Shares in Hornby were soaring over seven per cent this morning after the company said it would be resuming dividends thanks to rising sales momentum in the year ended 31 March.
The group, which as well as providing model railways, owns Scalextric, Airfix, Corgi cars and Humbrol paints, saw turnover increase five per cent to £64.7 million.
Despite this Hornby saw its underlying profit before tax fall from £6.3 million last year to £5.7 million. Net debt however was slashed significantly in the year from £11.8 million to £3.2 million.
Hornby said it would be resuming a dividend payment of 5.0 pence per share.
The group's sales were helped, especially in the second half of the year by sales of Toy Story 3 products. There is also speculation that the group may have been helped by the "James May effect".
BBC presenter James May fronted a TV series just before Christmas in which he expounded the virtues of traditional toys some of which are owned by Hornby, such as Airfix and Scalextric. The series may have helped boost Hornby's Christmas sales which were high enough to leave it with "historically low" levels of stock.
Frank Martin, Chief Executive of Hornby, said, "We have made excellent progress during the year. Demand for our products has remained robust and we enjoyed a strong finish to the year. Many of our UK retailers have been keen to re-stock after a strong Christmas trading period.
"Given the strong cash generation over the year, we have reduced our debt levels significantly. This has also enabled the Group to be able to announce the resumption of a dividend. This is an important step and demonstrates our confidence in the strategy and the financial strength of the business.
"Looking forward, Hornby is in excellent shape. We have agreed a number of new exciting licenses including collaboration with Disney/Pixar to produce products associated with the new Toy Story 3 Movie. Importantly, we continue to introduce more merchandise associated with the London 2012 Olympic Games. We expect these product lines to perform well as we get closer to the games."
By 08:49 shares in Hornby were up 7.68 per cent to 137.83 pence per share.