H1 adj. EBITDA is below expectations with weak P2 sales and higher freight costs impacting margins, such that consensus forecasts are likely to fall by 7.5%. However, current trading suggests growth rates have improved since the period end and management are of the view that this recent blip is transitory. We are not so sure, see our recent report – Pausing for breath, 22nd June 2021. Interims 6 months to 31st August 2021 Adj. EBITDA was £85.1m (-5%) and below expectations (consensus: £96.3m), with weakening P2 sales and higher freight and duty costs impacting margins. In constant currency, P2 Group sales growth was disappointing at +10% (P1: +32%), and below implied consensus expectations of c. +30%. Group gross margins were -40bps (P1: -60bps). All geographies have shown a deterioration in performance with P2 constant currency sales growth in the UK at +19% (P1: +50%); USA at +9% (P1: +40%). In Europe, performances continue to be weak at -16% (P1: -12%) with management citing disruption at EU entry ports delaying delivery times and impacting demand. We note gross margins were also down as much as 420bps with the imposition of duties (following the Brexit transition period), together with customs clearance costs and irrecoverable sales tax on returns eroding margins. In the meantime, ROW remained weak too with sales -18% (P1: -15%). Outlook Full year guidance remains for sales growth to be +25% this year (consensus: +29%), implying management expect a re-acceleration of growth in H2 – there have been some signs of improvement in August and September trading. However, due to investment in technology and infrastructure, EBITDA margins are now expected to be 9% to 9.5% (previously 9.5% to 10%) and capex is expected to be £275m (prev. £250m). A new warehouse will be constructed in North America in 2023. Taking the mid-point of new guidance implies a full year adj. EBITDA outcome of £198m and assumes H2 sales grow at +25% with adj. EBITDA margins up 70bps.