(Bloomberg) -- Ocado Group Plc lost almost £400 million ($506 million) last year, but said it was making progress on rolling out its automated technology and working with retailers. 

The grocery delivery company narrowed its pretax loss from £500 million in 2022. 

Ocado expects its technology division to grow as much as 20% this year, as efforts to roll out robotic warehouses worldwide for large retailers bear fruit. 

The shares rose nearly 10% in early trading Thursday before paring back some of the gains. The lift halted declines over the past two months that have seen Ocado lose about a third of its value.

The company, led by former Goldman Sachs banker Tim Steiner, sees its future as a maker of automated warehouses for supermarkets around the world, but most of its revenue currently comes from the online business it shares with Marks & Spencer Group Plc. 

Ocado Retail, as it’s known, suffered last year as it struggled to boost market share when shoppers returned to stores after the pandemic and shifted to discount grocers Aldi and Lidl to save money.

The downturn in performance threatens the working relationship between the two groups as M&S considers if it should pay the final £190 million payment owed to Ocado.

Ocado missed targets in 2023 that would have triggered the final performance-related payment and it now estimates the ‘fair value’ of the payout at £28 million. However, Steiner said that figure is “ludicrously low” and the targets need to be adjusted.

Ocado will negotiate and potentially take legal action if needed to get the full amount owed, Steiner said.

“We believe we have a very solid case to get full payment, we know M&S may not entirely share that view,” he told reporters on a call.

Kroger woes

Steiner said Ocado was also working to improve the performance of its partnership with US grocer Kroger Co., which hit pause on new warehouses last year. “When that is sorted out, we expect them to rapidly expand the business,” he added.

Charles Allen, an analyst at Bloomberg Intelligence, said it was disappointing that only three new centers are set to launch this year.

Ocado may have beaten expectations on both revenue and margin, but guidance for 2024 was mixed, said William Woods, an analyst at Bernstein.

--With assistance from Joel Leon.

(Updates with shares, analyst reaction, and extra detail. A previous version corrected fiscal year in second paragraph.)

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