Shares in Colorvision slumped 12 per cent yesterday when the Liverpool- based television and video retailer issued a profits warning following the decision by the Office of Fair Trading to revoke its consumer licences in January.
The company complained bitterly about its treatment by the OFT and said the issue now threatened its survival. The board has appointed advisers to identify companies who might buy a stake in the group.
As the shares fell 3p to 23p compared with their 250p peak in 1988, chairman Neville Michaelson said: "It is a tragedy that this case has been allowed to go so far without any debate as to the consequences and how it could be resolved. The directors will continue to fight to preserve this 32- year-old business on behalf of its 750 employees, our shareholders and the 200 sub-contractors and small businesses who are dependent on us."
The company has appointed Anthony Scrivener QC to act on its behalf on its appeal against the OFT decision
Mr Scrivener said: "In my opinion it is clear than the OFT has misdirected themselves in law and in fact on many important issues. I have no hesitation in advising the company to appeal."
In its trading statement yesterday the company said it now expects losses for the year to March 31 to be greater than current expectations among analysts of a pounds 750,000 deficit. The company said it was unlikely that there would be any major improvement in trading until the issue on credit licences had been resolved. Sales excluding satellite systems have been 29 per cent down on the comparable period last year.
The OFT stripped Colorvision of its consumer credit licences after concluding that the company had used misleading price information, not offered refunds where appropriate and entered false information on credit arrangements.
Colorvision is appealing against the decision and has said its infringements have not been unduly serious or unique in the industry. That process could normally take up to a year, however the OFT has now agreed to meet with the company to discuss the issue. No date has been fixed as the senior OFT official who will be chairing the meeting is on leave.
Colorvision gave immediate notice of appeal to the DTI and pending the outcome of the appeal, the company's credit licences remain in place. However, the company said the OFT statement contained "emotive statements" which had achieved widespread publicity.
Speaking on the company's Mr Scrivener QC said that the group's credit licences were renewed by the OFT in September 1993 and that much of the evidence that gave rise to the decision, predated that renewal.
Colorvision says it has developed new procedures and training methods to deal with any problems.
Colorvision was once a stock market darling in the late 19080. But since then the recession and the cut throat conditions in the electrical retailing market have taken their toll.
The company said in January that it said it felt it had been singled out by the OFT and said that the company would not have survived for 32 years if had not treated its customers correctly. But the bad publicity seems to have cast a pall over the group and its market capitalisation has now slumped from its pounds 50m peak in 1988 to just pounds 4.5m yesterday.