The company warned that its results for the six months to 31 October were likely to be significantly below market expectations.
Analysts had expected the packaging and specialist furniture company to make pre- tax profits of around pounds 2.6m in the full year, compared with pounds 2.1m last year. The share price fell sharply, ending down 24p at 51p.
Both Masterform and Masterpack, its packaging and display materials businesses, are heavily dependent on computer games.
'Despite the confidence expressed in the chairman's statement of June 1994, it has become apparent that volumes in the video games industry, particularly in the UK, have not recovered in the first half of the current financial year,' the company said.
However, at the time the full-year results were published in June, Masterform was already in difficulties following the loss of a contract for display units by Sega, the Japanese games giant, the previous October.
Video games sales are normally heavily weighted towards Christmas. As a result, the company said it was difficult to predict now the extent of any recovery in the second half. 'However, the board is confident of the long-term potential of the video games market,' it said.