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Melrose, the UK-listed engineering group, is on the lookout for more deals after its latest acquisition showed early signs of transformation.

The company buys up and improves underperforming manufacturing businesses and then sells them on, in a model likened to private equity.

Last summer Melrose snapped up the US-based company Nortek, which makes kitchen oven hoods and extractor fans, in a £2.2bn transaction following the Brexit referendum.

Management said that the business had achieved an increase to underlying operating profit of 35 per cent in the same four month period as a year earlier, while debt levels were also reduced.

It came as Melrose’s revenue more than tripled in 2016, as a result of the acquisition, to £889.3m.

On a statutory basis, there was a pre-tax loss of £69.3m, which it put down to acquisition and non-trading costs. More than £50m was also expended on restructuring, some £23m on equity-settled compensation scheme charges, alongside some other accounting charges.

But on an underlying level, which strips out these one-off costs and is preferred by the company as a measure of performance, pre-tax profit was £96.4m, up from £2.4m the year prior.

The company said its 2016 financial results had “exceeded market expectations”.

However, its other main business, the turbogenerator manufacturer Brush, was “still experiencing adverse trading headwinds”.

Melrose typically funds its deals through raising equity from shareholders, using conservative levels of debt financing to complete the balance. It tapped investors for £1.6bn last year to back the Nortek acquisition.

A final dividend of 1.9p per share was proposed, compared to 0.5p a year ago.

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