Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The principal activity of the Company, and the Group to which it is a part of, during the year was as a reseller of Mobile, Fixed line and Cloud Telephony, Networking Systems and Services, Cyber Security, Information Technology, Energy and other Business Services to the Public Sector, Corporate SME and Larger Enterprise customers throughout the UK.
The results of the Company show sales of £29.5m. The Company has net liabilities of £4.5m, including £3.1m of cash in hand. The net liabilities arise due to amortisation on the goodwill recorded on acquisitions and the interest charges due to the Group’s funding structure. The reported results include loan interest of £0.7m due for bank loans and loan notes issued, and £4.4m of amortisation of goodwill in respect of the acquisitions undertaken. In line with the Company's buy and build acquisition strategy, five business acquisitions were completed in the period. On 25 February 2021, the company incorporated a new company called Arrow Business Communications PS Limited for the purpose of acquiring three businesses into its Group of companies. On 2 March 2021, Arrow Business Communications PS Limited acquired 100% of the equity of Complete Networks Limited. This business provides Network Services and IT Solutions to Public Sector and Enterprise customers across the UK. On 26 April 2021, Arrow Business Communications PS Limited acquired 100% of the equity of UK-tec Limited. This business provides Network Services to Public Sector and Enterprise customers across the UK. On 31 August 2021, Arrow Business Communications PS Limited acquired 100% of the equity of Aimes Management Services Limited. This business provides Cloud Services, Network Services and IT Solutions to Public Sector and Enterprise customers across the UK. On 18 September 2021, the Company acquired 100% of the equity of Pescado Holdings Limited which is the holding company for Pescado Limited, Pescado Hosting Limited, Pescado IT Limited and 3b Limited. This Group of businesses provides Mobile and Hosted Telephony and IT Services to Corporate SME and Enterprise customers across the UK. On 26 October 2021, the Company acquired 100% of the equity of Circle IT Limited which holds 100% of the equity of Fabric IT Limited. This Group of businesses provides complex and high value IT, Products, Services and Solutions to Public Sector and Enterprise customers across the UK.
There are no material subsequent events.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The management of the business and the execution of the Group’s strategy are subject to several risks. The process of risk acceptance and risk management is addressed through a framework of policies, procedures and internal control. Compliance with regulation, legal and ethical standards is a high priority for the Group. The CFO and the finance team take an important oversight role in this regard.
The key business risks and uncertainties affecting the Group are considered to relate to macro-economic conditions, risk of non-payment by customers, integration of acquired businesses, and Ofcom regulation changes. These are managed by strong credit control and vetting procedures, a robust commercial approval process for new contracts and re-signs, and a portfolio approach to our product set. All underpinned by the stability provided by long term customer contracts. In 2021, the Group continued to experience some expected adverse financial impact from the Covid-19 pandemic and the subsequent lockdowns enforced by the UK Government. The Group sales and results were not affected by Brexit, because we are largely a domestic-based business. However, we were affected by equipment shortages associated with the global shortage of silicon chips. This has caused some delay in delivering solutions to customers. However, apart from some timing differences that were managed, the financial impact has been modest. Actions taken in 2020 to stabilise the business meant the impact of lower variable usage and temporary project delays (due to being unable to access client sites) was minimal in 2021. The directors have continued to focus on securing complementary strategic acquisitions as part of a buy-and-build strategy. In most respects this has protected the profitability and cash flow for the Group.
The Company’s main key performance indicator is earnings before interest, tax, depreciation, and amortisation (EBITDA). The Company achieved an EBITDA of £2.2m.
The principal financial instruments of the Company comprise of bank balances, trade debtors and trade creditors.
Working capital requirements are met principally out of trade debtors and trade creditors which arise directly from the Company’s normal operations. The Company’s banking facilities are utilised to fund acquisitions and will be repaid out of operating cash flow. The Company’s finance facilities are held in sterling and the Company does not enter any hedging arrangements. Trade debtors are managed in respect of credit and there is a policy to minimise any risk by assessing new customer’s credit risk and monitoring existing customer’s creditworthiness. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due. Cash flow is closely monitored as part of day to day control procedures and the directors review cash flow projections on a weekly basis and ensure appropriate facilities are available to be drawn upon, as necessary.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors have complied with the requirements of s172 of the Companies Act 2006. The overarching Values and Commitment Strategy within Arrow is to develop a long-term, sustainable business. One that delivers value for all its stakeholders, including employees, clients, suppliers, business partners and the wider community. By managing the business responsibly, the directors intend to support the creation of a financially stable organisation and deliver value for all stakeholders. The Arrow Group is owned by its management team and employees, together with investment partner, MML. As noted elsewhere in this report, all employees are regularly consulted with and fully understand the business’s immediate and future strategic direction, as well as the current trading performance. This ownership model and consultative approach fosters a strong culture and high levels of employee satisfaction and retention, while also ensuring all employees are treated fairly and consistently. There is also a dedicated Employee Engagement team that focuses on continuously improving this key area within the business. Customer relationships are the heartbeat of the business, with customer retention being a key performance indicator. Monthly Net Promoter Score surveys provide valuable feedback on customer satisfaction and engagement within Arrow. Achieving high levels of service excellence is a core element of the Company’s philosophy. Many experienced customer account managers are employed to ensure customers are well supported with high levels of service excellence. Given that Arrow is a business using global suppliers, the directors fully acknowledge a duty to trade responsibly. Arrow has an Ofcom approved Code of Practice, is a member of the approved dispute resolutions scheme OTELO, and holds network accreditations with several of the industry’s leading network operators. Business is conducted in line with Arrow’s Code of Conduct and several other internal policies and procedures. These are all designed to ensure the Group maintains the highest possible reputation for standards of conduct. The Group also has a dedicated commercial team. They are responsible for maintaining regular engagement with suppliers, ensuring they‘re kept informed of the Group’s performance and strategic objectives – in both the short-term and longer-term. The Group has a Corporate Social Responsibility Policy to ensure the interests of all stakeholders, including those based in the wider community, are acknowledged and protected. Arrow is committed to identifying, managing, and minimising the environmental impact of business operations. Arrow maintains an Environmental Policy to manage this, and to ensure compliance with all applicable environmental legislation, and to strive to use pollution prevention and environmental best practices in all areas. With regards to impact on the community, Arrow engages with the local areas in which it works, is committed to making a positive social and economic impact , while understanding and managing any negative impacts of its business operations. In addition, the Group seeks to make a positive social contribution through the services we provide to clients. Programmes are in place to support employee volunteering and fundraising, as well as local community and charity support.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The Directors present their report and the financial statements for the year ended 31 December 2021.
The Directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £2,156,037 (2020 - loss £1,966,437).
The directors have not recommended payment of dividends.
The Directors who served during the year were:
In 2022, the Directors are to focus on the integration of the recently acquired subsidiaries so as to simplify the corporate
structure via corporate hiving-up of the assets and liabilities in advance of commencing strike-off proceedings for these legal entities.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The Company has not disclosed information in respect of greenhouse gas emissions, energy consumption and energy efficiency action as it is disclosed within the reporting of its ultimate parent company.
The Company has chosen in accordance with Section 414C(II) of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 to set out within the Company’s Strategic Report, the information required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review, details of the principal risks and uncertainties, subsequent events and the company's approach to compliance with Section 172(1) of the Companies Act 2006.
The auditors, Menzies LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARROW BUSINESS COMMUNICATIONS LIMITED
We have audited the financial statements of Arrow Business Communications Limited (the 'Company') for the year ended 31 December 2021, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of changes in equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARROW BUSINESS COMMUNICATIONS LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARROW BUSINESS COMMUNICATIONS LIMITED (CONTINUED)
Auditors' responsibilities for the audit of the financial statements (continued)
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standard 102;
∙UK employment legislation;
∙UK health and safety legislation;
∙General Data Protection Regulations;
∙UK tax legislation; and,
∙OFCOM
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary.
The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area
We assessed the susceptibility of the Company financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
∙Identifying and assessing the measures management has in place to prevent and detect fraud;
∙Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
∙Challenging assumptions and judgments made by management in its significant accounting estimates; and
∙Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
∙The use of management override of controls to manipulate results, or to cause the Group to enter into transactions not in its best interests; or
∙Posting of unusual journals and complex transactions.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARROW BUSINESS COMMUNICATIONS LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 27 form part of these financial statements.
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STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2021
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Arrow Business Communications Limited is a private company, limited by shares, incorporated in the England and Wales under the Companies Act 2006. The address of the registered office is given on the Company Information page, which is also the principal trading address. The principal activities of the company and the nature of its operations are set out in the Strategic Report.
The financial statements are prepared in Pound Sterling, which is the functional currency of the entity.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Arrow Communications Holdings Limited as at 31 December 2021 and these financial statements may be obtained from Companies House.
The losses for the year arise as a result of the amortisation of goodwill as set out in note 13, directly as a result of the accelerated acquisition programme. The Company, and the group below it, is cash generative on an operating basis and the detailed forecasts prepared by the directors confirm that it is expected to remain so over the forthcoming years.
At the end of the year, the group in which the Company is a part of had unused bank facilities and together with ongoing discussions with the group's bankers to fund future acquisitions, the directors are confident that obligations can be met as they fall due. Therefore the financial statements have been prepared on a going concern basis.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The Company is a parent company that is also a subsidiary included in the consolidated financial statements of a larger group by a parent undertaking established under the law of any part of the United Kingdom and is therefore exempt from the requirement to prepare consolidated financial statements under section 400 of the Companies Act 2006.
Revenue from one off sale of goods is recognised when the risks and rewards of ownership have been passed to the customer, being once they have been delivered. Where revenue from services is part of a fixed length contract, the revenue is spread evenly across the length of the contract, along with any associated costs which have been incurred in securing the contract.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Goodwill
All intangible assets are considered to have a finite useful life.
The estimated useful lives range as follows:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Goodwill amortisation The period in which the goodwill of acquired trade and assets is considered to be a significant judgement, considering it is such a material charge in the year. The directors have reviewed their consideration of the life in which the goodwill is valued, being five years for all acquisitions since 2016 and 20 years for goodwill prior to this date, is adequate. Impairment Goodwill and investments are tested annually for impairment. Management have established that the key determinant of future value is retention of customers and are satisfied that the underlying assumptions regarding customer retention used in the setting of the useful life of goodwill and that investments have not required impairment, are not unreasonable.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
12.Taxation (continued)
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 on 10 June 2021. These include increment of the rate of corporation tax to 25 percent from 19 percent from April 2023.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Share premium account
Capital redemption reserve
Profit and loss account
Amounts outstanding for pension commitments included within other creditors were £97,424 (2020 - £Nil).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
25.Financial commitments
Loans included within entities of the group that the Company is a part are secured by fixed and floating charges over the assets of the Company and the group. At the year end the loans amounted to £176,242,950 (2020: £116,793,353).
The Company's immediate parent company is Arrow Business Communications Group Limited.
The ultimate parent entity is Arrow Communications Holdings Limited, to which consolidated accounts include this company. The consolidated accounts are available from Companies House for the year ended 31 December 2021. The ultimate controlling party of Arrow Communications Holdings Limited is MML Capital Europe VII Equity I S.A., a company based in Luxembourg. MML Capital Europe VII Equity I S.A is a 100% subsidiary of MML Partnership Capital VII SCSp acting by its general partner MML Partnership Capital VII GP S.a.r.l.
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