Consumers have yet to give up their daily latte despite penny-pinching elsewhere on the high street, the UK's third-largest coffee chain said yesterday.

Caffè Nero said that, unlike many other high street operators, it had experienced buoyant trading in 2005 and annual profits would "materially" beat expectations.

The chief executive, Gerry Ford, said the group had managed to avoid the impact of the consumer slowdown.

"We are still buying our daily newspaper and still buying a coffee but perhaps not the television, the DVD player or the car," he said.

The group said a strong performance in the second half of its financial year meant revenues would be at the top end of expectations. House broker Collins Stewart predicted full-year profits of £4.9m, up from a previous estimate of £4.3m. Caffè Nero shares rose 12p to 201.5p.

Mr Ford said more people were visiting specialist coffee chains as tastes changed. "As more people taste good coffee they are less willing to have instant coffee or bad office coffee."