International engineering group IMI has marked the most profitable year in its 144-year history with a £113 million acquisition.

IMI, which is based at Birmingham Business Park, bought Truflo to strengthen its position in the valve and fluid control sector after notching pretax profits up 8.9 per cent at £175.5 million.

The purchase is the first this year with IMI saying it expects to spend £80 million to £100 million per year on bolt on acquisitions.

But the company has unveiled an even bigger war chest which could go up to £600 million over the next two to three years as it seeks to invest more in its business and make more purchases.

Chief executive Martin Lamb said: "We are confident of spending at least £80-100 million per annum on judicious top quality bolt-on acquisitions.

"We have reduced our borrowing from around £400 million four years ago to virtually nothing.

"We are now planning to use part of that debt facility to finance further growth; we could easily go up to £400 million, £500 million, which is a very conservative figure at twice our earnings.

"There is the cash flow to take it up to £600 million."

Mr Lamb added the acquisition of Truflo, which employs 90 people at its Birmingham site, did not mean no more purchases for this year.

IMI, which employs around 2,000 people across the Midlands, warned that it would be looking at spending £20 million per year on transferring some of its manufacturing capabilities to already established low cost facilities in Mexico, Czech Republic and China.

The shift could see the company increasing the total of its production in these countries from 25 per cent to 40 per cent.

Mr Lamb said: "We are pleased with the efficiency, quality and cost of these operations and we are going to expand them.

"But we are also pleased with the performance of our UK operations, which have moved more into the higher value added products.

"There is not going to be any significant implications for the UK; but we are looking to close another facility in the US and move it to Mexico and move one or two in continental Europe to the Czech Republic."

In the year to December 31, IMI achieved an 8.2 per cent increase in sales of the continuing business to £1341 million.

Mr Lamb said the group would be taking action to reduce its cost base and improve margins.

He said: "2005 proved to be another positive year for the group, with profit before tax an all time high for IMI.

"We have been through a lot of changes in the last five years, and have exited from a lot of businesses and focused on business which we think will deliver in the future."

Mr Lamb said last year's disposal of Polypipe brought to an end its repositioning, and the new, reshaped company which focuses mainly on fluid controls and the drinks dispensing sector, was confident looking to the future.

He added the acquisition of Truflo, which makes valves for the the oil, gas, and nuclear industries, had helped it make a strong start to IMI's acquisitive spree. Truflo, whose 500 workers would be transferring to the IMI business, was bought from the Alchemy Investment Plan with money from IMI's own cash pile and banking facilities.

Mr Lamb said: "Truflo's activities in oil and gas and power sectors are complementary to our own, and their involvement in petrochemical and marine opens up a number of new opportunities for the combined business.

"Truflow has suffered from a shortage of investment over the last two or three years, and has extended lead times for orders. We can use some of our manufacturing capacity to overcome this."