REFILE-UPDATE 2-Centrica returns to profit growth but flat dividend weighs on shares

(Refiles to fix typo, paragraph 3) * Lost 409,000 household customers in 2016 * Profits rise 4 pct to 1.52 bln pounds in 2016 * Trading arm helps bottom line with 144 pct rise in profit * Shares down 3.5 pct on lack of dividend increase By

Karolin Schaps

LONDON

, Feb 23 (

Reuters

) -

Britain

's largest energy supplier

Centrica

returned to profit growth last year as it benefited from volatile energy prices and colder weather but shares fell after investors were disappointed not to see a dividend increase. The utility, which owns

British Gas

, lost 409,000 household customers last year as smaller rivals offered cheaper energy deals, but it managed to stem the flow of customers leaving in the second half of the year after cutting prices, it said. Centrica reported a 4 percent rise in 2016 adjusted operating profit to 1.52 billion pounds ($1.89 billion), compared with analyst expectations of 1.47 billion. Adjusted operating cashflow was ahead of its own guidance of up to 2.6 billion pounds, coming in at 2.69 billion pounds. Its trading unit helped boost the group's bottom line as the segment's profit rose 144 percent to 161 million pounds on the back of bets made amid volatile power prices and deferred gas purchases. It typically makes an annual profit of 50-100 million pounds. However, Centrica shares were down 3.5 percent at 0918 GMT, among the top three losers on London's FTSE100 index, as investors were disappointed by a flat dividend payment. Centrica said historically low interest rates meant its pension liabilities had spiralled to 1.14 billion pounds, up from 119 million at the end of 2015, meaning it had less capital available to return to shareholders. It said a dividend increase was on the cards once debt levels fall to 2.5-3 billion pounds, a range it expects to hit by the end of the year. Net debt stood at 3.47 billion pounds at the end of 2016. "I can't say if it (a dividend increase) will be in the final 2017 or not. We are going to keep it under review each time we report," Centrica Chief Executive

Iain Conn

told journalists. Centrica cut its dividend two years ago and again last year as earnings were hit hard by weak energy prices. "With the group saying a resumption of dividend growth is unlikely until it has shed more of its debts, shareholders are still feeling the effects of the hangover from the decision to splurge billions on offshore exploration and production at just the wrong time," said

George Salmon

, equity analyst at Hargreaves Lansdown. Centrica stuck to 2017 guidance figures, with adjusted operating cash flow of more than 2 billion pounds and capital expenditure of 1 billion pounds. It expects to cut another 250 million pounds in costs this year as it lets go another 1,500 people by the end of the year as part of its plan to cut 6,000 jobs. ($1 = 0.8024 pounds) (Additional reporting by

Nina Chestney

in London and

Esha Vaish

in Bengaluru; editing by

Jason Neely

and David Evans)
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