The drop in the pound since the Brexit vote has hit many British consumers' spending power, but Saga reported solid growth in its travel business on Friday.

"What we generally see is that our customers have a budget set, they are going to travel, they may just go on a slightly shorter vacation or potentially at a 3.5 star rather than a 4-star level," Chief Financial Officer Jonathan Hill told Reuters by phone.

Saga, which offers ocean and river cruises, singles holidays and escorted tours, reported an ahead-of-consensus 5.5 percent rise in first-half underlying pre-tax profit to 110 million pounds and announced an 11.1 percent increase in its interim dividend to 3.0 pence per share.

The firm is bringing a new cruise ship into its fleet in 2019.

Strong demand in the first half of the year has prompted Saga to exercise its option to purchase a second new ship and bring forward its arrival to August 2020, Chief Executive Officer Lance Batchelor told Reuters. Its launch had been pencilled in for early 2021.

Analysts at UBS said the new ships were "transformational" for the company's earnings, reiterating their "buy" rating on the stock.

Saga's profit before tax fell 6.3 percent, however, to 103 million pounds, due to costs associated with refinancing and net fair value losses on derivatives.

The firm's insurance underwriting business also saw a drop in pre-tax profit of 4.7 percent to 46.8 million pounds driven by lower reserve releases.

Saga shares were unchanged at 196.7 pence at 0917 GMT, while the FTSE mid-cap index <.FTMC> was down 0.18 percent.

(Additional reporting by Carolyn Cohn; editing by Pamela Barbaglia and Adrian Croft)

By Emma Rumney