The smoking ban accounted for 5 per cent of the decline in bar sales in the Republic during the past six months of 2004, drinks giant Diageo said yesterday.

Sales of Guinness stout were also down in terms of volume but the drink still managed to outperform the Irish market in the second half of the year. Volumes of stout sold fell 1 per cent compared to a 7 per cent decline in the same period in 2003.

A Diageo Ireland spokesman said the group was pleased with the result.

"The 1 per cent fall compares with a 3 per cent fall in volume sales for all Diageo products in Ireland and a 9 per cent reduction in the bar trade in the Republic overall," said Mr Michael Patten, Diageo director of corporate relations.

The slowdown in pub sales across the Republic means that Guinness's share of overall pub sales rose 1 per cent despite its marginal decline. Price increases during the year meant that net sales were 5 per cent ahead of the equivalent period in 2003.

Diageo , and particularly Guinness, relies predominantly on bar trade rather than off-licence business.

Diageo said the smoking ban introduced last year accounted for 5 per cent of the decline in bar sales in the last six months of 2004 - the first half of Diageo's financial year.

Mr Patten said Diageo believed the market had now taken account of the smoking ban and the move of business from bar trade to the off licence (where sales rose 5 per cent in the period) would slow or level off.

Diageo said one feature of the market in 2004 was the collapse in sale of alcopops. Sales slumped 25 per cent and these drinks are seen as accounting for less than 1 per cent of bar sales in 2005, according to the group.

On the spirits side, Diageo's Smirnoff, which is the top vodka brand in Ireland, saw sales surge 12 per cent following its relaunch. Sales of Bailey's were 6 per cent ahead, year-on-year.

However, sales of Smithwicks and the group's local lager brands - Budweiser, Carlsberg and Harp - fell 10 per cent, hurt in part by lower summer temperatures.

Diageo expects to start transferring production of Guinness for the British market, where it is growing, to St James's Gate from April. The €23 million move will be complete by the end of June, leading to a 50 per cent increase in output from the Dublin brewery.

Group wide, Diageo sales were down 1.5 per cent at £499 billion (€723 billion). Pre-tax profits were 5.5 per cent lower at £1.19 billion with a fraction rise in operating profit.

The company no longer breaks out profit figures for the Irish market.