The directors present the strategic report for the year ended 31 December 2023.
Description of Group Activities
SOMFY designs, assembles and distributes motors and automated devices (remote controls and sensors) as well as smart systems which control their operation. SOMFY ‘s main manufacturing activity is the assembly of subunits and parts designed by it but produced by subcontractor partners. The R&D activity’s role is to anticipate peoples’ new habits and needs in relation to homes and buildings, to design the corresponding solutions, guarantee the performance and compatibility of products from the same brand and ensure their interoperability with other brands in the field of connected homes and buildings. SOMFY controls its distribution (international supply chain, local sales and marketing presence), which means SOMFY can deliver its products worldwide. Its customers are manufacturers and installers, who integrate SOMFY solutions into carrier products: blinds, shutters, doors and gates, or by replacing existing equipment in buildings, by leveraging the strength of the Group’s brands. SOMFY also distributes finished products (a selection of motors and control panels, connected objects, digital applications) that are sold by prescribers, networks, retailer installers or resellers, via large specialist and DIY stores, and online, either directly or indirectly. SOMFY products are installed indiscriminately in individual homes, small businesses, apartment blocks, office blocks, hotels and collective residences.
Executive Summary
Somfy Ltd experienced a normalisation during the financial year in 2023, with a decline in turnover and profit compared to the previous year. The company reported a turnover of £18,583,101, a decrease from £19,479,124 in 2022, and a net profit of £1,234,664, down from £1,718,934. The main markets in which Somfy Ltd operates have been subject to varied performance in the last three years in line with the volatile conditions set forth by the exit from the COVID-19 pandemic. During 2023, the results of inflationary impacts led to decreased demand in the key growth markets for Somfy Ltd. Combining this with the fact that key customers across all markets started to reduce the significant stocks they had built up in the wake of global supply challenges in recent years, resulted in the decreased revenue and profit for Somfy Ltd.
Company Overview
Somfy Ltd is engaged in the sale and distribution of motors and controls for the window and door industry. The company operates within a highly competitive sector, and has established itself as a key player in the UK market. Its strategic focus remains on leveraging technology and improving supply chain efficiencies to enhance customer satisfaction and market share.
Somfy Ltd operates strongly in the residential access channel and motorisation of window fashion treatments.
Financial Performance Analysis
Revenue Analysis:
The company's revenue decreased by 4.6% year-over-year, primarily due to a reduced demand in the post-pandemic economic environment and competitive pressures. The decrease reflects a normalisation of sales levels after the heightened demand during the COVID-19 pandemic. Customer reduction of stock also contributed to the reduction in sales.
Profitability Analysis:
Profit before taxation saw a decrease to £1,622,490 in 2023 from £2,130,105 in 2022. The net profit also decreased, which can be attributed to increased administrative expenses and a challenging economic environment, influenced by inflation and global supply chain disruptions.
Expense Analysis:
Administrative expenses increased significantly, from £4,518,325 in 2022 to £6,066,118 in 2023. This rise is mainly due to increased labour costs and heightened operational costs linked to inflationary pressures.
Financial Position
Balance Sheet Review:
The total assets decreased from £2,503,034 in 2022 to £1,732,898 in 2023. The reduction in net assets is largely a result of increased dividend payments and higher administrative expenses. The company’s equity also decreased accordingly, reflecting a reduction in retained earnings after dividend distributions.
Capital Structure and Liquidity Analysis:
Somfy Ltd maintained a solid capital structure with an equity ratio consistent with the previous year, despite financial pressures. The company’s approach to managing liquidity has been cautious, focusing on maintaining sufficient cash flows to support operations and strategic investments.
Financial KPIs
1. Revenue and Profitability
Revenue: Decreased from £19,479,124 in 2022 to £18,583,101 in 2023, reflecting a decline of approximately 4.6%. This indicates a contraction in sales, which could be due to market contraction, increased competition, or a decrease in consumer spending.
Net Profit: Reduced from £1,718,934 in 2022 to £1,234,664 in 2023. This 28.2% decrease in profitability reflect increased costs or lower sales of end user products in key markets.
2. Gross Margin and Operating Margin
Gross Margin: Increased slightly, suggesting a better control over cost of sales & a shift to higher-margin products.
Operating Margin: Declined from 2022 to 2023, impacted by rising administrative and operational costs not matched by revenue growth.
3. Liquidity Ratios
Current Ratio: The current ratio of Somfy Ltd for the year ended December 31, 2023, is approximately 1.37. This, combined with company cash pooling policy process, ensures that the company is in a strong position to cover its short-term obligations.
Non-financial KPIs
1. Customer Satisfaction
Service score (target >4.5): The management team at Somfy Ltd continue to have customer service as a primary focus. The score for 2023 was 4.8. Increased use of our electronic e-shop continues to deliver benefits for the customer, and the company aims to switch to fully electronic ordering by June 2024.
End user service scoring: As the end user base for Somfy products grows in the UK, the company continues to monitor and track the service rate in assisting end users to enable them to get the best from Somfy products.
2. Environmental Impact
Carbon Footprint: The company measures the total greenhouse gas emissions caused directly and indirectly by the business. It's essential for evaluating the environmental impact and sustainability of company practices as the business grows. Data was collected and audited in 2023. The business expects to have comparative data in early 2025. KPI set to reduce carbon based on 2023 data.
Waste Reduction: The amount of waste reduced through recycling efforts and the continued focus on environmental impact of the company. These figures are directly collected in the carbon footprint data collection.
3. Employee Health, Safety, Wellbeing & Sense of Purpose
Workplace Accidents: The number of recorded workplace accidents stayed flat year on year, which reflects the effectiveness of health and safety policies. The company continues to focus on this area on a monthly basis to maintain our good practice. (2023 – 2 accidents resulting in 0 days lost time)
Wellbeing: The company continues to invest in benefits for employees that support their general health and wellbeing including cash plans, mental health support and availability of mental health first aid support. We track usage of these benefits including overall value to Somfy Ltd employees – Cash plan 102 claims made (19 out of 25, 75% of workforce) Total value of claims increased year on year across dental, complimentary therapy, Prescription, optical and support for private medical insurance.
Engagement: The company management team continue to use the internal engagement survey conducted every two years to drive activity and action in order to create the best culture and working. In most recent survey, scores increased by 0.7 pts to 8.4 with 96% participation in Somfy Ltd.
KPI Analysis
Combining financial and non-financial KPIs provides a holistic view of Somfy Ltd's operational, environmental, and financial health. While the financial data may show a contraction in profitability, non-financial metrics like high customer satisfaction scores and improvements in environmental impact suggest strong long-term potential and continued brand loyalty for the company. The management team continues to use a wide assortment of KPIs to deliver performance and strategy for the business.
Risk Analysis
The strategic report identifies several external risks including geopolitical tensions in Eastern Europe & the Middle East affecting energy prices and global inflationary trends. Financial risk management strategies have been focused on diversifying supply chains and hedging against currency fluctuations to manage costs effectively.
Geopolitical Unrest in Eastern Europe & Middle East.
The ongoing conflicts in Europe & the Middle East presents limited risk to the operations of Somfy Ltd. There are no significant suppliers in Ukraine or Israel. However, the effects on energy pricing levels as a result have manifested in downstream price increases in various areas of the supply chain. The risk to shipping in the Suez Canal and surrounding area continues to present a situation which requires close monitoring with a potential impact on shipping costs and lead times.
We continue to feel the impacts of an increased cost base, driven by rising costs in production during 2022 and 2023.
Whilst further impacts cannot be discounted if there is further escalation in the conflicts, the current status indicates stability in the impacts experienced by Somfy Ltd.
Inflationary and Interest Rate Impacts
The conflicts abroad combined with other factors had resulted in significant increases in inflation and interest rates, we now see reduction in inflation but still experiencing interest rates at their peak. With the prospective customer of Somfy Ltd, and its customers later in the demand chain, being impacted by household disposable income and the current economic climate, 2023 has seen an initial impact on sales as a result of these factors.
Environmental Objectives
SOMFY has made sustainable development a key element of its strategy and its Ambition 2030. By inspiring better living environments accessible to all, SOMFY is bringing well-being, safety and energy savings to its customers. Through connected products and services, users benefit from features that simplify their everyday lives, ensure the active monitoring of goods and people, while optimising the thermal and light contribution of solar energy.
SOMFY’s vision - “Inspiring a better way of living accessible to all” - serves the Group’s sustainable development trajectory, which is being built step by step: every day, the Group reduces the impact of its activities and products on the environment, cares about the daily lives and future of its employees, and maintains quality relationships with its partners and local communities. SOMFY’s sustainable development policy is the foundation of its sustainable growth. It is part of the Group’s Ambition 2030, through the implementation of its corporate responsibility and societal commitment, and is structured around three pillars: Planet, People and Prosperity.
Planet
SOMFY is reducing its environmental impact to help protect the planet and respond to the climate emergency. The Group’s solutions are accessible to all, improve the energy performance of buildings and contribute to the well-being of their occupants.
People
SOMFY strives on a daily basis to provide its employees with a fulfilling work environment that is also fair and inclusive. The Group also wants to take care of their sustainable employability by developing their skills.
Prosperity
SOMFY believes that value creation depends first and foremost on the mobilisation of all. For all of its stakeholders, the Group implements co-building approaches and respectful and ethical practices to start anew every day and create the trust that is essential to its future prosperity. The key themes of this sustainable development policy have been ratified by the Sustainable Development Committee of SOMFY’s Board of Directors: – Planet pillar: rolling out a low-carbon strategy by reducing the Group’s emissions and developing solutions that help avoid greenhouse gas emissions in buildings. In addition to carbon, SOMFY is broadening its scope of action and is committed to preserving biodiversity and promoting circular economy; – People pillar: ensuring the sustainable employability of its employees in a work environment that fosters performance and the development of inclusive teams; – Prosperity pillar: for sustainable growth, respecting all industry participants through ethical business practices that comply with product standards and GDPR requirements, involving suppliers in a responsible purchasing approach, and aiming for customer satisfaction.
Somfy Ltd contributed, for the first time in 2023, to collection of carbon footprint data which was audited by Science Based Targets. On going data collection will take place in 2024 with the ability to have comparative results in 2025.
Outlook and Strategic Focus
The outlook for Somfy Ltd remains cautiously optimistic, with strategic focus on expanding digital sales platforms to enhance customer reach and improving stock management to align with changing market demands. The company plans to continue its investment in marketing and new product development to drive revenue growth.
Somfy Ltd continues to maintain a platform for growth in the people, product, and strategy for the UK & Ireland. Supported by significant research and development functions at group level, Somfy Ltd will be well supported in bringing innovations to the market in the coming year. Combined with other strategic opportunities brings the management to the conclusion that cautious optimism in low growth is achievable in the coming year.
Conclusion
Despite the challenges faced in 2023, Somfy Ltd has maintained a robust strategic position with clear focus on operational efficiency and market expansion. The strategic initiatives aimed at digital transformation and market diversification are expected to strengthen the company’s market position and improve financial performance in the coming years.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 14.
The company paid dividends in the year in the amount of £2,000,000 (2022: £1,000,000).
Financial risk management objectives and policies
The Company’s activities expose it to a number of financial risks including credit risk, cash flow risk and liquidity risk.
Credit risk
The Company’s principal financial assets are bank balances and cash and trade and other receivables.
The Company’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
The Company has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Liquidity risk
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Company uses a mixture of long-term and short-term debt finance.
Further details regarding liquidity risk can be found in the Statement of accounting policies in the financial statements.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Constantin, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Geopolitical Unrest in Eastern Europe
The ongoing conflict in Europe presents limited risk to the operations of Somfy Ltd. There are no significant suppliers in Ukraine. However, the effects on energy pricing levels as a result have manifested in downstream prices increases in various areas of the supply chain. In 2023, increases in trade pricing has reflected those impacts and further increases cannot be ruled out in the short to medium term.
Whilst further impacts cannot be discounted if there is further escalation in the conflicts, the current status indicates stability in the impacts experienced by Somfy Ltd.
Inflationary Impacts
The conflict in Ukraine combined with other factors has resulted in significant increases in inflation and interest rates. Whilst the prospective customer of Somfy Ltd and its customers later in the demand chain are impacted by household disposable income and the current economic climate, 2023 has seem limited impact on sales as a result of these factors to date.
The current level of interest rates causes concern whilst homeowners face expiring mortgage rate deals in the course of the next year. The management team continue to monitor these impacts and the relation to sales.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We considered the nature of the company’s industry and its control environment, and reviewed the company’s documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management and the directors about their own identification and assessment of the risks of irregularities, including those that are specific to the company’s business sector.
We obtained an understanding of the legal and regulatory framework that the company operates in, and identified the key laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements; and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty.
We discussed among the audit engagement team including relevant internal specialists such as tax specialists regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
enquiring of management and external legal counsel concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations; and
reading minutes of meetings of those charged with governance and reviewing internal audit reports.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the companyand its environment obtained in the course of the audit, we have not identified any material misstatements in the directors' report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The notes on pages 18 to 29 form part of these financial statements.
The notes on pages 18 to 29 form part of these financial statements.
The notes on pages 18 to 29 form part of these financial statements.
The notes on pages 18 to 29 form part of these financial statements.
Somfy Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 7 Lancaster Way, Airport West, Yeadon, West Yorkshire, LS19 7ZA.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £1.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The depreciation policies have been set according to management's experience of the useful lives of a typical asset in each category, something which is reviewed annually. It is not considered practical to use a per unit basis to allocate depreciation without undue cost and therefore amounts are charged annually. The depreciation charged during the year was £36,347 (2022 - £35,619) which the directors feel is a fair reflection of the benefits derived from the consumption of the tangible fixed assets in use during the period.
Inventories are valued at the lower cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends.
Outstanding trade debtor balances are reviewed on a line by line basis by management to identify possible amounts where a provision is required. Management closely manage the collection of trade debtors and therefore are able to identify balances where there is uncertainty about its recoverability, and determine what provision is required (if any).
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date: