UPDATE 2-FirstGroup says UK rail stabilising, H1 profit down

* H1 profit down 44 percent after 100 mln stg fuel hit

* UK rail revenues up 1.7 percent as market stabilises

* U.S. Greyhound unit showing signs of improvement

* Shares up 1.1 percent

(Adds company, analyst comment, shares, details)

By Rhys Jones

LONDON, Nov 4 (Reuters) - British transport operator FirstGroup (FGP.L: Quote, Profile, Research) said the domestic rail market had stabilised in recent months but first-half profit had been dented by higher fuel costs and lower sales at its U.S. Greyhound unit.

"British rail is levelling out now, particularly in the London commuter networks and the trend has flattened over the last few weeks," chief executive Moir Lockhead told reporters on Wednesday.

FirstGroup, which has bus operations in Britain and North America as well as British rail franchises, said pretax profit fell 44 percent to 30.3 million pounds ($50 million) in the six months to the end of September as it took a 100 million hit on hedged fuel costs, which it is set to recover in 2010-11.