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Rolls-Royce shares take off on upbeat financial outlook

Shares in Rolls-Royce Holdings PLC jumped after the British aircraft engine maker said it was "well-placed" to beat its target of generating free cash flow of £1 billion by 2020.

Rolls-Royce also set a mid-term target of more than £1 per share of free cash flow, compared to 15 pence per share in 2017, and cash flow return on invested capital of 15%, up from 9% last year.

The company also reiterated that its restructuring plan would result in run-rate net cost savings of £400 million per year by the end of 2020.

CEO Warren East said the company is ready to deliver on its targets.

"I believe we are now prepared to execute. We're capable of executing and we're determined to do so," East told analysts and investors during the company's capital markets event.

Risks to achieving the targets include the problems involving the company's Trent engines, said CFO Stephen Daintith, who also said that free cash flow could even hit £1.2 billion by 2020.

"We're in the middle of managing pretty significant issues on the Trent 900 and 1000, and how that evolves, that's the risk around the business. So don't treat that as a sort of hard and fast number," Daintith said of the company's targets.

Rolls-Royce shares were up 7.61% to 950.00 pence as of 5:08 p.m. London time.

The company maintained its free cash flow guidance of £450 million, plus or minus £100 million, for 2018 despite additional expected costs of about £100 million due to the Trent engine issues.

The additional costs would be offset by "short-term discretionary cost mitigation actions," Rolls-Royce said.