Toy firm Hornby is facing a full-year loss after being dogged by lengthy supply chain woes with a major model railway manufacturer in China.

The Margate-based group, whose brands also include Airfix, Scalextric and Corgi, said sales over the crucial Christmas period were "reasonably strong", but that supply issues will hit revenues and profits for the year to March 31.

It has agreed a deal in the last week to cut ties with the Chinese supplier from July, although it said the impact on sales in the current year would wipe out profits at an underlying level while a further currency blow would leave it with losses of £1 million overall.

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Shares slumped more than 7% after the warning, which comes after a difficult past few years for Hornby.

The firm was first left with a supply squeeze in 2012 after its then 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.

It has since been broadening its supplier base, moving production to other Chinese firms as well as those in India and bringing some manufacturing back to Britain.