Tesco profits hit a new high largely due to online sales growth, with a 12.5% rise in underlying profit for the first half of 2006.

The UK retailing giant posted record half-year profits of £1 billion, up 10.3% year-on-year, along with a 28.7% rise in online sales, where revenues totalled £554m.

The company said profit at Tesco.com increased 43.1% to £33.8 million, excluding the recent launch costs of its non-food operation Tesco Direct.

It also said its online grocery business now has around 750,000 regular customers and is approaching 220,000 orders a week.

Overall, the retailer reported a 12.7% rise in sales to £22.7bn for the 26 weeks to 26 August, and a 19.7% rise in profit before tax to £1.09bn.

In a statement, Terry Leahy chief executive said: “Tesco is continuing to deliver strong progress across the Group – with all four parts of our strategy contributing.

“At the same time, with the recent launch of Tesco Direct and the preparations for our entry into the US in 2007, we are investing into new markets to drive the long term growth of the business.”

Nick Gladding, senior researcher for retail analyst Verdict told CIO: “A combination of the right technology and the strength of its brand and management has enabled Tesco to push through and be successful on all fronts.”

Last year, Philip Clarke, Tesco international operations and IT director earned £2.2m from the performance-related success of online and overseas ventures, demonstrating how core technology has been to the ongoing success.

Gladding added: “They are still fairly bullish about online, and don’t see any slowdown in growth, which has been consistently between 25 and 30% every year. And even though its Tesco Direct catalogue has fewer items than its website, they are talking about that breaking even by the next financial year too.”