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Britain's Ocado secures first deal beyond grocery retail

An Ocado grocery delivery van is driven along a street in London

LONDON (Reuters) -Britain's Ocado Group has secured its first deal outside grocery retail to provide its robotic warehouse technology to a site of drug distributor McKesson Corp's Canada unit, it said on Wednesday.

The online supermarket and technology group said there was huge potential for expansion beyond grocery, one of the most complex supply chains that has given it expertise to apply to other sectors.

Shares in Ocado closed up 5.6% on Wednesday, paring losses over the last year to 22.6%.

CEO Tim Steiner said Ocado's robotic, AI and machine learning technology was ideally suited to supply chains that required dense storage, highly accurate inventory management and secure stock control.

"It 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," he said.

The group has technology deals with 12 grocery retailers, including Kroger in the United States, Aeon in Japan and Casino in France. It also holds a 50% share of Ocado Retail in the UK in a joint venture with Marks & Spencer.

The deal with McKesson will see Ocado receive upfront fees during the construction process with the final payment upon final installation. Ocado will also receive an ongoing annual fee related to the servicing and maintenance of the technology.

Ocado said the impact of the deal will be minimal on cash flow and earnings in its current financial year. It will be cash and EBITDA positive in full year 2025.

In July, the group reported a return to first half underlying profit.

The group's shares soared by as much as 47% on June 22 after the Times newspaper reported possible takeover interest from more than one U.S. suitor including Amazon. Ocado and Amazon declined to comment at the time.

(Reporting by James Davey in London and Prerna Bedi in Bengaluru Editing by Shilpi Majumdar, Kirsten Donovan and Barbara Lewis)

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