Model railway and Scalextric fans ensured hobby firm Hornby reported a strong finish to 2007 trading. The group reported 'significant growth' in its UK market in the run-up to Christmas.

The good news was, however, offset by supply problems in continental Europe prompting analysts at house broker Dresdner Kleinwort to downgrade the company's 2008 numbers. Shares were flat in early trade at 197.3 pence.

Dresdner Kleinwort said the company's fundamental investment case was intact but that it was revising it pre-tax profit forecasts to March 2008 to £9.3 million from £9.7 million previously.

Dresdner said: 'The hiccough on supply is disappointing, but this should not detract from the resilient Christmas trading performance as well as the fact that order intake and sales for 2008 both in Europe and the UK are significantly up on last year.'

Chairman Neil Johnson said: 'A strong finish to 2007 shows once again that Hornby is extremely resilient in times of economic uncertainty.' Hornby said it was confident that Scalextric products based on the Mercedes McLaren team and its driver Lewis Hamilton will continue to do well.

After increasing its exposure to continental Europe in recent years, following the acquisition of businesses in Spain, Italy, France and Germany the company said the rate of new product introduction had strained the supply chain.

Hornby added that steps were being taken to strengthen the management and manufacturing resources available to the company.