Highland Spring in profits leap amid booming demand
Revenues fall by 3% due to changes in the way costs of selling are accounted for
By Bottled water group Highland Spring saw a doubledigit jump in profits last year despite turnover dipping due to the impact of a major new distribution agreement.
The Perthshire-based company, the UK’S largest bottled water producer, saw revenues fall by 3 per cent to £100 million in 2016 according to figures it filed at Companies House yesterday.
The drop was attributed to a distribution deal struck with Lucozade Ribena Suntor (LRS). The long-term agreement helped the group increase its sales and distribution reach, contributing to a volume sales increase of 7.1 per cent in the year.
But LRS taking on promotional and distribution costs which had been previously incurred by Highland Spring meant the sales price of products fell. The firm said that had it sold all of these products directly as in 2015, turno2012, ver would have been around £110m, an increase of some 7 per cent. Although turnover fell, it was the third consecutive year that the business has exceeded its strategic target of £100m sales.
Operating profits rose by 12 per cent to £5.6m which the company said was achieved through “efficiencies derived from an improved sales mix and higher utilisation of our core bottling resources”. Pretax profits rose to £4.9 million from £4.3m.
Mark Steven, group finance director of the Blackfordbased business which now bottles over 560 million litres of water a year, said the firm expects to make further progress in the current financial year with “above market double-digit growth”.
“We finished 2016 as the market leader. Our two new production lines are now fully operational and this summer saw our return to TV with our biggest brand campaign to date: Brave By Nature. We have great confidence in the UK bottled water market which has grown over 55 per cent since with double-digit growth on an annual basis continuing into 2017,” he said.
During 2016 and 2017 the firm has invested in excess of £30m in increasing bottling capacity to meet current and anticipated market demand. This included the installation of two new production lines at its Blackford facility, including the fastest bottled drinks line of its kind in the UK. In the announcement accompanying yesterday’s trading figures, the company praised the role played by its bankers HSBC in its continued growth.
“Its support for our business strategy enables us to continue to invest across people, bottling facilities and our product portfolio to ensure we are able to meet increasing consumer demand for healthier hydration choices.”
In addition to Highland Spring, the group’s brands include Speyside Glenlivet and Hydr8. Under the agreement struck with LRS in 2015, it distributes Highland Spring brands within the “impulse” and “out of home” channels including the foodservice sector and high street shops.
businessdesk@scotsman.com