The Irish internet domain registry this week released figures showing that it has turned the corner since a report four years ago criticised its financial management.
The figures showed that turnover at IE Domain Registry (IEDR) in 2005 grew 5 per cent to €2.3 million from €2.2 million the previous year. Pretax profits climbed 10 per cent last year to €981,800 from €895,000 in 2004. Retained profit after tax for the year was €864,846.
The company wiped out a deficit on its balance sheet that had been hanging over it for several years. The accounts show that net assets stood at €803,582 at the end of 2005. Twelve months earlier, it was in the red to the tune of €61,264.
In 2002, the company had a deficit of €1.4 million. During that year, a report by accountants KPMG made it clear that its financial controls were below the standards required of a limited company. It also had a considerable bad debt problem.
Its then chief executive, Mike Fagan, resigned. According to David Curtin, a former KPMG partner who first took control of IEDR's finances and then succeeded Fagan, the company was facing a lot of serious problems four years ago.
"The first problem was accounting policies that were not in line with industry standards," he says. As an example, he points out that the company was mistakenly accounting for deferred revenue when it was invoiced, rather than when it was received, which is the normal practice.
"The second issue was the bad debt problem. The money was not being collected promptly and there was a huge bad debt write off."
The bad debts amounted to €500,000. Not a lot of money by many people's standards, but in IEDR's context, it amounts to over 20 per cent of last year's turnover.
The last four years have been about bringing its cost base under control, putting in proper management systems and allowing the business to develop. Key to cost cutting has been introducing greater automation, which, in turn, has cut staff numbers from 20 to nine, and left the company with a structure that allows it to grow while controlling outgoings.
"We have improved our process, taken people out of it and put systems in place that are now more automated than ever before," he says. "What that means for us is that, like last year, we can grow our registrations by 36 per cent and still keep our operating costs pretty much in line."
IEDR's accounts seem to bear this out. The figures show that costs grew by €70,000 to €1.38 million between 2004 and 2005 - a 5 per cent increase, which was in line with turnover growth.
Curtin began to make changes in 2003, when he was appointed acting chief executive, and subsequently confirmed in that role.
"The company ended that year with a profit, and it's been profitable every year since then. Volumes (the number of registrations) have grown by 68 per cent."
IEDR sells mainly through resellers, namely telecoms providers like Eircom and BT and specialist companies like Irish Domains.
It prefers to deal through middlemen, who then handle the individual customers.
The resellers get bulk discounts, which means that they sell domain names cheaper than if a customer goes direct to IEDR itself. It will sell directly to customers who do not want to go through a third party.
It is currently working on expanding its brief. It has just won a tender from communications regulator ComReg to operate an electronic numbering registry.
"Essentially, if you have somebody's telephone number, you will be able to key it in to a website and get all their other contact details," he explains.
The new registry will be known as the ENUM registry. The service will only apply to people who want to be included in such a registry, and the product is largely geared at businesses and organisations.
"The other big thing is we're going to further automate what we already provide to the resellers' group," he says. That move will result in even further cost reductions, Curtin says.
In tandem with this, IEDR has continued to cut the charges for registration. It has cut these fees by 40 per cent over the past three years, and Curtin says that it is committed to further reductions this year.
The company is a not-for-profit organisation, but has to make a surplus in order to have something to plough back into developing its systems, Curtin says.
