Ocado could take legal action against grocery partner Marks & Spencer amid an ongoing row over payments between the businesses.

Tim Steiner, the boss of Ocado, said he is confident the fellow retail firm owes it “a substantial amount of money” but hopes to secure a settlement over the dispute.

M&S is due to pay Ocado a final instalment of £190.7 million as part of the payment for the £750 million 50-50 tie-up between the businesses, Ocado Retail, which was launched in 2019.

In its latest annual results, Ocado confirmed that the retail joint venture “failed to meet the performance measures” for the year needed to secure an automatic payment of the instalment.

Ocado said accounting rules have estimated that a payment of £28 million has been determined as fair value as a result.

Ocado Retail, our joint venture with M&S in the UK, has had significant success growing customer numbers, taking online grocery market share and rebuilding profitability

However, Mr Steiner, the co-founder and chief executive of Ocado Group, said this would be “ludicrously low”.

In the accounts, the company said it believes it will secure more than this “either via a formal litigation process or settlement”.

Mr Steiner told reporters on Thursday that it “would be best to come to a settlement arrangement”.

It came as Ocado posted a £394 million loss for the past year.

It also revealed that the Ocado Retail joint venture delivered an underlying profit after criticism from its retail partner over the operation last year.

On Thursday, the Ocado group revealed the reduced pre-tax loss for the year to December, after it was boosted by £187 million secured from a settlement with Norwegian rival AutoStore.

It came as the company reported that group revenues increased by 9.9% to £2.8 billion over the year.

This was largely driven by the firm’s technology solutions business, which saw 44% growth to £420.5 million for the year.

Meanwhile, Ocado Retail revenues were up 7%, as it hailed “continued strong customer retention”.

Mr Steiner said: “I am pleased to report good progress across the group in 2023.

“Our technology is transforming the way people shop for food as we help some of the world’s best and most innovative retailers set the bar for excellence in grocery ecommerce worldwide.

“Ocado Retail, our joint venture with M&S in the UK, has had significant success growing customer numbers, taking online grocery market share and rebuilding profitability, proving once again the attractions of our online model.”