Good morning, ladies and gentlemen, and welcome to Siemens Healthineers 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 Health and Ear's presentation. This conference call may include forward looking statements. These statements are based on the company's current expectations At this time, I would like to turn the call over to your host today, Mr.
Marc Kubenik, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good morning, dear analysts and investors. Thanks a lot for dialing in this time of the day, especially to those of you for whom it's a bank holiday. I'm sitting here with our CEO, Bernd Montag and our CFO, Jorgen Schmitz, who will be taking you through the details of our Q2 fiscal year 'twenty one results. You can find all the material, charts, earnings release and the half year report on the Investor Relations section of our website.
Before I hand over to Bernd, I have 2 housekeeping items. Firstly, I would like to make you aware of a perception study which we will be conducting towards June Together with our partner Quantifier, obviously, it will be hugely appreciated to see you participating And helping us prepare for our Capital Market Day mid November. Secondly, I would like to remind you of our 2 question rule in the Q and A And with that said, I will pass the word to Bernd Muntag, CEO of Siemens Health and Ear. Bernd, the floor is yours.
Yes. Thank you, Mark, and good morning also from my side. Thanks for dialing in and expressing your interest in Siemens Healthineers. Let me start the presentation by shedding some light on the financial performance of Q2. We recorded a continued Very strong comparable revenue growth with 13%.
Diagnostic revenues were again strong with 29% comparable revenue growth year on year driven by antigen sales and accompanied by solid underlying growth in our core business. Imaging revenue increased by 7% on a comparable basis while Advanced Therapies came in with 2%. We continue to see strong growth for CT and X-ray products, but not only revenue growth was strong. Our equipment book to bill in Q2 stands at 1.08, further increasing our backlog. This The reported adjusted EBIT margin of 16.8% is on a solid level.
The reduction of 120 basis points year over year was due to adverse effects With rather one off character this year compared to positive effects in Q2 last year. Jochen will elaborate on this Topic later. Adjusted basic earnings per share are at €0.44 This is a 5% decline year over year, which is driven by the increased number of shares due to the equity raises in March September last year, Which represents a headwind of 8 percentage points alone. We are raising the outlook for comparable revenue growth From 8% to 12% to now 14% to 17% and for adjusted EPS from EUR 1.6 €63,000,000 to €1.82,000,000 to €2.05 This is now incorporating an increased average number of shares and increased antigen revenue assumption of $750,000,000 better than expected operational developments and the contribution from Varian for the second half. I keep the outlook discussion short here as Jochen will spend much more time discussing the raised outlook and its assumptions later.
Furthermore, during this quarter, we have successfully closed our combination with Varian. Let me first express that I'm very proud that we successfully closed this very important combination. I am thrilled that we can now work together with Varian's talented, highly motivated colleagues to shape the future of healthcare And to create a world without fear of cancer. Varian has been successful in building a strong trusted brand, Strong customer loyalty and Varian has been transforming into the leading and most comprehensive multimodal cancer company. Together with Varian, we are making 2 leaps in one step, a leap in accelerating the fight against cancer And a leap in our impact on healthcare overall.
We are combining our unique and highly complementary market leading portfolios And capabilities to support clinicians around the globe to achieve better outcomes in Cancer Care. We are combining variant's portfolio in cancer care with Siemens Healthineers' expertise in in vitro diagnostics, Best in class imaging and advanced therapies in the field of minimally invasive procedures. Thus, Better than any other company in our industry, we can address the entire clinical pathway for cancer patients, but also For many other diseases, from early detection, diagnosis and therapy all the way to aftercare. We will accelerate digital and AI enriched offerings, enable data driven precision care. Together, We are the most holistic partner for the entire customer spectrum.
In diagnosis, we have the most comprehensive portfolio with in vivo and in vitro solutions. To put this into perspective, with our global install base in imaging and lab diagnostics, we have 240,000 patient touch 5 percent of the clinical decisions made in the healthcare system. On the lab diagnostic side, we provide about 10,000,000,000 tests per year on average. In therapy, so far, we have been primarily focused On the imaging part, I. E, the guiding part of minimally invasive techniques in cardiology, neurology and Oncology.
With the acquisition of Corindus, we have made a significant step into helping perform Delivery solutions from linear accelerators to proton therapy, radiation therapy planning and oncology information system software, An expanding array of interventional solutions, multidisciplinary oncology software offerings and Through CTSI, an unmatched service presence in supporting cancer care. Let's not forget, over the next 20 years, new cancer cases are expected to grow by 67% to 30,000,000 cancer patients What's even more staggering is that only about half of these people have access to care. And for those who do have access, there is significant variability in the quality of care, and we will help To address this, we all recognize that cancer care must evolve to address this gap, and that's exactly the purpose of combining our strength with Varian. Together, we want to establish a new level of intelligence and position, Accessibility and Affordability to Fight Against Cancer. By combining imaging and therapy delivery systems With seamless interface, we see a unique opportunity to improve efficiencies and enhance the patient experience We will harness The power of intelligent cancer care, applying AI and machine learning to improve clinical processes And workflows to customize personalized treatment planning and delivery techniques that meet every patient's unique needs everywhere and To build comprehensive decision support tools informed by data driven insights.
We will expand our enterprise service offerings by variant's end to end solution competence in oncology, making us even more unique For our largest customers. As one company, we are on the path to eliminating the fear of cancer, instead Turning it into a manageable chronic disease, one that we can help customers and patients successfully navigate over the long term. Ultimately, together we are a stronger company than ever before, Shaping the future of healthcare as one team. At the same time, This combination carries substantial benefits for our financial profile and value for our shareholders. With Varian, we will reach a higher growth profile and will generate substantial synergies.
We are fully committed To deliver our promise of over $300,000,000 of additional EBIT in fiscal year 2025 on the back of significant revenue and cost Thanks to the great efforts of our integration teams, we have already identified approximately The $150,000,000 of cost synergies that we expect to reach in 2025. At the same time, We continue to see substantial revenue synergy contribution by fiscal year 2025 and even more so beyond. On the cost side, we expect relatively quick savings from actions such as the variant delisting, Back office alignment measures and joint procurement activities, just to name a few. More importantly, we see significant synergy opportunities on the revenue side. For instance, we see potential from improved regional sales coverage by going more direct in some countries with our own sales and service teams rather than Furthermore, we can cross sell into existing customers and together with Varian B, we become even more relevant for our long term value partnerships.
We will work on joint product innovations on the software and digital side And we'll combine diagnosis with cancer care therapy solutions. Furthermore, we will drive synergies by scaling up Varian's Highly successful integrated digital service offerings like CTSI, which offers a range of service offerings like intelligence, evidence based Treatment Planning Solutions. As part of Siemens Healthineers and alongside our imaging, diagnostics And advanced therapy segments, Varian is our new 4th pillar focused on cancer care. Varian will be led By a strong leadership team with Chris Toth as CEO, as previously already announced, taking over from Dow Wilson And with Matthias Plage as Head of Finance. Chris is a Varian veteran with a long of successful leadership previous year holding the position as COO and President of Varian's Oncology Systems Business.
Matthias Plage is a Healthineers veteran with strong expertise in finance joining from imaging where he was very instrumental for the success as Head of Finance. Also for the business lines, Radiation Oncology, Proton and Interventional Solutions, we keep the talent in the company and all previous business leaders remained In Varian, this will allow us to further continue and even accelerate the huge success Varian had before. Together, We now have the most comprehensive portfolio for our customers, expanding our scale and relevance And at the same time becoming even more focused on tackling major disease areas. We are more global than ever before. By combining our footprints, we will establish the largest on the ground sales and service with the most dedicated And passionate team members.
There's no other company that comes even close to what we are creating here. Unparalleled innovation power is the basis of this new company. At our SHAPE 21 event in November, we highlighted some of our new innovations. The MAGNETUM free MAGS And commercial deliveries will start as planned towards the end of this fiscal year. The photon counting CT Technology will improve clinical value by significantly enhancing image quality and adding more information for the physician while at the same time reducing radiation dose.
The first photon counting CTs that will be used for clinical evaluations With this, we are preparing the next step towards commercial availability of the product. On the diagnostic side, we presented the upcoming integrated immunoassay in clinical chemistry Atellica CYA CI1900 analyzer for hub and spoke settings and for midsized labs with lower throughput needs. Also here, the R and D project is on track despite the pandemic. The Artellica Vitali is the 1st innovative product launch from our MiniCare acquisition. This patient site analyzer is the 1st high sensitivity troponin eye test from a fingerstick in lab test quality And hence expediting the diagnosis of heart attack.
The substantial reduction Turnaround time achieved when introducing this wireless handheld analyzer may offer clinicians a fast pathway to help diagnose and treat their patients, Helping to accelerate care and improve patient outcomes. We are confident that all these innovations will underpin Our strong positioning allowing us to further outgrow our addressable markets and tap into adjacent fields. By talking about addressable markets, let me give you some insights in the regional development of our business. We have largely seen a continuation of the developments we spoke about in Q1. EMEA and Asia Pacific recovery for the second half of this fiscal year.
The slight revenue decline in Americas is caused Other strong comps in Q2 2020. Order intake growth on the other hand had a very positive rebound in Americas, which confirms our expectations of a market recovery in the second half. Looking into EMEA, We see a significant double digit revenue growth driven by the high demand for our rapid antigen test Plus an impressively strong underlying business. In Asia Pacific, the positive underlying growth dynamics are unchanged Compared to Q1 and the team recorded a healthy double digit revenue growth, again driven by China. Our broad regional diversification pays into our resilient performance at all times.
This together with the service business in imaging and advanced therapies, the recurring revenue stream From our reagent sales and diagnostics and our growing order backlog in long term value partnerships, our broad global footprint And hence regional diversification constitute a business model creating resilience and A high revenue growth at the same time paired with good visibility over multiple years. Innovation driven growth, as shown on Slide 7, together with our leading position in structurally growing end markets, It's the first of 4 key elements of our compelling investment case. The second element is our sector leading margin With further scope of expansion in Imaging and Advanced Therapies and with Diagnostics on track to delivering improved margins over time on the back of Accelerating Growth. Expanding our portfolio into attractive adjacent growth markets Marks the 3rd pillar in creating shareholder value. 18 months ago, we acquired Corindus to further advance milliMele invasive In mid April, We finally closed the transformative acquisition of Varian to become an even more holistic partner for our customers and to reach A new level of profitable growth.
These four elements show our unique positioning to create shareholder value and to shape The future of health care. And with that, I would like to hand over to Jochen.
Yes. Thank you, Bernd, and also a very warm welcome from my side. Let us now have a closer look at our financial performance in Q2, by the way, the last quarter, which we report without Varian. I will go first through the Q2 performance. We will then talk about the most important facts and figures around the closing, And we'll then obviously look at the remaining fiscal year as a new company.
Now let me begin with the top line. We've continued our top line momentum with very strong growth both in orders and revenue. Let me give you some color on the order development first. Comparable order growth in Q2 was at 23%, driven by excellent equipment growth, which was even a touch higher. Although Q2 'twenty equipment order growth was flattish due to the start of the pandemic, it is an Excellent order intake, both in absolute terms and compared to pre COVID levels.
The U. S. Was a strong contributor to And our first question comes from the line of Chris. Speaking of revenues, revenue growth was at 13%, continuing the momentum from Q1, Driven by strong equipment and excellent antigen test sales. Service revenue growth is back to normal levels at around 5%, the resilient growth trajectory of our service business that we saw also before the pandemic.
Now switching to the regional perspective. EMEA again had excellent growth of 35%, driven by antigen test sales And by broadly distributed growth in the core businesses across the EMEA geographies. Asia Pacific again had significant growth driven Also this quarter by China but also by Japan. Americas still had a slight decline on the revenue line. But as I said before, the order dynamic showed a clear recovery for the United States, pointing towards a strong recovery in revenues for the second Half of this fiscal year.
Now let us look at the earnings performance in Q2. Our adjusted earnings per share was $0.44 in Q2. Year over year, this translates into a 5% decrease at face value, which was mainly driven By the dilution from a higher share count and by foreign exchange headwinds. Bear in mind that Q2 last year was before both Equity raises. Hence, we saw a dilution by the higher share count of around 8% year over year.
On foreign Change, we saw the drop through from the translational foreign exchange headwind of around 5%. Comparable for share count and foreign exchange, adjusted earnings per share were up by 8%. Profit margin was at 16.8 percent, which is a solid level fully in line with our full year guidance level of more than 100 Base points versus prior year 15.5% for the full year. However, margin for the Quarter was down year over year by 2 main topics. 1 being that Q2 prior year was a very tough Comparable.
We saw last year tailwinds from Siemens AG Share Plans impacting the P and L positively Across all three segments last year which we highlighted at that point in time clearly. In addition, we had last year a positive impact in diagnostics From higher capitalization. Taking these effects out, you would have seen roughly a flat margin development year over year already. In addition, year over year developments are related to this year's quarter. Due to our Better performance in fiscal year 2021, we had to account for significantly higher incentives in this fiscal year.
In our last outlook, we already highlighted that we expected group margins to soften over 1 percentage point Compared to our original budgeted incentive expenses. Now we expect group margin to be softened by around 1.5 to 2 percentage points compared to our original budget incentive expenses being part of the initial fiscal year 'twenty one outlook we gave in November. Year over year this translates into a headwind of over 2 percentage points. On a side note, It is important to understand that the incentive headwind from this year is likely to turn into an easy comps in terms of cost for the next year, whereas discretionary spend Might be mirroring this effect. In case of traveling and trade shows resuming more normal activity next year, the lower expenses this year Might become a tough comp in the next fiscal year.
But back to the recent Q2. As said, the incentive provisions resulted in a year over year drag Of over 2 percentage points this quarter. We expect to see this effect also in the coming quarters even a bit skewed relative to the first half year. Ongoing lower discretionary spending partly compensated this drag, but a net negative of about 100 basis points remained year On year margin development. For the second half, this will not be a positive year over year anymore.
Now let's have a look at the other line items. The financial income in Q2 is adjusted for effects related with the financing for the Waren acquisition. The adjustments in Q2 is net positive because it includes reversal of the valuation for purchase price hedging for the Verint transaction. This was a negative impact of about €50,000,000 in Q1, which now became a positive effect in Q2. On the other side, we incurred around €50,000,000 other financing expenses for Waren.
All in all, This translates into an adjusted financial income net of minus €13,000,000 fully in line with our outlook from Q1. The tax rate was 27% in Q2, lower than in prior year quarter and also in line with our outlook. Now let's have a look at the segment performances in Q2. In Imaging, we saw more than 7% revenue growth on the back of Strong prior year growth fueled both by healthy underlying growth in the core business as well as by pandemic related The latter in the computer tomography and x-ray business. In all other modalities, we saw moderate growth.
The Q2 margin was at very healthy level of 21.1 percent. However, down on a very strong prior year quarter, which was positively impacted By the share plans and a normalization of mix. To remind you, Q1 fiscal year 'twenty Was very weak in terms of mix and we saw most of this coming back already in Q2 fiscal year 2020. In this quarter, the margin was held back by the aforementioned higher incentive provisions, Foreign exchange headwind as well as mix. Diagnostics saw significant growth driven by Sales related to COVID-nineteen testing and solid growth in the core business.
Margin in Q2 was significantly up by 400 Base points year over year to 10.6%. The contribution from COVID-nineteen testing drove up margins versus the prior year quarter, Which had seen a material positive effect from the aforementioned share plans as well as from higher capitalization. At the same time, we also saw the headwind from incentive provisions in this quarter. In the Diagnostics segment, even a bit more pronounced than in the other segments Due to the success with antigen test, I will give some additional color on diagnostics later. Advanced Therapies saw 2% growth, a decent performance on the strong comparable of 6% in prior year quarter.
Considering that Advanced Therapies, there is no portfolio for pandemic related demand. Despite a softer growth quarter, We see advanced therapies well on track for substantial growth this year, also due to the fact that lead times in this segment can be a bit longer than in imaging, for example, when Hence, it is quite natural that there is a slight time offset to the developments We see in the core imaging business. Q2 margins in Advanced Therapies were down to 14.2% in Q2 And also ongoing investments for Corindus. This has led to a softer quarter. However, we are used to advanced therapies being Fundamentally, We see a very positive development of the business, but more about this later in the outlook section.
Now let us have a quick view at Varian. As you know, we closed Varian 2 weeks after the quarter end. So I will give you a quick run through of the most important KPIs Variance Q2. On orders, gross orders in Oncology Systems posted a sequential improvement in the first half of the fiscal year towards Mid single digit growth at constant currency in Q2. This is a clear step up versus the double digit declines in the second half of last fiscal year.
Especially the momentum in the United States and in China contributed to this improvement. On revenues, we also saw a Clear sequential improvement in the first half year to a still flattish year over year development in Q2 at constant currencies. As expected, the revenue development is trailing the order development. And finally, on margins, On an underlying basis, the operating non GAAP margins in Q2 was in the mid teens. Now let us look closer at the Q2 performance at diagnostics.
As you can see, we have updated the slide from Q1 to reflect the latest developments. The momentum of Rapid Antigen Test sales continues in Q2 with €190,000,000 worth of sales. The first half year, therefore, with €320,000,000 slightly ahead of what we had assumed. Originally, we assumed €300,000,000 to €350,000,000 for the fiscal year with the majority of sales in the first half. As you know, in March, we received for our rapid test a special approval For use by laypersons in Germany and recently also in France.
And just now we received the C mark for use by laypersons. This creates a new opportunity for rapid antigen testing, the self testing of layperson. The teams At Point of Care, we worked very hard to meet the additional and short term demand which arose from this opportunity. Therefore, we now updated our assumptions for rapid antigen test sales to around €750,000,000 Fiscal year 2021. We will later in the outlook section include this in our expectation for fiscal year 2021.
Now back to the Q2 performance. If we take out the rapid antigen test sales as well as sales from other COVID-nineteen related tests, We get to a very solid comparable growth number in Q2 in the mid- to high single digits. In Q2 In Q1, we already saw solid growth in the core business. We see this as a positive proof point that growth for routine testing is being sustained. This is fully in line with our plan for diagnostics.
On the profit line, the rapid antigen test sales were a significant contributor We expect the margin contribution to peak in Q3 based on high volumes. In the latter course of the second half of the fiscal year, we expect the margin accretion to decline due to slowing demand And respectively, lower volumes as well as accelerated price erosion. On the opposite, we saw in Q2 some Extraordinary headwinds like the incentive provisions being even a bit more pronounced in Diagnostics than in the other segments due to the strong revenue outperformance of diagnostics. If you take out the accretion from all COVID-nineteen related test sales in Q2 and the extraordinary headwinds, We saw that the underlying profitability was in the mid single digits, in line with what we saw in Q1. The fact that underlying profitability is being sustained is another positive proof point that we are on track in diagnostics with what we have planned.
Now let us shift gears from the Q2 performance in the segments to the successful closing of the Wern transaction And what this means for our balance sheet. Let me start with the cash performance in the first half. We saw an outstanding cash performance in the 1st 6 months. We generated cash of over €1,000,000,000 significantly above the prior year period. This cash performance was driven by a strong We also saw a positive impact from advances, for example, from increased government funding for health care As well as unused budgets from last year being filled up with orders now.
In addition, we also saw a lower cash out from incentives due to the fact that last year's We were lower in target achievement due to the pandemic. This high cash generation comes in at the right time since we had a large bill to settle in As you know, we closed the Werne transaction on April 15. And shortly before, We completed the financing with the 2nd and last equity raise end of March. With this last step, we achieved a very solid financing mix of around 65% debt and 35% equity for the transaction. The debt portion was financed with Term loans by Siemens AG at arm's length with very favorable market rates in March.
Shortly before this, Siemens AG Raised debt on the capital markets with the same maturity profile. The equity portion of 35% was within the range of Up to 50 of the total financing and most importantly enabled us to achieve an optimal financing mix For the company going forward, this brings me directly to our leverage post closing. Our net debt as of March 31 is from our today's standpoint understated because the proceeds from the equity raise in March Already sit on our balance sheet, while obviously the bill for the transaction was settled on the day of closing on April 15. Therefore, we calculated a pro form a net debt and leverage, which approximates our balance sheet assuming We would have closed the transaction on March 31. In this pro form a scenario, our net debt would be around €14,400,000,000 Adding the net debt respectively, net cash position of both companies.
On a pro form a EBITDA, Where we added the EBITDA of the last 12 months of both companies, we would be at a leverage of about 4.2 times net debt over EBITDA as of March 31. This leverage of 4.2 Represents what we communicated as an optimal finance mix for the company. On the one side, We made use of our healthy balance sheet by taking on debt at favorable market rates. And on the other hand, we raised The right amount of equity to end up with a leverage slightly above 4 at the top end of solid investment grade like territory. From there, we will now further delever with the strong cash generation of the combined company in the coming years.
Let me now share some details on the transaction. Bear in mind that it was only 2 weeks ago that we closed the transaction. So the analysis is still at an early stage and figures are based on our first estimates. But let me start with something that is already 100% clear. Varian will be reported as a new segment and will thereby Fully transparent to the markets.
To make sure that we can provide the transparency with correct books and records, the teams are working hard To harmonize accounting methods for our 1st joint disclosure in Q3. Due to the harmonization Being still work in progress, our estimates contain a certain degree of uncertainty due to differences in accounting methods, e. G. In revenue recognition. With Varian consolidated, we consequently incorporate Varian into our outlook for this fiscal year.
More on this later in the outlook section. Any views beyond 2021, you would refer to our planned Capital Market Day in autumn, where we intend to give you an update of the combined company also on the longer term prospects. With a transaction of that size, we will also incur sizable transaction related costs and PPEA effects. For second half, we expect costs in the range between €200,000,000 €300,000,000 e. G.
For transaction and integration related costs as well as for transaction related costs in financial income. These costs will be eliminated for our adjusted EBIT and adjusted EPS figures. Within these costs, we A negative impact on the financial income net from the valuation of the aforementioned deal contingent forward for the Verint financing As the U. S. Dollar euro relationship changed again until the closing date.
We saw the effect from this forward already negatively impacting Q1, then reversing in Q2. The valuation has been finalized with So we expect in Q3 negative impact of €100,000,000 in financial net income. The total PPA effects are currently estimated to be between $500,000,000 and $700,000,000 Whereas PPA effects are obviously higher at the beginning and becoming lesser over time. Regarding the tax effects, we do not expect material effects on the tax rate for this fiscal year. Regarding the financing expenses, We entered into several term loans amounting to a US10 $1,000,000,000 total with Siemens AG.
We then Did a debt restructuring and converted the U. S. Dollar loans into synthetic euro denominated loans benefiting From the lower interest rate in the euro zone. By doing that we achieved an average interest rate of around 0.3% per annum. Therefore, we expect around €25,000,000 to €30,000,000 of interest expenses per annum in the coming fiscal years for the Verint debt financing.
Let us now have a closer look on what to expect in the remaining fiscal year 2021. We raised our outlook again compared to our previous outlook from Q1 for 3 main reasons. 1st, Better than expected developments in our operational business. 2nd, an updated assumption on the rapid antigen test sale. And third, we incorporate Varian into our outlook.
We raised the outlook For comparable growth to 14% to 17% growth based on a raised growth guidance in all three segments. We expect imaging to grow clearly above 8% on the back of a strong order book and expected recovery in the U. S. Market. Diagnostic is now expected to grow above 25% due to the updated Rapid antigen test sales assumption of around €750,000,000 sales in fiscal 2021.
Advanced Therapies It's expected to grow above 7%, also based on a healthy order book and the recovery in the U. S. Market. For Diagnostic, we have also raised the guidance on profitability. We now expect Diagnostic margins to exceed 10% in fiscal year 2021.
Consequently, group margins are expected to improve by up to 200 basis points in fiscal year 2021. In the previous outlook, we expect an improvement of over 100 basis points. All other assumptions on margins and tax remain unchanged. Now let us have a closer look at the raise of the EPS outlook. The outlook for adjusted earnings per share was raised to €1.90 to €2.05 in fiscal year 2021.
As you know, the midpoint of our previous guidance was at about €1.73 adjusted EPS. We when you now look at the increased growth rate By 5 to 6 percentage points, including the high antigen assumption, we would expect around $0.16 to 0.18 of EPS accretion from these higher operations to around a midpoint of €1.90 Adjusted EPS without Varian on the original share count of 1,000,000,000,72,000,000 shares. Just to be super clear on this, the €1.90 are roughly calculated the midpoint expectation So now we incorporate Varian into the calculation. Going forward, we expect a revenue contribution from Varian In the second half between €1,200,000,000 and €1,400,000,000 Bear in mind that this will not Show in the comparable growth rate for fiscal year 2021 since portfolio effects are excluded for 12 months after closing. On the earnings side, we expect an adjusted EBIT margin at varying between 12% 14% in the second half of the year.
Let me remind you that the contribution is incorporated from the day of closing onwards. So we cannot account for revenues and profits in the 1st 2 weeks of April. Let me also remind you, as stated earlier, These are our first estimates and they contain a degree of uncertainty due to the harmonization of accounting methods. We have, for example, identified a difference in the rules for revenue recognition. At Healthineers, We recognize revenue at a later stage than Verint has been doing until now.
This is also one of the reasons why we choose to guide The adjusted financial income for the group is expected to be negative with €50,000,000 to €70,000,000 financial expenses in fiscal 2021. The slight increase versus previous guidance results from the interest Expenses for the debt financing for Varian of around €15,000,000 to €13,000,000 per annum, respectively €12,000,000 to €15,000,000 for a half year. Other transaction related financing costs are taken out of our adjusted EPS number accordingly. Including the debt financing, we expect Varian to be accretive to our adjusted earnings per share this fiscal year between $0.09 and $0.12 Before we now incorporate the varying EPS Into our outlook, let us briefly look at the share counts. Previously, we expected an average share count of 1,000,000,000,72,000,000 shares for fiscal year 2021.
After the capital raise end of March, We now have a total new share count of 1,000,000,000,128,000,000 which will be fully effective for fiscal year 2022. In fiscal year 2021, we still see an average share count of about 1,000,000,000 For the EPS calculation, yet higher than the previous outlook. Hence, we see a dilution of around 2 0.5 percent or around $0.05 from the higher average share count versus the previous outlook, which we need to consider When adding the Varian EPS accretion, the EPS accretion of Varian including the share count dilution would then Roughly be between 0.04 dollars to 0.07 dollars in fiscal 2021. Adding this to the rough Adjusted EPS calculation without varying of around €1.90 this would bring us to a midpoint range between €1.94 and €1.97 This rough calculation gets us gets in the ballpark of our New outlook of €1.90 to €205 adjusted earnings per share. Knowing that this was a lot of I hope it was still helpful in terms of understanding the bits and pieces that went into our outlook.
Before we go to the Q and A, let me Share our current view on Q3. In imaging, we expect the strong momentum to continue both in top line and in margins. In Diagnostic, we already highlighted the expected opportunities from rapid antigen test sales on top of a solid core business. And for Advanced Therapies, we expect a clear rebound in Q3, both in top line and in margins. And with This I close the presentation and hand it back to you, Marc.
Yes. So Patrick Wood from Bank of America will be the first one to ask his question
Perfect. Thank you very much. I'll tell you what, I'll be kind and I'll keep it just the one so people have lots of time. The order book number was considerably larger than I think at least I was expecting going into the quarter, the 23%. And obviously, in imaging, you start to analyze a slightly easier Period of time for Q3 and Q4, I guess, in the context of that order book and in the softening comps within that part of the business, Why wouldn't we expect growth to be and appreciate you've just raised the guidance, but more than the sort of greater than 8%, that would imply there's something Either rolling off or something that I'm missing.
Any color around that and the order book would be great. Thanks, guys.
Patrick, thanks for the question. And if you what I said is I said clearly above 8%, now. And I gave you some guidance that it might be more clearly more than 8. Secondly, If you look at prior year's numbers, yeah, and you don't look by quarter, you see that we were Still positive last year with regard to growth rates in imaging on a full year basis. Yeah.
Now we guide for a number clearly above 8. Yeah. That means if you add those two numbers together, you might end up with a double digit number. Divide this by 2 and you see that we are growing more than 5% per annum. What is the original guidance we have for imaging when we Announce our upgrading phase.
So I think this is a very, very solid development, yeah, and we feel very, very comfortable This is our development in imaging and we look at market share data in particular also from the United
Thank you, gentlemen. We will start today's question and answer session where we would like to ask you to limit yourself to 2 questions.
Okay. That did the trick. We're a bit irritated for a second. So Since Falko actually figured it out, you should be the next one to ask the question. So, Falko, the floor is yours.
Hello, hello. Can you hear me?
Yes, we hear you.
Perfect. Thank you. Good morning, everyone. Two questions, please. Firstly, on the COVID-nineteen anti gene tests and specifically on the margin, Margin for the expense, if I remember correctly, that level should have been around 50% in the first quarter.
Could you share some color on how it looked in the second quarter now? And what your expectation is for the next few quarters? And then my second question is on the underlying Diagnostics business. Thank you for sharing the color You just gave us, but can you give a little bit more detail on how you're progressing with the Atellica rollout On how the routine diagnostic testing levels are coming back and what we can expect here over the next two quarters this year? Thank you.
Yeah. Thanks, Feikel, for your question. On the COVID-nineteen antigen testing, Herman, what we clearly Highlighted last time was that we said, this test is a source test, that the contribution margin Of those kind of tests is about 50% of our, more or less of our self developed tests. Obviously, it's also depending very much on the price development of those tests. And this is, I think these are tests which are available by a lot of competitors.
So we expect therefore also With maybe slowing demand and increasing supply and Accelerated price erosion over time, in particular in the second half of our fiscal year also towards The Q4. In Q2, we Saw a price level around the €4 per test, which was a bit lower than in Q1. And with this, I give it back to Bernd.
For the diagnostics business ex antigen, yes. So we are making very good progress in our efforts to further mature The Atellica platform, we are very well on track with topics like the installation of Yeah. With further streamlining the processes, reducing costs, reducing one time efforts in the installations And also ongoing support costs. We are very happy with the development In the United States, which was often a topic in our calls, where we where the team is doing an excellent job, we saw A slight in the pandemic, a slight, let's say, reduction of the when it comes to Atenica Installation simply because of the pandemic or the changes in priorities when it comes to What our customers are focusing on, but that is more in the 10%, 20% range. But when it comes to the revenue development, we will now enter in Q3 a period of Extremely easy comps, yes.
Q3 last year was the most problematic one for diagnostics, yes, simply because of The reduction in elective procedures, so that we will now see in Q3 and Q4 Good growth driven by this year. But in the end, we will then get into a growth trajectory In the lowtomidsingledigits, yes, as the normal as
Okay. So, Michael Jungling from Morgan Stanley should be next in line. And just a reminder for the others, it's
Great. Can you hear me? Yes. Excellent. Thank you and good morning to all of you.
And I have two questions. Firstly, when it comes to the synergies with Varian, am I misinterpreting a more Positive tone on what you are now seeing when it comes to Varian synergies, perhaps also on the cost because previously I think of the More than $300,000,000 I think originally there was $200,000,000 of revenue synergies and $100,000,000 of costs in your slide deck today Refers to a €150,000,000 of cost synergies. Is that a correct interpretation Of the tone and the messaging that you are trying to send today. And then question number 2 is when it comes to the revenue synergies, how quickly can you change some of these distributor contracts, etcetera, that are part of the Revenue synergy calculation, can you talk about how quickly they can be adjusted and in what regions You will intend to do these first. Thank you.
Michael, I will start And then hand over to Bernd. On the synergy side, I mean, first of all, it's always important to remind That this transaction is definitely not a consolidation game. Therefore, we highlighted Very early in the process, yeah, the great opportunity on the synergy side from revenue, yeah? And this On the other hand, and therefore we were also maybe a bit cautious with regard to cost synergies. By the way, we always guided for more than €300 EBIT synergies from cost and revenue.
This is not new. That is exactly what we did say in early August. And now we as we Obviously worked our way together with Varian through the synergy profile. We have now much, I would say, Much more grip around the synergies, in particular on the cost side. And therefore, we felt comfortable To guide now for a concrete number on the cost side with 150,000,000 at least.
So that is not necessarily A super clear signal on higher synergies as we did not as we were not super clear on how high they will ultimately be 2025. But it is a clear signal that we have gotten our arms around it, Yes. Together with Varian and have a much more concrete number now on the cost synergies already.
Yes, Michael, regarding the going direct, the main geographies are the growth Geographies in Latin America, Eastern Europe and Asia Below the countries of the size of India and China, of course, yes, we are very in goes direct A long time already and this is very successful. Typically, this is a process which can take 1 to 2 years, yes, because we want to do this in an amicable way, Yes. And also make sure that we don't break customer relationships and so on. So it's not happening immediately, But it will happen and the plans are in place.
Okay. Maybe I can quickly follow-up on these revenue synergies with these growth countries. Can you talk about whether you will have to incur some significant financial expenditure as perhaps you Do some settlements or early settlements with the distributors that Varian has used in the past And the willingness for those parties to now enter into transactions, perhaps bring those forward.
Michael, as you can imagine, this is a case by case there is a case by case assessment necessary And they will not be there's not a clear pattern. Yeah. But obviously, if you Start buying something out of an existing contract. You need to do something on the settlement side for this. We have not fully figured out what it means and What the exact, I would say, timelines per country and per case will be.
And as you can imagine, this is also a topic which is heavily antitrust related. Yeah. Therefore, we could not do everything already. Yeah. But I think we will
Thanks, Michael. David Adling will be next in line JPMorgan. So please, David, floors also for your two questions.
Thank you. Good morning, guys. So firstly, yes, just on the on bearing again, just picking up on the 12% to 14% margin target for The second half, that's a touch below. I think the 15% they've done historically. Just any commentary in terms of any particular headwinds or whether that's just A timing thing in terms of particular quarters.
And then secondly, I'm sorry, I may have missed it, but did you give an order growth number for Verint in the quarter as well? Thank you.
Yes. Dave, thanks for the questions. What I said on the order numbers for Verint, I said we clearly see Significant sequential improvement, yes, I mean, we had double digit declines in the last year on the in Q3, Q4. And now we're already promising Q1 and now we are at mid single digit growth rates in radiation oncology on the water side. So clear uptick.
And on your second question with regard to or first question with regard to the margin Profile for the second half. As we guided for, we saw underlying about 15% profitability. But I also hinted towards these accounting harmonization topics. What do I mean by this? Or what have we Found out, so to say, it's not a big topic, it's just a temporary topic, but we have a different policy on revenue recognition.
Siemens Healthineers recognizes revenues later than Verint did so far. We recognize revenue normally when equipment has arrived at the customer side. Varian does recognize and has the contracts laid out in that way, normally ex factory. This can be several weeks The difference depending on where the equipment has to land at the end of the day. And as you know, the fiscal year end It's end of September as it was for Varian beforehand.
September is the strongest month of the year. Yeah. Therefore, there is a certain whatever risk. Yeah. It's not a risk Because it will end up in our books anyway, maybe in a different quarter, that there is a risk that some of the revenue will shift with full contribution margin Into the next quarter, yeah.
And as September is more pronounced than all the other months, This might be a bigger effect on Q4, but it also depends on how quickly we can adjust, So say the shipment behaviors and things like this. Therefore, there is significant uncertainty to this. But again, Not a valuation related uncertainty, just a temporary, so to say, recognition topic in which quarter we will show the revenue and the Related contribution margin, yeah. Therefore, those numbers are still, given This is significant level of uncertainty, but we felt that we should give you some indication of what we currently see. And please have in mind, We can openly talk about this since 2 weeks.
Yeah. So this is obviously mind forward looking statements. This is a topic you cannot talk before you don't have The closing in place, yes. And yes, and so far, yes, this topic, yes.
Thank you.
You're welcome. Thanks, David. So Scott Bardo from Berenberg would be the next in line. Scott, please, your two questions.
Thanks. Thank you, Mark, and good morning. So clearly, COVID-nineteen antigen tests I have presented a meaningful surprise to your initial expectation this year. I wonder if you could please comment on the demand you may see For serology testing, I know you put a lot of infrastructure in place here and have a good test. I wonder are you starting to see some The second question just follows on from David, please, just around the harmonization and thank you, Joachim, for Your sort of timing related comments there, but just putting those into some sort of context, I think that as we look into the next In fiscal 2022, we look for some sort of starting margin for Varian.
And I think Varian Guided prior to COVID for around 17.5% to 18.5% margins 2020 prior to COVID. Can you give us some flavor at least whether this is a reasonable Starting point, if you like, to incorporate in our modeling.
Thank you.
Yes, because I'll take the first one on serology. I mean, yes, we have a very, very good antibody test. I mean, the investment was in developing the test. I mean, you mentioned infrastructure. There's Not an infrastructure investment, yes, I mean, the test run on our established Atenica Systems plus also the legacy systems.
I mean on serology, it's Currently not a big business, yeah. There's some interest. And in the end, it will be The question will be is will after the vaccination, the topic of testing the immune status Become a clinical reality, which is so to say the bullish case. The more bearish case is to say, well, you know, in other infectious diseases, this is also not happening, yes, so vaccination is just refreshed Without doing a companion diagnostics on it, yes. So currently, I look at it as a potential upside, But not one I would bet on.
Scott, thanks for your question. And on the Starting margin for next fiscal year. I tried to say that we want to talk about 2022 around November, but I can give you At least, I would say some color on it. And the most recent disclosure of Varian for the future was The proxy filing they gave, this was, by the way, the number they showed us during the process. Yeah, that's how the procedure is.
And the proxy filing for 2022 suggest 16.8%. That is obviously without synergies. On the other hand, you know that the synergies we will see synergies kicking in from cost Rather quickly, on the other hand, depending on the way how we start working on the revenue synergies, which in particular, entail also R and D and some market development expenses. Yes, this net synergy Might be a bit lower than what the cost synergies alone would suggest. Therefore, this is something we need to work out.
I mean, we obviously did not have Yet a deep dive with Varian on their planning. Yeah. This is starting in the coming months. Yeah. And I think it's a bit too early, but I would say the proxy finding is the best information and the most recent one you can look at.
That's helpful. Thank you.
Thanks, Scott. So Veronika Dubajova from Goldman Sachs will be the next line. Veronika, floor is yours.
Excellent. Thanks, guys. Good morning and thank you for taking my questions. I have 2, please. My first one is on the imaging order growth, a pretty outstanding performance in particular versus your competitors.
And I'm just curious, Bernd, if you can talk to a little bit more color, kind of what's driving that order growth? You mentioned U. S. Or The Americas seeing strong performance, but if you can give some regional color, divisional color. And then the last couple of quarters, you've seen a fairly healthy tailwind CT, maybe if you can just break out the contribution from that to the order growth number, that would be super helpful just so we can think about The revenue composition from that order growth and how that translates into our models.
And then my second question is just on the broader sort of Portfolio, obviously, you're just digesting a very significant acquisition, but there's been some rumors in the press Suggesting that you might be considering a divestiture of a smaller less core business. And so I'm just curious if you can comment on that and in general your appetite to
Yes. Thank you, Veronika. So on the imaging side, some more color. I mean, let's start with a more regional view. I mean, what we see is a very Strong European business which is driven, I mean, by healthy underlying demand on the one hand, yes, but then also certainly Some pandemic readiness investments still And also the government programs to a bit of stimulus in it.
In China, which is basically the most important market to look at when it comes to APAC, There is a super strong underlying growth Plus, a special demand on the CT side here for establishing the so called fever clinic, Yes, which is a government triggered program, which is driving the special Increase on the CT side. This is now slowly going down again, yes. So this is Really more of a one off character. And we look and we see in the United States now The effect of, call it, unfreezing frozen budgets, yes, which Has created a situation, yes, where we have now already very good order growth, while revenue It's not yet following, yes, because of the timing of the orders. We saw good market share development again, yes, in the United States In the order book in this quarter.
So when you take it from a, let's say, from an overall timing of Orders and revenue point of view, geographically, we might see or we will see Some normalization over time in Europe and the normalization to the normal high growth rates in China, But we will see the U. S. Coming back, yes? I mean, I think what is really important to look at To be conscious of when you look at the strong numbers we presented in this quarter that The Americas contributed minus 1% to the top line, yes? So And when this super important market comes back here, it will compensate definitely a A portion of a normalization in Europe and in Asia.
And the same you can also see in the modality mix, there's currently a very high CT Mix in it, yes. But at the expense of And so to say, while MR and Mi Molecular Imaging Pet CTs and so on are, since they are not really pandemic related, are a little bit Down priority size and so we will see a similar normalization of the mix on the modality side, yes, It also implies there is no real mix effect, an adverse mix effect to be expected when it comes to margins, Yes, from a geographical point of view, but also from a modality mix point of view. Your portfolio question, I mean, we are of course, it is you know how we Build our portfolio in a way of being on the one hand super strong in the Focus in the mainly focus on certain businesses on the 4 verticals. But as important, It's about using the scale, yes, so that we can use our sales force And Gold can do key account management together to team up that we can use service And that we can also be meaningful when it comes to digitalization, but also when it comes to the value partnerships, yes.
This is How we look at the portfolio, and this is also why certain businesses often meet and if they don't 100% fit into this Type of story, why we choose to find optimized setups for them. And this is what has triggered also The rumors in the press, yes? But in the end, when you look at the strategy, it is about building this portfolio of leading businesses, which Leading on the one hand when compared standalone, but on the other hand, which benefit from the big trends
Okay. Thanks, Veronika.
Thank you.
So, Ed Riddle Day from Redburn would be, the second but last in the line. So if you want to register, there may be still a chance. Thanks. Ed, it was yours.
Good morning and thank you very much and congratulations On closing the deal. And Jochen, thanks for the very clear guidance this morning. Just on the PPA adjustment, just to be clear, that will be excluded from adjusted disclosures 4 related to variant. That would be my first question. And also on a just follow-up on advanced therapies.
Can you talk a bit on core Indus and the additional investment you're making there? And how we should
Okay. Ed, on your first question, this is a quick one. Yes, we exclude this from the PPA related to Varian is not part of the adjusted EPS guidance. As already, I think, clearly laid out in the annual report According to our definition of adjusted EPS, yes, it is not part of it. I just gave the numbers to give you a glimpse on what the reported numbers will look I will be impacted by him.
That's great, yes.
Okay. On I kick it off on Advanced Therapies. Hello, I mean, we had that during our time of being a public listed company, several times that we saw some lumpy development in advanced therapies, but on a yearly basis, yes, it's a very solid Business, yes. We expect as I said, we expect more than 7% growth, yes. And We stick to our initial guidance that we will stick with industry leading margins in that business and therefore expect A significant improvement in margin already in Q3 and Q4 again.
So therefore, nothing to worry about. On the investment side, we did a significant investment into that business with Corindus. As you know Corindus is an investment In an adjacent market, endovascular robotics, a market which needs to be developed, A market where we are relatively early stage, we are still on a heavy R and D roadmap working. Therefore, we are Constantly investing into that roadmap on an increasing basis as planned Due to the fact that the pandemic hit the planet, the development of the market and the coverage of The additional cost for R and D and market development is not to the extent yet Covered by revenue with regard to Corindus. And I think that is a bit the topic why we see even year over year An increasing burden, so to say, on the profitability side from Corindus on the advanced therapies.
It is currently a bit difficult to predict, yeah, how quickly we will get out of this, Yes. Depending on what how quickly we will see revenue starting covering the additional costs on the R and D And selling side, but we see a promising funnel, you know, but, it is still a business which is new, New to the planet, endovascular robotics is not an existing procedure. Therefore, it's also a bit more difficult to predict Then I would say market development in CT or MRI. But we are very, very Satisfied with what we did here in this regard with regard to the acquisition. Unfortunately, we were, if you want to say that in hindsight, we were a bit unlucky with the pandemic, I think this is, relatively speaking, a minor topic, yeah, considering a pandemic of this size, yeah.
Can you speak to the installed base now or?
On Corindus? Yes. It's still a limited number, yes? I don't have the numbers even exactly with me, but we think we talk about it smaller triple digit number of systems in the field.
Okay. So last question would be no, not last question, second but last again, would be Daniel Vandorff from Commerzbank.
Yes. Thanks for taking my questions. One is On the incentive provisions, what is the normal burdening level we should expect in the fiscal year, maybe to give a A bit more color here. And what operational performances would really make these incentive provisions really noticeable For us on the analyst side, any results? That would be my first question.
And then maybe a broader question on the integration of Varian. Maybe you can lay out the thought to report Varian as a separate segment and not combining it With imaging, for example, as a separate new system or segment, sorry, segment. Thank you.
Yes, maybe I start, Naya. I mean, first of all, we want to, on the Varian side, on the one hand, Ensure transparency, which is very important, but on the other hand, when it comes to the business, It is it deserves its own logic. This is very much about a customer group. I mean, in the core, core business, radiation therapy, which is Which deserves its own go to market, its own focus on the R and D side, Like, imaging does when it comes to radiology, and typically the combination is then when it comes to building the digital bridge between the 2 when it comes to building imaging components Into the therapy delivery or combining the offering in when it comes to Larger transactions which are then typically happening on the institutional level and not on the specific level, yes. So this is why Varian as much as advanced therapies, which is catering towards cardiology, neurology, and It deserves its own business logic.
One comment on the incentives before Jochen goes into We have to see, I mean, last year, I mean, this is, of course, very much about how are we doing compared to the original Targets, yes, in a year, yes? So it's not to be seen in historical numbers. It is what is The target, I mean, last year, we have been in the and the team, so to say, has been in the unfortunate And that the target have been set pre pandemic, yes. And you know that typically we want to be in the upgrading phase. We said we want to Grow by more than 5%, and we ended up with 0 revenue growth, yes, which in the last fiscal year Had an impact on the incentives, yes, while in this year, it is simply the opposite, yes.
So it is an extraordinarily good year following an extraordinarily bad year when comes to deviation from target, yes, because I mean this year the team is really doing a super great job in using Every opportunity from the pandemic and helping, the healthcare systems, yes. So this is the reason why, yes, Why there is also a big swing factor in the P and L in this cost item over time And it will certainly normalize in the years to come, yes.
Daniel, I think Bernd's explanation was perfect. And I just want I mean, I just can give you maybe normally, We would be in a payout situation. I would say normally you are between 80% 120%. Last year we were particularly low. And remember this year, early November, when we gave guidance, when the targets were set, we anticipate, for example, On antigen testing, dollars 100,000,000 worth of revenue.
Now it's $750,000,000 This alone makes a big difference. But on the other hand, we also So then a relatively, I would say, unexpected performance on the CT side, x-ray side. So it's not only antigen, but also Therefore, this year, we are at a particular high payout level because on the target achievements. And as you know, in theory, it goes from 0 to 200%. And over the 2 years now, we are going more to the extremes in both years.
And next year, let's assume next year will be more normal year and we go in the 100% arena. Therefore, it will suggest some Upside year over year next year and then we hopefully back in normal territory.
Okay. Thank you. That's helpful.
Thanks, Daniel. Last questions would be coming from William Mackie from Kepler Cheuvreux. So William, Ask your questions, please.
Good morning, Bernd, Yorkie and Mark. Thank you for the time. Just one question I wanted to come to with regard to logistics, supply chains And the integrity of your supply chains at this time and also, I mean, immediate disruptions. Could you just talk a little bit about Where the risks in the supply chains are, I know you have a relatively localized manufacturing and a relatively small volumes in terms of Unit outputs, but are you seeing any stress or risks relating to components in semiconductors? And particularly with regard to end markets, Is there any specific risk relating to India which may cause disruption in the 3rd Q4?
Thank you.
Yes. Thank you, Will. Now I need to say 2 things. On the one hand, We have it under control. And we I want to when I think about the people in the organization who potentially listen to the call, don't want to make it sound too easy because a lot of work is done to ensure the supply chain Integrity, when you look at what our challenges now and then, you know, there is really the topic of availability In the electronics market, yes, I mean, but which we have under control, yes, and then there are escalations, But this is handled very diligently also with safety stocks and so on.
Yes, so This is not a topic which you need to worry about. 2nd challenges and this It's when it comes to, you know, what we call factory installation, you know, this is cross border teams, you know, where people Do the installation of systems and need to cross borders, which is not so easy now and then when it comes to The pandemic rules here where we are in constant work of, you know, making sure that we have The support of governments and so on to do this and we managed this for the last 12 months very successfully and I don't see this Changing, yes, but it requires a lot of attention as much as it requires attention And then to make really sure, I mean, that, flights with antigen tests Onboards can really come from or can really land in France and so on and so on, yes. So a lot of topics Our managed and sometimes even micromanaged as we speak, yes, and the team is doing a great job. When it comes to India, Certainly a tragic development. We are helping as much as possible.
India is for us, from a supply chain point of view, It is not a not so much a hardware topic here. It is the hub when it comes to software development. Yes. So we will we have more than 2,000 highly skilled Software engineers and digital experts in India, they are in very good hands, yes, And the transition to home office has also very successfully worked there. So No risk to the supply chain coming from India.
Thank you very much.
This brings us to the end of Today's call, thanks for all your questions. Thanks for taking part. And as usual, Tim and myself will always be available for any follow ups. 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 corporate.siemons healthineers.com /investorrelations.