Model maker Hornby has said it could go out of business unless shareholders approve a turnaround plan which involves raising £8 million in a new share offering.

The train set manufacturer, which is also behind Scalextric, Corgi and Airfix, revealed losses of £13.7 million in its latest annual results today as the introduction of new planning systems disrupted its business more than expected.

Its turnaround plan aims to reduce the size of the firm, streamline its operations in Europe and focus on its most profitable brands.

It has also renegotiated its £10 million loan with Barclays into a revolving credit facility, repayable over the next three and a half years, subject to approval of the new share placing.

It is unclear what the new measures mean for dormant plans to build a new £1.6 million visitor centre in Ramsgate, replacing its historic attraction in Margate.

The company, based in Sandwich, parted ways with its former chief executive Richard Ames in February after a string of profit warnings.

Its results reveal revenues fell 4% to £55.8 million giving it an underlying pre-tax loss of £5.7 million, after making a £1.6 million underlying profit before tax a year earlier.

Executive chairman Roger Canham said the plan would be put to shareholders next month but admitted “if they are not approved there are serious concerns over the group’s ability to continue as a going concern”.

Hornby, which runs its warehouse operations from Hersden, near Canterbury, made its finance director Steve Cooke its new chief executive in April.

Mr Cooke said: “Last year was difficult and disappointing as we faced significant challenges during the continued turnaround and improvement of the business.

“We were pleased with the progress made in modernising many of our systems and processes, but much of the change last year resulted in substantial unplanned disruption which had a significant adverse impact on trading performance.

“The board has now completed a thorough review, which has identified that many core parts of the group are stable, profitable and cash generative, driven by iconic brands with strong market positions.

“The review has also identified areas that require fundamental change. The turnaround plan is intended to return the business to sustainable profitability and cash generation.”

The company aims to implement the turnaorund plan through the rest of this year, with its first impact expected to be seen in early 2017.