The group - which runs the Intercontinental, Crowne Plaza and Holiday Inn chains - reported pre-tax profits of �68m ($112m) for the six months to end-March, down from �99m a year ago.

Hundreds of jobs are being shed and costs trimmed as the firm struggles to cope with the slump in business.

The war in Iraq made people reluctant to travel while the outbreak of the Sars virus hit business in Asia during late-March.

Intercontinental's results are the first since the firm was demerged from the Six Continents group.

Gloomy outlook

The hotel group said it could not be sure when business would begin to pick up again.

"It is difficult to imagine a worse trading environment. Moreover visibility is still poor and we remain cautious," said chief executive Richard North.

Shares in the company fell heavily in morning trade but recovered to close up 0.25p at 428.25p.

The firm said last month that it was to cut 800 of its 2,600 back office staff.

"[We] are taking out significant levels of cost. At the same time we are cutting back on capital expenditure and are progressing the sale of a number of assets," Mr North said.

"All this will stand us in good stead now and leaves us well placed to benefit from recovery."