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Rolls Royce shares jumped as high as 14.4% this morning to fresh 3 year highs (biggest jump since Feb 2016) thanks to a strategy update including tweaked financial guidance versus yesterday.

Today’s announcement builds on yesterday’s already impressive 6.5% climb on a trio of good news.

Firstly, we were told that necessary restructuring/job cuts (to make it lean and mean) might cost £500m but would save a net £400m from 2020. Secondly, rising costs related to Trent 1000 engine problems would not affect the company’s £450m (+/- £100m) free cash flow guidance for 2018 (ROIC up to 15% from 9%). Lastly, the 2020 target of around £1bn cash flow still stood.

All good noise to help the shares reverse strongly from lows of 820p and break above May highs.

What’s new this morning?

The company now says that it is well placed to “exceed” that £1bn by 2020. Nice.

The mid-term ambition (no deadline) is also for free cash flow to exceed £1 per share (from 15p in 2017). With 1.86bn shares outstanding this implies a big target (£1.86bn+?), understandably helping the shares build on yesterday’s revival of investor interest, trading 1000p to test last summer’s 990p peak.

With 4yr falling highs resistance at 966p having already been successfully tested for support, Bulls are now eyeing Jan 2014’s peak of 1294p (29% north).

After all the positive noise from CEO East, now it’s time to deliver, to keep the shares bearing North.


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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Mike Van Dulken

Mike van Dulken

Accendo Markets’ Mike van Dulken has worked in the City since 2002, with some of the biggest names in the City. His career kicked off at Jefferies as an equity analyst before a 2007 move to Société Générale saw him help service hedge funds with short-term trade ideas during the financial crisis.

Head of Research at Accendo since 2010, covering shares, indices, commodities and FX, he is regularly quoted in the financial press. Accendo Markets has been voted Best CFD research Service by ADVFN in 2017 and 2018.

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