Renishaw’s Q1 trading update confirmed an expected decline in sales vs. a tough comparative, as large irregular orders from FY15 did not repeat. Meanwhile costs increased due to investment, reducing PBT by 23% to £16.3m. Guidance was reduced by c.4% for FY16 sales, although PBT guidance was maintained at £85-105m. Our forecast of £92.2m PBT is unchanged. However we think risk remains to the downside due to weakening industrial indicators, allied with Renishaw’s low visibility and high operational gearing. Accordingly we have reduced the premium to sector multiples in our valuation and cut our target price. We reiterate our Sell recommendation.
