I am pleased to announce our 2019 performance achieved record profits marking a decade of revenue growth. We built on our strong first half performance by delivering record second half results, driven by the development of new products and expansion across all categories, verticals and geographies.

Gross margin, EBIT, and net profit outpaced our impressive topline growth. TTI enters 2020 with a formidable record of industry leading performance, focused on our strategic drivers of powerful brands, innovative products, leading edge technology, exceptional people, and operational excellence.

Solid Corporate Performance

TTI reported sales of US$7.7 billion, an increase of 9.2% over 2018 and 10.7% growth in local currency. The defining force behind our sustained success is our cordless leadership strategy. We continue to expand our cordless product families by further investing in our core lithium battery platforms, driving cutting-edge brushless motor technology and developing state-of-the art electronics and power management systems. The result is a flow of new products with demonstrable end-user benefits. Our flagship Power Equipment business, representing 88.6% of total sales, grew 13.0% to US$6.8 billion. Driving this stellar performance is our Milwaukee Tool business with another year of impressive performance of 21.7% growth in local currency while the RYOBI ONE+ business generated a high single digit sales increase. We continued to make progress in the Floor Care and Appliance business with the strategic cordless and carpet washing categories up 18.9% over 2018. The overall Floor Care business declined 13.5%, however EBIT improved 12.8% as we strengthened the division by exiting certain European markets and discontinuing non-strategic legacy categories. Despite the sales decline, we are very encouraged with the performance of our cordless and carpet washing categories, which have both been well received by the market and have delivered significant growth.

TTI continued to consolidate and strengthen its position in North America delivering industry leading growth of over 10.2% while EMEA grew an outstanding 13.5% in local currency. Our selective geographic expansion into targeted under-represented markets is progressing with successes in key markets in the Nordic and Eastern European arena. In rest of world, Australia and our Asia businesses again produced another excellent year with above market growth at 10.0% in local currency.

Continuing Operational Excellence

Our flow of high margin new products, mix management, productivity gains and volume leverage helped drive the gross margin up for the 11th successive year. Gross margin expanded from 37.2% in 2018 to 37.7% in 2019. We maintained a relentless focus on operational excellence through the TTI OPEX System, generating efficiencies throughout our operations and expanding the supply chain beyond the traditional base. To support our rapid growth, we have made investments to expand our global manufacturing footprint in Asia, Mexico and the USA. Our manufacturing operation in Vietnam which has expanded rapidly over the last year has now become a strategically important part of our global manufacturing operations. These initiatives are delivering world-class service levels, high quality products, while helping us mitigate headwinds, including tariffs, and positioning TTI for future growth.

Delivering Financial Performance

EBIT increased 10.9% to US$673 million, with the EBIT margin improving by 10 basis points to 8.8%. Shareholders’ profits rose 11.3% to US$615 million, with earnings per share increasing 11.6% over 2018 to US33.67 cents. Through our disciplined working capital management, we delivered a gearing of 0.5% and working capital as 14.3% of sales.

The Board is recommending a final dividend of HK58.00 cents (approximately US7.46 cents) per share. Together, with the interim dividend of HK45.00 cents (approximately US5.79 cents) per share, this will result in a full-year dividend of HK103.00 cents (approximately US13.26 cents) per share, against HK88.00 cents (approximately US11.33 cents) per share in 2018, an increase of 17.0%.

High-Performance Strategy

A core foundation for our continued success has been an uninterrupted strategic focus on cordless technology over the years. We have remained dedicated to the four strategic pillars of Powerful Brands, Innovative Products, Exceptional People and Operational Excellence that have allowed us to concentrate on building an organization that delivers sustained performance, growth and profitability. TTI has followed its cordless leadership strategy in prioritizing the development of the cordless technologies necessary to bring revolutionary and ergonomic products to our end-users. We are leveraging our global product development resources and enhancing our well established power tool battery platforms for MILWAUKEE and RYOBI that are the most extensive in the industry as well as our newly launched battery platform for our floor care business. We see a bright future as we pursue the expansion of our cordless technology into new product categories.

We have identified new targets which are in line with our product development. An exciting and revolutionary development is the launch of the industrial MILWAUKEE MX FUEL Equipment system. The system is the result of extensive research and development into the industrial construction and maintenance equipment industries. This new groundbreaking cordless system is the platform that provides the technology and capability for Milwaukee Tool to step into the light equipment space.

Strong Outlook

TTI has an enviable track record of organically growing the top and bottom lines faster than our competitors. Looking forward, we have outlined strategic targets for expanding the product families around our leading MILWAUKEE and RYOBI battery platforms, entering new vertical markets and selective geographic expansion which create exciting opportunities for continued, above-market, sustained growth. These targets are aligned with our investments in R&D, strategic SG&A and new product development teams to continue delivering a flow of technically advanced innovative products that are fundamentally changing the way our users work at home and on the jobsite.

The Coronavirus is a global concern and with the situation as it currently stands today, we believe that we are well positioned given our diversified manufacturing base and supply chain to deal with the challenges that may present themselves and we are confident we will be able to deliver a solid 2020.

TTI remains committed to our strategic initiative of expanding our cordless leadership. One of the key factors is TTI OPEX which supports our world class product development system, drives deep management discipline and financial rigor. TTI is highly focused on further developing our world-class organization and has a pool of talent progressing through our Leadership Development Program. We are dedicated to stringent governance practices, sustainability and to increasing our positive impact on the environment.

I would like to thank our loyal customers, suppliers, shareholders, Board and entire TTI organization for another outstanding year. Our dedicated, skilled and passionate teams across the globe are enabling us to continuously achieve outstanding results. It is our unrelenting bold vision, customer focus and business momentum that will make 2020 another successful year and position TTI with exciting opportunities in the decade to come.

TTI continues to outpace the competition by accelerating the transition to cordless tools and equipment, delivering impressive organic growth while consistently generating gross margin improvement and record earnings. This extraordinary performance marks the success of our bold strategy, our powerful culture of execution and commitment to our deeply entrenched TTI OPEX System. We are at the leading edge of the cordless revolution in power tools, outdoor products, floor care and now light equipment with our innovative, zero emissions cordless products. It is through this strategic direction and tremendous drive that TTI reliably delivers on the financial goals of outgrowing the market, driving continuous gross margin improvement, investing in strategic SG&A and growing profit faster than sales. Our relentless cordless technology creation, new product development, geographic expansion and manufacturing advancements have TTI positioned for extraordinary future growth.

Unassailable Competitive Advantages

Our business strategy generates unassailable competitive advantages through in-house technology investment in which we have the capacity and capability to develop sophisticated cordless system components in brushless motors, battery technologies, advanced electronics and proprietary software. Our growing scale allows us to generate more advanced technology, expanding our competitive advantage and generating a virtuous cycle of new innovative products.

• Initiatives like our new Advanced Energy Center are set to impact the evolution of battery technologies enabling future breakthrough cordless product successes. This state-of-the-art facility focuses on next generation battery system technology, evaluation, prototyping and testing which integrates with our deep competency in cordless system technologies and manufacturing proficiencies for the creation of breakthrough innovative product solutions.

• We have taken the next step in revolutionizing the power tool industry with the MILWAUKEE MX FUEL ground-breaking system of cordless light equipment. The MX FUEL system is a super high-voltage lithium cordless platform designed to replace continuous use corded electric, gas and hydraulic driven products. We view this equipment launch as an incredibly significant and historic event because we are making a statement that lithium powered products are truly superior to traditional powered equipment. The breakthrough MX FUEL system is replacing outdated power sources with ultra-clean, ultra-safe cordless technology.

Superior Performance Commitment

A company-wide commitment to superior performance drives our organization, fuels our culture and defines our processes. TTI has established a highly tuned new product innovation machine. We vigorously drive our TTI OPEX System throughout the company by measuring results, improving productivity, eliminating waste and unnecessary costs, controlling non-strategic overhead and SG&A. It is the stringent application of our TTI OPEX System coupled with successful new products that produces an endless cycle of improvement, generating gross margin increases, funding new product development and marketing programs.

• Our team has done a magnificent job mitigating tariffs and excelling in today’s dynamic environment. We are in a strong position with our diversified manufacturing base and flexible, broad supply chain reach. TTI is prepared for sustained growth with the significant manufacturing expansion into Vietnam and Mexico, the move to US manufacturing of our carpet-washing category, and the announced hand tool manufacturing facility in the US. We continue to be encouraged about the momentum in our global operations and the improvements generated from our disciplined TTI OPEX System.

• We have an exceptional culture and the best team in the industry. The impressively talented TTI leaders are both rigorously developed at TTI and selectively chosen from the industry. The team is driving our business success on a growing global scale. Our successful leaders have the drive and passion to achieve vast product and industry knowledge, and create a culture of high-performance and accountability in their organizations. It is our relentless, focused, motivated and outstanding people who differentiate TTI from our competitors. The growing scale of the TTI enterprise demands our highly competent leadership and robust management processes to drive success at every level of the organization. It is our exceptional TTI team which will confidently deliver our outstanding performance in the future.

• LDP (Leadership Development Program) is uniquely important in the development of our exceptional leaders to support and feed our growth. We feel strongly that our recruiting, hiring, mentoring and organizational development process are absolute TTI strengths. The process begins with investing in campus recruiting and hiring into our thriving LDP top level, high-potential college graduates from over 100 campuses. Started over twelve years ago, this investment has generated a pipeline for superstars that are populating our sales, marketing, engineering, purchasing, supply-chain, manufacturing and finance disciplines throughout the company around the world. Today, some of these LDP graduates hold roles as vice president and president. Utilizing a unique to TTI highly selective process which identifies high-potential candidates, we are planning to hire over 770 graduates from top universities in 2020. Our vision is to develop more and more of our talented LDPs to progress quickly into meaningful leadership roles throughout the organization.

Financial Goals

Vast Growth Opportunity

We have vast growth opportunities in our core professional trade, industrial markets and DIY markets and are reaching incremental new markets further expanding our future potential. The Network Effect from our leading cordless battery platforms continue to gain traction, generating an unassailable advantage.

• Milwaukee Tool has built the world’s broadest, best-selling line of full-size lithium cordless in M18, dominates the subcompact category with M12, and introduces MX FUEL as the first ever real light equipment replacement, another game-changing technology. Benefiting from our cordless new product stream and extensive MILWAUKEE product family we are growing with our core mechanical, electrical and plumbing trades and expanding into carpentry, remodeling, transportation and power utility with more increment verticals being targeted.

• The RYOBI brand is transforming the global DIY market with ONE+ and 40V battery systems powering the industry’s broadest range of tools and outdoor products. The relentless transformation to cordless brings massive opportunities for the RYOBI brand and we are building out our ONE+ and 40V families. The full suite of RYOBI mowers is leading the cordless revolution in outdoor products. We see growing demand for batteries, tool replacement and tool upgrades generated through the Network Effect of our battery systems. The future of our floorcare business is promising as HOOVER and VAX implement our strategic cordless leadership strategy with new products utilizing the detachable ONEPWR battery platform.

• Our strategically targeted geographic expansion continues to deliver results. The European theater of operations is a major focus with great potential for TTI. We are delighted with our accelerating growth rates being achieved throughout the European market. Canada, and Australia and New Zealand are bright successes where we have substantially outperformed the market and hold commanding leadership positions with our key brands. Asia is an emerging opportunity for TTI. We are highly selective where we invest. Asia is a professional market and we are focused on building the Milwaukee Asia business one country after another.

Strategic Approach to Sustainability

TTI’s cordless leadership strategy is transforming older technologies with new environmentally friendly lithium battery tools and equipment. Through our zero emissions cordless products and employment of best practices in battery recycling, product refurbishment and packaging reduction we are actively contributing to the global sustainability initiative. Our commitment to sustainable business practices in the Environmental, Social and Governance (ESG) arena is of utmost importance, and will continue to be an important factor in TTI’s strategies going forward.

Cordless Leadership

Breakthrough Leadership

I am sincerely inspired by our industry leading performance. We have achieved great success delivering a decade of impressive results. TTI has created a powerful platform with our extraordinary brands, highly focused new product development teams, TTI OPEX System and targeted geographic expansion. We strive for breakthrough leadership in cordless technology and product innovation, thus creating a seismic shift in growth opportunities. We are set to continue delivering consistent growth in gross margins thanks to highly strategic investments in productivity, mix and accretive new products, plus efficiencies from volume leverage. Our teams have built outstanding partnerships with great customers around the world. TTI is embarking on the next decade of industry leading performance and cordless leadership.

I deeply appreciate the tremendous mentorship and guidance provided by our Chairman, Horst Pudwill, during our record breaking year in 2019. His bold vision generates exceptional clarity and drive which are the foundations of our high-performance culture. At its very beginnings, Horst sent TTI on the cordless leadership path. This foresight and unwavering commitment to cordless technology and confident investments to deliver industry changing cordless products have TTI positioned for continued record achieving results. It is this bold, cordless vision that Horst and I share for building an exceptional future at TTI.

Our Strategic Focus

TTI has a powerful strategy and a disciplined process that create vast growth opportunities.