from 37% the same time last year. From a balance sheet perspective, our capital-light model continued to deliver resilience, with closing cash at AUD 61.4 million and no financial debt. Turning to slide 6. We finished the 6-month period with 613,000 active customers. New customer ads slowed, reflecting softer demand and a decision to lower marketing spend. We prioritize our investment towards quality engagement and conversion over volume. Our average order value increased to $961, with repeat customers spending $1,050 per order on average, compared to $811 for new customers. This increase largely reflects the incorporation of higher duties in our pricing. Repeat customers now account for 69% of gross revenues, up from 67%.
This trend of increasing loyalty reflects the ongoing attractiveness of our business model to consumers. This loyalty is a key enabler as it helps sustain the business through cycles and underpins the long-term profitable growth. This chart once again reflects the benefits of having a strong cohort of loyal customers and our ability to increase our share of wallet over the long term. Our unit economics over the period strengthened, with both customer acquisition costs and Delivered Margin improving compared to the preceding six months. Customer acquisition costs declined to AUD 83, reflecting a reduction in paid marketing investment. While this comes at a cost to new customer ads, we believe it is prudent to manage marketing spend in line with achieving a reasonable return on investment.
Delivered Margin per active customer was AUD 179, delivering a sequential improvement versus H2FY25 at AUD 148. This reflects our deliberate reduction in promotional activity to prioritize profit. Our localization strategy continued to diversify our revenue base during the period, with emerging markets gross revenue increased by 21% year-on-year. These strategic markets now represent around 45% of Cettire's gross revenue. Established markets, including the US, UK, and Australia, contracted 13%, primarily driven by the challenges impacting the US. The US now represents approximately 41% of gross revenues, with Australia at 6% and UK at 8%. We continue to focus on increasing market share in existing and new markets by focusing on enhancing our capabilities and driving localized initiatives.
During the period, we launched our Arabic language capability to capitalize on the momentum we are seeing in the Middle East. We have also successfully launched Cettire's flagship store on the JD.com platform in China. We'll continue to explore additional routes to market in that region. Our supply chain, with hundreds of suppliers, continued to grow strongly over the past six months. Engagement levels remain very high as inventory holders and luxury brands seek new routes to market in the challenging demand environment. Pleasingly, we exited the half with record levels of inventory and grew our published stock products by 60% year-on-year. To support our strategy, we continue to invest in our commercial team to support our increased levels of pipeline opportunities. That includes luxury brands and third-party inventory holders. I'll now hand over to Tim.
Thanks, Dean, good morning, everybody. Sales revenue was AUD 382.8 million, down 3% on the prior year. This reflects the impact of US tariff changes and softer demand in the region. Excluding the US, sales revenue grew by 13% to AUD 225 million. Gross revenue was AUD 505.7 million, while refund rates remained relatively stable. Delivered Margin at 14% of sales was impacted by higher US duties costs being absorbed into our fulfillment cost base. This was partially offset by a decrease in overall promotional activity. The duties impact was more fulsome in the second quarter due to the end of the de minimis exemption in the US from September onwards. Importantly, however, Delivered Margin percent improved compared with the second half of fiscal year 2025.
Paid acquisition expenses were 4.2% of sales revenue, and brand investment was modest at AUD 1.9 million. This reflected our deliberate strategy to prioritize profitability. Adjusted EBITDA was AUD 8.7 million, delivering an EBITDA margin of 2.3%. Pleasingly, our focus on driving profit delivered a half-on-half adjusted EBITDA turnaround of AUD 20.5 million. Moving on to the balance sheet. Closing cash was AUD 61 million, and we continue to have zero financial debt. The increase in cash since June was supported by operating profits, combined with favorable working capital dynamics. The year-on-year increase in contract liabilities is reflective of lengthier delivery times that we saw in the period leading up to the end balance date. This has resulted in a deferral of revenue recognition until the subsequent period.
We continue to invest in our technology platform to develop capability and reinforce our competitive advantage. This resulted in capitalized investments as a proportion of sales revenue being 2.2%. The other key call-out relates to the receivables. As a reminder, we have receivables relating to credits for VAT paid on purchases in Europe. To be more specific, these are statutory receivables that are due and payable. They could be paid at any time. We're subject to the timeline of the government to pay out these amounts. The government has been slow to pay. Out of caution, we have conservatively reclassed an additional portion of this receivable to non-current. Short-term challenges in luxury are expected to persist, there are some signs of improvement. Importantly, the long-term fundamentals of the sector remain robust.
The most recent study on luxury by Bain & Altagamma estimates the personal luxury goods market for the 25 calendar year declined by 2%. They cited macroeconomic headwinds, trade disruption, shifting customer preferences, and a deteriorating value proposition as the reasons for the slowdown. On the positive side, the research is forecasting 3%-5% growth in the 2026 calendar year. Moving now to the outlook. In the short term, there continues to be uncertainty within the global luxury personal goods market, with performance varying significantly across geographies. In the current quarter, Cettire is cycling a period of aggressive promotional activity and some pull forward of US demand that occurred ahead of the Liberation Day tariffs being implemented in early April 2025. Promotional activity peaked in March 2025, whereas in the current year, Cettire has meaningfully reduced its level and frequency of promotion.
In light of the above, the Q3 comparator from last year has made the current quarter a lot more challenging from a growth perspective. It's against this backdrop that our quarter-to-date gross revenues have decreased by 13% versus the prior corresponding period. The U.S. policy and macroeconomic environment remain dynamic and will continue to influence our sales activity in that market. However, the company expects to achieve a significantly improved growth profile in the fourth quarter of fiscal year 2026. I'll now hand you back to Dean to conclude.
Thanks, Tim. In closing, the fundamentals of our business have not changed. We have a large and loyal customer base that has multiple growth pathways. We continue to grow our supplier base, creating one of the world's largest online inventories of luxury goods. We have a capital-light, self-funded model built for profitable growth and have flexibility to adapt to changing market conditions quickly. We have a fit-for-purpose, strong balance sheet, leading proprietary tech stack, and a first-class team with exceptional capabilities. With these foundations, Cettire is well positioned to navigate near-term challenges and deliver long-term profitable growth. On that note, I'll now hand back to Sam.
Great. Thanks very much, Dean, and thank you, Tim. As a reminder, the audience can submit written questions via the Q&A function at the bottom of your screen. We'll just move on to questions. The first question is on Delivered Margin. Can you talk to how Delivered Margin progressed through the half, and how much of this is structural versus cyclical changes? Sort of further looking from a medium- and longer-term perspective, how do you think about Delivered Margin overall?
Thanks, Sam. Excuse me. Just in terms of the Q1 versus Q2 profile, first quarter, we were Delivered Margin 15%; second quarter, we came in below that. I think the key influence there on the Q1 versus Q2 is the impact of the de minimis changes in the US was felt from September onwards, we've seen a large step-up in our fulfillment costs since that point. You know, we now have a duties attachment rate in the US of 100%, every order into the US attracts duty. Prior to the changes in the de minimis, the duties attachment rate in that market was a fraction of what it is today.
If you think about the duties as essentially as a pass-through, you might maintain the same amount of dollar Delivered Margin on an order, but that's off a higher revenue base, and so your percentage margin comes down. I think you, at the second part of your question, Sam, was around structural versus cyclical. I think if you compare our margin today with a couple of years ago, the bulk of the decline that we have seen is cyclical in nature. The luxury market has been through a number of challenges in the last couple of years that have been well documented, and the market remains very competitive. The bulk of the change that we've seen is cyclical.
More recently, the increased duties attachment rates in the USA, which I referred to, is dilutive to margin. Looking forward, we certainly think there's room to grow that Delivered Margin over the medium term. I say there's no reason why we can't get back to 20%+ over the medium term. I mean, currently, the market remains promotional. The other thing we've seen in the recent period is that there has been some consolidation in online luxury, and, you know, other things equal, that should provide a more constructive backdrop looking forward.
Great, thank you. Just in terms of the turnaround in EBITDA half on half, what are the main levers that have enabled that from negative AUD 12 million, approximately last half to positive AUD 9 million this half?
Look, Sam, obviously, it's been a challenging environment, when you take into account the slowdown in the luxury market and the elimination of the de minimis in the US, which is our biggest market. You know, despite this, we've been able to hold revenue and improve EBITDA, as you said, by $20 million in just 2 quarters. I think in terms of how we're able to do this, from a tariff perspective, we've increased our pricing to absorb the additional duties. We've also moderated our promotional activity to really focus on improved revenue quality. We also drove a lot of efficiencies from the fulfillment side.
We continued to invest in marketing, but in a strategic and conservative way. There's still a lot more to be done. We're targeting to have further improvements in the coming half.
Great, thank you. Next question: Your biggest market, the US, has had its challenges of late, many of which you've talked to in the presentation. What's driving the growth ex the USA, and can you specifically touch on margin expansion in regions like Middle East and China, and comment on the time it takes for these markets to switch on?
I think in a lot of these markets, we're still relatively early, and they're very, very large luxury markets. We've put a lot of effort into our localization initiatives, which we spoke about previously. In the Middle East, we released localized language, so Arabic language, and that, you know, that's been very, very helpful. You know, at the same time, in China, we're continuing our efforts there, and we launched our flagship store on the JD.com platform, which took a considerable amount of work from both sides, both JD and us.
Great, thank you. Just to follow up on the expansion strategy more broadly, how do you balance increasing sales and engagement in existing markets and with existing customers rather than expanding into new locations like you've mentioned?
You want to take that one, Tim?
I think Look, I mean, of course, we want both, there's no question. I think in the recent period, we've been putting a little bit more weight on engagement with our existing customer base. That's simply because the returns on marketing investment have been more challenging. We have had We've taken a very conservative approach to our marketing spend. You see that on our numbers in this half. You see that in effectively our net ads. The level of engagement that we have with our existing base continues to be very strong, and the customers that we do have are extremely attractive, right? You see that in the repeat customer AOV, and you see that in the repeat customer spend.
The returns on, unsurprisingly, the returns on engagement are on existing customers, I should say, are very attractive in the current market. I think the other thing that's interesting at the moment, which, you know, if you just kind of peel back the next layer of our the customer profile, we've seen in the last several months now, a stabilization in our retention rates, which is very encouraging. Notwithstanding some of the external pressures that we've touched on through the course of the call. That retention rate is very much stabilized and goes to the strength and engagement of the existing customer base.
We have less gross adds coming into the funnel at the moment as a consequence of our more conservative investment profile. It won't always be like this, you know, as the return profile improves, then we'll there'll be an opportunity for us to be more outward-facing in terms of that marketing investment. You know, you can expect that that will be, you know, a good portion of that investment will be allocated to the markets where newer. Those markets at the moment are growing really encouragingly, even at current investment levels. That's certainly something to keep an eye on.
Okay, great. Thank you. Next question. Your auditor has highlighted a material uncertainty in relation to going concern. Why is this? Do you expect any change in supply chain relationships or terms as a result of this?
Let's just be very clear that we have an unqualified set of accounts out today. That's very clear from the report from the auditor. I think that's very important for people to understand. From my perspective, there's not really anything new here. If you look back at our accounts in June, there was a current asset shortfall in June, and also a note in our annual report around going concern. I mentioned earlier on the call that we've taken a more conservative view around the timing of our, of when our tax receivables will convert to cash. As a consequence of taking that more conservative view, we have reclassed some of the receivable from current assets to non-current assets.
Naturally, this will impact the current asset balance, and that's why the auditor has commented in the way that they have. I think, this is, you know, there's an element here of this being a technical accounting point. The auditor has flagged that the business has a current asset shortfall, and accordingly, directed readers to read the relevant note in the accounts. I don't think there's too much more to say on that. With regards to supply chain, I think if I can refer back to our comments earlier in the presentation, the level of engagement that we have with the supply chain at the moment, both in terms of, directly with brands as well as, with third-party suppliers, is the strongest it's ever been.
Our supply chain has continued to grow very strongly over the last six months, and we're a very important partner to all of our suppliers, and it's business as usual on that front.
Okay, great. Just maybe a follow-up there. Can you please explain why these Italian VAT receivables are still growing and getting larger, and whether or not they can be collected on?
Sure. The simple mechanics work that we make purchases in various markets around Europe. We pay VAT on those purchases. This is purchase of goods and services, we pay VAT. In payment of that VAT, we generate an input VAT credit. No different to a business operating in Australia that pays GST and generates an input GST credit. Same thing conceptually. The process of getting a refund, though, is not necessarily the same. We have a net receivable position in those markets because our purchases exceed our sales in the market. Why does it take so long? Look, certain governments in Europe are notorious for being slow around managing their own payables, if you will, and can be particularly slow for foreign companies.
I think this is a very frustrating situation, but it's a major priority for us to convert it to cash. We're working on broader improvements to our supply chain, which we expect to be implemented during this half, which should considerably improve our cash flow profile around European input VAT going forward.
Thanks. You might have just touched on that with your final comments to that answer, Tim, but can you just, sorry, you flagged a few options to mitigate your current asset deficiency. Can you elaborate on these and whether or not they could possibly impact the business?
Look, I think the initiatives that we have in place are very straightforward. We need to continue executing in the market and driving sales, there remains considerable scope for us to improve the efficiency of our cost structure, both as pertains to variable costs as well as fixed costs. We are, you know, commercially, our objective is to run with the leanest possible cost structure, and ultimately translate that into profitability. If I refer back to Dean's comments, we have had a AUD 20 million plus turnaround in profitability in the last two quarters, we're very focused on continuing to drive improvements in profitability going forward.
I think the business has faced some very significant disruptions in its major markets over the last couple of years and the last 12 months in particular. We think about some of the news flow out of the United States, which is our largest market, and we've absorbed those challenges, we've held revenue. Against that backdrop, not only have we held revenue, but we've significantly improved profitability, and I think that's a testament to the flexibility that our business model has, and that sets us up well to drive improvements in profit going forward.
Great. Thank you. How should we think about marketing spend going into H2? Will spend be aggressively cut again in light of the Q3 '26 trading update that you provided and the ongoing volatility there?
I don't think you should, investors should expect any meaningful change in terms of current run rates. We're investing at the moment, at a level which is, which is, you know, still achieving a good balance between generating a return on investment, and overall growth. I think, there are some funny comps that we're working through in this quarter from a growth perspective. If you look back at the fourth quarter of last year, where anyone who was operating cross-border off the, against the backdrop of, the changes in US trade policy, had a very difficult operating environment.
We had a very challenging fourth quarter in fiscal year 2025. I think at this stage, our best current view is that the business will, from a growth perspective, even if this is a challenging quarter, that it will rebound strongly in the fourth quarter of this fiscal year. You've, we've indicated that in our trading update today, where, you know, we're anticipating that revenues are going to be, you know, not too far off where they were last year.
Great. Thank you. Do you have a rough sense of what gross profit, dollar growth and decline has been in the quarter to date? What is the offset on Delivered Margin with lower promotional intensity?
Sorry, I think the question is, what is profit in the third quarter? Is that the question?
Do you have a rough sense of what gross profit dollar, sorry, gross profit dollar growth or decline has been in the quarter to date?
I don't think we've made any comment today about current quarter profitability in our trading update. I don't think that it's appropriate to provide that on this call.
Next question: Any prospects, you might get a tax cash refund at some point, given the NPAT losses over the last calendar year?
Cash tax refund, was that the question? No. Generally, you know, the bulk of our business is resident in Australia for tax purposes, we tend not to get income tax refunds in Australia as a company, but you do have losses that you can offset in the future. I think that's a consideration in the Australian market, but I don't think we can expect income tax refunds.
Naturally, we're operating in many markets around the world at this point, and whilst there are certain markets in Europe which may not be as speedy at paying their payables as we are, there are plenty of other markets around the world where we do have input tax credits, which are paid on a timely basis.
Great, thank you. Just another one, sticking with the financial statements. Why did you pay AUD 5 million of cash taxes when you made a pre-tax loss last year?
The tax payment that we made would have been in relation to our tax position for the prior year, where we were profitable.
Okay, thank you. Are you able to break down the Q3 '26 sales performance by region, USA versus ex-USA? Interested to understand if ex-USA sales growth is holding up in Q3 to date.
Yeah, we haven't disclosed that, the numbers in terms of the Q3 to date regional splits. The dynamic that we've described broadly around the company that we have. We have a two-speed company this year, okay? We have the US where we are cycling not only the. If you think about this quarter last year, tariffs were not something that people were talking about. We have two layers of this tariff issue in the US. One is the general discussion around which country has to pay what based on where something's made, then there's a separate thread to that discussion around does the de minimis exemption apply or not?
Both of those changes in the US have been, you know, individually and collectively meaningful for us, as has the corresponding uncertainty that that's created for the consumer in the US. These are dynamics which have unquestionably had an impact on our business in recent quarters, and we are still cycling a world where that was not on the table. That's going to continue to present itself in year-on-year growth rates in coming quarters. If you think about it, the de minimis change was implemented at the end of August, so we're going to be seeing some strange things in the US comps really until the December quarter in this calendar year. That will continue to play out.
The rest of the business, excluding the US, continues to grow very strongly. We talked on the call about the global luxury market down 2% year-over-year in calendar year 2025, and our business has grown in the teens% in the second half of the year. That is, again, in a context of much lower promotional activity from our business. That's a very encouraging sign for us. We're continuing to take share. Our localization strategy is doing as it was intended to do, and I think we can expect this dynamic to play out for the foreseeable future.
Great. Thank you. That's all the time we have for questions today. If there are any unanswered still, please feel free to send them through, or if there's any additional follow-ups, and we'll endeavor to get back to you. That concludes the Q&A session and brings us to the end of today's first half earnings call for Cettire. Thank you all for joining and have a great day.