Good morning, ladies and gentlemen, and welcome to Siemens Healthineers Q4 Fiscal 2019 and Strategic and Financial Update Conference Call. As a reminder, this conference is being recorded. Before we begin, I would like to draw your attention to the Safe Harbor statement on Page 2 of the Siemens Healthineers presentation. This conference call may include forward looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties.
At this time, I'd like to turn the conference over to your host today, Mr. Marc Kobernik, Head of Investor Relations. Please go ahead, sir.
Thank you. Good morning, ladies and gentlemen. Welcome to our call today. The earnings release, Q4 results as well as the strategic and financial update presentation were released at 7 am this morning. You can find all the documents on our IR website.
Sitting together here in the room with Bert Mortak and Jochen Smits, who will be first taking you through our Q4 results, then followed by a strategic and financial update as promised for Siemens Healthineers. Following that, as usual, there will be a chance for you to ask your questions to Bernd and Jochen. And also in question of time, please may I remind you humbly to our good old two question rule. And by that, I will now pass over to our CEO, Leb Wontak.
Yes. Thank you, Marc, and good morning, everybody, and welcome to our Q4 earnings call. As you have seen in the invitation, we have extended our call by 30 minutes compared to the usual length. The reason is additionally to our Q4 fiscal year 2019 results. Jochen and I will give you a strategic and financial update on Siemens Healthineers on the years to come.
Before we are looking towards the future, we will take first take a look back at our Q4 fiscal year 2019 achievements. I would like to start off with running you through our performance compared to our group guidance. We achieved comparable revenue growth of 5.8 percent, clearly above our guidance range of 4% to 5%. Our adjusted profit margin came slightly below our guidance with 17.3%. Earnings per share are at €1.57 per share, and this reflects a growth rate of 24% year over year, which is well within our guided range.
With top line clearly above guidance, profitability slightly below and EPS well within the range, we have our financial targets largely achieved in fiscal year 2019. After this high level look at the group financial performance in the past fiscal year, let's have a look at our Q4 highlights. Revenue growth has been very strong with 8.5% an outstanding result of the team, especially considering that the last two quarters already showed strong growth with 6% each. Again, our very strong imaging business has been the driver with roughly 10% growth. Advanced Therapies even achieved 14%.
The book to bill rate was 1.1%, driven by a strong equipment order growth in Imaging and Advanced Therapies. Diagnostics revenue increased 2% with strong instrument sales that grew in the low teens on tough comps. In the Q4, we shipped around 600 Ateca solution analyzers. This is an acceleration year over year and brings the final full year count to more than 18 20 shipped analyzers in line with our revised guidance from Q3. Adjusted profit margin for the group came in at 19.1%.
That is 90 basis point increase to previous year's Q4. Margin therein was supported by positive currency effects of plus 50 basis points in a settlement gain and on the other hand, impacted by ongoing low profitability in Diagnostics. Earnings per share are up 36% year over year to €0.50 on higher profit and lower interest expenses. And of course, we also want our shareholders to participate in the achievements of this year. We will propose a dividend of €0.80 share, which equals 50% of our reported net income and shows a 14% increase compared to fiscal year 2019.
When we look back at fiscal year 2019, the key topic in all our conversations were the financials at Diagnostics and the ramp up of our Atenica solution. There were both highlights and lowlights. All in all, it was rockier than we thought. As you know, we took actions, made changes in responsibilities and promised you an update on the path forward. And here is the summary of this path forward.
First of all, Diagnostics is a key value driver for Siemens Healthineers. We have access to our market of more than €28,000,000,000 and expected market growth of 5% plus in the next years, driven by continuously increasing demand for diagnostic testing. The beauty of this business is the 90% share of high margin recurring revenue stemming from reagents and consumables. But before you can harvest those returns, you need to place the instrument first and invest in your customer. Jochen likes to call
it the necessary evil as placing the instruments is margin dilutive.
That especially holds true for the instruments is margin dilutive that especially holds true for large and complex settings. But it is the basis for future revenue growth and profitability for the next 5 to 7 years. Within this attractive market, we see trends, the often quoted bifurcation of the market, which clearly work in our favor. On the one hand, growth is shifting towards point of care with our customers looking for connectivity, fleet management applications, new form factors like handheld and broader menus. We are addressing those needs with inorganic additions like Apocal, ConVerx and late delivery acquisition of MiniCare, but also organically with an innovative product pipeline in order to capture this growth potential.
On the other hand, growth in the diagnostic market is happening in the large hospital and reference labs. Those customers are looking for a partner who helps them tackle the productivity challenge under the constraints of limited space and limited trained personnel available. Atellica Solution is exactly addressing these needs. A Telecar solution is a product only we can build. You need an engineering company like ours, leading in workflow and automation in the lab with a deep knowledge in artificial intelligence and technology to be able to develop a product like this.
You need a company that covers the whole space from reagents to the instrument to automation. We have the online service network capabilities from our imaging business we can leverage to serve also the diagnostics business. And we utilized these key strengths when we developed Atellica solution. Atellica is a product designed with customers, for customers, using this unique strength of being able to optimize the whole portfolio from instrument to automation to the reagents. It is the leading instrument when it comes to throughput and productivity.
It helps optimizing the limited space available in labs and allows for 300 modular configurations to adjust to customer specific needs. It addresses the issue of staff shortage with hands on time reduced by more than 70%, enabling our customers to manage growth with fewer operators. And our competitive success proves that it is the right product. We continue to have a competitive win rate of above 35% against all major competitors across every setting, winning over 300 new customers in fiscal year 2019. When we look at Mega Labs, labs processing in excess of 30,000 tubes per day, so the high volume, high complex settings, we are the go to solution winning almost every deal.
So Atellica is the right product. But clearly, the rollout of Atellica solution did not work out as we initially planned and expected. I personally dedicated most of my time over the last months analyzing the root causes together with the team, why we are behind our own expectations and where we have been too optimistic and what we change moving forward. 1st, and we highlighted that now at several occasions, shipments alone are not an adequate KPI. There's no direct link to future revenue and profits.
It does not tell us if it is a competitive win or retention. In some instances, we were overly focused on shipments instead of optimizing the bigger picture and sharpened commercial execution. We have learned our lesson and we have drawn the right conclusions. We de layered the organization with now much more direct accountability and responsibility and put the right people in place. We refined how we position Atellica in the market and will have a higher emphasis on assay penetration.
2nd, we pursued a very aggressive rollout strategy with a product which was and still is in its very early innings of its product lifecycle. Remember, a platform like a telecom solution is here to stay for decades. Initial production installation and support costs are significantly higher than they will be over time and are a burden on profitability. Now there is a clear path in place to target costs, but this also means that we stay in the investment phase for a longer period of time. A key positive of the rollout so far is our success in those settings for which we designed Atellica, the movers and shakers in the industry, customers who want to change the way they want their lab.
But it takes time and money to have those setting up and running until they draw the profitable reagents team. We heavily invested in our installation teams and are progressing rapidly along the learning curve to shorten cycle times. Nevertheless, that means it takes longer than initially planned to reach our growth targets. Finally, Atellica solution is only the first incarnation of our future Atellica family and who we will be in the lab. Development of Wave 2 is well on target, including a mid volume integrated system and a high volume clinical chemistry analyzer, just to name a few.
Now what does that mean for the relevant KPIs? We will see a further acceleration in comparable revenue growth in fiscal year 2020, but not yet at mid single digit rates. But there's a clear path to reach this level mid term when the implemented measures start bearing more and more fruit and the contribution from the Atelica franchise increases. On the profitability side, we continue to stay in the investment phase for a longer period of time with margins slightly decreasing in fiscal year 2020, burdened also by FX effects and the integration of the MiniCare acquisition. Also during this fiscal year, we will start slower with regard to top and bottom line and expect to see clear improvement as we move through this fiscal year.
We expect to see first margin improvement in 2021 2022 with a steeper recovery achieving mid teens around 2024. Let me summarize. The challenges are identified. We put in place clear measures, assign clear responsibility, have the right team in place and plan going forward to make diagnostics a key value driver for Siemens Healthineers. Now I hand over to Jochen, who will give some more insights on our Q4 results.
Thank you, Bernd, and a very warm welcome and good morning to everyone also from my side. Let's continue with more information on our financial performance in Q4. Let me start with order intake. Order growth was at 4.5% in Q4 with very strong equipment order growth above 5 percent, both in imaging advanced therapies after a particularly strong order intake already in the last quarters. With this strong order intake, we continue to grow orders above revenue, resulting in a healthy equipment book to bill ratio of 1.1 in Q4.
This is in particular healthy when we look at our outstanding revenue performance in Q4. Revenues grew with 8.5%, which is very impressive growth in our usually strongest quarter, our Q4. This performance was driven by outstanding growth in imaging with 10% organic growth as well as advanced therapies with 14% organic growth. Looking at our regional performance, key drivers were Asia with 12% and the Americas with 10%. They are in very good performance in the United States and in China, which both grew organically by 10%.
Let us now move to adjusted profit. Adjusted profit margin came in at 19.1 percent or €791,000,000 €791,000,000 sorry. In absolute terms, this is an improvement of 17% year over year, driven by our revenue growth in Q4 and our industry leading margins. On the adjusted profit margin, we saw an improvement of 90 basis points versus our previous Q4. Bear in mind that Q4 is usually our strongest quarter.
Hence, we are very happy that we further improved profitability coming from an already very high level. Let me give you some color on the drivers of this improvement. As expected, we saw foreign exchange tailwind in Q4 of about 50 basis points. Operationally, both Imaging and Advanced Therapies showed expanding margins, while total segment profitability was flattish year over year due to an ongoing margin drag from Diagnostics. In central items, we saw firstly the normalization compared to a weak Q4 last year and secondly, a positive one off from a settlement gain of low double digit €1,000,000 Let us see how this all translates into the bottom line, the earnings per share.
Earnings per share grew by 36%, driven by an outstanding revenue and a solid profitability contribution in Q4. Further positive contributions came from the lower interest expenses with the debt restructuring from Q3 now taking full effect in Q4 and from a lower tax rate. The tax rate came in lower versus prior year quarter due to positive income tax effects, taking the rate to 30% in Q4 versus 33% in prior year quarter. For the year, this brings us to a tax rate of about 28%, at the lower end of our originally guided expectation of 28% to 30%. I will provide additional color on our expectations going forward regarding interest and tax in the outlook section later in my presentation.
Let us now look at the segment performance in Q4, starting with Imaging. The impressive growth of 10% in Q4 was driven by substantial equipment growth in the mid teens. Service growth is stable in the known ballpark of mid single digit growth. Our business Molecular Imaging and Magnetic Resonance were the top contributors this quarter as well as ultrasound, which picked up growth momentum in the second half. Regionally, we saw a very strong performance of imaging in the Americas and in Asia and also strong growth in EMEA.
In terms of profitability, imaging further improved its margin in Q4 to 21.9% versus the already high level in Q4 prior year. The year over year improvement was mainly driven by our cost savings program and by tailwind from foreign exchange in the ballpark of low double digit basis points. Now let us look at Diagnostics. At Diagnostics, we see a continuation of the transition phase. Revenue growth is at 2% organic growth on the 3% growth from Q4 last year.
The continued transition shows in particular in the double digit instrument growth in Q4, which was on tough comps year over year. The strong instrument growth is a decisive precursor for future revenue growth from profitable reagent streams. However, on the short term, instruments are dragged on margins since they first need to be produced, shipped and stored. As Bernd has described, this is an investment. This brings us directly to the profitability performance of diagnostics.
The Diagnostics margins in Q4 continued to be dragged down by the ongoing ramp up of Atellica Solution and its corresponding transition effect. These continued transition effects dragged down the adjusted profit margin by around 200 basis points, a similar magnitude as in the previous quarters in this fiscal year. Bernd has already thoroughly explained what the challenges and learnings were and what we do to get diagnostic on market growth in the midterm and towards the profitability in the mid teens by around 2024. Besides the drag for Matelica Solution ramp up, diagnostic margin additionally faced headwinds from foreign exchange of minus 40 basis points. And finally, let us have a look at Advanced Therapies.
Advanced Therapies had very impressive growth of 14% in Q4 that was driven by substantial equipment growth in the high teens. The key factor of this strong quarterly performance was our ability to capitalize on our innovation strength with new products such as Artesino. And in the imaging segment, service growth is stable in the known ballpark of mid single digits growth. Looking at the recent performance, Advanced Therapies showed very strong growth across all the regions, particularly strong in China and in the United States. In terms of profitability, Advanced Therapies further improved its margin in Q4 to 22.7%.
Year over year, this is an improvement of 40 basis points. However, let me point out that this is an improvement on the very high level in the previous quarter of 22.3% adjusted profit margin. This year over year improvement on undoubtedly tough promise was mainly driven by contribution from our cost savings program and from a tailwind from foreign exchange in the ballpark of also low double digit basis points. After we now had a look at the performance of our 3 segments, let me add 2 closing remarks to our Q4 performance. Firstly, on the cash side, we had another good cash quarter with all three segments showing cash conversion rates of around 1.
In our strong Q4, we kept operating working capital stable year over year, while our investments in operating leases and in CapEx remained on a steady level. This all adds up to a cash conversion rate of 0.96 for the group in Q4, which again shows a strong cash generation ability of our business. Secondly, regarding our €240,000,000 cost savings program that we initiated with our IPO. We now achieved around €210,000,000 of savings. As you know, the cost savings program consists of 2 parts, savings from the stand alone setup and from delayering the organization.
The savings from the stand alone were successfully achieved. The delayering of the organization has been successfully implemented. And the savings were achieved with some savings from the delayering spilling over as expected beyond fiscal year 2019 due to timings. Hence, 18 months after the IPO, we have successfully executed our cost savings program and reinforced our company for the next evaluation in our strategy. For both cash flow and cost savings program, please see additional information in the appendix of the analyst presentation available on the Investor Relations homepage.
The appendix, you will find also the restatement of adjusted EBIT for the last 2 fiscal years. As already highlighted in Q3, we move from adjusted profit to adjusted EBIT in fiscal year 2020, a profit KPI which will be simpler to reconcile. However, changes will be not material. And with this, I conclude the section on the Q4 financial performance and hand it over back to Bernd to start our strategic and financial update.
Yes. Thank you, Jochen. Before diving into the strategic and financial outlook, I want to spend a couple of moments reflecting on what we have achieved in the first phase of our Siemens Healthineers Strategy 2025 since our IPO. We achieved our guidance in fiscal year 2018 and largely achieved the guidance in fiscal year 2019. With our first sizable acquisitions, Corindus Vascular Robotics and ECG Management Consultants, we underpinned our strategy towards expanding our market leadership until 2025.
We implemented a leaner organizational structure and were able to deliver more than €200,000,000 in cost savings to date. We launched significant product innovations across all segments and demonstrated our pole position when it comes to artificial intelligence and digital health. And last but not least, we clearly outperformed the market in the last 2 years. In our biggest segment, our imaging segment, we achieved comparable growth rates of 6% in fiscal year 2018 and even 7% in fiscal year 2019 at industry leading margins. With this, we have been able to compensate for the only disappointing piece in the puzzle, a development in diagnostics, which stayed clearly behind expectations in the last 2 years.
And now let us switch from reflecting on the past to how we are going to shape the future of the company to the strategic and financial update. I will start with two numbers, which are as simple as important to describe the future of Siemens Healthineers. The second phase of our Healthineers Strategy 2025, we call it the upgrading phase, is about the next level of profitable growth. When it comes to this, numbers probably say more than pictures or words. Next level of growth means comparable revenue growth of above and beyond 5% per annum over the medium term.
Drawing from this, we will grow EPS by roughly in the same period. With 5% top line and 10% bottom line growth, we see roughly the double of revenue growth falling through to EPS growth. So that is the next level of profitable growth in Encore. In the next 15 to 20 minutes, I will show you how we intend to make this happen from a business and strategic point of view. The global market for Health care is undergoing a massive transformation and we have positioned Siemens Healthineers in a unique way to drive and benefit from this transformation.
More than ever before, our customers are faced with the challenge to do more with less, more in the sense of treating more patients driven by demographic shift, population growth and increasing chronic disease burden. More in the sense of quality with the patient more and more acting like a consumer and more in the sense of making health care accessible and overcoming the social determinants of health. Less by doing all this under tight reimbursement schemes and less by doing all this in the midst of a global shortage of qualified medical staff. How do our customers cope with that? Firstly, they break down departmental silos, take a holistic view and start managing health.
Secondly, a trend towards industrialization where standardization of processes and outsourcing of non core processes will enable providers to do more with less. And thirdly, a further increase of efficiency will stem from the clear trend for consolidation, which increases economies of scale at health care providers. Siemens Healthineers is better positioned than any other company to support providers on this journey. We document this with our 4 value promises. We are expanding precision medicine, for example, by improving diagnostic accuracy like with our dual source CT and by further driving minimally invasive therapy with Artesino and Corindus.
We are transforming care delivery, for example, by improving access to care with single virtual cockpit or by optimizing clinical operations and addressing staff shortage with Atellica Solution. We are improving patient experience, for example, by delivering outcomes that matter to patients with high sensitivity troponin testing. And finally, we are digitalizing healthcare. Therefore, Siemens Healthineers is a key enabler to help provide us reshape and more efficiently manage the €7,000,000,000,000 global health care system, despite the fact that the market we address is only a fraction in terms of money spent in the whole system. However, as our technology and services play a crucial role in 70% of critical clinical decisions, we are the lever for sustainably improving processes and productivity.
There are innovations, for example, continuously help in coping with the constantly increasing number of procedures by simplifying the use of our machines, increasing the speed of scans without losing image quality, hence reducing the amount of labor intensity per scan. Our technology and services influence 50% of our customers' total spend. This is what health care providers spend for labor. And we have the opportunity to address this part of the spend with technology over time. Furthermore, in terms of patient experience, our technology helps, for example, by constantly improving image guidance for minimally invasive procedures, reducing error rates and patient time in the hospital.
This is good for the system, and this is good for the patient. Reduced error rates at procedures helped our customers to apply their device spend most effectively, whereas reduced patient in hospital time helps managing the labor spend. In the in vitro space, we are the productivity enhancer. Atellica solution is the way to industrialize the lab with its automation potential, scalability and significantly less hands on time, directly addressing our customers' challenge to do more with less. However, our opportunities do not stop here.
We see huge potential in digitalization of the health care system. Reading and analyzing data in large amounts by AI will be a key lever to support the speed and position of diagnostics. We are in a perfect position here to move beyond our core business of selling equipment to healthcare providers. With our digital and AI based offerings, we are in the unique position to make a difference for all areas of the health care market with equipment, labor, devices or drugs. We stand at a paradigm shift and have the unique opportunity to shape the future of global of the Global Healthcare System also by making new markets.
We are determined to seize this opportunity. However, we also see the potential to grow into adjacency by creating new ways of treatment that did not even exist before. Our move into robotics brings together the hands and eyes of the physician and will enable them in the future to accomplish remotely controlled minimally invasive procedures. So we are looking at huge opportunities out there to not only continuously outperform in our existing markets, but to actually significantly broaden our field by entering adjacencies and creating new markets. Let me briefly show you what makes us so well placed to benefit from this upside.
In short, it is our unique fingerprint. It puts us in such a great position to benefit from the long term trends influencing the industry. We have a unique position in technology and customer access. 18,500 patents that we own is a number demonstrating our technology leadership. And as you know, we constantly feed our R and D machine while achieving sector leading margins.
So this is sustainable. An installed base of more than 600,000 in the field, also an impressive number. Firstly, it gives us it means our technology is everywhere on the globe. Secondly, basically, every customer will very likely have been in touch with our product at some time in his or her professional career. Furthermore, it is also the base that enables a unique global service organization with highly sophisticated remote maintenance capabilities, even enhancing this leading position.
Therefore, we can boost this unique global footprint with 15,000 employees in an unmatched global service network directly present in over 70 countries worldwide. 90% of the global top 100 providers partner with us. This unique research network is a very important element of our ecosystem. Not only does it mean that we are always on top of the global trench in medicine, It also means that people who start their careers learning at these important institutions will be in touch with our technology and our people almost from day 1 on. Great multipliers at later stages of their careers.
Last but clearly not least, we have unique clinical expertise. I already alluded to this number a few minutes ago. 70% of all critical clinical decisions are influenced by our technologies. So we have a lot of data acknowledged that can help us to make the whole system become smarter and more efficient. Artificial intelligence and digitalization are the key levers to shape health care in the future.
Our huge pool of €750,000,000 and counting curated clinical data sets is a key ingredient for this paradigm shift. On the next four charts, I will take you through our plans on how we want to utilize our great starting point to become even better, achieving the next level of profitable growth. So we feel well positioned to benefit from the market environment I described. What you see here is our framework for the upgrading phase within our Healthy New Strategy 2025. Each segment has a dedicated plan for the upgrading phase.
Furthermore, we have 3 group wide drivers. This together will deliver the next level of profitable growth. Let me start with the individual segments. In the next three charts, I will introduce the segment approaches to deliver the next level of profitable growth. Consider this as an executive summary of what our segment heads will be presenting to you at the Meet the Management event in London in December.
For imaging, the leading team in the next years will be digital. A lot of the innovation and potential to make new markets stems from the potential of digitalization and artificial intelligence. In Diagnostics, obviously, a lot in the nearer term is still about making Atellica solution also a commercial success for us. Beyond this, we aim to further strengthen our global leadership in workflow. Finally, Advanced Therapies, the acquisition of Corindus has made clear that this business will change its face in the next years, transforming to new levels of growth with a focus on high growth procedures.
And now to the group rights drivers. As a company, we see potential to foster our growth potential also levering the strength of the group. We have identified additional growth potential in emerging markets. The key markets here, obviously the key market obviously is China. For us, this is a €20,000,000,000 market followed by India and Middle East and Africa.
For these three markets, we have concrete action plans for above market growth ranging from go to market, enhanced presence, dedicated products and solutions addressing the local needs. Midterm, we expect these 3 markets to account for 50% to 60% of global Healthiness growth. So the focus is very much relevant. We also see potential from a more and more focused go to market and from dedicated offerings when it comes to key accounts, which we pursue diligently. The ongoing consolidation has been an important driver for our top 130 accounts to actually grow more strongly than the overall market.
By now, these accounts make up a 5th of the group revenue. By intensifying collaboration and enhancing our key account management, we believe we can benefit even more from the strength of this customer group. Our recent acquisition of ECG should be supportive here as North America is the key region when it comes to the contribution to this customer segment. And finally, we believe our organization has important productivity upside to draw from digitalization. Therefore, this is a further important angle in terms of corporate focus.
Now let me briefly go into the individual segments. On this chart, I would like to explain what will be driving our growth in Imaging in the nearer future, but also beyond that. We see significant potential. As you know, the imaging business is very near to my heart as it is the part of the company where I spent large parts of my professional career. So it really comes from the heart when I say I feel very proud of what we have created.
This is an innovation driven growth machine. Innovation in our core modalities is what has made us so strong, being very close to our customers' needs and the trends in modern medicine, always seeking the next steps in quality and productivity. For the coming years, we are looking at further significant strengthening of our position in our core markets. Firstly, we are planning to launch new platforms with a strong focus on smart scanning and imaging automation for optimal user guidance. Of course, digitalization and artificial intelligence are key elements for these innovations.
While without being disrespectful to these innovations, this is somewhat our normal course of business. We also see really disruptive innovations coming up. In Magnetic Resonance, we are far advanced on developing a new level MR that will bring down cost significantly. It will enable us to take Magnetic Resonance to places and setups where it currently cannot go. This is not just about winning market share.
We will be growing the market with this. Also in CT and computer tomography, we are looking at breakthrough at a breakthrough when it comes to photon counting. We expect to launch in the next 2 years a photon counting in CT. We will redefine computer tomography with this innovation by, for example, reaching totally new levels of image quality. This pipeline of innovations makes us very optimistic that we will continue to outgrow our market, I.
E. Continue to grow our market share. However, we do not stop here. We believe there is huge potential in the field of expanding diagnostic offerings. We are launching an enterprise imaging system.
This will enable end to end workflow integration of diagnostic imaging clinical products as well as partner solutions into the customer's diagnostic information workflow. Furthermore, we plan to accelerate radiology services with the following key portfolio elements. SimGoo Virtual Cockpit enables remote scanning assistance to, for example, establish central operation centers. Tele radiology platforms offer a global marketplace, giving our customers the ability to integrate data and generate clinical insights to improve operational and financial efficiency. And finally, we want to lead clinical decisions.
Here, artificial intelligence is the key element for innovations. This will really be about growing our market, creating a new market. In the coming years, we plan to scale up offerings in this space. The first important element is radiology decision support. We call these products AI rat companions.
They enable automatic support of diagnostic interpretation to improve diagnostic accuracy and speed up the routine workflow. The second element may be a bit further out is integrated decision support. The AI pathway companion will support complex diagnostic and treatment decisions by patient centric data mapping along with pathways. It incorporates patient data in vivo and in vitro data as well as cohort and omics data to facilitate the decision support. This really has the potential to reshape the way health care is provided.
Summarizing this, from today's point of view, there is no stopping the imaging growth machine. In the Diagnostics segment, the Diagnostics segment has already gotten a lot of attention today. Therefore, I keep it a bit shorter here. There's a clear road map for transition and accelerating growth towards mid single digit. Firstly, we will deliver on our promise of Atellica, and I I explained earlier how and when we will get there.
Secondly, on our way to market growth and expanding workflow leadership, we will also position ourselves for the future by expanding our offerings along our strategic focus areas: automated high throughput solutions, connected point of care and end to end solutions as well as data digitalization and AI. As said earlier, Atellica Wave 2 developments are right on target as well as a promising innovation pipeline at in our point of care business is in place where we are driving for market leadership. Finally, we will also elevate our Diagnostics segment with a strong focus on further driving workflow excellence through innovation in automation and IT as well as by being by enabling AI driven insights. But the focus is not only workflow as our elevation will also be supported by unique tests, which will significantly increase clinical value for the patient and the provider. All in all, there's a clear path to grow Diagnostics by mid single digits, midterm and as explained earlier, concrete measures in place to develop profitability.
Advanced Therapies aspires to develop technologies and integrated offerings that deliver significant clinical value in fast growing procedures and directly benefit from this procedure growth. 3 building blocks create the foundation to take advantage of high procedural growth in our portfolio and for stopping for stepping up towards high single digit growth in the midterm. The first step towards a higher growth rate is addressed by our core business, the Innovate Technologies and Services, which enhance minimally invasive procedures. The latest example for those kinds of innovations is our newly launched ARTIS Aikonno. Additionally, we leveraged the entire Healthineers portfolio for next generation therapy guidance solutions.
Improving precision in minimally invasive procedures is the 2nd building block. With the acquisition of Cochinulus, we are able to enhance the eyes and hands of the physician, helping them to reach the most complex lesions in the most accurate way. This leads to an increasing position in interventions and transforms the way how medical care is delivered. The last pillar is how we can translate procedure growth into our business. We focus on areas where advanced imaging helps to drive outcome improvements, while at the same time, addresses clinical unmet needs, for example, in cardio or neurovascular and cancer therapy interventions.
With the Corindus robot, we are able to benefit the first time directly from a single procedure. The triad of addressing the core with image guidance and navigation, improving precision and transforming care delivery and expanding into highly growing procedures is transforming advanced therapies to new levels of profitable growth. With these presented segment plans and group wide levers of our upgrading phase, we will grow revenue above and beyond 5% per annum and EPS by roughly 10% in the same period. And with that, I would like to hand it back over to Jochen.
Thank you, Bernd. Dear analysts and investors, Bernd has just given you a detailed explanation on how we continue to drive the company from a just leading to a continuously leading and fast growing global player in the healthcare space. Bernd mainly gave you the strategic angle to this. In the following 10 to 15 minutes, I will give you the perspective on how this growth will be financed and how we will drive performance. And of course, I will comment in detail about the company's financial prospects in 2020 and the year thereafter.
I want to start with a high level look at the company in terms of sources and use of cash. A sound financial framework is an important foundation of profitable growth. Key source of funding for us is our high and sustainable free cash flow. Both imaging and advanced therapies have cash conversion rates of around 90%. Diagnostics can be a very strong cash generator, but primarily as a result of the Atellica rollout, the segment currently is in a transition phase also in its cash generation.
Out of this strong cash generation alone, we could very well finance inorganic growth moves every year without touching our healthy balance sheet too much. However, of course, for the right opportunities, we would be willing and able to go above this. But we have the ambition to keep a solid investment grade rating. Currently, Siemens is providing us with access to debt at attractive rates. Nevertheless, we are also considering external financing in the midterm.
Finally, in terms of equity, we have significant potential and a supportive majority shareholders. This is not meant as a potential indication of a large deal, which might induce the need for any equity measure, but just show the opportunities which are available to single sales and years. That said, I'm already on the right side of the chart, the use of cash. An important use of cash for us is our R and D spend. This is the fuel of future growth for us and a key element of our success.
We give this a high level of importance and are currently not planning on stepping the brakes when it comes to spending in research and development. But we are looking carefully into every spending request to make sure that resources are well allocated to support our profitable growth strategy. We expect to continue spending about 9% of revenue on R and D. We are also investing into the future growth potential of the company, mainly when it comes to production sites and capacities, always with an eye on productivity and efficiency, accommodating the needs of our businesses. Here we see a range of 3.5% up to 4.5% of revenue in the next years.
By the way, during our upgrading phase, we will intensify our own digitalization efforts for our own processes. And by this also increase our productivity efforts clearly above and beyond the 4% of total costs, which are part of our regular routine. We also offer investors a clear and effective dividend policy. We are paying out between 50% to 60% of reported net income. As Bernd has already said, we have proposed a dividend of €0.80 for fiscal year 2019, representing a payout of slightly above 50% and a 14% increase compared to fiscal year 2018.
In terms of M and A, we have a smart and opportunistic approach with a clear angle at reaching accretion as quickly as possible. We have signed or closed deals. MiniCare, a promising point of care immunoassay technology, Corindus, NECG Management Consultants, clearly in excess of €1,000,000,000 in fiscal year 2019. On the next chart, I will go a bit deeper into our thinking on what kind of M and A you could be expecting from us. Part of the motivation of the IPO was to give this company a certain degree of freedom to further expand in the logics of the med tech industry.
This obviously included the opportunity to do more M and A than what would have been likely happened with less independence. We have now done 1st M and A transactions with very different angles. In order to make our principal approach to how we think about M and A a bit more tangible, we have created this very simple matrix. And this obviously has to be understood as just a rough guidance to our thinking. We would generally differentiate between 3 different groups.
While a seed transaction would be an investment at an early stage of a business, where either we want to make sure we secure access to a certain technology or where we believe we can add value at an early stage. Here, accretion means EPS and EBIT will be something that happens rather long term. That is fine as we would also see this as smaller ticket deals way below €1,000,000,000 Our MiniCare acquisition is a perfect example for this. While the Corindus transaction size wise is rather on the border to an adjacent sea deal. Robotics are a different animal in terms of multiples.
And let me stress that EPS accretion is expected on a midterm timeframe. So again, kind of a borderline case between seed and adjacency. The more developed the business we acquire, the larger the deal size might become. But this also raises the hurdle for accretion. The other way around, a developed business does not have necessarily to be big.
Our acquisition in the consulting space of U. S.-based ECG Management Consultants in term of accretion criteria qualifies for the portfolio bucket, but size wise, it is rather small. And finally, let me stress again, we are not doing M and A just for the sake of doing M and A. We want to be smart in selecting target that fit our overall strategy, and we want to act in a decisive but also well timed fashion to find the most opportunistic moment or deal. So again, we work to summarize our approach smart, accretive and opportunistic.
Which leads me to our preferred way of investment, this is organic. The 2 categories here are R and D expenses, which we largely take through the P and L immediately and only the clear minority are capitalized and of course, CapEx. In terms of magnitude, the R and D spend is clearly the more important bucket. As Bernd has shown you in his presentation, this is the fuel for our growth machinery. Innovation is the key driver for our businesses.
Imaging and advanced therapies have been and will be seeing a similar rate of R and D being spent in the range between 9% 10% of revenue. Thanks to our size and market leading position in most of our businesses, we can afford this level of R and D without jeopardizing our sector leading margins. This is exactly the opposite. Innovation leadership, which comes generally in 2 passions, first to market and market leading cost position, ensures industry leading profitability levels. At Diagnostics, the rate is slightly lower.
And let me add, when it comes to CapEx, Diagnostics is currently playing a relatively more important role here. Here, we have been investing especially into production sites for Atellica reagent in the United States and in China. This CapEx phase will peak in fiscal year 2020. In the imaging space, we announced an important factory new build and capacity expansion, the new photonics center in Forza. This will be the single most important CapEx project in the next 3 years, securing our growth path in X-ray technology like computer tomography or C arms and also creating substantial productivity.
Overall, in light of the finalization of the factory build out in diagnostics, we expect the CapEx intensity to come down slightly in the next 3 years, more towards the 3.5 percent of revenue coming from around 4% previously and a potentially slightly higher level in fiscal year 2020. Now changing gears to outlook. Today, we have published our outlook for the new fiscal year 2020. So as you see from this, our outlook has 2 leading KPIs. The KPI for top line remains unchanged, the comparable revenue growth.
For the KPI on group profitability, we have decided to measure this in earnings per share. That said, we obviously still take operating margins very seriously as the most important enabler for EPS growth, and we will adequately brief you on the margin developments and prospects in reporting and outlooks. In order to make EPS more accessible for you comparing it to other companies in the space, we also decided to use adjusted EPS. The adjustments on EPS will be the same adjustments that are applied to the profit line. We have also decided to include M and A related transaction costs into the adjustment.
So for both the profit and the EPS line, we adjust for PPA, severance charges and M and A related transaction costs. The EPS adjustments are obviously net of tax. Now let's have a closer look on the outlook for fiscal year 2020. We expect this to be another strong year in terms of revenue growth for the group. The 5% to 6% growth, which we are guiding for, are supported by different dynamics in the three segments.
We expect imaging not to fully repeat the outstanding level of fiscal year 2019, however, continuing attractive growth within the group outlook of 5% to 6%. In the Diagnostics segment, we expect to see an acceleration of growth, yet it will not reach the lower end of the group range. Advanced therapies are likely to again show a strong year in terms of growth, well positioned in the bandwidth given for Healthineers. And remember, in the 1st year, the expected growth contribution from the acquisition is made comparable in the growth rate. In terms of profitability, I would first like to say a few words on the new profit definition that we introduced.
We have, as announced, moved from adjusted profit to adjusted EBIT as the key steering metric for the operation. The key change here is related to some interest income that were previously treated as operational. This is now in the interest result. That leads to slightly lower margin. So the adjusted EBIT margin for fiscal year 2019 would have been 17.1%.
In 2019, the adjustments were PPA and severance. So this leads to an adjusted EPS of 1.70 compared to the reported number of 1.57. This is a starting point for our group EPS outlook. We are expecting adjusted EPS to increase by 6% to 12% in fiscal year 2020. Keep in mind, this figure is including, for example, the margin dilution at Advanced Therapies as a result of the Corindus acquisition.
We are only adjusting for the transaction cost, not for the normal profitability of the business or integration costs. Excluding from the latter, the operational contribution of all the signed and closed M and A transactions, we would expect adjusted EPS to increase by even 8% to 14%, and hence, well in the ballpark of our 10% growth ambition that Bernd has already alluded to in his part. Now a few words on the underlying dynamics behind the EPS growth. Firstly, of course, the growing nominal revenue is a key underlying driver, with the group adjusted EBIT margin expected between 17% 18% this year. The margin dilution of the recently signed and closed transactions is about 50 basis points.
Further down, we see lower interest expenses at €60,000,000 to €80,000,000 which is a marketable reduction of about 50% compared to fiscal year 2019. The driver here is obviously the well known debt restructuring we did last year. Tax rate is assumed to be in the range between 27% 30%. Now before I move on to the outlook beyond 20 20, a few words on the outlook for adjusted EBIT segment margins explaining the 17% to 18% for the group. This is obviously a mixed picture.
Firstly, imaging is expected to further improve its industry leading margin at a rate comparable to fiscal year 2019. This is obviously very much a conversion story. Diagnostics. As Bernd has already highlighted, we will see a further year of transition with further slightly reducing margins. Key negative effects compared to 2019 levels stem from foreign exchange and from the integration of the MiniCare acquisition.
The initiated actions to turn around revenue and profitability dynamics will only start to take effect in the course of the year. That said, Q1 is expected to be very challenging and most likely the weakest quarter of the year in terms of margins and revenue growth in the Diagnostics segment. Please bear in mind that we have a record quarter this Q4 for Atellica solution instrument shipments. As said before, instruments are an investment. Consequently, the following quarter will be burdened with associated installations cost.
We had seen this pattern before. Q4 last year, we also had a record shipment quarter with over 400 shipments and the margin in the following Q1 was consequently burdened by installation costs. With around 600 shipments in Q4, we would expect a similar pattern. However, as said, this is an investment, and we expect to see margins to gradually recover after Q1. Advanced Therapy margins are expected to significantly decrease due to the acquisition of Corundus Robotics.
The impact of this integration was already quantified during the conference call regarding the transaction with roughly 300 basis points operational for the segment. Before I move on to the more midterm outlook, a few words on foreign exchange. Outlook is based on current exchange rate assumptions, which are a function of spot and forward rates. Now to the midterm outlook. As Bernd has already pointed out, we expect to manifest this next level of growth and profitability in the years 2021 2022 with more than 5% comparable revenue growth every year translating to around 10% EPS growth per annum.
So you could say EPS growth as roughly 2x the rate of revenue. Imaging, driven by its breakthrough innovations, is expected to grow above 5% every year, continuing to outperform the market, further gaining share. Diagnostics is expected to further accelerate its growth towards mid single digit growth. I believe Bernd has sufficiently explained the drivers. Advanced Therapies is stepping up its growth towards high single digit growth, capitalizing on the Corindus acquisition and the strength in their core business.
EPS is expected to grow faster than revenue. This is on the back of an expected improvement on EBIT margins across the board. Imaging is expected to see further gradual margin improvement from top line conversion. Advanced therapies, we likely see a steeper margin recovery due to the dynamics of the Corindus business case back to its sector leading margins by 2022. And finally, Diagnostics is expected to see first margin improvement in 2021 2022, but a steeper recovery, achieving mid teens around 2024.
With no big changes foreseen in the interest and the tax rate, we expect revenue growth paired with increasing operating margins to drive adjusted EPS growth to approximately 10% for 2021 2022. This brings us to the end of today's presentation, and I would hand back to the operator.
Thank you, gentlemen. We will now start today's question and answer session where we would like to ask you to limit yourself to 2 questions. Our first question comes from the line of Patrick Wood from Bank of America.
Thank you very much. I'll just ask by 2 upfront if I can, please. The first would be, obviously, there's a reasonable chunk of information on the slides on M and A and appreciate you guys are saying preferred growth is organic. But at least from our perspective, it feels like you're underlying again as per the IPO that M and A is an important part of your growth trajectory going forward. So I get the deal size metrics, that's actually quite helpful.
I'd just be curious if you could maybe put a little bit of flesh on the bones for us about, again, the kinds of targets and things you're looking for. It was obviously very helpful before when you explained about engineering style companies or robotics, but just to give us a flavor of your thought process around what are the key criteria you're really looking for, less financial or projects? That's the first question. And then the second question, I guess, pun for you would be, I hate to bring up diagnostics, but you obviously spent a few months there and doing a bit of a deep dive and you spent a lot of time in the imaging business in the past. I'm just curious how you would compare and contrast the 2.
I mean, is there a culture difference? Is there more that needs to change in the business rather than just the hardware side? I'm just curious to get your insights. Thank you.
Pat, I will start first on that M and A topic. The reason why we so to say put out this, I would say, this slide on M and A was not that we have changed the way we look at M and A, just to reiterate and explain maybe in an even, I would say, more understandable fashion how we are thinking about it. This said, I believe that the areas we look at are again, when we use the 3 words, seed, adjacency and portfolio. On the other hand, I said from a strategic standpoint only, all the things we will do in M and A are adjacent to what we do, generally speaking. We are not intending to move into the 4th segment, definitely not short and midterm.
And with this, I might also give it over to Gernd.
Yes. Thank you, Horne. So I mean the flesh from the public are some more what are the topics. So let me maybe draw and give you a little bit, let's say, when you look at what we presented, where should acquisitions fit. So one way of look one good way of looking at it is, when I described the upgrading with the 3 segments growth path and also what we want to do as a company overall, yes?
In the end, everything what we want to when we look at M and A needs to also fit into this, yes? So one theme is growing imaging into digital, meaning becoming central for efficient decision making, yes? So this is an area which would make sense, yes? In Diagnostics, it is what I talked about the bifurcation of the market where we on the one hand strengthen the point of care business, with a series of acquisitions we have made. And I mean there's and on the other hand, everything which enhances our profile as the workflow and digital company in diagnostics would make sense.
And in advanced therapies, everything which helps us to forward integrate into procedures. And then the ECG acquisition fits into strengthening the overall company by becoming a holistic partner. So in a way, the slide with the 6 priorities is also not a bad way to look at what makes strategic sense from an M and A perspective. To your Diagnostics question, I mean, first of all, I mean, as I said, I mean, I spent Jochen and I spent a lot of time together with the team of Diagnostics. And I'm impressed by the depth of the team.
So I think what is different, yes, and since you asked about imaging, what is a little bit of a new situation is the launch of a big technology platform, yes, which is a great product. But then going through all the efforts of from installation time to making sure that everybody on the globe is prepared and so on and so on. This is not what this business is usually doing, yes, because it is happening only a launch of that magnitude only happens every 10 to 15 years or 10 to 20 years, yes? And in the end, it is here, of course, on the imaging side, we have a super well oiled machine because we basically launch products every year. They don't have the same order of magnitude, yes?
While in diagnostics, it is an event where you don't have the a mature learning curve. And basically, this is also what is the reason why we have been overoptimistic in when it comes to the speed, but on the other hand, being very right on target when it comes to what we have built, yes.
Very helpful. Thanks for the color, guys.
Thank you. Our next question today comes from the line of Scott Bardo from Berenberg. Please go ahead.
Yes. Thanks very much for taking my questions. So I really just want to understand a little bit the divisional growth drivers both next year and over the interim. And I noticed that for the imaging segment, you referred to a new diagnostic MR platform and also moving into a newer technology with photon counting for computer tomography. History has told us to always take your new introduction seriously.
I just wonder if you could share with us why you're so confident that these new platforms position yourself for further market shares. Also with respect to the Diagnostics business, I think you've highlighted throughout your prepared remarks that you are the productivity partner and that you're winning major contracts with large players. I'm aware and I think Quest Laboratories have highlighted that they're about to award their complete portfolio of immunoassays to one vendor and that decision is pending. In light of your comments about being a leading productivity partner, can you share some thoughts around this and whether you would be disappointed were you not to secure this contract? Thank you.
Okay. Thank you, Scott. You put me in an interesting position here. So I mean first on imaging. I mean, the 2 innovations in the core we mentioned, there is a lot of reason why we can be very confident that they will resonate extremely well in the market.
I mean, on the one hand, I mean, when you look at MRI, I mean, it is certainly the Holy Grail of imaging on the one hand. The CT colleagues won't like to hear this, here. But there is a big drawback in MRI and that is it's a bulky thing and you need the installation is cumbersome and so on, you need all kind of site preparation and so on, so that there is a cost associated on the one hand with the product, but also with the environment. So there is a clear need to democratize MRI in order to bring it into new settings. And the technology which we have been working on is very, very promising.
And we have close clinical cooperation with leading institutions to show that this is not only a super attractive system from a cost point of view, but also from a clinical utility point of view. In CT, it is similar, yes, the counting technology. By the way, it is something we invest in since 2003. Yes, I know that because I was personally being involved here. It is really changing the basic engine of CT imaging, yes, in terms of image quality, resolution, dose efficiency and so on and so on.
We have been very diligently investing in this technology. And I have we're working with leading institutions from university from Beka Zettia, the German Cancer Research Center to NIH to Mayo Clinic in order to develop the technology and it is will be a major step. The diagnostics question on this one customer. Yes, this is one of the customers who would greatly benefit from the promises of Atelica. And I can only say that we are
happy so far with how the conversations are going. Very good. Thank you. And just to understand that contract hasn't been awarded yet, that's still pending? Correct.
And lastly thank you. And lastly on Advanced Therapies, I see you put out some quite bullish expectations for high single digit growth over the medium term, a bit more, I think, than I in the market expected. So what I really want you to understand is a little bit more about the contribution of Corindus to this foreseen growth path. And how confident are you to materially accelerate revenues for this business? And what is it really driving that?
Is it scale and expansion? Or is it innovations to come? Perhaps some thoughts about why you're so optimistic in this area? Thank you.
Scott, good question on AT. I think the how we see the core business developing in AT, it's we see this business also developing similar to imaging in a ballpark of above and beyond 5% on a relatively sustainable basis based on our strong core strength. And then on top comes the tailwind we expect from the Corindus acquisition, which then brings it into the higher single digit arena over time. And we are very convinced about the opportunity we have with Corindus in our hand now in the first, in the cardiovascular and peripheral vascular space and then also over the medium term in the neurovascular space. And therefore, we are very, very confident about that.
Sure. Do you want to put some more highlight on this?
No. I mean and then what I say now is, our update doesn't sound too lofty or philosophical. In the end, the growth in imaging that also in advanced therapies is to go beyond the box on the equipment and to participate what happens afterwards, yes, in the process. And this is also why we had this the slide with the pie chart where there's all the costs of labor, yes? So the more we move forward in using technology, on the one hand, to help operating many machines, how to move forward by having technology to help interpret images, by moving by using technology to support the operator in advanced therapies, yes, to have automated, let's say, assisted hands, yes, this is the general theme here, including also in diagnostics, yes, of taking out labor costs, yes, with and addressing it through technology.
And this is also what gives us the additional growth, yes? So it's not just the market growth of machines needed, yes, expressed in old fashioned terms, yes? But it is supporting the process which comes after. And here, we have huge opportunity simply because the need is there. And on the other hand, the technologies are there from digitalization to AI to robotics.
Very good. Thank you very much.
Thank you. We'll go to our next question today from Veronika Dubajova from Goldman Sachs. Please go ahead.
Thank you, gentlemen. Good morning and thank you for taking my questions. I have 2, please. The first one is, Jochen, I'd really like to understand sort of the path to the mid teen diagnostic margin target that you have for 2024. What I mean by that is help us understand what will be the key levers that will move the profitability from this high single digit that we'll likely see in 2020 all the way to the mid teens.
I mean, it's almost a doubling of margins. So it would be great to understand exactly how we get there. What extent is it cost control versus revenue growth versus mix? And then my second question is a question around the kind of broader hospital CapEx and imaging end market growth. We've heard a variety of data points from some of your peers, some of them flagging slowing U.
S. Growth, some of them flagging actually slowing Chinese growth. So I'd love to kind of get your sense for what you are seeing. And as you think about your targets for this mid single digit 5% plus growth in the imaging business, what assumptions have you made about the broader hospital CapEx end market in that assumption? Thank you.
Running, Mikael, on the diagnostic question. The main drivers behind the low profitability we see today and also then the improvement we expect up to mid teens around 2024 are obviously the same. What Bernd has pointed out, we underestimated, I would say, the support costs needed to get those systems up and running. We obviously did not walk quickly enough through the learning curve and experience curve on the classical things like standard product costs. It took us maybe partially also because of the high wind share in complex settings, much longer installation time than expected.
And we expect to see a clear improvement on the cost side of things with regard to SAEA support costs as well as standard product costs over time. Secondly, we will see the reagent revenue stream from all the installation efforts kicking in over time. And these are the main drivers behind behind that. And then if you look at the profitability levels of the business before we introduce Atelica, yes, it's a pity, but it was at 14% profitability in 20 17, yes? So that's not too long ago.
So therefore, we are very confident that we can achieve this mid teens around 2024.
Yes. Veronika, to your question around CapEx environment here. And I mean, from my point of view or from our point of view, when you look at global markets, global markets are healthy. Healthy means not exaggerating in a super positive way, but also not held back by concerns. Then you and you have seen, yes, I mean, also, I mean, our growth rates in imaging on the back of this environment, I mean, you have you can compare us to competition.
It is clear that, especially in the U. S, we have been very, very strong. I mean, the team did a very good job. But it also showed, what I very much what I often repeated that this is an environment where when you have a strong position, it also gives you the opportunity to get into to become even stronger, yes, to be the partner for the large institutions. But maybe let me dissect it a little bit, how we do see growth coming in.
On the one hand, we see that solid CapEx environment in the traditional sense. Then we will have share gains Again, we aim for it, and we have proven to gain share continuously. Next topic is with what you can add is new technology new systems which go into which create new markets, as I explained, yes? And then comes the additional topic on top, which I think one cannot really capture so much by looking at CapEx environment only. It is what do we do in order to help our customers to turn to invest and automate, so to say, and turn OpEx into savings and turn OpEx and make CapEx investment to make savings on the OpEx side by reducing labor cost, yes?
And this is what we do with digital, with AI based decision making, is will also in the long run, for sure, but also in the years to come, be a little bit too narrow, I believe, yes.
That's helpful. And can I just follow-up, you had on the diagnostic margin question? So I mean, would you say that the entirety of the margin compression that you've seen has been due to additional costs? And so your expectation is that as you build revenues on those additional costs that disappears or do you think you can actually scale those costs back? Just I think all of us are quite keen to sense check.
And I'm sorry to harp on this, but just sense check the expectation that you've put out there for 2024?
No, no. We are here to answer your questions. Yes. So no, no, we have. So I mean, when you look at why we are why are margins not coming in as quickly as we thought.
So on the one hand, one aspect is costs, yes, higher ramp up costs, yes, which means and I called it in the beginning in my speech, yes, the initially higher costs in the early innings of the product, yes? This is the production cost. This is the support cost for our customers. This is the implementation cost, yes? This will go away, yes?
Not from one day to the next, yes? But there's a clear path of a learning curve of target cost achievement and all and streamline processes. So this is the cost side of it. There's also a revenue side of it. And that is that because of the topic we have we talked about, I think, multiple times of the delayed ramp up of the reagent stream because of longer installation times, which is on the one hand attributable to the, let's say, the learning curve we go through.
But on the other hand, the downside of the success we have in the complex settings, yes, there's also a top line effect, yes, where the positive margin of reagent stream doesn't kick in as quickly as we thought, yes? So in this double whammy, so to say, of initially higher costs plus not yet having enough relief on the highly on the profitable reagent stream is why we go through that curve in the way we have also graphically illustrated it in one of the slides.
That's very clear. Thank you.
Thank you. We have time just for one more question now from David Adlington from JPMorgan.
Hey, guys. Thanks for taking
the question. I'm sorry, I'm just going to also focus on Diagnostics, just following up on Veronika's questions. Your initial margin guidance of 2016 to 2019, you obviously sort of pulled back now towards mid teens and obviously quite a long way out. So I suppose what's fundamentally changed in the business margin wise, walk away from that 16 to 2019 and down to 15%. And I was just wondering, are you still targeting a kind of a number around the installed base of machines?
And what sort of installed base numbers do you need to get to achieve that mid teens target?
Yes. So first of all, I mean, coming I mean, yes, I think we clearly said and it is not a topic we are proud of as you probably know that this initial target of getting to the 16% above, that we will not reach it in the time we initially targeted and that this is now, let's say, 2 years out. We have refrained from now also saying what will be the trajectory from there, yes, because I mean the potential in the business is certainly to be also at higher margins. But this is, I think, also it's a bit of a topic question whether this is something which we should now make a firm promise to. The I mean, what is important, and that is why you will also not see us give now exact shipment and whatever targets because this is always a very, very narrow way of looking at it.
In the end, the business is about you want to capture profitable reagent streams in the growing customers. This is what makes the trick. This is why we are happy about the 300 new customers we could win in the last year. But just counting the shipments, is on the one hand not really helpful, I believe, for you because it can be misleading, yes, because not every shipment will be a profitable addition, yes? And on the other hand, it is about optimizing the entire business.
So on. So it is more about optimizing the entire business. And that's basically it. So but we will, of course, yes, give you regular updates, yes, on where the And maybe to add one point to this,
David, yes? I mean, we And maybe to add one point to this, David, yes, I mean, we have talked about that also several times. We have a large installed base anyway. But due to the portfolio we had maybe in the past and the way where we won in the past, we were not necessarily winning at the customers who are the mover and shakers in the market. This has changed with Atelica, but it takes time until we get the benefit of it.
Therefore, it's not so much about the installed base in itself. For sure, it's a necessary evil as Bert quoted me, but it's not an evil, it's an investment. But at the end of the day, it is how much reagent revenue to generate with your installed base at the end of the day.
Okay. So that brings us to the end of today's call. Thanks everybody for participating. I think we'll have a good chances for touch points in the next few days as well. So if you have follow-up questions either directly with the whole IR team or obviously in the next few days.
Thanks for
your time.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Healthineers website. The website address is www.corporate.siemenshealthineers.com/ investor relations.