UPDATE 2-Interserve says govt demand strong after solid H1

* Public sector, international unit proving resilient

* Weak auto, retail markets hitting private sector profit

* Made around 5 mln stg due to weakness of sterling in H1

(Adds company, analyst comment, shares, details)

By Rhys Jones

LONDON, July 10 (Reuters) - Building and maintenance firm Interserve (IRV.L) said demand for its services from government bodies was still strong after a solid first half but that it would continue to cut costs in parts of the business exposed to the slowing private sector.

"Central government work in the UK has held up well and will continue to do so as the reality of public spending challenges hit home," Chief Executive Adrian Ringrose told Reuters in an interview on Friday.

"However, the output of automotive and retail clients is down and some of our relationships are being mothballed, which is the source of the drop of revenue and profit in that area."

Interserve, which cleans Britain's crown courts and maintains government buildings, said in a trading statement on Friday that it had reduced costs at its facilities management and specialist services divisions given the tough conditions and had taken out a "few hundred" staff due to reduced demand.

The company, which on Friday said it had won a 250 million pounds ($406.5 million) infrastructure contract with the UK's United Utilities, said the outlook was encouraging in the public and privatised sectors due its many long-term contracts.

Interserve, whose international operations generate more than half of its profit, said it had continued to deliver good results, especially in the Middle East.

"I think the negative sentiment towards Dubai has been overdone and we have resilient position there, while Abu Dhabi, Saudi Arabia and Qatar are all showing good growth," said Ringrose. He added the company had benefitted to the tune of "around 5 million pounds or so" from the weakness of sterling in the first-half.

Shares in Interserve, which have lost a quarter of their value so far this year, were 0.3 percent up at 170.75 pence by 0750 GMT, valuing the group at around 215 million pounds.

"We see value given Interserve's market positions and the opportunity, but few short-term catalysts," said KBC analyst Andrew Nussey, who maintained his "hold" rating on the group.

Interserve is expected to post a pretax profit of 82 million pounds for 2009, according to a Reuters Estimates poll of 11 analysts. ($1=.6150 Pound) (Editing by James Davey and Hans Peters)