Unpredictable Renishaw slips up

Founder and lord of the manor Sir David McMurtry admitted that the company had "been caught out", but said he was "not alarmed". That's because Renishaw's notoriously short order book - typically just one month - limits visibility and means surprises are commonplace. Of course, beating last year's impressive final quarter was a tall order, and management conceded long ago that the second half would not beat the first. It didn't. Strong sales to the Asian consumer electronics industry have not been repeated, and finance chief Allen Roberts confesses that business is still unpredictable both in terms of size and timing. There are lots of new products lined up, but they're expensive to develop and a higher cost of sales, at least initially, impacts margins.

And it's costs as well as sales that caught Renishaw out this time. Engineering spend, which includes research & development, jumped by £3.7m, employing another 94 expensive sales, marketing and engineering staff added £7.2m of distribution costs, and other recruitment swelled the administration bill by another £1.9m. A salary increase this month will only increase the wage burden. The hiring spree has evidently been focused on the core metrology division, where profits fell 8 per cent to £84.5m. Operating losses at the tiny healthcare unit narrowed to £5.4m, although targeting break-even over the next two years is not ambitious enough for some in the City.

Broker Numis Securities has cut forecasts for the next two years by 5 per cent, and now expects adjusted pre-tax profit of £90.9m in 2014, giving adjusted EPS of 99.9p.