Hornby has hiked sales in the past year despite challenging economic conditions.

The company, well known for its iconic Hornby model railways, Scalextric slot cars, Corgi die cast models, Humbrol paints and Airfix model kits, raised turnover by five per cent to £64.7 million in the 12 months ending March 31. However, pre-tax profit dipped from £6.1m to £5.2m.

Strong cash generation enabled the Margate firm to slash debt from £11.8m to £3.2m and resume dividend distribution. It will pay 5p per ordinary share on August 20.

Hornby has secured a wide range of product rights related to the 2012 London Olympic and Paralympic Games. The first were released recently and the company has appointed a project director to manage London 2012 product development.

They range from Corgi vehicles to limited edition Hornby train sets. Despite the controversy over the Olympic mascots, Hornby's chief executive Frank Martin expects the die cast models to be particularly popular.

"We believe that the London Olympics will provide a significant opportunity to drive incremental sales and profits over the next two years," he said.

The company is also working with Disney/Pixar on products linked to Toy Story 3. "Looking forward, Hornby is in excellent shape,†Mr Martin added. "We now have the brands, the products and the distribution network required to grow consistently over the coming years."