What Are One-Off or Non-Recurring Items

What Are One-Off or Non-Recurring Items? These are amounts that show up in the income statement or notes that boost profit temporarily (or maybe only once) but don’t reflect ongoing business strength. If you don’t spot them, you may mistake a spike in profit for solid growth — and invest at the wrong time.

⚙️ What to Look For

Type of Item	Where to Find It	Why It Matters
Asset sales / disposal gains	Income statement → “Other income” or notes	A one-time gain. Doesn’t mean the company will earn that again.
Tax benefits / deferred tax reversals	Notes to tax section	Can inflate net income while cash tax may not decline similarly.
Foreign exchange (FX) or hyper-inflation adjustments	Notes or disclosures	May boost reported profit but may not create sustainable cash.
One-time restructuring or write-backs	Footnotes	These may not repeat; using them to judge dividend safety is risky.
Accounting changes (IFRS 15/16/17 etc.)	Notes to financials	Can shift timing of revenue/costs and distort trend comparison.
Government subsidies or COVID-related credits	“Other income” or notes	Not part of core business; if removed, profit may fall.

🧮 Examples from Kenyan Stocks

Here’s how this applies to the examples:

1. Equity Group

Result: PAT for FY 2024 = KSh 48.8 billion. 

What to check: In the report it mentions strong growth in income from government securities and placements (which may be partly non-core). 

Why it matters: If part of the profit comes from “excess placements” rather than core lending business, the durability of profit is less certain.

2. EABL

Result: For year ended June 2024 net profit fell to KSh 10.9 billion from previous year despite rising revenue.

What to check: In the commentary they cited foreign exchange gains and reduction in finance costs — these are non-operational effects.

Why it matters: If profit growth is aided by FX gains or falling debt costs rather than higher revenue or margin expansion, then dividend safety might be weaker.

3. Safaricom

Result: Reported earnings before interest & tax for FY24 excluding Ethiopia operations = KSh 139.9 billion.

What to check: They have large operations in Ethiopia with currency and startup risks, and their results include adjustments for hyper-inflation/FX.

Why it matters: Some profit may come from Ethiopia business adjustments, which may not repeat — affect how we view the “normalised” profit base.

4. KPLC

In previous posts we discussed KPLC’s free cash flow, debt, and dividend payout. If the company’s profit or cash includes large one-offs (e.g., sales, gains) then the dividend may be riskier.

What to check: Are there major sale of assets, subsidy or tariff adjustments in the period? If yes, these inflate “profit” but may not be recurring.

✅ How to Use This in Your Investing Checklist

1. Scan the notes for big “Other income”, “Gains on sale of assets”, “FX gains”, “Deferred tax benefit”.
2. Calculate Adjusted Profit by removing obvious one-offs if disclosed.
3. Compare Adjusted Profit to the usual profit to see how big the one-off component is.
4. Check Operating Cash Flow (OCF) and Free Cash Flow (FCF) — if one-offs are big but cash flow weak → warning sign.
5. Check the trend: if one year has big one-off gain, and next year doesn’t, profits may fall, and dividend sustainability may be at risk.

🧭 Why It Matters for Dividend & Investment Decisions

• If a company uses one-off gains to boost profit and then pays big dividends based on that, the next year may see a drop → dividend cut risk.
• Investors may buy thinking “big profit = big dividend” but fail to check if that profit is real and recurring.
• A proper business should show steady operational profit + strong cash flow + low dependence on one-offs for dividend safety and growth.