Operations-related costs without charter rose by NOK 15 million during the quarter and NOK 34 million for the first half. Sales and administrative expenses fell by NOK 17 million and NOK 43 million respectively.

After mobilising and positioning during the first four months, m/v Finnmarken was on full charter in Australia from 30 April. The 18-month charter runs from this date. Expenses connected with start-up of the contract totalled NOK 98 million in the second quarter and NOK 126 million in the first half. These costs were met almost entirely by the charterer, and are included in revenues for the quarter.

M/v Fram has transferred half of its season from Greenland to Spitsbergen, so that the m/v Fram and Spitsbergen product areas must be viewed together. The change has been successful when both product areas are regarded as a whole. Results from other operations in Spitsbergen also improved from the second quarter of 2009.

Pre-tax profit for the second quarter was NOK 142 million, a decline of NOK 13 million from the same period of 2009. The first half showed a profit of NOK 9 million, compared with NOK 22 million the year before. Better results last year reflected higher charter revenues as well as gain on the sale of businesses in the first quarter of 2009.

These results were affected by increased volumes and a high level of activity on board. However, the strong NOK exchange rate compared with the same
period of 2009 mean that revenues failed to rise at the same pace. Much of Hurtigruten's volume is sold in EUR, while the accounts are compiled in NOK. The
strong NOK exchange rate accordingly has a direct effect on the bottom line, while the number of cruise nights also boost expenses in the form of crew pay, the cost of goods and income-related costs such as commissions, air travel and hotel accommodation.

Prospets

The criteria for a new eight-year public procurement contract on the Bergen-Kirkenes coastal service were published on 30 June. It is positive that the ministry has assumed a model with the same 34 ports and a service close to today's Hurtigruten offer. The deadline for bids is set at 30 September, with the contract coming into force on 1 January 2013 at the latest. Hurtigruten is prepared for competition over the tender and will submit a competitive bid which
also reflects the value of the government's public procurement and also makes normal fleet renewal possible.
   
Measures implemented last year to boost revenues have yielded results. Growth in the number of cruise nights during the first quarter set a new record, and developments were also positive during the second three months. It is particularly gratifying to see that the commitment to strengthening the company's position in the port-to-port segment is yielding results. The number of cruise nights booked for 2010 is now higher than the total volume for the whole of
last year.
   
The big restructuring which began in 2008 will be completed in the present year. Its final stage is the reorganisation in Germany and France, which are the biggest sales entities and therefore highly important. Most of the booking function in Hurtigruten is now concentrated at an outsourced unit in Tallinn. The quality and level of costs for this service remain unsatisfactory, and efficiency measures are being implemented. Although the structural changes have now been implemented, substantial cost savings are due to be achieved over
the next few years before operations become satisfactory.
   

The main activities in the autumn of 2010 will be:

- winning the competition for the Bergen-Kirkenes coastal service

- continuing efforts to strengthen the port-to-port market through a new pricing model, new market-and sales channels, new products and effective campaigns, while continuing cost-cutting work

- continuing to develop the concept and product for the fourth quarter, normally the most
difficult three-month period for Hurtigruten, on the basis of the good progress seen in the first quarter of 2010.

Volume developments in the first half are encouraging. It is stimulating to see that the restructuring and improvement programme are yielding the planned effects. The board is maintaining its goal of a profit for 2010.