Context

Macroeconomic context

Logista’s many business operations around the world can be shaped by the international political, social and macroeconomic climate and the impact that this has at the European level. During the 2022 financial year, the macroeconomic climate of the post-pandemic economic recovery was marked by two key events, firstly soaring raw material prices, and the subsequent spike in fuel and energy prices, and secondly, the war which broke out on 24 February between Russia and Ukraine has only served to exacerbate this trend and increase uncertainty concerning the pace of economic recovery over the coming months. This uncertainty has triggered volatility in the markets and in the prices of raw materials and fuel. A problem that has in turn driven inflation up to levels far higher than anything seen in recent years and caused central banks to hike interest rates.

Although Logista was dealt a blow by this complex macroeconomic climate during the first few months of the year, efficient management has allowed the company to successfully offset its effects.

The tourism sector has registered a positive performance and even recovered pre-pandemic levels across the various regions of southern Europe. This has favoured overseas demand for tobacco and convenience products – one of our most important businesses in our main markets (Spain, France, Italy and Portugal). Meanwhile, the Pharma business continues to benefit from the effects of the COVID-19 pandemic. Lastly, we have strengthened the solutions offered by the transport business lines, increasing the efficiency of our operations and acquiring Speedlink Worldwide Express at the start of the year, which has allowed us to extend our platform to other countries and our logistics network in the European Union

With regard to the short-medium term, we must also consider the possibility that the cost of the transport business will continue to climb on the back of rising oil prices. Although this complex backdrop is not expected to change over the coming months Logista should not be as adversely affected as other companies thanks to its equity structure and its ability to generate cash flow given that for the most part of its transport and distribution services involve non-cyclical products. We also remain committed to investing in growing our businesses, as shown by the announcement of the agreement to acquire Transportes El Mosca and Carbó Collbatallé, acquisitions which we expect to help bolster our results in the short-medium term thanks to the synergies and the cost reduction they will generate. By continually improving the efficiency of our processes and our business model, we have successfully mitigated the negative impacts of the current macroeconomic context on the Company’s results.

Regulatory context

As in previous financial years, the regulatory environment in the pharmaceutical and tobacco sectors has continued to introduce more stringent requirements for checks on the distribution of these products, and as such, any companies wishing to continue operating in the future must be able to comply with these requirements. Logista has been actively involved in this process, both in terms of establishing internal systems and controls that will allow it to continue offering our traditional services, but also in terms of acquiring new companies that allow us to break into new business areas such as the distribution of frozen goods.

This not only serves as a testament to our unwavering resolve to comply in the strictest sense with regulatory requirements, but also to our commitment to providing excellence in our client services via solutions that enable them to prepare for meeting such requirements.

Digital transformation and innovation

We are driving forward with our digital transformation of business processes to increase internal efficiency and we are deploying technical innovations for new client services.

The most noteworthy projects in 2022 were:

Optimising transport management in the supply chain for pharmaceutical products, maximising the potential of the routes and making best use of the available lorries for deliveries to pharmacies and hospitals. Entirely digitalised services include end-to-end temperature control in warehouses and lorries. Clients can track when their deliveries will arrive. The use of the digital twin in delivery services allows transport managers to simulate a number of scenarios to help them respond immediately to unforeseen circumstances.

Using huge amounts of sales data in pharmaceutical and convenience store businesses, allowing us to automatically optimise how we segment points of sale and product groups with Artificial Intelligence (AI). As a result, the sales and marketing teams can launch highly targeted one-to-one marketing campaigns to thousands of retailers. Tailoring products and services to individual points of sale increases both sales and margins, with the latest AI-based technology guaranteeing high-quality data and reliable results.

Increasing our presence at the points of sale in different channels by carrying out a full-scale update of the POS platform. Using the latest software technology, optimising the user interface and rolling out new hardware for 50,000 point-of-sale terminals reinforces Logista’s presence and integration. The POS platform offers new value-added payment and lottery services and also helps to generate huge amounts of data about consumer behaviour.

Supporting tobacco manufacturers’ direct-to-consumer (B2C) business model for reduced-risk products and its related devices by extending an express delivery platform in Italy. We are optimising transport services from tobacconists to consumers by taking advantage of the wide coverage of convenience stores and using riders to maximise last-mile deliveries to consumers

Internally, the business processes pertaining to support services such as finance, human resources, procurement and information technology are being fully integrated through the use of robotic process automation. The replacement of manual operations with automated processes is significantly reducing processing times and increasing efficiency. An integrated budgeting tool is also being rolled out, phasing out manual processes and supporting data-driven decision-making by enabling finance experts to simulate various business scenarios.

During 2022 financial year and in line with our commitment to digitalisation and the use of technology, the installation of the “SAP GRC Risk Management” system has been rolled out. The aim is for the integrated risk management system to be up and running in the 2023 financial year (see detailed information in the corporate governance chapter: process for identifying, evaluating and mitigating risks).

Cybersecurity

We continue to improve cybersecurity at Logista, focusing on three core pillars:

(1) strengthening the overall internal structure of our cybersecurity operations and ensuring we benefit from the expert services of the leading companies in the sector, (2) deploying, new security technology and (3) raising employee awareness around the new emerging threats.

Four of the most significant improvements made this year include:

Setting up a Security Operations Centre that monitors, analyses and detects any possible cyber incidents 24/7 and is equipped to work together with Logista to deal with any potential threats, thus minimising the impact that any of these cyber incidents could have on Logista’s operations.

Adopting special measures to combat any threats of cyber-war related to the war in Ukraine, with a view to primarily avoiding and responding to ransomware and denial-of-service attacks, which could potentially disable Logista’s operations. All this in combination with the awareness campaigns given to staff on detecting phishing and other threats related to social engineering.

Using encryption to increase the level of security for any clients or third-party information held on our databases, as well as for information concerning our employees and suppliers.

Taking measures to bring our policies into line with international cybersecurity standards, such as obtaining ISO/IEC 27001 certification in Logista Pharma, in order to guarantee continued improvement in terms of security management.

E-commerce

The COVID-19 pandemic caused online sales to surge to unprecedented levels, and while the rate of e-commerce growth has slowed now that we are on the other side of the pandemic, online sales are still above the levels seen in 2019. As a result, we expect that the logistical needs of markets will continue to become ever more complex due to the last-mile deliveries’ restrictions enforced by cities, and companies operating in this sector will be forced to offer quality solutions, a broad range of services and competitive rates. Against such a backdrop, Logista is an attractive logistics partner, specialist in accompanying large manufacturers in their direct sales.

Consumption in proximity retail channels

The end of the pandemic has seen consumers return to brick-and-mortar stores, with footfall levels returning to what they were in 2019. Small proximity retailers have particularly benefitted from this change in trend, winning back the loyalty of their customers. Logista distributes all types of products to almost 200,000 delivery points in France, Spain, Italy and Portugal, offering manufacturers simple, rapid access so that their products can be available in those establishments. This positioning will allow Logista to continue to benefit from growth opportunities through proximity channels.

Next-generation products

We continue to enhance our range of new tobacco-related products to complement the traditional products on offer. These innovative products call for new value-added services that in turn provide opportunities for Logista. We offer manufacturers the fastest and most effective route to consumers in Spain, France, Italy and Portugal, thanks to our extensive distribution network in each of these countries.

Environmental standards

There is growing demand among clients for services that meet certain environmental standards,a demand which has risen on the back of the COVID-19 pandemic and due to greater awareness about these issues in society as a whole.

Logista’s actions are guided by a quality and environment master plan, and a quality, environment and energy efficiency policy that establish guidelines and good practices for optimising the use of resources and preventing pollution throughout its business processes.

We carry out annual checks in line with the ISO 14064-3 standard on the main structures and processes for each business in Spain, France, Italy, Portugal and Poland, using the GHG Protocol and the ISO 14064-1 standard itself as a benchmark.

We have significantly improved the method used to calculate our carbon footprint, now producing a far more detailed impact assessment for our main sources of emissions. This information will not only help us to identify the most effective action to take to reduce emissions, it will also allow us to calculate exactly how much the measures implemented have helped reduce emissions by.

In addition, we have made environmental concerns a key part of our strategy and have committed to achieving a 30% and 54% reduction – compared with 2013 levels – in the direct and indirect emissions generated by our operations by 2030 and 2050 respectively. These targets have been set in line with the Paris Agreement and have been ratified and scientifically approved through the Science Based Targets initiative.

Logista’s efforts in this area have won recognition from several international bodies. CDP, for example, has included Logista in its prestigious “A List” as a global leader in tackling climate change – the only European distribution company to have achieved this recognition in the last six years. This year, Logista has also been named a Supplier Engagement Leader in recognition of its work to make its clients’ supply chain more sustainable, in line with a more responsible business model.

Logista is also included in the FTSE4Good IBEX index, a list of companies that demonstrate sound environmental, social and corporate governance practices, and has signed up to the ‘manifesto for a sustainable recovery’ in Spain.

This year, KPI targets linked to environmental management have been included in employees’ short-term incentive plans – in addition to those already set out in their long-term incentive plans. This reflects the company’s commitment to continuing to integrate environmental sustainability into the day-to-day management of its business.