Our view A disappointing unscheduled update from the Group this morning. Trading in Q2 to date sounds as though it has continued to be challenging and similar to Q1 which saw Group LFL sales of at c.-3%. Consensus trading profit for the full year is likely to move to c.£240m on the revised guidance, which would be a c.11% cut. Assuming the Group delivers c.£110m for the first half, a full year expectation of £240m would imply a flat profit performance in H2, year on year, helped by an easing comparative. Clearly, with H1 trading remaining challenging and the recent moves in interest rates, the outlook and challenge of delivering H2 expectations has deteriorated across the sector and today’s profit warning, while clearly disappointing, is understandable in that context. In the near term, the focus is likely to return to the weaker profit outcome this year and worries around rising UK interest rates rather than the medium-term potential. Trading update summary The Group has put out an unscheduled trading update, warning on profits for the full year. Trading profit for the full year FY23 is now expected to be c.£240m, which is around 11% below the current consensus expectation. The warning is a result of the fact that the Group has not seen the anticipated easing of market conditions in Q2 to date. New housing and the RM&I markets continue to be impacted by higher interest rates and weak consumer confidence. Non-residential markets are proving more resilient and Toolstation continues to perform in line with market expectations. Assuming the present conditions persist for the balance of the year, management now expects to deliver a full year adjusted operating profit of around £240m. Group continues to focus on its operational efficiencies and carefully targeted investment continues. Valuation Shares are flat YTD and reside on a FY23E PE of c.10.5 times and an EV:Sales multiple of c.0.53 times on our pre-existing estimates.