Legal & General Reports Mixed 2024 Results with Profit Decline
Why we think this is bad
Legal & General's 2024 financial results present a concerning picture, despite some positive elements. The company experienced a significant decline in profit after tax from £443m in 2023 to £195m in 2024, a major red flag overshadowing the modest increase in revenue and adjusted operating profit. The substantial decrease in cash and cash equivalents from £20,513m to £16,657m raises liquidity concerns. Operating cash flow declined from £(14,244)m to £(4,446)m, indicating ongoing cash flow challenges. The operating profit margin slightly decreased from 13.76% to 13.48%, suggesting efficiency pressures. With a high PE ratio of around 73.69, the company appears potentially overvalued. These factors, combined with market risks evidenced by significant investment variances, point to a challenging period ahead for the company.
Key Points
- Profit after tax decreased significantly from £443m in 2023 to £195m in 2024
- Revenue increased from £12,111m to £12,689m
- Adjusted operating profit rose slightly from £1,667m to £1,711m
- Cash and cash equivalents declined from £20,513m to £16,657m
- Operating cash flow decreased from £(14,244)m to £(4,446)m
- Operating profit margin decreased from 13.76% to 13.48%
- High PE ratio of approximately 73.69 suggests potential overvaluation
- Significant market risks evidenced by £(1,383)m in investment and other variances
Summary
Legal & General's 2024 financial results reveal a complex and concerning financial picture. While the company achieved a slight increase in revenue to £12,689m and adjusted operating profit to £1,711m, there was a substantial decline in profit after tax from £443m to £195m. This significant drop in profitability is a major concern. The company also experienced a notable decrease in cash and cash equivalents from £20,513m to £16,657m, indicating potential liquidity pressures. Operating cash flow declined significantly from £(14,244)m to £(4,446)m, suggesting ongoing cash management challenges. The operating profit margin slightly decreased from 13.76% to 13.48%, pointing to efficiency pressures. With a high PE ratio of about 73.69, the company appears potentially overvalued based on current earnings. The company faces significant market risks, evidenced by investment and other variances of £(1,383)m. Additionally, potential regulatory risks in the financial services sector and operational risks associated with managing a large investment portfolio should be considered. These factors collectively point to underlying challenges that may impact future performance, despite the modest top-line growth.