Due to rising costs and weaker-than-anticipated sales, Hornby is on course for a modest annual loss, the retailer of models and collectibles reported.

The model train company, which also produces Scalextric vehicles and Airfix model airplanes, reported to its shareholders that sales improved in the final quarter through the end of March, but will fall short of internal projections.

Comparing the current quarter to the same period last year, direct-to-consumer sales grew by 49%.

However, this was insufficient to compensate for the dismal performance during the Christmas quarter, when sales fell short of projections.

“Although group sales and gross margins for the fiscal year ending 31 March 2023 were higher than the previous year, we fell short of internal budgets for the full year,” it stated.

At approximately midday on Tuesday, Hornby shares were down nearly 7 percent to 21.9p. They have lost approximately 37% of their value in the past year.

At the end of March, the company had a net debt of £5.8 million compared to net cash of £3.9 million at the end of March 2022.

This was primarily due to an increase in year-end inventories and a decline in sales, according to the company.

“We remain cautious in our outlook due to the uncertainty surrounding the impact of several factors on our sales, including inflation, mortgage rate increases, and the rising cost of living for all consumers,” the statement continued.

In June, Hornby will release its full-year results.