Ocado lands fulfiment technology deal with McKesson Canada, shares surge

(Sharecast News) - Ocado shares shot higher on Wednesday after it announced a deal to provide fulfilment technology to healthcare provider McKesson Canada.

Under the terms of the agreement, Ocado Intelligent Automation (OIA) will provide automated fulfilment technology at a distribution site for McKesson Canada.

Ocado said it will sell its "proven, unique" warehouse fulfilment technology in a sector outside of grocery retail, and provide the AI-powered software applications necessary to operate that technology long term.

McKesson Canada is the largest pharmaceutical distributor in the country.

Chief executive Tim Steiner said: "Today represents a new and exciting milestone as we bring the amazing benefits of Ocado's technology to the healthcare distribution and logistics sector.

"Our technology is ideally suited to supply chains that require dense storage, highly accurate inventory management and secure stock control. lt has been proven over 20 years in one of the most complex supply chain environments, online grocery, and we're now bringing our experience and IP to more sectors. We are very pleased to be expanding in Canada."

Ocado did not provide any financial details but said it will receive upfront fees during the construction process, with the final payment upon final installation. It will also receive an ongoing annual fee related to the servicing and maintenance of the technology.

The impact of the deal is expected to be minimal on cash flow and earnings in the current financial year.

"This is a capital light deal which will be cash neutral throughout the development phase and will be cash and EBITDA positive in FY25 when installation is complete and we recognise the income, costs and profit," the company said.

At 1540 GMT, the shares were up 4.4% at 589.40p.