Deloitte Economics' Coronavirus Impact Monitor - The pandemic continues, while Q2 economic damage comes to light
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Deloitte Economics’ Coronavirus Impact Monitor The pandemic continues, while Q2 economic damage comes to light 12th edition, 14 August 2020
Coronavirus outbreak
Daily new cases are rising again in Denmark and other European countries, while the virus
continues to spread across the Americas
7-day rolling average new daily confirmed COVID-19 cases for selected countries
• COVID-19 is continuing its spread across the world, with
nearly 21 million confirmed cases in 188 countries. About US & Brazil Spain & France Denmark & Sweden
750,000 people have lost their lives. 70.000 8.000 1.400
• Cases of the disease are continuing to surge in many 60.000 7.000 1.200
# Daily cases
countries, while others, which had apparent success in 50.000
6.000
1.000
suppressing initial outbreaks, are now seeing infections rising 5.000
40.000 800
again. 4.000
30.000 600
• Latin America is the epicentre of COVID-19 according to the 3.000
WHO. Brazil has the second highest number of cases in the 20.000
2.000
400
world, after the United States, and has recorded more than 10.000 200
1.000
100,000 deaths.
0 0 0
• Several countries across Europe have reported a recent rise in 1 Mar 1 May 1 Jul 1 Sep 1 Mar 1 May 1 Jul 1 Sep 1 Mar 1 May 1 Jul 1 Sep
cases. Spain, which was one of the worst affected countries in
the early months of the pandemic, has seen new cases rise 7-day rolling average new daily confirmed COVID-19 deaths for selected countries
rapidly in recent weeks. The Danish Ministry of Foreign Affairs US & Brazil Spain & France Denmark & Sweden
advises against non-essential trips to Spain. 3.000 1.200 120
• The Danish government activated Phase III of the reopening
2.500 1.000 100
that took effect on 8 June 2020. The limit on size of
gatherings has been increased to 100. The political parties are 2.000 800 80
# Daily deaths
discussing if/how to proceed to Phase IV of the reopening.
1.500 600 60
• In Denmark, the increase in the number of confirmed cases
1.000 400 40
has remained relatively low during the summer, but has
started to tick higher recently. As of 12 August 2020, the 7- 500 200 20
day rolling average of new daily confirmed cases had risen to
126. 0 0 0
1 Mar 1 May 1 Jul 1 Sep 1 Mar 1 May 1 Jul 1 Sep 1 Mar 1 May 1 Jul 1 Sep
US Brazil Spain France Denmark Sweden
Sources: World Health Organisation (WHO), the Danish Health Authority (Sundhedsstyrelsen), Deloitte analysis
Coronavirus Impact Monitor – 14 August 2020 Page 2 Deloitte Economics © 2020
Danish cases by municipality
The proportion of COVID-19 tests returning positive results is increasing, which is driving
the total number of positive cases in Denmark
Positive tests by municipality:
• The chart opposite shows the percentage of tests returning Change in percentage of positive tests between week to 1 July and week to 13 August vs
positive results: cumulative percentage of positive tests to 1 July
3,0%
– On the X-axis we show the percentage of tests returning
positive results in each municipality up to 1 July 2020. The
2,5% Aarhus
municipalities to the right of the chart have had the highest
incidence of positive tests overall to 1 July.
Change (in percentage points) of tests returning positive
2,0%
– On the Y-axis we show the percentage-point change in the
proportion of tests returning positive results in the most
(week to 1 July vs. week to 13 August)
1,5% Gribskov Slagelse
Silkeborg Ishøj
recent week (to 13 August 2020) compared with the week
Sorø
to 1 July 2020. The municipalities to the top of the chart 1,0% Roskilde Glostrup
Haderslev Nyborg Gentofte
are showing the greatest increase in the positive testing Solrød Albertslund
rate.
0,5% Brøndby
Hvidovre
• What is perhaps most striking is Aarhus, where compared with
just over a month ago, the percentage of tests returning 0,0%
positive results has risen by over 2.5 percentage points. This Vallensbæk
compares with the just 1% of tests having been positive up to 1 (0,5%)
July 2020.
Jammerbugt
(1,0%)
• Municipalities such as Ishøj, Glostrup, Brøndby and Vallensbæk,
Rebild
have been hardest hit by the virus when looking at the rate of
positive cases per test. Vallensbæk, however, has not seen (1,5%)
much of a change in its positive testing rate, while Ishøj and
Glostrup have. (2,0%) Vesthimmerlands
• Overall, there is a large number of municipalities that are seeing (2,5%)
an increasing proportion of tests being positive. The rural 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5%
municipalities Vesthimmerland, Rebild and Jammerbugt are
Percentage of tests returning positive results, cumulative to 1 July
notable exceptions.
Highlighted municipalities Other municipalities
Source: Statens Serum Institut, Deloitte analysis
Coronavirus Impact Monitor – 14 August 2020 Page 3 Deloitte Economics © 2020
Impact on financial markets
European Technology and Medical/Pharma stock prices are now higher than pre-outbreak
levels, while Financial, Transport and Energy stock prices remain subdued
Equity markets: Sectoral indices in Europe1
• European equity markets continue to show sector divergence.
• Medical & Pharmaceutical stocks, and especially Technology Major outbreak in Europe
stocks, have been performing well and are now above pre- 120
outbreak levels (up 4% and 15%, respectively, year-to-date). 115
110
(2 Jan 2020 = 100)
104
• Financial stocks have recovered some losses over the summer,
Sectoral indices
100
but remain ~20% below January levels. 90
81
• The Transport industry, including airlines, continues to be 80
74
severely affected by the virus and the related travel restrictions, 70 69
and the Transport index is down by 26% since the beginning of 60
2020. 50
40
• New outbreaks in countries that had initially brought the spread 30 Dec
1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 1 Sep
of the virus under control and other regions where the 2019
outbreak has exploded, such as in the United States and Central Transport Energy Medical & Pharmaceuticals Financial Technology
and South America, have dampened the outlook on the airline
OMX C25 Index, median quarterly net income, DKKm
and leisure travel industries, as well as the Energy sector.
• The European energy sector, including oil and gas companies, is 1.400
still down by some 31% since the beginning of the year. 1.200
Q1 2020 net income
1.000
• The lower right-hand chart shows the development in quarterly
800
net income results for OMX C25 Index constituents.
600
• Following a sharp drop in Q1 2020, net income results for Q2 400
2020 indicate that Denmark’s largest companies have made a
200
swift recovery with expectations pointing to a continued
0
recovery over the remainder of 2020.
(200)
Q1 2019A Q2 2019A Q3 2019A Q4 2019A Q1 2020A Q2 2020A/E2 Q3 2020E Q4 2020E
25th percentile Median 75th percentile
Note: 1) Refinitiv European sectoral price indices measured by Refinitiv (Thomson Reuters) 2) Due to data availability, Q2 2020 is a blend of actual and expected Q2 earnings
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 14 August 2020 Page 4 Deloitte Economics © 2020Q2 GDP update
As Q2 GDP numbers are published, the true extent of which the coronavirus-related
lockdown restrictions have had is becoming apparent
Q1 2020 Quarter-on-quarter GDP growth for selected countries1:
Q1 and Q2 2020
Q2 2020
12%
0% 1% 0%
(1%) (1%) 0% (1%)
(2%) (2%) (2%) (1%) (2%) (1%) (2%) (2%)
(4%) (3%)
(5%) (5%) (5%)
(6%)
(7%) (7%)
(10%) (9%)
(10%) (10%)
(12%) (12%) (12%)
(14%)
(17%) (17%)
(19%)
(22%)
Finland
Italy
Mexico
Denmark
Brazil
Germany
Sweden
Iceland
Spain
OECD
Eurozone
China
India
Australia
Russia
France
Canada
US
Japan
UK
Norway
South Korea
• New GDP figures for Q2 2020 have started to be released by various countries, including figures published today for Denmark showing a 7% drop in Q2. This data captures
the first full quarter when the economic impact of the coronavirus was truly felt for most countries.
• Across the OECD as a whole, GDP has fallen by a massive 17% in Q2 2020 based on data available at the time of writing. Comparing this with the Q1 figure showing a 1%
drop, this illustrates that economic and societal restrictions implemented to combat the virus outbreak had its greatest impact only after Q1.
• Some countries have fared better than others. Based on data available at the time of writing, Denmark, Sweden, South Korea and the United States have “only”
experienced a 3%-10% contraction over the year, compared with between 22% and 19% for the United Kingdom and Spain where strict lockdowns were implemented,
although they still saw a large outbreak.
• Interestingly, having seen the greatest drop in Q1 output, China reported the greatest (and positive) increase in Q2. As the virus originated in China, China was one of the
first countries to implement quick and strict lockdowns reportedly containing the virus with relatively few overall cases given its population, but was also one of the first
countries to re-start production.
Note: 1) Some figures are preliminary and subject to change
Source: OECD, UK Office for National Statistics, Statistics Denmark
Coronavirus Impact Monitor – 14 August 2020 Page 5 Deloitte Economics © 2020Danish business sector confidence indicators
Sentiment across key sectors is recovering, particularly in the Retail sector, although
pessimism persists in the Services sector
• Recent July data suggests that sentiment across key sectors in the Danish economy is recovering after falling sharply in April and May 2020.
• The Retail sector in particular has recovered well, and survey participants now have a positive outlook for the first time since November 2019.
• Participants across the other major sectors are now less negative than previously – possibly indicating that they expect the lockdown-related events in the spring to have a
short-lasting impact on their sectors’ fortunes.
• While the Services sector also exhibits a less negative outlook than previously, it is significantly lower than the other sectors and much lower than any point since 2011.
Industrials1 Services1
10 20
5
10
0
-5 July 0
-10 (7)
-15 -10
-20 -20
-25 July
-30 -30 (28)
May
-35 (26) -40
-40 May
-45 -50 (47)
2004 2008 2012 2016 2020 2012 2014 2016 2018 2020
Construction1 Retail trade1
20 20
10
10
July
0 10
0
-10 July
-20 (13) -10
-30
-20
-40 April
-30 April
-50 (33)
(32)
-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 – 14 August 2020 Page 6 Deloitte Economics © 2020Danish consumer confidence and employment
There were 87 thousand fewer employed persons in May than in February, and there were
271 thousand workers on the state wage compensation scheme as of 3 August
Danish consumer confidence and YoY consumer
• After having bounced back in June 2020 from a low in April 2020, the spending growth
20.0 0.08
Danish consumer confidence index remained negative and broadly
unchanged in July 2020. 15.0 0.06
Consumer spending, change YoY
Consumer confidence, index
• While the index is still negative, which reflects a lot of ongoing uncertainty 10.0 0.04
surrounding the effects of the virus, which is still at large across the world, 5.0 0.02
the index is significantly higher than it was in April 2020, suggesting - 0
consumers are still cautious, but less fearful than at the beginning of the
(5.0) -0.02
outbreak.
(10.0) -0.04
• The latest Danish employment numbers show 2.72 million people
(15.0) -0.06
employed in May 2020, down from 2.80 million in February 2020.
(20.0) -0.08
• The Danish government introduced a temporary wage compensation 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
scheme, whereby the state pays 75% of the employee’s salary (max. Danish consumer spending, change YoY (RHS) Danish consumer confidence
DKK 30,000).
Danish employment and implied employment without
• The lower right-hand chart shows that if people on the wage compensation wage compensation
2,900
scheme had been laid off, as opposed to retaining their jobs with state
wage support, it is implied that employment would be some 0.3 million 2,800 2,785
lower.
Employment (000s)
2,715
• The scheme has been extended and is currently scheduled to end on 29 2,700
August 2020. It remains to be seen whether there is enough political
2,600
appetite to extend the scheme further.
• If the scheme is not extended beyond 29 August 2020, the question will be 2,500
2,483
how many workers will lose their jobs as businesses struggle to bear the
full cost of supporting them, while sales/activity levels are lower than pre- 2,400
outbreak. Jan 2018 May 2018 Sep 2018 Jan 2019 May 2019 Sep 2019 Jan 2020 May 2020
Danish employment Employment less workers on wage compensation
Coronavirus Impact Monitor – 14 August 2020 Page 7 Deloitte Economics © 2020Transport update
Global merchandise trade volumes down sharply on COVID-19 with some signs of
improving momentum for Eurozone trade volumes
Copenhagen Airport: Monthly passenger numbers
• The COVID-19 crisis has caused dramatic supply and demand
3.5 (81%) YoY
shocks in the world economy, and these shocks have caused major
Number of passengers
disruptions to trade and overall movements of people across the 3.0
July 2019,
economy:
(millions)
3.11
2.5 Feb 2020,
‒ In July, typically the busiest month for air travel at Only 26k passengers 1.99m
Copenhagen Airport, 595k passengers passed through the 2.0 passed through CPH in
April 2020
terminals, which is 81% lower than a year earlier.
1.5
‒ While this is significantly higher than April 2002, when only Oct 2020
26k passengers used the airport, there is still a long way to go 1.0
July 2020,
before air travel reaches pre-crisis levels, particularly 0.5 0.60m
considering that the crisis (and the climate change concerns)
has caused people and businesses to re-think air travel 0.0
choices. Mar 2018 Jun 2018 Oct 2018 Jan 2019 Apr 2019 Jul 2019 Oct 2019 Jan 2020 Apr 2020 Jul 2020
• Global merchandise trade volumes in Jan-May 2020 were down by Global merchandise trade volumes
some 9% compared with the same period last year. The COVID-19
130
pandemic has played a major role in this. All over the world, both Dec 2019
120 124.20
production and consumption have declined due to various
measures taken to limit the spread of the virus. This has obviously 110
had a great impact on international trade. May 2020
(2010=100)
100 103.00
Index
• On the positive side, trade in the eurozone appears to be
90
rebounding. May imports were up by 6.5% on April, and exports
are up by 10.2% on April. This positive development is due to the 80
May 2009
fact that measures were relaxed in many eurozone countries in 83.80
70
April and May. In other major economies, such as the United
States, China and Japan, imports and exports continue to decline or 60
only slightly increase. 50
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Note: 1) The Apple Mobility data measure volume of directions requests by region compared to a baseline volume on 13 January 2020.
Source: Copenhagen Airports, CPB World Trade Monitor
Coronavirus Impact Monitor – 14 August 2020 Page 8 Deloitte Economics © 2020Coronavirus heatmap
Deloitte Economics’ view on the short-term outlook across selected sectors in Denmark
Consumer
Denmark
• Consumer confidence has increased over the summer.
Energy & Resources Sector
• Coronavirus affects short-term prices, but prices are still expected Short term Outlook
to rebound in 2021.
Financial Services
• Valuations are recovering, although uncertainty remains.
Consumer Moderate impact Slow recovery
Industrials
• Eurozone manufacturing recorded its first sector expansion since
the beginning of 2019.
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
• Continuation of high activity in the M&A market and high volumes
and record-high prices in the residential market leads to a short- Industrials High impact Moderate recovery
term change from "high impact" to "moderate impact".
Technology, Media & Telco (TMT)
• TMT sectors have shown relative resilient to COVID-19, as the Life Science &
Neutral/Low impact Growth opportunities
world has gone digital. Health Care
Transport
• The transport market in continued recovery following the opening
Real Estate Moderate impact Moderate recovery
of several markets.
We refer to pages 12-19 for in-depth coverage of developments
in the industries above. Technology,
Moderate impact Moderate recovery
Media & Telco
Transport High impact Slow recovery
Sources: Deloitte analysis, Dansk Erhverv
Coronavirus Impact Monitor – 14 August 2020 Page 9 Deloitte Economics © 2020Key messages
The pandemic continues, while Q2 economic damage comes to light
• COVID-19 is continuing its spread across the world, with nearly 21 million confirmed cases in 188 countries. Cases of the disease are continuing to
surge in many countries, while others, which had apparent success in suppressing initial outbreaks, are now seeing infections rising again.
• In Denmark, the increase in the number of confirmed cases has remained relatively low during the summer, but has started to tick higher recently. The
proportion of COVID-19 tests returning positive results is increasing, which is driving the total number of positive cases in Denmark.
• European equity markets continue to show sector divergence. The COVID-19 impact on equity markets has been most severe on the transport and
energy sectors.
• Danish GDP contracted by 7% in Q2 2020. This is a far bigger contraction than the major contraction of 2.4% in Q4 2008 during the Global Financial
Crisis. However, the Danish GDP contraction of 7% in Q2 is fairly moderate compared with other developed countries that have experienced
contractions in the range of 3%-22%.
• Sentiment across key sectors in Denmark is recovering, particularly in the Retail sector, although pessimism persists in the Services sector.
• The COVID-19 crisis has caused dramatic supply and demand shocks in the world economy, and these shocks have caused major disruptions to trade
and overall movements of people across the economy. In July 2020, typically the busiest month for air travel at Copenhagen Airport, 595k passengers
passed through the terminals, which is 81% lower than a year earlier. Global merchandise trade volumes in Jan-May 2020 were down by some 9%
compared with the same period last year.
• 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
Partner, Head of Deloitte Economics Partner Vice President
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 – 14 August 2020 Page 10 Deloitte Economics © 2020Industry outlook
Consumer Page 12
Energy & Resources Page 13
Financial Services Page 14
Industrials Page 15
Life Science & Health Care Page 16
Real Estate Page 17
Technology, Media & Telco (TMT) Page 18
Transport Page 19
Public Page 20
Coronavirus Impact Monitor – 14 August 2020 Page 11 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Consumer
Consumer confidence and consumer related indexes have increased during the summer
Highlights from the industry (as of 12 August 2020)
Based on top 10 companies
110.0 Consumers will spend less on restaurants, apparel and electronics (non-
105.0 104.7 essential goods)
100.0 100.0
Consumers’ intention to spend more during the next four weeks
Indexed share price
95.0
90.3 Apparel/ Household Restaurant/
90.0 Alcohol Books Electronics Groceries Medicines
footwear goods takeout
85.0
80.0 80.5
75.0
70.0
-15% -13% -6% -16% 24% 19% 11% -13%
65.0
60.0
12 Jan 20 12 Feb 20 12 Mar 20 12 Apr 20 12 May 20 12 Jun 20 12 Jul 20 12 Aug 20 Consumers’ intended purchase channel
1 2 3
Retail Hospitality Consumer MSCI World 15% 14% 17% 15% 26%
16% 33% 46% 38% 19% 17%
20%
27%
Retail index has moved from index 100.6 to 104.7 (since last update). 29% 30%
69% 26% 67% 68%
63%
Hospitality index has moved from index 78.5 to 80.5 (since last update). 38% 32% 47%
28%
Consumer index has moved from index 88.6 to 90.3 (since last update).
Online/delivered Mixed In-store
Trading multiples and economic outlook
Index: MSCI World Retailing Index (top 10 companies) Latest consumer confidence index4 (as of July 2020) has increased to 98.70,
Historical averages Coronavirus impact
(EV/FY0 EBITDA) (EV/FY0 EBITDA) illustrating a positive development, but still indicating a somewhat doubtful
-1.5x attitude towards the future economic development.
101
13,6x 14,5x 17,0x 15,5x
12,3x
98
9 8 .7
95
Jul-06 Jul-08 Jul-10 Jul-12 Jul-14 Jul-16 Jul-18 Jul-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 – 14 August 2020 Page 12 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Energy & Resources
Coronavirus still affects short-term prices, but positive trends are appearing
Highlights from the industry (as of 13 August 2020)
110 Hydropower generation
100
− Prior to corona, electricity prices were already pressured in the Nordics due to
90
a warm winter, which increased the generation capacity of Norwegian
80
70
hydropower plants.
60 − Further, the mild winter decreased demand for electricity.
50
Lockdown affects demand
40
30 − The coronavirus lockdown negatively affected demand of public institutions,
20 private individuals and corporations.
1 jan 20 1 feb 20 1 mar 20 1 apr 20 1 maj 20 1 jun 20 1 jul 20 1 Aug 20 1 Sep 20
Carbon market prices
Natural gas TTF, spot Coal API2, spot Nordic electricity future, Q4-20 − Lower emissions of CO2 and other greenhouse gasses decreased carbon
prices.
Mild winter puts pressure on Nordic electricity prices prior to the corona crisis.
− Coal became cheaper, thereby lowering overall prices, as coal is marginally
Electricity demand decreased marginally due to the coronavirus lockdown.
price setting. This creates a self-enforcing effect, which drives down prices
Significant drop in carbon emissions, resulting in lower prices. even further.
Economic outlook
Selected futures
-48.0%
As expected, prices started to increase, as lockdowns were gradually lifted
-35.7% +3.5%
globally. Nordic power prices had a short rally in June 2020, but are depressing
35 33 again. Gas is upward trending, while coal is almost back to pre-crisis levels.
21 25 26
18
The short-term impact on electricity producers has been, and continues to be,
significant, but we expect prices to rebound in 2021. Short-term prices are still
Nordic power, Q4-20 Nordic power, FY-21 EUA, Dec-20 negatively affected, but the carbon market is returning to pre-crisis levels.
Jan 1, 2020 Aug 13, 2020
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 14 August 2020 Page 13 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Financial Services
Valuation recovery from the mid-March low point continues, albeit uncertainty remains
Highlights from the industry (as of 11 August 2020)
120 Banks and consumer finance
110 − Credit businesses that retain a large physical branch network or have IT inefficiencies
100 [99.3] will find a drag on their cost bases. This is at a time when they must work through
[93.6]
90
[86.7]
increased loan loss provisions amplified by the adoption of IFRS 9 accounting standard in
80 [83.1] 2018. A higher cost base juxtaposed against a continued low base rate environment and
[81.0] an inability to generate high levels of net interest margin. Inefficient or subscale players
70
may need to look for new capital or become part of a wider market consolidation.
60 [57.6]
50 Insurance
40 − Lloyds of London estimates a USD 203bn underwriting loss for the insurance industry as
30 a result of the global pandemic. Obviously, some asset classes have faired better than
1/31/20 2/28/20 3/31/20 4/28/20 5/29/20 6/30/20 7/31/20 others (e.g., motor insurance will benefit from lockdown versus business interruption
Nordic Banks Nordic Insurance European AM
insurance). As such, dependent on products and attitudes to reinsurance, stress may
remain in the insurance industry.
Nordic Consumer Finance Nordic DCA MSCI World
Certain FS subsectors, including Nordic banks and asset managers, have shown Asset Management
modest but steady recovery of market value during the summer. Uncertainty is still − A Deloitte study demonstrates that consumers expect to spend more on Wealth
priced into valuations for consumer finance and debt collection, although large Management services as a response to the COVID-19 crisis (click here to read the study).
gains have been made recently. Asset managers who have been successfully able to pivot from physical meetings to
conduct sales and provide advice virtually may be able to capture market shares.
However, the shock to equity markets will negatively affect income across the sector.
Trading multiples and economic outlook
Index: S&P Capital IQ1 The impact of the COVID-19-led recession on financial services firms was evident by
Market capitalization (1 Jan = index 100) Coronavirus impact (P/BV)3 high impairment charges in Q1. Some firms have reported profits for Q2, but prepare
16-03-20 11-08-20 -0.4x for the coming roll-backs of government support schemes. Firms that were affected
by lockdown measures (and traded through the summer months), may still be at risk
94 87 83 1,8x
81 1,4x of having cash flow issues and debt servicing issues during the autumn.
69 65 67
52 58 1,1x
43
Financial services firms that are easily able to interact with their clients online, and
offer a good user experience, may be stronger heading into the autumn. Many of the
tech elements, most notably the proliferation of smart phones, were not available
Nordic European Nordic Nordic Nordic Jan. 1, Mar. 16, Aug. 11,
Banks AM Consumer Insurers DCA2 2020 2020 2020
during the financial crisis. This has provided customers with a greater number of
Banks alternative providers.
Notes 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.
Sources: A. https://www.theguardian.com/business/2020/may/14/lloyds-of-london-coronavirus-payouts
Coronavirus Impact Monitor – 14 August 2020 Page 14 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Industrials
Eurozone manufacturing recorded its first sector expansion since the beginning of 2019
Share price development year-to-date The start of Q3 looks encouraging with drastically increasing business activity
Indexed share price as of:
120
12 August 23 June 50,9
110 US 49,8 The Eurozone manufacturing
109.2 101.3
39,8 PMI is positively affected in
100 111.0 98.8 July by output growing
90 100.0 94.8 53,3 rapidly, as lockdowns
87.8 79.3 UK 50,1 continued to ease and
80
40,7 economics reopened.
70
51,8 Demand also reveals sign of
60 Eurozone 47,4 reviving, helping curb the
50 39,4 pace of job losses.
1 Jan 20 1 Mar 20 1 May 20 1 Jul 20 1 Sep 20
51,0
Industrials Materials Automotive MSCI World
Germany 45,2
36,6 IHS Markit Manufacturing PMI:
MSCI World Index advanced to an almost six-month high due to further Index =50: No change
development of COVID-19 vaccine, reopening economies and stimulus packages. Index 50: Expansion
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)
-0.4x +2.4x -0.5x
13,2x 14,0x 13,8x 13,4x 10,4x 11,6x 11,8x 14,2x 10,0x 9,8x 10,1x 11,1x 10,6x
11,7x 11,8x
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 last update (23 June 2020), the EV/EBITDA Since last update (23 June 2020), the EV/EBITDA Since last update (23 June 2020), the EV/EBITDA
multiple is up from 12.7x to 13.4x. multiple is up from 13.3x to 14.2x. multiple is up from 10.5x to 10.6x.
Note: 1) Data as of 12 August 2020
Source: Capital IQ; MSCI World Indices; WSJ; IHS Markit
Coronavirus Impact Monitor – 14 August 2020 Page 15 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science 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 focusing
13,7x 14,1x 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 – 14 August 2020 Page 16 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science 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 12 August 2020)
110 2.0% General recovery from COIVD-19
100 1.8% − Prior to corona, a “soft landing” was expected after a drop in big
construction projects. Now most indications suggest that the industry
(2 Jan 2020 = 100)
Stock price index
90 1.5% as a whole will make it through relative unharmed. The industry is
Interest rate
80 1.3% further considered a vital part of rebooting the economy, with
suspension of governmental construction budget restrictions and
70 1.0% residential renovations supported by “Landsbyggefonden”.
60 0.8% − The employment in the building and construction sector dropped from
175,500 in Q1 2020 to 170,500 in Q2 2020; a drop of 5,000 jobs
50 0.5%
01 Jan 22 Jan 12 Feb 04 Mar 25 Mar 15 Apr 06 May 27 May 17 Jun 08 Jul 29 Jul
equivalent to 2.8%.
STOXX 600 Real Estate Index Danish long-term mortgage rates Residential market sees record high prices
− The residential market has been strong during the pandemic, with
The leading real estate index is in general recovering from the COVID-19 chock in March 2020, prices back at pre-crisis levels. The rebound has been caused by the
but is not back to COVID-19 level yet. Despite the current challenges in some sectors, the low interest environment and the resilience of the Danish consumers
industry is in general better prepared financially. and economy.
Interest rates are now back at pre-COVID 19 level, fuelling the real estate M&A markets.
Trading multiples and economic outlook
Index: Custom weighted average index1
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA) Price multiples are at pre-COVID-19 levels, and in general the major listed RE companies are
-0.6x well-positioned to handle the crisis.
27.6x 25.4x 26,4x 30,6x 30,0x Investors in the market initially wanted to postpone investments to the autumn to assess
the market development, but many investors have already re-entered the market.
We still expect decreasing prices at the end of 2020 for single-family houses and apartments
10y avg. 5y avg. 3y avg. 1 Jan 2020 Current in the major Danish cities when the cease of government subsidies will affect other groups
than people working in the services and transport industry.
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, Colliers International, Danmarks Statistik, Konjunkturanalyse 2019, and Dansk Byggeri
Coronavirus Impact Monitor – 14 August 2020 Page 17 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: TMT
TMT sectors have shown relative resilient to COVID-19, as the world has gone digital
Highlights from the industry (as of 11 August 2020)
130 TMT perceived as a defensive sector, which has less to lose from COVID-19
120 117
01-01-2020 = index 100
112 Telecom: Spend among consumers is often within a contract; demand is up; need
110
105 is not discretionary (new cars) or constrained (leisure).
100 100
90 Media and Entertainment: Financial impact varies across sub-sectors. Media
80 consumption up (e.g., Netflix, Disney+), but willingness/ability to pay may be
70 constrained, as economic outlook exacerbates. Events (consumer, business)
60 mostly heavily restricted; cinemas, theatres, museums mostly closed. TV and
1 Jan 20 11 Aug 20 movie production mostly halted. Theme parks mostly closed.
Information Technology1 Communication Services1 Media and Entertainment1 MSCI World
Technology: Some segments (e.g., robotics, communication software) seeing
TMT companies are trading above the overall equity market. record demand; digital transformation being accelerated; companies catering to
SMEs may suffer from customer liquidity.
Media and Entertainment quickly recovered after the shockwave on the stock market. As
people stay home, the entertainment market is making records.2
Trading multiples and economic outlook
Index: MSCI World Information Technology1 Forrester has revised its IT spending forecast downward and expects a 50%
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA) probability that global tech markets will decline by 2% or more in 2020 if a full-
+1.9x fledged recession hits.
23,6x 26,4x 29,9x
28,0x Gartner expects global IT spending to decline by +6% in 2020.
19,2x
Software spending is the subsector expected to show the highest resilience, while
computer equipment and IT consulting and systems integration services spending
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current are expected to show weaker growth.
Note: 1) MSCI World industry indices (top-10 companies for sector indices); 2) In EMEA and selected Asian countries, physical games sales are up by 63% according to GamesIndustry.biz.
Source: S& &P Capital IQ (June 2020), Gartner Market Databook (April 2020 update), Forrester Research (March 2020)
Coronavirus Impact Monitor – 14 August 2020 Page 18 Deloitte Economics © 2020Consumer Energy & Financial Industrials Life Science Real Estate TMT Transport
Resources Services & Health Care
Industry outlook: Transport
The transport market in continued recovery following the opening of several markets
Highlights from the industry (as of 14 August 2020)
Development of US transport companies Despite the ongoing recovery, the sector will lose substantial value, as
long-standing, structural inefficiencies have remained unaddressed
Revenue Last downturn
− Customer expectations for speed and service
− Inefficiencies from inflexible networks and evolving trade patterns
15% (~$90B) decline − Fragmentation of supply in a sector that is rarely consolidated
~15%
30% (~$180B) decline
decline − Lack of investment in new technologies to connect, learn, predict and
automate
− Shifting talent models from retiring workforce to the gig economy
Operating
profit − Disruptive entrants taking advantage of the inefficiencies to displace
others
~25% (~$15B) decline
~45% (~$30B) decline
~30%
decline
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Trading multiples of Danish transport companies (as of 14 August 2020) US transportation stock performance (as of 14 August 2020)
Historical averages Coronavirus impact2 80% S&P 500
(EV/FY1 EBITDA) (EV/FY1 EBITDA) DJ Industrials 62%
60% 57%
+1.9x DJ Transportation
40%
7,1x 7,4x 7,5x 8,4x 20% 19%
6,5x
4,6x 0%
-20%
-40%
10y avg. 5y avg. 3y avg. First close Trough Spot 01.01.15 01.01.16 01.01.17 01.01.18 01.01.19
2020
Note: 1) A.P. Møller-Mærsk, D/S Norden, DFDS, DSV Panalpina, NTG, TORM, 2) Lowest YTD is 4.6x on 20 March 2020
Source: Capital IQ, Shanghai Shipping Exchange
Coronavirus Impact Monitor – 14 August 2020 Page 19 Deloitte Economics © 2020Industry outlook: Public
The pandemic has been costly and may affect public spending in the long term
Highlights from the industry (as of 12 June 2020)
A timeline for COVID-19 government response Towards normality
− The 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.
From recover to thrive
− Continued pressure on government to increase pace by which the economy is
reopened, and phase 3 of the reopening has been extended several times.
− Focus on how to stimulate growth and adapt to the new normal.
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.
− Public EMU debt is expected to increase from 33% of GDP in 2019 to 41% in
2020.
− A European recovery fund of EUR 540bn has been introduced by the European
ministers of finance.
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 – 14 August 2020 Page 20 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
Björn Lagerstam Mads Damborg
State aid packages
Partner Partner
Email: blagerstam@Deloitte.dk Email: madsdamborg@deloitte.dk
Liquidity scenario analysis
Mobile: +45 30 93 48 30 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 – 14 August 2020 Page 21 Deloitte Economics © 2020Appendices
Global, Eurozone and Danish GDP forecasts Page 23
European corporate sector earnings expectations Page 24
European market volatility and credit default probability Page 25
Deloitte Government Response Portal Page 26
Coronavirus Impact Monitor – 14 August 2020 Page 22 Deloitte Economics © 2020GDP forecasts
Recent forecasts from OECD and World Bank support the outlook for a deep 2020
downturn
• At the beginning of June 2020, the OECD and the World Bank released new economic growth forecasts, accounting for the impact of the COVID-19 pandemic.
• These economic growth forecasts are broadly consistent with those from the IMF in the sense that they paint a picture of a sharp downturn in 2020, followed by a
recovery in 2021. The contractions of the economy are primarily due to major drops in Q1 and partly Q2 2020. From Q3 2020, economic activity is expected to increase
continuously. Nonetheless, economic activity is not expected to be back on 2019 Q4 levels within the next two years.
• Please note that these forecasts assume that current containment efforts are effective in containing the COVID-19 outbreak. In case we get a second wave of infections
before the end of 2020, and the authorities impose a new round of lockdowns, the downturn is obviously going to be deeper, and the recovery in 2021 may therefore to
be more moderate.
Denmark: GDP growt h Eurozone: GDP growt h World: GDP growt h
8% 8% 8%
6% 6% 6%
4.7% 5.2%
4.9% 4%
4% 1.2% 4% 2.9%
2.4% 2%
2% - 2%
- (2%) -
(4%) (2%)
(2%)
(6%)
(4%) (4%)
(8%) (5.2%)
(9.1%) (6%)
(6%) (6.2%) (10%)
(12%) (8%)
(8%)
2015
2007
2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2019
2020
2021
2005
2006
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2019
2020
2021
2006
2018
2005
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2019
2020
2021
Historical (IMF) Median Historical (IMF) Median
Historical (IMF) Median IMF OECD IMF OECD
IMF OECD World Bank World Bank
Note: Labels shown in the charts represent median forecast.
Source: IMF, OECD, World Bank
Coronavirus Impact Monitor – 14 August 2020 Page 23 Deloitte Economics © 2020Corporate sector earnings expectations
Corporate earnings expectations have been severely curtailed since the outbreak,
although analysts have become more optimistic
Change in net income consensus estimates between
• The selloff in European equity markets, triggered by the 31 January 2020 and 13 August 20201
COVID-19 pandemic and the associated economic
slowdown, differs across sectors, see page 4.
Energy
• To shed light on the underlying drivers of this selloff
across sectors, the chart opposite displays changes in Consumer discretionary
expectations of stock analysts. In particular, the chart
Financials
shows how stock analysts have downgraded consensus
expectations for net income across sectors and time:
Transportation
− Energy, including oil and gas companies, has seen its
Communication services
net income estimates being downgraded by 40%-
70% in 2020-2021 likely due to sharp declines in oil Industrials
and gas prices.
Materials
− Consumer Discretionary, Financials, and
Transportation are expected to be severely affected. Utilities
Their net income estimates for 2020 are, on average,
Other consumer staples
more than 30% below pre-crisis estimates.
− Real Estate is expected to weather the storm Information Technology
relatively well.
Real estate
− Only the Health Care and Food & Staples Retailing
sectors’ 2020 expectations have improved. Health care
• Prior to the summer, Food & Retailing was the only Food & staples retailing
sector with a positive 2020 outlook, and differences in
(70%) (60%) (50%) (40%) (30%) (20%) (10%) - 10% 20%
earnings expectations across other sectors were greater
2020 2021 2022 2023
suggesting that analysts are becoming more optimistic.
Note: 1) Based on analyst estimates for S&P Europe 350 Index constituent companies
Source: S&P Capital IQ
Coronavirus Impact Monitor – 14 August 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
• The VSTOXX Index measures 30-day implied volatility 100
of the EURO STOXX 50 equity index and reflects
90
investors' uncertainty about future equity market
80 81
moves. 74
Volatility index
70
• As shown, the coronavirus induced an increase in 60
volatility to a level comparable to that experienced
50
during the global financial crisis in 2008.
40
• Volatility has fallen back since then, and over the 30
summer, it has continued to fall to more normal levels, 23
20
although it still remains somewhat elevated when
10
comparing to the last few years when volatility had
0
been notably low. 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
• The default probability has fallen significantly from the
30
peak reached in March 2020, and the current level
24.5%
(24%) is now once again in line with long-term levels. 20
• As the index reflects cost of debt, refinancing remains 10
costlier for leveraged companies compared to pre-
outbreak, even though interest rates are very 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 – 14 August 2020 Page 25 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 – 14 August 2020 Page 26 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.
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