Shares in the Group jumped 23% with news it will supply its grocery delivery platform to the French retailer.
Companies: Ocado Group
Good news for Ocado (LON: OCDO) shareholders today with news the Group has struck a deal with Groupe Casino in France.
Shares in the online grocery retailer jumped over 23% in early morning trading on Tuesday as it announced it would supply its Ocado Smart Platform (OSP) technology to the French retailing giant. Management said the deal is expected to "create significant long-term value for the business".
Ocado will help the company behind some of France's most recognisable supermarket brands including Monoprix and Spar build its online grocery platform and with the construction of an automated warehouse.
Ocado said their "scalable, modular end-to-end solution" will be first implemented by Monoprix while a customer fulfilment centre will be built to serve the Paris, Normandie, and Hauts de France regions in the north of the country. The build and launch is expected to take "at least" two years.
Ocado will be paid certain upfront fees ar various stages of the project, with ongoing fees dependant on the performance of the fulfilment centre.Commenting on the expected financial impact for Ocado, the statement said:
..It will have minimal impact to earnings in FY17, given the current financial year ends on 3 December 2017. In FY18, Ocado expects the transaction to be earnings neutral with the costs of establishing the partnership, offsetting the initial fees payable. Ocado expects to incur additional capex of £15m in the FY18 to support this partnership and accelerate the development of the platform, with further capex in future years.
In FY19 and beyond, the profitability of Ocado Solutions is likely to grow as the fees from the transaction increase and as other deals are signed."
Striking deals abroad is said to be a key test of the Group's business model. Group CEO Tim Steiner said in February 2015 an overseas deal would be struck "by the end of the year", with investors having to patiently wait two years for an official announcement of an overseas partnership which was flagged in June this year.
Ocado made £12m Net Profit from £1.3 bn in Revenues last financial year and trades at a staggering forecast price to earnings multiple of 164x.