Earnings Call: H1 2016

Aug 18, 2016

To welcome you to TDI's Group of Companies 20 16 Third Half Result Announcement. Some you look happy, some of you look sad, 12% dive as of now. We will make up for it, don't worry. We are a solid company. The group had a strong first half delivering another period of record excited about our power tool equipment, our power business power tool business as a whole growing 13.6% before currency adjustment. Now currencies, like Joe said this morning at Bloomberg, it's a Australian dollar. We had the Canadian dollar. As a whole, I think we managed to do a fantastic job in our business over the past 6 months going forward. Additionally, we delivered performance throughout all geographic regions while delivering our 8th consecutive period of gross margin and profit improvement. Our new product development remains as strong as ever, and I'm very confident about the strategy going forward in driving continuous improvement and focusing on innovation. I will now pass the floor to Mr. Yu Galai, our Group CEO and Frank Chan, our CFO, to go into more details with our figures on the results. Frank, are you starting first or? Yes. Yes, Mr. Chairman, I will start first. So, yes, as Chairman stated, another set of record first half results. Our gross profit, our EBIT and our net profits all increased it for the 7th consecutive period with our gross margin increased it for the 8th consecutive halves. Our revenue increased it by 8.6% to US2.6 billion dollars As Chairman said, currency headwind continued to negatively affected our top line upon translation. It's only upon translation. So excluding this currency effect, our revenue increased by 9.7%. We grew in all geographic regions through innovative new products and strategic marketing programs. Our power equipment businesses delivered double digit revenue growth, outpaces the power tools industries. Milwaukee continued to lead the growth momentum delivering another impressive growth of 20.2 percent excluding FX globally. Gross margin increased from 35 point 6% to 36.1 percent another 50 basis points improvements, where gross profits increased it by 9 0.9% to US969 $1,000,000 EBIT increased by 11.3 percent to US201 $1,000,000 with margin improved to 7.5%. Net profit increased by 11.6 percent to US177 million dollars with margin improved to 6.6%. Earnings per share also increased by similar percentage, 11.7 percent to US0.969 dollars per share. The Board declared an interim dividend of HK0.20 dollars per share, an increase of 20 5% over that of last year, representing a payout ratio of 26.7% as compared to 20 3.8% same period last year. Power Equipment division accounting for over 82% of the Group's revenue led by Meraki's strong growth together with our highly recognized Ryobi brand in both consumer tools and outdoor products also delivered double digit growth, increased it by 12.6 percent or 13.6% after currency. Operating profits increased by 15.4 percent to US185 $1,000,000 with margins improved to 8.4%. 4 ks and Appliances Floorcare and Appliances division's revenue accounting for the balance 17%, 18% declined by 6.7% or 5.3% after FX. However, our cordless categories, our commercial business and our European business all delivered growth in the 1st 6 months. Operating profit was at US16 $1,000,000 with a margin of 3.4%. Actually it's 150 basis points improvement if we compare to the margin delivered by Flocket division of the full year 2015. This reflected our strategic decision to focus on cordless and commercial cleaning categories, while exiting non strategic low products which Joe will share with you later to drive the business to a new success in the coming in the years to come. From a geographic The growth actually will be double digit at 10.1% if we exclude the FX effect. We believe the strong growth momentum will continue into the second half of the year. Europe, despite the uncertain economic conditions and currency headwinds, we still managed to deliver a deliver a 5.5% increase or 7.3% excluding currencies. Our Milwaukee and consumer power tools and outdoor products actually delivered double digit growth in this region as well. Rest of the world again due to currency delivered only a 4.8% growth, but 11.4% excluding currency in local currencies. Australia and South Korea continue total revenue. The increase was mainly due to volume growth, strategic spend to maintain our growth momentum, market share gains and geographic expansions. R and D grew in line with revenue representing 2.6% of turnover comparable to this band that of last year. Administrative expenses increased by only 7.6% further leveraging on our revenue growth. Net finance cost remains flat as compared to last year at US8 $1,000,000 despite a revenue growth of close to 10%, cost cost of financing slightly higher during the period and when compared to that of last year and higher working capital requirements in the first half. Net 8.5%. We continue to maintain that this effective tax rate will be between 8% to 10%, Our balance sheet remains strong with shareholders' equity increased by 9% to US2.23 billion dollars with net current assets increased by 15.2 percent to US978 $1,000,000 close to US1 $1,000,000,000 Gearing ratio remains low at 16% as compared to 17.7% last year. Working capital requirement is normally higher at interim and gearing is projected to come down by end of the year. Working capital as a percentage to sales was at 19.3% below our target level of 20%, which we believe that is best in the industry. Increase in inventory days is mainly due to the build to support the strong demand in the second half of this year, which is very much in line with the strategy to maintain our service level. The increase in inventory Increase in the 3 days receivable days DSOs was just because of timing. Our receivables remain to be of very high quality and no collection issues is anticipated. CapEx spend increase was due to the timing mainly. Operating CapEx for the full year will be at $170,000,000 to $180,000,000 as projected together with infrastructure CapEx to expand capacity to a total of approximately RMB200 1,000,000 for the full year 2016. Total net debt reduced by 2% when compared to same period last year with the strategic increase in working capital and higher CapEx spend during the period. We continue to maintain an approximately 65% short term, 35% long term debt structure. Currently all our debts are on floating rate to capture the still low cost environment. However, we will adjust our portfolio when we consider appropriate for the long term benefit of the Group. With that said, I'll pass the floor to Mr. Joe Galla, our CEO. Thank you, Frank. So just to recap our financial results, we had record sales. Our sales were up in local currency 9.7%. So we outgrew the market again with outstanding market share gains because of our new product flow in our power equipment business. Our in fact, power equipment was up for the 6 month period, 13.6%. That's an extraordinary level of growth in the markets we compete in. And I'll show you the flagship Milwaukee business was actually up 20%, again, for yet another 6 month period in a marketplace that's growing low single digits. So we were thrilled with our performance in the first half in terms of top line growth. Floor care and appliances was down 5.3%. Remember, this business includes appliances, which we're exiting. We have a lot of OEM business that we moved away from. And there's parts of that business that are no longer strategic or profitable. So the top line is down. But we have tremendous enthusiasm about our floor care business out over the next 3 years. It's not a business that's going to change overnight, but you will see and I'll show you today some direction. We are very, very confident that floater will contribute to this company's profit growth as we go forward. And I think our credibility is pretty because 82% of the company is setting records after record with 1 6 month period of success after another. In fact, you see the P and L, as Frank pointed out. Sales up 10%, gross margin up another 50 bps. That's the 8th consecutive period, Frank, of gross margin improvement. So our line grows double digit, while the gross margin goes up, which means we're gaining, we're growing the company without cutting price. We're actually growing the company premium priced products that are priced above competition, thanks to the outstanding technology and the new product machine that we have built in this company. And of course, net profit up as at a record level, up 12% on the net line. So we are investing some of our gross margin improvement back in SG and A in a very thoughtful plan, so that we can drive more new product in the future. We can build market our brands and also are committed to geographic expansion. And we had, as Frank pointed out, outstanding success outside of our core North American market. In fact, our European team did a tremendous job in the first half. And in Asia, we're seeing real traction in some focused markets that we're after. So the company is no longer just a North American story. And that's thanks to the investments that we make in SG and A. So as we 6 month period to 6 month period, year after year. The progress here is extraordinary. And I can tell you that this will continue. We believe over the next 5 years, there's still a lot of room for TTi to expand that gross margin. As Floor Care gains traction with its new products, as continue to capture market share with our leadership position in our Milwaukee brand and our Ryobi brand, you will see the gross margin of the company will continue to show excellent, steady, solid progress. And it's not like there's one incident, Frank, that drove gross margin up. This is 30 bps, 50 bps, 70 bps. Every 6 you see us grinding out improvement in gross margin, while we grow the company double digits. So this is I could tell you, this is a very difficult thing to do in the industry that we're in and something we're very proud of. Okay, Frank pointed out inventory and working cap. We still are best in the world in terms of managing our working capital in this company. We put inventory in place in the 1st 6 months to cover the new product flow to customers like Home Depot, who demand high service level. We believe that we have the highest level of service to our customers of anyone in the industry. And we will be rewarded for that as time goes on. But with that said, we're very focused on working capital and on inventory specifically. This is an area you'll see improvement on this year and in the next couple of years. But we won't compromise service to our customers. That's a key part of TTi. A basic measure of productivity, of course, is looking at our sales growth versus headcount. Sales are up 10%, headcount up in the 6 month period, Frank, 1.5%. So what does that tell you? That tells you that our operations are increasingly efficient. The productivity plans, another reason why potential inflation of labor and to company to offset the potential inflation of labor and to continue to improve our profit as we grow the company, no matter what happens with the labor force that we work with around the world. Okay. I shared with you that Milwaukee was up 20% in the first half. That's if you look back over the last 3 years, we're growing this business at a 20% clip like clockwork. This is an extraordinary, unprecedented level of growth in a mature global power tool industrial marketplace. It's amazing. And we are doing it not just in our core market. North America had a fantastic first half. Europe was up 22% in the first half, 22% growth in Milwaukee. In Europe, with all the issues in Europe, we are taking market share like crazy and growing power tool company by far. And we had an amazing first half in a tough economy. And actually, Frank mentioned in Korea, we have invested in South Korea. We put a Milwaukee organization in place. And our results are so far ahead of plan. It's highly encouraging. Will build a very significant Milwaukee business in Korea, which is an advanced market that rewards productivity and technically advanced products. So and you'll see that as time unfolds. So had a had a record breaking, amazing first half. The Ryobi brand has become the number one brand of DIY power tools and outdoor equipment in the world. The one brand, the former one brand, which is a company I used to work for, held that position for 80 years. And we have passed everybody in the global DIY marketplace. And I don't think investors realize yet what this means. PTI is now the number one DIY brand of power tools and power equipment worldwide with Ryobi. And the key to Ryobi's success has been the Ryobi cordless 1 plus system, which is the now the number one cordless DIY program that's available in the world today. This is with all the competitors that we face and all the challenges for us to be number 1 in DIY is a pretty extraordinary situation. Of course, Milwaukee is the fastest growing industrial brand in the world today in Power Tools. And long term, the potential for Milwaukee is unbelievable. And again, I don't believe investors have any idea of how much upside there is with these two brands. So let's talk about why are we in a position of leadership? David, hand me a water, please. So we are today, TTi is the clear leader in the most important part of the power tool market, which is cordless. So we have invested like crazy over the last decade in breakthrough leadership, cordless technology. We did it before it was fashionable. We did it when the whole world was selling nickel cadmium. We invested in lithium. We invested heavily in onboard electronics. We invested in all sorts of advanced technology. And the payoff is in this room today and the payoff will be very evident over the next 5 years. So relinquish that position. And you'll see why here in a moment. So with Milwaukee, we have designed the fuel program, which is the world's most advanced cordless power tool line, thanks to a brushless motor that's really based on onboard electronics and advanced circuitry in the tool To make the fuel leadership position even stronger, we are pleased to announce today that we have developed the world's most powerful battery for a power tool. This is a 9 amp 18 volt battery. When used with the tools that we offer today and with the new tools I'll show you, you get unprecedented corded of performance with cordless tools. All the competitors will try and follow this. No one has one today. I'm sure after today, there'll be a lot of announcements. But we're first once again. And we're first with the, again, the world's most powerful battery for power tool use. With that we can do extraordinary things with cordless. For example, we have introduced last month, the world's 1st full size rotary hammer for drilling holes in concrete. So this is a for those of you who do a lot of large diameter hole drilling in concrete, this is a 5 kilograms rotary hammer. It drills literally drill holes of 1 916ths in diameter. So that's a full sized rotary hammer and there's no cord. It's unbelievable. And it's actually lighter than the corded version. You can do demolition work. You can take a chisel and chip with this product with our 9 amp battery for 20 consecutive minutes. That's the most rigorous application you can imagine. And we're the only company in the world that's got one of these rotary hammers. So next, we have developed what we believe will be the top performing cordless miter saw in the world. Historically, people have tried to develop cordless miter saws with little tiny blades, which give you an unsatisfactory performance. We have competitors that are now taking their corded miter saws and trying to adapt them to cordless. But the problem is they weigh a ton and they're awkward, unwieldy to take to the job site. The whole idea of cordless is to be small, compact, lightweight, maneuverable and portable. And that's what this saw gives you. This saw will be a 10 inches saw. It will perform 96% of the applications saw user requires and it will be £25 lighter than a product that our leading competitor just introduced last week. £25 lighter, which is a big deal to the end user. Okay, this is just the beginning. We have a full line of fuel Milwaukee cordless nailers. We launched this 2 months ago. We can't keep these in stock. These nailers dramatically outperform the competitors in the category. Our largest customer is delighted with the performance of these products. They're premium priced, but they work so well. Once people pick these up and try them, they won't put them down. They just want to buy them. And they are priced at a level that the industry has never seen for these kind of nailing products. We today, we'll show you this is the first ever cordless full size cordless polisher. So this is a great example of our cordless technology. This product, which weighs like pounds lighter than a corded polisher, allows you to polish your car, your boat, your Ferrari, whatever, your motorcycle without a cord. It's so light that it can be used by any end user. Landscapers love it. They can polish very generator or a cord. And it's it performs so well, people can't believe they look for the cord, they can't believe the technology. But because of our motors, because of the electronics on board, we're able to design cordless products that actually perform better than the corded products they replaced. This is amazing. Not only do we outperform our competitors' cordless options in the power tool business, but we can beat the corded a series of innovations on board. So we also have developed the world's best performing drywall screw gun. Now if you ever go to a job site in North America, you'll see a lot of drywall and you'll see these products used to drive drywall screws to put up the for the interior construction. Because of the brushless motor in the onboard electronics, drywall screw gun is faster than any corded or cordless screw gun in the market today. And it's also much more quiet, because the brushless motor has a much more forgiving sound. If you've ever been in a job site in the U. S, and you've heard a contractor use one of these, the sound is like nails on a chalkboard. That's why they always buy ear plugs to cover up their ears. So this has got a delightful sound. It's fast like crazy. And it's a pound lighter than anything in its class. And as you can see, this just goes on and on. We have have so many of these leadership cordless products in the works that the market's about to be attacked by range that will permanently change this marketplace. And the upside potential, if you just think of the next 5 years, we're going to keep doing this year after year for the next 5 years. All these products are highly accretive in terms of gross margin. All these products create an aftermarket of batteries. So when people buy cordless, they come back and they buy extra batteries. They come back and they buy extra tools that work off those batteries. And as you can see, this is a virtuous cycle that will generate an amazing long term financial performance for the company. One of the most exciting things we've ever done in an area where we're way ahead of our competition again is One Key. One Key is actually a range of products where we have a Bluetooth capability. So our tools connect to your iPhone through a unique Bluetooth with our own Milwaukee cloud. We launched this 6 months ago. Today, as of today, Milwaukee Bluetooth app is in the top 10% of all apps downloaded on Apple. The top 10%, can imagine all the apps? Now, it may not be that in the top 10% of the folks in this room, because not a lot of you are plumbers and electricians on commercial job sites. But the people who buy One Key love this app. Once they get it, they download it and they Sawzoid, cordless resimp saw. So this is a Sawzoid, cordless resimp saw. So this is a very powerful product for cutting all sorts of materials. A contractor who uses this has a difficult time setting the strokes per minute. In other words, the speed of this product is something we refer to as strokes per minute. This product actually has, if you pull the trigger, will give you 3,000 strokes per minute. So the goes back and forth 3,000 times a minute. Okay, if you pull the trigger and cut that fast in something like stainless steel, you actually melt the material because of the heat buildup. So with 1 key, we actually are able to take the your iPhone and you can punch in the application stainless steel and the saw will automatically adjust to the proper strokes per minute, which is about 18 50 strokes per minute versus 3,000. So all you do is punch in the application. The saw will adjust its cutting speed and it doesn't matter what the contractor does, he can squeeze as much as he wants. It will cut at the perfect speed and leave you with a perfect cut with no damage. There's no one in the world even close to this kind of technology. There are probably hundreds of applications where that One Key Bluetooth download gives you an advantage. And you'll see that as time goes on. We actually, when we launched One Key 6 months ago, we were shocked at the level of of sell through. We have, let's just say, people really understand the power of using their smartphone to control something as advanced as a power tool on a job site. Okay. We continue to be surprised at our commanding leadership position on the subcompact market. You might remember 6 years ago, we created a market, a 12 volt cordless market we call subcompact. These are ultra small tools that are much easier to use than say, a full size tool. So here's an brushless motors and the the traditional full size tools did, because of the brushless motors and the advanced electronics on board. We have 88 different tools in our 1 plus in our M12 platform, 88. The leading competitor that we go up against has like 10. No one's even come close to TTi's leadership in this critical and growing market. And it's another example of our commanding leadership position in cordless. Okay, so maybe the biggest opportunity that we'll talk to you about today is a whole new area called lighting. So high output lighting is an area that we think has massive potential long term for the company for profitable growth. So here's why. If you have a job site, a job if you're in the middle of a high rise conduction, whether it's night or day inside the building before the power is on, it's dark, it's always dark. So lighting on a job site is a big deal. Historically, lighting on a job site has been halogen, incandescent or fluorescent. Halogen lighting is so hot, if you touch it, you get 3rd degree burns. In fact, halogen lighting can be 150 to 180 degrees Fahrenheit. And the technology of lighting on the job site is about 40 years old. It's dated old technology. These lighting products are all AC. They plug in the wall. And they're unsatisfactory to say the least and unsafe. So we have pioneered a range a range of LED lights using Milwaukee's unique battery system. And we think we can change this job site lighting environment permanently and expand on our leadership in cordless. So here's an example. This is a light we call a radius light. So this is a light that you would put in a room like this. If this room was under construction and it was dark, you'd have a light like this that would light up the room so the workers can get their job done. Historically, all these lights that we compete with are floor mounted and they're huge. So in the middle of this room, you would have a giant light so that workers can get their work done. Now the problem with that is, first of all, you have to plug it into a generator, which makes a lot of noise. Secondly, the halogen is 150 degrees Fahrenheit. This is dangerous. And third, how do you work if the middle of the room has a big giant light in it? So you have to maneuver around the light. So we have a ceiling mounted light called a radius light. By the way, it's connected to one key. So your iPhone can you can set where to point the light, when to turn it off and on. These lights can connect together. So you can put 10 of these in a room in a large ballroom, interconnect them and control them all on your iPhone. And there's anything like this in the industry. Remember, every one of these lights is powered up the same battery that you use in a drill and a power tool. So we have begun selling some of these lights. You can't believe the reaction and the gross margins are highly accretive. Here's another example. This is called a search light. So this device is used by, say, a utility worker, if the power lines have a problem, which is during the day, right? So there's a storm, it's night. So the workers have to go out and figure out where the power lines have some sort of issue. This Milwaukee searchlight will shoot a beam 5 40 meters, 540 meter beam. So you can identify the issue in the, I don't want to shoot anybody in the eyes over there. You can identify the issue. But then the problem with traditional search lights, which have about half the beam strength as ours is, you spot the problem, but you can't see 2 feet in front of you because it's dark and the beam only shoots a long way away. So this has a floodlight alligator or something bad. So, this is people this is, people look at this as a flashlight. This is an amazing breakthrough for a utility worker, for an infrastructure worker, whether it's a nuclear power plant, an offshore drilling rig or any sort of electronic utility company or whatever. So and again, you need to TTI using our batteries and our technology. So we have now in our lighting program, remember this didn't exist 12 months ago. 12 months ago, there was no lighting. We now have 16 high performance LED lights, each one with unique features and capabilities that no competitor can match. All of our competitors now seem to be adding lights to their story, but their lights are just me too lights where they plug in a battery to an off the shelf made in China commodity light. And every one of these products was designed with specific input from a job site. And we think will end up being something that will be a must on high performance job sites around the world. So, okay. We 5 years ago, we said we're going to get into the hand tool market. We've never sold hand tools. We now have a massive line of hand tools broadly distributed around the world. We're expanding it. For example, here's a new line of locking pliers, which the largest company largest customer in the world just put our locking pliers in and discontinued the former world leader, which was called Vice Grip. It's pretty incredible. We replaced an iconic brand, but we did. This is an example of what we're doing in hand tools. We're methodically going category after category, attacking competitors with better product at a premium price and winning market share. We also were very fortunate to buy a company called Empire almost 3 years ago. We will double this business in 3 years and we'll double it again in another 3 years. We're about to launch with Empire Technology, a line of state of the art Milwaukee brand levels, of course, priced up with the performance that's at a whole new level. And this is an example of how we've gone into the hand tool market with 0 business. And now we've become a very formidable competitor here. And long term, we believe we'll get this business to $1,000,000,000 plus. Okay, so the other part of the power tool and power equipment story is RYOBI 1 plus So if you look over here, we have had amazing success taking our RYOBI cordless DIY platform and developing this line of marketing it globally. So much so that today, as I mentioned, Ryobi is the number one DIY brand of power tools in the world. Ryobi 1 plus is the number one cordless DIY line in the world. And Ryobi is incredible with all the competitors we have. A big reason for that is that we had the foresight to use the same battery with our power tools and with our outdoor equipment. So we have an overarching platform. Our competitors create a series of orphan platforms. They'll develop one battery for power tools and a whole different garage would have sometimes 2, 3, 4 different chargers, all kinds of batteries and none of it works together. And that's why people have just flocked to the Ryobi 1 Plus system, because we've been very disciplined about maintaining one platform. The marketing for Ryobi has been extremely successful. Here's an example of a TV ad we run-in Sweden. So do all Okay. If you don't speak Swedish, I'd be happy to translate that for you. So actually, what we've done around the world is tailor our marketing to the local markets, with a universal goal of being the number one line of DIY power tools in the world. This has worked better than we could have imagined. The growth rate of RYOBI 1 plus is off the chart. And the momentum we have here is really extraordinary. And the reason is, we have the same battery and we keep launching great new products. So in power tools, we already have the leading line of cordless DIY power tools. We're launching all kinds of new products this year. This is a really cool Quietstrike pulse driver. So this is a screw driving device that makes no noise. And for a DIYer, it's a real breakthrough. It performs beautifully. We also have, of course, lighting in our DIY program. So we take the same technology we have in Milwaukee and we adapt it to the view it yourself environment. And we're launching a whole range of these here in the next 6 months under Ryobi 1 plus In outdoor, we have developed a wide range of outdoor power equipment, all using that battery. This program has also been incredibly successful. And we also continue to drive more new product flow here in 1 plus So for example, we launched this blower earlier this year. This is a 18 volt blower that it will outperform anything in its class. It's selling like crazy. And it's just another good example of taking the OnePlus battery and expanding it into other areas. So a brand new area for us is garage door openers. We, this year, earlier this year, rolled out what we think is the most brilliantly engineered you if you have a garage door, it's likely you would have an opener. So when you pull up to that garage door, you push the button and the garage door would activate and come up. Okay. So how does this tie into Ryobi 1 Plus batteries? Well, we were able to engineer a garage door opener, so that if the power Ryobi battery in that garage door opener will actually allow you to open and close the garage door a 100 times on one charge, a 100 times. So if you think about it, the worst time in the world for the power to go out is when you pull up to the garage, it's raining outside, your kids are inside, there's no power. And ordinarily, you'd have to get out of the car and manually activate the garage door, which is a nightmare. So with Ryobi, you just push the button and it works just like it does if you have full power in the home. So this is such a breakthrough concept that initial sales are, let's just say, very, very encouraging. And we believe we're going to be a leader in this garage door opener space. But remember, it's all linked back to Realty ONE plus We're not developing orphans around the store of Home Depot. We're developing a universal platform with one ReLU 1 Plus now is an incredible line. It's the broadest line of DIY cordless products in the world today. We have dozens and dozens of new cool innovative products we're developing that will expand this line. And if you looked at our competitors, no one has anything like this. They have outdoor products. They have power tow products, but nobody has this overall family. So then finally, let's talk about floor care. So floor care, our results are down in the first half. Our enthusiasm about the businesses is high. Why? We have an outstanding plan in floor care to develop this business in terms of sales and profit. We believe future in floor care is cordless, robots and commercial. So those three areas, we're going to focus on cordless floor care products, on robots, which is a brand new area for us and on commercial, which is a massive opportunity for the floor care business. So what you see here is an example of cordless. This is a pole vac. This is a super light, convenient, high performance vac. You can operate as an upright vac. The suction is great. It weighs a third as much as a traditional upright back and it's cordless. And we think the potential for this, this element of the market is significant. So we're rolling out a variety of these pullbacks that target the convenience and space oriented floor care end user. We have, we've developed 3 different robots with all kind of functionality. And we've been thrilled to see the early reaction from our customer base on robots. So the major customers in North America have embraced our robot line. And you will see tremendous distribution and sales in the back half for the Hoover robot series. We will also roll these out later this year over in Europe. Now remember, when you look at our floor care results, we've never had robots. The robot market is almost as big as the entire upright vacuum cleaner market. It's a massive market. It's an area where cordless matters a lot, because these are all cordless. And guess what? We are very good at cordless technology. So we're optimistic that we can compete and flourish in a robot market that has a lot of promise. And so a couple of years ago, we bought a commercial brand of Flouquetra called Oric. Oric is a highly respected commercial brand in North America. It's also a brand engineered Orec product that's been out in 6 years. And it has, engineered Orec product that's been out in 6 years. And it has a, it's a bag system for superior cleanliness and sanitation. And it's got a unique bag coupling system that allows you to eliminate the danger of debris going back into the atmosphere. So in Europe, we have several brands for floor care. We have Vax, we have Zirt Devil. These brands of some of the new generation Corollis products we launched in Europe. Again, we do not make projections about our Flirtair business based on the first half this year. We have exited appliance categories and OEM categories that weren't strategically. And we are going to grow like crazy, the parts of the floor care market that have the best gross margin and long term promise. So and then, the last part of this is commercial. We have a technology we've developed in Hoover Commercial called Hush Tone, which means these commercial vacs, which you would use in a building like this, they're so quiet, you can't conduct a meeting while the sanitation team is and janitors are cleaning up the hutch tone technology, not only in corded, but also in cordless. And we will share more of this story with you as time goes on. But this is a very big marketplace that we think our technology will be successful in. So, and can tell you in the last 6 months, what you don't see when you look at Frank, the results that we announced is we've established a new global floor care headquarters in Charlotte, North Carolina. The headquarters is a very exciting dynamic product development environment, consistent a in North America and in Europe. So we have a much stronger and I would say, we have a floor care team that's aligned much more closely with TTi's core competence of high speed product development and really obsessing over what the customer really wants and then finding ways to solve those questions better than our competitors. So I think that you will see as time goes on that Floor Care will be a contributor to the company's financial progress. So I turn it back over to our Chairman, Horst Putwell. Horst? To your question over there, why can't the competition do it? If you have a TTi's history is cordless and small and compact, Leo, know. It's cordless and it's a puzzle. You have to have the battery technology, you have the electronics and you have the brushless. And to make it all work, I think we years ahead of our competition. Now how does our future look? I think fantastic. It will take many years for the competition to catch up. Going back to our floor care business, we have a plan in place where we'll improve substantially. And can you improve at 10%, 20%, I don't think we are far off. However, when you really look in details what happened at our Flour Care. If you look 4, 5, 6 years ago, TDI had essentially OEM business. Now we have in power tools, we have fantastic brands like Milwaukee, Ryobi, AG and so on. The OEM business were nearly down to 0. We did have or do have some OEM business, our flocking business, we call it appliances. For example, we had major customers with our name in the shredder business, the shredder business is gone. That business went down 90%. So we refocused on our business and say in future what can we do with our fantastic brands. We have Hoover, we have Oryx, we have DIRTT we have in the U. K, we have VAX and so on. And I must say I'm very, very excited about our Flockhead business day to day next months years to come. And you will see an improvement, I think, if we meet here next year in March, we have a presentation. We'll ask, wow, how come you turned around so fast? Anyhow, we are capable of doing it in Florka as we did in our power tools. And I must say, we are the envy of our industry how fast we come to market, the development process and so on. We have an idea today, next year, we are on the market, that we have an exciting pipeline of new products. And I'm very confident our second half of 2016 and, of course, for 2017. And we will execute. That's a promise. That's a promise. Thank you very much, ladies and gentlemen. Looking forward to seeing you all our next presentation 6 or 7 months from now. Thank you. Thank you.