The world's leading wines and spirits force Diageo has posted a pre-tax profit for the year to the end of June of £2.156 billion (US$3.38 billion) before exceptional items. The result represented a 6% increase from last year and was broadly in line with analyts' forecasts for profits in the region of £2.08 billion to £2.19 billion.

Operating profits before exceptionals fell by 3.7% to £2.029 billion on turnover down from £11.28 billion to £9.44 billion following the disposals of Pillsbury in October 2001 and Burger King in December 2002.

For continuing operations, which now represent Diageo's premium drinks business, turnover increased by 3% from £8,704m in the year ended 30 June 2002 to £8,961m in the year ended 30 June 2003.

"Diageo has demonstrated that it can generate growth in challenging times and, as a result of the sustained investment we have made in our brands and markets, Diageo is well positioned to benefit if general trading conditions improve," said the company's CEO, Paul Walsh.

The company said that its volumes rose by 1%, while net sales were up 4%.

Diageo said it had seen signs of improving trading in North America, the UK and Spain though Ireland and Latin America remained difficult.

"As we begin the new financial year, some of the issues we faced at the beginning of last year, including economic pressures in Latin America have receded but the future still remains difficult to predict. There are signs that trading conditions are improving in North America, Great Britain and Spain but further evidence of a more broadly based recovery will be required before we conclude that there is a sustainable upturn. However, Diageo has demonstrated that it can generate growth in challenging times and, as a result of the sustained investment we have made in our brands and markets, Diageo is well positioned to benefit if general trading conditions improve," Walsh said.