However, the group warned it would not meet its previous targets for profits and sales.

Diageo's vast portfolio of brands includes Smirnoff vodka, Bailey's Irish Cream and Guinness stout.

The company said the current environment for selling its drinks was "tough", particularly in Latin America and parts of Europe.

We represent an affordable indulgence Paul Walsh, Diageo chief executive

Chief executive Paul Walsh said the group had warned of difficult trading in September.

"That caution proved correct and this has been a tough six months."

Changing climate

But Mr Walsh said the sheer diversity of Diageo's brands would stand the company in good stead.

He told BBC Radio 4's Today programme:

"We represent an affordable indulgence and therefore we think we will weather any economic downturn pretty well."

However, the group admitted its expectations set out 18 months ago were too optimistic.

At the time, the group anticipated 10% sales growth and double-digit profit increases ahead.

"Clearly the economic climate is very different now to it was 18 months ago," said Mr Walsh.

Fast food hit

Analysts and investors appeared reassured however, and Diageo shares closed up 4.1% at 623.5p.

"You'd struggle to find anyone not saying things are tough," said Paul Morgan, a research analyst at Brown Shipley Investment Managers.

"The key is that they're coping when they are tough."

Profits for the last six months of 2002 hit �1.29bn, against �1.22bn in the same period the year before.

Diageo also admitted it would take a $1.4bn charge for the sale of its Burger King fast food business - higher than the market was expecting.

Diageo sold Burger King to a US consortium in December as part of its transformation into a pure drinks group.