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UPDATE 1-Tesco to pay first dividend since 2014-15 crisis, profit up 27 pct

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LONDON, Oct 4 (Reuters) - Britain's biggest retailer Tesco said on Wednesday it would pay a dividend for the first time since the 2014-15 year when it was mired in crisis, after its first-half profits jumped 27 percent.

The firm also reported a seventh straight quarter of underlying sales growth in its home market, successfully navigating an inflationary trading environment.

Tesco made operating profit before one off items of 759 million pounds ($1.01 billion) for the six months to Aug. 26.

That compares with 596 million pounds in the same period last year and analyst forecasts of about 700 million pounds.

Tesco, which in January agreed to buy wholesaler Booker for 3.7 billion pounds, said UK like-for-like sales rose 2.1 percent in the second quarter.

An interim dividend of 1 pence will be paid which "reflects improved performance and board confidence."

"Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago," Chief Executive Dave Lewis said.

The resumption of the dividend is the strongest sign yet that the British high street giant has returned to a stronger footing, after changing shopping habits, the rise of German discounters Aldi and Lidl and a 2014 accounting scandal all combined to hammer the business.

After stabilising the company, Lewis has got it growing again with a focus on more competitive prices, new and streamlined product ranges, better customer service and improved supplier relationships.

However, shares in Tesco closed Tuesday at 190 pence, lower than the 230 pence when Lewis joined in September 2014, reflecting concerns over the merits of the Booker deal as well as Tesco's pension deficit and debt levels.

The group said it had concluded a triennial pension review and that its annual contributions would increase by 15 million pounds to 285 million pounds from April 2018.

($1 = 0.7532 pounds) (Reporting by James Davey; editing by Kate Holton and Alistair Smout)