Nearly 400 listed companies have now published their half-year results, all of which are monitored by Scalens. The stock market has remained stable, despite news that is often better than expected: this is because the future, in the view of all these companies, remains uncertain.

CAC 40 sales rose by 7.6%, one to two points above inflation. Companies have succeeded in passing on price rises to their end customers. Often by moving upmarket, as the automotive industry players Stellantis, Renault and Michelin have pointed out. Edenred, a newcomer to the CAC 40, has posted 25% growth.

Some sectors are outperforming, such as defence, where Airbus and Safran are posting double-digit growth. The luxury sector is mixed, with LVMH and Hermès posting double-digit growth, but not Kering, which is posting 2% growth, less than inflation.

Other sectors are struggling, such as telecoms, which have so far been unable to pass on price rises, or those that have been buoyed by Covid orders, such as Eurofins.

Globally, German and UK companies are outperforming inflation with double-digit growth (+11%), and the US even more so, as double-digit growth is being achieved with very low inflation.

UK and US growth driven by oil, Germany by cars

Extra-financial performance has also become a major feature of this series of publications. In the CAC 40, nine out of ten companies disclose an extra-financial indicator every six months, compared with one in three in the first half of 2022. Most of these are carbon reduction indicators, but they are not the only ones. ArcelorMittal, for example, opens its results press release with its employee health and safety performance.

Elsewhere in the world, 68% of American companies report on an extra-financial indicator, a remarkable improvement at a time when the oil majors are abandoning their climate strategy. In Germany and the UK, on the other hand, the trend has reversed, with only 65% (Germany) and 54% (UK) of companies this half-year reporting on their decarbonisation strategy. The country’s energy strategy is reflected in a decline in climate performance.

Another piece of good news for shareholders is that margins are holding up. All over the world, operating profit rose by a few points more than sales, to 8.0%. Most companies have maintained or improved their margins. In France, this was achieved without any job cuts; elsewhere in the world, and particularly in the United States, companies drastically reduced their costs, with massive redundancy plans at the start of the year in the banking and technology sectors.

Net profits rose even faster, by an average of 13% for the CAC 40.

In accounting terms, this means that companies had anticipated the current difficulties and set aside provisions, which they used to cope with the rise in commodity prices.

CAC 40 earnings per share, on the other hand, rose by just 9%.In other words, more shares were issued than cancelled in the first half of the year. Share issues at the start of 2023 mainly concerned employee savings plans, in line with the spirit of the law and the Afep Medef Code, which encourage greater employee involvement in corporate governance.Share buyback campaigns were significant, but less so than in 2022.The trend should reverse in the second half of the year. More than one company in five has announced a share buyback.These include Airbus, BNP Paribas and Stellantis.For the record, it was earnings per share and not net profit that was chosen by shareholders at the 2023 general meetings, when they set the rules for executive bonuses this year.

There are still signs of concern. Cash flow is growing at a slower rate than inflation, and is even shrinking. For the CAC 40, cash flow is up by 6%, less than operating profit. Outside France, cash flow is falling: by 16% in Germany and 25% in the United States.

Companies rushed to use these funds to invest in production tools and innovation, anticipating higher costs.

For the second half of the year, more than a third of companies are raising their targets, but they remain lower than in the first half. On average, they are forecasting only 4% to 6% growth.The stock market has drawn its conclusions: the first half was good, but wait and see.


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