Abhijit Bhattacharya: Yeah. Hi David a couple of points. So regarding the guidance we said the 100 basis points will be below the line this year for the whole remediation including the profit disgorgement, details of how much is for what we will come with only once we have the signed court order. To your second part of the question, yeah, of course we delivered like we said the €1 billion order of productivity. But of course there was also inflation in cost wages et cetera et cetera. So the net is what you see back in the P&L. So, that’s — you will see that also in our bridge.
David Adlington: Okay. Thanks for the details. Just to follow-up on consent decree, should we expect some below-the-line items in 2025 and beyond?
Abhijit Bhattacharya: Sorry see what?
David Adlington: On the consent decree, …
Abhijit Bhattacharya: Yeah.
David Adlington: …should we expect some one-off — some one-off items in 2025 and beyond?
Abhijit Bhattacharya: Yes. Yes. But we will come to — we provide more clarity later, as we get more information. And the other thing may be important to understand is, the 100bps that we talked about and the additional cost that’s all included in the cash outlook for 2024 and 2025. So we are not changing the cash outlook for 2024 or 2025, so this is all included in that.
David Adlington: That’s helpful. Thank you.
Operator: Thank you. The next question comes from the line of Richard Felton from Goldman Sachs. Please go ahead.
Richard Felton: Thanks. Good morning. Two questions from me please. First one is on D&T margin in Q4. So can you provide maybe a little bit of color around the mix impact in the quarter? I know strong growth in Ultrasound had been a tailwind through the year which I don’t think was the case in Q4. But can you maybe help us quantify that impact please? Then the other driver that you called out in D&T margin for Q4 was the phasing of production and costs. Can you maybe explain what the phasing actually was related to and quantify the impact? Just trying to get a sense of the underlying margin trajectory for that part of the business. Then my second question is a little bit more of a medium-term one on Sleep & Respiratory Care margins.
Look now that you have a little bit more visibility on the consent decree and I see more detail on what remediation activities are going to look like what level of profitability do you think is achievable for that part of business in the medium-term? Thank you.
Abhijit Bhattacharya: Yes. Hi. Richard let me take the first one on the Q4 impact on Diagnostic Imaging. So a couple of things. One is the mix is not just on Ultrasound, but it was a combined mix of a few things. So we had not only the mix of lower Ultrasound, because last year we had, let’s say, the backlog that we cleared, but also the geographic mix. So we sold more this year outside the U.S. and China. So that was another impact. And then also the mix between equipment and services was also slightly adverse compared to the year ago, because we sold — we had good sales in MR, et cetera, so there’s equipment sales, which comes at a slightly lower margin. So that was the mix impact. Now regarding the phasing of production that was — we have also brought down inventory big time.
So as you do that you taper off production, so that we start next year with healthy inventory, but not too high and that results in a slightly lower coverage of our factory costs. So that impacted the margin in the fourth quarter. And then there was some phasing of costs between — through the year and more significantly in 2022 the annual incentive payments were very low because — or nonexistent because of the poor performance. That of course comes as a cost this year. So that’s the difference between the two years. So those are the three big buckets that impacted the margin in the fourth quarter. Your second question on SRC outlook. Look for sure we will get back to profitability, but we are not giving separate guidance on every business.
I think you should see a significant step-up in the overall Connected Care profitability that we have given in our guidance and as part of that is also the improvement that we will drive in Sleep & Respiratory Care.
Richard Felton: Thank you.
Operator: Thank you. The next question comes from the line of Veronika Dubajova from Citi. Please go ahead.
Veronika Dubajova: Hi. Good morning. Roy, Abhijit, Leandro. And thank you so much for taking my question. I will keep it to two please. One would just love to get your take on China and your current expectations as far as your installations in China are concerned, and what’s embedded in the guidance for D&T both from a sales and a profitability perspective? Obviously, China is a very important and highly margin accretive market. So I’m just curious how you’re thinking about the anticorruption activity and how that plays out in terms of the China revenue impact this year. Your commentary in order has been very clear. I’m really just curious about the P&L and what you’ve kind of factored it in there. And then I’ll have a follow-up after that, if that’s okay, but let’s get this out of the way first.
Roy Jakobs: Sure. Maybe — thank you, Veronika for the question on China. I think China has been always an important part of our business also will remain an important part of our business. I think it’s fair to say that we know that China is going through a difficult phase, macroeconomically from a growth perspective where the growth is lower with around 3% to 5% for the country, as they have normally been kind of customized to that has a consumer impact, but it also has an impact in Health Care. And there in particular on top we have seen of course the anticorruption measures. Now what we know is that on the anticorruption, they’re working through a country program to actually go state by state. So what we have seen is that they have partly finished that program or at least they made a lot of progress on that in 2023, but we do expect that to continue into 2024.
And therefore, actually, we are seeing that China is back-end loaded for 2024. We see gradual improvement in China. It will continue to contribute to our total plan and also embedded in the guidance of 3% to 5%. I think what is important from an order perspective, it’s only 5% of our global sales, mainly in D&T. And also that on the consumer side, we have seen them coming back to growth, but we expect that to surely but slowly come further up. So China will strengthen throughout the year is our expectation. The government actions are not finished and they will still need to complete that program.
Veronika Dubajova: Okay. That’s helpful. And Roy, would you expect China for D&T to be flat to grow or to be down for the full year?
