Model railway maker Hornby (LON:HRN) chugged into the red in the first half but said it was doing well in the run-up to Christmas.
Hornby made an underlying loss of £3.4mln in the six months to September 30 versus a profit of £200,000 in the same period a year ago.
Sales at the group, whose brands also include Scalextric, Airfix, Humbrol and Corgi, dropped to £22.3mln from £24.2mln last time.
Statutory losses widened to £4.5mln from £500,000 a year ago.
The company has had problems introducing a new IT system, which significantly disrupted trading in July and August, although it was now up and running.
But the group, which has been undergoing a shake-up under chief executive Richard Ames, said UK trading had recovered strongly, up 10% year-on-year since the start of September.
Ames said: "Following significant disruption in the first two months, the business is performing well in the important Christmas and New Year period."
Hornby also faced disruption in its European business due to a restructuring, with supply chain disruption in two European model rail factories hitting trading during the second and third quarters.
The group also exchanged contracts to sell part of its Margate headquarters site in Kent, subject to planning consent.