and amortisation
how we performed financial highlights
1
“ our first full year of ownership of fki has 
exceeded our expectations with margin 
improvements debt reduction and cash 
generation being the highlights in a very 
difficult year these results illustrate the  
quality of our businesses
  across the group sales in our early 
cycle businesses are now beginning to 
increase and in our later cycle businesses 
order books are reviving for the moment 
it appears recovery which has been 
noticeable for several months in the east 
may be on the way to the west
  we continue to believe that market and 
economic conditions favour acquisitions  
over disposals at present and so we 
continue to look for the right opportunity 
fortunately the strong growth potential of 
our existing businesses over the next few 
years gives us the ability to be patient”
  
 christopher miller 
 chairman