SOMFY - Annual financial report 2018

04 MANAGEMENT BOARD MANAGEMENT REPORT

At the end of the year, the Innovation Department also launched a new initiative, IDEAS CONTEST, allowing employees all over the world to participate in our innovation programmes and put forward their own ideas; and, if successful, potentially see them come to fruition as prototypes developed in the FabLab. This initiative seeks to strengthen the company’s flow of ideas and innovation and supports the patent process through PPI (Patent a Product Idea) sheets. INTELLECTUAL PROPERTY AND TECHNOLOGICAL INNOVATION DEPARTMENT — Somfy consistently invests in intellectual property and particularly in patents. At the end of 2018, its portfolio contained 2,153 patents or patent applications. In 2018, 40 new inventions were registered with the INPI (France’s National Industrial Property Institute), a figure in line with previous years. Somfy routinely and consistently protects its innovations, making it one of the leading French patent applicants. The Group also supports its brands and increasingly seeks to prosecute companies which try to use names which are similar or identical to its own. It takes this action systematically, against brands, domain names or commercial websites. The Intellectual Property and Technological Innovation Department is co-founder of the Somfy Tech Program initiative. TECHNICAL DEPARTMENT — Cross-company collaboration on methodological issues concerning software development, to guarantee the interoperability of different solutions and anticipate data flow between both embedded and cloud-based products and services, is still a key driver for the continued improvement of our teams. Notably, the Technical Department is continuing to work to introduce standards development within the Group to improve agility and continued service improvement, with a further rollout of the Engineering System that was first deployed in 2017 on the Modules principle. This is essential for an understanding of complex systems, from modelling to maintenance, for purposes of software design and also for mechanical systems. The Technical Department has continued to develop and deliver a complete portfolio of technological building blocks with two main objectives: next stage connectivity and energy-efficient electrical motors. The Technical Department acted as project manager in the introduction of the Somfy Tech Program initiative. PROXIMITY R&D CENTRES — NANXUN (LIAN DA, China) In 2018, operations grew with staffing levels remaining stable at around 45 engineers and technicians in mechanical design, electronics development and project management. Synergies with the development teams, based in Cluses, are now fully operational. The number of new projects rose from 22 in 2017 to 33 in 2018. Teams in Cluses and Nanxun launched new ranges of wirefree motorisation for interior blinds. These new tubular motors dedicated to residential markets clearly outstrip those of our competitors in terms of performance and autonomy. Our range of motorised curtains has also been overhauled in order to better address the needs of the global market and more specifically Asia and the Middle East. The new “ultra-quiet” Glydea generation of motors has been on the market since September 2018. The new Movelite range of motors, designed as an entry-level product, has been available since December 2018. Development of connected

solutions for the Asian and American markets has been stepped up. Thanks to the joint endeavours of the teams in Cluses, Hong Kong and Nanxun, a full range of motors, controls and sensors will soon be available in a Zigbee version. Finally, our range of tubular motors designed for emerging markets has also been overhauled with the launch of our new “optimum” range.

NIEPOLOMICE (SOPEM, Poland)

Led by the Technical Department, in 2018 this site continued to build its capability with, in terms of organisation, the introduction of a joint technical centre for the development and validation of embedded software.

BOLOGNA (WAY, Italy)

In 2018, the ASA and Mingardi brands R&D centre completed three major projects. WAY completely overhauled its range of tubular motors and selected a motor base produced by SITEM in Tunisia which is fully compatible with all Somfy accessories, thereby facilitating multi-brand approaches amongst the Group’s customer base. In the field of home automation, WAY collaborated with Overkiz to produce a home box using ASA brand RTW protocol which allows ASA radio motors to be remote-controlled in applications for rolling shutters, awnings and screens. Finally, WAY launched a new motor designed to open windows, produced in three different models to meet different market needs in terms of power and technical specifications. CONNECTED SOLUTIONS BUSINESS — CONNECTED SECURITY 2018 The Connected Solutions business has upgraded its organisation to affirm its positioning in the security and residential access control market in Europe. Since 1 October, the new Security Business Group (BG) has brought together teams from Cluses and Rumilly, from Somfy and its subsidiary Domis, and those of Labège (Toulouse), from the acquisition in 2016 of Myfox. The aim is to acquire the resources they need to consolidate and develop the positions they have achieved in a highly competitive sector, and thus ensure the long-term success of this fast-growing business. Security, which complements Somfy’s core business, is set to be a valuable addition to the Group’s historical product ranges. It is also set to accelerate the use of short channels and allow us to win new customers. Among other advantages, the Security BG uses a collaborative R&D approach of the design thinking type, where the product design and the constant improvement of these products through upgrades are grounded in an iterative process, based on feedback from sales teams, customers, consumers, journalists, etc. This user-centred approach is made possible by Agile project management – a product development method from the digital world that the BG has tailored to its own industrial environment. This overall approach also applies to production and procurement. The Rumilly manufacturing facility, managed within the BG and dedicated to Connected Solutions, was certified as an “Industry Showcase of the Future” by the Future Industry Alliance in November. It helps to bring connected objects designed and manufactured in a 4.0 connected factory to connected consumers. The first product to date to have emerged from this combined approach is the Home Keeper alarm, launched in October. Through connectivity, it combines a professional-typed product, with an Installer application for easy installation and maintenance on the one hand, and on the other hand the Somfy Protect application's same quality of user experience and security services.

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SOMFY – ANNUAL FINANCIAL REPORT 2018