Uvance and modernization drive service growth

In Q1 of FY2027, Service Solutions generated revenue of ¥548.9 billion, up 6.7% year on year, and adjusted operating profit of ¥62.8 billion, up 31.3%. Given that consolidated adjusted operating profit was ¥54.9 billion, Service Solutions was the main driver of profit growth. In the next results release, it will be necessary to assess not only the headline revenue growth rate, but also how much of the revenue increase translated into adjusted operating profit growth and whether the speed of conversion from orders to revenue has been maintained.

Uvance, the core of the business portfolio transformation, generated revenue of ¥709.3 billion in FY2025, up 47% from ¥482.8 billion in FY2024. In Q1 of FY2026, revenue was ¥192.2 billion, up 31% year on year, while orders were ¥193.3 billion, up 47%, indicating that growth momentum has continued at least for now. Uvance’s share of Service Solutions had previously expanded to 29% as of Q1 of FY2026. In the next results release, key points will be whether this share rises into the 30% range and whether the increase is accompanied by a decline in margins.

Modernization orders were ¥91.6 billion in Q1, up 23% year on year, while revenue was ¥54.4 billion, up 5.4%. As order growth is outpacing revenue growth, the timing of project launches and delivery capacity could affect revenue recognition in H1. Modernization revenue was ¥249.7 billion in FY2025, below the initial target of ¥330.0 billion, according to the company, while it expanded to ¥392.1 billion in FY2026. In FY2027-H1, we want to see whether revenue returns to double-digit year-on-year growth and whether the gap between orders and revenue narrows.

As of Q1, the annual coverage ratio for domestic Service Solutions revenue was 68%, with 32% still to be acquired. This is useful for assessing the scope for achieving the full-year plan, but details of progress against the consolidated full-year revenue forecast and the order backlog including overseas operations have not been disclosed. In the next results release, we want to assess the Uvance and modernization order backlogs, the timing of revenue recognition, domestic and overseas growth rates, and Service Solutions margins together, to distinguish growth driven by project pull-ins from growth driven by sustained demand.