Model maker Hornby has been given a lifeline from its bank after it waived conditions on its loan for this month.

The Sandwich-based toy firm revealed in February it was at risk of breaking its lending agreement, with expected trading losses set to reach up to £6 million this financial year.

However Barclays agreed to waive convenant tests for March after “constructive dialogue” with management at the troubled business.

Hornby said trading is in line with expectations, with second half sales for the year so far down 2%, although its UK business is up 4%.

Executive chairman Roger Canham said: “The group welcomes the continued support from its lender, Barclays.

“Recent trading has been encouraging and the board is pleased with the positive like-for-like growth that our core UK business is delivering.

“We will update shareholders on the continued progress that we are making when we announce our results for the year in June.”

The company, which has its visitor centre in Margate, suffered a share price collapse after it wiped £3 million of profit forecasts in February.

It also scrapped another £1 million after a full stock take at its warehouse in Canterbury and review of its European balance sheet.

Its chief executive Richard Ames quit the company days later.