Coffee bar group Caffe Nero's expansion plans were back into the spotlight after

it emerged it had set aside £10 million for growth.

The company, which has been linked with a bid for troubled rival Coffee Republic, said the cash pile would maintain its current rate of expansion of three to four new stores a month.

It said its business remained healthy and the Aroma sites bought from McDonald's in April were trading 20 per cent above pre-acquisition levels.

The comments are in contrast to those made by Coffee Republic last week, which reported spiralling losses.