MELROSE INDUSTRIES PLC The distribution of this Prospectus and the accompanying documents and the allotment and issue of New Melrose Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by New Melrose to obtain any approval, authorisation or exemption to permit the allotment or issue of New Melrose Ordinary Shares or the possessing or distribution of this Prospectus and the accompanying documents in any jurisdiction, other than the United Kingdom. Persons outside the United Kingdom into whose possession this Prospectus comes should inform themselves about, and observe, any applicable restrictions and legal, exchange control or regulatory requirements in relation to the distribution of this Prospectus and the Proposals. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into any Scheme Restricted Jurisdiction.
No New Melrose Ordinary Shares have been marketed to, or are available for purchase in whole or in part by, the public in the United Kingdom or elsewhere in connection with the Admission. This Prospectus does not constitute or form part of any offer or invitation to purchase, subscribe for, sell or issue, or any solicitation of any offer to purchase, subscribe for, sell or issue, New Melrose Ordinary Shares or any other securities of New Melrose.
A copy of this document, which comprises a prospectus (''Prospectus'') relating to the New Melrose Ordinary Shares prepared in accordance with the Prospectus Rules made under section 73A of the Financial Services and Markets Act 2000 (as amended) (''FSMA''), has been filed with the FCA and has been approved by the FCA in accordance with section 87A of FSMA and made available to the public as required by rule 3.2 of the Prospectus Rules.
Shareholders should read the whole of this Prospectus and any documents incorporated herein by reference. In particular, your attention is drawn to the factors described in the ''Risk Factors'' section of this Prospectus.(incorporated under the Companies Act 2006 and registered in England and Wales with registered number 9800044)
Introduction to the premium listing segment of the Official List and admission to trading on the main market of the London Stock Exchange of 995,206,966 New Melrose Ordinary Shares RothschildSponsor and Financial Adviser
Broker
Applications will be made to the UKLA for the New Melrose Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Melrose Ordinary Shares to be admitted to trading on the main market of the London Stock Exchange (together, ''Admission''). It is expected that Admission will become effective, and that dealings in the New Melrose Ordinary Shares will commence, at 8.00 a.m. on the Effective Date which, subject to the satisfaction of certain conditions, is expected to occur on 19 November 2015. No application has been or is currently intended to be made for any other class of shares issued by New Melrose to be admitted to the Official List or to trading on the London Stock Exchange or to be admitted to listing or dealing on any other exchange.
The New Melrose Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with each other and will rank in full for all dividends and other distributions thereafter declared, made or paid in respect of the New Melrose Ordinary Shares.
Shareholders should only rely on the information contained in this Prospectus and any documents incorporated herein by reference. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been so authorised. New Melrose will comply with its obligations to publish a supplementary prospectus pursuant to section 87G of FSMA and rule 3.4 of the Prospectus Rules containing further updated information required by law or by any regulatory authority, but, except as required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules or any other applicable law, assumes no further obligation to publish additional information. Without prejudice to New Melrose's legal or regulatory obligations to publish a supplementary prospectus, neither the delivery of this Prospectus nor Admission shall, under any circumstances, create any implication that there has been no change in the affairs of the Melrose Group since the date of this Prospectus or that the information is correct as of any time subsequent to the date of this Prospectus.
Rothschild, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting solely for New Melrose and no one else in relation to the Admission and solely for New Melrose and Old Melrose and no one else in relation to the Proposals and, save for any responsibility which may arise under FSMA or the regulatory regime established thereunder, accordingly will not be responsible to anyone other than New Melrose and Old Melrose for providing the protections afforded to the respective clients of Rothschild or for providing advice in connection with the Admission and the Proposals, as applicable, the contents of this Prospectus or any transaction, arrangement or other matter referred to in this Prospectus.
Investec, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting solely for New Melrose and no one else in relation to Admission and solely for New Melrose and Old Melrose and no one else in relation to the Proposals and, save for any responsibility which may arise under FSMA or the regulatory regime established thereunder, accordingly will not be responsible to any person other than New Melrose and Old Melrose for providing the protections afforded to the respective clients of Investec or for providing advice in connection with the Admission and the Proposals, as applicable, the contents of this Prospectus or any transaction, arrangement or other matter referred to in this Prospectus.
Apart from the responsibilities and liabilities, if any, which may be imposed on Rothschild or Investec under FSMA or the regulatory regime established thereunder, neither Rothschild nor Investec accepts any responsibility whatsoever and makes no representation or warranty, express or implied, in relation to the contents of this Prospectus, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Melrose Group, the New Melrose Ordinary Shares or the Proposals. Each of Rothschild and Investec accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement.
The contents of this Prospectus are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own legal, financial or tax adviser for legal, financial or tax advice.
This Prospectus is not an offer of securities for sale in the United States or in any other country or jurisdiction. New Melrose Ordinary Shares to be issued to Shareholders in connection with the Scheme have not been, and will not be, registered with the SEC under the US Securities Act, and will be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act. For the purpose of qualifying for the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act with respect to the New Melrose Ordinary Shares issued pursuant to the Scheme, Old Melrose will advise the Court that it will rely on the Section 3(a)(10) exemption based on the Court's sanctioning of the Scheme, which will be relied upon by Old Melrose as an approval of the Scheme. The Court will hold a hearing on the Scheme's fairness to Old Melrose Shareholders, at which hearing all such Shareholders will be entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme.
The New Melrose Ordinary Shares have not been and will not be registered on a United States securities exchange or quoted on any inter- dealer quotation system in the United States. New Melrose does not intend to take any action to facilitate a market in New Melrose Ordinary Shares in the United States. Consequently, New Melrose believes that it is unlikely that an active trading market in the United States will develop for the New Melrose Ordinary Shares.
Neither the SEC nor any other US federal or state securities commission or regulatory authority has approved or disapproved the New Melrose Ordinary Shares or passed an opinion on the adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.
Old Melrose and New Melrose are public limited companies incorporated under the laws of England and Wales. All of the Directors of Old Melrose and New Melrose are citizens or residents of countries other than the United States. Substantially all of the assets of such persons and a significant proportion of the assets of Old Melrose and New Melrose are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon such persons, Old Melrose or New Melrose, or to enforce against them judgments of US courts, including judgments predicated upon civil liabilities under the securities laws of the United States or any state or territory within the United States. The United States and the United Kingdom do not have a treaty providing for the reciprocal recognition of judgements (other than arbitral awards) in civil and commercial matters. Consequently, a final and conclusive judgement by any federal or state court of the United States based on civil liability, whether or not predicated solely upon US federal securities laws, would not automatically be enforceable in England and Wales. In addition, it is doubtful whether the courts of England and Wales would accept jurisdiction and impose civil liability if proceedings were commenced in England or Wales in an original action predicated solely upon US federal securities laws.
Some financial and other numerical information in this Prospectus has been rounded and, as a result, the numerical figures shown as totals in this Prospectus may vary slightly from the exact arithmetic aggregation of the figures that precede them.
The New Melrose Ordinary Shares have not been, and will not be, registered under the securities laws of any state or jurisdiction of the United States and, accordingly, will only be issued to the extent that exemptions from the registration or qualification requirements of state ''blue sky'' securities laws are available or such registration or qualification requirements have been complied with.
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors 14
Important Information 33
Expected Timetable of Principal Events 34
Directors, Company Secretary, Registered Office and Advisers 35
Part I Information on the Proposals 36
Part II Information on Old Melrose and new Melrose 44
Part III Operating and Financial Review Relating to the Melrose Group 51
Part IV Capital Resources 53
Part V Historical Financial Information Relating to Old Melrose 58
Part VI Unaudited Pro Forma Information on the Melrose Group 60
Part VII United Kingdom Taxation Considerations 65
Part VIII Directors, Corporate Governance and Employees 69
Part IX Additional Information 82
Definitions 113
Documents Incorporated by Reference 120
SUMMARYSummaries are made up of disclosure requirements known as 'Elements'. The elements are numbered in Sections A-E (A.1-E.7).
This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some of the Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.
Even though an Element may be required to be inserted because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of 'not applicable'.
Element | Disclosure Requirement | Disclosure |
A.1 | Warning | THE FOLLOWING SUMMARY SHOULD BE READ AS AN INTRODUCTION TO THIS PROSPECTUS ONLY. ANY DECISION TO INVEST IN NEW MELROSE ORDINARY SHARES SHOULD BE BASED ON A CONSIDERATION OF THIS PROSPECTUS AS A WHOLE INCLUDING THE INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. |
Where a claim relating to information contained in this Prospectus is brought before a court, a plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating this Prospectus before legal proceedings are initiated. Civil liability attaches only to those persons who have tabled this summary, including any translation of this summary but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus or it does not provide, when read together with the other parts of this Prospectus, key information in order to aid investors when considering whether to invest in New Melrose Ordinary Shares. | ||
A.2 | Subsequent resale of securities or final placement of securities through financial intermediaries | Not applicable. New Melrose is not engaging any financial intermediaries for any resale of securities or final placement of securities after publication of this Prospectus. |
Section B-ISSUER | ||
Element | Disclosure Requirement | Disclosure |
B.1 | Legal and commercial name | New Melrose Industries PLC (to be renamed as Melrose Industries PLC) (''New Melrose'') |
B.2 | Domicile and legal form, applicable legislation and jurisdiction of incorporation | New Melrose was incorporated in England and Wales on 29 September 2015 under the Companies Act as a public company limited by shares with registration number 9800044 and was incorporated for the purpose of implementing the Scheme. New Melrose is domiciled in the United Kingdom and the principal legislation under which it operates is the Companies Act. |
B.3 | Current operations and principal activities | As part of the Proposals, New Melrose will become the holding company of the Melrose Group on the Scheme becoming effective. New Melrose has no current operations or activities and has not traded since incorporation. |
The principal businesses operated by Old Melrose's trading subsidiaries are discussed below:
Brush
Brush Turbogenerators is the world's largest independent manufacturer of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors.
From its five plants in the UK, Czech Republic, the Netherlands, the US and the newly built generator plant in China, Brush designs, manufactures and services turbogenerators, for both gas and steam turbine applications, and supplies a globally diverse customer base.
In addition, Brush designs and manufactures systems and power transformers under the brand name Brush Transformers and also produces a wide range of indoor and outdoor medium voltage AC/DC switchgear under the Hawker Siddeley Switchgear brand name. A further brand, Harrington Generators International, is a specialist UK-based small generator manufacturer supplying the construction, military, telecoms and rail sectors.
Elster
The Elster business is a world leader in measuring and improving the flow of natural gas, electricity and water. The Elster Group comprises three operating units: Elster Gas (the gas meters, systems, heat process units and technologies business segment), Elster Electricity (the electricity meters, communications and energy management business segment) and Elster Water (the water metering and communications systems business segment).
On 28 July 2015, the Board announced that, in line with its ''buy, improve, sell'' business model, the Melrose Group had entered into an agreement with respect to the sale of the Elster Group to Honeywell International Inc. for a consideration of £3.3 billion, subject to customary adjustments, payable in cash on completion. The Disposal is expected to complete in the first quarter of 2016 and remains conditional upon, among other things, obtaining approvals from regulatory authorities in Brazil, China, the European Union, South Africa and Turkey. The Shareholders of Old Melrose approved the Disposal at a general meeting of Old Melrose, held on 21 August 2015.
4a Significant recent trends On 28 July 2015, Old Melrose published its unaudited results for affecting the Melrose the six month period to 30 June 2015. The following text has been Group and the extracted from that statement:
industries in which it ''Elster has performed strongly. Headline operating profit is up operates 22%, at constant currency, at the half year and headline operating
margins have increased in all three of its businesses to a combined 20.1% on sales. Revenue growth of 14%, at constant currency, has been achieved, driven by strong performances in Gas and Electricity. With order intake growth at 18%, Elster's prospects remain exciting.
Brush has experienced challenging markets in the first half of 2015. However, with actions being taken to reduce cost and enhance efficiency and with a better order phasing, a much improved performance is expected going forward.''
''Current trading conditions remain challenging for Brush, but with action being taken in the business, coupled with a better order phasing, a much improved second half of 2015 is anticipated. Brush is a high quality business and your Board believes that its medium to long term prospects continue to look attractive.
Your Board is optimistic about the future and believes that Melrose is very well positioned to continue to create superior value for shareholders.''
There has been no change to the Board's expectations since the publication of the interim results on 28 July 2015.
Description of the Old Melrose is the holding company of various principal Melrose Group and subsidiaries. On the Scheme becoming effective, New Melrose will New Melrose's position become the holding company of all of these subsidiaries.
therein
Interests in New So far as New Melrose is aware, as at the Latest Practicable Date, Melrose and voting the following persons hold voting rights, whether directly or rights indirectly, of (and/or holdings, whether direct or indirect, of certain financial instruments which give the holder an unconditional right
or a right exercisable in his sole discretion to acquire) three per cent. or more of the ordinary issued share capital of Old Melrose:
Shareholder
Number of Old Melrose Ordinary Shares(1)
Approximate percentage of Old Melrose
issued share capital
BlackRock, Inc. . . . . . . . . . . . Aberdeen Asset Managers
Limited . . . . . . . . . . . . . . .
104,103,286
53,456,498
9.71%
4.99%
Schroders plc . . . . . . . . . . . . .
46,308,210
4.32%
Note:
Where the holding of Old Melrose Ordinary Shares has not been re-notified to Old Melrose since the share capital consolidation became effective on 20 February 2015, the number of Old Melrose Ordinary Shares is as notified to Old Melrose prior to this consolidation.
As at the Latest Practicable Date, the interests (all of which are beneficial) of the Directors, their immediate families and (so far as is known to them or could with reasonable diligence be ascertained by them) persons connected (within the meaning of section 96B of FSMA) with the Directors in the issued share capital of Old Melrose, including: (i) those arising pursuant to transactions notified to Old Melrose pursuant to Disclosure and Transparency Rule 3.1.2R; or (ii) those of the connected persons of the Directors, which would, if such connected person were a Director, be required to be disclosed under (i) above, together with such interests as are expected to subsist immediately following Admission, are set out in the following table:
Interests as at the Latest Practicable DateNumber of Old Melrose
Ordinary Shares
Percentage of Old Melrose issued ordinary share capital
Executive Chairman
Christopher Miller(1) . . . . . . . . . .
14,203,260
1.427%
Executive Vice-Chairman
David Roper . . . . . . . . . . . . . . . .
7,530,783
0.757%
Executive Directors:
Simon Peckham . . . . . . . . . . . . .
7,775,196
0.781%
Geoffrey Martin . . . . . . . . . . . . .
3,739,054
0.376%
Non-Executive Directors:
Perry Crosthwaite . . . . . . . . . . . .
174,724
0.018%
John Grant . . . . . . . . . . . . . . . . .
275,257
0.028%
Justin Dowley . . . . . . . . . . . . . . .
451,264
0.045%
Elizabeth Hewitt . . . . . . . . . . . . .
24,202
0.002%
Note:
(1) The interest of Christopher Miller includes 5,311,426 Old Melrose Ordinary Shares held by Harris & Sheldon Investments Limited, a company which is connected with Christopher Miller within the meaning of section 252 of the Companies Act.
Number of options over Old Melrose 2012 Incentive Shares held at the Latest Practicable DateChristopher Miller . . . . . . . . . . . . . . . . . . . . . . 8,500
David Roper . . . . . . . . . . . . . . . . . . . . . . . . . . 8,500
Simon Peckham . . . . . . . . . . . . . . . . . . . . . . . . 8,500
Geoffrey Martin . . . . . . . . . . . . . . . . . . . . . . . 8,500
None of the Old Melrose Ordinary Shareholders referred to above has now, or will following the Proposals have, different voting rights from any other holder of Old Melrose Ordinary Shares or New Melrose Ordinary Shares in respect of any Old Melrose Ordinary Shares or New Melrose Ordinary Shares held by them.
As at the Latest Practicable Date, New Melrose is not aware of any person or persons who directly or indirectly, acting jointly with others or acting alone, exercised or could exercise control over Old Melrose.
Select historical The summary financial information set out below has been financial information extracted without material adjustment from the audited consolidated accounts of the Melrose Group for the years ended
31 December 2014, 31 December 2013 and 31 December 2012, and from the unaudited interim statements of the Melrose Group for the six month period ended 30 June 2015.
Since 30 June 2015, being the date to which the last interim unaudited results of the Melrose Group were prepared, the Melrose Group has entered into the Disposal Agreement in relation to the Disposal. The illustrative financial impact of the Disposal, once completed, is set out further under element B.8 below.
Condensed consolidated income statementSix months ended
30 June Year ended 31 December
2015 2014(1) 2014(2) 2014 2013(3) 2013 2012(4) 2012
£m £m £m £m £m £m £m £m Unaudited Unaudited Unaudited Audited Audited Audited Audited Audited
Restated Restated Restated Restated
Revenue . . . . . 117.7 164.5 327.3 1,377.5 1,466.4 1,732.8 1051.1 1,551.4
Gross profit . . . 35.8 54.3 107.1 502.5 514.4 607.3 331.0 483.5
Operating (loss)/
profit . . . . . . (3.2) 27.0 37.1 162.4 192.5 219.9 54.0 137.1
Headline(5)
operating profit 6.1 26.0 48.1 246.0 240.0 274.9 149.3 243.1
(Loss)/Profit
before tax . . . (13.4) 13.2 12.6 128.9 144.0 171.1 6.3 92.0
(Loss)/Profit for the period from continuing
operations . . . (12.1) 11.5 8.3 87.1 102.4 121.9 (6.9) 42.9
69.8
38.8
186.4
107.6
462.2
442.7
47.7
1.3
57.7
50.3
194.7
194.7
564.6
564.6
40.8
44.2
Profit for the period from discontinued operations . . .
Profit for the period . . . . .
Earnings per share
From continuing operations:
Basic . . . . . . .
Diluted . . . . . .
(1.2)p
(1.2)p
1.0p
1.0p
0.8p
0.8p
7.9p
7.8p
7.9p
7.8p
9.5p
9.3p
(0.9)p
(0.9)p
4.4p
4.3p
Notes:
Restated to include the results of Bridon and the Elster Group within discontinued operations.
Restated to include the results of the Elster Group within discontinued operations.
Restated to include the results of Bridon within discontinued operations.
Restated to include the results of Truth, Marelli, Crosby, Acco and Harris within discontinued operations and for the adoption of IAS 19 (revised): ''Employee Benefits''.
Before exceptional costs, exceptional income and intangible asset amortisation.
Condensed consolidated balance sheetAs at 30 June As at 31 December
2015
2014
2014(1)
2014
2013
2012(2)
2012
£m
£m
£m
£m
£m
£m
£m
Unaudited
Unaudited
Unaudited Restated
Audited
Audited
Audited Restated
Audited
Non-current assets . . . . .
388.5
2,856.6
2,685.7
2,689.9
2,944.5
3,530.6
3,496.2
Current assets . . . . . . . .
2,640.6
640.9
498.4
498.4
732.8
919.4
920.0
Total assets . . . . . . . . .
3,029.1
3,497.5
3,184.1
3,188.3
3,677.3
4,450.0
4,416.2
Current liabilities . . . . . .
856.2
484.9
452.0
452.0
524.4
696.3
692.0
Non-current liabilities . . . .
861.2
1,518.3
1,158.4
1,162.6
965.0
2,012.0
1,982.5
Total liabilities . . . . . . .
1,717.4
2,003.2
1,610.4
1,614.6
1,489.4
2,708.3
2,674.5
Net assets . . . . . . . . . .
1,311.7
1,494.3
1,573.7
1,573.7
2,187.9
1,741.7
1,741.7
Notes:
Restated to reflect the completion of the acquisition accounting of Eclipse Inc.
Restated to reflect the completion of the acquisition accounting for the Elster Group.
Select unaudited The following unaudited pro forma income statement and pro forma financial statement of net assets of the Melrose Group has been based on information the income statement of the Old Melrose Group for the year ended 31 December 2014 and the net assets of the Old Melrose Group as
at 30 June 2015 and has been prepared in accordance with Annex II of the Prospectus Rules and on the basis of the notes set out below.
The unaudited pro forma income statement has been prepared to illustrate the effect of the Disposal and the Proposed Return of Capital on the income statement of the Melrose Group as if completion of the Disposal and the Proposed Return of Capital had occurred on 1 January 2014.
The unaudited pro forma statement of net assets has been prepared to illustrate the effect of the Disposal and the Proposed Return of Capital on the IFRS position of the Melrose Group as if completion of the Disposal and the Proposed Return of Capital had occurred on 30 June 2015.
As indicated above, the unaudited pro forma income statement and statement of the net assets has been prepared for illustrative purposes only. Due to its nature, it addresses a hypothetical situation and, therefore, does not represent the Melrose Group's actual financial position or results following completion of the Disposal or the Proposed Return of Capital.
Unaudited pro forma statement of net assets of the Old Melrose Group as at 30 June 2015Adjustments for the Disposal
Proposed Unaudited Return of pro forma of
Non-current assets
Goodwill and other
Melrose Group Elster Group Capital and the Melrose
as at 30 June as at repayment of Group as at 2015 30 June 2015 Net proceeds borrowings 30 June 2015
£m £m £m £m £m Note 1 Note 2 Note 3 Note 4 Note 5
intangible assets . . . . . 272.5 272.5
Property, plant and
equipment . . . . . . . .
110.6
110.6
Deferred tax assets . . . . .
5.4
5.4
388.5
-
-
-
388.5
Current assets
Inventories . . . . . . . . .
58.6
58.6
Trade and other receivables
73.2
73.2
Derivative financial assets .
7.6
7.6
Cash and cash equivalents .
45.6
3,279.0
(3,037.9)
286.7
Assets held for sale . . . .
2,455.6
(2,455.6)
-
2,640.6
(2,455.6)
3,279.0
(3,037.9)
426.1
Total assets . . . . . . . . .
3,029.1
(2,455.6)
3,279.0
(3,037.9)
814.6
Current liabilities
Trade and other payables .
(93.0)
(93.0)
Interest-bearing loans and
borrowings . . . . . . . .
(1.2)
1.2
-
Derivative financial
liabilities . . . . . . . . .
(7.5)
(7.5)
Current tax liabilities . . . .
(1.8)
(1.8)
Provisions . . . . . . . . . .
(15.4)
(15.4)
Liabilities held for sale . . .
(737.3)
737.3
-
(856.2)
737.3
-
1.2
(117.7)
Net current assets . . . . .
1,784.4
(1,718.3)
3,279.0
(3,036.7)
308.4
Non-current liabilities
Interest-bearing loans and
borrowings . . . . . . . .
(786.7)
786.7
-
Derivative financial
liabilities . . . . . . . . .
(2.2)
(2.2)
Deferred tax liabilities . . .
(15.9)
(15.9)
Retirement benefit
obligations . . . . . . . .
(34.1)
(34.1)
Provisions . . . . . . . . . .
(22.3)
(22.3)
(861.2)
-
-
786.7
(74.5)
Total liabilities . . . . . . .
(1,717.4)
737.3
-
787.9
(192.2)
Net assets . . . . . . . . . .
1,311.7
(1,718.3)
3,279.0
(2,250.0)
622.4
Notes:
The unaudited pro forma statement of net assets as at 30 June 2015 has been compiled on the following basis:
The net assets of the Melrose Group have been extracted without material adjustment from the Old Melrose Group's unaudited interim financial statements for the six months ended 30 June 2015 prepared in accordance with IAS 34: ''Interim Financial Reporting'' as adopted by the European Union.
These adjustments remove the assets and liabilities relating to the Elster Group, reflecting the fact that, following the Disposal, the Melrose Group will no longer consolidate the results of the Elster Group. The financial information on the Elster Group (including the McKechnie Plan and the FKI UK DB Scheme) has been extracted, without material adjustment, from the historical information on the Elster Group set out in part IV (Financial Information Relating to the Elster Group) of the Old Melrose Elster Circular incorporated by reference into this Circular.
The adjustment reflects the estimated cash proceeds of £3,300 million to be received from the Disposal, less associated costs of the Disposal of an estimated £21 million.
It is intended that £2,000 million-£2,500 million of the cash proceeds from the Disposal will be returned to shareholders. For illustrative purposes only, a Proposed Return of Capital of
£2,250 million is shown, which is the mid-point of the £2,000 million-£2,500 million range. The remainder of the cash proceeds will be used, in part, to repay the Melrose Group's interest- bearing loans and borrowings. For illustrative purposes only, a repayment of £787.9 million is shown, which is the total amount of the Melrose Group's interest-bearing loans and borrowings at 30 June 2015.
No adjustments have been made to reflect the trading or other transactions of the Melrose Group since 30 June 2015. The unaudited pro forma statement of net assets does not constitute statutory accounts within the meaning of section 434 of the Companies Act.
Unaudited pro forma income statement of the Melrose Group for year ended 31 December 2014
The income statement of the Melrose Group has been extracted without material adjustment from the Old Melrose Group's audited 2014 financial statements for the year ended 31 December 2014 prepared in accordance with International Financial Reporting Standards.
These adjustments remove the income statement balances relating to the Elster Group, reflecting the fact that, following the Disposal, the Melrose Group will no longer consolidate the results of the Elster Group (including the McKechnie Plan and the FKI UK DB Scheme). The financial information extracted is based upon the disclosures made in the Old Melrose Group's unaudited interim financial statements for the six months ended 30 June 2015 in which the 2014 income statement was restated to exclude the results of the Elster Group from continuing operations.
This adjustment is made based on the assumption that the proceeds from the sale of the Elster Group were received and the corresponding Proposed Return of Capital took place on 1 January 2014. An adjustment has been made to reduce the net finance costs for the year ended 31 December 2014 on the basis that part of the cash proceeds from the Disposal will be used to repay the Melrose Group's interest-bearing loans and borrowings. For illustrative purposes only, the repayment of all debt is assumed. The adjustment reflects the illustrative subsequent reduction in net finance costs, being the net of finance costs and finance income relating to loan balances held throughout the period of £22.4 million. In addition estimated project costs of £1.0 million have
Set out below are details of significant changes in the financial condition and operating results of the Melrose Group during the period covered by the audited annual reports and accounts for the three years ended 31 December 2014 and the unaudited financial statements for the six months ended 30 June 2015 to the Latest Practicable Date.
Unless otherwise indicated, the following variations in operating performance are stated on a constant currency basis.
In the year ended 31 December 2012, the Melrose Group delivered a strong overall performance, achieving a 7 per cent. increase in revenue and 9 per cent. increase in headline operating profit for its
continuing businesses. The Energy division (Brush and Marelli Motori) performed well with revenue and headline operating profit both up 8 per cent. as the businesses benefited from strong demand in the energy and oil & gas end markets. The Lifting division (Bridon, Crosby and Acco) also performed strongly with revenue up 8 per cent. and headline profit up 15 per cent., also benefitting from robust demand in the energy, oil & gas and mining end markets. The Other Industrial division (Truth Hardware and Harris) delivered an increase in headline operating profit of 2 per cent. despite a slight decline in revenue of 5 per cent. off the back of an improving US housing market. During the year the Melrose Group acquired the Elster Group for £1.8 billion. In the four months under Melrose ownership the Elster Group achieved an 11 per cent. increase in headline operating profit despite a slight decline in revenue of 2 per cent. on a pro forma basis.
In the year ended 31 December 2013, the Melrose Group achieved an increase in headline operating profit of 20 per cent. despite a slight decrease in revenue of 3 per cent. for its continuing businesses. The Elster Group performed very strongly with a headline operating profit increase of 37 per cent. despite a 3 per cent. decrease in revenue, driven by the restructuring programmes and operational improvement initiatives (including the closure of uneconomic facilities, new product launches and the rationalisation and relocation of manufacturing operations) implemented soon after it was acquired. Brush and Bridon experienced a decrease in revenue and headline operating profit of 4 per cent. and 6 per cent., respectively, as Brush suffered from delays in funding approvals and uncertainty in investment decisions from its turbine original equipment manufacturer customers as a consequence of the global financial crisis and as Bridon performance was impacted by reductions in operating expenditure in the mining industry, despite improved trading conditions in its other core sectors. In the second half of the year, the Melrose Group completed the disposals of five businesses (Truth Hardware, Marelli Motori, Crosby, Acco and Harris) for a total consideration of approximately £950 million.
In the year ended 31 December 2014, the Melrose Group achieved a notable increase in headline operating profit of 11 per cent. on flat revenue for its continuing businesses. The Elster Group performed very strongly with a headline operating profit increase of 14 per cent. achieved on the back of a 1 per cent. increase in revenue. All three businesses within the Elster Group achieved large gains in headline operating profit as the Melrose Group continued with its programme of efficiency improvements. Brush experienced a small decline in revenue and headline operating profit of 3 per cent. and 7 per cent. respectively, as it continued to face a challenging market, particularly in new build generators. Overall, movements in exchange rates in 2014 caused a headwind to profits of around 8 per cent. During the year, the Melrose Group completed the disposal of Bridon for £365 million and the acquisition of Eclipse Inc. (which forms part of the Elster Group) for £98 million.
During the period from 1 January to 30 June 2015, the Elster Group performed strongly with revenue increasing by 14 per cent. and headline operating profit increasing by 22 per cent., benefitting from strong order demand in Gas and Electricity. Brush experienced challenging markets in the first half of 2015. The Melrose Group's results were affected by the announcement on
28 July 2015 of the disposal of the Elster Group for £3.3 billion, as a result of which the Elster Group's results for the period were reported within discontinued operations.
Save as set out above there has been no significant change in the financial condition and operating results of the Melrose Group during or after the period covered by the historical key financial information on the Melrose Group set out in this section. The Disposal, if it completes, will constitute a significant change for the Melrose Group.
Since its incorporation on 29 September 2015, New Melrose has not traded and there has been no significant change in the financial or trading position of New Melrose.
Adjustments to Melrose Group Elster Group reflect disposal
year to year to proceeds and Pro forma 31 December 31 December return of continuing
2014 2014 capital Group
£m £m £m £m Note 1 Note 2 Note 3 Note 4
Revenue . . . . . . . . . . . . 1,377.5 (1,050.2) - 327.3
Cost of sales . . . . . . . . . . (875.0) 654.8 - (220.2)
Gross profit . . . . . . . . . . 502.5 (395.4) - 107.1Headline(5) operating
expenses . . . . . . . . . . . (259.7) 199.6 - (60.1)
Share of headline results of
joint ventures . . . . . . . . 3.2 (2.1) - 1.1
Intangible asset
amortisation . . . . . . . . | (54.7) | 46.1 | - | (8.6) |
Exceptional operating costs | (34.3) | 26.5 | (1.0) | (8.8) |
Exceptional operating |
income . . . . . . . . . . . . 5.4 - - 5.4
Total net operating
expenses . . . . . . . . . . . | (340.1) | 270.1 | (1.0) | (71.0) | |||
Operating profit . . . . . . . | 162.4 | (125.3) | (1.0) | 36.1 | |||
Headline(5) operating profit | 246.0 | (197.9) | - | 48.1 | |||
Finance costs . . . . . . . . . | (48.2) | 9.5 | 35.5 | (3.2) | |||
Finance income . . . . . . . . | 14.7 | (0.5) | (13.1) | 1.1 | |||
Profit before tax . . . . . . . | 128.9 | (116.3) | 21.4 | 34.0 | |||
Headline(5) profit before tax | 212.5 | (188.9) | 22.4 | 46.0 | |||
Headline(5) tax . . . . . . . . | (57.4) | 52.2 | (4.8) | (10.0) | |||
Exceptional tax . . . . . . . . | 15.6 | (14.7) | - | 0.9 | |||
Total tax . . . . . . . . . . . . Profit for the year from continuing operations . . . | (41.8) 87.1 | 37.5 (78.8) | (4.8) 16.6 | (9.1) 24.9 | |||
Headline(5) profit for the | |||||||
year from continuing operations . . . . . . . . . . | 155.1 | (136.7) | 17.6 | 36.0 | |||
Profit for the year from | |||||||
discontinued operations . | 107.6 | 78.8 | - | 186.4 | |||
Profit for the year . . . . . . | 194.7 | - | 16.6 | 211.3 | |||
Notes:
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distributed by
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