Cettire taps new accounting firm to assess revenue, as CEO snaps up $16m in stock

The online luxury retailer has brought in a second firm to assess how it recognises revenue after auditor Grant Thornton failed to sign off on annual accounts last week, sources say.

Dean Mintz, the CEO of Cettire, appearing in a video link conference.

Luxury online marketplace Cettire has drafted in a second accounting firm to assess how it recognises revenue, after auditor Grant Thornton failed to sign off on its annual financial accounts last week, according to sources.

The Australian understands a second accounting firm is conducting work on Cettire’s financial accounts and assessing the way it has long booked revenue as a principal, rather than agent. Grant Thornton is also working through its own review of the revenue treatment.

International Financial Reporting Standards provide several indicators around this accounting treatment, depending on which party controls the supply of goods or services.

Questions are being asked because Cettire operates a drop-shipping model, which connects wholesale suppliers with customers, meaning the company doesn’t hold inventory.

Auditor Grant Thornton refused to sign off on the Cettire accounts for the year ended June 30, as it undertakes the additional review around the company’s recognition of revenue.

Last week, as it released unaudited accounts for past financial year, Cettire said: “The technical review is nuanced and ongoing and, in particular, is considering whether, as the business evolves, Cettire should continue to recognise revenue as principal or agent … Grant Thornton is in the process of completing its assessment.”

Cettire admitted a change to its revenue recognition, under an agent model, would reduce income but not impact reported earnings. The company will gauge the advice of Grant Thornton and the second accounting firm as it weighs up how to book revenue in the future, sources said.

Cettire, run by the reclusive Dean Mintz, has brought in a second accounting firm.

The unaudited Cettire accounts highlighted difficult operating conditions in the luxury market, which saw the company post a drop in net profit to $10.47m for the 12 months ended June 30. The results spurred a 20 per cent slide in Cettire’s stock on Thursday as investors fretted about the outlook and the unaudited nature of the accounts.

Cettire’s adjusted full-year earnings before interest, tax, depreciation and amortisation was $32.5m, printing below analyst expectations and at the lower end of $32m to $35m guidance. This measure excludes share-based payments, unrealised foreign exchange losses or gains and the impact of foreign exchange contracts and “other items”.

Adjusted EBITDA for the 2023 financial year was $29.3m.

Reclusive Cettire chief executive Dean Mintz has, however, taken advantage of the sharp decline in the company’s share price since the disappointing annual results to scoop up $15.8m of stock in on-market trades.

The soft annual results saw Cettire’s shares languishing at around $1.38, before the buying activity prompted a more than 30 per cent surge in the stock on Monday. Cettire closed 12 per cent lower at almost $1.36 per share on Wednesday.

According to a statement issued on Wednesday, as well as a substantial shareholder notice issued with the ASX, Mr Mintz acquired 11,436,790 shares in the company, representing 3 per cent of the shares outstanding, through on-market purchases.

Following the purchase, Mr Mintz will have around a 33 per cent shareholding in Cettire and remain its largest shareholder.

“We are relentlessly focused on driving profitable revenue growth, expanding our global footprint, remaining self-funding and executing Cettire’s growth strategy,” Mr Mintz said in a statement. “I believe we are well placed to deliver profitable growth in fiscal 2025 and beyond,” he said.

He declined to be interviewed on Wednesday.

Mr Mintz’s buying of Cettire’s stock comes after he sold about $127m worth of his holding in early March at a price of $4.63. This followed him offloading about $207m worth of his stake in three transactions between March 2022 and August 2023.

Mr Mintz’s latest share trading to purchase stock does fall within Cettire’s accepted trading window — as a company insider — which opened 24 hours after the results were issued to the market last Thursday. However, those full-year results are yet to be signed off by Grant Thornton.

Investors and analysts are watching to see if there are differences between Cettire’s unaudited accounts, released last week, and their audited financials, which are now due by the end of September.

The Australian Securities and Investments Commission is understood to be assessing an anonymous complaint about Mr Mintz’s dumping of Cettire stock earlier this year, with the selling allegedly occurring after the receipt of questions by a media organisation around how the company collected duties.

The complaint alleged Mr Mintz was in receipt of material non-public information at the time of the selldown. It also asked ASIC to look at the sharp rally in Cettire’s stock on Monday as Mr Mintz was buying stock, and to question whether he was privy to material non-public information in making the recent purchases.

On Wednesday, an ASIC spokeswoman wouldn’t comment on the complaint or trading activity in Cettire’s shares, but on the release of unaudited accounts, said: “Listed entities have three months to lodge audited financial reports with ASIC following year-end. Many companies lodge preliminary, unaudited reports at the end of August to meet ASX rule requirements, and these entities remain quoted.”

A Cettire spokeswoman declined to comment on the complaint made to ASIC. She separately noted even though the company released unaudited results last week, it was still acceptable for Mr Mintz to purchase shares as the results issued to the market met the criteria for the window to be open for insiders to buy stock.

The purchase of the large parcel of shares is the maximum Mr Mintz could have bought, at 3 per cent of issued capital, without triggering the requirement to make a takeover bid for Cettire. Under the ASX’s ‘creep provisions’, Mr Mintz can next purchase shares in six months' time.

Last week, Cettire cautioned of tough conditions even as sales in July and August tracked about 20 per cent above the same period a year earlier. That left investors jittery given the trajectory fell short of analyst expectations.