You've spotted three separate warning signs in Safaricom's numbers over the last thirteen lessons. Today we line them up as one reusable checklist you can run on any company's statements, starting with your own.
This lesson introduces no new figures. Instead, it collects three things you've already found in Safaricom's real, audited statements and names them as a pattern: a red flag — not proof that a company is in trouble, but a signal that something is worth investigating before you accept the headline number at face value. A red flag is a question, not a verdict.
None of the three items below mean "sell" or "this company is failing." Safaricom is a real, profitable, dividend-paying business. The point of a red flag is simply: don't stop reading at the bottom line. Go one line further and ask "why."
In Lesson 1 you saw Safaricom's own Statement of Profit or Loss for the year ended 31 March:
| KShs millions | FY2024 | FY2023 |
|---|---|---|
| Total revenue | 349,447.2 | 310,904.8 |
| Depreciation & amortisation (total) | (82,948.0) | (54,865.0) |
| Profit for the year | 42,658.4 | 52,482.8 |
Source: Safaricom PLC Annual Report and Financial Statements 2024, p.177 (figures simplified/grouped for this lesson; audited, currency KShs millions).
The pattern: revenue grew +12.4% (310,904.8 → 349,447.2) while profit for the year fell about -18.7% (52,482.8 → 42,658.4). Whenever you see revenue and profit moving in opposite directions, some cost line grew even faster than revenue — your job is to find which one. In Safaricom's case, Lesson 1 traced it to depreciation & amortisation nearly doubling (54,865.0 → 82,948.0), mostly network investment including the Ethiopia expansion — a reasonable business reason, but you only know that because you checked.
Lessons 4 and 5 compared Safaricom's profit for the year to the actual cash its operations generated:
| KShs millions | FY2024 |
|---|---|
| Profit for the year | 42,658.4 |
| Net cash generated from operating activities | 107,923.6 |
Source: Safaricom PLC Annual Report and Financial Statements 2024, p.181 (figures simplified/grouped for this lesson; audited, currency KShs millions).
The pattern: here the gap actually runs the reassuring direction — operating cash flow (107,923.6) is much higher than profit (42,658.4), mostly because depreciation & amortisation is a non-cash expense that reduces profit but doesn't take any cash out the door. The red flag isn't "cash and profit are different" (they're almost always different) — it's when profit is reported as strong while operating cash flow is weak, flat, or negative. That combination can mean the profit exists mostly on paper: for example, from sales booked but not yet collected, or from non-cash gains inflating the top of the income statement, which brings us to the third flag.
Lesson 13 looked at one specific line inside Safaricom's profit-before-tax build-up: a hyperinflationary monetary gain of KShs 22,363.2 million in FY2024 (KShs 10,383.1 million in FY2023), arising from accounting for its Ethiopian operations under hyperinflation rules — an accounting adjustment, not cash from customers or operations.
Source: Safaricom PLC Annual Report and Financial Statements 2024, p.177 (audited, currency KShs millions).
The pattern: when a big chunk of profit before tax comes from a line that isn't ordinary trading (a fair value adjustment, a one-off gain, a currency or inflation adjustment), ask how much of the "profit" would be left without it. It doesn't mean the number is fake or against the rules — it means you should mentally set that gain aside and look at the underlying trading performance on its own.
Every red flag on this list is really the same instruction applied to a different pair of numbers: when two numbers that usually move together suddenly diverge, find out why before you trust the headline. Revenue vs profit. Profit vs operating cash. Profit vs profit-without-the-one-off-gain.
None of these three checks require anything beyond the income statement and cash flow statement you already know how to read. Running all three takes a few minutes and turns a single headline number into an informed opinion.
Next lesson, we'll turn to a number you've already seen quoted for both companies — EPS (earnings per share) — and ask what it actually measures, and what it doesn't tell you on its own.
Primary source for this lesson's numbers: Safaricom PLC Annual Report and Financial Statements 2024. For a printable, standalone version of this checklist to keep beside you when you read any company's statements, see the Red-Flag Checklist reference card.
Something unclear, or want to dig into a line item we skipped (like "what other non-cash gains show up in real financial statements")? Ask your teacher — that's what these sessions are for.