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(Sharecast News) - Grocery technology firm Ocado has struck a partnership with South Korean business conglomerate Lotte Shopping to develop the latter's online offering.
Ocado expects the deal to create "significant long-term value", with the impact of the transaction likely to be "negligible" on earnings in the current financial year as no cash fees will be recognised in revenue until operations commence.
The structure of fees was said to be similar to those agreed with other international Ocado Solutions partners, with Lotte set to pay Ocado Solutions certain fees upfront and during the development phase, then ongoing fees linked to both sales achieved and installed capacity within the customer fulfilment centres and service criteria.
Under the agreement, Ocado and Lotte will develop a network of customer fulfilment centres across South Korea, with six planned by 2028, all of which will be underpinned by the end-to-end capabilities of the FTSE 100-listed group's Smart Platform. Ocado's in-store fulfilment solution will also be rolled out across Lotte's store estate.
Hargreaves Lansdown equity analyst Matt Britzman said: "This is welcome news for a group that's been struggling to drum up tangible deals for the solutions businesses. More so, given the tricky underlying conditions, it's pleasing to see a large business happy to go out and commit to multiyear spend on integrating Ocado's end-to-end solutions into their business - testament to the product on offer and efficiencies it's able to deliver.
"Investors will be pleased to hear no additional capital raises are on the cards, with the capex spend having already been modelled into Ocado's plans. This was the second bit of good news investors have had recently, following a less than rosy outlook in the latest trading update. News broke midway through October that the group's largest partner, Kroger, was looking to merge with key US rival Abertsons. Ocado has already helped Kroger open a number of CFCs in the US, a potential merger could see a further opportunity across the pond for Ocado."
As of 0820 GMT, Ocado shares had surged 21.62% to 574.55p.
Reporting by Iain Gilbert at Sharecast.com
