Caffe Nero shares high on results

SHARES in Caffe Nero rose to within a whisker of their all-time high today as the company blew another hole in one-time rival Coffee Republic and signalled that full-year profits will come in way above current City targets.

Chief executive Gerry Ford said the espresso bars operator had 'materially outperformed' expectations in the second half of its financial year to May. Ford said: 'I'm extremely encouraged that the market is still buoyant both inside the M25 and outside.'

Analysts had been expecting pre-tax profits to come in at £1.9m for 2003-04 and Caffe Nero's shares moved up 4p to 98p, just below the recent high of 99p.

The company now has 171 sites across the UK and is opening one a week as it battles for supremacy in the coffee market with US giant Starbucks and Whitbread's Costa Coffee.

It revealed today that it was buying eight more sites across the South of England from Coffee Republic for less than it costs to build them from scratch. Under the deal, it is paying £700,000 and the value of its 5.7% stake in the business, acquired two years ago as the potential platform for a takeover bid.

Coffee Republic is fighting to survive and recently announced a strategy to target the deli market. It is valued at just £3.5m. Caffe Nero's stake will be placed by Coffee Republic's brokers Seymour Pierce Ellis.

The eight bars stretch from Brighton to Cardiff and Caffe Nero's growth means it has already beaten its target of having 160 sites up and running by the summer.