REG - Melrose Industries - Notification of transfer to a Premium Listing <Origin Href="QuoteRef">MRON.L</Origin> - Part 4
24/03/2017 14:35
- Part 4: For the preceding part double click ID:nRSX5026Ac
demand for security and home automation products. Consumer spending, employment levels, regulation, technological
advancements and the evolution of the traditional security market towards home automation and other macroeconomic factors
influence demand for these products.
The Ergonomics segment includes Ergotron, one of the world's largest manufacturers of computer ergonomics equipment.
Ergotron provides a wide variety of solutions to healthcare, education, corporate office and home applications. The key
driver for revenue and operating margins is demand for technology and wellness products in the markets in which Ergotron
operates. Seasonal factors, public authority spending, corporate and consumer spending, employment levels, the public
awareness of wellness, regulation, technological advancements and other macroeconomic factors influence demand for these
products.
(3)Long-term growth rates
Long-term growth rates are based on long-term forecasts for growth in the sectors and geography in which the CGU operates.
Long-term growth rates are determined using a blend of publicly available historical data and a long-term growth rate
forecast and further take into account the international presence and the markets in which each business operates.
Energy group of CGUs - Brush China
The goodwill related to the Energy group of CGUs is tested for impairment by comparing the carrying amount of the Energy
group against recoverable amounts of the Energy CGUs. As disclosed within note 3, determination of the Brush China
recoverable amount involved management judgement on highly uncertain matters, particularly with respect to the level of
demand for generators in the Chinese market, the successful resolution of current customer discussions, and therefore the
timing and quantity of forecast unit sales, as well as long term growth rates and discount factors. The value in use model
prepared for Brush China was prepared using cash flow projections to the end of the life of the Brush China factory, was
discounted at a pre-tax discount rate of 11.7% and used sale price and cost inflation data from available market sources.
Sensitivity analysis
The forecasts, prepared using a methodology required by IAS 36: "Impairment of assets", show headroom of £95.4 million
above the carrying amount for the Energy group of CGUs. In accordance with IAS 36 a sensitivity analysis has been
undertaken and a reasonably possible increase in the discount rate from 11.0% to 12.8% would reduce headroom to £nil. A
reasonably possible decrease in revenue in 2017 of 19% from 2016 revenue of £246.4 million (on a constant currency basis)
would also reduce headroom to £nil. The recoverable amounts of the Air Management, Security & Smart Technology, and
Ergonomics groups of CGUs are higher than the recent acquisition date fair values of these groups of CGUs, and as a result,
no sensitivity analysis has been disclosed.
12. Goodwill and other intangible assets (continued)
Allocation of significant intangible assets
The allocation of significant customer relationships, brands and intellectual property is as follows:
Customer relationships Brands and intellectual property
Remaining amortisation period Net book value Remaining amortisation period Net book value
31 December2016years 31 December 2015years 31 December 2016£m 31 December 2015£m 31 December 2016years 31 December 2015years 31 December 2016£m 31 December 2015£m
AQH 14 - 213.0 - 15 - 65.9 -
HVAC 11 - 117.7 - 15 - 84.6 -
SCS 14 - 130.4 - 15 - 30.0 -
Ergotron 10 - 115.7 - 18 - 97.4 -
Brush 2 3 4.5 7.1 12 13 65.6 66.6
581.3 7.1 343.5 66.6
Acquisition of businesses
On 31 August 2016 the Group acquired 100 per cent of the issued share capital and obtained control of Nortek Inc.
("Nortek") for cash consideration of £1,093.1 million.
Nortek is a leading diversified global manufacturer of innovative air management, security, home automation and ergonomic
and productivity solutions (note 5).
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table
below. Fair values are provisional as of 31 December 2016 and are based on the information held to date. Should additional
information come to light that would require adjustment to the fair values recognised in the table below, such adjustments
would be recorded if material.
Fair value£m
Nortek
Property, plant and equipment 143.3
Intangible assets, computer software and development costs 868.4
Interests in joint ventures 3.0
Inventories 255.6
Trade and other receivables 301.5
Cash and cash equivalents 9.4
Trade and other payables (360.4)
Provisions (209.7)
Deferred tax (163.7)
Retirement benefit obligations (42.2)
Current tax (9.4)
Interest-bearing loans and borrowings (1,065.9)
Net liabilities (270.1)
Total consideration 1,093.1
Goodwill 1,363.2
Amounts recycled to goodwill 39.5
Total goodwill 1,402.7
Total consideration satisfied by:
Cash consideration 1,093.1
Acquisition related costs charged through the income statement amount to £38.7 million (note 6).
The fair value of financial assets include gross trade and other receivables of £318.3 million. The best estimate at
acquisition date of the contractual cash flows not to be collected is £16.8 million.
Amounts recycled to goodwill of £39.5 million relates to the impact of the Group's hedging strategy to fix the cash cost of
the consideration at the date of the acquisition announcement. The difference between the cash cost based on the exchange
rate on the date of completion and the exchange rate entered into to hedge the transaction, representing the effective
element of the hedge, has been recycled to goodwill.
Nortek contributed £642.9 million to revenue and £86.3 million to underlying operating profit for the four month period
between the date of acquisition and the Balance Sheet date.
12. Goodwill and other intangible assets (continued)
If the acquisition of Nortek had been completed on the first day of the financial year, Group revenues would have been
approximately £2,077 million and Group underlying operating profit would have been approximately £196 million.
The goodwill arising on acquisition of Nortek is attributable to the anticipated profitability and cash flows arising from
the businesses acquired, the assembled workforce, technical expertise, knowhow, market share and geographical advantages
afforded to the Group, and which, as described earlier in this note, the Group expects to realise through a combination of
revised strategic direction, operational improvements and investment. None of the goodwill is expected to be deductible for
income tax purposes.
Contingent liabilities acquired in respect of warranty obligations of £7.6 million and legal claims of £15.2 million have
been recognised within provisions, none of which were utilised in the period. The majority of expenditure is expected to be
incurred over the next five years.
13. Property, plant and equipment
Land and buildings£m Plant and equipment£m Total£m
Cost
At 1 January 2015 86.5 191.9 278.4
Additions 5.9 23.7 29.6
Disposals (1.1) (1.8) (2.9)
Disposal of businesses - (2.5) (2.5)
Exchange adjustments (2.9) (8.5) (11.4)
Transfer to held for sale(1) (35.6) (114.3) (149.9)
At 31 December 2015 52.8 88.5 141.3
Additions 1.6 14.7 16.3
Disposals - (0.5) (0.5)
Acquisition of businesses 74.3 69.0 143.3
Exchange adjustments 10.2 14.7 24.9
At 31 December 2016 138.9 186.4 325.3
Accumulated depreciation and impairment
At 1 January 2015 (9.6) (69.2) (78.8)
Charge for the year (2.3) (15.3) (17.6)
Disposals 0.5 1.3 1.8
Disposal of businesses - 2.3 2.3
Exchange adjustments 0.5 4.2 4.7
Transfer to held for sale(1) 6.6 52.6 59.2
At 31 December 2015 (4.3) (24.1) (28.4)
Charge for the year (2.6) (13.3) (15.9)
Disposals - 0.2 0.2
Impairments(2) (2.2) (0.3) (2.5)
Exchange adjustments (2.0) (4.8) (6.8)
At 31 December 2016 (11.1) (42.3) (53.4)
Net book value
At 31 December 2016 127.8 144.1 271.9
At 31 December 2015 48.5 64.4 112.9
At 1 January 2015 76.9 122.7 199.6
(1) Transferred to assets held for sale at 30 June 2015 in accordance with IFRS 5, subsequently disposed on 29 December
2015.
(2) The impairment charges in the year relate to the closure of the Nortek head office.
14. Interests in joint ventures
31 December 31 December
2016 2015
£m £m
Aggregated amounts relating to joint ventures:
Share of assets 2.6 2.4
Share of liabilities (2.6) (2.4)
Interests in joint ventures - -
Share of joint venture revenues 1.9 1.7
Share of results of joint ventures 0.9 0.3
Dividends received from joint ventures (0.9) (0.3)
A list of subsidiaries and significant holdings including the name, country of incorporation and proportion of ownership
interest is given in note 3 to the Company's separate financial statements.
15. Inventories
31 December 31 December
2016 2015
£m £m
Raw materials 74.9 14.0
Work in progress 48.4 31.4
Finished goods 174.0 10.2
297.3 55.6
The Directors consider that there is no material difference between the Balance Sheet value of inventories and their
replacement cost.
Construction contracts
31 December2016£m 31 December2015£m
Contracts in progress at the Balance Sheet date:
Amounts due from contract customers included in other receivables 2.3 4.3
2.3 4.3
Contract costs incurred plus recognised profit less recognised losses to date 2.3 7.5
Less: progress billings - (3.2)
2.3 4.3
The average life of contracts is one to two years (31 December 2015: one to two years).
16. Trade and other receivables
Current 31 December 31 December
2016 2015
£m £m
Trade receivables 348.4 58.1
Allowance for doubtful receivables (18.3) (0.8)
Other receivables 15.2 4.3
Prepayments 20.5 6.3
365.8 67.9
Trade receivables are non interest-bearing. Credit terms offered to customers vary upon the country of operation but are
generally between 30 and 90 days.
Non-current 31 December 31 December
2016 2015
£m £m
Other receivables 5.2 1.1
16. Trade and other receivables (continued)
An allowance has been made for estimated irrecoverable amounts with reference to past default experience and management's
assessment of credit worthiness, an analysis of which is as follows:
Nortek£m Energy £m Discontinued£m Total£m
At 1 January 2015 - 0.2 7.2 7.4
Income Statement charge - 0.8 0.8 1.6
Utilised - (0.2) (0.6) (0.8)
Exchange differences - - (0.7) (0.7)
Transfer to held for sale(1) - - (6.7) (6.7)
At 31 December 2015 - 0.8 - 0.8
Acquisition of businesses 16.8 - - 16.8
Income Statement charge 2.2 0.4 - 2.6
Utilised (2.6) (0.3) - (2.9)
Exchange differences 0.9 0.1 - 1.0
At 31 December 2016 17.3 1.0 - 18.3
(1) Transferred to assets held for sale at 30 June 2015 in accordance with IFRS 5, subsequently disposed on 29 December
2015.
The concentration of credit risk is limited due to the large number of customers and because they are unrelated to each
other. Credit control procedures are implemented to ensure that sales are only made to organisations that are willing and
able to pay for them. Such procedures include the establishment and review of customer credit limits and terms. The Group
does not hold any collateral or any other credit enhancements over any of its trade receivables nor does it have a legal
right of offset against any amounts owed by the Group to the counterparty.
The ageing of impaired trade receivables past due is as follows:
Ageing of impaired trade receivables past due 31 December 31 December
2016 2015
£m £m
0 - 30 days 8.6 -
31 - 60 days 6.2 -
60+ days 3.5 0.8
18.3 0.8
Included in the Group's trade receivables balance are overdue trade receivables with a carrying amount of £62.5 million (31
December 2015: £13.6 million) against which an appropriate provision of £18.3 million (31 December 2015: £0.8 million) is
held.
The balance deemed recoverable of £44.2 million (31 December 2015: £12.8 million) is past due as follows:
31 December 31 December
2016 2015£m
£m
0 - 30 days 41.9 5.6
31 - 60 days 0.9 2.6
60+ days 1.4 4.6
44.2 12.8
The Directors consider that the carrying amount of trade and other receivables, including amounts not past due and not
impaired, approximates to their fair value.
17. Cash and cash equivalents
31 December 31 December
2016 2015
£m £m
Cash and cash equivalents 42.1 2,451.4
Cash and cash equivalents comprises cash at bank and in hand which earns interest at floating rates based on daily bank
deposit rates and short-term deposits which are made for varying periods of between one day and one month and earn interest
at the respective short-term deposit rates. The carrying amount of these assets is considered to be equal to their fair
value. The high value in cash and cash equivalents at 31 December 2015 primarily related to the receipt of funds as a
result of the proceeds from the disposal of the Elster disposal group. The associated capital return to shareholders took
place in January 2016 and reduced cash back to normal operating levels.
18. Trade and other payables
Current 31 December 31 December
2016 2015£m
£m
Trade payables 230.2 30.3
Other payables 22.6 12.2
Other taxes and social security 7.4 0.9
Accruals 166.2 27.8
426.4 71.2
Trade payables are non interest-bearing. Normal settlement terms vary by country and the average credit period taken for
trade and other payables is 66 days (2015: 68 days).
Non-current 31 December 31 December
2016£m 2015
£m
Other payables 9.6 -
Accruals 4.1 -
13.7 -
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
19. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. Details of
the Group's exposure to credit, liquidity, interest rate and foreign currency risk are included in note 24.
Current Non-current Total
31 December2016£m 31 December2015£m 31 December2016£m 31 December2015£m 31 December2016£m 31 December2015£m
Floating rate obligations
Bank borrowings - US Dollar loan - - 590.5 - 590.5 -
Fixed rate obligations
Bank borrowings - Euro loan - - 1.7 - 1.7 -
Finance leases
Finance leases 0.5 - 1.1 - 1.6 -
0.5 - 593.3 - 593.8 -
Unamortised finance costs - - (10.2) - (10.2) -
Total interest-bearing loans and borrowings 0.5 - 583.1 - 583.6 -
As at 1 January 2016, the Group held a £200 million Sterling multi-currency revolving credit facility that was undrawn.
This facility was due to mature on 11 July 2019.
On 6 July 2016 a new five year multi-currency US $1.25 billion committed bank facility was entered into to assist with the
acquisition of Nortek and the £200 million revolving credit facility was subsequently cancelled. The new facility consists
of a US $350 million term loan facility and a US $900 million revolving credit facility.
The US $350 million term loan facility was fully drawn at 31 December 2016. The drawdowns under the revolving credit
facility as of 31 December 2016 were US $379 million.
Throughout the year, the Group remained compliant with all covenants under the facilities disclosed above. A number of
companies are guarantors under the new bank facility.
Drawdowns under the new facility bear interest at interbank rates of interest plus a margin determined by reference to the
Group's performance under its debt cover covenant ratio, ranging between 0.85% and 2.00% (31 December 2015: range between
0.75% to 1.90%). The margin as at 31 December 2016 was 1.35% (31 December 2015: 1.55%).
19. Interest-bearing loans and borrowings (continued)
Maturity of financial liabilities
The table below shows the maturity profile of anticipated future cash flows, including interest, on an undiscounted basis
in relation to the Group's financial liabilities. The amounts shown therefore differ from the carrying value and fair
value of the Group's financial liabilities. The contractual terms of derivative liabilities requires gross settlement. Note
24 provides details on notional amounts, and therefore, gross settlements, of material currency pairs.
Interest-bearing loans and borrowings£m Derivative financial liabilities£m Other financial liabilities £m Total financialliabilities£m
Within one year 15.2 4.2 419.0 438.4
In one to two years 18.6 - 13.7 32.3
In two to five years 644.9 - - 644.9
After five years 0.8 - - 0.8
Effect of financing rates (95.9) - - (95.9)
31 December 2016 583.6 4.2 432.7 1,020.5
Within one year - 1.5 70.3 71.8
In one to two years - - - -
In two to five years - - - -
Effect of financing rates - - - -
31 December 2015 - 1.5 70.3 71.8
20. Provisions
Surplus leaseholdproperty costs£m Environmental and legal costs£m Warranty relatedcosts £m Product liability£m Employee related£m Other£m Total£m
At 1 January 2016 5.0 16.8 2.8 - - 5.4 30.0
Acquisition of businesses 10.2 49.0 76.3 37.8 11.3 25.1 209.7
Utilised (1.9) (4.8) (7.9) (1.9) (16.0) (29.6) (62.1)
Net charge to operating profit(1) 5.3 2.3 6.4 4.4 12.9 54.3 85.6
Transfer from accruals - - 2.5 - - 0.3 2.8
Unwind of discount 0.1 0.1 - - - - 0.2
Exchange differences 1.0 3.0 4.9 2.2 0.7 1.6 13.4
At 31 December 2016 19.7 66.4 85.0 42.5 8.9 57.1 279.6
Current 4.9 32.6 33.3 11.5 5.4 50.4 138.1
Non-current 14.8 33.8 51.7 31.0 3.5 6.7 141.5
19.7 66.4 85.0 42.5 8.9 57.1 279.6
(1) Includes £61.4 million of restructuring charges and other non-underlying items and £24.2 million charged through
underlying operating profit.
The provision for surplus leasehold property costs represents the estimated net payments payable over the term of these
leases together with any dilapidation costs. This is expected to result in cash expenditure over the next one to eight
years.
Environmental and legal costs provisions relate to the estimated remediation costs of pollution, soil and groundwater
contamination at certain sites and estimated future costs and settlements in relation to legal claims. Due to their nature,
it is not possible to predict precisely when these provisions will be utilised.
The provision for warranty related costs represents the best estimate of the expenditure required to settle the Group's
obligations, based on past experiences. Warranty terms are, on average, between one and five years.
The employee related provision relates to the estimated cost of the Group's health insurance and workers compensation
plans. The product liability provision relates to the estimated cost of future product and general liabilities claims. Due
to their nature it is not possible to predict precisely when these provisions will be utilised.
Other provisions relate to costs that will be incurred in respect of restructuring programmes, usually resulting in cash
spend within one year. In addition other provisions include long term incentive plans for divisional senior management and
the employer tax on equity-settled incentive schemes which are expected to result in cash expenditure over the next five
years.
Where appropriate, provisions have been discounted using a discount rate of 3% (31 December 2015: 3%).
21. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the
current and prior reporting period.
Deferred tax assets Deferred tax liabilities
Tax losses and other assets£m Accelerated capital allowances and other liabilities£m Deferred tax on intangible assets£m Total deferred tax liabilities£m Total netdeferred tax£m
At 1 January 2015 68.7 (7.5) (259.8) (267.3) (198.6)
Credit to income 22.1 1.0 9.5 10.5 32.6
Charge to other comprehensive income (0.5) (5.2) - (5.2) (5.7)
Transfer to held for sale(1) (61.9) 5.2 224.1 229.3 167.4
Exchange differences (2.7) - 12.5 12.5 9.8
At 31 December 2015 25.7 (6.5) (13.7) (20.2) 5.5
Acquisition 168.2 - (331.9) (331.9) (163.7)
Credit/(charge) to income 22.8 (2.3) 12.8 10.5 33.3
Credit/(charge) to other comprehensive income 4.8 (2.7) - (2.7) 2.1
Exchange differences 1.2 (0.2) (22.6) (22.8) (21.6)
222.7 (11.7) (355.4) (367.1) (144.4)
Set off of assets and liabilities(2) (173.4) - 173.4 173.4 -
Net amount at 31 December 2016 49.3 (11.7) (182.0) (193.7) (144.4)
(1) Transfers to assets and liabilities held for sale at 30 June 2015 in accordance with IFRS5, subsequently disposal on
29 December 2015.
(2) Set off of deferred tax assets and liabilities in accordance with IAS 12 within the Nortek US Federal tax group.
As at 31 December 2016, the Group had gross unused federal and corporate losses of £274.4 million (31 December 2015: £184.0
million) available for offset against future profits. At 31 December 2016, a £34.9 million deferred tax asset (31 December
2015: £21.2 million) in respect of £169.1 million (31 December 2015: £114.8 million) of these gross losses was recognised
in the Balance Sheet. No asset was recognised in respect of the remaining losses due to the divisional and geographic split
of anticipated future profit streams. The majority of these losses may be carried forward indefinitely subject to certain
continuity of business requirements. In addition a deferred tax asset has been recognised on certain federal tax credits
and state tax losses with a net tax value of £31.8 million (2015: £nil).
A net deferred tax asset of £5.5 million (31 December 2015: liabilities of £0.3 million) was recognised in respect of Group
retirement benefit obligations.
As at 31 December 2016, the aggregate amount of temporary differences associated with undistributed earnings of
subsidiaries was £187.5 million (31 December 2015: £99.5 million) on which deferred tax liabilities not recognised were
£33.8 million (31 December 2015: £nil). No liability is recognised in respect of £170.3 million (2015: £99.5 million) of
the temporary differences associated with undistributed earnings of subsidiaries because the Group is in a position to
control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse
in the foreseeable future.
22. Share-based payments
Melrose Incentive Plan
The Company has 50,000 options (31 December 2015: 50,000 options) in issue which enable the holders of these options to
subscribe for 2012 Incentive Shares. These options are held by Directors and senior employees. Further details of the 2012
Melrose Incentive Plan are provided in the Directors' Remuneration Report on pages 76 to 77.
The inputs into the Black Scholes model that were used to fair value the plan when it was originally established in 2012
were as follows:
Valuation assumptions(1)
Weighted average share price £0.43
Weighted average exercise price £0.54
Expected volatility 30%
Expected life as at inception 5.0 years
Risk free interest 1.0%
(1) Adjusted to include the effects of the Rights Issue (note 11).
22. Share-based payments (continued)
Expected volatility was determined by calculating the historical volatility of the Company's share price.
The Group recognised an IFRS 2 charge of £4.0 million (2015: £4.0 million) in the year ended 31 December 2016 in relation
to the equity-settled 2012 Melrose Incentive Plan.
23. Retirement benefit obligations
Defined contribution plans
The Group operates defined contribution plans for qualifying employees across several jurisdictions. The assets of the
plans are held separately from those of the Group in funds under the control of trustees.
The total costs charged in relation to the continuing businesses during the year of £5.9 million (2015: £3.8 million)
represents contributions payable to these plans by the Group at rates specified in the rules of the plans.
Defined benefit plans
The Group sponsors defined benefit plans for qualifying employees of certain subsidiaries. The funded defined benefit plans
are administered by a separate fund that is legally separated from the Group. The trustees of the funds are required by law
to act in the interest of the fund and of all relevant stakeholders in the plans. The trustees of the pension funds are
responsible for the investment policy with regard to the assets of the fund.
During the year, a number of plans were acquired as part of the acquisition of Nortek. Plans acquired include the funded
Nortek, Inc. Retirement Plan, the unfunded Nortek Supplemental Executive Retirement Plans and the unfunded post retirement
medical benefits in the US, the Eaton-Williams Group Pension and Assurance Scheme in the UK and a number of small funded
and unfunded defined arrangements across Europe.
The most significant defined benefit pension plans in the Group at 31 December 2016 were:
§ The Brush Group (2013) ("Brush UK") Pension Plan, which is defined benefit in type and is a funded plan. The plan is
closed to new members and the accrual of future benefits for existing members.
§ The Brush Aftermarket North America, Inc. ("Brush US") Group Pension Plan which is defined benefit in type and is a
funded plan. The plan is closed to new members and the accrual of future benefits for existing members.
§ The Nortek, Inc. ("Nortek US") Retirement Plan, which is defined benefit in type and is a funded plan. The plan is
closed to new members and the accrual of future benefits to existing members.
The cost of the Group's defined benefit plans are determined in accordance with IAS 19 (revised): "Employee benefits" using
the advice of independent professionally qualified actuaries on the basis of formal actuarial valuations and using the
projected unit credit method. In line with normal practice, these valuations are undertaken triennially in the UK and
annually in the US.
The valuation of the Brush UK Pension Plan was based on a full actuarial valuation as of 31 December 2013, updated at 31
December 2016 by independent actuaries. The Brush US Pension Plan valuation was based on a full actuarial valuation as of
31 December 2015, updated at 31 December 2016 by independent actuaries. The Nortek US Pension Plan valuation was based on a
full actuarial valuation as of 1 January 2016, updated at 31 December 2016 by independent actuaries.
The Group contributed £10.5 million (2015: £5.1 million) to the defined benefit pension plans in the year ended 31 December
2016.
Following agreement with the Brush Group (2013) Pension Plan Trustees, the Group contributed £8.8 million early to the
Brush UK Pension Plan in the year ended 31 December 2016. No contributions are expected to be made in the year ending 31
December 2017. The Group expects to contribute approximately £0.1 million to the Brush US Pension Plan in the year ending
31 December 2017. The Group expects to contribute approximately £3.7 million to the Nortek US Plan in the year ending 31
December 2017.
In total, the Group expects to contribute approximately £4.9 million to its defined benefit plans in the year ending 31
December 2017.
23. Retirement benefit obligations (continued)
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group's pension liabilities are as set out below:
31 December 2016 31 December 2015
UK Plans% p.a. US Plans % p.a. Brush UK Plan% p.a. Brush US Plan % p.a.
Rate of increase in salaries n/a n/a n/a n/a
Rate of increase in pensions in payment 3.3 n/a 3.0 n/a
Discount rate 2.7 3.9 3.7 4.1
RPI inflation assumption 3.3 n/a 3.0 n/a
CPI inflation assumption 2.2 n/a 1.9 n/a
Mortality
Brush UK Pension Plan
Mortality assumptions for the Brush UK Pension Plan, as at 31 December 2016 were based on the Self Administered Pension
Scheme ("SAPS") "S1" base tables with a scaling factor of 110%, which reflected the results of a mortality analysis carried
out on the plan's membership. Future improvements are in line with the Continuous Mortality Investigation ("CMI")
improvement model with a long-term rate of improvement of 1.25% p.a. for both males and females.
The assumptions were that a member currently aged 65 will live on average for a further 21.4 years (31 December 2015: 21.4
years) if they are male and for a further 23.6 years (31 December 2015: 23.6 years) if they are female. For a member who
retires in 2036 at age 65, the assumptions were that they will live for a further 22.8 years (31 December 2015: 23.0 years)
after retirement if they are male and for a further 25.1 years (31 December 2015: 25.5 years) after retirement if they are
female.
The mortality assumptions were consistent with those adopted for the full valuation as at 31 December 2013.
Brush US Pension Plan
The mortality assumptions adopted as at 31 December 2016 were set to reflect the Group's best estimate view of life
expectancies of members of the pension arrangement. Each assumption reflected the characteristics of the membership of the
Brush US Pension Plan.
The assumptions were that a member currently aged 65 will live on average for a further 19.9 years (31 December 2015: 20.3
years) if they are male and for a further 21.9 years (31 December 2015: 22.3 years) if they are female. For a member who
retires in 2036 at age 65, the assumptions were that they will live for a further 21.5 years (31 December 2015: 22.0 years)
after retirement if they are male and for a further 23.5 years (31 December 2015: 23.9 years) after retirement if they are
female.
The mortality assumptions were consistent with those adopted for the full valuation as at 31 December 2015.
Nortek US Pension Plan
The mortality assumptions adopted as at 31 December 2016 were set to reflect the Group's best estimate view of life
expectancies of members of the pension arrangement. Each assumption reflected the characteristics of the membership of the
Nortek US Pension Plan.
The assumptions were that a member currently aged 65 will live on average for a further 20.2 years if they are male and for
a further 22.3 years if they are female. For a member who retires in 2036 at age 65, the assumptions were that they will
live for a further 21.8 years after retirement if they are male and for a further 23.9 years after retirement if they are
female.
The mortality assumptions were consistent with those adopted for the full valuation as at 1 January 2016.
23. Retirement benefit obligations (continued)
Balance Sheet disclosures
The amount recognised in the Balance Sheet arising from net liabilities in respect of defined benefit plans was as
follows:
31 December2016£m 31 December2015
£m
Present value of funded defined benefit obligations (549.1) (360.7)
Fair value of plan assets 522.6 343.5
Funded status (26.5) (17.2)
Present value of unfunded defined benefit obligations (6.9) -
Net liabilities (33.4) (17.2)
The plan liabilities and assets at 31 December 2016 were split by plan as follows:
Brush UKPlan£m Brush US Plan£m Nortek USPlan£m Nortek EuropeanPlans£m Total£m
Plan liabilities (236.4) (188.1) (95.5) (36.0) (556.0)
Plan assets 253.5 174.9 73.6 20.6 522.6
Net assets/(liabilities) 17.1 (13.2) (21.9) (15.4) (33.4)
The major categories and fair values of plan assets at the end of the reporting period for each category were as follows:
31 December 31 December
2016 2015
£m £m
Equities 152.4 129.2
Government bonds 107.1 80.1
Corporate bonds 155.0 122.2
Property 6.7 5.7
Other(1) 101.4 6.3
Total 522.6 343.5
(1) At 31 December 2016, £73.6 million of assets in relation to the Nortek US Plan were held in cash as they were in the
process of being
transferred to the new plan custodian. The investment strategy is now approximately 60% equities and 40% bonds.
The assets were well diversified and the majority of plan assets had quoted prices in active markets. All government bonds
were issued by reputable governments and were generally AA rated or higher. Interest rate and inflation rate swaps were
also employed to complement the role of fixed and index-linked bond holdings for liability risk management.
The trustees continually review whether the chosen investment strategy is appropriate with a view to providing the pension
benefits and to ensure appropriate matching of risk and return profiles. The main strategic policies included maintaining
an appropriate asset mix, managing interest rate sensitivity and maintaining an appropriate equity buffer. Investment
results were regularly reviewed.
There was no self investment (other than in relevant tracker funds) either in the Group's own financial instruments or
property or other assets used by the Group.
23. Retirement benefit obligations (continued)
Movements in the present value of defined benefit obligations during the year:
Year ended 31 December2016 Year ended 31 December2015
£m £m
At beginning of year 360.7 1,343.7
Acquisition of businesses 136.3 -
Current service cost 0.1 1.0
Past service cost - (2.2)
Interest cost on obligations 15.4 29.4
Terminations - (2.6)
Remeasurement gains - demographic (6.1) (19.2)
Remeasurement losses/(gains) - financial 42.1 (39.8)
Remeasurement gains - experience (2.8) (7.2)
Benefits paid out of plan assets (26.6) (56.1)
Benefits paid out of Group assets for unfunded plans (0.5) (4.8)
Currency translation differences 37.4 0.9
Transfer to held for sale(1) - (882.4)
- More to follow, for following part double click ID:nRSX5026AeRecent news on Melrose Industries
See all newsREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
Announcement