Fantasy wargames retailer Games Workshop yesterday said sales and profits had gone into retreat following the advances made through The Lord of the Rings trilogy.
The Nottingham- based group, which owns the global licence for the tabletop battle-game based on the film trilogy, had warned of a " bubble effect" surrounding the blockbuster films, which caused a rush of fans to its stores to buy a tabletop version of the trilogy.
Sales have now returned to more normal levels, although the company conceded in its annual results that it had underestimated the level of the downturn on figures for the last quarter of its financial year.
Across the year to May 29, Games Workshop said turnover fell to £136.6 million, from £151.8 million a year earlier, while operating profits of £13.9 million compared with £19.9 million in 2004.
Pre-tax profits were down from £ 19 . 6 million to £13.5 million.
Earnings per share came in at 28.2p, compared with the previous 40.8p, while the final dividend is maintained at 14.02p per share.
Despite the downturn, Games Workshop said it remained in "good health" and that it had no plans for shortterm actions to tackle its cost base.
The company added: "We know what we need to do - we need to stick to the basics of our business model, which is designing and manufacturing the best model soldiers in the world, and getting these into the hands of hobbyists wherever they may be.
"There are no quick fixes or smart tricks, nor are we looking for any."
Chief executive Tom Kirby said: "For the last two years we have been concerned that, for Games Workshop, the Lord of the Rings business might create a bubble effect which might not be sustainable.
"But we have to confess that we underestimated the impact which this would have on our sales and profits in the last quarter of this financial year."
However, Mr Kirby said he continues to see the company as a "growth business" and added that it needs to take "time out" to establish steady growth again.
The group achieves about 70 per cent of its sales outside the UK and has direct sales operations in the UK, the United States, Canada, France, Germany, Spain and Australia.
It retains control over every aspect of design, manufacture, distribution and retailing of its models and rulebooks and sells its products through its own chain of more than 350 outlets and more than 4,000 independent shops worldwide.