Rolls-Royce share price rises amid pension liabilities transfer

Rolls-Royce’s share price (LON:RR) has climbed higher in London this morning as the company announced that it had completed a deal transfer some pension liabilities to Legal & General (LON:LGEN). The update comes after the company recently said that it remained confident in its underlying operating profit and free cash flow guidance of £700 million +/- £100 million.

As of 09:46 BST, Rolls-Royce’s share price had added 1.60 percent to 899.80p, outperforming the broader UK market, with the FTSE 100 index currently standing 0.58 percent higher at 7,261.88 points. The group’s shares have added just under 10 percent to their value over the past year, as compared with a near six-percent fall in the Footsie.

RR transfers pension liabilities

Rolls-Royce announced in a statement today that its UK pension trustee has completed a deal to transfer certain pension risk liabilities to Legal & General. The transaction covers the transfer of assets and liabilities relating to approximately 33,000 pensioners who are members of the Rolls-Royce UK Pension Fund out of a total of 76,000 members, and is set to reduce the company’s post-retirement obligations by around £4.1 billion.

“This is a significant transaction which represents another step on our journey to simplify, de-risk and strengthen the company,” Rolls-Royce’s CFO Stephen Daintith commented in the statement.

Rolls-Royce said that the deal will see it make an exceptional cash contribution of around £30 million. The company, however, reassured investors that its free cash flow guidance for the current year remained unchanged.

Analysts on British engine maker

The 16 analysts offering 12-month targets for the Rolls-Royce share price for the Financial Times have a median target of 1,095.00p on the shares, with a high estimate of 1,288.00p and a low estimate of 760.00p. As of June 4, the consensus forecast amongst 18 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.