Glanbia’s half-year results released this Wednesday are packed with useful information for shareholders. There is, of course, the strong performance the group delivered in the first six months of this year thanks to its ability to pass on steep price rises to customers across its two main divisions without losing sales volume – pricing was up 13.9 per cent for performance nutrition products like SlimFast and fitness protein bars, and 17.9 per cent for B2B ingredients.

But April 2022 also saw the final separation between Glanbia PLC and the Irish dairy business owned by the farmer co-op at the origin of the group. Following the sale of its 40 per cent remaining interest in Glanbia Ireland to the co-op for €307 million, this is the first time the PLC reports fully disaggregated earnings between its continuing global nutrition empire and the domestic agribusiness it is leaving behind.

While the focus ahead of the April de-merger was on the co-op’s decision to proceed with the deal on the basis of its merits for farmer members, the latest figures from the PLC now allow us to assess the disposal of Glanbia Ireland, along with brands like Avonmore and Gain Feeds, from the perspective of its own shareholders.

Glanbia’s results for the first half of 2022 also contain re-stated comparative figures for the same period last year, which were not disaggregated at the time between the PLC’s continuing business and its divested share in the Irish agribusiness.

We can now see that Glanbia Ireland contributed €11.1 million of its profit after tax to the PLC’s bottom line in the first half of 2021, or €26.4 million for the whole of last year. As part of the deal, Glanbia has forgone any dividend due from the Irish agribusiness for the few months it was still invested in it earlier this year, so that was the end of that.

Instead, the PLC booked a €55.9 million exceptional gain on the disposal of its share in Glanbia Ireland in April – the difference between the €307 million sale and the book value of its 40 per cent share until then. The group has paid €8 million to cover Glanbia Ireland’s separation costs and committed another maximum €1.5 million towards rebranding when the domestic business drops the Glanbia name later this year.

The new Glanbia’s bottom line is exactly the same as the old one’s, without the contribution from its Irish agribusines.

On the bottom line, the Irish agribusiness was a big contributor to group results in the first half of last year. One in every eight euros in the PLC’s net profit at the time came from Glanbia Ireland. But the global group’s flagship performance nutrition was still in the middle of a restructuring plan to restore profitability after a couple of bad years – a transformation that took place under the cover of further turbulence caused by the pandemic. The first half of 2021 alone saw the PLC spend €52.2 million in exceptional restructuring costs as it simplified its performance nutrition range and supply chains, and sorted out legacy pension issues.

This delivered results throughout last year and the Irish agribusiness’s contribution to group profit dwindled in proportion. Now the overhauled Glanbia Performance Nutrition is restored to its former double-digit margin glory, despite recent inflationary pressure – and with help from the strong US dollar, as Glanbia sells mostly in the US but reports in euro.

On a pre-exceptional basis, continuing operations delivered virtually the same net profit as last year – €122 million for the first half. The new Glanbia’s bottom line is exactly the same as the old one’s, without the contribution from its Irish agribusiness – but with an extra €307 million in the bank from the proceeds of its disposal.

From an individual shareholder’s perspective, this windfall has allowed the PLC to keep buying back shares (a record €148 million worth of them so far this year, after €93 million last year). So not only are profits steady despite the loss of Glanbia Ireland’s contribution – they are also spread less thinly, resulting in bigger earnings per share.

In the first half of last year, Glanbia generated 27.90c in basic earnings per share, of which a welcome 4c came from Glanbia Ireland. For the same period this year, the PLC is reporting 46.10c per share – not counting the once-off gain from Glanbia Ireland’s disposal. Even though 4c can be attributed to currency exchange fluctuations, basic earnings per share have still risen by nearly two thirds year-on-year.

Glanbia also reports an adjusted earnings per share figure, which strips out all exceptionals as well as intangible asset amortisation and is relatively steady year-on-year. This is because the first half of 2021 saw most of the expenditure on the performance transformation restructuring detailed above, resulting in higher adjusting earnings of 52.86c per share, slightly higher than the corresponding 52.31c reported for the first six months of this year.

But the adjusted earnings per share of Glanbia’s continuing operations is now on the rise. And, given how important that restructuring was to the group’s immediate survival, however, basic earnings per share were arguably more significant last year than the adjusted figure.

Looking back over the past three years, the timing of Glanbia Ireland’s disposal has been as good as it gets for the PLC’s shareholders (which, by the way, include the co-op and many individual farmers). The modest but steady profit stream from Irish milk and grain processing and domestic trade in farm inputs helped cushion the drop in performance suffered by the performance nutrition as it dealt with the twin challenges of its own bloating and Covid-19 disruption. 

Now the contribution from Glanbia Ireland to the group’s bottom line would fade to insignificance as it returns to better financial health, but the windfall from the domestic business’s disposal is more important because of the boost it has provided to share buybacks in a period when the share price remains relatively low. The PLC made repurchases at an average price of €12.55 per share last year and €11.73 in the first half of this year. The share price is now €12.60, still far from its pre-2019 highs of nearly €20 and even from a €15 peak this time last year.

In fact, Glanbia repurchased €31 million worth of its own stock directly from the co-op, which was partly selling down its interest in the PLC through a €70 million placement in January to help fund the full acquisition of Glanbia Ireland. This has reduced the downward price pressure that might have resulted from the co-op offloading those shares in the open market.

The only negative for Glanbia shareholders may come from a future crash in the performance of Glanbia’s high-tech nutritional products trade. If the PLC repeats the past mistake of conducting too many acquisitions and ending up with messy product ranges and supply chains that hit the wall in the face of global economic convulsions, it will no longer have the reliable workhorse of Irish agribusiness to fall back on for support.