CHILDREN'S entertainment group HIT's takeover interest in Thomas the Tank Engine owner, Southampton-based Gullane, is in danger of going off the rails.

HIT, which owns the rights to Bob the Builder, is reviewing a possible £157m offer after Gullane warned full-year profits would not meet its hopes.

Gullane, based at Stoneham Lane, is also home to Sooty, Fireman Sam and the Guinness World Records business it acquired from Diageo last year, said certain contract agreements would not be concluded in time for this financial year.

Bob the Builder and Barney the Dinosaur owner HIT has been considering a 500p a share offer but said the tentative approach had been based on previous market expectations.

It said at the weekend following Gullane's latest announcement: "The board of HIT Entertainment is considering whether to make an offer for Gullane and, if so, at what price.''

The hitch comes two years after HIT failed to land the Southampton entertainment production company with a mooted 750p-a-share offer.

A combination would create a significant force in the European children's entertainment market, with powerful television and merchandising rights.

Analysts had forecast profits before tax and exceptionals in the region of £11.5m in the year to June 30, but Gullane said the figure was now likely to be in line with last year's £9.7m.

Gullane said earlier optimism for its full year had been based on certain major TV production and distribution agreements for its branded properties.

It added: "However, certain other agreements, most notably in respect of Guinness World Records, have been delayed and Gullane now believes that it will not be possible to conclude them in the current financial year."

The company added that net sales of Guinness World Records books in the US had fallen below estimates and that it will now be next year before "brand management decisions" show through.

In licensing and live events, revenues have been "satisfactory" with continued strong growth from Thomas the Tank Engine in the US.

The company added: "Gullane continues to believe there is significant potential for growth from all of its high quality brands.''