SOMFY - Annual financial report 2018

07 CONSOLIDATED FINANCIAL STATEMENTS

NET FINANCIAL DEBT —

8.7

57.3

9.5

1.6

44.7

178.6

42.1

222.4

104.6

2017 Net financial surplus

Cash flow Change in WRC Net investments in property, plant and equipment and intangible assets

Dividends

Dooya - Change of method

Put options and earnout

Other

2018 Net financial surplus

The balance sheet remained very strong, with equity that increased to €894.4 million. The net financial surplus totalled €222.4 million, an increase of €117.8 million, including €42.1 million in respect of the change in Dooya’s consolidation method. OUTLOOK — The home motors and automation market remains structurally buoyant as a result of growing consumer demand for comfort and security, and growing public awareness of energy and environmental challenges. A short-term slowdown cannot however be ruled out, on account of economic uncertainties and geopolitical risks throughout the world. The investment effort will be maintained, and even intensified should the context allow it, to enable the Group to consolidate its base and its leadership. It will specifically focus on product innovation, streamlining information systems, with the rollout of an ERP over the course of the year, and digitalising organisations and processes. The policy of developing partnerships with complementary players and the opening up of new ecosystems and protocols (ZigBee network) will also be pursued. This will form part of the commitment to offering “integrated” solutions based on proprietary protocols, while simultaneously continuing to digitalise the historical activities, and will help position the Group as an industry standard for the connected home.

2018 HIGHLIGHTS

CHANGE IN DOOYA’S POSITION AND CONSOLIDATION METHOD WITHIN THE GROUP — Somfy has held a 70% interest in Dooya , the Chinese leader in tubular motors since 2010 and has a call option on the remaining 30%, exercisable from 2035. Governance alongside the minority shareholder in the company was implemented upon acquisition, with Somfy having majority representation on the Dooya Board of Directors. Since then, Dooya has grown at a sustained rate while remaining highly profitable. Its sales increased from €35 million in 2010 to €163 million in 2017 and its current operating margin fluctuated between 6 and 7% over the period, except last year, as a result of higher raw material prices and significant industrial and commercial investments. Under the influence of Somfy, the company has focused on the Chinese domestic market, where it now holds a leading position, but has consequently been less active than its main local competitors in international markets in which it has significant potential due to its positioning.

For this reason, the Group wished to clarify its brand policy and has decided to: focus on Somfy and related brands (Simu, BFT, Asa, etc.), – spearheads of the connected building market, in order to stimulate their innovation capacity and consolidate their positioning and performance in the various market segments; manage Dooya as an independent entity, in partnership with the – minority shareholder to enable it to develop separately, particularly at international level, and adapt as effectively as possible to its own competitive environment. In this way, the Group intends to revitalise and consolidate the foundation of its main brand, Somfy, while securing Dooya’s position and thus preserve the value of its investment in the company. At the end of June 2018, new rules of governance have been adopted for this purpose without involving any changes to the capital structure but consolidating the minority shareholder’s role with joint control over the company. Pursuant to IFRS 10 and 11, these changes resulted in Dooya being excluded from full consolidation and its consolidation under the equity accounting method at its fair value as determined by an independent expert.

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SOMFY – ANNUAL FINANCIAL REPORT 2018