SOMFY - Annual financial report 2019

07 CONSOLIDATED FINANCIAL STATEMENTS

These cash flows have been projected over several years using specific growth rates which are consistent with the Group’s historical growth rates. The growth rate used to project cash flows to infinity is consistent with the long-term inflation rate relevant to the countries concerned. The discount rate used corresponds to the weighted average cost of capital and reflects the expected return on invested capital (equity and liabilities necessary to finance operations). It is

calculated based on the financial data extracted from a sample of comparable companies, comprising listed companies operating in the same business segment as the companies to be valued. Risk is mainly taken into account at a cash flow level. In 2019, cash flow discount rates, determined from market data, were 10% for the European CGUs and 18.0% for the Asian CGUs. In 2018, cash flow discount rates, determined from market data, were 10% for the European CGUs, 18% for the Brazilian CGUs and 16.5% for Asian CGUs.

BREAKDOWN OF THE GOODWILL OF THE MAIN CGUS AND DETAILS OF THE MAIN ASSUMPTIONS USED FOR EACH CGU AT 31 DECEMBER 2019

Gross value

Impairment

Net value Discount rate Rate of growth to infinity

€ thousands

80,636

BFT

92,918

-12,281 -7,574

10.0%

2.0%

–

O&O

7,574 1,091

–

–

1,091

Domis

–

10.0%

2.0%

Axis/Somfy Activités SA/Somfy Protect by Myfox

10,426

20,126

-9,700

10.0%

2.0%

– – –

Pujol

5,680

-5,680

– – –

– – –

Neocontrol

423

-423

Lian Da iHome

8,882 1,438 2,367

-8,882

719

-719

18.0% 10.0% 10.0%

2.5% 2.0% 2.0%

2,367

Simu Other

– –

313

313

TOTAL FULLY-CONSOLIDATED COMPANIES

140,812

-45,259

95,553

–

–

The revision of the iHome business plan led to the recognition of goodwill impairment of €0.7 million at 30 June 2019. Following a review of the value of other goodwill, no other impairment charge was recognised during the 2019 financial year. Given Somfy Protect by Myfox’s full consolidation by Somfy, residual goodwill was transferred to the Somfy CGU’s overall goodwill at 31 December 2018. Furthermore, no impairment was necessary in relation to assets with an unspecified life and the use of which is independent from other assets. Sensitivity analysis OTHER INTANGIBLE ASSETS NOTE 5.2

The Group conducted sensitivity analyses on the results of impairment tests using different assumptions for EBITDA ratio and discount rates. Analyses of the sensitivity to assumptions considered individually, including changes deemed reasonably possible in these assumptions, have highlighted scenarios where the recoverable value would fall below the book value of assets subject to the tests, therefore requiring additional impairment of the latter: the total impairment of the BFT goodwill at the end of 2019 was – €12.3 million. A one-point increase in the discount rate combined with a two and a half-point decrease in the EBITDA to sales ratio in the normative flow used in the calculation of the terminal value would require an additional impairment of €2.2 million; a two-point increase in the discount rate combined with a – two-point decrease in the EBITDA to sales ratio in the normative flow used in the calculation of the terminal value could lead to the recognition of an additional impairment of €0.4 million on the goodwill of iHome.

Intangible assets acquired by the Group are recognised at historical cost, after deduction of accumulated amortisation and potential writedown. Intangible assets primarily comprise: SOFTWARE Internally-developed software is recognised on the balance sheet when the following two conditions are met simultaneously: it is probable that the future economic benefits attributable – to the software will flow to the company; and, its cost or value can be measured reliably. – Conditions defined by IAS 38 in terms of development cost capitalisation must also be met (including project technical feasibility, intention to complete the software and availability of resources).

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SOMFY – ANNUAL FINANCIAL REPORT 2019