Luxury goods giant LVMH Moet Hennessy Louis Vuitton SA on Friday posted a sharp rise in first half net profit despite a difficult environment which included war in Iraq and the SARS outbreak.

The Paris-based group reported a 24 per cent jump in six month profit to 265 million euros (£186m) from the year-ago period even though sales fell 10 per cent year-on-year to 5.24 billion euros.

The company said in a press release sales were also hit by the weak dollar but added operating margins climbed to 17 per cent from 14 per cent on cost-cuts and disposal of peripheral brands.

Its core Vuitton brand enjoyed double-digit organic growth but the fashion and leather goods segment which houses 12 brands saw its operating profit slip 1.9 per cent year-on-year to 634 million euros.

Executive chairman Bernard Arnault said: "Unless there is a new accident, we are set for a progressive recovery.

"If the American recovery is confirmed, if Japan continues to give positive signals, and if no new geo-political accident happens we could be back to a normal situation towards the end of the first half of 2004. Europe, however, remains a grey spot."