Theo Fennell rides to the rescue of his own company

Theo Fennell – the jewellery designer once dubbed the "King of Bling" for his diamond-encrusted crucifixes and silver Marmite lids – is returning to rescue the company he founded from falling sales and a creative dead end.

From his first shop on London's Fulham Road in 1982, Mr Fennell became the jeweller to the stars, with David Beckham, Liz Hurley, Elle Macpherson and Elton John among the names on its celebrity-studded client list.

Mr Fennell was forced out in February 2008, after differences of opinion with the board over the direction of the company. But since his departure, sales have plummeted – down by 21 per cent over the crucial Christmas period.

In the major shake-up announced yesterday, Mr Fennell is being reinstated as creative director, and has increased his stake from 15 per cent to 19.3 per cent. Rupert Hambro, the former chairman of Hamleys, and Alasdair Hadden-Paton, a former finance director at the Townhouse hotel group, are also joining the company as major shareholders. The three between them will control 29.9 per cent of the stock. Meanwhile, Richard Northcott, the chairman of the board who co-founded the company with Mr Fennell has resigned, as has Viscount Cowdray, a non-executive director. Both will remain shareholders.

Mr Fennell described his decision to return as "necessary" yesterday, and said a situation had evolved which was conducive to his return. "The company was quite patently underperforming," he said.

The problems stemmed from the group's move away from the ostentatiously original designs pursued by Mr Fennell in favour of a more mainstream agenda, alienating its super-rich customers and leaving it more exposed to the problems in the economy. "The direction the business was taking was one that was more radically affected by the recession than its natural market would have been," Mr Fennell said.

"The key to our success was that we were designer led, our selling point was that we were different to everyone else. After my departure perhaps there was more emphasis on the commercial. In the spirit of the designs, the direction was more high street, producing accessories ranges and so on.

"Jewellery is not like handbags and shoes, it is a more emotional thing," Mr Fennell said. "It is a heartfelt business that is very talismanic. Jewellery has a unique place in people's lives and it needs to be made with respect."

Mr Fennell's return as the creative driving force at the company is not the board's only volte-face. Barbara Snoad, the former chief executive replaced by Pamela Harper a few months before Mr Fennell's departure, was also recently re-appointed. On the creative side, Mr Fennell's role will be the same as before he left. But with the full backing of the board behind his taste for the relentlessly original, he will have more control.

"My head is exploding with ideas, but it normally is," he said.

The first one-off pieces will be available within days, with the first new collections likely to hit the shops at the end of July.

Rupert Hambro, the incoming chairman, said: "I have long been an admirer of Theo's design genius and the original business that he created. The group lost direction in 2008. With Theo returning, working alongside Barbara Snoad, we have the right team in place to re-build and grow the business."