Small UK energy supplier Ovo makes first profit

* Ovo makes six-month pre-tax profit of 30.4 mln pounds

* To reach 1 million customers in 2017 or 2018 - CEO

* Ovo well placed to enter battery storage market - CEO

By Karolin Schaps

LONDON, Sept 30 (Reuters) - Ovo Energy, one of the fast-growing independents challenging Britain's "big six" energy suppliers, reported a pre-tax profit for the first time in its seven-year history and said it aimed to reach a million customers within the next two years.

The company, which supplies gas and electricity mainly to households, raised its customer base by 20 percent to 681,000 in the first half of this year, it said in its annual report published on Friday.

Ovo is set to reach the one million customer mark in 2017 or 2018 which would give it a roughly four percent market share, up from 2.7 percent now, Chief Executive Stephen Fitzpatrick told Reuters.

Ovo made a pre-tax profit of 30.4 million pounds ($39.4 million) in the first half, compared with a pre-tax loss of 3.6 million pounds in the same period a year ago.

The company said it had turned a profit because more customers had now been with it for a number of years.

Ovo has to spend money on brokerage fees for price comparison sites, and on sales and marketing, to acquire new customers so loyal customers are more profitable.

"As more customers stay for longer they become profitable customers," Fitzpatrick said.

"As we were growing really quickly through 2013, 2014 and 2015 we had a large proportion of customers in their first year so that was a big drag on bottom-line earnings."

Ovo's growth reflects a change in Britain's energy retail market where more and more customers are switching from traditional suppliers in search of cheaper tariffs and better customer service.

The Big Six suppliers are SSE (LSE: SSE.L - news) , Iberdrola (Amsterdam: ID6.AS - news) 's Scottish Power, Centrica (Frankfurt: A0DK6K - news) 's British Gas, RWE (LSE: 0FUZ.L - news) npower , E.ON and EDF Energy.

Britain's competition watchdog found households overpaid 1.4 billion pounds a year between 2012 and 2015 because of uncompetitive standard energy tariffs to which about 70 percent of the largest companies' customers are subscribed.

Fitzpatrick said he thinks his customers stay with Ovo because they receive accurate bills, the company's online system is intuitive to use and they are offered a friendly phone service.

The supplier, which sold a 17 percent stake to Mayfair Equity Partners in April 2015, is not currently planning to sign on further investors or to go public, Fitzpatrick added.

It had cash and cash equivalents of 70.3 million pounds on the balance sheet at the end of June, leaving spare money for investments.

Fitzpatrick hinted at the launch of a new product, saying: "We're really well set up to take advantage of the falling cost of battery storage" but he declined to give any details.

($1 = 0.7714 pounds) (Editing by Adrian Croft)