Model railway firm Hornby said today it was on track to make its first profit in three years.

The Kent-based company, whose brands include Airfix, Scalextric and Corgi, said that strong sales over the year left it in line to deliver an underlying profit of around £1.5 million, matching market expectations.

The firm said sales in the last quarter improved significantly, against a particularly weak quarter a year ago. It expects annual sales for the group and the UK business to grow by 13%, which lifted shares by 5%.

Hornby made a loss of £516,000 in the six months to September 30 amid long-term supply problems, but the deficit was half the level seen a year before.

The firm encountered difficulties in 2012 after its biggest manufacturer shut a factory producing the group's model railways in a year that also saw it suffer slower-than-expected demand for Olympic-themed products.

But at the time of its half-year results in September the firm said it had made 'material progress' with its turnaround after it moved to a purpose-built warehouse near Canterbury and addressed some of the supply chain issues which have blighted the business.

The firm said the move from its historic headquarters in Margate, where it has been based for more than 60 years, to new offices in Sandwich is under way, and is expected to be completed by the end of May.

The next phase of the group's reorganisation will include the rationalisation of its European warehouses and management structures later this year.

The company said it had opened talks with its banks to discuss funding options for this investment, and expects these discussions will have concluded by the time it releases its annual results in June.

Chief executive Richard Ames joined the firm last April from bookmaker Ladbrokes to lead the turnaround. He said: 'The business is in good shape as we continue to make encouraging progress with our strategy to drive Hornby's recovery.'

Brokers at Numis said: 'Hornby has posted a strong end to the year.'

The toy firm added that its group finance director Nick Stone will leave the business later this year to pursue other opportunities, adding that a search for his replacement has already begun.