Sunday, 27 March 2016

Grand-Flo: changing the goalposts?

Article in The Edge: "Grand-Flo: Profit guarantee for Innoceria purchase revised", one snippet:

Grand-Flo Bhd, which acquired a 50% stake in property development company Innoceria Sdn Bhd last year, said the period for the RM15 million net profit guarantee provided by the vendors will be three years instead of two as initially agreed.

The vendors had guaranteed a net profit of RM10 million in 2014 and RM5 million in 2015, but both parties have now agreed to an aggregate profit guarantee of RM15 million for a three-year period from 2014 to 2016.

"This agreement was reached after reasonable consideration of the unexpected longer gestation period in the development business which was not foreseen at the time of the acquisition," said Grand-Flo in a filing with Bursa Malaysia today.

This looks like a rather good deal for the sellers of Innoceria, a profit guarantee of RM 15 Million over three years instead of over two years. Looks like a case of changing the goalposts during the game.

Why is Grand-Flo so lenient?

What exactly is the current situation, for instance the profits over 2014 and 2015 of Innoceria?

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