Accounts filed at Companies House for the family owned Rutherglen business show its turnover slipped 3.2% from £9.1 million to £8.8m during 2012.
Turnover from the rest of the world grew from £256,049 to £264,107 but in the UK it slid from £8.8 to £8.5m.
The dip in revenue meant pre-tax profits fell 52% from £265,375 to £127,434 during the year.
However positive cashflow across the 12 months saw net debt shaved by almost 44% from £1.03m to £581,341.
Writing in the accounts the directors pointed out they had planned ahead for the difficult conditions and said: "The company had taken the position of caution on manufacturing new products and decided that building a stronger client base was the priority for 2012.
"The benefit of this will be seen from 2013 onwards."
As well as its own creations - ranging from scooters and skateboards to dinosaurs and bubble guns - H Grossman has licenses for franchises such as Ben 10, Doctor Who, Moshi Monsters, Hello Kitty and Mr Men.
It supplies into high street staples such as Asda, Toys R Us, Smyths, John Lewis and Argos as well as a number of independent retailers.
Average staff numbers at H Grossman rose by one to 34 with employee costs going from £823,071 to £839,695.
Directors' remuneration decreased from £216,708 to £211,387 with the highest paid seeing their emoluments rise from £68,895 to £82,938.
Stock levels at the year end were at £4.7m, down from £5.2m at the close of 2011.
H Grossman is controlled by husband and wife team Martin and Elinor Grossman.
The business was started in 1946 by Martin's father Harry Grossman.
At the London Toy Fair in January this year the company unveiled a range of four-metre long dinosaurs which could be ridden by a child and cost up to £9500.