After the publication of the financial results of listed companies for the first half of 2003, there is a ray of hope that recovery is well on the way. However, many analysts dispute the picture of higher profits projected by companies. Besides, there are some nebulous parts in the financial statements that need closer examination. Indeed, a second reading of the statements reveals some worrying figures. For example, while listed companies’ pretax profits increased 11.9 percent, operating profits have decreased 4.6 percent. Extraordinary results have risen 34.6 percent, a rather suspect figure. Further questions are raised by the continued rise in liabilities (6.1 percent) and the great jump in production costs (14.7 percent). We should note that the «extraordinary results» account is a non-transparent item often used for embellishing results. Many companies with operating losses manage to produce pretax profits thanks to the device of extraordinary results. Two such examples are Naoussa Spinning Mills and Autohellas. In the case of the former, there was an operating loss of 5.5 million euros. However, extraordinary revenues of 8.6 million euros helped yield half-year profits of 3.43 million euros. In the same manner, Autohellas posted a pretax profit of 4.8 million euros, despite operating losses of 2.4 million. In this case, again, we have extraordinary profits of 7.8 million euros. Examples such as these often make it prudent to wait for the full-year results and the comments made by chartered accountants, which are published in small print. Often, their observations provide a very different story. Despite these important caveats, all market analysts agree that many companies are recovering and that they have solved recent problems. Of course, this is not true of every listed firm. Overall, the increase in profits is due to bank results rather than to industrial and commercial firms. An analysis of the results of the 345 listed firms shows that total parent company profits for the first half of 2003 were 2.88 billion euros, a rise of 11.9 percent. On a consolidated basis – that is, including the subsidiaries – profits rose 14.4 percent, to 3.171 billion euros. Banks and holding companies have taken advantage of the favorable conditions on the Athens Stock Market and the bond market to boost their results. Construction companies are reaping the benefits of the building boom ahead of the Athens Olympics. If we exclude these three sectors, parent company profits are up 8.4 percent and consolidated profits are up by just 3.4 percent. Of the 345 listed companies, 280 show profits and 65 losses. Among the 280 profitable firms, 35 show profits of less than 300,000 euros. A total of 252 firms published consolidated results: Of these, 210 showed profits and 42 losses. Winners and losers Half-year results give the impression that this year will be the best since 1999. Company profits dipped significantly in the period 2000-2002, which coincided with the decline of the Athens Stock Exchange. Banks and telecommunications firms dominate the results: The profits of banks account for 25.40 percent of total profits and those of telecom firms for another 16.99 percent. Other strategic sectors such as refineries, games of chance, electricity, construction and cement account for 76.4 percent of total profits. The firms which are included in the stock market’s blue chip index, the FTSE/ASE-20, account for 72 percent of total profits. According to an analysis by investment firm Magna Trust, the significant rise in profits is mostly due to: – Cost cuts and an end to loss-incurring activities during previous years. – The reduction in amortizations, since many investment programs financed by capital increases are now almost complete. – The readjustment of banks’ portfolio of loans, with several loans switching from a fixed to a variable interest rate, which, in the present climate, favors banks. – The shutdown of many small and medium-sized enterprises which yielded market share to the big companies. – The very bad half-year results in 2002, but also, as we mentioned above, to the trend in profit embellishment. Sectors which recovered most spectacularly this year include restaurants, hotels, insurance and furniture. The first two can also look forward to the 2004 Athens Olympics, while insurance has benefited from the recent stock market rally. Despite the fact that textiles had a good first half, the incidence and weight of extraordinary profits is too great not to raise questions about the full-year result. Magna Trust commented on the steadily positive results of publishers and printers, another sector which expects benefits from the Olympics. Publishers and printers also expect a positive impact from the national elections, which might take place by early May 2004, as well as from internal restructuring. Refineries rode on their spectacular first-quarter results, which were better than the whole of last year. Construction firms also had a good half, but the gap between the big groups and the smaller companies widened significantly. Cement and prefabricated construction firms did very well in the second quarter, making up for almost all their losses in the first quarter. There was double-digit profit growth in games of chance. The recovery of the stock market in the second quarter helped leasing companies in the same manner that it helped banks and holding firms. Their turnover, added value and commissions increased significantly. Telecoms firms’ results showed stagnation, with OTE’s profits worsening and those of the other companies in the sector improving. Information technology firms’ results were disappointing, since they failed to take maximum advantage of their investments. In the health sector, both profits and profit margins declined. Investment firms boosted their net asset value, if not their profits, while metals firms’ profits went down. Finally, the passenger shipping sector continues to have problems from high costs and write-offs. Given that the sector is about to open to foreign competition, the time for Greek companies to seek alliances and consolidate is getting very short. Instead, they might become targets of hostile buyouts.