Limelight shares lost more than 40 per cent of their value, closing 27p down at 37.5p. They were priced at 175p when the company was brought to the market last November with NM Rothschild acting as its financial adviser and Cazenove, the blue-blooded City firm, acting as broker.
Some institutions noted that Rothschild was also adviser to Aerostructures Hamble, the engineering business chaired by Lord King, which issued a series of profits warnings after coming to the market in 1994. It was eventually taken over a year later at a fraction of the issue price. In that case there were threats of litigation from institutions though it never materialised.
It is possible that there could be a Stock Exchange investigation into the performance of Limelight shares, though the exchange refused to comment yesterday. "It is a disaster," said one institutional investor. "It may be one for the regulators."
Limelight blamed the latest warning on "unprecedented decline" in appointments at its Moben kitchen showrooms in the first quarter which caused sales to drop by a third in the first three months. The Portland conservatory business was also affected by local competition.
Stephen Cotter, chief executive, admitted the performance was poor but said he had not been subjected to any pressure from institutions for boardroom changes. "We are as devastated as the shareholders. But no one could have foreseen these massive decreases."
Stephen Boler, the Cheshire entrepreneur who developed the company and made pounds 60m from the float, still owns 17 per cent of the shares and is a non-executive director. He has written to the company saying he has no intention of returning to an executive position or of taking the company private.
Reporting a slump in first-half operating profits from pounds 8.1m to pounds 700,000, Limelight said sales at Moben-Kitchens Direct, Dolphin Bathrooms and Portland conservatories had all fallen sharply. Only Sharps bedrooms recorded a sales gain. Dolphin and Portland slumped into a loss in the period.
Mr Cotter said trading had increased since the end of the half year with overall group sales in the first nine weeks up by 5 per cent on the same period last year. However he admitted that a kitchens and bathrooms company should be seeing more benefit from the pounds 30bn of building society windfalls.