Recovery On Track For Train-Maker Hornby

Things are looking up for model railway maker Hornby (LSE: HRN.L - news) as it attempts to recover from its recent financial woes.

The Kent-based business warned last month it was expecting to post "substantially" wider underlying pre-tax losses - between £5.5m and £6m, also revealing a £1m write-off after reviewing its stock and balance sheet.

The losses left it at risk of defaulting on its bank loans - but it now says lender Barclays (LSE: BARC.L - news) has agreed to a waiver this month and the two remain in "constructive" talks.

The firm had suffered major disruption due to new computer and stock management systems and its trading in Europe was hit by trouble with Chinese suppliers.

Having issued profit warnings three times in the past six months, Hornby has seen its market value plunge by more than 70%.

But the group, which also includes Scalextric, Airfix and Corgi, was buoyed by a 7.6% share price rise following Wednesday's announcement.

Sales were worse than expected in January but the company says trading since then has been "encouraging", with UK sales up 4% in the second half to March. Wider group sales fell by 2%, however.

In a statement, Hornby said: "Recent trading has been encouraging and the board is pleased with the positive like-for-like growth that our core UK business is delivering.

"We will update shareholders on the continued progress that we are making when we announce our results for the year in June."