Concern in the City about heavy trading in Caradon shares late on Friday intensified yesterday, amid concerns that newspapers were tipped off about its financial health.
Yesterday's warning from Caradon, which owns the Alpine and Everest double glazing companies, that interim profits would be unchanged at pounds 90.2m, and even lower in the second half, was brought forward from Thursday. The interim dividend is being held at 2.9p.
On Friday, Caradon was the stock market's most heavily traded company after late afternoon dealings saw 26 million shares change hands at around 210p each, well below the closing price of 221p.
Yesterday's profits warning sparked a number of analyst downgrades, and the shares fell 18p to 203p in turnover of 10 million. The price reached 257p in May.
Dealers expressed concern over Friday's trading, implying that the parties involved were aware of Caradon's poor performance. Reports in two Sunday newspapers that the company's results would be disappointing added to their suspicions that there was a leak.
Suggestions the company tipped off the newspapers to soften the blow in advance of the profits announcement were strongly denied by Caradon. "It is clear that some information was in the market on Friday," a spokesman said. "If a company thinks there is a danger of a false market in its shares then they should make an announcement. We did this."
The Stock Exchange declined to comment, though one City source said the regulators had decided to act, if only to clear any individuals involved.
Caradon, which makes windows, doors and boilers, blamed a big depression in its markets, particularly in the US, for the poor first-half figures. UK and European markets have also been weak.
Caradon said: "The general market has declined but a massive amount of de-stocking seen at our major distributors worsened the performance, especially in window and door products. We have not yet seen any improvement to the current difficult market conditions, and we do not expect any improvement in the second half of 1995. Accordingly, we do not expect pre-tax profits for the second half to reach the level achieved in the first half of 1995."
The company said it would give details of rationalisation provisions at its official interim results statement on Thursday.
It is thought that the provisions will further reduce analysts' full- year expectations. They yesterday downgraded profits to pounds 165m-pounds 175m, from pounds 210m-pounds 220m.
Underlying profits were actually lower, since the results include a pounds 5.4m gain from buying a stake in Germany's Weru.