Our view. The disappointing Q3 update demonstrated that the Group still has lots of work to do on improving the operational performance of Merchanting. Markets remain difficult although there are early signs that the market will be better from 2025, however the Group continues to lose market share and see margin pressure. Toolstation is performing more or less as expected. The new CEO has been very candid about the work still to be done in Merchanting and his focus on improving this area of the business. The medium-term investment case remains essentially the same as before – based on Toolstation UK delivering on its targets and Merchanting taking share in a recovering market with good margins. Understandably, there will be more questions around the medium-term potential of Merchanting with no financial benefit expected until H2 2025. We welcome the new CEO’s focus and honest appraisal of Merchanting and expect him to drive better operational performance. We retain our BUY rating on market recovery and a better operational performance but acknowledge that there looks to be a longer lead time of seeing an improvement in Merchanting. Cuts to estimates. We cut our estimates on a weaker Merchanting delivery. We now expect underlying operating profit (including property profit) of c.£134m (from £151m) for FY24E and £190m for FY25E. We expect leverage (post IFRS 16) of 2.5x this year, falling to 2.1x in FY25E. We also acknowledge some further downside risk around employee costs which may results from NIC changes in the budget. Valuation. The shares trade on a FY25E PE of c.17.5x and an EBITDA multiple of c.7.5x with a dividend yield of c.2.4%.