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The Guardian - UK
The Guardian - UK
Business
Jack Simpson

Ocado ‘could sue’ M&S in dispute over £190m final payment

Ocado van and driver
Ocado posted a pre-tax loss of £394m for the 12 months to 3 December 2023. Photograph: PA Images/Alamy

Ocado has threatened to sue Marks & Spencer over a multimillion-pound payment linked to their online joint venture.

M&S, which owns 50% of Ocado Retail, is withholding part of the £190m final payment after their delivery tie-up failed to hit certain performance targets.

Tim Steiner, chief executive of Ocado, told reporters on Thursday he believed M&S owed it a “substantial amount of money” and if a settlement was not agreed the online grocery specialist could pursue litigation against M&S to retrieve more of the final payment it believed it was owed.

His comments came after Ocado posted a pre-tax loss of £394m for the 12 months to 3 December 2023, which compared with the previous year’s loss of £500m.

When M&S struck a deal to buy half of the Ocado Retail joint venture in 2019, as part of its move into the online delivery sector, it agreed to pay an initial £562m with a final payment of £190m to be made based on whether the tie-up met certain performance targets.

During 2023, Ocado failed to meet the targets that would have automatically led to the payment being made, with accounting rules estimating that the payment should come to just £28m.

However, Ocado said in its accounts that that arrangement stated that targets could be adjusted if management had to take decisions or actions that differed from the assumptions when the deal was struck. It said the criteria for the final payment should be revised to take into account “significant decisions and actions” taken during the Covid-19 pandemic.

It added that the £28m was “significantly lower than the amount that Ocado believes it will receive in the future (either via a formal litigation process or settlement).”

On Thursday, Steiner told reporters that the current payment being suggested was “ludicrously low” and that Ocado had a strong case for full payment.

He said: “We would much rather solve this in a nice and constructive way, which is what we’re working towards doing. We are very confident that we are owed a substantial sum of money and ultimately I hope we will never get there but we will not walk away from that sum of money.”

An M&S Spokesman said: “M&S remains committed to the turnaround strategy for Ocado Retail and our focus is on working with them and Ocado Group to deliver it.

“On the specific issue of the contractual contingency payment, our advice is that the financial performance of Ocado Retail means the criteria for the performance payment was not met.”

On Thursday, the Ocado group revealed that its pre-tax loss for the year was reduced after it secured £187m from a settlement with its Norwegian rival AutoStore after a case in the high court.

Group revenues increased by 9.9% to £2.8bn over the year, with this figure largely driven by the company’s technology solutions business, which enjoyed 44% growth to £420.5m for the year.

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