IE Domain Registry Annual Report 2019

IE Domain Registry  Annual Report & Review  2019 41 Financial Statements The directors present their report and the financial statements for the financial year ended 31 December 2019. Principal Activity The company was incorporated on 16 November 1999 and commenced to trade on 1 July 2000. The principal activity of the company is the registry for .ie Internet domain names. Results and Dividends The profit for the financial year, after providing for depreciation, taxation and the unrealised gains on financial investment amounted to €231,438 (2018 profit – €68,401). No dividends are payable as the company is limited by guarantee and does not have a share capital. Business Review From an operational perspective, 2019 was an excellent year of development and growth. In 2019, the company extended its Strategic Development Fund. This Fund was initially established in 2015 to finance a set of promotion, marketing and customer service initiatives to meet the strategic objectives and priorities of expansion and protection of the .ie namespace. In 2019, the fund again financed the successful e-commerce website OPTIMISE program for SMEs, financed publications backed by robust independent research, and financed the celebration of Sligo as Ireland’s Digital Town 2019. Since its inception, the fund has also facilitated the design, development and rollout of new services for customers, including secondary market, Internationalised Domain Names (IDN’s), domain locking and rules liberalisation. Turnover increased by 8.7% to €3.61 million (2018 – €3.32 million). Volume growth in domains was again strong in 2019, although year-on-year new registration growth decreased by 1.7%. The .ie volume growth is generated by the registrar sales channel, which accounts for over 99% of all new registrations. When non-renewals are considered, the net growth of the .ie namespace was 26.8% less than the exceptional net growth in 2018, which was attributed to the liberalisation rules change in March 2018. This .ie growth was achieved in the global context of modest increases for legacy TLDs such as .com, but sharp declines in volumes at new TLDs, which continued to struggle. The deferred revenue on the balance sheet increased by 4.9% in 2019, to €2.51 million (2018 – €2.39 million). This is because the invoiced value of registration fees increased by 4.3%, reflecting renewals and new growth in 2019. Administrative expenses increased by 11.1% from €3.17 million to €3.52 million. Employment costs increased by 12.6% in 2019 to €1.63 million reflecting additional staff recruited in 2019 and cost of living salary increases. Promotion, sponsorship, and advertising costs were again high as the company continued its activities to generate demand from SMEs and continued its joint promotion with registrars of the .ie namespace. The financial position of the company at 31 December 2019 is solid with Members’ Funds of €4.1 million. The market value of financial investments at 31 December 2019 is €4.33 million (2018 – €4.13 million), up by €0.2m in 2019. Principal Risks and Uncertainties The company is exposed to risk and uncertainty arising from market fluctuations in its financial investments. These risks are managed by a combination of appropriate investment principles, advice from independent investment advisors and oversight by a Board sub committee. The company’s financial investments are for the long-term in conservative managed funds diversified across multiple investment managers. In common with other small and medium-sized enterprises, the company’s performance is impacted by macro-economic risks posed by weak SME balance sheets, and the ongoing uncertainty arising from the Brexit referendum in the UK – the largest market for Irish SME exporters. These risks continue to be managed prudently by the company. The impact of new regulations remains uncertain, as the EU continues its initiatives to; complete the Digital Single Market; address cyber security threats; and implement ePrivacy initiatives. In common with internet service providers, the company faces risks in relation to digital disruption and innovations from internet global giants, which offer new apps and free services, financed by advertising revenues. The company faces risks in relation to the ever-increasing range and sophistication of cyber attacks on internet infrastructure and on businesses. The company also faces risks in relation to reliance on key computer systems and key staff. The company’s cyber security controls, business continuity plans and disaster recovery procedures address the risks associated with cyber threats, technical abuse using the DNS and reliance on key computer systems. In addition, the multi-stakeholder Policy Advisory Committee (PAC) continues to provide advice and recommendations to the board on a range of policy responses for the .ie namespace. Staff training, cross-skilling and key process documentation mitigate the potential exposure arising from the loss of key staff members. Directors’ Report for the financial year ended 31 December 2019