basic principles and business performance of DEUTZ AG

DEUTZ AG is the parent company of the DEUTZ Group. At home and abroad, DEUTZ AG has various direct and indirect subsidiaries and equity investments. The subsidiaries include two production facilities in Spain and Germany as well as several companies that perform sales and service functions. On 1 October 2017, DEUTZ AG acquired 100 per cent of the voting shares in both Torqeedo GmbH, an electric drive specialist headquartered in Gilching, and IML Motori S.r.l., a long-standing sales and service partner based in Milan, Italy. IML Motori S.r.l. was renamed DEUTZ Italy S.r.l. on 31 December 2017. Torqeedo GmbH and DEUTZ Italy S.r.l. (formerly IML Motori S.r.l.) have equity investments in two further companies each – of 100 per cent for both of Torqeedo GmbH’s equity investments and of 100 per cent and 75 per cent for DEUTZ Italy S.r.l.’s equity investments. In total, DEUTZ AG has a direct or indirect stake in 34 companies (2016: 28 companies). DEUTZ AG is also by far the largest production company of the DEUTZ Group and provides the head-office functions for the Group. For details of DEUTZ AG’s equity investments, please see the list of shareholdings.

Because the business performance and financial situation of DEUTZ AG are essentially the same as for the DEUTZ Group, we make reference here to the ‘Business performance in the DEUTZ Group’.

Because of the significance of DEUTZ AG within the Group, and its heavy interdependencies with other Group companies, the Group is managed at the level of DEUTZ AG. In addition to the key performance indicators used for management at Group level, the net income of DEUTZ AG, as the relevant variable in the payment of dividends, is also an element of the management system of the Company. The internal management system for the DEUTZ Group is described in this combined management report. The DEUTZ Group’s net income in accordance with IFRS is reconciled to DEUTZ AG’s net income in accordance with the German Commercial Code (HGB):

DEUTZ AG: Reconciliation
€ million  
DEUTZ Group net income (IFRS) 121.2
Consolidation of equity investments –15.4
DEUTZ AG income (IFRS) 105.8
Material differences due to different financial reporting standards  
Recognition of development expenditure 33.5
Measurement of provisions for pensions and other post-retirement benefits –4.3
Recognition of deferred taxes –9.5
Capitalisation of acquisition-related costs 2.2
Other differences relating to the financial reporting standards 1.0
DEUTZ AG net income (HGB) 128.7