SOMFY - Annual financial report 2018

04 MANAGEMENT BOARD MANAGEMENT REPORT

INFORMATION ON RESEARCH AND DEVELOPMENT ACTIVITIES (ARTICLES L. 232-1 AND L. 233-26 OF THE COMMERCIAL CODE)

Midway through the Believe & ACT! strategic plan, R&D initiatives have yielded results and have made real progress in all the areas of growth identified in the plan, as well as in our core business. These initiatives continue to focus on methods and equipment to promote innovation. In 2018, our R&D initiatives to connect our entire core business and gain recognition as an industry standard for automation and the connectivity of opening and closing systems in homes and buildings were recognised at two trade shows of significance to the Group: in January at the CES (Consumer Electronics Show) in Las Vegas, and in March at R+T, the trade fair for our industry (Shutters, Blinds, Doors & Gates), which takes place every three years in Stuttgart. CES 2018 proved a success for Somfy. When it set up its display at the CES in Las Vegas, Somfy had a clear ambition – to position itself as a key player in the Smart Home and Internet-of-Things (IoT). Mission accomplished. Somfy’s 180 m² booth, at the heart of the Smart Home space, attracted crowds of visitors, including the French Secretary of State for Digital Affairs, Mounir Majhoubi. American customers discovered our new Zigbee bi-directional (open protocol) motors and Somfy’s vision for the Smart Home in three areas: Home Protect, Home Climate and Home Ambiance. French specialist superstores (Boulanger, Leroy Merlin, etc.) were particularly interested in the Home Protect security range. This showcased the Group’s latest connected innovations: a connected outdoor camera, a connected thermostat (launched in 2017) and a connected door lock. The trade fair gave us the opportunity to talk to people about our expansion strategy, So Open, launched in 2017, and to mention Somfy’s expansion into four areas: protocols, ecosystems, the TaHoma gateway and our APIs (Application Programming Interfaces). These allow third parties to interact with Somfy applications and create new solutions using their own applications. Partners we were delighted to welcome at our booth included Schneider, Legrand, Google and Alliance Zigbee, etc. Somfy enjoyed very good media coverage particularly in highly influential American and French media, such as CNET, Digital Trends, 01net and Les Numériques, amongst many others. The R+T 2018 trade fair was attended by more than 60,000 visitors from more than 125 countries. It is the leading trade fair for market innovation, acting as a barometer of the activity in our business lines and offering an ideal forum for exchange for the Somfy brand and its customers, whom we welcomed at an 840 m² stand with five separate areas for sales presentations: Home Ambiance, an immersive display of our new product range in connected interior blinds and curtains; Home Protect: security innovations including an openwork rolling shutter motor, our new outdoor camera and the Home Keeper professional alarm; Home Climate: devices for energy efficiency and air quality with a new connected thermostat, window-opening motor and a new building-management system, animeo Connect; Home Access: new access management equipment (motorised garage doors and gates, connected door locks, connected video door phone, etc.); and, finally, Somfy With You: our brand services ecosystem. The Group’s other brands were also represented at R+T 2018 with their own stands and innovations.

Another achievement of 2018 involving all R&D teams and departments was the introduction of a professional network to promote the Group’s technological expertise. The “Somfy Tech Program”, launched in June 2018, aims to strengthen the internal network of technological capabilities. This initiative allows us to identify technological fields that are strategic for Somfy, identify the necessary resources for these fields and identify relevant expert employees. This offers a new way of promoting the competences of these employees and increasing their visibility within the company. It also gives us time to nurture and expand their expertise with a view to maintaining, and even increasing, the technical expertise of other employees working in R&D through expert support and training. On 14 June, 16 employees were promoted to the rank of Expert. This programme will enable us to safeguard those strategic areas in which we face competitive challenges. The selection of these areas and programme co-ordination is entrusted to an Expert Committee which identifies relevant experts for each area. The other major R&D-related achievement affecting all areas of the Group is the rollout of a centralised database to manage the technical specifications of our products: MDM or Master Data Management, launched in June 2018. One of its objectives is to increase the reliability of the launch process. In the medium term, the MDM will be closely coupled with the future ERP (Enterprise Resource Planning) solution selected by Somfy, with a view to eliminating multiple data entries and corrections. MDM foreshadows the rollout of a unified product information management (PIM) solution, scheduled for delivery in 2019 to feed our business systems. INNOVATION DEPARTMENT — The Innovation Department supports the operational teams, helping them formulate their vision for the future and identify drivers for innovation. It also supports them on their first project resulting from this new vision. The Innovation team organises workshops for groups of employees, using a method primarily focused on consumers and their usage patterns. Since 2016, the Innovation Department has organised My Somfy Lab, a collaborative creation platform, based on a prospective network within the company. It has a quarterly publication, “Explore”. It hosts a group on Yammer, the company’s social network, and Open Cafés to disseminate good practices and research findings. In April 2018, the Innovation Department, in partnership with the development teams, inaugurated a 75 m² FabLab (Fabrication Laboratory) called the “Yeti Lab” at the Cluses R&D Centre. This laboratory allows teams to produce a prototype of their project using its equipment (3D printer, laser cutting, etc.) and methods. Its aim? To be able to move quickly from an idea to a prototype, to turn the idea into a physical object with a view to assessing its feasibility, potential uses, etc. It promotes collaborative work over short timescales aiming to generate momentum for the project. The FabLab also offers workshops and training and is targeted at all employees.

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SOMFY – ANNUAL FINANCIAL REPORT 2018