If there was a prize for the most punned business in Britain, Hornby would surely take the crown. Every year, the model train and plane maker’s results would either see Hornby “steaming ahead” or “hitting the buffers”.

But there isn’t such a prize, and the only one that Hornby looks like taking is the infamous title of the first major collapse of 2016. A £9m bank loan, of which major chunk is due next month, cannot be paid. Bosses at Hornby’s headquarters in Kent, are locked in negotiations with Barclays – which has been the firm’s long-term lender for years – as they try to persuade stony-faced bankers that a business which relies on middle-aged men playing with toy trains still has a future.

A sign of their intent was issued on Monday as the chief executive, Richard Ames, departed with immediate effect after less than two years. The former boss of bookmaker Ladbrokes’ online operation bet all of Hornby’s money on a turnaround that has not worked.

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Its sales were positive at Christmas but last month’s figures proved too much and the much-vaunted revival of the 115-year-old business failed to materialise. Hornby warned that its pretax losses would be between £5.5m and £6m, as it blamed the bigger-than-expected costs of restructuring its European operation and a stock check which revealed a £1m shortfall.

Mr Ames’s exit boosted the company’s shares by 37 per cent, or 9p, to 33.5p last night. But the damage was done last week when another profits warning sent the stock crashing by more than 60 per cent to an all-time low.

So, what went wrong for one of the UK’s most iconic toy makers? Is it going the way of the VHS? Or is it just a hostage to misfortune? 

Most people would initially assume that the model railway business is defunct. In an age of mindboggling technology, smartphones that can run our lives and a virtual world that provides an outlet for millions of teenagers, what chances would Hornby have of winning new customers? Yet the company would point to the fact that – week in, week out – events are held across the country for train enthusiasts, the shelves of WHSmith still stock five monthly magazines targeted at the market and, as the rise and rise of adult colouring-in books has shown, returning to simpler pleasures is making a comeback.

Assuming, then, that there is a market for model railways, Hornby needs to look at itself when trying to work out what has gone so wrong. Obvious signs could be found on its website. A quick look at its Thomas the Tank Engine train sets – one of the firm’s big sellers – showed 20 products on offer. On closer inspection, 11 of these were out of stock, with no indication of when they would be back in again. A further five items were available only to pre-order, leaving just four options to buy. 

More damningly, the pre-orders included a “70th anniversary” Thomas train, which will not be available next month despite the fact that the franchise celebrated its 70th birthday last year. This would suggest that the supply chain, which has been the bogeyman for Hornby  for at least a decade, is still not fixed. 

Back in 1995, Hornby –whose brands also include Airfix, Scalextric and Corgi – thought it had found the solution to its supply problems when it outsourced all production to a Chinese manufacturer, Sanda Kan. However, a decade later, with new owners at the supplier stripping out costs, Hornby would meet its deliveries at the docks only to find shipments half-empty and usually late. When much of your business is reliant on key Christmas sales, a late delivery can mean the difference between “full steam ahead” and “coming off the tracks” headlines.

Sanda Kan was sacked and huge efforts were made to spread responsibility across suppliers in the Far East. But this came at a cost and, as Hornby is now seeing, it has not been plain sailing.

Other issues have come and gone: sets that are not selling, including a disastrous licensing agreement to sell die-cast models based on the London 2012 Olympics that no one wanted.

On message forums, model train enthusiasts complain that many independent retailers no longer stock Hornby products because the company beats them on price by selling directly through its website. Others point out that many models are just too expensive – a side effect of increasing wage demands in China which mean that many sets now cost upwards of £150.

The company’s internal costs have also spiralled. Issues with its outdated warehouse in Margate – a site so small that articulated lorries could not turn around once they were inside the gates – and dilapidated head office were resolved by taking new premises in Canterbury and Sandwich. But again, these costs could not be offset by an increase in sales.

Centralising its operations in the UK and closing European outposts cost money – although the decision will repay in the long term – and an updated computer stock-checking system was installed. This helped to tell management that Hornby was running low on cash. 

Mr Ames insisted that the endless spending would eventually come good. But if chairman Roger Canham, who is in charge for the foreseeable future, cannot persuade the bank that the ousted boss did his calculations correctly, Hornby might be decommissioned for good. 

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