Our view The Group has started the year well with price inflation boosting revenue. Merchanting is seeing decent volume growth and strong price inflation being passed on in the market. Growth rates in Toolstation were impacted by the exceptionally strong comparative, but the business is doing well and expected to normalise in terms of growth rates in H2 2022. Overall, we would not expect full year profit consensus to change materially on the back of this update. However, if volumes hold up into H2 2022 with price inflation continuing to be strong, there is upside risk to estimates; clearly visibility and risk around volumes into H2 2022 is the key concern, especially as weaker end markets may make it more difficult to pass on price increases. Q1 update summary Today’s trading update confirms a positive start to the year with total sales up by 13.6% on the prior year. Merchanting saw total sales up by 17.9% in line with expectations, with pricing accounting for around two-thirds of the growth and volumes therefore up by c.5-6%. Cost inflation continues to be passed through, with customer demand remaining strong across all the group’s end markets. Toolstation sales were down by 6% as anticipated, with LFL sales down by 11.9%, reflecting the tough comparative of Q1 2021 (+42%). Group stock levels remain healthy. Pricing is now likely to be strong throughout the whole year, rather than ease off in H2 2022 as previously expected. Management confirm their expectations remain unchanged, but they are clearly mindful of the macro headwinds. Valuation The shares are down by 18% YTD and flat over the last month. They reside on FY22E PE and EV/Sales multiples of c.11 times and c.0.7 times respectively, with an expected operating margin of 6.7%. Dividend yield is 3.4%.