The popularity of Smirnoff-based drinks has been waning fast

The drink firm reported that pre-tax earnings before exceptional items for the year to June fell 7.5% to £1.82bn ($3.3bn) on sales of £9bn.

But it told investors the coming year would mark a turnaround with higher demand for ready-to-drink products such as Smirnoff Ice.

Shares in Diageo closed up 13 pence, or 1.6%, at 805p.

The rise, analysts said, was partly down to plans announced to double the amount of shares Diageo buys back from investors to £1.4bn this year, as well as to the fact that the profits - although lower - were in line with expectations.

But the improved forecast was also a major factor, they said.

Sales of ready-to-drink products based on Smirnoff vodka fell 25% in continental Europe and 19% in the UK during the year to June.

Now, though, the slide appears to be bottoming out, the firm said.

"Better pricing and a stabilising ready-to-drink trend may give us the opportunity to improve on the net sales growth we achieved this year," said Paul Walsh, Diageo's chief executive.