The company, which had a notorious reputation for disappointing investors, had been getting back on an even keel under new management led by Trevor Grice following the abrupt departure of chief executive John Clegg four years ago.
But yesterday analysts cut their pre-tax forecasts from pounds 27m to about pounds 22m after Wace told its annual shareholders' meeting that industry destocking, rising raw material costs and pricing pressures would lead to lower profits this year.
Although its US and continental European businesses are performing in line with expectations, domestic markets for pre-press and labelling are particularly tough.
Analysts said profits at Ferry Pickering, the packaging and folded cartons group bought for pounds 26m last year, will be some pounds 500,000 below forecast.
The profits warning is a setback for Mr Grice, the Yorkshire-born chartered accountant who joined Wace when the shares hovered just above 60p.
He engineered a rapid turnaround in fortunes, first by cutting costs and reducing the sky-high level of debts to manageable levels. More recently, he has tried to re-position Wace away from pre-press printing towards an integrated business offering clients, who include British Airways and food retailer Asda, a "one-stop shop" service embracing pre-press, imaging, cartons and labels.
However, analysts are concerned that while Mr Grice is a proven cost- cutter he has yet to show he can grow the business in difficult market conditions.
"(He) is just not making progress other than through reorganisation. It's more of the same bad news," said one analyst. Another was sceptical about Wace's ambitions to re-invent itself. "I don't like being sold concepts," said one analyst. "I look at a boring manufacturing sector."
Under John Clegg, Mr Grice's predecessor, Wace expanded at break-neck speed through a series of acquisitions in the late Eighties and early Nineties.
The onset of severe recession in the advertising and printing industries led to a string of profit warnings, and Mr Clegg's tenure at the top ended in controversy in 1992 amid allegations of insider share dealing involving members of his own family. These were the subject of a DTI inquiry whose findings have yet to be published.