Earnings Call: H1 2018

Aug 16, 2018

Good morning, ladies and gentlemen. I would like to welcome all of you to TTiS Group 2018 First Half Results Announcement. The group delivered unprecedented revenue increase of approximately 20%, 19.1% to be exact. The growth and consecutive level of gross margin improvement, which is a true testament of the group's strategy. I will now pass on the floor to Mr. Joe Gallai to explain in details our strategy a little bit more detailed and for Mr. Frank Chan, our CFO, to go on the financials. Thank you, Mr. Chairman. Frank, why don't you start with the good news? And by the way, there's no bad news. So I started to disappoint the sell side analysts that they might written a few things they regret. Frank, would you start, please? Yes. It's an ongoing good news. So yes, thank you, Chairman and Joe. As Chairman highlighted again another set of record first half results for 2018. Our sales increased by 19.1 percent to be exact to over US3.4 billion dollars This housing performance, mainly outpasted the power tools industries delivering robust double digit growth together with sales improvements by our Floorcare and Appliances division which also delivered a double digit growth. It's worth highlighting that Milwaukee delivered 8 consecutive period of growth, 29.8% in the reporting period and Acacia of 22.5% from 2010. Gross profit despite all the cost headwinds and challenging environment that we heard about in the market increased it by 20.6 percent to over US1.27 billion dollars with a 50 basis points margin improvements to 37.1 percent, our 10th consecutive period of margin growth. The improvement is mainly driven by our proven strategy, a continued flow of new innovative products, favorable mix, operational excellence in lean manufacturing and automations, very efficient and effective global procurement and supply chain programs and our focus in improving quality, efficiency and productivity. EBIT increased by 20.7 percent to US280.7 million dollars with a 10 basis points margin improvements to 8.2%. During the period under review, we increased by 24.6% to 2.50% close to 2 Net profit increased by 24.6 percent to close to $255,000,000 Net profit margin increased by 30 basis points to 7.4% 0.4% as we managed our finance cost very efficiently and continue to maintain a low effective tax rate. Earnings per share increased by 24.4 percent to US0.13 dollars 9 per share. The Board declared an interim dividend of HK0.38 dollars per share, an increase of close to 37% over last year, representing a payout ratio of 35.2% as compared to last year's 86.4% of the group's revenue led by Miyake and Ryobi's global organic growth increased by 20.1 percent with operating profits increased by 20.7 percent with a 10 basis points margin improvement to 9.5%. With the a volume in the second half of the year, we do expect that the growth momentum will continue with margins further improved. Slightly improved. The sales increase was from new cordless products, which grew an impressive 45% over last year and the selling of our legacy corded products. We do believe the performance of this division will continue to improve with the industry transitioning from corded to cordless applications and the launch of our new cordless platform. From a geographic perspective, North America delivered an 18.1% growth. The division represents approximately 76% of the group's revenue. Europe led by Milwaukee's very strong sales growth delivered a sales increase of 24.43 percent. Europe now account for approximately 16.2% of the group's business. Rest of the world representing the balance 8.1 percent also delivered a strong 17.6% growth led by Australia and South Korea. During the period under review, we increased our R and D spend by 20 basis points to 2.9 percent of group's revenue. This strategic spend will to continue our high velocity growth momentum with Milwaukee in particular and positioned ourselves as a leader in cordless technology in the industry. During the period under review, we have continued with our strategic investments in areas like leadership development program and usual conversions, increased sales coverage and geographic expansion, yielding unprecedented organic growth and further enhancing gross margins, while at the same time leveraging on our non strategic SG and A spend. Based we leveraging on our very healthy financial position and liquidity together with prudent cash management, we've managed to reduce our finance costs by 42% to only US5.3 million dollars which account only for 0.1 percent of the group's revenue. We will continue with this strategy with the objective to offset any additional finance cost increase due to U. S. LIBOR rate increase or volatility in the financial market. Effective tax rate was at 7.5% lower than that of last year's in period but higher than the full year last year's full year's effective tax rate of 6.9 percent. We have taken a conservative approach reviewing our tax position, but we do maintain that our low effective tax rate is very sustainable for full year 2018 and going forward. Our balance sheet continued to be very strong and healthy with shareholders' equity increased by 14.8 percent to now over US2.9 billion dollars and net current assets increased by 26.1 percent to now over US1.6 billion dollars Gearing was at 1.8% as compared to 8.8% same period last year. Working capital normally is higher in the first half of the year, but we do that this gearing ratio will be further improved by the end of the year. Working capital as a percentage to sales was at 17% as compared to 19.1% reported same period last year. With our very focused and disciplined working capital management, we do project that this percentage will not be higher than the 20% target level for the full year. Inventory days was at 88 days same as that of last year's same period. As previously reported, we strategically carried a slightly higher level of inventory to support our strong sales growth and we project our inventory days will be at similar level for the full year. The slightly high inventory level, however, been partially financed by our payable days, which increased it from 87 to 93 days. We will continue to leverage our volume, order visibility and financial strength for the best trade terms from suppliers. Receivable days remained very comparable to 67 days. CapEx at Intrum was mainly due to timing of spend. We maintain that the current year's full year CapEx will be between US240 dollars to US260 $1,000,000 and be in line with our policy that operating CapEx be matched to depreciation charges. So effectively, it's self financing. 1,000,000 to $1,000,000 to or 77.2 percent. Approximately 40% of our debts are short term, which are mainly trade finance related. Debt structure remains comparable to last year, approximately 89% in floating rate and 11% in fixed. We will continue to prudently manage our debt portfolio, capitalizing our strong balance sheet for the best optimal debt structure for the long term growth of the group and for the best effective borrowing costs. With that said, I'll pass the floor to Joe. Frank, I'm sorry, the slide is stuck here. I'm not going to be able to move past the 19.1% growth. And by the way, Frank, we didn't mention that is 100 percent organic growth. No acquisitions, where we have restructuring charges, which we vary below the line, which sell side analysts often overlook when our competitors do this. This is pure organic growth, which we think is the most powerful way to build the company. And it's working like crazy. Yes, floor care was up 12.9%. It's a small start. The base is low. We're not celebrating the floor care success yet, although it's certainly progress. We will next year, share floor care strategies that we think will allow us to win in this market. And it will be abundantly clear that we care about this category, and we have a good strategy. Now, power equipment, this growth rate is so high, people think we're exaggerating. And I'm glad we actually think we're able to show the numbers. We've had questions about the second half. People say, well, okay, the first half was great. Does that mean the second half is going to be below expectation? So listen, our guidance has not changed in the last 5 years, Stefan, and it won't change in the next 5. We will guide strong single digit growth the top line. Milwaukee will grow 20% a year on the top line, even though the base is huge now. And our gross margin will continue to go up. And I'll explain tariff and commodity in a moment. So we had many questions about second half. Is the growth in the first half, did it come at the expense of the second half? The answer is no. We're not going to guide 19%, Stefan, but we guide strong single digit. But believe me, our team is not satisfied with strong single digits. So, as you saw in the first half, our team over delivered. I'm incredibly proud of the performance of the organization. These are amazing numbers. The P and L Frank covered. I want to talk to you about the SG and A investment we made for a moment, because it's another area where we need to help the sell side analysts understand that we don't have an issue of escalating costs. We have a strategic decision to invest aggressively in those elements of SG and A. Extremely proud that I'm extremely proud that we have been had the discipline to do and our competitors just don't do it. Okay. Gross margin up Frank, 50 basis points to 37.1%. This trend will not stop. I know that we have competitors that are announcing dramatic drops in their gross margin as a percent of sales. You won't hear that from us. I actually believe and I'm very confident that over the next 5 years, it's a long time, but I believe the gross margin will continue, frankly, go up year after year, half after half, might 30 bps, might be 68 bps, but it won't go down. And in fact, I think history is the best indicator of the future. And after 10 years of consecutive performance, I think we have some credibility here when we talk about gross margin. And I would competitor that can put up that chart. There's no excuses. We don't blame other issues beyond our control. We just our team just goes out and makes it happen. And we build a company that's quite capable of being nimble and reacting to whatever policy that might come about that might be scaring the financial markets. But for us, we view these things as an opportunity. In fact, let's just talk for a moment about the tariff situation. People need to understand tariffs discriminate. All of our competitors manufacture in China. We manufacture in China. Our operation there is world class, all of our competitors manufacture there too. So the issue is not what impact tariffs will have on PTI. The issue is, which competitor is best able and best positioned to be nimble and flexible and respond to whatever tariffs come about and things are certainly not finalized. But who can manage it best? And I can tell you right now that we are not making an excuse in advance in telling you that tariffs are going to affect our gross margin or our EBIT margins. They will not. We have a very thoughtful plan leverages the decades of flexibility we've built into our system. We have 6 factories in the U. S. In fact, we're the only major floor care manufacturer that kept the factory in the U. S. When we bought a company called Oreccourse, we were criticized for not closing the factory because our competitors are restructuring experts. And we decided to maintain that U. S. Manufacturing facility, not because we anticipated one basket. We feel like a global manufacturing supply chain network is smart. That's why we have opened up a Vietnamese manufacturing operation, which is new, which and Vietnam has a wonderful relationship with the U. S. Today. We have 2 manufacturing facilities in Europe. We have 6 in the U. S. And we are quite confident that whatever tariffs end up being finalized, that we will offset the impact with our incredibly flexible manufacturing network. In addition, our productivity programs are flourishing. We believe that are global leaders in taking cost out of our manufacturing and supply chain network. And I have to admit that volume is our When you grow 19%, and it's not via acquisition, can you imagine how the profit just comes out of the through leverage? And that is why we didn't announce and make an excuse that commodities are going to hurt our first half. And we have competitors that have announced with excruciating detail how commodities are going to affect their results. Buy the same copper, our competitors do. The difference is, we will offset those issues plus, and we will continue to march ahead and improve our gross margin. So, again, I believe that our future has never been more exciting. And to be honest, I really think that all this noise about tariff and trade war is going to is a tremendous advantage for TTi because of the flexibility that our Chairman has built into this company and that I've tried to perpetuate. I think this is going to show how speed and decisiveness and planning for the future is a massive advantage. So I used to believe that flexibility was our major advantage in new product development. And that's certainly true. In fact, our product development program is on fire. We have so much new cordless innovative product coming that I could tie you up for the next day. And I still wouldn't cover all the products we have. I'll do my best to skim the surface today. But the fact is, there is no company that's remotely close to TPI in generating high impact, demonstrably superior, technologically advanced new products. And it's a major part of why we're winning worldwide. Okay, let's talk about SG and A. I know that there are a number of sell side analysts who say, oh my goodness, yes, the growth is up, the gross margin is up, but there they go again, expenses are up too. So we have stratified for you SG and A into 2 general buckets, non strategic, which is basically administrative overhead, which by the way, is down 30 bps in the first half, not up. And then we have strategic SG and A, which was up 60 bps. And to be honest, I would have spent more money if I could have hired the engineers we were after in the first half. Although we're hiring 5 times the number of engineers that any competitor is hiring in the same period of time. I wish we could have hired more. These MIT engineers 10 top schools where we hire technical Gen Xers, right David? Gen Xers. And I am incredibly proud that we have to have the discipline and Horace has had the, out of our out of our engineering system, while our competitors are buying up 2nd rate companies and actually laying them off engineers, so they can make some kind of an SG and A target, which is what many sales side analysts are looking for. Okay, so what are the 6 areas where we invest? R and D, we're hiring not just the old manufacturing engineer and electrical engineer, we're hiring software development engineers, because our cordless tools are flourishing and are in a leadership position because of the software and the firmware and the electronics that we build on board. We're so far ahead in the technical arena here that, I believe that we are on the way of building an unassailable competitive leadership position in cordless. And that's in Ryobi, that's in outdoor and that's in Milwaukee. We also have a vaunted product management system. It's the best I've ever seen. I've seen some good ones. This product management system, so the product manager, which is an individual that we recruit off the college campus in our LDP program, she or he leads the product development of a products. We have hundreds of product managers in the company. We haven't cut back. And I think there's nobody in our space that has anywhere near the talent that we have in something called product management. Then we have something that's misunderstood called end user conversion. Yes, we're investing a lot of money in end user conversion. No, we don't buy billboards in Fenway Park in Boston, so that our executives can have free tickets to baseball games. No, we don't do that. What we're doing with that money is investing in experts, end user specialists, who go to the job site. And I'm not talking home building. Rescon is so misunderstood by many of the people in the room. And it's just, I'm really going to try help you understand it. New home construction is important to us. It's about 7% of our company's future. But the big areas, the big verticals are the other 26 verticals that like power utility companies, and like the whole commercial plumbing arena and datacom installation. And there's so many areas that are so much more exciting with so much more potential than home building. But if the Wall Street Journal publishes that home building starts are down, all of a sudden our stock gets hit. And we have analysts that actually think that affects our results. And hopefully you'll see that we have to look past that. So end user conversion, I'll get to it more in a minute. Coverage means more sales people in existing geographies. So when we have a dominating position and we've achieved global Ryobi, cordless, we are in Ryobi, the Ryobi brand is the number one brand in the world for DIY tools, and by far number 1 in DIY cordless. Milwaukee Professional Cordless is now number 1 in the U. S, Canada, Australia, New Zealand, and on New Zealand, and on the way to being number 1 in a lot of countries that will surprise you. Why is that? Because we, we, when we go into a market and we get traction, we don't back off to save the SG and A. We, we, we, we, we, we, we, we go into a market and we get traction, we don't, we don't back off to save the SG and A. We, a market and we get traction, we don't back off to save the SG and A. We're continuing to hire the amazing talent that we have, so that we can show growth rates that are well above market. And 20% guidance on Milwaukee without an acquisition for the next 5 years is pretty darn good growth guidance, I would think. You won't hear that from a competitor. Okay, geographic expansion. This is quite different. We are moving into new markets. We've never been in before. And what I would like our analysts to do is also recognize, I think some of the things I'm most proud of are things we didn't do. For example, what's in the headline today, Stefan, Turkey? We decided not to go into Turkey 6 years ago when every competitor went in. And we were criticized for that. We pulled out of Brazil long before the Olympics. We haven't had, Frank, a bad debt write off for so long that it's almost tedious and boring for our auditors. Every company has a bad debt reserve. And we, why don't we use it? Because if you're not in Turkey, you don't have to deal with writing off the accounts that don't pay their bills, right? Now where we do go are markets where we study the market and we decide, okay, this is a good investment. That's why our South Korea business is exploding. It's growing so fast. And I was in Malaysia last 2 weeks ago with David Butts. And our Malaysian company has gone from 0 to a significant market share position in 4 years. It's where we've gone in and it takes SG and A. When you go into a new country, you don't get you don't make money the 1st year. That's why other companies are afraid to do this. You make money 3rd or 4th year out, and then you make a lot of money once you build the market share. That's exactly what we're doing. By the way, that's what we've done in Australia, New Zealand. So we've done in Canada. And we know how to do this. And I can assure you that the geographic expansion is paying off like crazy. One of the reasons why we have so much ability versus our competitors to grow at a faster rate is because of something called leadership development, LBP. This year, we will hire 5.30 graduates off the off the college campuses around the world, 100 of them outside the U. S. And Canada. This doesn't include the engineers we hired this year, which the target 100 engineers. And these are blue chip software development specialists that will allow us to continue to revolutionize the industry. But for 12 years, David, we have hired off the college campuses. And you noticed during the financial crisis, we didn't cut this to look good for short term sell side analysts. We stuck to our guns here. And Horst and I feel very strongly that this youth movement that we began to recruit into the company, this represents the future leadership of the company. And we're 12 years in, so we have kids that we hired off the campus are now running significant parts of our company. And this is such a massive advantage. And you will see that if you visit our operations. And I believe that all of our competitors combined don't have a fraction of this kind of campus recruiting going on. It's the first thing they cut because you get no benefit from this for the 1st 3 years. So again, we have a disciplined long term strategy. We stick to it. We don't respond to headlines. We're not managing this company for next quarter or next half. We're managing it for, I'm giving you guidance for 5 years without acquisition benefit. And I think that's pretty special. Okay, first, productivity. So we have a basic productivity measurement, sales up 19%, headcount up 6%. So, yeah, we're investing in highly skilled college graduates, but we're not we're reducing the headcount because our productivity programs and our automation programs are going extremely well. And even with all the volume, we've been able to manage this headcount growth at a level that I think is pretty impressive. Okay. So, damn it Frank, this thing is stuck again on the slide. This is a number you won't see often for a business that was classified as a G and P grower linked to housing starts. This is a number you see in Silicon Valley by some very famous tech companies. And what I love about it is, while we're growing Milwaukee 29.8%, the gross margin continues to go up year after year. We don't cut our prices at the end of a quarter to make a number. We don't discount Milwaukee to sell. In fact, we feel strongly that there's a reverse reverse price elasticity here. In other words, price denotes quality. These contractors, they buy these tools, they read the menu from the right hand side. They look for the the price guides them and tells them that there must be something going on with our product. And thankfully, when you turn one of our products on, our cordless Milwaukee products, we so outperform our competition that it becomes very clear that you should make the switch to Milwaukee. We are growing this for at this rate for 2 big reasons. 1 is, Milwaukee is basically on the vanguard of leading a once in a generation revolution in labor saving devices, in power tools specifically, from corded, from pneumatic, from hydraulic to cordless. And we also are developing so many power assisted hand tools that we're revolutionizing the way mechanics and hand tool users perform their function. This is the first reason. We won't have all the business in cordless, just the best part of it, the high end of the market. And that's okay with me. Secondly, we are growing at this rate because we have an end user conversion program that's caught fire around the world. So, let's look at the globality of this Milwaukee success here for a second. Yes, North America was up 27. And Frank, I've never seen you make a mistake, but you mentioned the U. S. Was up a lot. And actually, in a day, it's not the U. S. People forget, Canada is not one of the 50 states. Trudeau will make that clear to you. So, the fact is, our Canadian company is the crown jewel of TTi. There's no tariffs in Canada. We've become number 1 in the market. And that tends to increase the ratio that we linked to North America. But the U. S. Is growing too, okay? But not as fast as Europe. Look at the star of the company in the first half. The European Theater of Operations at TTi for Milwaukee grew 43%. This is in Europe, where you read one bad article after another. And we're up 43%. Rest of world is Asia, Australia, New Zealand, Latin America, and that's up a cool 29.8%. These are growth numbers that you won't see from our competition. And it's obvious we're outgrowing the market and taking market share at rates that nobody's ever seen in this industry. And this all reflects what I said earlier, which I know it sounds like I'm exaggerating, but we are leading a global stampede, a revolution from other power sources that are archaic and pollute and are inherently dangerous. And we're leading this stampede to high performance cordless. Now, here's the let me give you a couple examples of end user conversion. End users, and you're going to notice there's not one housing, house builder in this discussion. So I hope that our sell side friends will recognize that home building is a very small fraction of what we're doing at TTi Milwaukee. So here's a cell phone company you might have heard of called Verizon. We converted their existing legacy brand of tools to all Milwaukee, 100%. This is an all cordless, it's a major deal. And the future, once you convert a company like this to your cordless platform, they have the batteries and chargers. The loyalty becomes it goes beyond relationship. The loyalty is common sense, because you have an installed base and it becomes very difficult to change. Another example, San Diego Gas and Electric. Quebec, a power utility company outside of Montreal. We convert their entire tool athlete from our enemy to Milwaukee. Here's a large water utility company in France, SOUR. Again, 100% conversion from existing brands to high performance Milwaukee cordless. And then we have this windmill company in Denmark that decided to convert again 100% from the enemy to all Milwaukee cordless. By the way, we're not doing these conversions on price. We're doing it because we enhance productivity, we increase job site safety, and we have the bold vision of expanding cordless tenfold over the next decade, probably more. And the end users wow, these guys are really committed. They're not putting their toe in a wire and cordless. And they're still launching Pneumatic and Encorda and Petro. We have competitors that are actually still rolling out broad lines of corded tools, gas powered petrol tools, pneumatic tools, hydraulic tools. And people don't even realize that's like rolling out it looks good in the announcement and short term you load the channel. We it looks good in the announcement and short term you load the channel. We are hyper focused on cordless and it's a major part of our success. Anyhow, here's a big company in Australia, another party utility company converted from another enemy 100% to Milwaukee. This is interesting. We had a distributor in Australia that carried none of our products 5 years ago. Now, they came to us and said, we want to build a Milwaukee showcase inside of our store. And this is what we came up with to help them. And once one distributor in the world does something like this, believe me, there's a lot of showcase envy that happens. And I think that this will suddenly become much more prevalent around the world. Okay. So, two reasons why Milwaukee is outgrowing the market without any acquisition benefit and increasing gross margin at a rate that's never been seen in the industry. Two reasons. One was the end user conversion program. And I just showed you a small sample. But when you asked me about SG and A, remember, we're hiring these millennials and now Gen Xers who go to Gen Zers. Gen Zers. Sorry, Gen Zers. I have a son who's a Gen Zers. He's gonna kill me if he heard I said that. We go to the job site and we convert the user. It's a very special skill and our people are highly trained and there's no one that's putting the kind of money into that process. The second thing is new product. We, we launched this year, the 3 most important new cordless introductions ever. Now we have competitors that are hurt our stock and people misperceive to be important. And I that hurt our stock and people misperceive to be important. And I tried to assure everybody that we don't copy our competitors. And we certainly don't copy mistakes. And I the most important developments ever in power tool cordless technology history, but are catalysts for growth for a long, long time beyond the 5 years that I've talked about. Okay, the first is we just rolled out our 3rd generation of brushless motor fuel driver impact drivers. Now, our 2nd generation was so incredibly successful that it grew. Our 2nd generation outgrew our competitors entire new system that so many of you wrote about a couple of years ago. And now we already have our 3rd generation. And this 3rd generation, these are 18 volt products that are smaller, lighter, faster, run with less heat, more powerful with longer life, faster charge times and more features, including connectivity, etcetera. There is no competitor that's even remotely in the neighborhood of our 3rd generation. Our 2nd generation is still considered to be by the experts the best products in the world. And this new generation is 40% better, David, all the way around. So there's 2 products in this next gen, the drill driver and the impact driver. We have a mandate inside the company, an R and D mandate that every 2 years, we expect to launch another generation. Now it may take 2 years 4 months, but like Apple launches new iPhones, we will not launch like a cow, so that we can have a short term benefit. We will continue to invest in the next generation and the one after that. In fact, we have 3 generations out over the next 6 years that we can already, we already have laid out exactly what we plan to do. Now these, you have to do a lot of invention to achieve that. And it's not the old kind of mechanical engineering invention. This is all about the software. This is all about software development engineering. And that's why it's so hard to hire these kids because they want to go work in Silicon Valley and work on apps for your iPhone. But we are fortunately in the Midwest. And if a brilliant graduate goes to University of Michigan, or to Cornell or MIT. We've been very or Clemson, we've been very successful in recruiting these people. And the key to the future of tools is all about the software. So anyhow, that's what NextGen does. Now, the 2nd major breakthrough we're launching, and this one blew our competition and our customers away. We rolled this out last month. This is, we've launched 5 new tools. And for the first time, we can replace continuous run time corded tools, or for that matter, petrol or hydraulic or pneumatic. We can replace it with a cordless alternative. And because the battery that we developed is so powerful, because these tools are so well engineered, the end user picks these things up and they're literally blown away with the performance. And people said, well, why don't you have a flexible voltage system that goes up from 18 to 60? Because that's primitive technology. We have an 18 volt system. And if you design it right with the right software, you can over engineer and deliver better performance than the competition. And you just think about it for a second. Your iPhone, if you hold it up, your iPhone does more things, performs better than the pay phone or landline that those of you and maybe my generation grew up with. Why is that? Because the iPhone is smaller, lighter. It's more expensive, but it's because it's all about the software and the engineering. See, people think we're a power tool company, but we become a technology company that happens to sell power tools in Flour Care. And when you roll your eyes like we do and say, someday somebody's going to be very smart and recognize the opportunity here. Right, Horace? So anyhow, let's look at these 5 tools. I know I'm enthusiastic and proud of what we've done, because our team is amazing. And I'm trying to represent outstanding performance and the talent we have in this company. So, this is the battery. This battery is better than our competition. Not only because it's the first ever 12 amp battery, but also because if you open that thing up and look at the software and the electronics inside, you'll think you just opened up your iPad. It is a very sophisticated device. That's why our batteries are safer in hazardous conditions. That's why our batteries last longer. They charge faster. And that's why we harness and harvest more of the inherent power in our batteries than our competition does. And with that battery, we've rolled out 5 continuous runtime tools. The first, here's a cordless reciprocating saw, 18 volt 12 amp. And this actually not only outperforms every cordless reship saw on the planet, but it actually outperforms our 15 amp corded recip saw, which is amazing. So we've been global leaders in recip saws forever with Milwaukee. And we have a cordless product that's lighter than corded and outperforms corded, the very best corded recess saw we've sold for years. It's an amazing product. Next, we have a search saw. This is a search saw again. It's 12 amp, 18 volt. And one of the things our competition did a good job of is demonstrate that in their flexible system, their search saw would cut faster than the saws that we had before. And so, we stunned the market by launching an 18 volt search saw, not 60, that actually cuts faster than the 60 volt competitor. It also has the battery lasts longer. It's got more features. It's more organized, easier to use. And it will, we believe people who are using Sarc saws for a living will flock to this product. Next, we have a table saw. This is a cordless table saw that outperforms the other cordless table saws in the market. It's selling like crazy. And it allows the user who is accustomed to stationary equipment to remove the cord and take these tools wherever the work takes them. Here is an angle grinder. This is not a swan granter. This is a, we call it a lag, a large angle grinder. These products are used on the Alaskan pipeline, on the Malaysian pipeline, on all sorts of offshore drilling rigs, etcetera. This is a tool that you use for 2 shifts. It's an all day tool. And that's why it's been very difficult to get any of these users, these pipeline wildcatters, we call them, to switch to cordless. Until now, because that product, you can use that product continuously in a hazardous, frigid or humid and hot condition. And it will outperform corded. You don't have the danger of electrocution. You're not tethered to some generator, which burns petrol, which makes all sorts of noise and bad for the environment. And it's another example of how we're pioneering this cordless revolution. The most successful and most surprising to me success here in these 5 new high performance continuous runtime products is the chainsaw. This is a chainsaw. Of course, it outperforms our competitors' cordless chainsaws. That's kid stuff now. But we actually, with that chainsaw, we will cut faster than the world's best selling petrol chainsaw. This is an amazing development. So you don't need to go to the Exxon station to get the petrol. You don't have fumes. Just push the button and it will out cut. It'll cut faster than the best selling gas power chain saws in the world. And I think when people try it, they can't believe it. And if you were a naysayer, cordless before, that product is what people say, okay, I give up. I'm going cordless, because it just blows people away. So, by the way, we have other 18 volt products that are also interesting. I'll cover just a few. The fastest growing floor care brand in the company is called Milwaukee. Here's another floor care product. One thing I've learned over the years is every job site, every single job site in the world, at the end of the day is filthy. And you have to vacuum the floor. And so we are developing a series of job site floor care products. We use the technology that we are fortunate enough to have with Hoover and Vax, but we adapt that technology to job site commercial conditions. And we use the same cordless battery that you use in your drill. So the user now doesn't have to fumble around looking for other power sources or generated a power to vacuum cleaner at the end of the day. They just use the same cordless system called Milwaukee M18. And it's selling like crazy. This is where we are today with our M18 full sized professional grade cordless program. There's more tools there than any competitor can offer in full size. There's more brushless products there than anybody has. But don't memorize that slide because in goals. We have so many ideas on the drawing board that, this is generation global revolution, you better be ready to perpetuate that success. And that's exactly what we're doing. And yes, we'll spend some money into SG and A. And yes, Frank, eventually we'll lever down. But if we can hire more MIT engineers that are coding the software, we will do it. And investors will be the one to benefit. Once you realize what we're doing, you'll see the benefit. So, okay. Next, the 3rd major innovation in professional cordless that nobody understands and there's no recognition of with our sell side community is our subcompact series. So our competitor is launched a system that flexes to 60 volt. And they announced that this is the most important revolutionary cordless program ever launched, except they forgot that the fastest growing market in cordless is subcompact. People went smaller and lighter. Is your iPhone bigger and heavier than the paper? People want smaller and lighter and more ergonomic. And so if you deliver the same kind of performance in a compact package, wouldn't that be a colossal advantage versus the bigger heavier stuff that we're used to. And that's why when this flexible system doesn't even approach, doesn't even touch the compact, the subcompact market. It's hard to read reports that say, oh, this is going to take share from TTi. In fact, the fastest growing cordless business in the world today is the subcompact. And we are by far the global leaders here. We have so many subcompact Growlers products that it's already achieved a position of unassailable leadership. One of the reasons why our self palm program is selling so well is we're on our 6th year of selling heated jackets that all have a 12 volt battery. And it's a Trojan horse. Many people entered a system, believe it or not, with our apparel program, which is our Milwaukee heated jacket line. And that battery, when you pop it out of the jacket, works in 50 other tools on the way to 250. So a Trojan horse strategy sometimes is a little bit stealthy, but can be very powerful long term. And now we roll out one break subcompact cordless product after another. And what we've done in the last 6 months is going to change the industry as you know it for cordless professional. For rivet gun. This is not a full size 18 volt. We were able to engineer this device with a subcompact 12 volt battery. And it's so well engineered and so powerful. It changes the way that sheet metal workers, which are not Rescon, by the way, not homebuilders, metal workers do their job. This will pop a rivet in seconds with no effort. If you've ever used a rivet tool, a pop rivet tool, you will know, it is a challenging onerous task. And carpal tunnel and all sorts of other ailments come about because these things are not designed with the user in mind. So this is selling at rates so far above the forecast. I'm ashamed of our forecast, but I think that's a high class problem. So secondly, we have an inflator. We've had inflators for years, but we now have a pro grade inflator for use on a job site. And there are so many vehicles, David, that require air the job site that I wish I hadn't overlooked this before, but this is selling like crazy. Next, we have a soldering iron. This one is a shock. So this little tiny device replaces a large cumbersome unwieldy device that's plugged in, can be stationary or portable. This is a soldering iron that changes the way end users who work with this kind of activity, whether it's in the automotive channel or verticals, it changes the way they do their work. And the sales are again incredible. Then we have our whole line of ratchets. These are so a ratchet, these are cordless sub compact ratchets. This is a power assisted hand tool. So in the old days, we could only use this device, this hand tool, which is a socket and a a ratchet. And by the way, we're going to launch these too. I'll mention that in a second because we have many automotive users and transportation vertical focused end users who still want their old socket and ratchet. So, and we have a beautiful line of these that's going to surprise some different competitors when we roll this out. Well, we just launched it. But why use that if you can pick this up, push the button and have effortless performance with exactly the right torque and with a series of ratchets. And here we have, these are called stubby impact wrenches. This is a breakthrough again. These are little tiny sub compact impact wrenches, replace big heavy pneumatic devices. Pneumatic means you would have an impact wrench that's 3 the weight of this, that connects that has a hose that connects to a compressor that on a job site has to connect to a generator, which is full of diesel or petrol, which in order to power the whole system. So you're tethered twice with the most noisy polluting devices on a job site. And now all that's gone and you just have this. And the performance of these is actually better than the pneumatic. They're quite amazing. In fact, you could take a subcompact impact wrench and break the lug nuts on a car, on a vehicle. And if you've ever, ever and my father ran a scrapyard, I've done hundreds of these with hand tools over the years. If you've ever done that application, you know it's very tough. And this, you pull the trigger, boom, the lug nut comes off. And you don't again, you have the noise in the aggravation of pneumatic, which is 40 year old technology. And this keeps going. Here's a brand new another invention of ours. This is a cut off, a subcompact cut off saw. So, this user is cutting a muffler pipe off to replace it, a common automotive application. But there's dozens of things you can do with this. This replaces a device 4 times the size and weight, that's 6 times the noise, is 4 times more expensive. And you just pull the trigger and you go. So that's all subcompact. This is a completely overlooked revolutionary range of innovative products that we've launched and that we now have built an amazing leadership position worldwide. That's our M12 series today. Again, don't memorize the slide, because it will change a lot as we go forward. Okay, a couple of other comments. Lighting, we have pioneered cordless lighting. So if you think about a job site, a job site, if you're building this building, there's no power until you're completed, the job is complete. So you need to wheel in a generator, which makes a lot of noise and requires petrol. And you plug the lights into the generator. So, you can power, you can light up the worksite, so the user can do his job. So you think of how preposterously silly that is. If the user already has 15 batteries in 6 chargers, why would you make him carry a generator into a job site to light it up? So we allow that user to take his Milwaukee or her Milwaukee battery, plug it selling like crazy. We got so many requests for personal lighting that we rolled this out last year almost as a favor to several of our customers. And sales are fivefold because the Milwaukee brand is hot and because these products were all well designed. And you can see these things if you wish later. Okay. Let me just mention a few verticals that are unappreciated misunderstood. First is the drain cleaning vertical. Now, this is maybe not a pleasant thought, but if you ever have a plumbing issue where you have a clog and you call a plumber, Historically, you would use a corded device to try to break through the issue. And here we have a full line of cordless revolutionary drain cleaning solutions that again will revolutionize the way a plumber does his job. Here's another vertical that is completely misunderstood. People think the President of the United States has to somehow fund infrastructure for infrastructure to be important. And that's absurd. First of all, the power utility companies don't ask the government for money. They're all monopolies. They control regions of a country and they make so much money because they have a monopolistic position. So what these companies are doing is investing their own money, not government funds, into improving, upgrading or repairing, let's just say, a legacy a decades old network of power lines, etcetera. So in the power utility area, we have all sorts of tools used to cut wire, repair it. We have, hand tools that are specifically targeted for this space. We have actually something called a bucket light. And this light actually hangs on that the chamber the area where the user is standing. This bucket. Okay. So this is a light and you actually hook it on to that white area, where the user is 30 feet above the ground. And by the way, people don't have to fix power lines in the daytime with a beautiful blue sky. When the power line goes down is when there's a storm, usually at night when people call and say, oh my God, my power's out. So this light hangs on that cherry picker chamber for the user. And this is the first one ever in the utility companies look at this and they can't believe it. They say, well, this is exactly what we need. And we probably have 30 products in the power utility space, David, that are like that. They're just like, wow, I can't believe somebody has thought about us as an end user. So anyhow, here's another vertical that is fascinating to me. We, for years, there are other companies that have the automotive aftermarket. It's really, we don't look at this as the automotive aftermarket. We look at this as a transportation vertical. And it's cars and buses and trucks and trains and tractors and motorcycles and whatever other vehicle you can think of. All these vehicles need maintenance and repair. And this is today as of today, that's the range we have to support this vertical. It has nothing to do with homebuilding. And this product line is growing like crazy. And yes, we the something unless we have something better than what our competitors offer. We have some pretty good competitors in this space. But when you look at these hand tools, you'll see they're all engineered to shareholders are going to be very, very pleased that we are making those kind of long term shareholders are going to be very, very pleased that we are making those kind of long term investments. So when we go see dealer or a company that repairs buses, we don't just go in with a couple of tools. We go in with a full range, storage hand tools, accessories, power tools, all are better than what they're using today. There's no pneumatic here, which is what they tend to use. And I think that you'll see the growth from this vertical is the potential is quite vast. These hand tools, by the way, if you can do something, you have to do it right. Our Chairman would accept nothing less. And I love that philosophy. So, it took us a while, but the mechanic hand tools we have are gorgeous. They look like jewelry. In fact, I really think people will buy these, take them home and display them and they continue to use the old stuff that they have now. But that's okay. Eventually, the old stuff will go. So, anyhow, that's a pretty interesting step. So look, tape measures that business we weren't in. We have a competitor that controlled 80% of the global market. That's changing fast. The stud tape measure, my team named this, I actually didn't name it, but I'll give credit for that. Anyhow, the stud tape measure has got the best blade in history. This is your indestructible long lasting tapes. The margins are great. And what I love most is, you pick our competitors version up and pick this up, you'll see ours is better. And this is a big market. These are almost disposable hand tools. So we now have a broad range of tapes. Our customers have come to us and insisted that we do something about striking tools. So we and the Milwaukee brand is white hot. So we have a line of Milwaukee Hammers. They're priced up at a premium. And so far, David, the sales are amazing. So we have come up with some new technology and accessories too. This is a whole line of carbide tip, carbide tooth cutting tools, saws all blades, hole saws, all that outperform competition and all that are a big step in terms of technology for the business end of our cordless tool. And here's something brand new. We just rolled out a line of Milwaukee carbide tipped circular saw blades for the search I just showed you. Not only are they gorgeous, they perform beautifully. We did this as an experiment, but the sales suggest it's beyond experimentation. We have a out is, we have a competitor, a large competitor that doesn't call their tool business the tool business. They call it tools and storage. And they don't call it tools and storage, because storage is small. And they happen to have a very large position Not only is the PACOUT a great way to organize all, if you think about this room full of things, where would you put them if you're a professional user or a do it yourself? You have to put these somewhere. And so, Packet allows you to store and organize in a mix and match system that's patented. And not only can you store it, but it's also mobile. You can wheel these things just like your luggage through an airport. And for our contractor, that's a real breakthrough. And perhaps, of course, that's why the sales on PACCARTER are 3 times what I originally told you. So I'm not as good at forecasting as I used to be. But again, it's a high class problem. So, okay, let me tell you the greatest success of the first half. I just spent more time than I should have on our Milwaukee brand because I'm quite excited about it. But the most impressive success and the thing I'm most proud of in the first half, is what we've done with our Ryobi brand. Because the DIY market is about 1 6th the size of the professional market. It's not growing nearly as fast. And yet, Ryobi business posted amazing breakthrough growth results in the U. S, in Canada, in Europe and Australia and New Zealand. It's incredible. Why is that? Because we've spent years, years, in fact, almost 20 years perpetuating and improving and expanding the same cordless system, the RAYOBE 1 plus 18 volt system. We have competitors that have changed their battery interface and their chargers 20 times in the same period of time. They're creating all these orphans you find in a consumer's garage. So you have one charger and battery for your string trimmer, another one for your hand vac, a third one for a drill. I mean, it's absurd. It's so confusing that users are bewildered by this. And so we simplify the whole thing. You choose Ryobi, you'll never have to worry again about what charger to use, what battery works, because they all work. They're all fully compatible. And when you take that compatibility discipline and combine it with an onslaught of new products year after year, you end up with Ryobi, which is now the globe's leader in DIY power tools. This is a cordless compressor. So it looks like a real compressor. Fill up the car. And it, for the user that's reluctant to go make the switch to the fill up the car. And for the user that's reluctant to go make the switch to cordless, this eases the switch, because it looks like what he or she used before. Here's a, the Ryobi line is not only DIY. There's a surprising number of professionals, budget oriented professionals that buy Ryobi because actually we over engineer, we have for years, we over engineer Ryobi. So Ryobi outperforms the specs of a DOA tool. It's like people just they pick it up, they know it's going to work. So actually, plumbers are buying these. These are PEX pinch clamps is a fancy term for a device that the non copper plumbing, allows you to manipulate it and install it in a home or in a commercial installation. Here's one of the top selling vacuum cleaners in North America. This is a Ryobi stick vac. It uses the 1 plus battery system. So you can buy it without paying for a charger and battery, like our competitors always charge you when they sell you a stick vac. The performance is better than the leading competitor in the world in terms of suction life, because we're good at charging a bit of batteries. And it is exceeding our expectations and sound like crazy, because there's so many people in Ryobi cordless that it's not a hard decision to buy the stick vac. So we now have, and this, if you can just look at the wall here, we have the world's largest range of DIY cordless. 130 tools in the system. And again, you can assume every time we see you that there'll be more tools on that wall. And it is one of the reasons why we're so successful in Ryobi is because we have the only overarching platform. We go from power tools, and we arch into the outdoor arena with the same battery. And now we're in some new categories. For example, we have a swimming pool vac. So you take your handle, put it underwater and you can vacuum your pool. It outperforms the traditional overpriced pool cleaning devices that you buy. And it uses same battery. And people look at this and say, why not to add to their system? Okay, One interesting situation we saw develop in the first half this year is we had again a major competitor that actually blamed the weather and said their outdoor business was going to be down this year because the weather was so bad in the U. S. We have happened to have the same weather. We sell in the same 50 states. And our outdoor business had an amazing record breaking 20% plus growth in the first half in the same weather. And why is that? Because we are not perpetuating petrol and clinging to old technology. We are obsessed with cordless. This is our cordless mower program. This is just our mower program. We are now the largest cordless mower company in the world. We have the best technology. We have over we have 20 cordless mowers now for 3 continents that cater to the indigenous needs. And these mowers are a wonderful Trojan horse for outdoor, whether they're 18 volt or 40 volt. Because then, once you buy a mower, it's not a hard step to buy a string trimmer, a blower vac, chainsaw that all works off the same battery system. And we have dozens and dozens of new outdoor products, whether they're smaller 18 volt or larger 40 volt, that we think will exactly revolutionize the way people, whether you're a landscaper or a homeowner, whether people take care of their yard. Okay, finally, I can't wait till next year to show you everything we're doing at Flirt Care. But what I can tell you, with great confidence and enthusiasm, that our Flirt Care business is not only Frank, not only do we have a good first half, but we have a strategy to win. And business is not, it's no fun if you don't have a way to win. Being a fast follower, being number 3 is not interesting to us. So, it's taken longer than it should have. And I apologize for that. But I exciting. Okay, there's 2 elements to the leadership floor care program. 1st is carpet washing. And no, we don't have cordless carpet washing yet, because you have to heat the water and we are still working on the technology. We will have it. And I believe we'll be first and I I believe we'll have something amazing. But right now, these new carpet washers are selling like crazy. In fact, we're up 38% in the first half in carpet washing. We haven't been up in a decade. 38%. Now, we re engineered the full size carpet washer called SmartWash. It's a lot easier to use. It's better than our competitor. But I'm really excited about the dash because many people don't want to wash all the carpets in all the rooms in the house. But if there's an or the issue on a carpet and it stores easily in any closet. And it's again, it's selling like crazy. The other part of floor care that is incredibly exciting, and this is the small tip of the iceberg, is what we call the blade. So we actually had a young engineer in Birmingham, U. K, that has already revolutionized the concept of the stick vac. We have an impressive competitor that created the stick vac, cordless stick vac, which is the way people around the world now vacuum their floors. The blade is amazing because it's the first ever stick vac with a motor mounted horizontally instead of vertically. And so the ergonomic advantage of this are abundantly clear when you pick this thing up. It's so much easier to use than the vertical mount. The suction is amazing, Stephan. And the preliminary sales for a company that has seemingly struggled Preliminary sales are quite encouraging. So, cordless, we are going to win in floor care by being leaders in carpet washing, by being leaders in cordless floor care. And next year when we're agree with me that we're at least on the right track. And I think the numbers show that, of course. So just in summary, we continue to be a company that is winning, not through being desperate acquirers and paying for restructuring charges that you don't see or recognize in the sales side. We're not winning, we're not are whatever some political leader does in terms of tariffs, we are commodities. We have all the same issues. But our team has learned that if we just dig in and we use our speed, our talent and our absolute obsession with being number 1, that we can we believe we can overcome these issues and continue to deliver the same kind of results going forward, which is above market growth, gross margin expansion, and yes, EBIT growth that will be impressive to our investors. So, let me now turn it over to our Chairman, Horst Puttbahl. Horst? Joe, very well spoken. And I have no doubt that the strategy we have developed and implemented over the past year will continue to deliver exceptional results for the group. We are growing me put that in perspective. You took €550,000,000 in the first half or whatever you annualize. If you buy a company today with between $500,000,000 or $1,000,000,000 in sales and revenue, you have to pay between 2x and four times sales. What we are adding to the company is $2,000,000,000 to $3,000,000,000 every year in additional value. What we gain, our competitors pay out. Or maybe one competitor who has 0 gearing, you can't. Thank you very much. I assure you we will continue to deliver fantastic results.