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Peter Dilnot
Group Finance Director
Chief Executive Officer
7 March 2024
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"ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f19358": { "value": "2000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseThroughSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f19360": { "value": "22000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DecreaseIncreaseThroughTaxOnSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f19362": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:ComprehensiveIncome", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19364": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:PurchaseOfTreasuryShares", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19366": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsPaid", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19368": { "value": "0", "decimals": -6, "dimensions": { "concept": "mplc:DemergerDistribution", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19370": { "value": "-39000000", "decimals": -6, "dimensions": { "concept": "mplc:DerecognitionOfNoncontrollingInterestsOnDemerger", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19372": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseThroughSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19374": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:DecreaseIncreaseThroughTaxOnSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19376": { "value": "-1439000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:ComprehensiveIncome", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19378": { "value": "93000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:PurchaseOfTreasuryShares", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19380": { "value": "81000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsPaid", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19382": { "value": "-1973000000", "decimals": -6, "dimensions": { "concept": "mplc:DemergerDistribution", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19384": { "value": "-39000000", "decimals": -6, "dimensions": { "concept": "mplc:DerecognitionOfNoncontrollingInterestsOnDemerger", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19386": { "value": "2000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseThroughSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19388": { "value": "22000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DecreaseIncreaseThroughTaxOnSharebasedPaymentTransactions", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19392": { "value": "309000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:IssuedCapitalMember", "unit": "iso4217:GBP" } }, "f19394": { "value": "3271000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:SharePremiumMember", "unit": "iso4217:GBP" } }, "f19396": { "value": "109000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:MergerReserveMember", "unit": "iso4217:GBP" } }, "f19398": { "value": "753000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:CapitalRedemptionReserveMember", "unit": "iso4217:GBP" } }, "f19400": { "value": "-2330000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:OtherReservesMember", "unit": "iso4217:GBP" } }, "f19402": { "value": "273000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember", "unit": "iso4217:GBP" } }, "f19404": { "value": "1182000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:RetainedEarningsMember", "unit": "iso4217:GBP" } }, "f19406": { "value": "3567000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f19408": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:NoncontrollingInterestsMember", "unit": "iso4217:GBP" } }, "f19410": { "value": "3567000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f19428": { "value": "1. Corporate information
Melrose Industries PLC (\u201cthe Company\u201d) is a public company limited by shares. The Company is incorporated in the United Kingdom under
the Companies Act 2006 and registered in England and Wales. The address of the registered office is given on the back cover. The nature
of the Group\u2019s operations and its principal activities by operating segment are set out in note 5 and in the Divisional reviews on pages 8 to 13.
The Consolidated Financial Statements of the Group for the year ended 31 December 2023 were authorised in accordance with a resolution
of the Directors of Melrose Industries PLC on 7 March 2024.
These Financial Statements are presented in pounds Sterling which is the currency of the primary economic environment in which the Company
is based. Foreign operations are included in accordance with the policies set out in note 2.
Corporate structure
Capital structure
On 19 April 2023, a share consolidation took place whereby shareholders received one new share in the Company for every three existing shares
held. In accordance with IAS 33: Earnings per Share, a one for three adjustment is required to the weighted average number of shares in
existence prior to the share consolidation and the prior year has been restated accordingly.
On 2 October 2023, the Group commenced a \u00a3500 million share buyback programme which is expected to complete by the end of
September 2024. At 31 December 2023, 18,761,840 shares had been purchased at an average price of 494 pence per share with cash
spent of \u00a393 million, inclusive of costs of \u00a31 million. These are held as treasury shares and the costs of the purchase have been recognised in
retained earnings. No liability has been recognised in respect of the remaining share buyback programme as there is no contractual obligation.
In 2022, the Group completed a share buyback programme with 318,003,512 shares repurchased and subsequently cancelled, with cash spent
of \u00a3504 million, inclusive of costs of \u00a34 million.
Discontinued operations, disposals and assets held for sale
On 20 April 2023, the Group completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses through
the flotation of Dowlais Group plc (\u201cDowlais\u201d) on the London Stock Exchange. The results of the Dowlais businesses have been classified within
discontinued operations for both years presented; with the Income Statement, the Statement of Cash Flows and their associated notes being
restated accordingly. See note 13 for further detail.
Dowlais became a related party to the Group on demerger.
On 12 December 2023, the Group agreed a disposal of its Fuel Systems business, a non-core part of the Structures segment. At 31 December 2023,
the disposal was expected to complete within the next twelve months and accordingly the assets and liabilities of the business have been classified as
held for sale as at 31 December 2023. The disposal completed on 1 March 2024.
In addition, discontinued operations for 2022 include the results of the Ergotron business which was classified as held for sale as at 30 June 2022,
and was subsequently disposed on 6 July 2022.
1.1 New Standards, Amendments and Interpretations affecting amounts, presentation or disclosure reported in the current year
In the current financial year, the Group has adopted the following new and revised Standards, Amendments and Interpretations. Their adoption
has not had a significant impact on the amounts reported in these Financial Statements:
\u2022
Amendments to IAS 1: Presentation of Financial Statements and making materiality judgements \u2013 disclosure of accounting policies
\u2022
Amendments to IAS 12: Income taxes \u2013 deferred tax related to assets and liabilities arising from a single transaction
\u2022
Amendments to IAS 12: Income taxes \u2013 international tax reform \u2013 pillar two model rules
\u2022
Amendments to IAS 8: Accounting polices, changes in accounting estimates and errors \u2013 definition of accounting estimates
1.2 New Standards, Amendments and Interpretations in issue but not yet effective
At 31 December 2023, the following Standards, Amendments and Interpretations were in issue but not yet effective:
\u2022
Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture
\u2022
Amendments to IAS 1: Classification of liabilities as current or non-current and non-current liabilities with covenants
\u2022
Amendments to IAS 7 and IFRS 7: Supplier finance arrangements
\u2022
Amendments to IFRS 16: Lease liability in a sale and leaseback
The Directors do not expect that the adoption of the above Standards, Amendments and Interpretations will have a material impact on the
Financial Statements of the Group in future periods.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19431": { "value": "Melrose Industries PLC", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19432": { "value": "public company limited ", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19433": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19434": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19436": { "value": "England and Wales", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19439": { "value": "2023-12-31", "dimensions": { "concept": "ifrs-full:DateOfEndOfReportingPeriod2013", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19446": { "value": "On 19 April 2023, a share consolidation took place whereby shareholders received one new share in the Company for every three existing shares
held. In accordance with IAS 33: Earnings per Share, a one for three adjustment is required to the weighted average number of shares in
existence prior to the share consolidation and the prior year has been restated accordingly.
On 2 October 2023, the Group commenced a \u00a3500 million share buyback programme which is expected to complete by the end of
September 2024. At 31 December 2023, 18,761,840 shares had been purchased at an average price of 494 pence per share with cash
spent of \u00a393 million, inclusive of costs of \u00a31 million. These are held as treasury shares and the costs of the purchase have been recognised in
retained earnings. No liability has been recognised in respect of the remaining share buyback programme as there is no contractual obligation.
In 2022, the Group completed a share buyback programme with 318,003,512 shares repurchased and subsequently cancelled, with cash spent
of \u00a3504 million, inclusive of costs of \u00a34 million.", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19458": { "value": "Discontinued operations, disposals and assets held for sale
On 20 April 2023, the Group completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses through
the flotation of Dowlais Group plc (\u201cDowlais\u201d) on the London Stock Exchange. The results of the Dowlais businesses have been classified within
discontinued operations for both years presented; with the Income Statement, the Statement of Cash Flows and their associated notes being
restated accordingly. See note 13 for further detail.
Dowlais became a related party to the Group on demerger.
On 12 December 2023, the Group agreed a disposal of its Fuel Systems business, a non-core part of the Structures segment. At 31 December 2023,
the disposal was expected to complete within the next twelve months and accordingly the assets and liabilities of the business have been classified as
held for sale as at 31 December 2023. The disposal completed on 1 March 2024.
In addition, discontinued operations for 2022 include the results of the Ergotron business which was classified as held for sale as at 30 June 2022,
and was subsequently disposed on 6 July 2022.13. Discontinued operations
On 30 March 2023, shareholders approved the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses
through the flotation of Dowlais Group plc (\u201cDowlais\u201d) on the London Stock Exchange. As a consequence, the assets and liabilities of Dowlais
were reclassified as held for sale in accordance with IFRS 5: Non-current Assets Held for Sale and Discontinued Operations.
On 20 April 2023, the Group completed the demerger of Dowlais. The results of the Dowlais businesses have been classified within discontinued
operations for both years presented. In addition, discontinued operations for 2022 include the results of the Ergotron business which was
disposed of on 6 July 2022.
The demerger distribution of \u00a31,973 million has been measured at fair value in accordance with IFRIC 17: Distributions of Non-cash Assets to Owners
(see note 3b). Total demerger costs of \u00a364 million, of which \u00a36 million was recognised in the year ended 31 December 2022, were incurred before
a contribution of \u00a319 million in the form of one percent of Dowlais Group plc issued equity which has been retained by the Group. The Melrose
Automotive Share Plan has also been taken into account within the loss on disposal calculation, but its net impact was immaterial.
Financial performance of discontinued operations:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Revenue
1,582
4,715
Operating costs
(1,550)
(4,740)
Operating profit/(loss)
32
(25)
Net finance costs
(7)
(13)
Profit/(loss) before tax
25
(38)
Tax
(28)
(20)
Loss after tax
(3)
(58)
Loss on disposal of net assets of discontinued operations, net of recycled cumulative translation differences
but before transaction costs
(978)
(16)
Demerger transaction costs
(2)
(39)
\u2013
Loss for the year from discontinued operations
(1,020)
(74)
A
ttributable to:
Owners of the parent
(1,020)
(79)
Non-controlling interests
\u2013
5
(1,020)
(74)
(1)
Restated for operations discontinued in the year (see note 1).
(2)
Demerger transaction costs of \u00a339 million comprise total cash costs incurred in the year of \u00a358 million, offset by a non-cash contribution from Dowlais of
\u00a319 million.
Cash flow information relating to discontinued operations is shown in note 27.
Classes of assets and liabilities disposed of and amounts classified as held for sale during the year were as follows:
Classified as
Businesses
held for sale
(1)
disposed
\u00a3m
\u00a3m
Goodwill and other intangible assets
\u2013
2,989
Property, plant and equipment
4
1,789
Current and deferred tax
1
127
Equity accounted investments
\u2013
417
Inventories
4
515
Trade and other receivables
9
753
Derivative financial instruments
\u2013
45
Cash and cash equivalents
\u2013
320
Total assets
18
6,955
Trade and other payables
5
1,232
Interest-bearing loans and borrowings
(2)
\u2013
1,205
Lease obligations
1
158
Current and deferred tax
\u2013
435
Retirement benefit obligations
\u2013
439
Provisions
4
344
Total liabilities
10
3,813
Net assets
8
3,142
Demerger distribution fair value
1,973
Derecognition of non-controlling interests on demerger
39
Demerger costs incurred
(39)
Cumulative translation difference recycled on demerger
152
Loss on disposal of businesses
(1,017)
(1) Relates to the Fuel Systems business (see note 1).
(2) Prior to the demerger the interest-bearing loans and borrowings were inter-company. On demerger, these were subsequently settled.
Post Balance Sheet event
On 1 March 2024, the Group completed the disposal of its Fuel Systems business for \u00a350 million, before costs and other deductions.", "dimensions": { "concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19472": { "value": "1.1 New Standards, Amendments and Interpretations affecting amounts, presentation or disclosure reported in the current year
In the current financial year, the Group has adopted the following new and revised Standards, Amendments and Interpretations. Their adoption
has not had a significant impact on the amounts reported in these Financial Statements:
\u2022
Amendments to IAS 1: Presentation of Financial Statements and making materiality judgements \u2013 disclosure of accounting policies
\u2022
Amendments to IAS 12: Income taxes \u2013 deferred tax related to assets and liabilities arising from a single transaction
\u2022
Amendments to IAS 12: Income taxes \u2013 international tax reform \u2013 pillar two model rules
\u2022
Amendments to IAS 8: Accounting polices, changes in accounting estimates and errors \u2013 definition of accounting estimates
1.2 New Standards, Amendments and Interpretations in issue but not yet effective
At 31 December 2023, the following Standards, Amendments and Interpretations were in issue but not yet effective:
\u2022
Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture
\u2022
Amendments to IAS 1: Classification of liabilities as current or non-current and non-current liabilities with covenants
\u2022
Amendments to IAS 7 and IFRS 7: Supplier finance arrangements
\u2022
Amendments to IFRS 16: Lease liability in a sale and leaseback
The Directors do not expect that the adoption of the above Standards, Amendments and Interpretations will have a material impact on the
Financial Statements of the Group in future periods.", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19499": { "value": "2.
Summary of material accounting policies
Basis of accounting
The Consolidated Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (\u201cIFRSs\u201d) as issued by the IASB. The Consolidated Financial Statements have been prepared on an historical cost
basis, except for the revaluation of certain financial instruments and investments which are recognised at fair value at the end of each reporting
period. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
Alternative Performance Measures
The Group presents Alternative Performance Measures (\u201cAPMs\u201d) 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 (\u201cESMA\u201d).
APMs used by the Group are set out in the glossary to these Financial Statements on pages 232 to 239 and the reconciling items between
statutory and adjusted results are listed below and described in more detail in note 6.
Adjusted profit measures exclude items which are significant in size or volatility or by nature are non-trading or non-recurring or any item released
to the Income Statement that was previously a fair value item booked on an acquisition.
On this basis, the following are the principal items included within adjusting items impacting operating profit:
\u2022
Amortisation of intangible assets that are acquired in a business combination, excluding computer software and development costs;
\u2022
Significant restructuring project costs and other associated costs, including losses incurred following the announcement of closure for
identified businesses, arising from significant strategy changes that are not considered by the Group to be part of the normal operating costs
of the business;
\u2022
Acquisition and disposal related gains and losses;
\u2022
Impairment charges that are considered to be significant in nature and/or value to the trading performance of the business;
\u2022
Movement in derivative financial instruments not designated in hedging relationships, including revaluation of associated financial assets
and liabilities;
\u2022
The charge for the Melrose equity-settled compensation scheme, including its associated employer\u2019s tax charge; and
\u2022
The net release of fair value items booked on acquisitions.
Further to the adjusting items above, adjusting items impacting profit before tax include:
\u2022
Acceleration of unamortised debt issue costs written off as a consequence of Group refinancing;
\u2022
Significant settlement gains and losses associated with debt instruments including interest rate swaps following acquisition or disposal related
activity or non-trading transactions, which are not considered by the Group to be part of normal financing costs;
\u2022
Finance costs in respect of the Group\u2019s net debt strategically allocated to a demerger group of businesses at the start of the year and
subsequently settled on demerger; and
\u2022
The fair value changes on cross-currency swaps, entered into by GKN prior to acquisition, relating to cost of hedging which are not deferred
in equity.
In addition to the items above, adjusting items impacting profit after tax include:
\u2022
The net effect on tax of significant restructuring from strategy changes that are not considered by the Group to be part of the normal operating
costs of the business;
\u2022
The net effect of significant new tax legislation; and
\u2022
The tax effects of adjustments to profit before tax.
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.
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 year results and comparative periods
where provided.
Basis of consolidation
The Group\u2019s Financial Statements include the results of the parent undertaking and all of its subsidiary undertakings. In addition, the Group\u2019s
share of the results and equity of joint ventures and associated undertakings (together \u201cequity accounted investments\u201d) are included. The results
of businesses acquired during the period are included from the effective date of acquisition and, for those sold during the period, to the effective
date of disposal. Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into
line with those used by the Group.
All intra-Group balances and transactions, including unrealised profits arising from intra-Group transactions, have been eliminated in full.
Non-controlling interests in subsidiaries are identified separately from the Group\u2019s equity therein. The interest of non-controlling shareholders is
initially measured at the non-controlling interests\u2019 proportion of the share of the fair value of the acquiree\u2019s identifiable net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests\u2019
share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
Going concern
The Consolidated 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\u2019s liquidity and funding arrangements are described in the Finance Director\u2019s Review. There is significant liquidity headroom
of \u00a31.0 billion at 31 December 2023 and sufficient headroom throughout the going concern forecast period. Forecast covenant compliance
is considered further below.
Covenants
The Group\u2019s 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. As a result of the demerger on 20 April 2023, the Group renegotiated its banking
arrangements. No testing of the interest cover covenant was required at 31 December 2023. The interest cover covenant will be tested from
30 June 2024. Covenant calculations are detailed in the glossary to these Consolidated Financial Statements.
The financial covenants during the period of assessment for going concern are as follows:
31 December
30 June
31 December
2023
2024
2024
Net debt to adjusted EBITDA
3.5x
3.5x
3.5x
Interest cover
n/a
4.0x
4.0x
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 end markets and operational factors, including supply chain challenges, throughout the going concern period
and has been monitored against the actual results and cash generation in the year. Climate scenario analysis was used to model the impact of
climate change on the Group\u2019s cash flow position. Climate is deemed to not have a material impact over the period of 12 months for the
assessment of going concern or 36 months for assessment of viability of the Group.
The reasonably possible sensitised case models more conservative sales assumptions for 2024 and the first half of 2025. The sensitised
assumptions are specific to each business taking into account their markets, but on average represents a c.10% reduction to the Group\u2019s
forecast revenue in each of 2024 and the first half of 2025 respectively. The sensitised revenues have had a consequential impact on profit
and cash flow, along with a further downside sensitivity applied to increase working capital by approximately 2% of revenue. Given that there
is liquidity headroom of \u00a31.0 billion and the Group\u2019s leverage was 1.1x, comfortably below the covenant test at 31 December 2023, no further
sensitivity detail is provided.
Under the reasonably possible sensitised case, even with significant reductions, no covenant is breached at the forecast testing dates being
30 June 2024 and 31 December 2024, and the Group will not require any additional sources of finance. Testing at 30 June 2025 is also
favourable, assuming arrangements similar in nature with existing agreements.
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured at the fair value of assets
transferred, the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the Group in exchange for
control of the acquiree. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities. Costs directly attributable to business combinations are recognised as an expense in the Income
Statement as incurred.
The acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific guidance
is provided by IFRSs. Non-current assets and directly attributable liabilities that are classified as held for sale in accordance with IFRS 5:
Non-current assets held for sale and discontinued operations, are recognised and measured at fair value less costs to sell. Also, deferred tax
assets and liabilities are recognised and measured in accordance with IAS 12: Income taxes, liabilities and assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 19 (revised): Employee benefits and liabilities or equity instruments related to
the replacement by the Group of an acquiree\u2019s share-based payments awards are measured in accordance with IFRS 2: Share-based payment.
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group
reports provisional amounts where appropriate. Those provisional amounts are adjusted during the measurement period, or additional assets
or liabilities recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised at that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum period of one year.
Goodwill on acquisition is initially measured at cost, being the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the acquiree over the acquirer\u2019s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
If, after reassessment, the Group\u2019s interest in the fair value of the acquiree\u2019s identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the
acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the cash-generating units acquired. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to which goodwill relates. Where the recoverable amount of the cash-generating unit is less
than the carrying amount, an impairment loss is recognised in the Income Statement and is not subsequently reversed. When there is a disposal
of a cash-generating unit, goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that
operation. The amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and
the operation retained.
Equity accounted investments
A joint venture is an entity which is not a subsidiary undertaking but where the interest of the Group is that of a partner in a business over which
the Group exercises joint control with its partners over the financial and operating policies. In all cases voting rights are 50% or lower.
Associated undertakings are entities that are neither a subsidiary nor a joint venture, but where the Group has a significant influence. The results,
assets and liabilities of equity accounted investments are accounted for using the equity method of accounting. The Group\u2019s share of equity
includes goodwill arising on acquisition.
When a Group entity transacts with an equity accounted investment of the Group, profits and losses resulting from the transactions with the
equity accounted investments are recognised in the Group\u2019s Consolidated Financial Statements only to the extent of interests in equity
accounted investments that are not related to the Group.
Revenue
Revenues are recognised either at the point of transfer of control of goods and services, or recognised over time on an activity basis using
the costs incurred as the measure of the activity. Costs are recognised as they are incurred.
The nature of agreements into which the Group enters means that certain of the Group\u2019s arrangements with its customers have multiple
elements that can include any combination of:
\u2022
Sale of products and services;
\u2022
Risk and revenue sharing partnerships (\u201cRRSPs\u201d);
\u2022
Design and build; and
\u2022
Construction contracts.
Contracts are reviewed to identify each performance obligation relating to a distinct good or service and the associated consideration. The Group
allocates revenue to multiple element arrangements based on the identified performance obligations within the contracts in line with the policies
below. A performance obligation is identified if the customer can benefit from the good or service on its own or together with other readily
available resources, and it can be separately identified within the contract. This review is performed by reference to the specific contract terms.
Sale of products and services
This revenue stream accounts for the majority of Group sales. Contracts in the Automotive, Powder Metallurgy and Other Industrial segments
operate almost exclusively on this basis, and it also covers a high proportion of the Aerospace segment\u2019s revenues.
Invoices for goods are raised and revenue is recognised when control of the goods is transferred to the customer. Dependent upon contractual
terms this may be at the point of despatch, acceptance by the customer or, in Aerospace, certification by the customer. The revenue recognised
is the transaction price as it is the observable selling price per product.
Cash discounts, volume rebates and other customer incentive programmes are based on certain percentages agreed with the Group\u2019s customers,
which are typically earned by the customer over an annual period. These are allocated to performance obligations and are recorded as a reduction
in revenue at the point of sale based on the estimated future outcome. Due to the nature of these arrangements an estimate is made based on
historical results to date, estimated future results across the contract period and the contractual provisions of the customer agreement.
Many businesses in the Powder Metallurgy and Automotive segments recognise an element of revenue via a surcharge or similar raw material cost
recovery mechanism. The surcharge is generally based on prior period movement in raw material price indices applied to current period deliveries.
Risk and revenue sharing partnerships (\u201cRRSPs\u201d)
This revenue stream whilst material affects a small number of businesses, exclusively in the Engines segment. Revenue is recognised under
RRSPs for both the sale of product as detailed above and sales of services, which are recognised by reference to the stage of completion based
on the performance obligations in the contract. In most RRSP contracts, there are two separate phases where the Group earns revenue; sale of
products principally to engine manufacturers and aftermarket support.
The assessment of the stage of completion is dependent on the nature of the contract and the performance obligations within it.
The value of revenue is based on the standalone selling price for each element of the contract.
Revenue is recognised at the point control passes to the customer. For products and services, this has been identified as the point of despatch,
acceptance by the customer or certification by the customer. Where the amount of revenue recognised is not yet due for collection under the
terms of the contract, it will be recognised as variable consideration within the unbilled work done contract asset (\u201cunbilled work done\u201d). Revenue
is not recognised where recovery is not probable due to potential significant reversals in the future. This can be affected by assessment of future
volumes including aftermarket expectations which are impacted by technology development, fuel price and competition.
Participation fees are payments made to engine manufacturers and original equipment manufacturers relating to RRSPs and long-term
agreements. They are recognised as contract assets to the extent they can be recovered from future sales. Where participation fees have been
paid under the RRSP, the amortisation is recognised as a revenue reduction under IFRS 15, as performance obligations are satisfied.
Generally, during the design and development phase of a typical RRSP contract, the Group performs contractually agreed-upon tasks for a
customer. It is usual for the Intellectual Property Rights (\u201cIPRs\u201d) that underpin technology advancement or know-how to remain with the Group
such that the customer cannot benefit from the IPRs either on their own or together with other resources that are readily available to the
customer. Where IPRs are transferred to the customer the Group has determined this is not separately identifiable from other promises in the
contract due to an exclusivity clause for the supply of product. Accordingly, it has been determined that the Group\u2019s promise to transfer goods
to its customer is a performance obligation that is separately identifiable and this uses development and know-how as an input.
Design and build
Generally, revenue is only recognised on the sale of product as detailed above, however, on occasions cash is received in advance of work
performed to compensate the Group for costs incurred in design and development activities. The Group performs an assessment of its
performance obligations to understand multiple elements. Where it is determined there is only one type of performance obligation, being the
delivery of product, any cash advance is factored into the revenue allocated across the deliveries required under the contract.
Where the performance obligation has not been satisfied amounts received are recognised as a contract liability. If there is more than one
performance obligation, revenue is allocated to each one based on a standalone selling price for each element of the contract.
Due to the nature of design and build contracts, there can be significant \u2018learning curves\u2019 while the Group optimises its production processes.
During the early phase of these contracts, all costs including any start-up losses are taken directly to the Income Statement, as they do not meet
the criteria for fulfilment costs.
Construction contracts
Where multiple performance obligations are identified, revenue is recognised as each performance obligation is met. This requires an assessment
of total revenue to identify the allocation across the performance obligations, based on the standalone selling price for each obligation.
In cases where one of the following criteria is met, revenue is recognised over time:
\u2022
The customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance;
\u2022
The Group\u2019s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
\u2022
The Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for
performance completed to date.
Due to the nature of the criteria above, only certain contracts in the Group qualify for over time recognition. On this basis revenue is recognised
using the input method, which uses costs incurred and the assessed margin across the contract. The input method is used to measure progress
as it best depicts the transfer of control to the customer. The margin and associated revenue are calculated based on the estimated transaction
price and expected total costs, with considerations made for the associated contract risks.
If any of the above criteria are not met, revenue is recognised at a point in time when control transfers to the customer which, in line with the sale
of goods and services above, is the point of delivery or customer acceptance dependent on the terms of the contract.
Unbilled work done addresses contract matters, such as price or scope amendments, which are included based on the expected value or most likely
amount. A constraint is included unless it is highly probable that the revenue will not significantly reverse in the future. This constraint is calculated
based on a cautious expectation of the life of certain RRSPs. Variations in contract work, claims and incentive payments are included in revenue from
construction contracts based on an estimate of the expected value the Group expects to receive. Variations are included when the customer has
agreed to the variation or acknowledged liability for the variation in principle. Claims are included when negotiations with the customer have reached
an advanced stage such that it is virtually certain that the customer will accept the claim.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bring the asset into operation, and
any material borrowing costs on qualifying assets. Qualifying assets are defined as an asset or programme where the period of capitalisation is
more than 12 months. Purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to
acquire the asset.
Where assets are in the course of construction at the balance sheet date, they are classified as capital work-in-progress. Transfers are made to
other asset categories when they are available for use, at which point depreciation commences.
Right-of-use assets arise under IFRS 16 and are depreciated over the shorter of the estimated life and the lease term.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Freehold land
nil
Freehold buildings and long leasehold property
over expected economic life not exceeding 50 years
Short leasehold property
over the term of the lease
Plant and equipment
3-15 years
The estimated useful lives of property, plant and equipment are reviewed on an annual basis and, if necessary, changes in useful lives are
accounted for prospectively.
The carrying values of property, plant and equipment are reviewed annually for indicators of impairment, or if events or changes in circumstances
indicate that the carrying value may not be recoverable. If such indication exists an impairment test is performed and, where the carrying values
exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant
and equipment is the greater of net selling price and value in use. In assessing value in use, estimated future cash flows, considering the
implications of climate change (see note 11 for further detail), are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds or costs and the carrying amount of the item) is included in the Income Statement in the period that the item is derecognised.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses.
On acquisition of businesses, separately identifiable intangible assets are initially recorded at their fair value at the acquisition date.
Access to the use of brands and intellectual property are valued using a \u201crelief from royalty\u201d method which determines the net present value of
future additional cash flows arising from the use of the intangible asset.
Customer relationships and contracts are valued on the basis of the net present value of the future additional cash flows arising from customer
relationships with appropriate allowance for attrition of customers.
Technology assets are valued using a replacement cost approach, or a \u201crelief from royalty\u201d method.
Amortisation of intangible assets is recorded in administration expenses in the Income Statement and is calculated on a straight-line basis over
the estimated useful lives of the asset as follows:
Customer relationships and contracts
20 years or less
Brands and intellectual property
20 years or less
Technology
20 years or less
Computer software
5 years or less
Development costs
20 years or less
Where computer software is not integral to an item of property, plant or equipment, its costs are capitalised and categorised as intangible assets.
Computer software is initially recorded at cost. Where these assets have been acquired through a business combination, this will be the fair value
allocated in the acquisition accounting. Where these have been acquired other than through a business combination, the initial cost is the
aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Intangible assets (other than computer software and development costs) are tested for impairment annually or more frequently whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses are measured on a similar basis to property,
plant and equipment. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Research and development costs
Research costs are expensed as incurred.
Costs relating to clearly defined and identifiable development projects are capitalised when there is a technical degree of exploitation, adequacy
of resources and a potential market or development possibility in the undertaking that are recognisable; and where it is the intention to produce,
market or execute the project. A correlation must also exist between the costs incurred and future benefits and those costs can be measured
reliably. Capitalised costs are expensed on a straight-line basis over their useful lives of 20 years or less. Costs not meeting such criteria are
expensed as incurred.
Inventories
Inventories are valued at the lower of cost and net realisable value and are measured using a first in, first out or weighted average cost basis.
Cost includes all direct expenditure and appropriate production overhead expenditure incurred in bringing goods to their current state under
normal operating conditions. Net realisable value is based on estimated selling price less costs expected to be incurred to completion and
disposal. Provisions are made for obsolescence or other expected losses where necessary.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, balances with banks and similar institutions, and short-term deposits which are readily
convertible to cash and are subject to insignificant risks of changes in value.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowings.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the Income Statement when the liabilities are derecognised or impaired, as well as through the
amortisation process.
Government refundable advances
Government refundable advances are reported in \u201cTrade and other payables\u201d in the Balance Sheet. Refundable advances include amounts
advanced by a government, accrued interest and directly attributable costs. Refundable advances are provided to the Group to part-finance
expenditures on specific development programmes. The advances are provided on a risk sharing basis, i.e. repayment levels are determined
subject to the success of the related programme. Balances are held at amortised cost and interest is calculated using the effective interest
rate method.
Leases
Where a lease arrangement is identified, a liability to the lessor is included in the Balance Sheet as a lease obligation calculated at the present
value of minimum lease payments. A corresponding right-of-use asset is recorded in property, plant and equipment. The discount rate used to
calculate the lease liability is the Group\u2019s incremental borrowing rate, unless there is a rate implicit in the lease. The incremental borrowing rate is
used for the majority of leases. Incremental borrowing rates are based on the term, currency, country and start date of the lease and reflect the
rate the Group would pay for a loan with similar terms and security.
Following initial recognition, the lease liability is measured at amortised cost using the effective interest rate method. Where there is a change in
future lease payments due to a rent review, change in index or rate, or a change in the Group\u2019s assessment of whether it is reasonably certain
to exercise a purchase, extension or break option, the lease obligation is remeasured. A corresponding adjustment is made to the associated
right-of-use asset.
Right-of-use assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Lease payments are apportioned between finance costs and a reduction in the lease obligation so as to reflect the interest on the remaining
balance of the obligation. Finance charges are recorded in the Income Statement within finance costs.
Leases with a term of 12 months or less and leases for low value are not recorded on the Balance Sheet and lease payments are recognised
as an expense in the Income Statement on a straight-line basis over the lease term. Expenses relating to variable lease payments which are not
included in the lease liability, due to being based on a variable other than an index or rate, are recognised as an expense in the
Income Statement.
Financial instruments \u2013 assets
Classification and measurement
All financial assets are classified as either those which are measured at fair value, through profit or loss or Other Comprehensive Income,
and those measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are not subsequently measured at fair value through profit or loss,
this includes directly attributable transaction costs. Trade and other receivables, contract assets and amounts due from equity accounted
investments are subsequently measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted under IFRS 9 is applied. The simplified approach requires that at
the point of initial recognition the expected credit loss across the life of the receivable must be recognised. As these balances do not contain a
significant financing element, the simplified approach relating to expected lifetime losses is applicable under IFRS 9. Cash and cash equivalents
and other receivables are also subject to impairment requirements.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured
reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the Income Statement in the period in which they
are incurred.
Investments
The Group has investments in listed shares and unlisted shares, that are not traded in an active market, which are classified as financial assets,
measured at fair value. Fair value for listed shares is calculated by reference to quoted market price. Fair value for unlisted shares is determined
by assessment of expected future dividends discounted to net present value. Any changes in fair value are recognised in Other Comprehensive
Income and accumulated in retained earnings. Dividends from investments are recognised in the Income Statement when the Group\u2019s right to
receive the dividend is established.
Trade and other receivables
Trade and other receivables are measured and carried at amortised cost using the effective interest method, less any impairment. For trade
receivables, the carrying amount is reduced by an allowance for expected lifetime losses. Subsequent recoveries of amounts previously
written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the
Income Statement.
Trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis. In measuring the
expected credit losses, the Group considers all reasonable and supportable information such as the Group\u2019s past experience at collecting
receipts, any increase in the number of delayed receipts in the portfolio past the average credit period, and forward looking information such
as forecasts of future economic decisions.
Other receivables are also considered for impairment and if required the carrying amount is reduced by any loss arising which is recorded in the
Income Statement, although for the Group this is not material.
Financial instruments \u2013 liabilities
Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instruments
and are initially measured at fair value, net of transaction costs. The Group derecognises financial liabilities when the Group\u2019s obligations are
discharged, significantly modified, cancelled or they expire.
Classification and measurement
Non-derivative financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective interest rate basis. The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant periods. The effective interest rate is the rate that discounts estimated future cash payments
throughout the expected life of the financial liability, or, where appropriate, a shorter period to the gross carrying amount of the financial liability.
Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue derivative financial instruments for speculative trading purposes. Details of
derivative financial instruments are disclosed in note 25 of the Financial Statements.
Derivative financial instruments are recognised and stated at fair value in the Group\u2019s Balance Sheet. Their fair value is recalculated at each
reporting date. The accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for
hedge accounting and are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses on the revaluation to fair value at the period end
are recognised immediately in the Income Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the Balance Sheet.
Derivatives embedded in non-derivative host contracts are recognised at their fair value in the Group\u2019s Balance Sheet when the nature,
characteristics and risks of the derivative are not closely related to the host contract. Gains and losses arising on the remeasurement of these
embedded derivatives at each balance sheet date are recognised in the Income Statement.
Hedge accounting
In order to qualify for hedge accounting, the Group is required to document from inception the relationship between the item being hedged and
the hedging instrument, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at
the inception of the hedge and on an ongoing basis, the Group documents that the hedge will be highly effective, which is when the hedging
relationships meet all of the following hedge effectiveness requirements:
\u2022
there is an economic relationship between the hedged item and the hedging instrument;
\u2022
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
\u2022
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation
is accounted for prospectively.
The Group designates certain hedging instruments as either cash flow hedges or hedges of net investments in foreign operations.
Cash flow hedge
Derivative financial instruments are classified as cash flow hedges when they hedge the Group\u2019s exposure to the variability in cash flows that are
either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecasted cash flow.
The Group designates the full change in the fair value of a foreign exchange forward contract (i.e. including the forward elements) as the hedging
instrument for all of its hedging relationships involving foreign exchange forward contracts.
The effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the Statement of Comprehensive
Income and accumulated in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and accumulated in equity are recycled to the Income Statement
in the periods when the hedged item is recognised in the Income Statement or when the forecast transaction is no longer expected to occur.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or
non-financial liability.
Hedges of net investments in foreign operations
Derivative financial instruments and certain loan instruments, are classified as net investment hedges when they hedge the Group\u2019s net investment
in foreign operations. The effective element of any foreign exchange gain or loss from revaluing the hedging instruments at a reporting period end
is recognised in the Statement of Comprehensive Income. Any ineffective element is recognised immediately in the Income Statement.
The Group designates only the spot rate component of cross currency swaps in net investment hedges. The changes in the fair value of the
aligned forward and currency basis elements are recognised in other comprehensive income and accumulated in equity. If the hedged item is
time-period related, then the amount accumulated in equity is reclassified to profit or loss on an appropriate basis.
Gains and losses accumulated in equity are recognised immediately in the Income Statement when the foreign operation is disposed.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a rate
that reflects the current market assessment of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of subsequent
reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37:
Provisions, contingent liabilities and contingent assets and the amount initially recognised less cumulative amount of revenue recognised in
accordance with the principles of IFRS 15: Revenue from contracts with customers.
Pensions and other retirement benefits
The Group operates defined benefit pension plans and defined contribution plans, some of which require contributions to be made to
administered funds separate from the Group.
For the defined benefit pension and retirement benefit plans, plan assets are measured at fair value and plan liabilities are measured on
an actuarial basis and discounted at an interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent
currency and term to the plan liabilities. Any assets resulting from this calculation are limited to past service cost plus the present value of
available refunds and reductions in future contributions to the plan. The present value of the defined benefit obligation, and the related current
service cost and past service cost, are measured using the projected unit credit method.
The service cost of providing pension and other retirement benefits to employees for the period is charged to the Income Statement.
Net interest expense on net defined benefit obligations is determined by applying discount rates used to measure defined benefit obligations
at the beginning of the year to net defined benefit obligations at the beginning of the year. The net interest expense is recognised within
finance costs.
Remeasurement gains and losses comprise actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets
(excluding interest). Remeasurement gains and losses, and taxation thereon, are recognised in full in the Statement of Comprehensive Income
in the period in which they occur and are not subsequently recycled.
Actuarial gains and losses may result from differences between the actuarial assumptions underlying the plan obligations and actual experience
during the period or changes in the actuarial assumptions used in the valuation of the plan obligations.
For defined contribution plans, contributions payable are charged to the Income Statement as an operating expense when employees have
rendered services entitling them to the contributions.
Foreign currencies
The individual Financial Statements of each Group company are presented in the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the Consolidated Financial Statements, the results and financial position of each Group
company are expressed in pounds Sterling, which is the functional currency of the Company, and the presentation currency for the Consolidated
Financial Statements.
In preparing the Financial Statements of the individual companies, transactions in currencies other than the entity\u2019s functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Income Statement
for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the Income Statement for
the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in
equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of the Group\u2019s foreign operations are translated at
exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in the Statement of Comprehensive Income and accumulated in equity (attributed to
non-controlling interests as appropriate). Such translation differences are recognised as income or as expenses in the period in which the related
operation is disposed of. Any exchange differences that have previously been attributed to non-controlling interests are derecognised but they
are not reclassified to the Income Statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the rate prevailing at the balance sheet date.
Taxation
The tax expense is based on the taxable profits for the period and represents the sum of the tax paid or currently payable and deferred tax.
Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group\u2019s liability for current tax is calculated using
tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
A tax provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future
outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.
The assessment is based on the judgement of tax professionals within the Company supported by previous experience in respect of such
activities and in certain cases based on specialist independent advice.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
\u2022
where the deferred tax liability arises on the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
where the timing of the reversal of the temporary differences associated with investments in subsidiaries and interests in equity accounted
investments can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and carry-forward of unused tax
assets and unused tax losses can be utilised except:
\u2022
where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
in respect of deductible temporary differences associated with investments in subsidiaries and interests in equity accounted investments,
deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or substantively enacted at the relevant balance sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a
net basis.
Tax relating to items recognised directly in other comprehensive income is recognised in the Statement of Comprehensive Income and not in the
Income Statement.
Revenues, expenses and assets are recognised net of the amount of sales tax except:
\u2022
where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
\u2022
where receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet.
Share-based payments
The Group has applied the requirements of IFRS 2: Share-based payment. The Group issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments are measured at fair value of the equity instrument excluding the effect of non-market
based vesting conditions at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of shares that will eventually vest and adjusted for the
effect of non-market based vesting conditions.
Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on the
Directors\u2019 best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Non-current assets and disposal groups
Non-current assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and businesses are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable and the asset or
business is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify
for recognition as a completed sale within one year from the date of classification.
Government grants
Government grants are not recognised in the Income Statement until there is reasonable assurance that the Group will comply with the
conditions attached to them and that the grants will be received. Government grants are recognised in the Income Statement on a systematic
basis over the periods in which the Group recognises the related costs for which the grants are intended to compensate.
Specifically, government grants where the primary condition is that the Group should purchase, construct or otherwise acquire non-current
assets (including property, plant and equipment) are recognised as deferred government grants in the Balance Sheet and transferred to the
Income Statement on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial
support to the Group with no future related costs are recognised in the Income Statement in the period in which they become receivable.
Climate change
In preparing the Consolidated Financial Statements, the Directors have considered the impact of climate change with specific regard to the risks
identified in the Task Force on Climate-related Financial Disclosures (\u201cTCFD\u201d) report on page 58 as well as the Group\u2019s Transition Plan including
emission targets.
The Directors have considered the impact of climate change in respect to the following areas and have determined that there is no material
impact on the financial reporting judgements and estimates:
\u2022
Group\u2019s going concern assessment (note 2);
\u2022
Estimated future cash flows used in impairment assessments, where applicable, of the carrying value of non-current assets (such as goodwill)
(note 11);
\u2022
Inventory valuation with respect to climate related shift in demand (note 16);
\u2022
Recoverability of trade receivables and contract assets related to unbilled work done on risk and revenue sharing partnerships, which consider
the future expectations of airframe and engine manufacturers as well as airline customer behaviours (note 17); and
\u2022
Forecasts of future profitability to assess the recoverability of deferred tax assets in the UK, The Netherlands and US (note 22).
The Group\u2019s Transition Plan sets out the actions the Directors intend to take in the transition to a net zero economy, how they plan to execute
on the interim and long-term emissions reduction targets, and how they plan to achieve Net Zero by 2050. The Transition Plan also sets out how
climate considerations are integrated into strategic thinking and future planning, such as major capital expenditure, acquisitions, and disposals.
The main short-term and medium-term objectives to meet this target are:
\u2022
Reduce absolute Scope 1 and 2 emissions 50% by 2030 from a 2020 baseline. This will be met by sourcing at least 50% of the Group\u2019s
electricity from renewable sources by 2025 (where renewable energy is commercially and reasonably available in the relevant jurisdiction)
through either continued investment in onsite renewable energy as well as procurement of power purchase agreements and renewable energy
certificates. The Group will also continue to invest in energy efficiency measures to reduce overall energy consumption. The estimated
investment needed to meet these scope 1 and 2 emission improvements are incorporated into current financial planning and forecasting.
\u2022
The Group is uniquely positioned at the early stages of an aircraft life cycle to play a role in eradicating emissions for the entire sector and
ultimately unlocking its potential to positively contribute to a low carbon economy. The targets to achieve 80% of total Research and
Development (\u201cR&D\u201d) expenditure on climate-related R&D per year to contribute to aerospace decarbonisation by 2025 and achieve 100% of
new products which contribute to aerospace decarbonisation by 2025 demonstrate the emphasis Melrose places on developing innovative
and breakthrough technologies such as battery electric and hydrogen propulsion. During the year \u00a348 million was spent on climate related
R&D. Future investments required to meet these targets are incorporated into our forecasts.", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19503": { "value": "Basis of accounting
The Consolidated Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (\u201cIFRSs\u201d) as issued by the IASB. The Consolidated Financial Statements have been prepared on an historical cost
basis, except for the revaluation of certain financial instruments and investments which are recognised at fair value at the end of each reporting
period. Historical cost is generally based on the fair value of the consideration given in exchange for assets.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19592": { "value": "Basis of consolidation
The Group\u2019s Financial Statements include the results of the parent undertaking and all of its subsidiary undertakings. In addition, the Group\u2019s
share of the results and equity of joint ventures and associated undertakings (together \u201cequity accounted investments\u201d) are included. The results
of businesses acquired during the period are included from the effective date of acquisition and, for those sold during the period, to the effective
date of disposal. Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into
line with those used by the Group.
All intra-Group balances and transactions, including unrealised profits arising from intra-Group transactions, have been eliminated in full.
Non-controlling interests in subsidiaries are identified separately from the Group\u2019s equity therein. The interest of non-controlling shareholders is
initially measured at the non-controlling interests\u2019 proportion of the share of the fair value of the acquiree\u2019s identifiable net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests\u2019
share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-
controlling interests having a deficit balance.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19607": { "value": "Going concern
The Consolidated 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\u2019s liquidity and funding arrangements are described in the Finance Director\u2019s Review. There is significant liquidity headroom
of \u00a31.0 billion at 31 December 2023 and sufficient headroom throughout the going concern forecast period. Forecast covenant compliance
is considered further below.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19694": { "value": "Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured at the fair value of assets
transferred, the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the Group in exchange for
control of the acquiree. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities. Costs directly attributable to business combinations are recognised as an expense in the Income
Statement as incurred.
The acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific guidance
is provided by IFRSs. Non-current assets and directly attributable liabilities that are classified as held for sale in accordance with IFRS 5:
Non-current assets held for sale and discontinued operations, are recognised and measured at fair value less costs to sell. Also, deferred tax
assets and liabilities are recognised and measured in accordance with IAS 12: Income taxes, liabilities and assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 19 (revised): Employee benefits and liabilities or equity instruments related to
the replacement by the Group of an acquiree\u2019s share-based payments awards are measured in accordance with IFRS 2: Share-based payment.
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group
reports provisional amounts where appropriate. Those provisional amounts are adjusted during the measurement period, or additional assets
or liabilities recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised at that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum period of one year.
Goodwill on acquisition is initially measured at cost, being the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the acquiree over the acquirer\u2019s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
If, after reassessment, the Group\u2019s interest in the fair value of the acquiree\u2019s identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the
acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the cash-generating units acquired. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to which goodwill relates. Where the recoverable amount of the cash-generating unit is less
than the carrying amount, an impairment loss is recognised in the Income Statement and is not subsequently reversed. When there is a disposal
of a cash-generating unit, goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that
operation. The amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and
the operation retained.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19695": { "value": "Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured at the fair value of assets
transferred, the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the Group in exchange for
control of the acquiree. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities. Costs directly attributable to business combinations are recognised as an expense in the Income
Statement as incurred.
The acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific guidance
is provided by IFRSs. Non-current assets and directly attributable liabilities that are classified as held for sale in accordance with IFRS 5:
Non-current assets held for sale and discontinued operations, are recognised and measured at fair value less costs to sell. Also, deferred tax
assets and liabilities are recognised and measured in accordance with IAS 12: Income taxes, liabilities and assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 19 (revised): Employee benefits and liabilities or equity instruments related to
the replacement by the Group of an acquiree\u2019s share-based payments awards are measured in accordance with IFRS 2: Share-based payment.
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group
reports provisional amounts where appropriate. Those provisional amounts are adjusted during the measurement period, or additional assets
or liabilities recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised at that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum period of one year.
Goodwill on acquisition is initially measured at cost, being the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the acquiree over the acquirer\u2019s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
If, after reassessment, the Group\u2019s interest in the fair value of the acquiree\u2019s identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the
acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the cash-generating units acquired. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to which goodwill relates. Where the recoverable amount of the cash-generating unit is less
than the carrying amount, an impairment loss is recognised in the Income Statement and is not subsequently reversed. When there is a disposal
of a cash-generating unit, goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that
operation. The amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and
the operation retained.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19696": { "value": "Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured at the fair value of assets
transferred, the liabilities incurred or assumed at the date of exchange of control and equity instruments issued by the Group in exchange for
control of the acquiree. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities. Costs directly attributable to business combinations are recognised as an expense in the Income
Statement as incurred.
The acquired identifiable assets and liabilities are measured at their fair value at the date of acquisition except those where specific guidance
is provided by IFRSs. Non-current assets and directly attributable liabilities that are classified as held for sale in accordance with IFRS 5:
Non-current assets held for sale and discontinued operations, are recognised and measured at fair value less costs to sell. Also, deferred tax
assets and liabilities are recognised and measured in accordance with IAS 12: Income taxes, liabilities and assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 19 (revised): Employee benefits and liabilities or equity instruments related to
the replacement by the Group of an acquiree\u2019s share-based payments awards are measured in accordance with IFRS 2: Share-based payment.
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group
reports provisional amounts where appropriate. Those provisional amounts are adjusted during the measurement period, or additional assets
or liabilities recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised at that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum period of one year.
Goodwill on acquisition is initially measured at cost, being the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the acquiree over the acquirer\u2019s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
If, after reassessment, the Group\u2019s interest in the fair value of the acquiree\u2019s identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer\u2019s previously held equity interest in the
acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the cash-generating units acquired. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to which goodwill relates. Where the recoverable amount of the cash-generating unit is less
than the carrying amount, an impairment loss is recognised in the Income Statement and is not subsequently reversed. When there is a disposal
of a cash-generating unit, goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that
operation. The amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and
the operation retained.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19759": { "value": "Equity accounted investments
A joint venture is an entity which is not a subsidiary undertaking but where the interest of the Group is that of a partner in a business over which
the Group exercises joint control with its partners over the financial and operating policies. In all cases voting rights are 50% or lower.
Associated undertakings are entities that are neither a subsidiary nor a joint venture, but where the Group has a significant influence. The results,
assets and liabilities of equity accounted investments are accounted for using the equity method of accounting. The Group\u2019s share of equity
includes goodwill arising on acquisition.
When a Group entity transacts with an equity accounted investment of the Group, profits and losses resulting from the transactions with the
equity accounted investments are recognised in the Group\u2019s Consolidated Financial Statements only to the extent of interests in equity
accounted investments that are not related to the Group.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19760": { "value": "Equity accounted investments
A joint venture is an entity which is not a subsidiary undertaking but where the interest of the Group is that of a partner in a business over which
the Group exercises joint control with its partners over the financial and operating policies. In all cases voting rights are 50% or lower.
Associated undertakings are entities that are neither a subsidiary nor a joint venture, but where the Group has a significant influence. The results,
assets and liabilities of equity accounted investments are accounted for using the equity method of accounting. The Group\u2019s share of equity
includes goodwill arising on acquisition.
When a Group entity transacts with an equity accounted investment of the Group, profits and losses resulting from the transactions with the
equity accounted investments are recognised in the Group\u2019s Consolidated Financial Statements only to the extent of interests in equity
accounted investments that are not related to the Group.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19774": { "value": "Revenue
Revenues are recognised either at the point of transfer of control of goods and services, or recognised over time on an activity basis using
the costs incurred as the measure of the activity. Costs are recognised as they are incurred.
The nature of agreements into which the Group enters means that certain of the Group\u2019s arrangements with its customers have multiple
elements that can include any combination of:
\u2022
Sale of products and services;
\u2022
Risk and revenue sharing partnerships (\u201cRRSPs\u201d);
\u2022
Design and build; and
\u2022
Construction contracts.
Contracts are reviewed to identify each performance obligation relating to a distinct good or service and the associated consideration. The Group
allocates revenue to multiple element arrangements based on the identified performance obligations within the contracts in line with the policies
below. A performance obligation is identified if the customer can benefit from the good or service on its own or together with other readily
available resources, and it can be separately identified within the contract. This review is performed by reference to the specific contract terms.
Sale of products and services
This revenue stream accounts for the majority of Group sales. Contracts in the Automotive, Powder Metallurgy and Other Industrial segments
operate almost exclusively on this basis, and it also covers a high proportion of the Aerospace segment\u2019s revenues.
Invoices for goods are raised and revenue is recognised when control of the goods is transferred to the customer. Dependent upon contractual
terms this may be at the point of despatch, acceptance by the customer or, in Aerospace, certification by the customer. The revenue recognised
is the transaction price as it is the observable selling price per product.
Cash discounts, volume rebates and other customer incentive programmes are based on certain percentages agreed with the Group\u2019s customers,
which are typically earned by the customer over an annual period. These are allocated to performance obligations and are recorded as a reduction
in revenue at the point of sale based on the estimated future outcome. Due to the nature of these arrangements an estimate is made based on
historical results to date, estimated future results across the contract period and the contractual provisions of the customer agreement.
Many businesses in the Powder Metallurgy and Automotive segments recognise an element of revenue via a surcharge or similar raw material cost
recovery mechanism. The surcharge is generally based on prior period movement in raw material price indices applied to current period deliveries.
Risk and revenue sharing partnerships (\u201cRRSPs\u201d)
This revenue stream whilst material affects a small number of businesses, exclusively in the Engines segment. Revenue is recognised under
RRSPs for both the sale of product as detailed above and sales of services, which are recognised by reference to the stage of completion based
on the performance obligations in the contract. In most RRSP contracts, there are two separate phases where the Group earns revenue; sale of
products principally to engine manufacturers and aftermarket support.
The assessment of the stage of completion is dependent on the nature of the contract and the performance obligations within it.
The value of revenue is based on the standalone selling price for each element of the contract.
Revenue is recognised at the point control passes to the customer. For products and services, this has been identified as the point of despatch,
acceptance by the customer or certification by the customer. Where the amount of revenue recognised is not yet due for collection under the
terms of the contract, it will be recognised as variable consideration within the unbilled work done contract asset (\u201cunbilled work done\u201d). Revenue
is not recognised where recovery is not probable due to potential significant reversals in the future. This can be affected by assessment of future
volumes including aftermarket expectations which are impacted by technology development, fuel price and competition.
Participation fees are payments made to engine manufacturers and original equipment manufacturers relating to RRSPs and long-term
agreements. They are recognised as contract assets to the extent they can be recovered from future sales. Where participation fees have been
paid under the RRSP, the amortisation is recognised as a revenue reduction under IFRS 15, as performance obligations are satisfied.
Generally, during the design and development phase of a typical RRSP contract, the Group performs contractually agreed-upon tasks for a
customer. It is usual for the Intellectual Property Rights (\u201cIPRs\u201d) that underpin technology advancement or know-how to remain with the Group
such that the customer cannot benefit from the IPRs either on their own or together with other resources that are readily available to the
customer. Where IPRs are transferred to the customer the Group has determined this is not separately identifiable from other promises in the
contract due to an exclusivity clause for the supply of product. Accordingly, it has been determined that the Group\u2019s promise to transfer goods
to its customer is a performance obligation that is separately identifiable and this uses development and know-how as an input.
Design and build
Generally, revenue is only recognised on the sale of product as detailed above, however, on occasions cash is received in advance of work
performed to compensate the Group for costs incurred in design and development activities. The Group performs an assessment of its
performance obligations to understand multiple elements. Where it is determined there is only one type of performance obligation, being the
delivery of product, any cash advance is factored into the revenue allocated across the deliveries required under the contract.
Where the performance obligation has not been satisfied amounts received are recognised as a contract liability. If there is more than one
performance obligation, revenue is allocated to each one based on a standalone selling price for each element of the contract.
Due to the nature of design and build contracts, there can be significant \u2018learning curves\u2019 while the Group optimises its production processes.
During the early phase of these contracts, all costs including any start-up losses are taken directly to the Income Statement, as they do not meet
the criteria for fulfilment costs.
Construction contracts
Where multiple performance obligations are identified, revenue is recognised as each performance obligation is met. This requires an assessment
of total revenue to identify the allocation across the performance obligations, based on the standalone selling price for each obligation.
In cases where one of the following criteria is met, revenue is recognised over time:
\u2022
The customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance;
\u2022
The Group\u2019s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
\u2022
The Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for
performance completed to date.
Due to the nature of the criteria above, only certain contracts in the Group qualify for over time recognition. On this basis revenue is recognised
using the input method, which uses costs incurred and the assessed margin across the contract. The input method is used to measure progress
as it best depicts the transfer of control to the customer. The margin and associated revenue are calculated based on the estimated transaction
price and expected total costs, with considerations made for the associated contract risks.
If any of the above criteria are not met, revenue is recognised at a point in time when control transfers to the customer which, in line with the sale
of goods and services above, is the point of delivery or customer acceptance dependent on the terms of the contract.
Unbilled work done addresses contract matters, such as price or scope amendments, which are included based on the expected value or most likely
amount. A constraint is included unless it is highly probable that the revenue will not significantly reverse in the future. This constraint is calculated
based on a cautious expectation of the life of certain RRSPs. Variations in contract work, claims and incentive payments are included in revenue from
construction contracts based on an estimate of the expected value the Group expects to receive. Variations are included when the customer has
agreed to the variation or acknowledged liability for the variation in principle. Claims are included when negotiations with the customer have reached
an advanced stage such that it is virtually certain that the customer will accept the claim.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19885": { "value": "Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bring the asset into operation, and
any material borrowing costs on qualifying assets. Qualifying assets are defined as an asset or programme where the period of capitalisation is
more than 12 months. Purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to
acquire the asset.
Where assets are in the course of construction at the balance sheet date, they are classified as capital work-in-progress. Transfers are made to
other asset categories when they are available for use, at which point depreciation commences.
Right-of-use assets arise under IFRS 16 and are depreciated over the shorter of the estimated life and the lease term.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Freehold land
nil
Freehold buildings and long leasehold property
over expected economic life not exceeding 50 years
Short leasehold property
over the term of the lease
Plant and equipment
3-15 years
The estimated useful lives of property, plant and equipment are reviewed on an annual basis and, if necessary, changes in useful lives are
accounted for prospectively.
The carrying values of property, plant and equipment are reviewed annually for indicators of impairment, or if events or changes in circumstances
indicate that the carrying value may not be recoverable. If such indication exists an impairment test is performed and, where the carrying values
exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant
and equipment is the greater of net selling price and value in use. In assessing value in use, estimated future cash flows, considering the
implications of climate change (see note 11 for further detail), are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds or costs and the carrying amount of the item) is included in the Income Statement in the period that the item is derecognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19896": { "value": "Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Freehold land
nil
Freehold buildings and long leasehold property
over expected economic life not exceeding 50 years
Short leasehold property
over the term of the lease
Plant and equipment
3-15 years
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f19959": { "value": "Intangible assets
Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses.
On acquisition of businesses, separately identifiable intangible assets are initially recorded at their fair value at the acquisition date.
Access to the use of brands and intellectual property are valued using a \u201crelief from royalty\u201d method which determines the net present value of
future additional cash flows arising from the use of the intangible asset.
Customer relationships and contracts are valued on the basis of the net present value of the future additional cash flows arising from customer
relationships with appropriate allowance for attrition of customers.
Technology assets are valued using a replacement cost approach, or a \u201crelief from royalty\u201d method.
Amortisation of intangible assets is recorded in administration expenses in the Income Statement and is calculated on a straight-line basis over
the estimated useful lives of the asset as follows:
Customer relationships and contracts
20 years or less
Brands and intellectual property
20 years or less
Technology
20 years or less
Computer software
5 years or less
Development costs
20 years or less
Where computer software is not integral to an item of property, plant or equipment, its costs are capitalised and categorised as intangible assets.
Computer software is initially recorded at cost. Where these assets have been acquired through a business combination, this will be the fair value
allocated in the acquisition accounting. Where these have been acquired other than through a business combination, the initial cost is the
aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Intangible assets (other than computer software and development costs) are tested for impairment annually or more frequently whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses are measured on a similar basis to property,
plant and equipment. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20005": { "value": "Research and development costs
Research costs are expensed as incurred.
Costs relating to clearly defined and identifiable development projects are capitalised when there is a technical degree of exploitation, adequacy
of resources and a potential market or development possibility in the undertaking that are recognisable; and where it is the intention to produce,
market or execute the project. A correlation must also exist between the costs incurred and future benefits and those costs can be measured
reliably. Capitalised costs are expensed on a straight-line basis over their useful lives of 20 years or less. Costs not meeting such criteria are
expensed as incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20015": { "value": "Inventories
Inventories are valued at the lower of cost and net realisable value and are measured using a first in, first out or weighted average cost basis.
Cost includes all direct expenditure and appropriate production overhead expenditure incurred in bringing goods to their current state under
normal operating conditions. Net realisable value is based on estimated selling price less costs expected to be incurred to completion and
disposal. Provisions are made for obsolescence or other expected losses where necessary.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20023": { "value": "Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, balances with banks and similar institutions, and short-term deposits which are readily
convertible to cash and are subject to insignificant risks of changes in value.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20053": { "value": "Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowings.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the Income Statement when the liabilities are derecognised or impaired, as well as through the
amortisation process.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20054": { "value": "Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowings.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the Income Statement when the liabilities are derecognised or impaired, as well as through the
amortisation process.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20065": { "value": "Government refundable advances
Government refundable advances are reported in \u201cTrade and other payables\u201d in the Balance Sheet. Refundable advances include amounts
advanced by a government, accrued interest and directly attributable costs. Refundable advances are provided to the Group to part-finance
expenditures on specific development programmes. The advances are provided on a risk sharing basis, i.e. repayment levels are determined
subject to the success of the related programme. Balances are held at amortised cost and interest is calculated using the effective interest
rate method.Government grants
Government grants are not recognised in the Income Statement until there is reasonable assurance that the Group will comply with the
conditions attached to them and that the grants will be received. Government grants are recognised in the Income Statement on a systematic
basis over the periods in which the Group recognises the related costs for which the grants are intended to compensate.
Specifically, government grants where the primary condition is that the Group should purchase, construct or otherwise acquire non-current
assets (including property, plant and equipment) are recognised as deferred government grants in the Balance Sheet and transferred to the
Income Statement on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial
support to the Group with no future related costs are recognised in the Income Statement in the period in which they become receivable.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20074": { "value": "Leases
Where a lease arrangement is identified, a liability to the lessor is included in the Balance Sheet as a lease obligation calculated at the present
value of minimum lease payments. A corresponding right-of-use asset is recorded in property, plant and equipment. The discount rate used to
calculate the lease liability is the Group\u2019s incremental borrowing rate, unless there is a rate implicit in the lease. The incremental borrowing rate is
used for the majority of leases. Incremental borrowing rates are based on the term, currency, country and start date of the lease and reflect the
rate the Group would pay for a loan with similar terms and security.
Following initial recognition, the lease liability is measured at amortised cost using the effective interest rate method. Where there is a change in
future lease payments due to a rent review, change in index or rate, or a change in the Group\u2019s assessment of whether it is reasonably certain
to exercise a purchase, extension or break option, the lease obligation is remeasured. A corresponding adjustment is made to the associated
right-of-use asset.
Right-of-use assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Lease payments are apportioned between finance costs and a reduction in the lease obligation so as to reflect the interest on the remaining
balance of the obligation. Finance charges are recorded in the Income Statement within finance costs.
Leases with a term of 12 months or less and leases for low value are not recorded on the Balance Sheet and lease payments are recognised
as an expense in the Income Statement on a straight-line basis over the lease term. Expenses relating to variable lease payments which are not
included in the lease liability, due to being based on a variable other than an index or rate, are recognised as an expense in the
Income Statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20094": { "value": "Financial instruments \u2013 assets
Classification and measurement
All financial assets are classified as either those which are measured at fair value, through profit or loss or Other Comprehensive Income,
and those measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are not subsequently measured at fair value through profit or loss,
this includes directly attributable transaction costs. Trade and other receivables, contract assets and amounts due from equity accounted
investments are subsequently measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted under IFRS 9 is applied. The simplified approach requires that at
the point of initial recognition the expected credit loss across the life of the receivable must be recognised. As these balances do not contain a
significant financing element, the simplified approach relating to expected lifetime losses is applicable under IFRS 9. Cash and cash equivalents
and other receivables are also subject to impairment requirements.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured
reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the Income Statement in the period in which they
are incurred.
Investments
The Group has investments in listed shares and unlisted shares, that are not traded in an active market, which are classified as financial assets,
measured at fair value. Fair value for listed shares is calculated by reference to quoted market price. Fair value for unlisted shares is determined
by assessment of expected future dividends discounted to net present value. Any changes in fair value are recognised in Other Comprehensive
Income and accumulated in retained earnings. Dividends from investments are recognised in the Income Statement when the Group\u2019s right to
receive the dividend is established.
Trade and other receivables
Trade and other receivables are measured and carried at amortised cost using the effective interest method, less any impairment. For trade
receivables, the carrying amount is reduced by an allowance for expected lifetime losses. Subsequent recoveries of amounts previously
written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the
Income Statement.
Trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis. In measuring the
expected credit losses, the Group considers all reasonable and supportable information such as the Group\u2019s past experience at collecting
receipts, any increase in the number of delayed receipts in the portfolio past the average credit period, and forward looking information such
as forecasts of future economic decisions.
Other receivables are also considered for impairment and if required the carrying amount is reduced by any loss arising which is recorded in the
Income Statement, although for the Group this is not material.
Financial instruments \u2013 liabilities
Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instruments
and are initially measured at fair value, net of transaction costs. The Group derecognises financial liabilities when the Group\u2019s obligations are
discharged, significantly modified, cancelled or they expire.
Classification and measurement
Non-derivative financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective interest rate basis. The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant periods. The effective interest rate is the rate that discounts estimated future cash payments
throughout the expected life of the financial liability, or, where appropriate, a shorter period to the gross carrying amount of the financial liability.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20095": { "value": "Financial instruments \u2013 assets
Classification and measurement
All financial assets are classified as either those which are measured at fair value, through profit or loss or Other Comprehensive Income,
and those measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are not subsequently measured at fair value through profit or loss,
this includes directly attributable transaction costs. Trade and other receivables, contract assets and amounts due from equity accounted
investments are subsequently measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted under IFRS 9 is applied. The simplified approach requires that at
the point of initial recognition the expected credit loss across the life of the receivable must be recognised. As these balances do not contain a
significant financing element, the simplified approach relating to expected lifetime losses is applicable under IFRS 9. Cash and cash equivalents
and other receivables are also subject to impairment requirements.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured
reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the Income Statement in the period in which they
are incurred.
Investments
The Group has investments in listed shares and unlisted shares, that are not traded in an active market, which are classified as financial assets,
measured at fair value. Fair value for listed shares is calculated by reference to quoted market price. Fair value for unlisted shares is determined
by assessment of expected future dividends discounted to net present value. Any changes in fair value are recognised in Other Comprehensive
Income and accumulated in retained earnings. Dividends from investments are recognised in the Income Statement when the Group\u2019s right to
receive the dividend is established.
Trade and other receivables
Trade and other receivables are measured and carried at amortised cost using the effective interest method, less any impairment. For trade
receivables, the carrying amount is reduced by an allowance for expected lifetime losses. Subsequent recoveries of amounts previously
written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the
Income Statement.
Trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis. In measuring the
expected credit losses, the Group considers all reasonable and supportable information such as the Group\u2019s past experience at collecting
receipts, any increase in the number of delayed receipts in the portfolio past the average credit period, and forward looking information such
as forecasts of future economic decisions.
Other receivables are also considered for impairment and if required the carrying amount is reduced by any loss arising which is recorded in the
Income Statement, although for the Group this is not material.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20105": { "value": "Recognition and derecognition of financial assets
Financial assets are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instruments
and are initially measured at fair value, net of transaction costs. The Group derecognises financial liabilities when the Group\u2019s obligations are
discharged, significantly modified, cancelled or they expire.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20112": { "value": "Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted under IFRS 9 is applied. The simplified approach requires that at
the point of initial recognition the expected credit loss across the life of the receivable must be recognised. As these balances do not contain a
significant financing element, the simplified approach relating to expected lifetime losses is applicable under IFRS 9. Cash and cash equivalents
and other receivables are also subject to impairment requirements.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20120": { "value": "Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured
reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20126": { "value": "Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the Income Statement in the period in which they
are incurred.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20165": { "value": "Investments
The Group has investments in listed shares and unlisted shares, that are not traded in an active market, which are classified as financial assets,
measured at fair value. Fair value for listed shares is calculated by reference to quoted market price. Fair value for unlisted shares is determined
by assessment of expected future dividends discounted to net present value. Any changes in fair value are recognised in Other Comprehensive
Income and accumulated in retained earnings. Dividends from investments are recognised in the Income Statement when the Group\u2019s right to
receive the dividend is established.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20174": { "value": "Trade and other receivables
Trade and other receivables are measured and carried at amortised cost using the effective interest method, less any impairment. For trade
receivables, the carrying amount is reduced by an allowance for expected lifetime losses. Subsequent recoveries of amounts previously
written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the
Income Statement.
Trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis. In measuring the
expected credit losses, the Group considers all reasonable and supportable information such as the Group\u2019s past experience at collecting
receipts, any increase in the number of delayed receipts in the portfolio past the average credit period, and forward looking information such
as forecasts of future economic decisions.
Other receivables are also considered for impairment and if required the carrying amount is reduced by any loss arising which is recorded in the
Income Statement, although for the Group this is not material.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20189": { "value": "Financial instruments \u2013 liabilities
Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Group\u2019s Balance Sheet when the Group becomes a party to the contractual provisions of the instruments
and are initially measured at fair value, net of transaction costs. The Group derecognises financial liabilities when the Group\u2019s obligations are
discharged, significantly modified, cancelled or they expire.
Classification and measurement
Non-derivative financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective interest rate basis. The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant periods. The effective interest rate is the rate that discounts estimated future cash payments
throughout the expected life of the financial liability, or, where appropriate, a shorter period to the gross carrying amount of the financial liability.
Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue derivative financial instruments for speculative trading purposes. Details of
derivative financial instruments are disclosed in note 25 of the Financial Statements.
Derivative financial instruments are recognised and stated at fair value in the Group\u2019s Balance Sheet. Their fair value is recalculated at each
reporting date. The accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for
hedge accounting and are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses on the revaluation to fair value at the period end
are recognised immediately in the Income Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the Balance Sheet.
Derivatives embedded in non-derivative host contracts are recognised at their fair value in the Group\u2019s Balance Sheet when the nature,
characteristics and risks of the derivative are not closely related to the host contract. Gains and losses arising on the remeasurement of these
embedded derivatives at each balance sheet date are recognised in the Income Statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20206": { "value": "Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue derivative financial instruments for speculative trading purposes. Details of
derivative financial instruments are disclosed in note 25 of the Financial Statements.
Derivative financial instruments are recognised and stated at fair value in the Group\u2019s Balance Sheet. Their fair value is recalculated at each
reporting date. The accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for
hedge accounting and are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses on the revaluation to fair value at the period end
are recognised immediately in the Income Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the Balance Sheet.
Derivatives embedded in non-derivative host contracts are recognised at their fair value in the Group\u2019s Balance Sheet when the nature,
characteristics and risks of the derivative are not closely related to the host contract. Gains and losses arising on the remeasurement of these
embedded derivatives at each balance sheet date are recognised in the Income Statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20207": { "value": "Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue derivative financial instruments for speculative trading purposes. Details of
derivative financial instruments are disclosed in note 25 of the Financial Statements.
Derivative financial instruments are recognised and stated at fair value in the Group\u2019s Balance Sheet. Their fair value is recalculated at each
reporting date. The accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for
hedge accounting and are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses on the revaluation to fair value at the period end
are recognised immediately in the Income Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the Balance Sheet.
Derivatives embedded in non-derivative host contracts are recognised at their fair value in the Group\u2019s Balance Sheet when the nature,
characteristics and risks of the derivative are not closely related to the host contract. Gains and losses arising on the remeasurement of these
embedded derivatives at each balance sheet date are recognised in the Income Statement.
Hedge accounting
In order to qualify for hedge accounting, the Group is required to document from inception the relationship between the item being hedged and
the hedging instrument, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at
the inception of the hedge and on an ongoing basis, the Group documents that the hedge will be highly effective, which is when the hedging
relationships meet all of the following hedge effectiveness requirements:
\u2022
there is an economic relationship between the hedged item and the hedging instrument;
\u2022
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
\u2022
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation
is accounted for prospectively.
The Group designates certain hedging instruments as either cash flow hedges or hedges of net investments in foreign operations.
Cash flow hedge
Derivative financial instruments are classified as cash flow hedges when they hedge the Group\u2019s exposure to the variability in cash flows that are
either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecasted cash flow.
The Group designates the full change in the fair value of a foreign exchange forward contract (i.e. including the forward elements) as the hedging
instrument for all of its hedging relationships involving foreign exchange forward contracts.
The effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the Statement of Comprehensive
Income and accumulated in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and accumulated in equity are recycled to the Income Statement
in the periods when the hedged item is recognised in the Income Statement or when the forecast transaction is no longer expected to occur.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or
non-financial liability.
Hedges of net investments in foreign operations
Derivative financial instruments and certain loan instruments, are classified as net investment hedges when they hedge the Group\u2019s net investment
in foreign operations. The effective element of any foreign exchange gain or loss from revaluing the hedging instruments at a reporting period end
is recognised in the Statement of Comprehensive Income. Any ineffective element is recognised immediately in the Income Statement.
The Group designates only the spot rate component of cross currency swaps in net investment hedges. The changes in the fair value of the
aligned forward and currency basis elements are recognised in other comprehensive income and accumulated in equity. If the hedged item is
time-period related, then the amount accumulated in equity is reclassified to profit or loss on an appropriate basis.
Gains and losses accumulated in equity are recognised immediately in the Income Statement when the foreign operation is disposed.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20208": { "value": "Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue derivative financial instruments for speculative trading purposes. Details of
derivative financial instruments are disclosed in note 25 of the Financial Statements.
Derivative financial instruments are recognised and stated at fair value in the Group\u2019s Balance Sheet. Their fair value is recalculated at each
reporting date. The accounting treatment for the resulting gain or loss will depend on whether the derivative meets the criteria to qualify for
hedge accounting and are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses on the revaluation to fair value at the period end
are recognised immediately in the Income Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end date are classified as current in the Balance Sheet.
Derivatives embedded in non-derivative host contracts are recognised at their fair value in the Group\u2019s Balance Sheet when the nature,
characteristics and risks of the derivative are not closely related to the host contract. Gains and losses arising on the remeasurement of these
embedded derivatives at each balance sheet date are recognised in the Income Statement.
Hedge accounting
In order to qualify for hedge accounting, the Group is required to document from inception the relationship between the item being hedged and
the hedging instrument, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at
the inception of the hedge and on an ongoing basis, the Group documents that the hedge will be highly effective, which is when the hedging
relationships meet all of the following hedge effectiveness requirements:
\u2022
there is an economic relationship between the hedged item and the hedging instrument;
\u2022
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
\u2022
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation
is accounted for prospectively.
The Group designates certain hedging instruments as either cash flow hedges or hedges of net investments in foreign operations.
Cash flow hedge
Derivative financial instruments are classified as cash flow hedges when they hedge the Group\u2019s exposure to the variability in cash flows that are
either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecasted cash flow.
The Group designates the full change in the fair value of a foreign exchange forward contract (i.e. including the forward elements) as the hedging
instrument for all of its hedging relationships involving foreign exchange forward contracts.
The effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the Statement of Comprehensive
Income and accumulated in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and accumulated in equity are recycled to the Income Statement
in the periods when the hedged item is recognised in the Income Statement or when the forecast transaction is no longer expected to occur.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or
non-financial liability.
Hedges of net investments in foreign operations
Derivative financial instruments and certain loan instruments, are classified as net investment hedges when they hedge the Group\u2019s net investment
in foreign operations. The effective element of any foreign exchange gain or loss from revaluing the hedging instruments at a reporting period end
is recognised in the Statement of Comprehensive Income. Any ineffective element is recognised immediately in the Income Statement.
The Group designates only the spot rate component of cross currency swaps in net investment hedges. The changes in the fair value of the
aligned forward and currency basis elements are recognised in other comprehensive income and accumulated in equity. If the hedged item is
time-period related, then the amount accumulated in equity is reclassified to profit or loss on an appropriate basis.
Gains and losses accumulated in equity are recognised immediately in the Income Statement when the foreign operation is disposed.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20274": { "value": "Cash flow hedge
Derivative financial instruments are classified as cash flow hedges when they hedge the Group\u2019s exposure to the variability in cash flows that are
either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecasted cash flow.
The Group designates the full change in the fair value of a foreign exchange forward contract (i.e. including the forward elements) as the hedging
instrument for all of its hedging relationships involving foreign exchange forward contracts.
The effective portion of any gain or loss from revaluing the derivative financial instrument is recognised in the Statement of Comprehensive
Income and accumulated in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and accumulated in equity are recycled to the Income Statement
in the periods when the hedged item is recognised in the Income Statement or when the forecast transaction is no longer expected to occur.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or
non-financial liability.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20299": { "value": "Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a rate
that reflects the current market assessment of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20308": { "value": "Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of subsequent
reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37:
Provisions, contingent liabilities and contingent assets and the amount initially recognised less cumulative amount of revenue recognised in
accordance with the principles of IFRS 15: Revenue from contracts with customers.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20316": { "value": "Pensions and other retirement benefits
The Group operates defined benefit pension plans and defined contribution plans, some of which require contributions to be made to
administered funds separate from the Group.
For the defined benefit pension and retirement benefit plans, plan assets are measured at fair value and plan liabilities are measured on
an actuarial basis and discounted at an interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent
currency and term to the plan liabilities. Any assets resulting from this calculation are limited to past service cost plus the present value of
available refunds and reductions in future contributions to the plan. The present value of the defined benefit obligation, and the related current
service cost and past service cost, are measured using the projected unit credit method.
The service cost of providing pension and other retirement benefits to employees for the period is charged to the Income Statement.
Net interest expense on net defined benefit obligations is determined by applying discount rates used to measure defined benefit obligations
at the beginning of the year to net defined benefit obligations at the beginning of the year. The net interest expense is recognised within
finance costs.
Remeasurement gains and losses comprise actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets
(excluding interest). Remeasurement gains and losses, and taxation thereon, are recognised in full in the Statement of Comprehensive Income
in the period in which they occur and are not subsequently recycled.
Actuarial gains and losses may result from differences between the actuarial assumptions underlying the plan obligations and actual experience
during the period or changes in the actuarial assumptions used in the valuation of the plan obligations.
For defined contribution plans, contributions payable are charged to the Income Statement as an operating expense when employees have
rendered services entitling them to the contributions.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20338": { "value": "Foreign currencies
The individual Financial Statements of each Group company are presented in the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the Consolidated Financial Statements, the results and financial position of each Group
company are expressed in pounds Sterling, which is the functional currency of the Company, and the presentation currency for the Consolidated
Financial Statements.
In preparing the Financial Statements of the individual companies, transactions in currencies other than the entity\u2019s functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Income Statement
for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the Income Statement for
the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in
equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of the Group\u2019s foreign operations are translated at
exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in the Statement of Comprehensive Income and accumulated in equity (attributed to
non-controlling interests as appropriate). Such translation differences are recognised as income or as expenses in the period in which the related
operation is disposed of. Any exchange differences that have previously been attributed to non-controlling interests are derecognised but they
are not reclassified to the Income Statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the rate prevailing at the balance sheet date.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20385": { "value": "Taxation
The tax expense is based on the taxable profits for the period and represents the sum of the tax paid or currently payable and deferred tax.
Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group\u2019s liability for current tax is calculated using
tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
A tax provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future
outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.
The assessment is based on the judgement of tax professionals within the Company supported by previous experience in respect of such
activities and in certain cases based on specialist independent advice.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
\u2022
where the deferred tax liability arises on the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
where the timing of the reversal of the temporary differences associated with investments in subsidiaries and interests in equity accounted
investments can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and carry-forward of unused tax
assets and unused tax losses can be utilised except:
\u2022
where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
in respect of deductible temporary differences associated with investments in subsidiaries and interests in equity accounted investments,
deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or substantively enacted at the relevant balance sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a
net basis.
Tax relating to items recognised directly in other comprehensive income is recognised in the Statement of Comprehensive Income and not in the
Income Statement.
Revenues, expenses and assets are recognised net of the amount of sales tax except:
\u2022
where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
\u2022
where receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20396": { "value": "Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
\u2022
where the deferred tax liability arises on the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
where the timing of the reversal of the temporary differences associated with investments in subsidiaries and interests in equity accounted
investments can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and carry-forward of unused tax
assets and unused tax losses can be utilised except:
\u2022
where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022
in respect of deductible temporary differences associated with investments in subsidiaries and interests in equity accounted investments,
deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or substantively enacted at the relevant balance sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a
net basis.
Tax relating to items recognised directly in other comprehensive income is recognised in the Statement of Comprehensive Income and not in the
Income Statement.
Revenues, expenses and assets are recognised net of the amount of sales tax except:
\u2022
where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
\u2022
where receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20462": { "value": "Share-based payments
The Group has applied the requirements of IFRS 2: Share-based payment. The Group issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments are measured at fair value of the equity instrument excluding the effect of non-market
based vesting conditions at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of shares that will eventually vest and adjusted for the
effect of non-market based vesting conditions.
Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on the
Directors\u2019 best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20473": { "value": "Non-current assets and disposal groups
Non-current assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and businesses are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable and the asset or
business is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify
for recognition as a completed sale within one year from the date of classification.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20474": { "value": "Non-current assets and disposal groups
Non-current assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and businesses are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable and the asset or
business is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify
for recognition as a completed sale within one year from the date of classification.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20545": { "value": "3.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group\u2019s accounting policies, which are described in note 2, the Directors are required to make judgements, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experiences and other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both
current and future periods.
Critical judgements
In the course of preparing the Financial Statements, critical judgements within the scope of paragraph 122 of IAS 1: Presentation of Financial
Statements have been made during the process of applying the Group\u2019s accounting policies.
a) Adjusting items
Judgements are required as to whether items are disclosed as adjusting, with consideration given to both quantitative and qualitative factors.
Further information about the determination of adjusting items in the year ended 31 December 2023 is included in note 2.
b) Demerger distribution
On 20 April 2023, the Group completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses through
the flotation of Dowlais Group plc (\u201cDowlais\u201d) on the London Stock Exchange.
The demerger distribution of \u00a31,973 million has been measured at fair value in accordance with IFRIC 17: Distributions of Non-cash Assets
to Owners and represents the number of Dowlais shares distributed to equity holders of 1,351,475,321 multiplied by the opening share price on
20 April 2023 of 146 pence. It was considered that the opening share price provided a fair representation of the value of the demerger
distribution as it was the share price closest to the time of demerger. If a different share price had been used, for example a closing price on day
one or first week of trading average, the demerger distribution value would have been impacted. For each 1p change in the share price, the
demerger distribution would have been impacted by \u00a314 million.
There are no other critical judgements other than those involving estimates, that have had a significant effect on the amounts recognised in the
Financial Statements. Those involving estimates are set out below.
Key sources of estimation uncertainty
Assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
c)
Assumptions used to determine the carrying amount of the Group\u2019s net retirement benefit obligations
The Group\u2019s pension plans are significant in size. The defined benefit obligations in respect of the plans are discounted at rates set by reference
to market yields on high quality corporate bonds. Significant estimation is required when setting the criteria for bonds to be included in the
population from which the yield curve is derived. The most significant criteria considered for the selection of bonds to include are the issue size of
the corporate bonds, quality of the bonds and the identification of outliers which are excluded. In addition, assumptions are made in determining
mortality and inflation rates to be used when valuing the plan\u2019s defined benefit obligations. At 31 December 2023, the retirement benefit
obligation was a net deficit of \u00a399 million (31 December 2022: \u00a3488 million).
Further details of the assumptions applied and a sensitivity analysis on the principal assumptions used to determine the defined benefit liabilities
of the Group\u2019s obligations are shown in note 24. Whilst actual movements might be different to sensitivities shown, these are a reasonably
possible change that could occur.
d)
Estimates of future revenues and costs of long-term contractual arrangements
The Group has certain large, complex contracts where significant judgements and estimates are required in order to allocate total
associated consideration.
A key judgement is the measurement of unbilled work done, in particular relating to certain risk and revenue sharing partnerships (\u201cRRSPs\u201d). A
detailed review of the Group\u2019s RRSP contracts determined where terms and conditions result in unbilled work done and this is further set out in
note 17. Distinguishing between a contractual right and the economic compulsion of partners with regard to the sale of original equipment (\u201cOE\u201d)
components and aftermarket activities relies on an interpretation of complex legal agreements. This specific point governs whether unbilled work
done is recognised on the sale of OE components and this can significantly impact the level of profitability from one period to the next. Further
disclosure is set out in note 4.
The forecast revenues and costs in respect of RRSP contracts are inherently imprecise and significant estimates are required to assess
the pattern of future maintenance activity, the costs to be incurred and escalation of revenue and costs. The estimates take account of
the uncertainties, constraining the expected level of revenue as appropriate. Measurement of unbilled work done is driven by forecasting
aftermarket revenue per delivered engine which is in turn contingent on overall programme success, levels of discounting that might be offered
by the engine manufacturers (the Group\u2019s customers), engineering requirements needed for optimal performance of the engine and the allocation
of revenue to individual units. In addition, where programmes are at an early stage the wider implications of any competing engines as well as
complications outside of the Group can be difficult to assess. Any of these inputs could change in the next year as programmes evolve and due
to the size and scale of these contracts, almost any modification could result in material changes in future periods.
The unbilled work done contract asset calculated is the best estimate of revenue allocated to completed performance obligations using input
assumptions and constraints as detailed further in note 17. As the impacted RRSP contracts mature, there are reasonably possible changes
to assumptions, such as engineering requirements to support programmes and the expected life of certain engines which could lead to the
unbilled work done contract asset on the Balance Sheet of \u00a3595 million (31 December 2022: \u00a3450 million) increasing to between \u00a3655 million
and \u00a3695 million. This would lead to recognition of additional revenue and profit in the next year of between \u00a360 million and \u00a3100 million.", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20633": { "value": "4. Revenue
An analysis of the Group\u2019s revenue is as follows:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Revenue recognised at a point in time
2,388
2,030
Revenue recognised over time
962
924
Revenue
3,350
2,954
(1) Revenue has been restated for discontinued operations (see note 1).
As set out in the accounting policies in note 2, the Group has four primary revenue streams. There is little judgement or estimation in the revenue
recognition of three of these areas; (i) sale of products and services, (ii) design and build and (iii) construction contracts. However, in the fourth
area, as disclosed in note 3d, there is estimation involved in accounting for certain RRSP contracts. RRSP contracts generally include the sale
of products and services as well as certain aspects of design and build arrangements. Further details are set out below.
Risk and revenue sharing partnerships
The Group has approximately \u00a316 billion (31 December 2022: \u00a313 billion) in respect of contractual transaction prices including a constrained
estimate of unbilled work done, on five (31 December 2022: four) engine programmes, out of a wider population of such programmes, which has
been allocated to contracted performance obligations not satisfied at 31 December 2023. These performance obligations will be satisfied and
revenue will be recognised over a period of up to 30 years (2022: 30 years).
An additional programme has been included during the year as a result of a modification to a contract. This was announced on 6 November 2023
following a major new agreement with GE Aerospace. The agreement expands the Group\u2019s participation on the GEnx RRSP programme and also
secures new technology work packages, aftermarket repair of engines structures and further production of fan cases for a range of GE engines.
Whilst the new agreement has not had a material impact on the reported results for the year ended 31 December 2023 or Balance Sheet as at
31 December 2023, the implications have been assessed under IFRS 15 and are material in future years. The key effects are:
\u2022
The Group\u2019s involvement on the GEnx RRSP has been extended beyond its current focus on OE to include significantly greater participation
in the aftermarket phase. The contract modification will be accounted for prospectively, with pricing implications affecting revenue from
1 January 2024. Following changes to the termination rights, to commercially protect the Group for its increased aftermarket share, the Group
now has a contractual right to aftermarket revenue.
\u2022
The new agreement will also: 1) support GE Aerospace\u2019s progress towards its cost and carbon emissions reduction targets with new proprietary
technology for the GEnx programme, specifically additive fabrications replacing existing processes, 2) allow the Group to join GE Aerospace\u2019s
global aftermarket repair network on the GEnx programme with specialised repair content for complex structural components and 3) extend
existing contracts to now deliver 100% of GEnx, CF6 and GE90 fan cases, as well as 50% of GE9X fan case assembly.
The amount of revenue recognised from RRSP contracts during the year was \u00a3680 million (2022: \u00a3547 million), which included an increase
in the unbilled work done contract asset of \u00a3173 million (2022: \u00a3106 million). Within this there is revenue from the delivery of product which
is recognised at a point in time of \u00a3629 million (2022: \u00a3517 million) and revenue from provision of service which is recognised over time of
\u00a351 million (2022: \u00a330 million). Due to the nature of certain of these RRSP arrangements, there is an associated unbilled work done contract
asset including movements during the year which is disclosed in note 17.
The nature of products and services delivered in RRSP contracts varies depending on the individual terms. Typically, they include a design
and development phase (which has been determined not to be a distinct performance obligation and so no revenue is recognised) and two other
phases where the Group does have performance obligations and earns revenue:
i)
Sale of structural OE engine components, such as turbine cases, principally to engine manufacturers, where revenue is recognised at a point
in time; and
ii)
Aftermarket support which can include: sale of spare parts where revenue is recognised at a point in time and stand ready services for life
of engine obligations to maintain permanent technical, and other programme related, support functions. Obligations can occur at any time
during the engine life and include: engineering and technical support for engine configuration changes and provision of aftermarket inventory
support solutions.
RRSP revenue recognised over time
The nature of these RRSP contracts on long-term engine programmes means that, as a partner, the Engines segment can share revenue
earned from maintenance, repair and overhaul services which are provided by the engine manufacturers (the Group\u2019s customers) or their
sub-contractors, but not the Group. The Group has a stand ready obligation to contribute to certain of the partnerships which typically results
in the provision of services such as technical and other programme support activities over the whole life of the engine. These services occur
over the life of the engine and due to the nature of compensation from customer arrangements, which is often flight hour based, as well as
costs which are less predictable, revenue is recognised over time using the engine manufacturer\u2019s actual overhaul costs as an input method.
This method is considered appropriate as it best reflects the customers\u2019 receipt and consumption of benefit from the Group\u2019s stand ready
performance obligation.
The total contract revenue includes amounts from: expected sales of OE engine components, expected sales of spare parts and aftermarket
revenue per delivered engine for stand ready services for the life of engine obligations. The total contract revenue is allocated to all of the
performance obligations.
During the year, \u00a330 million (2022: \u00a3nil) of revenue has been recognised relating to performance obligations satisfied by the Group in previous years
as risks have reduced and the constraint reassessed. There has been a further \u00a327 million (2022: \u00a319 million) of revenue recognised from changes
in assumptions which will also impact the revenue allocation between future years. Assumption changes were made following operational progress
by engine manufacturers with their customers, providing more certainty over future costs and volumes for the RRSP partners.
The Group participates on the Pratt & Whitney (\u201cPW\u201d) 1100G RRSP programme which produces a geared turbofan (\u201cGTF\u201d) engine. A specific
fleet of the GTF engines have been impacted by a rare condition in powder metal used to manufacture certain of the engine parts, which are not
supplied by the Group. GKN Aerospace has a 4% programme share on the GTF PW1100G variant impacted by this issue. According to RTX
(PW\u2019s parent company), the full potential cash impact to Melrose of approximately \u00a3200 million will be incurred over the next three to four years,
if it is assumed that this is all a programme cost to be shared by partners in the PW1100G RRSP programme.
Melrose's financial assumptions for all of its RRSP programmes are very constrained recognising that most of the Group\u2019s work is done on
the delivery of its parts which typically last the life of the engine, appropriately allowing for risks to arise over the full programme duration. As a
result, there is no net impact on the Group\u2019s results for the year ended 31 December 2023 and the unbilled work done contract asset remains
appropriately constrained at 31 December 2023, in accordance with the requirements of IFRS 15. This position has been determined based on
an assessment of risk, confidence in progress on the programme during the year and future expectations.", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20780": { "value": "5. 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\u2019s Chief Operating Decision Maker (\u201cCODM\u201d),
which has been deemed to be the Group\u2019s Board, in order to allocate resources to the segments and assess their performance.
Following the demerger of the Automotive, Powder Metallurgy and Other Industrial segments during the year their results are classified within
discontinued operations and the comparative results for 2022 have been restated accordingly. In addition, the results of the Aerospace business
are now viewed by the CODM as separated into Engines and Structures. The incremental information is provided below with comparative results
for 2022 also re-presented accordingly.
The operating segments are as follows:
Engines
\u2013 An industry leading global tier one supplier to the aerospace engines market, including structural engineered components; parts
repair; commercial and aftermarket contracts.
Structures
\u2013 A multi-technology global tier one supplier of both civil and defence air frames, including lightweight composite and metallic
structures; electrical distribution systems and components.
In addition, there is a corporate cost centre which is also reported to the Board. The corporate cost centre contains 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\u2019s length basis in a manner similar to transactions with third parties.
The Group\u2019s geographical segments are determined by the location of the Group\u2019s 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\u2019s operating segments and corporate cost
centre for the year ended 31 December 2023.
a) Segment revenues
The Group derives its revenue from the transfer of goods and services over time and at a point in time. The Group has assessed that the
disaggregation of revenue recognised from contracts with customers by operating segment is appropriate as this is the information regularly
reviewed by the CODM in evaluating financial performance. The Group also believes that presenting this disaggregation of revenue based on
the timing of transfer of goods or services provides useful information as to the nature and timing of revenue from contracts with customers.
Year ended 31 December 2023
Engines
Structures
Total
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Timing of revenue recognition
A
t a point in time
931
1,457
2,388
Over time
262
700
962
Revenue
1,193
2,157
3,350
Y
ear ended 31 December 2022 \u2013 restated
(1)
Engines
Structures
Total
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Timing of revenue recognition
A
t a point in time
806
1,224
2,030
Over time
229
695
924
Revenue
1,035
1,919
2,954
(1) Revenue has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
b)
Segment operating profit
Year ended 31 December 2023
Engines
Structures
Corporate
(1)
Total
Continuing operations
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
djusted operating profit/(loss)
310
110
(30)
390
Items not included in adjusted operating profit
(2)
:
A
mortisation of intangible assets acquired in business combinations
(135)
(125)
\u2013
(260)
Restructuring costs
(26)
(111)
(12)
(149)
Melrose equity-settled compensation scheme charges
\u2013
\u2013
(38)
(38)
A
cquisition and disposal related gains and losses
\u2013
\u2013
(3)
(3)
Movement in derivatives and associated financial assets and liabilities
(3)
(6)
123
114
Net release and changes in discount rates of fair value items
1
2
\u2013
3
Operating profit/(loss)
147
(130)
40
57
Finance costs
(79)
Finance income
14
Loss before tax
(8)
Tax
9
Profit after tax for the year from continuing operations
1
Year ended 31 December 2022 \u2013 restated
(3)
Engines
Structures
Corporate
(1)
Total
Continuing operations
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
djusted operating profit/(loss)
162
24
(39)
147
Items not included in adjusted operating profit
(2)
:
A
mortisation of intangible assets acquired in business combinations
(135)
(125)
\u2013
(260)
Restructuring costs
(25)
(63)
(2)
(90)
Movement in derivatives and associated financial assets and liabilities
20
1
(100)
(79)
Melrose equity-settled compensation scheme charges
\u2013
\u2013
(15)
(15)
Net release and changes in discount rates of fair value items
3
9
\u2013
12
A
cquisition and disposal related gains and losses
(5)
\u2013
20
15
Operating profit/(loss)
20
(154)
(136)
(270)
Finance costs
(83)
Finance income
25
Loss before tax
(328)
Tax
99
Loss after tax for the year from continuing operations
(229)
(1)
Corporate adjusted operating loss of \u00a330 million (2022: \u00a339 million), includes \u00a31 million (2022: \u00a33 million) of costs in respect of divisional management
long-term incentive plans.
(2)
Further details on adjusting items are discussed in note 6.
(3)
Operating profit has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
c)
Segment total assets and liabilities
Total assets
Total liabilities
Restated
(1)
Restated
(1)
31 December
31 December
31 December
31 December
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Engines
3,957
3,798
1,396
1,202
Structures
2,388
2,894
1,099
1,315
Corporate
584
761
867
1,838
Continuing operations
6,929
7,453
3,362
4,355
Discontinued operations
\u2013
6,534
\u2013
2,464
Total
6,929
13,987
3,362
6,819
(1)
Total assets and liabilities have been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
d)
Segment capital expenditure and depreciation
Depreciation of
Depreciation of
Capital expenditure
(1)
owned assets
(1)
leased assets
Restated
(2)
Restated
(2)
Restated
(2)
Year ended
Year ended
Year ended
Year ended
Year ended
Year ended
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Engines
55
38
43
46
7
7
Structures
63
39
74
77
17
14
Corporate
\u2013
\u2013
\u2013
\u2013
1
1
Continuing operations
118
77
117
123
25
22
Discontinued operations
51
231
43
238
6
25
Total
169
308
160
361
31
47
(1)
Including computer software and development costs. Capital expenditure excludes lease additions.
(2)
Capital expenditure and depreciation have been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
e) Geographical information
The Group operates in various geographical areas around the world. The parent company\u2019s country of domicile is the UK and the Group\u2019s
revenues and non-current assets in the rest of Europe and North America are also considered to be material.
The Group\u2019s revenue from external customers and information about its segment assets (non-current assets excluding deferred tax assets,
non-current derivative financial assets, non-current other receivables and retirement benefit surplus) by geographical location are detailed below:
Revenue
(1)
from
external customers
Segment assets
Restated
(2)
Year ended
Year ended
Restated
(2)
31 December
31 December
31 December
31 December
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
UK
579
509
882
1,042
Rest of Europe
540
408
2,166
2,501
North America
2,138
1,971
1,179
1,038
Other
93
66
22
28
Continuing operations
3,350
2,954
4,249
4,609
Discontinued operations
1,582
4,715
\u2013
5,333
Total
4,932
7,669
4,249
9,942
(1)
Revenue is presented by destination.
(2)
Revenue and segment assets have been restated for discontinued operations (see note 1).", "dimensions": { "concept": "ifrs-full:DisclosureOfOperatingSegmentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f20791": { "value": "Engines
\u2013 An industry leading global tier one supplier to the aerospace engines market, including structural engineered components; parts
repair; commercial and aftermarket contracts.
Structures
\u2013 A multi-technology global tier one supplier of both civil and defence air frames, including lightweight composite and metallic
structures; electrical distribution systems and components.", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f21796": { "value": "a) Operating profit \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
Notes
\u00a3m
\u00a3m
Operating profit/(loss)
57
(270)
A
mortisation of intangible assets acquired in business combinations
a
260
260
Restructuring costs
b
149
90
Melrose equity-settled compensation scheme charges
c
38
15
A
cquisition and disposal related gains and losses
d
3
(15)
Movement in derivatives and associated financial assets and liabilities
e
(114)
79
Net release and changes in discount rates of fair value items
f
(3)
(12)
Total adjustments to operating profit/(loss)
333
417
A
djusted operating profit
390
147
(1)
Results have been restated for discontinued operations (see note 1).
a.
The amortisation charge on intangible assets acquired in business combinations of \u00a3260 million (2022: \u00a3260 million) 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.
b.
Restructuring and other associated costs in the year totalled \u00a3149 million (2022: \u00a390 million), including \u00a359 million (2022: \u00a311 million) of
losses incurred in closing businesses within the Group. These are shown as adjusting items due to their size and non-trading nature and
during the year ended 31 December 2023 these included:
\u2022
A charge of \u00a3137 million (2022: \u00a388 million) primarily relating to the continuation of significant restructuring projects, necessary for the
business to achieve its full potential target operating margins.
There are three significant ongoing multi-year restructuring programmes, impacting multiple sites across the Engines and Structures
divisions, two of which include European footprint consolidations, and one significant multi-site restructuring programme in North America.
These programmes incurred a combined charge, excluding losses, of \u00a362 million in the year. Since commencement, the cumulative
charges, excluding losses, on these three restructuring programmes to 31 December 2023 has been \u00a3217 million (31 December 2022:
\u00a3155 million), approximately 35% relating to the two significant European programmes and approximately 65% in North America.
As at 31 December 2023, actions to complete the European programmes, on average, are approximately 95% complete and will
complete in 2024. During the year, the North America multi-site restructuring programme has been expanded and is approximately 70%
complete and now expected to conclude in 2025. In addition to the remaining charges to be incurred on these projects, \u00a337 million is
included in restructuring provisions at 31 December 2023 to be settled in cash over the next two years.
\u2022
A net charge of \u00a312 million (2022: \u00a32 million) within the Melrose corporate cost centre that relates to changes made following the
announced change to the Group\u2019s ongoing strategy. These include the costs of merging the Melrose corporate cost function with the
previously separate Aerospace division head office team. These restructuring actions reshape the corporate cost centre to serve as an
ongoing pureplay aerospace business.
c.
The charge for the Melrose equity-settled Employee Share Scheme of \u00a338 million (2022: \u00a315 million), which includes a charge to the accrual
for employer\u2019s tax payable of \u00a328 million (2022: credit of \u00a31 million), is excluded from adjusted results due to its size and volatility. The shares
that would be issued, based on the Scheme\u2019s current value at the end of the reporting period, are included in the calculation of the adjusted
diluted earnings per share, which the Board considers to be a key measure of performance.
d.
An acquisition and disposal related net charge of \u00a33 million (2022: credit of \u00a315 million) arose in the year which primarily relates to ongoing
acquisition commitments. The prior year also includes the profit on disposal of two corporate properties, a loss on disposal of a non-core
Aerospace business and the initial costs incurred in respect of the demerger. These items are excluded from adjusted results due to their
non-trading nature.
e.
Movements in the fair value of derivative financial instruments (primarily forward foreign currency exchange contracts where hedge
accounting is not applied) entered into to mitigate the potential volatility of future cash flows, on long-term foreign currency customer
and supplier contracts, including foreign exchange movements on the associated financial assets and liabilities are shown as an adjusting
item because of volatility and size. This totalled a credit of \u00a3114 million (2022: charge of \u00a379 million) in the year.
f.
The net release of fair value items in the year of \u00a33 million (2022: \u00a312 million) where items have been resolved for more favourable amounts
than first anticipated are shown as an adjusting item, avoiding positively distorting adjusted operating profit.", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22210": { "value": "7. Expenses \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Operating profit/(loss) is stated after charging/(crediting):
Cost of inventories
2,696
2,533
A
mortisation of intangible assets acquired in business combinations
260
260
Depreciation and impairment of property, plant and equipment
101
115
A
mortisation and impairment of computer software and development costs
42
41
Lease expense
(2)
1
1
Staff costs
1,095
1,013
Research and development costs
(3)
60
51
Profit on disposal of property, plant and equipment
\u2013
(33)
Expense of writing down inventory to net realisable value
53
43
Reversals of previous write-downs of inventory
(44)
(38)
Impairment recognised on trade receivables
8
3
Impairment reversed on trade receivables
(2)
(2)
(1)
Expenses have been restated for discontinued operations (see note 1).
(2)
Represents low value leases of \u00a31 million (2022: \u00a31 million).
(3)
Shown net of government and customer funding and includes staff costs totalling \u00a327 million (2022: \u00a325 million).
The analysis of auditor\u2019s remuneration is as follows:
\n \n
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts
4.6
6.8
Fees payable to the Company\u2019s auditor and their associates for other audit services to the Group:
The audit of the Company\u2019s subsidiaries
0.2
1.1
Non-statutory audit of certain of the Company\u2019s businesses
0.9
1.9
Total audit fees
5.7
9.8
A
udit-related assurance services:
Review of the half year interim statement
0.4
0.4
Other assurance services
0.3
0.2
Total audit-related assurance services
0.7
0.6
Total audit and audit-related assurance services
6.4
10.4
Tax services
\u2013
\u2013
Reporting accountant services
0.2
0.9
Total audit and non-audit fees
6.6
11.3
Details of the Company\u2019s policy on the use of the auditors for non-audit services and how auditor\u2019s independence and objectivity were safeguarded
are set out in the Audit Committee report on pages 122 to 123. No services were provided pursuant to contingent fee arrangements.
An analysis of staff costs and employee numbers is as follows:
\n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Staff costs during the year (including executive Directors)
Wages and salaries
(2)
891
840
Social security costs
(3)
136
101
Pension costs (note 24)
\u2013 defined contribution plans
58
56
Share-based compensation expense
(4)
10
16
Total staff costs
1,095
1,013
(1) Staff costs have been restated for discontinued operations (see note 1).
(2)
Wages and salaries for discontinued operations were \u00a3251 million in the period prior to disposal (2022: \u00a3924 million).
(3)
Includes an employer\u2019s tax charge of \u00a328 million (2022: credit of \u00a31 million) on the change in value of the employee share plans, shown as an adjusting item
(see note 6).
(4) Shown as an adjusting item (see note 6).
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Number
Number
A
verage monthly number of persons employed (including executive Directors)
Engines
3,960
3,817
Structures
10,733
10,649
Corporate
48
49
Continuing operations
14,741
14,515
Discontinued operations
23,880
25,444
Total average number of persons employed
38,621
39,959
(1) Persons employed has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
An analysis of finance costs and income is as follows:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Finance costs
Interest on bank loans and overdrafts
(49)
(72)
A
mortisation of costs of raising finance
(4)
(10)
Net interest cost on pensions
(1)
\u2013
Lease interest
(5)
(3)
Unwind of discount on provisions
(1)
(1)
Finance costs on demerger settled net debt
(2)
(17)
\u2013
A
ccelerated unamortised debt issue costs
(2)
(2)
\u2013
Fair value changes on cross-currency swaps
(2)
\u2013
3
Total finance costs
(79)
(83)
Finance income
Interest receivable
1
\u2013
Net interest income on pensions
\u2013
1
Bond redemption gains
(2)
13
24
Total finance income
14
25
Total net finance costs
(65)
(58)
(1) Finance costs and income have been restated for discontinued operations (see note 1).
(2)
These are shown as adjusting items (see note 6).", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22211": { "value": "7. Expenses \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Operating profit/(loss) is stated after charging/(crediting):
Cost of inventories
2,696
2,533
A
mortisation of intangible assets acquired in business combinations
260
260
Depreciation and impairment of property, plant and equipment
101
115
A
mortisation and impairment of computer software and development costs
42
41
Lease expense
(2)
1
1
Staff costs
1,095
1,013
Research and development costs
(3)
60
51
Profit on disposal of property, plant and equipment
\u2013
(33)
Expense of writing down inventory to net realisable value
53
43
Reversals of previous write-downs of inventory
(44)
(38)
Impairment recognised on trade receivables
8
3
Impairment reversed on trade receivables
(2)
(2)
(1)
Expenses have been restated for discontinued operations (see note 1).
(2)
Represents low value leases of \u00a31 million (2022: \u00a31 million).
(3)
Shown net of government and customer funding and includes staff costs totalling \u00a327 million (2022: \u00a325 million).
The analysis of auditor\u2019s remuneration is as follows:
\n \n
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts
4.6
6.8
Fees payable to the Company\u2019s auditor and their associates for other audit services to the Group:
The audit of the Company\u2019s subsidiaries
0.2
1.1
Non-statutory audit of certain of the Company\u2019s businesses
0.9
1.9
Total audit fees
5.7
9.8
A
udit-related assurance services:
Review of the half year interim statement
0.4
0.4
Other assurance services
0.3
0.2
Total audit-related assurance services
0.7
0.6
Total audit and audit-related assurance services
6.4
10.4
Tax services
\u2013
\u2013
Reporting accountant services
0.2
0.9
Total audit and non-audit fees
6.6
11.3
Details of the Company\u2019s policy on the use of the auditors for non-audit services and how auditor\u2019s independence and objectivity were safeguarded
are set out in the Audit Committee report on pages 122 to 123. No services were provided pursuant to contingent fee arrangements.
An analysis of staff costs and employee numbers is as follows:
\n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Staff costs during the year (including executive Directors)
Wages and salaries
(2)
891
840
Social security costs
(3)
136
101
Pension costs (note 24)
\u2013 defined contribution plans
58
56
Share-based compensation expense
(4)
10
16
Total staff costs
1,095
1,013
(1) Staff costs have been restated for discontinued operations (see note 1).
(2)
Wages and salaries for discontinued operations were \u00a3251 million in the period prior to disposal (2022: \u00a3924 million).
(3)
Includes an employer\u2019s tax charge of \u00a328 million (2022: credit of \u00a31 million) on the change in value of the employee share plans, shown as an adjusting item
(see note 6).
(4) Shown as an adjusting item (see note 6).
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Number
Number
A
verage monthly number of persons employed (including executive Directors)
Engines
3,960
3,817
Structures
10,733
10,649
Corporate
48
49
Continuing operations
14,741
14,515
Discontinued operations
23,880
25,444
Total average number of persons employed
38,621
39,959
(1) Persons employed has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
An analysis of finance costs and income is as follows:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Finance costs
Interest on bank loans and overdrafts
(49)
(72)
A
mortisation of costs of raising finance
(4)
(10)
Net interest cost on pensions
(1)
\u2013
Lease interest
(5)
(3)
Unwind of discount on provisions
(1)
(1)
Finance costs on demerger settled net debt
(2)
(17)
\u2013
A
ccelerated unamortised debt issue costs
(2)
(2)
\u2013
Fair value changes on cross-currency swaps
(2)
\u2013
3
Total finance costs
(79)
(83)
Finance income
Interest receivable
1
\u2013
Net interest income on pensions
\u2013
1
Bond redemption gains
(2)
13
24
Total finance income
14
25
Total net finance costs
(65)
(58)
(1) Finance costs and income have been restated for discontinued operations (see note 1).
(2)
These are shown as adjusting items (see note 6).", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22346": { "value": "The analysis of auditor\u2019s remuneration is as follows: \n \n
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts
4.6
6.8
Fees payable to the Company\u2019s auditor and their associates for other audit services to the Group:
The audit of the Company\u2019s subsidiaries
0.2
1.1
Non-statutory audit of certain of the Company\u2019s businesses
0.9
1.9
Total audit fees
5.7
9.8
A
udit-related assurance services:
Review of the half year interim statement
0.4
0.4
Other assurance services
0.3
0.2
Total audit-related assurance services
0.7
0.6
Total audit and audit-related assurance services
6.4
10.4
Tax services
\u2013
\u2013
Reporting accountant services
0.2
0.9
Total audit and non-audit fees
6.6
11.3
Details of the Company\u2019s policy on the use of the auditors for non-audit services and how auditor\u2019s independence and objectivity were safeguarded
are set out in the Audit Committee report on pages 122 to 123. No services were provided pursuant to contingent fee arrangements.", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22465": { "value": "An analysis of staff costs and employee numbers is as follows: \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Staff costs during the year (including executive Directors)
Wages and salaries
(2)
891
840
Social security costs
(3)
136
101
Pension costs (note 24)
\u2013 defined contribution plans
58
56
Share-based compensation expense
(4)
10
16
Total staff costs
1,095
1,013
(1) Staff costs have been restated for discontinued operations (see note 1).
(2)
Wages and salaries for discontinued operations were \u00a3251 million in the period prior to disposal (2022: \u00a3924 million).
(3)
Includes an employer\u2019s tax charge of \u00a328 million (2022: credit of \u00a31 million) on the change in value of the employee share plans, shown as an adjusting item
(see note 6).
(4) Shown as an adjusting item (see note 6).
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Number
Number
A
verage monthly number of persons employed (including executive Directors)
Engines
3,960
3,817
Structures
10,733
10,649
Corporate
48
49
Continuing operations
14,741
14,515
Discontinued operations
23,880
25,444
Total average number of persons employed
38,621
39,959
(1) Persons employed has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22663": { "value": "
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Finance costs
Interest on bank loans and overdrafts
(49)
(72)
A
mortisation of costs of raising finance
(4)
(10)
Net interest cost on pensions
(1)
\u2013
Lease interest
(5)
(3)
Unwind of discount on provisions
(1)
(1)
Finance costs on demerger settled net debt
(2)
(17)
\u2013
A
ccelerated unamortised debt issue costs
(2)
(2)
\u2013
Fair value changes on cross-currency swaps
(2)
\u2013
3
Total finance costs
(79)
(83)
Finance income
Interest receivable
1
\u2013
Net interest income on pensions
\u2013
1
Bond redemption gains
(2)
13
24
Total finance income
14
25
Total net finance costs
(65)
(58)
(1) Finance costs and income have been restated for discontinued operations (see note 1).
(2)
These are shown as adjusting items (see note 6).", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22664": { "value": "
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Finance costs
Interest on bank loans and overdrafts
(49)
(72)
A
mortisation of costs of raising finance
(4)
(10)
Net interest cost on pensions
(1)
\u2013
Lease interest
(5)
(3)
Unwind of discount on provisions
(1)
(1)
Finance costs on demerger settled net debt
(2)
(17)
\u2013
A
ccelerated unamortised debt issue costs
(2)
(2)
\u2013
Fair value changes on cross-currency swaps
(2)
\u2013
3
Total finance costs
(79)
(83)
Finance income
Interest receivable
1
\u2013
Net interest income on pensions
\u2013
1
Bond redemption gains
(2)
13
24
Total finance income
14
25
Total net finance costs
(65)
(58)
(1) Finance costs and income have been restated for discontinued operations (see note 1).
(2)
These are shown as adjusting items (see note 6).", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22665": { "value": "
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Finance costs
Interest on bank loans and overdrafts
(49)
(72)
A
mortisation of costs of raising finance
(4)
(10)
Net interest cost on pensions
(1)
\u2013
Lease interest
(5)
(3)
Unwind of discount on provisions
(1)
(1)
Finance costs on demerger settled net debt
(2)
(17)
\u2013
A
ccelerated unamortised debt issue costs
(2)
(2)
\u2013
Fair value changes on cross-currency swaps
(2)
\u2013
3
Total finance costs
(79)
(83)
Finance income
Interest receivable
1
\u2013
Net interest income on pensions
\u2013
1
Bond redemption gains
(2)
13
24
Total finance income
14
25
Total net finance costs
(65)
(58)
(1) Finance costs and income have been restated for discontinued operations (see note 1).
(2)
These are shown as adjusting items (see note 6).", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22832": { "value": "8. Tax \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
A
nalysis of tax charge/(credit) in the year:
Current tax
Current year tax charge
19
16
A
djustments in respect of prior years
4
(4)
Total current tax charge
23
12
Deferred tax
Origination and reversal of temporary differences
(61)
(85)
A
djustments in respect of prior years
(3)
(8)
Tax on the change in value of derivative financial instruments
29
(25)
A
djustments to deferred tax attributable to changes in tax rates
(1)
(1)
Non-recognition of deferred tax
4
8
Total deferred tax credit
(32)
(111)
Tax credit on continuing operations
(9)
(99)
Tax charge on discontinued operations
28
20
Total tax charge/(credit) for the year
19
(79)
A
nalysis of tax credit on continuing operations in the year:
\u00a3m
\u00a3m
Tax charge in respect of adjusted profit before tax
68
4
Tax credit recognised as an adjusting item
(77)
(103)
Tax credit on continuing operations
(9)
(99)
(1) Tax has been restated for discontinued operations (see note 1).
The tax charge of \u00a368 million (2022: \u00a34 million) arising on adjusted profit before tax of \u00a3331 million (2022: \u00a362 million), results in an effective tax
rate of 20.5% (2022: 6.5%).
The \u00a377 million (2022: \u00a3103 million) tax credit recognised as an adjusting item includes a credit of \u00a377 million (2022: \u00a3105 million) in respect of
tax credits on adjustments to loss before tax of \u00a3339 million (2022: \u00a3390 million) and a charge of \u00a3nil (2022: \u00a32 million) in respect of internal
Group restructuring.
The tax charge/(credit) for the year for continuing and discontinued operations can be reconciled to the profit/(loss) before tax per the Income
Statement as follows:
\n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Profit/(loss) before tax:
Continuing operations
(8)
(328)
Discontinued operations (note 13)
25
(38)
17
(366)
Tax charge/(credit) on profit/(loss) before tax at 23.5% (2022: 25.0%)
4
(91)
Tax effect of:
Disallowable expenses and other permanent differences within adjusted profit
(9)
4
Disallowable items included within adjusting items
8
(2)
Temporary differences not recognised in deferred tax
5
13
Tax credits and withholding taxes
3
15
A
djustments in respect of prior years
13
(29)
Tax charge classified within adjusting items \u2013 continuing operations
\u2013
2
Tax charge classified within adjusting items \u2013 discontinued operations
\u2013
8
Effect of changes in tax rates
(2)
1
Effect of rate differences between UK and overseas rates
(3)
\u2013
Total tax charge/(credit) for the year
19
(79)
(1) Tax has been restated for discontinued operations (see note 1).
The reconciliation has been performed at a tax rate of 23.5% (2022: 25.0%). The reconciliation rate usually represents the weighted average of
the tax rates applying to profits and losses in the jurisdictions in which those results arose in the year. However, for 2023 this rate was close to
zero due to offsetting profits and losses in the relevant jurisdictions and as such the UK rate has been used.
Tax (credits)/charges included in Other Comprehensive Income are as follows:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Deferred tax movements on retirement benefit obligations
(29)
1
Deferred tax movements on hedge relationship gains and losses
8
(5)
Total credit for the year
(21)
(4)
There is also a tax credit of \u00a322 million (2022: \u00a3nil) recognised directly in the Statement of Changes in Equity in respect of deferred tax on
equity-settled share-based payments.
Global Minimum Tax rules and Franked Investment Income \u2013 litigation
The Group has reviewed the impact of the new Global Minimum Tax (\u201cPillar 2\u201d) rules and considers they are unlikely to have a material impact
on the Group tax charge in their current form.
Since 2003, certain entities in the Group have been involved in litigation with HMRC in respect of various advance corporate tax payments and
corporate tax paid on certain foreign dividends which, in the Group\u2019s view, were levied by HMRC in breach of the Group\u2019s EU community law rights.
On 5 February 2024, the High Court handed down the latest decision in the case. This considered the question of time limits for valid claims.
The decision is broadly positive for the Group, however the decision can be appealed. The continuing complexity of the case and uncertainty over
the issues raised means that it is not possible to predict the final outcome of the litigation with any reasonable degree of certainty.", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f22833": { "value": "8. Tax \n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
A
nalysis of tax charge/(credit) in the year:
Current tax
Current year tax charge
19
16
A
djustments in respect of prior years
4
(4)
Total current tax charge
23
12
Deferred tax
Origination and reversal of temporary differences
(61)
(85)
A
djustments in respect of prior years
(3)
(8)
Tax on the change in value of derivative financial instruments
29
(25)
A
djustments to deferred tax attributable to changes in tax rates
(1)
(1)
Non-recognition of deferred tax
4
8
Total deferred tax credit
(32)
(111)
Tax credit on continuing operations
(9)
(99)
Tax charge on discontinued operations
28
20
Total tax charge/(credit) for the year
19
(79)
A
nalysis of tax credit on continuing operations in the year:
\u00a3m
\u00a3m
Tax charge in respect of adjusted profit before tax
68
4
Tax credit recognised as an adjusting item
(77)
(103)
Tax credit on continuing operations
(9)
(99)
(1) Tax has been restated for discontinued operations (see note 1).
The tax charge of \u00a368 million (2022: \u00a34 million) arising on adjusted profit before tax of \u00a3331 million (2022: \u00a362 million), results in an effective tax
rate of 20.5% (2022: 6.5%).
The \u00a377 million (2022: \u00a3103 million) tax credit recognised as an adjusting item includes a credit of \u00a377 million (2022: \u00a3105 million) in respect of
tax credits on adjustments to loss before tax of \u00a3339 million (2022: \u00a3390 million) and a charge of \u00a3nil (2022: \u00a32 million) in respect of internal
Group restructuring.
The tax charge/(credit) for the year for continuing and discontinued operations can be reconciled to the profit/(loss) before tax per the Income
Statement as follows:
\n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Profit/(loss) before tax:
Continuing operations
(8)
(328)
Discontinued operations (note 13)
25
(38)
17
(366)
Tax charge/(credit) on profit/(loss) before tax at 23.5% (2022: 25.0%)
4
(91)
Tax effect of:
Disallowable expenses and other permanent differences within adjusted profit
(9)
4
Disallowable items included within adjusting items
8
(2)
Temporary differences not recognised in deferred tax
5
13
Tax credits and withholding taxes
3
15
A
djustments in respect of prior years
13
(29)
Tax charge classified within adjusting items \u2013 continuing operations
\u2013
2
Tax charge classified within adjusting items \u2013 discontinued operations
\u2013
8
Effect of changes in tax rates
(2)
1
Effect of rate differences between UK and overseas rates
(3)
\u2013
Total tax charge/(credit) for the year
19
(79)
(1) Tax has been restated for discontinued operations (see note 1).
The reconciliation has been performed at a tax rate of 23.5% (2022: 25.0%). The reconciliation rate usually represents the weighted average of
the tax rates applying to profits and losses in the jurisdictions in which those results arose in the year. However, for 2023 this rate was close to
zero due to offsetting profits and losses in the relevant jurisdictions and as such the UK rate has been used.
Tax (credits)/charges included in Other Comprehensive Income are as follows:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Deferred tax movements on retirement benefit obligations
(29)
1
Deferred tax movements on hedge relationship gains and losses
8
(5)
Total credit for the year
(21)
(4)
There is also a tax credit of \u00a322 million (2022: \u00a3nil) recognised directly in the Statement of Changes in Equity in respect of deferred tax on
equity-settled share-based payments.
Global Minimum Tax rules and Franked Investment Income \u2013 litigation
The Group has reviewed the impact of the new Global Minimum Tax (\u201cPillar 2\u201d) rules and considers they are unlikely to have a material impact
on the Group tax charge in their current form.
Since 2003, certain entities in the Group have been involved in litigation with HMRC in respect of various advance corporate tax payments and
corporate tax paid on certain foreign dividends which, in the Group\u2019s view, were levied by HMRC in breach of the Group\u2019s EU community law rights.
On 5 February 2024, the High Court handed down the latest decision in the case. This considered the question of time limits for valid claims.
The decision is broadly positive for the Group, however the decision can be appealed. The continuing complexity of the case and uncertainty over
the issues raised means that it is not possible to predict the final outcome of the litigation with any reasonable degree of certainty.", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f23235": { "value": "9. Dividends
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Interim dividend for the year ended 31 December 2023 of 1.5p
20
\u2013
Second interim dividend for the year ended 31 December 2022 of 1.5p (4.5p)
(1)
61
\u2013
Interim dividend for the year ended 31 December 2022 of 0.825p (2.475p)
(1)
\u2013
33
Final dividend for the year ended 31 December 2021 of 1.0p (3.0p)
(1)
\u2013
44
81
77
(1) Adjusted to include the effects of the one for three share consolidation (see note 1).
A final dividend for the year ended 31 December 2023 of 3.5p per share totalling an expected \u00a346 million is declared by the Board. The final
dividend of 3.5p per share was declared by the Board on 7 March 2024 and in accordance with IAS 10: Events after the reporting period, has
not been included as a liability in the Consolidated Financial Statements.
During the year, the Group commenced a \u00a3500 million share buyback programme with \u00a393 million of cash spent, inclusive of costs of \u00a31 million
(see note 1). In the prior year, the Group also undertook a share buyback programme, with \u00a3504 million of cash spent, inclusive of costs of \u00a34 million.", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f23301": { "value": "0.035", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f23308": { "value": "10. Earnings per share
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Earnings attributable to owners of the parent
\u00a3m
\u00a3m
Earnings for basis of earnings per share
(1,019)
(308)
Less: loss from discontinued operations (note 13)
1,020
79
Earnings for basis of earnings per share from continuing operations
1
(229)
(1)
Earnings has been restated for discontinued operations (see note 1).
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Number
Number
Weighted average number of ordinary shares for the purposes of basic earnings per share (million)
1,349
1,406
Further shares for the purposes of diluted earnings per share (million)
56
\u2013
Weighted average number of ordinary shares for the purposes of diluted earnings per share (million)
1,405
1,406
(1) Adjusted to include the effects of the one for three share consolidation (see note 1).
On 2 October 2023, the Group commenced a \u00a3500 million share buyback programme, with 18,761,840 shares repurchased by 31 December 2023.
These are held as treasury shares and are excluded from the number of shares for the purposes of calculating earnings per share. In the prior year,
the Group completed a \u00a3500 million share buyback programme with 318,003,512 shares repurchased and subsequently cancelled.
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Earnings per share
pence
pence
Basic earnings per share
From continuing and discontinued operations
(75.5)
(21.9)
From continuing operations
0.1
(16.3)
From discontinued operations
(75.6)
(5.6)
Diluted earnings per share
From continuing and discontinued operations
(75.5)
(21.9)
From continuing operations
0.1
(16.3)
From discontinued operations
(75.6)
(5.6)
(1)
Earnings per share has been restated for discontinued operations and to include the effects of the one for three share consolidation (see note 1).
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Adjusted earnings from continued operations
\u00a3m
\u00a3m
A
djusted earnings for the basis of adjusted earnings per share
263
58
(1)
Earnings has been restated for discontinued operations (see note 1).
Adjusted earnings per share from continuing operations:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
pence
pence
A
djusted basic earnings per share
19.5
4.1
A
djusted diluted earnings per share
18.7
4.1
(1)
Earnings per share has been restated for discontinued operations and to include the effects of the one for three share consolidation (see note 1). ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f23634": { "value": "11. Goodwill and other intangible assets \n \n
Customer
relationships
Brands and
Computer
Development
Goodwill
and contracts
intellectual property
Other
(1)
software
costs
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
A
t 1 January 2022
2,850
4,406
480
1,011
49
522
9,318
A
dditions
\u2013
\u2013
\u2013
\u2013
6
21
27
A
cquisition of businesses
(2)
1
\u2013
\u2013
3
\u2013
\u2013
4
Disposals
\u2013
\u2013
\u2013
\u2013
(2)
(4)
(6)
Transfer to held for sale
(3)
(455)
(122)
(100)
\u2013
\u2013
\u2013
(677)
Exchange adjustments
189
386
13
33
3
31
655
A
t 31 December 2022
2,585
4,670
393
1,047
56
570
9,321
A
dditions
\u2013
\u2013
\u2013
\u2013
3
13
16
Disposals
\u2013
\u2013
\u2013
\u2013
(1)
(3)
(4)
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
(1)
(1)
(2)
Disposal of businesses
(4)
(1,575)
(1,749)
(184)
(401)
(33)
(100)
(4,042)
Exchange adjustments
(49)
(154)
(2)
(15)
(1)
(15)
(236)
A
t 31 December 2023
961
2,767
207
631
23
464
5,053
A
mortisation and impairment
A
t 1 January 2022
\u2013
(1,226)
(95)
(383)
(29)
(195)
(1,928)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(7)
(43)
(50)
Adjusting items
\u2013
(338)
(24)
(104)
\u2013
\u2013
(466)
Impairments
(5)
\u2013
\u2013
\u2013
\u2013
\u2013
(9)
(9)
Disposals
\u2013
\u2013
\u2013
\u2013
2
4
6
Transfer to held for sale
(3)
\u2013
71
35
\u2013
\u2013
\u2013
106
Exchange adjustments
\u2013
(105)
(9)
(9)
(2)
(9)
(134)
A
t 31 December 2022
\u2013
(1,598)
(93)
(496)
(36)
(252)
(2,475)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(3)
(39)
(42)
Adjusting items
\u2013
(228)
(12)
(69)
\u2013
\u2013
(309)
Disposals
\u2013
\u2013
\u2013
\u2013
1
3
4
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
1
1
2
Disposal of businesses
(4)
\u2013
694
46
237
17
59
1,053
Exchange adjustments
\u2013
53
\u2013
6
1
5
65
A
t 31 December 2023
\u2013
(1,079)
(59)
(322)
(19)
(223)
(1,702)
Net book value
A
t 31 December 2023
961
1,688
148
309
4
241
3,351
A
t 31 December 2022
2,585
3,072
300
551
20
318
6,846
(1) Other includes technology and order backlog intangible assets recognised on acquisitions.
(2) Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(3) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(4) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
(5) Impairments in 2022 were shown as adjusting items.
The goodwill generated as a result of major acquisitions represents the premium paid in excess of the fair value of all net assets, including
intangible assets, identified at the point of acquisition. The carrying value of goodwill includes a premium, paid in order to secure shareholder
agreement to the business combination, that is less than the value that the Directors believed could be added to the acquired businesses.
The goodwill arising on bolt-on acquisitions is attributable to the anticipated profitability and cash flows arising from the businesses acquired,
synergies as a result of the complementary nature of the business with existing Melrose businesses, the assembled workforce, technical
expertise, knowhow, market share and geographical advantages afforded to the Group.
The future improvements applied to the acquired businesses, achieved through a combination of revised strategic direction, operational
improvements and investment, are expected to result in improved profitability. The combined value achieved from these improvements is
expected to be in excess of the value of goodwill acquired.
Following the Group\u2019s demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen on 20 April 2023 the internal reporting
structure changed for the remaining GKN Aerospace business to show an Engines segment and a Structures segment (see note 5). As a
consequence, the Aerospace group of cash-generating units (\u201cCGUs\u201d) was reorganised into an Engines group of CGUs and a Structures group
of CGUs effective from 20 April 2023.
As a result of the change in the groups of CGUs structure, an allocation of goodwill to the two new groups of CGUs has been performed based
on their valuation at 20 April 2023. Subsequently, impairment testing was completed, dated 20 April 2023, based on the old structure of one
group of CGUs (Aerospace) and the new structure of two groups of CGUs (Engines and Structures). No impairment was identified in respect of
any of the groups of CGUs.
Restated
(1)
31 December
31 December
2023
2022
Goodwill
\u00a3m
\u00a3m
Engines
608
627
Structures
353
363
Continuing operations \u2013 Aerospace
961
990
Discontinued operations
\u2013
1,595
Total
961
2,585
(1)
Goodwill has been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023 when the Aerospace
group of CGUs was re-organised into the Engines and Structures groups of CGUs.
Impairment testing
The Group tests goodwill annually or more frequently if there are indications that goodwill might be impaired. The date of the annual impairment
test is 31 October, aligned with internal forecasting and review processes. In accordance with IAS 36: Impairment of assets, the Group assesses
goodwill based on the recoverable amount, being the higher of the value in use basis and the fair value less costs to sell basis. Due to the change
in Group strategy to become a pure-play Aerospace group, the value in use methodology has been used to determine recoverable amount.
Value in use calculations have been used to determine the recoverable amount of goodwill and other relevant net assets allocated to the Engines
and Structures groups of CGUs for the year ended 31 December 2023. The calculation uses the latest approved forecasts extrapolated into
perpetuity with growth rates shown below, which do not exceed the long-term growth rate for the relevant market.
In the prior year, fair value less costs to sell calculations were used to determine the recoverable amount of goodwill and other relevant net assets
allocated to the Aerospace, Automotive and Powder Metallurgy groups of CGUs. When applying the fair value less costs to sell methodology, it
was difficult to assess a sale value using observable market inputs (level 1) or inputs based on market evidence (level 2) in the environment and
so unobservable inputs (level 3) were used. A combination of discounted cash flows and EBITDA multiple valuations were used to establish fair
values for each of the groups of CGUs. Under IAS 36, the benefits from future uncommitted restructuring plans were permitted when applying
the fair value less costs to sell basis, to the extent that similar actions would be carried out by a market participant.
Based on impairment testing completed no impairment was identified in respect of either of the groups of CGUs. No sensitivity analysis has been
provided as there is no reasonably possible change in key assumptions that could result in an impairment in either the Engines or Structures
groups of CGUs.
The basis of impairment tests and the key assumptions are set out in the tables below:
31 December 2023
Pre-tax
Long-term
Groups of CGUs \u2013 value in use
discount rates
growth rates
Years in forecast
Engines
12.25%
3.4%
5
Structures
12.50%
3.4%
5
31 December 2022
Post-tax
Long-term
Groups of CGUs \u2013 fair value less costs to sell
discount rates
growth rates
Years in forecast
A
erospace
10.75%
3.0%
5
A
utomotive
11.25%
3.5%
5
Powder Metallurgy
12.0%
3.9%
5
Risk adjusted discount rates
Cash flows within the Engines and Structures groups of CGUs are discounted using a pre-tax discount rate specific to each group of CGUs.
Discount rates reflect the current market assessments of the time value of money and the territories in which the group of CGUs operates.
In determining the cost of equity, the Capital Asset Pricing Model (\u201cCAPM\u201d) has been used. Under CAPM, the cost of equity is determined
by adding a risk premium, based on an industry adjustment (\u201cBeta\u201d), to the expected return of the equity market above the risk-free return.
The relative risk adjustment reflects the risk inherent in each group of CGUs relative to all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of government bonds, and an interest rate premium equivalent
to a corporate bond with a similar credit rating to the Group.
Assumptions applied in financial forecasts
The Group prepares cash flow forecasts derived from financial budgets and medium-term forecasts. Each forecast has been prepared using a
five year cash flow period. The key assumptions used in forecasting cash flows relate to future budgeted revenue and operating margins likely
to be achieved and the expected rates of long-term growth by sector. Underlying factors in determining the values assigned to each key
assumption are shown below.
Impairment testing has considered the impact of two transitional climate scenarios used by the Group to assess climate-related risks and
opportunities. Demand for the Group\u2019s products may be impacted by the different scenarios over the medium to long-term. Whilst recognising
these scenarios contain major assumptions, the modelling indicates no material impact on existing revenue assumptions, with any potential
reduction in Melrose's existing products being offset by the Group\u2019s transition plan into lower-carbon products under existing financial planning.
The potential of transition risks such as, the transitioning of carbon intensive machinery to more carbon efficient or electric models also did not
indicate a material impact on the existing financial cost in the short to medium term forecasting. The impairment testing also considers the
potential costs from climate related risks under physical scenarios RCP 2.6 and 8.5. Risks such as flooding and storm events were predicted
to not have a material impact on cost within our financial forecasting horizon.
Revenue growth and operating margins:
Revenue growth assumptions in the forecast period are based on financial budgets and five-year term forecasts by management, taking into
account industry growth rates and management\u2019s historical experience in the context of wider industry and economic conditions. Projected
sales are built up with reference to markets and product categories. They incorporate past performance, historical growth rates, projections
of developments in key markets, secured orders and orders forecast to be achieved in the short to medium-term given trends in the relevant
market sector. Revenue assumptions are made using external market data, where available.
Operating margins have been forecast based on historical levels achieved considering the likely impact of changing economic environments and
competitive landscapes on volumes and revenues and the impact of management actions on costs. Forecasts for operating costs are based on
inflation forecasts and supply and demand factors, which take account of climate change implications for affected markets. Impairment testing
includes short to medium-term planning (five years) for both of the groups of CGUs, which will address known risks from climate change and
other environmental factors impacting forecast costs as well as the opportunities in associated markets as they prepare for change e.g. hydrogen
propulsion which impacts revenues.
The key drivers for growth in revenue and operating margins are global demand for commercial and military aircraft. Consumer spending,
passenger load factors, raw material input costs, market expectations for aircraft production requirements, technological advancements,
and other macro-economic factors influence demand for these products.
Long-term growth rates:
Long-term growth rates are determined using long-term growth rate forecasts that take into account the international presence and the markets
in which each business operates.
Allocation of significant intangible assets
The allocation of significant customer relationships and contracts, brands, intellectual property and technology is as follows:
Customer relationships and contracts
Brands, intellectual property and technology
Remaining
Remaining
amortisation period
Net book value
amortisation period
Net book value
Restated
(1)
Restated
(1)
31 December
31 December
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
2023
2022
years
years
\u00a3m
\u00a3m
years
years
\u00a3m
\u00a3m
Engines
15
16
1,355
1,555
15
16
149
166
Structures
5
6
333
410
15
16
308
368
Continuing operations
1,688
1,965
457
534
Discontinued operations
\u2013
1,107
\u2013
317
Total
1,688
3,072
457
851
(1) Significant intangible assets have been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023
when the Aerospace group of CGUs was re-organised into the Engines and Structures groups of CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f23635": { "value": "11. Goodwill and other intangible assets \n \n
Customer
relationships
Brands and
Computer
Development
Goodwill
and contracts
intellectual property
Other
(1)
software
costs
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
A
t 1 January 2022
2,850
4,406
480
1,011
49
522
9,318
A
dditions
\u2013
\u2013
\u2013
\u2013
6
21
27
A
cquisition of businesses
(2)
1
\u2013
\u2013
3
\u2013
\u2013
4
Disposals
\u2013
\u2013
\u2013
\u2013
(2)
(4)
(6)
Transfer to held for sale
(3)
(455)
(122)
(100)
\u2013
\u2013
\u2013
(677)
Exchange adjustments
189
386
13
33
3
31
655
A
t 31 December 2022
2,585
4,670
393
1,047
56
570
9,321
A
dditions
\u2013
\u2013
\u2013
\u2013
3
13
16
Disposals
\u2013
\u2013
\u2013
\u2013
(1)
(3)
(4)
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
(1)
(1)
(2)
Disposal of businesses
(4)
(1,575)
(1,749)
(184)
(401)
(33)
(100)
(4,042)
Exchange adjustments
(49)
(154)
(2)
(15)
(1)
(15)
(236)
A
t 31 December 2023
961
2,767
207
631
23
464
5,053
A
mortisation and impairment
A
t 1 January 2022
\u2013
(1,226)
(95)
(383)
(29)
(195)
(1,928)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(7)
(43)
(50)
Adjusting items
\u2013
(338)
(24)
(104)
\u2013
\u2013
(466)
Impairments
(5)
\u2013
\u2013
\u2013
\u2013
\u2013
(9)
(9)
Disposals
\u2013
\u2013
\u2013
\u2013
2
4
6
Transfer to held for sale
(3)
\u2013
71
35
\u2013
\u2013
\u2013
106
Exchange adjustments
\u2013
(105)
(9)
(9)
(2)
(9)
(134)
A
t 31 December 2022
\u2013
(1,598)
(93)
(496)
(36)
(252)
(2,475)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(3)
(39)
(42)
Adjusting items
\u2013
(228)
(12)
(69)
\u2013
\u2013
(309)
Disposals
\u2013
\u2013
\u2013
\u2013
1
3
4
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
1
1
2
Disposal of businesses
(4)
\u2013
694
46
237
17
59
1,053
Exchange adjustments
\u2013
53
\u2013
6
1
5
65
A
t 31 December 2023
\u2013
(1,079)
(59)
(322)
(19)
(223)
(1,702)
Net book value
A
t 31 December 2023
961
1,688
148
309
4
241
3,351
A
t 31 December 2022
2,585
3,072
300
551
20
318
6,846
(1) Other includes technology and order backlog intangible assets recognised on acquisitions.
(2) Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(3) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(4) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
(5) Impairments in 2022 were shown as adjusting items.
The goodwill generated as a result of major acquisitions represents the premium paid in excess of the fair value of all net assets, including
intangible assets, identified at the point of acquisition. The carrying value of goodwill includes a premium, paid in order to secure shareholder
agreement to the business combination, that is less than the value that the Directors believed could be added to the acquired businesses.
The goodwill arising on bolt-on acquisitions is attributable to the anticipated profitability and cash flows arising from the businesses acquired,
synergies as a result of the complementary nature of the business with existing Melrose businesses, the assembled workforce, technical
expertise, knowhow, market share and geographical advantages afforded to the Group.
The future improvements applied to the acquired businesses, achieved through a combination of revised strategic direction, operational
improvements and investment, are expected to result in improved profitability. The combined value achieved from these improvements is
expected to be in excess of the value of goodwill acquired.
Following the Group\u2019s demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen on 20 April 2023 the internal reporting
structure changed for the remaining GKN Aerospace business to show an Engines segment and a Structures segment (see note 5). As a
consequence, the Aerospace group of cash-generating units (\u201cCGUs\u201d) was reorganised into an Engines group of CGUs and a Structures group
of CGUs effective from 20 April 2023.
As a result of the change in the groups of CGUs structure, an allocation of goodwill to the two new groups of CGUs has been performed based
on their valuation at 20 April 2023. Subsequently, impairment testing was completed, dated 20 April 2023, based on the old structure of one
group of CGUs (Aerospace) and the new structure of two groups of CGUs (Engines and Structures). No impairment was identified in respect of
any of the groups of CGUs.
Restated
(1)
31 December
31 December
2023
2022
Goodwill
\u00a3m
\u00a3m
Engines
608
627
Structures
353
363
Continuing operations \u2013 Aerospace
961
990
Discontinued operations
\u2013
1,595
Total
961
2,585
(1)
Goodwill has been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023 when the Aerospace
group of CGUs was re-organised into the Engines and Structures groups of CGUs.
Impairment testing
The Group tests goodwill annually or more frequently if there are indications that goodwill might be impaired. The date of the annual impairment
test is 31 October, aligned with internal forecasting and review processes. In accordance with IAS 36: Impairment of assets, the Group assesses
goodwill based on the recoverable amount, being the higher of the value in use basis and the fair value less costs to sell basis. Due to the change
in Group strategy to become a pure-play Aerospace group, the value in use methodology has been used to determine recoverable amount.
Value in use calculations have been used to determine the recoverable amount of goodwill and other relevant net assets allocated to the Engines
and Structures groups of CGUs for the year ended 31 December 2023. The calculation uses the latest approved forecasts extrapolated into
perpetuity with growth rates shown below, which do not exceed the long-term growth rate for the relevant market.
In the prior year, fair value less costs to sell calculations were used to determine the recoverable amount of goodwill and other relevant net assets
allocated to the Aerospace, Automotive and Powder Metallurgy groups of CGUs. When applying the fair value less costs to sell methodology, it
was difficult to assess a sale value using observable market inputs (level 1) or inputs based on market evidence (level 2) in the environment and
so unobservable inputs (level 3) were used. A combination of discounted cash flows and EBITDA multiple valuations were used to establish fair
values for each of the groups of CGUs. Under IAS 36, the benefits from future uncommitted restructuring plans were permitted when applying
the fair value less costs to sell basis, to the extent that similar actions would be carried out by a market participant.
Based on impairment testing completed no impairment was identified in respect of either of the groups of CGUs. No sensitivity analysis has been
provided as there is no reasonably possible change in key assumptions that could result in an impairment in either the Engines or Structures
groups of CGUs.
The basis of impairment tests and the key assumptions are set out in the tables below:
31 December 2023
Pre-tax
Long-term
Groups of CGUs \u2013 value in use
discount rates
growth rates
Years in forecast
Engines
12.25%
3.4%
5
Structures
12.50%
3.4%
5
31 December 2022
Post-tax
Long-term
Groups of CGUs \u2013 fair value less costs to sell
discount rates
growth rates
Years in forecast
A
erospace
10.75%
3.0%
5
A
utomotive
11.25%
3.5%
5
Powder Metallurgy
12.0%
3.9%
5
Risk adjusted discount rates
Cash flows within the Engines and Structures groups of CGUs are discounted using a pre-tax discount rate specific to each group of CGUs.
Discount rates reflect the current market assessments of the time value of money and the territories in which the group of CGUs operates.
In determining the cost of equity, the Capital Asset Pricing Model (\u201cCAPM\u201d) has been used. Under CAPM, the cost of equity is determined
by adding a risk premium, based on an industry adjustment (\u201cBeta\u201d), to the expected return of the equity market above the risk-free return.
The relative risk adjustment reflects the risk inherent in each group of CGUs relative to all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of government bonds, and an interest rate premium equivalent
to a corporate bond with a similar credit rating to the Group.
Assumptions applied in financial forecasts
The Group prepares cash flow forecasts derived from financial budgets and medium-term forecasts. Each forecast has been prepared using a
five year cash flow period. The key assumptions used in forecasting cash flows relate to future budgeted revenue and operating margins likely
to be achieved and the expected rates of long-term growth by sector. Underlying factors in determining the values assigned to each key
assumption are shown below.
Impairment testing has considered the impact of two transitional climate scenarios used by the Group to assess climate-related risks and
opportunities. Demand for the Group\u2019s products may be impacted by the different scenarios over the medium to long-term. Whilst recognising
these scenarios contain major assumptions, the modelling indicates no material impact on existing revenue assumptions, with any potential
reduction in Melrose's existing products being offset by the Group\u2019s transition plan into lower-carbon products under existing financial planning.
The potential of transition risks such as, the transitioning of carbon intensive machinery to more carbon efficient or electric models also did not
indicate a material impact on the existing financial cost in the short to medium term forecasting. The impairment testing also considers the
potential costs from climate related risks under physical scenarios RCP 2.6 and 8.5. Risks such as flooding and storm events were predicted
to not have a material impact on cost within our financial forecasting horizon.
Revenue growth and operating margins:
Revenue growth assumptions in the forecast period are based on financial budgets and five-year term forecasts by management, taking into
account industry growth rates and management\u2019s historical experience in the context of wider industry and economic conditions. Projected
sales are built up with reference to markets and product categories. They incorporate past performance, historical growth rates, projections
of developments in key markets, secured orders and orders forecast to be achieved in the short to medium-term given trends in the relevant
market sector. Revenue assumptions are made using external market data, where available.
Operating margins have been forecast based on historical levels achieved considering the likely impact of changing economic environments and
competitive landscapes on volumes and revenues and the impact of management actions on costs. Forecasts for operating costs are based on
inflation forecasts and supply and demand factors, which take account of climate change implications for affected markets. Impairment testing
includes short to medium-term planning (five years) for both of the groups of CGUs, which will address known risks from climate change and
other environmental factors impacting forecast costs as well as the opportunities in associated markets as they prepare for change e.g. hydrogen
propulsion which impacts revenues.
The key drivers for growth in revenue and operating margins are global demand for commercial and military aircraft. Consumer spending,
passenger load factors, raw material input costs, market expectations for aircraft production requirements, technological advancements,
and other macro-economic factors influence demand for these products.
Long-term growth rates:
Long-term growth rates are determined using long-term growth rate forecasts that take into account the international presence and the markets
in which each business operates.
Allocation of significant intangible assets
The allocation of significant customer relationships and contracts, brands, intellectual property and technology is as follows:
Customer relationships and contracts
Brands, intellectual property and technology
Remaining
Remaining
amortisation period
Net book value
amortisation period
Net book value
Restated
(1)
Restated
(1)
31 December
31 December
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
2023
2022
years
years
\u00a3m
\u00a3m
years
years
\u00a3m
\u00a3m
Engines
15
16
1,355
1,555
15
16
149
166
Structures
5
6
333
410
15
16
308
368
Continuing operations
1,688
1,965
457
534
Discontinued operations
\u2013
1,107
\u2013
317
Total
1,688
3,072
457
851
(1) Significant intangible assets have been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023
when the Aerospace group of CGUs was re-organised into the Engines and Structures groups of CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f23636": { "value": "11. Goodwill and other intangible assets \n \n
Customer
relationships
Brands and
Computer
Development
Goodwill
and contracts
intellectual property
Other
(1)
software
costs
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
A
t 1 January 2022
2,850
4,406
480
1,011
49
522
9,318
A
dditions
\u2013
\u2013
\u2013
\u2013
6
21
27
A
cquisition of businesses
(2)
1
\u2013
\u2013
3
\u2013
\u2013
4
Disposals
\u2013
\u2013
\u2013
\u2013
(2)
(4)
(6)
Transfer to held for sale
(3)
(455)
(122)
(100)
\u2013
\u2013
\u2013
(677)
Exchange adjustments
189
386
13
33
3
31
655
A
t 31 December 2022
2,585
4,670
393
1,047
56
570
9,321
A
dditions
\u2013
\u2013
\u2013
\u2013
3
13
16
Disposals
\u2013
\u2013
\u2013
\u2013
(1)
(3)
(4)
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
(1)
(1)
(2)
Disposal of businesses
(4)
(1,575)
(1,749)
(184)
(401)
(33)
(100)
(4,042)
Exchange adjustments
(49)
(154)
(2)
(15)
(1)
(15)
(236)
A
t 31 December 2023
961
2,767
207
631
23
464
5,053
A
mortisation and impairment
A
t 1 January 2022
\u2013
(1,226)
(95)
(383)
(29)
(195)
(1,928)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(7)
(43)
(50)
Adjusting items
\u2013
(338)
(24)
(104)
\u2013
\u2013
(466)
Impairments
(5)
\u2013
\u2013
\u2013
\u2013
\u2013
(9)
(9)
Disposals
\u2013
\u2013
\u2013
\u2013
2
4
6
Transfer to held for sale
(3)
\u2013
71
35
\u2013
\u2013
\u2013
106
Exchange adjustments
\u2013
(105)
(9)
(9)
(2)
(9)
(134)
A
t 31 December 2022
\u2013
(1,598)
(93)
(496)
(36)
(252)
(2,475)
Charge for the year:
Adjusted operating profit
\u2013
\u2013
\u2013
\u2013
(3)
(39)
(42)
Adjusting items
\u2013
(228)
(12)
(69)
\u2013
\u2013
(309)
Disposals
\u2013
\u2013
\u2013
\u2013
1
3
4
Transfer to held for sale
(3)
\u2013
\u2013
\u2013
\u2013
1
1
2
Disposal of businesses
(4)
\u2013
694
46
237
17
59
1,053
Exchange adjustments
\u2013
53
\u2013
6
1
5
65
A
t 31 December 2023
\u2013
(1,079)
(59)
(322)
(19)
(223)
(1,702)
Net book value
A
t 31 December 2023
961
1,688
148
309
4
241
3,351
A
t 31 December 2022
2,585
3,072
300
551
20
318
6,846
(1) Other includes technology and order backlog intangible assets recognised on acquisitions.
(2) Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(3) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(4) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
(5) Impairments in 2022 were shown as adjusting items.
The goodwill generated as a result of major acquisitions represents the premium paid in excess of the fair value of all net assets, including
intangible assets, identified at the point of acquisition. The carrying value of goodwill includes a premium, paid in order to secure shareholder
agreement to the business combination, that is less than the value that the Directors believed could be added to the acquired businesses.
The goodwill arising on bolt-on acquisitions is attributable to the anticipated profitability and cash flows arising from the businesses acquired,
synergies as a result of the complementary nature of the business with existing Melrose businesses, the assembled workforce, technical
expertise, knowhow, market share and geographical advantages afforded to the Group.
The future improvements applied to the acquired businesses, achieved through a combination of revised strategic direction, operational
improvements and investment, are expected to result in improved profitability. The combined value achieved from these improvements is
expected to be in excess of the value of goodwill acquired.
Following the Group\u2019s demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen on 20 April 2023 the internal reporting
structure changed for the remaining GKN Aerospace business to show an Engines segment and a Structures segment (see note 5). As a
consequence, the Aerospace group of cash-generating units (\u201cCGUs\u201d) was reorganised into an Engines group of CGUs and a Structures group
of CGUs effective from 20 April 2023.
As a result of the change in the groups of CGUs structure, an allocation of goodwill to the two new groups of CGUs has been performed based
on their valuation at 20 April 2023. Subsequently, impairment testing was completed, dated 20 April 2023, based on the old structure of one
group of CGUs (Aerospace) and the new structure of two groups of CGUs (Engines and Structures). No impairment was identified in respect of
any of the groups of CGUs.
Restated
(1)
31 December
31 December
2023
2022
Goodwill
\u00a3m
\u00a3m
Engines
608
627
Structures
353
363
Continuing operations \u2013 Aerospace
961
990
Discontinued operations
\u2013
1,595
Total
961
2,585
(1)
Goodwill has been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023 when the Aerospace
group of CGUs was re-organised into the Engines and Structures groups of CGUs.
Impairment testing
The Group tests goodwill annually or more frequently if there are indications that goodwill might be impaired. The date of the annual impairment
test is 31 October, aligned with internal forecasting and review processes. In accordance with IAS 36: Impairment of assets, the Group assesses
goodwill based on the recoverable amount, being the higher of the value in use basis and the fair value less costs to sell basis. Due to the change
in Group strategy to become a pure-play Aerospace group, the value in use methodology has been used to determine recoverable amount.
Value in use calculations have been used to determine the recoverable amount of goodwill and other relevant net assets allocated to the Engines
and Structures groups of CGUs for the year ended 31 December 2023. The calculation uses the latest approved forecasts extrapolated into
perpetuity with growth rates shown below, which do not exceed the long-term growth rate for the relevant market.
In the prior year, fair value less costs to sell calculations were used to determine the recoverable amount of goodwill and other relevant net assets
allocated to the Aerospace, Automotive and Powder Metallurgy groups of CGUs. When applying the fair value less costs to sell methodology, it
was difficult to assess a sale value using observable market inputs (level 1) or inputs based on market evidence (level 2) in the environment and
so unobservable inputs (level 3) were used. A combination of discounted cash flows and EBITDA multiple valuations were used to establish fair
values for each of the groups of CGUs. Under IAS 36, the benefits from future uncommitted restructuring plans were permitted when applying
the fair value less costs to sell basis, to the extent that similar actions would be carried out by a market participant.
Based on impairment testing completed no impairment was identified in respect of either of the groups of CGUs. No sensitivity analysis has been
provided as there is no reasonably possible change in key assumptions that could result in an impairment in either the Engines or Structures
groups of CGUs.
The basis of impairment tests and the key assumptions are set out in the tables below:
31 December 2023
Pre-tax
Long-term
Groups of CGUs \u2013 value in use
discount rates
growth rates
Years in forecast
Engines
12.25%
3.4%
5
Structures
12.50%
3.4%
5
31 December 2022
Post-tax
Long-term
Groups of CGUs \u2013 fair value less costs to sell
discount rates
growth rates
Years in forecast
A
erospace
10.75%
3.0%
5
A
utomotive
11.25%
3.5%
5
Powder Metallurgy
12.0%
3.9%
5
Risk adjusted discount rates
Cash flows within the Engines and Structures groups of CGUs are discounted using a pre-tax discount rate specific to each group of CGUs.
Discount rates reflect the current market assessments of the time value of money and the territories in which the group of CGUs operates.
In determining the cost of equity, the Capital Asset Pricing Model (\u201cCAPM\u201d) has been used. Under CAPM, the cost of equity is determined
by adding a risk premium, based on an industry adjustment (\u201cBeta\u201d), to the expected return of the equity market above the risk-free return.
The relative risk adjustment reflects the risk inherent in each group of CGUs relative to all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of government bonds, and an interest rate premium equivalent
to a corporate bond with a similar credit rating to the Group.
Assumptions applied in financial forecasts
The Group prepares cash flow forecasts derived from financial budgets and medium-term forecasts. Each forecast has been prepared using a
five year cash flow period. The key assumptions used in forecasting cash flows relate to future budgeted revenue and operating margins likely
to be achieved and the expected rates of long-term growth by sector. Underlying factors in determining the values assigned to each key
assumption are shown below.
Impairment testing has considered the impact of two transitional climate scenarios used by the Group to assess climate-related risks and
opportunities. Demand for the Group\u2019s products may be impacted by the different scenarios over the medium to long-term. Whilst recognising
these scenarios contain major assumptions, the modelling indicates no material impact on existing revenue assumptions, with any potential
reduction in Melrose's existing products being offset by the Group\u2019s transition plan into lower-carbon products under existing financial planning.
The potential of transition risks such as, the transitioning of carbon intensive machinery to more carbon efficient or electric models also did not
indicate a material impact on the existing financial cost in the short to medium term forecasting. The impairment testing also considers the
potential costs from climate related risks under physical scenarios RCP 2.6 and 8.5. Risks such as flooding and storm events were predicted
to not have a material impact on cost within our financial forecasting horizon.
Revenue growth and operating margins:
Revenue growth assumptions in the forecast period are based on financial budgets and five-year term forecasts by management, taking into
account industry growth rates and management\u2019s historical experience in the context of wider industry and economic conditions. Projected
sales are built up with reference to markets and product categories. They incorporate past performance, historical growth rates, projections
of developments in key markets, secured orders and orders forecast to be achieved in the short to medium-term given trends in the relevant
market sector. Revenue assumptions are made using external market data, where available.
Operating margins have been forecast based on historical levels achieved considering the likely impact of changing economic environments and
competitive landscapes on volumes and revenues and the impact of management actions on costs. Forecasts for operating costs are based on
inflation forecasts and supply and demand factors, which take account of climate change implications for affected markets. Impairment testing
includes short to medium-term planning (five years) for both of the groups of CGUs, which will address known risks from climate change and
other environmental factors impacting forecast costs as well as the opportunities in associated markets as they prepare for change e.g. hydrogen
propulsion which impacts revenues.
The key drivers for growth in revenue and operating margins are global demand for commercial and military aircraft. Consumer spending,
passenger load factors, raw material input costs, market expectations for aircraft production requirements, technological advancements,
and other macro-economic factors influence demand for these products.
Long-term growth rates:
Long-term growth rates are determined using long-term growth rate forecasts that take into account the international presence and the markets
in which each business operates.
Allocation of significant intangible assets
The allocation of significant customer relationships and contracts, brands, intellectual property and technology is as follows:
Customer relationships and contracts
Brands, intellectual property and technology
Remaining
Remaining
amortisation period
Net book value
amortisation period
Net book value
Restated
(1)
Restated
(1)
31 December
31 December
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
2023
2022
years
years
\u00a3m
\u00a3m
years
years
\u00a3m
\u00a3m
Engines
15
16
1,355
1,555
15
16
149
166
Structures
5
6
333
410
15
16
308
368
Continuing operations
1,688
1,965
457
534
Discontinued operations
\u2013
1,107
\u2013
317
Total
1,688
3,072
457
851
(1) Significant intangible assets have been restated for discontinued operations (see note 1) and to reflect the revised groups of CGUs effective from 20 April 2023
when the Aerospace group of CGUs was re-organised into the Engines and Structures groups of CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f24758": { "value": "12. Investments
31 December
31 December
2023
2022
Investments, carried at fair value
\u00a3m
\u00a3m
Shares
114
62
The Group holds a 10% equity share in HiiROC Limited, a hydrogen technology company, a 4% investment in PW1100G-JM Engine Leasing
LLC, an engine leasing business, and a 1% investment in Dowlais Group plc which was retained following the demerger on 20 April 2023 at an
initial valuation of \u00a320 million.
There was a gain on remeasurement to fair value of \u00a335 million (2022: loss of \u00a334 million) and a foreign exchange translation loss of \u00a33 million
(2022: gain of \u00a39 million). A dividend of \u00a35 million (2022: \u00a34 million) was received during the year which was recorded within operating profit.
Certain of the investments are classified as a level 3 fair value under the IFRS 13 fair value hierarchy. To calculate the value at 31 December 2023,
the expected dividend flow was discounted to net present value using a discount rate of 10.5%. If the discount rate changed from 10.5% to 9.5%
the fair value would increase by \u00a38 million.15. Equity accounted investments
31 December
31 December
2023
2022
\u00a3m
\u00a3m
A
ggregated amounts relating to equity accounted investments:
Share of current assets
4
416
Share of non-current assets
9
322
Share of current liabilities
(6)
(289)
Share of non-current liabilities
\u2013
(14)
Interests in equity accounted investments
7
435
Year ended
Year ended
31 December
31 December
2023
2022
Group share of equity accounted investments
\u00a3m
\u00a3m
A
t 1 January
435
429
Share of results of equity accounted investments
4
49
A
dditions
\u2013
3
Disposals
(3)
\u2013
Disposal of businesses
(1)
(417)
\u2013
Dividends paid to the Group
\u2013
(59)
Exchange adjustments
(12)
13
A
t 31 December
7
435
(1) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
During the year the Group demerged its one significant joint venture, held within the Automotive segment, Shanghai GKN HUAYU Driveline
Systems Co Limited (\u201cSDS\u201d). In addition, the Group sold its 20% investment in Business Park Aviolanda B.V. for proceeds of \u00a33 million.", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f25161": { "value": "14. Property, plant and equipment \n \n
Land and
Plant and
buildings
equipment
Total
\u00a3m
\u00a3m
\u00a3m
Cost
A
t 1 January 2022
1,143
2,722
3,865
A
dditions
38
281
319
A
cquisition of businesses
(1)
1
\u2013
1
Right-of-use asset reassessments
\u2013
(1)
(1)
Disposals
(19)
(117)
(136)
Disposal of businesses
(2)
(6)
\u2013
(6)
Transfer to held for sale
(3)
(49)
(20)
(69)
Exchange adjustments
61
263
324
A
t 31 December 2022
1,169
3,128
4,297
A
dditions
34
150
184
Right-of-use asset reassessments
2
\u2013
2
Disposals
(3)
(37)
(40)
Disposal of businesses
(2)
(641)
(2,102)
(2,743)
Transfer to held for sale
(3)
(8)
(12)
(20)
Exchange adjustments
(30)
(100)
(130)
A
t 31 December 2023
523
1,027
1,550
A
ccumulated depreciation and impairment
A
t 1 January 2022
(300)
(1,037)
(1,337)
Charge for the year
(59)
(299)
(358)
Disposals
4
108
112
Disposal of businesses
(2)
6
\u2013
6
Transfer to held for sale
(3)
27
15
42
Impairments
(4)
(2)
(16)
(18)
Exchange adjustments
(6)
(139)
(145)
A
t 31 December 2022
(330)
(1,368)
(1,698)
Charge for the year
(38)
(111)
(149)
Disposals
2
34
36
Disposal of businesses
(2)
120
834
954
Transfer to held for sale
(3)
7
9
16
Impairments
(1)
\u2013
(1)
Exchange adjustments
10
59
69
A
t 31 December 2023
(230)
(543)
(773)
Net book value
A
t 31 December 2023
293
484
777
A
t 31 December 2022
839
1,760
2,599
(1)
Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(2)
Disposal of businesses in 2023 related to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1). Disposal of
businesses in 2022 related to the sale of a non-core business in the Structures segment.
(3)
Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the
Ergotron business (see note 1).
(4)
Impairments in 2022 were shown as adjusting items.
Assets under the course of construction at 31 December 2023 totalled \u00a3126 million (31 December 2022: \u00a3243 million).
Property, plant and equipment includes the net book value of right-of-use assets as follows:
Land and
Plant and
buildings
equipment
Total
Right-of-use asset
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
265
48
313
A
dditions
19
19
38
A
cquisition of businesses
(1)
1
\u2013
1
Right-of-use asset reassessments
\u2013
(1)
(1)
Depreciation
(31)
(16)
(47)
Disposals
(2)
(3)
(5)
Transfer to held for sale
(2)
(1)
(5)
(6)
Exchange adjustments
14
4
18
A
t 31 December 2022
265
46
311
A
dditions
21
10
31
Right-of-use asset reassessments
2
\u2013
2
Depreciation
(23)
(8)
(31)
Transfer to held for sale
(2)
(1)
\u2013
(1)
Disposal of businesses
(3)
(117)
(28)
(145)
Impairments
(1)
\u2013
(1)
Exchange adjustments
(6)
(1)
(7)
A
t 31 December 2023
140
19
159
(1) Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(2) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(3) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f25162": { "value": "14. Property, plant and equipment \n \n
Land and
Plant and
buildings
equipment
Total
\u00a3m
\u00a3m
\u00a3m
Cost
A
t 1 January 2022
1,143
2,722
3,865
A
dditions
38
281
319
A
cquisition of businesses
(1)
1
\u2013
1
Right-of-use asset reassessments
\u2013
(1)
(1)
Disposals
(19)
(117)
(136)
Disposal of businesses
(2)
(6)
\u2013
(6)
Transfer to held for sale
(3)
(49)
(20)
(69)
Exchange adjustments
61
263
324
A
t 31 December 2022
1,169
3,128
4,297
A
dditions
34
150
184
Right-of-use asset reassessments
2
\u2013
2
Disposals
(3)
(37)
(40)
Disposal of businesses
(2)
(641)
(2,102)
(2,743)
Transfer to held for sale
(3)
(8)
(12)
(20)
Exchange adjustments
(30)
(100)
(130)
A
t 31 December 2023
523
1,027
1,550
A
ccumulated depreciation and impairment
A
t 1 January 2022
(300)
(1,037)
(1,337)
Charge for the year
(59)
(299)
(358)
Disposals
4
108
112
Disposal of businesses
(2)
6
\u2013
6
Transfer to held for sale
(3)
27
15
42
Impairments
(4)
(2)
(16)
(18)
Exchange adjustments
(6)
(139)
(145)
A
t 31 December 2022
(330)
(1,368)
(1,698)
Charge for the year
(38)
(111)
(149)
Disposals
2
34
36
Disposal of businesses
(2)
120
834
954
Transfer to held for sale
(3)
7
9
16
Impairments
(1)
\u2013
(1)
Exchange adjustments
10
59
69
A
t 31 December 2023
(230)
(543)
(773)
Net book value
A
t 31 December 2023
293
484
777
A
t 31 December 2022
839
1,760
2,599
(1)
Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(2)
Disposal of businesses in 2023 related to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1). Disposal of
businesses in 2022 related to the sale of a non-core business in the Structures segment.
(3)
Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the
Ergotron business (see note 1).
(4)
Impairments in 2022 were shown as adjusting items.
Assets under the course of construction at 31 December 2023 totalled \u00a3126 million (31 December 2022: \u00a3243 million).
Property, plant and equipment includes the net book value of right-of-use assets as follows:
Land and
Plant and
buildings
equipment
Total
Right-of-use asset
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
265
48
313
A
dditions
19
19
38
A
cquisition of businesses
(1)
1
\u2013
1
Right-of-use asset reassessments
\u2013
(1)
(1)
Depreciation
(31)
(16)
(47)
Disposals
(2)
(3)
(5)
Transfer to held for sale
(2)
(1)
(5)
(6)
Exchange adjustments
14
4
18
A
t 31 December 2022
265
46
311
A
dditions
21
10
31
Right-of-use asset reassessments
2
\u2013
2
Depreciation
(23)
(8)
(31)
Transfer to held for sale
(2)
(1)
\u2013
(1)
Disposal of businesses
(3)
(117)
(28)
(145)
Impairments
(1)
\u2013
(1)
Exchange adjustments
(6)
(1)
(7)
A
t 31 December 2023
140
19
159
(1) Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(2) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(3) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f25911": { "value": "16. Inventories
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Raw materials
235
518
Work in progress
195
328
Finished goods
80
179
510
1,025
In 2023, the write down of inventories in continuing businesses to net realisable value amounted to \u00a353 million (2022: \u00a343 million). The reversal
of write downs in continuing businesses amounted to \u00a344 million (2022: \u00a338 million). Write downs and reversals in both years relate to ongoing
assessments of inventory obsolescence, excess inventory holding and inventory resale values across all of the Group\u2019s businesses.
Climate change may impact the demand from customers for certain products, however given the speed of inventory turnover the Directors
consider that there is no material impact and inventory is appropriately valued.
The Directors consider that there is no material difference between the net book value of inventories and their replacement cost. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f25988": { "value": "17.
Trade and other receivables
31 December
31 December
2023
2022
Current
\u00a3m
\u00a3m
Trade receivables
430
989
A
llowance for expected credit loss
(10)
(20)
Other receivables
162
286
Prepayments
33
36
Contract assets
98
135
713
1,426
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.
31 December
31 December
2023
2022
Non-current
\u00a3m
\u00a3m
Other receivables
21
23
Contract assets
768
647
789
670
As described in note 25, certain businesses participate in receivables working capital programmes and have the ability to choose whether
to receive payment earlier than the normal due date, for specific customers on a non-recourse basis. As at 31 December 2023, eligible
receivables under these programmes have been factored and derecognised in line with the derecognition criteria of IFRS 9: Financial
Instruments. All receivables are solely payments of principal and interest and are held to collect.
An allowance has been made for expected lifetime credit losses with reference to past default experience and management\u2019s assessment
of credit worthiness over trade receivables, an analysis of which is as follows:
Restated
(1)
Discontinued
Engines
(1)
Structures
(1)
operations
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
2
5
16
23
Income Statement charge/(credit)
2
(1)
(2)
(1)
Utilised
(2)
\u2013
\u2013
(2)
Transfer to held for sale
(2)
\u2013
\u2013
(2)
(2)
Exchange adjustments
2
(1)
1
2
A
t 31 December 2022
4
3
13
20
Income Statement charge
1
5
1
7
Utilised
(2)
(1)
\u2013
(3)
Disposal of businesses
(3)
\u2013
\u2013
(13)
(13)
Exchange adjustments
\u2013
\u2013
(1)
(1)
A
t 31 December 2023
3
7
\u2013
10
(1)
The allowance for expected lifetime credit losses has been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures
segments.
(2)
Transfer to held for sale in 2022 related to the Ergotron business which was subsequently disposed of during the second half of the year (see note 1).
(3)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
The concentration of credit risk is limited due to the large number of unrelated customers. 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:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
0 \u2013 30 days
\u2013
4
31 \u2013 60 days
\u2013
\u2013
60+ days
10
16
10
20
Included in the Group\u2019s trade receivables balance are overdue trade receivables with a gross carrying amount of \u00a319 million (31 December 2022:
\u00a353 million) against which a provision of \u00a310 million (31 December 2022: \u00a320 million) is held.
There are no amounts provided against balances that are not overdue as these are deemed recoverable, following an assessment for impairment
in accordance with policies described in note 2.
The ageing of the balance deemed recoverable of \u00a39 million (31 December 2022: \u00a333 million) is as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
0 \u2013 30 days
9
30
31 \u2013 60 days
\u2013
3
60+ days
\u2013
\u2013
9
33
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The Group\u2019s contract assets comprise the following:
Participation fees
Unbilled receivables
Unbilled work done
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
193
61
305
52
611
A
dditions
2
929
124
\u2013
1,055
Utilised
(13)
(918)
(18)
(7)
(956)
Disposal of businesses
(1)
\u2013
(3)
\u2013
\u2013
(3)
Exchange adjustments
22
10
39
4
75
A
t 31 December 2022
204
79
450
49
782
A
dditions
8
962
193
\u2013
1,163
Utilised
(17)
(973)
(20)
(5)
(1,015)
Disposal of businesses
(1)
(9)
\u2013
\u2013
(10)
(19)
Transfer to held for sale
(2)
\u2013
(1)
\u2013
\u2013
(1)
Exchange adjustments
(10)
(4)
(28)
(2)
(44)
A
t 31 December 2023
176
63
595
32
866
(1)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
Disposal of businesses in 2022 related to the sale of a non-core business in the Structures segment.
(2)
Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment (see note 1).
An assessment for impairment of contract assets has been performed in accordance with policies described in note 2. No such impairment has
been recorded.
Climate change and the effect on customers\u2019 ability to pay is considered in the allowance for expected credit losses. Climate change related
considerations have been taken into account in the forecasting of revenues and costs in respect of RRSP contracts in a similar manner to
those described in the impairment testing section (note 11). The Directors have concluded that climate related impacts are not material in
the recoverability of trade receivables and contract assets related to unbilled work done on risk and revenue sharing partnerships.
Participation fees
Participation fees are described in the accounting policies (note 2) and are considered to be a reduction in revenue for the related customer
contract. Amounts are capitalised and \u201camortised\u201d to match to the related performance obligation.
Unbilled receivables for over time recognition
Unbilled receivables for over time recognition represent work completed with associated margins where contracts contain a legal right to
compensation for work completed, including a margin, and there is no alternative use for the customer\u2019s asset.
Unbilled work done
Unbilled work done only has a material impact on one entity in the Group, exclusively relating to certain RRSP arrangements in the
Engines segment.
Where the Group has a contractual right to aftermarket revenue, IFRS 15 requires that the total contract revenue is allocated to the performance
obligations. The principal contractual term that determines the existence of unbilled work done is the absence of a termination clause that the
customer can unilaterally exercise and which results in future purchases being considered optional. Where there is such a termination clause and the
Group commercially relies on economic compulsion of the contracting parties, the two phases of activity are treated as distinct and no unbilled work
done contract asset is recognised. In the absence of such a term, there is a contractual link between the sale of OE components and aftermarket,
which results in unbilled work done, and the total contract revenue is allocated to the distinct performance obligations.
Unbilled work done is measured using a weighted average unit method, taking account of an estimate of stand-alone selling price for individual
performance obligations and is recognised when control of the OE component passes to the customer (the engine manufacturer). Due to the
long-term nature of agreements, calculation of the total programme revenues is inherently imprecise and as set out in note 3d requires significant
estimates, including an assessment of the aftermarket revenue per engine which reflects the pattern of future maintenance activity and
associated costs to be incurred. In order to address the future uncertainties, risk adjustments as well as constraints have been applied to the
expected level of revenue as appropriate. This approach best represents the value of goods and services supplied taking account of the
performance obligations, risk and overall contract revenues.
As a consequence of allocating additional revenue to the sale of OE components, an unbilled work done contract asset has been recognised
which will be satisfied through cash receipt during the aftermarket phase. The constraints applied to unbilled work done are reassessed at each
period end, and will unwind as risks reduce and when uncertainties are resolved. This is expected to lead to additional revenue recognition in
future periods in relation to items sold in the current and preceding periods. Further information is shown in note 4.", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f26648": { "value": "18. Cash and cash equivalents
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Cash and cash equivalents
58
355
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. The carrying amount of these assets is considered to be
equal to their fair value.
31 December
31 December
2023
2022
Reconciliation of cash and cash equivalents, net of bank overdrafts
\u00a3m
\u00a3m
Cash and cash equivalents per Balance Sheet
58
355
Bank overdrafts included within current interest-bearing loans and borrowings (note 20)
(1)
(63)
Cash and cash equivalents, net of bank overdrafts per Statement of Cash Flows
57
292
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f26681": { "value": "19. Trade and other payables
31 December
31 December
2023
2022
Current
\u00a3m
\u00a3m
Trade payables
501
1,257
Other payables
110
375
Customer advances and contract liabilities
246
281
Other taxes and social security
56
73
Government refundable advances
5
7
Funded development costs
64
57
A
ccruals
183
279
Deferred government grants
14
18
1,179
2,347
As at 31 December 2023, and as described in note 25, included within trade payables were drawings on supplier finance facilities of \u00a386 million
(31 December 2022: \u00a3200 million). Trade payables are non-interest-bearing. Normal settlement terms vary by country and the average credit
period taken for trade and other payables is 91 days (31 December 2022: 93 days).
31 December
31 December
2023
2022
Non-current
\u00a3m
\u00a3m
Other payables
\u2013
19
Customer advances and contract liabilities
225
213
Other taxes and social security
1
3
Government refundable advances
44
52
Funded development costs
49
89
A
ccruals
16
29
Deferred government grants
23
26
358
431
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Non-current amounts; other payables, other taxes and social security and accruals fall due for payment within one to two years; government
refundable advances are forecast to fall due for repayment between 2024 and 2055 and the deferred government grants will be utilised over
the next five years.
Funded development costs
When the Group is awarded design and development work as part of a related serial production of components contract, management assesses
whether the two phases of work are distinct under IFRS 15: Revenue from contracts with customers.
Where it is considered there is only one performance obligation under the contract, being the delivery of manufactured product, any cash
received from customers which contributes to \u2018funding\u2019 the up-front design and development expenditure incurred, is deferred on the
Balance Sheet as an obligation and released to revenue in the Income Statement based on expectations of volumes.
Development cost funding is in the Engines segment (\u00a31 million) and Structures segment (\u00a3112 million).
Customer advances and contract liabilities include cash receipts from customers in advance of the Group completing its performance obligations
and are generally utilised as product is delivered. Non-current amounts in respect of customer advances and contract liabilities will be utilised
as follows: one to two years \u00a3118 million, two to five years \u00a322 million and over five years \u00a385 million (31 December 2022: one to two years
\u00a365 million, two to five years \u00a350 million and over five years \u00a398 million).
The Group\u2019s Customer advances and contract liabilities comprise the following:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Customer cash advances
62
95
Material rights given
30
34
RRSP related obligations
379
365
471
494
Customer cash advances
There are a discrete number of contracts with customers, where commercial terms lead to customer advances relating to serial production of
components. Where cash is received in advance of performance, this usually addresses non-standard commercial impacts on the Group such
as long lead times on inventory.
Customer cash advances received before the Group delivers product is deferred on the Balance Sheet as an obligation and released to revenue
based on expectations of volumes.
Material rights given
Where the Group has agreed contracts with customers that contain any unusual pricing features, these are assessed to determine if material
rights have been transferred to the customer. A material right could occur when there is a material step down in price or if contracts are modified
with lump sum cash receipts offset by a reduction in future pricing.
If a material right has transferred to the customer, any cash received in advance of the Group performing its obligations under a contract is
deferred on the Balance Sheet and released to revenue in the Income Statement based on the terms of the contract.
RRSP related obligations
As detailed in the accounting policies (note 2), significant estimates disclosure (note 3), revenue disclosures (note 4) and contract asset disclosure
(note 17), the Group has certain RRSP arrangements, with more complex revenue recognition considerations. Whilst the Group has an unbilled
work done contract asset of \u00a3595 million (31 December 2022: \u00a3450 million), detailed in note 17, which represents the Group having completed
certain of its performance obligations in advance of cash receipt, it also has contract liabilities.
These include:
\u2022
Cash received for a \u201cstand ready\u201d obligation (described in note 4) of \u00a358 million (31 December 2022: \u00a391 million) to contribute to aftermarket
activities of certain RRSPs, which typically results in the provision of services such as technical and other programme support activities over the
whole life of the engine. This will be recognised over time in line with the engine manufacturer\u2019s actual maintenance, repair and overhaul costs.
\u2022
A pricing rebate provision for estimated discounts provided by engine manufacturers on the sale of OE of \u00a368 million (31 December 2022:
\u00a363 million).
\u2022
Cash received to compensate where the production cost incurred on an RRSP contract is in excess of the Group\u2019s share of the programme,
totalling \u00a322 million (31 December 2022: \u00a38 million). This will be released to the Income Statement when the Group has satisfied its
performance obligations.
\u2022
Cash received in respect of RRSP contract amendments of \u00a359 million (31 December 2022: \u00a361 million). This will be released over the life of
the contract in accordance with the original terms of the contract.
\u2022
A provision for engineering and warranty commitments in respect of RRSP contracts of \u00a330 million (31 December 2022: \u00a327 million). This is
expected to be utilised over the warranty terms of the contracts.
\u2022
Other contract liabilities of \u00a3142 million (31 December 2022: \u00a3115 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f26979": { "value": "20. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group\u2019s interest-bearing loans and borrowings. Details of the Group\u2019s exposure
to credit, liquidity, interest rate and foreign currency risk are included in note 25.
\n \n
Current
Non-current
Total
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Floating rate obligations
Bank borrowings \u2013 US Dollar loan
\u2013
\u2013
467
759
467
759
Bank borrowings \u2013 Sterling loan
\u2013
\u2013
1
182
1
182
Bank borrowings \u2013 Euro loan
\u2013
\u2013
106
363
106
363
Other loans
53
\u2013
\u2013
\u2013
53
\u2013
Bank overdrafts
1
63
\u2013
\u2013
1
63
Fixed rate obligations
2032 bond
\u2013
\u2013
10
130
10
130
54
63
584
1,434
638
1,497
Unamortised finance costs
\u2013
\u2013
(8)
(3)
(8)
(3)
Non-cash acquisition fair value adjustment
\u2013
\u2013
\u2013
2
\u2013
2
Total interest-bearing loans and borrowings
54
63
576
1,433
630
1,496
The Group\u2019s committed bank facilities were refinanced during the year. The new facilities consist of a multi-currency term loan denominated
US$300 million and \u20ac100 million, and a US$250 million revolving credit facility, both of which mature in April 2026. In addition, the Group also
entered into multi-currency revolving credit facilities totalling US$690 million, \u00a3300 million and \u20ac300 million that initially mature in April 2026,
but with the potential to be extended for two additional one-year periods at the Company\u2019s option.
At 31 December 2023, the term loan was fully drawn and there were drawings of US$298 million, \u00a31 million and \u20ac22 million on the revolving
credit facilities. Applying the exchange rates at 31 December 2023, the headroom equated to \u00a31,043 million. There are also a number of
uncommitted overdraft, guarantee and borrowing facilities made available to the Group.
During the year, \u00a34 million of unamortised finance costs were charged to the Income Statement, and an additional \u00a32 million was written off
relating to the old bank facility that was replaced on demerger. New unamortised finance costs of \u00a311 million were recognised on the inception
of the new bank facility.
Throughout the year, the Group remained compliant with all covenants under the facilities disclosed above. A number of Group companies are
guarantors under the bank facilities. Further details on covenant compliance for the year ended 31 December 2023 are contained in note 25.
The bank margin on the bank facility depends on the Group leverage and were as follows:
\n \n
31 December 2023
31 December 2022
Margin
Range
Margin
Range
Facility:
Term loan
1.30%
0.9% \u2013 2.2%
0.75%
0.75% \u2013 2.0%
Revolving credit facilities
1.30% \u2013 1.55%
0.9% \u2013 2.4%
0.75%
0.75% \u2013 2.0%
At the start of the year the Group held capital market borrowings with an outstanding nominal value of \u00a3130 million from an original \u00a3300 million bond,
issued in May 2017 and due to mature in May 2032. In December 2023, an agreement was reached with certain remaining bondholders that resulted
in \u00a3120 million of the outstanding nominal value being bought back and cancelled for a total cost of \u00a3109 million (excluding accrued interest). This
represented a gain of \u00a313 million after associated costs including the release of a fair value adjustment of \u00a32 million on the bond, recognised on
acquisition of GKN. This gain has been recognised as an adjusting item within finance income in the Consolidated Income Statement.
Details of the remaining bond are in the table below:
\n \n
Notional amount
Coupon
Maturity date
\u00a3m
% p.a.
May 2032
10
4.625%
Maturity of financial liabilities (excluding currency contracts and lease obligations)
The table below shows the maturity profile of anticipated future cash flows, including interest, on an undiscounted basis in relation to the Group\u2019s
financial liabilities (other than those associated with currency risk, which are shown in note 25, and lease obligations which are shown in note 28).
The amounts shown therefore differ from the carrying value and fair value of the Group\u2019s financial liabilities.
Interest-bearing
Interest rate
loans and
derivative financial
Other financial
Total financial
borrowings
liabilities
liabilities
liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Within one year
88
\u2013
799
887
In one to two years
45
\u2013
21
66
In two to five years
565
\u2013
7
572
A
fter five years
11
\u2013
32
43
Effect of financing rates
(79)
\u2013
\u2013
(79)
31 December 2023
630
\u2013
859
1,489
Within one year
131
3
1,918
2,052
In one to two years
1,358
\u2013
60
1,418
In two to five years
18
\u2013
15
33
A
fter five years
160
\u2013
25
185
Effect of financing rates
(171)
\u2013
\u2013
(171)
31 December 2022
1,496
3
2,018
3,517
", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToBanksExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f26980": { "value": "20. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group\u2019s interest-bearing loans and borrowings. Details of the Group\u2019s exposure
to credit, liquidity, interest rate and foreign currency risk are included in note 25.
\n \n
Current
Non-current
Total
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Floating rate obligations
Bank borrowings \u2013 US Dollar loan
\u2013
\u2013
467
759
467
759
Bank borrowings \u2013 Sterling loan
\u2013
\u2013
1
182
1
182
Bank borrowings \u2013 Euro loan
\u2013
\u2013
106
363
106
363
Other loans
53
\u2013
\u2013
\u2013
53
\u2013
Bank overdrafts
1
63
\u2013
\u2013
1
63
Fixed rate obligations
2032 bond
\u2013
\u2013
10
130
10
130
54
63
584
1,434
638
1,497
Unamortised finance costs
\u2013
\u2013
(8)
(3)
(8)
(3)
Non-cash acquisition fair value adjustment
\u2013
\u2013
\u2013
2
\u2013
2
Total interest-bearing loans and borrowings
54
63
576
1,433
630
1,496
The Group\u2019s committed bank facilities were refinanced during the year. The new facilities consist of a multi-currency term loan denominated
US$300 million and \u20ac100 million, and a US$250 million revolving credit facility, both of which mature in April 2026. In addition, the Group also
entered into multi-currency revolving credit facilities totalling US$690 million, \u00a3300 million and \u20ac300 million that initially mature in April 2026,
but with the potential to be extended for two additional one-year periods at the Company\u2019s option.
At 31 December 2023, the term loan was fully drawn and there were drawings of US$298 million, \u00a31 million and \u20ac22 million on the revolving
credit facilities. Applying the exchange rates at 31 December 2023, the headroom equated to \u00a31,043 million. There are also a number of
uncommitted overdraft, guarantee and borrowing facilities made available to the Group.
During the year, \u00a34 million of unamortised finance costs were charged to the Income Statement, and an additional \u00a32 million was written off
relating to the old bank facility that was replaced on demerger. New unamortised finance costs of \u00a311 million were recognised on the inception
of the new bank facility.
Throughout the year, the Group remained compliant with all covenants under the facilities disclosed above. A number of Group companies are
guarantors under the bank facilities. Further details on covenant compliance for the year ended 31 December 2023 are contained in note 25.
The bank margin on the bank facility depends on the Group leverage and were as follows:
\n \n
31 December 2023
31 December 2022
Margin
Range
Margin
Range
Facility:
Term loan
1.30%
0.9% \u2013 2.2%
0.75%
0.75% \u2013 2.0%
Revolving credit facilities
1.30% \u2013 1.55%
0.9% \u2013 2.4%
0.75%
0.75% \u2013 2.0%
At the start of the year the Group held capital market borrowings with an outstanding nominal value of \u00a3130 million from an original \u00a3300 million bond,
issued in May 2017 and due to mature in May 2032. In December 2023, an agreement was reached with certain remaining bondholders that resulted
in \u00a3120 million of the outstanding nominal value being bought back and cancelled for a total cost of \u00a3109 million (excluding accrued interest). This
represented a gain of \u00a313 million after associated costs including the release of a fair value adjustment of \u00a32 million on the bond, recognised on
acquisition of GKN. This gain has been recognised as an adjusting item within finance income in the Consolidated Income Statement.
Details of the remaining bond are in the table below:
\n \n
Notional amount
Coupon
Maturity date
\u00a3m
% p.a.
May 2032
10
4.625%
Maturity of financial liabilities (excluding currency contracts and lease obligations)
The table below shows the maturity profile of anticipated future cash flows, including interest, on an undiscounted basis in relation to the Group\u2019s
financial liabilities (other than those associated with currency risk, which are shown in note 25, and lease obligations which are shown in note 28).
The amounts shown therefore differ from the carrying value and fair value of the Group\u2019s financial liabilities.
Interest-bearing
Interest rate
loans and
derivative financial
Other financial
Total financial
borrowings
liabilities
liabilities
liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Within one year
88
\u2013
799
887
In one to two years
45
\u2013
21
66
In two to five years
565
\u2013
7
572
A
fter five years
11
\u2013
32
43
Effect of financing rates
(79)
\u2013
\u2013
(79)
31 December 2023
630
\u2013
859
1,489
Within one year
131
3
1,918
2,052
In one to two years
1,358
\u2013
60
1,418
In two to five years
18
\u2013
15
33
A
fter five years
160
\u2013
25
185
Effect of financing rates
(171)
\u2013
\u2013
(171)
31 December 2022
1,496
3
2,018
3,517
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f27492": { "value": "21.
Provisions
Loss-making
Property
Environmental and
Warranty
contracts
related costs
litigation
related costs
Restructuring
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2023
108
28
119
200
83
73
611
Utilised
(26)
\u2013
(7)
(11)
(97)
(8)
(149)
Charge to operating profit
(1)
23
1
18
16
96
63
217
Release to operating profit
(2)
(2)
\u2013
(9)
(18)
(2)
\u2013
(31)
Disposal of businesses
(3)
(41)
(5)
(63)
(154)
(18)
(63)
(344)
Transfer to held for sale
(4)
(1)
\u2013
(1)
(2)
\u2013
\u2013
(4)
Unwind of discount
(5)
\u2013
\u2013
\u2013
\u2013
\u2013
1
1
Exchange adjustments
(3)
(1)
(3)
(4)
(3)
(1)
(15)
A
t 31 December 2023
58
23
54
27
59
65
286
Current
38
5
34
15
49
47
188
Non-current
20
18
20
12
10
18
98
58
23
54
27
59
65
286
(1) Includes \u00a3182 million of adjusting items and \u00a335 million recognised in adjusted operating profit.
(2) Includes \u00a38 million of adjusting items and \u00a323 million recognised in adjusted operating profit.
(3) Disposal of businesses relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
(4) Transfer to held for sale relates to the contractually agreed sale of a non-core business in the Structures segment (see note 1).
(5) Includes \u00a31 million within finance costs relating to the time value of money.
Loss-making contracts
Provisions for loss-making contracts are considered to exist where the Group has a contract under which the unavoidable costs of meeting the
obligations exceed the economic benefits expected to be received under it. This obligation has been discounted and will be utilised over the
period of the respective contracts, which is up to 15 years. At 31 December 2023, the loss-making contracts provision within Engines totalled
\u00a314 million (31 December 2022: \u00a317 million) and \u00a344 million within Structures (31 December 2022: \u00a345 million).
Calculation of loss-making contract provisions is based on contract documentation and delivery expectations, along with an estimate of directly
attributable costs and represents management\u2019s best estimate of the unavoidable costs of fulfilling the contract.
Utilisation in continuing operations during the year of \u00a323 million has benefited adjusted operating profit with \u00a33 million recognised in Engines
and \u00a320 million recognised in Structures. In addition, \u00a321 million has been charged on a net basis (2022: \u00a38 million released) and is shown as
an adjusting item.
Property related costs
The provision for property related costs represents dilapidation costs for ongoing leases and is expected to result in cash expenditure over the
next eight years. Calculation of dilapidation obligations are based on lease agreements with landlords and external quotes, or in the absence
of specific documentation, management\u2019s best estimate of the costs required to fulfil obligations.
Environmental and litigation
There are environmental provisions amounting to \u00a37 million (31 December 2022: \u00a326 million) relating 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 and
associated insurance obligations amounting to \u00a347 million (31 December 2022: \u00a393 million). Liabilities for environmental costs are recognised
when environmental assessments are probable and the associated costs can be reasonably estimated.
The Group has on occasion been required to take legal or other actions to defend itself against proceedings brought by other parties. Provisions
are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, considering
professional advice received. This represents management\u2019s best estimate of the likely outcome. The timing of utilisation of these provisions is
frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and negotiations. Contractual and other
provisions represent management\u2019s best estimate of the cost of settling future obligations and reflect management\u2019s assessment of the likely
settlement method, which may change over time. However, no provision is made for proceedings which have been, or might be, brought by
other parties against Group companies unless management, considering professional advice received, assess that it is more likely than not that
such proceedings may be successful.
Warranty related costs
Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant
products and subsequently updated for changes in estimates as necessary. The provision for warranty related costs represents the best
estimate of the expenditure required to settle the Group\u2019s obligations, based on past experience, recent claims and current estimates of costs
relating to specific claims. Warranty terms are, on average, between one and five years.
Restructuring
Restructuring provisions relate to committed costs in respect of restructuring programmes, as described in note 6, usually resulting in cash
spend within one to two years. A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring
and has raised a valid expectation in those affected that it will carry out the restructuring by either starting to implement the plan or by
announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising
from the restructuring, which are those amounts that are necessarily entailed by the restructuring programmes.
Other
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 during the next three years.
Where appropriate, provisions have been discounted using discount rates between 0% and 7% (31 December 2022: 0% and 14%) depending
on the territory in which the provision resides and the length of its expected utilisation.", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f27822": { "value": "22. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior year.
Deferred tax assets
Deferred tax liabilities
Accelerated
Tax losses and other
capital allowances
Deferred tax on
Total deferred
Total net
assets
and other liabilities
intangible assets
tax liabilities
deferred tax
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
250
(127)
(487)
(614)
(364)
Credit to income
35
3
111
114
149
Credit to equity
4
\u2013
\u2013
\u2013
4
Disposal of businesses
(1)
(10)
\u2013
\u2013
\u2013
(10)
A
cquisition of businesses
(2)
\u2013
(1)
\u2013
(1)
(1)
Transfer to held for sale
(3)
(9)
\u2013
30
30
21
Exchange adjustments
44
(18)
(71)
(89)
(45)
Movement in set off of assets and liabilities
(4)
59
(7)
(52)
(59)
\u2013
A
t 31 December 2022
373
(150)
(469)
(619)
(246)
Credit/(charge) to income
55
(85)
73
(12)
43
Credit to equity
43
\u2013
\u2013
\u2013
43
Disposal of businesses
(1)
(189)
31
347
378
189
Transfer to held for sale
(3)
(1)
\u2013
\u2013
\u2013
(1)
Exchange adjustments
(18)
10
25
35
17
Movement in set off of assets and liabilities
(4)
264
(18)
(246)
(264)
\u2013
A
t 31 December 2023
527
(212)
(270)
(482)
45
(1) Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
Disposal of businesses in 2022 related to the sale of a non-core business.
(2)
Acquisition of businesses in 2022 related to Permanova Lasersystem AB within the Engines segment.
(3) Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
(4)
Set off of deferred tax assets and liabilities in accordance with IAS 12 within territories with a right of set off.
As at 31 December 2023, the Group had gross unused corporate income tax losses of \u00a32,039 million (31 December 2022: \u00a32,176 million)
available for offset against future profits. A deferred tax asset of \u00a3446 million (31 December 2022: \u00a3477 million) has been recognised in respect
of \u00a31,799 million (31 December 2022: \u00a31,938 million) of these gross losses. The movement in deferred tax assets relating to tax losses arises
primarily through the Income Statement. There is also a credit of \u00a3nil (2022: \u00a36 million) included within equity. No asset has been recognised
in respect of the remaining losses due to the divisional and geographic split of anticipated future profit streams. Most of these losses may be
carried forward indefinitely subject to certain continuity of business requirements. Where losses are subject to time expiry, a deferred tax asset
is recognised to the extent that sufficient future profits are anticipated to utilise these losses. The Group continues to recognise deferred tax
assets as it is confident that the global recovery, together with restructuring actions taken, will result in future taxable profits against which
the deferred tax assets will be realised. In addition to the corporate income tax losses included above, a deferred tax asset of \u00a333 million
(31 December 2022: \u00a347 million) has been recognised on tax credits (primarily US) and US state tax losses.
Using similar forecasting considerations to those in the impairment section (note 11), climate change is deemed not to have a material impact
on the future taxable profits of the Group and its ability to utilise unused tax losses and deductible temporary differences.
Deferred tax assets have also been recognised on Group retirement benefit obligations at \u00a37 million (31 December 2022: \u00a314 million) and on
other temporary differences at \u00a3261 million (31 December 2022: \u00a3318 million). The gross deferred tax assets therefore amount to \u00a3747 million
(31 December 2022: \u00a3856 million).
Deferred tax liabilities have been recognised on intangible assets at \u00a3479 million (31 December 2022: \u00a3923 million) and accelerated capital
allowances and other temporary differences at \u00a3223 million (31 December 2022: \u00a3179 million). The gross deferred tax liabilities therefore amount
to \u00a3702 million (31 December 2022: \u00a31,102 million).
There are no material unrecognised deferred tax assets at 31 December 2023 (31 December 2022: \u00a3nil), other than the losses referred to above.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries except where the distribution of such profits is planned.
If these earnings were remitted in full, tax of \u00a32 million (31 December 2022: \u00a362 million) would be payable.", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f28149": { "value": "23. Share-based payments
2020 Employee Share Plan
Following the demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen (\u201cDowlais\u201d, see note 1), certain adjustments were
made to the
Melrose 2020 Employee Share Plan (\u201cthe MESP\u201d), following shareholder approval, which preserved the rights of the participants
of the plan.
Firstly, the invested capital was allocated between the continuing Melrose Group and Dowlais. Secondly, recognising that the timelines of both
the demerger and the crystallisation date of the MESP coincided, the performance of the MESP was extended by one year. Finally, to recognise
the value creation platform already prepared for Dowlais whilst under Melrose ownership, the invested capital allocated formed the basis for the
creation of a separate parallel Melrose Automotive share plan (\u201cthe MASP\u201d), under which the creation of further value in Dowlais will be rewarded
up to 31 May 2025. The MASP is not an equity-settled share-based payment arrangement for the Group and so an adjustment was recorded
to recycle \u00a35 million from Retained Earnings.
Further details in respect of the MESP are set out in the Directors\u2019 Remuneration Report on page 134.
The MESP
During the year, the Group recognised a charge of \u00a335 million (2022: \u00a315 million) in respect of the MESP, inclusive of a \u00a328 million charge in
respect of related national insurance (2022: credit of \u00a31 million), recognised in adjusting items (note 6).
The estimated value of the MESP at 31 December 2023 if settled at that date was \u00a3302 million (31 December 2022: \u00a3nil). Using a Black-Scholes
option pricing model, the projected value of this plan at 31 May 2024 (being the end of the revised four year performance period) is \u00a3274 million
(31 December 2022: \u00a322 million).
The annual IFRS 2 charge in respect of the MESP was \u00a316 million which ceased on 31 May 2023. The inputs into the Black-Scholes valuation
model that were used to fair value the plan at the grant date were as follows:
Valuation assumptions
(1)
Weighted average share price
\u00a31.81
Weighted average exercise price
\u00a31.71
Expected volatility
58%
Expected life as at inception
2.4 years
Risk free interest
0.0%
(1) Valuation assumptions are not required to be updated to reflect the current capital structure of the Group.
Expected volatility was determined by calculating the historical volatility of the Company\u2019s share price.", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f28206": { "value": "24. 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 \u00a358 million (2022: \u00a356 million) represent 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 separate funds that are 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, \u00a3439 million of net retirement benefit obligations were disposed with the demerger of the GKN Automotive, GKN Powder
Metallurgy and GKN Hydrogen businesses (note 1).
Also during the year, a buy-in policy was purchased for \u00a345 million which fully insured pensioner members who were in the GKN Group Pension
Scheme Number 4. The present value of funded defined benefit obligations for GKN Group Pension Scheme Number 4 was actuarially calculated
and the plan asset was set equal. Following the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses, the
most significant defined benefit pension plans in the Group at 31 December 2023 were:
GKN Group Pension Schemes (Numbers 1 and 4)
The GKN Group Pension Schemes (Numbers 1 and 4) are funded plans closed to new members and were closed to future accrual in 2017.
The valuation of the plans was based on a full actuarial valuation as of 5 April 2022, updated to 31 December 2023 by independent actuaries.
In June 2023, the UK High Court ruled that certain historical amendments for contracted-out defined benefit schemes were invalid if they were
not accompanied by the correct actuarial confirmation. The judgement is subject to appeal. The Trustees and the Group are monitoring
developments and will consider if there are any implications for the GKN UK Group Pension Schemes, if the ruling is upheld.
GKN US Consolidated Pension Plan
The GKN US Consolidated Pension Plan is a funded plan, closed to new members and closed to future accrual. The US Pension Plan valuation
was based on a full actuarial valuation as of 1 January 2023, updated to 31 December 2023 by independent actuaries.
The cost of the Group\u2019s defined benefit plans is 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.
Contributions
The Group contributed \u00a372 million (2022: \u00a359 million) to defined benefit pension plans and post-employment plans, inclusive of the \u00a345 million
purchase of a buy-in policy discussed above, in the year ended 31 December 2023. The Group expects to contribute \u00a325 million in 2024.
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group\u2019s pension liabilities are as set out below:
Rate of increase
Price inflation
of pensions in payment
Discount rate
(RPI/CPI)
% per annum
%
%
31 December 2023
GKN Group Pension Schemes (Numbers 1 and 4)
2.6
4.5
2.9/2.5
GKN US plans
n/a
4.8
n/a
31 December 2022
GKN Group Pension Schemes (Numbers 1 \u2013 4)
2.7
4.8
3.2/2.7
GKN US plans
n/a
5.0
n/a
GKN Europe plans
2.6
3.7
2.6/2.6
Mortality
GKN Group Pension Schemes (Numbers 1 and 4)
The GKN Group Pension Schemes (Numbers 1 and 4) use the SAPS \u201cS3PA\u201d base tables with scheme-specific adjustments. The base table
mortality assumption for each of the UK plans reflects best estimate results from the most recent mortality experience analyses for each scheme.
Scaling factors vary by scheme.
Future improvements for all UK plans are in line with the 2022 Continuous Mortality Investigation (\u201cCMI\u201d) core projection model (SK = 7.5, A = 0%,
w2022 = 25%) with a long-term rate of improvement of 1.25% p.a. for both males and females.
GKN US Consolidated Pension Plan
GKN US Pension and Medical Plans use base mortality tables in line with PRI \u2013 2012 tables. Future improvements for all US plans are in line
with MP2021.
The following table shows the future life expectancy of individuals age 65 at the year end and the future life expectancy of individuals aged 65
in 20 years\u2019 time.
GKN Group
GKN US
Pension Schemes
Consolidated
(Numbers 1 and 4)
Pension Plan
years
years
Male today
22.0
19.7
Female today
24.0
21.6
Male in 20 years\u2019 time
22.8
21.2
Female in 20 years\u2019 time
25.0
23.1
Balance Sheet disclosures
The amounts recognised in the Consolidated Balance Sheet in respect of defined benefit plans were as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Present value of funded defined benefit obligations
(1,193)
(1,931)
Fair value of plan assets
1,118
1,941
Funded status
(75)
10
Present value of unfunded defined benefit obligations
(24)
(498)
Net liabilities
(99)
(488)
A
nalysed as:
Retirement benefit surplus
\u2013
93
Retirement benefit obligations
(99)
(581)
Net liabilities
(99)
(488)
The net retirement benefit obligations in continuing businesses is attributable to Engines: liability of \u00a32 million (31 December 2022: \u00a31 million)
and Structures: liability of \u00a397 million (31 December 2022: \u00a326 million).
The plan assets and liabilities at 31 December 2023 were as follows:
UK
US
Other
Plans
(1)
Plans
Plans
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Plan assets
1,070
47
1
1,118
Plan liabilities
(1,136)
(72)
(9)
(1,217)
Net liabilities
(66)
(25)
(8)
(99)
(1) Includes a liability in respect of the GKN post-employment medical plans of \u00a36 million and a net deficit in respect of the GKN Group Pension Scheme
(Numbers 1 and 4) of \u00a360 million.
The major categories and fair values of plan assets at the end of the year for each category were as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Equities
\u2013
85
Government bonds
363
722
Corporate bonds
60
196
Property
9
18
Insurance contracts
439
28
Multi-strategy/Diversified growth funds
130
354
Private equity
24
80
Other
(1)
93
458
Total
1,118
1,941
(1) Primarily consists of cash collateral and liability driven investments.
Excluding the insurance contracts purchased in respect of GKN Group Pension Scheme Number 4, 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 are regularly reviewed.
Movements in the present value of defined benefit obligations during the year:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
A
t 1 January
2,429
3,471
Current service cost
2
9
Interest cost on obligations
71
66
Remeasurement gains \u2013 demographic
\u2013
(1)
Remeasurement losses/(gains) \u2013 financial
3
(1,072)
Remeasurement losses \u2013 experience
23
102
Benefits paid out of plan assets
(79)
(134)
Benefits paid out of Group assets for unfunded plans
(7)
(24)
Settlements
(1)
\u2013
(44)
Disposal of businesses
(2)
(1,214)
\u2013
Exchange adjustments
(11)
56
A
t 31 December
1,217
2,429
(1)
During 2022, a settlement gain of \u00a32 million was recognised in discontinued operations relating to the buy-out of certain US pension schemes and was shown
as an adjusting item.
(2)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
The defined benefit plan liabilities were 13% (31 December 2022: 15%) in respect of active plan participants, 27% (31 December 2022: 25%)
in respect of deferred plan participants and 60% (31 December 2022: 60%) in respect of pensioners.
The weighted average duration of the defined benefit plan liabilities at 31 December 2023 was 12.7 years (31 December 2022: 12.8 years).
Movements in the fair value of plan assets during the year:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
A
t 1 January
1,941
3,010
Interest income on plan assets
66
61
Return on plan assets, excluding interest income
(93)
(1,003)
Contributions
65
35
Benefits paid out of plan assets
(79)
(134)
Plan administrative costs
(4)
(8)
Settlements
(1)
\u2013
(42)
Disposal of businesses
(2)
(775)
\u2013
Exchange adjustments
(3)
22
A
t 31 December
1,118
1,941
(1) During 2022, a settlement gain of \u00a32 million was recognised in discontinued operations relating to the buy-out of certain US pension schemes and was shown as
an adjusting item.
(2)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1).
The actual return on plan assets was a loss of \u00a327 million (2022: loss of \u00a3942 million).
Income Statement disclosures
Amounts recognised in the Consolidated Income Statement in respect of these defined benefit plans were as follows:
\n \n
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Continuing operations
\u00a3m
\u00a3m
Included within operating profit/(loss):
\u2013 plan administrative costs
4
8
Included within net finance costs:
\u2013 interest cost on defined benefit obligations
56
35
\u2013 interest income on plan assets
(55)
(36)
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Discontinued operations
\u00a3m
\u00a3m
Included within operating profit/(loss):
\u2013 current service cost
2
9
\u2013 settlement gains
(2)
\u2013
(2)
Included within net finance costs:
\u2013 interest cost on defined benefit obligations
15
31
\u2013 interest income on plan assets
(11)
(25)
(1)
Restated for discontinued operations (see note 1).
(2)
During 2022, a settlement gain of \u00a32 million was recognised in discontinued operations relating to the buy-out of certain US pension schemes and was shown
as an adjusting item.
Statement of Comprehensive Income disclosures
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of these defined benefit plans were as follows:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Return on plan assets, excluding interest income
(93)
(1,003)
Remeasurement gains arising from changes in demographic assumptions
\u2013
1
Remeasurement (losses)/gains arising from changes in financial assumptions
(3)
1,072
Remeasurement losses arising from experience adjustments
(23)
(102)
Net remeasurement loss on retirement benefit obligations
(119)
(32)
Risks and sensitivities
The defined benefit plans expose the Group to actuarial risks, such as longevity risk, inflation risk, interest rate risk and market (investment) risk.
The Group is not exposed to any unusual, entity specific or plan specific risks.
A sensitivity analysis on the principal assumptions used to measure the plan liabilities at the year end was as follows:
Decrease/(increase)
Increase/(decrease)
to plan liabilities
to profit before tax
Change in assumption
\u00a3m
\u00a3m
Discount rate
Increase by 0.5 ppts
71
(2)
Decrease by 0.5 ppts
(78)
2
Inflation assumption
(1)
Increase by 0.5 ppts
(42)
n/a
Decrease by 0.5 ppts
45
n/a
A
ssumed life expectancy at age 65 (rate of mortality)
Increase by 1 year
(43)
n/a
Decrease by 1 year
44
n/a
(1) The inflation sensitivity encompasses the impact on pension increases, where applicable.
The sensitivity analysis above was determined based on reasonably possible changes to the respective assumptions, while holding all other
assumptions constant. There has been no change in the methods or assumptions used in preparing the sensitivity analysis from prior years.
Sensitivities are based on the relevant assumptions and membership profile as at 31 December 2023 and are applied to obligations at the
end of the reporting period. Whilst the analysis does not take account of the full distribution of cash flows expected, it does provide an
approximation to the sensitivity of assumptions shown. Extrapolation of these results beyond the sensitivity figures shown may not be appropriate
and the sensitivity analysis presented may not be representative of the actual change in the defined benefit obligation as it is unlikely that the
change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f29249": { "value": "25.
Financial instruments and risk management
The table below sets out the Group\u2019s accounting classification of each category of financial assets and liabilities and their carrying values at
31 December 2023 and 31 December 2022:
\n \n
Discontinued
Engines
Structures
Corporate
operations
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
31 December 2023
Financial assets
Classified as amortised cost:
Cash and cash equivalents
\u2013
\u2013
58
\u2013
58
Net trade receivables
168
252
\u2013
\u2013
420
Classified as fair value:
Investments
57
\u2013
57
\u2013
114
Derivative financial assets
Foreign currency forward contracts
\u2013
\u2013
47
\u2013
47
Interest rate derivatives
\u2013
\u2013
3
\u2013
3
Embedded derivatives
(1)
\u2013
9
\u2013
\u2013
9
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
\u2013
\u2013
(630)
\u2013
(630)
Government refundable advances
(43)
(6)
\u2013
\u2013
(49)
Lease obligations
(35)
(150)
(7)
\u2013
(192)
Other financial liabilities
(345)
(419)
(46)
\u2013
(810)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
\u2013
\u2013
(102)
\u2013
(102)
Embedded derivatives
(1)
\u2013
(4)
\u2013
\u2013
(4)
31 December 2022 (restated)
(2)
Financial assets
Classified as amortised cost:
Cash and cash equivalents
\u2013
\u2013
355
\u2013
355
Net trade receivables
160
298
\u2013
511
969
Classified as fair value:
Investments
52
\u2013
10
\u2013
62
Derivative financial assets
Foreign currency forward contracts
\u2013
\u2013
61
1
62
Embedded derivatives
(1)
\u2013
12
\u2013
\u2013
12
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
\u2013
\u2013
(1,496)
\u2013
(1,496)
Government refundable advances
(47)
(12)
\u2013
\u2013
(59)
Lease obligations
(44)
(155)
(8)
(159)
(366)
Other financial liabilities
(306)
(452)
(45)
(1,156)
(1,959)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
\u2013
\u2013
(217)
(1)
(218)
Interest rate swaps
\u2013
\u2013
(3)
\u2013
(3)
Embedded derivatives
(1)
\u2013
(6)
\u2013
\u2013
(6)
(1)
The embedded derivative is classified as a level 3 fair value under the IFRS 13 fair value hierarchy.
(2)
Financial assets and liabilities have been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
Reconciliation of liabilities arising from financing activities
Liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,799 million at 31 December 2022 comprising; external debt of
\u00a31,433 million (excluding \u00a363 million of bank overdrafts) and lease obligations of \u00a3366 million. During the year a cash outflow in those liabilities totalled
\u00a3781 million as follows: net drawdown of external debt of \u00a3462 million (note 27), net repayment of external debt of \u00a31,205 million (note 27) following
the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses and repayment of principal on lease obligations of
\u00a338 million (note 28). There is also a decrease to liabilities arising from financing activities relating to non-cash items totalling \u00a3197 million comprising;
a decrease in external debt of \u00a361 million due to changes in foreign exchange rates and other non-cash movements (including costs of \u00a311 million
(note 20) of raising debt finance) and a decrease in respect of lease obligations of \u00a3136 million. As at 31 December 2023, liabilities arising from
financing activities, as defined by IAS 7, totalled \u00a3821 million comprising; external debt of \u00a3629 million (excluding \u00a31 million of bank overdrafts)
and lease obligations of \u00a3192 million.
Liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,805 million at 31 December 2021 comprising; external debt of
\u00a31,360 million (excluding \u00a35 million of bank overdrafts), cross currency swaps of \u00a369 million and lease obligations of \u00a3376 million. During the year
a cash outflow in those liabilities totalled \u00a3127 million as follows: net repayment of external debt and cross-currency swaps associated with debt
of \u00a375 million (note 27) and repayment of principal on lease obligations of \u00a352 million (note 28). There is also an increase to liabilities arising from
financing activities relating to non-cash items totalling \u00a3121 million comprising; an increase in external debt and cross-currency swaps associated
with debt of \u00a379 million due to changes in foreign exchange rates and other non-cash movements and an increase in respect of lease obligations
of \u00a342 million. As at 31 December 2022, liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,799 million comprising; external
debt of \u00a31,433 million (excluding \u00a363 million of bank overdrafts), cross currency swaps of \u00a3nil and lease obligations of \u00a3366 million.
Fair values
As at 31 December 2023, the \u00a310 million (31 December 2022: \u00a3130 million) bond maturing in 2032 had a carrying value of \u00a310 million
(31 December 2022: \u00a3132 million) and a fair value of \u00a39 million (31 December 2022: \u00a3110 million).
The Directors consider that the carrying amount of other financial assets and liabilities approximate to their fair values.
Credit risk
The Group\u2019s principal financial assets were cash and cash equivalents, trade receivables and derivative financial assets which represented the
Group\u2019s maximum exposure to credit risk in relation to financial assets.
The Group\u2019s credit risk on cash and cash equivalents and derivative financial assets was limited because the counterparties were banks with
strong credit ratings assigned by international credit rating agencies (investment grade). Exposure is managed on the basis of risk rating and
counterparty limits. The value of credit risk in derivative assets has been modelled using publicly available inputs as part of their fair value.
The Group\u2019s credit risk was therefore primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet
were net of allowance for expected credit loss, estimated by the Group\u2019s management based on prior experience and their assessment of the
current economic environment. Note 17 provides further details regarding the recovery of trade receivables.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements:
Net amounts of
Gross amounts of
financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off
presented in the
not set off in the
assets/(liabilities)
in the Balance Sheet
Balance Sheet
Balance Sheet
Net amount
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
58
\u2013
58
(12)
46
Derivative financial assets
59
\u2013
59
(50)
9
Financial assets subject to master
netting arrangements
117
\u2013
117
(62)
55
Interest-bearing loans and borrowings
(630)
\u2013
(630)
(40)
(670)
Derivative financial liabilities
(106)
\u2013
(106)
102
(4)
Financial liabilities subject to master
netting arrangements
(736)
\u2013
(736)
62
(674)
Gross amounts of
Net amounts of financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off in
presented in the Balance
not set off in the
assets/(liabilities)
the Balance Sheet
Sheet
Balance Sheet
Net amount
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
355
\u2013
355
(71)
284
Derivative financial assets
74
\u2013
74
(62)
12
Financial assets subject to master netting
arrangements
429
\u2013
429
(133)
296
Interest-bearing loans and borrowings
(1,496)
\u2013
(1,496)
(81)
(1,577)
Derivative financial liabilities
(227)
\u2013
(227)
214
(13)
Financial liabilities subject to master
netting arrangements
(1,723)
\u2013
(1,723)
133
(1,590)
Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern.
The capital structure of the Group as at 31 December 2023 consists of net debt, as disclosed in note 27, and equity attributable to the owners of the
parent, comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.
Liquidity risk management
Overview of banking facilities
The Group\u2019s committed bank facilities were refinanced during the year. The new facilities consist of a multi-currency term loan denominated
US$300 million and \u20ac100 million, and a US$250 million revolving credit facility, both of which mature in April 2026. In addition, the Group also
entered into multi-currency revolving credit facilities totalling US$690 million, \u00a3300 million and \u20ac300 million that initially mature in April 2026,
but with the potential to be extended for two additional one-year periods at the Company\u2019s option.
At 31 December 2023, the term loan was fully drawn and there were drawings of US$298 million, \u00a31 million and \u20ac22 million on the revolving
credit facilities. Applying the exchange rates at 31 December 2023, the headroom equated to \u00a31,043 million. There are also a number of
uncommitted overdraft, guarantee and borrowing facilities made available to the Group.
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 \u00a357 million at 31 December 2023 (31 December 2022: \u00a3292 million) and are offset to arrive at the Group net debt
position of \u00a3572 million (31 December 2022: \u00a31,139 million). The combination of this cash and the headroom on the revolving credit facility
allows the Directors to consider that the Group has sufficient access to liquidity for its current needs. The Board takes careful consideration
of counterparty risk with banks when deciding where to place cash on deposit.
Covenants
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 normally tested half-yearly in June and December. As a result of the demerger, the Group renegotiated its banking arrangements.
No testing of the interest cover covenant was required at 31 December 2023. From 30 June 2024, the date of its first test, the interest cover
covenant is set at 4.0x.
The net debt to adjusted EBITDA covenant test level is 3.5x from 31 December 2023. At 31 December 2023, the Group net debt leverage
was 1.1x.
Bonds
Capital market borrowings as at 31 December 2023, inherited as part of the GKN acquisition, consist of a \u00a310 million bond maturing May 2032
following a further repurchase of the bond during the year, see note 20 for details.
Working capital
The Group has a small number of uncommitted working capital programmes that provide favourable financing terms on eligible customer
receipts and competitive financing terms to suppliers on eligible supplier payments.
Businesses which participate in these customer related finance programmes have the ability to choose whether to receive payment earlier
than the normal due date, for specific customers on a non-recourse basis. As at 31 December 2023, the drawings on these facilities were
\u00a3268 million (31 December 2022: \u00a3325 million). At 31 December 2023, the drawings in the continuing Group within Engines were \u00a3107 million
(31 December 2022: \u00a385 million) and \u00a3161 million in Structures (31 December 2022: \u00a353 million). At 31 December 2022, there were drawings
of \u00a3187 million within businesses demerged during the year.
In addition, some suppliers have access to utilise the Group\u2019s supplier finance programmes, which are provided by a small number of the
Group\u2019s banks. There is no cost to the Group for providing these programmes to its suppliers. These arrangements do not change the date
suppliers are due to be paid by the Group, and therefore there is no additional impact on the Group\u2019s liquidity. If the Group exited these
arrangements there could be a potential impact of up to \u00a342 million (31 December 2022: \u00a394 million) on the Group\u2019s cash flow. These
programmes allow suppliers to choose whether they want to accelerate the payment of their invoices, by the financing banks, for an interest
cost which is competitive, based on the credit rating of the Group as determined by the financing banks. The amounts owed to the banks
are presented in trade payables on the Balance Sheet and the cash flows are presented in cash flows from operating activities. As at
31 December 2023, total facilities were \u00a3143 million (31 December 2022: \u00a3328 million) with drawings of \u00a386 million (31 December 2022:
\u00a3200 million). The arrangements do not change the timing of the Group\u2019s cash outflows. At 31 December 2023, the drawings in the continuing
Group within Engines were \u00a343 million (31 December 2022: \u00a339 million) and \u00a343 million in Structures (31 December 2022: \u00a336 million).
At 31 December 2022, there were drawings of \u00a3125 million within businesses demerged during the year.
Hedge of net investments in foreign entities using loans and derivatives
Interest-bearing loans and borrowings are designated as hedges of net investments in the Group\u2019s subsidiaries in the USA and Europe to reduce
the exposure to the related foreign exchange risks.
The value of these were as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Local borrowing currency:
US Dollar
467
759
Euro
106
363
The foreign exchange movement on the local borrowings, which is recorded in currency translation on net investments within Other
Comprehensive Income, was a gain of \u00a343 million (2022: loss of \u00a360 million). As at 31 December 2023, the cumulative loss in the foreign
currency translation reserve for continuing hedges on net investments using borrowings was \u00a325 million (31 December 2022: \u00a387 million).
There were no cross-currency swaps outstanding at 31 December 2023 or 31 December 2022. In the prior year, there were cross currency
swaps with an opening fair value liability of \u00a31 million, with foreign exchange movements on these cross-currency swaps, which were recorded
in derivative gains/(losses) on hedge relationships within Other Comprehensive Income, being a gain of \u00a319 million and net cash receipts of
\u00a318 million.
The foreign exchange movement on those GKN cross-currency swaps, which is recorded in derivative gains/(losses) on hedge relationships,
was \u00a3nil (2022: loss of \u00a362 million).
Finance cost risk management
The bank margin on the bank facility depends on the Group leverage, see note 20 for details.
The policy of the Board is to fix up to approximately 70% of the interest rate exposure of the Group\u2019s borrowings.
The interest rate derivatives are designated as cash flow hedges and were highly effective throughout 2023. The fair value of the contracts as
at 31 December 2023 was a net asset of \u00a33 million (31 December 2022: liability of \u00a33 million). The movement of \u00a36 million for the year ended
31 December 2023 (2022: \u00a34 million) comprised of a credit of \u00a32 million (2022: \u00a34 million) booked to derivatives gains/(losses) on hedge
relationships in the year within Other Comprehensive Income, and a \u00a34 million (2022: \u00a3nil) reduction in the interest accrual. During the prior year,
a balance of \u00a32 million retained in the cash flow hedge reserve following the cancellation of interest rate swaps in 2021 was recycled to finance
costs in the Income Statement.
During the year ended 31 December 2023, some of the critical terms of the interest rate derivatives and the hedged items were not perfectly
matched; however, this did not give rise to any ineffectiveness through the Income Statement in the year (2022: \u00a3nil).
Interest rate sensitivity analysis
Assuming the net debt, inclusive of interest rate derivatives, held as at the balance sheet date was outstanding for the whole year, a one
percentage point rise in market interest rates for all currencies would decrease profit before tax by the following amounts:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Sterling
\u2013
(2)
US Dollar
(1)
(5)
Euro
(1)
(2)
On the basis of the floating-to-fixed interest rate derivatives in place at the balance sheet date, a one percentage point fall in market interest rates
for all currencies would decrease Group equity by \u00a39 million (31 December 2022: \u00a3nil).
Exchange rate risk management
The Group trades in various countries around the world and is exposed to movements in a number of foreign currencies. Following the demerger
and subsequent update to the Group\u2019s strategy to be a pureplay aerospace business going forward, the exposure to foreign exchange
movements related to a disposal now no longer represents a material risk for the Group.
The Group therefore carries exchange rate risk that can be categorised into two types: transaction and translation risk, as described in the
paragraphs below. The Group\u2019s policy is designed to protect against the majority of the cash risks but not the non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes when it invoices a customer or purchases from suppliers in a
different currency to the underlying functional currency of the relevant business. The Group\u2019s policy is to review transactional foreign exchange
exposures, and place necessary hedging contracts, quarterly on a rolling basis. To the extent the cash flows associated with a transactional
foreign exchange risk are committed, the Group will hedge 100% at the time the cash flow becomes committed. For forecast and variable cash
flows, the Group hedges a proportion of the expected cash flows, with the percentage being hedged lowering as the time horizon lengthens.
The Group hedges on a sliding scale, typically hedging around 90% of foreign exchange exposures expected over the next twelve months,
with the percentage decreasing by approximately 10 percentage points for each subsequent year. This policy does not eliminate the cash risk
but does bring some certainty to it.
The translation rate risk is the effect on the Group results in the period due to the movement of exchange rates used to translate foreign
results into Sterling from one period to the next. No specific exchange instruments are used to protect against the translation risk because it
is a non-cash risk to the Group, until foreign currency is subsequently converted to Sterling. However, the Group utilises its multi-currency
banking facilities, where relevant, to maintain an appropriate mix of debt in each currency. The hedge of having debt drawn in these currencies
funding the trading units with US Dollars or Euro functional currencies protects against some of the Balance Sheet and banking covenant
translation risk.
As at 31 December 2023, the Group held foreign exchange forward contracts to mitigate expected exchange rate fluctuations on future cash
flows from sales to customers and purchases from suppliers. The fair value of all foreign exchange forward contracts across the Group was a net
liability at 31 December 2023 of \u00a355 million (31 December 2022: \u00a3156 million). There were no contracts where hedge accounting was applied as
at 31 December 2023 (31 December 2022: no contracts where hedge accounting was applied).
The change in fair value of foreign exchange forward contracts recognised in derivative gains/(losses) on hedging relationships within Other
Comprehensive Income was \u00a3nil (2022: \u00a3nil) and a credit of \u00a3nil (2022: \u00a31 million) was reclassified to the Income Statement.
There were no cross-currency swaps in place during the year. In the prior year, certain cross-currency swaps were designated as net investment
hedges and \u00a35 million was booked through the Income Statement in finance costs of which a credit of \u00a33 million was treated as an adjusting
item (note 6). These cross-currency swaps were designated in a net investment hedge accounting relationship against US Dollar and Euro net
assets of certain subsidiaries. The hedged risk was the spot rate, which represented the significant component of the movement and therefore
was recorded in the foreign currency translation reserve (note 26).
The following table shows the maturity profile of undiscounted contracted gross cash outflows of derivative financial liabilities used to manage currency
risk, being both the cross-currency swaps above and foreign exchange forward contracts used to manage transaction exchange rate risk:
0\u20131 year
1\u20132 years
2\u20135 years
5+ years
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December 2023
Foreign exchange forward contracts
549
370
464
58
1,441
Year ended 31 December 2022
Foreign exchange forward contracts
855
618
834
19
2,326
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7: Financial instruments: Disclosures as the risk that the fair value or future cash flows of a financial asset
or liability will fluctuate because of changes in foreign exchange rates.
The following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the
balance sheet date, illustrating the (decrease)/increase in Group operating profit caused by a 10% strengthening of the US Dollar and Euro
against Sterling compared to the year-end spot rate. The analysis assumes that all other variables, in particular other foreign currency exchange
rates, remain constant. The Group operates in a range of different currencies, and those with a notable impact are shown below:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
2
(11)
Euro
(5)
(3)
The following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance
sheet date, illustrating the increase/(decrease) in Group equity caused by a 10% strengthening of the US Dollar and Euro against Sterling.
The analysis assumes that all other variables, in particular other foreign currency exchange rates, remain constant.
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
\u2013
(10)
Euro
(1)
(7)
In addition, the change in equity due to a 10% strengthening of the US Dollar against Sterling for the translation of net investment hedging
instruments would be a decrease of \u00a347 million (2022: \u00a377 million) and for the Euro, a decrease of \u00a311 million (2022: \u00a336 million). However,
there would be no overall effect on equity because there would be an offset in the currency translation of the foreign operation.
Fair value measurements recognised in the Balance Sheet
Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching the maturities of the contracts.
Interest rate swap and cross-currency swap contracts are measured using yield curves derived from quoted interest and foreign exchange rates.
Hedge accounted derivatives
The following table sets out details of the Group\u2019s material hedging instruments where hedge accounting is applied at the balance sheet date:
Fair value of assets/
Average fixed rate
Notional principal
(liabilities)
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
Hedging Instruments
%
%
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Pay fixed, receive floating interest rate derivatives
Within one year
3.49%
2.24%
414
260
\u2013
(3)
In one to two years
3.49%
\u2013
414
\u2013
\u2013
\u2013
In two to five years
3.49%
\u2013
414
\u2013
3
\u2013
Total
3
(3)
During the year, the Group entered into pay fixed, receive floating interest rate derivatives totalling $440 million and \u20ac80 million, which were
outstanding as at 31 December 2023. Pay fixed, receive floating derivatives, which totalled $315 million, that were outstanding at 31 December 2022
matured during the year.
Derivative and financial assets and liabilities are presented within the Balance Sheet as:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Non-current assets
46
36
Current assets
13
38
Current liabilities
(42)
(86)
Non-current liabilities
(64)
(141)
The change in fair value of interest rate derivatives is discussed in the Finance Risk Management section of the Finance Director\u2019s Review.
All hedging instruments are booked in the Balance Sheet as derivative financial assets or derivative financial liabilities.
The fair value of derivative financial instruments is derived from inputs other than quoted prices that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices) and they are therefore categorised within Level 2 of the fair value hierarchy set out in
IFRS 13: Fair value measurement. The Group\u2019s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date
the event or change in circumstances that caused the transfer to occur. There have been no transfers between levels in the year.
The following table sets out details of the Group\u2019s material hedged items at the balance sheet date where hedge accounting is applied:
Balance in translation
Balance in translation
Change in fair value for
and hedging reserve
and hedging reserve
calculating ineffectiveness
for continuing hedges
for discontinued hedges
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Hedged items
Floating rate borrowings \u2013 interest risk
(2)
(4)
(2)
\u2013
\u2013
\u2013
Net assets of designated investments
\u2013
\u2013
\u2013
\u2013
\u2013
116
There is no balance held in cash flow hedge reserve from hedging relationships for which hedge accounting is no longer applied.", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f29250": { "value": "25.
Financial instruments and risk management
The table below sets out the Group\u2019s accounting classification of each category of financial assets and liabilities and their carrying values at
31 December 2023 and 31 December 2022:
\n \n
Discontinued
Engines
Structures
Corporate
operations
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
31 December 2023
Financial assets
Classified as amortised cost:
Cash and cash equivalents
\u2013
\u2013
58
\u2013
58
Net trade receivables
168
252
\u2013
\u2013
420
Classified as fair value:
Investments
57
\u2013
57
\u2013
114
Derivative financial assets
Foreign currency forward contracts
\u2013
\u2013
47
\u2013
47
Interest rate derivatives
\u2013
\u2013
3
\u2013
3
Embedded derivatives
(1)
\u2013
9
\u2013
\u2013
9
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
\u2013
\u2013
(630)
\u2013
(630)
Government refundable advances
(43)
(6)
\u2013
\u2013
(49)
Lease obligations
(35)
(150)
(7)
\u2013
(192)
Other financial liabilities
(345)
(419)
(46)
\u2013
(810)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
\u2013
\u2013
(102)
\u2013
(102)
Embedded derivatives
(1)
\u2013
(4)
\u2013
\u2013
(4)
31 December 2022 (restated)
(2)
Financial assets
Classified as amortised cost:
Cash and cash equivalents
\u2013
\u2013
355
\u2013
355
Net trade receivables
160
298
\u2013
511
969
Classified as fair value:
Investments
52
\u2013
10
\u2013
62
Derivative financial assets
Foreign currency forward contracts
\u2013
\u2013
61
1
62
Embedded derivatives
(1)
\u2013
12
\u2013
\u2013
12
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
\u2013
\u2013
(1,496)
\u2013
(1,496)
Government refundable advances
(47)
(12)
\u2013
\u2013
(59)
Lease obligations
(44)
(155)
(8)
(159)
(366)
Other financial liabilities
(306)
(452)
(45)
(1,156)
(1,959)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
\u2013
\u2013
(217)
(1)
(218)
Interest rate swaps
\u2013
\u2013
(3)
\u2013
(3)
Embedded derivatives
(1)
\u2013
(6)
\u2013
\u2013
(6)
(1)
The embedded derivative is classified as a level 3 fair value under the IFRS 13 fair value hierarchy.
(2)
Financial assets and liabilities have been restated for discontinued operations (see note 1) and the re-presentation of the Engines and Structures segments.
Reconciliation of liabilities arising from financing activities
Liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,799 million at 31 December 2022 comprising; external debt of
\u00a31,433 million (excluding \u00a363 million of bank overdrafts) and lease obligations of \u00a3366 million. During the year a cash outflow in those liabilities totalled
\u00a3781 million as follows: net drawdown of external debt of \u00a3462 million (note 27), net repayment of external debt of \u00a31,205 million (note 27) following
the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses and repayment of principal on lease obligations of
\u00a338 million (note 28). There is also a decrease to liabilities arising from financing activities relating to non-cash items totalling \u00a3197 million comprising;
a decrease in external debt of \u00a361 million due to changes in foreign exchange rates and other non-cash movements (including costs of \u00a311 million
(note 20) of raising debt finance) and a decrease in respect of lease obligations of \u00a3136 million. As at 31 December 2023, liabilities arising from
financing activities, as defined by IAS 7, totalled \u00a3821 million comprising; external debt of \u00a3629 million (excluding \u00a31 million of bank overdrafts)
and lease obligations of \u00a3192 million.
Liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,805 million at 31 December 2021 comprising; external debt of
\u00a31,360 million (excluding \u00a35 million of bank overdrafts), cross currency swaps of \u00a369 million and lease obligations of \u00a3376 million. During the year
a cash outflow in those liabilities totalled \u00a3127 million as follows: net repayment of external debt and cross-currency swaps associated with debt
of \u00a375 million (note 27) and repayment of principal on lease obligations of \u00a352 million (note 28). There is also an increase to liabilities arising from
financing activities relating to non-cash items totalling \u00a3121 million comprising; an increase in external debt and cross-currency swaps associated
with debt of \u00a379 million due to changes in foreign exchange rates and other non-cash movements and an increase in respect of lease obligations
of \u00a342 million. As at 31 December 2022, liabilities arising from financing activities, as defined by IAS 7, totalled \u00a31,799 million comprising; external
debt of \u00a31,433 million (excluding \u00a363 million of bank overdrafts), cross currency swaps of \u00a3nil and lease obligations of \u00a3366 million.
Fair values
As at 31 December 2023, the \u00a310 million (31 December 2022: \u00a3130 million) bond maturing in 2032 had a carrying value of \u00a310 million
(31 December 2022: \u00a3132 million) and a fair value of \u00a39 million (31 December 2022: \u00a3110 million).
The Directors consider that the carrying amount of other financial assets and liabilities approximate to their fair values.
Credit risk
The Group\u2019s principal financial assets were cash and cash equivalents, trade receivables and derivative financial assets which represented the
Group\u2019s maximum exposure to credit risk in relation to financial assets.
The Group\u2019s credit risk on cash and cash equivalents and derivative financial assets was limited because the counterparties were banks with
strong credit ratings assigned by international credit rating agencies (investment grade). Exposure is managed on the basis of risk rating and
counterparty limits. The value of credit risk in derivative assets has been modelled using publicly available inputs as part of their fair value.
The Group\u2019s credit risk was therefore primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet
were net of allowance for expected credit loss, estimated by the Group\u2019s management based on prior experience and their assessment of the
current economic environment. Note 17 provides further details regarding the recovery of trade receivables.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements:
Net amounts of
Gross amounts of
financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off
presented in the
not set off in the
assets/(liabilities)
in the Balance Sheet
Balance Sheet
Balance Sheet
Net amount
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
58
\u2013
58
(12)
46
Derivative financial assets
59
\u2013
59
(50)
9
Financial assets subject to master
netting arrangements
117
\u2013
117
(62)
55
Interest-bearing loans and borrowings
(630)
\u2013
(630)
(40)
(670)
Derivative financial liabilities
(106)
\u2013
(106)
102
(4)
Financial liabilities subject to master
netting arrangements
(736)
\u2013
(736)
62
(674)
Gross amounts of
Net amounts of financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off in
presented in the Balance
not set off in the
assets/(liabilities)
the Balance Sheet
Sheet
Balance Sheet
Net amount
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
355
\u2013
355
(71)
284
Derivative financial assets
74
\u2013
74
(62)
12
Financial assets subject to master netting
arrangements
429
\u2013
429
(133)
296
Interest-bearing loans and borrowings
(1,496)
\u2013
(1,496)
(81)
(1,577)
Derivative financial liabilities
(227)
\u2013
(227)
214
(13)
Financial liabilities subject to master
netting arrangements
(1,723)
\u2013
(1,723)
133
(1,590)
Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern.
The capital structure of the Group as at 31 December 2023 consists of net debt, as disclosed in note 27, and equity attributable to the owners of the
parent, comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.
Liquidity risk management
Overview of banking facilities
The Group\u2019s committed bank facilities were refinanced during the year. The new facilities consist of a multi-currency term loan denominated
US$300 million and \u20ac100 million, and a US$250 million revolving credit facility, both of which mature in April 2026. In addition, the Group also
entered into multi-currency revolving credit facilities totalling US$690 million, \u00a3300 million and \u20ac300 million that initially mature in April 2026,
but with the potential to be extended for two additional one-year periods at the Company\u2019s option.
At 31 December 2023, the term loan was fully drawn and there were drawings of US$298 million, \u00a31 million and \u20ac22 million on the revolving
credit facilities. Applying the exchange rates at 31 December 2023, the headroom equated to \u00a31,043 million. There are also a number of
uncommitted overdraft, guarantee and borrowing facilities made available to the Group.
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 \u00a357 million at 31 December 2023 (31 December 2022: \u00a3292 million) and are offset to arrive at the Group net debt
position of \u00a3572 million (31 December 2022: \u00a31,139 million). The combination of this cash and the headroom on the revolving credit facility
allows the Directors to consider that the Group has sufficient access to liquidity for its current needs. The Board takes careful consideration
of counterparty risk with banks when deciding where to place cash on deposit.
Covenants
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 normally tested half-yearly in June and December. As a result of the demerger, the Group renegotiated its banking arrangements.
No testing of the interest cover covenant was required at 31 December 2023. From 30 June 2024, the date of its first test, the interest cover
covenant is set at 4.0x.
The net debt to adjusted EBITDA covenant test level is 3.5x from 31 December 2023. At 31 December 2023, the Group net debt leverage
was 1.1x.
Bonds
Capital market borrowings as at 31 December 2023, inherited as part of the GKN acquisition, consist of a \u00a310 million bond maturing May 2032
following a further repurchase of the bond during the year, see note 20 for details.
Working capital
The Group has a small number of uncommitted working capital programmes that provide favourable financing terms on eligible customer
receipts and competitive financing terms to suppliers on eligible supplier payments.
Businesses which participate in these customer related finance programmes have the ability to choose whether to receive payment earlier
than the normal due date, for specific customers on a non-recourse basis. As at 31 December 2023, the drawings on these facilities were
\u00a3268 million (31 December 2022: \u00a3325 million). At 31 December 2023, the drawings in the continuing Group within Engines were \u00a3107 million
(31 December 2022: \u00a385 million) and \u00a3161 million in Structures (31 December 2022: \u00a353 million). At 31 December 2022, there were drawings
of \u00a3187 million within businesses demerged during the year.
In addition, some suppliers have access to utilise the Group\u2019s supplier finance programmes, which are provided by a small number of the
Group\u2019s banks. There is no cost to the Group for providing these programmes to its suppliers. These arrangements do not change the date
suppliers are due to be paid by the Group, and therefore there is no additional impact on the Group\u2019s liquidity. If the Group exited these
arrangements there could be a potential impact of up to \u00a342 million (31 December 2022: \u00a394 million) on the Group\u2019s cash flow. These
programmes allow suppliers to choose whether they want to accelerate the payment of their invoices, by the financing banks, for an interest
cost which is competitive, based on the credit rating of the Group as determined by the financing banks. The amounts owed to the banks
are presented in trade payables on the Balance Sheet and the cash flows are presented in cash flows from operating activities. As at
31 December 2023, total facilities were \u00a3143 million (31 December 2022: \u00a3328 million) with drawings of \u00a386 million (31 December 2022:
\u00a3200 million). The arrangements do not change the timing of the Group\u2019s cash outflows. At 31 December 2023, the drawings in the continuing
Group within Engines were \u00a343 million (31 December 2022: \u00a339 million) and \u00a343 million in Structures (31 December 2022: \u00a336 million).
At 31 December 2022, there were drawings of \u00a3125 million within businesses demerged during the year.
Hedge of net investments in foreign entities using loans and derivatives
Interest-bearing loans and borrowings are designated as hedges of net investments in the Group\u2019s subsidiaries in the USA and Europe to reduce
the exposure to the related foreign exchange risks.
The value of these were as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Local borrowing currency:
US Dollar
467
759
Euro
106
363
The foreign exchange movement on the local borrowings, which is recorded in currency translation on net investments within Other
Comprehensive Income, was a gain of \u00a343 million (2022: loss of \u00a360 million). As at 31 December 2023, the cumulative loss in the foreign
currency translation reserve for continuing hedges on net investments using borrowings was \u00a325 million (31 December 2022: \u00a387 million).
There were no cross-currency swaps outstanding at 31 December 2023 or 31 December 2022. In the prior year, there were cross currency
swaps with an opening fair value liability of \u00a31 million, with foreign exchange movements on these cross-currency swaps, which were recorded
in derivative gains/(losses) on hedge relationships within Other Comprehensive Income, being a gain of \u00a319 million and net cash receipts of
\u00a318 million.
The foreign exchange movement on those GKN cross-currency swaps, which is recorded in derivative gains/(losses) on hedge relationships,
was \u00a3nil (2022: loss of \u00a362 million).
Finance cost risk management
The bank margin on the bank facility depends on the Group leverage, see note 20 for details.
The policy of the Board is to fix up to approximately 70% of the interest rate exposure of the Group\u2019s borrowings.
The interest rate derivatives are designated as cash flow hedges and were highly effective throughout 2023. The fair value of the contracts as
at 31 December 2023 was a net asset of \u00a33 million (31 December 2022: liability of \u00a33 million). The movement of \u00a36 million for the year ended
31 December 2023 (2022: \u00a34 million) comprised of a credit of \u00a32 million (2022: \u00a34 million) booked to derivatives gains/(losses) on hedge
relationships in the year within Other Comprehensive Income, and a \u00a34 million (2022: \u00a3nil) reduction in the interest accrual. During the prior year,
a balance of \u00a32 million retained in the cash flow hedge reserve following the cancellation of interest rate swaps in 2021 was recycled to finance
costs in the Income Statement.
During the year ended 31 December 2023, some of the critical terms of the interest rate derivatives and the hedged items were not perfectly
matched; however, this did not give rise to any ineffectiveness through the Income Statement in the year (2022: \u00a3nil).
Interest rate sensitivity analysis
Assuming the net debt, inclusive of interest rate derivatives, held as at the balance sheet date was outstanding for the whole year, a one
percentage point rise in market interest rates for all currencies would decrease profit before tax by the following amounts:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Sterling
\u2013
(2)
US Dollar
(1)
(5)
Euro
(1)
(2)
On the basis of the floating-to-fixed interest rate derivatives in place at the balance sheet date, a one percentage point fall in market interest rates
for all currencies would decrease Group equity by \u00a39 million (31 December 2022: \u00a3nil).
Exchange rate risk management
The Group trades in various countries around the world and is exposed to movements in a number of foreign currencies. Following the demerger
and subsequent update to the Group\u2019s strategy to be a pureplay aerospace business going forward, the exposure to foreign exchange
movements related to a disposal now no longer represents a material risk for the Group.
The Group therefore carries exchange rate risk that can be categorised into two types: transaction and translation risk, as described in the
paragraphs below. The Group\u2019s policy is designed to protect against the majority of the cash risks but not the non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes when it invoices a customer or purchases from suppliers in a
different currency to the underlying functional currency of the relevant business. The Group\u2019s policy is to review transactional foreign exchange
exposures, and place necessary hedging contracts, quarterly on a rolling basis. To the extent the cash flows associated with a transactional
foreign exchange risk are committed, the Group will hedge 100% at the time the cash flow becomes committed. For forecast and variable cash
flows, the Group hedges a proportion of the expected cash flows, with the percentage being hedged lowering as the time horizon lengthens.
The Group hedges on a sliding scale, typically hedging around 90% of foreign exchange exposures expected over the next twelve months,
with the percentage decreasing by approximately 10 percentage points for each subsequent year. This policy does not eliminate the cash risk
but does bring some certainty to it.
The translation rate risk is the effect on the Group results in the period due to the movement of exchange rates used to translate foreign
results into Sterling from one period to the next. No specific exchange instruments are used to protect against the translation risk because it
is a non-cash risk to the Group, until foreign currency is subsequently converted to Sterling. However, the Group utilises its multi-currency
banking facilities, where relevant, to maintain an appropriate mix of debt in each currency. The hedge of having debt drawn in these currencies
funding the trading units with US Dollars or Euro functional currencies protects against some of the Balance Sheet and banking covenant
translation risk.
As at 31 December 2023, the Group held foreign exchange forward contracts to mitigate expected exchange rate fluctuations on future cash
flows from sales to customers and purchases from suppliers. The fair value of all foreign exchange forward contracts across the Group was a net
liability at 31 December 2023 of \u00a355 million (31 December 2022: \u00a3156 million). There were no contracts where hedge accounting was applied as
at 31 December 2023 (31 December 2022: no contracts where hedge accounting was applied).
The change in fair value of foreign exchange forward contracts recognised in derivative gains/(losses) on hedging relationships within Other
Comprehensive Income was \u00a3nil (2022: \u00a3nil) and a credit of \u00a3nil (2022: \u00a31 million) was reclassified to the Income Statement.
There were no cross-currency swaps in place during the year. In the prior year, certain cross-currency swaps were designated as net investment
hedges and \u00a35 million was booked through the Income Statement in finance costs of which a credit of \u00a33 million was treated as an adjusting
item (note 6). These cross-currency swaps were designated in a net investment hedge accounting relationship against US Dollar and Euro net
assets of certain subsidiaries. The hedged risk was the spot rate, which represented the significant component of the movement and therefore
was recorded in the foreign currency translation reserve (note 26).
The following table shows the maturity profile of undiscounted contracted gross cash outflows of derivative financial liabilities used to manage currency
risk, being both the cross-currency swaps above and foreign exchange forward contracts used to manage transaction exchange rate risk:
0\u20131 year
1\u20132 years
2\u20135 years
5+ years
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December 2023
Foreign exchange forward contracts
549
370
464
58
1,441
Year ended 31 December 2022
Foreign exchange forward contracts
855
618
834
19
2,326
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7: Financial instruments: Disclosures as the risk that the fair value or future cash flows of a financial asset
or liability will fluctuate because of changes in foreign exchange rates.
The following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the
balance sheet date, illustrating the (decrease)/increase in Group operating profit caused by a 10% strengthening of the US Dollar and Euro
against Sterling compared to the year-end spot rate. The analysis assumes that all other variables, in particular other foreign currency exchange
rates, remain constant. The Group operates in a range of different currencies, and those with a notable impact are shown below:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
2
(11)
Euro
(5)
(3)
The following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance
sheet date, illustrating the increase/(decrease) in Group equity caused by a 10% strengthening of the US Dollar and Euro against Sterling.
The analysis assumes that all other variables, in particular other foreign currency exchange rates, remain constant.
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
\u2013
(10)
Euro
(1)
(7)
In addition, the change in equity due to a 10% strengthening of the US Dollar against Sterling for the translation of net investment hedging
instruments would be a decrease of \u00a347 million (2022: \u00a377 million) and for the Euro, a decrease of \u00a311 million (2022: \u00a336 million). However,
there would be no overall effect on equity because there would be an offset in the currency translation of the foreign operation.
Fair value measurements recognised in the Balance Sheet
Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching the maturities of the contracts.
Interest rate swap and cross-currency swap contracts are measured using yield curves derived from quoted interest and foreign exchange rates.
Hedge accounted derivatives
The following table sets out details of the Group\u2019s material hedging instruments where hedge accounting is applied at the balance sheet date:
Fair value of assets/
Average fixed rate
Notional principal
(liabilities)
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
Hedging Instruments
%
%
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Pay fixed, receive floating interest rate derivatives
Within one year
3.49%
2.24%
414
260
\u2013
(3)
In one to two years
3.49%
\u2013
414
\u2013
\u2013
\u2013
In two to five years
3.49%
\u2013
414
\u2013
3
\u2013
Total
3
(3)
During the year, the Group entered into pay fixed, receive floating interest rate derivatives totalling $440 million and \u20ac80 million, which were
outstanding as at 31 December 2023. Pay fixed, receive floating derivatives, which totalled $315 million, that were outstanding at 31 December 2022
matured during the year.
Derivative and financial assets and liabilities are presented within the Balance Sheet as:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Non-current assets
46
36
Current assets
13
38
Current liabilities
(42)
(86)
Non-current liabilities
(64)
(141)
The change in fair value of interest rate derivatives is discussed in the Finance Risk Management section of the Finance Director\u2019s Review.
All hedging instruments are booked in the Balance Sheet as derivative financial assets or derivative financial liabilities.
The fair value of derivative financial instruments is derived from inputs other than quoted prices that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices) and they are therefore categorised within Level 2 of the fair value hierarchy set out in
IFRS 13: Fair value measurement. The Group\u2019s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date
the event or change in circumstances that caused the transfer to occur. There have been no transfers between levels in the year.
The following table sets out details of the Group\u2019s material hedged items at the balance sheet date where hedge accounting is applied:
Balance in translation
Balance in translation
Change in fair value for
and hedging reserve
and hedging reserve
calculating ineffectiveness
for continuing hedges
for discontinued hedges
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Hedged items
Floating rate borrowings \u2013 interest risk
(2)
(4)
(2)
\u2013
\u2013
\u2013
Net assets of designated investments
\u2013
\u2013
\u2013
\u2013
\u2013
116
There is no balance held in cash flow hedge reserve from hedging relationships for which hedge accounting is no longer applied.", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f29798": { "value": "Fair values
As at 31 December 2023, the \u00a310 million (31 December 2022: \u00a3130 million) bond maturing in 2032 had a carrying value of \u00a310 million
(31 December 2022: \u00a3132 million) and a fair value of \u00a39 million (31 December 2022: \u00a3110 million).
The Directors consider that the carrying amount of other financial assets and liabilities approximate to their fair values.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f29805": { "value": "Credit risk
The Group\u2019s principal financial assets were cash and cash equivalents, trade receivables and derivative financial assets which represented the
Group\u2019s maximum exposure to credit risk in relation to financial assets.
The Group\u2019s credit risk on cash and cash equivalents and derivative financial assets was limited because the counterparties were banks with
strong credit ratings assigned by international credit rating agencies (investment grade). Exposure is managed on the basis of risk rating and
counterparty limits. The value of credit risk in derivative assets has been modelled using publicly available inputs as part of their fair value.
The Group\u2019s credit risk was therefore primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet
were net of allowance for expected credit loss, estimated by the Group\u2019s management based on prior experience and their assessment of the
current economic environment. Note 17 provides further details regarding the recovery of trade receivables.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements:
Net amounts of
Gross amounts of
financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off
presented in the
not set off in the
assets/(liabilities)
in the Balance Sheet
Balance Sheet
Balance Sheet
Net amount
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
58
\u2013
58
(12)
46
Derivative financial assets
59
\u2013
59
(50)
9
Financial assets subject to master
netting arrangements
117
\u2013
117
(62)
55
Interest-bearing loans and borrowings
(630)
\u2013
(630)
(40)
(670)
Derivative financial liabilities
(106)
\u2013
(106)
102
(4)
Financial liabilities subject to master
netting arrangements
(736)
\u2013
(736)
62
(674)
Gross amounts of
Net amounts of financial
Related amounts of
Gross amounts of
recognised financial
assets/(liabilities)
financial instruments
recognised financial
assets/(liabilities) set off in
presented in the Balance
not set off in the
assets/(liabilities)
the Balance Sheet
Sheet
Balance Sheet
Net amount
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
355
\u2013
355
(71)
284
Derivative financial assets
74
\u2013
74
(62)
12
Financial assets subject to master netting
arrangements
429
\u2013
429
(133)
296
Interest-bearing loans and borrowings
(1,496)
\u2013
(1,496)
(81)
(1,577)
Derivative financial liabilities
(227)
\u2013
(227)
214
(13)
Financial liabilities subject to master
netting arrangements
(1,723)
\u2013
(1,723)
133
(1,590)
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30129": { "value": "Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern.
The capital structure of the Group as at 31 December 2023 consists of net debt, as disclosed in note 27, and equity attributable to the owners of the
parent, comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30159": { "value": "Liquidity risk management
Overview of banking facilities
The Group\u2019s committed bank facilities were refinanced during the year. The new facilities consist of a multi-currency term loan denominated
US$300 million and \u20ac100 million, and a US$250 million revolving credit facility, both of which mature in April 2026. In addition, the Group also
entered into multi-currency revolving credit facilities totalling US$690 million, \u00a3300 million and \u20ac300 million that initially mature in April 2026,
but with the potential to be extended for two additional one-year periods at the Company\u2019s option.
At 31 December 2023, the term loan was fully drawn and there were drawings of US$298 million, \u00a31 million and \u20ac22 million on the revolving
credit facilities. Applying the exchange rates at 31 December 2023, the headroom equated to \u00a31,043 million. There are also a number of
uncommitted overdraft, guarantee and borrowing facilities made available to the Group.
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 \u00a357 million at 31 December 2023 (31 December 2022: \u00a3292 million) and are offset to arrive at the Group net debt
position of \u00a3572 million (31 December 2022: \u00a31,139 million). The combination of this cash and the headroom on the revolving credit facility
allows the Directors to consider that the Group has sufficient access to liquidity for its current needs. The Board takes careful consideration
of counterparty risk with banks when deciding where to place cash on deposit.
Covenants
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 normally tested half-yearly in June and December. As a result of the demerger, the Group renegotiated its banking arrangements.
No testing of the interest cover covenant was required at 31 December 2023. From 30 June 2024, the date of its first test, the interest cover
covenant is set at 4.0x.
The net debt to adjusted EBITDA covenant test level is 3.5x from 31 December 2023. At 31 December 2023, the Group net debt leverage
was 1.1x.
Bonds
Capital market borrowings as at 31 December 2023, inherited as part of the GKN acquisition, consist of a \u00a310 million bond maturing May 2032
following a further repurchase of the bond during the year, see note 20 for details.
Working capital
The Group has a small number of uncommitted working capital programmes that provide favourable financing terms on eligible customer
receipts and competitive financing terms to suppliers on eligible supplier payments.
Businesses which participate in these customer related finance programmes have the ability to choose whether to receive payment earlier
than the normal due date, for specific customers on a non-recourse basis. As at 31 December 2023, the drawings on these facilities were
\u00a3268 million (31 December 2022: \u00a3325 million). At 31 December 2023, the drawings in the continuing Group within Engines were \u00a3107 million
(31 December 2022: \u00a385 million) and \u00a3161 million in Structures (31 December 2022: \u00a353 million). At 31 December 2022, there were drawings
of \u00a3187 million within businesses demerged during the year.
In addition, some suppliers have access to utilise the Group\u2019s supplier finance programmes, which are provided by a small number of the
Group\u2019s banks. There is no cost to the Group for providing these programmes to its suppliers. These arrangements do not change the date
suppliers are due to be paid by the Group, and therefore there is no additional impact on the Group\u2019s liquidity. If the Group exited these
arrangements there could be a potential impact of up to \u00a342 million (31 December 2022: \u00a394 million) on the Group\u2019s cash flow. These
programmes allow suppliers to choose whether they want to accelerate the payment of their invoices, by the financing banks, for an interest
cost which is competitive, based on the credit rating of the Group as determined by the financing banks. The amounts owed to the banks
are presented in trade payables on the Balance Sheet and the cash flows are presented in cash flows from operating activities. As at
31 December 2023, total facilities were \u00a3143 million (31 December 2022: \u00a3328 million) with drawings of \u00a386 million (31 December 2022:
\u00a3200 million). The arrangements do not change the timing of the Group\u2019s cash outflows. At 31 December 2023, the drawings in the continuing
Group within Engines were \u00a343 million (31 December 2022: \u00a339 million) and \u00a343 million in Structures (31 December 2022: \u00a336 million).
At 31 December 2022, there were drawings of \u00a3125 million within businesses demerged during the year.", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30205": { "value": "Hedge of net investments in foreign entities using loans and derivatives
Interest-bearing loans and borrowings are designated as hedges of net investments in the Group\u2019s subsidiaries in the USA and Europe to reduce
the exposure to the related foreign exchange risks.
The value of these were as follows:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Local borrowing currency:
US Dollar
467
759
Euro
106
363
The foreign exchange movement on the local borrowings, which is recorded in currency translation on net investments within Other
Comprehensive Income, was a gain of \u00a343 million (2022: loss of \u00a360 million). As at 31 December 2023, the cumulative loss in the foreign
currency translation reserve for continuing hedges on net investments using borrowings was \u00a325 million (31 December 2022: \u00a387 million).
There were no cross-currency swaps outstanding at 31 December 2023 or 31 December 2022. In the prior year, there were cross currency
swaps with an opening fair value liability of \u00a31 million, with foreign exchange movements on these cross-currency swaps, which were recorded
in derivative gains/(losses) on hedge relationships within Other Comprehensive Income, being a gain of \u00a319 million and net cash receipts of
\u00a318 million.
The foreign exchange movement on those GKN cross-currency swaps, which is recorded in derivative gains/(losses) on hedge relationships,
was \u00a3nil (2022: loss of \u00a362 million).Hedge accounted derivatives
The following table sets out details of the Group\u2019s material hedging instruments where hedge accounting is applied at the balance sheet date:
Fair value of assets/
Average fixed rate
Notional principal
(liabilities)
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
Hedging Instruments
%
%
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Pay fixed, receive floating interest rate derivatives
Within one year
3.49%
2.24%
414
260
\u2013
(3)
In one to two years
3.49%
\u2013
414
\u2013
\u2013
\u2013
In two to five years
3.49%
\u2013
414
\u2013
3
\u2013
Total
3
(3)
During the year, the Group entered into pay fixed, receive floating interest rate derivatives totalling $440 million and \u20ac80 million, which were
outstanding as at 31 December 2023. Pay fixed, receive floating derivatives, which totalled $315 million, that were outstanding at 31 December 2022
matured during the year.
Derivative and financial assets and liabilities are presented within the Balance Sheet as:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Non-current assets
46
36
Current assets
13
38
Current liabilities
(42)
(86)
Non-current liabilities
(64)
(141)
The change in fair value of interest rate derivatives is discussed in the Finance Risk Management section of the Finance Director\u2019s Review.
All hedging instruments are booked in the Balance Sheet as derivative financial assets or derivative financial liabilities.
The fair value of derivative financial instruments is derived from inputs other than quoted prices that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices) and they are therefore categorised within Level 2 of the fair value hierarchy set out in
IFRS 13: Fair value measurement. The Group\u2019s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date
the event or change in circumstances that caused the transfer to occur. There have been no transfers between levels in the year.
The following table sets out details of the Group\u2019s material hedged items at the balance sheet date where hedge accounting is applied:
Balance in translation
Balance in translation
Change in fair value for
and hedging reserve
and hedging reserve
calculating ineffectiveness
for continuing hedges
for discontinued hedges
31 December
31 December
31 December
31 December
31 December
31 December
2023
2022
2023
2022
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Hedged items
Floating rate borrowings \u2013 interest risk
(2)
(4)
(2)
\u2013
\u2013
\u2013
Net assets of designated investments
\u2013
\u2013
\u2013
\u2013
\u2013
116
There is no balance held in cash flow hedge reserve from hedging relationships for which hedge accounting is no longer applied.", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30348": { "value": "Exchange rate risk management
The Group trades in various countries around the world and is exposed to movements in a number of foreign currencies. Following the demerger
and subsequent update to the Group\u2019s strategy to be a pureplay aerospace business going forward, the exposure to foreign exchange
movements related to a disposal now no longer represents a material risk for the Group.
The Group therefore carries exchange rate risk that can be categorised into two types: transaction and translation risk, as described in the
paragraphs below. The Group\u2019s policy is designed to protect against the majority of the cash risks but not the non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes when it invoices a customer or purchases from suppliers in a
different currency to the underlying functional currency of the relevant business. The Group\u2019s policy is to review transactional foreign exchange
exposures, and place necessary hedging contracts, quarterly on a rolling basis. To the extent the cash flows associated with a transactional
foreign exchange risk are committed, the Group will hedge 100% at the time the cash flow becomes committed. For forecast and variable cash
flows, the Group hedges a proportion of the expected cash flows, with the percentage being hedged lowering as the time horizon lengthens.
The Group hedges on a sliding scale, typically hedging around 90% of foreign exchange exposures expected over the next twelve months,
with the percentage decreasing by approximately 10 percentage points for each subsequent year. This policy does not eliminate the cash risk
but does bring some certainty to it.
The translation rate risk is the effect on the Group results in the period due to the movement of exchange rates used to translate foreign
results into Sterling from one period to the next. No specific exchange instruments are used to protect against the translation risk because it
is a non-cash risk to the Group, until foreign currency is subsequently converted to Sterling. However, the Group utilises its multi-currency
banking facilities, where relevant, to maintain an appropriate mix of debt in each currency. The hedge of having debt drawn in these currencies
funding the trading units with US Dollars or Euro functional currencies protects against some of the Balance Sheet and banking covenant
translation risk.
As at 31 December 2023, the Group held foreign exchange forward contracts to mitigate expected exchange rate fluctuations on future cash
flows from sales to customers and purchases from suppliers. The fair value of all foreign exchange forward contracts across the Group was a net
liability at 31 December 2023 of \u00a355 million (31 December 2022: \u00a3156 million). There were no contracts where hedge accounting was applied as
at 31 December 2023 (31 December 2022: no contracts where hedge accounting was applied).
The change in fair value of foreign exchange forward contracts recognised in derivative gains/(losses) on hedging relationships within Other
Comprehensive Income was \u00a3nil (2022: \u00a3nil) and a credit of \u00a3nil (2022: \u00a31 million) was reclassified to the Income Statement.
There were no cross-currency swaps in place during the year. In the prior year, certain cross-currency swaps were designated as net investment
hedges and \u00a35 million was booked through the Income Statement in finance costs of which a credit of \u00a33 million was treated as an adjusting
item (note 6). These cross-currency swaps were designated in a net investment hedge accounting relationship against US Dollar and Euro net
assets of certain subsidiaries. The hedged risk was the spot rate, which represented the significant component of the movement and therefore
was recorded in the foreign currency translation reserve (note 26).
The following table shows the maturity profile of undiscounted contracted gross cash outflows of derivative financial liabilities used to manage currency
risk, being both the cross-currency swaps above and foreign exchange forward contracts used to manage transaction exchange rate risk:
0\u20131 year
1\u20132 years
2\u20135 years
5+ years
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December 2023
Foreign exchange forward contracts
549
370
464
58
1,441
Year ended 31 December 2022
Foreign exchange forward contracts
855
618
834
19
2,326
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7: Financial instruments: Disclosures as the risk that the fair value or future cash flows of a financial asset
or liability will fluctuate because of changes in foreign exchange rates.
The following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the
balance sheet date, illustrating the (decrease)/increase in Group operating profit caused by a 10% strengthening of the US Dollar and Euro
against Sterling compared to the year-end spot rate. The analysis assumes that all other variables, in particular other foreign currency exchange
rates, remain constant. The Group operates in a range of different currencies, and those with a notable impact are shown below:
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
2
(11)
Euro
(5)
(3)
The following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at the balance
sheet date, illustrating the increase/(decrease) in Group equity caused by a 10% strengthening of the US Dollar and Euro against Sterling.
The analysis assumes that all other variables, in particular other foreign currency exchange rates, remain constant.
31 December
31 December
2023
2022
\u00a3m
\u00a3m
US Dollar
\u2013
(10)
Euro
(1)
(7)
In addition, the change in equity due to a 10% strengthening of the US Dollar against Sterling for the translation of net investment hedging
instruments would be a decrease of \u00a347 million (2022: \u00a377 million) and for the Euro, a decrease of \u00a311 million (2022: \u00a336 million). However,
there would be no overall effect on equity because there would be an offset in the currency translation of the foreign operation.", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30562": { "value": "Fair value measurements recognised in the Balance Sheet
Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching the maturities of the contracts.
Interest rate swap and cross-currency swap contracts are measured using yield curves derived from quoted interest and foreign exchange rates.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30891": { "value": "26. Issued share capital and reserves
31 December
31 December
2023
2022
Share Capital
\u00a3m
\u00a3m
A
llotted, called-up and fully paid
1,351,475,321 (31 December 2022: 4,054,425,961) Ordinary Shares of 160/7 pence (31 December 2022:
160/21 pence) each
309
309
309
309
On 19 April 2023, a share consolidation took place whereby shareholders received one new share in the Company for every three existing
shares held. In addition, a share buyback programme has commenced during the year with 18,761,840 shares repurchased and held as
treasury shares.
The rights associated with each class of share are described in the Directors\u2019 Report.
Merger reserve and Other reserves
The Merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition of subsidiaries.
Other reserves comprise accumulated adjustments in respect of Group reconstructions.
Translation and hedging reserve
In order to provide useful information about the Group\u2019s hedging arrangements, the translation reserve and hedging reserve are combined.
Including the different components of hedging in one place enables a clearer explanation of the three components of hedging. These
components are disaggregated below with movements within Other Comprehensive Income during the year shown below and further
explanation provided in note 25.
Translation
Cost of hedge
Cash flow hedge
Foreign currency
and hedging
reserve
reserve
translation reserve
reserve
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
(10)
(9)
95
76
Movements within other comprehensive income:
Retranslation of net assets
\u2013
\u2013
665
665
A
ssociated deferred tax
\u2013
\u2013
6
6
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
(60)
(60)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in net investment hedges
\u2013
\u2013
(43)
(43)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
4
\u2013
4
A
ssociated deferred tax
\u2013
(1)
\u2013
(1)
A
mounts reclassified to the Income Statement
10
6
(25)
(9)
A
t 31 December 2022
\u2013
\u2013
638
638
Movements within other comprehensive expense:
Retranslation of net assets
\u2013
\u2013
(250)
(250)
A
ssociated deferred tax
\u2013
\u2013
(7
)
(7
)
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
43
43
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
2
\u2013
2
A
ssociated deferred tax
\u2013
(1)
\u2013
(1
)
A
mounts reclassified to the Income Statement
\u2013
\u2013
(152)
(152)
A
t 31 December 2023
\u2013
1
272
273
The cash flow hedge reserve represents the cumulative fair value gains and losses on derivatives for which cash flow hedge accounting
has been applied. Movements and balances on derivatives designated in net investment hedges are shown as part of the foreign currency
translation reserve.
The foreign currency translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other than
Sterling, together with gains and losses on the translation of liabilities and cumulative fair value gains and losses on derivatives that hedge the
Company\u2019s net investment in foreign subsidiaries.
Amounts reclassified to the Income Statement during the year includes a credit of \u00a3152 million (2022: \u00a311 million) following the disposal
of businesses.", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30892": { "value": "26. Issued share capital and reserves
31 December
31 December
2023
2022
Share Capital
\u00a3m
\u00a3m
A
llotted, called-up and fully paid
1,351,475,321 (31 December 2022: 4,054,425,961) Ordinary Shares of 160/7 pence (31 December 2022:
160/21 pence) each
309
309
309
309
On 19 April 2023, a share consolidation took place whereby shareholders received one new share in the Company for every three existing
shares held. In addition, a share buyback programme has commenced during the year with 18,761,840 shares repurchased and held as
treasury shares.
The rights associated with each class of share are described in the Directors\u2019 Report.
Merger reserve and Other reserves
The Merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition of subsidiaries.
Other reserves comprise accumulated adjustments in respect of Group reconstructions.
Translation and hedging reserve
In order to provide useful information about the Group\u2019s hedging arrangements, the translation reserve and hedging reserve are combined.
Including the different components of hedging in one place enables a clearer explanation of the three components of hedging. These
components are disaggregated below with movements within Other Comprehensive Income during the year shown below and further
explanation provided in note 25.
Translation
Cost of hedge
Cash flow hedge
Foreign currency
and hedging
reserve
reserve
translation reserve
reserve
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
(10)
(9)
95
76
Movements within other comprehensive income:
Retranslation of net assets
\u2013
\u2013
665
665
A
ssociated deferred tax
\u2013
\u2013
6
6
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
(60)
(60)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in net investment hedges
\u2013
\u2013
(43)
(43)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
4
\u2013
4
A
ssociated deferred tax
\u2013
(1)
\u2013
(1)
A
mounts reclassified to the Income Statement
10
6
(25)
(9)
A
t 31 December 2022
\u2013
\u2013
638
638
Movements within other comprehensive expense:
Retranslation of net assets
\u2013
\u2013
(250)
(250)
A
ssociated deferred tax
\u2013
\u2013
(7
)
(7
)
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
43
43
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
2
\u2013
2
A
ssociated deferred tax
\u2013
(1)
\u2013
(1
)
A
mounts reclassified to the Income Statement
\u2013
\u2013
(152)
(152)
A
t 31 December 2023
\u2013
1
272
273
The cash flow hedge reserve represents the cumulative fair value gains and losses on derivatives for which cash flow hedge accounting
has been applied. Movements and balances on derivatives designated in net investment hedges are shown as part of the foreign currency
translation reserve.
The foreign currency translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other than
Sterling, together with gains and losses on the translation of liabilities and cumulative fair value gains and losses on derivatives that hedge the
Company\u2019s net investment in foreign subsidiaries.
Amounts reclassified to the Income Statement during the year includes a credit of \u00a3152 million (2022: \u00a311 million) following the disposal
of businesses.", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f30893": { "value": "26. Issued share capital and reserves
31 December
31 December
2023
2022
Share Capital
\u00a3m
\u00a3m
A
llotted, called-up and fully paid
1,351,475,321 (31 December 2022: 4,054,425,961) Ordinary Shares of 160/7 pence (31 December 2022:
160/21 pence) each
309
309
309
309
On 19 April 2023, a share consolidation took place whereby shareholders received one new share in the Company for every three existing
shares held. In addition, a share buyback programme has commenced during the year with 18,761,840 shares repurchased and held as
treasury shares.
The rights associated with each class of share are described in the Directors\u2019 Report.
Merger reserve and Other reserves
The Merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition of subsidiaries.
Other reserves comprise accumulated adjustments in respect of Group reconstructions.
Translation and hedging reserve
In order to provide useful information about the Group\u2019s hedging arrangements, the translation reserve and hedging reserve are combined.
Including the different components of hedging in one place enables a clearer explanation of the three components of hedging. These
components are disaggregated below with movements within Other Comprehensive Income during the year shown below and further
explanation provided in note 25.
Translation
Cost of hedge
Cash flow hedge
Foreign currency
and hedging
reserve
reserve
translation reserve
reserve
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
(10)
(9)
95
76
Movements within other comprehensive income:
Retranslation of net assets
\u2013
\u2013
665
665
A
ssociated deferred tax
\u2013
\u2013
6
6
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
(60)
(60)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in net investment hedges
\u2013
\u2013
(43)
(43)
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
4
\u2013
4
A
ssociated deferred tax
\u2013
(1)
\u2013
(1)
A
mounts reclassified to the Income Statement
10
6
(25)
(9)
A
t 31 December 2022
\u2013
\u2013
638
638
Movements within other comprehensive expense:
Retranslation of net assets
\u2013
\u2013
(250)
(250)
A
ssociated deferred tax
\u2013
\u2013
(7
)
(7
)
Foreign exchange differences on borrowings hedging net assets
\u2013
\u2013
43
43
A
ssociated deferred tax
\u2013
\u2013
\u2013
\u2013
Change in fair value of derivatives designated in cash flow hedges
\u2013
2
\u2013
2
A
ssociated deferred tax
\u2013
(1)
\u2013
(1
)
A
mounts reclassified to the Income Statement
\u2013
\u2013
(152)
(152)
A
t 31 December 2023
\u2013
1
272
273
The cash flow hedge reserve represents the cumulative fair value gains and losses on derivatives for which cash flow hedge accounting
has been applied. Movements and balances on derivatives designated in net investment hedges are shown as part of the foreign currency
translation reserve.
The foreign currency translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other than
Sterling, together with gains and losses on the translation of liabilities and cumulative fair value gains and losses on derivatives that hedge the
Company\u2019s net investment in foreign subsidiaries.
Amounts reclassified to the Income Statement during the year includes a credit of \u00a3152 million (2022: \u00a311 million) following the disposal
of businesses.", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f31278": { "value": "27. Cash flow statement
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Notes
\u00a3m
\u00a3m
Reconciliation of operating profit/(loss) to net cash used in operating activities generated
by continuing operations
Operating profit/(loss)
57
(270)
A
djusting items
6
333
417
A
djusted operating profit
6
390
147
A
djustments for:
Depreciation of property, plant and equipment
100
104
A
mortisation of computer software and development costs
42
41
Restructuring costs paid and movements in provisions
(160)
(60)
Defined benefit pension contributions paid
(2)
(67)
(23)
Change in inventories
(10)
(88)
Change in receivables
(140)
(172)
Change in payables
4
112
Tax paid
(17)
(8)
Interest paid on loans and borrowings
(3)
(79)
(76)
Interest paid on lease obligations
(5)
(6)
A
cquisition and disposal costs
(65)
(10)
Net cash used in operating activities
(7)
(39)
(1)
Restated for discontinued operations (see note 1).
(2)
The year ended 31 December 2023 includes \u00a345 million for the purchase of a buy-in policy for GKN Group Pension Scheme Number 4 (see note 24).
(3)
The year ended 31 December 2023 includes \u00a317 million of finance costs on the proportion of the Group\u2019s net debt strategically allocated to demerged businesses
at the start of the year and settled on demerger (see note 6).
31 December
31 December
2023
2022
Reconciliation of cash and cash equivalents, net of bank overdrafts
\u00a3m
\u00a3m
Cash and cash equivalents per Balance Sheet
58
355
Bank overdrafts included within current interest-bearing loans and borrowings (note 20)
(1)
(63)
Cash and cash equivalents, net of bank overdrafts per Statement of Cash Flows
57
292
Cash flow information relating to discontinued operations is as follows:
Restated
(1)
Year ended
Year ended
31 December
31 December
2023
2022
Cash flow from discontinued operations
\u00a3m
\u00a3m
Net cash from discontinued operations
54
377
Defined benefit pension contributions paid
(5)
(36)
Tax paid
(8)
(81)
Interest paid on lease obligations
(3)
(6)
Interest paid on loans and borrowings
(2)
(11)
Net cash from operating activities from discontinued operations
36
243
Interest received
\u2013
3
Dividends received from equity accounted investments
\u2013
59
Purchase of property, plant and equipment
(62)
(203)
Proceeds from disposal of property, plant and equipment
\u2013
21
Purchase of computer software and capitalised development costs
(5)
(20)
Net cash used in investing activities from discontinued operations
(67)
(140)
Repayment of principal under lease obligations
(6)
(23)
Net cash used in financing activities from discontinued operations
(6)
(23)
(1)
Restated for discontinued operations (see note 1).
Net debt reconciliation
Net debt consists of interest-bearing loans and borrowings (excluding any acquisition related fair value adjustments) and cash and
cash equivalents.
Net debt is considered to be an alternative performance measure as it is not defined in IFRS. The most directly comparable IFRS measure is
the aggregate of interest-bearing loans and borrowings (current and non-current) and cash and cash equivalents. A reconciliation from the most
directly comparable IFRS measure to net debt, used as a basis for banking covenant calculations, is given below:
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Interest-bearing loans and borrowings \u2013 due within one year
(54)
(63)
Interest-bearing loans and borrowings \u2013 due after one year
(576)
(1,433)
External debt
(630)
(1,496)
Less:
Cash and cash equivalents
58
355
(572)
(1,141)
A
djustments:
Non-cash acquisition fair value adjustments
\u2013
2
Net debt
(572)
(1,139)
The table below shows the key components of the movement in net debt:
At
At
31 December
Acquisitions
Other non-cash
Effect of foreign
31 December
2022
Cash flow
and disposals
movements
exchange
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
External debt (excluding bank overdrafts)
(1,433)
(462)
1,205
18
43
(629)
Non-cash acquisition fair value adjustments
2
\u2013
\u2013
(2)
\u2013
\u2013
(1,431)
(462
)
1,205
16
43
(629)
Cash and cash equivalents, net of bank
overdrafts
292
169
(385)
\u2013
(19)
57
Net debt
(1,139)
(293)
820
16
24
(572)
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f31889": { "value": "28.
Commitments
Amounts payable under lease obligations:
31 December
31 December
2023
2022
Minimum lease payments
\u00a3m
\u00a3m
A
mounts payable:
Within one year
45
69
A
fter one year but within five years
102
166
Over five years
75
209
Less: future finance charges
(30)
(78)
Present value of lease obligations
192
366
A
nalysed as:
A
mounts due for settlement within one year
40
60
A
mount due for settlement after one year
152
306
Present value of lease obligations
192
366
It is the Group\u2019s policy to lease certain of its property, plant and equipment. The average lease term is 10 years. Interest rates are fixed at the
contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
During the year \u00a3158 million of lease obligations were disposed of with the demerger of the GKN Automotive, GKN Powder Metallurgy and
GKN Hydrogen businesses (see note 13).
The Group\u2019s obligations under lease arrangements are secured by the lessors\u2019 rights over the leased assets.
Certain leases within the Group contain extension or termination options to allow for flexibility within these lease agreements. Where these
options are not reasonably certain to be exercised, they are not included in the lease obligation. The value of these associated undiscounted
cash flows is \u00a3179 million (31 December 2022: \u00a3171 million).
The table below shows the key components in the movement in lease obligations.
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
A
t 1 January
366
376
A
dditions
31
38
Interest charge
8
9
Reassessment of lease obligation
2
(1)
Payment of principal
(38)
(52)
Payment of interest
(8)
(12)
Disposals
\u2013
(5)
Disposal of businesses
(1)
(158)
(3)
Transfer to held for sale
(2)
(1)
(7)
Exchange adjustments
(10)
23
A
t 31 December
192
366
(1)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1). Disposal of
businesses in 2022 related to the sale of a non-core business in the Structures segment.
(2)
Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
Capital commitments
At 31 December 2023, there were commitments of \u00a3115 million (31 December 2022: \u00a3127 million) relating to the acquisition of new plant
and machinery.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f31890": { "value": "28.
Commitments
Amounts payable under lease obligations:
31 December
31 December
2023
2022
Minimum lease payments
\u00a3m
\u00a3m
A
mounts payable:
Within one year
45
69
A
fter one year but within five years
102
166
Over five years
75
209
Less: future finance charges
(30)
(78)
Present value of lease obligations
192
366
A
nalysed as:
A
mounts due for settlement within one year
40
60
A
mount due for settlement after one year
152
306
Present value of lease obligations
192
366
It is the Group\u2019s policy to lease certain of its property, plant and equipment. The average lease term is 10 years. Interest rates are fixed at the
contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
During the year \u00a3158 million of lease obligations were disposed of with the demerger of the GKN Automotive, GKN Powder Metallurgy and
GKN Hydrogen businesses (see note 13).
The Group\u2019s obligations under lease arrangements are secured by the lessors\u2019 rights over the leased assets.
Certain leases within the Group contain extension or termination options to allow for flexibility within these lease agreements. Where these
options are not reasonably certain to be exercised, they are not included in the lease obligation. The value of these associated undiscounted
cash flows is \u00a3179 million (31 December 2022: \u00a3171 million).
The table below shows the key components in the movement in lease obligations.
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
A
t 1 January
366
376
A
dditions
31
38
Interest charge
8
9
Reassessment of lease obligation
2
(1)
Payment of principal
(38)
(52)
Payment of interest
(8)
(12)
Disposals
\u2013
(5)
Disposal of businesses
(1)
(158)
(3)
Transfer to held for sale
(2)
(1)
(7)
Exchange adjustments
(10)
23
A
t 31 December
192
366
(1)
Disposal of businesses in 2023 relates to the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (see note 1). Disposal of
businesses in 2022 related to the sale of a non-core business in the Structures segment.
(2)
Transfer to held for sale in 2023 relates to the contractually agreed sale of a non-core business in the Structures segment and in 2022 related to the Ergotron
business (see note 1).
Capital commitments
At 31 December 2023, there were commitments of \u00a3115 million (31 December 2022: \u00a3127 million) relating to the acquisition of new plant
and machinery.30. Contingent liabilities
As a result of acquisitions made by the Group, certain contingent legal and warranty liabilities have been identified as part of the fair value review
of these acquisition balance sheets. Whilst it is difficult to reasonably estimate the timing and ultimate outcome of these claims, the Directors\u2019
best estimate has been included in the Balance Sheet where they existed at the time of acquisition and hence were recognised in accordance
with IFRS 3: Business combinations. Where a provision has been recognised, information regarding the different categories of such liabilities and
the amount and timing of outflows is included within note 21.
Given the nature of the Group\u2019s business many of the Group\u2019s products have a large installed base, and any reworks related to such
products could be particularly costly. The costs of product reworks are not always covered by insurance. Reworks may have a material adverse
effect on the Group\u2019s financial condition, results of operations and cash flows.
The Group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of
trading subsidiaries. No losses are anticipated to arise on these contingent liabilities. The Group does not have any other significant
contingent liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f32138": { "value": "29. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note. Sales to and purchases from Group companies are priced on an arm\u2019s length basis and generally are settled on 30 day terms.
During the year ended 31 December 2023, \u00a3417 million of equity accounted investments were disposed with the demerger of the GKN
Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (note 13) into Dowlais, who became a related party upon demerger.
During the year, the Group entered into a Transitional Services Agreement with Dowlais to provide services and support to ensure continuity
immediately following the demerger. As a result, income of \u00a31 million (2022: \u00a3nil) has been recognised in the Income Statement for continuing
operations.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories
specified in IAS 24: Related party disclosures. Further information about the remuneration of individual Directors is provided in the audited part of
the Directors\u2019 Remuneration Report on pages 131 and 141.
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Short-term employee benefits
5
5
Share-based payments
5
10
10
15
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f32141": { "value": "Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note. Sales to and purchases from Group companies are priced on an arm\u2019s length basis and generally are settled on 30 day terms.
During the year ended 31 December 2023, \u00a3417 million of equity accounted investments were disposed with the demerger of the GKN
Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses (note 13) into Dowlais, who became a related party upon demerger.
During the year, the Group entered into a Transitional Services Agreement with Dowlais to provide services and support to ensure continuity
immediately following the demerger. As a result, income of \u00a31 million (2022: \u00a3nil) has been recognised in the Income Statement for continuing
operations.", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f32151": { "value": "Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories
specified in IAS 24: Related party disclosures. Further information about the remuneration of individual Directors is provided in the audited part of
the Directors\u2019 Remuneration Report on pages 131 and 141.
Year ended
Year ended
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Short-term employee benefits
5
5
Share-based payments
5
10
10
15
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f32202": { "value": "30. Contingent liabilities
As a result of acquisitions made by the Group, certain contingent legal and warranty liabilities have been identified as part of the fair value review
of these acquisition balance sheets. Whilst it is difficult to reasonably estimate the timing and ultimate outcome of these claims, the Directors\u2019
best estimate has been included in the Balance Sheet where they existed at the time of acquisition and hence were recognised in accordance
with IFRS 3: Business combinations. Where a provision has been recognised, information regarding the different categories of such liabilities and
the amount and timing of outflows is included within note 21.
Given the nature of the Group\u2019s business many of the Group\u2019s products have a large installed base, and any reworks related to such
products could be particularly costly. The costs of product reworks are not always covered by insurance. Reworks may have a material adverse
effect on the Group\u2019s financial condition, results of operations and cash flows.
The Group has contingent liabilities representing guarantees and contract bonds given in the ordinary course of business on behalf of
trading subsidiaries. No losses are anticipated to arise on these contingent liabilities. The Group does not have any other significant
contingent liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f32227": { "value": "COMPANY BALANCE SHEET FOR MELROSE INDUSTRIES PLC \n \n
31 December
31 December
2023
2022
Notes
\u00a3m
\u00a3m
Fixed assets
Investments
3
10,608
10,591
Debtors:
Amounts falling due after one year
4
549
487
Creditors:
Amounts falling due within one year
5
(4,893)
(3,443)
Net current liabilities
(4,344)
(2,956)
Total assets less current liabilities
6,264
7,635
Provisions
6
(22)
(2)
Net assets
6,242
7,633
Capital and reserves
Issued share capital
7
309
309
Share premium account
3,271
3,271
Merger reserve
109
109
Capital redemption reserve
753
753
Retained earnings
1,800
3,191
Shareholders\u2019 funds
6,242
7,633
The Company reported a profit for the financial year ended 31 December 2023 of \u00a3737 million (2022: loss of \u00a319 million).
The financial statements were approved by the Board of Directors on 7 March 2024 and were signed on its behalf by:
Geoffrey Martin
Peter Dilnot
Group Finance Director
Chief Executive Officer
7 March 2024
7 March 2024
Registered number: 09800044
COMPANY STATEMENT OF CHANGES IN EQUITY
\n \n
Issued
Share premium
Merger
Capital redemption
Retained
Shareholders\u2019
share capital
account
reserve
reserve
earnings
funds
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
A
t 1 January 2022
333
3,271
109
729
3,775
8,217
Loss for the year (note 2)
\u2013
\u2013
\u2013
\u2013
(19)
(19)
Total comprehensive loss
\u2013
\u2013
\u2013
\u2013
(19)
(19)
Purchase of own shares
(1)
(24)
\u2013
\u2013
24
(504)
(504)
Dividends paid
\u2013
\u2013
\u2013
\u2013
(77)
(77)
Equity-settled share-based payments
\u2013
\u2013
\u2013
\u2013
16
16
A
t 31 December 2022
309
3,271
109
753
3,191
7,633
Profit for the year (note 2)
\u2013
\u2013
\u2013
\u2013
737
737
Other comprehensive expense
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Total comprehensive income
\u2013
\u2013
\u2013
\u2013
732
732
Purchase of own shares
(1)
\u2013
\u2013
\u2013
\u2013
(93)
(93)
Dividends paid
\u2013
\u2013
\u2013
\u2013
(81)
(81)
Demerger distribution
(2)
\u2013
\u2013
\u2013
\u2013
(1,973)
(1,973)
Equity-settled share-based payments
\u2013
\u2013
\u2013
\u2013
2
2
Deferred tax on equity-settled share-based
payments
\u2013
\u2013
\u2013
\u2013
22
22
A
t 31 December 2023
309
3,271
109
753
1,800
6,242
(1)
Further information is set out in note 1.
(2)
Further information is set out in note 13 to the Group Consolidated Financial Statements.
Refer to the Section 172 statement in the Strategic Report on pages 37 to 42 for further details on the Company\u2019s Distribution Policy.", "dimensions": { "concept": "ifrs-full:DisclosureOfConsolidatedAndSeparateFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f33135": { "value": "United Kingdom 11th Floor, The Colmore Building, 20 Colmore Circus Queensway, Birmingham, B4 6AT", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:213800RGNXXZY2M7TR85", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } } } }