Rentokil Initial (RTO1) Risk Analysis
Risk Overview Q4, 2023
Source: the company's latest filing for the period ended Dec 31, 2023, filed Mar 27, 2024
Risk Change Over Time
- Accounting & Financial Operations - Risk 1We have identified a material weakness in our internal control over financial reporting within the meaning of Section 404 of the Sarbanes-Oxley Act, which could, if not remediated, adversely affect our ability to report our financial results accurately or in a timely manner, which may adversely affect our business and reputation.
Following our U.S. listing on the NYSE and registration with the U.S. Securities and Exchange Commission (the "SEC") in October 2022, we are required to comply with certain requirements under the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), including the maintenance of adequate internal control over financial reporting. Beginning with this Form 20-F, we are required to evaluate the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is required to audit the effectiveness of its internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act. While we have designed an internal control over financial reporting framework for the purposes of the effectiveness evaluation described above, if such controls fail, we may be subject to sanctions or investigations by regulatory authorities, including the SEC and the NYSE. It should be noted that, prior to 2022, we identified errors to our financial statements, which resulted in a restatement of the relevant periods. In our Annual Report on Form 20-F/A for the year ended 31 December 2022 filed with the SEC on 8 February 2024, we reported disclosure errors to our financial statements resulting in a revision of the relevant periods. The prior restatement and revision each resulted from material weaknesses in our internal control over financial reporting, including a lack of sufficient resources with the appropriate level of technical accounting knowledge, combined with incomplete policies and procedures related to the segregation of duties and control activities required for accurate and timely financial accounting, reporting, and disclosures, and a failure to design and maintain effective IT controls over user access, change management, database management and segregation of duties for information systems that are relevant to the preparation of our financial statements. The Company has remediated the material weakness in respect of lack of sufficient resources with the appropriate level of technical accounting knowledge, combined with incomplete policies and procedures related to the segregation of duties and control activities required for accurate and timely financial accounting, reporting, and disclosures. In respect of the material weakness relating to a failure to design and maintain effective IT general controls over user access, change management, database management and segregation of duties for information systems that are relevant to the preparation of our financial statements, the Company's management has designed and is in the process of implementing remediation measures. However, the material weakness will not be considered remediated until the applicable controls are designed and operate for a sufficient period of time and the Company's management has concluded, through testing, that these controls are operating effectively. In addition, as we implement these remediation efforts, we may determine that additional steps may be necessary to remediate the material weakness, or we may identify other material weaknesses or control deficiencies. We cannot provide assurance that these remediation efforts will be successful, that we will not identify new material weaknesses or that our internal control over financial reporting will be effective in accomplishing all control objectives. If material weaknesses in our internal control over financial reporting are not remediated in a timely manner, we could suffer material misstatements in our consolidated financial statements, fail to meet our reporting obligations or fail to prevent fraud, which may cause investors to lose confidence in our reported financial information, which in turn could have a material and adverse effect on the trading price of ordinary shares in the capital of Rentokil Initial plc, and subject us to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions. Failure to implement or maintain effective internal control systems required of public companies could also restrict our future access to the capital markets. Furthermore, we may need to incur additional costs and use additional management and other resources as our business and operations further expand or in an effort to remediate any significant control deficiencies that may be identified in the future. For further details on our internal control over financial reporting, please see the information set forth under the heading Item 15 "Controls and Procedures" included herein.
Risk Highlights Q4, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 27
- Accounting & Financial Operations - Risk 1We may be required to recognise impairment charges or be subject to asset revaluations or downgrades.
We have significant amounts of goodwill and intangible assets, such as customer lists. In accordance with applicable accounting standards, goodwill and indefinite-lived intangible assets are not amortised and are subject to assessment for impairment by applying a fair-value based test annually, or more frequently if there are indicators of impairment, including: - observable indications that the asset's value has declined significantly more than would be expected as a result of the passage of time or normal use;- significant changes with an adverse effect on the entity that have taken place, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates, or in the market to which an asset is dedicated;- market interest rates or other market rates of return on investments have increased, and those increases are likely to affect the discount rate used in calculating an asset's value in use and decrease the asset's recoverable amount materially;- the carrying amount of the net assets of the entity is more than its market capitalisation;- evidence that there is obsolescence or physical damage of the asset;- significant changes with an adverse effect on the entity that have taken, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose of an asset before the previously expected date, and reassessing the useful life of an asset as finite rather than indefinite; and - indication that the economic performance of an asset is, or will be, worse than expected. Based upon future economic and financial market conditions, our operating performance and other factors, including those listed above, we may incur impairment charges in the future, including in relation to the Terminix acquisition in respect of goodwill created and the value at which assets were recognised at completion. It is possible that such impairment, if required, could be material. Any future impairment charges that we are required to record could have a material adverse impact on our business, results of operations, financial condition and/or prospects.
- Accounting & Financial Operations - Risk 2ChangedWe have identified a material weakness in our internal control over financial reporting within the meaning of Section 404 of the Sarbanes-Oxley Act, which could, if not remediated, adversely affect our ability to report our financial results accurately or in a timely manner, which may adversely affect our business and reputation.
Following our U.S. listing on the NYSE and registration with the U.S. Securities and Exchange Commission (the "SEC") in October 2022, we are required to comply with certain requirements under the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), including the maintenance of adequate internal control over financial reporting. Beginning with this Form 20-F, we are required to evaluate the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is required to audit the effectiveness of its internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act. While we have designed an internal control over financial reporting framework for the purposes of the effectiveness evaluation described above, if such controls fail, we may be subject to sanctions or investigations by regulatory authorities, including the SEC and the NYSE. It should be noted that, prior to 2022, we identified errors to our financial statements, which resulted in a restatement of the relevant periods. In our Annual Report on Form 20-F/A for the year ended 31 December 2022 filed with the SEC on 8 February 2024, we reported disclosure errors to our financial statements resulting in a revision of the relevant periods. The prior restatement and revision each resulted from material weaknesses in our internal control over financial reporting, including a lack of sufficient resources with the appropriate level of technical accounting knowledge, combined with incomplete policies and procedures related to the segregation of duties and control activities required for accurate and timely financial accounting, reporting, and disclosures, and a failure to design and maintain effective IT controls over user access, change management, database management and segregation of duties for information systems that are relevant to the preparation of our financial statements. The Company has remediated the material weakness in respect of lack of sufficient resources with the appropriate level of technical accounting knowledge, combined with incomplete policies and procedures related to the segregation of duties and control activities required for accurate and timely financial accounting, reporting, and disclosures. In respect of the material weakness relating to a failure to design and maintain effective IT general controls over user access, change management, database management and segregation of duties for information systems that are relevant to the preparation of our financial statements, the Company's management has designed and is in the process of implementing remediation measures. However, the material weakness will not be considered remediated until the applicable controls are designed and operate for a sufficient period of time and the Company's management has concluded, through testing, that these controls are operating effectively. In addition, as we implement these remediation efforts, we may determine that additional steps may be necessary to remediate the material weakness, or we may identify other material weaknesses or control deficiencies. We cannot provide assurance that these remediation efforts will be successful, that we will not identify new material weaknesses or that our internal control over financial reporting will be effective in accomplishing all control objectives. If material weaknesses in our internal control over financial reporting are not remediated in a timely manner, we could suffer material misstatements in our consolidated financial statements, fail to meet our reporting obligations or fail to prevent fraud, which may cause investors to lose confidence in our reported financial information, which in turn could have a material and adverse effect on the trading price of ordinary shares in the capital of Rentokil Initial plc, and subject us to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions. Failure to implement or maintain effective internal control systems required of public companies could also restrict our future access to the capital markets. Furthermore, we may need to incur additional costs and use additional management and other resources as our business and operations further expand or in an effort to remediate any significant control deficiencies that may be identified in the future. For further details on our internal control over financial reporting, please see the information set forth under the heading Item 15 "Controls and Procedures" included herein.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.