Annual report 2010 - Imperial Tobacco Group

Operating Review continuedStrategy Performance Governance FinancialsTobacco logistics delivers products for domestic andinternational tobacco manufacturers, including ImperialTobacco, to tobacconists and other sales outlets in Spain,France, Italy, Portugal and Poland. The business is run onan operationally neutral basis, providing individual customersolutions based on our cutting edge technology and ourspecialised network. The high quality of the service weprovide has allowed us to achieve a market share above 90per cent in the distribution of tobacco in Spain, France andItaly and just under 20 per cent in Portugal.Our integrated logistics services can assure full traceabilitythroughout the entire logistics value chain, from pick-up andtransport of the product at customers’ factories to post-saleservice. We can also provide specialised services for customersin a number of different sectors in Spain, Portugal, France andItaly: convenience, telecommunications, transportation,pharmaceutical, publishing, lottery and others.We are market leaders in the distribution of convenienceproducts to petrol stations in Spain, Portugal and France.Convenience products are also distributed to other pointsof sales in these countries and Italy including tobacconists,bakeries and grocery stores.We have an e-transaction business with our own technologicalplatform for e-recharge, installed in the main network of pointsof sale including in tobacconists, kiosks and convenience shopsin Spain, Portugal and France. In this area, different productsare offered including telephone cards and transport tickets.We are present in the transportation segment, throughcourier and industrial parcel activities in Spain and Portugal.Our long distance transport network across Europe allowsus to provide our customers with an integral solution for theirlogistics needs covering all services, from their factories tothe point of sale. In addition, our logistics business is theleading logistics provider in Spain and Portugal in differentsectors including pharmaceutical and publishing.Our PerformanceDistribution fees were £936 million (2009: £964 million) withadjusted operating profit of £176 million (2009: £177 million).Given current economic conditions, our overall logisticsbusiness has performed robustly.In tobacco logistics, in spite of volume declines, our businesshas been resilient. In Spain, we have offset market declineswith price increases and cost saving initiatives, performingahead of our expectations. In France, we delivered a goodperformance with market volumes broadly stable and in Italyour results benefited from price increases.In other logistics, our focus continues to be on maintainingour profitability while continuing to seek opportunities toprofitably grow our operations. We have continued to gainmarket share in our French wholesale business and weachieved strong volume growth of 15 per cent in our pharmadivision. Following the signing of our joint venture last yearto provide a range of services to one of the Spanish Lotterycompanies, we have made an upfront investment andcommenced operations.OutlookWe will further consolidate our leading positions and focuson our core profitable activities in currently challenging marketconditions. With our ongoing emphasis on enhancing ourservice levels to existing customers while seeking opportunitiesto extend our logistics footprint combined with cost savinginitiatives, we believe our logistics business will continue tobe effectively positioned.40