HIGHLAND Spring has hailed favourable weather and the continuing shift to healthier lifestyles as it achieved a 22 per cent increase in underlying operating profits to £3.08 million last year.

The Perthshire-based bottled water supplier booked record turnover of £97.7 million in the year to December 31 amid the "most buoyant" market conditions in some years.

However profits were down 26 per cent on a pre-tax basis due to accountancy adjustments relating to a "historic" VAT issue.

The firm said a VAT overpayment from 20 years ago was released back into its profit and loss account with permission from HMRC, which boosted the balance sheet by £1.78 million in 2012. A smaller release of £791,000 was made last year, with the firm stating a VAT release of a similar size to be inserted into the 2014 accounts.

With sales volumes rising by 10 per cent to 460.5 million litres, Highland Spring retained its status as the UK's number one bottled water businesslast year - a title it first won in 2012.

Chief executive Les Montgomery said 2013 had seen a "strong sales performamce" by the company which has continued into its current year.

He said: "2014 has also been shaping up extremely well, with a recent highlight being our sponsorship of the Ryder Cup which showcased Highland Spring to a global audience.

"Another milestone was achieving the £100 million sales turnover target for the 12 months to March, 2014.

"The bottled water category continues to grow extremely well as consumers increasingly make healthier drinking choices and this long-term consumer trend is very much to our advantage."

Writing in the accounts, the directors said the bottled water market in general had benefited in 2013 from the "most buoyant" market conditions in some years.

Data from Zenith International, regarded as the industry benchmark, suggested Highland Spring held a 21 per cent UK market share in 2013, contributing to 15 per cent of market growth over the year.

The same source also signalled its eponymous brand had grown its brand share of packaged waters to 11 per cent, up from 10.6 per cent the year before.

While the market for packaged water grew at 11.6 per cent, the growth on the Highland Spring brand was faster at 15.7 per cent, according to Zenith.

The directors note in the accounts that the bottled water market had faced "aggressive price promotional strategies " last year, notably in the multiple grocer and cash and carry sectors.

Asked what effect this had on the company, Mr Montgomery said: "Retail selling prices are entirely in the control of each retailer and cannot be influenced by suppliers. Certainly, grocery retail is hugely competitive just now, a fact of life for all suppliers who welcome their business.

"The beneficiary is undoubtedly the consumer who has more choice than ever before and very keen prices to attract them as part of their shopping decision-making process."

The accounts show Highland Spring employed an average of 420 staff over the year, up from 404. The emoluments of the highest-paid director rose to £314,000, compared with £302,000 in 2012.