Passenger numbers fell at Irish Continental Group (ICG) during the first half of 2006, but the shipping company reported an increase in freight traffic.

Revenue for the first half was €141.9 million, up from €139.6 million in the same period last year. Pretax profit was €2.7 million, up from €1.7 million in 2005.

The company said it had completed the replacement of its Irish sea ferry crews with outsourced staff and that the savings from this would mitigate the effect of a challenging revenue environment.

The company said in a statement that its initiative to reduce its crewing costs "to internationally competitive levels" generated savings for the half year that were in line with expectations. The process was completed during the half year.

"Our vessels are now principally crewed by third party crewing agencies at internationally competitive cost levels," the company said. "The severence costs involved on this amounted to €29.1 million, which was taken as an exceptional charge against the 2005 results. The figure is net of a rebate of the statutory redundancy element of the severence package of €4.1 million. Application has been made to the appropriate authorities for the refund of this rebate."

Chairman John McGuckian said the company had achieved a solid result in challenging circumstances. "Our labour cost savings and capacity management have compensated for a demanding trading environment."

New competing freight capacity is coming on stream in the second half although market growth is also expected.

Passengers carried were down 10 per cent, to 598,000, for the first half, while cars carried were down 11 per cent, to 145,000. A reduction in ferry frequency meant these figures were in line with the reduced sailings. Roll-on-roll-off freight volumes were up three per cent. The company declared an interim dividend of 10.92 cent, up 10 per cent.

The second half of the year is more important for ICG as it includes the peak tourist season. The company said the pattern of the first half had been repeated. "Overall our car volumes are down 12 per cent year to date, while our roll on, roll off freight volumes are up 3 per cent." It said it expected a challenging revenue environment in the second half, mitigated by the flow of cost savings.

Davy said it was modestly reducing its full year earnings forecast for 2007 from 100 cent to 95.6 cents, based on increased freight capacity on the Irish Sea, especially from Stena, and weak tourism traffic. It has left its 2006 forecast at 90.2 cent.