Model train and slot-car racing toy maker Hornby said in a trading update today that it expected to report a satisfactory trading result for the current financial year despite slow UK sales during the summer of 2006.

Currently celebrating the 50th anniversary of the introduction of Scalextric, Hornby said it was introducing a number of limited edition products and promotional activities to commemorate the milestone and would be encouraging consumers to trade up to digital Systems for both slot-racing and model railways.

Although the company experienced lower sales in the UK market during the first half of the financial year, demand improved during the autumn and continued to strengthen in the run up to Christmas. Orders and sales for the final quarter (January-March) are expected to be above last year’s levels.

The company’s European subsidiaries in Spain, Italy, France and Germany has contributed to growth as had the first-time contribution from the newly acquired Airfix/Humbrol business - a performance which is expected to continue in the January-March period, leading Hornby to expect underlying trading performance for the full year to be “broadly in line with market expectations”, and include a positive contribution from Airfix/Humbrol.

However, statutory reported profits for the current year will be impacted by the effect of the strengthening of Sterling against the Euro during the period with the company's Euro-denominated inter-company loans likely to generate a £0.7 million charge to group

profits (2006: £0.3m gain)Hornby said it was continuing to make good progress in rebuilding the brands it acquired in Continental Europe and that would reduce the company's dependence on the UK market.

The re-launch and future development of the acquired Airfix/Humbrol brands was under way, the company reported, with all the acquired tooling assets now under its control of Hornby. Third-party suppliers were now commencing manufacture of the acquired ranges and new product categories to be marketed under the Airfix brand were under active development.

Chairman, Neil Johnson said: “Christmas sales were encouraging after a period of slow sales in the UK during the summer of 2006 and we therefore expect to report a satisfactory trading result for the current financial year. Strategically, we have continued to make very good progress in building a profitable hobby business across Europe. The acquired businesses have all performed better than last year as increased volumes have come on stream. There is excellent potential to continue this process and to leverage the brand strengths we have in the key European markets. The acquired Airfix/Humbrol brands are expected to make a small but positive contribution in the current financial year, with significant opportunity to re-establish this business in all world markets over the coming years."