THE company behind Guinness hinted last night that the slump in demand for ready-to-drink brands was easing as it posted a two per cent rise in annual operating profits.

Diageo scaled back spending on promoting brands such as Smirnoff Ice after worldwide sales fell by five per cent during the past year, but told investors that trends suggested the market was stabilising.

Drinkers in Europe led the way in turning their backs on such drinks, with volumes of Smirnoff ready-to-drink products down by more than 25 per cent on the Continent and by 19 per cent in the UK.

Diageo, whose other brands include Pimms, said the decline of the ready-to-drink market cut its overall sales growth by one per cent in the past year.

Operating profits before exceptional items of £1.94bn in the 12 months to the end of June was two per cent higher than the £1.91bn reported last year, or seven per cent higher after taking account of the impact of currency swings.

Diageo said its eight priority brands, including Johnnie Walker whisky, Guinness, Baileys, Jose Cuervo tequila and Captain Morgan rum, were its engine for growth.