Ansell Limited (ASX: ANN) shares are on the rise this morning after the company provided an update regarding its share buyback program. At the time of writing, the Ansell share price has edged 1.68% higher to $37.47.
Let's take a look at what the company announced.
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What did Ansell announce?
In a statement to the ASX this morning, the personal protection and glove manufacturer announced it may recommence its share buyback program from 5 March 2021. This date is the day after the company's dividend reinvestment program pricing period concludes.
Ansell had previously announced, at its November 2020 AGM, that it would pause the share buyback program for 12 months. The buyback, which was announced in October 2019, was initiated due to "an absence of sufficient opportunities and [an] excess of cash on the balance sheet."
That announcement was prior to the COVID-19 pandemic. Since then, the company has seen unprecedented demand for its rubber gloves and personal protection equipment.
In its half-yearly update for FY21, Ansell recorded a 24.5% increase in sales on the prior corresponding period (pcp). As well, earnings per share (eps) and profit attributable both rose – by 65.5% and 61.9% respectively on the pcp. The company partially attributed these increases to the pandemic.
What is a share buyback?
According to the Commonwealth Bank of Australia (ASX: CBA):
A buyback is when a company offers to re-purchase some of its shares from existing shareholders.
The net effect is a reduction in the total number of a company's shares on issue. This is generally seen as a way for companies to boost shareholder returns because after the buyback a company's profit will be spread across fewer shares.
CommBank suggests some of the reasons for a share buyback include:
- Using surplus cash the company doesn't plan to use for acquisitions.
- Making a change to the company's capital structure. This is because changing the amount of shares on issue will have an impact on things like the company's ratio of debt to equity.
- Giving a boost to shares if the company feels they are undervalued.
The buyback will result in either a capital gain or loss, depending on the price you purchased the share at. This will have tax implications for the investor.
Ansell share price snapshot
The Ansell share price has soared nearly 115% over the past five years. Over the course of the last 12 months, Ansell shares have gained around 27%. Shares in the company reached a 52-week high of $42.91 in November 2020 and a low of $21.43 in March 2020.
Based on the current Ansell share price, the company has a market capitalisation of around $4.8 billion.
