Long-standing supply chain issues have promped a model manufacturer to issue a warning to shareholders over its performance.

Hornby says sales have been below expectations since October and that delays with its supplier will likely lead to a £1m loss overall in the year ending March 31, 2014.

The Margate-based manufactuer, which employs about 250 people, says arrangements have been agreed in the last week to cease working with one of its major suppliers.

Their final production from them will be completed in July, with the firm paying about £600,000 for materials, work-in-progress and components.

Executive chairman, Roger Canham said: “Whilst the outlook for the year is disappointing, we have used this year of management change to make some important decisions that we are optimistic will enable us to return to growth.

“Importantly, we have now reached a conclusion with our previous major supplier.

“I am confident that this draws a line under this painful period of the group’s recent trading.

“The board is encouraged that from here, we will have a more solid supply base from which we can grow our market share in the UK and European markets.

“Whilst the retail sector remains challenging, we have the strength of brands and an exciting pipeline of product launches to enable us to restore Hornby’s financial performance in the years to come.”

In November, Hornby announced losses of £700,000 in the six months to September, up £200,000, which it put down to opening 35 concessions at WHSmith and Hawkins Bazaar stores across the country.

Its turnover for the period was £22.5m, down from £23.5m the year before.