It's time. So we would now like to start the consolidated financial results briefing of Hitachi Limited for the 1st quarter ended June 2020. Thank you very much for taking time out of your busy schedule to attend this meeting. We are holding this meeting in web conference format to prevent the spread of COVID-nineteen. The materials are posted on Hitachi Limited IR website and news release website, so please refer to them.
Now let me introduce the speakers. Yoshihiko Kawamura, Senior Vice President and Executive Officer, CFO Tomomi Kato, General Manager of Financial Strategy Division Yasuo Hirano, Executive General Manager of Corporate Brand and Communications Division. In addition to the 3, today, we also have Mr. Claudio Fakin, CEO of Hitachi ABD Power Grids Mr. Kalamura will explain the overview of the financial results.
Please give us a moment to change the screen.
Mr. Kawamura, the floor is yours. My name is Kawamura, the CFO of Hitachi Limited. Thank you very much for your attendance. We have 45 minutes for this event.
In about 15 minutes, I would like to provide an overview and leave as much time as possible for questions and answers with you. At the outset, COVID-nineteen is impacting us across the board. And I would like to express my deep respect to the medical care, health care providers. Because of their effort, we are enabled with our business. We're able to conduct our business.
I would like to express my sincere gratitude to them upfront. Now let me start the presentation. Please look at the first page. On a qualitative basis, we have described the status of our quarter 1 business. Before I go into the numbers, I would like to describe some of these points.
At the end of May, when we discussed the impact of COVID-nineteen, we have formulated some assumptions. And those assumptions that we formulated have remained unchanged. In the first half of this fiscal year, there will be quite a bit of impact from COVID-nineteen. The impact, 70% to 80% of the impact will manifest in the first half. And into the second half, the impact will start to fade, but those assumptions have not been changed.
And we will see sector by sector charts, but 5 sectors remain quite firm so far. On the other hand, subsidiaries are being heavily impacted by COVID-nineteen. They're not necessarily doing well. So 5 sectors, as far as they are concerned, IT segment business is doing very well. IT accounts for 50% of income.
And in terms of income, they are earning twice as much as other segments. So IT revenue and income is becoming the backstop and the leader in our overall business. And point number 3, so our understanding is that we should channel our resources to IT business. So we would like to promote and accelerate digital transformation through continued strategic investment in the expansion of Lumada business. This remains unchanged.
And we will show you some numbers. As of 1st July, Hitachi EBB progress is now part of the consolidation. We now have this joint venture company. And the performance of this company in fiscal year 2020 because of various reasons, it will show numbers in the red, but those numbers will be absorbed. Industry and Mobility have upward revisions to their forecasts.
So with their upward revisions, they will be compensating for the loss to incur Bahitachi BB progress. So overall, the numbers remain unchanged. And number 5, cash management. There could be fluctuations going forward. So on a continuous basis, we are enhancing cash flow management to secure enough liquidity inclusive of bank's commitment lines.
We have liquidity of over 1,000,000,000,000,000 secured for ourselves broadly. So those are the qualitative descriptions. Let's take a look at some of the charts. Please take a look at Page 4 for quarter 1 fiscal year 2020 results. This is for quarter 1 only.
On the left hand side, revenues and in the middle, adjusted operating income. As you can see, on the far left, Q1 last fiscal year and the middle bar is Q1 excluding COVID-nineteen impact and on the far right, Q1 with the corona impact and a similar arrangement for the middle part of the page. So inclusive of the COVID-nineteen impact, the Q1 performance is such that we had seen declines both in revenue and income. But Q1 FY 'nineteen and Q1 FY 'twenty without COVID-nineteen impact in the middle in terms of adjusted operating income, the two bars are almost at the same level. So in Q1, there has been heavy impact from COVID-nineteen.
So operating income ratio, 3.7 percent. And as you can see, 53,000,000,000. And net income attributable to Hitachi, 223,200,000,000 EBITDA,439,100,000,000 cash flow generated from operating activities, 153,700,000,000. These are as planned. Moving on to Page 5.
You can see the 5 sectors as well as this year's subsidiaries. At the very top, revenues. In 5 sectors, yen 1,269,300,000,000. List of subsidiaries, yen 224,900,000,000. And one line below, adjusted operating income for 5 sectors, it was JPY 62,900,000,000.
And listed subsidiaries were heavily hit by COVID-nineteen, so negative JPY 4,600,000,000 JPY 4,600,000,000 loss. And please look at the next line. Adjusted operating income ratio for 5 secondtors alone, 5.0 percent and listed subsidiaries because of their losses, negative 1.4%. And the quarter income, net income attributable to Hitachi stockholders, JPY225,000,000,000 for 5 sectors. This is subsidiaries negative 1,700,000,000, total 223,200,000,000.
So 5 sectors and this is subsidiaries. There is quite a bit of contrast between the 2. Moving on to the next page. So revenues and adjusted operating incomes. What's been affecting?
The factors are shown in waterfall chart. At the top is revenues. On the far left, Q1 last year and on the far right, Q1 this fiscal year. You can see the factors impacting revenues and adjusted operating income. To take a look at the revenues.
There was divestiture of Hitachi Chemical pushing the performance down. And there's foreign exchange, AMS JRA, Hy Tech, that accounted for JPY 47,500,000,000 plus. And this is before the COVID-nineteen impact, and you have to subtract the COVID-nineteen impact. On a net basis, 1,594,200,000,000. And below adjusted operating income, you can see that the factors are almost the same as those for revenues.
Excluding COVID-nineteen impact, RUB 124,000,000,000 COVID-nineteen impact, RUB65,700,000,000. So on a net basis, adjusted operating income was 58,300,000,000. Moving on to the next page. Factors affecting the 5 sectors, they are similar. So let me skip this page for now.
Please take a look at Page 8. This shows the status of cash flow and the financial position. What to pay attention to is total assets in the first chart. In the middle, there is a gray shaded part, Q1 FY 'twenty, total assets exceeded 10,000,000,000,000 yen It's been accumulating. Please look at the far right column.
Change from March 31, 2020, cash and cash equivalents increased by 1,000,000,000,000 yen and that was borrowing to acquire ABB Grid. As of June 30, these were the numbers recorded. And when consolidating ABB in July 1, this was spent. And there's interest bearing debt, JPY 956,100,000,000 of increase was seen. This was the number shown on balance sheet as of June 30, and this was spent and paid.
And so cash and cash equivalents number is different as of July 1. And DE ratio at the bottom of this chart, please take a look, it was 0.35 points. Because of borrowings, it was increased to 0.66x. And our cruising rate should be 0.5, and so it's quite higher than that. And so we will see a higher level this year, but next year and onward, we would like to bring it down to 0.5.
We shall conduct cash management to that end. And summary of consolidated statement of cash flows below. These numbers are as planned. Cash flows from operating activities, dollars 153,700,000,000 cash flows from investing activities, dollars 357,400,000,000 free cash flow, dollars 111,200,000,000 core free cash flow, dollars 80,700,000,000 as planned. And moving on to Page 9.
We are channeling our management resources to Lumada business and Lumada related and Lumada Core. Please take a look at the forecast for FY 'twenty, 1,100,000,000,000 yen. I think we're on plan. The red part represents Lumada core business. This is very close to the IT business.
Gray represents Lumada related business. Railway, energy, these are applications of Lumada Technology, scale by digital type of business. We would like to utilize digitalization to drive business. And that is accumulating to JPY 440,000,000,000. And below, there are some noteworthy events qualitative descriptions.
Mr. Gajen Kanjia, who used to be with Cognizant, is now the CEO of Hitachi Vantara. And I understand that Lumada related business will be further driven with its effort. And we have collaboration with Microsoft as well as Teixin. They're advancing.
So that's the status of quarter
1. So next page, this is the fiscal year 2020 overall numbers. Page 11, please. So like Q1, this is the same design. Revenues and adjusted operating income are shown.
Left side is fiscal year 2019, and the right one is the fiscal year 'twenty forecast, excluding COVID impact. So the profit is down RMB372,000,000,000. We have not revised this from the beginning of the year and 4.7%. So this is our current plan. On the right side, you can see RMB 335,000,000,000 net income attributable to Hitachi Limited and EBITDA, dollars 1,297,000,000,000 and cash flows from operating activities, dollars 500,000,000,000 this has remained unchanged.
12 Page 12, please. This is the full year forecast by 5 sectors and listed subsidiaries. This is similar to the Q1 trend, the first line at revenues. Five sectors, yen 6,360,000,000,000 and listed subsidiaries, yen 1,520,000,000,000 dollars adjusted operating income, 5 sectors, yen 338,000,000,000 and listed subsidiary, yen 34,000,000,000 and adjusted ratio, 5.3% and 2.2%, respectively. So there's a difference between 5 secondtors and listed subsidiaries.
On the bottom line, net income attributable to Hitachi, 5 sectors, 331,500,000,000 and listed subsidiaries, 3,500,000,000 total, 335,000,000. No change there. Page 13 is ABB. We are presenting this for the first time today on July 1. The power grid has come on board.
So how we look at this? So it was just July 1, and we are closely looking at the inside right now. The biggest difference is ABB has U. S. GAAP, but we are based on IFRS.
And so we are correcting the differences and this is taking a bit time. The best estimate is presented here. So the way to look at this table is, on the left side, Dachi Abb Power Grids, Standalone figures is shown. On the right side, you see related costs. So from the standalone figures, we have many cost items, one of which is the structural reform, structural reform expenses.
And we acquired a company, so there is the PPA, the amortization of goodwill or the intangible asset purchase price allocation, PPA. So this is netted from the power grid estimate. And so the right figure is what we are recognizing this time. So adjusted operating income, 2nd from the top, JPY 54,500,000,000 excluding the COVID impact and JPY 43,700,000,000 forecast, and this is 6.3 percent structural reform expenses, yen 15,900,000,000 and PPA, the amortization of the intangible asset is estimate JPY 60,500,000,000. So if you net off those 2, negative 30,700,000,000 yen in adjusted operating income.
Next, cash flow is the second from the bottom, adjusted EBITA, A. So the gray forecast is 45,200,000,000 yen and structural reform expenses, RMB 15,900,000,000 PPA,
this is
not a cash item. It is the accounting on the accounting basis. So there's no cash impact, so 0. And on the net basis, it is 29,300,000,000. And my point here is, on the left side, Hitachi ABB Power Grid, 2nd from the top, adjusted operating income, the ratio is 6.3%.
This number On Page 12, our adjusted operating income far right, this is the 3rd number from the top. It says 4.7%. So against this 4.7%, it is not by any means behind this number. So we are adding a profitable portfolio. Next page, please.
So this is the same as the previous waterfall chart from fiscal year 2019 to fiscal year 'twenty. And I would like to skip this part. That concludes my explanation. And there are many reference materials, which I would like to explain in the Q and A session. Thank you.
There are several more slides to cover. And I would like to hand it over to Claudio Fekin in Switzerland for the rest of the presentation.
Could you talk slowly and clearly about the slide you have prepared? Thank you.
Thank you, and good afternoon to all. So starting from the first slide, please. The transformation position us for profitable growth. Next slide, please. Hitachi ABB Power Grids is well positioned as the leading player when it comes to market technology, installed base and portfolio.
We are in attractive markets, dollars 100,000,000,000 growing on an average 2% to 3% every year, but also with many high growth segments, such as digitalization of the grids and electrification of transportation that, as you can see, they're growing 2 to 3 times faster. Our transformation is well underway. Over the past few years, we have been investing in growth initiatives, sharpening our portfolio, also developing new business models and driving continuous improvement in our operations with people and innovation as the core and tool foundations to deliver this transformation. These efforts and a strong global leadership team position us to grow faster than the market and strengthen our leading market position in line with our 2025 strategic plan. Next slide, please.
COVID-nineteen has brought new challenges. And since the beginning, we have reprioritized to focus on, number 1, protecting people then preserving business continuity but also moving on preparing for the new norm by taking the learnings from this crisis. The team has shown great resilience and further improved customer collaboration across all markets despite all challenges. Now while we address the challenges on the short term, we also see medium- to long term opportunities, such as a significant stimulus packages to accelerate decarbonization efforts through the green energy transition in most markets. One of those examples, as you can see in this slide, is offshore wind, which is a promise from many of our related businesses and technologies.
When you look at offshore wind, that requires renewable integration, requires high voltage DC technology to interconnect, but also requires digitalization and power quality technology, both on the transmission and on the distribution side. Of course, we are still in the midst of the pandemic, and there is still quite some uncertainties, as you can all see on global scale, on how fast the shape of the recovery will be. Next slide, please. Now let me walk you through on why do we see the impact of COVID-nineteen for our business being rather on the short term, and we preserve our optimism on the long term market growth. On the left hand side, you see the COVID impact on our business in line with the market.
The market will be affected in 2020. We already seen it and experienced it in the 1st few months of the year. Now given the long business cycle nature, on average 18 months to convert our orders into revenues. Part of the impact of COVID-nineteen slowdown will also reflect in our revenues in 2021, and that's what you see at the center part of the slide. Now this, obviously, will continue to put pressure on the earnings.
However, we continue, obviously, to take all the necessary cost measures, and we do not change our ambition level to double digit margins in the time frame 'twenty one, 'twenty two, as you can see in the margin corridor on the right hand side. Our fundamental market drivers remain intact, and we remain positive on the medium- to long term growth, obviously, once the crisis is being addressed. And this will support revenue and earning growth paths. As you can see reflected in the chart, we're still aiming in line with our 2025 plan to be on the upper end of the corridor towards the 12% margin. Next slide, please.
Now charting the course for the future, and we have a unique opportunity to position ourselves, Hitachi ABB Power Grids, even stronger in this market. And the synergies will come, 1st of all, from addressing the customer needs, leveraging the segments, the adjacencies, the opportunities, the breadth of our portfolio on the energy platform side, which we bring together with the digital technologies that is coming with Lumada, with the competence and the existing business that Itachi brings. So we have a unique opportunity once this crisis is behind us to accelerate many of those synergies, primarily on the market side, on the growth side, but also on the cost side. In conclusion, Hitachi and BB Power Grids bring together 2 highly respected companies with a combined technology heritage of 2.5 centuries, as I like to say it, and with a great enhanced talent pool across both the energy and the digital technologies to strengthen our position by 2025. Thank you.
Mr. Fakkin, thank you very much. At this moment, we would like to move on to Q and A. Those of you with questions, on the screen of the web conference system, there's a button for raising your hand. We will call upon your name once your name is called.
Please unmute yourself, state your name and affiliation before asking questions. Now if questions are answered And if you no longer want to ask questions, please release the question button. Now your video will not be shown. Those of you with questions, please raise your hand. I see a question here.
Please unmute yourself and start your question. Question? Can you hear me? Yes, I can. Thank you very much.
I have a question regarding Hitachi ABB Power Grids. First, this fiscal year's forecast is as such about 43,700,000,000 yen without amortization of operating income. So that's worth 3 quarters from July, 15,900,000,000 yen and amortization of intangible assets, JPY 60,500,000,000. How transient are they? I understand that amortization will take place every year.
And I think initially, amortization was to be 30,000,000,000 yen, but it's been increased to 60,000,000,000 yen. So I wonder what the reasons behind that are. So if you could please elucidate on those aspects. Well, thank you for the question. Kawamura will answer with an overview.
And as to amortization, Kato will respond. So these numbers are from July onward, 9 months' worth of numbers, as you understand. And understand. And JPY 60,500,000,000 well, earlier, we were talking about JPY 30,000,000,000 or so, and we scrutinized the number since because there's much to be amortized in terms of the orders received. And we try to amortize to the extent we count for this year, and thus the number increased to 60,500,000,000 yen.
And in total, we are to amortize 500,000,000,000. And in the 1st year, the number is going to be large, but it's going to decline year after year. So turning over to Kato, allow me to supplement. I said 30,000,000,000 yen initially, but over the long term, the average was to be 30,000,000,000 yen in terms of amortization. But now that we have scrutinized the numbers, taking a closer look, in a short period of 1 to 3 years, we would like to see allocation for amortization.
So initially, amortization is going to be large. After closing, it will reduce by 10,000,000,000 every year. So in fiscal year 2024, 2025, I think we will achieve half of 60,500,000,000 yen As Karma san said, the initial balance sheet is yet to be formulated. We have to change from U. S.
GAAP to IFRS. It's been less than 1 month since closing. So we need to take a few more months to hammer the details out. So JPY 60,000,000,000 is still our best estimate at this moment. It's still an estimate.
I hope you'll understand that. And earlier, what you asked about for structural reform, the number that was shown for this, well, this is a one off number. That's our basic understanding. In order to promote integration, we have to spend Question. I have additional question.
So in terms of operating income, there will be operating loss as part of the consolidated results. So what's your assessment of this? How different is it from your initial assessment when you decided on the acquisition of this company? Is there a gap in your awareness in terms of your assessment? And as you explained earlier, based on the operating income a contribution of operating income to the consolidated results over the medium to long term, what is the rough outlook over the medium to long term?
If you could share that with us, please. To address your first question, so initial assessment, how does it panned out in terms of operating income for Hitachi BNP Paragas. Page 13. We did have this forecast. So adjusted operating income of JPY 40,000,000,000.
We were assuming, but on the far right, related costs. This is something that accumulated as we took into various points into consideration. PMI and so forth, JPY 60,000,000,000. And because of various factors accumulated, the number is as stated. Earlier, we were seeing JPY 40,000,000,000.
But then at the time of the acquisition, yes, that was the number that we were looking at. And ABB Power Grid forecast going forward. In Claudio's slide on Page 19, there was an outlook or forecast for the future. And operating margin is shown on the right hand side. There's a range included in this graph.
EBITDA target corridor is between 8% to 12%, and we have back calculated to see what the profit could be. And we would like Claudio to confirm this and elaborate on this.
Yes. Page 19, could you specifically talk about the future projection of the number you are indicating here? So you are just pointing out the range of the percentage of the operating EBITDA. Could you say evaluate the range of the number, please?
Sure. So what we show here is the range of earnings as a stand alone. And as I mentioned before, the aim for us is to be recover from this crisis as fast as we can and go back to the levels that we had earlier, so reaching achieving that 10% on the time frame 2021 to 2022. Now as I mentioned before, we have a transformation that we initiated a couple of years back, which we invested growth, operational improvements, portfolio, business models. All of that has been supporting navigating also through this crisis, mitigating the impacts from the crisis and the market volatility.
And therefore, once we see this crisis behind us, we remain confident that with the market recovery, we will continue to drive our strategy in line with the commitments, in line with the plan and aiming at the upper end of this range, which is, as you see, towards the 12%. Whether it's going to be 2024, 20 25 will depend a lot on how we navigate this crisis, as I mentioned before.
Thank you very much, Claudio.
What just he said, Claudio, as he said upfront, this is a stand alone number. And outside, we will be looking at the synergies created with Hitachi. And customers who have power grids, we have not had a strong access and approach to these customers. But we will have those customers, and we can supply our products to these customers creating synergies. And in terms of cost, we can have collaboration.
We can have common operations. ABB has very large share service center, which we can utilize. So in terms of cost, I think we can create new synergies between Hitachi and ABB Pargre's. So for both business, revenue and cost synergies can be thought and that will be reflected in here. Thank you.
Thank you. I have two questions. 1st, last year compared to the Q1 last year, quarterly profit has increased significantly. So what is the reason behind that? So you can ask your second question or should I just ask the second question first?
Okay. I'll go ahead. So as mentioned, I had another question on ABB. This fiscal year, operating income will be operating loss. When do you think you can turn profitable?
What is your target or outlook on when you become profitable? Thank you very much. So the first question, comparing the Q1 of last year and this year, why is it increasing this year? Kato will explain in more detail, but first I will start. So the Q1, if we compare the 2 first quarters, as you see in the table, it's not increasing.
But compared to the budget of the Q1, what happened is around 30,000,000,000 yen increase in income. Industry and Mobility, there was an upward revision in profit and that had
a big
impact. So this momentum is what we are trying to maintain in the second and third quarter. Now second question, when the ABB Power Grid business will turn profitable? On a cash flow basis, it is already generating profit. The problem is this PPA.
It's really dependent on PPA. As I said earlier, we are scrutinizing the very details now. So around 50,000,000,000 PPA will be incurred next year. So operating income at 9% to 10% with the declining COVID impact, 9% to 10% margin, then we will be breakeven in 2021. That is our outlook.
And therefore, in the fiscal year 2022, the situation will become better. Of course, it depends on PPA, but we think we can turn profitable. So that is our estimate. Thank you. Kato will any more details on the Q1 question?
1st quarter, on an absolute basis, on Page 4, I explained, excluding the COVID impact, the amount, JPY 124,000,000,000, so it is about the same as last year. And Page 6, the waterfall chart. As I explained about the previous year, the revenue and income because of the divestiture of Hitachi Chemical, we had that much down. And euro, yen appreciated against euro, so foreign exchange factor. And the profitability improvement, this 11,100,000,000, the cost reduction was around 37,800,000,000 yen.
So without COVID, it's about the same, same level. And one more point, Page 30, please. So this is segment by segment numbers. Left side, first half, fiscal 2019. Of the 5 segments, IT, Energy, Industry and Mobility in 4 sectors, the number the amount may have gone down, but thanks to the structural reform in 4 sectors, the ratio improved.
That's all. Thank you.
Thank you. To continue. There's another question there. Please unmute yourself and start your questions. I have two points about ABB and listed subsidiaries.
First on ABB. The cost of acquisition initially was estimated to be 30,000,000,000. Now it's increased to 60,000,000,000 or so. Prior to the acquisition prior to COVID-nineteen pandemic, ABB profitability have been down, it was pointed out. And within ABB, a structural reform is taking place, and thus increased cost was being incurred.
I think that was the explanation. So from Hitachi's point of view, you took a closer look at the business. And did you realize that structural reform was not advancing as fast as it should have been? Or have there been any change in awareness? Well, if you could please state your second question as well.
Well, question well, actually, I had additional questions with respect to ABB to give all the questions upfront. Well, there are various target numbers associated with ABB. Perhaps it's that I didn't understand all of them. Ultimately, operating EBIT to be 8% to 12% in fiscal year 'twenty four, 'twenty five and fiscal year 'twenty one, a 10% potentially. But then earlier, I think the answer was it's going to breakeven in around FY 'twenty one.
And I think Kato san was talking about the enterprise value to being doubled in FY 'twenty one or so. So what are the actual targets and goals? If you could please clarify and sort them out. And what's going to be the pathway, if you will, towards achieving such goals? So what is currently 6% to 7% margin is to be doubled going forward in the next several years.
And on listed subsidiaries, listed subsidiaries are now becoming a drag on Hitachi's performance, inclusive of Hitachi Construction Machinery, Hitachi Metal. What do they mean for you? What are their positions visavis your performance? And even before COVID-nineteen pandemic, perhaps there were some problems. So how are you to treat them?
Sorry for being long. Thank you for your questions. Regarding EBB, now that we have acquired, we are now scrutinizing the numbers, but we're not met with any particular surprise. I think more or less, it's as planned and as expected. So there's nothing more much to revise or change in terms of our awareness.
And Page 30, of 43,700,000,000 yen and operating income margin 6.3%. If it increases to 8% to 9%, then the amount will be 50,000,000,000 yen. So 50,000,000,000 yen of PPA next year expected. It will be offset against that. And of course, there are some assumptions behind this, but that's what we're looking at, at this moment.
And the second question regarding listed subsidiaries and their problems. As you rightly pointed out, we only have 2 subsidiaries, Construction Machinery and Methu. Both are having difficulty in their performance. So what to do with our relationship with these subsidiaries? During the MTP, we would like to come up with an answer.
We're having intensive discussions with these subsidiaries. And soon, in several months' time, we would like to come up with a direction as to what to do with these subsidiaries. With respect to Hitachi Mato, as you know, it has had quality problems. And we have now set up an investigation committee involving external people. And there could be potential compensation And specific discussions for that will And specific discussions for that will start once investigation committee comes up with a conclusion.
So it will be toward the end of this fiscal year. And Construction Machinery, we are discussing what the growth plan should be. And within that, we will decide what our future direction should be. Kato speaking, to Sappho. Pages 13 and 19, just to explain the relationship on Page 19.
Well, what Claudio san earlier talked about on the right hand side, earnings development. Operating EBITDA. Well, these terms are used by ABB, operating EBITA. Page 13, on the left, adjusted EBITA, and we said 6.5% estimate. And of course, there are some detailed differences between the two terms.
But roughly speaking, conceptually, they are similar. So PPA is excluded, subtracted from adjusted operating income, and that is what adjusted EBITDA is. So this is equivalent to what he said in terms of operating EBITDA. Carmen speaking. Enterprise value to be doubled going forward.
Let's turn to Claudio for further details.
Our higher management talked about the possibility of making the profit level almost double or the enterprise value almost double. Can you really talk about the projection or say trajectory to reach the level or the double the enterprise value for the profit?
Sure. So and it's also somewhat reflected in the slide we just referred before. So if you look at starting from where we are now, and obviously, that starting point is lower than our plans, but I assume that everyone has the same situation. Nobody had in any plan to deal with this crisis and with this pandemic. So if you don't take that out, you look at all the actions that we've been putting in place, starting from the transformation, our plan would take us to doubling that overall value within the strategic time frame that we have set ourselves 2025.
Now as also was mentioned before, we have an opportunity here in addition to the growth initiatives that we have in our plan, also in addition to the cost initiatives that we have in our plan, there will be definitely support either from acceleration initiatives, so getting us earlier to some of those opportunities with Hitachi across the market, but also across the technology. And we will definitely see also additional initiatives that would come on top, as it was mentioned before, to support this transition. The life cycle of this business, as we mentioned, is on average 18 months. Now we have everything in this business from software and services that are accretive to the business, that have short cycle, that turn orders into revenues very fast, recovery. At the same time, we have long cycle projects.
If you look at an high voltage DC project execution, that lifetime is anything between 3 5 years. So all of that supports the resilience of this business, but at the same time, the opportunity with Itachi to tap in all those parts of the portfolio and create additional value going forward.
Thank you very much. It is past time, so we would like to take one last question. Just one question, if you may. So I have one question to Kawamura san. The absolute amount of the income IT sector was strong, both in terms of margin or absolute terms.
Which area is strong? Which part of IT was the driver? Thank you. IT sector has 4 main components in the portfolio. 1 is finance related another is public sector, government sector, the business for the government sector and the third is storage, the hardware centering on storage and 4th is data, Lumada related business.
The strong one was the government public IT business. So with the COVID-nineteen, remote working, teleworking and non contact became the demand, the needs. And with TV, videoconference, big demand is emerging. And so by developing new applications, we are generating new businesses, and this is growing strongly. And furthermore, education, health care, these areas where IT investment had not been sufficient to deal with COVID, we expect more investment.
So this is what we are expecting now. And regarding Lumada, as I mentioned at the beginning, it is now growing as planned. So we will focus more investment in this area. So the government sector and Lumada scale by digital, those 2 are the drivers. Thank you.
Thank you very much.
It's time to close the meeting. So with that, we would like to close Hitachi Limited's web conference on Q1 FY 2020 earnings.