Coffee Republic said on Wednesday it expected to be cash flow positive in early 2008 as first-half like-for-like sales rose 4.2 percent and it reduced its losses by 30 percent.
The coffee bar and deli franchise chain has doubled its number of outlets to 86 in the last nine months.
It said it made a loss of 895,000 pounds in the six months to Sept. 23, as revenue fell by almost half to 2.8 million pounds after franchising a number of its coffee shops.
Recently installed financial director James Muirhead, told Reuters that the UK market remained tough, with concerns lingering over a general retail slowdown and spiralling resource costs.
With milk costs rising around 40 percent alone, Muirhead said the firm would pass the rises onto its franchisees, and it was targeting positive cash flow by early next year and would be fully profitable on a pretax basis by March 2009.
Despite the price and consumer worries, Muirhead said signs for UK growth were good after the firm secured a contract to sell coffee in 73 Cineworld Cinemas.
He added it was dealing with "400 to 500 applications a month for franchise start-ups".
Outside of the UK, the company is looking at expansion in booming Indian cities, following in the footsteps of larger rivals Costa Coffee (WTB.L: Quote, Profile, Research) and Starbucks.
Shares in the firm, which have fallen around 40 percent in the last six months, were up 0.6 percent by 1420 GMT.
(Reporting by Gurjeet Aulak, editing by Will Waterman)
