Ansell’s refreshed share buy-back program points to positive medium-term earnings outlook

About Ansell Limited

Ansell Limited (ASX:ANN, Ansell) is a world leader in health and safety protection solutions. The Group operates in two business segments; Industrial and Healthcare. The Industrial segment manufactures and markets hand and upper arm protective solutions for various industrial applications. The Healthcare segment manufactures and markets a range of hand-protective solutions for healthcare professionals and patients. Employing over 14,000 people worldwide with operations in North America, Latin America, Europe, and Asia Pacific, Ansell has been listed on the ASX since 1985.

Reinstatement of on-market share buy-back program

The decision by the Ansell board to reinstate the company’s on-market share buy-back program sends a positive message to shareholders about its earnings prospects. Ansell directors consider that the best use of its estimated $150 million cash for now is to apply these funds to the purchase of Ansell shares.

A noteworthy aspect of this share buy-back is that it follows the previous and ongoing share buy-back program that has been renewed each year since May 2017.  Since the renewal of the most recent buy-back program announced in December 2022, 2,384,387 shares were bought on the market during the 12 months to 19 December 2023 for a total consideration of $55.8 million, representing $23.42 per share.

The renewal of the on-market share buy-back program provides for a maximum of 12,539,021 shares to be purchased on-market by the company over the coming 12 months from 5 January 2024. This number is ten percent of the 125,390,219 shares presently outstanding and is permitted under the ‘10/12’ rule of the Corporations Law which allows a listed public company to purchase up to ten percent of outstanding shares within any twelve-month period without shareholder approval.

The buy-back program allows Ansell to opportunistically purchase its own shares on the market up to the maximum number of 12,539,021 shares entirely at the board’s discretion. Under the ASX business rules governing on-market share buy-backs, no shares can be bought back until 21 days have elapsed after the buy-back announcement date. The logic of this rule is that shareholders who were not required to approve the buy-back, ought to be given sufficient time to be made aware of the intended buy-back. This means that technically Ansell’s on-market buy-back can commence from 5 January 2024, although since this date no shares have been bought back. The most likely explanation for this is that until the release of Ansell’s half-year results on 20 February, the market is not sufficiently informed of the company’s current financial performance or financial position. Directors (often referred to as ‘insiders’) acting for the company however are already fully appraised of the company’s impending financial results and until all market participants have the updated financial information the buy-back cannot commence. Consequently, it can be reasonably assumed that following the release of the company’s December 31 half-year results presentation, the on-market buy-back is likely to commence within a few days following the release.

Directors will determine the on-market buy-back share prices with just one restriction. The ASX listing rules limit the on-market buy-back price to not more than 5 percent above the average market price over the last 5 days on which share sales were recorded before the day on which the share purchase was made.

Looking Ahead

Continuation of the share buy-back program infers that Ansell directors consider the current market price is below the intrinsic value of the company’s shares. Put another way, the buy-back indicates the director’s belief that Ansell’s earnings prospects are not adequately reflected in the current market price of Ansell shares.

Ansell will release its half-year results for the period ended 31 December 2023 on 20 February 2024.

The company has guided the market to earnings per share to be in the range of US92 cents to US$1.12 per share and statutory earnings per share in the range of US57 cents to US77 cents per share. It is reasonable to assume that the on-market buy-back program should be supportive of the Ansell share price post the release of the December half-year earnings result.