Caffe Nero, the Italian-style coffee bar operator, remains on top form as it announced record results for the year to May. Turnover leapt 28% to £50.5m and pre-tax profits improved from £519,000 to £1.7m. Holding an estimated 11% of the branded coffee bar market in the UK, chairman Gerry Ford said the company is aiming to achieve 15% market share by operating 400 stores. Caffe Nero opened 43 stores in 2004, bringing the total to 162 outlets. 21 stores were opened in the first quarter of the current financial year. One big difference going forward is that the group is now self-financing, so internal cashflow will be used to finance organic growth. A fit-out of a new store is usually £200,000. Ford also stated the company is looking eventually to enter the northern European market, where coffee consumption per capita is higher than that of the UK. Apparently, that market has few brands, making it 'ripe for the taking'. The company acquired eight stores from rival Coffee Republic, paying £730,000 and surrendering its 6% shareholding. Considering Coffee Republic's shares have slumped to 0.75p (compared to the 4.5p per share offer Caffe Nero made for it a couple of years back), Ford comments it was no longer worth hanging on to them. Broker Numis has upgraded its 2005 pre-tax forecast to £3.6m. The prospective p/e of 17.9 is average for the sector, but the shares are worth holding.