Earnings Call: H1 2015

Aug 20, 2015

Good morning, ladies and gentlemen. Thank you for attending here this morning and taking the time. And I really like to welcome you for TTi's 2015 interim announcement for the Group. As you will see, we were able to deliver exceptionally strong first half and revenue was up 10%, actually considering the translation of currency we were up close to 15%. And our profit was up close to 16% for the first half. I think this is an amazing achievement and there is no other competitor in our industry globally who were able to grow and capture market share like TTi. I will now hand over the floor to Mr. Joe Gallai, our Group CEO and Mr. Frank Shan, our Group CFO, who will share some of the details on our first half results. And Frank will begin with the financial review. Frank? Yes, that's right. Thank you, Horst. Yes. Thank you, Mr. Chairman. So another record first half for TTi. So we've continued to maintain our very strong sales growth, momentum and margin improvements and delivered another record first half. As Chairman said, our revenue increased by 10% to $2,470,000,000 despite headwinds in currency, negatively affecting our top line upon translation. If we exclude the currency effect, our sales actually grew by 14.4%. Revenue growth was mainly driven by new innovative products, category expansions and market share gains. Milwaukee, in particular, delivered a very strong growth of over 24% on a global basis, over 28% if we exclude the currency effect. We believe this growth strong growth momentum will continue in the second half of twenty fifteen. Gross margin increased for the 7th consecutive period since 2008 to 35.6 percent, a 60 basis points increase over last year. Gross profit increased by 12 percent to US881 million dollars EBIT also increased by 12.1 percent to $181,000,000 with margin improved to 7.3%. Net after tax profits increased by 16.5 percent to 159,000,000 with margin improved by 30 basis points to 6.4%. Earnings per share also increased it by 16.4% to $0.0867 The Board declared an interim dividend of HKD0.16 per share, an increase of 28% over last year, representing a payout ratio of 23.8% as compared to 21.6% same period last year. Power Equipment segment accounting for 79% of the group's revenue delivered a strong 16.7% growth or 21.5% excluding FX impact. Milwaukee continued to lead the strong growth momentum globally together with Ryobi's 1 plus lithium mine collars platform for both tools and outdoor products. This division delivered an 18.1% increase in operating profits for the period. Floor Care and Appliances division representing the balanced 21% of the group's revenue registered a 9.7% decrease or 6.6% excluding currencies negative translation effect to both our European and rest of the world's revenue adoption of the mandated new EU Energy Laboring Directive, resulting in oversupply of legacy products in channel and the strategic exit of low margin OEM appliances business were the all the major factors for the revenue decline. However, good news is our cordless program continues to flourish in this very challenging environment. We are confident that this business unit will be on track for growth in the years to come. As we continue to invest in advertising and promoting our new lithium mine program in the first half with revenue and profit contribution expected to be coming in the second half of the year together with the higher than expected engineering cost to comply with our new European system directive, this division's operating profits reduced it by 17.5% as compared to that of last year. From a geographic perspective, North America market remained very strong, accounting for 74.2 percent of the group's revenue and delivered a 16.4% growth. Europe, representing approximately 17.8% of the business, registered a 10.2% decline in revenue as a result of negative translation. If we exclude the currency effect, our European business actually delivered an organic growth of 4.9%. Rest of the world, despite the fact that they also be negatively affected by currency, continued to deliver a strong sales growth of 8.5% or 19.3% if we exclude currency. Total SG and A spend increased by 12% or 28.4 percent to the group's revenue. We have continued to reinvest part of our gross margin improvements into strategic spend, new product launches, geographic expansion, advertising and promotion, etcetera. As we've always stated, new innovative products are the most critical and important sales growth and margin improvement drivers. We spent 2.6% of our revenue in R and D as compared to 2.5% last year. Net finance costs reduced further reduced by 40% to $7,600,000 as compared to $12,600,000 last year. Improvements came mainly from the retirement of some high cost debts in the Q1 and the better managed effective interest costs during the period, leveraging our low gearing ratio. Net finance cost represents now approximately 0.3% of the group's revenue. Effective tax rate was at 8.5%. We continue to maintain that an effective tax rate of 8% to 10% is very sustainable going forward. On the balance sheet side, we have a very strong balance sheet. Shoulders' equity increased by 12.7 percent to $2,050,000,000 an increase of $231,000,000 with net current assets increased by 17.6%. Gearing ratio was at 17.7% as compared to 22.8% last year. At the end of the Q2 this year, we bought our own offices and fully paid in cash. Our gearing would have been at 14.3% if we have not had this transaction. Further improvements in gearing is projected by year end. And by the way, you are most welcome to visit our new office early next year. We have continued to manage our working capital diligently and effectively and maintained the percentage of sales to be below our target level of 20%. Our working capital to sales was at 17.1% as compared to 18.4% last year, with inventory and payable days remained the same, while receivable days reduced it by 6 days to 63 days. CapEx for the 1st 6 months excluding the US17 million dollars office purchase amounted to $66,600,000 in line with our total full year budget estimate of $165,000,000 to $175,000,000 Total net debt reduced by $50,000,000 or 12.1 percent to $364,000,000 despite the 10% revenue growth and the full repayment in cash of our new office. We've continued to maintain an approximately 60%, 65% short term and 35%, 40% long term debt portfolio. At present, all our debts are floating rates, capitalizing on the current low interest rate environment. However, we will consider carrying some fixed rate debts in our books and we'll closely follow the rate movements to optimize our debt structure. So having said that, I'll pass the floor to Joe. Thank you, Frank. And let me just say it's a pleasure to share with you the spectacular results we delivered in the first half of twenty fifteen. As Frank pointed out, sales were very strong in the face of very difficult currency headwinds in most of the markets that we serve, we were still able to report 10% growth, which is the strongest growth rate in the industry. And if you look at local currency, if you look at the way our local Genuine Managers are performing in markets all over the world, we were actually up, as Horst pointed out, 14.4%. So that's the real rate of market share gains, although that doesn't tell the whole story. And I'll show you how. And the most important part of the company, our growth dwarfs the 14.4% and we're really transforming the global market. Our gross margin was up yet again 5 years in a row, Frank, 60 bps, 60 basis points from 35 to 35.6. So we are growing like crazy, but not by cutting price. Our competitors continue to react to TTi. They come up with promotions. They lower pricing to hold on to market share to try to grow their business. We are growing without cutting price. We're growing while our gross margin increases. And of course, our EBIT also went up. Yes, we continue to invest, Frank, in SG and A by design. We think our investors long term will be richly rewarded for our strategy of investing some of that gross margin improvement into more R and D, more product management, more geographic expansion, more powerful marketing programs that working incredibly well around the world today. So our gross margin is up a lot. EBIT is up some because we invest back in SG and A. Net profit up $16,500,000 EPS up nicely. And of course, record quarter is a pretty good way to kick off 2015 I mean a record half, sorry, excuse me. So gross margin has been a constant theme. We say it's an obsession. It's a focus of the company. We are changing TTi from its historic origins of being an OEM supplier. Historically, TTi was a strong OEM. We made products for other brands that other people sold around the world. Now as we're completing this transition that Horst Pudwell set off when he bought Milwaukee back in 'five, you can see that that march toward a much higher gross margin continues actually ahead of pace. In fact, we are way ahead of where we thought we'd be at this point. And we don't know how high this gross margin can go the next 5 years, but I can assure you it will go up over the next 5 years like clockwork just like you've seen over the last 5. So this is and when you look at gross margin going up, the most important takeaway is that it's going up while we grow the company at an incredible rate. So we are capturing market share and growing while improving margin, which means we're not lowering price to capture the market share. It's a key part of the TTi strategy. Okay. Let's take a closer look at the 2 segments of the company. Power equipment is now 79% of the company and the power equipment segment grew 16.7%, which is a remarkable number and in local currency 21.5%, 21.5%, 21.5%, it was a growth rate of the most important largest segment of the company. Floor care down 9.7%, some of that by design, some of that was an issue we had in Europe and local currency 6.6%. Now let me explain why Floor Care was down. We 1st of all, American Floor Care business had an outstanding first half. We were on track. We're delivering exactly what we'd hoped to do in the first half, 1st 6 months with the Hoover, Urich and Dirty Level business in North America. So the reason this number is down is that our European Floor Care business was down a lot because we were forced to comply with an EU mandated ECO environmental law on vacuum cleaners on these kind of appliances. And we underestimated the cost that compliance and we also underestimated the sales impact. Many customers loaded up on the products last year. Therefore, they didn't order this year. The engineering costs were much higher than what we expected. While this was bad news in the half, it's the great news, it's episodic. This is a one time issue. I'm not proud that we mismanaged this compliance, but we are now fully compliant with the EU mandated ECO STAR law. We this issue is behind us and we will resume our normal growth rate and profit improvement in the European Floor Care business as we move forward. Now the other reason this number was down is by design we are exiting low margin OEM products that we have in this sector of the company. So we still do some OEM business. We are exiting anything that has a gross margin that's unacceptable, we're just walking away. If our OEM customers don't accept the price increases, we're just discontinuing the product. We are very bold and aggressive about pursuing our gross margin targets. So, we are happy to walk away from low margin revenue. But that's why this issue this number looks like it does. So, if you look geographically, North America had phenomenal first half of 16.4%. And that's after the impact the negative impact of the Canadian dollar. The European business was down strictly because of floor care. The power equipment part, Frank, of Europe had a fantastic first half. And of course, rest of the world, which is largely Australia was up nicely, up 8.5% after currency. And okay, here's the currency in local currency, which is how we have to measure our local presidents and general managers and country managers. Again, North America up 16.7%. Europe was up. Even though Floor Care was way up, Europe was still up. And the power equipment business in Europe is taking market share like crazy in the key Western European markets, U. K, Scandinavia, Germany, the Benelux, France, Iberia, we are Poland, we are taking market share at an incredible rate in the markets we've targeted in Western Europe. Of course, we feel very good. We had the foresight to avoid markets that we always classified as high risk. For example, Russia, many investors asked us the last 6 years, why are you not doing more in Russia? And I think now the answer is pretty clear. We don't go into markets when we see risk. We don't we are very careful about our receivables. We like to deal with customers that pay their bills on time. And if we see any sense of corruption or a disruptive geopolitical environment, we've been very, very conservative. On the other hand, when we pick a market that we deem having high potential, like the U. K, for example, we go in we don't go in subtly. We go in bold with incredibly aggressive resources. Our goal if we go in is to go in and go to number 1. In Australia, for example, when we decided to invest in ahead of all these competitors that have been there for decades because we made the bold investment. So anyhow, in rest of world, if you look at local currency, again, largely Australia, we're up 19.4%. It's pretty good performance by the teams we have around the world. Okay. Frank pointed out working capital. We are extremely disciplined and rigorous in managing working capital, fixed capital and cash in this company. You see our gearing ratios, Frank, at all time record levels, record good levels. Our working cap came in better than last year at 17.1%. And am particularly proud of our team delivering 17.1 because as you might recall, 3 years ago, we said we have to make sure we have enough inventory in place to serve our customers while we're growing at double digits. So when you're growing a company at the rate we are and 10% overall, but of our businesses are up by 20%, 25%, 30%. So we can't run out of product or our customers get very upset. So we have made a decision to put in whatever level of inventory we need locally in our local logistics centers, so that when Home Depot decides they want to do a promotion in last minute or Bunnings in Australia decides, we can deliver without any issue. And therefore, we've increased our inventory level. In fact, you see we added over $100,000,000 of inventory versus last year. And yet because of the discipline on payables management and receivables and because, as I said, we don't take chances with customers, we don't go into places like Russia where we're not going to collect the rubles or places like Brazil that are that we think have far too much corruption and there's too much risk for TTi. Because of that, look at receivables. We improved by 6 days over last year in receivables in a time when most of our competitors are struggling collecting bills from high risk customers. So, Frank, working cap comes in at 17.1%, the lowest in the industry better than last year and it reflects, again, supreme discipline on the part of our management team around the world. And I like this trend chart. So when we started focusing on on cash and working capital, we were at 22.1%, which wasn't bad in terms of working cap as a percent of sales. But to consistently drive that down and we do it the wrong way. We have competitors that will literally at the end of a quarter before they report the results to Wall Street, they'll cut inventory. The customers suffer. They can't deliver. They cut inventory to look good to Wall Street and show that their inventory hit some kind of a target. And then the customers are furious and they can't deliver. We're not doing that. We are not going to do that. If we have too much inventory, that's the way it goes. But we still with our obsession with serving our customers, we still were able to reduce working capital like clockwork, Frank, over a 5 year run. Okay. So we look at productivity in a very basic way. We look at headcount versus sales growth. So, as I pointed out, our sales were up 10% in the first half, but really the way you have to look at this is sales in local currency was up 14.4%, and yet our headcount only increased 3%. What does that say? We've invested aggressively in productivity, in reducing labor and becoming more efficient in our Chinese manufacturing complex. And you can see it here. So we're growing at a rate that the industry has never seen and we've only had a 3% representation of our team's outstanding job in becoming more than accurate representation of our team's outstanding job in becoming more efficient year after year here at TTi. Okay. So let's talk about new products. So first of all, we did our Milwaukee business in the first half this year delivered extraordinary growth. In fact, after currency, Milwaukee globally grew 24% over last year. Now Frank, in local currency, we were up 29% in shape, almost 30% in Milwaukee. Can you imagine, we're in a mature industry and we're growing at rates that Silicon Valley would be proud of. And in fact, we are the metaphor we is, we are the Silicon is we are the Silicon Valley of Power Tools. We are the disruptive force. We are revolutionizing the way power tools are used. We are the company that is on the vanguard of new technology. We are taking bold risk in terms of breakthrough, new product and technology. And so and the reward for us has been growth rates that have never been seen, of course, in the industry. So we're up 24% in the first half in Milwaukee. And let me assure you that we're just getting cranked up. We're just getting started here. We are capturing market share like crazy in the countries we've gone after. We're doing it not by cutting price, but by launching revolutionary product that transforms hey, they were up 10%, that's great. Just remember, hey, they were up 10%, that's great. Just remember, keep in mind, yes, we're up 10%, but we're really the core business of the company with a vast potential for the future is Milwaukee. And that was up 29 percent in local currency. And believe me, the momentum we have is not slowing down. So what are we doing to keep to perpetuate this kind of extraordinary growth and market share gain? Well, this is really all I need to show you because this tells the story of our philosophy here at TTi. So 3 years ago, we launched the most important new product in the history of power tools. This is we call it Milwaukee Fuel. This was a cordless drill with a uniquely engineered brushless motor and an advanced electronics package on board with the finest batteries ever created for power tools. This tool dramatically outperformed any cordless drills ever sold worldwide. Standard highest performing cordless product in the world on any job site. And yet, we are now, obsoleting the unit we launched 3 years ago and we're launching the next version, V2 of the Milwaukee Fuel Cordless Drill. So the new Milwaukee brushless motor cordless drill is 10% smaller. It's lighter and it's 60% more powerful. There's 60% more torque in the new one than the one we launched 3 years ago. Plus it's 10% faster than the old unit. So our competitors have been scrambling for 3 years to catch up to what we launched before. And the bad news is we have a leapfrog technology that we're rolling out in the second half this year that will set yet another standard. And believe me, we're not going to stop here. This is V2. But we view this business like iPhone. Every year, like it or not, you're going have to go buy another one because the better one is coming out. And we don't launch a new product and then milk it for a decade. When with cordless, we think we have to continue to transform, improve, upgrade. So this is launching in the second half. We have many, many other new versions of fuel Milwaukee, cordless coming. A new impact driver is another example. Here, this is moving on. We have a number of new technology products and platforms using Milwaukee Fuel Technology that will continue to perpetuate growth rates that you've seen in the past. For example, this is a cordless magnetic drill press. Now this is a revolutionary product. Why? Because historically a magnetic drill press uses an electromagnet a cord requiring AC power. And you use these products if you're building a bridge, a dam, a nuclear power plant, an offshore drilling rig, if you have to drill large diameter precise holes in metal beams. This is the only way you can do it in a remote location. Historically, this product has been corded. Every job site on earth has to use these. We have the 1st legitimate magnetic field press that's cordless. The magnet is battery power. And the accuracy and performance of the Mag Dual Press is sets a new standard. So, it's an expensive tool. It's priced at a significant premium over AC. But based on early reactions, our customers that they will not be able to do without this. This product will become a new standard on any of these commercial job sites. Another example, this is a new right angle drill for large diameter holes for plumbers. So in the ResCon, ResCon is flourishing in the U. S, it's flourishing in Australia, it's flourishing in the U. K. In the ResCon arena, you need to drill these large holes for dryer vents or for bathrooms, etcetera. And this product is affectionately known as the Super Hog. We also have a version of these for the electrician called a whole hog. I know these names are not from an Italian designer, but this is the target here is the professional end user and they love these sort of descriptions. Anyhow, that SuperHog is more powerful than the standard AC drill that the plumber is using today and yet it's cordless. Here's a fuel small angle grinder, so it's a cordless angle grinder with a revolutionary electric brake. So you release the trigger and if there's a spark issue, if you're in a condition where there could be a fire or some sort of issue, this immediately shuts the unit off. So it's incredibly safe, which is very important for the Western markets where safety in the job site is critical. In the developing markets, safety hasn't become as critical yet. It should be and someday it will be. That's why we focus on Western markets like France, like Germany, like Scandinavia, like Australia, like Canada, etcetera. We focus on the markets where job site safety and productivity is critical, not the price of the tool, but the overall job site environment. And that focus on that kind of safety and productivity is what sets us apart. We're not chasing $18 throwaway angle grinders that are corded, that are used and where safety is not an issue. We are focused on the high end of the market where we can provide real value add with this kind of technology. Okay. So I'm just going to announced last announced last month for the first time ever a power tools platform, a range of tools. These are all Milwaukee fuel cordless power tools that are actually controlled by your smartphone. So you take your iPhone, if you're a commercial plumber and you have 1,000 plumbers in your company, you can take one iPhone and you can set the torque, the RPMs, the exact setting for every drill in the entire fleet all over the country, all over the world, all over a job site. This is I don't have to rely on every single plumber to know where to set the torque. I can do it in the office. And then I can record the actual results of the crimp crimp the wire at the exact pension level that is required for a fiber optic cable or for a complex and sophisticated installation. So, I can I have one iPhone and I can measure keep track of 1,000 tools site all over the world? I can set the settings. I can track the performance. And there's probably a 1,000 other apps that our software development engineers have already dreamed up that you'll hear about in the years to come. We're so far ahead of the industry here that we think that this is yet another breakthrough that takes TTi's leadership to a whole another position. So you will see in the future a lot about One Key. But for now, you should just know we're the first ever tool company that's incorporated the smartphone and turns the smartphone into a control and monitoring device for a fleet of power tools, whether you have 10 power tools or 10,000. Okay. Another revolutionary platform that we rolled out this past year is what we call Force Logic. This is a these Force Logic cordless fuel Milwaukee tools will actually allow a commercial electrician to replace the primitive hydraulic tools they're using use this I'm not talking about in Sri Lanka. This is in the streets of Manhattan. This is in London. This is in Sydney, Australia. Some of these primitive barbaric tools have been around for decades. And the productivity improvement that we provide with this advanced technology will literally liberate this commercial electricity. Let me just I'm going to show you a quick video to give you a sense of what these products can do. So with this Milwaukee tool, when you make your compression crimp, as soon as that green light comes on, you know that you've got a proper optimum crimp made for that connector. You don't have to worry about a failure sometime in the future. Well, I feel very confident. Wind, rain, snow in the trench with dirt, I see that green light, then I know that I've got the proper tension connection on that sleeve, and, yeah, I feel good about it. I would consider the M18 crimper very suitable for our line working conditions with the head swiveling the way it is and where the trigger is located. It is easy to use. Very reliable tool. Okay. So as you can see, this end user is not the do it yourselfer. This is not the highly paid Hong Kong based investment banker or securities analyst or doctor or lawyer etcetera. These are commercial electricians, which is our which is the market that we covet. This long term this commercial arena that we're after, whether it's a plumber, electrician, a nuclear, products that serve so big, you can't believe it. It's vast. And the products that serve this industry have been viewed as commodities for years, decades. And our mission at TTi, our vision is to transform this market to turn it into cordless powered by Milwaukee fuel. This gives you a great example that these products will revolutionize, change the way that user does his job every day. And they're not cheap. We're not selling we're not giving these products away. They're priced at a significant premium. But when you change someone's life for the better in terms of this productivity, we think that the premium is justified and we're getting it. Okay. So this is an example of thousands of applications. Every job site on earth has electricity or fiber optic cable and we intend to replace the existing products with Force Logic. Okay. Going on, power tool accessories continues to be a focus. We are now launching a new generation of the highly regarded Shockwave impact duty screwdriver bits. The number one power tool application in the world is driving screws or threaded mechanical fasteners. We now have the best accessory line for that application. We also launched these gorgeous new gold drill bits. Now drill bits historically don't look like jewelry, but these titanium nitride nitride coated drill bits not only are beautiful and make a great gift, but they also because of the titanium nitride, they have permanent lubricity. So titanium gives you actually a better performance in virtually every application versus non titanium drill bits. They're easy to find because they're gorgeous. And these actually have a hex shank engineered into the bit and our engineers were able to come up with a way to grind these things from solid steel and engineer a hex shank in without any breakage. So you can use these hex shank titanium nitride coated bits in any high force, high torque application. There's 0 breakage issue, you get faster performance because of the lubricity of titanium. These bits are engineered with a precise 135 degree split point. So there's no skating or walking on the surface. The fluting is advanced and we expect to be a major factor in drill bits because of this new technology. Our hand tool business has been a tremendous success. Remember 5 years ago, we had hand tool sales in the company. Our largest competitor has a very large and very profitable hand tool business. Our goal is to take a full of brand new hand tools that we're rolling out that will continue to allow us to take market share and capture this high potential market. We also successfully acquired the leading level company in North America last year called Empire. The acquisition has been a fantastic success. The integration has gone better than planned. We are growing sales just by organizing displays in our retail outlets. We haven't even launched the new generation levels yet, which will you'll see under the Milwaukee brand that will come next year. But when we do that, we start taking market share globally from the incumbent suppliers here who have basically not changed this level the level for a decade. It's time for innovation. We'll bring it. We also continue to grow our heart line. This is a tradesman line of hand tools. We have one new product after another. Heart fits in beautifully below the Milwaukee level in the market, but it still provides tradesman quality at a great price and our sales here have grown nicely. Moving on to consumer power tools. RYOBI 1 plus continues to grow at a rate that's better than any DIY brand of power tool in the world. In fact, the Ryobi 1 plus range is the now the one line of DIY cordless power tools in the world. Not only is Ryobi 1 in the U. S. And Canada, but in Australia, New Zealand, it's now achieved the number one position in DIY. And in Western Europe, this is the fastest growing brand by far in the DIY market for power tools. So we are thrilled that the OnePlus platform has caught on and spreading like wildfire. OnePlus is the only overarching platform that includes not only the power tools, but also the outdoor power equipment that use outside the home. The fact that we don't have orphan battery platforms like our competitors, the fact that we have one battery and one charging system that you can use for outdoor and indoor gives this DIY range an enormous advantage, an enormous advantage, really an unassailable advantage in the DIY marketplace. Of course, we're going to expand RYOBI 1 plus with one new cool fantastic DIY product after another. For example, in the next 6 months, we'll launch a new finishing sander, a new random orbit sander, a new cordless fabulous drill driver that is the finest DIY cordless drill driver ever developed. We rolled this out in Europe here in the next month. A new multi tool, 18 bolt in the Ryobi 1 plus system. So, you can see we already have the broadest line of cordless tools available in the world with 1 platform and we're expanding it like crazy in this next 6 months. So we'll just keep doing that. And you'll notice there wasn't any corded tool in that discussion. We are very much focused on our cordless platforms. The outdoor products, not just the indoor. And we've expanded our Ryobi OnePlus outdoor range because it's become so popular and it's selling so well. And this we're about to sell, for example, this new 18 volt pump weed sprayer. So instead of those unbelievably unbelievably aggravating hand pumps when you're spraying insecticide in the garden, now you just fill the tank up, push the button and you can apply whatever insecticide or other chemicals required in the yard, a great example of productivity from Ryobi. So we've had great success with our 40 volt outdoor platform. The 40 volt really allows the user for the first time to replace petrol in their lawnmower, spring trimmer, hedge trimmer, blower vac chainsaw, even snowblower. For the first time, you don't need a petrol product to give you performance that allows you to take care of the larger outdoor area garden or yard. And we're expanding 40 volt. Next year will be a big year for this program. The snowblower is interesting. We snowblower is not a big business for us, course, but we like it because this gives us a counter seasonal product to sell in the Ryobi outdoor system. So all the other Ryobi products are big in the springtime, so the weather is a big deal in May, June. Of course, the snow blower gives us something to sell in November, December, January. We like that counter seasonality. Finally, on FLOOR Care, don't misinterpret the results from the first half of this year and think for one second that we're not on track and excited about the future we have at TTi and Floor Care. In fact, I'm extremely encouraged and enthusiastic about the about the potential of Floor Care as we go forward. The issues we had were episodic. We've solved them. We understand it. Going forward, you're going to see one very consistent theme with floor care. And if you look over here on my left, what you'll see is 8 different new floor care products we're launching, 4 in the VAX platform in Europe, 4 in the Hoover platform in the U. S. And the one thing that's consistent about all eight of these products, every single one of them is cordless. There's not a single corded product in this run. We believe the future of Floor Care will be cordless. We intend to lead that future. These products are engineered beautifully and transform the way a woman would clean and maintain her home. So in the VAX system, which VAX is the brand we use in the U. K, the product that we're incredibly excited about is we call it the Lift Solo. And let me show you a commercial that we're about to run-in Great Britain to trumpet the attributes of this wonderful product. So, we intend to take the same marketing approach to the U. S. With the Hoover range. The Hoover line is rolling out here a concurrent with the Vax line in Britain. We will advertise the lift off product in North America. I will show you the ad next time. We like that British ad a lot. We also like we have a new agency in the U. S. And we're very, very excited about the new advertising theme that Hoover is going to pursue as to develop our cordless market. So we will show you that new ad in March, but it's awesome. And then finally, the last focus area for floor care is the commercial area. We haven't talked about this before with our investors. The commercial market for cleaning, for janitorial sanitation is massive. We're talking about a multi $1,000,000,000 market. And we think that Hoover is the perfect brand to go after this market. We've developed a technology called Hush Tone. These Hush Tone vacs, this particular one is corded, but of course we'll have a cordless version. This hush tone vac allows you allows the commercial housekeeping service in a in a hotel, in a hospital, in a school to vacuum and not have a noise that's disruptive. And in fact, many of these buildings have rules or there's ordinances in municipal buildings where you can only have a certain noise level. So, is the most quiet vac you've ever heard. And that'll be the theme as we develop commercial and there's more to come in the future. So and finally, we bought the Oryk brand in North America. This brand is on track. It's got great potential. It allows us to sell the technology we develop globally in a higher price point, different channel distribution. The Oryk brand has a great reputation and it's only going to get better. So, look, just to summarize before I open up for Q and A, we really appreciate your support and you being here today. You can tell we're highly enthusiastic about what just happened the last 6 months. But I just I need to make sure you understand, we as great as the first half was this year and as impressive as our results are, Frank, over the last 5 years, we're just getting started. We have so much new product in under in the company that I can tell you our competitors are in for a rough, rough future. So let me just wrap this up and say one final comment. We have a competitive advantage in this company that none of our competitors can match, because we have a fabulous Chairman, Mr. Putwell, who's brilliantly put this company together. He's an absolute pleasure to work with. And at this point, I am Horst, I'd like to thank you and turn the floor back over to our Chairman, Horst Pudwell. Joe, thank you. As you can see, I am extremely pleased with our performance. I'm very optimistic that we will deliver another set of strong results in the second half of the year. Now as Joe said, we will put additional focus on our floor care. And the other concern, we will get the double digit EBIT testing in there. And our brands are all very strong and performing. And as Joe said, we are working very hard on the improvement of FlourQue and we will get there. And our brands are going to be more and more recognized. We're taking competition and we will develop and put additional money in R and D to grow our business for the future. And as Joe said, we are not looking quarter by quarter. We're having a medium term, long term view how to make GTI give GTI the number one leader on the board. I would like to thank all of you for your support and our trust. And I hope to see you again for our next presentation sometime in March. Thank you very