Deloitte Economics' Coronavirus Impact Monitor - Is C25 heading for a recovery by the end of 2020?
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Deloitte Economics’ Coronavirus Impact Monitor Is C25 heading for a recovery by the end of 2020? 9th edition, 29 May 2020
Coronavirus outbreak
New daily confirmed cases continue to slow in Denmark, while the number of daily deaths
are falling across the globe
Confirmed COVID-19 cases: World and Denmark
• Between 1 February 2020 and 28 May 2020, the As of 28 May 2020
6.0 5.6 20,000
number of global confirmed COVID-19 cases rose from
# confirmed cases in Denmark
# confirmed cases globally
9,800 to about 5.6 million. 5.0
15,000
• As the number of new cases in Europe show signs of 4.0 11,480
(millions)
falling, countries are beginning to take steps to reopen
their societies and economies. The Danish government 3.0 10,000
has activated Phase II of the reopening to take effect
2.0
from 18 May 2020. 5,000
1.0
• In Denmark, the increase in the number of confirmed
cases has remained relatively low. As of 28 May 2020, 0.0 0
there were 11,480 confirmed cases. 24 Feb 9 Mar 23 Mar 6 Apr 20 Apr 4 May 18 May 1 Jun
Denmark (RHS) World (LHS)
• The chart shows the daily number of deaths in the 7-day rolling average confirmed daily COVID-19 deaths:
World, US and Denmark
world, the United States and Denmark. There are
World US Denmark
currently around 4,000-5,000 daily deaths in the 7,000 2,500 16
world, lower than the 6,000-7,000 peak in mid-April.
6,000 14
2,000
• In Denmark, the 7-day average daily death rate has 12
5,000
fallen significantly to around 2 per day, from a peak of
10
# Daily deaths
1,500
around 16 at the beginning of April 2020. 4,000
8
• In Denmark, there were 20 patients in intensive care 3,000
1,000 6
as of 28 May 2020, of which 11 patients were in
2,000
respirators. This number has fallen steadily since the 4
500
peak at around 100-150 at the beginning of April 1,000 2
2020. The Danish Health Authority has ~925 0
0 0
respirators available for COVID-19 patients. 1 Mar 1 Apr 1 May 1 Jun 1 Mar 1 Apr 1 May 1 Jun 1 Mar 1 Apr 1 May 1 Jun
Sources: World Health Organisation (WHO), The Danish Health Authority (Sundhedsstyrelsen)
Coronavirus Impact Monitor – 29 May 2020 Page 2 Deloitte Economics © 2020
Impact on financial markets
COVID-19 impact on equity markets has been most severe on the transport and energy
sectors, while medical and pharmaceutical stocks have largely recovered
Equity markets: Sectoral indices in Europe1
• The outlook for increased public expenditure and gradual
opening of economies have supported markets. Major outbreak in Europe
• European equity indices suffered material losses
110
following the COVID-19 outbreak in Europe, but have, to
100
(2 Jan 2020 = 100)
some extent, recovered from the bottom reached in mid-
Sectoral indices
March 2020. 90
80
• The Transport industry, including airlines, continues to
be severely affected by the virus and the related travel 70
restrictions. The Refinitiv Europe Transport Price Index is 60
down by some 28% since the end of January 2020,
50
driven by a material decline in volumes.
40
• The European energy sector, including oil and gas 30 Dec 13 Jan 27 Jan 10 Feb 24 Feb 9 Mar 23 Mar 6 Apr 20 Apr 4 May 18 May 1 Jun
2019
companies, has lost more than 30% since the end of Transport Energy Medical & Pharmaceuticals Financial Technology
January 2020. Declining energy prices have applied
downward pressure on energy equities. OMX C25 Index, median quarterly net income, DKKm
• Financials, including banks, have also experienced value 1,200
destruction. Market concerns about increased credit Consensus
1,000
losses and funding squeezes are likely drivers. estimates
Q1 2020 net income
800
• The lower right-hand chart shows the development in
600
quarterly net income results for OMX C25 Index
constituents. 400
200
• Q1 2020 results were unsurprisingly down compared to
Q1 2019 results a year earlier, but consensus estimates 0
(dashed lines) point to a relatively quick recovery, (200)
reaching about 2019 levels by the end of the year. Q1 2019 A Q2 2019 A Q3 2019 A Q4 2019 A Q1 2020 A Q2 2020 E Q3 2020 E Q4 2020 E
25th percentile Median 75th percentile
Note: 1) Refinitiv European sectoral price indices measured by Refinitiv (Thomson Reuters)
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 29 May 2020 Page 3 Deloitte Economics © 2020
Economic Outlook: IMF and Deloitte survey
Q1 GDP contracted sharply across Europe and US
• The “sudden stop” in the global economy, caused by the COVID-19 Economic growth projections
pandemic, has translated into significant downward revisions of 5.8% 6.0%
4.7%
economic growth projections worldwide. According to IMF’s April 3.4%
predictions: 1.9%
1.4%
− The global economy is expected to contract by 3.0% in 2020
instead of the initially estimated 3.4% growth. This 3.0%
contraction in global GDP is much worse than the 0.1%
(3.0% )
contraction experienced during the 2009 financial crisis, ref.
page 23 in the appendix.
(6.5% )
− Danish GDP is projected to contract by 6.5% in 2020 (7.5% )
World Eurozone Denmark
compared to the pre-COVID-19 growth estimate of 1.9%. GDP
in Denmark shrank by 4.9% in 2009. The median forecast of
2020 forecast Revised 2020 forecast Revised 2021 forecast
Danish 2020 GDP growth is -5.1% according to our survey of pre COVID-19 post-COVID-19 post-COVID-19
professional forecasters, ref. page 24 in the appendix.
• Consistent with this, the eurozone economy contracted by 3.8% in Deloitte survey1:
When do you think activity will rebound in your economy?
Q1 according to preliminary estimates from Eurostat. The French
and Spanish economies shrank by 5.8% and 5.2%, respectively, in
Q1, a sign of the extensive havoc caused by measures imposed to 83% 83%
77% 76%
72% 2021
curb the coronavirus’ spread. In the United States, GDP shrank at 64% 67% 63%
60% 62% 59%
an annualised rate of 4.8% in Q1.
• Deloitte’s latest survey among ~ 2,000 colleagues and clients from
all over the world on 7 May 2020 reveals that the majority of 40% 39% 41% 37%
36% 33%
participants continues to expect an economic rebound first in 28% 2020
23% 24%
17% 17%
2021. This appears to be aligned with IMF’s expectations of a 2021
12 Mar 19 Mar 26 Mar 2 Apr 9 Apr 16 Apr 23 Apr 30 Apr 7 May 14 May 28 May
rebound.
Note: 1) Deloitte surveys conducted on 12, 19, 26 March, 2, 9, 16, 23, 30 April and 7 May 2020, involving about 2,000 colleagues and clients.
Source: Deloitte surveys, IMF World Economic outlook (October 2019) for pre-COVID-19 figures; IMF World Economic Outlook (April 2020) for revised forecasts
Coronavirus Impact Monitor – 29 May 2020 Page 4 Deloitte Economics © 2020Government policy response impact
Q1 economic contraction broadly in line with the stringency of the lockdown in Denmark
• Several countries have published first estimates of GDP Q1 2020 GDP growth vs the Oxford COVID-19 Government
growth for Q1 2020. These initial GDP estimates Response Stringency Index1
0%
highlight how the coronavirus pandemic, and the
response to it, has affected the global economy. It is United
States Japan
expected that the duration of the outbreak, the public (1%)
South
health restrictions imposed to contain the virus spread, United Norway Korea
Kingdom
and other voluntary social distancing measures, all (2%)
affect on the size of the economic slowdown. Germany
Denmark
• The Government Response Stringency Index captures (3%)
Q1 2020 (QoQ) GDP growth
this information by collecting information on government
policy responses to measure the stringency of the
(4%)
lockdown country by country.
• The Government Response Stringency Index is a Italy
(5%)
composite measure based on nine response Spain
indicators, including school closures, workplace closures,
France
and travel bans, given the policies that have been put in (6%)
place in Denmark.
(7%)
(8%)
(9%)
China
(10%)
10 15 20 25 30 35 40 45 50 55 60
Average of daily ‘stringency’ index for Q1 2020
Note: 1) Index is a composite measure based on nine response indicators, including school closures, workplace closures, and travel bans, rescaled to a value from 0 to 100 (100 = strictest response).
Sources: Oxford COVID-19 Government Response Tracker, Thomson Reuters Eikon
Coronavirus Impact Monitor – 29 May 2020 Page 5 Deloitte Economics © 2020Private spending
Danish spending appears to be returning to more normal levels
Private spending in Denmark (2020 versus 2019) 1
• Danish spending data shows signs
130
that spending is slowly starting to
120
recover as the economy sluggishly
(100=same weekday in 2019)
110
begins to open following the
lockdown since 11 March 2020. For 100
instance, compared with late March 90
Index
2020, when total spending was down 80
by 20%, spending has been down by 70
only some 0%-12% in the past week. 60
• Spending at restaurants has been 50
27 Feb 7 Mar 16 Mar 25 Mar 3 Apr 12 Apr 21 Apr 30 Apr 9 May 18 May 27 May
picking up since mid-May in line with
the Phase 2 opening of the Danish Total 7-day moving average Index=100=100
economy. We also see some positive
in other parts of retail. This includes Private spending on select sectors (2020 versus 2019) 1
spending at gas stations where the
220
spending gap to last year’s levels has 200
(100=same weekday in 2019)
narrowed to around 17% recently. 180
160
• Spending at airlines remains at very
140
depressed levels, consistent with the 120
Index
tight travel restrictions in place. 100
80
60
40
20
0
7 Mar 16 Mar 25 Mar 3 Apr 12 Apr 21 Apr 30 Apr 9 May 18 May 27 May
Airlines Electronics stores Hotels & motels Index=100
Clothing stores Grocery stores Restaurants
Note: 1) Spending data is based on transactions, both domestically and abroad, with cards and MobilePay in stores for around 1m Danske Bank Danish personal customers. Excludes cash payments
and bank transfers. The charts show spending in 2020 compared with the same days in 2019 to correct for different spending patterns across the week. Source: Danske Bank
Coronavirus Impact Monitor – 29 May 2020 Page 6 Deloitte Economics © 2020Danish business sector confidence indicators
Sentiment across key sectors stabilised in May 2020
• Recent data suggests that sentiment across key sectors in the Danish economy stabilised in May 2020, after falling sharply in April 2020.
• Within the Services and the Industrial sectors, sentiment deteriorated slightly in May 2020.
• Sentiment has improved across the Construction and Retail trade sectors, possibly reflecting a more positive outlook on the economy as the government
implemented the first two phases to reopen society.
• Interestingly, sentiment within Industrials and Construction, while falling sharply in April 2020, did not reach the same levels as during the financial
crisis, suggesting that the COVID-19 related restrictions are perhaps not deemed to be as damning to the economy.
Industrials1 Services1
10 20
5
10
0
-5 0
-10
-15 -10
-20 -20
-25
-30 -30
-35
-40
-40
-45 -50
2004 2008 2012 2016 2020 2012 2014 2016 2018 2020
Construction1 Retail trade1
20 20
10
10
0
0
-10
-20 -10
-30
-20
-40
-30
-50
-60 -40
2004 2008 2012 2016 2020 2012 2014 2016 2018 2020
Note: 1) Net index which expresses the difference in percentage of companies, weighted by employees, which have stated positive and negative expected sector development
Source: Statistics Denmark
Coronavirus Impact Monitor – 29 May 2020 Page 7 Deloitte Economics © 2020Coronavirus heatmap
Deloitte Economics’ view on the short-term outlook across selected sectors in Denmark
Consumer
Denmark
• Consumers are less confident affecting non-essential goods sectors.
Energy & Resources Sector
• Coronavirus affects short-term prices, but prices are expected to Short-term Outlook
rebound in 2021.
Financial Services
• The anticipated recession will have a large impact on the sector.
Consumer High impact Slow recovery
Industrials
• Eurozone economic downturn shows signs of easing as lockdowns
are lifted.
Energy & Resources High impact Moderate recovery
Life Science & Health Care (LSHC)
• Swift recovery of the LSHC sector with listed companies trading
above pre-corona levels.
Financial Services High impact Moderate recovery
Real Estate
• Expectation-driven real estate market leads to price reductions in
the short term.
Industrials High impact Moderate recovery
Technology, Media & Telco (TMT)
• TMT sectors have shown relative resilient to COVID-19 as the world
has gone digital. Life Science &
Neutral/Low impact Growth opportunities
Transport Health Care
• The transportation market in recovery following the opening of
several markets.
Real Estate High impact Moderate recovery
Public
• The pandemic will cause a major deficit on public finances in both
2020 and 2021. Technology,
Moderate impact Moderate recovery
Media & Telco
We refer to pages 12-20 for in-depth coverage of developments
in the sectors above.
Transport High impact Slow recovery
Sources: Deloitte analysis, Dansk Erhverv
Coronavirus Impact Monitor – 29 May 2020 Page 8 Deloitte Economics © 2020Key messages
Q1 has been tough on C25, but as restrictions are being lifted and economic activity slowly
begins to rebound a limited optimism is observed
• In Denmark, the number of confirmed cases continues to slow. As of 28 May 2020, there were 11,480 confirmed cases. The reopening of the society
has not been accompanied by a significant increase in confirmed cases.
• The COVID-19 crisis has caused dramatic supply and demand shocks in the world economy, and these shocks are inevitably causing major disruptions
to trade.
• Governments all over the world have introduced major aid packages, which amount to two-digit percentages of GDP, including credit measures.
• Q1 GDP contracted sharply across Europe and the United States, and unemployment rates have sky-rocketed. More than 40 million Americans have
claimed unemployment insurance since mid-March 2020 pushing unemployment to levels not observed since the Great Depression. Projections of GDP
growth rates reveal a significant contraction of the world economy in 2020.
• The OMX C25 index for Q1 2020 was unsurprisingly down on Q1 2019, but consensus estimates point to a relatively quick recovery, reaching about
2019 levels by the end of the year.
• The COVID-19 crisis is now in the recovery phase, where lockdown restrictions are being lifted in most Western countries. This is reflected in increased
spending, and economic activity is slowly beginning to rebound. Sentiment across key sectors also seems to stabilise.
• Deloitte Economics will continue monitoring the impact of the coronavirus in Denmark and globally. Find our updates here
For questions on the contents of this report, please contact:
Majbritt Skov Tinus Bang Christensen Peter Lildholdt
Director, Head of Deloitte Economics Partner Assistant Director
Mobile: +45 30 93 54 71 Mobile: +45 30 93 44 63 Mobile: +45 40 35 25 36
maskov@deloitte.dk tbchristensen@deloitte.dk plildholdt@deloitte.dk
Disclaimer: The information in this document is intended for knowledge sharing only.
Coronavirus Impact Monitor – 29 May 2020 Page 9 Deloitte Economics © 2020Industry outlook
Consumer Page 11
Energy & Resources Page 12
Financial Services Page 13
Industrials Page 14
Life Science & Health Care Page 15
Public Page 16
Real Estate Page 17
Technology, Media & Telco (TMT) Page 18
Transport Page 19
Coronavirus Impact Monitor – 29 May 2020 Page 10 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Consumer
Consumers are less confident affecting non-essential goods sectors
Highlights from the industry (as of 27 May 2020)
110.0 Based on top 10 Consumers will spend less on restaurants, apparel and electronics
105.0 companies
100.0 101.3 Consumers’ intention to spend more over the next four weeks
Indexed share price
95.0 92.5 Apparel/ Household Restaurant/
90.0 Alcohol Books Electronics Groceries Medicines
90.7 footwear goods takeout
85.0 84.9
80.0
75.0
70.0
-14% -17% -6% -17% 30% 23% 10% -18%
65.0
60.0
26 Dec 19 26 Jan 20 26 Feb 20 26 Mar 20 26 Apr 20 26 May 20 Consumer intended purchase channel
1 2 3
Retail Hospitality Consumer MSCI World
16% 16% 17% 16%
38% 41% 33%
16% 49% 19% 20% 17%
Retail index has moved from index 93.4 to 101.3 (since last update). 27% 27%
29%
68% 25% 65% 68%
62%
Hospitality index has moved from index 80.0 to 84.9 (since last update). 34% 31% 40%
26%
Consumer index has moved from index 91.7 to 92.5 (since last update).
Online/delivered Mixed In-store
Trading multiples and economic outlook (as of 27 May 2020)
Index: MSCI World Retailing Index (top 10 companies) As of April 2020, the consumer confidence index4 was 98.02 indicating a
Historical averages Coronavirus impact
(EV/FY0 EBITDA) (EV/FY0 EBITDA) somewhat doubtful attitude towards the economic development, possibly
-2.2x
resulting in higher saving and less consumption among consumers.
101
13.2x 14.1x 17.0x 14.8x
11.7x
98
9 8 .0
95
Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Apr-18 Apr-20
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current
Consumer confidence index (OECD-Europe)
Note: 1) MSCI World Retailing Index; 2) MSCI World Consumer Services Index; 3) MSCI Consumer Staples Index; 4) Based on OECD – Europe region
Sources: Capital IQ; MSCI; European Parliament; Deloitte State of the Consumer Tracker
Coronavirus Impact Monitor – 29 May 2020 Page 11 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Energy & Resources
Coronavirus affects short-term prices, but prices are expected to rebound in 2021
Highlights from the industry (as of 28 May 2020)
110 Hydropower generation
100
− Prior to Corona, electricity prices were already pressured in the
90
Nordics due to a warm winter, which increased the generation capacity
80
of Norwegian hydropower plants.
70
60 − Further, the mild winter decreased demand for electricity.
50
40
Lockdown affects demand
30
20 − The coronavirus lockdown has negatively affected the demand of both
1 jan 20 1 feb 20 1 mar 20 1 apr 20 1 maj 20 1 jun 20 public institutions, private individuals and corporations.
Natural gas TTF, spot Coal API2, spot Nordic electricity future, Q3-20
Carbon market prices
The mild winter puts pressure on Nordic electricity prices prior to the Corona crisis. − Lower emissions of CO2 and other greenhouse gasses have decreased
Electricity demand has decreased marginally due to the Coronavirus lockdown. carbon prices.
Significant drop in carbon emissions resulting in lower prices. − Coal becomes cheaper, lowering overall prices, as coal is marginally
price setting. This creates a self-enforcing effect, which drives down
prices even further.
Economic outlook
Selected futures
As the effects described above are temporary and a result of the current
-38.2% -29.0%
-63.9% -13.4% lockdowns and restrictions on travel, we expect an increase in prices once
35 33 the restrictions are lifted.
26 22 23 25 21
9 Although the short-term impact on electricity producers is significant, we
expect prices to rebound in 2021. This is supported by significantly larger
Nordic power, Q3-20 Nordic power, Q4-20 Nordic power, FY-21 EUA, Jun-20 price drops in electricity futures prices in the short-term compared to the
long-term.
Jan 1, 2020 May 27, 2020
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 29 May 2020 Page 12 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Financial Services
The anticipated recession will have a large impact on the sector
Highlights from the industry (as of 27 May 2020)
Banks and consumer finance
120
110
− Credit businesses that retain a large physical branch network or have IT
inefficiencies will find a drag on their cost bases. This is at a time where they
100 must work through increased loan loss provisions amplified by the adoption
[89.0]
90 [87.0] of IFRS9 accounting standard in 2018. A higher cost base juxtaposed against
[80.6] a continued low base rate environment and an inability to generate high
80 [80.4] levels of net interest margin. Inefficient or subscale players may need to look
70 for new capital or become part of a wider market consolidation.
[64.1]
60
Insurance
50 [A]
[44.1] − Lloyds of London estimates a USD 203bn underwriting loss for the
40 insurance industry as a result of the global pandemic. Obviously, some asset
30 classes will fair better than others (e.g., motor insurance will benefit from
1/9/20 1/24/20 2/25/20 3/26/20 4/28/20
1 5/25/20 lockdown versus business interruption insurance). Dependent on products
and attitudes to reinsurance, there may be stress in the insurance industry.
Banking Insurance European AM
Consumer Finance DCA MSCI World Asset managers
− A Deloitte study demonstrates that consumers expect to spend more on
Equity values of financial services firms have made a modest recovery from the wealth management services as a response to the COVID-19 crisis (click
mid-March 2020 low point. Uncertainty, particularly in consumer finance, and here to read the study). Asset managers who have been successfully able to
debt collector businesses continues to be priced into valuations. pivot from physical meetings to conduct sales and provide advice virtually
may be able to capture market share. However, the shock to equity markets
will negatively affect income across the sector.
Trading multiples and economic outlook
Index: S&P Capital IQ
The impact of the COVID-19-led recession on financial services firms will be
Market capitalization (1 Jan = index 100) Coronavirus impact (P/BV) 3
felt, as government support schemes unwind in the next few months. Firms
Nordic Insurers 81 that have been affected by lockdown measures may trade through the
-0.4x
summer months before losing the battle with cash flow issues and debt
Nordic Banks 80 1.7x servicing issues during the autumn.
Nordic Consumer 1.3x
64 1.0x Financial Services businesses that are easily able to interact with their
Finance
Nordic DCAs2 44 clients online, and offer a good user experience, are better placed to thrive
during the recession. Many of the tech elements, most notably the
European AM 87 proliferation of smart phones, were not available during the financial crisis.
Jan. 1, Mar. 16, Current
27-05-2020 This provides customers with a greater number of alternative providers.
2020 2020
Note: 1) Indices are from Stoxx Europe 600 Financial Services and MSCI World; 2) DCA: Debt Collection Agencies; 3) P/BV is measured as average of Nordic Insurers, banks, and DCA
Source: A. https://www.theguardian.com/business/2020/may/14/lloyds-of-london-coronavirus-payouts
Coronavirus Impact Monitor – 29 May 2020 Page 13 Deloitte Economics © 2020Consumer Energy & Financial Life Science
Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Industrials
Eurozone economic downturn shows signs of easing as lockdowns are lifted
Share price development year-to-date The “Manufacturing PMI Output Index1” is slowly picking up in May 2020
Indexed share price as of:
110
28 May 7 May 35.4
100 Eurozone 18.1
98.5 92.4 The index is based on the
93.1 84.3 38.5
90 survey question:
90.6 85.1
34.9
80 “Is the level of
78.0 69.3 UK 16.3
43.9 production/output in your
70
company higher, the same or
60 31.5 lower than one month ago?”
Germany 19.7
50 41.0
1 Jan 20 1 Feb 20 1 Mar 20 1 Apr 20 1 May 20 Index =50: No change
Industrials Materials Automotive MSCI World 35.3 Index 50: Expansion
The industrial indices and the stock market in general have further rebounded in 35.8
recent weeks with activity level in the economy picking up.
May April March
Trading multiples
MSCI World Industrials Index MSCI World Materials Index MSCI World Automotive Index
Historical averages Coronavirus impact Historical averages Coronavirus impact Historical averages Coronavirus impact
(EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA)
-1.0x +0.9x -0.6x
13.1x 14.2x 13.8x 12.8x 10.3x 11.5x 11.7x 11.8x 12.7x 10.1x 9.8x 10.0x 11.1x 10.5x
11.7x
10y avg. 5y avg. 3y avg. Jan 1, 20 Current 10y avg. 5y avg. 3y avg. Jan 1, 20 Current 10y avg. 5y avg. 3y avg. Jan 1, 20 Current
Since the last update on 7 May 2020, the EV/EBITDA Since the last update on 7 May 2020, the EV/EBITDA Since the last update on 7 May 2020, the EV/EBITDA
multiple has been up from 11.8x to 12.8x. multiple has been down from 13.1x to 12.7x. multiple has been up from 9.8x to 10.5x.
Note: 1) Data as of 28 May 2020
Sources: Capital IQ; MSCI World Indices; IHS Markit; Trading Economics
Coronavirus Impact Monitor – 29 May 2020 Page 14 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Life Science and Health Care (LSHC)
Swift recovery of LSHC sector with listed companies trading above pre-corona levels
Highlights from the industry (as of 6 May 2020)
Indexed share price development
110 Collaboration is the new normal
105
103.6 − COVID-19 has further accelerated an ongoing trend of collaboration
100 99.2 among LSHC companies, scientists, and public institutions.
95
90 − Examples of recent private collaborations are:
85.1
85 − Bavarian Nordic and AdaptVac for COVID-19 vaccine
80
− Consortium of 15 large life science companies, including Novartis,
75
Johnson & Johnson, and Pfizer, to share knowledge
70
65
60 Race for COVID-19 vaccine or other treatment
22 Dec 19 22 Jan 20 22 Feb 20 22 Mar 20 22 Apr 20 − The antiviral, Remdesivir, has shown promising results in preliminary
1 2
Healthcare Life science MSCI World
trials with improved recovery time and potential survival benefits.
Significant recovery in both Health Care and Life Science in recent weeks continues. − Race for developing a vaccine is still ongoing with a horizon of 12-18
Life Science trades above pre-corona levels. months.
Significantly faster recovery and better performance among Life Science and Health − According to Milken Institute, 123 candidate vaccines and 203 different
Care companies compared to the general market. treatment variations are being developed as of 7 May 2020.
Trading multiples and economic outlook
Index: MSCI World Health Care Index
Historical averages (EV/EBITDA FY0) Coronavirus impact (EV/EBITDA FY0)
LSHC companies trade above pre-corona levels.
0.0x Countries are reopening, and many health care systems are again
13.7x 14.1x focusing on other illnesses and treatments than COVID-19.
11.7x 14.2x 14.2x
Rapid recovery expected for LSHC companies unrelated to COVID-19
treatments as demand for non-essential medications and equipment rises.
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current Continued high demand for COVID-19 related therapies and equipment.
Note: 1) MSCI World Health Care Index (top 10 constituents); 2) MSCI World Pharmaceuticals, Biotechnology and Life Sciences Index (top 10 constituents)
Sources: Milken Institute, Deloitte Health Forward Blog, Capital IQ, NIH
Coronavirus Impact Monitor – 29 May 2020 Page 15 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Public
The pandemic will cause a major deficit on public finances in both 2020 and 2021
Highlights from the industry (as of 28 May 2020)
A timeline for COVID-19 government response Towards normality
− Government’s focus is to move society towards normality and avoid an
increase in the reproduction rate.
− As part of a controlled reopening, all citizens can book an appointment
to a COVID-19 test.
The recovery phase has intensified
− Pressure on government to increase the pace, by which the economy is
reopened.
− Phase 2 of the reopening has been extended to include for instance zoos
and museums.
Deficit on public finances
After a surplus in 2019, a deficit of 7.2% of GDP is expected in 2020. The
deficit is expected to be 1.8% of GDP in 2021.
− The public EMU debt is expected to increase from 33% pf GDP in 2019 to
41% in 2020.
− European recovery fund of about DKK 5,000bn is being negotiated in EU.
Economic outlook
Aid packages and focus on supporting the private sector through earlier start-up of planned investment and prepayment of suppliers are expected to ease the negative
impact on the economy.
Aid packages and the economic setback will have an immediate negative impact on public finances and may challenge government spending in the long term.
The severe and long-lasting financial and economic impacts of the pandemic depend on the effects of the aid packages and the strategy for the reopening of society.
Digitalisation in the public sector may be boosted as the crisis has reinforced virtual ways of working.
Sources: Deloitte Insights, Government’s response to COVID-19. From pandemic crisis to a better future, April 2020, Ministry of Finance, May 2020
Coronavirus Impact Monitor – 29 May 2020 Page 16 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Real Estate
Expectation-driven real estate market leads to price reductions in the short term ...
Highlights from the industry (as of 28 May 2020)
Retail
110 2.0%
− Despite the reopening of the retail sector, footfall is not at pre-COVID-
100 1.8%
19 levels.
(2 J an 2 0 2 0 = 1 0 0 )
Stoc k pric e index
90 1.5% − As the number of transactions in retail is back to pre-COVID-19 levels,
I nterest rate
we believe that a shift to online trade has already taken place. As
80 1.3%
such, new occupiers and business models need to be developed by
70 1.0%
landlords.
− The reopening of many cafés and restaurants has not attracted
60 0.8%
customers as expected, and it will take time before "normality".
50 0.5% • Residential
01 Jan 22 Jan 12 Feb 04 Mar 25 Mar 15 Apr 06 May 27 May − Historically, there has been a close relationship between consumer
STOXX 600 Real Estate Index Danish long-term mortgage rates confidence and growth in housing prices.
The leading real estate index is recovering from the COVID-19 chock in March 2020. Despite the − This suggests decreasing prices in 2020. However, transaction volumes
current challenges in some sectors, the industry is in general better prepared financially. have recovered since Easter – also driven by the summer housing
Interest rates are now fixed at a higher level. However, in troubled times, we normally see a market.
spread to bigger economies such as Germany, which may last throughout the COVID-19 crisis.
Trading multiples and economic outlook
Index: Custom weighted average index1
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA) As seen opposite, price multiples are not affected significantly by COVID-19, and in
+0.6x general the major listed RE companies are well-positioned to handle the crisis.
27.6x 25.4x 28.1x 30.6x 31.2x Decreasing prices in 2020 for single-family houses and apartments in the major
Danish cities are expected due to reduced volumes. Many households have
significant savings, and financing costs are still very low. However, as volumes and
prices are expectation-driven, we believe that the uncertainty about the financial
10y avg. 5y avg. 3y avg. 1 Jan 2020 Current impact of COVID-19 will put things on a hold – for now!
Note: 1) Based on Collier International, Patrizia AG, Agate Ejendomme, Jeudan A/S, and Park Street Nordicom
Sources: Finans Danmark, Thomson Reuters Eikon, Capital IQ
Coronavirus Impact Monitor – 29 May 2020 Page 17 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: TMT
TMT sectors have been relatively resilient to COVID-19 as the world has gone digital
Highlights from the industry (as of 28 May 2020)
120 TMT perceived as a defensive sector, which has less to lose from COVID-19
112
110 108
102
Telecom: Spend among consumers is often within a contract; demand is
100
up; need is not discretionary (new cars) or constrained (leisure).
90 91
Media and Entertainment: Financial impact varies across sub-sectors.
80
Media consumption up (e.g., Netflix, Disney+), but willingness/ability to
70 pay may be constrained as economic outlook exacerbates. Events
60 (consumer, business) mostly heavily restricted; cinemas, theatres,
1 Jan 20 1 Feb 20 1 Mar 20 1 Apr 20 1 May 20 museums mostly closed. TV and movie production mostly halted. Theme
Information Technology1 Communication Services Media and Entertainment MSCI World
parks mostly closed.
TMT companies are trading above the overall equity market. Technology: Some segments (e.g., robotics, communication software)
experiencing record demand; digital transformation being accelerated;
Media and Entertainment quickly recovered after the shockwave on the stock
companies catering to SMEs may suffer from customer liquidity.
market. As people stay at home, the entertainment market is making records 2.
Trading multiples and economic outlook
Index: MSCI World Information Technology
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA)
Forrester has revised its IT spending forecast downward by a best-case
scenario where the global tech market growth is slowing to ~2% in 2020.
+0.3x
24.1x If a full-fledged recession hits, there is a 50% probability that the global
21.3x 28.0x 28.3x
16.1x tech market will decline by 2% or more in 2020.
Software spending is the subsector expected to show highest growth,
while computer equipment and IT consulting and systems integration
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current
services spending are expected to show weaker growth.
Note: 1) MSCI World industry indices used, 01-01-2020 = index 100; 2) In EMEA and selected Asian countries, physical game sales are up by 63% according to GamesIndustry.biz.
Sources: S&P Capital IQ (May 2020), Forrester Research (March 2020)
Coronavirus Impact Monitor – 29 May 2020 Page 18 Deloitte Economics © 2020Energy & Financial Life Science
Consumer Industrials Public Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Transportation
The transportation market in recovery following the opening of several markets
Highlights from the industry (as of May-29)
130 The transportation stocks indicate belief in the market’s recovery
125
120 − The rapid spread of COVID-19 has had a major impact on global goods
115 transport, with ripple effects from the shortfall in demand for goods
110
105 104.0 from China
100 99.0
95 95.9 − The recent surge in stock prices since the low point in mid-March
90
85 indicates an expectation to a recovering demand global trade as
80
75 several countries are now opening up, driving the recovery of physical
70 retail
65
60
May 19 Jul 19 Sep 19 Oct 19 Dec 19 Feb 20 Mar 20 May 20
Accelerated conversion to e-commerce to aid in recovery
MSCI World MSCI Transportation Danish Transportation Index
− As of mid-April, US retailers’ online YoY revenue growth was 68%,
substantiated by a 146% YoY growth in number of online retail orders
Transportation indices have largely followed the total market as a recovering market − A big rush on freight capacity and subsequent increase in freight rates
implies and increased need for goods transportation is expected as demand recovers and companies try to get their
products on the water
Trading multiples and economic outlook (as of May-29)
Danish-listed transportation companies1 The Shanghai Containerized Freight Index (SCFI) is down 19.0% to 829
Historical averages Coronavirus impact2
(EV/FY1 EBITDA) (EV/FY1 EBITDA) from its high 1023 in week 1, however up 9.5% YoY
+0.1x
1100
7.1x 7.5x 7.5x 7.4x 7.5x
900
4.6x
700
500
10y avg. 5y avg. 3y avg. Last close Trough Current 1 11 21 2019 31 41 51 202061
2019
Note: 1) A.P. Møller-Mærsk, D/S Norden, DFDS, DSV Panalpina, NTG, TORM, 2) Lowest YTD is 4.6x on March 20 th
Source: Capital IQ, Shanghai Shipping Exchange, Forbes, IHS Markit
Coronavirus Impact Monitor – 29 May 2020 Page 19 Deloitte Economics © 2020Industry outlook: Deloitte contacts
How Deloitte can help you
Consumer Energy & Resources
• Please use the contact details opposite to get in touch
with our Financial Advisory industry group leaders and Mads Damborg Troels Ellemose Lorentzen
find out how we can assist you. Partner Partner
• We are well-positioned to assist in a range of tasks,
Email: madsdamborg@deloitte.dk Email: tlorentzen@deloitte.dk
such as those below.
Mobile: +45 30 93 54 81 Mobile: +45 30 93 56 90
Focus areas Financial Services Life Science & Health Care
Mike Robinson Mads Damborg
State aid packages
Partner Partner
Email: michrobinson@deloitte.dk Email: madsdamborg@deloitte.dk
Liquidity scenario analysis
Mobile: +45 30 93 00 03 Mobile: +45 30 93 54 81
Debt covenant advice and financing Government & Public Services TMT
Rikke Beckmann Danielsen Kasper Svold Maagaard
Business restructuring and M&A
Partner Partner
Email: rdanielsen@deloitte.dk Email: kmaagaard@deloitte.dk
Bankable business plan development Mobile: +45 30 93 56 92 Mobile: +45 30 93 54 54
Stakeholder management and process control Industrials Real Estate
Niels Stoustrup Tinus Bang Christensen
Impact assessment Partner Partner
Email: nstoustrup@deloitte.dk Email: tbchristensen@deloitte.dk
Economic modelling and forecasting Mobile: +45 30 93 59 15 Mobile: +45 30 93 44 63
Coronavirus Impact Monitor – 29 May 2020 Page 20 Deloitte Economics © 2020Appendices
European corporate earnings expectations Page 22
Danish, European and World GDP development Page 23
Danish 2020 GDP expectations Page 24
European market volatility and credit default probability Page 25
Government support packages Page 26
Deloitte Government Response Portal Page 27
Coronavirus Impact Monitor – 29 May 2020 Page 21 Deloitte Economics © 2020Corporate earnings expectations
Corporate earnings expectations have been severely curtailed since the outbreak
Change in net income consensus estimates between
31 January 2020 and 27 May 20201
• The selloff in European equity markets, triggered by the
COVID-19 pandemic and the associated economic
slowdown, differs across sectors, ref. page 3. Energy
• To shed light on the underlying drivers of this selloff
Consumer discretionary
across sectors, the chart opposite displays changes in
expectations of stock analysts. In particular, the chart Financials
shows how stock analysts have downgraded consensus
Transportation
expectations of net income across sectors and time:
− Energy, incl. oil and gas companies, saw its net Industrials
income estimates being downgraded by 40%-80%
Materials
in 2020-2021 likely due to sharp declines in oil and
gas prices. Information Technology
− Consumer Discretionary, Financials, and Other consumer staples
Transportation are expected to be severely affected.
Their net income estimates for 2020 are, on Communication services
average, more than 40% below pre-crisis
Utilities
estimates.
− Health Care and Real Estate are expected to Health care
weather the storm relatively well, both in the short
Real estate
(2020) and the long (2023) term.
Food & staples retailing
− Food & Staples Retailing is the only sector whose
expectations for 2020 have improved, albeit the (90%) (80%) (70%) ( 60%) (50%) ( 40%) (30%) (20%) ( 10%) - 10%
improvement is marginal.
2020 2021 2022 2023
Note: 1) Based on analyst estimates for S&P Europe 350 Index constituent companies
Source: S&P Capital IQ
Coronavirus Impact Monitor – 29 May 2020 Page 22 Deloitte Economics © 2020Danish, European and World GDP development
World Economic Outlook: GDP growth projections for Denmark, Eurozone and World
Denmark: GDP growth
10% 6 .0 %
5%
• IMF is projecting the global economy to contract by
-
3% in 2020, far worse than the -0.1% growth
experienced during the 2009 financial crisis. The (5% )
(4 .9 % ) (6 .5 % )
economic growth forecasts from the IMF assume that ( 10%)
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
the COVID-19 pandemic fades in the second half of
Historical Forecast
2020 and that containment efforts can be unwound.
The disruptions are assumed to be concentrated
mostly in the second quarter of 2020 for almost all Eurozone: GDP growth
10%
4 .7 %
countries, with a gradual recovery thereafter, as it
5%
takes some time for production to ramp up after the
-
shock.
(5% )
(4 .5 % )
• The global economy is projected to rebound in 2021, (10%) (7 .5 % )
growing at 5.8% as economic activity normalises, 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Historical Forecast
helped by policy support. In comparison, global growth
rebounded to 5.4% in 2010 from -0.1% in 2009.
World: GDP growt h
• Please note that the 2021 rebound depends critically 10% 5 .8 %
on the pandemic fading in the second half of 2020, 5%
allowing containment efforts to be gradually scaled -
back and restoring consumer and investor confidence. (5% )
(0 .1 % )
(3 .0 % )
(10%)
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Historical Forecast
Source: IMF, World Economic Outlook (April 2020)
Coronavirus Impact Monitor – 29 May 2020 Page 23 Deloitte Economics © 2020Danish 2020 GDP expectations
Latest survey of forecasters suggests a Danish GDP contraction of 5.1% for 2020
• The Danish Central Bank forecasts three scenarios for the Danish economy in 2020. The three scenarios differ by the speed with which containment
efforts are unwound. In the mild scenario, where GDP is contracting by 3% in 2020, restrictions are gradually eased from Easter to a full lifting of
restrictions by October 2020.
• The Confederation of Danish Industry has based its projection of a 7% decline in 2020 GDP on a survey of its member firms.
• The Economic Councils project two scenarios for the Danish economy. In the optimistic scenario, the economy rebounds relatively quickly, and GDP
declines by 3.5% in 2020. In the pessimistic scenario, a second wave of COVID-19 emerges during the fall, and new containment efforts and
restrictions are activated; new aid packages are introduced. In this scenario, GDP contracts by 5.5% in 2020.
• Nordea updated its economic outlook for Denmark and the Nordic countries on 27 May 2020. Nordea expects the Danish GDP to contract 5% in 2020
before rebounding 4% in 2021. Previously, Nordea expected a 3% fall in output in 2020.
• The Danish Ministry of Finance has also updated its forecast, expecting a 5.25% contraction in national output in 2020 (compared to an earlier
prediction of -4.4%).
Denmark: GDP growth and 2020 market expectations
8%
6% 3 .9 %
3 .2 %
4% 2 .3 % 1 .9 % 2 .3 % 2 .0 % 2 .4 % 2 .4 %
1 .3 % 1 .6 %
0 .9 % 0 .9 %
2% 0 .2 %
(0 .5 % )
-
( 2% )
(4 .9 % )
( 4% )
M edian; (5 .1 % )
( 6% )
( 8% )
(10%)
(12%)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Historical (IMF) Danish Central Bank Ministry of Finance
The Economic Councils IMF Confederation of Danish Industry
Danske Bank Nordea Median
Sources: IMF, Danish Central Bank, Danish Ministry of Finance, DØRS, Confederation of Danish Industry, Danske Bank, Nordea
Coronavirus Impact Monitor – 29 May 2020 Page 24 Deloitte Economics © 2020Market volatility and European credit default probability
Equity market volatility remains elevated and comparable to the levels observed during the
global financial crisis
VSTOXX Index1
100
• The VSTOXX Index measures 30-day implied volatility 90
of the EURO STOXX 50 equity index and reflects 80 81
investors' uncertainty about future equity market 74
Volatility index
70
moves.
60
• As shown, the coronavirus induced an increase in 50
volatility to a level comparable to that experienced
40
during the global financial crisis in 2008. Since then,
30 29
volatility has declined, but still remains elevated and
20
comparable to the levels observed during the global
financial crisis. 10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
iTraxx Europe Crossover index: Default probability2
• The chart opposite shows the development in the %
implied default probabilities based on the 5Y iTraxx 70
61.7%
European Crossover spread of Credit Default Swaps and
60
an assumed recovery rate of 40%. It measures default 50.2%
Default probability in %
probabilities on a portfolio of sub-investment grade 50
43.3%
corporate debt in Europe.
40
• With a current default probability of about 30%, we are
30 30.2%
at the highest level since the European debt crisis, but
still below peak financial crisis levels. 20
• As the index reflects cost of debt, any refinancing will 10
be costly for leveraged companies, even though interest
rates are close to being record low. 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: 1) VSTOXX as volatility index of EURO STOXX; 2) Default probability calculated based on 5Y iTraxx European Crossover CDS and a recovery rate of 40%
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 29 May 2020 Page 25 Deloitte Economics © 2020Government support packages
Massive state aid packages are launched to counter economic fallout from COVID-19
• The various lock-down measures in response to COVID- State aid packages relative to GDP
19 have halted economic activity in certain sectors and
harshly disrupted others. The resulting job losses and Austria 10%
bankruptcies may crate major economic strains for Canada 6%
millions in Europe and worldwide. China 1%
• Gigantic state aid packages have been launched across Denmark 4% 13% 17%
the world to counter the impact of the economic crisis. EU 4%
• EU finance ministers agreed on a EUR 540bn (3.5% of Finland 8%
EU GDP) emergency support package for countries hit by France 17%
the coronavirus. The measures aim to provide safety Germany 22%
nets for workers, businesses and sovereigns. Greece 5%
• As these state aid packages are launched, governments Italy 21%
sharply increase debts to finance the increased spending Japan 20%
levels. On this background, the questions about the
New Zealand 4%
following issues have started start to emerge:
Norway 7% 3% 10%
− The sustainability of government debt funding Portugal 4%
Spain 9%
− The impact on inflation from sharp increases in
Sweden 2% 10% 12%
government spending
Switzerland 6%
The Netherlands 2%
UK 21%
USA 13%
Credit Fiscal
In some countries, including Denmark, aid packages also include credit measures like state-guaranteed loans.
Sources: Danske Bank, Deloitte Covid-19 portal as of 5 May 2020
Coronavirus Impact Monitor – 29 May 2020 Page 26 Deloitte Economics © 2020Deloitte Government Response Portal
Database of financial, tax, business and social measures announced by governments
globally
• To aid our clients in navigating the complex landscape of COVID-19 assistance programmes, we have developed a free digital portal that captures the
latest financial, tax, business and social measures enacted by country.
Access the portal!
Coronavirus Impact Monitor – 29 May 2020 Page 27 Deloitte Economics © 2020This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. About Deloitte Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com. Deloitte Touche Tohmatsu Limited Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more. © 2020 Deloitte Statsautoriseret Revisionspartnerselskab. Member of Deloitte Touche Tohmatsu Limited.
You can also read
