Hornby delighted as group sees demand pick up steam

In November, the Airfix and Scalextric firm reported caution among some UK retailers on buying in stock, but the situation "improved significantly" in the run-up to the festive season, Hornby said.

The trend continued into early January as demand for its collectibles remained undimmed, putting retailers' stocks at "historically low levels".

"We are delighted that the appeal of our products remains strong," Hornby added.

Best-sellers for the Margate-based company included Scalextric products based on the Formula One Grand Prix teams, and Disney/Pixar's animated adventure Cars.

Hornby has also secured licences with Disney/Pixar for model tie-ins for Toy Story 3, which is set for release in the summer.

The group holds the rights to produce branded toys for the London 2012 Olympics – including a limited edition of the London-Beijing-London handover bus.

Hornby has gained positive feedback on its early Olympics products and will launch more collectables across its brands later this year.

The firm continued to make improvements to its supply chain in China, which was disrupted by the takeover of its main supplier by Hong Kong toy firm Kader.

Hornby has broadened its supplier base to reduce its exposure to a single company, although Kader is now delivering increased capacity and volumes.

This gave the firm "renewed confidence" over being able to meet demand – particularly in Europe, where profits will be "significantly ahead" of last year.

The strength of the euro has helped offset the weakness of the pound against the dollar earlier in the year.

This left pre-tax profits sharply lower in the six months to September 30, at 700,000 against 1.8m a year earlier.

Chairman Neil Johnson said the recent pick-up in the pound against the dollar would also help the firm rebuild squeezed UK margins and stand Hornby in "good stead".

Numis analyst Andrew Wade said: "Looking ahead, Hornby continues to innovate, leverage its brands, and de-risk its supply chain and we see considerable scope for growth over the medium term."