Model maker Hornby made a pre-tax loss of £4.5 million in the first six months of its financial year but bosses remain upbeat after an upturn in trading.

The news comes after the company warned shareholders last month to expect losses as it suffered a 45% decline in sales in July as it brought in new planning systems, known as ERP, which disrupted normal activities.

Sales were also down 8% in August but are up 10% year-on-year since the beginning of September.

The company, which moved its head office from Margate to Sandwich in February, revealed revenues slipped to £22.3 million in the six months to the end of September, compared to £24.1 million in the same period last year.

It made an underlying pre-tax loss of £3.4 million, compared to a profit of £245,000 a year earlier, but said net debt had been reduced from £11 million to £5.7 million.

It has exchanged contracts to sell part of its old headquarters in Margate, which is likely to be turned into commercial property.

It is in negotiations with the same company to sell the rest of the site, which is still home to its visitor centre.

This will move into a new building in Ramsgate’s harbour area, which is due to open next Easter.

Chief executive Richard Ames said: “We are at an important stage in Hornby’s transformation.

“Our new ERP system is now embedded in the UK operation and following significant disruption in the first two months, the business is performing well in the important Christmas and New Year period.”

“We have pulled forward our reorganisation plan for our European operations, which has contributed to further trading disruption but which accelerates our overall plan.

“We are confident that these changes will give us the platform from which we can drive our business forward.”

As well as model trains, Hornby also makes Scalextric, Airfix models, Humbrol paints and Corgi die cast models.