Melrose Regulatory News (MRO)

2 September 2021

MELROSE INDUSTRIES PLC

UNAUDITED RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2021

Melrose Industries PLC today announces its interim results for the six months ended 30 June 2021 ("the Period").

Highlights

Group

▪ Melrose is trading ahead of expectations, with better profit margins, better earnings per share and significantly lower net debt2; building the Group's encouraging momentum

▪ The commitment, made on acquisition by Melrose, to improve significantly the funding of the GKN UK defined benefit pension schemes has been delivered ahead of schedule with the funding position of the schemes transformed for the better. The funding deficit of approximately £1 billion has currently reduced to approximately £150 million. Consequently the annual contribution halves to £30 million with no ongoing requirement to contribute from future disposal proceeds

▪ Net debt2 at 30 June 2021 was significantly lower at £300 million; proforma net debt2 at 30 June 2021 is £1,029 million after adjusting for the announced Return of Capital to be settled on 14 September 2021 (1.5x proforma leverage2)

▪ Free cash flow2 generation in the first half was £75 million; all the investment in restructuring costs, capital expenditure and sustainable technology has been self-funded from trading cash flows in the Period

▪ The Group recorded an adjusted2 earnings per share of 2.2 pence. Adjusting for the accretion post the announced Return of Capital and share consolidation, the Proforma EPS2 increases to 2.5 pence. The statutory loss per share was 3.1 pence

▪ The Nortek Air Management and Brush disposals both completed in the Period and Melrose has exchanged contracts for the sale of Nortek Control for $285 million, all of which are consistent with doubling shareholders' money, or more, on each acquisition

▪ On 14 September Melrose is returning £729 million, 15 pence per share, to shareholders. In addition, the Melrose Balance Sheet has spare capacity for a significant further Capital Return next year

▪ An interim dividend of 0.75 pence per share (2020: nil) is declared

Melrose Industries PLC Leconfield House Curzon Street London W1J 5JA Tel: 020 7647 4500 Fax: 020 7647 4501

Registered in England & Wales Registered no: 09800044 Registered office:  11th floor The Colmore Building Colmore Circus Queensway Birmingham West Midlands B4 6AT

Businesses

▪ Melrose businesses own world-leading sustainable technology which provides customers with solutions to significantly reduce their impact on the environment

▪ All businesses improved their adjusted2 operating margin in the Period compared to 2020 full year: Aerospace by +2.9 ppts; Automotive by +4.0 ppts; Powder Metallurgy by +6.9 ppts; and Ergotron by +0.8 ppts. Automotive and Powder Metallurgy are ahead of plan on their restructuring projects

▪ Aerospace is well positioned on many significant platforms; the civil aerospace business is now weighted more towards the faster narrowbody recovery and Defence demand remains strong. As previously indicated, significant restructuring is ongoing

▪ Automotive is well placed to benefit from the transition to electric vehicles. In the first half of this year over one third of new business bookings awarded were for pure electric platforms, over 50% if full hybrid platforms are included. Additionally, during the last 18 months Automotive has been awarded six major eDrive programmes for global and Chinese vehicle manufacturers. Automotive should grow at more than double the rate of light vehicle production over the long-term

▪ Powder Metallurgy is making clear market share gains, growing revenue at 43% in the first half, and with close to 70% of the business achieving more than 14% adjusted2 operating margins

Justin Dowley, Chairman of Melrose Industries PLC, today said:

"We are continuing to see recovery in all our businesses with trading ahead of expectations. Encouragingly, our Aerospace business is now weighted towards the expected narrowbody recovery. Our Automotive and Powder Metallurgy businesses are poised for strong growth as soon as the well publicised chip shortage abates and the progression in margins is ahead of plan with more to come. As with all its promises, Melrose has delivered its acquisition funding commitment to GKN pensioners early. We have scope on our balance sheet to return more money to shareholders next year and we are excited by the upcoming possibilities."

1. Proforma results are presented to give a meaningful measure of ongoing performance, adjusting for the announced Return of Capital and the associated share consolidation

2. Described in the glossary to the 2021 Interim Financial Statements

ENDS

Enquiries:

Montfort Communications: +44 (0) 20 3514 0897

Nick Miles +44 (0) 7739 701634 / Charlotte McMullen +44 (0) 7921 881 800

miles@montfort.london / mcmullen@montfort.london

Investor Relations: +44 (0) 7974 974690

ir@melroseplc.net

CHAIRMAN'S STATEMENT

I am pleased to report our interim results for the six months ended 30 June 2021 (the "Period"), which are ahead of expectations. These highlight good progress across all Group businesses.

RESULTS FOR THE CONTINUING GROUP

These results include statutory revenue for the Group of £3,540 million (2020: £3,386 million), an adjusted profit before tax of £141 million (2020: adjusted loss of £105 million) and a statutory loss before tax of £256 million (2020: £720 million).

Further details of these results are contained in the Finance Director's Review.

TRADING

The impact of the global pandemic has continued now for over a year and, while we are not yet free from the effects, our businesses are progressing well on their recovery. It is pleasing to see our GKN businesses improving their underlying performance, delivery record and customer relations.

The semi-conductor shortage, whilst not impacting directly, continues to weigh on the production output of the automotive sector and GKN Automotive and GKN Powder Metallurgy are not immune from that. However, as demonstrated at the recent Capital Markets Day, having made a number of necessary structural changes over the past 18 months, both of these businesses are performing strongly, have world-leading technology and, with some further market recovery, are well on their way to achieving their margin targets ahead of schedule.

Encouragingly, after a challenging pandemic experience, GKN Aerospace is making steady progress. We have continued to invest heavily in world-leading technology, and we are taking the necessary actions to reshape the business. With a new CEO now in place and with exposure to narrowbody aircraft, which is currently the largest part of the civil business and beginning to show recovery, GKN Aerospace is building momentum and your Board is confident that it will achieve our margin expectations as volumes recover.

All businesses have continued to be robustly cash generative, even as significant investments have been made for future growth during the market recovery. Proforma net debt has been reduced to £1,029 million after adjustment for the announced Return of Capital, and proforma leverage is now a prudent 1.5 times adjusted EBITDA.

The Chief Executive's Review provides greater detail on the Group's trading for the Period.

M&A ACTIVITY

During the Period, we successfully completed the sales of the Nortek Air Management division and the Brush business and have recently agreed the sale of Nortek Control for $285 million. These mark successful outcomes for shareholders, with the businesses going to good new homes in which their development can be continued. The £2.8 billion gross sale proceeds (including Nortek Control), together with the value of the retained Ergotron business, mean shareholders are on track to enjoy a doubling of their equity investment in the Nortek acquisition. Meanwhile Brush marks the last business to be sold from the highly successful FKI acquisition, which has delivered shareholders a 2.6x equity return.

RETURN OF CAPITAL

The Return of Capital following the sales of Nortek Air Management and Brush has been approved by shareholders, with the post consolidation shares admitted to trading on Tuesday of this week and the distribution to shareholders to be settled on 14 September 2021.

In addition, as referred to in the 22 June 2021 announcement and recognising the current prudent funding position of the Group, on the assumption that our businesses continue their recoveries, your Board intends to announce a further Return of Capital to shareholders with the full year results next March.

DIVIDEND

Your Board has declared an interim dividend of 0.75 pence per share (2020: nil), which will be paid on 15 October 2021 to shareholders on the register at the close of business on 10 September 2021.

PENSIONS

The GKN UK pension schemes, which we inherited in 2018, had at that time an accounting deficit of £0.6 billion. At acquisition of GKN we increased the funding target to a prudent level which increased the funding deficit to approximately £1 billion. Within three years we have delivered on our funding commitment to trustees and members, ahead of schedule with the funding position for the schemes being transformed for the better. The current funding deficit has reduced to approximately £150 million, and therefore the annual contribution halves to £30 million per annum with no requirement for further contributions from future disposals. Your Board is very proud to have been able to achieve this for the GKN UK pension schemes. It is a clear illustration of Melrose delivering its acquisition promises.

Further details are contained in the Finance Director's Review.

BOARD MATTERS

Co-founder and Executive Vice Chairman David Roper retired as scheduled on 31 May 2021. Archie Kane will also retire on 31 December 2021. We thank both of them for their service, but particularly David for his significant contributions since helping to found Melrose in 2003. They will both be missed. We appointed a further two non-executive directors, Heather Lawrence and Victoria Jarman, to the Board on 1 June 2021, who will add their extensive experience, skills, and knowledge to your Board.

I am pleased to report your Board meets the guidelines of both the Hampton Alexander Review and the Parker Report.

STRATEGY AND PURPOSE

Having shown its resilience throughout the pandemic, the Melrose "Buy, Improve, Sell" strategy remains the same, with the disposals in the Period being the latest demonstration of its strength. We buy high quality underperforming manufacturing businesses and invest in making them stronger, better businesses for the benefit of all stakeholders, whilst delivering an excellent return for shareholders. Only Ergotron now remains within the Group from our Nortek acquisition and GKN has been focused on its key businesses. We remain fully committed to the successful strategy we adopted at inception in 2003.

We continue to execute well against our strategy and aims. The GKN businesses' operational performance continues to improve and if not for semi-conductor disruption in the auto markets the evidence of this would be even clearer. As end markets recover we expect the full operating margin benefit and targets to be delivered. We also continue to invest in the success of the businesses with a focus on leading sustainable technologies that secure our market positions and drive opportunity over the longer term.

Encouragingly, our Automotive division continues to secure new eDrive platform wins and demand remains strong for its core sideshaft products. Aerospace is seeing more definite signs of end market improvement, but our focus remains on operational change with much work still to be done. Powder Metallurgy performed well in the first half, and we see this progress continuing through the second half as we expect to see a full operating margin benefit when supply chain issues within the automotive sector alleviate.

Justin DowleyNon-Executive Chairman

2 September 2021

CHIEF EXECUTIVE'S REVIEW

I am pleased with the Group's first half performance. Outlined below is an overview of each Division's performance over the Period. GKN Automotive and GKN Powder Metallurgy are ahead of plan and well progressed, with a number of key improvement and restructuring projects implemented during the year. Restructuring at GKN Powder Metallurgy is expected to be largely complete by the end of the year. A key task for GKN Powder Metallurgy is the development of its additive and hydrogen storage businesses. Whilst we appreciate and regret the effect upon our employees of some aspects of this restructuring, we have to improve our businesses' performance so that they can achieve their potential and create the best possible future prospects and competitiveness in rapidly changing times. Both businesses are being positioned in their markets to benefit from these changes as we transition to a more sustainable environment.

While GKN Aerospace results do not yet reflect the improvements already made to the underlying business, largely because of the continued COVID-19 impact on the sector, there are significant actions being undertaken to drive sustainable profitability, with more to come in the second half and through 2022. Improving the performance of our Aerospace business is a continuing focus for the months to come.

There also continues to be a strong emphasis on working capital discipline across the Group as growth has returned, which contributed to the robust cash performance, but there remains substantial opportunity for further improvements. As ever, we continue to invest heavily in the world-leading technology of our businesses, with sustainability being a key theme.

Our businesses are very well positioned to contribute to the fight against climate change and we are committed to ensuring they do so.

AEROSPACE

In the first half of the year GKN Aerospace made good progress adjusting to the ongoing COVID-related challenges in the sector. During the Period, sales were down 33% versus 2019 and 18% versus 2020 (which included a first quarter largely unaffected by COVID). Encouragingly we have started to see demand pick up in recent months, most notably due to the recovery in narrowbody build rates. We expect this to continue in the second half and then strongly into next year and beyond. GKN Aerospace is well placed to capture this recovery with established supply positions on all major narrowbody platforms, both in aerostructures and engines.

The significant ongoing cost actions taken to adjust the business to lower civil demand levels has started to read through to improving margins. We have adjusted costs to reflect the new market reality, including reducing management layers and simplifying the operating structure. We are taking difficult decisions to exit unprofitable business and sold two non-core Dutch businesses in the Period. There are actions underway to consolidate and focus our production capabilities globally, including ongoing footprint projects in Europe and further projects are planned in North America. In the first half, we facilitated the consolidation of our three Special Security (SSA) sites in the US under one SSA Board. We are already starting to see the benefits of this more coordinated approach. Our work also continues globally to improve operational performance and there is momentum for further gains in quality and delivery performance. All these improvement actions simplify and focus GKN Aerospace, reduce costs and improve productivity. In combination they provide a clear path to achieving the operating margin target of 10% and, with further market recovery, beyond.

From a market perspective, COVID clearly continues to impact the aviation sector significantly, albeit domestic and regional air travel is now recovering in all geographies. GKN Aerospace is well placed to grow revenues given the forecasted increase in narrowbody build rates and the continued positive outlook for major Defence programmes. The business has good positions on all the high volume civil and defence aircraft platforms today. For the Engines division, we are also starting to see an increase in aftermarket demand and increasing air travel will boost revenue from flight-hour related customer contracts. In parallel, we are increasing market share where appropriately profitable, including by incorporating GKN proprietary technology, such as titanium additive manufacturing, into OE engine manufacturing.

To underpin its long-term position, GKN Aerospace has continued to maintain significant investment in developing sustainable product solutions. The business is playing a leading role in the aerospace sector's move to reducing the impact of aviation on the environment. This encompasses building and flying current aircraft far more efficiently, while also developing the next generation of aircraft and engine propulsion systems to reduce emissions. For example, GKN Aerospace continues to invest in the £54 million UK H2GEAR collaboration programme and the £50 million European Clean Sky 2 programme, both aiming to develop ground-breaking hydrogen propulsion systems to power aircraft using liquid hydrogen and generating just water as a by-product. The business has also delivered the first fully integrated wings, tail and wiring system for Eviation's Alice electric aircraft which is due to have its maiden flight later this year. These and other projects provide future growth opportunities in the years ahead with GKN Aerospace's brand new £32 million Global Technology Centre in Bristol, UK playing a central role.

Aerospace Outlook

GKN Aerospace has made good progress in its actions to align with the market and future opportunities although there is still much to accomplish. The business is being improved and restructured in order to benefit from market recovery, while investment continues in developing long-term sustainable technology. With these ongoing management actions and the expected ramp-up in narrowbody demand, GKN Aerospace is well placed to drive sustained sales growth and margin expansion. The recent appointment of a new CEO underpins our confidence in making good progress during the second half of this year and beyond.

AUTOMOTIVE

GKN Automotive had a good first half of the year. While the global semi-conductor shortage continues to weigh on the entire automotive sector, the business has achieved a 34% increase in sales for the Period compared to prior year, with Europe and Asia Pacific ahead of the Americas, and China up by 21%.

Whilst volatility remains, management are ahead of plan in implementing strong, additional measures to control costs and working capital. These efforts have been supported by the continued delivery of GKN Automotive's 'Full Potential' transformational programme. This progress has contributed to the business achieving 8% decremental margins in the first half compared to the second half of 2020 and holding adjusted operating margins at 6.2%, showing a clear path to its operating margin target of at least 10%.

As outlined during the Capital Markets Day in May 2021, GKN Automotive is optimally placed to benefit from the shift towards electrified mobility. As the world transitions to electric vehicles (EV), its world-leading drive system portfolio has secured strong market share amongst both global automotive OEMs and pure-play electric vehicle manufacturers. To compliment the business' leadership position in driveshafts, Melrose has accelerated GKN Automotive's investment in next generation eDrive capabilities, to capture the significant growth opportunities presented by the increasing demand for electric vehicles, including investment in eDrive R&D of over £50 million per year. This has been critical in placing GKN Automotive at the forefront of the global switch to electric vehicles.

The UK based Abingdon Innovation Centre, expanded as part of the GKN global R&D investment, has already received over £1 million from the Melrose Skills Fund, with a further £4 million to follow in supporting the switch to eDrive and the next generation of engineers. This has been supplemented with some grants from the UK government averaging about £0.5 million per year for the last three years. An important piece of this investment in Abingdon has been funding partnerships with leading research institutions in the UK automotive ecosystem, including the University of Nottingham and the University of Newcastle, as GKN Automotive continues to proactively contribute to the ongoing decarbonisation of the global automotive sector. These partnerships are leading to the development of lighter, more efficient EV powertrains for the volume automotive market.

GKN Automotive's significant investment in the EV revolution is already yielding success. Despite the pandemic, in the past 18 months GKN Automotive has secured critical eDrive awards on six key platforms for a range of major global and Chinese vehicle manufacturers and has a strong pipeline for the future. Over one third of new business bookings awarded in the first half of this year were on pure electric platforms, and over 50% including full hybrid platforms as well. Automotive is well positioned to grow at more than double the rate for light vehicle production over the long-term.

Automotive Outlook

In the second half, GKN Automotive will need to remain agile and responsive to ongoing market headwinds, including expected production volatility, materials cost inflation and supply chain disruption. However, the benefits of key restructuring projects are expected to lead to improved margins in the second half of the year and into 2022. In the event the sales in 2022 return to 2019 levels, GKN Automotive would be well on track to achieve its margin target. Your Board believes that the underlying strength of the GKN Automotive business and operations, and the results of management's actions, have positioned the business well.

POWDER METALLURGY

GKN Powder Metallurgy has continued to gain market share and sales increased by 43% compared to the first half of 2020, and were broadly equivalent to pre-pandemic sales volumes in 2019. New business wins during the first half reached approximately £100 million, almost 30% of which result from further consolidation of the fragmented global sintering sector. We expect to continue to benefit from the market consolidation.

GKN Powder Metallurgy reacted swiftly to the second quarter semi-conductor supply challenges with targeted cost savings. It continued to be swift in exiting non-core and unprofitable business as well as taking the necessary operational improvements to achieve 11.2% adjusted operating margins for the first half. Its targeted operating margins of 14% are within reach and we expect the necessary improvement actions to be substantially complete by the end of this year.

Hydrogen and Additive

Like our other businesses, GKN Powder Metallurgy continues to invest heavily in its technology, including into its Additive Manufacturing and Hydrogen Storage initiatives. In the short time since its successful launch of GKN Hydrogen in May 2021, the business has secured pilot schemes with key targeted partners.

Powder Metallurgy Outlook

With some predictions of an easing of semi-conductor shortage in the second half, GKN Powder Metallurgy expects to see the start of a more normalised supply period. Restructuring actions are expected to be largely complete by the end of the year and the continued investments in technology, together with a fully digitised manufacturing approach, provides the business with the confidence that it will thrive as its markets return.

OTHER INDUSTRIAL

With the sale of Brush in the Period and the agreement on 23 August 2021 to sell Nortek Control, the Other Industrial division now comprises only Ergotron.

Ergotron

Ergotron's overall sales grew 11% during the Period, driven predominantly by the Office segment as a result of the steady return to work within the US. This growth is despite Ergotron exiting some low margin business. Ergotron continued to capitalise on new market opportunities, supporting companies reopening their office spaces and employees working from home. The business continues to develop and expand its market position to serve the increasingly hybrid approach to office and home working as markets recover from COVID-19.

Following strong demand within the Healthcare segment in 2020 due to pandemic-related purchasing, the first half of 2021 saw the gradual resumption of new medical facility builds and equipment upgrades. The pursuit of these opportunities during the first half of the year was supported by several strategic operational and cost optimisation initiatives.

Ergotron Outlook

During the second half of 2021, management expect continued strong demand within the Office segment. The business is well positioned to capture future growth opportunities as its core US market continues to recover and rebuild.

Simon Peckham

Chief Executive

2 September 2021

FINANCE DIRECTOR'S REVIEW

The presentation of the results in these Condensed Interim Financial Statements is impacted by the disposals of the Nortek Air Management division and the Brush business, previously held within the Other Industrial division, and their classification as discontinued operations.

In addition, on 23 August 2021 contracts were exchanged for the disposal of the Nortek Control business, previously held within the Other Industrial division. Consistent with this, Nortek Control was shown as being held for sale at 30 June 2021 and is similarly classified as a discontinued operation.

MELROSE GROUP RESULTS - CONTINUING OPERATIONS

Statutory results:

The statutory IFRS results show revenue of £3,540 million (2020: £3,386 million), an operating loss of £137 million (2020: £618 million) and a loss before tax of £256 million (2020: £720 million). The diluted earnings per share ("EPS"), calculated using the weighted average number of shares in issue during the Period of 4,860 million (2020: 4,858 million), were a loss of 3.1 pence (2020: loss of 12.1 pence).

Adjusted results:

The adjusted results are also shown on the Income Statement. They are adjusted to include the revenue and operating profit from equity accounted investments ("EAIs") and to exclude certain items which are significant in size or volatility or by nature are non-trading or non-recurring, or are items released to the Income Statement that were previously a fair value item booked on an acquisition. The Group's accounting policy is to consistently exclude these items from the adjusted results, which are used as an Alternative Performance Measure ("APM") as described by the European Securities and Markets Authority ("ESMA"). APMs used by the Group are defined in the glossary to the Condensed Interim Financial Statements.

The Melrose Board considers the adjusted results to be an important measure used to monitor how the businesses are performing as they achieve consistency and comparability between reporting periods when all businesses are held for the complete reporting period.

The adjusted results for the period ended 30 June 2021 show revenue of £3,828 million (2020: £3,624 million), an operating profit of £223 million (2020: loss of £11 million) and a profit before tax of £141 million (2020: loss of £105 million). Adjusted diluted EPS, calculated using the weighted average number of shares in the Period, were 2.2 pence (2020: loss of 1.7 pence).

Proforma results:

Proforma results are presented for the period ended 30 June 2021 to give a meaningful measure of ongoing performance. These include the impact of the Return of Capital and share consolidation, shown as a post Balance Sheet event in these Condensed Interim Financial Statements.

Proforma earnings per share were 2.5 pence, calculated using the ongoing ordinary shares that are in issue following the 9 for 10 share capital consolidation on 31 August 2021, discussed later in this review.

Both proforma net debt and proforma leverage, presented later in this review, include the recently approved Return of Capital of £729 million to be made subsequent to the half year.

Tables summarising the statutory results and adjusted results by reportable segment are shown in note 3 of the Condensed Interim Financial Statements.

RECONCILIATION OF STATUTORY RESULTS TO ADJUSTED RESULTS

The following tables reconcile the Group statutory revenue and operating loss to adjusted revenue and adjusted operating profit/(loss):

Adjusting revenue item:

The Group has certain investments in businesses in which it does not hold full control (EAIs), the largest of which is a 50% interest in Shanghai GKN HUAYU Driveline Systems ("SDS"), within the Automotive business. During the period ended 30 June 2021, EAIs in the Group generated £288 million of revenue (2020: £238 million), which is not included in the statutory results but is shown within adjusted revenue so as not to distort the operating margins reported in the businesses when the adjusted operating profit from these EAIs is included.

Adjusting items to the statutory operating loss are consistent with prior periods and include:

The amortisation charge on intangible assets acquired in business combinations of £226 million (2020: £236 million), which is excluded from adjusted results due to its non-trading nature and to enable comparison with companies that grow organically. However, where intangible assets are trading in nature, such as computer software and development costs, the amortisation is not excluded from adjusted results.

Restructuring and other associated costs in the Period of £85 million (2020: £95 million) which are shown as adjusting items due to their size and non-trading nature. During the period ended 30 June 2021 they included:

· A charge of £26 million (2020: £43 million) within the Aerospace division including costs incurred as the business takes further steps to substantially reduce its cost structure, recognising the magnitude and length of the impact of COVID-19 on the aerospace industry. These include costs relating to the initial stages of a major footprint consolidation in The Netherlands, as well as the continued global integration programme, reducing management layers and simplifying the business, ensuring the Aerospace division is well positioned and able to react to changes in its new environment.

· A charge of £52 million (2020: £25 million) within the Automotive division, which included the commencement of significant footprint consolidation actions in Europe incurred as the business continues to address its cost base and deliver its 'Full Potential' transformational programme with a clear path to achieving greater than 10% adjusted operating margins.

· A total charge of £7 million (2020: £27 million) across the Powder Metallurgy, Other Industrial and Corporate divisions.

Movements in the fair value of derivative financial instruments (primarily forward foreign currency exchange contracts) where hedge accounting is not applied, entered into within the businesses to mitigate the potential volatility of future cash flows, on long-term foreign currency customer and supplier contracts, along with foreign exchange movements on the associated financial assets and liabilities. This totalled a charge of £44 million (2020: £89 million) in the Period and is shown as an adjusting item because of its volatility and size.

Other adjusting items, which include: acquisition and disposal related net gains, on businesses not shown as discontinued operations, of £10 million (2020: net losses of £4 million), excluded from adjusted results due to their non-trading nature; the charge for the Melrose equity-settled Incentive Scheme, including its associated employer's tax charge, of £9 million (2020: £1 million), excluded from adjusted results due to its volatility; an adjustment of £15 million (2020: £14 million) to gross up the post-tax profits of EAIs to be consistent with the adjusted operating profits of subsidiaries within the Group; and the net release of fair value items totalling £9 million (2020: £11 million), shown as an adjusting item to avoid positively distorting adjusted results.

In the comparative period, a write down of assets of £179 million, which was recognised as a result of the impact of COVID-19, of which £133 million was within the Aerospace division, was shown as an adjusting item because of the unprecedented nature of the COVID-19 pandemic, along with its non-trading nature and size.

TAX - CONTINUING OPERATIONS

The statutory results for the Period show a tax credit of £105 million (2020: £135 million), arising on a statutory loss before tax of £256 million (2020: £720 million). The Group Income Statement current underlying adjusted tax rate is approximately 22%.

During the Period ended 30 June 2021 the Group paid tax of £40 million (2020: £5 million).

 DISPOSALS AND ASSETS HELD FOR SALE

The Nortek group was acquired on 31 August 2016 for an enterprise value of £2.2 billion, funded by £1.6 billion of equity and £0.6 billion of debt.

On 22 June 2021, the Group completed the disposal of Nortek Air Management to Madison Industries LLC ("Madison") for gross proceeds of £2.6 billion, and on 23 August 2021 the Group entered into an agreement to sell Nortek Control for £0.2 billion, which together represented 87% of the turnover of Nortek businesses. As such, these businesses are shown as discontinued operations in all periods throughout the Condensed Interim Financial Statements and Nortek Control is held for sale at 30 June 2021.

The net proceeds associated with the disposal of Nortek Air Management and Nortek Control, plus more than £700 million of cash generated by the Nortek businesses since acquisition and the retention of the Ergotron business in the Group, means the Group is well placed to achieve the targeted doubling of shareholders' investment on the Nortek acquisition.

In addition, the Group disposed of the Brush business on 18 June 2021, for cash consideration of £0.1 billion. Brush is the final business to be sold from the FKI acquisition in 2008, which has been a highly successful investment for Melrose shareholders, providing a 2.6x return on shareholders' initial equity, equivalent to an IRR of 29%.

Discontinued businesses included £832 million of revenue and a statutory operating profit of £5 million (2020: revenue of £817 million and operating profit of £35 million) after remeasuring Nortek Control to the disposal value of £0.2 billion and before contributing a net £1.4 billion profit on disposal of businesses in the Period.

RETURN OF CAPITAL AND NUMBER OF SHARES IN ISSUE

In line with the Group's strategy, following the disposal of Nortek Air Management and Brush, a return of £729 million in cash to shareholders, equivalent to 15 pence per existing ordinary share was proposed and subsequently voted in favour by shareholders on 9 July 2021.

This return will be made via a redeemable preference share scheme alongside a 9 for 10 share consolidation which happened on 31 August 2021 and reduced the number of ordinary shares by 10%, from 4,858 million to 4,372 million. The weighted average number of shares used for earnings per share in calculations in 2021 will be 4,695 million.

CASH GENERATION AND MANAGEMENT

As a result of good cash management initiatives adopted by all businesses in the Group, a free cash inflow of £75 million (2020: £29 million) was achieved in the Period, after restructuring costs of £92 million (2020: £88 million). Adjusted free cash flow, shown before restructuring cash spend, was £167 million (2020: £117 million).

An analysis of the adjusted free cash flow from continuing operations is shown in the table below:

Net working capital was reduced by £6 million (2020: £220 million) in the first half, despite turnover growing over the same period last year by 12% at constant currency.

Net capital expenditure in the Period was £104 million (2020: £160 million), representing 0.6x (2020: 0.8x) depreciation of owned assets, net interest paid in the Period was £73 million (2020: £63 million), tax payments were £40 million (2020: £5 million) and ongoing contributions to defined benefit pension schemes were £12 million (2020: £43 million).

The movement in net debt (as defined in the glossary to the Condensed Interim Financial Statements) is summarised as follows:

Group net debt at 30 June 2021, translated at closing exchange rates (being US $1.38 and €1.16), was £300 million (31 December 2020: £2,847 million).

The movement in net debt during the Period consisted of a free cash inflow of £75 million and significant inflows primarily relating to the disposals of Nortek Air Management and Brush totalling £2,401 million, shown after the settlement of associated interest rate swaps totalling £47 million, tax paid on the extraction of Ergotron and Nortek Control from the Nortek tax group of £32 million and one-off contributions to defined benefit pension schemes within disposed businesses of £39 million. In addition, cash generated from discontinued operations totalled £56 million, a dividend was paid to shareholders of £36 million and there was a £51 million reduction to net debt in respect of foreign exchange and other non-cash movements.

For bank covenant purposes the Group's net debt is calculated at average exchange rates for the previous twelve months, to better align the calculation with the currency rates used to calculate profits, and was £335 million.

The Group net debt leverage on this basis at 30 June 2021 was 0.5x EBITDA (31 December 2020: 4.1x EBITDA), substantially below the Melrose normal leverage of 2.0x to 2.5x EBITDA.

Proforma net debt following the payment of the approved Return of Capital, discussed earlier in this review, was £1,029 million, with proforma leverage of 1.5x. This calculation excludes the agreed net proceeds from the disposal of Nortek Control.

PROVISIONS

Total provisions at 30 June 2021 were £838 million (31 December 2020: £1,021 million).

The following table details the movement in provisions in the Period:

The net charge to adjusted operating profit in the Period of £47 million, includes £10 million in respect of certain non-cash divisional long-term incentive plan charges. The remainder is primarily in respect of warranty, product liability and workers' compensation charges which are closely matched by similar cash payments in the Period.

The net charge shown as an adjusting item in the Income Statement of £68 million includes a net charge of £75 million related to restructuring activities which is partly offset by a net release of £7 million related to fair value items.

During the Period £136 million of cash was spent against provisions with £89 million relating to restructuring activities.

Provisions of £111 million were disposed of with the sale of the Brush and Nortek Air Management businesses and included within Other are foreign exchange movements of £20 million, the transfer of Nortek Control related provisions to held for sale of £6 million and the impact of discounting on certain provisions of £2 million.

PENSIONS AND POST-EMPLOYMENT OBLIGATIONS

At 30 June 2021 total plan assets of the Melrose Group's defined benefit pension plans were £3,212 million (31 December 2020: £3,775 million) and total plan liabilities were £3,905 million (31 December 2020: £4,613 million), a net deficit of £693 million (31 December 2020: £838 million). The reduction in gross assets and gross liabilities includes defined benefit pension plan assets of £428 million and defined benefit pension plan liabilities of £372 million, disposed with the Nortek Air Management and Brush businesses.

The most significant pension schemes in the Group are the GKN Group Pension Schemes (Numbers 1 - 4), two of which are allocated to Aerospace and two of which are allocated to the Automotive division. At 30 June 2021 in total these four plans had aggregate gross assets of £2,465 million (31 December 2020: £2,556 million) and liabilities of £2,549 million (31 December 2020: £2,755 million), and a net deficit of £84 million (31 December 2020: £199 million), split 47% of the deficit held within Aerospace and 53% within Automotive.

The funding commitment of the GKN UK defined benefit schemes, made by the Group when GKN was acquired in 2018, has been delivered ahead of schedule and the ongoing contributions to these defined benefit pension schemes will halve to £30 million per annum, with no further requirement to contribute amounts following disposals of businesses.

The values of the Group plans were updated at 30 June 2021 by independent actuaries to reflect the latest key assumptions. A summary of the assumptions used are shown in note 12 to the Condensed Interim Financial Statements.

FINANCIAL RISKS AND UNCERTAINTIES

The principal financial risks and uncertainties faced by the Group include: liquidity risk; finance cost risk; exchange rate risk; contract and warranty risk; and commodity cost risk and are explained in detail on pages 41 and 42 of the 2020 Annual Report. Further explanations and details of the strategic risk profile of the Group, which includes non-financial risk, are set out on pages 46 to 53 of the 2020 Annual Report.

EXCHANGE RATES USED IN THE PERIOD

Exchange rates used for currencies most relevant to the Group in the Period were:

The Group policy on foreign currency risk is explained on pages 41 and 42 of the 2020 Annual Report, a copy of which is available on the Company's website, www.melroseplc.net.

The following table shows an indication of a full year impact of a 10 percent strengthening of the major currencies, if they were to strengthen in isolation against all other currencies, on the re-translation of adjusted operating profit into Sterling:

In the first half of the year the Group suffered an 8% adverse translational foreign exchange impact compared to the same period last year.

The impact from transactional foreign exchange exposures is not material in the short-term due to hedge coverage being approximately 90%.

A 10 percent strengthening in either the US Dollar or Euro would result in a partial natural hedge against the translational movement in profits and would have had the following impact on debt as at 30 June 2021:

LIQUIDITY RISK MANAGEMENT

The Group's net debt position at 30 June 2021 was £300 million (31 December 2020: £2,847 million). Adjusting for the approved Return of Capital to shareholders, proforma net debt at 30 June 2021 was £1,029 million, as described earlier.

The Group's committed bank facilities include a multi-currency denominated term loan that is due to mature in April 2024 and a multi-currency denominated revolving credit facility that matures in January 2023:

As at 30 June 2021, the term loan was fully drawn and the multi-currency committed revolving credit facility was undrawn. Applying the exchange rates at 30 June 2021, the headroom equated to just under £3.0 billion (31 December 2020: £1.6 billion applying the exchange rates at 31 December 2020).

In addition to the headroom on the multi-currency committed revolving credit facility, cash, deposits and marketable securities, net of overdrafts, in the Group amounted to £1.3 billion at 30 June 2021 (31 December 2020: £160 million). As at 30 June 2021, £1.0 billion of the cash was placed in low volatility money market funds that can be withdrawn at short notice.

The Group also holds capital market borrowings as at 30 June 2021 consisting of:

The committed bank funding has two financial covenants, being a net debt to adjusted EBITDA covenant and an interest cover covenant, both of which are tested half-yearly in June and December.

The Group had a waiver for its net debt to adjusted EBITDA covenant test as at 30 June 2021, and following the disposal of Nortek Air Management the net debt to adjusted EBITDA covenant test level will be 4.25x at 31 December 2021; 4.0x at 30 June 2022; and 3.75x at 31 December 2022, before returning to 3.5x at 30 June 2023 and onwards. At 30 June 2021 the Group leverage afforded substantial headroom and was 0.5x, or 1.5x when adjusting net debt for the agreed £729 million Return of Capital to shareholders.

The interest cover bank covenant test is set at 3.0x at 30 June 2021 and 31 December 2021; and 3.25x at 30 June 2022, before returning to 4.0x from 31 December 2022 onwards. As at 30 June 2021 the Group interest cover was 5.6x, affording comfortable headroom.

FINANCE COST RISK MANAGEMENT

The policy of the Board is to fix approximately 70% of the interest rate exposure of the Group. Following the sale of Nortek Air Management and Brush, the Group's net debt reduced significantly and, to maintain the policy of fixing 70% of the ongoing interest rate exposure, several of the interest rate swaps were cancelled at a cost of £47 million.

At 30 June 2021 the weighted average cost of the instruments used to fix the cost of LIBOR on the Group's committed bank facility was c.1.2% and the bank margin on the Group's committed bank facility will reduce, following the disposal of the Nortek Air Management division and Brush business, to 0.95% on the revolving credit facility and 0.75% for the term loan from October 2021 onwards.

The Group also holds cross-currency swaps associated with the remaining fixed rate capital market borrowings, described earlier in this review, with a weighted average income statement cost of c.3.4% per annum.

The combined average Income Statement cost of the Group's debt for the next 12 months is expected to be approximately 3.6% (31 December 2020: 3.9%) before the amortisation of the bank arrangement fees and approximately 4.3% (31 December 2020: 4.2%) including this amortisation charge.

GOING CONCERN

As part of their consideration of going concern, the Directors have reviewed the Group's future cash forecasts and profit projections, which are based on market and internal data and recent past experience.

The Group has modelled a reasonably possible downside scenario against future cash forecasts. The Group's Balance Sheet is transformed compared to the same time last year, and for any reasonably possible downside scenario, the Group has sufficient headroom to avoid breaching any financial covenant and would not require any additional sources of financing throughout the forecast period.

The long-term impact of COVID-19 remains uncertain and the impacts of the pandemic on trading conditions could be more prolonged or severe than that which the Directors have considered in this reasonably possible scenario.

The Group's current committed bank facility headroom, its access to liquidity, and the sensible levels of bank covenants in place with lending banks, allow the Directors to consider it appropriate that the Group can manage its business risks successfully and adopt a going concern basis in preparing these Condensed Interim Financial Statements.

 Geoffrey Martin

Group Finance Director

2 September 2021 

CAUTIONARY STATEMENT

This announcement contains forward-looking statements. These statements are made in good faith based on the information available up to the time of the approval of this announcement, and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. Accordingly, readers are cautioned not to place undue reliance on any such forward-looking statements. Subject to compliance with applicable laws and regulations, the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this announcement.

This announcement has been prepared solely to provide information to shareholders to assess the Company's strategies and the potential for those strategies to succeed, and neither the Company nor its directors accept any liability to any other person save as would arise under English law.

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

a) the condensed financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the UK;

b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year); and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Simon Peckham Geoffrey Martin

Chief Executive Group Finance Director

2 September 2021 2 September 2021

INDEPENDENT REVIEW REPORT TO MELROSE INDUSTRIES PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of cash flows, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group will be prepared in accordance with United Kingdom adopted International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with United Kingdom adopted International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with United Kingdom adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

 Deloitte LLP

Statutory Auditor, London, United Kingdom

2 September 2021

Melrose Industries PLC

Condensed Consolidated Income Statement

(1) Results for the period ended 30 June 2020 and the year ended 31 December 2020 have been restated for discontinued operations (see note 2).

(2) Defined in the summary of significant accounting policies (see note 2).

Melrose Industries PLC

Condensed Consolidated Statement of Comprehensive Income

Melrose Industries PLC

Condensed Consolidated Statement of Cash Flows

(1) Results for the period ended 30 June 2020 and year ended 31 December 2020 have been restated for discontinued operations (see note 2).

As at 30 June 2021, the Group had net debt of £300 million (31 December 2020: £2,847 million). A definition and reconciliation of the movement in net debt is shown in note 13.

Melrose Industries PLC

Condensed Consolidated Balance Sheet

(1)  Cash and cash equivalents and current interest-bearing loans and borrowings have been restated, with no impact on net assets (see note 2). 

Melrose Industries PLC

Condensed Consolidated Statement of Changes in Equity

Notes to the Condensed Interim Financial Statements

1. Corporate information

The interim financial information for the six months ended 30 June 2021 has been reviewed by the auditor, but not audited. The information for the year ended 31 December 2020 shown in this report does not constitute statutory accounts for that year as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor has reported on those accounts. Their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Summary of significant accounting policies

The interim financial information for the six months ended 30 June 2021, which has been approved by the Board of Directors, has been prepared on the basis of the accounting policies set out in the Group's 2020 Annual Report on pages 143 to 152.

The Group's 2020 Annual Report can be found on the Group's website www.melroseplc.net. These Condensed Interim Financial Statements should be read in conjunction with the 2020 information. The Condensed Interim Financial Statements have been prepared in accordance with UK-endorsed International Financial Reporting Standards ("IFRS") which does not differ from the previous EU-endorsed IFRS, and hence the previously reported accounting policies still apply. These Condensed Interim Financial Statements do not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006 and should be read in conjunction with the Annual Report 2020. These Condensed Interim Financial Statements have been prepared in accordance with IAS 34: "Interim Financial Reporting" contained in UK-adopted IFRS.

Discontinued operations and assets held for sale

During the first half of the year, the Group completed the disposal of the Nortek Air Management segment and the Brush business, previously included in the Other Industrial segment. In addition, the Board formally commenced a disposal process aligned to its strategic priorities, to dispose of the Nortek Control business, previously included in the Other Industrial segment, with a high expectation that this would conclude within one year. An update is provided in note 15. In accordance with IFRS 5: "Non-current assets held for sale and discontinued operations", associated assets and liabilities at 30 June 2021 are classified as held for sale and separately shown on the Balance Sheet.

The results of Nortek Air Management, Brush and Nortek Control have been classified within discontinued operations for all periods presented; with the Income Statement, the Statement of Cash Flows and their associated notes being restated accordingly. In addition, discontinued operations for 2020 include the results of the Wheels and Structures business, also classified as held for sale at 30 June 2020, which was disposed in November 2020. Further detail is shown in note 9. 

Prior half year restatement of cash and cash equivalents and bank overdrafts

During the second half of 2020, the Group changed its presentation of cash and cash equivalents and bank overdrafts within the Balance Sheet relating to cash pooling arrangements. Whilst the Group has the legal right to offset amounts under these cash pooling arrangements, it was determined that the appropriate presentation should be on a gross basis in line with the requirements of IAS 32: "Financial Instruments: Presentation" and other associated interpretations. The 30 June 2020 Balance Sheet comparatives have been restated accordingly. The impact of this change is to increase both cash and cash equivalents and bank overdrafts within current interest-bearing loans and borrowings by £76 million as at 30 June 2020. This has no impact on net assets or other primary statements.

Alternative performance measures

The Group presents Alternative Performance Measures (“APMs”) in addition to the statutory results of the Group. These are presented in accordance with the Guidelines on APMs issued by the European Securities and Markets Authority (“ESMA”).

APMs used by the Group are set out in the glossary to these Condensed Interim Financial Statements and the reconciling items between statutory and adjusted results are listed below and described in more detail in note 4.

Adjusted revenue includes the Group’s share of revenue from equity accounted investments (“EAIs”).

Adjusted profit measures exclude items which are significant in size or volatility or by nature are non-trading or non-recurring, any item released to the Income Statement that was previously a fair value item booked on an acquisition, and include adjusted profit from EAIs.

On this basis, the following are the principal items included within adjusting items impacting operating profit:

2. Summary of significant accounting policies (continued)

Further to the adjusting items above, adjusting items impacting profit before tax include:

In addition to the items above, adjusting items impacting profit after tax include:

The Board considers the adjusted results to be an important measure used to monitor how the businesses are performing as this provides a meaningful reflection of how the businesses are managed and measured on a day-to-day basis and achieves consistency and comparability between reporting periods, when all businesses are held for a complete reporting period.

The adjusted measures are used to partly determine the variable element of remuneration of senior management throughout the Group and are also in alignment with performance measures used by certain external stakeholders. The adjusted measures are also taken into account when valuing individual businesses as part of the “Buy, Improve, Sell” Group strategy model.

Adjusted profit is not a defined term under IFRS and may not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measures. All APMs relate to the current period results and comparative periods where provided.

Going concern

The Condensed Interim Financial Statements have been prepared on a going concern basis as the Directors consider that adequate resources exist for the Company to continue in operational existence for the foreseeable future.

The Group's liquidity and funding arrangements are described in the Finance Director's Review. There is significant liquidity/financing headroom (c. £3 billion) at 30 June 2021 and throughout the going concern forecast period. Forecast covenant compliance is considered further below.

Covenants

The Group's banking facility has two financial covenants being a net debt to adjusted EBITDA covenant and an interest cover covenant, both of which are tested half yearly in June and December.

Due to the pervasive impact of COVID-19 on certain of the Group's businesses, revised financial covenants with lending banks were agreed in 2020. These revised financial covenants, updated for the disposal of Nortek Air Management, for the going concern period are as follows:

Testing

The Group has modelled two scenarios in its assessment of going concern; a base case and a reasonably possible sensitised case.

The base case takes into account the estimated impact of a continued recovery from the COVID-19 pandemic as well as other end market and operational factors throughout the going concern period and has been monitored against the actual results and cash generation in the period since 1 July 2021.

The reasonably possible sensitised case models more conservative sales assumptions in the remaining period of 2021 and the relevant period in 2022, however, given there is liquidity headroom of approximately £3 billion and the Group's leverage was 0.5x at 30 June 2021, no further sensitivity detail is provided.

Under the reasonably possible sensitised case, even with significant reductions, no covenant is breached at any of the forecast testing dates being 31 December 2021 and 30 June 2022, with the testing at 31 December 2022 also favourable, and the Group does not require any additional sources of finance, even following repayment of the £450 million bond in September 2022.

2. Summary of significant accounting policies (continued)

In addition to the reasonably possible sensitised case a 'reverse stress test' has been prepared to consider the point at which the covenants may be breached. This reverse stress test indicates that a significant reduction in sales, beyond what is considered reasonable, would be required in order to breach covenants. In this remote situation, management could take further mitigating actions to protect profits and conserve cash, such as reducing capital expenditure to minimum maintenance levels.

3. Segment information

Segment information is presented in accordance with IFRS 8: "Operating segments" which requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reported to the Group's Chief Operating Decision Maker ("CODM"), which has been deemed to be the Group's Board, in order to allocate resources to the segments and assess their performance.

As a result of the disposal, the results of the Nortek Air Management business during the period are classified within discontinued operations and the comparative results in 2020 have been restated accordingly. In addition, the results of the Brush business, which was disposed in June 2021, and the Nortek Control business, which has been classified as held for sale as described in note 2, have also been classified as discontinued operations. The Brush and Nortek Control businesses were previously classified within the Other Industrial segment and comparative results for 2020 have been restated accordingly.

The operating segments are as follows:

Aerospace - a multi-technology global tier one supplier of both civil and defence air frames and engine structures.

Automotive - a global technology and systems engineer which designs, develops, manufactures and integrates an extensive range of driveline technologies, including electric vehicle components.

Powder Metallurgy - a global leader in precision powder metal parts for the automotive and industrial sectors, as well as the production of powder metal.

Other Industrial - comprises the Group's Ergotron business.

In addition, there are central cost centres which are also reported to the Board. The central corporate cost centres contain the Melrose Group head office costs and charges related to the divisional management long-term incentive plans.

Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a reasonable basis. Inter-segment pricing is determined 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 non-current assets and, for revenue, the location of external customers. Inter-segment sales are not material and have not been disclosed.

The following tables present the results and certain asset and liability information regarding the Group's operating segments and central cost centres for the six month period ended 30 June 2021 and comparative periods.

a) Segment revenues

6 months ended 30 June 2021

 6 months ended 30 June 2020 - restated(1)

(1) Revenue has been restated for discontinued operations (see note 2).

3. Segment information (continued)

a) Segment revenues (continued)

Year ended 31 December 2020 - restated(1)

(1) Revenue has been restated for discontinued operations (see note 2).

b) Segment operating profit