The Olympics provide little cheer for Hornby

The group had hoped sales of its merchandise would drive a bounce-back in profits but admitted that demand for London 2012 items – such as model taxis and buses – had been lower than expected. Faced also with major disruption to one of its largest suppliers in China, Hornby, based in Margate, Kent, said it is now expecting to break even in this financial year.

The group – which makes model railways, Scalextric racing cars and also owns the Airfix and Corgi brands – has been hit by weak consumer spending amid the recession and saw profits fall from £4.5m to £3.4m in the year to March 31. Shares fell by more than a third after the profit warning.

Hornby said that, despite encouraging early demand for Games-related products, the presence of substantial quantities of other London 2012 goods meant sales failed to deliver.

“Retailers lost confidence in many categories of London 2012 merchandise and repeat orders for our products were cancelled,” it added. The group said it would be “constrained significantly” in the current financial year, but would keep a tight lid on costs and had “redoubled efforts” in product development and innovation in order to turn sales around.

Hornby is also looking for other suppliers in China and India after one of its main manufacturers announced it was rationalising its facilities.

The Chinese supplier accounts for more than a third – around 35 per cent – of Hornby’s purchases, although the firm said it had already reduced this from around 75 per cent four years ago.

Hornby said: “The current disruption is part of a painful process but we b elieve that, working with all our suppliers, we will be able to work through this process to arrive at a more balanced supply base.”