DSG facing tough times following plunge in profits

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The former Tesco executive starts work next week and will immediately be faced with a messy Italian operation, strife at PC World and an economy that has put the skids on consumer confidence.

He will also need to win over a sceptical City, which is concerned about future dividends and dubious about the value of the shares. DSG is poised to drop out of the FTSE 100, giving little encouragement to buy the stock.

Today the group behind Currys recorded a 26% fall in first-half profits to £52.4 million, a number that chairman Sir John Collins called " disappointing".

PC World has suffered from falling margins and a massive oversupply of laptops. UniEuro, the struggling Italian arm, lacks management strength by DSG's own admission and is operating in a particularly tough economic environment.

DSG makes most of its money in the run-up to Christmas, meaning the next two months are vital.

Sir John said it is difficult to " extrapolate trends" based on recent sales but that it is "appropriate to be cautious about the consumer environment in 2008".

DSG is also in a dogfight with Carphone Warehouse, which is giving away electrical goods such as PlayStation as part of its internet broadband package.

Finance director Kevin O'Byrne downplayed this today, insisting it had not hurt sales at Currys. "Their brokers are making a big deal of it, but you have to sign a long contract with high tariffs," he said of the Carphone offer.

Overall sales at DSG in the six months to 13 October rose 8% to £3.37 billion. Like-for-like sales are up 5%. The interim dividend was level at 2.02p, a relief to investors nervous that it would be cut.

Nick Bubb at Pali International said in a note to clients: "The disappointing profit fall is in line with expectations. The key thing is that the interim dividend was held.

"Unless bid rumours revive, it's hard to see much short term upside pre-Xmas."