Xaar has given an update on trading during H1 18. While the group continues to make progress in its new products and markets, the decline in sales from its legacy ceramic tile printing market has been sharper than anticipated. Management has lowered its expectations for sales to this market and initiated a corresponding cost reduction programme to align capacity with demand. The group aims to make savings of c.£2m in H2 18 such that FY18 adjusted PBT remains in line with market expectations, although with a more pronounced H2 weighting. We have downgraded our top of the range FY18 adjusted PBT forecast to this level, which represents a 16% reduction, followed by cuts of 12% for FY19 and 7% for FY20. This downgrade is disappointing, but is driven by the legacy business only. We expect continued strong growth from non-ceramics sales (82% of forecast product sales in FY18, vs. c.33% in FY15) and a return to profit growth for the group in 2019