The company also asked for its shares to be suspended pending clarification of its financial position. Ron Welch, chairman and founder of the group, has resumed as chief executive, succeeding Nick Winks, who had held the post since 1986. Alan Macleod, marketing director, has also resigned, although this is believed to be due to cost-cutting.
The group's shares have tumbled from 72p at the beginning of the year to the 25p suspension price. The company announced a pounds 2.3m loss for 1991 and said trading was still poor.
At their peak in 1990 the shares were worth 260p and the company raised pounds 5.2m through a rights issue at 203p in the same year.
The City was surprised by the speed with which the group had run into financial difficulties. At the annual meeting in May, Mr Winks gave no hint of the approaching problems, although he said that trading remained poor and restructuring was in progress.
Borrowings at the end of December stood at pounds 6.7m, 75 per cent of shareholders' funds, although there was a further pounds 3.6m of hire purchase and finance lease commitments and bills of exchange.
It is believed that borrowings have not risen significantly since, but the group has made significant losses in the first half of the year. This will reduce net assets and means the group is in breach of its banking covenants.
Sources close to the company say that Mr Winks was the victim of a boardroom coup led by the non-executive directors - Simon Every, former finance director of Portals, and David Haggett, senior partner of the group's solicitors - following a difference of opinion about strategy.
Mr Winks is a forceful character who was responsible for much of the group's expansion in the UK, Germany and the Netherlands.
But observers say he found it hard to adapt to the change in style needed for the recession.
They add that the scale and suddenness of the group's problems means that negotiations with bankers, led by National Westminster and the Bank of Scotland, are likely to be difficult.Reuse content