Melrose PLC Full Year Results Announcement Twelve months to 31 - - PowerPoint PPT Presentation

Melrose PLC

Twelve months to 31 December 2011

March 2012

Full Year Results Announcement

Strictly private and confidential Buy Improve Sell

Buy Improve Sell

Contents

Sections

1 Highlights 2 Summary financial results 3 Investment case 4 Summary of operating divisions 5 Energy

6 Lifting

7 Other Industrial 8 Questions 9 Appendices

2

Highlights

3 Buy Improve Sell

Buy Improve Sell

Highlights in 2011

• Businesses performing strongly

‒

Sales, orders, profits and margins are all up

‒

Investment phase well underway

‒

Raw material cost increases recovered

• More to go for in all businesses
• Since flotation in 2003 c.£1.5 billion of shareholder value created
• Dynacast sold and proceeds returned to shareholders
• New five year £600 million bank refinancing
• Final dividend of 8.4p (20% increase)
• Seeing more acquisition opportunities but will be selective

4

Summary financial results

5 Buy Improve Sell

Summary financial results

6 Buy Improve Sell

Income performance

Buy Improve Sell

Continuing operations Headline¹ Other Total Revenue (£m) 1,153.9

• 1,153.9

Operating profit/(loss) (£m) 180.8 (63.8) 117.0 Operating margin 15.7% n/a 10.1% Profit/(loss) before tax (£m) 161.2 (63.8) 97.4 Tax (£m) (41.4) 58.8 17.4 Profit/(loss) after tax (£m) 119.8 (5.0) 114.8 Profit from discontinued

• perations (£m)
• 171.7

171.7 Profit for the year (£m) 119.8 166.7 286.5

Income Statement  significant growth in all areas

2011 statutory format

7

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Restated to include the results of Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp within discontinued operations

3.

Calculated using results of continuing and discontinued operations

4.

Calculated using continuing operations only and current number of shares Continuing operations Operating Tax Total Intangible asset amortisation (£m) (23.7)

• (23.7)

Increase in legal provision (£m) (21.0)

• (21.0)

Restructuring costs (£m) (15.9)

• (15.9)

Acquisition and disposal costs (£m) (3.2)

• (3.2)

Tax relief on exceptional items (£m)

• 20.7

20.7 Exceptional tax credit (£m)

• 38.1

38.1 Total other non-headline¹ costs (£m) (63.8) 58.8 (5.0)

2011 other non-headline¹ items

2011 2010² Reported growth Revenue (£m) 1,153.9 1,035.4 +11% Order intake (£m) 1,212.6 991.2 +22% Headline¹ operating profit (£m) 180.8 147.0 +23% Headline¹ operating margin 15.7% 14.2% +1.5ppts Headline¹ profit before tax (£m) 161.2 121.7 +32% Headline¹ tax (£m) (41.4) (34.5) Headline¹ profit after tax (£m) 119.8 87.2 +37% 24.1p 20.9p

2011 headline¹ growth

• Significant growth achieved in all areas
• Profit growth up to three times faster than revenue
• Exceptional costs £5.0 million net of tax

Highlights

+20% 28.8p Headline¹ weighted average diluted EPS – full Group³ +36% 28.4p Proforma4 headline¹ diluted EPS – continuing Group

Buy Improve Sell

Group revenue growth – year on year

Revenue growth accelerating

2011 summary performance

8

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Calculated using results of continuing and discontinued operations

3.

Calculated using continuing operations only and current number of shares

First half 2011 Second half 2011 +14% +9%

• Pace of revenue growth is increasing

‒

First half up 9%

‒

Second half up 14%

• Each division trading at similar level to previous peak sales (HY2 2008)

Highlights

Other Industrial Group Energy Lifting +4%

• 3%

+3% +1%

Revenue (HY2 11) v previous peak (HY2 08)

2011 Reported growth Revenue (£m) 1,153.9 +11% Order intake (£m) 1,212.6 +22% Headline¹ operating profit (£m) 180.8 +23% Headline¹ operating margin 15.7% +1.5ppts Headline¹ profit before tax (£m) 161.2 +32% Headline¹ tax (£m) (41.4) Headline¹ profit after tax (£m) 119.8 +37% +11% 1,153.9 Revenue (£m) +20% 28.8p Headline¹ weighted average diluted EPS – full Group² +36% 28.4p Proforma³ headline¹ diluted EPS – continuing Group

Buy Improve Sell

Strong order intake signalling confidence for the future

Group Energy Lifting Other

Order intake growth – year on year

9

2011 summary performance

Industrial +22% +37% +21%

• 1%

Months of revenue in order book

Other Industrial Group Energy Lifting 7.9 months 2.1 months 1.7 months 4.3 months 2011 Reported growth Revenue (£m) 1,153.9 +11% Order intake (£m) 1,212.6 +22% Headline¹ operating profit (£m) 180.8 +23% Headline¹ operating margin 15.7% +1.5ppts Headline¹ profit before tax (£m) 161.2 +32% Headline¹ tax (£m) (41.4) Headline¹ profit after tax (£m) 119.8 +37%

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Calculated using results of continuing and discontinued operations

3.

Calculated using continuing operations only and current number of shares

• Orders coming in faster than revenue growth
• Book to bill ratio 1.05x
• Order book equal to more than four months of revenue

Highlights

+22% 1,212.6 Order intake (£m) +20% 28.8p Headline¹ weighted average diluted EPS – full Group² +36% 28.4p Proforma³ headline¹ diluted EPS – continuing Group

Buy Improve Sell

Headline¹ operating margin continues to grow

FKI acquisition Full year 2010 First half 2011 Second half 2011

Headline¹ operating margin

10

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Calculated using results of continuing and discontinued operations

3.

Calculated using continuing operations only and current number of shares

4.

Per last FKI results before Melrose acquisition, March 2008 (continuing operations)

14.2% 15.5% 15.9% (Jul 08)

2011 summary performance

+3.2ppts +1.3ppts +0.4ppts Second half 2011 First 18 months 2010 First half 2011 10.0%

Growth in operating margin since FKI (cumulative)

+4.2ppts +5.5ppts +5.9ppts +2.3ppts 2011 Reported growth Revenue (£m) 1,153.9 +11% Order intake (£m) 1,212.6 +22% Headline¹ operating profit (£m) 180.8 +23% Headline¹ operating margin 15.7% +1.5ppts Headline¹ profit before tax (£m) 161.2 +32% Headline¹ tax (£m) (41.4) Headline¹ profit after tax (£m) 119.8 +37%

4

• Continued improvement in headline operating margin

‒

First half 15.5%

‒

Second half 15.9%

• Cumulative 5.9 percentage point improvement since FKI acquisition

(on similar revenue base) Highlights

+1.5ppts 15.7% Headline¹ operating margin +20% 28.8p Headline¹ weighted average diluted EPS – full Group² +36% 28.4p Proforma³ headline¹ diluted EPS – continuing Group

Buy Improve Sell

Headline¹ earnings per share (EPS) at record levels

11

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Calculated using results of continuing and discontinued operations

3.

Calculated using continuing operations only and current number of shares

2011 headline¹ diluted EPS growth 2011 summary performance

Full Group Continuing Group +36% +20% Full Group² Continuing Group³ 28.8p 28.4p

2011 headline¹ diluted EPS

² ³ (weighted) (proforma) (weighted) (proforma)

2011 Reported growth Revenue (£m) 1,153.9 +11% Order intake (£m) 1,212.6 +22% Headline¹ operating profit (£m) 180.8 +23% Headline¹ operating margin 15.7% +1.5ppts Headline¹ profit before tax (£m) 161.2 +32% Headline¹ tax (£m) (41.4) Headline¹ profit after tax (£m) 119.8 +37%

Headline¹ weighted average diluted EPS – full Group² (p)

28.8 +20%

Proforma³ headline¹ diluted EPS – continuing Group (p)

28.4 +36%

• Full Group EPS (including Dynacast) up 20%
• Continuing Group EPS (excluding Dynacast) up 36%
• New pension accounting rules (IAS 19) will add c.£6 million (EPS = c.1p)

to the pension charge in the Income Statement in 2013 and beyond Highlights

+20% 28.8p Headline¹ weighted average diluted EPS – full Group² +36% 28.4p Proforma³ headline¹ diluted EPS – continuing Group

Summary financial results

12 Buy Improve Sell

Cash performance

Buy Improve Sell

Profit conversion to cash strong, working capital efficient

Last 12 months (£m) Headline¹ operating profit 180.8 Depreciation² 23.1 Working capital movement (23.3) Headline¹ operating cash flow (pre capex) 180.6 Headline¹ EBITDA³ conversion to cash (pre capex) % 89% Net capital expenditure (38.9) Net interest and net tax paid (38.9) Defined benefit pension contributions (24.9) Other (including discontinued operations) (23.4) Cash generated from trading (after all costs including tax) 54.5

Cash generated from trading (after all costs including tax)

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Includes computer software amortisation

3.

Operating profit before depreciation and amortisation

13

First half Second half 102% 74%

2011 headline¹ EBITDA³ conversion to cash (pre capex)

Total profit conversion to cash since start

• f Melrose

110%

• Cash generation strong, and getting stronger in the second half

‒

First half conversion 74%

‒

Second half conversion 102%

• Working capital efficiencies remain intact despite business growth

Highlights

Buy Improve Sell

Investing in the future

Cash generated from trading (after all costs including tax)

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Includes computer software amortisation

3.

Operating profit before depreciation and amortisation

First half 2010 Second half 2010 First half 2011 Second half 2011

Increasing investment ratios (capex to depreciation²)

14

0.6x 1.4x 1.5x 1.9x Last 12 months (£m) Headline¹ operating profit 180.8 Depreciation² 23.1 Working capital movement (23.3) Headline¹ operating cash flow (pre capex) 180.6 Headline¹ EBITDA³ conversion to cash (pre capex) % 89% Net capital expenditure (38.9) Net interest and net tax paid (38.9) Defined benefit pension contributions (24.9) Other (including discontinued operations) (23.4) Cash generated from trading (after all costs including tax) 54.5

Capital investment ratios in 2011 by division

7.9 months 2.1 months 1.7 months Other Industrial Energy Lifting +3.2ppts +1.3ppts +0.4ppts 1.4x 2.4x 1.1x 1.7 months Group +0.4ppts 1.7x

• Melrose now into a significant investment phase
• Capital expenditure to depreciation² ratios increasing

‒

First half 1.5x

‒

Second half 1.9x Highlights

Summary financial results

15 Buy Improve Sell

Balance Sheet

Buy Improve Sell

Provision and tax movements – five exceptional movements

2011 Balance Sheet position

16 31 Dec 2011 (£m) 31 Dec 2010 (£m) Fixed assets, intangible assets and goodwill 1,121 1,435 Net working capital 145 116 Pensions and retirement benefits (118) (120) Provisions (121) (119) Deferred tax and current tax (75) (134) Other (14) (8) Net debt (290) (287) Net assets 648 883

Provisions – three exceptional movements

£21m £38m £21m Increase Decrease Net restructuring Tax credit on exceptional items and intangible asset amortisation Increase in legal provision Lower liabilities in respect of

• verseas tax audits and recognition
• f further recoverable losses

Tax – two exceptional movements

Increase Decrease £11m De Wind legal and captive insurance £24m

• Five significant movements in provisions and tax in the
• year. In addition, £8 million of liabilities sold with

businesses

• Tax position now significantly cleaner, old FKI issues

cleared up Highlights

Buy Improve Sell

Leverage

¹ stable despite repaying 100% of Dynacast proceeds

Dec 2008 Dec 2009 Dec 2010 Dec 2011

Leverage¹ ratio remains low

(despite selling 25% of the Group and returning all proceeds to shareholders)

2011 Balance Sheet position

17

Leverage¹ 1.4x 1.3x 1.8x 2.7x 31 Dec 2011 (£m) 31 Dec 2010 (£m) Fixed assets, intangible assets and goodwill 1,121 1,435 Net working capital 145 116 Pensions and retirement benefits (118) (120) Provisions (121) (119) Deferred tax and current tax (75) (134) Other (14) (8) Net debt (290) (287) Net assets 648 883

• Leverage¹ remains at 1.4x (2010: 1.3x) despite selling 25% of the

Group and handing back all proceeds to shareholders Highlights

1.

Net debt divided by headline² EBITDA³

2.

Before exceptional costs, exceptional income and intangible asset amortisation

3.

Operating profit before depreciation and amortisation

18 Buy Improve Sell

Refinancing and shareholder rewards Summary financial results

Buy Improve Sell

Sterling 25% US $ 35% Euros 8%

£600m

Undrawn 32%

Refinancing to 2016 complete – cheaper debt than previously

Revolving credit facility - £600m

19

10 banks – shows confidence

(* New to Group)

BAML Barclays Wells Fargo* Santander Royal Bank of Canada* RBS JP Morgan ICBC HSBC Lloyds

c.2.5% c.3% Old interest rate New interest rate

Reduction in cost of debt

• New five year bank refinancing completed in January 2012
• Cheaper finance cost than before, now c.2.5% (previously c.3%) which includes the bank margin currently 1.5%
• Fixed interest cost for five years on 70% debt, floating interest rates on 30% debt

Highlights

Buy Improve Sell

Significant cash rewards for shareholders

(£m) Acquired for (£200m debt and £244m equity) (444) Net cash realised during ownership (post tax) 157 Sold for 806 Net cash gain 519

IRR on equity, %

34%

Dynacast and McKechnie case study Total net cash return to shareholders over the life of Melrose

20 Raised (£m) Repaid (£m) Initial cash raised (Oct 03) (13) McKechnie Dynacast acquisition (May 05) (244) Capital return after the sale of McKechnie Aerospace (May 07) 220 FKI acquisition (Jul 08) (528) Capital return after the sale of Dynacast (Jul 11) 373 Annual dividends (up to interim 11)

178 Total (785) 771

Net investment by shareholders Market capitalisation Shareholder gain

£14m c.£1.5bn 34% c.£1.5bn

• Total net shareholder gain of c.£1.5 billion
• Dynacast and McKechnie achieved an IRR of 34%
• Virtually all equity raised now returned to shareholders

Highlights

Investment case

21 Buy Improve Sell

Buy Improve Sell

Strong end markets and ready for next acquisition

• Change management focus

(incentivise well)

• Set strategy & targets/sign off

investments

• Drive operational improvements
• Invest in the businesses (capex in

excess of depreciation)

• Focus on operating cash

generation

• Commercially choose the right

time to sell, often between 3 - 5 years but flexible

• Return value to shareholders from

significant disposals

• Good manufacturing businesses

underperforming their potential

• Use public market leverage
• Melrose management are

substantial equity investors

1 2 3 4 5 6

Two Way Bet

22

54% Energy, Oil & Gas and Mining

Buy Improve Sell

1 Energy 31% 3 Mining 7% 2 Oil & Gas 16% 4 Industrials 21% 5 Hardware 7% 6 Other 18%

Strong end market exposure

Total £1,153.9 million

Revenue by end market – full year 2011

Summary of operating divisions

• Energy
• Lifting
• Other Industrial

23 Buy Improve Sell

Energy

www.marellimotori.com www.brush.eu

“World number one independent supplier of turbogenerators”

30% of Melrose 75% of Energy 10% of Melrose 25% of Energy

“Global manufacturer of electrical rotating machines, always a step ahead”

24

Buy Improve Sell

1 2 3 4 Full year Second half (£m) FY 2011 FY 2010 2011 v 2010 HY2 2011 HY2 2010 2011 v 2010 Revenue 461.6 427.5 +8% 245.8 223.3 +10%

Order intake 502.0 367.6 +37% 268.3 193.3 +39% Headline¹ EBITDA² 99.0 81.7 +21% 53.3 43.8 +22% Headline¹ EBITDA² margin 21.4% 19.1% +2.3ppts 21.7% 19.6% +2.1ppts Headline¹ operating profit 91.1 73.7 +24% 49.4 39.9 +24% Headline¹ operating margin 19.7% 17.2% +2.5ppts 20.1% 17.9% +2.2ppts

Energy division

Revenue by geographical destination – full year 2011 Revenue by end market – full year 2011

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Operating profit before depreciation and amortisation

1 2 3 4

Total £461.6m

25

78% Energy and Oil & Gas Total £461.6m

Brush turbogenerators 75% Marelli 25%

Energy – headline¹ results

1 Europe 63% 3 Asia 10% 2 North America 23% 4 RoW 4% 1 Energy 72% 3 Industrials 11% 2 Oil & Gas 6% 4 Other 11%

Lifting

www.thecrosbygroup.com www.bridon.com www.accomhs.com

“Global technology leaders in the manufacture of wire and wire rope” “Industry leader in material handling” “World leading manufacturer of lifting products”

26

22% of Melrose 53% of Lifting 18% of Melrose 43% of Lifting 2% of Melrose 4% of Lifting

Buy Improve Sell

5 1 2 3 4 Full year Second half (£m) FY 2011 FY 2010 2011 v 2010 HY2 2011 HY2 2010 2011 v 2010 Revenue 484.4 422.7 +15% 246.5 210.5 +17% Order intake 506.1 417.7 +21% 262.4 210.6 +25% Headline¹ EBITDA² 91.4 76.1 +20% 46.6 36.5 +28% Headline¹ EBITDA² margin 18.9% 18.0% +0.9ppts 18.9% 17.3% +1.6ppts Headline¹ operating profit 82.6 66.7 +24% 42.6 32.0 +33% Headline¹ operating margin 17.1% 15.8% +1.3ppts 17.3% 15.2% +2.1ppts

Lifting division

Revenue by geographical destination – full year 2011 Revenue by end market – full year 2011

1 2 3 4

Lifting – headline¹ results

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Operating profit before depreciation and amortisation

27

53% Energy, Oil & Gas and Mining Total £484.4m Total £484.4m

Bridon 53% Crosby 43% Acco 4%

1 Europe 22% 3 Asia 17% 2 North America 49% 4 RoW 12% 1 Energy 5% 3 Mining 15% 2 Oil & Gas 33% 4 Industrials 39% 5 Other 8%

Other Industrial

7% of Melrose

39% of Other Industrial

7% of Melrose

36% of Other Industrial

4% of Melrose

25% of Other Industrial

www.truth.com www.harrisequip.com www.mckechnie-plastics.co.uk

“World class leader in the manufacturing of ferrous processing equipment” “One of Europe’s leading manufacturers of engineered plastic assemblies” “Industry leader in the design and manufacture of quality operating hardware”

28

Buy Improve Sell

3 4 1 2 5 6 Full year Second half (£m) FY 2011 FY 2010 2011 v 2010 HY2 2011 HY2 2010 2011 v 2010 Revenue 207.9 185.2 +12% 110.8 97.3 +14% Order intake 204.5 206.0

• 1%

106.7 101.5 +5% Headline¹ EBITDA² 28.9 27.7 +4% 14.7 13.7 +7% Headline¹ EBITDA² margin 13.9% 15.0%

• 1.1ppts

13.3% 14.1%

• 0.8ppts

Headline¹ operating profit 23.1 21.8 +6% 11.9 10.9 +9% Headline¹ operating margin 11.1% 11.8%

• 0.7ppts

10.7% 11.2%

• 0.5ppts

Other Industrial division

Revenue by geographical destination – full year 2011 Revenue by end market – full year 2011

1 2 3 4

Other Industrial – headline¹ results

1.

Before exceptional costs, exceptional income and intangible asset amortisation

2.

Operating profit before depreciation and amortisation

29

Total £207.9m Total £207.9m 2% Energy

Truth 36% Harris 25% MPC 39%

1 Energy 2% 3 Hardware 37% 2 Industrials 3% 4 Automotive 29% 1 Europe 40% 3 Asia 1% 2 North America 56% 4 RoW 3% 5 Scrap processing 24% 6 Other 5%

Buy Improve Sell

Key 2011 highlights

30

• Investment in capacity
• New product development
• Restructuring of HMA (Holland)
• Development of aftermarket and GMS
• New 5 year contract with GE
• Very strong order book
• Switchgear restructured
• New CEO appointed
• Increased European capacity
• Investment underway
• Strong recovery in markets
• Investment in new factory and technology centre underway
• Re “professionalising” the business in all areas
• Continued focus on quality and technology leadership
• Strengthening order book

Questions

31 Buy Improve Sell

Appendices

32 Buy Improve Sell

Appendices

33

A – track record

Buy Improve Sell

Buy Improve Sell

18% 24% 11% 16% 10%² 15%7 Entry Exit/current

Our track record  for operational improvement

Cash generation Operating margin¹ improvement Revenue growth (compound)

Dynacast McKechnie Average6 headline5 operating profit conversion to cash (pre capex)

110%

McKechnie³ Dynacast4 FKI

+6ppts +5ppts +5ppts

• Margins improved in all acquisitions
• Achieved through investment, changed

management focus and better

• perational performance
• Cash generation a key focus
• Shows businesses are cash

generative, well managed and profits are good “quality”

• Superior revenue growth of 16% p.a.

achieved in McKechnie³

• Creditable 6% p.a. revenue growth

achieved in Dynacast4

1.

Headline5 operating margin

2.

Per last FKI results before Melrose acquisition, March 2008 (continuing operations)

3.

McKechnie Aerospace held May 2005 until May 2007. Calculated using full year 2005 results and forecast full year 2007 results

4.

Dynacast sales growth from 2006 until 2010

5.

Before exceptional costs, exceptional income and intangible asset amortisation

6.

From the start of Melrose in 2003

7.

Latest results 15.7%

34

6% 16%

Buy Improve Sell

Acquisition equity increase Total shareholder return2 Earnings and dividends per share

16.3 24.1 28.8 7.7 11.0 13.0 2009 2010 2011

Our track record  for a shareholder

… even through a downturn

21% 21% 31% 8% 6% 5% Start of Melrose McKechnie / Dynacast FKI

• No decline in earnings or

dividends in last global downturn cycle

• Earnings increased by 77% in two

years

• Dividends increased by 69% in

the same period

• Compared to private equity

‒

Lower leverage

‒

Liquid investment

• McKechnie / Dynacast equity

increase 3.2x (in 2 - 6 years)

• Based on market cap FKI currently
• ver 2.5x

(Oct 03) (May 05) (Jul 08) Melrose FTSE 350 Source: Datastream 3.2x 2.5x McKechnie / Dynacast FKI to date³

1

Headline4 diluted EPS of continuing and discontinued operations as reported in 2011

2

Based on closing share price as of 31 December 2011, annual compound rate

3

Shares issued at £1.45 to buy FKI

4

Before exceptional costs, exceptional income and intangible asset amortisation

35

EPS¹ (p) DPS (p)

Appendix B – financials

36

Appendices

Buy Improve Sell

B – financials

Buy Improve Sell

Exchange rates

2011 2010 US Dollar Euro US Dollar Euro Average rates 1.60 1.15 1.55 1.17 Closing rates 1.55 1.20 1.56 1.16

37

Buy Improve Sell

Net exceptional items

Full year 2011 (£m) Cash costs Non cash costs Total Tax Total net of tax Increase in legal provision (21.0)

• (21.0)

5.3 (15.7) Restructuring costs (14.1) (1.8) (15.9) 2.3 (13.6) Acquisitions and disposals of businesses (3.2)

• (3.2)
• (3.2)

Total exceptional costs (38.3) (1.8) (40.1) 7.6 (32.5) Amortisation of intangible assets

• (23.7)

(23.7) 13.1 (10.6) Exceptional tax credit

• 38.1

38.1 Total exceptional (costs)/credits including amortisation of intangible assets net of tax (38.3) (25.5) (63.8) 58.8 (5.0)

Net exceptional costs and intangible asset amortisation

38

Buy Improve Sell

Recovery of commodity costs from customers

Group Energy Lifting Other Industrial (£m) % of revenue (£m) % of revenue (£m) % of revenue (£m) % of revenue Revenue 1,153.9 461.6 484.4 207.9 Key commodity Copper 27.7 2.4% 27.2 5.9%

• 0.5

0.2% Zinc 7.3 0.6%

• 2.6

0.5% 4.7 2.3% Steel 188.5 16.4% 56.9 12.3% 107.6 22.3% 24.0 11.6% Plastics 22.0 1.9% 0.8 0.2% 1.0 0.2% 20.2 9.7% Total 245.5 21.3% 84.9 18.4% 111.2 23.0% 49.4 23.8% Energy costs 20.1 1.7% 5.0 1.1% 11.2 2.3% 3.9 1.9%

Material and energy costs and as a percentage of revenue

39

Buy Improve Sell

Pensions – strategy being implemented when commercially opportune

2011 Balance Sheet position

31 Dec 2011 (£m) 31 Dec 2010 (£m) Fixed assets, intangible assets and goodwill 1,121 1,435 Net working capital 145 116 Pensions and retirement benefits (118) (120) Provisions (121) (119) Deferred tax and current tax (75) (134) Other (14) (8) Net debt (290) (287) Net assets 648 883

Pensions – (UK and US DB schemes all closed)

40 Annual cash payments (£m) 31 Dec 2011 Assets (£m) Liabilities (£m) Deficit (£m) UK

23.1 758 (834) (76) US 1.1 195 (230) (35) Other 0.7 6 (13) (7) Total 24.9 959 (1,077) (118)

1 2 3 4 5

Pensions – spread of investments

1 Equities 36% 3 Corporate bonds & fixed income 32% 2 Gilts 22% 4 Property 2% 5 Other 8%

Buy Improve Sell

Pensions being managed – FKI UK DB Plan

FKI UK defined benefit pension plan Exit options and amounts

Most likely exit option by type of pension liability

• 1. Pensioners

The cash cost of buying out the pensioners could be covered by the savings made from closure. Therefore could potentially sell around half of the gross liabilities without any increase in the annual cash contribution.

• 2. Employees

Employees in the closed DB plan are the most likely pension liabilities to be sold via a corporate transaction. As at 31 December 2011 the two largest companies, Bridon and Turbogenerators, have employee deficits of approximately £30 million each.

• 3. Deferreds

These are no longer employees of the Group and so fall somewhere between pensioners and employees. Could be sold via either route or held

• nto more long term. As at 31 December 2011 if held long term these liabilities would require an annual contribution of c.£8 million.

1 2 3 4 1 Equities 31% 3 Corporate bonds 33% 2 Gilts 35% 4 Property & Other 1%

• Pension liabilities can be sold either via a corporate transaction or to a pension buyout provider

Asset split – FKI UK DB plan

Status Annual cash payments Liabilities (£m) Deficit (£m) FKI UK defined benefit plan Now closed 18.5 (680) (79)* Percentage of market cap¹ gross of tax 51% 6% Percentage of market cap¹ after deferred tax asset 4% * Gross of any deferred tax asset 41

1.

Based on share price at 31 December 2011

Buy Improve Sell

Disposal of businesses

Disposed businesses

Business Proceeds (£m) 2011 revenue (£m) EBITDA¹ multiple Comments Dynacast 366.5 164.0 7.4x² Transferred £19m of gross pension liabilities to buyer Brush Traction 18.8 5.4 3.7x Transferred over £100m of parent guarantees to buyer Logistex UK

• 1.6

n/a Transferred £22m of gross pension liabilities to buyer Madico 1.7 0.2 3.4x Weber Knapp 3.5 6.6 2.3x Total 390.5 177.8 6.6x 42

1.

Headline³ operating profit before depreciation and amortisation

2.

Multiple of enterprise value

3.

Before exceptional costs, exceptional income and intangible asset amortisation