HIGH Street spending around Christmas time is crucial to the fortunes

of Amstrad, the consumer electronics company founded by Alan Sugar.

Given continuing weak demand for its mature products throughout Europe

and internal restructuring within the company it is not surprising that

profitability is under pressure.

In the six months to December 31 it made a smaller-than-expected

profit of just #25,000 before tax in what has traditionally been the

stronger trading half. That compares with #1.7m previously but the

interim dividend was maintained at 1.0p.

Profits were dragged down by about #7m of stock write-downs and

rationalisation provisions which pushed continuing operations into a

loss of #8.5m. Most of the write-downs relate to Amstrad Consumer

Electronics (ACE).

Normally one would have expected Amstrad to make a loss at the

year-end on the basis of its low interim profitability but Mr Sugar said

that the nature of Amstrad's business had changed to such an extent that

''seasonal factors are not as significant''. He added that the half-year

position should be maintained in the second half.

Of more importance to the future is the progress made by David Rogers,

the new chief executive, in reshaping the group's business. ACE is said

to have improved its trading performance recently helped by the

establishment last November of a direct selling operation. Amstrad

Direct sells faxes and computer direct to consumers. The benefits of

restructuring ACE under new management are expected to be felt next

year.

Two recent acquisitions are making encouraging progress. Viglen, the

personal computer manufacturer, made a profit of #5m. Its production

capacity will increase with the opening of a new factory.

The company's policy of taking an immediate write-down against

reserves of goodwill arising from the Viglen acquisition led a reduction

in Amstrad's net asset value. Net current assets dropped to #177.8m from

#228.1m.

Dancall Telecom, the telecoms equipment manufacturer, is said to be

making money. Later this year Dancall is to launch its new digital

cellular telephone.

Also on the positive side the group's balance sheet was strong with

net interest of #2.7m on its #136.4m cash pile.

Many in the City believe that Anstrad has turned the corner and can

look forward to a brighter future. The strong cash position together

with analysts forecasts for profits of #15m-#20m in 1996 helped Amstrad

shares gain 8p to 141p.