Glove and condom maker Ansell (ANN) surprised yesterday with a share buyback of up to $US100 million, an announcement that came three weeks after the company released solid 2015-16 financial year results.
Usually share buybacks are announced in unison with full year or interim (or quarterly) financial reports, but for some reason Ansell chose to either delay its announcement, or rush it out because of continuing weakness in the share price.
On August 10 Ansell reported a 20% rise in underlying profit of $US188 million, which was slightly ahead of market expectations.
But that disappointed investors who then sold down Ansell shares by around 15% on the day of the release. Up to yesterday they had recovered slightly, but were still down 11%.
Share buybacks can be interpreted as a signal that company management believe their stock is undervalued in the market, although they are also associated with companies trying to put a support level under their shares – News Corp and Seven West Media have done share buybacks which have achieved that purpose, for example.
Ansell said yesterday that it will launch the share buyback “no earlier than 15 September”.
“Providing attractive returns to shareholders through a disciplined approach to capital management remains central to Ansell’s strategy,” Ansell chief executive Magnus Nicolin said in the statement to the ASX.
"I am pleased therefore to be able to announce today a new on market share buy-back program."
Ansell said that it plans to reduce its issued share capital by approximately 6 million shares, based on the closing share price of $21.96 on Friday.
The shares rose 17 cents yesterday to $22.13, which doesn’t sound much, but the wider market sold off nearly 80 points or well over 1.1% yesterday, so the buyback announcement worked.
The buyback will be funded from existing cash reserves and cash earned through the normal course of business over the 12 month repurchase period.
Ansell said it intends the repurchase to be "opportunistic" regarding the prevailing price of its shares and conditions in the broader share market.
“The buy-back will form part of our continued approach to capital management and will complement our ongoing investment in improved manufacturing productivity and a continued focus on identifying strategic acquisitions with attractive returns,” Mr Nicolin added.
