Hornby recovery derailed by slow start

The group - whose brands also include Scalextric, Airfix and Corgi - said UK trading was far worse than expected in January as its new year promotions failed to boost flagging sales.

It now expects to post “substantially” wider underlying pre-tax losses for the full year, at between £5.5m to £6m, and revealed a £1m write-off after reviewing its stock and balance sheet.

Hornby said it was now in talks with its lender as the scale of losses could see the firm breach its banking agreements.

The group admitted the new year woes marked a “substantial setback in our recovery plan”, as it had hoped to turn the corner after a tough past few years that have seen the firm beset by troubles.

It had suffered major disruption from new computer and stock management systems, while European trading was also impacted by troubles with suppliers in China.

The group had seen buoyant trading in the run up to Christmas, when like-for-like sales rose 17 per cent throughout November and December, according to Hornby.

But trading since the start of the new year has been in “stark contrast”, it added.

The Kent-based company said while UK trading is expected to improve in February and March, sales will still be “significantly” behind previous expectations.

International sales have also fallen short of forecasts, despite returning to growth, rising by 5 per cent across December and January

Richard Ames, chief executive of Hornby, said: “Undoubtedly this is a disappointing result, but we have a strong portfolio of brands that we are determined to see flourish.”

In December, Hornby posted half-year losses of £4.5m in the six months to September 30, up from £500,000 a year earlier.