`
`Chervon (HK) Limited
`Exhibit 2005 - Page 1
`
`
`
`Contents
`
`2
`8
`10
`14
`
`Financial Highlights
`Chairman’s Statement
`Chief Executive Officer’s Message
`Our Strategic Focus
`– Unassailable competitive advantage
`– Superior performance commitment
`– Vast growth opportunities
`46 Management’s Discussion and Analysis
`56
`Board of Directors
`62
`Corporate Governance Report
`74
`Environmental, Social and Governance Report
`122 Report of the Directors
`132 Independent Auditor’s Report
`136 Consolidated Financial Statements
`142 Notes to the Consolidated Financial Statements
`223 Financial Summary
`224 Corporate Information
`
`MILWAUKEE MX FUEL 14” Cut-Off Saw
`Delivers the best 14” cut-off saw experience by providing true
`14” cut capacity, the fastest cuts from start to finish, and no gas
`headaches. No emissions, less vibration, and quiet operation
`allows users to work safer and be more productive.
`
`Company Profile
`Techtronic Industries Company Limited (the “Company”,
`the “Group” or “TTI”) is a fast-growing world leader in Power
`Tools, Accessories, Hand Tools, Outdoor Power Equipment,
`and Floor Care for Do-It-Yourself (DIY), professional and industrial
`users in the home improvement, repair, maintenance,
`construction and infrastructure industries. The Company is
`committed to accelerating the transformation of these
`industries through superior environmentally friendly cordless
`technology. The TTI brands like MILWAUKEE, RYOBI and
`HOOVER are recognized worldwide for their deep heritage and
`cordless product platforms of superior quality, outstanding
`performance, safety, productivity and compelling innovation.
`
`Founded in 1985 and listed on the Stock Exchange of
`Hong Kong (“SEHK”) in 1990, TTI is included in the Hang Seng Index
`as one of their fifty constituent stocks. The Company maintains
`a powerful brand portfolio, global manufacturing and product
`development footprint, healthy financial position with record 2019
`worldwide sales of US$7.7 billion and over 30,000 employees.
`TTI designs, develops, manufactures and markets leading-edge,
`high-performance and high-quality emission free cordless power
`tools and equipment through a variety of distribution channels
`in a growing number of countries.
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 2
`
`
`
`Changes
`
`+9.2%
`
` +50 bps
`
`+10.9%
`
`+11.3%
`
`+11.6%
`
`+17.0%
`
`33.67
`
`30.16
`
`Revenue
`
`Gross profit margin
`
`EBIT
`
`Profit attributable to Owners of the Company
`
`Basic earnings per share (US cents)
`
`Dividend per share (approx. US cents)
`
`2019
`US$’ million
`
`2018
`US$’ million
`
`7,667
`
`37.7%
`
`673
`
`615
`
`33.67
`
`13.26
`
`7,021
`
`37.2%
`
`607
`
`552
`
`30.16
`
`11.33
`
`EBIT
`
`US$m
`
`Basic Earnings per Share
`
`US cents
`
`25.66
`
`22.32
`
`19.37
`
`35
`
`30
`
`25
`
`20
`
`15
`
`10
`
`5
`
`0
`
`+11.6%
`
`US33.67 cents
`
`Delivered the twelfth
`consecutive year of
`record basic EPS
`
`673
`
`607
`
`519
`
`450
`
`400
`
`+10.9%
`
`US$673 million
`
`Outpaced our
`topline growth
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`'15
`
`'16
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`Financial Highlights
`
` 10th
`consecutive year of
`record revenue
`
`• Flagship Milwaukee Tool business continues to grow 20%+ in local currency
`• RYOBI cordless delivered double-digit sales growth
`
`Revenue
`US$m
`
`8,000
`
`+9.2%
`
`US cents
`Basic Earnings per Share
`
`13.26
`
`11.33
`
`8.69
`
`6.44
`
`5.05
`
`14
`
`12
`
`10
`
`8
`
`6
`
`4
`
`2
`
`0
`
`Dividend per Share
`
`+17.0%
`
`US13.26 cents
`
`The final dividend is
`US$7.46 cents
`per share
`
`'17
`
`'18
`
`'19
`
`US$m
`
`EBIT
`
`615
`
`552
`
`470
`
`409
`
`354
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`Net Profit
`
`Dividend per Share
`3
`Techtronic Industries Annual Report 2019
`
`Net Profit
`
`+11.3%
`
`US$615 million
`
`The development of new
`products and expansion
`across all categories
`
`7,000
`
`6,000
`
`5,000
`
`4,000
`
`3,000
`
`US$7,667 million
`
`'10
`
`'11
`
`'12
`
`'13
`
`'14
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`For the year ended December 31, 2019
`
`
`
`
`
`222
`
`
`
`
`
`Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 3
`
`
`
`2,893
`
`2,615
`
`2,226
`
`1,985
`
`1,798
`
`' 15
`
`' 16
`
`' 17
`
`' 18
`
`' 19
`
`Gross Profit
`
`US$m
`
`3,000
`
`2,500
`
`2,000
`
`1,500
`
`1,000
`
`500
`
`0
`
`Gross Margin Improvement
`
`+10.6%
`
`US$2,893 million
`Drive Gross Margin Improvement
`
`+50 bps
`
`37.7%
`
`Gross Margin % improved
`from 37.2% in 2018
`
`8 years of at least
`
`+50 bps
`
`Annual Gross Margin % Increases
`
`US$278 million
`
`Gross Profit Increase
`
`
`
`Financial HighlightsFinancial Highlights
`
` 11th
`consecutive year of
`Gross Margin
`improvement
`
`Gross Profit Margin
`
`'09
`
`'10
`
`'11
`
`'12
`
`'13
`
`'14
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`37.7%
`
`37.2%
`
`36.7%
`
`36.2%
`
`35.7%
`
`35.2%
`
`+50 bps
`
`34.2%
`
`33.5%
`
`32.6%
`
`32.2%
`
`31.3%
`
`
`
`44
`
`
`
`Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019
`
`Techtronic Industries Annual Report 2019
`
`5
`
`For the year ended December 31, 2019
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 4
`
`
`
`Financial Highlights
`
` 12th
`consecutive year of
`record profit
`
`• EBIT margin improved 10 bps to 8.8%
`• Net profit margin grew to 8.0% as compared to 7.9% last year
`
`Net Profit
`US$m
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`+11.3%
`
`US$615 million
`
`'08
`
`'09
`
`'10
`
`'11
`
`'12
`
`'13
`
`'14
`
`'15
`
`'16
`
`'17
`
`'18
`
`'19
`
`For the year ended December 31, 2019
`
`Strategic SG&A Investments
`
`+40 bps
`
`SG&A
`
`Non Strategic
`-10 bps
`
`Strategic
`+50 bps
`
`2019 Working Capital
`
`Inventory
`Turnover Days
`
`Receivables
`Turnover Days
`
`Payables
`Turnover Days
`
`Working Capital as a
`Percentage of Sales
`
`Research & Development
`
`Product Management
`
`End User Conversion
`
`Marketing
`
`Sales Coverage
`
`In Store Representatives
`
`Geographic Expansion
`
`Leadership Development Program
`
`2019
`US$’ million
`
`2018
`US$’ million
`
`2,113
`101
`
`1,161
`55
`
`2,177
`104
`
`1,767
`92
`
`1,089
`57
`
`1,922
`100
`
`Changes
`
`+ 9 days
`
`– 2 days
`
`+ 4 days
`
`+14.3%
`
`+13.3%
`
`+1.0%
`
`6
`
`Techtronic Industries Annual Report 2019
`
`Techtronic Industries Annual Report 2019
`
`7
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 5
`
`
`
`Chairman’s Statement
`
`“ I am proud to report that TTI had a
`strong year of financial performance
`with record profits delivering
`a decade of consecutive annual
`revenue growth.”
`
`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.
`
`Horst Julius Pudwill
`Chairman
`March 4, 2020
`
`8
`
`Techtronic Industries Annual Report 2019
`
`Techtronic Industries Annual Report 2019
`
`9
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 6
`
`
`
`Chief Executive Officer’s Message
`
`“ We are not just selling more
`cordless power tools than the
`competition, we are building a
`great tool company for the future.”
`
`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
`
`Sales
`
`Outgrow the Market
`
`GM% Drive Gross Margin Improvement
`
`SG&A
`
`Invest in Strategic SG&A
`
`EBIT
`
`Grow Profit Faster than Sales
`
`Sales
`
`Outgrow the Market
`
`10
`
`Techtronic Industries Annual Report 2019
`
`GM% Drive Gross Margin Improvement
`
`Techtronic Industries Annual Report 2019
`
`11
`
`SG&A
`
`Invest in Strategic SG&A
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 7
`
`
`
`Chief Executive Officer’s Message
`
`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
`
`Cordless Leadership
`
`Batteries
`Aftermarket
`
`8
`
`Replacement
`Cycle
`
`7
`
`Corded to
`Cordless
`
`1
`
`2
`
`Pneumatic to
`Cordless
`
`Network
`Effect
`
`6
`
`3
`
`Hydraulic to
`Cordless
`
`5
`
`4
`
`Gas to
`Cordless
`
`Hand Tools to
`Cordless
`
`Corded Lighting to
`Cordless
`
`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.
`
`Joseph Galli Jr
`Chief Executive Officer
`March 4, 2020
`
`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.
`
`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.
`
`Our Strategic Focus
`
`TTI has a powerful strategy and a disciplined process
`that create vast growth opportunities.
`
`Powerful Brands
`
`Unassailable Competitive Advantage
`
`Innovative Products
`
`Exceptional People
`
`Sustainability
`
`Vast Growth
`Opportunities
`
`Operational Excellence
`
`Superior Performance Commitment
`
`12
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`Techtronic Industries Annual Report 2019
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`13
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 8
`
`
`
`Our Strategic Focus
`
`Unassailable
`Competitive
`Advantage
`
`TTI is at the forefront, transforming the global market for industrial,
`professional and DIY tools and equipment from traditional power sources to
`revolutionary lithium cordless power. We have been investing in technologies
`ranging from lithium batteries, powerful brushless motors to the system
`electronics necessary to develop product innovations that are disrupting our
`industry. This unrelenting dedication to advancing cordless technologies are
`underpinning product innovations aimed at performance, safety, reliability
`and productivity for the user while minimizing the environmental impact.
`The TTI product portfolio is filled with breakthrough cordless products with
`innovative user benefits and features. TTI holds an unassailable leadership
`position with cutting-edge cordless battery platforms and their extensive range
`of innovative products.
`
`Breakthrough Technologies
`
`Product Innovation
`
`MILWAUKEE M18 FUEL 1” High Torque Impact Wrench with ONE-KEY
`
`MILWAUKEE M18 FUEL 1” High Torque Impact Wrench with ONE-KEY is the world’s first cordless
`1” High Torque Impact Wrench. The POWERSTATE Brushless Motor delivers up to 1,800 ft-lbs of
`torque, making this the most powerful cordless impact wrench. The ONE-KEY technology, featuring
`the ability to Customize, Track and Manage the impact wrench, also has repeatable torque output
`for maximum control.
`
`14
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`15
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`Chervon (HK) Limited
`Exhibit 2005 - Page 9
`
`
`
`2 REDLINK PLUS
`
`INTELLIGENCE
`The most advanced system of hardware and
`software in cordless power tool electronics today.
` ■ Most advanced electronic system on the market
`for maximum performance
` ■ Total system communication with overload
`protection increases tool life
`
`XC5.0
`
`TM
`
`3 REDLITHIUM XC5.0
`
`BATTERY PACK
`Compatible with the entire M18 System,
`it delivers more run-time, power and recharges
`than the competition.
` ■ Over 2X more recharges than
`leading competitor
` ■ Fuel gauge displays remaining charge
` ■ Operates Below -18°C / 0°F
`
`
`
`Unassailable Competitive AdvantageUnassailable Competitive Advantage
`
`Breakthrough Technologies
`
`DRIVEN TO OUTPERFORM.
`
`For the first time in power tool history, M18 FUEL products are
`delivering game-changing corded performance without the cord.
`The motors on MILWAUKEE M18 FUEL tools are more powerful
`and energy efficient – outliving any other brand. To add to the
`revolutionary technology, M18 FUEL possesses the smartest
`electronics found in any power tool. REDLINK PLUS electronics
`manage an array of power requirements across 200+ M18 tools
`using one common battery. MILWAUKEE built, the M18 battery
`delivers cleaner, more consistent power, lasts longer and delivers
`more run-time in the harshest jobsite conditions.
`
`LONGER
`
`MOTOR LIFE
`
`MORE
`
`POWER
`
`MORE
`
`RUN-TIME
`
`1POWERSTATE
`
`BRUSHLESS
`MOTOR
`This best-in-class brushless motor
`works harder and lives longer than
`all leading competitors.
` ■ MILWAUKEE designed and
`built brushless motor
` ■ Outperforms all leading competitors
` ■ Longer motor life
`
`16
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`17
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 10
`
`
`
`1
`
`Unassailable Competitive Advantage
`
`Product Innovation
`
`EQUIPMENT REDEFINED
`TRADE FOCUSED
`SYSTEM WIDE
`
`The MX FUEL Equipment System revolutionizes the light equipment
`market by delivering the performance, run-time and durability
`demanded by the trades without the hazards associated with
`emissions, noise, vibration and the frustrations of gas maintenance.
`This completely compatible system goes beyond the limitations of
`gasoline and power cord units, utilizing the industry’s most advanced
`batteries, motors and electronics to deliver a best-in-class experience
`for users. This is Equipment Redefined.
`
`18
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`
`
`Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019
`
`
`
`1919
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 11
`
`
`
`Unassailable Competitive Advantage
`
`Product Innovation
`
`Continued 40V Innovation
`The cordless revolution continues with the addition of innovative
`new RYOBI 40V products and the expansion of brushless tool
`offerings. Each tool is powered by a 40V lithium-ion battery that is
`compatible with all RYOBI 40V tools, allowing for endless lawn and
`garden project possibilities on a single battery platform.
`
`#1 Cordless Lawn and Garden Brand*
`RYOBI remains the #1 Cordless Lawn and Garden Brand in the
`US* with a wide range of tools, cutting-edge technology, and
`GAS-LIKE POWER. The 40V platform offers a variety of tools such
`as string trimmers, lawn mowers, blowers, chain saws, and more.
`
`* Based on TraQline 2019 Dollar Brand Share Sales Data for Cordless Handheld Outdoor Products in the U.S.† and Walk-Behind Cordless Mowers.
`
`† Cordless Handheld Outdoor Products include string trimmers, leaf blowers and chainsaws.
`
`RYOBI 40V 21” Brushless Self-Propelled Mower
`RYOBI redefines power and convenience with the new 40V 21” Self-Propelled
`Cordless Lawn Mower. Combining 40V of lithium power with advanced brushless
`technology, this mower delivers GAS-LIKE POWER, surrendering nothing but gas.
`The high capacity 7.5 Ah battery delivers maximum run-time and instant power to
`cut up to half an acre on a single charge.
`
`20
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`Techtronic Industries Annual Report 2019
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`
`
`Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019
`
`
`
`2121
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 12
`
`
`
`Our Strategic Focus
`
`Superior
`Performance
`Commitment
`
`TTI relentlessly drives robust processes in new product development,
`operations and supply chain, organizational development and cost
`management at all levels of the Company. Our new product development
`is connected across numerous R&D sites, operating 24/7, generating
`innovative new products on a growing scale. We have diversified our
`focused manufacturing capabilities in Asia, North America and Europe
`as part of our operations strategy. Operations and global supply chain
`harness cost efficiencies with the flexibility to handle our growth
`while adapting to an ever-changing market. At the core of our superior
`performance commitment is the TTI OPEX System which extracts cost
`savings, improves quality and delivers productivity in all functions.
`Driving these processes is the TTI organization, which is built on a
`foundation of internally developed high performance leaders trained
`and mentored through our Leadership Development Program (LDP).
`TTI has the organization, systems and processes committed to delivering
`superior performance.
`
`New Product
`Machine
`
`Operational
`Excellence
`
`Leadership
`Development
`Program
`
`MILWAUKEE M18 FUEL 6½” Circular Saw Brushless Motor
`
`22
`
`
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`Techtronic Industries Annual Report 2019Techtronic Industries Annual Report 2019
`
`Techtronic Industries Annual Report 2019
`
`23
`
`Chervon (HK) Limited
`Exhibit 2005 - Page 13
`
`
`
`Superior Performance Commitment
`
`New Product Machine
`
`A TTI strategy is the investment in R&D to drive innovative, technology-
`rich product development. We have built a powerfu