Diageo, the world's largest spirits maker, has reported a 3% rise in annual profits but warned that meeting targets for this year will be tough.

The group, whose brands include Johnny Walker whisky, Smirnoff vodka and Bailey's Irish Cream liqueur, said it had achieved its objective in the year to June of transforming itself into a "focused premium drinks company".

Profits in the year were boosted by strong sales of its premium brands including the increasingly popular Smirnoff Ice.

Chief executive Paul Walsh said the company had maintained its targets for the current year but said the year ahead would be a difficult one.

Tough year ahead

But Mr Walsh warned: "As we face continuing difficulties in respect of the economic environment in which we operate, particularly in areas such as Latin America, we recognise that it will be challenging to deliver these targets."

In the year to 30 June, Diageo sold its Pillsbury brand and bought the Seagram spirits and wine businesses.

In July, it announced the sale of its Burger King fast-food chain for $2.26bn (�1.4bn) to a group made up of US venture capitalist firms Texas Pacific and Bain Capital, together with private equity group Goldman Sachs Capital Partners.

"The best way for us to create shareholder value is to further build and grow the brands we already own rather than try and acquire new ones," Mr Walsh told the BBC's World Business Report.

Pre-tax profits for the year were up 3% to �2.043bn, in line with forecasts.

But premium drink sales slowed from 11% in the first half of the year, to 9% for the year as a whole.