UPDATE 5-Sainsbury sees recovery signs, H1 profit up 19%

* H1 underlying profit 307 million stg, vs forecast 301 mln

* Sees market growth slowing on lower food price inflation

* Plays down speculation Qatari investor preparing a bid

* Expansion drive to add 10,000 jobs by March 2011

* Shares up 3.4 percent

(Adds more company comment, updates shares)

By Mark Potter

LONDON, Nov 11 (Reuters) - British grocer J Sainsbury (SBRY.L) posted a forecast-beating 19 percent rise in first-half profit and said it saw signs of a pick-up in spending, though industry growth would be curbed by lower food price inflation.

Chairman David Tyler played down speculation the company's biggest shareholder, the Qatar Investment Authority (QIA), might make a fresh takeover bid after a failed attempt in 2007.

"There's no suggestion whatsoever that it (QIA's attitude) has changed from what it has been over the last 12 or 18 months, which is wishing this business well and being a long-term shareholder," he told reporters on Wednesday.

Sainsbury, Britain's third biggest grocer behind Asda (WMT.N) and market leader Tesco TSCO.L>, said profit before tax and one-off items rose to 307 million pounds ($512 million) in the 28 weeks to Oct. 3, beating the average forecast for 301 million in a Reuters poll.

Growth was driven by an 800,000 increase in weekly customer transactions to 18.5 million, as well as strong sales of non-food ranges and tight cost management.

Chief executive Justin King also fleshed out Sainsbury's plan, announced with a 432 million pound equity fundraising in June, to accelerate growth by expanding outside its stronghold in the south and east of England and into more non-food ranges.

The group expected to create 10,000 jobs in the two years to March 2011, he said.

"What comes through is how much the model has developed over the last five years and the opportunities that lie ahead whether in food, new space, non-food or online," said RBS analyst Justin Scarborough, keeping a 'buy' rating on Sainsbury shares.

At 1545 GMT, the shares were up 3.4 percent at 338.7 pence, outperforming a 0.1 percent rise on the DJ Stoxx European retail index .SXRP.