Hornby brings divi out of the siding

The group, which as well as making model trains owns iconic toy brands Airfix and Scalextric, did not pay a full-year dividend in 2009 due to the volatility of sterling against the Hong Kong dollar, the currency in which most of its purchases are made.

Despite issuing a trading statement less than a month ago, Hornby yesterday said the year to 31 March had finished "even more strongly than we expected".

It now expects profits in excess of market predictions and said it intended to recommend a resumption of dividend payments.

Chief executive Frank Martin said he was "comfortable" with house broker Numis's revised underlying pre-tax profit forecast of 5.7 million for the year to the end of March.

That compares with mean forecasts of 5m on revenues of 65m in a poll of analysts. Numis said it appeared that a greater proportion of Hornby's stock had benefited from more favourable currency fluctuations.

It also praised a strong pipeline of new products, with a line-up that includes Toy Story 3 merchandise deals for Hornby and Scalextric, new packaging and models for Airfix and an Olympic Games product for Corgi.

"We expect this innovation to drive sales growth across the board," Numis analyst Nick Coulter added.

Hornby's supply chain in China was disrupted by the takeover of its main supplier by Hong Kong toy firm Kader in 2008, but the company has since worked to reduce its exposure to a single firm. It is due to announce its annual results in early June.

Martin said Hornby's order intake was "substantially above" the same period last year as confidence returned throughout the distribution chain and he expected Hornby's core business to be "much stronger" in 2010.

Shares in the group closed up 18p or 15.3 per cent at 136p.