Scheme is set to benefit all the employees who contribute to the success of the business.

Hornby said it was making steady progress in its efforts to turn the business around despite falling sales, and announced a profit share scheme for its employees.

Hornby narrowed its underlying half-year loss to £3m from a £4.6m loss a year ago though revenues fell by more than £3m to £13.8m. It also cut its net debt to £1.8m from £4.7m.

The company said its plans to transform the group were going well and that it had removed its aggressive discounting strategy, now favouring the long-term health of the brands over the short-term sales.

“Having slammed on the brakes as hard as we could to prevent further damage to the brands from discounting, the trust in the supply chain is starting to move in the right direction,” CEO Lyndon Davies said in a statement.

“Motivation and alignment has been an issue in the past for the business, especially for staff below the board level who have not had their fair share of the rewards. As a result, I am proud to announce a profit share scheme for our employees. Employees at all levels who contribute to the success of the business will share in the rewards,” he added.

Davies said Hornby will give staff a one-off 5% bonus for getting to break even and around 15% of operating profit shared between employees thereafter.

Shares in the company were 7.7% down at 30.00p in early trade.