Sony, the world's second-largest consumer electronics maker, has reported a 24.5 per cent drop in annual profits.

Net income was 123.6bn yen ($1.06bn) in the year ending March 31, down from 163.8bn a year earlier.

However, group operating profit was a better-than-expected 191.3bn yen, up from 113.9bn a year ago.

Financial analysts had expected operating profit of 130.8bn yen, while Sony's own forecast was just 100bn.

Full-year sales jumped 4.4 per cent, driven by strong demand for flat panel TVs.

In the fourth quarter, Sony made a net loss of 66.5bn yen, worse than the 56.5bn figure recorded in the same period in 2005.

Sony has attributed the drop in annual profits to the high cost of restructuring.

The company has also been hit hard by rising development costs for its next-generation PlayStation 3 (PS3) video console.

Sony has been forced to delay the launch of the PS3 until November due to technical hitches related to the machines Blu-ray high-definition DVD player.

For the current 2006/2007 financial year, Sony predicts that net income will increase by 5 per cent but operating profit will fall by 48 per cent.

Shares in Sony closed up 0.67 per cent at 6,030 yen in Tokyo. Full-year results were announced after the market closed.