by Trevor Sturgess

Kent-based international hobby products group Hornby has steamed ahead in the final quarter of the year, reporting an excellent financial performance despite challenging conditions.

In a trading update, the company - whose iconic brands include Scalextric, Airfix, Humbrol and Corgi - said that a good Christmas was followed by strong orders.

But the Margate firm admits that the year ending March 31 was challenging, with adverse foreign exchange rates and de-stocking by retailers in the early half of the year.

An improved second half saw strong cash generation and debt reduction.

Hornby has won a licence from Disney Pixar to produce model trains and racing cars featured in Toy Story 3 film due out this summer.

It also has an exclusive worldwide deal with the Mercedes GP Formula One racing team to make products featuring German driver Michael Schumacher.

It builds on an existing relationship with McLaren and its British champions Jenson Button and Lewis Hamilton.

The company claims that its recently-launched 1:24 scale Mosquito in the Airfix range is one of the finest model kits ever produced.

The company also expects to benefit from the early release of Olympic Games 2012 merchandise.

Models of the Hitachi 395 high-speed trains operating across Kent are also proving popular, with the first in Olympic livery due out in September.

Neil Johnson, chairman, said: "Whilst the challenges to the global economy are likely to remain with us for some time, we enter the new financial year in a positive frame of mind.

"We have continued to invest in product innovation, introducing exciting new ranges. We are delighted that, as a result, demand is growing both in the UK and overseas markets.

"We continue to see opportunities to build our business and generate improved returns for our shareholders."

Hornby's full-year results will be released in June.