Business
Ocado and Kroger sign Master Services Agreement
Ocado and Kroger sign Master Services Agreement.
About this update from Ocado Group Plc
[{"type":"text","content":"\n \nRNS Number : 5949F Ocado Group PLC 30 October 2018 \n\n30th October 2018\nOcado Group plc / The Kroger Co.\nOcado and Kroger sign Master Services Agreement \nOcado Group plc (\"Ocado\") and The Kroger Co. (\"Kroger\") announce that they have signed service and operational terms including how Kroger will order Customer Fulfilment Centres (\"CFCs\") and the basis on which Ocado will now develop and operate those sites. This is the future services agreement referred to in the announcement made on 17 May 2018.\nUnder the terms of the agreement, Kroger is expected to order 20 CFCs over the first three years of the agreement, and order the first three CFCs by the end of 2018. The terms and fee structure are similar to those for other transactions to-date combining up-front fees and ongoing capacity fees.\nAs with other recent deals, Ocado has agreed to install and maintain modules of Mechanical Handling Equipment (\"MHE\") sufficient to provide an agreed level of throughput. The target is for Kroger's CFCs to go live within approximately two years of each order being placed.\nIn order to expedite the opening of CFCs in the US, the first CFCs ordered in 2018 will have funding requirements similar to earlier deals. \nThe two parties remain committed to exploring value-neutral alternative structures that would result in a lower capital commitment per CFC by Ocado in order to ensure that future CFCs are funded in a way that makes best use of the funding capacities of both parties. Discussion on these revised payments terms has now started and a further agreement is expected to be announced in due course. \nFurther details on the location of the first three CFCs will be made public by Kroger within the next several weeks.\nExpected financial impact for Ocado\nOcado expects the earnings impact of the Master Services Agreement to be neutral in FY18. Up to the point when the final funding structure has been finalised, Ocado will finance Kroger's CFCs in a similar basis to previous deals. We do not expect that this will involve more than the first three CFCs. The expected peak cumulative net outflow for Ocado of these initial three CFCs is £90m. With over £500m of financing headroom, Ocado has more than sufficient funds to cover this.\n \nLuke Jensen, CEO of Ocado Solutions, said: \n \n\"We are delighted to have signe...