HUNTER Laing, the Scotch whisky blender and bottler, has seen profits fall by more than 20 per cent as margins came under pressure on several fronts in its latest financial year.

The Glasgow-based firm, which is investing £10 million to build its own distillery on Islay, made a pre-tax profit of £1.1 million in the year to April 30, according to its latest accounts, down from £1.4m the year before.

Hunter Laing, which exports its whiskies to more than 60 countries, declared its sales performance had been in line with expectations, as turnover edged up to £6.5m from £6.4m last time.

But finance director David Armour acknowledged that margins had been “suppressed” during the year by factors such as a shift in sales mix towards lower margin products, and by the necessity of outsourcing some bottling to keep up with demand.

The company, led by Stewart Laing with sons Andrew and Scott, also incurred some one-off costs linked to its acquisition of a new warehouse in East Kilbride, where its bottling operation is based, and its investment in its first distillery at Ardnahoe on Islay.

Mr Armour said: “Ultimately we were quite pleased turnover went up, albeit very slightly. Our margin did come down a bit, and that’s a function of two or three things. Mainly [there has] been a bit of sales mix change. We have been shipping more tankers than case goods, so that always suppresses your margins a little bit.

“The mix of the business this year has been towards slightly lower margin products, but it is still not a bad result.”

Mr Armour said the period had seen the company make progress in opening new markets. He highlighted a significant client win in Mexico, which had asked Hunter Laing to supply the spirit it ordered in tanker format. That allows the client to package the product locally. The company also began to make inroads into China.

“When you are buying in tankers and sending it on, you tend to make slightly less money, but it is good volume and good cash flow,” Mr Armour said.

“That’s really been the only territory where we did that, everything else has been as normal, and we’ve been spending a bit of money, particularly China, where we are now starting to see a bit of traction. You always spend money trying to seed a market.”

Mr Armour said the Brexit vote has had little effect on trade so far beyond a “marginal” increase due to the fall in the value of sterling. But he admitted that the prospect of the UK being denied access to the single European market is a cause of concern.

“You always want to make sure your main markets are preserved,” Mr Armour said. “But to be honest we probably sell more into the US and the Far East than into Europe.”

“Will it affect us? Of course it will affect us. But will it be that bad? We’re not sure. We don’t see that. We are certainly targeting more of our efforts into other markets. Right now, South America is certainly seeing some opportunity, China as well. And the US just keeps going strong for us.”

Hunter Laing took steps to expand its bottling operation in East Kilbride over the period. The commissioning of a second bottling line began last week at the site, which will effectively double the capacity of the operation.

It is also developing a maturation warehouse at the site, currently in the process of being bonded, which will allow it to consolidate its dry goods under a single roof. Mr Armour hopes it will be in operation by the end of this year.

Hunter Laing continued to invest in whisky stock over the period, with stocks valued at £6.1m at the end of the period, up from £4.8m the year before.

Meanwhile work on the Islay distillery is expected to begin in February or March, after planning permission was secured from Argyll and Bute Council in September.

“It’s pretty exciting for everybody,” Mr Armour said.