UPDATE 2-Babcock may sell rail unit, seeks buys elsewhere

* H1 pretax profit 66.1 mln stg, as expected * Mulls defence, nuclear acquisitions

* Raises interim dividend 20 percent to 4.8 pence

* Shares down 2 percent

(Adds company, analyst comment, shares, detail)

By Rhys Jones

LONDON, Nov 10 (Reuters) - British engineer Babcock International Plc (BAB.L) may sell its underperforming rail unit after it was ruled out of a track contract last month and said on Tuesday it would expand in defence and nuclear where margins are higher.

Network Rail, operator of Britain's rail network, earlier this year decided against renewing a contract with Babcock, costing the company around 2 million pounds in profit and prompting the group to review the future of the division.

Chief Executive Peter Rogers said all options were being considered on the future of the rail business and he would talk to the company's board in December or January with a decision.

Babcock, which reported an expected 30 percent rise in first-half profit, driven by growth in marine and defence, said it was mulling defence acquisitions in Britain and nuclear purchases in the United States, France, Italy and eastern Europe.