Grainger Annual Report 2015

FY2015 Annual Report · Grainger
Loading PDF…
ANNUAL REPORT AND ACCOUNTS 2015

Leading the market
Simplifying the business

CONTENTS

DIRECTORS’ REPORT

/ Our objective and strategy
/ Financial highlights
/ Chairman’s statement
/ Chief Executive’s review
/ Abbeville case study
/ Our market environment

Strategic report
1 
1 
2 
4 
6 
8 
10  / Our business model
12  / Key performance indicators
14  / Operational measures
15  / Performance income statement
17  / Performance asset values
19  / Financial review
24  / Our people and our customers
26  / Risk management
30  / Sustainability

Governance
37  / Letter from the Chairman
38  / The Grainger Board
40  / Leadership
42  / Effectiveness
47  / Accountability
49  / Audit Committee report
53  / Nominations Committee report
55  / Remuneration Committee report
74  / Board Risk and Compliance 

Committee report
75  / Other disclosures

Financials
77  / Independent auditors’ report
80  / Financial statements
156 / EPRA performance measures
160 / EPRA sustainability 

performance measures

169 / Five year record
170 / Shareholders’ information
171  / Glossary of terms
173  / Advisers

1

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

GRAINGER IS THE UK’S LARGEST LISTED RESIDENTIAL LANDLORD

Our objective is to be the UK’s leading private  
rented sector landlord, delivering sustainable  
long-term returns to our investors and our partners.

Our strategy is to maximise the returns from  
our reversionary portfolio while we grow our  
private rented sector business. We are simplifying  
our business to focus on our objective, and  
have accelerated the pace of change this year.  
This will continue.

FINANCIAL HIGHLIGHTS

Recurring proﬁt* 

Proﬁt before tax 

OPBVM**

£41.2m

2014: £47.1m

£50.0m

2014: £81.1m

£101.9m

2014: £107.5m

Total dividend

2.75p

2014: 2.50p

Gross NAV

319p

2014: 291p

Group LTV

45.5%

2014: 46.5%

NNNAV

263p

2014: 242p

Net debt

£1,138m

2014: £1,044m

Return on shareholder equity

Return on capital employed

9.5%

2014: 17.0%

10.0%

2014: 25.6%

Growth in vacant 
possession value

5.7%

2014: 12.0%

Proﬁt before tax is the only recognised GAAP measure in the ﬁnancial highlights above.
*  Recurring proﬁt is deﬁned as proﬁt before tax, valuation movements and non-recurring items (see Note 3 to the accounts on page 100).
**  OPBVM is operating proﬁt before valuation movements and non-recurring items (see page 20 and Note 3 to the accounts on page 100).
For more information visit our website: www.graingerplc.co.uk 

 
2

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Chairman’s statement

In 2015 we have made some important changes 
at Grainger, in terms of both the leadership of our 
Company and our future strategy. 

Leadership
Robin Broadhurst served the Company 
with great diligence and skill prior to his 
retirement in February 2015 after eight 
years as Chairman and we had intended 
that Ian Coull would succeed him. Due to 
ill health, however, Ian was unable to take 
up the role and so when I was asked by my 
Board colleagues to take over, I was more 
than willing to do this. I have now served 
on the Board for over seven years and 
have developed a deep admiration for the 
Company and for the tremendous work 
that our staff do to ensure that Grainger’s 
customers are well served in safe, secure 
and decent homes. 

Andrew Cunningham also signalled his 
intention to retire in 2016 after nineteen 
years as a Director, the last six as Chief 
Executive. Andrew will retire in early 2016, 
having seen the Company through the 
ﬁnancial crisis and consequent challenges 
for the property sector. His steady hand 
and sound judgment meant that Grainger 
came through the difﬁcult period of 2007–
2010 in very good shape. Andrew will 
be succeeded by Helen Gordon, a highly 
regarded and very experienced property 

professional who brings a wealth of 
expertise gained from senior positions in 
property development, fund management 
and most recently, banking. Helen was 
selected following a thorough search 
process in which we attracted many ﬁrst 
class candidates. The Board is looking 
forward to working with Helen as we 
reshape the business during 2016 in line 
with a refreshed strategy. 

Mark Greenwood has been our Finance 
Director for the last ﬁve years. Mark is also 
retiring this year and we are grateful to him 
for the important contribution he has made 
to our business during his time with us. 
We are delighted to welcome Vanessa 

Simms as our new Finance Director 
in early 2016. She joins us from Unite 
Group plc, where she has been Deputy 
Finance Director since 2012, and brings 
with her signiﬁcant relevant PLC and real 
estate experience.

Strategy 
When I took over as Chairman, I was 
pleased to have the backing of so many 
Shareholders for accelerating the pace  
of change at Grainger, which consisted  
of making three important changes. 

Firstly, we had a clear message that our 
drive to build the UK’s leading private 
rented sector (PRS) business was well 
understood and that an increase in pace 
was greatly welcomed. We have been 
working hard to accelerate our progress in 
this area during 2015 with some important 
acquisitions and development projects. 
We remain committed to our strategic 
objective to build a substantial market-
leading PRS business. Later in this report, 
we set out both the market opportunity 
(See Our market environment) and the risks 
and challenges (See Risk Management) 
associated with this strategy.

In order to accomplish this, our second 

planned change was to simplify our 
business model. Although Grainger has 
traditionally seen merit in diversiﬁcation,  
it was clear that the overhead cost of such 
a strategy was high and that the business 
needed to be more focussed and play to 
our core competencies. Accordingly, in 
2015 we have been reviewing each of our 
business lines and where these did not ﬁt 
with the future shift to a PRS portfolio, 

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

we would look to divest, thereby driving 
enhanced shareholder value. We are well 
underway with the sale of our German 
assets, taking advantage of strong demand. 
We will continue this process where we  
are of the view that individual business lines 
do not align well with our future move to 
PRS assets. 

Thirdly, as part of our on-going balance 
sheet management we announced early 
this year that we were reviewing our cost 
of debt. The majority of our debt was 
arranged in 2011 (when lending markets 
were still feeling the effects of the global 
ﬁnancial crisis), but as the term of this 
funding approached an end, we sought 
to take advantage of the lower costs of 
borrowing available in the market today. 
Over the course of this year we have 
reﬁnanced our core syndicate debt as 
well as a facility for one of our portfolios. 
The average cost of debt at the year end 
is 4.6% which is more appropriate for our 
future business. 

In summary, our business will transition 
over the next few years from a traditional 
trading model that was historically aligned 
with house price inﬂation to one that is 
more income focussed, based on a market-
leading portfolio of PRS assets. The pace 
and shape of this change and the detail  
of the execution will be the priority for the 
new leadership team and a detailed review 
of our strategy for accomplishing this shift 
of our strategy for accompl
of our strategy for accompl
will be set out in the early part of 2016. 
will be set out in the early p

3

Our reversionary portfolio is still highly  
cash generative and, as these assets 
naturally become vacant, we are able to 
realise their full latent value. This process 
will be important in ensuring that, as we 
grow our PRS portfolio, through both 
acquisition and development, it can be 
ﬁnanced, in part, by recycling capital from 
this reversionary portfolio. 

Board 
I am pleased to have had tremendous 
support from my Board colleagues this 
year and have worked closely with Andrew 
Cunningham and Mark Greenwood 
to implement the changes required to 
our business. Each has accomplished so 
much in their ﬁnal months with Grainger. 
I wish them both well in their retirement. 
I would also like to welcome Rob Wilkinson 
to the Board, whose expertise in fund 
management and real estate will replace 
the contribution from Simon Davies, 
who retires from the Board this year. 
On behalf of the Board, I would like to 
thank Simon for his valuable input, and 
we wish him well for the future. Details of 
the work and activities of the Board and its 
Committees over the last year are set out 
in the corporate governance section of our 
Annual Report and Accounts.

Our staff
Finally, I would like to thank all of the staff 
at Grainger who deliver such an unrivalled 
service to our customers. We never forget 
that we have many thousands of families 
that make their home with Grainger and 
we all take that responsibility very seriously. 
The Board is very grateful to our staff for 
the tremendous effort they make each and 
every day.

Baroness Margaret Ford
Chairman 

19 November 2015

“Our strategic 
objective to build  
a substantial market 
leading PRS business 
remains our  
clear aim”

 
4

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Chief Executive’s review

Our extensive and unrivalled experience in all aspects of the 
residential market puts us in an excellent place to be the 
market leader. It is an important time for the sector and the 
whole business looks forward to the future with conﬁdence 
and excitement.

In addition to the solid trading performance 
this year, we have continued to simplify 
the Group’s operations and accelerate 
the growth of our Private Rented Sector 
(PRS) business. Over time we will maximise 
the returns from our regulated tenancy 
portfolio as properties naturally fall vacant 
and are sold. In turn we will grow the 
PRS business to increase the proportion 
of our income generated by rents. 
Underpinning this long-term strategic 
change is our continuing simpliﬁcation of 
the business. We have announced the sale 
of our German JV with Heitman and of our 
intention to dispose of our German assets, 
which together will leave us as a UK-only 
focussed residential business. 

Financial performance
We have seen strong levels of growth in 
our key performance measures. NAV has 
increased by 9.7% and NNNAV by 8.8% 
and our return on Shareholders’ equity was 
10.0%. At the asset level our UK portfolio 
increased in value by 5.7% and we sold 
our vacant properties at 9.1% above last 
September’s valuation at a margin of 
50.5%, producing a strong sales proﬁt 
performance of £68.4m, 12.9% above 
last year’s ﬁgure of £60.6m. After several 
years of outperformance, this year our UK 
Residential portfolios performed broadly 
in line with the wider UK housing market. 
We continue to see positive signs of future 
growth in the English regions and continue 
to invest accordingly.

Our proﬁt before tax reduced to £50.0m 

from £81.1m, having been adversely 
affected by the £18.2m loss we incurred 
as we exercised our security rights to re-
acquire the ERIL portfolio, a £7.0m increase 
in the derivatives fair value charge and a 
£4.6m reduction in fees and other income 
compared to last year.

Building a modern PRS business
The imbalances between housing supply 
and demand allied with the changing 
attitude towards home ownership have led 
to increased demand for good quality, well 
managed, private rented accommodation. 
The PRS is the fastest growing housing 
tenure in the UK, with nearly one in ﬁve 
people renting privately today. This growing 
demand is a result of changing lifestyles and 
economic drivers, which are set to continue. 
We will meet some of the demand through 
the acquisition of existing assets and we 
have successfully bought 927 such units 
in the year for £86.7m, producing a gross 
yield of 7.7%. These acquisitions have 
the advantage of producing immediate 
income and the opportunity to produce 
future income and capital growth once 
absorbed into Grainger’s residential 
management platform. 

We have focussed much of our effort 
this year in building a pipeline of purpose-
built rental properties. We believe 
there is considerable demand for such 
assets, particularly when linked to good 
property management and high customer 
service standards. 

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

5

The attractiveness of purpose-built PRS 
assets to the consumer market has been 
evidenced by our experience at our ﬁrst 
such development released to the private 
rental market earlier this year, Abbeville 
Apartments in Barking. This building was 
fully let in less than eight weeks at rent 
levels above both our expectations and 
the local market and is producing a gross 
yield on cost of 10.2%. The block was built 
under a forward purchase agreement and 
we will deliver further projects through 
similar purchase or funding agreements. 

This pipeline of assets is further enhanced 

by our direct development activities, for 
example at land that we own at Seven 
Sisters, on sites being developed with 
the Royal Borough of Kensington and 
Chelsea and at strategic land sites such as 
Berewood in Hampshire and Wellesley near 
Aldershot. Going forward, the activities of 
our development division will increasingly 
be focussed on delivering product for our 
PRS business. 

In total, including acquisitions completed 

since our year end, we now own, or 
manage in co-investment vehicles, c.3,650 
PRS units in the UK with a further pipeline 
of c.1,500 units either already secured or 
at an advanced stage, of which we expect 
the majority to be developed over the next 
three years. 

Creating a sustainable business
We recognise the importance of 
creating a sustainable business for all 
our stakeholders. In particular we are 
conscious of our responsibility to provide 
homes to our customers with a personal 
level of service. Consequently we continue 
to develop ways of communicating with 
our tenants – whether through tenants’ 
charters or customer satisfaction surveys. 
We believe that this communication 
and feedback will become increasingly 
important in creating a distinctive PRS 
product in a competitive environment.

We are delighted that our commitment 
to sustainability and customer service has 
been recognised in a number of ways this 
year – Green Star Status in the Global Real 

Estate Sustainability Benchmark, and being 
awarded Residential Asset Manager for the 
fourth successive year in the Property Week 
RESI Awards amongst others. 

Outlook
This year has seen us make real progress 
in accelerating the strategic change of 
the business. We are simplifying our 
activities to create a UK-focussed residential 
specialist with exposure to two main 
asset classes – a highly cash generative 
portfolio of reversionary properties which 
deliver a unique exposure to both capital 
appreciation and rental income, and 
a growing portfolio of PRS properties 
which will provide consistent rental 
income streams.

As part of this simpliﬁcation, we have 

exchanged contracts for the sale of 
our German JV with Heitman, which 
follows our stated intention to dispose 
of our wholly-owned German assets. 
Following completion of these transactions 
we will be a UK-only focussed residential 
business. As we simplify the Group, 
our balance sheet will be signiﬁcantly 
strengthened, providing a robust ﬁnancial 
platform on which to build a modern 
PRS business. 

The beginning of the 2015/16 year 

continues to provide evidence of the robust 
trading characteristics of the business. As at 
31 October 2015, our total Group sale 
pipeline1 amounted to £68m, which should 
deliver £33m of proﬁt, with vacant UK sales 
values on completed sales 1.0% above 
September 2015 valuations (FY14: £77m, 
£35m and 1.9% respectively).

Our extensive experience in all aspects 
of the residential marketplace puts us in an 
excellent place to be the market leader. It is 
an important time for the sector and the 
whole business looks forward to the future 
with conﬁdence and excitement.

Andrew Cunningham
Chief Executive Ofﬁcer 

19 November 2015

1   Completed sales, contracts, exchanged and properties 

in solicitors’ hands.

“We have  
continued to simplify 
the Group’s operations 
and accelerate the 
growth of our PRS 
business”

 
 
6

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Abbeville case study

Abbeville Apartments has been designed speciﬁcally for 
renting. With customer needs leading the design, the 100 
apartments all come with double-sized bedrooms, lots 
of storage and appealing communal features such as a 
residents’ lounge, ﬁtness studio, communal garden and 
a loading bay for moving in and out.

As one of the UK’s leading professional 
landlords, established in 1912, we 
have applied our long-term investment 
approach to this building. We offer 
ﬂexible tenancies for a period of up  
to three years and transparent fees. 
To ensure great customer service,  

we have a dedicated property 
management team based on-site, 
and an online tenant portal where 
occupants can communicate directly 
with their building manager, request 
a repair and ﬁnd and store all the 
information they need for living in 
the building.

Sustainability was a key consideration 
in design and construction. The heating 
and hot water supply is provided  
by a combined heat and power  
unit complemented by photovoltaic 
panels on the roof. We have also 
installed a Heating Interface Unit –  
a smart meter – into every apartment 
to encourage greater awareness of 
energy consumption. 

The design also promotes healthy 
lifestyles. It has a large, conveniently 
located bike storage area and a  
24-hour ﬁtness studio. 

OUR CUSTOMERS

Amenities such as parks, shops and 
restaurants are also within easy walking 
distance and Grainger has taken care 
to provide residents with space to 
interact right on their doorstep, with 
a landscaped private courtyard and a 
communal residents lounge with free 
WIFI and coffee. 

Successful launch
Lettings at Abbeville Apartments 
were very strong. In less than eight 
weeks since the scheme launched 
the building was fully let. The level 
of demand for the homes was 
exceptionally high with over 1,000 
registered interested parties, leading 
to rental levels being ahead of plan. 
Furthermore, 40% of the customers 
have opted for a three-year tenancy 
agreement. This is not only great 
for the customers concerned as 
it provides greater security and 
certainty but it is also a positive trend 
for Grainger as it reduces costs and 
the potential for voids. The scheme 
generates gross rent of c.£1.5m.

31

AVERAGE   
AGE

57%

PREVIOUSLY   
RENTED

84%

PREVIOUSLY LIVED 
IN LONDON

SUSTAINABILITY FEATURES

16%
16%
13%

Work in the IT profession

Work in ﬁnancial services

Are teachers or health  
care professionals

Sedum green  
roof

Photovoltaic  
cells

Smart meters

Combined heat  
and power unit

7

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
8

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Our market environment

The UK housing market is dominated by the imbalance 
between high levels of demand and limited supply.

Housing supply and demand 
Current estimates of housing demand 
range from 250,000 to 300,000 new 
homes required each year. In 2014 the UK 
built 140,000 new homes – well below 
the amount required to meet household 
growth. This supply/demand imbalance 
underpins capital value growth (house 
price inﬂation). In this ﬁnancial year, UK 
house prices grew by 6.1% according to 
the combined average of the Halifax and 
Nationwide house price indices. 

While London and the South East 

continue to perform strongly, over the past 
year we have seen an increasing number 
of positive signs in the regions, particularly 
in the stronger core regional cities such as 
Birmingham and Manchester. In response, 
Grainger has increased its investment focus 
in strategic regional locations in England in 
order to capture future growth prospects. 
This year we invested almost £90m in 
rented residential assets located in the 
English regions.

Growth in the private rented sector
One of the more pronounced changes 
taking place in the UK Residential market 
is the sustained growth in the PRS. It has 
grown considerably since 2002, nearly 
doubling to 4.4 million households.1

This growth looks set to continue for 
years to come, with Savills predicting that 
the PRS will grow by 1.2 million households 
over the next ﬁve years.

The bulk of this rental demand has been 

driven by the 25–34 age group, the 
so-called ‘millennials’, with renters in this 
age group more than doubling since 2003. 
Today, one in every two individuals, between 
25 and 34, rent privately in the UK. 

Drivers of rental demand 
The ﬁnancial drivers underpinning rental 
growth since the recession are well 
documented. One example is the constraint 
placed on mortgage lending, particularly 
affordability and deposit requirements, 
making mortgages much harder to attain 
than they were previously. 

The growth, however, in the PRS began 

in 2002, well before the recession and 
when these ﬁnancial drivers took effect. 

Social and cultural drivers have also been 
contributing to growth in the PRS. These non-
ﬁnancial drivers are less well understood so 
to help improve understanding of these 
factors, we commissioned an in-depth 
piece of research, which was published 
during this ﬁnancial year2. It explores the 
emerging social trends in Britain and the 
impact that they will have on housing and 
the built environment. 

According to this research, social changes 
such as more ﬂexible working patterns, the 
sharing economy, later family formation 
and commuting preferences, among many 
others, are all supporting growth in the 
rental sector.

Other research we conducted also 

revealed that many people value 
the ﬂexibility and the lower levels of 
responsibility associated with renting that 
they cannot get from home ownership.3 
Population growth in urban centres, 

or ‘urbanisation’, is another major 
contributor to changes in the residential 
landscape in the UK and growth in PRS, 
with rental levels being more pronounced 
in cities. Between 2001 and 2011, the 
total population of city centres grew by 
37%.4 London, in particular, has grown to 
8.6 million people, and 26% rent privately. 
The Mayor of London predicts that London 
will reach 11 million people by 2050.

The growth in these cities has again 

been led by those young, highly educated, 
single residents, the ‘millennials’, the same 
group driving growth in the rental market. 
In particular, city centres have experienced 
the most pronounced population increase 
amongst those aged between 20 and 29. 
Almost half of residents in large city centres 
are now between 20 and 29.

Political and legislative factors  
inﬂuencing the rental market 
For many years, Grainger has been 
championing the potential of the PRS, 
including Build-to-Rent, institutional 
investment and Residential Real Estate 
Investment Trusts and the contributions 
it can make to housing supply, to the 
economy and to standards of living.

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

9

Our efforts, together with those of many 
others in the industry with whom we have 
worked closely, has resulted in a broadly 
positive political and legislative environment 
for future investment in the sector.

Following the Government’s Montague 

Review in 2012, we have seen positive 
amendments to the planning system in 
the National Planning Policy Framework, 
new government funding support via the 
Build-to-Rent Fund and PRS Guarantees 
and changes to the stamp duty land tax 
regime for bulk purchases of residential 
properties amongst many other positive 
policy initiatives.

More could still be done. In particular, 
we would like to see the formal adoption 
of the ‘rental covenant’ concept, whereby 
local authorities reduce or waive onerous 
planning obligations for the guarantee 
that a development will be rented for the 
long term.

Alongside the positive market drivers 
there is, nonetheless, some level of risk in 
political, legislative and regulatory terms. 
The 2015 General Election highlighted 
a few such risks, including proposals for 
some form of government intervention on 
private rents from the Labour Party and 

the narrow focus on home ownership by 
the Conservatives. 

There is also uncertainty over what the 
London Mayoral Election will mean for the 
housing and rental markets in the capital. 

Grainger takes a very hands-on, proactive 
and practical approach to managing these 
political and legislative risks. We engage 
regularly with politicians from all parties, as 
well as senior civil servants, to ensure that 
our views are heard and we are able to 
anticipate any possible risks to the business. 
By working constructively in this way we 
ensure that any possible intervention and 
changes proposed by any political party are 
positively managed to protect the interests of 
all stakeholders and do not damage future 
investment in the PRS wherever possible.

A market opportunity for Build-to-Rent 
rather than buy-to-let
The evidence supports that we will see 
sustained growth in demand for long-term, 
speciﬁcally designed rental homes in the UK 
– known as Build-to-Rent. 

As previously outlined, an increasing 
number of households are wishing to 
rent and they are choosing to rent for 
longer periods in their lives. These rental 

consumers are increasingly expecting better 
value-for-money and better quality, and so 
driving increased competition. 

We are facing a unique opportunity 
in the UK to create a professionalised, 
institutionally-backed PRS, with large scale, 
long-term landlords, providing tenants with 
safe, secure homes for rent at good value. 
Over the coming few years, we expect 

to see continued support from central 
government for the sector. We are 
conﬁdent that we have the right measures 
in place to monitor, measure and mitigate 
the political risks to the best of our ability, 
and that with a positive policy environment 
and on-going market conditions, the PRS 
will continue to grow and evolve. 

Grainger is best placed to take advantage 
of this opportunity by utilising its core skills 
and delivering good quality, long-term 
rental homes through Build-to-Rent. 

1  English Housing Survey, February 2015.
2   Tomorrow’s Home by Lily Bernheimer, commissioned 
by Grainger plc and ADAM Urbanism, October 2014.
3  Survey commissioned by Grainger into the attitudes 

toward renting, 2012.

4   Centre for Cities, Urban Demographics: Where 

people live and work, Elli Thomas, Ilona Serwicka 
and Paul Swinney, July 2015.

HOUSING TRENDS

UK housing tenures

Age of household reference person, 
by tenure, 25–34 years

Millions of households

Millions of households

10
9
8
7
6
5
4
3
2
1

2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2

Source: English Housing Survey, February 2015

Household types in the PRS

COUPLES WITH NO DEPENDENT CHILDREN

SINGLE OCCUPANTS AGED UNDER 60

25%

23%

COUPLES WITH DEPENDENT CHILDREN

20%

0
8
9
1

4
8
9
1

8
8
9
1

2
9
9
1

6
9
9
1

0
0
0
2

4
0
0
2

8
0
0
2

2
1
0
2

4
0
–
3
0

5
0
–
4
0

6
0
–
5
0

7
0
–
6
0

8
0
–
7
0

9
0
–
8
0

0
1
–
9
0

1
1
–
0
1

2
1
–
1
1

3
1
–
2
1

4
1
–
3
1

MULTI-PERSON HOUSEHOLD

Own outright
Buying with mortgage
Private renters

Social renters
Local authority
Housing association

14%

LONE PARENTS WITH DEPENDENT CHILDREN

12%

 
 
10

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Our business model

WHAT WE DO 

REVERSIONARY ASSETS

We own and manage residential properties with a sitting 
tenant. As the tenant has the right to live in the property  
for their entire life, the property is acquired at a discount  
to the property’s vacant possession value (the reversionary 
surplus). We sell these properties once they are vacated  
by the tenant to realise the reversionary surplus. 

Division

Wholly-owned assets

Assets under management  
(co-investments)

TOTAL

Units

8,234

264

8,498

Market value
£1,654m

£83m

£1,737m

PRIVATE RENTED SECTOR (PRS) ASSETS

We let these assets at market rents and manage them  
proactively to drive rental growth.
Leveraging our strong experience as a long-term landlord and 
manager. In the UK, we are developing purpose-built residential 
assets for rent in order to grow our UK PRS business.

We will maximise the potential to grow this business in  
the UK through the quality of our products, the expertise  
of our management and the excellence of our service.

Division

Wholly-owned assets

Assets under management  
(co-investments)

TOTAL

UK
Units
1,739

1,914

3,653

Market value
£399m

£625m

Germany
Units
2,813

2,517

£1,024m 5,330

Market value
£143m

£193m

£336m

Combined Total
Units
4,552

4,431

8,983

Market value
£542m

£818m

£1,360m

TOTAL ASSETS OWNED AND MANAGED

Division

Total reversionary and private  
rented sector assets

Development assets

Assets managed  
for third-parties

TOTAL

Units

17,481

–

2,009

19,490

Market value
£3,097m

£95m

£168m

£3,360m

11

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

GENERATING RETURNS

 – Our reversionary business is highly cash generative. It will 
generate more than £120m p.a. until 2030, providing an 
excellent basis for the growth of our PRS business.

 – The PRS business provides returns derived from the 

maximisation of net rental income resulting from product 
design and effective asset management.

GENERATING WIDER VALUE FOR OTHERS

 – What we do will create wider value and beneﬁts  

for our stakeholders:

Creating great places  
to rent, where people 
choose to live

Operating productive,  
healthy and rewarding  
places to work

Providing safe homes  
for our lifetime tenants

Delivering investment  
in the communities where  
we develop and operate

Stimulating thought  
leadership to address  
crucial issues in the  
residential sector

 
12

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Key performance  
indicators

We set out to achieve our objective of 
being the UK’s leading private rented sector 
landlord through four strategic themes:

LEADERSHIP

MAXIMISING RETURNS

We will maintain our position as the UK’s leading 
private rented sector landlord through a focus on 
the quality of our products, the expertise of our 
management and the excellence of our service.

We will maximise current and future returns by using our residential 
expertise to outperform our peers and industry benchmarks.

KEY PERFORMANCE INDIC ATORS

CUSTOMER RECOGNITION OF THE 
QUALITY OF OUR PRODUCT: 

 – Abbeville Apartments, the UK’s first purpose- 
built PRS scheme launched in June and fully  
let in eight weeks, achieving rental levels ahead  
of plan and 40% of customers opting for  
a three-year tenancy. 

PEER RECOGNITION AS EXPERTS  
IN THE RESIDENTIAL SECTOR 

 – We were awarded ‘Residential Asset Manager  
of the Year’ for the fourth consecutive year.1 

 – We were recognised for our sustainability efforts 

for both our own portfolio and the GRIP PRS 
fund2 with the highest rating of Green Star by  
the Global Real Estate Sustainability Benchmark.

 – We were awarded an EPRA Gold standard  
for the quality and transparency of our 
sustainability reporting.

 – We were awarded a Silver Award for EPRA’s  

Best Practice Reporting.

 – We became one of the first corporate  
landlords to be accredited through the 
London Rental Standard.

 – We continue to be a member of the 

FTSE4Good index.

PBT (£m) 
Proﬁt before tax 

81.1

64.3

50.0

£50.0m

NAV (p) 
Gross net asset value per share
319 319p

291

242

2013 2014 2015

2013 2014 2015

UK HPI performance (%)
Measured against average 
movement in the Halifax and 
Nationwide indices

Average indices

Grainger

12.0

9.5

6.4

5.6

6.1 5.7

NNNAV (p) 
Triple net asset value per share
Growth in NNNAV is a performance 
condition for the long-term 
incentive scheme 

242

263 263p

195

2013

2014

2015

2013 2014 2015

ROSE (%) 
Return on shareholder equity
10.0%

25.6

25.2

1  RESI Awards.
2  GRESB benchmark 2015.

10.0

2013 2014 2015

 
 
 
 
 
 
 
 
 
 
BALANCE

OPTIMISATION

We will manage the transition to our future 
business, consciously balancing risks and 
opportunities to deliver sustainable change.

We will continue to simplify our business so that 
our ﬁnancial resources, our operational processes 
and our peoples’ efforts are optimised to deliver  
our objective.

13

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

PRS UNITS ACQUIRED 

927

SIZE OF PRS PIPELINE

c.1,500

UNITS

Gross cash generated 
from business operations (£m)

431

303

258

£258m

Group LTV (%)
48.0 46.5 45.5 45.5%

2013 2014 2015

Efﬁciency (%)
Proportion of property expenses and overheads 
net of fees/other income as a percentage of 
market value of assets under management
1.52 1.52%

1.64

1.38

Our Key Performance 
Indicators (KPIs) 
have been selected 
to provide a balance 
between ﬁnancial and 
non-ﬁnancial targets. 
They have been set to 
enable us to measure 
success against the 
Group’s strategic 
objectives and are 
aligned in determining 
the performance- 
related pay of the 
Executive Directors.

2013 2014 2015

2013 2014 2015

Simpliﬁcation
Disposal of our wholly-owned  
German assets is underway

i

F
n
a
n
c
a
l
s

i

 
 
 
 
14

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Operational 
measures

In addition to our strategic KPIs, there are a number of  
other performance measures that the Group actively 
monitors to assess the performance and direction of the 
business and which contribute to its overall performance  
as measured by the KPIs.

STAFF

READ MORE P24

SUSTAINABILITY

READ MORE P30

FINANCIAL

READ MORE P19

OPERATIONAL MANAGEMENT

READ MORE P15

TREASURY

READ MORE P23

8.6%

Percentage turnover  
for permanent  
employees

4.2 Days

Sickness absence per 
employee per annum

15.3 Hours

Average hours of 
training per employee 
per annum 

25%

Ratio of female 
to male staff at 
senior manager 
level or above 

70%

Proportion of tenants 
satisﬁed with Grainger’s 
management service

104 Homes

Number of homes built 
to Code for Sustainable 
Homes Level 4 

46 Days

Total number of staff working 
days contributed for 
charitable causes

£101.9m

OPBVM 

9.5%

ROCE

£41.2m

Recurring proﬁt 

100 Days

Sales velocity in days 
UK Residential

50.5%

Margin on vacant sales

9.1%

Vacant sales values above 
previous year VPV 

8.4%

Increase in regulated rent 
levels

2.7%

Percentage of rent arrears 
in UK portfolio

3.1:1

Interest cover ratio on core 
syndicate facility 

77%

Hedging percentage

4.6%

Average cost of debt 

£142m

Cash and headroom  
on facilities

5.2 Years

Average maturity of 
drawn debt

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

15

Our Macaulay Walk development has 
again been the principal proﬁt contributor 
and has delivered an outstanding sales 
performance with 56 of a total of 57 
private units sold by year end with the 
ﬁnal unit sold in October 2015. Sales have 
been completed at values between £850 
– £1,300/sq. ft. Since sales commenced 
at the development it has made a proﬁt 
of £21.2m, delivering a gross margin of 
34%. The ﬁnal phase ﬁt-out of a further 24 
residential units is well progressed and we 
anticipate completion before the end of the 
calendar year. We already have two units 
exchanged and two under offer.

Germany 
The £2.3m of sales (FY14: £15.2m) relates 
to general portfolio management and 
optimisation activities. A broadly break-
even proﬁt result of £0.1m built on the 
small loss (£0.2m) in the prior year, which 
arises as assets are held as investment 
property and are revalued annually. 

Performance 
income statement

Margins on vacant sales have 
increased to 50.5% from 
49.2%. Vacant sales were 
made at an average of 9.1% 
above last year’s valuations. 
Gross rental income for 
the year was £58.7m, 
representing 24.1% of 
total Group revenue.

SALES

UK Residential & Retirement Solutions
The Company’s trading business performed 
very strongly throughout the year. 
Margins on sales of vacant properties 
increased to 50.5% (FY14: 49.2%) and 
sales of vacant properties were made at an 
average of 9.1% above September 2014 
VPV (2014 excess to 2013 VPV: 14.1%). 
Sales of tenanted properties and other 
sales decreased from £103.1m in 2014 to 
£23.5m. The largest disposal in the previous 
year was the sale of a home reversion 
(Retirement Solutions) portfolio in January 
2014 for £84.7m, which generated a 
proﬁt of £9.9m. This was subsequently 
re-acquired on 2 April 2015 following the 
Company exercising its security under the 
sale contract. Although we expected a 
de-minimus level of proﬁts from tenanted 
investments sales, we undertook a few 
opportunistic disposals which enabled us to 
deliver £4.8m of proﬁt (FY14: £10.4m).

Development
The Development business had sales of 
£33.7m and generated £9.8m of proﬁt 
(FY14: £32.8m of sales and £12.3m of 
proﬁt). This performance was weighted 
towards the ﬁrst half of FY15. 

Sales

Trading sales on vacancy
UK Residential
Retirement Solutions

Tenanted Sales
Other Sales
Residential Total
Development
UK Total
Germany
Overall Total
Deduct: Sales of CHARM properties
Statutory sales and proﬁt

2015

Gross sales 
value  
£m

No. of  
units

310
321
631
98
32
761
–
761
43
804
(61)
743

92.0
43.4
135.4
19.5
4.0
158.9
33.7
192.6
2.3
194.9
(7.5)
187.4

Proﬁt 
£m

52.8
15.6
68.4
4.8
3.2
76.4
9.8
86.2
0.1
86.3
(0.4)
85.9

2014

Gross sales 
value  
£m

78.1
45.2
123.3
96.6
6.5
226.4
32.8
259.2
15.2
274.4
(7.2)
267.2

No. of  
units

287
364
651
1,331
27
2,009
–
2,009
191
2,200
(67)
2,133

Proﬁt 
£m

42.9
17.7
60.6
10.4
5.5
76.5
12.3
88.8
(0.2)
88.6
(0.6)
88.0

 
 
 
 
 
16

Grainger plc / Annual Report and Accounts 2015 / Strategic report

RENTS

FEES

The majority of fee income is derived 
from asset and property management 
fees from co-investment vehicles and 
management contracts. 

In the prior year we saw material 

contributions from performance fees on 
our G:Ramp arrangement with Lloyds 
Banking Group. As predicted we have a 
reduced level of activity in 2015 as this 
particular arrangement approaches its 
conclusion. Hence this year we saw a fall 
in fees and other income from £12.8m to 
£8.2m. The largest single contributor to fee 
income is £3.4m from management of the 
GRIP portfolio co-owned with APG.

We recorded an increase in net rent 
following the recent portfolio purchases of 
stabilised market rented assets. Total net 
rents in the year amounted to £37.9m 
(FY14: £37.0m). 

Our UK Residential portfolio generated 
net rental income in the year of £32.3m 
(FY14: £30.2m). 

The German business saw net rents 
of £3.8m (FY14: £5.1m), the reduction 
principally reﬂecting the higher level 
of vacancies arising as we have been 
upgrading one of our large portfolios, FRM. 
Certain assets in the Retirement Solutions 

portfolio also produce a net rental income 
and this amounted to £1.7m in the year 
(FY14: £1.5m).

The UK market rented properties which 
we manage saw like-for-like rent increases, 
excluding the impact of refurbishment, 
on new lets of 5.6% and on renewals of 
2.4%, compared to the market average 
of 2.7% according to the Ofﬁce of 
National Statistics. 

Across our wholly-owned portfolio, rental 
increases generated an additional £1.5m of 
gross rental income.

Net rents

UK Residential 
Retirement 
Solutions
Germany 
Development
Net Rents

2015 
£m
32.3

1.7
3.8
0.1
37.9

2014 
£m
30.2

1.5
5.1
0.2
37.0

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

Performance 
asset values

The total market value of 
assets under management 
at 30 September 2015 was 
£3.4bn, up from £3.2bn the 
previous year. 19,490 units 
were under management at 
the year end (FY14: 19,831).

17

Group Performance
For the 12 months ended 30 September 2015, Gross NAV increased by 9.7% to 319p and 
NNNAV by 8.8% to 263p. 

(£m)
30 September 2014
Proﬁt after tax
Revaluation gain on trading stock
  Discount reduction
  Value increase
Elimination of previously recognised surplus on sales
Dividends paid
Impact of swap break costs
Impact of derivatives and hedging net of tax 
Fair value of ﬁxed rate loan net of tax
Deferred/contingent tax
Other
30 September 2015

Gross NAV 
pence/share
291
10

NNNAV 
pence/share
242
10

13
24
(16)
(2)
(4)
1
–
2
–
319

13
24
(16)
(2)
–
–
(3)
(4)
(1)
263

Grainger’s reversionary surplus, which is the uplift from the reported market value of 
our properties to the vacant possession value, including our share of investments in joint 
ventures and associates, is valued at £507m, equivalent to 121p per share before tax 
(FY14: £503m, 120p). For our wholly-owned assets, this is £477m before tax, 114p per 
share (FY14: 109p, £455m). This surplus is based on current values (it excludes future house 
price inﬂation), is supplementary to our net asset calculations and represents part of the 
cash and proﬁt which will be crystallised when the properties are sold on vacancy.

UK Residential portfolios’ movements in the year

Grainger’s UK Residential portfolio 
Grainger’s Retirement Solutions 
portfolio 
Grainger’s combined UK portfolio 

2015

2014

VPV Market value
10.2%

5.6%

VPV Market value
15.9%

14.6%

5.9%
5.7%

6.6%
9.6%

6.0%
12.0%

9.4%
14.6%

Our UK Residential portfolios have performed well in 2015. The vacant possession value 
(VPV) in our combined UK portfolios rose by 5.7% whilst their market value rose by 9.6%. 
A particular contributor to the rise in market value has been recognition, on advice from our 
independent valuers, of a narrowing of the discount applied to the vacant possession value 
to arrive at our market value. This is supported by continuing evidence from tenanted 
transactions across the whole market. It is also reﬂective of our own experience when selling 
and buying tenanted properties. The underlying drivers of the narrowing of the discount are 
that the average age of the tenants is increasing giving a shorter period to vacancy, there is 
increasing demand for regulated properties, and rents are moving closer to market levels. 
The weighted average discount to vacant possession value on our regulated tenancy portfolio 
has narrowed from 22.8% to 20.0%. The impact of this has been to increase the revaluation 
gain on owned investment property in the income statement by £1.5m and the uplift on 
trading stock from statutory book value to market value in our NAV measures by £51.4m. 
This increases NAV by 12.6p per share and NNNAV by 10.1p per share.

 
 
18

Grainger plc / Annual Report and Accounts 2015 / Strategic report

PERFORMANCE ASSET VALUES Continued

IPD Region

Regulated 
tenancies  
IV discount %

Assured Short 
hold tenancies  
IV discount %

2015
1-3 London 80.0
4-12 Other 
regions

2014
77.5

2015
2014
95.0 90.0

80.0 75.0

95.0 90.0

Development portfolio
As at 30 September 2015, the market value 
of our UK Development portfolio was 
£95.0m (FY14: £107.2m), the reduction 
largely due to sales at our Macaulay Walk 
development during the year. The gross 
development value, including joint ventures, 
with detailed planning consent is valued 
at £550m (FY14: £434m). This includes 
our 50% share of the King Street, 
Hammersmith development in conjunction 
with Helical Bar, which has a total gross 
development value of £202m, following the 
receipt of planning permission in November 
2013, and seven sites in the Royal Borough 
of Kensington and Chelsea with a gross 
development value of £96m.

Co-investment vehicles
Grainger’s equity investment in its joint 
ventures and associates equates to £179.2m 
(FY14: £177.2m) and principally comprises: 

 – our 24.9% investment in GRIP, for which 
we provide property and asset management 
services, co-investing with APG; 

 – a 50% investment in Walworth Investment 
Properties Limited (WIP), our joint venture 
with Dorrington, which owns the 
Walworth Estate; 

 – our 25% investment in the two Stuttgart 
portfolios in Germany with Heitman; and

 – a 50% interest in the Hammersmith joint 

venture with Helical Bar.

During the year we disposed of our 50% 
interest in the Sovereign joint venture 
with Moorﬁeld to Lonestar Real Estate 
Fund III. This disposal gave rise to a proﬁt 
of £4.4m which has been treated as a 
non-recurring item.

The gross asset value of co-investment 
vehicles at 30 September 2015 was  
£1,050m (FY14: £1,016m). Grainger’s total 
return from co-investment vehicles in the 
year amounted to 16.6% (FY14: 23.5%).

Our Heitman associate in Germany has 
delivered a positive performance in 2015, 
supported by our active asset management 
approach, returning in excess of 25% to 
Grainger in 2015 (FY14: 15%). 

JVs/Associates Summary

Gross Asset 
Value

Grainger Equity 
Investment

2015 
£m
552
197
–
228
73

2014 
£m
500
176
55
212
73

2015 
£m
86
60
–
22
11

2014 
£m
85
52
14
17
9

1,050 1,016

179

177

GRIP
WIP
Sovereign*
Heitman
Other
Overall 
Total

* Our interest in Sovereign was sold during the year.

Germany 
As noted last year the overall German 
residential market has performed well 
and investor interest has continued to 
strengthen. As announced on 13 August 
2015 in our Trading Update, we believe 
now is the time to capture the growth in 
value of our wholly-owned assets there 
and reinvest the proceeds within our UK 
market rented business. The process of 
preparing for the sale of our German assets 
is well underway, although at the year end 
not advanced enough for us to classify the 
business as held-for-sale under IFRS 5.

Purchases
Our strong cash generation continues to 
support reinvestment and we have spent 
£106m on property purchases in our 
UK residential business (FY14: £182m). 
During the year, we have acquired 927 
tenanted PRS units located predominantly 
in the English regions for £86.7m. On an 
annualised basis these acquisitions should 
deliver around £6.7m of gross rental 
income, reﬂecting a yield on cost of 7.7%. 
These acquisitions and those completed 
since the year end take Grainger’s overall 
UK owned and managed PRS portfolio to 
c.3,650 units, one of the largest portfolios 
in the UK.

Assets under management
The total market value of assets under 
management at 30 September 2015 
was £3,360m, up from £3,159m 
the previous year. 19,490 units were 
under management at the year end 
(FY14: 19,831), Whilst the number of units 
has fallen slightly, the strong valuation 
gains achieved this year on both the wholly-
owned assets and our co-investment assets 
has resulted in a net increase of £201m.

Performance of Grainger UK assets vs Halifax and Nationwide indices

Grainger UKR
Grainger UKR & RS
Halifax
Nationwide

Index

140

135

130

125

120

115

110

105

100

95

2009

2010

2011

2012

2013

2014

2015

 
 
Financial review

We made a return on shareholder equity of 10.0% during 
2015. Over the past ﬁve ﬁnancial years we have delivered 
a total return on shareholder equity of 96.5%, which is an 
average return of 14.5% per annum.

19

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

Return on shareholder 
equity

10.0%

Gross NAV up

9.7%

to 319p

Return on capital employed

9.5%

Our key measures of ﬁnancial 
performance are: 

The table below summarises our OPBVM, 
recurring proﬁt and proﬁt before tax.

Proﬁt on sale of assets
Net rents
Management fees/
other income
Overheads/other
OPBVM 
Net ﬁnance costs
Joint ventures and 
associates
Recurring proﬁt 
before tax
Valuation movements 
including derivatives
Non-recurring items
Proﬁt before tax

2015  
£m
86.3
37.9

8.2
(30.5)
101.9
(62.3)

1.6

41.2

26.1
(17.3)
50.0

2014  
£m
88.6
37.0

12.8
(30.9)
107.5
(63.4)

3.0

47.1

35.3
(1.3)
81.1

Gross net asset value 
per share (pence) 
Triple net asset value 
per share (pence) 
Operating proﬁt 
before valuation 
movements and 
non-recurring items 
(OPBVM)
Recurring proﬁt
Proﬁt before tax
Excess on sale of 
normal sales to 
previous valuation 
Return on capital 
employed*
Return on Shareholder 
equity**

2015

2014

319p

291p

263p

242p

£101.9m £107.5m
£41.2m £47.1m
£50.0m £81.1m

9.1%

14.1%

9.5% 17.0%

10.0% 25.6%

*   Operating proﬁt after net valuation movements on 

investment properties plus share of results from joint 
venture/associates plus the movement on the uplift of 
trading stock to market value as a percentage of opening 
gross capital deﬁned as investment property, ﬁnancial 
interest in property assets (CHARM), investment in joint 
venture/associates and trading stock at market value.

**  Growth in triple asset value (NNNAV) in the year plus the 

dividend per share relating to each year as a percentage of 
opening NNNAV.

 
20

Grainger plc / Annual Report and Accounts 2015 / Strategic report

FINANCIAL REVIEW Continued

A summary of OPBVM by division and 
of the main movements in the year is set 
out below:

Main movements within OPBVM

2014 OPBVM
Increase in gross rents 
Increase in residential proﬁt 
on sale
Decrease in development 
trading proﬁt
Increase in interest income 
from CHARM
Decrease in gross management 
fee and other income 
Increase in property expenses, 
overheads and other income 
and expenses
2015 OPBVM 

£m
107.5
1.3

0.3

(2.5)

2.4

(4.6)

(2.5)
101.9

The major movements within OPBVM are:
 – A reduction in management fee income 
with 2014 beneﬁting from the receipt 
of performance fees from G:RAMP (our 
residential asset management agreement 
with Lloyds Banking Group).

 – An increase in interest income from 
CHARM as a result of an increase in 
vacant possession values of 6.2% this year 
compared to a forecast 4.0% increase.

 – In the development division both 

2015 and 2014 have beneﬁted from 
strong proﬁts from our Macaulay Walk 
development. The proﬁt in 2015 was 
slightly lower than in 2014, accounting 
for the majority of the £2.5m reduction 
in development trading proﬁt. 

Interest income and expense 
The net recurring interest charge has 
decreased by £1.1m from £63.4m in 2014 
to £62.3m at 30 September 2015. 

Joint ventures and associates
Joint ventures and associates contributed 
a proﬁt of £1.6m to recurring proﬁt in the 
year (FY14: £3.0m). (The major contribution 
from these entities is seen through 
revaluation – see the table alongside).

Total

Divisional Analysis of OPBVM

Proﬁt on sale 
of assets  
£m

Net rents  
£m

Management 
fees/other 
income  
£m

Overheads/
other  
£m

Total  
2015  
£m

Total  
2014  
£m

UK Residential 
portfolio
Retirement Solutions 
portfolio
Fund and third-party 
management
Development assets 
German Residential 
portfolio
Group and other
OPBVM 2015
OPBVM 2014

60.8

32.3

15.6

–
9.8

0.1
–
86.3
88.6

1.7

–
0.1

3.8
–
37.9
37.0

0.5

1.6

4.3
0.5

1.1
0.2
8.2
12.8

(9.2)

84.4

71.1

6.7

25.6

34.8

(0.6)
8.7

2.1
(18.3)
101.9

(4.9)
(1.7)

(2.9)
(18.5)
(30.5)
(30.9)

2.4
11.9

2.7
(15.4)

107.5

Valuation and non-recurring items
Valuation and non-recurring items in 2015 compared with 2014 is analysed as follows:

Valuation
Adjustment of inventories to net realisable value
Valuation gain on UK investment property
One-off valuation deﬁcit on German FRM 
investment property
Valuation gain on German investment property 
including share of Heitman joint venture
Impairment of joint ventures
Change in fair value of derivatives
Valuation gains on UK investment property in joint 
ventures and associates
Change in fair value of derivatives of joint ventures 
and associates

Non-recurring
Proﬁt on disposal of joint venture/ subsidiary
ERIL impairment of receivable plus costs
ERIL mark to market debt adjustment net of tax
Accelerated loan fees write off/other

2015  
£m 

(1.2)
17.0

–

2.5
(4.1)
(5.8)

18.1

(0.4)
26.1

4.4
(11.4)
(6.8)
(3.5)
(17.3)
8.8

2014  
£m

0.8 
7.6 

(5.9)

1.2
(2.4)
1.2 

33.2 

(0.4)
35.3

0.8 
–
–
(2.1)
(1.3)
34.0

Movement

(2.0)
9.4

5.9

1.3
(1.7)
(7.0)

(15.1)

–
(9.2)

3.6
(11.4)
(6.8)
(1.4)
(16.0)
(25.2)

 
 
 
 
 
 
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

21

Proﬁt before tax
Having taken account of all of the above 
movements, proﬁt before tax was £50.0m 
compared to a proﬁt before tax of £81.1m 
in 2014. The most signiﬁcant movements 
which contributed to the decrease were the 
£18.2m loss on re-acquisition of ERIL and 
a £7.0m adverse movement on derivatives 
and a £4.6m reduction in fees and 
other income.

Tax
The Group has an overall tax charge of  
£7.3m for the year, comprising a £7.4m UK 
tax charge and a £0.1m overseas tax credit. 
The net reduction of £2.9m, from the 
expected charge of £10.2m, results from 
a prior period credit of £4.7m, a £2.8m 
reduction as tax on JV and Associates’ 
proﬁt is included above the tax line in the 
Income Statement, a £0.3m reduction from 
other losses and non-taxable items, offset 
by non-deductible expenditure totalling 
£4.9m. 

The Group works in an open and 

transparent manner and maintains a regular 
dialogue with HM Revenue & Customs. 
This approach is consistent with the ‘low 
risk’ rating we have been awarded by 
HM Revenue & Customs, which was 
reconﬁrmed this year, and to which the 
Group is committed.

The Group made net corporation tax 

payments totalling £4.9m in the year. 

Earnings per share
Basic earnings per share is a proﬁt of 10.4p 
(FY14: a proﬁt of 18.1p). A year-on-year 
comparison is shown below:

2014 Proﬁt/earnings 
per share
Movements in:
OPBVM 
Contribution from 
joint ventures and 
associates
Fair value of 
derivatives
Revaluation of 
investment properties 
Net interest payable
Non-recurring items
Taxation/other 
2015 Proﬁt/earnings 
per share

Pence per 
share

£m

74.7

18.1

(5.6)

(1.4)

(1.4)

(0.3)

(7.0)

(1.7)

1.5
1.0
(16.0)
(4.5)

0.4
0.3
(3.9)
(1.1)

42.7

10.4

Dividend for the year
After considering the investment and 
working capital needs of the business, 
the Directors have recommended a ﬁnal 
dividend of 2.11p per ordinary share 
(FY14: 1.89p) which equates to £8.7m 
(FY14: £7.8m). This is in addition to the 
interim dividend of 0.64p per ordinary 
share (FY14: 0.61p). The total dividend for 
the year will therefore be 2.75p per ordinary 
share (FY14: 2.50p), an increase of 10%. 
Earnings cover dividends by 3.8 times.

UK investment property valuation gain
The net valuation uplift in 2015 on our 
UK wholly-owned investment property 
assets relating primarily to the Group’s 
wholly-owned investment property in its 
UK Residential division showed an uplift 
of £17.0m (FY14: £7.6m). 

Derivative movements
Fair value movements on derivatives is a 
charge of £6.2m relating to the Group’s 
derivative contracts including £0.4m 
relating to our share of derivatives within 
joint ventures and associates. 

The fair value of swaps at 30 September 
2015 is a net liability of £33.5m compared 
to a net liability of £48.0m at 30 September 
2014. The reduction relates primarily to 
£17.9m of swaps cash settled during 
the year.

Valuation gains in UK joint ventures/
associates
Valuation gains within UK joint ventures 
and associates amounted to £20.2m 
before deferred tax (£18.1m after tax) 
(FY14: £37.0m and £33.2m), comprising 
gains from our joint venture and associate 
operations with our partners Dorrington 
and APG.

Germany investment property  
valuation gain 
The German portfolios in direct ownership 
and in our Heitman joint venture showed 
an overall valuation gain before deferred tax 
of £5.1m (£2.5m after tax) (FY14: a deﬁcit 
of £3.9m before tax and £4.6m after tax).

Non-recurring 
Non-recurring items of £17.3m comprise a 
loss of £18.2m on the one-off impairment 
associated with our re-acquisition of the 
ERIL portfolio along with a £4.4m proﬁt 
arising from the disposal of our joint 
venture interest in Sovereign, and a £3.5m 
charge relating to the accelerated write off 
of loan costs on the reﬁnancing of our bank 
syndicate debt. 

 
22

Grainger plc / Annual Report and Accounts 2015 / Strategic report

FINANCIAL REVIEW Continued

Cash inﬂows from sales, 
rents, fees

£258m

Consolidated LTV

45.5%

Headroom

£142m

Net asset values
We set out below the two measurements to enable Shareholders to compare our 
performance year-on-year.

30 September 
2015

30 September 
2014

Movement

Gross net assets per share (NAV)
 – Market value of net assets per share before 
deduction for deferred tax on property 
revaluations and before adjustments for the fair 
value of derivatives

Triple net asset value per share (NNNAV)
 – Gross NAV per share adjusted for deferred and 
contingent tax on revaluation gains and for the 
fair value of derivatives

319p

291p

10%

263p

242p

9%

The European Public Real Estate Association (EPRA) Best Practices Committee has 
recommended the calculation and use of an EPRA NAV and an EPRA NNNAV. The  
deﬁnitions of these measures are consistent with Gross NAV and NNNAV as described and 
shown in this document.

A reconciliation between the statutory balance sheet and the market value balance 

sheets for both Gross NAV and NNNAV is set out in Note 4 to the accounts.

Reconciliation of Gross NAV to NNNAV

Gross NAV
Deferred and contingent tax
Fair value of derivatives adjustments net of tax
NNNAV

£m
1,334
(179)
(54)
1,101

Pence per 
share
319
(43)
(13)
263

The major movements in Gross NAV  
in the year are:

The major movements in NNNAV  
in the year are:

Pence per 
share

£m

Pence per 
share

£m

Gross NAV at 
30 September 2014
Proﬁt after tax 
Revaluation gains on 
trading stock
Elimination of previously 
recognised surplus on 
sales
Dividends paid
Impact of derivatives 
and hedging net of tax
Deferred tax on 
property valuations
Gross NAV at 
30 September 2015

1,215
43

155

(66)
(10)

(13)

10

291
10

37

(16)
(2)

(3)

2

1,334

319

NNNAV at 
30 September 2014
Proﬁt after tax 
Revaluation gains on 
trading stock
Elimination of 
previously recognised 
surplus on sales
Dividends paid
Fair value of ﬁxed rate 
loan net of tax
Contingent tax
Other
NNNAV at 
30 September 2015

1,012
43

155

(66)
(10)

(12)
(18)
(3)

242
10

37

(16)
(2)

(3)
(4)
(1)

1,101

263

 
 
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

An analysis of the sources of valuation growth split between the gain shown in the 
income statement and the gain included within our Gross NAV and NNNAV movements is 
shown below:

Division
UK Residential 
Retirement Solutions 
Development
UK joint venture and associates*
German portfolios*

Trading  
stock  
£m
136
18
(2)
3
–
155

Income 
statement  
£m
15
2
–
18
3
38

Total increase 
in value  
£m
151
20
(2)
21
3
193

*  Includes Grainger share of assets held within joint ventures and associates.

An increase in market value of 1% across the Group’s residential property including our 
share of joint ventures and associates leads to an increase in value of £24.7m before 
deferred and contingent tax and £19.6m after tax. This is equivalent to 6p per share on 
NAV and 5p per share on NNNAV. 

Market value analysis of property assets

Shown  
as stock  
at cost  
£m
1,057
95
1,152
1,020

Market  
value 
adjustment  
£m
688
–
688
597

Investment 
property/
ﬁnancial 
interest in 
property 
assets  
£m
451
–
451
431

Market  
value  
£m
1,745
95
1,840
1,617

Total 
£m
2,196
95
2,291
2,048

Residential 
Development 
Total at 30 September 2015
Total at 30 September 2014

2014 includes property assets within held-for-sale.

Financial resources, interest cost and 
derivative movements

Net debt
Consolidated loan 
to value
Core loan to value
Core interest cover
Average maturity of 
drawn facilities
Headroom
Average cost of debt1 
Average cost of debt 
at period end2 

2015

2014
£1,138m £1,044m

45.5% 46.5%
40.6% 42.0%
3.7

3.1

5.2 years 4.8 years
£142m £297m
6.0%

5.3%

4.6%

5.4%

1  Including costs and commitment fees.
2  Including costs excluding commitment fees.

As at 30 September 2015, net debt was 
£1,138m, an increase of £94m from the 
30 September 2014 level of £1,044m. 
Our consolidated loan to value now 
stands at 45.5% (FY14: 46.5%). LTV on 
the core facility was 40.6% (FY14: 42.0%) 
compared to a maximum allowable LTV 
covenant under that facility of 75%. 
The interest cover ratio on the core facility 
stood at 3.1 times (2014: 3.7 times) 
compared to a minimum interest cover 
covenant of 1.35 times.

As at 30 September 2015, the average 
maturity of the Group’s drawn debt was 
5.2 years (FY14: 4.8 years). 

In August 2015, the Group reﬁnanced 
its syndicated core facility which had been 
due to mature in July 2016. The new 
£580m facility will mature in August 2020. 

23

The margin on the facility reduced by 50bps 
to 170bps and the facility structure enables 
further pricing beneﬁts to be gained at 
future lower levels of loan to value.

On 1 October 2015, an amendment and 
restatement of the Grainger Invest property 
portfolio bank facility was concluded with 
the existing lenders, HSBC and Santander, 
reducing its cost, extending its maturity and 
increasing its size to £150m from £120m.
Following the reﬁnancing of the Grainger 
Invest Portfolio, which was completed on 
1 October 2015 and which had £109m of 
outstanding debt due in March 2016 at 
the balance sheet date, there are now no 
signiﬁcant debt repayments until 2020.

At 30 September 2015, the Group had 
free cash balances of £44m plus available 
overdraft of £1m along with undrawn 
committed facilities of £97m. Thus, 
headroom totalled £142m (FY14: £297m). 
In early October, on the reﬁnancing of the 
Grainger Invest bilateral noted above this 
had increased, on a pro forma basis, to 
£183m.

The Group’s average cost of debt at the 
period end, including costs but excluding 
commitment fees, was 4.6% (FY14: 5.4%). 
At 30 September 2015, gross debt was 
77% hedged (FY14: 68%) of which 11% 
was subject to caps (FY14: 4%). Net debt 
has increased by £94m from £1,044m to 
£1,138m. The material cash outﬂows were 
attributable to property purchases, capex 
and investment totalling £148m, property 
expenses and overheads of £57m, interest 
payments of £60m, and swap settlements 
of £18m. The £65m acquisition of the Just 
Retirement loan as part of the re-acquisition 
of ERIL also contributed to the increase 
in net debt. These outﬂows were largely 
offset by gross rents, sales and fees of 
£258m.

Having fully considered the Group’s 
current trading, cash ﬂow generation 
and debt maturity, the Directors have 
concluded that it is appropriate to prepare 
the Group ﬁnancial statements on a going 
concern basis.

Mark Greenwood
Finance Director

19 November 2015

 
 
24

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Our people  
and our customers 
In addition to being a property business, we are also 
strongly committed to being a people-focussed business. 
We believe strength comes from the relationships that 
we have with each person with whom we work. 

OUR PEOPLE

To fully leverage the skills and expertise we 
have, our people need to have a strong 
positive connection to the Company, our 
strategy, values and brand. For our staff this 
means having fulﬁlling and rewarding work 
as well as career opportunities. 

We place a high priority on communicating 

our business focus, objectives and current 
projects through presentations and 
conferences, breakfast meetings, monthly 
updates and via our intranet. We celebrate 
success and bring together staff for ofﬁce 
social events and support charity fundraising 
and volunteering activities.

Team meetings give everyone the  
forum to discuss their team’s work and 
wider business issues. Spending time in 
communicating a clear and consistent 
narrative and sharing experiences not only 
provides an understanding of our business 
direction, but the importance of our  
values and ethics in everything we do.

To be best in class in the residential property 

sector we need to continually develop 
the expertise we have in the Company and 
ensure that our people understand how 
they can contribute to its success. We have 
always placed great importance on 
investing in our people and retaining them 
by providing opportunities for a long-term 
career with Grainger. 

This year we delivered more than 100 
training events covering technical, professional, 
management and personal development 
competencies. 27 members of staff have 
been supported in studying for a professional 
qualiﬁcation with ﬁve successfully gaining a 
post graduate qualiﬁcation. 

We have provided work experience for  

12 young people, which constitutes a 
future investment in attracting talent into  
a residential property career. 

Sharing knowledge and experience is an 
important part of our development activities. 
Many of our training programmes are 
designed and delivered by our own staff 
through our Lunch and Learn workshops. 
This year we introduced new selection 

and induction processes to support 
our PRS strategy as well as providing 
extensive training in customer service and 
complaints handling. 

Having an agile workforce has enabled us 
to establish a multi-disciplinary team to lead 
our PRS business with talent from across 
our ofﬁce network. 

Our graduate scheme attracted 250 

applicants this year and continues to provide 
a pipeline of residential property specialists. 
Career development is underpinned by 

personal development plans for all our 
staff with access to ﬁrst class management 
and business school institutions 
through our Emerging Leaders and 
Leadership Programmes.

Employee proﬁle 
(2015 ﬁgures)

Role
Non-Executive 
Directors
Grainger Trust 
Non-Executive 
Directors
Executive Directors
Senior Managers
Managers
Associate
Support
Graduates
Off site

Age
18–25
26–33
34–41
42–49
50–57
58–65
65+

Male Female

Total

4

2

6

1
3
31
53
16
9
1
4
122

2
0
11
49
41
61
2
2

3
3
42
102
57
70
3
6
170 292

No. Employees
22
86
77
47
42
16
2
292

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

25

OUR CUSTOMERS

To achieve our objective of being the UK’s 
leading PRS landlord we must have an 
in-depth understanding of our customers, 
of their aspirations and concerns, and the 
factors that affect their choice of landlord. 
We must also know where we need to 
improve and take on board the feedback 
that our customers provide.

We continue to build on the research 

work done in previous years and this 
year we have looked more into customer 
expectations and social trends with the 
Tomorrow’s Home research. We have also 
sought to improve our understanding of 
how we are perceived through increasingly 
sophisticated customer satisfaction 
measurement processes. We look forward 
to the introduction of benchmarking 
studies across the PRS, a development we 
have supported for several years. This year 
has also seen the improvement of the 
complaints handling processes across 
Grainger; we welcome feedback from our 
customers to help us get better and the 
opportunity to make things right when we 
make a mistake. 

We must design our PRS business with 
the customer at the heart of what we do 
and how we operate. During this year we 
have worked on improving key processes 
such as gas servicing. We have sought 
to improve their efﬁciency and where 
relevant, to ensure their compliance but 
most importantly to understand how our 
customers interact with us through these 
processes. Process and service improvement 
also forms the heart of our continuing 
partnership with Kier in the provision 
of repairs and maintenance services. 
Customer satisfaction and efﬁciency of 
operation form central elements of the 
measures of success for the partnership. 
This work will continue as we develop 
our operating model for the PRS business 
to enable us to grow whilst striving to meet 
individual customer’s expectations.

At the same time as looking to the future, 
we continue to invest in the communities, 
in which we operate. Highlights of the 
past year include the sale and transfer 
of a number of community assets at 
our Moor Pool Estate to the Moor Pool 
Heritage Trust, a local residents’ group. 
Staff from Grainger’s London Bridge ofﬁce 
volunteered a day’s work to help clean 
up a neglected park in Waterloo, near 
one of Grainger’s housing estates, along 
with a local residents’ group, Friends of 
Hatﬁeld’s Green. The clean-up is part 
of a long-running project by the Group 
to bring London’s green spaces back 
into use. In Wellesley, our large housing 
development in Aldershot, in addition 
to sponsoring the local football club, we 
provide rent-free space to the local charity, 
The Source, for their BikeStart initiative – a 
programme for 16 to 25-year-olds to get 
them used to the work environment and 
provide a stepping stone into employment 
or education. Lastly, we continue to be 
big supporters of Land Aid, the property 
industry charity. In addition to being a long-
standing, active Foundation Partner of Land 
Aid, our very own Land Aid Ambassador 
organised a hugely successful industry-
wide Quiz Night along with Capita and 
Pinsent Masons with over 200 people in 
attendance and raised over £5,000.
We are proud of our heritage as a 
responsible landlord and the values that 
underpin this heritage will be carried 
forward in our future PRS business. 
Tenant satisfaction ratings for 

repairs and maintenance services are 
currently lower than we would expect. 
Service improvement programmes are now 
underway to raise these levels and ensure 
that performance is rigorously measured 
and analysed.

 
26

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Risk 
management 
To achieve our objective of being the UK’s leading PRS landlord we 
recognise that we must have a good understanding of the risks we face, 
those inherent in our strategy and operations and those posed by external 
conditions. Our systematic and robust approach aims to continuously 
monitor those risks, our risk management and internal controls systems 
and evolve our management accordingly.

Risk management approach
Good risk management is fundamental 
to our ability to meet our operational 
and strategic objectives. The competitive 
market in which we operate requires 
effective decision making; ensuring 
that the risks the business takes are 
adequately assessed and challenged 
and appropriate returns are achieved, 
whilst retaining our overall resilience to 
risks over which we have limited control 
through our disaster recovery and business 
continuity procedures.

During the reporting period we have 
continued to embed our risk management 
approach and our enhanced project 
protocols and controls have entrenched. 
We are now building a software solution 
to further facilitate our visibility and 
reporting of risks within projects and across 
the business. 

Our overall risk management ambition 

remains – to foster and embed a 
culture of risk management that is 
responsive, forward looking, consistent 
and accountable.

Robust risk assessment
Our systematic risk management approach 
is designed to identify risks to the business 
using both a bottom up and a top 
down approach. 

Once identiﬁed, the impact and 

probability of risks are determined and 

scored at both a Gross (before mitigation) 
and Net (after mitigation) basis. This allows 
the business to identify those risks 
which are heavily dependent on internal 
mitigating controls. When forming this 
assessment the business considers strategic, 
market, ﬁnancial, operational, IT, project 
and people risks. 

A risk scoring matrix is used to ensure 
that a consistent approach is taken when 
assessing the overall impact to the Group. 
Likelihood is based on the frequency of 
occurrence in a rolling 12-month period 
for risks arising within operational areas. 
These risks, and their impact and likelihood 
scores, are documented in divisional, unit 
and project risk registers. The risk registers 
are reviewed at least quarterly and more 
frequently, as required, and collated into 
a Group top risk report for the Executive 
Committee and the Board Risk and 
Compliance Committee.

Grainger has a separate Risk and 

Compliance function, headed by a Senior 
Manager, reporting to an Executive 
Committee member who leads and 
manages the risk management framework 
and processes and provides compliance, 
policy and governance advice and support 
to the business. The Group Risk and 
Compliance Director provides appropriate 
challenge and input to the risk ﬁndings, 
reported controls and Group top risk report 
and attends and reports to the Board Risk  
and Compliance Committee.

Risk control assurance
The Grainger plc Board Risk and 
Compliance Committee (BRCC) is 
responsible for the Group’s risk 
management framework. It reviews the 
Group’s principal risks and ratiﬁes the risk 
appetite on the key risk areas of the risk 
framework set by the Executive. The BRCC 
is supported in the discharge of this 
responsibility by various committees, 
speciﬁcally the Audit Committee which 
focuses on the ﬁnancial risk control. 
The internal controls framework for these 
risks is monitored by the Audit Committee 
through the Internal Audit monitoring plan 
and the resulting audit outcomes.

Assurance on risk controls is currently 

provided by internal management 
information, internal audits, external audits 
and Board oversight. There is also an 
externally supported whistleblowing facility.

Principal risks and uncertainties
The Directors have undertaken a robust, 
systematic assessment of the Group’s 
principal risks. These have been considered 
within the timeframe of four years, which 
aligns with our viability statement (see 
page 29).

27

TABLE OF PRINCIPAL RISKS AND UNCERTAINTIES 

Risk or uncertainty
1 Deterioration and/or 
instability of wider 
global/European 
economic markets 
leading to long-term 
ﬂat or negative  
growth in the value  
of assets.

2 Lack of availability of 
ﬁnance for the Group 
to achieve its strategic 
objectives; inability to 
obtain sufﬁcient funds 
to implement the 
current business plan 
and strategy either 
through debt or equity, 
at appropriate price 
and terms.

Possible impact

Risk appetite 

Management

Market uncertainty may cause  
drop in housing demand; asset  
and portfolio values fall; 
development risks increase; 
subsequent ﬁnancial/investment 
constraints, unattractive to 
external investors and partners; 
poor Shareholder returns;  
inability to comply with banking 
covenants.

Reduced or severely limited ability 
to take advantage of business 
opportunities; unable to grow; 
unable to trade proﬁtably; illiquidity.

Grainger’s business  
is based on taking  
well-judged risks on  
house price and 
rental inﬂation.

Grainger has no appetite 
for low levels of available 
ﬁnance or headroom 
below those prudently 
required to support the 
business.

 – Reducing reliance on trading income 
 – Maintenance of capacity against banking covenants
 – Growth of non-HPI dependent income streams  

and cash ﬂows

 – Portfolios weighted towards areas of higher growth
 – High proportion of liquid assets to enable sales  

where necessary

 – Proven ability during last economic downturn  

of ability to continue sales

 – Geographically diverse portfolio

 – Financial headroom maintained at appropriate levels
 – Appropriately qualiﬁed treasury, strategic capital and 

legal teams

 – Positive relationship management with banks and 

other sources

 – Ability to control the timing and quantum of new 

acquisitions to reduce cash outﬂows

 – Historically proven cash generation ability throughout 

the economic cycle

 – Simpliﬁcation of business model makes ﬁnancing 

more straightforward

3 Failure to meet current 
or increased legal or 
regulatory obligations 
or anticipate and 
respond to changes in 
legislation or 
regulation that creates 
increased and costly 
obligations. 

Fines, penalties and sanctions; 
damage to reputation; loss 
of operational efﬁciency and 
increased costs; reduction in 
market opportunities; impact on 
ability to ﬁnance opportunities; 
additional up-front cost 
implications of building new 
systems and approach to meet 
obligations.

Grainger has no appetite 
for legal and regulatory 
breach due to the risks 
this poses to its staff, 
customers, assets and 
reputation.

 – On-going management and staff training
 – Specialist legal, compliance and corporate affairs 

teams who monitor and advise internally and review 
legislative, regulatory and consultation papers
 – Use of external specialists to advise and maintain 

forward focus

 – Active networking with key policy inﬂuencers and 

relevant industry groups who lobby government and 
policy makers

 – Whistleblowing facility

4 Failure to attract, 

retain and develop our 
people to ensure we 
have the right skills in 
the right place at the 
right time to deliver our 
strategy.

Reduced ability to deliver 
business plan and strategy; 
mismanagement; reduced control; 
inability to grow market share of 
PRS; failure to innovate and evolve 
to maintain competitiveness in a 
customer driven market.

We have no appetite 
to accept a lack of 
appropriate skills, 
expertise and experience 
such as would materially 
diminish our ability to 
deliver our strategy and 
respond to changes. 

 – Succession plans are regularly reviewed
 – Management and Leadership Development Training
 – Retention policies in place for key staff
 – Annual benchmarking of reward
 – Regular staff surveys
 – Performance reviews and appraisals
 – Look for opportunities to develop and provide career 

development and opportunities internally

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
28

Grainger plc / Annual Report and Accounts 2015 / Strategic report

RISK MANAGEMENT Continued

Risk or uncertainty
5 A signiﬁcant failure 
within or by a key 
third-party supplier 
or contractor.

6 A signiﬁcant Health 

and Safety incident as 
a result of inadequate 
or inappropriately 
implemented Health 
and Safety procedures 
and controls within 
Grainger.

7 Failure of supporting 
control environment.

8 Failure to implement 
PRS strategy due to 
failure to acquire 
assets on acceptable 
terms and/or failure to 
integrate PRS assets 
efﬁciently in the 
management platform.

9 Excessive capital 

allocated to activities 
which carry 
development risk.

Possible impact

Risk appetite 

Management

Increased costs; inability to 
deliver performance objectives 
to satisfaction of stakeholders; 
possible legal action and regulatory 
sanctions; reputational damage.

Harm to customers, tenants, 
employees, contractors or visitors; 
possible legal action and/or ﬁne; 
subsequent reputational damage.

We utilise a signiﬁcant 
range of third-party 
services and so recognise 
that we carry an inherent 
risk of some kind of 
unforeseen failure. 
However, through 
management and control 
we seek to minimise this 
risk.

Grainger has no appetite 
for Health and Safety 
breaches both within 
its own operations and 
those of its third-party 
contractors.

 – Established internal controls and management 

systems and with regard to third-party contractor/
supplier base

 – Established ‘three lines of defence’ model to facilitate 

stronger monitoring and controls

 – (see further information in ‘Future Developments’ 

section on page 29)

 – Speciﬁc internal management systems for Health 

and Safety

 – Established ‘three lines of defence’ model to facilitate 

stronger monitoring and controls

 – Specialist Health and Safety Director and team 

responsible for oversight of compliance

 – Regular reporting to the Executive Committee

Grainger’s underlying control 
environment does not support the 
efﬁcient operation of the business 
and does not support the control 
framework – leading to increased 
costs; risk of regulatory action; 
inability to report on performance 
to the satisfaction of stakeholders; 
reputational damage.

We accept that problems 
may occur. However, all 
such problems should 
be contained within 
an effective control 
framework. Our focus 
is on continuously 
improving this 
framework on a standard 
‘three lines of defence’ 
model.

Acquisition of unproﬁtable 
schemes will depress Group 
returns. Lack of competitiveness 
in acquiring schemes will lead 
to failure to deliver strategy and 
reduction in scale and proﬁtability 
of business.

Grainger’s business 
is based on taking 
well-judged risks for 
appropriate returns in 
the acquisition, delivery 
and management of 
PRS assets. 

 – Standard controls and processes across the business 

supported by our core systems

 – Use of external specialist advisers where required
 – Operation of standardised project management 

framework

 – Implementation of ‘three lines of defence’ 

responsibilities

 – Active Business Continuity and Disaster Recovery 

in place

 – Audit and Board Risk and Compliance Committee 

oversight

 – Experienced team assembled to focus on winning 
and delivering PRS acquisitions (including build-to-
rent schemes) and subsequent management of 
such assets

 – Close review by Executive Committee and Board
 – Use of external professionals where appropriate

Exposure to risk of cost overrun/
income shortfall on schemes 
developed for sale or rent.

Part of Grainger’s returns 
are based on well-judged 
capital allocation which 
includes such activities.

 – Capital allocated to development is capped
 – Speciﬁc teams responsible with specialist skills – 

development and PRS teams

 – Review and sign-off of all such schemes by the 
Executive Committee and the main Board as 
appropriate

 – Future schemes will focus on delivering build-to-rent 

so reducing risk of sales risks

29

There have been no signiﬁcant failings in 
our controls within the reporting period. 
Refer to the Audit Committee and Board 
Risk and Compliance Committee reports 
within the Governance section for details 
of all matters discussed in the year.

We continuously review and reﬁne the 
identiﬁcation and design of our material 
controls to ensure they are appropriate 
to the business strategy, associated risks 
and risk appetite of the Group. We plan 
to move towards a balanced business 
scorecard of KPI measures which will 
be reported via a newly developed 
internal dashboard. 

Viability statement
Taking into account the Group’s current 
position and its principal risks as above, 
the Directors have assessed the Group’s 
prospects and viability.

The Group’s business model has proven 

to be strong and defensive in the long 
term and it has consistently demonstrated 
its ability to sell assets, even in challenging 
market conditions. From 2006 to 2015 
the gross cash generation has never been 
less than £240m per annum and has 
averaged c.£296m with a peak of £430m. 
Currently the Group directly owns £2.2bn 
of residential property assets which are 
relatively liquid, as has been proved in the 
past. The Group would remain viable even 
in the event of very severe and sustained 
house price deﬂation as it would be able 
to accelerate the natural conversion of our 
assets to cash and suspend acquisition 
activity. Only an unprecedented and 
long-term lack of liquidity in UK residential 
property markets would cause any threat 
to the Group.

Speciﬁcally, the Board has reviewed its 
four-year business planning period to 2019 
in more detail. The Board believes that 
a viability assessment period to 2019 is 
appropriate as this timeframe aligns with 
the Group’s budget planning horizon. 
The budget has been stress tested against 
severe and prolonged reductions in house 
prices. Two different scenarios were 
modelled to stress-test the business model. 
First an aggressive but short-term house 
price crash with a slow return to growth 
thereafter and secondly a continuing 
slow decline in house prices. The testing 
incorporated the use of mitigating 
actions available to the business, such 
as a reduction in acquisition spend and 
accelerated sales. 

The ﬁrst scenario modelled a short-
term crash, greater in both severity and 
duration than the correction experienced 
in 2008 – 9. The valuation assumptions 
used in this analysis were for two full years 
(eight quarters) of decreasing prices, with 
year-on-year falls of 15% p.a. – a total 
decline of c.27.5%. There then follows 
one subsequent year where 0% growth is 
forecast and one further year at 5% annual 
growth. The second scenario modelled 
a long-term decline in house prices of 
2.0% p.a. over the life of the model with 
no recovery.

Based on the results of this analysis, the 

Directors have a reasonable expectation 
that the Group will be able to continue in 
operation and meet its liabilities as they 
fall due over the four-year period of their 
detailed assessment.

Future developments 
In the forthcoming year we plan to 
reﬁne our risk appetite statements and 
measurement of risk to further improve 
our risk management. We will also be 
building on the work we have done 
in the current year to incorporate the 
UK Corporate Governance Code areas 
of impact of business model, future 
performance, operational performance, 
solvency and liquidity into our strategic risk 
impact assessments.

The Group is evolving to a three lines 
of defence model of assurance where 
operational management provide the ﬁrst 
line, the Risk and Compliance, Legal and 
Health and Safety teams provide second 
line and Internal audit the third line of 
defence. This additional second line, or 
layer, of monitoring will, over time, increase 
the level of evidence and visibility of the 
effectiveness of the day-to-day operations 
of the business. This will provide further 
opportunities to strengthen and improve 
our business, helping to ensure that we 
are positioned to deliver a competitive, 
consistent, quality service and product to 
our customers.

As stated we are also developing a 

software solution to provide:
 – an enhanced tool for use by managers to 

monitor their risks;

 – better, live data reporting across the 

Group; and

 – an integrated tool for risk reporting 

and risk related actions arising from our 
internal monitoring activity.

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
30

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Sustainability

Aligning our sustainability  
and business strategies.

Over the past few years, I have been proud 
to see sustainability become embedded 
into Grainger’s business activities. It is now 
just one of the many things we consider 
when making decisions, and sits alongside 
our values, our ﬁnancial performance and 
our portfolio, in enabling us to maintain 
our leading reputation, attract and retain 
tenants and be the partner of choice for a 
broad range of investors, local authorities 
and other stakeholders. 

This year, we looked to align our 

sustainability strategy with our updated 
business strategy and have deﬁned four 
sustainability themes which form the focus 
of our activities: leadership, alignment, 
balance and optimisation.

We have continued to set sustainability 
targets aligned to our business strategy, 
focusing on areas such as measuring 
tenant satisfaction and working with our 
partners to deliver the best outcomes 
for our customers. We have also looked 
to challenge ourselves and set more 
stretching, multi-year targets and I am 
pleased to say we have fully achieved or  
are on track to achieve 65% of our targets 
for this year.

Demonstrating leadership in  
the residential sector
I am pleased to see Grainger being 
recognised as leaders in sustainability 
alongside large multinational companies. 
For example, both Grainger plc and our 
GRIP fund were awarded Green Star status 
in the 2015 Global Real Estate Sustainability 
Benchmark (GRESB). Our sustainability 
reporting has earned us an EPRA 
sustainability (sBPR) Gold Award in 2014 
and 2015, and we continue to be listed in 
the FTSE4Good index. These awards are 
an illustration of the efforts we’ve made 
to get to a position of leadership, and our 
focus now is on maintaining leadership and 
collaborating with other organisations to 
improve the performance of the residential 
sector as a whole. 

This year, we have focused on sharing 
our experience with other organisations in 
our sector, through our involvement in the 
Global Real Estate Sustainability Benchmark 
industry working groups and the British 
Property Federation’s Sustainability 
Committee. We are heavily involved in the 
new British Property Federation working 
group focused on the PRS and Build-
to-Rent sector to debate and share best 
practice, and will continue to explore what 
sustainability means to PRS landlords and 
customers in the coming year.

Balancing stakeholder interests
Over the years, the maturity of our staff’s 
understanding of sustainability has grown 
and Grainger employees appreciate that 
sustainability is about being a better 
company that treats our customers, our 
stakeholders and our staff fairly.

We’ve done a lot of research into 
customer expectations, such as our 
Tomorrow’s Home research into social 
trends and how people’s usage of 
housing has changed over the years. 
We are now reﬂecting these trends in our 
rental properties – for example looking 
at ease of access to public transport, 
and providing different types of social 
space to PRS tenants with different 
demographic proﬁles. 

At Wellesley, our long-term strategic land 

development partnership at Aldershot, 
we are developing a mixed, integrated 
community that appeals to a broad range 
of customers. We are creating a living 
environment with lots of open space, 
community facilities and cycleways that 
retains the historic character of the site and 
is mindful to its military heritage. 

One of my personal highlights from my 
tenure as CEO are the initiatives we have 
put in place around training and developing 
our staff, enabling them to maximise their 
potential. Examples include our graduate 
recruitment programme, our emerging 

leaders programme and providing support to 
all staff looking to pursue further education 
opportunities. This year we have continued 
our efforts to increase the depth of our 
employees’ knowledge on sustainability, 
through providing sustainability training 
as part of our graduate programme, and 
developing a long-term plan to incorporate 
sustainability into the learning and 
development of all our staff. 

Optimising our properties
We welcome increasing competition in 
our sector, because it will drive standards 
up for everyone. Our investors push 
us to demonstrate our environmental 
performance, and as institutional 
players move into the PRS market, we 
expect them to exercise the same high 
sustainability standards on their residential 
businesses as they do for their commercial 
property portfolios.

Our customers will have more landlords 
to choose from, and we expect our efforts 
to improve the environmental and social 
performance of our properties and offer 
a more sustainable rental option will be 
what makes prospective tenants choose 
a Grainger property over one owned by 
a different landlord.

We are implementing the latest technology 

in our new developments to help our 
customers live in comfort, such as wireless 
utility meters, online tenant portals and 

DELIVERING VALUE 
THROUGH SUSTAINABILITY

31

plasma screens sharing updates on the 
property and the local area.

Because we develop homes that are 
here for the long term, they have to be 
sustainable and efﬁcient to run. We are 
conducting whole life costing analysis for 
our PRS properties to understand the long-
term operational costs of our investments 
and ensure we deliver the best returns.

Looking ahead
I believe the key success factor in Grainger’s 
Corporate Responsibility (CR) programme 
has been the recognition at all levels of the 
organisation that it is important – all the 
way from the Board, down to the newest 
members of staff.

The embodiment of our values and the 
principles of corporate responsibility within 
all our activities stands out as one of the 
most signiﬁcant changes I have experienced 
during my tenure as Chief Executive, and I 
have no doubt that this will continue under 
our future leadership.

When you understand the importance 
of a home to an individual, as we do, you 
understand what you need to offer as a 
provider of housing, and you build that into 
your business strategy, as we have done 
with sustainability. 

Andrew Cunningham
CEO

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

A

T

S

S U

U

 B

I N A B I L ITY STRATE
I N E S S STRATE

S

G

Y

:        

G

Y
:

L
e
a
d
e
r
s
h

i

p

L
e
a
d
e
r
s
h

i

p

GRAINGER 
VALUES

          R
              Alig

n

eturns                 

  B a la

ment                          

a la

       B

n

o

i

t

n
o

i

a
s
i

t
a
s
i

m
pti

ptim
n ce           O
n ce                           O

OUR SUSTAINABILITY  
STRATEGY THEMES

LEADERSHIP 
We will maintain a position of leadership  
in the ﬁeld of sustainability, as measured 
against our peers in the property industry  
and more generally.

ALIGNMENT 
Our sustainability and business strategies  
are aligned. There is nothing in our 
sustainability strategy that does not  
contribute to our business objectives  
and nothing in our business strategy that  
detracts from our sustainability objectives.

BALANCE  
We will seek to balance the interests  
of all our stakeholders – investors, staff, 
tenants/customers, partners and others  
so as to create a resilient business. 

OPTIMISATION  
We will make the best of the assets in  
our care and will exercise stewardship  
in the discharge of our obligations to  
all our stakeholders.

“ I think if you’re going  
to be a market leader,  
you can’t pick and  
choose the bits of being  
a market leader, you have  
to have a high position  
in everything and 
sustainability is one  
of those areas” 

ANDRE W CUNNINGHAM,
CHIEF EXECUTIVE

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32

Grainger plc / Annual Report and Accounts 2015 / Strategic report

SUSTAINABILITY Continued

OUR ACHIEVEMENTS THIS YEAR

PROGRESS AGAINST CR TARGETS IN 2015

2015 CR target progress

CR Targets commenced in 2015

Key

Total
9

Design, deﬁne and agree a consistent process to measure customer 
satisfaction across portfolios and geographies (2015) and create a baseline 
for customer satisfaction (2016)

Status
Achieved
Multi-year target on  
track to be achieved
In progress
Partially achieved
On hold/cancelled

2
2
1
3

As we continue to embed sustainability 
into our business, we carry on setting 
more stretching and long-term CR targets. 
These targets then feed into long-term 
strategic objectives that align with our 
business goals. 

We are pleased to report that we have 
fully achieved nine of our 17 targets with a 
further two targets on track to be achieved 
in line with their two-year timeframes, and 
are committed to continuing unﬁnished 
actions on two targets that are in progress 
next year. One target was partially achieved 
and two were placed on hold and will be 
revisited in the future.

Our target to create a sustainable 
procurement policy was placed on hold 
because we identiﬁed a need to review 
our broader procurement processes, which 
we are undertaking in 2016. We also 
encountered challenges in evaluating 
the applicability of best practice building 
ratings, due to a lack of suitable ratings 
that are used consistently in the sector. 
Our renewables target was partially 
achieved because, although we are trialling 
renewables, we determined that our 
standard inspections are not an appropriate 
mechanism to identify suitable properties.

We have made great progress in 
achieving targets regarding our supply 
chain that continued from 2014. There was 
one target carried over from 2013 – 
regarding measuring and managing tenant 
satisfaction in our German business – which 
has not been implemented and will not be 
carried over due to signiﬁcant changes to 
our German operations.

Pilot a focus group of new Grainger Build-to-Rent (Market rent) tenants 
to better understand their value drivers and preferences including 
their understanding of our offering, satisfaction levels, and views on 
sustainability as a decision-driver in the rental market

Amend our standard inspection process to assess the potential for 
renewables on inspected properties, with a view to trialling renewables 
on a sample of properties in 2016

Review opportunities for incorporating further sustainability requirements 
into the GRIP standard refurbishment speciﬁcation (in 2015) and following 
a cost/beneﬁt analysis roll out a new agreed speciﬁcation across all 
refurbishments (in 2016)

Evaluate the applicability of using a best practice building rating 
(e.g. BREEAM, LEED, SKA etc) on relevant refurbishments projects

Assess before June 2015 the feasibility of Grainger reporting to GRI G-4 and 
to GRI CRES-D (a requirement for GRI reporting from December 2015)

Represent Grainger on the BPF, EPRA or INREV sustainability committees

Contribute to the setting up of a PRS industry group to debate and share 
best practice, leading the debate on sustainability

Review the available methodologies for measuring the socio-economic 
impact of a Grainger development, with a view to conducting a socio-
economic impact assessment on a Grainger development in 2016

Create a sustainable procurement policy

Deliver sustainability training & awareness raising to a further 10% of 
staff and create a long-term plan for integrating sustainability into all 
employees’ learning and development

CR Targets commenced in 2014

Measure and improve tenant satisfaction in G:Invest and WIP portfolios 
between 2013 and 2014

Implement a Property Conditions Assessment programme within the 
repairs and maintenance programme in 2014 and use the results in 
2015 to develop a standard process and schedule for sustainability 
improvements, including but not limited to EPC ratings

Create a joint multi-year strategy with Kier to implement Grainger and 
Kier’s aligned CR priorities in property maintenance

Integrate Grainger’s EMS into the ‘major’ project procurement process; 
(where ‘major’ is deﬁned as any construction contract with a value greater 
than £1m)

Report on the GHG emissions generated by Kier in delivering services for 
Grainger in 2014 and set a target to reduce footprint in 2015

2015 Status

On track to  
be achieved

In progress

Partially  
achieved

Achieved

On hold

Achieved

Achieved

Achieved

On track to  
be achieved

On hold until 
2016

Achieved

2015 Status

Achieved

In progress

Achieved

Achieved

Achieved

For full information on our current and future targets, performance and strategy, visit 
www.graingercr.com.

33

Health and safety
We continue to manage Health and 
Safety risk through our Health and Safety 
Management System which includes 
real time monitoring and reporting of 
accidents and incidents. We provide 
Health and Safety training for all staff and 
also conduct Health and Safety audits of 
external managing agents and contractors. 
This year 100% of companies were fully in 
compliance with our requirements (received 
an audit rating of satisfactory or above).

2013

2014

2015

1-year trend

S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

A-C 37% A-C 46% A-C 43%
D-E 47% D-E 43% D-E 47%
F-G 11% F-G 10%
F-G 16%

79%

67%

73%

– CSH 3: 50
– CSH 4: 22 CSH 4: 104

75%

77%

70%

84%

77%

78%

£51,597

£39,947

£70,039

41

41

57

62

46

48

the highlights was collaborating with our 
repairs and maintenance partner Kier to 
undertake a joint team volunteering day. 
We also collaborate with Kier in other 
areas, to reduce our carbon footprint, 
and to understand common areas 
between our sustainability strategies 
where we can create joint outcomes. 
Customer satisfaction with repairs and 
maintenance services are not at the levels 
we expect and service improvement 
programmes are underway to raise these 
levels and ensure that performance is 
rigorously measured and analysed.

KPI
Our properties
Average EPC energy efﬁciency rating 
(% of properties)1

Average Considerate Constructors 
Scheme (CCS) score2 
Number of new homes built to the 
Code for Sustainable Homes

Customers
Proportion of tenants satisﬁed with 
Grainger’s management service (%)4 
Supply chain
Customers rating contractors’ service 
at good or above %3 
Community investment
Total donated to charities (total cash 
and in-time contributions, £)5
Number of staff working days 
contributed for charitable causes
Number of staff involved in 
volunteering activities during 
Company time

1  Based on 2,252 EPCs – UK only.
2  Grainger registers all major refurbishment and development sites – UK only.
3   In 2014, this KPI was amended to report responses in relation to services performed by Grainger’s repairs and maintenance 

contractor, Kier, and a new measurement system was introduced in May 2015. Based on a sample of 978 surveys 
undertaken between December 2014 and September 2015. Existing market rented and regulated tenants – UK only. 

4   Based on the percentage of respondents who said they were ‘very satisﬁed’ or ‘fairly satisﬁed’ with the service provided by 
Grainger in letting and exit surveys. A new scoring methodology (ﬁve point rating) was introduced in 2015 and includes the 
percentage of respondents who awarded four or ﬁve out of ﬁve. Based on a sample of 142 responses for exit surveys only– 
UK only.

5   Includes corporate donations, money raised by employees for charitable causes (including activities by employees in their 

own time), staff time contributed through volunteering and money donated by staff through payroll giving.

Progress against key performance 
indicators in 2015
Grainger measures performance against 
a wide range of non-ﬁnancial key 
performance indicators. Many of these 
relate to embedding previous CR targets. 
A sample of our KPIs is reported below, 
and further information can be found at 
www.graingercr.com.

Our properties
We continue to expand our visibility to 
the implications of Minimum Energy 
Efﬁciency Standards for our portfolio, and 
make improvements to our properties to 
minimise this risk. Our GRIP fund has set an 
ambitious target to achieve 100% coverage 
of Energy Performance Certiﬁcates by 
the end of 2015. We also seek to help 
our tenants monitor and reduce their 
energy use, and have continued to 
implement smart meters into 100% of 
new homes we develop, taking advantage 
of the latest technology to gather meter 
readings wirelessly. 

Our customers
Alongside our efforts to get to know our 
customers and their expectations better, 
we continue to measure how satisﬁed 
they are with the service they receive from 
us. These surveys show we have made 
demonstrable improvements in how we 
communicate with our customers, with 
satisfaction ratings for how we keep our 
tenants informed improving by 26% on 
our G:Invest portfolio, however they also 
highlight that we have more work to do. 
We are implementing a project to apply 
a consistent methodology for measuring 
customer satisfaction across all our 
portfolios, which will support us in analysing 
customer feedback to determine how we 
can deliver improved satisfaction levels.

Our supply chain and our communities
Supporting the local communities where 
we own properties, and around our ofﬁces, 
is integral to our culture and our values. 
This year 17% of Grainger staff took part 
in our volunteering activities, and one of 

 
34

Grainger plc / Annual Report and Accounts 2015 / Strategic report

SUSTAINABILITY Continued

SUMMARY OF EPRA SUSTAINABILITY PERFORMANCE MEASURES

This table provides an overview of the 
EPRA sustainability performance measures 
that Grainger is able to report on, and 
an explanation of where data cannot 
be reported. 

We have reduced Scope 1 and 2 GHG 
emissions from Grainger obtained energy 
consumption in owned assets by 7%. 

not reporting on any energy or water 
consumed by our tenants, as this is outside 
our Scope 1 and 2 boundaries. 

This is driven by a reduction in electricity 
consumption in the UK Residential portfolio. 

For our full EPRA sustainability best 
practice recommendations reporting 
tables, see pages 160 to 168 and 
www.graingercr.com

This year we are able to report on all 

We are reporting on an operational 

Sustainability Performance Measures for all 
portfolios, including like-for-like measures.

control approach, in line with our reporting 
for UK mandatory GHG reporting. We are 

EPRA sustainability best practice recommendations compliance table

EPRA Sustainability Performance Measure

Total electricity consumption 
Like-for-like total electricity consumption
Total district heating & cooling consumption 
Like-for-like total district heating & cooling consumption 
Total fuel consumption1
Like-for-like total fuel consumption
Building energy intensity2
Total direct greenhouse gas (GHG) emissions3

Elec-Abs
Elec-LfL
DH&C-Abs
DH&C-LfL
Fuels-Abs
Fuels-LfL
Energy-Int
GHG-Dir-Abs
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions4
GHG-Dir-LfL
GHG-Indir-LfL Like-for-like total indirect greenhouse gas (GHG) emissions
GHG-Int
Water-Abs
Water-LfL
Water-Int
Waste-Abs
Waste-LfL
Cert-Tot

Greenhouse gas (GHG) intensity from building energy consumption5
Total water consumption6
Like-for-like total water consumption
Building water intensity 7
Total weight of waste by disposal route 8
Like-for-like total weight of waste by disposal route
Type and number of sustainably certiﬁed assets

Like-for-like total direct greenhouse gas (GHG) emissions

Compliance self-assessment

Property investment portfolio

Ofﬁces

UK 
Residential 
assets

German 
assets

Own  
ofﬁce 
occupation

GRIP  
assets

N/A
N/A
N/A
N/A

N/A

N/A

N/A
N/A

N/A

N/A
N/A

N/A
N/A

N/A
N/A
N/A
N/A
N/A

N/A
N/A
N/A
N/A

N/A

N/A

N/A
N/A

N/A

Where measure  
is reported

Pages
161 & 163
161 & 165
N/A
N/A
161 & 163
161 & 165
161 & 163
162 & 164
162 & 164
162 & 166
162 & 166
162 & 164
164
166
164
167
167
168

Key:

Fully reported 

Partially reported 

Not reported 

1  Fuel consumption is not applicable in our ofﬁces or our German property investment portfolio.
2   The intensity measure used for our property investment portfolio is kWh per £m value of assets under management. The intensity measure used for our own occupied ofﬁces is kWh 

per employee.

3  Direct GHG emissions include emissions from fuel combustion from our property investment portfolio only. 
4  Indirect GHG emissions include Scope 2 GHG emissions from purchased electricity and Scope 3 GHG emissions from transmission and distribution losses associated with purchased electricity.
5   Greenhouse gas intensity from building energy includes Scope 1 and 2 GHG emissions only. The intensity measure used for our property investment portfolio is kg/CO2e per £m value of 

assets under management. The intensity metric used for our own occupied ofﬁces is kg/CO2e per employee.

6  Not gathered for our own ofﬁces due to landlord metering arrangement. Not gathered for our German property investment portfolio.
7  The intensity metric used for our property investment portfolio is m3 per £m value of assets under management.
8  We do not provide waste management for our UK Residential portfolio. Waste data was not gathered for our German ofﬁce or property investment portfolio.

 
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

35

Scope 1 & 2 Global GHG emissions data for the ﬁnancial year:

Emissions from
Combustion of fuels and operation of facilities
Electricity, heat, steam and cooling for own use 
Total footprint
Company’s chosen intensity measurement:
Emissions reported above per £m  
value of assets under management

Emissions reported above per owned unit1

Emissions reported above per employee2 

2014
577 tCO2e
1,560 tCO2e
2,137 tCO2e

2015
580 tCO2e
1,413 tCO2e
1,993 tCO2e

Trend
1%
-9%
-7%

0.68 per £m 
value of AUM
0.19 per  
owned unit
7.58 per 
employee

0.61 per £m 

value of AUM -10%
0.16 per  
owned unit
6.82 per 
employee

-16%

-10%

Scope 3 Global GHG emissions data for the ﬁnancial year:

Emissions from
Developments (contractor electricity and fuel use)
Repairs and maintenance (contractor fuel use)
Electricity transmission and distribution losses 
Business travel (grey ﬂeet, air and rail)
Estimated tenant energy use3

2014
904 tCO2e
187 tCO2e
116 tCO2e
128 tCO2e

2015
Trend
454 tCO2e -50%
188 tCO2e
1%
99 tCO2e
-15%
161 tCO2e
26%
26,883 tCO2 29,026 tCO2
8%

1  Number of owned units on the last day of the ﬁnancial year within the scope of data collection. 
2  Total number of employees in Grainger plc on the last day of the ﬁnancial year, 30 September 2015.
3   This has been estimated based on a sample of Energy Performance Certiﬁcates (EPCs) and reported in CO2 only for UK 

properties only.

Limitations to data collection
We have not reported on emissions relating 
to small-scale refurbishment as they are 
not considered material. Emissions related 
to water consumption, waste treatment 
and disposal and staff commuting are also 
not included.

Intensity metrics
We have used three intensity metrics; 
market value of assets under management, 
the number of units owned and 
number of employees in line with our 
ﬁnancial reporting.

Restatements
We have recalculated emissions for 2014 
as we are able to report more accurate 
data for Scope 1 emissions from natural 
gas consumption in owned properties 
and fuel consumption in leased vehicles, 
and for Scope 2 emissions from electricity 
consumption in our ofﬁces.

Estimation
Missing periods of consumption for 
properties have been estimated using 
the daily average of known consumption. 
Properties have been excluded from the 
analysis where we have not been able to 
record any consumption.

Grainger uses a database of over 2,000 

EPCs produced between 2006 and 
2015 across the UK Residential and GRIP 
portfolios to estimate tenant emissions. 
The EPC carbon footprint is taken across a 
representative sample of properties, and 
this is multiplied out to produce an estimate 
for the whole UK portfolio.

GRAINGER PLC MANDATORY 
GREENHOUSE GAS EMISSIONS 
REPORTING

Our portfolio is the same in 2015 as it was 
in 2014 and our total carbon footprint has 
reduced. This is due to a reduction in Scope 
2 emissions from electricity consumption in 
our property portfolio.

Methodology
We have used the main requirements of 
the GHG Protocol Corporate Accounting 
and Reporting Standard (revised edition) 
and ISO14064:Part 1, data gathered for our 
on-going reporting under the CDP climate 
change programme, energy consumption 
data and emissions factors from the UK 
Government’s conversion factors for 
Company Reporting 2014 and 2015. 
In alignment with Defra Environmental 
Reporting Guidelines, we have used the 
conversion factor for the year the emissions 
took place where known, and the 2015 
conversion factor for all data where the 
date is unknown. We have used the GHG 
Protocol’s location-based methodology for 
conversion factors for Scope 2 emissions.
We have reported on all emissions 
sources required under the Companies 
Act 2006 (Strategic Report and Directors’ 
Reports) Regulations 2013. We have used 
the operational control consolidation 
method. These sources fall within our 
consolidated ﬁnancial statement. We do 
not have responsibility for any emissions 
sources that are not included in our 
consolidated statement.

Scope 1 Data
This includes landlord-obtained gas 
consumed in common areas and by tenants 
on an unmetered basis as well as fuel 
consumption in vehicles owned or leased 
by Grainger plc. Fugitive emissions are 
not applicable.

Scope 2 Data
This includes landlord-obtained electricity 
consumed in common areas and by tenants 
on an unmetered basis as well as electricity 
consumed by Grainger plc in its own ofﬁces.

 
36

Grainger plc / Annual Report and Accounts 2015 / Strategic report

Grainger has continued to demonstrate 
leadership in reporting, being one of the 
ﬁrst organisations to report in line with the 
EPRA Best Practices Recommendations 
on Sustainability Reporting 2nd Edition, 
published in September 2014, and 
maintaining its Gold award in the EPRA 
sustainability awards. It has also continued 
to improve performance on the Global 
Real Estate Sustainability Benchmark, with 
both Grainger plc and GRIP Unit Trust 
achieving green star status for 2015, and 
its Disclosure score on the CDP climate 
change programme. Following a review 
undertaken this year, Grainger has made 
a sensible decision to defer transitioning 
to the GRI G4 guidelines until its 2016 
reporting, whilst it undergoes signiﬁcant 
change to its leadership and the scope of its 
operations. We recommend that Grainger 
undertakes a materiality review based on 
stakeholder engagement prior to making 
this transition, to ensure it discloses its 
performance in areas that are meaningful 
to its key stakeholders and aligned to 
Grainger’s business strategy.

Claire Racine
Associate Director 
Upstream Sustainability Services 
JLL

19 November 2015

Observations and recommendations
Grainger has succeeded in further 
integrating sustainability into its business 
activities, and the formal alignment of 
sustainability with its business strategy 
presents an opportunity to ensure 
sustainability is considered alongside other 
strategic objectives.

The most signiﬁcant environmental 

impact Grainger has is through 
the operation of its properties. 
Grainger has experienced challenges 
this year in incorporating sustainability 
into its standard property management 
and maintenance procedures, such as 
property conditions reports. Whilst it 
continues to make improvements to the 
energy efﬁciency of its properties, and is 
piloting the installation of renewables, JLL 
recommends Grainger continues its efforts 
to formalise processes that enable the 
feasibility of improvements to be evaluated 
across all portfolios.

Grainger has placed its target to create 

a sustainable procurement policy on 
hold in 2015, pending a review of the 
business’s procurement practices and 
will carry this over to 2016. A review of 
Grainger’s environmental Aspects and 
Impacts identiﬁed procurement as an area 
of signiﬁcant opportunity for the business 
in the areas of development and property 
management. Recent changes to legislation 
and standards such as the Modern 
Slavery Act 2015 and ISO 14001:2015 
place a signiﬁcant emphasis on supply 
chain collaboration, and we recommend 
Grainger works closely with its key suppliers 
to support the implementation of a 
sustainable procurement policy. 

SUSTAINABILITY Continued

ADVISER’S STATEMENT

Grainger has engaged Upstream 
Sustainability Services, JLL, as advisers on its 
sustainability strategy and implementation 
since 2005. Our programme of work 
includes assisting Grainger plc with setting 
CR targets and reviewing performance 
against these targets at year end. 
Due to JLL’s long-standing relationship 
with Grainger plc, the review of target 
achievement and this statement itself 
cannot be considered entirely independent.
JLL’s observations and recommendations 

are based on analysis of documents, 
interviews and/or other secondary evidence 
provided by Grainger plc and relevant third-
parties. All reasonable efforts were made 
to check the quality, accuracy and credibility 
of the available information but this did 
not include site visits or audits on primary 
data (e.g. meter readings and invoices). 
Consequently, this statement does not 
represent formal assurance or veriﬁcation 
of the corporate responsibility content 
of Grainger plc’s 2015 Annual Report 
and Accounts.

Summary of target performance
Grainger has achieved ﬁve of its 11 new 
targets for 2015, with one partially achieved 
and a further two, two-year targets on 
track to be achieved by 2016. Two targets 
were not completed (one is in progress and 
one was temporarily placed on hold) and 
will be carried forward into next year, and 
one target, to evaluate the applicability 
of using a best practice building rating on 
relevant refurbishment projects, has been 
placed on hold until there is consensus on 
industry best practice. Grainger has also 
made signiﬁcant progress in achieving 
four of the ﬁve targets carried over from 
2014, although one target, to use the 
results of Property Conditions Assessments 
to develop a standard process and 
schedule for sustainability improvements, 
is in progress and will be carried over into 
2016, with a renewed focus on meeting 
Minimum Energy Efﬁciency Standards. 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

GOVERNANCE

Letter from the Chairman

The Directors are committed to applying  
effective corporate governance and promoting  
the highest standards. I am therefore pleased  
to introduce this year’s corporate governance report.

Compliance with the UK Corporate 
Governance Code 2014 (the ‘Code’)
The governance rules applicable to all UK 
companies admitted to the Ofﬁcial List of 
the UK Listing Authority are set out in the 
Code, published by the Financial Reporting 
Council. Copies of the Code can be 
obtained from the UK Financial Reporting 
Council’s website at www.frc.org.uk. 
The Board fully supports the principles set 
out in the Code and conﬁrms that it has 
complied with all of the provisions of the 
Code throughout the ﬁnancial year ended 
30 September 2015.

This report sets out Grainger’s 

governance policies and practices and 
includes details of how the Group applies 
the principles and complies with the 
provisions of the Code.

Composition and independence
The Board reviews Non-Executive Director 
independence on an annual basis and takes 
into account the individual’s professional 
characteristics, their behaviour at Board 
meetings and their contribution to unbiased 
and independent debate. The Board agreed 
that I was independent on my appointment 
as Chairman. All of the Non-Executive 
Directors are considered by the Board to 
be independent. 

In accordance with the Code, all 

current Directors will stand for election 
or re-election (as applicable) at the 2016 

AGM, with the exception of Andrew 
Cunningham, Mark Greenwood and Simon 
Davies who are retiring from the Board. 
It being their ﬁrst AGM, Helen Gordon, 
Andrew Carr-Locke and Rob Wilkinson will 
be subject to election by the Shareholders 
at the AGM. 

Details of the Directors are set out 

below, together with a summary of their 
experience, competences and skills.

Diversity
Grainger believes that a diverse culture 
and perspective is a key factor in driving its 
success, and supports the Davies Report’s 
aspiration to promote greater female 
representation on listed company boards. 
Whilst all appointments are made on 
merit, an example of our commitment to 
diversity is that the Company currently has 
a female Chairman, Senior Independent 
Director and will also have a female CEO 
and Finance Director when Helen Gordon 
and Vanessa Simms take up their respective 
roles in 2016. We will continue to look 
to follow the procedures recommended 
by Lord Davies and by the Code to 
maintain a balanced and diverse Board. 
However, diversity is much wider than 
gender. Diversity of thought is also hugely 
important amongst the Board. By bringing 
together Non-Executive Directors with 
diverse backgrounds and experience, we 
gain enormously from varied perspectives 

37

across a range of issues. The Nominations 
Committee report contains further details 
of diversity in our business. 

Board evaluation
Following last year’s externally facilitated 
board evaluation of the Grainger Board, 
this year the Company Secretary and I have 
led the evaluation of the Board. In addition, 
I have reﬂected on the recommendations 
and action points from last year and 
the areas to focus on for next year. 
Further details are set out below.

Shareholder engagement
The Board regards strong engagement with 
stakeholders and investors as fundamental 
to maintaining an active on-going dialogue 
with them and to understand their views. 

Andrew Cunningham and Mark 

Greenwood had regular meetings with 
the Company’s Shareholders and analysts 
while I have met with both fund managers 
and corporate governance ofﬁcers of 
our major Shareholders throughout 
the year. Further meetings will also be 
held in advance of the Annual General 
Meeting in February 2016. Part of our 
Shareholder engagement programme 
throughout the year was in connection 
with CEO succession matters and in 
respect of the 29% vote against our 2014 
Directors’ Remuneration report, in order to 
understand the issues behind this vote and 
to take action to address them. 
Further details regarding our 

engagement with our Shareholders are 
set out below and in the Remuneration 
Committee Report.

Fair, balanced and understandable
The Board has concluded that the 2015 
Annual Report and Accounts, taken as a 
whole, is fair, balanced and understandable 
and provides the information necessary 
for Shareholders to assess the Company’s 
position and performance, business model 
and strategy.

Baroness Margaret Ford
Non-Executive Chairman 

19 November 2015

 
38

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

The Grainger 
Board
The Board is responsible to 
the Company’s Shareholders 
for the long-term success  
of the Group, its strategy, 
values and its governance. 

E

A

R

Executive Committee

Audit Committee

Remuneration Committee

RK

Risk Committee

N

Nominations Committee

Committee Chairman

1

3

5

7

9

2

4

6

8

10

1. Baroness Margaret Ford
NON-EXECUTIVE CHAIRMAN 

3. Helen Gordon MRICS
CHIEF EXECUTIVE DESIGNATE 

AGED 57

AGED 56

Appointment
Appointed to the Board in 2008, became Senior 
Independent Director in February 2014 and 
Chairman in February 2015.

Skills, Competence and Experience
Margaret has wide-ranging experience in a 
number of sectors and extensive knowledge of the 
residential property market. She has substantial 
plc level experience including chairmanship of both 
boards and committees. She is chairman of STV 
Group plc and holds non-executive directorships 
with SEGRO plc and Taylor Wimpey plc. She is an 
Honorary Professor of Real Estate at Glasgow 
University and an Honorary Member of the Royal 
Institute of Chartered Surveyors. Margaret formerly 
chaired the Olympic Park Legacy Company, English 
Partnerships, Barchester Healthcare Limited and 
May Gurney Integrated Services Plc. Prior to these 
appointments, Margaret had a long career in 
management consulting with Price Waterhouse 
and then Eglinton Management Centre, which 
she founded. She sits in the House of Lords as an 
independent peer.

Committee membership

N

R

Appointment
Appointed to the Board in November 2015.

Skills, Competence and Experience
Helen is a highly experienced, proven and well 
regarded real estate investor. She has signiﬁcant 
experience working across a wide range of real 
estate asset classes, including residential property. 
This is combined with an extensive knowledge of 
the City. Helen is a Chartered Surveyor and before 
joining Grainger was Global Head of Real Estate 
Asset Management of Royal Bank of Scotland 
plc. She previously held senior property positions 
at Legal and General Investment Management, 
Railtrack and John Laing Developments. Helen is 
currently a board member of the New Covent Garden 
Market Authority, a Trustee of the College of Estate 
Management and an Advisory Board member of 
Cambridge University Land Economy Department. 

Committee membership

E

2. Andrew Cunningham FCA, FRICS
CHIEF EXECUTIVE OFFICER  

AGED 59

4. Mark Greenwood FCMA
FINANCE DIRECTOR  

AGED 56

Appointment
Appointed to the Board as Finance Director in 1996, 
became Deputy Chief Executive in 2002 and Chief 
Executive Ofﬁcer in 2009. Andrew will be retiring 
from Grainger in January 2016.

Appointment
Appointed to the Board as Finance Director in 
September 2010. Mark will be retiring from Grainger 
at the end of 2015.

Skills, Competence and Experience
Andrew is widely recognised as a leader in the 
residential property sector. He has extensive real 
estate and ﬁnance knowledge, and also brings 
substantial executive leadership and listed company 
experience. Andrew is a Chartered Accountant 
and before joining Grainger was a partner in a 
predecessor ﬁrm of PricewaterhouseCoopers. 
He is a Fellow of the Royal Institute of Chartered 
Surveyors and was member of the British Property 
Federation policy committee. He is a member of the 
advisory boards of the Cambridge University Land 
Economy Department and the Durham University 
Business School.

Committee membership

E

Skills, Competence and Experience
Mark brings extensive ﬁnancial experience to 
Grainger from the property and construction sectors 
in the UK and internationally. He has substantial 
experience in senior ﬁnance leadership roles in a 
listed environment. Mark has worked in ﬁnance since 
1982 and held a number of senior positions within 
Alfred McAlpine plc from 1989 to 2008. He was 
group ﬁnance director from 2007 until its takeover 
in 2008 by Carillion. From 2008 to 2010 Mark was 
ﬁnance director of the Middle East and North Africa 
business of Carillion plc.

Committee membership

E

39

5. Nick Jopling FRICS
EXECUTIVE DIRECTOR 

AGED 54

7. Tony Wray
NON-EXECUTIVE DIRECTOR 

AGED 54

9. Andrew Carr-Locke
NON-EXECUTIVE DIRECTOR 

AGED 62

Appointment
Appointed to the Board in 2010 as Executive Director 
with responsibility for property.

Skills, Competence and Experience
Nick has approximately 30 years’ experience in 
the residential property sector. He has substantial 
knowledge and expertise in relation to residential 
property transactions and asset and property 
management. Nick was previously with CB Richard 
Ellis where he was executive director of residential. 
He is a member and former chairman of the Urban 
Land Institute’s UK Residential Council and was a 
member of Sir Adrian Montague’s committee that 
reviewed the Barriers to Institutional Investment in 
Private Rented Homes.

Committee membership

E

Appointment
Appointed to the Board in October 2011.

Appointment
Appointed to the Board in March 2015.

Skills, Competence and Experience
Tony brings extensive experience in a broad range 
of senior operational and strategic leadership roles, 
in particular in public companies. He was the chief 
executive of FTSE 100 water company Severn Trent 
plc from 2007 to 2014, having joined its board in 
2005. He has also held director roles within Transco 
and National Grid Transco, and was a member of the 
Water UK Board.

Committee membership

A

RK

N

Skills, Competence and Experience
Andrew has substantial experience in senior 
ﬁnance positions in listed companies, particularly 
in respect of the residential property sector. He also 
has wide-ranging experience as a non-executive 
director of public companies. Andrew is a Fellow of 
the Chartered Institute of Management Accountants 
and was Group Finance Director at George Wimpey 
plc between 2001 and 2007. He has previously held 
senior ﬁnance roles at Courtaulds Textiles plc, Diageo 
plc, Bowater Scott and Kodak. Andrew was Executive 
Chairman of Countryside Properties until 2014 and 
is a non-executive director of Dairy Crest plc. He has 
also previously held non-executive directorships at 
Royal Mail Holdings, Venture Production and AWG. 

Committee membership

A

R

RK

N

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

6. Belinda Richards
NON-EXECUTIVE DIRECTOR 

8. Simon Davies
NON-EXECUTIVE DIRECTOR 

AGED 57

AGED 56

10. Rob Wilkinson
NON-EXECUTIVE DIRECTOR 

AGED 43

Appointment
Appointed to the Board in April 2011 and appointed 
Senior Independent Director in March 2015.

Skills, Competence and Experience
Belinda has a wide-ranging experience and 
understanding of commerce, ﬁnance and business 
operations. She has strong experience as a board 
member of other substantial listed companies. Until 
2010, Belinda was global head of Deloitte’s Merger 
Integration and Separation Advisory Services. 
Prior to this, she held senior roles at Cap Gemini 
and KPMG. Belinda is a non-executive director of 
Wm Morrison Supermarkets plc and Aviva UK Life 
and Pensions. She was previously a non-executive 
director of Balfour Beatty Plc and Friends Life Group 
plc. Belinda serves on the Advisory Group of Audit 
Committee Chairmen at the Financial Reporting 
Council and is a member of the Governing Council of 
the Centre for the Study of Financial Innovation.

Committee membership

A

R

RK

N

Appointment
Appointed to the Board in November 2012.

Appointment
Appointed to the Board in October 2015.

Skills, Competence and Experience
Rob has substantial experience in real estate and 
corporate ﬁnance. Rob is a Chartered Accountant 
and the Chief Executive Ofﬁcer of AEW Europe, a 
leading European real estate investment manager. 
Prior to joining AEW Europe in 2009, he was a 
Managing Director with the Goodman Group and 
also held investment banking positions at UBS and 
Eurohypo. Rob is also Chairman of the Green Rating 
Alliance. 

Skills, Competence and Experience
Simon has signiﬁcant experience of the investment 
and fund management sector and a deep 
understanding of stock markets and investor 
expectations. He was executive chairman at 
Threadneedle Asset Management for ﬁve years until 
2012, having previously been chief executive and 
chief investment ofﬁcer. He is currently chairman of 
JP Morgan Overseas Investment Trust plc and Sound 
Oil plc and is also a director of Old Mutual Wealth 
Management Limited and LCH. Clearnet Group 
Limited. Simon will be retiring from the Board on 
30 November 2015.

Committee membership

R

RK

 
40

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Leadership

GOVERNANCE FR AMEWORK

CHAIRMAN

BOARD: 
Non-Executive Chairman, four Executive Directors  
and ﬁve Non-Executive Directors

Nominations 
Committee

Audit  
Committee

Chief  
Executive

Remuneration 
Committee

Board Risk  
and Compliance 
Committee

THE BOARD

The Board is responsible to the Company’s 
Shareholders for the long-term success 
of the Group, its strategy, values and 
its governance.

The role of the Board
The Board provides leadership of the 
Group and, either directly or through the 
operation of committees of Directors and 
delegated authority, applies independent 
judgement on matters of strategy, 
performance, resources (including key 
appointments) and standards of behaviour. 
The Board sets the Group’s strategic 
objectives and approves and monitors 
business plans and budgets submitted 
by the Executive Directors and senior 
management. The written statement of 
matters reserved to the Board is reviewed 
and approved annually by the Board and 
a copy is available on the Group’s website 
www.graingerplc.co.uk or from the 
Company Secretary on request.

EXECUTIVE COMMITTEE

THE EXECUTIVE COMMITTEE

BUSINESS   
FUNCTIONS: 

DIVISIONAL   
BOARDS: 

–  Legal Risk and 
Governance

– IT
– HR
– Corporate Affairs
– Finance

–  Retirement 
Solutions 
– UK Residential 
– Development 
– Fund Management 
– Germany 

This is an advisory Committee that 
operates under the direction and authority 
of the CEO. It oversees the day-to-day 
running of the business, ensuring strategic 
coordination and alignment. It identiﬁes 
strategic business development 
opportunities and monitors material 
transactional projects across Grainger. 

DIVISIONAL OPERATING BOARDS 
AND BUSINESS FUNCTIONS

Responsible for the oversight and day-
to-day operation of the relevant division 
or central function to ensure they are 
operating effectively and efﬁciently, aligned 
to strategic goals and provide a competitive 
advantage to the business.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

41

Non-Executive Directors
The Non-Executive Directors are responsible 
for bringing independent and objective 
judgement and scrutiny to all matters 
before the Board and its Committees, using 
their substantial and wide-ranging skills, 
competencies and experience. The key 
responsibilities of Non-Executive Directors 
are set out in their letters of appointment 
and include requirements to:
 – Challenge and contribute to the 

development of the Company’s strategy;

 – Scrutinise the performance of 

management in meeting agreed goals 
and objectives and monitor the reporting 
of performance; and to

 – Satisfy themselves that ﬁnancial 

information is accurate and that ﬁnancial 
controls and systems of risk management 
are robust and defensible.

A copy of the standard letter of 
appointment for a Non-Executive Director 
is available from the Company Secretary 
on request. The Non-Executive Directors 
meet periodically without the Executive 
Directors present. There have been two 
such meetings since 1 October 2014 and 
an additional meeting of the Non-Executive 
Directors without the Chairman or the 
Executive Directors present where the 
Chairman’s performance was discussed.

Senior Independent Director
The Senior Independent Director is 
available to Shareholders if they request a 
meeting or have concerns, where contact 
through the normal channels has failed to 
resolve the issue or where such contact 
is inappropriate. No such requests were 
received from Shareholders during the 
year. The Senior Independent Director 
leads the annual performance review of 
the Chairman.

THE DIRECTORS

Chairman
Baroness Margaret Ford 
7 years

Executive Directors
Andrew Cunningham
19 years
Helen Gordon
1 month
Nick Jopling
5 years
Mark Greenwood 
5 years

Non-Executive Directors
Belinda Richards  
(Senior Independent Director)
4 years
Tony Wray
4 years
Simon Davies
3 years
Andrew Carr-Locke
8 months
Rob Wilkinson
2 months

*   Vanessa Simms will join the Board in 

early 2016.

BALANCE OF DIRECTORS 

30%

Male
Female

7
3

70%

Chairman and Chief Executive
The posts of Chairman and Chief 
Executive are separate and their roles and 
responsibilities are clearly established, set 
out in writing and agreed by the Board. 
A copy of the written statement of roles 
is available on the Group’s website or 
from the Company Secretary on request. 
The Chairman is responsible for running 
the Board and ensuring its effectiveness. 
The Chief Executive reports to the 
Chairman, as does the Company Secretary 
on matters of corporate governance. 
The Chairman is the guardian of the 
Board’s decision making and is responsible 
for ensuring a constructive relationship 
between Executive and Non-Executive 
Directors and for fostering an open culture 
where debate is an appropriate balance of 
robust challenge and support.

The Chief Executive is responsible for 
running the business and implementing 
the Board’s decisions. He chairs a regular 
meeting with the other Executive 
Directors and the additional members of 
the Executive Committee, all of whom 
report directly to him. In addition, he 
holds monthly meetings with each 
of the divisional boards to review all 
operational issues.

Chairman
Executive 
Directors
Non-
Executives

1

4

5

 
42

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Effectiveness

The standard Board schedule sets six 
formal meetings throughout the year. 
These meetings were duly held. In addition, 
a further two meetings were organised at 
comparatively short notice. The principal 
business of such meetings being the 
ratiﬁcation of the recommendations of  
the Nominations Committee:
 – to appoint Helen Gordon as successor to 
Andrew Cunningham as Chief Executive;

 – to appoint Rob Wilkinson as an 

independent Non-Executive Director; and

 – to report Mark Greenwood’s notice 

of retirement.

The Board has a list of matters reserved 
to it and a rolling annual plan of items for 
discussion, agreed between the Chairman 
and the Chief Executive. The list of reserved 
matters and annual plan are reviewed 
regularly to ensure all matters reserved to 
the Board, as well as other key issues, are 
discussed at the appropriate time. At each 
Board meeting the Chief Executive provided 
a review of the business setting out how 
it was performing and details of strategic 
issues arising. 

The Board Activity table sets out examples 

of the range of subjects discussed by the 
Board, including details of the presentations 
given to the Directors. This relates to 
addressing the action point in last year’s 
annual Board review to increase the number 
of external presentations to the Board to 
bring alternative perspectives and viewpoints.

BOARD MEETINGS 2014/15

OCT

NOV

DEC

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

BOARD ACTIVITY

STRATEGIC

FINANCIAL

 – Strategy, in particular the transition 
to a market rented business and 
implementation of that strategy. 
Part of this review included receiving 
a presentation from the Company’s 
Managing Director of PRS

 – JP Morgan Cazenove, one of our 

brokers, gave a presentation regarding 
their view on the current domestic 
and international real estate asset 
and equities markets 

 – Material transactions and 
business opportunities

 – Competitor activity
 – Economic and legislative landscape

PEOPLE

 – Executive and Non-Executive 

Director succession

 – The development of the Group’s 
people. The Board also received 
a presentation from the Human 
Resources Director on talent 
development across the Company

 – Performance of business divisions
 – The Group’s debt and capital structure 

and hedging policy

 – The Group’s ﬁnancial results 

throughout the year

 – Dividend policy

GOVERNANCE

 – Regulatory and governance issues
 – Shareholder relations and engagement
 – Freshﬁelds, Grainger’s principal 

Group-level panel law ﬁrm, provided 
training and updates to the Board on 
current developments in corporate and 
regulatory law, in particular in respect 
of the Model Code on share dealing

 – Reports from Board Committees

OPERATIONS

 – Supply Chain Management
 – Health and Safety, which included a 
presentation to the Board from the 
Health and Safety Director

 – German Division operational and 

ﬁnancial performance was considered 
closely throughout the year. The Board 
also received a presentation from the 
Accounting Director on this matter
 – Information Technology projects  

across the Company

A T E G IC

S T R

P

E

O

P

L

E

FIN

A

N

CIA
L

THE BOARD

E
C
N
A
N
R
E
V
O
G

OPERATIONS

Attendance table 

Executive Directors
Andrew Cunningham
Nick Jopling
Mark Greenwood

Non-Executive Directors
Baroness Margaret Ford
Belinda Richards1
Tony Wray
Simon Davies1
Andrew Carr-Locke2
Robin Broadhurst
John Barnsley
Ian Coull

43

Access to independent advice
All Directors have access to the advice and 
services of the Company Secretary who 
ensures that Board processes are followed 
and good corporate governance standards 
are maintained. Any Director who considers 
it necessary or appropriate may take 
independent, professional advice at the 
Company’s expense. None of the Directors 
sought such advice in the current year.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

 to 30 September 2015

Meetings  
attended
8
8
8

Meetings  
attended
8
7
8
7
4
2
2
1

Meetings eligible  
to attend
8
8
8

Meetings eligible  
to attend
8
8
8
8
5
2
2
1

i

F
n
a
n
c
a
l
s

i

1   Belinda Richards and Simon Davies were both unable to attend a single Board meeting called at short notice due to prior 

diary commitments.

2   Andrew Carr-Locke notiﬁed the Company in advance of his appointment as a Director that he would be unable to attend 

the May 2015 Board meeting due to a prior diary commitment.

Board committees
The Board has established four principal 
Board Committees to which it has 
delegated certain of its responsibilities. 
They are the Audit Committee, 
Remuneration Committee, Nominations 
Committee and the Board Risk and 
Compliance Committee (BRCC). 
The roles, membership and activities 
of these committees are described 
in more detail later in the Corporate 
Governance statement.

Information ﬂow
The Chairman, together with the Company 
Secretary, ensures that the Directors receive 
clear information on all relevant matters in a 
timely manner. Board papers are circulated 
sufﬁciently in advance of meetings for 
them to be thoroughly digested to ensure 
informed debate. The Board papers contain 
the Chief Executive’s written report, 
high level papers on each business area, 

key metrics and speciﬁc papers relating 
to agenda items. The Board papers 
are accompanied by a management 
information pack containing detailed 
ﬁnancial and other supporting information. 
The Board receives a bi-weekly update from 
the Chief Executive throughout the year 
and occasional ad hoc papers on matters 
of particular relevance or importance. 
The Board also received presentations from 
various business units including: Human 
Resources, Legal, Risk and Governance, IT, 
Health & Safety and Private Rented Sector.

Time commitment
The Board is satisﬁed that the Chairman 
and each of the Non-Executive Directors 
committed sufﬁcient time during the year 
to enable them to fulﬁl their duties as 
Directors of the Company. None of the 
Non-Executive Directors has any conﬂict of 
interest that has not been disclosed to the 
Board in accordance with the Company’s 
Articles of Association.

 
 
44

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Induction and professional development
The Chairman, supported by the Company 
Secretary, is responsible for ensuring that 
induction and training are provided to 
each Director. The Company Secretary 
organises the induction process and regular 
updating and training of Board members. 
Pursuant to the recommendations of last 
year’s annual evaluation, the Company 
Secretary has documented our existing 
induction framework and related process. 

Margaret Ford had been on the Board 
for over six years when she took 
over as Chairman. This included time 
spent as Senior Independent Director 
and Chairman of two Committees. 
Therefore she had a pre-existing deep 
knowledge and familiarity with the 
Group. Consequently, her transition and 
induction to the role of Chairman was 
focussed on Shareholder engagement and 
meeting major Shareholders and investors 
to further understand their prevailing 
views. In addition and to supplement this 
change in role, meetings have been held 
with, amongst others, the Company’s 
brokers, ﬁnancial advisers and public 
relations consultants.

The inductions in respect of Helen 

Gordon and Rob Wilkinson are underway 
and will be reported upon in next year’s 
Annual Report. 

Training and updating in relation 
to a range of matters is provided to 
Board members throughout the year. 
Subjects include the business of the Group, 
legal and regulatory responsibilities of 
Directors and Grainger’s sustainability 
programme. This training and updating is 
delivered by a combination of presentations 
by Executives and senior managers, visits 
to business operations and circulation of 
appropriate Board papers and brieﬁng 
materials. Individual Directors are also 
expected to take responsibility for 
identifying their own training needs and 
to ensure they are adequately informed 
about the Group and their responsibilities 
as a Director.

The Board is conﬁdent that all its 
members have the knowledge, ability 
and experience to perform the functions 
required of a Director of a listed company.

ANDREW CARR-LOCKE  
COMPANY INDUCTION

This year, Andrew Carr-Locke was 
appointed and received a comprehensive, 
tailored induction to the Company. 
This involved meeting with the Company 
Secretary to go through the Board 
Handbook which includes sections on 
Directors’ duties, corporate governance, 
share dealing, Company policies and the 
use of the Company’s electronic Board 
portal. Andrew also received brieﬁngs 
from each of the Executive Directors 
regarding Grainger’s business operations 
as well as having a signiﬁcant number  
of sessions with individuals from across 
the business to give him an insight into 
the Group. These include meeting senior 
managers from the following groups 
and divisions:

 – Legal, Risk and Governance

 – UK Residential

 – Private Rented Sector

 – Strategic Capital Markets

 – Finance

 – Treasury

 – Tax

 – Corporate Affairs

 – Information Technology

 – Human Resources

 – Retirement Solutions

 – Germany

 – Property Services

 – Property and Asset Management

In addition, Andrew visited Grainger’s 
ofﬁces in Newcastle, London and 
Frankfurt and that opportunity was used 
to be shown some of the Company’s 
properties near each of these ofﬁces. 
These included Grainger’s Macaulay 
Walk development in Clapham, 
regulated blocks in Waterloo and 
Mariners Cottages in South Shields.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

45

PERFORMANCE EVALUATION

As reported in the 2014 Annual Report and Accounts, the annual board evaluation was externally facilitated. There were a 
number of action points which we set ourselves for the coming year, and the table below speciﬁes the progress made against 
those objectives.

Action points from 2014 Evaluation
Chairman and CEO to consider 
having more presentations from 
external professionals. 

Progress Report
More external presentations were made to the Board and its Committees than in the previous year. 
These included presentations from brokers, lawyers and FCA compliance consultants. The usage 
of external presentations will be a matter that the Chairman and CEO will consider regularly going 
forward. 

Adopt a consistent, focussed and 
succinct approach to format of 
board information.

Review the decision making process 
to establish a more structured 
approach.

Formally document the existing 
director induction process.

Seek ways to continue to build 
upon the current exemplary work 
of the Committees.

The format of board papers has been standardised further with improved signposting and layout for 
information and decision making. In particular, a consistent dashboard summary table for property 
investments and business opportunities has been developed. 

A regular formal pre-Board meeting session attended by the Chairman, Executive Directors and the 
Company Secretary has been instituted. The purpose of this is to identify those key points from the 
Board Papers that Executive Directors wish to focus upon and have improved structure on those 
matters which are for information and/or decision by the Board. This has been positive in making 
Board meetings more efﬁcient and focussed, with clear output of decisions.

The Company Secretary has led on documenting this existing process for usage in the future.

Each of the Committees reﬂects regularly on what steps for improvement can be made to increase its 
effectiveness in implementing its role and functions. This has included reviewing the format of reports 
and the usage of presentations by internal senior managers and external advisers. 

2015 EVALUATION

The annual evaluation of the Board and 
its Committees for 2015 was led by the 
Chairman and the Company Secretary 
through completion of a detailed 
questionnaire relating to the effectiveness 
of the Board and its Committees and 
thereafter individual meetings with each 
of the Directors. The Company Secretary 
collated the results of the questionnaire 
and these were considered by the 
Chairman and reported to the Board 
as a whole. The overall results were 
positive and indicated that the Board, its 
Committees and individual Directors were 
all operating effectively and demonstrated 
a commitment to the role. The key 
ﬁndings and action points arising from the 
evaluation are summarised as follows:

Findings: 
 – Board meetings are conducted in an 
effective manner which encourages 
open discussions with appropriate time 
allocated to key issues and strategy 
in particular. 

 – Succession planning is operating at a 

high standard and the previous year has 
shown that the Board and Nominations 
Committee have the ﬂexibility to deal 
with both planned and unexpected 
succession matters. 

 – Committees are working very effectively.

 – Good progress on the quality of 

board information has been made, 
which strikes an appropriate balance 
between being concise and having 
sufﬁcient detail.

Action points:
 – Review the structure and approach to 
Non-Executive Director training and 
development.

 – The balance of skills and experience 

for the business is currently very good. 
An assessment will be made to ensure 
this balance continues to be effective in 
respect of a PRS-focussed strategy and 
implementation of it. 

 – Build upon progress made in respect 
of improving effective relations with 
stakeholders, in particular with regard to 
communicating the Grainger business 
model and PRS strategy.

 – Continue to improve on progress 
made regarding the quality of 
board information.

 
46

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

In addition, and in accordance with 
the Code, as it will be their ﬁrst AGM 
as Directors of the Company, Andrew 
Carr-Locke, Helen Gordon and Rob 
Wilkinson will be subject to election 
by the Shareholders at the 2016 AGM.

In light of the performance evaluation 
summarised above and the provisions of 
the Company’s Articles of Association, 
the Board recommends that all of those 
Directors proposed for election and 
re-election are so elected and re-elected 
(as applicable).

The review of the Chairman’s performance, 
which was led by Belinda Richards as Senior 
Independent Director, concluded that the 
Chairman’s leadership and performance 
was effective and of a high standard. 
The Board and its Committees will 
monitor progress and continue their 
critical review of its effectiveness during 
the year ahead. In accordance with the 
prevailing provisions of the Code, it is the 
current intention of the Board that the next 
external facilitation of the Board evaluation 
will be carried out in 2017, being three 
years since the previous external evaluation.

Re-election of Directors
We continue to adopt the recommendations 
of the Code that all of the Directors 
offer themselves for re-election annually, 
notwithstanding that the Company’s 
Articles of Association require the Directors 
to offer themselves for re-election every 
three years. Therefore in accordance with 
the Code, all current Directors will stand 
for re-election at the 2016 AGM, with 
the exception of Andrew Cunningham, 
Mark Greenwood and Simon Davies who 
are retiring from the Board in advance of 
the AGM. 

Accountability

47

Internal control
The Board is responsible for reviewing and 
approving the Group’s system of internal 
control and its adequacy and effectiveness. 
The Group has a cyclical process for 
identifying, assessing and managing its 
signiﬁcant risks, which has been in place 
for the full year under review and up to 
the date of approval of the Annual Report 
and Accounts. The process is designed to 
enable the Board to be conﬁdent that such 
risks are mitigated or controlled as far as 
possible. It should be noted, however, that 
no system can eliminate the risk of failure to 
achieve business objectives entirely and can 
only provide reasonable and not absolute 
assurance against material misstatement 
or loss. The BRCC is delegated the task 
of reviewing all identiﬁed risks, with the 
ultimate key risks retained for full Board 
review. Both the Audit Committee and 
the BRCC report to the Board at every 
Board meeting subsequent to a meeting of 
those Committees. Risks and controls are 
reviewed to ensure effective management 
of appropriate strategic, ﬁnancial, 
operational and compliance issues. 
The Audit Committee also reviews the 
half year and full year ﬁnancial statements, 
which include the results of our associate 
and joint ventures, which are subject to the 
same internal controls as within the Group. 
In addition, the Group has an internal 
audit function that performs relevant 
reviews as part of a programme approved 
by the Audit Committee. The Committee 
considers any issues or risks arising 
from an internal audit review, so that 
appropriate actions are undertaken to 
ensure satisfactory resolution. The Internal 
Audit Manager has a direct reporting line 
to the Chairman of the Audit Committee. 
A detailed annual budget is produced each 
year, together with longer-term projections 
in accordance with the agreed strategy, 
which are presented to the Board for 

consideration and approval. A fundamental 
part of the control process is the diligent 
monitoring of actual performance 
against this budget by the Board. 
Where applicable, revisions are made to 
expected out-turn against which further 
progress can be monitored. A detailed 
monthly management information pack 
is prepared, which covers each major 
area of the business and that includes 
detailed consolidated results and ﬁnancial 
information for the business as a whole. 
The performance of each business area 
is reviewed monthly by both divisional 
management and the Executive Directors 
and is subsequently reported to the Board.
The Board also discusses in detail the 

projected ﬁnancial impact of major 
proposed acquisitions and disposals, 
including their ﬁnancing. All such proposed 
substantial investments are considered 
by all Directors. Where meetings are 
required between Board meetings and 
a full complement of Directors cannot 
be achieved, a committee of Directors 
considers the necessary formalities. 
The Board is also responsible for reviewing 
and approving the Group’s treasury 
strategy, including mitigation against 
changes in interest rates. The Group’s 
processes for internal control have been 
in place throughout the year and have 
sought to implement the FRC Guidance 
on Risk Management, Internal Control and 
Related Financial and Business Reporting. 
Further details are contained in the Audit 
Committee report and the BRCC report.

The Board regularly reviews the Group’s 
processes for internal control and conducts 
a formal annual review of these processes 
and the risks relating to the business. 
No signiﬁcant failings or weaknesses were 
identiﬁed from this review in the year.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
48

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Relations with Shareholders
The Board of Grainger believes that 
understanding the views of its Shareholders 
is a fundamental principle of good 
corporate governance therefore strong 
engagement with stakeholders and 
investors is key to achieving this and 
progressing the business and its strategy.
The framework of investor relations 

is set around the ﬁnancial reporting 
calendar, with additional engagement 
taking place throughout the year when 
regarded as beneﬁcial to the Company. 
Grainger has held more than 100 meetings 
with Shareholders, analysts and potential 
investors in the year, in addition to the usual 
half-yearly results announcements and 
brieﬁngs. Andrew Cunningham and Mark 
Greenwood have held the vast majority of 
these meetings and manage the Group’s 
investor relations programme with the 
Director of Corporate Affairs. Feedback is 
always sought following such meetings, 
which is then presented to the Board. 
In addition Robin Broadhurst, the previous 
Chairman, Baroness Ford (in her capacity 
at the time as Senior Independent Director 
and as Chairman of the Remuneration 
Committee) and the Company Secretary 
also met and had conference calls with 
a combination of fund managers and 
corporate governance ofﬁcers of the 
Company’s major Shareholders in advance 
of the 2015 AGM. It is anticipated that 
a similar pre-AGM engagement process 
will take place in advance of the 2016 
AGM. Subsequent to her appointment 

as Chairman, Margaret Ford held 
numerous meetings with major investors 
to discuss their views on Grainger and 
its performance.

Examples of the issues raised as 
part of the Shareholder engagement 
programme include:
 – Grainger’s future strategy in market 

rented assets and how this relates to the 
existing business

 – Grainger’s view on likely House 

Price Inﬂation

 – The Company’s capital structure, in 

particular discussion of share buy-backs

 – Optimal overall debt levels and cost 

of debt

 – The impact of wider monetary policy 

on Grainger

 – The strategic role of business divisions, 

in particular Germany 

 – Director succession, in particular in 

respect of Chairman and CEO

 – Directors’ remuneration

 – Results of the external board evaluation 
and the change in auditors from PwC 
to KPMG

An area of particular focus in relation to 
Shareholder engagement in 2015 has been 
in connection with the signiﬁcant (29%) 
vote against the Director’s Remuneration 
report received at the 2015 AGM. Details of 
the shareholder engagement in respect of 
this issue are speciﬁed in the Remuneration 
Committee report.

The Group’s website includes a speciﬁc and 
comprehensive investor relations section, 
containing all RNS announcements, share 
price information, annual documents 
available for download and similar 
materials. All the Directors, standing for 
election or re-election (as applicable), intend 
to be in attendance at the 2016 AGM 
and to be available to answer questions. 
All Shareholders have the opportunity 
to attend the AGM, which continues as 
a route for communication with smaller 
and private Shareholders.

The notice of meeting and Annual 

Report and Accounts are sent out at least 
20 working days before the meeting. 
Separate votes are held for each proposed 
resolution, including the approval of the 
Remuneration Committee report. A proxy 
count is given in each case after the voting 
on a show of hands. Grainger includes, as 
standard, a ‘vote withheld’ category, in line 
with best practice. 

Shareholders are also able to lodge their 

votes through the CREST system.

Substantial shareholdings
As at 30 September 2015 and 31 October 
2015 (being the latest practicable date prior 
to the date of this report), the Company is 
aware of the following interests amounting 
to 3% or more in the Company’s shares:

Schroder Investment Management Ltd
BlackRock Investment Management Ltd
Aberforth Partners
Crystal Amber Advisers (UK) Ltd
State Street Global Advisers Ltd

30 September 2015

31 October 2015

Holding 
million
77.7
28.7
14.2
14.2
13.3

Holding  
%
18.6
6.9
3.4
3.4
3.2

Holding 
million
77.2
28.2
14.2
14.2
13.4

Holding  
%
18.5
6.9
3.4
3.4
3.2

Audit  
Committee  
report

The Audit Committee 
currently comprises 
three independent 
Non-Executive Directors.

Belinda Richards
Committee Chairman

49

ATTENDANCE TABLE

Committee Member
Belinda Richards
(Committee Chairman)
John Barnsley
Baroness Margaret Ford
Tony Wray
Andrew Carr-Locke

Member since

April 2011

February 2003 to February 2015

July 2008 to March 2015

November 2011

March 2015

Meetings  
attended

Meetings  
eligible  
to attend

4
2
2
4
2

4
2
2
4
2

Both Belinda Richards and Andrew Carr-Locke have recent and relevant ﬁnancial experience as required by the Code.

DEAR SHAREHOLDER

The Audit Committee plays a fundamental 
role in ensuring that the interests of 
Shareholders are properly protected by 
monitoring the activities and conduct of 
management and auditors. It is responsible 
for reviewing the integrity of ﬁnancial 
statements to establish that decisions 
and judgements are appropriate in the 
circumstances, and that the performance 
of the auditors is effective. The Audit 
Committee at Grainger works closely with 
the Board Risk and Compliance Committee 
(BRCC) to ensure that the systems of 
internal control and risk management are 
robust and effective. It is a policy that I, as 
Chairman of the Audit Committee, am also 
a member of the BRCC, and similarly Tony 
Wray, as Chairman of the BRCC is also a 
member of the Audit Committee. I ﬁnd that 
this approach assists signiﬁcantly in properly 
implementing the roles and responsibilities 
of Committees and good governance. 
This report details the activities of the 
Audit Committee that were undertaken 
during the course of the year in fulﬁlling 
our responsibilities.

Committee meetings
The Committee met four times during 
the year. The meetings were attended by 
the Committee members, the Company 
Secretary and, by invitation, the Finance 
Director, the Group Financial Controller, 
representatives from the external auditors 
and the Internal Audit Manager. Once a 
year, the Committee meets separately 
with the external auditors and with 
management without the other being 
present. The Chairman of the Committee 
has regular quarterly meetings with the 
Internal Audit Manager.

Role and responsibilities
 – Monitoring the integrity of the annual 
and interim ﬁnancial statements, the 
accompanying reports to Shareholders 
and corporate governance statements.

 – Reporting to the Board on the 
appropriateness of the Group’s 
accounting policies and practices.

 – In conjunction with the BRCC reviewing 

and monitoring the effectiveness 
of the Group’s internal control and 
risk management systems, including 
reviewing the process for identifying, 
assessing and reporting all key risks.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
50

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

 – Managing the internal audit function and 
approving their terms of reference and 
their forward audit plan.

 – To make recommendations to the Board 

in relation to the appointment and 
removal of the external auditors and to 
approve their remuneration and terms 
of engagement. 

 – To review and monitor the external 

auditor’s independence and objectivity 
and the effectiveness of the audit process, 
taking into consideration relevant UK 
professional and regulatory requirements.

 – To develop and implement policy on 

the engagement of the external auditor 
to supply non-audit services, taking 
into account relevant ethical guidance 
regarding the provision of non-audit 
services by the external audit ﬁrm, and 
to report to the Board identifying any 
matters in respect of which it considers 
that action or improvement is needed 
and making recommendations as to the 
steps to be taken. A copy of the current 
policy is available on the Company’s 
website (www.graingerplc.co.uk/who-
we-are/corporate-governance/board-
committees.aspx).

 – To report to the Board on how it has 

discharged its responsibilities.

 – To oversee the whistleblowing provisions 

of the Group and to ensure they are 
operating effectively.

ACTIVITIES OF THE COMMITTEE

The Committee has worked largely to a regular and structured programme agreed 
with the Committee Chairman, management and the external auditors at the start of 
the ﬁnancial year. The Committee considered, discussed and made decisions in relation 
to a range of matters throughout the course of the year, the most signiﬁcant of which 
are speciﬁed below.

 – Reviewed and discussed with the 

 – Received reports from internal audit 

external auditors the key accounting 
considerations and judgements 
reﬂected in the Group’s results 
for the six-month period ending 
31 March 2015.

covering various aspects of the Group’s 
operations, systems, controls and 
processes, including:

 – treasury management
 – selection and supervision of estate 

 – Reviewed and agreed the external 

agents on sales of property

auditors’ audit strategy memorandum 
in advance of their audit for the year 
ending 30 September 2015.

 – Discussed the report received from 
the external auditors regarding their 
audit in respect of the year ending 
30 September 2015, which included 
comments on their ﬁndings on internal 
control and a statement on their 
independence and objectivity.

 – Reviewed the Group’s whistleblowing 
policy and satisﬁed itself that this met 
FCA rules and good standards of 
corporate governance.

 – Reviewed and agreed the forward 
internal audit plans and monitored 
the progress against those plans at 
each meeting.

 – Reviewed and approved the register of 
non-audit assignments undertaken by 
the external auditors in the year ending 
30 September 2015.

 – Reviewed the Audit Committee’s terms 

of reference.

 – delegations of authority
 – property acquisitions, sales and 

development transactions 
 – post transactional operational 

delivery planning
 – data governance
 – payroll analytics

 – Considered the presentation 

of the ﬁnancial statements and 
announcements, in particular  
the analysis between recurring  
and non-recurring items. The  
Committee was satisﬁed with 
management’s presentation.

 – Reviewed the Company’s tax policy.

 – Reviewed Grainger’s accounting policy 
in respect of non-audit fees to auditors.

 – Gave oversight and received updates in 
respect of projects to ensure continued 
effective and efﬁcient ﬁnancial 
operations and processes.

 – In conjunction with the BRCC 

considered the ‘viability statement’ as 
required under the Code.

 – Reviewed the Company’s investment 

appraisal process.

SIGNIFICANT AREAS

The signiﬁcant areas considered by the Committee and discussed with the external 
auditors during the year were:
 – Property valuations: we received 

 – Considered the accounting treatment 
of substantial transactions including 
any judgemental areas. This included 
the re-acquisition of Equity Release 
(Increments) Limited as part of the 
enforcement of security over that 
company pursuant to a failure by 
Clifden Holdings Limited to pay 
the deferred consideration by the 
relevant date.

 – Considered the classiﬁcation of 

the German wholly-owned assets 
announced for disposal on 13 August 
2015, and whether such assets should 
be classiﬁed as held-for-sale. It was 
agreed that as at 30 September 2015, 
not all of the relevant criteria to make 
such a classiﬁcation had been satisﬁed, 
and subsequently it was correct not to 
treat such assets as held-for-sale.

reports from management on the 
assumptions to be used in valuing the 
Group’s property assets. In considering 
the proposals we reviewed the 
valuations and, for reversionary 
assets, the suggested discount rates 
provided by the external valuers, 
and conﬁrmed that the external 
valuers were sufﬁciently independent 
from the Group. Management’s 
recommendations in relation to the 
Directors’ valuations were scrutinised 
against external evidence and the 
veriﬁcation work completed by the 
external valuers. We were content after 
due challenge and debate with the 
assumptions and judgements applied.

 – Presumed risk of fraud in revenue 
recognition by overstatement and 
management override of controls: the 
Committee considered the presumed 
risks of fraud as deﬁned by auditing 
standards and was content that there 
were no issues arising.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

51

External audit and evaluation
The Group’s current external auditors are 
KPMG LLP (‘KPMG’) who were appointed 
in December 2014 following a successful 
tender earlier that year. Following a 
period of shadowing the previous auditor, 
PricewaterhouseCoopers LLP (‘PwC’), an 
orderly handover took place and the Audit 
Committee is pleased with the insights 
that the new audit team offered and their 
performance to date. An assessment of 
KPMG’s effectiveness, performance, quality 
and processes regarding the 2015 audit 
will be carried out following its conclusion. 
A similar review was carried out by the 
Committee in respect of the 2014 audit 
process, which included discussion with 
Committee members and obtaining 
feedback from senior management. 
No material issues were raised and the 
Committee would like to thank PwC for 
the high quality of service given to the 
Company over many years. 

The Committee reviewed KPMG’s 
proposals for the audit and the audit 
plan. The Committee is conﬁdent that 
appropriate plans were put in place to carry 
out an effective, high quality audit.

In respect of ensuring independence 

and objectivity of auditors, the Audit 
Committee is responsible for reviewing 
this and ensuring this is safeguarded 
notwithstanding the provision of any other 
services to the Group. The Board recognises 
the importance of safeguarding auditor 
objectivity and has taken the following 
steps to ensure that auditor independence 
is not compromised:
 – As previously referred to, each year 

the Audit Committee carries out a full 
evaluation of the external auditor as 
to its complete independence from 
the Group and relevant ofﬁcers of the 
Group in all material respects and that it 
is adequately resourced and technically 
capable to deliver an objective audit to 
Shareholders. Based on this review, the 
Audit Committee recommends to the 
Board the continuation, or removal and 
replacement, of the external auditor.

 
52

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

 – The external auditors provide audit-
related services such as regulatory 
and statutory reporting as well as 
formalities relating to Shareholders 
and other circulars.

 – The external auditors may undertake 
certain non-audit work given their 
knowledge of the Group’s businesses. 
This work may include due diligence 
reviews, statutory assurance 
engagements and tax services where 
the calculations will not be used for 
material entries to ﬁnancial statements. 
Such provision will however be assessed 
on a case-by-case basis so that the best 
placed adviser is retained. Prior to any 
such assignment being commenced 
by the external auditor, approval of the 
Audit Committee must be obtained. 
This approval conﬁrms that sufﬁcient and 
appropriate safeguards are put in place 
to ensure that auditor independence is 
retained. The Audit Committee monitors 
the application of policy in this regard 
and keeps the policy under review. 
The extent to which non-audit services 
may be provided by the Group’s auditor 
will be kept under review in light of 
new restrictions to be introduced by 
EU legislation which comes into effect 
in 2016.

 – The Audit Committee reviews on a 

regular basis all fees paid for audit, and all 
consultancy fees, with a view to assessing 
reasonableness of fees, value of delivery 
and any independence issues that may 
have arisen or may potentially arise in 
the future.

 – The external auditors’ report to the 
Directors and the Audit Committee 
conﬁrming their independence in 
accordance with Auditing Standards. 
In addition to the steps taken by the 
Board to safeguard auditor objectivity, 
KPMG operates a ﬁve-year rotation policy 
for audit partners. 

 – The Audit Committee supports the 

principle of regular re-tendering of audit 
services to preserve independence. 
Under current regulations, the Company 
will be required to retender audit 
services no later than in 2024. The Audit 
Committee will continue to monitor 
regulation in respect of audit tendering. 
The re-appointment of KPMG for a 
further year will be recommended 
to Shareholders for approval at the 
2016 AGM. 

As referred to above, auditors may be 
invited to tender to provide non-audit 
services. The Audit Committee give careful 
consideration before appointing the 
auditors to provide other services having 
regard to the policy and the matters listed 
above regarding the preservation of auditor 
independence. This being so, the Group 
regularly use other providers to ensure that 
independence and full value for money 
are achieved. Other services provided by 
an auditor from time to time are generally 
limited to work that is closely related to the 
annual audit or where the work is of such 
a nature that a detailed understanding 
of the business is necessary. In addition, 
as KPMG have recently been appointed 
as auditor, certain engagements were 
instructed prior to their appointment as 
auditor, and have been on-going since that 
date. In such cases it was decided that it 
was in the Company’s best interests for this 
work to continue to be provided by KPMG 
in order to avoid unnecessary disruption 
and the additional costs of engaging a 
replacement adviser. 

In respect of non-audit services, during 

the year, KPMG was paid £11,750 in 
connection with UK employment tax 
compliance services and €2,860 for 
German tax advisory services.

Internal Audit 
Deloitte LLP are appointed by the 
Company as Internal Auditor. Internal Audit 
undertakes audits across Grainger 
using a risk-based methodology and in 
accordance with the changing risk proﬁle 
of the Company. Individual audits are 
supported as appropriate by specialist skills 
and subject matter expertise. Audits are 
identiﬁed during an annual audit planning 
cycle, which is informed by the results of 
current and previous audit testing, the 
Company’s strategy and performance, the 
risk management process and the plans of 
other assurance providers.

Additional audits are identiﬁed during the 

year in response to changing priorities and 
requirements. All Internal Audit ﬁndings 
are graded, appropriate remedial actions, 
responsibilities and timescales are agreed 
with management, and progress monitored 
and reported.

Internal Audit’s plans and resources are 

considered and monitored by the Audit 
Committee, together with all internal 
control ﬁndings and remedial actions. 
Internal Audit has a direct reporting line 
to the Chairman of the Audit Committee. 
The effectiveness of Internal Audit is 
assessed by the review of their reports, 
meetings with the Chairman of the 
Audit Committee without management 
being present, feedback from senior 
management and the Finance Director 
to assess views on effectiveness of 
Internal Audit.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

Nominations  
Committee  
report

The Nominations 
Committee currently 
comprises the Chairman 
of the Board and three 
independent Non-Executive 
Directors.

Baroness Margaret Ford
Committee Chairman

53

ATTENDANCE TABLE

Committee Member
Baroness Margaret Ford  
(Committee Chairman)
Belinda Richards
Tony Wray
Andrew Carr-Locke

Member since

February 2012

February 2014

February 2014

March 2015

DEAR SHAREHOLDER

The Nominations Committee plays 
a fundamental role in ensuring the 
selection and recommendation of strong 
candidates for appointment to the Board. 
The Committee monitors the balance 
of skills, experience, independence 
and knowledge of the Board and 
its Committees, with any changes 
recommended to the Board for its review 
and decision. The Committee is also 
responsible for succession planning and 
monitors talent development at senior 
management level. It has been a particularly 
busy year for the Nominations Committee, 
dealing with succession and Board change 
at positions of Chairman, Executive Director 
and Non-Executive Director, as well as 
substantial changes to the membership 
of Board Committees. This report details 
the main activities of the Nominations 
Committee that were undertaken 
during the course of the year in fulﬁlling 
our responsibilities.

Key responsibilities
The key responsibilities of the Committee 
are to:
 – Review the size, balance and 

constitution of the Board, including 
the diversity and balance of skills, 
knowledge and experience of the 
Non-Executive Directors.

 – Consider succession planning for 

Directors and other senior executives.

Meetings  
attended

Meetings 
eligible to  
attend

4
4
4
2

4
4
4
2

 – Identify and nominate for the 

approval of the Board candidates to ﬁll 
Board vacancies.

 – Review annually the time commitment 
required of Non-Executive Directors.

 – Make recommendations for the 
Board, in consultation with the 
respective Committee Chairman 
regarding membership of the four 
Board Committees.

Process for Board appointments
Prior to making an appointment, the 
Nominations Committee will evaluate 
the balance of skills, knowledge and 
experience on the Board. Pursuant to this 
evaluation, a speciﬁcation of the personal 
attributes, experience and capabilities 
required to effectively perform the 
relevant appointment will be drafted. 
The Committee will also make any 
recommendations to the Board concerning 
the appointment of any Director and 
Company Secretary. In circumstances 
where an external recruitment or 
benchmarking an internal candidate is 
appropriate, the Committee will engage 
the services of an independent external 
search consultancy to assist in preparing 
the appointment speciﬁcation.

Main activities of the Committee 
during the year
The Committee met formally four times 
during the year to 30 September 2015. 
The Committee has a number of standing 
agenda items which relate to its key 

 
54

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

responsibilities detailed above. In applying 
those responsibilities, the Committee 
considered, discussed and made decisions 
in relation to a range of matters throughout 
the course of the year, the most signiﬁcant 
of which are speciﬁed below:

Board changes
 – Andrew Cunningham gave notice of his 
retirement as CEO and will be leaving 
Grainger in January 2016. Following a 
thorough and robust external search 
overseen by the Committee, and 
following unanimous recommendation 
to the Board, it was announced that 
Helen Gordon was selected as Grainger’s 
next CEO. Helen joined Grainger as CEO 
designate on 3 November 2015 and will 
take up the role of CEO in January 2016. 

 – Mark Greenwood gave notice to 

the Company in August 2015 of his 
retirement as Finance Director to the 
Board. It was agreed with Mark that he 
would continue to work at Grainger and 
serve on the Board until the end of 2015. 
Consequent to this, the Committee led 
a thorough external search to identify 
an appropriate successor to Mark, and 
following unanimous recommendation 
by the Committee to the Board, Vanessa 
Simms was selected as the Company’s 
Finance Director. Vanessa will take up 
her role in Spring 2016.

 – The Board has received notice from 
Simon Davies that he would like to 
retire from the Board on or about 
30 November 2015, by which time 
he will have completed three years’ 
service. Consequently, Simon will also 
be relinquishing his membership of the 
Remuneration and Risk and Compliance 
Committees at that time.

 – As previously announced, Ian Coull was 
due to take up the Chairmanship of the 
Board in February 2015 following the 
AGM and Robin Broadhurst’s retirement. 
Due to ill health, Ian was unable to take 
up that position and was granted a leave 
of absence from the Board. In response 
to this, it was agreed that Baroness 
Margaret Ford would be appointed 

as interim Chairman. Due to on-going 
health issues, Ian was unable to return 
to the Board and resigned his position 
as a Director in June 2015. Consequently, 
it was agreed that due to her extensive 
relevant experience, skills and personal 
attributes, Baroness Ford would become 
Chairman on a permanent basis.

 – Following previous reporting and 

announcements, Andrew Carr-Locke 
formally joined the Board as an 
independent Non-Executive Director 
in March 2015.

 – The Committee reviewed the 

composition of the Board including 
the range of skills, knowledge, level 
of experience and balance between 
Executive and Non-Executive Directors. 
Following this review, it was agreed that 
a search for an additional independent 
Non-Executive Director with fund 
management and real estate sector 
experience be carried out. Following a 
robust external search, the Committee 
unanimously recommended to the 
Board that Rob Wilkinson join as a Non-
Executive Director subject to the usual 
FCA conﬁrmations. Following receipt of 
such conﬁrmations, Rob was appointed 
in October 2015. 

Senior Independent Director
 – Following Margaret Ford being appointed 

as Chairman on a permanent basis, 
Belinda Richards was appointed Senior 
Independent Director, thus ensuring 
that these roles are separated and 
implementing best governance practice.

Committee changes
 – In accordance with the Code, and 

following Margaret Ford’s appointment 
as Chairman, Belinda Richards 
was appointed as Chairman of the 
Remuneration Committee in Margaret’s 
place. In addition, and having regard to 
best practice, Margaret relinquished her 
membership of the Audit Committee. 

 – Following a review of the membership 
of the Committees having regard to 
the balance of skills, knowledge and 

experience, it was subsequently decided 
to appoint Andrew Carr-Locke as a 
member of the Risk and Compliance, 
Nomination, Remuneration and 
Audit Committees.

 – Mark Greenwood retired from the Risk 
and Compliance Committee, it being 
agreed that it should be comprised of 
Non-Executive Directors only. The Finance 
Director and the Property Director have a 
standing invitation to attend all meetings 
of that Committee.

Search consultants
The Committee engaged the Zygos 
Partnership (‘Zygos’), an independent 
executive search consultancy, for the 
recruitment of Helen Gordon, Rob 
Wilkinson and Vanessa Simms. The Board 
conﬁrms that Zygos is not connected with 
the Company in any other way. 

Diversity
The Directors are committed to having a 
balanced Board which includes diversity 
of perspectives, skills, knowledge and 
background. In respect of gender diversity 
speciﬁcally, the Board supports Lord 
Davies’ aspiration to promote greater 
female representation on listed company 
boards, and notes the signiﬁcant positive 
progress that has been made in this area 
in respect of FTSE 350 companies since 
the original Davies report was published. 
All appointments to the Grainger Board 
are made on merit, and within this context 
the Directors will continue to have regard 
to the recommendations of the Davies 
report and the issue of diversity as it and 
best practice develops further. As at the 
date of this report, female representation 
at Board level was 30%. Both the Chairman 
and Senior Independent Director are 
female. This ﬁgure will increase to 50% 
when Helen Gordon and Vanessa Simms 
take up their positions in 2016. Page 24 
contains details of the gender split of all 
Grainger staff.

Remuneration  
Committee  
report

I am pleased to present 
on behalf of the Board, for 
the ﬁrst time as Grainger’s 
Remuneration Committee 
Chairman, the 2015 
Directors’ Remuneration 
report.

Belinda Richards
Committee Chairman

55

DEAR SHAREHOLDER

This Directors’ Remuneration report 
sets out details of our remuneration 
policy, describes how the policy will be 
implemented for the year ahead, and 
discloses the amounts paid to our Executive 
and Non-Executive Directors for the year 
ended 30 September 2015.

What is in this report?
Our remuneration policy received binding 
Shareholder approval at the 2014 Annual 
General Meeting and the policy took 
formal effect from the date of approval. 
The Committee is satisﬁed that the 
policy remains ﬁt for purpose and it is 
currently intended that it will cover the 
full three-year period to the 2017 Annual 
General Meeting. To maximise clarity 
and transparency, for reference, we have 
republished our remuneration policy 
report in an abridged form (pages 57 to 
61). This report also includes an Annual 
Report on Remuneration (pages 62 to 73) 
which describes how the remuneration 
policy was implemented for the year ended 
30 September 2015 and how we intend 
to apply the policy for 2016. The Annual 
Report together with this annual statement 
will be put to an advisory Shareholder vote 
at the 2016 Annual General Meeting. 

Alignment of remuneration 
with strategy
The Committee’s overarching aim in 
designing the remuneration policy is to 
promote the long-term success of the 
Company. To achieve this aim the policy 
seeks to closely align remuneration with the 
Company’s strategic objectives, to build a 
sustainable performance culture, to reward 
outperformance of expectations and to 
align the interests of our management 
team with those of our Shareholders.

  INDEX TO THE REPORT

Committee Chairman’s  
Annual Statement

Summary of Remuneration Policy 

Annual Report on Remuneration

1 Single total ﬁgure of 

remuneration for each Director 
– 2014 & 2015

/ 55

/ 57

/ 62

/ 62

2 Annual Bonus awards – 

/ 64

performance assessment for 
2015

3 LTIS awards – performance 

/ 65

assessment for 2015

4 Share scheme interests 
awarded during the year

/ 66

5 Payments to past Directors

/ 66

6 Payments for loss of ofﬁce

/ 66

7 Directors’ shareholding  
and share interests

8 Performance graph and table 
– total shareholder return 

/ 67

/ 69

9 Chief Executive single ﬁgure 

/ 70

10 Percentage change in 
remuneration of Chief 
Executive and employees

/ 70

11 Relative importance of spend 

/ 70

on pay

12 Statement of implementation 
of Remuneration Policy for 
2016 

13 Directors’ Service Agreements 
and Letters of Appointment

14 Details of Remuneration 

Committee, advisers to the 
Committee and their fees

15 Statement of voting at 
general meeting

/ 71

/ 72

/ 72

/ 73

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
 
 
 
56

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

The packages of our Executive Directors 
are made up of base salary, beneﬁts 
and pension, and, subject to stretching 
performance conditions, an annual bonus 
and Long-Term Incentive Scheme (‘LTIS’). 
Performance conditions are made up of 
a combination of corporate and personal 
objectives derived from the Company’s key 
performance indicators and participants are 
only rewarded in the event that strategic 
objectives are successfully delivered. 
During the year, in line with best practice, 
robust withholding and recovery provisions 
were approved by the Committee and will 
apply to both the annual bonus and LTIS 
(described on page 72) and, in addition, 
shareholding guidelines will continue 
to apply.

2015 performance and reward
Aligned with our core objective of 
generating Shareholder returns through 
the active management of our assets, the 
majority of our annual bonus is subject 
to a combination of OPBVM and ROSE 
targets. These metrics combine to ensure 
that Executive Directors are focused on 
driving proﬁt from our day-to-day activities 
at the same time as maximising the value 
of our underlying assets. In addition, a 
minority of our bonus opportunity is earned 
based on how well our Executive Directors 
perform against a broader scorecard of our 
key performance metrics which include 
targets relating to: (i) retaining our leading 
position in the residential property market; 
(ii) achieving an appropriate balance in our 
revenue generating opportunities; and (iii) 
the optimisation of our capital structure 
and gearing.

With regards to the awards granted in 
2012, these are due to vest in December 
2015, with 50% of the award based on 
NNNAV performance measured over the 
three-year period to 30 September 2015 
and 50% of the award based on absolute 
total shareholder return performance 
measured over the three-year period to 
10 December 2015. Total shareholder 
return is currently forecast to show an 
annual compound increase in the region 
of 33% and NNNAV increased by 68% 
against the 23% increase in the Halifax 
and Nationwide Home Price Indices. 
The NNNAV performance achieved 
was slightly less than the maximum 
performance requirement included in 
the conditions and, based on current 
forecasts, absolute total shareholder return 
performance is set to exceed the maximum 
performance requirement. Therefore, based 
on current forecasts, 98% of awards look 
set to vest overall. This level of forecast 
vesting is consistent with the strong 
performance of the Company to date 
under the relevant portions of the three-
year performance periods. 

Implementation of policy for 2016
The base salary of Nick Jopling, will be 
increased by 3% with effect from 1 January 
2016, in line with the level of increase 
awarded to the Company’s workforce more 
generally. No increases in salary will be 
awarded to Andrew Cunningham or Mark 
Greenwood in light of their forthcoming 
retirements from the Board.

Other than the introduction of 

withholding and recovery provisions in the 
annual bonus and LTIS for ﬁnancial year 
2015 awards, no other changes will apply 
in how we operate our policy for the 2016 
ﬁnancial year.

Exactly in accordance with the contractual 
provisions speciﬁed in Executive Directors’ 
service agreements and having reference to 
the Company’s agreed policy for departing 
Executive Directors, Andrew Cunningham 
and Mark Greenwood were not eligible 
for a bonus in 2015 having given notice to 
the Company during the ﬁnancial year to 
terminate their employment in connection 
with their retirement. Grainger currently 
applies a similar policy to all staff whereby 
no annual cash bonus will be payable in 
circumstances where notice has been 
given by an employee to the Company to 
terminate his or her employment within the 
relevant ﬁnancial year.

Nick Jopling earned a bonus at 56% 
of his salary and 45% of the maximum. 
Bonus at this level was payable as a result 
of delivering OPBVM of £101.9m marginally 
ahead of the budget set at the start of 
the year and ROSE of 10%. In addition, 
a number of key personal performance 
targets were delivered during the year.

Details of the Committee’s assessment 

of performance against the targets are 
set out in detail in the Annual Report on 
Remuneration on page 64. In light of this 
performance achieved, the Committee 
was comfortable with the bonus out-
turn payable. 

LTIS awards are subject to performance 
targets that are also aligned with delivering 
long-term sustainable returns for our 
Shareholders. Performance targets are 
based on NNNAV and absolute total 
shareholder return. With regards to the 
awards granted in 2011 under the LTIS, 
these vested in full in December 2014. 
This reﬂected the strong performance 
of the Company over the relevant three-
year performance period for the award 
with total shareholder return showing 
an annual compound increase of 28% 
and NNNAV increasing by 58% against 
the 14% increase in the Halifax and 
Nationwide Home Price Indices. In both 
cases, the performance achieved exceeded 
the maximum performance requirement 
included in the conditions.

57

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

SUMMARY OF 
REMUNERATION POLICY

An abridged form of the Policy report that 
was approved by Shareholders at the 2014 
Annual General Meeting, including the key 
aspects of our policy, has been included in 
this report for the purposes of clarity and 
transparency. Where references were made 
in the Policy report last year to speciﬁc levels 
of pay in 2015, these have been updated so 
that the report can be read in the context 
of the 2016 ﬁnancial year. The original 
Policy report, approved at the 2014 Annual 
General Meeting, can be found on pages 
72 to 79 in the 2013 Annual Report and 
Accounts on the Company’s website 
(www.graingerplc.co.uk).

The tables below summarise the main 
elements of the remuneration packages for 
the Executive Directors.

i

F
n
a
n
c
a
l
s

i

Changes to the Board
As detailed in the Corporate Governance 
report, the current ﬁnancial year will see 
a change of leadership in the Company. 
Our current Chief Executive, Andrew 
Cunningham, will be retiring in January 
2016 following nearly 20 years’ service with 
the Company, and Mark Greenwood, our 
Finance Director, will be retiring at the end 
of December 2015 after ﬁve years with 
the Company. 

Andrew’s successor, Helen Gordon, 
receives a base salary of £460,000 and 
pension, beneﬁts and incentive opportunity 
fully in line with our approved policy. 
In addition, in order to facilitate her 
recruitment, Helen will receive certain 
performance adjusted and/or related 
buy-out awards in order to compensate 
her for awards forfeited from her previous 
employer as a result of joining Grainger. 
The Committee has taken considerable care 
in ensuring that the buy-out is appropriate 
in light of our recruitment policy. Details of 
the package and the buy-out awards are 
provided on page 71.

Mark’s successor, Vanessa Simms, will 

receive a base salary of £320,000 and 
she will receive a pension, beneﬁts and 
incentive opportunity in accordance with 
the approved remuneration policy.

Shareholder engagement
A key area of focus for the Remuneration 
Committee and the Board during 
2015 was a Shareholder engagement 
programme in connection with the 
signiﬁcant (29%) vote against the Annual 
Report on Remuneration at the 2015 
AGM. The Board values the opinions of 
its Shareholders and other stakeholders 
and has proactively sought to understand 
the reasoning behind this voting result. 
The feedback we collected suggested 
that the primary issue related to a lack of 
robustness in retrospective annual bonus 
disclosure. As a result, the Committee has 
taken signiﬁcant care in ensuring that the 
narrative and disclosure levels in this year’s 
report have been brought into line with the 
best practice expectations of investors in 
order to address this issue (see page 64 for 
further details). 

The Committee is committed to 

maintaining an on-going dialogue with 
Shareholders on the issue of executive 
remuneration and we welcome any further 
feedback you may have. 

We look forward to your support on the 
resolution relating to remuneration at the 
AGM on 10 February 2016.

Belinda Richards
Chairman of Remuneration Committee

 
58

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Base Salary

Purpose and link to strategy

Operation

Opportunity

Beneﬁts

To provide a competitive level of non-variable remuneration aligned to market practice for similar sized 
organisations; to reﬂect the seniority of the post and expected contribution to the delivery of the 
Company’s strategy.

Basic salaries are reviewed by the Remuneration Committee annually with uplifts effective from 1 January being 
by reference to cost of living, responsibilities and market rates, as for all employees.

The basic salaries for the Executive Directors are eligible to be increased with effect from 1 January in line with 
the standard increase that will be applied to all staff.

Purpose and link to strategy

To aid recruitment and retention of high-quality executives.

Operation

Pension

Purpose and link to strategy
Operation

Opportunity

Annual Bonus

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Car allowance, private medical insurance, life assurance, ill health income protection, travel insurance, 
health check-up. 

To aid recruitment and retention of high-quality executives.
The Group will pay a pension allowance or contribute into a personal pension arrangement for all of the 
Executive Directors. If appropriate, a salary sacriﬁce arrangement can apply.
The pension contribution or allowance is based on 15% of basic salary.

To incentivise performance over a 12-month period based on a balanced scorecard performance agreement 
which is aligned to leadership, corporate strategy, innovation/growth and external relationships/reputation. 
It has two ﬁnancial performance measures that are linked to the strategic objectives of the Company and 
the KPIs through which those objectives are monitored plus an assessment of personal performance against 
objectives that are set for the Executive Directors that reﬂect the business targets and priorities for each year.
Performance measures are based on:
37.5% – operating proﬁt before valuation movements and non-recurring items (OPBVM)
37.5% – return on Shareholders’ equity (ROSE)
25% – assessment of personal performance
Maximum bonus potential is capped at:
150% of salary for the Chief Executive
125% of salary for the other Executive Directors
OPBVM (37.5%) – Actual OPBVM is compared to the budgeted ﬁgure that is approved by the Board.
Budget less 10% – 0% vests
Budget achieved – 60% vests
Budget plus 20% – 100% vests
Calculated on a pro rata basis
ROSE (37.5%) – The calculation of ROSE is:
Closing NNNAV + dividends paid
Opening NNNAV
Less than or equal to 5% – 0% vests
Greater than 15% – 100% vests
Calculated on a pro rata basis
Personal performance (25%) – Personal performance is assessed against individual personal objectives that are 
set at the beginning of the ﬁnancial year.
The Chairman assesses the performance of the Chief Executive, and the Chief Executive assesses the 
performance of the other Executive Directors.

 
 
i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

59

Long-Term Incentive Scheme (‘LTIS’)

Purpose and link to strategy

Operation

Opportunity

Performance metrics

To incentivise delivery of sustained performance over the longer term.
To encourage greater Shareholder alignment through personal investment in the Company’s shares.
The awards are based upon the absolute levels of increase in both NNNAV and TSR. Fundamentally, it was 
considered that absolute measures of performance were suitable because Grainger is unusual in nature 
and has no natural comparator group. Grainger is the only listed company of its size to invest primarily in 
residential property assets. All other comparably sized property companies are principally commercial and/or 
development-focused. 
The awards are capped at 150% of basic salary for the Chief Executive and at 100% of basic salary for the other 
three Directors. 
There is also a matching awards element to the scheme, where participants are able to pledge shares of 
equivalent value at 30% of their basic salary. To the extent that performance criteria are met, these shares will 
be matched one-for-one at the end of the three-year performance period.
Awards are split equally between NNNAV and TSR.
TSR Performance Conditions (50%)

Percentage of the TSR element of an award that 
will vest

Growth in TSR over three years
TSR base threshold for vesting is 5% with the maximum at 15%
Less than 5%
Between 5% and 15%
More than 15%
NNNAV Performance Conditions (50%)

Nil
Pro rata vesting
100%
Percentage of the NNNAV element of an award that 
will vest

Growth in NNNAV over a three-year period relative to the average of the Halifax and Nationwide indices by a 
factor of:
NNNAV base threshold for vesting where NNNAV growth exceeded the average Halifax and Nationwide indices 
by a factor of 1.5. The maximum level occurs at a factor of 3.
Nil
Less than 1.5
Pro rata vesting
Between 1.5 and 3
Greater than 3
100%
There is also a matching awards element to the scheme, to encourage executives to develop and maintain a 
shareholding in the Company. Participants are able to pledge or buy shares of equivalent value to 30% of their 
relevant salary and to the extent that the performance criteria outlined above are met; these shares will be 
matched one-for-one at the end of the three-year period.
These performance criteria are believed to be stretching, but realistic, and to reward executives if Grainger’s 
return to Shareholders is signiﬁcant in absolute terms.

The Grainger plc Company Share Option Plan (‘CSOP’)

Purpose and link to strategy
Operation

Opportunity

To aid recruitment and retention of high-quality executives.
The CSOP is approved by HMRC under schedule 4 of ITEPA.
The Remuneration Committee has discretion to grant options under the CSOP, which awards will be subject to 
the same performance conditions as apply to the LTIS above.
The exercise price per ordinary share under an option is determined by the Remuneration Committee at the 
time of grant but may not be less than the greater of: (i) the market value of an ordinary share as at the date of 
grant; and (ii) in the case of an option to subscribe for ordinary shares, the nominal value of an ordinary share.
Each Director’s participation is limited so that the aggregate market value of ordinary shares subject to all 
options (calculated as at the date of grant of each option) held by that individual and granted under the CSOP or 
any other HMRC approved company share option plan operated by the Company or any associated company, 
shall not exceed £30,000 (or such other amount as may be permitted by HMRC from time to time).

 
60

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Savings related share schemes

Purpose and link to strategy
Operation

Opportunity

To encourage employees to make a long-term investment in the Company’s shares.
All employees, including the Executive Directors, are eligible to participate in the Company’s Save As You Earn 
(‘SAYE’) scheme and Share Incentive Plan (‘SIP’), both of which are approved by HMRC and subject to the limits 
prescribed.
SAYE: Participants may invest up to £500 per month (or such other amount as may be permitted by HMRC from 
time to time) for three or ﬁve-year periods in order to purchase shares at the end of the contractual period at a 
discount of 20% to the market price of the shares at the commencement of the saving period.
SIP: Participants can invest up to £150 per month (or such other amount as may be permitted by HMRC 
from time to time) in shares in the Company, and the Company will then, subject to certain limits, double that 
investment. The Company may also allocate free shares annually on a percentage of basic pay, subject to a 
maximum of £3,600 (or such other amount as may be permitted by HMRC from time to time).

Approach to recruitment remuneration
When setting the remuneration package 
for a new Executive Director, the 
Committee will apply the same principles 
and implement the policy as set out in the 
preceding tables. 

Base salary will be set at a level 

appropriate to the role and the experience 
of the Director being appointed. This may 
include agreement on future increases 
up to a market rate, in line with increased 
experience and/or responsibilities, 
subject to good performance, where it is 
considered appropriate.

In relation to external appointments, the 
Committee may structure an appointment 
package that it considers appropriate to 
recognise awards or beneﬁts that will 
or may be forfeited on resignation from 
a previous position, taking into account 
timing and valuation and such other 
speciﬁc matters as it considers relevant. 
This may take the form of cash and/or share 
awards. The policy is that the maximum 
payment under any such arrangements 
(which may be in addition to the normal 
variable remuneration) should be no more 
than the Committee considers is required 

to provide reasonable compensation to the 
incoming Director.

If the Director will be required to relocate 

in order to take up the position, it is the 
Company’s policy to allow reasonable 
relocation, travel and subsistence payments. 
Any such payments will be at the discretion 
of the Committee.

In the case of an employee who is 
promoted to the position of director, it is 
the Company’s policy to honour pre-
existing award commitments in accordance 
with their terms.

Non-Executive Director appointments 
will be through letters of appointment. 
Non-Executive Directors’ base fees, 
including those of the Chairman, will 
be set at a competitive market level, 
reﬂecting experience, responsibility and 
time commitment. Fees will be reviewed 
bi-annually. Additional fees are payable 
for the chairmanship of Audit, Risk and 
Remuneration Committees and for the 
additional responsibilities of the Senior 
Independent Director.

61

all relevant circumstances, in particular, 
having regard to the performance of the 
Company, the Director’s performance and 
behaviour towards the Company during 
the performance cycle of the relevant 
awards. Options under the Company’s 
HMRC approved share option scheme 
(CSOP) may be exercised early. The policy is 
that the Committee should retain the ability 
to exercise discretion in accordance with 
the rules but that performance conditions 
would be assessed in the advance of early 
exercise. Options may also be exercised 
in connection with a change of control 
or other corporate events and again the 
policy is that performance conditions would 
be assessed as at the date of the early 
exercise event.

It is the Company’s policy to honour pre-
existing award commitments in accordance 
with their terms.

Where the Executive Director participates 

in one or more of the Company’s all-
employee share schemes, his awards may 
vest or be exercisable on or following 
termination, where permissible, in 
accordance with the rules of the plan.

Non-Executive Directors’ appointments 
may be terminated without compensation.

Provision on payment for loss of ofﬁce
If an Executive Director’s employment is 
to be terminated, the Committee’s policy 
in respect of the contract of employment, 
in the absence of a breach of the service 
agreement by the director, is to agree a 
termination payment based on the value 
of base salary and contractual pension 
amounts and beneﬁts that would have 
accrued to the Director during the 
contractual notice period. The policy is that, 
as is considered appropriate at the time, 
the departing Director may work, or be 
placed on garden leave, for all or part of 
their notice period, or receive a payment in 
lieu of notice in accordance with the service 
agreement. The Committee will consider 
mitigation to reduce the termination 
payment to a leaving Director when 
appropriate to do so, having regard to 
the circumstances.

In addition, where the Director may 
be entitled to pursue a claim against the 
Company in respect of his/her statutory 
employment rights or any other claim 
arising from the employment or its 
termination, the Company will be entitled 
to negotiate settlement terms (ﬁnancial 
or otherwise) with the Director that the 
Committee considers to be reasonable 
in all the circumstances and in the best 
interests of the Company and to enter into 
a settlement agreement with the Director 
to effect both the terms agreed under 
the service agreement and any additional 
statutory or other claims, including bonus 
payments and to record any agreement in 
relation to bonus and/or share awards, in 
line with the policies described above.
The Company has an enhanced 

redundancy policy allowing redundancy 
amounts to be calculated by reference to 
actual basic weekly salary and the policy 
may be extended to Executive Directors 
where relevant.

The Committee will consider whether a 
departing Director should receive an annual 
bonus in respect of the ﬁnancial year in 
which the termination occurs or in respect 
of any period of the ﬁnancial year following 
termination for which the Director has 
been deprived of the opportunity to earn 
an annual bonus. If the employment 
ends by reason of redundancy, retirement 
with the agreement of the Company, ill 
health or disability or death, the Director 
may be considered for a bonus payment. 
If the termination is for any other reason, 
any bonus payment would only be at 
the discretion of the Committee. It is the 
Committee’s policy to ensure that any such 
bonus payment reﬂects the departing 
Director’s performance and behaviour 
towards the Company.

Any bonus payment will normally be 
delayed until the performance conditions 
have been determined for the relevant 
period and may be time pro-rated, 
where appropriate. 

The Committee will consider whether 
share awards, including matching share 
awards, held by the Director under the 
Company’s long-term incentive scheme 
should lapse or vest. Any determination 
by the Committee will be in accordance 
with the rules of the relevant plan, which 
have been approved by Shareholders. 
In summary, the plan rules provide that 
awards can vest if employment ends by 
reason of redundancy, retirement, ill health 
or disability, death or change of ownership. 
Vesting of awards will normally be in 
accordance with the normal performance 
cycle of the relevant awards, with vesting 
subject to satisfaction of the relevant 
performance conditions. Any awards 
which vest will normally be time pro-rated. 
The Committee will have discretion to allow 
a higher level of vesting if appropriate. 

If employment ends for any other reason, 

the plan rules permit the Committee 
to exercise its discretion. In doing so, 
the policy is that it will take account of 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
62

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

ANNUAL REPORT ON REMUNERATION 

1

Single total ﬁgure of remuneration for each Director
The details set out in notes 1 to 7 on pages 62 to 69 of this report have been audited by KPMG LLP.

2015
Executive Directors
Andrew Cunningham
Mark Greenwood
Nick Jopling

Non-Executive Directors
Baroness Margaret Ford
Robin Broadhurst
John Barnsley
Belinda Richards
Tony Wray
Simon Davies
Ian Coull
Andrew Carr-Locke

Total

a

b

Salary  
and fees
£’000

Taxable
beneﬁts1
£’000

Share 
incentive  
plan
£’000

c

Bonus

Annual2
£’000

Legacy3
£’000

d

LTIS  
awards
vesting4
£’000

e

Pension
costs5
£’000

443
274
343
1,060

112
49
15
55
50
42
29
28
380
1,440

16
16
16
48

–
–
–
–
–
–
–
–
–
48

7
7
7
21

–
–
–
–
–
–
–
–
–
21

–
–
192
192

–
–
–
–
–
–
–
–
–
192

109
–
–
109

–
–
–
–
–
–
–
–
–
109

1,550
693
863
3,106

–
–
–
–
–
–
–
–
–
3,106

67
41
51
159

–
–
–
–
–
–
–
–
–
159

Total
£’000

2,192
1,031
1,472
4,695

112
49
15
55
50
42
29
28
380
5,075

 
1

Single total ﬁgure of remuneration for each Director Continued

2014
Executive Directors
Andrew Cunningham
Peter Couch6
Mark Greenwood
Nick Jopling

Non-Executive Directors
Baroness Margaret Ford
Robin Broadhurst
John Barnsley
Belinda Richards
Tony Wray
Simon Davies
Ian Coull

Total

a

b

Salary  
and fees
£’000

Taxable
beneﬁts1
£’000

Share 
incentive  
plan  
£’000

c

Bonus

Annual2
£’000

Legacy3
£’000

d

LTIS  
awards
vesting4
£’000

e

Pension
costs5
£’000

428
89
265
331
1,113

55
140
45
50
50
42
1
383
1,496

16
11
16
16
59

–
–
–
–
–
–
–
–
59

6
4
6
6
22

–
–
–
–
–
–
–
–
22

409
–
203
254
866

–
–
–
–
–
–
–
–
866

109
–
–
–
109

–
–
–
–
–
–
–
–
109

1,445
475
516
698
3,134

–
–
–
–
–
–
–
–
3,134

64
13
40
50
167

–
–
–
–
–
–
–
–
167

63

Total
£’000

2,477
592
1,046
1,355
5,470

55
140
45
50
50
42
1
383
5,853

1  Taxable beneﬁts include a car allowance and private medical insurance.
2   Exactly in accordance with the contractual provisions speciﬁed in their service agreements and having reference to the Company’s policy for departing Executive Directors, Andrew 

Cunningham and Mark Greenwood were not eligible for a bonus in relation to the year under review having given notice to the Company to terminate their employment in connection with 
their retirement.

3   The legacy bonus paid in 2015 represents the ﬁnal tranche of an historic earned bonus that was due to Andrew Cunningham. The scheme, which applied to Andrew Cunningham only, 

closed in 2010 when the balance in the notional bonus pool stood at £545,621, reﬂecting performance between 2003 and 2010, and it was agreed to pay out this sum in ﬁve equal tranches 
beginning in 2011. The ﬁnal instalment of £109,125 was paid in March 2015.

4   Pursuant to evolving best practice following the introduction in 2013 of the Remuneration Reporting Regulations, the basis on which the LTIS vesting values has been determined has been 

changed for 2015. The 2015 LTIS vesting values are based on the forecast value of the awards due to vest on 10 December 2015 (50% of the award is based on NNNAV performance 
measured over the three years to 30 September 2015 and 50% of the award is based on absolute total shareholder return measured over the three-year period to 10 December 2015). 
The NNNAV performance measured to 30 September 2015 was marginally less than the maximum performance requirements and 96% of this part of the award is due to vest and forms part 
of the 2015 LTIS value. Absolute TSR performance (based on an assessment of performance measured to 30 September 2015 is forecast to exceed the maximum performance requirement 
and the 2015 LTIS value thus assumes 100% of this part of the award is due to vest. The share price for the purposes of valuing the award is the share price at 30 September 2015, (238p) for 
the NNNAV element, and the three-month average share price to 30 September 2015 (237.2p) for the TSR element. This value will be trued up in next year’s report to reﬂect the actual level 
of vesting and share price at the vesting date. The 2014 LTIS value has been restated and reﬂects the actual value of the awards that vested in December 2014.

5  The pension costs are based on 15% of base salary.
6  Peter Couch left the Company on 31 January 2014.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
 
64

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

2

Annual Bonus awards – performance assessment for 2015
Actual performance against the targets set for 2015 are set out below (straight-line payouts occur between the relevant performance 
points). Exactly in accordance with the contractual provisions speciﬁed in Executive Directors’ service agreements and having reference to 
the Company’s agreed policy for departing Executive Directors, Andrew Cunningham and Mark Greenwood were not eligible for a bonus 
in 2015 having given notice to the Company during the ﬁnancial year to terminate their employment in connection with their retirement. 
Grainger currently applies a similar policy to all staff where no annual cash bonus will be payable in circumstances whereby notice has been 
given by an employee to the Company to terminate his or her employment within the relevant ﬁnancial year. The detail below sets out the 
ﬁnancial targets that were set out at the start of the year (which were considered equally challenging to those set in prior years allowing 
for the prevailing trading environment) and performance achieved against them together with the personal targets set for Nick Jopling and 
the extent of achievement against these.

Measure

Proﬁt (OPBVM)

Weighting 

37.5%

Threshold  
(0% out-turn)
90% of budget 
(£91.1m)

Target  
(60% out-turn)
100% of budget 
(£101.2m)

Maximum  
(100% out-turn)
120% of budget 
(£121.4m) 

2015  
Performance
100.7% of budget 
(£101.9m)

Out-turn  
(% of max element)

Bonus

61.4%

Out-turn  
(% of max element)

Measure
ROSE

Weighting 
37.5%

Threshold  
(0% out-turn)
5%

Maximum  
(100% out-turn)
15%

2015  
Performance
10%

Bonus
48.1%

The ROSE as detailed above at 10% was calculated from the closing NNNAV of 263p per share plus the dividend per share for the year 
divided by the opening NNNAV per share of 242p. 

In respect of the personal performance targets set for Nick Jopling, these were assessed against a range of criteria approved by the 

Committee at the start of the year. These targets are aligned to Grainger’s corporate objectives.

1. Delivery of strategy
 – Target: Lead the strategic plan to secure a private rented sector portfolio of scale against the projected timeline. 

 – Outcome: The completion of signiﬁcant transactions and PRS developments throughout the year have resulted in a further c.900 PRS 
units being added to the portfolio. Such transactions include the acquisition of the major regional residential portfolio announced in 
February 2015 and the completion of Abbeville Apartments. In addition, Nick has overseen the growth of a pipeline of c.1,500 PRS units. 
Consequently, signiﬁcant progress has been made towards meeting this key strategic target. 

2. Innovation and growth
 – Target: Launch Grainger’s ﬁrst Build-to-Rent project, Abbeville Apartments.

 –  Outcome: The highly successful launch of a unique product in the market resulting in a marked increase in valuation.

3. Leadership and promoting high performance
 – Target: To put in place operational plans to become ‘Best in Class’ for the sector.

 – Outcome: Operational plans have been developed and implemented in order to maximise gross revenues. These include a new IT 

strategy, customer service and complaints handling, and supply chain improvement. 

65

2

Annual Bonus awards – performance assessment for 2015 Continued

4. External relationships and reputation
 – Target: To increase involvement in investor relations to ensure effective communications with stakeholder community and government 

bodies, and position Grainger as a market leader in the residential property sector.

 – Outcome: High quality contribution and signiﬁcant increase in participation in investor meetings, roadshows and site visits and effectively 

complementing the Chief Executive and Finance Director in this regard. 

The extent of achievement detailed above resulted in a bonus being earned at 60% of the maximum bonus available in relation to the 
personal performance element. With regards to areas of speciﬁc disclosure in relation to the above personal targets that were excluded on 
the grounds of commercial sensitivity, the Committee will consider further disclosure in next year’s Directors’ Remuneration report having 
had regard to any on-going areas of commercial sensitivity. 

3

LTIS awards – performance assessment for 2015
The awards made to Executive Directors in December 2012 and which are due to vest in December 2015 are based on NNNAV and 
absolute total shareholder return targets measured over a three-year period. Performance against the vesting schedule can be summarised 
as follows:

LTIS awards vesting in December 2015

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

Measure
Three year Growth in Total Shareholder 
Return (annual compound)1
NNNAV (increase over three years 
relative to HPI, as measured by 
Nationwide and Halifax)2

Weighting

Threshold

Maximum

50%

50%

5%

1.5

15%

3.0

Actual  
Performance

33%

2.95

Out-turn  
(% of max element)

LTIS

100%

96%

1  Performance measurement period three years to 10 December 2015 – actual performance is a forecast based on performance measured to 30 September 2015.
2   Performance measurement period three years to 30 September 2015. NNNAV increased by 67.5% between September 2012 and September 2015 whilst the average increase in the Halifax 

and Nationwide Housing indices over the same period was 22.9%.

The forecast vesting value of the awards made in December 2012, subject to the above performance targets, is included in the 2015 single 
ﬁgure table above.

The awards made to Executive Directors in December 2011 and which vested in December 2014 were based on NNNAV and absolute 

total shareholder return targets measured over a three-year period. Performance against the vesting schedule can be summarised 
as follows:

LTIS awards vesting in December 2014

Measure
Three-year Growth in Total Shareholder 
Return (annual compound)1
NNNAV (increase over three years 
relative to HPI, as measured by 
Nationwide and Halifax)2

Weighting

Threshold

Maximum

50%

50%

5%

1.5

15%

3.0

Actual  
Performance

28%

Out-turn  
(% of max element)

LTIS

100%

4.1

100%

1  Performance measurement period three years to 2 December 2014.
2   Performance measurement period three years to 30 September 2014. NNNAV increased by 58.2% between September 2011 and September 2014, whilst the average increase in the Halifax 

and Nationwide Housing indices over the same period was 14.2%.

 
 
66

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

4

Share scheme interests awarded during the year

Andrew Cunningham
Mark Greenwood
Nick Jopling

LTIS share awards

Matching awards

Number
336,503
138,874
173,592

Face value  
£’000
646
266
333

Number
67,300
41,662
52,077

Face value  
£’000
196
122
152

The face value is based on a price of 191.9p being the average share price from the ﬁve business days immediately preceding the award 
that was made on 16 December 2014.

The awards are contingent upon satisfying the performance criteria, for TSR and NNNAV growth, as detailed on page 59, in the three 

years to 16 December 2017.

The threshold levels, below which nothing would vest, are a compounded annual rate of 5% for TSR and a multiple between growth in 

NNNAV and HPI of 1.5 times.

5

Payments to past Directors
Peter Couch, who retired from the Board on 31 January 2014, retained a pro-rated entitlement to 246,853 shares granted on 2 December 
2011 under the terms of the Company’s LTIS. This award vested in full on 2 December 2014 when the value of the shares that vested, 
at 199.4p per share, was £492,224.

As previously reported, Peter Couch’s entitlement to 12 months’ notice of pay was paid to him over the notice period which expired at 
the end of January 2015. During the four months to 31 January 2015, he received £90,542, being the ﬁnal four months of this entitlement, 
all of which had been fully provided for in the 2014 ﬁnancial statements. 

6

Payments for loss of ofﬁce
In relation to the retirement of Mark Greenwood and Andrew Cunningham, which will take place on 31 December 2015 and in January 
2016 respectively, in line with the Company’s Remuneration Policy, they will be treated as ‘good leavers’ for the purposes of their 
outstanding long-term incentive awards. Accordingly, their outstanding awards will remain eligible to vest at the normal vesting date 
subject to: (i) a pro-rata reduction for the proportion of the vesting period elapsed to the date of their retirement; and (ii) the application 
of performance targets over the original performance period. 

There will be no other payments made in connection with their retirement.

 
67

7

Directors’ shareholding and share interests

Performance share awards

Andrew Cunningham

LTIS Shares

Matching shares 

Mark Greenwood 

LTIS Shares

Matching shares

Nick Jopling

LTIS Shares

Matching shares

Awards 
granted
02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14
02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14
02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14
02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14
 02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14
02-Dec-11
10-Dec-12
09-Dec-13
16-Dec-14

Maximum 
award
625,496
554,675
311,234
336,503
125,099
110,935
62,246
67,300
258,141
228,913
128,445
138,874
10,000
68,674
38,533
41,662
322,676
286,141
160,557
173,592
40,000
84,496
48,167
52,077

Awards 
vested
625,496
– 
–
–
125,099
– 
–
–
258,141
– 
–
–
10,000
– 
–
–
322,676
– 
–
–
40,000
– 
–
–

Maximum 
outstanding 
awards at  
Awards 
30 Sept 2015
lapsed
–
– 
– 554,675
311,234
–
– 336,503
–
–
110,935
–
62,246
–
67,300
–
–
–
228,913
– 
128,445
– 
138,874
– 
–
– 
68,674
– 
38,533
– 
41,662
– 
–
–
286,141
–
160,557
–
173,592
–
–
–
84,496
–
48,167
–
52,077
–

Market price 
at date of 
vesting  
(p)

Vesting date
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17
199 02-Dec-14
–  10-Dec-15
– 09-Dec-16
– 16-Dec-17

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

7

Directors’ shareholding and share interests Continued

Share options

Granted in year

Lapsed  
in year

Exercised  
during year

Share  
options at  
1 Oct 2014 Number

Grant  
price  

(p) Number Number

Exercise  
price 
(p)

Market  
price on 
exercise  
(p)

Gains on 
exercise  
of share 
options 
(£)

Share  
options at  
30 Sept  
2015

Exercise  
price 
(p)

Earliest 
exercise  
date

Latest 
exercise  
date 

Andrew  
Cunningham SAYE
SAYE

Mark  
Greenwood

Nick Jopling

SAYE
SAYE
SAYE
SAYE
SAYE

17,331

– 
–  20,026 151.30

–  17,331
–

– 
– 

–
–

–
–

– 
–
– 20,026

13,062
5,199
21,770
8,665

– 
– 
– 
–
 –  10,013 151.30

–  13,062 68.90 228.2 20,808
– 
–
– 
– 
–
– 
– 
–
– 8,665
–
– 

– 
– 
–
–

–
– 5,199
– 21,770
–
–
– 10,013

–
–
–
–

–

–
151.3 01-Mar-20 01-Sep-20

–

–

–

–
173.1 01-Sep-17 01-Mar-18
68.9 01-Sep-17 01-Mar-18
– 
151.3 01-Mar-20 01-Sep-20

– 

–

The closing trade share price on 30 September 2015 was 238.0p. The highest trade share price during the year was 254.0p and the lowest 
was 171.6p.

Directors’ shareholdings

Andrew Cunningham
Nick Jopling
Mark Greenwood
Helen Gordon
Baroness Margaret Ford
Belinda Richards
Tony Wray
Simon Davies
Andrew Carr-Locke
Rob Wilkinson

Ordinary shares of 5p each (thousands)

1 Oct 2014
1,424
402
306
–
40
–
10
100
–
–
2,282

30 Sep 2015
1,770
599
466
–
40
–
10
100
–
–
2,985

Beneﬁcial

31 Oct 2015
1,770
599
466
–
40
–
10
100
–
–
2,985

 
 
 
 
 
 
 
 
69

7

Directors’ shareholding and share interests Continued

Shareholding guidelines for Executive Directors
The Committee believes that it is important for a signiﬁcant investment to be made by each Executive Director in the shares of the 
Company and has established share ownership guidelines for the Grainger Executive Directors. These guidelines state that Executive 
Directors are expected and encouraged to build over a ﬁve-year period a shareholding, equivalent in value to at least one year’s salary.

Current levels of share ownership by the Executive Directors in post during the ﬁnancial year under review are as follows:
The values were calculated as at 31 October 2015 when the share price was 249p. These values do not include the value of any shares 

that are scheduled to vest on 10 December 2015.

Andrew Cunningham
Mark Greenwood
Nick Jopling

8

Performance graph and table

Current  
holdings 
(thousands)
1,770
466
599

Value at  
31 October 2015 
£’000
4,407
1,160
1,491

% of  
current  
salary
994%
423%
434%

Total shareholder return
This graph shows the value by 30 September 2015 of £100 invested in Grainger plc on 30 September 2008 compared with the value of 
£100 invested in the FTSE 250 Index and in the FTSE 350 Real Estate/Real Estate Investment & Services indices.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

Grainger plc
FTSE 250 Index
FTSE 350 Real Estate/Real Estate Investment & Services indices

300

250

200

150

100

50

0

SEP 2008

SEP 2009

SEP 2010

SEP 2011

SEP 2012

SEP 2013

SEP 2014

SEP 2015

i

F
n
a
n
c
a
l
s

i

 
 
 
70

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

9

Chief Executive single ﬁgure 

2015
2014
2013
2012
2011
2010
2009*

Andrew Cunningham
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham

Chief Executive  
single ﬁgure of  
total remuneration 
£’000
2,192
2,477
2,519
733
1,083
777
583

Annual variable element 
award rates against 
maximum opportunity  
%
–
64
63
19
50
43
22

Long-term incentive 
vesting rates against 
maximum opportunity 
%
98
100
100
–
16
–
–

*  Andrew Cunningham was acting Chief Executive for most of 2009 due to the absence through illness of Rupert Dickinson.

 The single ﬁgure of total remuneration and long-term incentive vesting rates against maximum opportunity values for years preceding 2015 have been restated to take account of a change to 
the method of calculating the LTIS vesting values (see footnote 4 to the single total ﬁgure of remuneration for each Director table on page 63).

10

Percentage change in remuneration of Chief Executive and employees
The percentage change in remuneration between 2014 and 2015, excluding LTIS and pension contributions, for the Chief Executive and 
for all other employees in the Group was as follows:

Chief Executive
Employee population

11

Base salary
4%
4%

Percentage change 2014–2015

Beneﬁts
0%
-7%

Annual Bonus
-100%
-17%

Relative importance of spend on pay
The difference in actual expenditure between 2014 and 2015 on remuneration for all employees in comparison to proﬁt after tax and 
distributions to Shareholders by way of dividend are set out in the tabular graphs below:

Proﬁt after tax (£m)

Dividend (£m)

74.7

42.7

−£32m
−43%

11.4

10.3

£1.1m
10.7%

Total employee pay (£m)
21.9 £1.4m
+6.8%

20.5

2014 2015

2014 2015

2014 2015

 
 
 
 
i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

71

by her previous employer. In making its 
estimate, the information considered 
included publicly available information 
relating to the performance of her former 
employer against the performance targets 
originally set so that any compensation 
provided mirrored as closely as possible 
the value that she would likely have 
received had she remained in employment 
with her previous employer over the full 
performance period. This approach was 
considered appropriate given that the 
performance period for this award was 
in the 35th month of the 36 months 
comprising the performance period 
when she commenced employment 
with Grainger. 

 – Tranche 2: an exchange of the award 

granted by her previous employer in 2014 
for an equivalent award of Grainger shares, 
having assessed the performance to date 
of both companies so that a broadly 
equivalent expected value is maintained 
through the exchange. These shares will 
vest following an assessment of Grainger’s 
performance against the LTIS targets set 
for the 2014 award.

 – Tranche 3: an exchange of the award 
granted by her previous employer in 
2015 for an equivalent award of Grainger 
shares that will vest based on Grainger’s 
performance against the LTIS targets set 
for the 2015 award.

The number of shares comprising each 
tranche can only be set when the awards 
are granted to ensure that the value most 
closely mirrors the replacement value of the 
awards that have been forfeited. Full details 
of the awards will be disclosed through an 
RNS announcement as soon as the awards 
have been ﬁnalised. 

The Remuneration Committee conﬁrms 
that it is of the view that the package agreed 
with Helen Gordon is appropriate and that 
the Company is not paying any more than 
was necessary to facilitate her recruitment.

12

Statement of implementation of 
Remuneration Policy for 2016

Base salary
The base salary of Nick Jopling, Executive 
Director, will be increased by 3% with 
effect from 1 January 2016, in line with 
the standard increase that applied to all 
staff. For context, salaries were increased 
last year by 4% with effect from 1 January 
2015 (2014: 2.5%) in line with the standard 
increase that applied to all staff. 

Annual bonus
The annual bonus for the 2016 ﬁnancial 
year will operate on the same basis as 
for the 2015 ﬁnancial year and will be 
consistent with the policy detailed in the 
remuneration policy section of this report 
other than recovery and withholding 
provisions will, for payments made in 
relation to the 2015 ﬁnancial year onwards, 
now operate (see below).

The maximum bonus will continue to 
be capped at 150% of salary for the Chief 
Executive and 125% of salary for the other 
Executive Directors. However, payments up 
to this level will only be made in exceptional 
circumstances and the bonus performance 
assessments will be linked to 120% of 
salary for the Chief Executive and 100% of 
salary for the other Executive Directors. 

There will be no change in the 

performance metrics or weightings for 
2016, which are described in the policy 
table on page 58. The targets themselves, 
as they relate to the 2016 ﬁnancial year, 
are deemed to be commercially sensitive. 
However, retrospective disclosure of the 
targets and performance against them will 
be provided in next year’s Annual Report 
on Remuneration to the extent that they 
do not remain commercially sensitive at 
that time.

LTIS
The LTIS awards for the 2016 ﬁnancial year 
will operate on the same basis as for the 
2015 ﬁnancial year and will be consistent 
with the policy detailed in the remuneration 
policy section of this report other than 
recovery and withholding provisions will, 
for awards granted in relation to the 2015 
ﬁnancial year onwards, now operate 
(see below).

It is anticipated that awards of 100% 

and 150% of salary will be made to 
Nick Jopling and Helen Gordon, the 
new Chief Executive, respectively in the 
current year. In addition they will be given 
the opportunity of receiving awards of 
matching shares up to 30% of salary, as 
detailed in the policy section of this report.

There will be no change in the 

performance metrics or weightings for the 
2016 awards, which are described fully in 
the policy table on page 59.

Appointment of new Chief Executive
Helen Gordon commenced her 
appointment as Chief Executive designate 
on 3 November 2015 and will become 
Chief Executive on the retirement of 
Andrew Cunningham in January 2016. 
Upon appointment to the Board her salary 
has been set at £460,000 and she will 
receive pension, beneﬁts and incentive 
opportunity fully in line with our approved 
policy, as described above. 

In order to facilitate her recruitment, 
Helen will also receive a performance 
adjusted and/or related buy-out award to 
replace the share award forfeited from her 
previous employer as a result of joining 
Grainger. The buy-out, as far as practicable, 
is to be structured so that performance-
related awards in her former employer are 
replaced with performance-related awards 
of an equivalent value in Grainger.

The award will comprise three tranches 

which will include:
 – Tranche 1: an award of Grainger shares 
replacing the value of shares that the 
Committee estimated would have vested 
at the conclusion of the performance 
period relating to the 2013 LTIP awarded 

 
72

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

12

Statement of implementation 

of Remuneration Policy for 2016 
Continued

Recovery and withholding provisions
During the year, the Committee introduced 
recovery and withholding provisions into 
the annual bonus plan and LTIS  
such that these may apply where:
 – There is a misstatement of the 

Company’s results;

 – There is a miscalculation or an assessment 
of any performance conditions was based 
on incorrect information; or

 – It is determined that the individual 

committed serious misconduct prior to 
the relevant amounts being received and  
they would not have received such 
amounts had this been known at 
that time.

The provisions apply for three years from 
the date on which annual bonuses are paid 
or LTIS awards vest.

Non-Executive Director’s fees
At the biennial review undertaken in 2015 
the following increases in the annual 
fees to Non-Executive Directors which 
would be effective from 1 October 2015, 
were agreed:
 – Basic Non-Executive Director fee 
increased to £45,000 (£42,000);

 – Fee for chairing Board Committee 
increased to £9,000 (£7,500); and

 – Chairman’s fee increased to £150,000 

(£140,000).

13

Directors’ Service Agreements and Letters of Appointment

Executive Directors
Andrew Cunningham
Nick Jopling
Mark Greenwood
Non-Executive Directors
Baroness Margaret Ford
Belinda Richards
Tony Wray
Simon Davies
Andrew Carr-Locke

Notice period
12 months
6 months
6 months

Contract commencement date
October 2009
September 2010
September 2010
Date of initial appointment
July 2008
April 2011
October 2011
November 2012
March 2015

Helen Gordon joined the Board in November 2015 and has a notice period of 12 months. 
Rob Wilkinson joined the Board in October 2015.

14

Details of the Remuneration Committee, advisers to the Committee and their fees
The Remuneration Committee currently comprises four independent Non-Executive 
Directors including the Company Chairman. Details of the Directors who were members 
of the Committee during the year are as follows:

Committee Member
Belinda Richards (Committee Chairman)
Baroness Margaret Ford 
Robin Broadhurst
Simon Davies
Andrew Carr-Locke

Member since
March 2015 1
January 2010 1 
February 2013 2 
February 2013
April 2015

Meetings  
attended
2
4
2
4
2

Meetings eligible 
to attend
2
4
2
4
2

1   Belinda Richards replaced Baroness Margaret Ford as Chairman of the Committee when Baroness Ford took over as 

Chairman of the Company in March 2015.

2  Robin Broadhurst retired from the Committee in February 2015.

The Company Secretary, Deputy Company Secretary, HR Director and other members 
of the senior management team may be invited to attend Committee meetings as 
appropriate. No Directors are involved in deciding their own remuneration.

The Remuneration Committee is advised by New Bridge Street (NBS), a trading 

name of Aon plc. Aon plc provides no other services to the Company. NBS advises the 
Committee on developments in executive pay and on the operation of Grainger’s incentive 
plans. Total fees paid to NBS in respect of services to the Committee during the 2015 
ﬁnancial year were £63,000 (2014: £12,000). NBS is a signatory to the Remuneration 
Consultants’ Group Code of Conduct and any advice provided is governed by that Code. 
The Committee reviews the adviser relationship periodically and remains satisﬁed that the 
advice it receives from NBS is independent and objective.

 
 
 
 
 
 
73

15

Statement of voting at general meeting
At the AGM held on 4 February 2015, the Directors’ Remuneration report received the following votes from Shareholders:

For
Against
Total votes cast (for and against)
Votes withheld

Total number of votes
204,825,406
83,919,669
288,745,075
34,463,722

Directors’ Remuneration report

% of votes cast
71
29
100
–

A key area of focus for the Remuneration Committee and the Board during 2015 was a Shareholder engagement programme in 
connection with the signiﬁcant (29%) vote against the Annual Report on Remuneration at the 2015 AGM. The programme included 
seeking feedback from all major Shareholders on remuneration-related matters and meetings were also held with certain prominent proxy 
voting agencies. 

A relatively consistent comment received as part of the feedback process related to the extent and clarity of retrospective disclosure in 

relation to Directors’ bonus targets. In particular, that the level of transparency of the composition of such targets could be enhanced. 
The Committee has taken signiﬁcant care in ensuring that the narrative and disclosure levels in this year’s report have been brought into 
line with the best practice expectations of investors as we understand them and have been expanded accordingly to address this issue.
The Committee also took on board other suggestions during the engagement process for how we might bring our packages further 
into line with the best practice expectations of investors. The feedback gathered informed the Committee’s decision to adopt recovery and 
withholding provisions into the incentive arrangements during the year. 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

 
 
74

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

Board 
Risk and 
Compliance  
Committee  
report

The Board Risk and 
Compliance Committee 
currently comprises four 
independent Non-Executive 
Directors.

Tony Wray
Committee Chairman

ATTENDANCE TABLE

Committee Member
Tony Wray 
(Committee Chairman)
Belinda Richards
John Barnsley
Simon Davies
Andrew Carr-Locke

Member since

May 2012

May 2012

May 2012 to March 2015

November 2012

May 2015

Meetings  
attended

Meetings  
eligible  
to attend

5
5
4
4
3

5
5
4
5
3

DEAR SHAREHOLDER

The Board Risk and Compliance Committee 
(BRCC) plays a fundamental role in ensuring 
that Shareholders’ interests are properly 
protected by overseeing the Group’s risk 
management and compliance framework. 
It is responsible for advising the Board on 
the Group’s overall risk appetite, tolerance 
and strategy and, in conjunction with the 
Audit Committee, to verify the operation of 
appropriate internal controls over key risks 
and to ensure compliance.

It is a policy that I, as Chairman of 
the BRCC, am also a member of the 
Audit Committee. I ﬁnd that adopting 
this approach signiﬁcantly enhances 
the governance and oversight of 
the Company’s internal controls and 
risk management. 

This report details the activities of the 

BRCC that were undertaken during 
the course of the year in fulﬁlling 
our responsibilities.

Committee meetings
The Committee met ﬁve times during 
the year. The meetings were attended by 
the Committee members, the Company 
Secretary and, by invitation, the Finance 
Director, the Executive Director Property, 
the Risk and Compliance Director and the 
Internal Audit Manager.

Role and responsibilities
 – To provide oversight of the risk 

management controls of the Company 
to ensure that these controls are proper 
and effective and in accordance with the 
statutory and regulatory requirements 
and relevant guidance;

 – To provide oversight of the process for 
identifying and managing risks and 
amending the process as required;

 – To ensure that effective and robust 

risk management is an integral part of 
Grainger’s strategy setting, business 
planning and decision making process;

 – To consider the incidence of risks that 
arise and to provide the necessary 
oversight to adapt/adjust controls to 
improve effectiveness as recommended 
by management; 

 – In conjunction with the Audit Committee, 

to ensure audits and monitoring are 
performed to fulﬁl the agreed assurance 
map and verify the operation of controls 
over key risks;

 – To review the results of audits and 

ensure that action is taken to address any 
identiﬁed gap in compliance relating to 
the operation of controls over key risks;

 – To review the Company’s risk register, 
which identiﬁes the key risks to the 
business, how these are mitigated, the 
present status of defence against the 
risks, and the actions required to improve 
this if deemed necessary; and

 – To provide oversight to ensure that 

agreed actions to mitigate these risks, as 
detailed in the risk map, are carried out. 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a
l
s

i

Other 
disclosures

75

In accordance with UK Financial Conduct 
Authority’s Listing Rules, the information 
to be included in the Annual Report 
and Accounts, where applicable, 
under LR 9.8.4 is set out in Note 17 on 
page 115 in relation to the dividend 
waiver arrangements.

Directors’ interests in signiﬁcant 
contracts
No Directors were materially interested in 
any contract of signiﬁcance.

Statement of Directors’ responsibilities
The Directors are responsible for preparing 
the Annual report and the Group and 
parent company ﬁnancial statements 
in accordance with applicable law 
and regulations. 

Company law requires the Directors 
to prepare Group and parent company 
ﬁnancial statements for each ﬁnancial 
year. Under that law they are required to 
prepare the Group ﬁnancial statements 
in accordance with IFRSs as adopted 
by the EU and applicable law and have 
elected to prepare the parent company 
ﬁnancial statements in accordance with UK 
Accounting Standards. 

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 Group 
and parent company and of their proﬁt or 
loss for that period. In preparing each of 
the Group and parent company ﬁnancial 
statements, the Directors are required to: 
 – Select suitable accounting policies and 

then apply them consistently;

 – Make judgements and estimates that are 

reasonable and prudent;

 – For the Group ﬁnancial statements, 

state whether they have been prepared 
in accordance with IFRSs as adopted by 
the EU; 

 – For the parent company ﬁnancial 

statements, state whether applicable 
UK Accounting Standards have been 
followed, subject to any material 
departures disclosed and explained in the 
parent company ﬁnancial statements; and

 – Prepare the ﬁnancial statements on 
the going concern basis unless it is 
inappropriate to presume that the Group 
and the parent company will continue 
in business. 

The Directors are responsible for keeping 
adequate accounting records that are 
sufﬁcient to show and explain the parent 
company’s transactions and disclose 
with reasonable accuracy at any time the 
ﬁnancial position of the parent company 
and enable them to ensure that its ﬁnancial 
statements comply with the Companies Act 
2006. They have general responsibility for 
taking such steps as are reasonably open 
to them to safeguard the assets of the 
Group and to prevent and detect fraud and 
other irregularities. 

Under applicable law and regulations, 

the Directors are also responsible for 
preparing a Strategic report, Directors’ 
report, Directors’ Remuneration report 
and Corporate Governance Statement 
that complies with that law and 
those regulations. 

The Directors are responsible for the 

maintenance and integrity of the corporate 
and ﬁnancial information included on 
the Company’s website. Legislation in 
the UK governing the preparation and 
dissemination of ﬁnancial statements may 
differ from legislation in other jurisdictions. 

Responsibility statement of the 
Directors in respect of the annual 
ﬁnancial report 
We conﬁrm that to the best of 
our knowledge:
 – The ﬁnancial statements, prepared 

in accordance with the applicable set 
of accounting standards, give a true 
and fair view of the assets, liabilities, 
ﬁnancial position and proﬁt or loss of the 
Company and the undertakings included 
in the consolidation taken as a whole; 
and

 – The Strategic report and Directors’ 
report includes a fair review of the 
development and performance of the 
business and the position of the issuer 
and the undertakings included in the 
consolidation taken as a whole, together 

 
76

Grainger plc / Annual Report and Accounts 2015 / Governance

GOVERNANCE Continued

with a description of the principal risks 
and uncertainties that they face.

We consider the Annual Report and 
Accounts, taken as a whole, is fair, balanced 
and understandable and provides the 
information necessary for Shareholders 
to assess the Group’s position and 
performance, business model and strategy. 
The Directors have taken all the steps 
that they ought to have taken as a Director 
in order to make themselves aware of any 
relevant audit information and to establish 
that the Company’s auditors are aware of 
that information.

The maintenance and integrity of the 
Grainger plc website is the responsibility 
of the Directors; the work carried out by 
the auditors does not involve consideration 
of these matters and, accordingly, the 
auditors accept no responsibility for any 
changes that may have occurred to the 
ﬁnancial statements since they were initially 
presented on the website.

Legislation in the UK governing the 

preparation and dissemination of ﬁnancial 
statements may differ from legislation in 
other jurisdictions.

Directors’ indemnities and insurance 
We have in place contractual entitlements 
for the Directors of the Company and of 
its subsidiaries to claim indemniﬁcation 
by the Company in respect of certain 
liabilities which might be incurred by them 
in the course of their duties as Directors. 
These arrangements, which constitute 
qualifying third-party indemnity provision 
and qualifying pension scheme indemnity 
provision, have been established in 
compliance with the relevant provisions 
of the Companies Act 2006. They include 
provision for the Company to fund the 
costs incurred by Directors in defending 
certain claims against them in relation to 
their duties as Directors of the Company 
or its subsidiaries. The Company also 
maintains an appropriate level of Directors’ 
and ofﬁcers’ liability insurance.

Financial risk management
Details are included in Note 29 to the 
ﬁnancial statements.

Sustainability 
Our approach to sustainability is based on 
our assessment of the potential risk and 
opportunity to our business. In the year 
ended 30 September 2015, the Group 
achieved 65% and partially achieved 6% 
of the applicable sustainability targets that 
it committed to meeting by that date. 
Further information is provided in pages 30 
to 36.

International operations
Our German portfolio continues to be 
centrally managed and controlled from 
our overseas ofﬁces.

Health and safety
Grainger has a well-developed Health and 
Safety Management System for the internal 
and external control of health and safety 
risks, which is managed by the Director of 
health and safety. This includes the use of 
online risk management systems for the 
identiﬁcation, mitigation and reporting of 
real time health and safety management 
information. The Group Health and Safety 
Committee consists of members from 
across the organisation. The Committee 
continues to monitor the delivery of legal 
compliance in health and safety through 
audit and implementation of improvements 
to enable the Group to become ‘best 
in class’.

Employment of disabled persons
The Company gives full and fair 
consideration to applications for 
employment made by disabled persons, 
having regard to their particular aptitudes 
and abilities. In the event of an employee 
becoming disabled every effort is made to 
ensure that their employment within the 
Company continues and that appropriate 
training is arranged where necessary. It is 
the policy of the Company that the training, 
career development and promotion of 
disabled persons should, as far as possible, 
be identical to that of other employees.

Employee involvement
The Group places considerable value on 
the involvement of its employees and has 
continued its practice of keeping them 
informed on matters affecting them as 
employees, for example, eligibility to join 
Company share schemes, and on the 
various factors affecting the performance 
of the Group. Communication is made 
using the intranet, ‘The Source’, and 
through regular meetings with, and 
presentations by, senior management.

Independent auditors and disclosure 
of information to auditors
As far as each Director is aware, there is 
no relevant audit information of which 
the Company’s auditors are unaware. 
Each Director has taken steps that they 
ought to have taken as Directors in order 
to make themselves aware of any relevant 
audit information and to establish that 
the Company’s auditors are aware of 
that information. 

Political donations
In accordance with the Company’s policy, 
no political donations were made in 2015 
(2014: £nil).

Takeover directive
On a change of control, the core banking 
facilities (described in Note 28 to the 
accounts) will become repayable should 
alternative terms for continuing the facilities 
not be agreed with the lenders within 
45 days. There are no other material 
matters relating to a change of control of 
the Company following a takeover bid. 
The Directors have conﬁrmed approval of 
the Directors’ report.

By order of the Board.

Adam McGhin
Company Secretary

77

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Independent auditors’ report to the members of Grainger plc only

OPINIONS AND CONCLUSIONS 
ARISING FROM OUR AUDIT

1  Our opinion on the Group ﬁnancial 

statements is unmodiﬁed 

We have audited the ﬁnancial statements 
of Grainger plc for the year ended 
30 September 2015 set out on pages 80 to 
155. In our opinion: 
 – the ﬁnancial statements give a true and 
fair view of the state of the Group’s and 
of the parent company’s affairs as at 
30 September 2015 and of the Group’s 
proﬁt for the year then ended; 

 – the Group ﬁnancial statements have 

been properly prepared in accordance 
with International Financial Reporting 
Standards as adopted by the 
European Union; 

 – the parent company ﬁnancial statements 

have been properly prepared in 
accordance with UK Accounting 
Standards; and

 – the ﬁnancial statements have been 
prepared in accordance with the 
requirements of the Companies Act 
2006; and, as regards the Group 
ﬁnancial statements, Article 4 of the 
IAS Regulation. 

2  Our assessment of risks of material 

misstatement

In arriving at our audit opinion above on 
the ﬁnancial statements the risks of material 
misstatement that had the greatest effect 
on our audit were as follows:

Valuation of investment properties 
(investment properties £357.8m)
Refer to Annual Report page 51 (Audit 
Committee Report) Annual Accounts 
page 90 and 94-97 (accounting policies) 
and Annual Accounts pages 115-116 
(ﬁnancial disclosures). 

The risk: 
Investment property is carried at fair 
value which relies on assumptions 
which are inherently judgemental and 
a small adjustment in one or more 
of the assumptions could result in a 
material change in the carrying value of 
investment properties.

The Directors are assisted in arriving 
at the vacant possession (‘VP’) value of 
UK residential properties by the in house 
surveying team. The VP is based on 
data derived from comparable market 
transactions. The determination of the 
appropriate data requires signiﬁcant 
judgement. A discount is then applied to 
the VP to derive fair value. 

For retirement solutions properties 
the risk is that the vacancy and discount 
rate assumptions used in estimating the 
discount from VP are inappropriate.

For the Tricomm portfolio there is a risk 
that the signiﬁcant assumptions of house 
price inﬂation (‘HPI’) and discount rates 
are inappropriate in the discounted cash 
ﬂow model. 

For German residential investment 

properties the risk relates to the estimation 
of the rent multiple, based on the location, 
size and condition of the property, which 
drives the fair value of the assets.

There is a risk that inaccurate and 

incomplete property information is used by 
the in house surveying team or the external 
valuers in their valuation.

Our response: 
We used our own valuation specialist to 
assist us in assessing the year end valuation 
reports prepared by the external valuers for 
use in the ﬁnancial statements. 
Our procedures to address the risks in 
relation to the four categories of property 
identiﬁed above included:

UK Residential and Retirement Solutions 
properties
 – for UK Residential properties, assessing 
the design of the valuations process and 
sample testing Directors’ valuations to 
evaluate if they have been prepared in 
accordance with the process; 

 – attending the regional meetings 

between the independent external 
valuer and the Group, for those UK 
Residential and Retirement Solutions 
properties, where there is a variance in 
the VP value between the external valuer 
and director’s valuation above a set 
percentage. By attending these meetings, 
together with our own valuation 
specialist, we assessed the degree of 
challenge, evidence presented and the 
conclusions reached;

 – evaluating the inputs used in the 

valuations against our knowledge and 
experience of the industry; including 
challenging the valuations by comparison 
with market comparable transactions and 
changes in industry benchmarks; 

 – performing sensitivity analyses over the 

identiﬁed key assumptions; 

Retirement Solutions
 – performing a speciﬁc assessment of the 
vacancy assumption against external 
indices, and critically assessing the 
discount rate assumptions used by the 
external independent valuer relating to 
the VP valuation; 

Tricomm
 – comparing the key assumptions, included 

in the discounted cash ﬂow model 
relating to HPI to market indices;

 – assessing discount rates against 

our knowledge and experience of 
the industry; 

 
78

Grainger plc / Annual Report and Accounts 2015 / Financials

INDEPENDENT AUDITORS’ REPORT Continued

German residential 
 – comparing the key valuation assumptions, 

in particular the multiple of net rental 
income to our knowledge of the German 
property market, taking into account the 
locality, condition and size of property; 
and

 – performing sensitivity analyses over the 

identiﬁed key assumptions.

We compared the investment property 
value recorded in the ﬁnancial statements 
to the independent external valuer’s reports 
and assessed the adequacy of the Group’s 
disclosures about the sensitivities and inputs 
into the valuations in accordance with 
relevant accounting standards.

Our procedures included testing whether 

the property information provided by the 
Group to the independent external valuers’ 
and used by the in house surveying team 
was complete and accurate, for example by 
agreeing key inputs, such as rental income, 
occupancy and current tenancy details, to 
the Group’s property contracts.

Carrying value of inventories (trading 
properties) (inventories £1,152.2m)
Refer to Annual Report page 51 (Audit 
Committee Report) Annual Accounts pages 
90-91 and 94-98 (accounting policies) 
and Annual Accounts pages 122-123 
(ﬁnancial disclosures). 

The risk: 
Trading properties are held in inventories at 
the lower of cost and net realisable value 
(‘NRV’). The Group strategy is to sell trading 
stock on vacancy, and therefore the NRV 
of UK residential and Retirement Solutions 
properties is the net proceeds expected on 
sale with VP. An assessment of the NRV is 
carried out by reference to key assumptions 
such as comparable market sales, HPI 
and vacancy rates, which may require 
signiﬁcant judgement.

For land and property developments  
where the intention is to sell on completion, 
NRV is the expected net sales proceeds 
on sale of the property. The key risk is 
development inventories continue to be 
held at cost when an impairment should 
be recognised, because the total forecast 
proﬁts on the individual developments may 
be over-estimated. 

Our response: 
The procedures outlined above in relation 
to the assessment of the design of the 
valuations process also formed part of the 
response to this risk.

We compared predicted HPI to trends 
in market indices and the vacancy rate to 
historic averages. We performed sensitivity 
analyses on these assumptions to assess the 
level of headroom before an adjustment 
to the carrying value would be required. 
For a selection of property sales after the 
balance sheet date, we compared the value 
carried in the balance sheet with the sales 
price achieved. 

We focussed on land and property 

developments where the market valuation 
from the independent external valuer, 
based on the current state of the site at 
the balance sheet date, suggested that 
impairment might be required to reduce 
the carrying amount below cost. For sites 
where the valuations indicated a value 
lower than the cost carried in the balance 
sheet and the Group’s intention is to 
develop the site, we inspected the Group’s 
plans and forecasts used to support the 
NRV assessment and performed sensitivity 
analyses to assess the headroom before 
an adjustment to the carrying value is 
required. For sites where the intention is to 
sell without development we compared the 
carrying value of inventory to the market 
value, estimated by the independent 
external valuer, of the site in its current 
condition, based on comparable sales.

We also considered the adequacy of the 
Group’s disclosures about the degree of 
estimation involved before an adjustment 
to the carrying value is required.

3  Our application of materiality and an 
overview of the scope of our audit
The materiality for the Group ﬁnancial 
statements as a whole was set at £4.0m, 
determined with reference to a benchmark 
of Group proﬁt before tax, normalised to 
exclude non-recurring items as disclosed 
in Note 3 and by averaging over the last 
three years to reduce volatility. This gives 
a normalised average proﬁt before tax 
of £74.1m with a materiality of £4.0m 
being 5.4%. We consider normalised PBT 
to be one of the principal considerations 
for the Directors in assessing the ﬁnancial 
performance of the Group.

We report to the Audit Committee 

any corrected or uncorrected 
identiﬁed misstatements exceeding 
£0.2m, in addition to other identiﬁed 
misstatements that warranted reporting on 
qualitative grounds. 

We identiﬁed two components for the 
scoping of our audit of the Group ﬁnancial 
statements, the UK and Germany. The UK 
component was subject to a full-scope 
audit performed to component materiality 
of £3.7m. The German component was 
subject to audit of speciﬁc balances and 
classes of transactions. German component 
materiality was £2.0m. The UK and 
German component audits covered 100% 
of Group revenue, 100% of Group proﬁt 
before tax and 100% of Group total assets. 
All components are audited by the Group 
engagement team.

4  Our opinion on other matters prescribed 

by the Companies Act 2006 is 
unmodiﬁed 
In our opinion:
 – the part of the Directors’ Remuneration 
report to be audited has been properly 
prepared in accordance with the 
Companies Act 2006; and 

 – 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 Group ﬁnancial statements.

5  We have nothing to report on the 

disclosures of principal risks

Based on the knowledge we acquired 
during our audit, we have nothing material 
to add or draw attention to in relation to: 
 – the Directors’ viability statement on page 
29, concerning the principal risks, their 
management, and, based on that, the 
Directors’ assessment and expectations of 
the Group’s continuing in operation over 
the four years to 2019; or 

 – the disclosures in Note 2 of the ﬁnancial 
statements concerning the use of the 
going concern basis of accounting. 

6  We have nothing to report in respect of 
the matters on which we are required to 
report by exception 

Under ISAs (UK and Ireland) we are 
required to report to you if, based on the 
knowledge we acquired during our audit, 
we have identiﬁed other information 
in the Annual Report that contains a 
material inconsistency with either that 
knowledge or the ﬁnancial statements, a 
material misstatement of fact, or that is 
otherwise misleading. 

In particular, we are required to report to 

you if: 
 – we have identiﬁed material 

inconsistencies between the knowledge 
we acquired during our audit and the 
Directors’ statement that they consider 
that the Annual Report and ﬁnancial 
statements taken as a whole is fair, 
balanced and understandable and 
provides the information necessary 
for Shareholders to assess the Group’s 
performance, business model and 
strategy; or

 – the Audit Committee report does 
not appropriately address matters 
communicated by us to the 
Audit Committee.

Under the Companies Act 2006 we are 
required to report to you if, in our opinion: 
 – adequate accounting records have not 
been kept by the parent company, or 
returns adequate for our audit have not 
been received from branches not visited 
by us; or 

 – the parent company ﬁnancial 

statements and the part of the Directors’ 
Remuneration report to be audited are 
not in agreement with the accounting 
records and returns; or 

 – certain disclosures of Directors’ 

remuneration speciﬁed by law are not 
made; or

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

79

 – we have not received all the information 

and explanations we require for our audit. 

Under the Listing Rules we are required 
to review: 
 – the Directors’ statements, set out on 
pages 23 and 29, in relation to going 
concern and longer-term viability; and 

 – the part of the Corporate governance 
statement on page 37 relating to the 
Company’s compliance with the eleven 
provisions of the 2014 UK Corporate 
Governance Code speciﬁed for 
our review. 

We have nothing to report in respect of the 
above responsibilities.

Scope and responsibilities
As explained more fully in the Directors’ 
responsibilities statement set out on 
page 75, the Directors are responsible for 
the preparation of the Group ﬁnancial 
statements and for being satisﬁed 
that they give a true and fair view. 
A description of the scope of an audit of 
ﬁnancial statements is provided on the 
Financial Reporting Council’s website at 
www.frc.org.uk/auditscopeukprivate. 
This report is made solely to the Company’s 
members as a body and is subject to 
important explanations and disclaimers 
regarding our responsibilities, published 
on our website at www.kpmg.com/
uk/auditscopeukco2014a, which are 
incorporated into this report as if set out 
in full and should be read to provide an 
understanding of the purpose of this 
report, the work we have undertaken and 
the basis of our opinions.

Bill Holland (Senior Statutory Auditor)  
for and on behalf of KPMG LLP, Statutory Auditor 
Chartered Accountants 
15 Canada Square
Canary Wharf
London
E14 5GL

19 November 2015

 
 
80

Grainger plc / Annual Report and Accounts 2015 / Financials

Consolidated income statement

For the year ended 30 September 2015
Group revenue
Net rental income
Proﬁt on disposal of trading property
Administrative expenses
Fees and other income 
Other expenses
Proﬁt on disposal of investment property
Income from ﬁnancial interest in property assets
Proﬁt on disposal of subsidiary
Proﬁt on disposal of joint venture
(Write down)/write back of inventories to net realisable value
Impairment of joint venture
Impairment of deferred consideration receivable
Operating proﬁt before net valuation gains on investment property
Net valuation gains on investment property
Operating proﬁt after net valuation gains on investment property
Change in fair value of derivatives
Finance costs
Finance income
Share of proﬁt of associates after tax
Share of proﬁt of joint ventures after tax
Proﬁt before tax
Tax charge for the year
Proﬁt for the year attributable to the owners of the Company
Basic earnings per share 
Diluted earnings per share

Notes

3, 4, 5

6

7

9

10

11

8

22

3

21

24

21

40

18

29

14

14

20

21

13

15

34

17

17

2015 
£m
244.1
37.9
85.4
(36.1)
8.2
(5.6)
0.5
9.2
–
4.4
(1.2)
(4.1)
(15.8)
82.8
13.9
96.7
(5.8)
(67.7)
1.9
15.4
9.5
50.0
(7.3)
42.7
10.4p
10.3p

2014 
£m
319.1
35.9
87.2
(34.7)
12.8
(3.6)
0.8
7.0
0.7
0.1
0.8
(2.4)
–
104.6
1.5
106.1
1.2
(66.3)
2.9
21.1
16.1
81.1
(6.4)
74.7
18.1p
17.9p

 
 
Consolidated statement of comprehensive income

For the year ended 30 September 2015
Proﬁt for the year
Items that will not be transferred to consolidated income statement:
Actuarial (loss)/gain on BPT Limited deﬁned beneﬁt pension scheme 
Items that will be reclassiﬁed subsequently to consolidated income statement: 
Fair value movement on ﬁnancial interest in property assets 
Exchange differences on translating foreign operations
Changes in fair value of cash ﬂow hedges 
Other comprehensive income and expense for the year before tax
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to consolidated income statement
Tax relating to items that will be reclassiﬁed subsequently to consolidated income statement
Other comprehensive income and expense for the year after tax
Total comprehensive income and expense for the year attributable to the owners of the Company

Notes

34

30

22

15

15

2015 
£m
42.7

(0.6)

–
(0.7)
(0.8)
(2.1)

0.1
(0.7)
(2.7)
40.0

Included within other comprehensive income is a charge of £0.6m net of tax (2014: charge of £0.9m) relating to associates and joint 
ventures accounted for under the equity method. 

81

2014 
£m
74.7

0.9

1.0
(0.3)
5.4
7.0

(0.1)
(1.5)
5.4
80.1

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
82

Grainger plc / Annual Report and Accounts 2015 / Financials

Consolidated statement of ﬁnancial position

As at 30 September 2015
ASSETS
Non-current assets
Investment property
Property, plant and equipment
Investment in associates
Investment in joint ventures
Financial interest in property assets
Deferred tax assets
Intangible assets

Current assets
Inventories – trading property
Trade and other receivables
Derivative ﬁnancial instruments
Cash and cash equivalents
Assets classiﬁed as held-for-sale

Total assets
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Retirement beneﬁts
Provisions for other liabilities and charges
Deferred tax liabilities

Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Provisions for other liabilities and charges
Current tax liabilities
Derivative ﬁnancial instruments 

Total liabilities
Net assets

Notes

2015 
£m

2014 
£m

18

19

20

21

22

15

23

24

25

29

29

39

28

30

26

15

28

27

26

15

29

357.8
1.6
108.4
70.8
93.7
12.0
2.7
647.0

1,152.2
31.6
2.0
88.8
–
1,274.6
1,921.6

1,093.1
1.7
0.2
32.3
1,127.3

133.3
56.9
0.7
3.0
35.5
229.4
1,356.7
564.9

332.9
2.1
103.5
73.6
94.5
12.2
2.2
621.0

1,020.2
74.9
–
74.4
3.4
1,172.9
1,793.9

1,085.0
2.2
0.3
25.8
1,113.3

33.1
54.5
0.8
6.5
48.0
142.9
1,256.2
537.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
83

Notes

2015 
£m

2014 
£m

31

34

20.9
110.7
20.1
0.3
(3.5)
4.6
411.7
564.8
0.1
564.9

20.9
110.4
20.1
0.3
(1.4)
4.6
382.7
537.6
0.1
537.7

As at 30 September 2015
EQUITY
Capital and reserves attributable to the owners of the Company
Issued share capital
Share premium
Merger reserve
Capital redemption reserve 
Cash ﬂow hedge reserve
Available-for-sale reserve
Retained earnings
Equity attributable to the owners of the Company
Non-controlling interests
Total equity

The ﬁnancial statements on pages 80 to 150 were approved by the Board of Directors on 19 November 2015 and were signed on their 
behalf by:

Andrew R Cunningham 
Director 

Mark Greenwood 
Director

Company registration number: 125575

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
84

Grainger plc / Annual Report and Accounts 2015 / Financials

Consolidated statement of changes in equity

Issued  
share  
capital  
£m

Share  
premium  
£m

Merger  
reserve  
£m

Notes

Capital  
redemption  
reserve  
£m

Cash  
ﬂow  
hedge  
reserve  
£m

Available- 
for-sale  
reserve  
£m

Retained  
earnings  
£m

Non- 
controlling  
interests  
£m

Total  
equity  
£m

Balance as at  
1 October 2014
Proﬁt for the year
Actuarial loss on BPT Limited 
deﬁned beneﬁt pension 
scheme 
Exchange adjustments offset 
in reserves 
Changes in fair value of cash 
ﬂow hedges 
Tax relating to  
components of other 
comprehensive income
Total comprehensive income 
and expense  
for the year
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid 
Balance as at  
30 September 2015

34

30

15

31, 34

32

16

20.9
–

110.4
–

20.1
–

0.3
–

(1.4)
–

4.6
–

382.7
42.7

0.1
–

537.7
42.7

–

–

–

–

–
–
–
–
–

–

–

–

–

–
0.3
–
–
–

–

–

–

–

–
–
–
–
–

–

–

–

–

–
–
–
–
–

–

–

(0.8)

(1.3)

(2.1)
–
–
–
–

–

–

–

–

–
–
–
–
–

(0.6)

(0.7)

–

–

–

–

(0.6)

(0.7)

(0.8)

0.7

–

(0.6)

42.1
–
(4.7)
2.0
(10.4)

–
–
–
–
–

40.0
0.3
(4.7)
2.0
(10.4)

20.9

110.7

20.1

0.3

(3.5)

4.6

411.7

0.1 564.9

 
85

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Issued 
share 
capital 
£m

Share 
premium 
£m

Merger 
reserve 
£m

Notes

Capital 
redemption 
reserve  
£m

Cash  
ﬂow  
hedge  
reserve  
£m

Equity  
component  
of convertible 
bond  
£m

Available- 
for-sale 
reserve  
£m

Retained  
earnings  
£m

Non-
controlling 
interests 
£m

Total 
equity 
£m

Balance as at 
1 October 2013
Proﬁt for the year
Actuarial gain on BPT 
Limited deﬁned beneﬁt 
pension scheme 
Fair value movement 
on ﬁnancial interest in 
property assets 
Exchange adjustments 
offset in reserves 
Changes in fair value 
of cash ﬂow hedges 
Tax relating to 
components of other 
comprehensive income
Total comprehensive 
income and expense 
for the year
Repayment of 
convertible bond
Award of SAYE shares
Purchase of own shares
Share-based payments 
charge
Dividends paid 
Balance as at  
30 September 2014

34

30

22

15

31, 34

32

16

20.8
–

109.8
–

20.1
–

0.3
–

(5.5)
–

5.0
–

3.8
–

311.1
74.7

0.1 465.5
74.7
–

–

–

–

–

–

–

–
0.1
–

–
–

–

–

–

–

–

–

–
0.6
–

–
–

–

–

–

–

–

–

–
–
–

–
–

–

–

–

–

–

–

–
–
–

–
–

–

–

–

5.4

(1.3)

4.1

–
–
–

–
–

20.9

110.4

20.1

0.3

(1.4)

–

–

–

–

–

–

(5.0)
–
–

–
–

–

–

0.9

1.0

–

–

–

(0.3)

–

(0.2)

(0.1)

0.8

75.2

–
–
–

–
–

5.0
–
(2.1)

2.0
(8.5)

–

–

–

–

–

–

–
–
–

–
–

0.9

1.0

(0.3)

5.4

(1.6)

80.1

–
0.7
(2.1)

2.0
(8.5)

4.6

382.7

0.1

537.7

 
 
 
 
 
 
86

Grainger plc / Annual Report and Accounts 2015 / Financials

Consolidated statement of cash ﬂows

For the year ended 30 September 2015
Cash ﬂow from operating activities
Proﬁt for the year
Depreciation and amortisation
Net valuation gains on investment property
Net ﬁnance costs
Proﬁt on disposal of subsidiary
Proﬁt on disposal of joint venture
Share of proﬁt of associates and joint ventures
Proﬁt on disposal of investment property
Share-based payment charge 
Change in fair value of derivatives
Impairment of joint venture
Impairment of deferred consideration receivable
Interest income from ﬁnancial interest in property assets
Tax
Operating proﬁt before changes in working capital
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Decrease in provisions for liabilities and charges
Increase in trading property
Cash generated by (used by) operations
Interest paid
Tax paid
Payments to deﬁned beneﬁt pension scheme
Net cash outﬂow from operating activities 
Cash ﬂow from investing activities 
Proceeds from sale of investment property 
Proceeds from ﬁnancial interest in property assets
Proceeds from sale of joint venture
Interest received
Distributions received
Investment in associates and joint ventures
Acquisition of subsidiary net of cash acquired
Acquisition of investment property 
Acquisition of property, plant and equipment and intangible assets 
Net cash inﬂow from investing activities

Notes

2015  
£m

19, 23

18

14

21 

20, 21

8

32, 34

29

21

40

22

15

15

30

8 

22

21 

20, 21

20, 21

40

18

19, 23

42.7
1.1
(13.9)
65.8
–
(4.4)
(24.9)
(0.5)
2.0
5.8
4.1
15.8
(9.2)
7.3
91.7
8.2
(0.5)
(0.2)
(34.4)
64.8
(60.8)
(4.9)
(1.1)
(2.0)

14.5
10.0
18.4
0.6
2.7
(0.2)
0.6
(29.6)
(1.2)
15.8

2014  
£m

74.7
0.9
(1.5)
63.4
(0.7)
(0.1)
(37.2)
(0.8)
2.0
(1.2)
–
–
(7.0)
6.4
98.9
(31.3)
(6.2)
(3.2)
(65.9)
(7.7)
(54.5)
(7.2)
(1.1)
(70.5)

22.1
9.8
–
1.7
4.3
(5.1)
–
(3.4)
(2.7)
26.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the year ended 30 September 2015
Cash ﬂows from ﬁnancing activities 
Awards of SAYE options
Purchase of own shares
Proceeds from new borrowings 
Issue of corporate bond
Repayment of convertible bond
Payment of loan costs 
Purchase of interest rate caps
Settlement of derivative contracts
Repayment of borrowings
Dividends paid
Net cash inﬂow from ﬁnancing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Net exchange movements on cash and cash equivalents
Cash and cash equivalents at the end of the year

87

Notes

31, 34

16

29

29

2015  
£m

2014  
£m

0.3
(4.7)
523.0
–
–
(5.9)
(2.0)
(17.9)
(481.2)
(10.4)
1.2
15.0
74.4
(0.6)
88.8

0.6
(2.1)
381.2
275.8
(24.3)
5.1
–
(35.3)
(561.5)
(8.5)
31.0
(12.8)
90.3
(3.1)
74.4

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
 
 
 
 
 
 
 
88

Grainger plc / Annual Report and Accounts 2015 / Financials

Notes to the ﬁnancial statements

1. ACCOUNTING POLICIES

(a) Basis of preparation
Grainger plc is a company incorporated and 
domiciled in the UK. It is a public limited 
liability company listed on the London 
Stock Exchange and the address of the 
registered ofﬁce is given on page 170. 
The Group ﬁnancial statements consolidate 
those of the Company and its subsidiaries, 
together referred to as the ‘Group’, and 
equity account the Group’s interest in 
joint ventures and associates. The parent 
company ﬁnancial statements present 
information about the Company and not 
about its Group.

These ﬁnancial statements for the 
year ended 30 September 2015 have 
been prepared in accordance with EU 
endorsed International Financial Reporting 
Standards (‘IFRSs’), IFRS IC interpretations 
and those parts of the Companies Act 
2006 applicable to companies reporting 
under IFRS. The Company has elected to 
prepare its company ﬁnancial statements 
in accordance with UK GAAP. These are 
presented on pages 151 to 155.

The accounting policies set out below 
have, unless otherwise stated, been applied 
consistently to all periods presented in 
the Group ﬁnancial statements. No new 
accounting policies have been adopted in 
the year and there has been no change 
to the basis of accounting estimates in 
the year.

The Group ﬁnancial statements have 
been prepared under the historical cost 
convention except for the following assets 
and liabilities, and corresponding income 
statement accounts, which are stated 
at their fair value: investment property, 
derivative ﬁnancial instruments, ﬁnancial 
interest in property assets and assets 
classiﬁed as held-for-sale.

The preparation of ﬁnancial statements in 
conformity with IFRS requires management 
to make judgements, estimates and 
assumptions that affect the application 
of accounting policies and the reported 
amounts of assets and liabilities, income 
and expenses. Although these estimates 
are based on management’s best 
knowledge of the events and amounts 
involved, actual results ultimately may differ 
from those estimates. The areas involving a 
higher degree of judgement or complexity, 
or areas where assumptions and estimates 
are signiﬁcant to the consolidated ﬁnancial 
statements, are disclosed in Note 2.

(b) Basis of consolidation
i) Subsidiaries Subsidiaries are all entities 
(including special purposes entities) over 
which the Group has control. The Group 
controls an entity when the Group is 
exposed to, or has rights to, variable returns 
from its involvement with the entity and 
has the ability to affect those returns 
through its power over the entity.

Subsidiaries are fully consolidated from 
the date on which control is transferred to 
the Group. They are de-consolidated from 
the date control ceases. 

Inter-company transactions, balances 

and unrealised gains on transactions 
between Group companies are eliminated. 
Accounting policies of subsidiaries have 
been changed where necessary to ensure 
consistency with the policies adopted by 
the Group.
ii) Business combinations At the time of 
acquisition, the Group considers whether 
each acquisition represents the acquisition 
of a business or the acquisition of an asset. 
The Group accounts for an acquisition as a 
business combination where an integrated 
set of activities are acquired in addition to 
the property. When the acquisition of a 
subsidiary does not represent a business, 
it is accounted for as an acquisition of 
asset and liabilities. The cost of acquisition 

is allocated to the assets and liabilities 
acquired based on their fair values, and no 
goodwill or deferred tax is recognised.

iii) Goodwill and impairment Business 
combinations are accounted for using 
the acquisition method. The cost of the 
acquisition is measured as the fair value of 
the assets given and equity instruments 
issued. Identiﬁable assets acquired and 
liabilities and contingent liabilities assumed 
in a business combination are measured 
initially at their fair values at the date 
of acquisition. Goodwill represents the 
excess of the cost of an acquisition over 
the fair value of the Group’s share of net 
identiﬁable assets including intangible 
assets of the acquired entity at the 
date of acquisition. If the cost of the 
acquisition is less than the fair value of 
the net assets of the subsidiary acquired, 
the difference is recognised directly in 
the income statement. Costs attributable 
to an acquisition are expensed in the 
consolidated income statement under the 
heading ‘Other expenses’. 

Goodwill on acquisition of subsidiaries 

is included within this caption on the 
statement of ﬁnancial position. Goodwill on 
acquisition of joint ventures and associates 
is included in investments in joint ventures 
and associates. 

Goodwill is allocated to cash generating 
units for the purpose of impairment testing 
and is tested annually for impairment 
and carried at cost less accumulated 
impairment losses. Impairment losses on 
goodwill are not reversed. Gains and losses 
on the disposal of an entity include the 
carrying amount of goodwill relating to the 
entity sold.
iv) Joint ventures and associates Joint 
ventures are those entities over whose 
activities the Group has joint control, 
established by contractual agreement. 
Associates are all entities over which 
the Group has signiﬁcant inﬂuence but 

89

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

The title ‘Other’ has been included in the 
segmental tables in Note 4 to reconcile 
the segments to the ﬁgures reviewed by 
the CODM.

The measure of proﬁt or loss used by the 

CODM is the trading proﬁt or loss before 
valuation gains or deﬁcits on investment 
properties and excluding all revaluation and 
non-recurring items as set out in Note 3. 
The CODM reviews by segment two key 
statements of ﬁnancial position measures 
of net asset value. These are Gross net 
asset value (‘NAV’) and Triple net asset 
value (‘NNNAV’) measures. Further detail is 
provided in Note 4.

Transactions between the reportable 

segments are based on market prices.

(d) Share capital 
Ordinary shares are classiﬁed as equity. 
Incremental costs directly attributable to the 
issue of new shares or options are shown 
in equity as a deduction, net of tax, from 
the proceeds.

(e) Foreign currency translation
i) Functional and presentation currency 
Items included in the ﬁnancial statements of 
each of the Group’s entities are measured 
using the currency of the primary economic 
environment in which the entity operates 
(‘the functional currency’). The consolidated 
ﬁnancial statements are presented in 
Pounds Sterling, which is the Company’s 
functional and presentation currency.
ii) Foreign currency transactions Foreign 
currency transactions are translated at the 
foreign exchange rates prevailing at the 
dates of the transactions. Monetary assets 
and liabilities denominated in foreign 
currencies at the statement of ﬁnancial 
position date are translated into Sterling 
at the foreign exchange rate ruling at 
that date. Foreign exchange gains and 
losses resulting from the settlement of 
such transactions are recognised in the 
income statement.

not control, generally accompanying a 
shareholding of between 20% and 50% 
of the voting rights. Signiﬁcant inﬂuence 
is the power to participate in the ﬁnancial 
and operating decisions of the investee 
but has no control or joint control over 
those policies. Where the Group owns 
less than 50% of the voting rights but 
acts as property and/or asset manager 
an assessment is made as to whether or 
not the Group has de facto control over 
an investee. This includes a review of the 
Group’s rights relative to those of another 
investor or investors and the ability the 
Group has to direct the investees’ relevant 
activities (further detail is provided in 
Note 20).

Investments in joint ventures and 

associates are accounted for by the equity 
method of accounting and are initially 
recognised at cost, and the carrying 
amount is increased or decreased to 
recognise the Group’s share of the proﬁt 
or loss after the date of acquisition. 
The Group’s investment in joint ventures 
and associates includes goodwill (net of any 
accumulated impairment loss) identiﬁed 
on acquisition.

If the ownership interest in an associate 

is reduced but signiﬁcant inﬂuence is 
retained, only a proportionate share of the 
amounts previously recognised in other 
comprehensive income is reclassiﬁed to 
proﬁt or loss where appropriate.

The Group’s share of its joint ventures’ 

and associates’ post-acquisition proﬁts 
or losses is recognised in the income 
statement, and its share of post-acquisition 
movements in reserves is recognised in 
other comprehensive income. Where the 
Group’s interest has been reduced to £nil, 
additional losses are provided for, and a 
liability is recognised, only to the extent 
that the Group has incurred legal or 
constructive obligations or made payments 
on behalf of the joint venture or associate. 
The cumulative post-acquisition movements 
are adjusted against the carrying amount of 
the investment. 

Unrealised gains on transactions between 

the Group and its joint ventures and 

associates are eliminated to the extent of 
the Group’s interest in joint ventures and 
associates. The accounting policies of joint 
ventures and associates have been changed 
where necessary to ensure consistency with 
the policies adopted by the Group. 

Dilution gains and losses arising on 

investment in associates and joint ventures 
are recognised in the income statement.

(c) Segmental reporting
The Group’s risks and rates of return are 
affected predominantly by differences 
between the property asset types it owns 
and manages. An operating segment 
is a distinguishable group of assets and 
operations, reﬂected in the way that the 
Group manages its business, that is subject 
to risks and returns that are different from 
those of other operating segments.

IFRS 8, ‘Operating Segments’ (‘IFRS 8’) 

requires operating segments to be 
identiﬁed based upon the Group’s internal 
reporting to the chief operating decision 
maker (‘CODM’) to make decisions about 
resources to be allocated to segments and 
to assess their performance. The Group’s 
CODM is the chief executive. 

The Group has identiﬁed ﬁve such 
segments as follows:
 – UK Residential;

 – Retirement Solutions;

 – Fund and third-party management;

 – UK and European development; and

 – German Residential. 

All of the above segments are UK based 
except German Residential which has its 
assets and tenants based in Germany and 
UK and European development which 
includes assets based in the Czech Republic. 
More detail is given relating to each of the 
above segments in Note 4. 

The Group has a segment director 
responsible for the performance of each 
of these ﬁve segments and the Group 
reports key ﬁnancial information to the 
CODM on the basis of these ﬁve segments. 
Each of these ﬁve segments operates 
within a different part of the overall 
residential market.

 
90

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

1. ACCOUNTING POLICIES Continued

iii) Foreign operations The assets and 
liabilities of foreign operations, including 
goodwill and fair value adjustments 
arising on consolidation, are translated to 
Sterling at foreign exchange rates ruling 
at the statement of ﬁnancial position 
date. Revenues and expenses of foreign 
operations are translated at average foreign 
exchange rates for the relevant period. 
Foreign exchange gains and losses net of 
deferred income tax are recognised within 
other comprehensive income.
iv) Net investment hedges Hedges of 
net investments in foreign operations are 
accounted for similarly to cash ﬂow hedges. 
Any gain or loss on the hedging instrument 
relating to the effective portion of the 
hedge is recognised in other comprehensive 
income within the translation reserve as 
part of retained earnings. Any gain or 
loss relating to the ineffective portion 
is recognised in the income statement 
within ‘Finance costs’. Gains and losses 
accumulated in equity are included in 
the income statement when the foreign 
operation is partially disposed of or sold.

(f) Investment property
Property that is held for long-term rental 
yields or for capital appreciation or both, 
and that is not occupied by the companies 
in the consolidated Group, is classiﬁed as 
investment property.

Investment property is measured 
initially at its cost, including related 
transaction costs.

After initial recognition, investment 
property is carried at fair value. Fair value is 
based on active market prices, adjusted, if 
necessary, for any difference in the nature, 
location or condition of the speciﬁed asset. 
If this information is not available, the 
Group uses alternative valuation methods 
such as recent prices on less active markets 
or discounted cash ﬂow projections. 
The majority of investment property falls 
within Level 2 of the fair value hierarchy as 
deﬁned by IFRS 13. Further details are given 
in Note 29.

Subsequent expenditure is included in 
the carrying amount of the property when 
it is probable that the future economic 
beneﬁts associated with the item will ﬂow 
to the Group and the cost of the item 
can be measured reliably. All other repairs 
and maintenance costs are charged to 
the income statement during the ﬁnancial 
period in which they are incurred. 

Gains or losses arising from changes in 
the fair value of the Group’s investment 
properties are included in the income 
statement of the period in which they arise.
Where speciﬁc investment properties are 
expected to sell within the next 12 months 
their fair value is shown under assets 
classiﬁed as held-for-sale within current 
assets. Any loss on the reclassiﬁcation of 
these assets from investment properties 
to assets held-for-sale is charged to the 
income statement of the period in which 
this occurs.

In general, however, it is not possible 
for the Group to identify which properties 
will be sold within the next 12 months. 
Although the size of the Group’s property 
portfolio does result in a relatively 
predictable vacancy rate, it is not possible 
to predict in advance the speciﬁc properties 
that will become vacant.

(g) Financial interest in property assets
Financial interest in property assets is initially 
recognised at fair value plus transaction 
costs and subsequently carried at fair value. 
Subsequent to initial recognition, the net 
change in value that is recorded through 
the income statement is as follows: i) the 
carrying value of the assets is increased 
by the effective interest rate; and ii) the 
carrying value of the assets is revised to the 
net present value of the updated projected 
cash ﬂows arising from the instrument 
using the effective interest rate applicable 
at acquisition. The change in value recorded 
through the income statement is shown 
on the line ‘Income from ﬁnancial interest 
in property assets’. Cash received from the 
instrument in the year is deducted from the 
carrying value of the asset. 

Differences between the updated 
projected cash ﬂows using the effective 
interest rate applicable at acquisition 
compared to updated projected cash 
ﬂows using a year end effective interest 
rate, assessed as the rate available in the 
market for an instrument with a similar 
maturity and credit risk, are taken through 
other comprehensive income with a 
corresponding adjustment to the carrying 
value of the assets. When gains or losses 
in the assets are realised, the accumulated 
fair value adjustments recognised in equity 
are included in the income statement as 
gains and losses from ﬁnancial interest in 
property assets. 

(h) Inventories – trading property
Tenanted residential properties held-for-sale 
in the normal course of business are shown 
in the ﬁnancial statements as a current 
asset at the lower of cost and net realisable 
value. Cost includes legal and surveying 
charges and introducer fees incurred during 
acquisition together with improvement 
costs. Net realisable value is the net sale 
proceeds that the Group expects on sale of 
a property with vacant possession.

91

The liability recognised in the statement 
of ﬁnancial position is the present value 
of the deﬁned beneﬁt obligation at the 
statement of ﬁnancial position date less the 
fair value of scheme assets. The deﬁned 
beneﬁt obligation is valued by projecting 
the best estimate of future beneﬁt outgo 
(allowing for future salary increases for 
active members, revaluation to retirement 
for deferred members and annual pension 
increases for all members) and then 
discounting to the statement of ﬁnancial 
position date.

There are no current or past service costs 

as the scheme is closed to new members 
and employee contributions. The net 
interest amount, calculated by applying the 
discount rate to the net deﬁned beneﬁt 
liability, is reﬂected in the income statement 
each year. Actuarial gains and losses net of 
deferred income tax are reﬂected in other 
comprehensive income each year.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Land and property held within the 
development segment of the business 
are shown in the ﬁnancial statements at 
the lower of cost and net realisable value.
Cost represents the acquisition price 

including legal and other professional costs 
associated with the acquisition together 
with subsequent development costs net 
of amounts transferred to costs of sale. 
Net realisable value is the expected net 
sales proceeds of the developed property. 
Where residential properties are sold 
tenanted or where land is sold without 
development, net realisable value is the 
current market value net of associated 
selling costs.

(i) Cash and cash equivalents
Cash and cash equivalents includes cash in 
hand, deposits held at call with banks and 
other short-term highly liquid investments 
with original maturities of three months 
or less.

(j) Income tax
Income tax on the proﬁts or losses for 
the periods presented comprises both 
current and deferred tax. Current tax is 
the expected tax payable on the taxable 
income for the year using rates applicable 
during the year. Tax payable upon the 
realisation of revaluation gains recognised 
in prior periods is recorded as a current 
tax charge with a release of the associated 
deferred tax.

Deferred income tax is recognised, 
using the liability method, on temporary 
differences arising between the tax bases 
of assets and liabilities and their carrying 
amounts in the consolidated ﬁnancial 
statements. Deferred income tax is 
determined using tax rates (and laws) that 
have been enacted or substantively enacted 
by the statement of ﬁnancial position date 
and are expected to apply when the related 
deferred income tax asset is realised or the 
deferred income tax liability is settled.

Deferred income tax assets are recognised 
only to the extent that it is probable that 
taxable proﬁt will give rise to a future tax 
liability against which the deferred tax 
assets can be recovered.

Deferred income tax is provided 
on temporary differences arising on 
investments in subsidiaries and associates, 
except where the timing of the reversal 
of the temporary difference is controlled 
by the Group and it is probable that the 
temporary difference will not reverse in the 
foreseeable future.

Deferred income tax assets and 

liabilities are offset when there is a legally 
enforceable right to offset current tax assets 
against current tax liabilities and when the 
deferred income taxes assets and liabilities 
relate to income taxes levied by the same 
tax authority on either the taxable entity 
or different taxable entities where there 
is an intention to settle the balances on a 
net basis.

(k) Employee beneﬁts
i) Deﬁned contribution pension 
scheme Obligations for contributions to 
deﬁned contribution pension schemes 
are recognised as an expense in the 
income statement in the period to which 
they relate.
ii) Deﬁned beneﬁt pension scheme The 
Group currently contributes to a deﬁned 
beneﬁt pension scheme that was closed to 
new members and employee contributions 
in 2003. The full deﬁcit in the scheme was 
recognised in the statement of ﬁnancial 
position as at 1 October 2004.

An actuarial valuation of the scheme 
is carried out every three years. The cost 
of providing beneﬁts is determined using 
the Projected Unit Credit Method, with 
actuarial valuations being carried out at 
each statement of ﬁnancial position date by 
a qualiﬁed actuary, also under the Projected 
Unit Credit Method, for the purpose of 
determining the amounts to be reﬂected 
in the Group’s ﬁnancial statements under 
IAS 19.

 
92

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

1. ACCOUNTING POLICIES Continued

iii) Share-based compensation The Group 
operates a number of equity-settled,  
share-based compensation plans 
comprising awards under a Long-Term 
Incentive Scheme (‘LTIS’), a Deferred Bonus 
Plan (‘DBP’), a Share Incentive Plan (‘SIP’) 
and a Save As You Earn (‘SAYE’) scheme. 
The fair value of the employee services 
received in exchange for the grant of shares 
and options is recognised as an employee 
expense. The total amount to be expensed 
over the vesting period is determined by 
reference to the fair value of the shares 
and options granted. For market-based 
conditions, the probability of vesting 
is taken into account in the fair value 
calculation and no revision is made to the 
number of shares or options expected 
to vest. For non-market conditions, each 
year the Group revises its estimate of 
the number of options or shares that are 
expected to vest. It recognises the impact of 
the revision to original estimates, if any, in 
the income statement with a corresponding 
adjustment to equity.

Awards that are subject to a market-
based performance condition are valued 
at fair value using the Monte Carlo 
simulation model. Awards not subject to a 
market-based performance condition are 
valued at fair value using the Black Scholes 
valuation model.

When options are exercised the proceeds 

received, net of any directly attributable 
transaction costs, are credited to share 
capital (nominal value) and share premium.

(l) Revenue recognition
Revenue is measured at the fair value of 
the consideration received or receivable 
and is stated net of sales taxes and value 
added taxes. 

Group revenue
Group revenue, set out in Note 5, 
comprises gross rental income, service 
charge income on a principal basis, gross 
proceeds before sales costs from the sale 
of trading properties and management fee 
and other income.
i) Gross rental income Gross rental income 
is recognised on a straight-line basis over 
the lease term on an accruals basis. 
ii) Service charges income The Group is 
responsible for providing service charge 
services in both the UK and in Germany. 
Where Grainger is exposed to the 
signiﬁcant risks and rewards associated 
with the rendering of services, it is acting as 
principal. Otherwise it is acting as agent.

In the UK, Grainger acts primarily as agent. 
Accordingly, service charge receivables and 
payables are shown in the statement of 
ﬁnancial position with no amount passing 
through the income statement. 

In Germany, Grainger acts primarily 
as principal. Accordingly, service charge 
income is shown in the income statement 
with service charge recoveries from tenants 
recorded as a component of Group 
revenue. Where recovery of service charges 
is doubtful, a provision for impairment 
is made.
iii) Sales proceeds from property trading 
Revenue arising from the sale of trading 
property is recognised on legal completion.
iv) Management fee and other income 
Management fee income is recognised in 
the accounting period in which the services 
are rendered. 

Management fee income includes 
performance fees which are recognised 
in line with contract provisions when the 
revenue can be reliably measured, and 
there is reasonable certainty that the 
performance criteria will be met. 

(m) Proﬁt recognition
Residential and development property 
is regarded as sold when the signiﬁcant 
risks and returns have been transferred to 
the buyer. This is deemed to be on legal 
completion. Proﬁts or losses are calculated 
by reference to the carrying value of the 
property sold. For a development property 
this is assessed through the use of a gross 
margin for the site as a whole or other basis 
that provides an appropriate allocation 
of costs.

(n) Leases
i) Group as lessor The net present value 
of ground rents receivable is, in the 
opinion of the Directors, immaterial. 
Accordingly, ground rents receivable 
are taken to the income statement on a 
straight-line basis over the period of the 
lease. Properties leased out to tenants 
are included in the statement of ﬁnancial 
position as either investment property or as 
trading property under inventories. 

Where the Group grants a lifetime lease 

on an investment property and receives 
from the lessee an upfront payment in 
respect of the grant of the lease, the 
upfront payment is treated as deferred rent 
in the statement of ﬁnancial position. 

This deferred rent is released to the 
income statement on a straight-line basis 
over the projected term of the lease. 
At each year end the projected term of the 
lease is revised on an actuarial basis and the 
remaining deferred rent is released to the 
income statement on a straight-line basis 
over this revised lease term.
ii) Group as lessee The Group occupies a 
number of its ofﬁces as a lessee. After a 
review of all of its occupational leases, 
the Directors have concluded that all such 
leases are operating leases. Payments, 
including prepayments, made under 
operating leases (net of any incentives 
received from the lessor) are charged to the 
income statement on a straight-line basis 
over the period of the lease.

93

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

(r) Trade receivables
Trade receivables are recognised initially 
at fair value and subsequently measured 
at amortised cost using the effective 
interest method, less provision for 
impairment. A provision for impairment 
in trade receivables is established when 
there is objective evidence that the Group 
will not be able to collect all amounts 
due. The amount of the provision is the 
difference between the asset’s carrying 
amount and the present value of estimated 
future cash ﬂows, discounted at the 
effective interest rate. The movement 
in the provision is recognised in the 
income statement.

(s) Trade payables
Trade payables are recognised initially at 
fair value and subsequently measured 
at amortised cost using the effective 
interest method.

(t) Provisions
Provisions are recognised when: (a) the 
Group has a present obligation as a result 
of a past event; (b) it is probable that an 
outﬂow of resources will be required to 
settle the obligation; and (c) a reliable 
estimate can be made of the amount of 
the obligation.

(u) Dividends
Dividend distributions to the Company’s 
Shareholders are recognised as a liability 
in the Group ﬁnancial statements in the 
period in which the dividends are either 
approved by the Company’s Shareholders 
or are appropriately authorised and no 
longer at the discretion of the Group. 
Interim dividends are recognised 
on payment.

The net present value of ground rents 
payable is, in the opinion of the Directors, 
immaterial. Accordingly, ground rent 
expenses are taken to the income 
statement on a straight-line basis over the 
lease term. 

(o) Derivative ﬁnancial instruments 

Derivatives
The Group uses derivative instruments 
to help manage its interest rate risk. 
In accordance with its treasury policy, the 
Group does not hold or issue derivatives for 
trading purposes. Derivatives are classiﬁed 
as current assets and current liabilities. 

The derivatives are recognised initially at 
fair value. Subsequently, the gain or loss on 
re-measurement to fair value is recognised 
immediately in the income statement, 
unless the derivatives qualify for cash ﬂow 
hedge accounting in which case any gain or 
loss is taken to equity in a cash ﬂow hedge 
reserve via other comprehensive income. 
In order to qualify for hedge accounting, 
the Group is required to document in 
advance the relationship between the item 
being hedged and the hedging instrument. 
The Group is also required to demonstrate 
that the hedge will be highly effective on an 
on-going basis. This effectiveness testing is 
re-performed at each period end to ensure 
that the hedge remains highly effective.
When a hedging instrument expires 
or is sold, or when a hedge no longer 
meets the criteria for hedge accounting, 
any cumulative gain or loss existing in 
equity at that time remains in equity and is 
recognised when the forecasted transaction 
is ultimately recognised in the income 
statement. When a forecasted transaction 
is no longer expected to occur, the 
cumulative gain or loss that was recognised 
in equity is immediately transferred to the 
income statement.

Fair value estimation
The fair value of interest rate swaps is based 
on a discounted cash ﬂow model using 
market information.

(p) Derecognition of ﬁnancial assets 
and liabilities 
Derecognition is the point at which the 
Group removes an asset or a liability 
from its statement of ﬁnancial position. 
The Group’s policy is to derecognise 
ﬁnancial assets only when the contractual 
right to the cash ﬂows from the ﬁnancial 
asset expires. The Group also derecognises 
ﬁnancial assets that it transfers to another 
party provided that the transfer of the 
assets also transfers the right to receive 
cash ﬂows from the ﬁnancial asset. 
When the transfer does not result in the 
Group transferring the right to receive 
cash ﬂows from the ﬁnancial asset but 
it does result in the Group assuming a 
corresponding obligation to pay cash ﬂows 
to another recipient, the ﬁnancial asset 
is derecognised.

The Group derecognises ﬁnancial 
liabilities only when its obligation is 
discharged, is cancelled or expires.

Financial assets classiﬁed as available-for-

sale are the ﬁnancial interest in property 
assets. Derivative ﬁnancial instruments 
not in hedge accounting relationships 
are classiﬁed as fair value through proﬁt 
and loss. 

q) Borrowings
Borrowings are initially recognised at the 
fair value of consideration received, net of 
transaction costs incurred. Borrowings are 
subsequently stated at amortised cost. 
Any difference between the proceeds (net 
of transaction costs) and the redemption 
value is recognised in the income statement 
over the period of the borrowings using the 
effective interest method.

Borrowings are classiﬁed as current 

liabilities unless the Group has an 
unconditional right to defer settlement of 
the liability for at least 12 months after the 
statement of ﬁnancial position date.

 
Valuation of residential property 
The Group’s residential trading property is 
carried in the statement of ﬁnancial position 
at the lower of cost and net realisable value. 
The Group’s investment property is carried 
in the statement of ﬁnancial position at 
fair value. The Group does, however, in 
its principal non-GAAP net asset value 
measures, NAV and NNNAV, include 
trading stock at market value. The market 
value of the Group’s property which, in the 
case of investment property, is the same as 
fair value is detailed below. 

94

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

1. ACCOUNTING POLICIES Continued

(v) Assets classiﬁed as held-for-sale
Assets are classiﬁed as held-for-sale, as 
deﬁned by IFRS 5, when the assets are 
available-for-sale in their present condition, 
the sale is highly probable and it is expected 
to be completed within one year from the 
date of classiﬁcation. 

Non-current assets classiﬁed as held-
for-sale are measured at the lower of their 
carrying amount and fair value less costs to 
sell. Assets and liabilities classiﬁed as held-
for-sale are presented separately as current 
items in the statement of ﬁnancial position. 
On re-classiﬁcation, investment property 
that is measured at fair value continues to 
be measured at fair value.

(w) Acquisition of and investment in 
own shares
The Group acquires its own shares to 
enable it to meet its obligations under the 
various share schemes in operation. No gain 
or loss is recognised in proﬁt or loss on the 
purchase, sale, issue or cancellation of the 
Company’s own shares. The acquisition 
cost of the shares is debited to an 
investment in own shares reserve within 
retained earnings. 

Where the Group buys back its own 
shares as treasury shares it adopts the 
accounting as described above. Where it 
subsequently cancels them, issued share 
capital is reduced by the nominal value 
of the shares cancelled and this same 
amount is transferred to the capital 
redemption reserve.

(x) Adoption of new and revised 
International Financial Reporting 
standards and interpretations
There are no new standards, amendments 
or interpretations that are effective for the 
ﬁrst time for the current ﬁnancial year that 
have a material impact on the Group. 
The Group is assessing the impact 
of the following revised standards and 
interpretations that are not yet effective. 
Where already endorsed by the EU, these 
changes will be adopted on the effective 
dates noted. Where not yet endorsed by 
the EU the adoption date is less certain. 
 – Annual Improvements to IFRSs 2012 – 
2014, effective 2017 ﬁnancial year;

 – IFRS 9 Financial Instruments: Classiﬁcation 

and Measurement, effective 2019 
ﬁnancial year (not yet endorsed by 
the EU);

 – IFRS 15 Revenue from Contracts with 

Customers, effective 2018 ﬁnancial year 
(not yet endorsed by the EU).

2 CRITICAL ACCOUNTING ESTIMATES 
AND ASSUMPTIONS

The Group’s signiﬁcant accounting policies 
are stated in Note 1 above. Not all of these 
accounting policies require management 
to make subjective or complex judgements 
or estimates. The following is intended 
to provide further detail relating to those 
accounting policies that management 
consider critical because of the level of 
complexity, judgement or estimation 
involved in their application and their 
impact on the consolidated ﬁnancial 
statements. The Group performs 
sensitivity analysis as part of the risk 
management process. 

The Directors consider that a +/- 1% 
(2014: 1%) movement in interest rates, 
a +/- 10 percentage point (2014: 
10 percentage point) movement in Sterling 
exchange rates and a +/- 1 percentage 
point (2014: 1 percentage point) movement 
in house prices represents a reasonable 
possible change. 

The results and the basis of each valuation and their impact on both the statutory ﬁnancial statements and market value for the Group’s 
non-GAAP net asset value measures are set out below:

95

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

% of properties  
for which  
external valuer  
provides  
valuation  
%

55%
***
100%
100%
****
100%
96%
100%

Total  
£m
1,152.2
357.8
93.7
1,603.7

1,160.3
338.2
327.2
111.5
93.7
22.9
142.6
95.0
2,291.4
1,839.9
357.8
93.7
2,291.4
1,603.7
687.7
2,291.4

UK  
Residential  
(‘UKR’)  
£m
836.9
169.1
–
1,006.0

Retirement  
Solutions  
(‘RS’)  
£m
220.0
46.1
93.7
359.8

Fund and  
third-party  
management  
(‘Funds’)  
£m
–
–
–
–

UK and European  
developments  
(‘Development’) 
£m
95.3
–
–
95.3

German 
Residential 
(‘Germany’) 
£m
–
142.6
–
142.6

–
–
–
–
–
–
142.6
–
142.6
–
142.6
–
142.6
142.6
–
142.6

1,160.3
–
327.2
111.5
–
22.9
–
–
1,621.9
1,452.8
169.1
–
1,621.9
1,006.0
615.9
1,621.9

14.6

–

14.6

–
338.2
–
–
93.7
–
–
–
431.9
292.1
46.1
93.7
431.9
359.8
72.1
431.9

2.4

–

2.4

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

–

20.2

20.2

–
–
–
–
–
–
–
95.0
95.0
95.0
–
–
95.0
95.3
(0.3)
95.0

–

–

–

(3.1)

13.9

8.2

5.1

28.4

42.3

Trading property 
Investment property
Financial asset (CHARM)
Total statutory book value
Allsop LLP
  UK Residential
  Retirement Solutions
  Grainger Invest
  Tricomm investment valuation
  Financial asset (CHARM)
  Abbeville Apartments
Cushman and Wakeﬁeld LLP
CBRE Limited
Total assets at market value
Trading property 
Investment property
Financial asset
Total assets at market value
Statutory book value
Market value uplift*

Net revaluation gain recognised in the 
income statement for wholly-owned 
properties
Net revaluation gain relating to joint 
ventures and associates**
Net revaluation gain recognised in the 
year**

* The market value uplift is the difference between the statutory book value and the market value of the Group’s properties. Refer to Note 4 for market value net asset measures.
** Includes Group share of joint ventures and associates revaluation gain before tax.
*** See Note 2 iv) below for the basis of valuation adopted this year. 
**** Allsop provides vacant possession values used by the Directors to value the ﬁnancial asset in accordance with the accounting policy set out in Note 1(g).

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
96

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

2. CRITICAL ACCOUNTING ESTIMATES 
AND ASSUMPTIONS Continued

i) UK Residential
The Group’s own in-house qualiﬁed 
surveying team provided a vacant 
possession value for the majority of the 
Group’s UKR properties as at 30 September 
2015. A structured sample of these 
in-house valuations was reviewed by 
Allsop LLP, an external independent valuer. 
Valuing the large number of properties in 
the portfolio is a signiﬁcant task. For this 
reason it is undertaken on an external 
inspection basis only. Invariably, when 
the in-house valuations are compared 
to those of the external valuer, around 
75% of the valuations are within a small 
acceptable tolerance. Where the difference 
is more signiﬁcant this is discussed with 
the valuer to determine the reasons for the 
difference. Typically, the reasons vary but 
it could be, for example, that further or 
better information about internal condition 
is available or that respective valuers 
have placed a different interpretation on 
comparable sales. Once such reasons have 
been identiﬁed the Group and the valuer 
agree the appropriate valuation that should 
be adopted as the Directors’ valuation. 

Overall, across all of the properties valued 

by Allsop LLP, the Directors’ valuations 
were approximately 1.12% higher than the 
Allsop LLP values.

Allsop LLP has provided the Directors 

with the following opinion on the 
Directors’ valuation: ‘Property held in the 
UK Residential portfolios was valued as at 
30 September 2015 by Grainger’s in-house 
surveyors. These valuations were reviewed 
and approved by the Directors. Allsop LLP 
has undertaken a comprehensive review 
of the Directors’ valuation and they are 
satisﬁed with the process by which the 
in-house valuations were conducted. 
As part of the review, Allsop LLP valued 
approximately 55% of the UK Residential 

Signiﬁcant unobservable inputs within the 
valuation relate to assumptions for house 
price inﬂation and the discount rates to 
apply to the cash ﬂows. The assumptions 
adopted for house price inﬂation are 3% in 
2016, 4% in 2017 and 2018, 3.5% in 2019 
and 2020 and 3% thereafter. The discount 
rates applied to the cash ﬂows range 
between 4.25% and 9.25%.

iv) Retirement Solutions
All of the property owned by the Group in 
the Retirement Solutions portfolio has been 
valued by the Directors at 30 September 
2015 and is included at Directors’ valuation 
in the market value numbers presented. 
All of the property owned by the Group 
in the Retirement Solutions portfolio 
excluding CHARM, was also valued as at 
30 September 2015 by Allsop LLP who are 
external independent valuers. The Directors’ 
valuation, excluding CHARM, places a value 
on the assets which is £7.0m (2.1%) lower 
than the Allsop LLP valuation. The ﬁnancial 
asset, CHARM, was valued by the directors 
in accordance with the accounting policy set 
out in Note 1(g) above. Allsop LLP provide 
vacant possession values for the CHARM 
assets and these are used in the assessment 
of projected future cash ﬂows to be received 
from the ﬁnancial asset. For the assets 
valued by Allsop LLP, they undertake a Red 
Book valuation on a market value basis 
in accordance with the RICS Valuation – 
Professional Standards. The valuation was 
based upon an assessment of the vacant 
possession value of each property obtained 
through an external or internal inspection 
by Allsop LLP of approximately 50% of 
the properties in the portfolio within the 
last 12 months and a desktop valuation of 
the remainder. The market value subject 
to tenancy was obtained subsequently 
by taking into account, on a property-by-
property basis, a number of factors, primarily 
the estimated period until vacant possession 
may arise and the appropriate discount rate.

portfolio, independently of the Group. 
Based on the results of that review, Allsop 
LLP has concluded that they have a high 
degree of conﬁdence in those Directors’ 
valuations.’ Allsop LLP also recommend the 
discount to apply to the vacant possession 
valuations to establish the market value 
of each property. For property in the UK 
Residential portfolio the discounts are 
established by tenancy type and are based 
on evidence gathered by Allsop LLP from 
recent transactional market evidence. 
After due consideration and challenge of 
Allsop LLP, the Directors have adopted all 
of the recommendations made by Allsop 
LLP in relation to the discounts, the impact 
of which has been to increase the market 
value of trading stock in the Group’s non-
GAAP net asset measures by £51.4m and 
in the income statement by £1.5m as a 
valuation gain.

ii) Grainger Invest (‘GInvest’)
All of the property owned by the Group 
in the GInvest portfolio was valued as at 
30 September 2015 by Allsop LLP who are 
external independent valuers. 

The market values of the properties 

subject to the assumption that the 
dwellings would be sold individually, which 
is deemed to be the highest and best use, 
in their existing condition, and subject 
to any existing leases or tenancies was 
provided by Allsop LLP. The valuer’s opinion 
of market value was primarily derived using 
comparable recent market transactions on 
arm’s-length terms. 

iii) Tricomm investment valuation 
Allsop LLP has also valued as at 
30 September 2015 the property assets 
owned by the Group and let under a 
long-term lease arrangement with the 
Secretary of State for Defence under a PFI 
Project Agreement. Allsop LLP has provided 
an Investment Valuation which is deﬁned 
as ‘the value of an asset to the owner or a 
prospective owner for individual investment 
or operational objectives’. The Investment 
Valuation has been made in accordance 
with RICS Professional Valuation Standards 
(2014), and is based on a discounted cash 
ﬂow model.

97

v) Cushman and Wakeﬁeld – German 
Residential 
The whole of the property portfolio in 
Germany was valued as at 30 September 
2015 by Cushman and Wakeﬁeld LLP 
who are external independent valuers. 
Whilst in the UK, valuers rely predominantly 
on recent transactional evidence for 
similar properties to value investment 
property, in Germany investment property 
is valued using an income capitalisation 
approach under which net rental income 
is discounted to a net present value. 
Both methodologies are permitted under 
IFRS 13.

vi) CBRE – UK and European development
The current market value of the Group’s 
land and property held within the 
development segment has been assessed 
by CBRE Limited who are external 
independent valuers. Their valuation, 
representing 96% of the total value of 
development trading stock, is on the 
basis of fair value as deﬁned in the RICS 
Professional Valuation Standards (2014) 
where fair value is the same as market 
value. The remaining 4% of the portfolio is 
a Directors’ valuation. 

vii) Joint ventures and associates 
The valuation methodology for assets held 
within joint ventures and associates is as 
described above for each of the divisions 
with the exception of assets held within 
the GRIP Unit Trust (‘GRIP’), Walworth 
Investment Properties Limited (‘WIP’) 
and MH Grainger JV Sarl, all of which 
are shown within the Fund’s division. 
WIP is valued on the same basis as the 
GInvest portfolio. MH Grainger JV Sarl is 
valued on the same basis as the German 
Residential portfolio. Valuations of 100% 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

of the GRIP portfolio were carried out at 
30 June 2015 by external valuers, Savills 
(UK) Limited. In aggregate, the valuation 
of the individual dwellings as at 30 June 
2015 was £511.0m for all assets still held 
at September. After full consideration 
of house price movements in those 
areas where GRIP property assets are 
situated the Group’s Directors made an 
adjustment to the 30 June 2015 valuations 
based on the movement in house price 
indices to 30 September 2015 and an 
adjustment for sales, purchases and capital 
expenditure, in assessing the Group’s 
share of GRIP net assets for the purposes 
of the Group’s accounts to 30 September 
2015. The Group’s share of the revaluation 
gain based on the indexed revaluation 
was £1.5m. For every 1% movement in 
the market value of the GRIP investment 
property the Group’s share of the 
movement would amount to £1.3m. 

The Directors consider the valuations 

provided by external valuers to be 
representative of fair value.

As required by RICS Valuation 

Professional Standards, all of the external 
valuers in the UK mentioned above have 
made full disclosure of the extent and 
duration of their work for, and fees earned 
by them from, the Group, which in all cases 
are less than 5% of their total fees.

Net realisable value of trading property
The Group’s residential trading properties 
are carried in the statement of ﬁnancial 
position at the lower of cost and net 
realisable value. 

As the Group’s business model is to sell 

trading stock on vacancy, net realisable 
value is the net sales proceeds which the 
Group expects on sale of a property with 
vacant possession. 

A net realisable value provision has been 
made at 30 September 2015 to write down 
properties expected to be sold ultimately 
at vacant possession value. The provision 

has been assessed on what the Group 
considers to be reasonable assumptions. 
These allow for a 3.9% growth in property 
prices between 2016 and 2020 inclusive 
followed by growth in house prices of 
4.0% thereafter. The assumptions also 
allow for an annual vacancy rate of 7.2% 
in 2016, increasing by 0.1% p.a. thereafter. 
In addition, a speciﬁc provision of £1.5m 
has been made this year to write down 
the book cost of certain properties to 
their current vacant possession value on 
the assumption of sale on vacancy but 
with no further growth in property prices. 
The Group does sell some property as 
investment sales, a sale with the tenant still 
in situ. A net realisable value provision has 
been made at 30 September 2015 against 
projected investment sales.

In aggregate, a charge of £1.0m has 
been made in the 2015 income statement 
(2014: credit of £0.5m) to adjust the book 
value of residential trading properties to the 
lower of cost and net realisable value. A 1% 
decrease in house prices would increase 
the provision by £0.1m, a 1% increase has 
no impact (2014: a 1% increase/decrease 
would decrease/increase the provision by 
£0.1m). A 1% increase/decrease in annual 
vacancy rate assumptions would have no 
impact in 2015 (2014: increase/decrease the 
provision by £0.1m).

Land and property held within the 
Development segment of the business 
are shown in the ﬁnancial statements at 
the lower of cost and net realisable value. 
Net realisable value is the expected net 
sales proceeds of the developed property 
and a provision is made when, and to the 
extent that, total projected project costs 
exceed total projected project revenues.

Where land and property is sold without 

development, net realisable value is the 
current market value net of associated 
selling costs. 

 
98

Grainger plc / Annual Report and Accounts 2015 / Financials

The assumptions adopt an increase  
in house prices of 4.0% per annum. 
A change of 1% to average house price 
inﬂation over the 10-year period from 
1 October 2015 would either increase the 
valuation by £5.5m (2014: £4.6m) or reduce 
the valuation by £5.1m (2014: £4.3m). 
At 30 September 2015 it is estimated 
that, with respect to the Group’s ﬁnancial 
interest in property assets a general 
increase/(decrease) of one percentage point 
in house prices at the statement of ﬁnancial 
position date would increase/(decrease) the 
Group’s proﬁt before tax by approximately 
£0.7m (2014: £0.7m). 

There is no additional effect on equity 
as a result of a change in house prices as, 
in accordance with IAS 39 AG8, changes 
to future cash ﬂow assumptions are 
recognised though the income statement. 
Consideration has been given to the 
current market value of the ﬁnancial asset 
based on our assessment of a market 
discount rate. We have concluded that the 
discount rate as at 30 September 2015 
should be the same as the rate adopted at 
30 September 2014. This revised discount 
rate is 0.85% lower than the effective 
interest rate when the ﬁnancial interest was 
acquired. A 1% change to this discount rate 
would either increase the carrying value by 
£7.4m (2014: £7.8m) or reduce the carrying 
value by £6.4m (2014: £6.8m).

NOTES TO THE FINANCIAL STATEMENTS Continued

2. CRITICAL ACCOUNTING ESTIMATES 
AND ASSUMPTIONS Continued

Decisions regarding whether to develop 
a site or to sell a site undeveloped 
are made by the Directors based on 
market conditions prevailing at the 
time. The assumptions adopted as at 
30 September 2015 are based upon 
the current intentions of the Directors. 
In addition, estimates at 30 September 
2015 of project proﬁtability are based on 
assumptions regarding projected build costs 
and sales proceeds for those sites where 
development is expected to occur. In some 
cases these projections are made without 
the beneﬁt of planning permission having 
been agreed. 

The assumptions made may or may 
not be borne out in practice. It is possible 
therefore that any net realisable value 
provision required should be more than or 
less than that made.

A charge of £0.2m has been made in 
the 2015 income statement (2014: credit 
of £0.3m) in adjusting the book value of 
development stock to net realisable value. 

Valuation of ﬁnancial interest in 
property assets
The valuation is based on an assessment 
of the future cash ﬂows that will arise from 
our ﬁnancial interest and on the effective 
interest rate used to discount those cash 
ﬂows. The valuation methodology adopted 
is set out in Note 1(g) above. The key 
assumptions affecting the carrying value 
are house price inﬂation and the effective 
interest rate. 

The fair value of our interest changes as 
cash ﬂows are realised and an increase of 
£nil (2014: increase of £1.0m) in the fair 
value has been recognised in the statement 
of other comprehensive income and the 
available-for-sale reserve. 

Credit risk arises from the credit exposure 
relating to cash receipts from the ﬁnancial 
instrument. All of the cash receipts are 
payable by the Church Commissioners, 
a counterparty considered to be low risk 
as they have no history of past due or 
impaired amounts and there are no past 
due amounts outstanding at the year end. 

Distinction between investment and 
trading property
The Group considers the intention at the 
outset when each property is acquired 
in order to classify the property as either 
an investment or a trading property. 
Where the intention is to either trade the 
property or where the property is held 
for immediate sale upon receiving vacant 
possession within the ordinary course 
of business, the property is classiﬁed as 
trading property. 

Where the intention is to hold the 

property for its long-term rental yield and/
or capital appreciation, the property is 
classiﬁed as an investment property.

Derivative ﬁnancial instruments
Fair value measurements for derivative 
ﬁnancial instruments are obtained from 
quoted market prices and/or valuation 
models as appropriate. When not directly 
observable in active markets, the fair value 
of derivative contracts must be computed 
internally based on internal assumptions 
as well as directly observable market 
information, including forward and yield 
curves for commodities, currencies and 
interest. Changes in internal assumptions 
and forward curves could materially 
impact the internally computed fair 
value of derivative contracts, particularly 
long-term contracts, resulting in 
corresponding impact on income or loss 
in the consolidated income statement. 
The Group utilises an external independent 
valuer, J C Rathbone Associates Limited, to 
provide recommendations on the internal 
assumptions which have been fully adopted 
by the Directors.

99

In addition, as set out on page 29, the 
Directors have considered the Group’s 
viability in detail over a four-year period 
to September 2019. Two different 
scenarios were modelled to stress-test 
the business model. First an aggressive 
but short-term house price crash with 
a slow return to growth thereafter and 
secondly a continuing slow decline in 
house prices. The Directors have concluded 
that they have a reasonable expectation 
that the Group will be able to continue in 
operation and meet its liabilities as they 
fall due over the four-year period of their 
detailed assessment.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Germany wholly-owned assets
The Group announced on 13 August 2015 
that it had appointed advisers to assist with 
the disposal of its wholly-owned residential 
property assets in Germany. 

Consideration has been given as to 
whether the German wholly-owned 
assets meet the criteria to be classiﬁed as 
held-for-sale at the statement of ﬁnancial 
position date. Although certain criteria, 
set out in IFRS 5, were considered to have 
been met, the Directors concluded that, 
at the statement of ﬁnancial position date, 
sufﬁcient work had not been carried out 
to establish a formal plan for sale and that 
the portfolio had not yet been actively 
marketed. As a result, the Directors were 
unable to conclude that all the criteria had 
been met to conﬁrm that a sale of the 
assets was highly probable. Therefore, the 
Germany wholly-owned property assets 
have not been classiﬁed as held-for-sale. 

Going concern
The Directors are required to make an 
assessment of the Group’s ability to 
continue to trade as a going concern for the 
foreseeable future. The Directors have given 
this matter due consideration and have 
concluded that it is appropriate to prepare 
the Group ﬁnancial statements on a going 
concern basis. The main considerations 
were as follows:

i) Covenant compliance 
The Group’s core banking facility has two 
covenants, being loan-to-value (‘LTV’) and 
interest cover. At 30 September 2015, the 
LTV was 40.6% compared to a default 
level of 75% and the interest cover ratio 
was 3.1 times compared to a minimum 
requirement of 1.35 times. The Group 
has other bank debt on which there 
are also covenant requirements. As at 
30 September 2015, the Group is operating 
comfortably within these requirements. 
The Directors have reviewed the Group’s 
ﬁnancial projections covering a minimum 
period of at least 12 months beyond 
the date of signing of these ﬁnancial 
statements, and which include covenant 
compliance forecasts. These projections 
show that the Group will comfortably meet 
its covenant requirements.

ii) Banking facilities 
The Group’s existing core facilities were 
£580.0m on 30 September 2015, of which 
£483.3m were drawn. The Group had free 
cash balances plus available overdraft of 
£45.0m and undrawn committed facilities 
of £96.7m, in total, ‘headroom’, of £141.7m 
at 30 September 2015. On 1 October 
2015, a revision to the Grainger Invest bank 
facility was concluded with existing lenders, 
HSBC and Santander. This increased 
headroom, on a pro forma basis, to £183m.
The Directors have reviewed the available 
headroom of the Group, and conﬁrmed 
that even without any further management 
actions, the Group has sufﬁcient resources 
to meet future repayments as they fall due. 
As has been demonstrated over the past 

few years, the Group is able to generate 
strong cash ﬂows even in very difﬁcult 
general market conditions. The Group’s 
cash ﬂow projections conﬁrm that the 
Group will remain well within its facilities 
for a minimum period of at least 12 months 
beyond the date of signing of these 
ﬁnancial statements.

 
100

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

3. ANALYSIS OF PROFIT BEFORE TAX

The results for the years ended 30 September 2014 and 2015 respectively have been affected by valuation movements and non-recurring 
items. The table below provides further analysis of the consolidated income statement showing the results of trading activities separately 
from these other items.

2015

2014

(£m)
Group revenue
Net rental income
Proﬁt on disposal of trading property
Administrative expenses
Fees and other income 
Other expenses
Proﬁt on disposal of investment property
Income from ﬁnancial interest in 
property assets

Proﬁt on disposal of subsidiary
Proﬁt on disposal of joint venture
(Write down)/write back of inventories to net 
realisable value
Impairment of joint venture
Impairment of deferred consideration receivable
Operating proﬁt before net valuation gains 
on investment property
Net valuation gains on investment property
Operating proﬁt after net valuation gains 
on investment property
Change in fair value of derivatives
Finance costs
Finance income
Share of proﬁt of associates after tax
Share of proﬁt of joint ventures after tax
Proﬁt before tax

Trading  Valuation  Non-recurring
–
–
244.1
–
–
37.9
–
–
85.4
–
–
(36.1)
–
–
8.2
(2.4)
–
(3.2)
–
–
0.5

9.2

–
–

–
–
–

101.9
–

101.9
–
(64.2)
1.9
1.3
0.3
41.2

–

–
–

(1.2)
(4.1)
–

(5.3)
13.9

8.6
(5.8)
–
–
14.1
9.2
26.1

–

–
4.4

–
–
(15.8)

(13.8)
–

(13.8)
–
(3.5)
–
–
–
(17.3)

Total 
244.1
37.9
85.4
(36.1)
8.2
(5.6)
0.5

9.2

–
4.4

(1.2)
(4.1)
(15.8)

82.8
13.9

96.7
(5.8)
(67.7)
1.9
15.4
9.5
50.0

Trading  Valuation  Non-recurring 
–
–
(1.1)
–
–
–
–
–
–
–
(1.0)
–
–
–

319.1
37.0
87.2
(34.7)
12.8
(2.6)
0.8

7.0

–
–

–
–
–

107.5
–

107.5
–
(66.3)
2.9
3.0
–
47.1

–

–
–

0.8
(2.4)
–

(1.6)
1.5

(0.1)
1.2
–
–
18.1
16.1
35.3

–

0.7
0.1

–
–
–

(1.3)
–

(1.3)
–
–
–
–
–
(1.3)

Total 
319.1
35.9
87.2
(34.7)
12.8
(3.6)
0.8

7.0

0.7
0.1

0.8
(2.4)
–

104.6
1.5

106.1
1.2
(66.3)
2.9
21.1
16.1
81.1

Proﬁt before tax in the trading columns above of £41.2m (2014: £47.1m) is the recurring proﬁt of the Group.

The non-recurring items in 2015 include a loss of £18.2m in relation to the re-acquisition of Equity Release (Increments) Limited (ERIL), 

a £4.4m proﬁt on the sale of the Sovereign joint venture, and a £3.5m charge relating to the accelerated write off of loan costs after 
reﬁnancing of bank syndicate debt during 2015. The impairment of joint venture of £4.1m relates to the Group’s investments in Curzon 
Park Limited and its Prague joint venture.

In the prior year the £1.1m non-recurring cost presented within net rental income relates to a provision for contractor remedial costs 
which we are taking action to recoup. The £2.4m impairment of joint venture relates to the Group’s investment in its Prague joint venture.

101

4. SEGMENTAL INFORMATION

Information relating to the Group’s operating segments is set out in the tables below. The tables distinguish between trading, valuation 
and non-recurring items and should be read in conjunction with Note 3.

2015 Income statement 

(£m)
Group revenue
Segment revenue-external
Net rental income
Proﬁt on disposal of trading property
Administrative expenses
Fees and other income 
Other expenses
Proﬁt on disposal of investment property
Income from ﬁnancial interest in 
property assets
Operating proﬁt before net valuation gains 
on investment property
Net trading interest payable
Share of trading proﬁt of joint ventures and 
associates after tax
Trading proﬁt before tax, valuation and 
non-recurring items
Write down of inventories to net realisable value
Net valuation gains on investment property
Impairment of joint venture
Proﬁt on disposal of joint venture
Change in fair value of derivatives
Share of valuation gains in joint ventures and 
associates after tax
Impairment of deferred consideration receivable
Other net non-recurring items
Proﬁt before tax

UK  
Residential

Retirement  
Solutions

Fund and  
third-party  
management

UK and 
European 
development

German  
Residential 

Other

Total

154.3
32.3
60.5
(8.9)
0.5
(0.4)
0.4

35.7
1.7
15.1
(2.0)
1.6
–
–

–

9.2

84.4
(8.0)

–

76.4
(1.0)
14.6
–
–
–

–
–
–

25.6
(10.8)

0.5

15.3
–
2.4
–
4.4
–

–
(15.8)
(2.4)

4.3
–
–
(3.9)
4.3
(1.0)
–

–

(0.6)
1.5

0.9

1.8
–
–
–
–
–

17.7
–
–

34.4
0.1
9.8
(1.1)
0.5
(0.6)
–

–

8.7
(0.1)

–

8.6
(0.2)
–
(4.1)
–
–

–
–
–

15.2
3.8
–
(2.9)
1.1
–
0.1

–

2.1
(2.6)

0.2

(0.3)
–
(3.1)
–
–
0.5

5.6
–
–

0.2
–
–
(17.3)
0.2
(1.2)
–

244.1
37.9
85.4
(36.1)
8.2
(3.2)
0.5

–

9.2

(18.3)
(42.3)

101.9
(62.3)

–

1.6

(60.6)
–
–
–
–
(6.3)

–
–
(3.5)

41.2
(1.2)
13.9
(4.1)
4.4
(5.8)

23.3
(15.8)
(5.9)
50.0

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
102

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

4. SEGMENTAL INFORMATION Continued

2014 Income statement

(£m)
Group revenue
Segment revenue-external
Net rental income
Proﬁt on disposal of trading property
Administrative expenses
Fees and other income 
Other expenses
Proﬁt on disposal of investment property
Income from ﬁnancial interest in 
property assets
Operating proﬁt before net valuation gains 
on investment property
Net trading interest payable
Share of trading proﬁt/(loss) of joint ventures 
and associates after tax
Trading proﬁt before tax, valuation and  
non-recurring items
Write back of inventories to net realisable value
Net valuation gains on investment property
Impairment of joint venture
Proﬁt on disposal of subsidiary
Proﬁt on disposal of joint venture
Change in fair value of derivatives
Share of valuation gains in joint ventures and 
associates after tax
Other net non-recurring items 
Proﬁt before tax

UK  
Residential

Retirement  
Solutions

Fund and  
third-party  
management

UK and  
European  
development

German  
Residential 

Other

Total

136.8
30.2
47.8
(8.3)
0.4
(0.1)
1.1

123.1
1.5
27.1
(2.3)
1.7
(0.1)
(0.1)

–

7.0

71.1
(8.4)

–

62.7
0.5
6.4
–
–
–
–

–
(2.0)

34.8
(9.1)

0.6

26.3
–
1.2
–
0.7
–
–

–
–

8.5
–
–
(4.6)
8.5
(1.5)
–

–

2.4
1.6

2.6

6.6
–
–
–
–
–
(0.2)

33.2

34.1
0.2
12.3
(1.6)
1.1
(0.1)
–

–

11.9
(1.0)

(0.1)

10.8
0.3
–
(2.4)
–
–
–

–
–

16.5
5.1
–
(3.1)
1.0
(0.1)
(0.2)

–

2.7
(2.7)

(0.1)

(0.1)
–
(6.1)
–
–
0.1
(0.1)

1.0
(0.1)

0.1
–
–
(14.8)
0.1
(0.7)
–

319.1
37.0
87.2
(34.7)
12.8
(2.6)
0.8

–

7.0

(15.4)
(43.8)

–

(59.2)
–
–
–
–
–
1.5

–
–

107.5
(63.4)

3.0

47.1
0.8
1.5
(2.4)
0.7
0.1
1.2

34.2
(2.1)
81.1

Segmental revenue from external customers is derived as follows:
£228.9m from UK customers (2014: £302.6m).
£15.2m from Germany (2014: £16.5m).
There are no other material revenue streams from external customers in foreign countries.

Non-current assets other than ﬁnancial instruments and deferred tax assets are located as follows:
£469.3m within the UK (2014: £444.4m).
£165.7m in Germany (2014: £166.7m).

 
 
 
 
 
 
 
103

The majority of the Group’s properties are held as trading stock and are therefore shown in the statutory statement of ﬁnancial position 
at the lower of cost and net realisable value. This does not reﬂect the market value of the assets and, accordingly, our key statement of 
ﬁnancial position measures of net asset value include trading stock at market value. The two principal net asset value measures reviewed 
by the CODM are Gross Net Asset Value (‘NAV’) and Triple Net Asset Value (‘NNNAV’).

NAV is the statutory net assets plus the adjustment required to increase the value of trading stock from its statutory accounts value 
of the lower of cost and net realisable value, to its market value. In addition, the statutory statement of ﬁnancial position amounts for 
both deferred tax on property revaluations and derivative ﬁnancial instruments net of deferred tax, including those in joint ventures and 
associates, are added back to statutory net assets. Finally, the market value of Grainger plc shares owned by the Group are added back 
to statutory net assets.

NNNAV reverses some of the adjustments made between statutory net assets and NAV. All of the adjustments for the value of derivative 
ﬁnancial instruments net of deferred tax, including those in joint ventures and associates, are reversed. The adjustment for the deferred tax 
on property revaluations is also reversed. In addition, adjustments are made to net assets to reﬂect the fair value, net of deferred tax, of the 
Group’s ﬁxed rate debt and to deduct from net assets the contingent tax calculated by applying the expected rate of tax to the adjustment 
to increase the value of trading stock from its statutory accounts value of the lower of cost and net realisable value, to its market value.

These measures are set out below by segment along with a reconciliation to the summarised statutory statement of ﬁnancial position. 

2015 Segment net assets

(£m)
Total segment net assets (statutory)
Total segment net assets (NAV)
Total segment net assets (NNNAV)

UK 
Residential
223.3
864.1
696.9

Retirement 
Solutions
116.4
190.0
156.2

Fund and 
third-party 
management
92.3
100.6
92.0

UK and 
European 
development
81.7
81.4
81.5

German 
Residential 
80.2
87.1
81.3

Other
(29.0)
10.9
(6.4)

Total
564.9
1,334.1
1,101.5

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
104

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

4. SEGMENTAL INFORMATION Continued

2015 Reconciliation of NAV measures

(£m)
Investment property
Investment in associates
Investment in joint ventures
Financial interest in property assets
Intangible assets
Inventories – trading property
Trade and other receivables
Derivative ﬁnancial instruments
Cash and cash equivalents
Property, plant and equipment
Deferred tax asset
Value of own shares held
Total assets
Interest-bearing loans and borrowings
Trade and other payables
Retirement beneﬁts
Current tax liabilities
Provisions for other liabilities and charges
Deferred and contingent tax liabilities
Derivative ﬁnancial instruments
Total liabilities
Net assets

Adjustments  
to market  
value, deferred  
tax and  
derivatives
–
4.8
8.0
–
–
687.7
–
(2.0)
–
–
(7.1)
12.3
703.7
–
–
–
–
–
30.0
35.5
65.5
769.2

Statutory 
balance sheet
357.8
108.4
70.8
93.7
2.7
1,152.2
31.6
2.0
88.8
1.6
12.0
–
1,921.6
(1,226.4)
(56.9)
(1.7)
(3.0)
(0.9)
(32.3)
(35.5)
(1,356.7)
564.9

Gross NAV  
balance  
sheet
357.8
113.2
78.8
93.7
2.7
1,839.9
31.6
–
88.8
1.6
4.9
12.3
2,625.3
(1,226.4)
(56.9)
(1.7)
(3.0)
(0.9)
(2.3)
–
(1.291.2)
1,334.1

Deferred and  
contingent  
tax
–
(3.5)
(7.8)
–
–
–
–
–
–
–
–
–
(11.3)
–
–
–
–
–
(167.6)
–
(167.6)
(178.9)

Derivatives
–
(1.3)
(0.2)
–
–
–
–
2.0
–
–
13.6
–
14.1
(32.3)
–
–
–
–
–
(35.5)
(67.8)
(53.7)

Triple NAV  
balance  
sheet
357.8
108.4
70.8
93.7
2.7
1,839.9
31.6
2.0
88.8
1.6
18.5
12.3
2,628.1
(1,258.7)
(56.9)
(1.7)
(3.0)
(0.9)
(169.9)
(35.5)
(1,526.6)
1,101.5

105

In order to provide further analysis the following table sets out NNNAV assets and liabilities by segment. 

Segment assets and liabilities for NNNAV

30 September 2015  
(£m)
NNNAV assets
Investment property
Investment in associates
Investment in joint ventures
Financial interest in property assets
Intangible assets
Inventories – trading property
Trade and other receivables
Derivative ﬁnancial instruments
Cash and cash equivalents
Property, plant and equipment
Deferred tax asset
Value of own shares held
Total segment NNNAV assets
NNNAV liabilities
Interest-bearing loans and borrowings
Trade and other payables
Retirement beneﬁts
Current tax liabilities
Provisions for other liabilities and charges
Deferred and contingent tax liabilities
Derivative ﬁnancial instruments
Total segment NNNAV liabilities
Net NNNAV assets

UK  
Residential 

Retirement  
Solutions

Fund and  
third-party 
management

UK and  
European 
 development

German 
Residential 

Other

Total

169.1
–
–
–
0.5
1,452.8
3.9
–
56.6
–
–
–
1,682.9

(814.2)
(14.2)
–
(14.9)
(0.7)
(122.9)
(19.1)
(986.0)
696.9

46.1
–
–
93.7
–
292.1
3.6
–
3.5
–
8.2
–
447.2

(239.4)
(30.0)
–
(3.4)
–
(18.2)
–
(291.0)
156.2

–
86.5
60.1
–
–
–
2.5
–
5.2
–
–
–
154.3

(61.5)
(0.8)
–
–
–
–
–
(62.3)
92.0

–
–
10.7
–
–
95.0
17.0
–
18.2
–
–
–
140.9

(53.0)
(6.4)
–
–
–
–
–
(59.4)
81.5

142.6
21.9
–
–
1.2
–
1.9
–
5.3
–
0.1
–
173.0

(82.6)
(4.6)
–
1.5
–
(4.0)
(2.0)
(91.7)
81.3

–
–
–
–
1.0
–
2.7
2.0
–
1.6
10.2
12.3
29.8

(8.0)
(0.9)
(1.7)
13.8
(0.2)
(24.8)
(14.4)
(36.2)
(6.4)

357.8
108.4
70.8
93.7
2.7
1,839.9
31.6
2.0
88.8
1.6
18.5
12.3
2,628.1

(1,258.7)
(56.9)
(1.7)
(3.0)
(0.9)
(169.9)
(35.5)
(1,526.6)
1,101.5

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
 
106

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

4. SEGMENTAL INFORMATION Continued

2014 Segment net assets

(£m)
Total segment net assets (statutory)
Total segment net assets (NAV)
Total segment net assets (NNNAV)

2014 Reconciliation of NAV measures

(£m)
Investment property
Investment in associates
Investment in joint ventures
Financial interest in property assets
Intangible assets
Inventories – trading property
Trade and other receivables
Cash and cash equivalents
Property, plant and equipment
Deferred tax asset
Assets classiﬁed as held-for-sale
Value of own shares held
Total assets
Interest-bearing loans and borrowings
Trade and other payables
Retirement beneﬁts
Current tax liabilities
Provisions for other liabilities and charges
Deferred and contingent tax liabilities
Derivative ﬁnancial instruments
Total liabilities
Net assets

UK  
Residential
216.2
768.0
631.5

Retirement  
Solutions
135.1
207.3
176.9

Fund and 
third-party 
management
87.4
92.7
87.4

UK and 
European 
development
56.1
65.3
63.5

German 
Residential 
83.2
91.7
83.2

Other
(40.3)
(9.8)
(30.7)

Total
537.7
1,215.2
1,011.8

Adjustments to 
market value, 
deferred tax and 
derivatives
–
(0.4)
9.4
–
–
596.9
–
–
–
(9.6)
–
9.6
605.9
–
–
–
–
–
23.6
48.0
71.6
677.5

Statutory  
balance sheet
332.9
103.5
73.6
94.5
2.2
1,020.2
74.9
74.4
2.1
12.2
3.4
–
1,793.9
(1,118.1)
(54.5)
(2.2)
(6.5)
(1.1)
(25.8)
(48.0)
(1,256.2)
537.7

Gross NAV 
balance sheet
332.9
103.1
83.0
94.5
2.2
1,617.1
74.9
74.4
2.1
2.6
3.4
9.6
2,399.8
(1,118.1)
(54.5)
(2.2)
(6.5)
(1.1)
(2.2)
–
(1,184.6)
1,215.2

Deferred and 
contingent tax
–
–
(7.7)
–
–
–
–
–
–
–
–
–
(7.7)
–
–
–
–
–
(143.2)
–
(143.2)
(150.9)

Derivatives
–
0.4
(0.5)
–
–
–
–
–
–
13.1
–
–
13.0
(17.5)
–
–
–
–
–
(48.0)
(65.5)
(52.5)

Triple NAV 
balance sheet
332.9
103.5
74.8
94.5
2.2
1,617.1
74.9
74.4
2.1
15.7
3.4
9.6
2,405.1
(1,135.6)
(54.5)
(2.2)
(6.5)
(1.1)
(145.4)
(48.0)
(1,393.3)
1,011.8

In order to provide further analysis the following table sets out NNNAV assets and liabilities by segment. 

107

UK 
Residential

Retirement 
Solutions

Fund and 
third-party 
management

UK and 
European 
development

German 
Residential 

Other

Total

Segment assets and liabilities for NNNAV

30 September 2014  
(£m)
NNNAV assets
Investment property
Investment in associates
Investment in joint ventures
Financial interest in property assets
Intangible assets
Inventories – trading property
Trade and other receivables
Cash and cash equivalents
Property, plant and equipment
Deferred tax asset
Assets classiﬁed as held-for-sale
Value of own shares held
Total segment NNNAV assets
NNNAV liabilities
Interest-bearing loans and borrowings
Trade and other payables
Retirement beneﬁts
Current tax liabilities
Provisions for other liabilities and charges
Deferred and contingent tax liabilities
Derivative ﬁnancial instruments
Total segment NNNAV liabilities
Net NNNAV assets

5. GROUP REVENUE

Gross rental income (see Note 6)
Service charge income on a principal basis (see Note 6)
Gross proceeds from sale of trading property (see Note 7)
Fees and other income (see Note 10)

140.1
–
–
–
0.5
1,307.5
5.8
52.6
–
–
–
–
1,506.5

(746.9)
(7.6)
(2.2)
(0.6)
(0.8)
(103.2)
(13.7)
(875.0)
631.5

44.3
–
18.5
94.5
–
202.4
37.8
7.9
–
3.5
3.4
–
412.3

(193.8)
(26.5)
–
–
–
(15.1)
–
(235.4)
176.9

–
86.2
52.0
–
–
–
0.8
3.6
–
–
–
–
142.6

(55.0)
(0.1)
–
–
–
–
(0.1)
(55.2)
87.4

–
–
4.3
–
1.0
107.2
25.4
(6.4)
–
–
–
–
131.5

(59.4)
(6.8)
–
–
–
(1.8)
–
(68.0)
63.5

148.5
17.3
–
–
–
–
2.3
7.9
–
–
–
–
176.0

(80.4)
(5.1)
–
(0.1)
–
(3.0)
(4.2)
(92.8)
83.2

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

–
–
–
–
0.7
–
2.8
8.8
2.1
12.2
–
9.6
36.2

(0.1)
(8.4)
–
(5.8)
(0.3)
(22.3)
(30.0)
(66.9)
(30.7)

2015  
£m
58.7
4.7
172.5
8.2
244.1

332.9
103.5
74.8
94.5
2.2
1,617.1
74.9
74.4
2.1
15.7
3.4
9.6
2,405.1

(1,135.6)
(54.5)
(2.2)
(6.5)
(1.1)
(145.4)
(48.0)
(1,393.3)
1,011.8

2014  
£m
57.4
4.2
244.7
12.8
319.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

6. NET RENTAL INCOME

Gross rental income
Service charge income on a principal basis
Property repair and maintenance costs
Service charge expense on a principal basis

2015  
£m
58.7
4.7
(20.5)
(5.0)
37.9

2014  
£m
57.4
4.2
(20.4)
(5.3)
35.9

There are no contingent rents recognised within net rental income in 2015 or 2014 relating to properties where the Group acts as a lessor 
of assets under operating leases. A signiﬁcant proportion of the Group’s non-cancellable operating leases relate to Regulated Tenancies 
and Lifetime Leases under which tenants have the right to remain in a property for the remainder of their lives. It is therefore not possible 
to estimate the timing of future minimum lease payments. 

7. PROFIT ON DISPOSAL OF TRADING PROPERTY

Gross proceeds from sale of trading property
Selling costs
Net proceeds from sale of trading property
Carrying value of trading property sold

8. PROFIT ON DISPOSAL OF INVESTMENT PROPERTY

Gross proceeds from sale of investment property
Selling costs
Net proceeds from sale of investment property
Carrying value of investment property sold:
– Investment property (see note 18)
– Assets classiﬁed as held-for-sale (see note 39)

9. ADMINISTRATIVE EXPENSES

Total Group administrative expenses

10. FEES AND OTHER INCOME

Property and asset management fee income
Other sundry income

2015 
£m
172.5
(3.5)
169.0
(83.6)
85.4

2015  
£m
14.9
(0.4)
14.5

(10.2)
(3.8)
0.5

2015  
£m
36.1

2015  
£m
7.5
0.7
8.2

2014  
£m
244.7
(6.1)
238.6
(151.4)
87.2

2014  
£m
22.5
(0.6)
21.9

(12.5)
(8.6)
0.8

2014  
£m
34.7

2014  
£m
12.3
0.5
12.8

 
 
 
i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

11. OTHER EXPENSES

External costs relating to fee income
Transaction expenses
Business improvement costs 

12. EMPLOYEES

Wages and salaries
Termination beneﬁts
Social security costs
Other pension costs – deﬁned contribution scheme (see Note 30)
Share-based payments (see Note 32)

109

2014  
£m
0.9
2.5
0.2
3.6

2014  
£m
15.0
0.5
2.0
1.0
2.0
20.5

2015  
£m
0.2
4.9
0.5
5.6

2015  
£m
16.6
–
2.3
1.0
2.0
21.9

The 2014 comparatives for wages and salaries and social security costs have been amended to more accurately reﬂect the allocation 
between the categories in the table above. Interest on net pension scheme liabilities amounted to £nil in 2015 (2014: £0.2m) and is 
included within ﬁnance costs (see Note 14).

The average monthly number of Group employees during the year (including Executive Directors) was:

UK Residential
Retirement Solutions
UK and European development
German Residential
Shared services
Group

2015  
Number
99
15
9
20
118
17
278

2014  
Number
97
15
10
15
118
15
270

Details of Directors’ remuneration, including pension costs, share options and interests in the LTIS are provided in the audited section of the 
Remuneration Committee report on pages 62 to 69.

Information about beneﬁts of Directors
The following amounts are disclosed in accordance with Schedule 5 of the Large and Medium-Sized Companies and Groups (Accounts 
and Reports) Regulations 2008 (Schedule 5).

Aggregate Directors’ remuneration
Aggregate amount of gains on exercise of share options
Aggregate amount of money or assets received or receivable under scheme interests
Aggregate cash paid into deferred contribution pension schemes

2015  
£’000
1,810
–
3,134
159
5,103

2014  
£’000
2,552
239
3,562
167
6,520

The number of Directors in deﬁned contribution pension schemes during 2015 was three (2014: four). None of the Directors (2014: None) 
were members of the Group deﬁned beneﬁt scheme. 

 
110

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

12. EMPLOYEES Continued

Key management compensation

Short-term employee beneﬁts
Post-employment beneﬁts
Share-based payments
Payments for loss of ofﬁce

2015  
£m
5.7
0.4
1.5
–
7.6

2014  
£m
6.4
0.4
1.4
0.4
8.6

Key management ﬁgures shown above include Executive and Non-Executive Directors and all internal directors of speciﬁc functions.

13. PROFIT BEFORE TAX

Proﬁt before tax is stated after charging/(crediting):
  Depreciation on ﬁxtures, ﬁttings and equipment (see Note 19)
  Amortisation of IT software (see Note 23)
  Bad debt expense (see Note 25)
  Foreign exchange movements
  Operating lease payments
  Auditor’s remuneration (see below)

2015  
£m

2014  
£m

0.7
0.4
0.3
–
1.2
0.2

0.3
0.6
1.2
(0.1)
1.3
0.4

The remuneration paid to KPMG LLP, the Group’s principal auditor (2014: PricewaterhouseCoopers LLP), is disclosed below:

Auditor’s remuneration

Fees payable to the Company’s auditor and their associates for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and their associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation
Tax advisory services
Tax compliance services
Other assurance services
Other services not covered above
Total fees

2015  
£’000
107

2014  
£’000
117

126
2
12
–
–
247

134
76
–
74
22
423

The relevant proportion of amounts paid to the auditor for the audit of ﬁnancial statements of joint ventures is £4,000.

During the year, £12,000 was paid by the Group to KPMG LLP in connection with UK employment tax compliance services. £2,000 was 

paid for tax advisory services in Germany.

Details of the Group’s policy on the use of the Group’s auditors for other services, the reasons why the ﬁrm was used rather than another 

supplier and how the auditor’s independence and objectivity was safeguarded are set out in the Audit Committee report on pages 49 
to 52. No services were provided pursuant to contingent fee arrangements.

 
 
14. FINANCE COSTS AND INCOME

Finance costs
Bank loans and mortgages
Non-bank ﬁnancial institution
Convertible bond
Other ﬁnance costs 
Foreign exchange losses on ﬁnancing activities
Loan issue costs – amortisation and write off
Interest on net pension scheme liabilities (see Note 30)

Finance income
Interest receivable from associates and joint ventures (see Note 36)
Other interest receivable
Bank deposits

Net ﬁnance costs

111

2015  
£m

2014  
£m

35.9
23.7
–
0.1
–
8.0
–
67.7

1.6
0.2
0.1
1.9
65.8

40.2
19.2
1.2
–
0.1
5.4
0.2
66.3

2.4
0.3
0.2
2.9
63.4

Loan issue costs – amortisation and write off shown under ﬁnance costs in 2015 include a £3.5m charge relating to the accelerated write 
off of loan costs after reﬁnancing of bank syndicate debt during 2015 (see Note 3).

15. TAX

Current tax
Corporation tax on proﬁt
Adjustments relating to prior years

Deferred tax
Origination and reversal of temporary differences
Adjustments relating to prior years

Income tax charge for the year

2015  
£m

5.1
(3.7)
1.4

6.9
(1.0)
5.9
7.3

2014  
£m

5.3
(5.5)
(0.2)

7.6
(1.0)
6.6
6.4

The 2015 current tax adjustments relating to prior years include the utilisation of tax losses and other reliefs available to the Group which 
have been included in submitted tax returns.

The Group works in an open and transparent manner and maintains a regular dialogue with HM Revenue & Customs. This approach 
is consistent with the ‘low risk’ rating we have been awarded by HM Revenue & Customs, which was reconﬁrmed this year, and to which 
the Group is committed.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
 
112

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

15. TAX Continued

Movements in tax during the year are set out below:

2015 Movement in tax
Current tax
Deferred tax
Trading property uplift to fair value 
on business combinations 
Investment property revaluation 
Accelerated capital allowances
Short-term temporary differences
Actuarial deﬁcit on BPT Limited 
pension scheme
Equity component of available-for-sale 
ﬁnancial asset
Fair value movement in cash ﬂow 
hedges and exchange adjustments

Total tax – 2015 movement

Opening 
balance  
£m
6.5

Payments  
made in the 
year  
£m
(4.9)

Transfers  
£m
–

Acquired 
in the year  
£m
–

Movements 
recognised  
in income 
£m
1.4

Exchange 
adjustments 
£m
–

17.2
6.6
0.8
(11.1)

(0.4)

1.2

(0.7)
13.6
20.1

–
–
–
–

–

–

–
–
(4.9)

–
–
–
0.6

–

–

(0.6)
–
–

2.1
–
–
(1.9)

–

–

–
0.2
0.2

(1.3)
5.4
(0.1)
1.9

–

–

–
5.9
7.3

–
–
–
–

–

–

–
–
–

Deferred tax balances are disclosed as follows:
  Deferred tax assets: non-current assets
  Deferred tax liabilities: non-current liabilities 
Deferred tax

Movements 
recognised 
in other 
comprehensive 
income 
£m
–

–
–
–
–

Closing 
balance 
£m
3.0 

18.0
12.0
0.7
(10.5)

(0.1)

(0.5)

–

0.7
0.6
0.6

2015  
£m

12.0
(32.3)
 (20.3)

1.2

(0.6)
20.3
23.3

2014  
£m

12.2
(25.8)
(13.6)

Deferred tax has been predominantly calculated at a rate of 20% (2014: 20%). 

In addition to the tax amounts shown above, the Group has a contingent tax liability representing the difference between the carrying 
value of trading properties in the statement of ﬁnancial position and their market value. This contingent tax, which is not provided in the 
accounts, amounts to £137.5m (2014: £119.6m). 

No beneﬁt has been recognised in respect of deductible temporary differences with a tax value of £0.5m (2014: £1.4m).
It is not possible for the Group to identify the timing of movements in deferred tax between those expected within one year and those 

expected in greater than one year. This is because movements in the main balances, both assets and liabilities, will be determined by 
factors outside the control of the Group, namely the vacation date of properties and interest yield curve movements. However, given the 
long-term nature of our property ownership, we anticipate that the balance will predominantly be crystallised in a period greater than 
one year.

 
113

Opening 
balance  
£m
13.9

Payments  
made in the 
year  
£m
(7.2)

Movements 
recognised  
in income 
£m
(0.2)

Exchange 
adjustments 
£m
–

Transfers  
£m
–

Movements 
recognised 
in other 
comprehensive 
income 
£m
–

Closing 
balance 
£m
6.5

2014 Movement in tax
Current tax
Deferred tax
Trading property uplift to fair value 
on business combinations 
Investment property revaluation 
Accelerated capital allowances
Short-term temporary differences
Actuarial deﬁcit on BPT Limited 
pension scheme
Equity component of available-for-sale 
ﬁnancial asset
Fair value movement in cash ﬂow hedges 
and exchange adjustments

Total tax – 2014 movement

18.9
4.9
0.8
(15.6)

(0.5)

1.0

(3.9)
5.6
19.5

–
–
–
–

–

–

–
–
(7.2)

–
–
–
(1.9)

–

–

1.9
–
–

(1.7)
1.9
–
6.4

–

–

–
6.6
6.4

–
(0.2)
–
–

–

–

–
(0.2)
(0.2)

The tax charge for the year of £7.3m (2014: £6.4m) comprises:

UK tax
Overseas tax

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

–
–
–
–

0.1

0.2

1.3
1.6
1.6

2015  
£m
7.4
(0.1)
7.3

17.2
6.6
0.8
(11.1)

(0.4)

1.2

(0.7)
13.6
20.1

2014  
£m
7.3
(0.9)
6.4

The main rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group’s results for 
this accounting period are taxed at an effective rate of 20.5% and should be taxed at 20% in the 2016 period. The change in tax rate has 
no impact on the income statement in the current year (2014: no impact).

 
 
 
 
 
 
 
 
 
114

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

15. TAX Continued

The tax charge for the year is different to the charge for the year derived by applying the standard rate of corporation tax in the UK of 
20.5% (2014: 22%) to the proﬁt before tax. The differences are explained below:

Proﬁt before tax
Proﬁt before tax at a rate of 20.5% (2014: 22%)
Expenses not deductible for tax purposes
Share of joint ventures/associates after tax
Other losses and non-taxable items
Adjustment in respect of prior periods

2015  
£m
50.0
10.2
4.9
(2.8)
(0.3)
(4.7)
7.3

2014  
£m
81.1
17.8
1.1
(4.2)
(1.8)
(6.5)
6.4

As shown above, deferred tax has been taken directly to other comprehensive income in relation to the actuarial gain or loss on the BPT 
Limited pension scheme and the fair value movement in cash ﬂow hedges and exchange adjustments. The tax effect is shown separately 
within the consolidated statement of comprehensive income on page 81.

Factors that may affect future tax charges
In addition to the changes in rates of corporation tax disclosed above, a number of changes to the UK corporation tax system have been 
proposed. Subsequent to the year end a further reduction in the main rate has been substantively enacted, reducing the main rate to 19% 
from 1 April 2017 and to 18% from 1 April 2020. This reduction has not been reﬂected in the deferred tax items in the balance sheet as 
it was not substantively enacted at the year end. This change is therefore expected to reduce the net deferred tax liability of the Group in 
future periods. 

16. DIVIDENDS

Under IAS 10, ﬁnal dividends are excluded from the statement of ﬁnancial position either until they are approved by the Company in 
general meeting or until they have been appropriately authorised and are no longer at the Company’s discretion. Dividends paid in the year 
are shown below:

Ordinary dividends on equity shares:
Final dividend for the year ended 30 September 2013 – 1.46p per share
Interim dividend for the year ended 30 September 2014 – 0.61p per share
Final dividend for the year ended 30 September 2014 – 1.89p per share
Interim dividend for the year ended 30 September 2015 – 0.64p per share

2015  
£m

2014  
£m

–
–
7.8
2.6
10.4

6.0
2.5
–
–
8.5

A ﬁnal dividend in respect of the year ended 30 September 2015 of 2.11p per share amounting to £8.7m will be proposed at the 2016 
AGM. If approved, this dividend will be paid on 12 February 2016 to Shareholders on the register at close of business on 29 December 
2015. The 2015 interim dividend of 0.64p per share was paid in July 2015. This gives a total dividend for 2015 of 2.75p per share 
(2014: 2.50p per share).

 
115

17. EARNINGS PER SHARE

Basic
Basic earnings per share is calculated by dividing the proﬁt or loss attributable to the owners of the Company by the weighted average 
number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held both in trust and as 
treasury shares to meet its obligations under the long-term incentive scheme (‘LTIS’), Deferred Bonus Plan (‘DBP’) and SAYE schemes, 
on which the dividends are being waived.

Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of shares in issue by the dilutive effect of ordinary 
shares that the Company may potentially issue relating to its share option schemes and contingent share awards under the LTIS and DBP, 
based upon the number of shares that would be issued if 30 September 2015 was the end of the contingency period. Where the effect 
of the above adjustments is antidilutive, they are excluded from the calculation of diluted earnings per share. 

30 September 2015

30 September 2014

Weighted 
average 
number of 
shares 
(thousands)

Proﬁt for  
the year  
£m

Earnings  
per share 
pence

Proﬁt for  
the year  
£m

Weighted 
average 
number of 
shares 
(thousands)

Earnings  
per share 
pence

Basic earnings per share
Proﬁt attributable to equity holders 
Effect of potentially dilutive securities
Share options and contingent shares
Diluted earnings per share
Proﬁt attributable to equity holders

18. INVESTMENT PROPERTY

Opening balance 
Additions
Disposals (see Note 8)
Net transfer to assets classiﬁed as held-for-sale (see Note 39)
Net valuation gains
Exchange adjustments
Closing balance

42.7

412,440

10.4

74.7

411,806

–

2,927

(0.1)

–

4,333

42.7

415,367

10.3

74.7

416,139

2015  
£m
332.9
29.6
(10.2)
(0.4)
13.9
(8.0)
357.8

18.1

(0.2)

17.9

2014  
£m
354.1
3.4
(12.5)
(2.2)
1.5
(11.4)
332.9

The Group has valued all of its investment property as at 30 September 2015 at fair value. The current use of the property is considered to 
be highest and best use.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
116

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

18. INVESTMENT PROPERTY Continued

Information relating to the basis of valuation of investment property, the use of external independent valuers, and the judgements 
and assumptions adopted by management is set out in Note 2 ‘Critical accounting estimates and assumptions’. The fees paid to the 
independent valuers were not on a contingent basis.

A net revaluation gain of £13.9m has arisen on valuation of investment property to fair value as at 30 September 2015 (2014: £1.5m) and 

this has been taken to the income statement. 

The historical cost of the Group’s investment property as at 30 September 2015 is £362.2m (2014: £351.6m). 
Rental income from investment property during the year was £20.8m (2014: £22.1m).
Direct property repair and maintenance costs arising from investment property that generated rental income during the year was £7.6m 

(2014: £7.4m). 

The decrease in value of £8.0m (2014: decrease of £11.4m) relates to an exchange movement on the Group’s German Residential 

property. This reﬂects the movement in the Sterling/Euro exchange rate between the respective year end dates, and is recognised within 
other comprehensive income.

19. PROPERTY, PLANT AND EQUIPMENT

Cost
Opening cost
Additions
Disposals
Foreign exchange movements
Closing cost
Accumulated depreciation
Opening accumulated depreciation
Charge for the year
Disposals
Foreign exchange movements
Closing accumulated depreciation
Net book value:
Closing net book value
Opening net book value

All property, plant and equipment relates to ﬁxtures, ﬁttings and equipment.

Total 
2015  
£m

6.6
0.2
(0.1)
–
6.7

4.5
0.7
(0.1)
–
5.1

1.6
2.1

Total 
2014  
£m

5.3
1.3
(0.1)
0.1
6.6

4.7
0.3
(0.1)
(0.4)
4.5

2.1
0.6

 
 
 
 
20. INVESTMENT IN ASSOCIATES

Opening balance
Share of proﬁt for the year
Dividends received
Loans (repaid by)/advanced to associates
Loan interest received
Exchange movements
Share of change in fair value of cash ﬂow hedges taken through other comprehensive income
Closing balance

As at 30 September 2015, the Group’s interest in associates was as follows:

G:Res 1 Limited
GRIP Unit Trust
MH Grainger JV Sarl*
Vesta LP

117

2014  
£m
88.2
21.1
(3.4)
0.7
(1.2)
(1.4)
(0.5)
103.5

2015  
£m
103.5
15.4
(2.1)
(7.2)
–
(0.8)
(0.4)
108.4

% of ordinary 
share capital/ 
units held
26.2
24.9
21.0
15.0

Country of 
incorporation
Jersey
Jersey
Luxembourg
United Kingdom

*   Grainger FRM GmbH holds a 20.969% interest in the equity of MH Grainger JV Sarl which owns 94.9% of the equity of Grainger Stuttgart Portfolio one GmbH & Co. KG and Grainger 

Stuttgart Portfolio two GmbH & Co. KG (‘Stuttgart Portfolios’). Grainger FRM GmbH holds a direct interest of 5.1% in the equity of the Stuttgart Portfolios. Overall, therefore, Grainger FRM 
GmbH has an interest of 25% in the equity of the Stuttgart Portfolios.

Although the Group acts as property and/or asset manager for the GRIP Unit Trust and MH Grainger JV Sarl, the remaining equity of each 
is held by a single investor. Each investor is actively involved in the respective business and in controlling the key ﬁnancial and operational 
activities of the business. Accordingly, the Group does not have de facto control of these entities. G:Res 1 Limited is being voluntarily wound 
up and the Group no longer provides any management services to it. The wind up process is under the direction of the fund’s Trustees and 
the Group’s investment at 30 September 2015 is £0.1m. Although the Group’s equity interest in Vesta LP is 15%, the investment is being 
equity accounted as an associate as the Group is exercising signiﬁcant inﬂuence through its representation on the Board. 

Apart from the Vesta LP, which has an accounting period end of 30 September, the accounting period end of all associates is 

31 December 2015. The results of associates for the 12 months to 30 September 2015 and their ﬁnancial position as at that date have 
been equity accounted in these ﬁnancial statements.

In relation to the Group’s investment in associates, the Group’s share of the aggregated assets, liabilities, revenues and proﬁt or loss of 
associates is shown below:

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
118

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

20. INVESTMENT IN ASSOCIATES Continued

2015 Summarised income statement

Net rental income and other income
Administration and other expenses
Proﬁt on disposal of properties
Operating proﬁt 
Revaluation gains on investment property 
Change in fair value of derivatives
Interest payable
Proﬁt/(loss) before tax
Tax
Proﬁt/(loss) after tax

2015 Summarised statement of ﬁnancial position
Trading and investment property
Current assets
Total assets
Non-current liabilities
Current liabilities
Net assets

2014 Summarised income statement

Net rental income and other income
Administration and other expenses
Proﬁt on disposal of properties
Operating proﬁt 
Revaluation gains on investment property 
Change in fair value of derivatives
Interest payable
Proﬁt before tax
Tax
Proﬁt after tax

2014 Summarised statement of ﬁnancial position
Trading and investment property
Current assets
Total assets
Non-current liabilities
Current liabilities
Net assets

MH Grainger  
JV Sarl
1.3
(0.3)
0.6
1.6
8.2
–
(1.0)
8.8
(3.1)
5.7

48.2
8.9
57.1
(24.8)
(10.4)
21.9

GRIP Unit 
Trust
4.3
(0.7)
1.0
4.6
8.9
(0.4)
(3.2)
9.9
–
9.9

128.7
8.7
137.4
(48.8)
(2.2)
86.4

MH Grainger  
JV Sarl
2.1
(0.3)
0.8
2.6
2.2
(0.2)
(1.8)
2.8
(1.6)
1.2

46.5
6.5
53.0
(29.3)
(6.4)
17.3

G:Res1 
Limited
–
(0.2)
–
(0.2)
–
–
–
(0.2)
–
(0.2)

–
0.1
0.1
–
–
0.1

GRIP Unit 
Trust
4.1
(0.5)
1.0
4.6
17.4
(0.3)
(2.6)
19.1
0.8
19.9

118.1
6.3
124.4
(39.0)
(0.8)
84.6

Vesta LP
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–

G:Res1 
Limited
–
–
–
–
–
–
–
–
–
–

–
1.6
1.6
–
–
1.6

Total  
£m
5.6
(1.2)
1.6
6.0
17.1
(0.4)
(4.2)
18.5
(3.1)
15.4

176.9
17.7
194.6
(73.6)
(12.6)
108.4

Total  
£m
6.2
(0.8)
1.8
7.2
19.6
(0.5)
(4.4)
21.9
(0.8)
21.1

164.6
14.4
179.0
(68.3)
(7.2)
103.5

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

21. INVESTMENT IN JOINT VENTURES

At 1 October 2013
Loans advanced 
Increase in provisions against loans
Loan interest received
Disposal
Share of proﬁt for the year
Exchange adjustment
Distributions received
At 30 September 2014
Loans advanced 
Increase in provisions against loans
Loan interest received
Disposal
Share of proﬁt for the year
Transfer
Share of change in fair value of cash ﬂow hedges taken through other comprehensive income
Distributions received
At 30 September 2015

Net assets  
£m
42.9
–
–
–
(0.4)
14.4
(0.1)
(0.9)
55.9
–
–
–
(14.6)
9.5
(0.8)
(0.3)
(0.6)
49.1

Loans  
£m
14.8
2.8
(0.4)
(0.3)
–
1.7
(0.9)
–
17.7
7.4
(4.1)
(0.7)
0.6
–
0.8
–
–
21.7

119

Total  
£m
57.7
2.8
(0.4)
(0.3)
(0.4)
16.1
(1.0)
(0.9)
73.6
7.4
(4.1)
(0.7)
(14.0)
9.5
–
(0.3)
(0.6)
70.8

On 1 June 2015, the Group disposed of its joint venture interest in New Sovereign Reversions Limited to Lone Star Real Estate Fund III. 
The consideration received was £18.4m, resulting in a proﬁt on sale of £4.4m. 

On 17 October 2013, the Group disposed of its 50% interest in Gebau Vermogen GmbH to our joint venture partners, for a 

consideration of €0.5m (£0.4m), resulting in a proﬁt on sale of £0.1m following receipt of a dividend.

At 30 September 2015, the Group’s interest in joint ventures was as follows:

Curzon Park Limited
King Street Developments (Hammersmith) Limited
Walworth Investment Properties Limited
CCZ a.s.
CCY a.s.
Prazsky Project a.s.

% of ordinary share capital held
50
50
50
50
50
50

Country of incorporation
United Kingdom
United Kingdom
United Kingdom
Czech Republic
Czech Republic
Czech Republic

The accounting period end of Curzon Park Limited is 28 February. The results for the 12 months to 30 September 2015 and the ﬁnancial 
position as at that date have been equity accounted in these ﬁnancial statements.

The accounting period end of King Street Developments (Hammersmith) Limited is 31 March. The results for the 12 months to 

30 September 2015 and the ﬁnancial position as at that date have been equity accounted in these ﬁnancial statements.

The proposed High Speed Rail Link (‘HS2’) from London to Birmingham indicates that the potential route will cover at least part of our 

development site at Curzon Park in Birmingham. We are assessing the long-term impact with our advisers and aim to collaborate with 
other affected owners in the area as well as with HS2 Ltd, the company responsible for developing and promoting this new rail link. 
HS2 remains a clear policy from the government. HS2 Ltd continue to discuss the planned rail link with the government and communities 
affected by the proposed route. Changes to the HS2 Hybrid Bill are being considered by the HS2 Select Committee as a result of these 
discussions and consultations. Royal Assent of the HS2 Hybrid Bill could be sought in late 2016 or early 2017 although there is still 
uncertainty around the exact timing. Royal Assent would give legal permission to construct the line, leading to commencement 

 
 
 
120

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

21. INVESTMENT IN JOINT VENTURES Continued

of a Compulsory Purchase Order (CPO) process which we could expect to follow during 2017. We have no current view from advisers 
on possible CPO value. As a result of the continuing uncertainty around the CPO process, the Group has decided to further impair its 
investment in Curzon Park Limited. The Group has made a further provision in 2015 of £3.2m (2014: £nil) to write down its investment 
to £4.8m (2014: £8.0m). The value of £4.8m has been provided by CBRE Limited, the Group’s external, independent valuers for its 
development assets. This is based on the value the site may have as a development opportunity discounted to reﬂect the uncertainty 
around HS2 and the CPO process. 

The companies in Prague in which the Group holds a 50% equity stake have received planning permission to develop a site at Zizkov in 
the suburbs of Prague. However, a challenge has been made contesting the permission granted. As a result of the challenge, the Directors 
have reviewed the carrying value of the investment for future impairment. Given the considerable time it has taken to reach the current 
planning position and the on-going uncertainties, the Group has made a provision of £0.9m (2014: £2.4m) against the further investment 
made during 2015 to retain the carrying value at £nil. 

In relation to the Group’s investment in joint ventures, the Group’s share of the aggregated assets, liabilities, revenues and proﬁt or loss 

are shown below: 

2015 Summarised income statement

Net rental income and other income
Administration and other expenses
Proﬁt on disposal of properties
Operating proﬁt 
Net revaluation gains on investment property
Interest payable
Proﬁt before tax
Tax
Proﬁt after tax

Czech Republic 
combined  
£m
–
–
–
–
–
–
–
–
–

King Street 
Developments 
(Hammersmith) 
Limited  
£m
–
–
–
–
–
–
–
–
–

New Sovereign 
Reversions 
Limited  
£m
–
(0.2)
1.0
0.8
–
(0.3)
0.5
–
0.5

Curzon Park 
Limited  
£m
–
–
–
–
–
–
–
–
–

2015 Summarised statement of ﬁnancial position

Trading and investment property
Current assets
Total assets
Non-current liabilities
Current liabilities
Net assets

Czech Republic 
combined  
£m
11.6
0.6
12.2
(3.5)
(8.7)
–

King Street 
Developments 
(Hammersmith) 
Limited  
£m
5.4
0.7
6.1
–
(6.1)
–

Curzon Park 
Limited  
£m
17.4
0.1
17.5
–
(21.9)
(4.4)

Walworth 
Investment 
Properties 
Limited  
£m
1.6
–
0.2
1.8
11.3
(1.7)
11.4
(2.4)
9.0

Walworth 
Investment 
Properties 
Limited  
£m
94.8
3.9
98.7
(30.0)
(15.2)
53.5

Total  
£m
1.6
(0.2)
1.2
2.6
11.3
(2.0)
11.9
(2.4)
9.5

Total  
£m
129.2
5.3
134.5
(33.5)
(51.9)
49.1

The results and ﬁnancial position of the three Czech Republic companies have been aggregated in the above tables as individually they are 
not material and the development being undertaken in Prague is being managed as a single development with each company owning 
part of the combined site.

2014 Summarised income statement

Net rental income and other income
Administration and other expenses
Proﬁt on disposal of properties
Operating proﬁt 
Net revaluation gains on investment property
Interest payable
Change in fair value of derivatives 
Net realisable value provision movement
(Loss)/proﬁt before tax
Tax
(Loss)/proﬁt after tax

Czech Republic 
combined  
£m
–
–
–
–
–
(0.3)
–
–
(0.3)
–
(0.3)

King Street 
Developments 
(Hammersmith) 
Limited  
£m
–
–
–
–
–
–
–
–
–
–
–

Curzon Park 
Limited  
£m
–
–
–
–
–
(0.1)
–
(1.3)
(1.4)
–
(1.4)

New Sovereign 
Reversions 
Limited  
£m
–
(0.5)
1.1
0.6
–
(0.6)
–
–
–
0.5
0.5

2014 Summarised statement of ﬁnancial position

Trading and investment property
Current assets
Total assets
Non-current liabilities
Current liabilities
Net assets/(liabilities)

Czech Republic 
combined  
£m
12.0
0.7
12.7
(3.3)
(8.4)
1.0

King Street 
Developments 
(Hammersmith) 
Limited  
£m
3.1
0.1
3.2
(3.2)
–
–

New Sovereign 
Reversions 
Limited  
£m
25.6
1.9
27.5
(11.3)
(1.9)
14.3

Curzon Park 
Limited  
£m
17.3
0.1
17.4
(12.4)
(9.5)
(4.5)

22. FINANCIAL INTEREST IN PROPERTY ASSETS

Opening balance
Cash received from the instrument
Amounts taken to income statement
Amounts taken to other comprehensive income before tax
Closing balance

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

121

Total  
£m
1.5
(0.5)
1.3
2.3
19.5
(2.6)
(0.1)
(1.3)
17.8
(3.4)
14.4

Total  
£m
142.6
6.2
148.8
(67.0)
(25.9)
55.9

2014  
£m
96.3
(9.8)
7.0
1.0
94.5

Walworth 
Investment 
Properties 
Limited  
£m
1.5
–
0.2
1.7
19.5
(1.6)
(0.1)
–
19.5
(3.9)
15.6

Walworth 
Investment 
Properties 
Limited  
£m
84.6
3.4
88.0
(36.8)
(6.1)
45.1

2015  
£m
94.5
(10.0)
9.2
–
93.7

Financial interest in property assets relates to the CHARM portfolio, which is a ﬁnancial interest in equity mortgages held by the Church 
of England Pensions Board as mortgagee. It is accounted for under IAS 39 in accordance with the designation available-for-sale ﬁnancial 
assets and is valued at fair value. 

The CHARM portfolio is considered to be a Level 3 ﬁnancial asset as deﬁned by IFRS 13. The key assumptions used to value the asset 
are set out within Note 2 ‘Critical accounting estimates and assumptions’, and the ﬁnancial asset is included within the fair value hierarchy 
within Note 29.

 
122

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

23. INTANGIBLE ASSETS

Cost
Opening cost at 1 October 2014
Additions
Foreign exchange movements
Closing cost at 30 September 2015
Accumulated amortisation
Opening accumulated amortisation at 1 October 2014
Charge for the year
Closing accumulated amortisation at 30 September 2015
Net book value
Closing net book value at 30 September 2015
Opening net book value at 1 October 2014

Cost
Opening cost at 1 October 2013
Additions
Closing cost at 30 September 2014
Accumulated amortisation
Opening accumulated amortisation at 1 October 2013
Charge for the year
Closing accumulated amortisation at 30 September 2014
Net book value
Closing net book value at 30 September 2014
Opening net book value at 1 October 2013

Goodwill is tested annually for impairment based on a value in use calculation.

24. INVENTORIES – TRADING PROPERTY

Residential trading property*
Development trading property

Goodwill  
£m

IT Software 
£m

Total  
£m

0.6 
–
–
0.6

–
–
–

0.6
0.6

2.2 
1.0
(0.1)
3.1

0.6
0.4
1.0

2.1
1.6

2.8
1.0
(0.1)
3.7

0.6
0.4
1.0

2.7
2.2

Goodwill  
£m

IT Software 
£m

Total  
£m

0.6
–
0.6

–
–
–

0.6
0.6

0.8
1.4
2.2

–
0.6
0.6

1.6
0.8

1.4
1.4
2.8

–
0.6
0.6

2.2
1.4

2015  
£m
1,056.9
95.3
1,152.2

2014  
£m
925.8
94.4
1,020.2

*  Residential trading property comprises assets held within the UK Residential and Retirement Solutions divisions.

Trading property of £83.6m (2014: £151.4m) was recognised as an expense during the year and included in ‘proﬁt on disposal of 
trading property’.

 
 
 
 
 
 
 
 
 
 
123

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

The market value of inventories as at 30 September 2015 was £1,839.9m (2014: £1,617.1m).

Provisions of £1.2m against the net realisable value of trading property have been made in the consolidated income statement in the year 

(2014: a write-back of £0.8m). Further details are given in Note 2 ‘Critical accounting estimates and assumptions’. 

It is not possible for the Group to identify which properties will be sold within the next 12 months. The size of the Group’s property 

portfolio does result in a relatively predictable vacancy rate. However, it is not possible to predict in advance the speciﬁc properties that will 
become vacant. Trading property is shown as a current asset in the consolidated statement of ﬁnancial position.

25. TRADE AND OTHER RECEIVABLES

Trade receivables
Deduct: Provision for impairment of trade receivables
Trade receivables – net
Other receivables
Prepayments 

2015  
£m
23.2
(1.8)
21.4
2.3
7.9
31.6

2014  
£m
62.4
(2.2)
60.2
5.5
9.2
74.9

Trade receivables in 2014 include deferred consideration receivable of £4.0m in from sales within our Development division at our 
previously held Gateshead College site. This was received during the year. Included within trade receivables is £nil (2014: £35.0m) of 
deferred consideration relating to the portfolio sale to Clifden Holdings Limited. £15.8m has been written off in the 2015 consolidated 
income statement, with the balance recovered through the re-acquisition of Equity Release (Increments) Limited (further details are set out 
in Note 40).

Other receivables in 2014 include a loan of £3.7m made to Clarins Limited to enable that company to develop a property in the City of 
Westminster. The property was sold in 2015 but there was a shortfall of £0.6m in proceeds compared to the value of the loan. This has 
been written off through other expenses in the consolidated income statement.

The fair values of trade and other receivables are considered to be equal to their carrying amounts. The credit quality of ﬁnancial assets 

that are neither past due nor impaired is discussed in Note 29, ‘Financial risk management and derivative ﬁnancial instruments’. 

Movements on the Group provision for impairment of trade receivables are as follows:

Opening balance
Provision for receivables impairment during the year
Receivables written off during the year as not recoverable
Unused amounts reversed
Foreign exchange movement
Closing balance

2015  
£m
2.2
1.0
(0.6)
(0.7)
(0.1)
1.8

2014  
£m
1.3
1.8
(0.3)
(0.6)
–
2.2

The charge relating to the creation and release of provisions for impaired receivables has been included in ‘property repair and 
maintenance costs’ in the consolidated income statement (see Note 6). Amounts provided for are generally written off when there is no 
expectation of recovering additional cash.

 
 
124

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

25. TRADE AND OTHER RECEIVABLES Continued

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

Pounds Sterling
Euros

26. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Opening balance
Transfer from other payables
Addition
Utilisation
Released
Closing balance

2015  
£m
29.7
1.9
31.6

Current

Non-current

2015  
£m
0.8
0.2
0.1
(0.2)
(0.2)
0.7

2014  
£m
2.9
–
0.9
(2.5)
(0.5)
0.8

2015  
£m
0.3
–
–
(0.1) 
–
0.2

2014  
£m
72.6
2.3
74.9

2014  
£m
0.4
–
–
(0.1)
–
0.3

The Group holds a non-current provision of £0.2m (2014: £0.3m) that relates to the estimated cost of providing private medical insurance 
to former directors of BPT Limited.

In addition, a provision of £0.7m (2014: £0.8m) relates to maintenance liabilities arising on certain of the Group’s freehold properties. 

We expect such obligations to be settled within 12 months of the statement of ﬁnancial position date. 

27. TRADE AND OTHER PAYABLES

Deposits received
Trade payables
Tax and social security costs
Accruals 
Deferred income

2015  
£m
2.9
12.0
0.5
29.5
12.0
56.9

2014  
£m
2.4
12.0
2.4
23.9
13.8
54.5

Accruals and deferred income includes £10.8m (2014: £12.9m) of rent received in advance relating to lifetime leases. It is not possible for 
the Group to identify which properties will become vacant within the next 12 months and therefore to identify the proportion of rent 
received in advance that is expected to be released to the income statement within the next 12 months. 

Information about the Group’s exposure to currency and liquidity risks is included in Note 29.

 
 
28. INTEREST-BEARING LOANS AND BORROWINGS

Current liabilities
Bank loans 
Non-bank ﬁnancial institution
Mortgages
Corporate bond

Non-current liabilities
Bank loans
Non-bank ﬁnancial institution
Mortgages
Corporate bond

Total interest-bearing loans and borrowings

125

2014  
£m

33.5
(0.1)
0.3
(0.6)
33.1

2015  
£m

124.4
9.3
0.2
(0.6)
133.3

537.7
266.2
16.8
272.4
1,093.1
1,226.4

612.6
182.6
18.0
271.8
1,085.0
1,118.1

Information about the Group’s exposure to interest rate, foreign currency and liquidity risks is included in Note 29. 

The £0.6m debit shown above under current liabilities for the Corporate bond represents the bond issue costs that will be amortised to 

the income statement during the next ﬁnancial year. The Corporate bond does not mature until December 2020.

The analysis of the loans and borrowings in the below tables (a) to (e) is before deducting unamortised issue costs of £11.1m 

(2014: £12.7m) relating to the raising of the loan ﬁnance and a fair value adjustment of £8.2m arising from the acquisition of debt as 
part of the acquisition of Equity Release (Increments) Limited. It also includes the premium raised on the second issue (tap issue) on 
the corporate bond, which is treated as a liability on the balance sheet and amortised using the effective interest rate method. As at 
30 September 2015, the unamortised premium was £0.7m (2014: £0.8m).

(a) Analysis of bank loans

Bank loans – Pounds Sterling
Bank loans – Euro

2015  
£m
528.7
140.0
668.7

2014  
£m
497.8
155.8
653.6

Sterling bank loans include variable rate loans bearing interest at rates between 1.7% and 2.55% above LIBOR and Euro bank loans include 
variable rate loans bearing interest at rates between 0.8% and 2.2% above EURIBOR. Fixed rate loans bear interest at rates between 5.2% 
and 6.3%.

The weighted average variable interest rate on bank loans as at 30 September 2015 was 2.3% (2014: 2.8%). Bank loans are secured by 

ﬁxed and ﬂoating charges over speciﬁc property and other assets of the Group.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
126

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

28. INTEREST-BEARING LOANS AND BORROWINGS Continued

(b) Analysis of non-bank ﬁnancial institutions

Fixed rate – Pounds Sterling
Variable rate – Pounds Sterling

2015  
£m
142.1
125.8
267.9

2014  
£m
83.1
100.0
183.1

The ﬁxed rate loans are secured by speciﬁc assets within the Retirement Solutions division and bear interest at a weighted average rate of 
7.0%. £100m of the variable rate loan is secured by ﬂoating charges over the assets of the Group and bears interest at 4.0% over LIBOR. 
The balance is funded by the Homes and Communities Agency and bears interest at 1% over the EC reference rate. 

(c) Mortgages

Mortgages – Euro

2015  
£m
17.0

2014  
£m
18.2

The mortgages are secured by ﬁxed and ﬂoating charges over speciﬁc investment property in the Group’s German Residential portfolio 
and bear interest at a ﬁxed rate of 0.5%.

(d) Convertible bond

Opening balance
Amortised during the year
Repaid during the year
Closing balance (Pounds Sterling)

The convertible bond reached maturity in May 2014 and the nominal value was repaid in full.

(e) Corporate bond

Corporate bond – Pounds Sterling

2015  
£m
–
–
–
–

2014  
£m
24.3
0.6
(24.9)
–

2015  
£m
275.0

2014  
£m
275.0

The £275m, 5.0% secured corporate bond, due December 2020, was issued in the ﬁnancial year ended September 2014. The primary 
issue was £200m issued at par in November 2013 with a secondary tap issue in August 2014 of £75m issued at 101.125%. The premium 
on the tap issue is being amortised to the income statement using the effective interest rate method.

Other loans and borrowings information
The core banking facility, variable rate UK bank loans, the European bank loans and the Homes and Communities Agency loans are 
generally rolled over every three months. At roll over, LIBOR, EURIBOR and the EC reference rate are reset for the following interest period.

 
The maturity proﬁle of the Group’s debt, net of ﬁnance costs, is as follows:

Within one year
Between one and two years
Between two and ﬁve years
More than ﬁve years
Total non-current interest bearing loans and borrowings

127

2015  
£m
133.3
52.8
582.5
457.8
1,093.1
1,226.4

2014  
£m
33.1
516.8
73.3
494.9
1,085.0
1,118.1

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS

Categories of ﬁnancial instruments
A summary of the classiﬁcations of the ﬁnancial assets and liabilities held by the Group is set out in the following table:

2015

Loans and 
receivables/
cash and cash 
equivalents 
£m

Assets at fair 
value through 
proﬁt and 
loss  
£m

Derivatives 
used for 
hedging 
£m

Available- 
for-sale  
£m

Total book 
value  
£m

Fair value  
£m

Fair value 
adjustment 
£m

–

–

23.7
–
88.8
112.5

–
2.0
–
2.0

–

–
–
–
–

93.7

93.7

93.7

–
–
–
93.7

23.7
2.0
88.8
208.2

23.7
2.0
88.8
208.2

–

–
–
–
–

Loans and 
receivables/
cash and cash 
equivalents 
£m

Liabilities at 
fair value 
through 
proﬁt and 
loss 
£m

Other 
ﬁnancial 
liabilities at 
amortised 
cost 
£m

Derivatives 
used for 
hedging 
£m

Total book 
value  
£m

Fair value  
£m

Fair value 
adjustment 
£m

–

–

–

1,093.1

1,093.1

1,125.4

–
–
–
–
112.5

–
–
30.5
30.5
(28.5)

–
–
5.0
5.0
(5.0)

133.3
56.9
–
1,283.3
(1,189.6)

133.3
56.9
35.5
1,318.8
(1,110.6)

133.3
56.9
35.5
1,351.1
(1,142.9)

–

–
–
–
–
–

Non-current assets
Financial interest in property assets
Current assets
Trade and other receivables excluding 
prepayments
Derivative ﬁnancial instruments
Cash and cash equivalents
Total ﬁnancial assets

Non-current liabilities
Interest-bearing loans and borrowings
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Derivative ﬁnancial instruments
Total ﬁnancial liabilities
Total net ﬁnancial assets/(liabilities)

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
128

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS Continued

The fair value adjustment relates to the Group’s ﬁxed rate loans with Lloyds Bank plc, Partnership Assurance Group plc, UniCredit Bank 
AG, Just Retirement Limited and the Corporate Bond, all of which are stated at amortised cost in the consolidated statement of ﬁnancial 
position. The fair value of these ﬁxed rate loans is calculated as £479.3m (2014: £400.4m). There is no requirement under IAS 39 to revalue 
these loans to fair value in the consolidated statement of ﬁnancial position.

Non-current assets
Financial interest in property assets
Current assets
Trade and other receivables excluding prepayments
Cash and cash equivalents
Total ﬁnancial assets

Non-current liabilities
Interest-bearing loans and borrowings
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Derivative ﬁnancial instruments
Total ﬁnancial liabilities
Total net ﬁnancial assets/(liabilities)

2014

Loans and 
receivables/
cash and cash 
equivalents 
£m

Assets at  
fair value 
through proﬁt 
and loss  
£m

Derivatives 
used for 
hedging 
£m

Available- 
for-sale  
£m

Total book 
value  
£m

Fair value  
£m

–

65.7
74.4
140.1

–

–
–
–

–

–
–
–

94.5

94.5

94.5

–
–
94.5

65.7
74.4
234.6

65.7
74.4
234.6

Loans and 
receivables/
cash and cash 
equivalents 
£m

Liabilities at 
fair value 
through proﬁt 
and loss 
£m

Derivatives 
used for 
hedging 
£m

Other 
ﬁnancial 
liabilities at 
amortised 
cost 
£m

Total book 
value  
£m

Fair value  
£m

–

–

–

1,085.0

1,085.0

1,102.5

–
–
–
–
140.1

–
–
42.8
42.8
(42.8)

–
–
5.2
5.2
(5.2)

33.1
54.5
–
1,172.6
(1,078.1)

33.1
54.5
48.0
1,220.6
(986.0)

33.1
54.5
48.0
1,238.1
(1,003.5)

129

Financial risk management
The Group’s objectives for managing ﬁnancial risk are to minimise the risk of adverse effects on performance and to ensure the ability of 
the Group to continue as a going concern while securing access to cost-effective ﬁnance and maintaining ﬂexibility to respond quickly to 
opportunities that arise.

The Group’s policies on ﬁnancial risk management are approved by the Board of Directors and implemented by Group treasury. 

Written policies and procedures cover interest rate risk, credit risk, the use of derivative and non-derivative ﬁnancial instruments 
and investment of excess liquidity. Compliance is monitored by internal audit. Group treasury reports to the Board Risk and 
Compliance Committee.

The Group uses derivative ﬁnancial instruments to hedge its exposure to ﬁnancial risk but does not take positions for 

speculative purposes.

The sources of ﬁnancial risk and the policies and activities used to mitigate each are discussed below and include credit risk, liquidity risk 

and market risk, which includes interest rate risk, foreign exchange risk, credit availability risk, house price risk in relation to the Tricomm 
Housing portfolio and the CHARM portfolio, our ﬁnancial interest in property assets, and capital risk.

Credit risk
Credit risk is the risk of ﬁnancial loss due to a counterparty’s failure to honour its obligations. The Group’s principal ﬁnancial assets include 
its ﬁnancial interest in property assets, bank balances and cash, trade and other receivables. The carrying amount of ﬁnancial assets 
recorded in the ﬁnancial statements represents the Group’s maximum exposure to credit risk without taking account of the value of any 
collateral obtained.

The Group’s ﬁnancial interest in property assets relates to a ﬁnancial interest in equity mortgages held by the Church of England Pensions 

Board as mortgagee, a counterparty considered to be low risk as they have no history of past due or impaired amounts and there are no 
past due amounts outstanding at the year end.

The Group sometimes enters entered into sales contracts within the Development division under which a proportion of the consideration 
is deferred. Each purchaser is subject to ﬁnancial due diligence prior to sale and the Group retains a legal charge over the land until full and 
ﬁnal settlement is received. At 30 September 2015, £nil (2014: £4.0m) was outstanding from no (2014: one) counterparties. In addition, 
at 30 September 2014, £35.0m deferred consideration was due from a portfolio sale in the Retirement Solutions division (see Note 40 for 
further details of movements in 2015). The Group had some protection from credit risk by a call option over the entire share capital of the 
entity sold to the counterparty. 

The Group’s principal credit risk relates to trade receivables. Where it is identiﬁed that recovery is doubtful, a provision for impairment 

is made. For all Assured Shorthold Tenancies, credit checks are performed prior to acceptance of the tenant. Regulated tenants are 
incentivised through the beneﬁt of their tenancy, agreement to avoid default on their rent. Lifetime tenancies are generally at low or zero 
rent and hence suffer minimal credit risk. Rent deposits and personal guarantees are held in respect of some leases. Taking these factors 
into account, the risk to the Group of individual tenant default and the credit risk of trade receivables is considered low, as is borne out by 
the low level of trade receivables written off both in this year and in prior years.

Tenant deposits of £1.5m (2014: £1.9m) are held that provide some security against rental arrears and property dilapidations caused by 
the tenant. The Group does not hold any other collateral as security. Of the net trade receivables balance of £21.4m, we consider £14.8m 
to be not due and not impaired. Of the £2.3m other receivables balance, £1.2m is considered not due and not impaired.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
130

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS Continued

As at 30 September 2015, tenant arrears of £1.8m within trade receivables were impaired and fully provided for (2014: £2.2m). 
The individually impaired receivables are based on a review of outstanding arrears and an assessment of collectability. The ageing of these 
receivables is:

Up to two months
Three months or more

2015  
£m
0.2
1.6
1.8

Rental receivables are due on demand and hence all balances outstanding at the year end are past due. The balances within trade 
receivables that are past due but are not considered to be impaired, because we have either collected the debt since the statement of 
ﬁnancial position date or there is a history of regular payment, are as follows:

Up to two months
Three months or more

2015  
£m
1.5
0.7
2.2

2014  
£m
0.1
2.1
2.2

2014  
£m
2.2
–
2.2

The credit risk on liquid funds and derivative ﬁnancial instruments is managed through the Group’s policies of monitoring counterparty 
exposure, monitoring the concentration of credit risk through the use of multiple counterparties and the use of counterparties of good 
ﬁnancial standing. At 30 September 2015, the fair value of all interest rate derivatives that had a positive value was £2.0m (2014: £nil). 

At 30 September 2015, the combined credit exposure arising from cash held at banks, money market deposits and interest rate swaps 

was £90.8m (2014: £74.4m), which represents 4.7% (2014: 4.2%) of total assets. Deposits were placed with ﬁnancial institutions with 
A- or better credit ratings.

The Group has the following cash and cash equivalents:

Pounds Sterling
Euros
Czech Koruna

Cash and cash equivalents can be analysed as follows:

Cash at bank 
Short-term deposits

2015  
£m
83.5
5.3
–
88.8

2015  
£m
84.8
4.0
88.8

2014  
£m
66.3
7.9
0.2
74.4

2014  
£m
63.8
10.6
74.4

Included within 2015 year end cash balances is £10.6m (2014: £9.0m) held in third-party client accounts where Grainger acts as trustee or 
agent. The corresponding liability is included within trade payables.

At the year end, £4.0m was placed on deposit (2014: £10.6m) at effective interest rates between 0.4% and 0.5% (2014: 0.42% and 

0.5%). Remaining cash and cash equivalents are held as cash at bank or in hand.

The Group has an overdraft facility of £1.0m as at 30 September 2015 (2014: £5m).

131

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Liquidity risk
The Group ensures that it maintains continuity and ﬂexibility through a spread of maturities.

Although the Group’s core funding is supported by covenants requiring certain levels of loan to value with respect to the entities in 
the Group of obligors and to maintaining a certain level of interest cover at the Group level, the loan is not secured directly against any 
property allowing operational ﬂexibility. The Group has operated well within its covenants during 2015 and as at 30 September 2015 
(see Note 2 ‘Critical accounting estimates and assumptions’).

The Group ensures that it maintains sufﬁcient cash for operational requirements at all times. The Group uses short-term money market 
deposits to manage its liquidity. The Group also ensures that it has sufﬁcient undrawn committed borrowing facilities from a diverse range 
of banks and other sources to allow for operational ﬂexibility and to meet committed expenditure.

The business is very cash generative from its sales of vacant properties, gross rents and management fees. In adverse trading conditions, 

tenanted sales can be increased and new acquisitions can be stopped. Consequently, the Group is able to reduce gearing levels and 
improve liquidity quickly.

The following table analyses the Group’s ﬁnancial liabilities and net-settled derivative ﬁnancial liabilities at the statement of ﬁnancial 
position date into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in 
the table are the contractual undiscounted cash ﬂows. As the amounts included in the table are the contractual undiscounted cash ﬂows, 
these amounts will not equal the amounts disclosed on the statement of ﬁnancial position for borrowings, derivative ﬁnancial instruments, 
trade and other payables and provisions for liabilities and charges. A reconciliation to the statement of ﬁnancial position amounts is given 
below for borrowings only. Trade and other payables due within 12 months equal their carrying balances as the impact of discounting is 
not signiﬁcant. The cash ﬂows are calculated using yield curves for ﬂoating rate interest-bearing liabilities. Foreign currency related cash 
ﬂows are calculated by means of the forward rates relevant to each maturity date.

At 30 September 2015
Interest-bearing loans and borrowings
Cash ﬂow hedges
Derivatives at fair value through proﬁt and loss
Trade and other payables

At 30 September 2014
Interest-bearing loans and borrowings
Cash ﬂow hedges
Derivatives at fair value through proﬁt and loss
Trade and other payables

Less than  
1 year 
£m

Between  
1 and 2 
years 
£m

Between 
2 and 5  
years 
£m

More than  
5 years 
£m

Total 
£m

168.8
3.8
5.1
46.1

90.1
1.6
4.7
–

698.3
0.4
11.5
–

547.7
(0.3)
17.2
–

1,504.9
5.5
38.5
46.1

Less than  
1 year 
£m

Between  
1 and 2 
years 
£m

Between 
2 and 5  
years 
£m

More than  
5 years 
£m

72.9
3.1
9.2
43.4

557.0
2.0
6.6
–

152.2
0.6
14.4
–

612.3
–
21.3
–

Total 
£m

1,394.4
5.7
51.5
43.4

The 2014 comparatives for cash ﬂow hedges and derivatives at fair value through proﬁt and loss have been amended to show contractual 
undiscounted cash ﬂows. The previous disclosure was of discounted cash ﬂows. In addition, the 2014 comparative for interest-bearing 
loans and borrowings has been amended due to removing non-cash items from the reconciliation of maturity analysis tables on the 
following page.

 
 
 
 
 
 
132

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS Continued

Reconciliation of maturity analysis

At 30 September 2015
Interest-bearing loans and borrowings (see Note 28)
Foreign exchange impact of forward rates
Interest
Financial liability cash ﬂows shown above

At 30 September 2014
Interest-bearing loans and borrowings (see Note 28)
Foreign exchange impact of forward rates
Interest
Financial liability cash ﬂows shown above

Less than  
1 year 
£m

Between  
1 and 2 
years 
£m

Between 
2 and 5  
years 
£m

More than  
5 years 
£m

Total 
£m

133.3
1.6
33.9
168.8

52.8
2.6
34.7
90.1

582.5
1.4
114.4
698.3

457.8
0.4
89.5
547.7

1,226.4
6.0
272.5
1,504.9

Less than  
1 year 
£m

Between  
1 and 2 
years 
£m

Between 
2 and 5  
years 
£m

More than  
5 years 
£m

33.1
–
39.8
72.9

516.8
–
40.2
557.0

73.3
–
78.9
152.2

494.9
0.5
116.9
612.3

Total 
£m

1,118.1
0.5
275.8
1,394.4

The Group’s undrawn committed borrowing facilities are monitored against projected cash ﬂows.

Maturity of committed undrawn borrowing facilities

Expiring:
Between one and two years
Between two and ﬁve years
More than ﬁve years

2015  
£m

2014  
£m

–
96.7
–
96.7

207.9
3.7
30.0
241.6

Market risk
The Group is exposed to market risk through interest rates, foreign exchange ﬂuctuations, the availability of credit and house price 
movements relating to the Tricomm Housing portfolio and the CHARM portfolio. The Group internally measures its market risk exposure 
by running various sensitivity analyses. The Directors consider that a +/- 1 percent (2014: 1 percent) movement in interest rates, a +/- 10 
percentage point (2014: 10 percentage point) movement in Sterling and a +/- 1 percentage point (2014: 1 percentage point) movement in 
house prices represents a reasonable possible change. The approach the Group takes to each of these risks is set out below. The Group is 
not signiﬁcantly exposed to equity price risk or to commodity price risk.

133

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Fair values
IFRS 13 sets out a three-tier hierarchy for ﬁnancial assets and liabilities valued at fair value. These are as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable inputs for the asset or liability.

The fair value of swaps and other ﬁnancial instruments is derived from the present value of future cash ﬂows discounted at rates obtained 
by means of the current yield curve appropriate for those instruments. As all signiﬁcant inputs required to value the swaps are observable, 
they all fall within Level 2.

The CHARM portfolio falls within Level 3, inputs not based on observable market data. The signiﬁcant unobservable inputs affecting 
the carrying value are house price inﬂation and effective interest rate. Further details regarding the basis of valuation and the sensitivity to 
changes in the key valuation assumptions are documented in Note 2, ‘Critical accounting estimates and assumptions’. Note 22 provides a 
reconciliation of movements and amounts recognised in the income statement and other comprehensive income. 

The Tricomm Housing portfolio falls within Level 3. The Investment valuation provided by Allsop LLP, which is based on a discounted 
cash ﬂow model in accordance with RIC’s Professional Valuation Standards (2014), includes a number of unobservable inputs and other 
valuation assumptions. Further details of these assumptions and signiﬁcant unobservable inputs are documented in Note 2, ‘Critical 
accounting estimates and assumptions’. The reconciliation between opening and closing balances is detailed in the table below.

Opening balance
Amounts taken to income statement
Closing balance

The following table presents the Group’s assets and liabilities that are measured at fair value.

2015  
£m
109.1
2.4
111.5

2014  
£m
105.9
3.2
109.1

Level 3
Financial interest in property assets
Tricomm Holdings portfolio

Level 2
Interest rate swaps – in cash ﬂow hedge accounting relationships
Interest rate swaps – not in cash ﬂow hedge accounting relationships
Interest rate caps – not in cash ﬂow hedge accounting relationships
Investment property
Assets classiﬁed as held-for-sale

2015

2014

Assets 
£m

Liabilities 
£m

Assets 
£m

Liabilities 
£m

93.7
111.5
205.2

–
–
2.0
246.3
–
248.3

–
–
–

5.0
30.5
–
–
–
35.5

94.5
109.1
203.6

–
–
–
223.8
3.4
227.2

–
–
–

5.2
42.8
–
–
–
48.0

The Group’s trading property is carried in the consolidated statement of ﬁnancial position at the lower of cost and net realisable value. 
As trading property is only shown at market value within the Group’s non-GAAP NAV and NNNAV measures it has been excluded from 
the fair value hierarchy table above. If the market value of trading property were included it would fall within Level 2 of the fair value 
hierarchy as deﬁned by IFRS 13. The statutory book value of trading property is £1,152.2m and its market value is £687.7m higher at 
£1,839.9m.

The Group’s ﬁxed rate loans are included in the consolidated statement of ﬁnancial position at amortised cost. As the ﬁxed rate loans are 
only shown at fair value in the Group’s non-GAAP NAV and NNNAV measures they have been excluded from the fair value hierarchy table 
above. Had they been included they would fall within Level 2 of the fair value hierarchy as deﬁned in IFRS 13. The statutory book value of 
ﬁxed rate loans is £446.9m and their fair value is £479.3m.

 
 
 
 
134

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS Continued

Interest rate swaps are all classiﬁed as either current assets or current liabilities.

The notional principal amount of the outstanding interest rate swap contracts as at 30 September 2015 was £357.0m (2014: £334.2m). 
All of the ﬁnancial derivatives included in the above table were valued by external consultants, J C Rathbone Associates Limited, using 

a discounted cash ﬂow model and market information and were checked internally using a software package.

In accordance with IAS 39, the Group has reviewed its interest rate hedges. In the absence of hedge accounting, movements in fair 
value are taken directly to the income statement. However, where cash ﬂow hedges have been viewed as being effective, and have been 
designated as such, any gains or losses have been taken to other comprehensive income through the cash ﬂow hedge reserve.

A valuation was carried out at 30 September 2015 by external consultants, J C Rathbone Associates Limited, to calculate the market 
value of the Group’s ﬁxed rate debt on a replacement basis, taking into account the difference between the ﬁxed interest rates for the 
Group’s borrowings and the market value and prevailing interest rate of appropriate debt instruments, as a fair value adjustment. The fair 
values compared to the carrying amounts of the Group’s ﬁxed rate ﬁnancial liabilities are analysed below.

Fixed rate loan facilities

Fixed rate loan facilities

Book value at 
30 September 
2015 
£m
464.8

Book value at 
30 September 
2014 
£m
401.1

Fair value at 
30 September 
2015 
£m
497.2

Fair value at 
30 September 
2014 
£m
418.6

Interest rate risk
The Group’s interest rate risk arises from the risk of ﬂuctuations in interest charges on ﬂoating rate borrowings. The Group mitigates 
this risk through the use of variable to ﬁxed interest rate swaps, caps and collars. This subjects the Group to fair value risk as the value of 
the ﬁnancial derivatives ﬂuctuates in line with variations in interest rates. However, the Group seeks to cash ﬂow hedge accounts where 
applicable. The Group is, however, driven by commercial considerations when hedging its interest rate risk and is not driven by the strict 
requirements of the hedge accounting rules under IAS 39 if this is to the detriment of achieving the best commercial arrangement.

Hedging activities are carried out under the terms of the Group’s hedging policies and are regularly reviewed by the Board to ensure 
compliance with this policy. The Board reviews its policy on interest rate exposure regularly with a view to establishing that it is still relevant 
in the prevailing and forecast economic environment. The current Group treasury policy is to maintain ﬂoating-rate exposure of no greater 
than 40% of expected borrowing. As at 30 September 2015, 77% (2014: 68%) of the Group’s net borrowings were economically hedged 
to ﬁxed or capped rates.

Based on the Group’s interest rate proﬁle at the statement of ﬁnancial position date, a 1% increase in interest rates would decrease 

annual proﬁts by £4.2m (2014: £3.9m). Similarly, a 1% decrease would increase annual proﬁts by £4.2m (2014: £3.9m). 

Based on the Group’s interest rate proﬁle at the statement of ﬁnancial position date, a 1% increase in interest rates would decrease the 

Group’s equity by £3.3m (2014: £3.1m). Similarly, a 1% decrease would increase the Group’s equity by £3.3m (2014: £3.1m). 

Upward movements in medium- and long-term interest rates, associated with higher interest rate expectation, increase the value of the 
Group’s interest rate swaps that provide protection against such moves. The converse is true for downward movements in the interest yield 
curve. Where the Group’s swaps qualify as effective hedges under IAS 39, these movements in fair value are recognised directly in other 
comprehensive income rather than the income statement.

135

As at 30 September 2015, the market value of derivatives designated as cash ﬂow hedges under IAS 39, is a net liability of £5.0m 
(2014: £5.2m). The total ineffectiveness of cash ﬂow hedges recognised within the income statement totals a gain of £0.4m (2014: £0.4m). 
The fair value movement on derivatives not in hedge accounting relationships and amounts reclassiﬁed from equity to the income 
statement amounted, in aggregate, to a charge of £5.8m (2014 credit: £1.2m) in the income statement analysed as follows:

Fair value movement on derivatives not designated as cash ﬂow hedges
Amounts reclassiﬁed from equity to the income statement

2015  
£m
(6.2)
0.4
(5.8)

2014  
£m
3.0
(1.8)
1.2

At 30 September 2015, the market value of derivatives not designated as cash ﬂow hedges under IAS 39, is a net liability of £28.5m 
(2014: £42.8m). The cash ﬂows occur and enter in the determination of proﬁt and loss until the maturity of the hedged debt.

The table below summarises debt hedged at 30 September 2015.

Hedged debt

Hedged debt maturing:
  Within one year
  Between one and two years
  Between two and ﬁve years
  Over ﬁve years

2015  
£m

2014  
£m

90.2
36.7
109.1
257.1
493.1

125.8
90.5
40.5
108.3
365.1

Interest rate proﬁle – including the effect of derivatives

Weighted 
average 
interest rate 
%
5.5
4.4
3.0
4.5

Average 
maturity 
years
7.2
3.8
4.4
5.2

2015

Sterling 
£m
437.0
445.3
189.3
1,071.6

Euro 
£m
18.6
47.8
90.6
157.0

Total 
£m
455.6
493.1
279.9
1,228.6

Weighted 
average 
interest rate 
%
5.3
6.5
3.2
5.0

Average 
maturity 
years
9.0
2.0
3.1
4.8

2014

Sterling 
£m
381.1
310.3
264.5
955.9

Euro 
£m
20.0
54.8
99.2
174.0

Total 
£m
401.1
365.1
363.7
1,129.9

Fixed rate
Hedged rate
Variable rate

At 30 September 2015, the ﬁxed interest rates on the interest rate swap contracts vary from 1.11% to 5.23% (2014: 1.11% to 5.38%); 
the weighted average rates are shown in the table above.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
136

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

29. FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS Continued

Foreign exchange risk
The Group’s foreign exchange risk arises from the exposure due to translating overseas trading performance and overseas net assets into 
Sterling. The Group does not have foreign currency trading with cross border currency ﬂows. The Group hedges foreign currency assets 
naturally by funding them through borrowings in the applicable foreign currency and aims to ensure that it has no material unhedged net 
assets or liabilities denominated in a foreign currency. Proﬁt translation is not hedged.

The Group’s statement of ﬁnancial position translation exposure is summarised below:

Gross foreign currency assets
Gross foreign currency liabilities
Net exposure

2015  
Euro 
£m
89.2
(83.3)
5.9

2014 
Euro  
£m
84.2
(93.5)
(9.3)

2015 
Czech 
Koruna  
£m
0.8
–
0.8

2014  
Czech 
Koruna 
£m
–
(7.8)
(7.8)

As at 30 September 2015, it is estimated that a general increase/decrease of 10 percentage points in the value of Sterling against the Euro 
would decrease/increase the Group’s proﬁt before tax by approximately £0.2m (2014: £0.3m) and equity by £0.5m (2014: £6.1m).

As at 30 September 2015, it is estimated that a general increase/decrease of 10 percentage points in the value of Sterling against the 
Czech Koruna would decrease/increase the Group’s proﬁt before tax by approximately £nil (2014: £nil) and equity by £0.1m (2014: £0.7m).

Credit availability risk
Credit availability risk relates to the Group’s ability to reﬁnance its borrowings at the end of their terms or to secure additional ﬁnancing 
where necessary. The Group maintains relationships with a range of lenders and maintains sufﬁcient headroom through cash and 
committed borrowings. On 11 August 2015 the Group drew down on its new syndicate bank facility which had been due to mature 
in July 2016. The new facility amounted to £580m. Since the year end, on 1 October 2015 the Group concluded the re-ﬁnancing of its 
Grainger Invest banking facility with HSBC and Santander. The new facility amounted to £150m.

House price risk
The cash ﬂows arising from the Group’s ﬁnancial interest in property assets (CHARM) and the Tricomm Housing portfolio are related to the 
movement in value of the underlying property assets and, therefore, are subject to movements in house prices. However, consistent with 
the Group’s approach to house price risk across its portfolio of trading and investment properties, the Group does not seek to eliminate 
this risk as it is a fundamental part of the Group’s business model.

Capital risk management
The Board manages the Group’s capital through the regular review of: cash ﬂow projections, the ability of the Group to meet contractual 
commitments, covenant tests, dividend cover and gearing. The current capital structure of the Group comprises a mix of debt and equity. 
Debt is both current and non-current interest-bearing loans and borrowings as set out in the consolidated statement of ﬁnancial position. 
Equity comprises issued share capital, reserves and retained earnings as set out in the consolidated statement of changes in equity.

Group loans and borrowings have associated covenant requirements with respect to loan to value and interest cover ratios. The Board 
regularly reviews all current and projected future levels to monitor anticipated compliance and available headroom against key thresholds. 
Loan to value is reviewed in the context of the Board’s view of markets, the prospects of, and risks relating to, the portfolio and the 
recurring cash ﬂows of the business. The Group is now operating within a range of gearing of 45%–50%, which it considers to be 
appropriate in the medium term.

The Group monitors its cost of debt and weighted average cost of capital (WACC) on a regular basis. At 30 September 2015, the 
weighted average cost of debt was 5.30% (2014: 6.0%) and the WACC was 6.22% (2014: 6.93%). Investment and development 
opportunities are evaluated using a risk adjusted WACC in order to ensure long-term shareholder value is created.

Certain Group subsidiaries are regulated by the Financial Conduct Authority and therefore have externally applied capital adequacy 

requirements; however, these do not have any material impact on the Group as a whole.

137

30. PENSION COSTS

Deﬁned contribution scheme
The Group operates a deﬁned contribution pension scheme for its employees. The assets of the scheme are held separately from those 
of the Group in independently administered funds. The Group has no legal or constructive obligations to pay further contributions if 
the fund does not hold sufﬁcient assets to pay all employees the beneﬁts relating to employee service in the current and prior periods. 
Pension arrangements for Directors are disclosed in the report of the Remuneration Committee and the Directors’ Remuneration report on 
pages 55 to 73. The pension cost charge in these ﬁnancial statements represents contributions payable by the Group. The charge of £1.0m 
(2014: £1.0m) is included within employee remuneration in Note 12. 

Deﬁned beneﬁt scheme
In addition to the above, the Group also operates a ﬁnal salary deﬁned beneﬁt pension scheme, the BPT Limited Retirement Beneﬁts 
Scheme. The assets of the scheme are held separately in funds administered by Trustees and are invested with Friends Life, an independent 
investment manager. Pension beneﬁts are linked to the members’ ﬁnal pensionable salaries and service at their retirement date (or date of 
leaving if earlier). The Trustees are responsible for running the scheme in accordance with the scheme’s trust deed and rules, which sets out 
their powers. The Trustees of the scheme are required to act in the best interests of the beneﬁciaries of the scheme. There is a requirement 
that at least one-third of the Trustees are nominated by the members of the scheme. 

There are three categories of pension scheme members:
 – Active members: currently employed by the Group. Note no beneﬁts have accrued since 30 June 2003, although active members retain 

a ﬁnal salary link;

 – Deferred members: former employees of the Group; and

 – Pensioner members: in receipt of pension.

The deﬁned beneﬁt obligation is valued by projecting the best estimate of future beneﬁt payments (allowing for future salary increases for 
active members, revaluation to retirement for deferred members and annual pension increases for all members) and then discounting to 
the statement of ﬁnancial position date. In the period up to retirement, beneﬁts receive increases linked to CPI inﬂation (subject to a cap of 
no more than 5% p.a.). After retirement, beneﬁts receive ﬁxed increases of 5% p.a. The valuation method used is known as the Projected 
Unit Method. The approximate overall duration of the scheme’s deﬁned beneﬁt obligation as at 30 September 2015 was 17 years.

The IAS 19 calculations for disclosure purposes have been based upon the results of the actuarial valuation carried out as at 1 July 2013, 

updated to 30 September 2015, by a qualiﬁed independent actuary.

Principal actuarial assumptions under IAS 19

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Discount rate
Retail Price Index (RPI) inﬂation
Consumer Price Index (CPI) inﬂation
Salary increases
Rate of increase of pensions in payment
Rate of increase for deferred pensioners

2015 

2014 
3.70% p.a. 3.80% p.a.
3.10% p.a. 3.20% p.a.
2.10% p.a. 2.20% p.a.
3.60% p.a. 3.70% p.a.
5.00% p.a. 5.00% p.a.
2.10% p.a. 2.20% p.a.

 
138

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

30. PENSION COSTS Continued

Demographic assumptions

Mortality tables for pensioners 

Mortality tables for non-pensioners 

Life expectancies

Life expectancy for a current 65-year-old 
Life expectancy at age 65 for an individual aged 45 in 2015

2015

100% of S1PA CMI 2012 
model with a long-term 
rate of improvement of 
1.50% p.a. for males and 
1.00% p.a. for females
As for pensioners

2014
100% of S1PA CMI 2012 
model with a long-term 
rate of improvement of 
1.50% p.a. for males and 
1.00% p.a. for females
As for pensioners

30 September 2015

30 September 2014

Male
87.8 years
90.0 years

Female
89.5 years
91.0 years

Male

Female
87.7 years 89.4 years
89.9 years 90.9 years

Risks
Through the scheme, the Group is exposed to a number of risks:
 – Asset volatility: the scheme’s deﬁned beneﬁt obligation is calculated using a discount rate set with reference to corporate bond yields; 
however, the scheme also invests in equities. These assets are expected to outperform corporate bonds in the long term, but provide 
volatility and risk in the short term.

 – Changes in bond yields: a decrease in corporate bond yields would increase the scheme’s deﬁned beneﬁt obligation; however, this 

would be partially offset by an increase in the value of the scheme’s bond holdings. 

 – Inﬂation risk: some of the scheme’s deﬁned beneﬁt obligation is linked to inﬂation, therefore higher inﬂation will result in a higher 
deﬁned beneﬁt obligation (subject to the appropriate caps in place). The majority of the scheme’s assets are either unaffected by 
inﬂation, or only loosely correlated with inﬂation, therefore an increase in inﬂation would also increase the deﬁcit.

 – Life expectancy: if scheme members live longer than expected, the scheme’s beneﬁts will need to be paid for longer, increasing the 

scheme’s deﬁned beneﬁt obligation.

The Trustees and Group manage risks in the scheme through the following strategies:
 – Diversiﬁcation: investments are well diversiﬁed, such that the failure of any single investment would not have a material impact on the 

overall level of assets.

 – Investment strategy: the Trustees are required to review their investment strategy on a regular basis. 

Market value of scheme assets
The assets of the scheme are invested in a diversiﬁed portfolio as follows:

Equities
Bonds
Properties
Cash
Insurance policies
Total value of assets
The actual return on assets over the period was 

139

30 September 2015

30 September 2014

% of total 
scheme 
assets
39%
40%
2%
4%
15%
100%

Market 
value 
£m
10.4
10.8
0.5
1.2
4.0
26.9
0.8

% of total 
scheme 
assets
42%
38%
2%
2%
16%
100%

Market 
value 
£m
10.8
9.8
0.4
0.7
4.1
25.8
2.6

The assets of the scheme are held with Friends Life in a managed fund. All of the assets listed have a quoted market price in an active 
market with the exception of the insurance policy asset where its value has been set equal to the secured pensioner liability. 

Deﬁned beneﬁt obligations, scheme assets and scheme deﬁcit

Market value of scheme assets
Present value of scheme liabilities
Scheme deﬁcit at 30 September

History of assets, liabilities, experience gains and losses

Gains/(losses) arising on scheme liabilities:
  Due to experience
  Percentage of deﬁned beneﬁt obligation
  Due to change of basis 
  Percentage of deﬁned beneﬁt obligation
Experience adjustments:
  Gains/(losses) arising on scheme assets 
  Percentage of scheme assets

2015 
£m 
26.9
(28.6)
(1.7)

2014 
£m 
25.8
(28.0)
(2.2)

2013 
£m 
22.8
(26.9)
(4.1)

2012 
£m
21.7
(27.5)
(5.8)

2011  
£m
18.6
(23.1)
(4.5)

2015 

2014 

2013 

2012

2011 

–
–
£(0.4)m
(1.4)%

£(0.2)m
(0.7)%

£0.5m
1.8%
£(1.2)m
(4.3)%

–
–
£0.9m
3.3%

–
–
£(4.0)m
(14.5)%

£0.1m
0.4%
£1.7m
7.4%

£1.6m
(6.2)%

£(0.2)m
(0.9)%

£2.0m
9.2%

£(0.6)m
(3.2)%

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
140

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

30. PENSION COSTS Continued

The change in the market value of the scheme assets over the year was as follows:

Market value of scheme assets at the start of the year
Interest income
Employer contributions
Actual return on assets less interest
Beneﬁts paid
Market value of scheme assets at the end of the year

The change in value of the deﬁned beneﬁt obligation over the year was as follows:

Value of deﬁned beneﬁt obligation at the start of the year
Interest on pension scheme liabilities
Actuarial gains: experience differing from that assumed
Actuarial gains: changes in demographic assumptions
Actuarial losses: changes in ﬁnancial assumptions
Beneﬁts paid
Value of deﬁned beneﬁt obligation at the end of the year

Amounts recognised in the consolidated income statement

Net interest cost

The net interest cost shown above has been included within ‘Finance costs’ (see Note 14).

Amounts recognised in the consolidated statement of comprehensive income

Actual return on assets less interest
Actuarial loss on deﬁned beneﬁt obligation

2015  
£m
25.8
1.0
1.1
(0.2)
(0.8)
26.9

2015  
£m
28.0
1.0
–
–
0.4
(0.8)
28.6

2015  
£m
–

2015  
£m
(0.2)
(0.4)
(0.6)

2014  
£m
22.8
1.0
1.1
1.6
(0.7)
25.8

2014  
£m
26.9
1.2
(0.5)
(1.9)
3.1
(0.8)
28.0

2014  
£m
0.2

2014  
£m
1.6
(0.7)
0.9

The loss shown in the above table of £0.6m (2014: gain of £0.9m) has been included in the consolidated statement of comprehensive 
income on page 81. 

Future funding obligation 
The Trustees are required to carry out an actuarial valuation every three years. The last actuarial valuation of the scheme was performed by 
the Actuary for the Trustees as at 1 July 2013. This valuation revealed a funding shortfall of £4.4m. As a result of this valuation, the Group 
agreed a recovery plan with the Trustees to pay additional contributions to eliminate the deﬁcit by 31 January 2020. Based on this plan, 
the Company expects to pay £0.6m p.a. to the scheme, including the standard expense charges payable under the managed fund policy, 
until 31 January 2020. 

 
Sensitivity analysis
Set out below is an analysis of how the scheme deﬁcit would vary with changes to the key actuarial assumptions:

Discount rate movement of 0.1% p.a. 
Inﬂation movement of 0.1% p.a. 
Life expectancies movement of one year 

Increase/decrease in deﬁcit of £0.4m
Increase/decrease in deﬁcit of £0.1m
Increase/decrease in deﬁcit of £1.1m

31. ISSUED SHARE CAPITAL

Allotted, called-up and fully paid:
418,256,902 (2014: 417,792,510) ordinary shares of 5p each

141

2015  
£m

2014  
£m

20.9

20.9

During the year, The Grainger Employee Beneﬁt Trust acquired 2,000,000 shares at a cost of £4.1m (2014: 1,000,000 shares at cost of 
£2.1m). The Group paid £0.6m (2014: £0.5m) to the share incentive plan during the year for the purchase of matching shares and free 
shares in the scheme. The total cost of acquiring own shares of £4.7m (2014: £2.1m) has been deducted from retained earnings within 
Shareholders’ equity. 

As at 30 September 2015, share capital included 3,656,096 (2014: 3,651,092) shares held by The Grainger Employee Beneﬁt Trust and 
1,506,300 (2014: 1,506,300) shares held by Grainger plc as treasury shares. The total of these shares is 5,162,396 (2014: 5,157,392) with 
a nominal value of £258,120 (2014: £257,870) and a market value as at 30 September 2015 of £12.3m (2014: £9.6m). 

Movements in issued share capital during the year and the previous year were as follows:

At 30 September 2013
Options exercised under the SAYE scheme
At 30 September 2014
Options exercised under the SAYE scheme
At 30 September 2015

Number
416,529,484
1,263,026
417,792,510
464,392
418,256,902

Nominal 
value 
£’000
20,826
64
20,890
23
20,913

Share options
The Company operates a SAYE share option scheme available to employees. The number of shares subject to options as at 30 September 
2015, the periods in which they were granted and the periods in which they may be exercised, are given below. 

Year of grant
SAYE share options
2010
2011
2012
2013
2014(A)
2014(B)
2015
Total SAYE share options

Exercise price 
(pence)

Exercise 
period

2015  
number

2014  
number

90.8
98.7
68.9
115.1
173.1
151.3
173.3

2013–16
2014–17
2015–18
2016–19
2017–20
2018–20
2018–21

–
20,316
107,716
95,427
187,488
524,494
215,979
1,151,420

6,805
27,446
573,838
96,468
492,215
–
–
1,196,772

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
142

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

31. ISSUED SHARE CAPITAL Continued

The movement on the share options schemes during the year is as follows:

SAYE scheme
2010
2011
2012
2013
2014(A)
2014(B)
2015

Weighted average exercise price (pence per share)

Opening 
position

6,805
27,446
573,838
96,468
492,215
–
–
1,196,772
116.3

Exercised

Granted

Lapsed

(6,805)
(7,130)
(447,589)
–
(1,877)
(991)
–
(464,392)
70.3

–
–
–
–
(18,533)
–
–
(1,041)
– (302,850)
(14,949)
(1,514)
(338,887)
166.3

540,434
217,493
757,927
157.6

Closing 
position

–
20,316
107,716
95,427
187,488
524,494
215,979
1,151,420
147.3

For those share options exercised during the year, the weighted average share price at the date of exercise was 229.5p (2014: 46.5p). 
For share options outstanding at the end of the year, the weighted average remaining contractual life is 3.4 years (2014: 3.0 years). 
There were 33,698 (2014: 7,130) share options exercisable at the year end with a weighted average exercise price of 68.9p (2014: 98.7p).
The Group operates an equity-settled, share-based compensation plan comprising awards under a long-term incentive scheme (‘LTIS’), 

a deferred bonus plan (‘DBP’), a share incentive plan (‘SIP’) and a save as you earn (‘SAYE’) scheme.

For the LTIS awards, one-half are subject to an absolute total shareholder return performance condition measured over three years from 

the date of grant and one-half are subject to annual growth in NNNAV compared to the average growth in the Halifax and Nationwide 
House Price indices all measured over three years from the date of grant. Awards subject to an absolute total shareholder return 
performance, which is a market based performance condition, have been valued at fair value using a Monte Carlo simulation valuation 
model. Awards subject to growth in NNNAV, which is a non-market based performance condition, have been valued at fair value using 
a Black-Scholes valuation model.

Awards granted under the DBP have no speciﬁc performance conditions other than the Company meeting its target for operating proﬁt 

before valuation movements and non-recurring items (OPBVM) and employees in the scheme continuing to be employed. There is a 
three-year vesting period from the date of grant. One-third of the awards vest at the end of each year. Participants can choose to exercise 
their awards on vesting or to retain their awards within the plan until the end of the third year at which point a 50% matching element 
is added to their award entitlement. During the year, in addition to the normal DBP scheme, an enhanced DBP scheme (EDBP) was also 
provided. The enhanced scheme operates in exactly the same way as the normal DBP scheme except that if participants retain their awards 
within the plan until the end of the ﬁfth year, a further additional 50% matching award is added to their award entitlement. Awards under 
the DBP/EDBP have been valued based on the share price at the date of the award less the dividend yield at the award date as there is no 
entitlement to dividends during the vesting period.

Awards under the SAYE scheme have been valued at fair value using a Black-Scholes valuation model.
Awards under the SIP scheme have been based on the share price at the date of the award.
Shares were awarded, subject to any vesting conditions set out above, to Executive Directors and selected employees during the year 
under the LTIS. Share options were granted to employees of the Group during the year in two separate tranches under the SAYE scheme. 
The main assumptions used to value the share awards and SAYE options granted during the year are set out in the tables below.

 
 
 
 
 
 
i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

143

32. SHARE-BASED PAYMENTS 

Share awards:

LTIS

DBP

EDBP

SAYE

Award date
Number of shares on grant
Exercise price (£)
Vesting period from date of grant (years)
Exercise period after vesting (years)
Share price at grant (£)
Expected risk free rate (%)
Expected dividend yield (%)
Expected volatility (%)
Fair value (£)

16 December 
2014 
Market based
514,600
–
3
7
1.92
0.8
1.0
34.49
0.82

16 December 
2014 
Non-market 
based
514,600
–
3
7
1.92
0.8
1.0
34.49
1.86

16 December 
2014
85,752
–
1–3
3
1.92
N/A
1.0
N/A
1.92

16 December 
2014

7 January 
7 January 
2015 
2015  
 3-year 
5-year 
scheme
scheme
163,860 254,867 285,567
1.513
5
–
2.1
1.07
1.0
52.0
1.06

1.513
3
–
2.1
0.69
1.0
34.0
0.74

–
1–5
3
1.92
N/A
1.0
N/A
1.92

8 July 2015 
3-year 
scheme
165,737
1.733
3
–
2.54
0.97
0.82
30.60
0.94

8 July 2015 
5-year 
scheme
51,756
1.733
5
–
2.54
1.43
0.82
48.94
1.31

The expected volatility ﬁgures used in the valuation were calculated based on the historic volatility over a period equal to the expected term 
from the date of grant.

The share-based payments charge recognised in the income statement is £2.0m (2014: £2.0m). 
Movements in options and options exercisable as at 30 September 2015 are shown in Note 31.

The movement in share awards during the year is as follows:

Scheme
LTIS
2 December 2011
10 December 2012
13 December 2012
9 December 2013
16 December 2014
Total

Scheme
DBP
6 December 2010
12 December 2011
21 December 2012
9 December 2013
16 December 2014
EDBP
16 December 2014
Total

Opening 
balance

Awards  
vested

Awards 
granted

Awards 
lapsed

Closing 
position

–
1,628,265 (1,628,265)
–
–
1,449,341
–
–
165,649
–
843,046
–
– 1,029,199
–
1,029,199

4,086,301 (1,628,265)

–
–
– 1,449,341
– 165,649
– 843,046
– 1,029,199
– 3,487,235

Opening 
balance

Awards  
vested

Awards 
granted

Awards 
lapsed

Closing 
position

189,693
209,787
168,306
192,927
–

(157,040)
(142,205)
–
–
–

–
–
–
–
85,752

–
760,713

–
(299,245)

163,860
249,612

32,653
–
67,582
–
– 168,306
192,927
–
85,752
–

– 163,860
711,080
–

 
144

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

33. CHANGES IN EQUITY

The consolidated statement of changes in equity is shown on pages 84 to 85. Further information relating to the merger reserve and cash 
ﬂow hedge reserve is provided below. Movements on the retained earnings reserve are set out in Note 34. 

Merger reserve
The merger reserve arose when the Company issued shares in partial consideration for the acquisition of City North Group plc in the year 
ended 30 September 2005. The issue satisﬁed the provisions of Section 612 of the Companies Act 2006 (formerly Section 131 of the 
Companies Act 1985) and the premium relating to the shares issued was credited to a merger reserve.

Cash ﬂow hedge reserve 
The fair value movements on those derivative ﬁnancial instruments qualifying for hedge accounting under IAS 39 are taken to this reserve 
net of tax. 

34. MOVEMENT IN RETAINED EARNINGS

The retained earnings reserve comprises various elements. Those elements, and the movements in each, are set out below:

Balance as at 1 October 2013
Proﬁt for the year
Actuarial gain on BPT Limited pension scheme net of tax
Exchange adjustments offset in reserves net of tax
Repayment of convertible bond
Purchase of own shares
Award of shares from own shares
Share-based payments charge
Dividends 
Balance as at 30 September 2014
Proﬁt for the year
Actuarial loss on BPT Limited pension scheme net of tax
Exchange adjustments offset in reserves net of tax
Purchase of own shares
Award of shares from own shares
Share-based payments charge
Dividends 
Balance as at 30 September 2015

Share-based 
payment 
reserve 
£m
6.7
–
–
–
–
–
(5.4)
2.0
–
3.3
–
–
–
–
(2.8)
2.0
–
2.5

Treasury 
shares 
bought back 
and cancelled 
£m
(7.8)
–
–
–
–
–
–
–
–
(7.8)
–
–
–
–
–
–
–
(7.8)

Investment in 
own shares 
£m
(16.4)
–
–
–
–
(2.1)
5.4
–
–
(13.1)
–
–
–
(4.7)
2.8
–
–
(15.0)

Translation 
reserve 
£m
3.1
–
–
(0.3)
–
–
–
–
–
2.8
–
–
(0.1)
–
–
–
–
2.7

Retained 
earnings 
£m
325.5
74.7
0.8
–
5.0
–
–
–
(8.5)
397.5
42.7
(0.5)
–
–
–
–
(10.4)
429.3

Total retained 
earnings 
reserve 
£m
311.1
74.7
0.8
(0.3)
5.0
(2.1)
–
2.0
(8.5)
382.7
42.7
(0.5)
(0.1)
(4.7)
–
2.0
(10.4)
411.7

Share-based payment reserve 
This reserve comprises the cumulative credit entries relating to the share-based payments charge made in the income statement less the 
average cost of shares issued to employees. 

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

35. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

A full list of all subsidiaries, joint ventures, associates and other related undertakings as at 30 September 2015 is set out below.

145

United Kingdom

United Kingdom

United Kingdom
United Kingdom

United Kingdom
United Kingdom

Country of  
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

Company
Atlantic Metropolitan (U.K.) Limited
BPT (Assured Homes) Limited
BPT (Bradford Property Trust) Limited
BPT (Full Reversions) Limited
BPT (Home Reversions) Limited
BPT (Residential Investments) Limited
BPT (Residential Management  
Services) Limited
BPT Bridgewater (Home Reversions) 
Limited
BPT Limited
Bridgewater (Home Reversions  
Number 1) Limited
Bridgewater (Home Reversions  
Number 2) Limited
United Kingdom
Bridgewater (Home Reversions) Limited United Kingdom
Bridgewater Contractual Tenancies 
Limited
Bridgewater Equity Release Limited
Bridgewater Equity Release Nominees 
(No 1) Limited
Bridgewater Equity Release Nominees 
(No 2) Limited
United Kingdom
Bridgewater Lifetime Mortgages Limited United Kingdom
United Kingdom
Bridgewater Property Holdings Limited
United Kingdom
Bridgewater Tenancies Limited
Bridgewater Tenancies Nominees 
Limited
Brierley Green Management Company 
Limited
Bromley No 1 Limited
Bromley No. 1 Holdings Limited
Bromley Property Holdings Limited
Bromley Property Investments Limited
Cambridge Place Management 
Company Limited
Chrisdell Limited
City North 5 Limited
City North Group Limited
City North Properties Limited
City Property Developments (No.2) 
United Kingdom
Limited
United Kingdom
City Property Developments Limited
United Kingdom
Crossco No 103 Limited
Curzon Park Limited
United Kingdom
Derwent Developments (Curzon) Limited United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom

United Kingdom

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%
100%

Group  
%
100%
100%
100%
100%
100%
100%

100%

100%
100%

100%

100%
100%

100%
100%

100%

100%
100%
100%
100%

100%

100%
100%
100%
100%
100%

100%
100%
100%
100%
100%

100%
100%
100%
50%
100%

100%

100%

Company
Derwent Developments Limited
Derwent Nominees (No 2) Limited
Eastbourne Artisans Dwellings 
Company Limited
Economic Reversions Limited
Ekacroft Limited
Equity Release (Increments) Limited
Equity Release (Increments) Nominees 
No.1 Limited
Equity Release (Increments) Nominees 
No.2 Limited
Equity Release (Increments) Nominees 
No.3 Limited
Equity Release (Increments) Nominees 
No.4 Limited
Equity Release (Increments) Nominees 
No.5 Limited
Equity Release (Increments) Nominees 
No.6 Limited
Equity Release (Increments) Nominees 
No.7 Limited
Equity Release (Increments) Nominees 
No.8 Limited
Equity Release (Increments) Nominees 
No.9 Limited
Equity Release (Increments) Nominees 
No.10 Limited
Faside Estates Limited
Formation Homes Limited
Frincon Holdings 1986 Limited
Frincon Holdings Limited
G W Dray & Son Limited
Gibson Gardens (Paignton)
GIP Limited
Globe Brothers Estates Limited
Grainger (Aldershot) Limited
Grainger (Barnsbury) Limited
Grainger (Clapham) Limited
Grainger (Elder) Limited
Grainger (Hadston) Limited
Grainger (Hornsey) Limited
Grainger (London) Limited
Grainger (Octavia Hill) Limited
Grainger (Peachey Number 2) Limited
Grainger (Peachey) Limited
Grainger (Samuel) Limited

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%

Group  
%
100%
100%

100%
100%
100%
100%

Country of  
incorporation
United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%

100%

100%

 
146

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

35. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES Continued

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%

Country of  
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

Group  
%
100%
100%
100%
100%
100%
100%
100%

United Kingdom

100%

United Kingdom

100%

United Kingdom

100%

United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%

100%

100%
100%
100%
100%

100%

100%

100%

100%

100%

100%

100%
100%

United Kingdom

100%

100%

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%

Group  
%
100%

100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%

50%
100%
100%

100%
100%

Country of  
incorporation
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom

United Kingdom

100%

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

100%
100%
100%
100%
100%
100%
100%

United Kingdom

100%

100%

Company
Grainger Retirement Housing Limited
Grainger Retirement Housing No.1 
(2007) Limited
Grainger Rural Developments Limited
Grainger Rural Limited
Grainger Serviced Apartments Limited
Grainger Seven Sisters Limited
Grainger Southwark Limited
Grainger Trust Limited
Grainger Unitholder No 1 Limited
Grainger Upminster Limited
Greit Limited
Greit Management Limited
Greit Properties Limited
H I Tricomm Holdings Limited
Hamsard 2342 Limited
Hamsard 2492 Limited
Hamsard 2517 (New Business) Limited
Hamsard 2517 Limited
Hamsard 2518 Limited
Harborne Tenants Limited
Hatch Warren Limited
Hinton & Wild Limited
Holdﬁeld Limited
Home Properties Limited
Home SGO Properties Limited
Hurlingham Business Park Limited
Infrastructure Investors Defence 
Housing (Bristol) Limited
Ingleby Court Management Limited
King Street Developments 
(Hammersmith) Limited
Langwood Properties Limited
Letpress Limited
Manor Court (Solihull) Management 
Limited
Margrave Estates Limited
Mariners Park Estate North 
Management Company Limited
Mariners Park Estate South 
Management Company Limited
Milford Reversions Limited
N & D London Investments
N & D London Limited
N & D Properties (Midlands) Limited
N & D Southern Limited
Nitro 2 Limited
Northumberland & Durham Property 
Trust Limited

Company
Grainger (Shoreditch) Limited
Grainger Asset Management Limited
Grainger Bradley Limited
Grainger Czech Republic Limited
Grainger Developments Limited
Grainger EL Investments Limited
Grainger Employees Limited
Grainger Enfranchisement No. 1 
(2012) Limited
Grainger Enfranchisement No. 2 
(2012) Limited
Grainger Enfranchisement No. 3 
(2012) Limited
Grainger Equity Release Investment 
Properties Limited
Grainger Equity Release Limited
Grainger Equity Release Management 
Limited
Grainger Europe (No.2) Limited
Grainger Europe (No.3) Limited
Grainger Europe (No.4) Limited
Grainger Europe Limited
Grainger Finance (Tricomm) Limited
Grainger Finance Company Limited
Grainger Homes (Gateshead) Limited
Grainger Homes Limited
Grainger Housing & Developments 
Limited
Grainger Invest (No.1 Holdco) Limited
Grainger Kensington & Chelsea  
Limited
Grainger Land & Regeneration Limited
Grainger Land Limited
Grainger Maidenhead Limited
Grainger McKay Limited
Grainger Newbury Limited
Grainger OCCC Limited
Grainger Pearl Holdings Limited
Grainger Pearl Limited
Grainger Pimlico Limited
Grainger Properties Limited
Grainger Property Services Limited
Grainger PRS Limited
Grainger RAMP Limited
Grainger Real Estate Limited
Grainger RES Limited
Grainger Residential Limited
Grainger Residential Management 
Limited

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%

Group  
%

Country of  
incorporation

United Kingdom

69%

United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom

100%
100%

100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
20%
100%
100%
100%
100%
100%

96%
100%

100%
100%

100%

100%

United Kingdom

100%

100%

United Kingdom

100%

100%

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

100%
100%
100%
100%
100%
30%
100%

United Kingdom

50%

United Kingdom
United Kingdom

100%
100%

United Kingdom

100%

United Kingdom
United Kingdom
United Kingdom

100%
50%
100%

Company
Oakleigh House (Sale) Management 
Company Limited
Park Developments (Liverpool)  
Limited
Park Estates (Liverpool) Limited
Park Estates Investments (Liverpool) 
Limited
PHA Housing Limited
PHA Limited
Planﬁrst Limited
Portland House Holdings Limited
Residential Leases Limited
Residential Tenancies Limited
Reversions Financing (No. 1) 2011 
Limited
Reversions Financing Limited
Rotation Finance Limited
RPQH Limited
Seaton Valley Properties Limited
Sixty-two Stanhope Gardens Limited
Southvale Investments Limited
Sowerby Holdings Limited
St Andrew’s Property Holdings Limited
Suburban Homes Limited
The Bradford Property Trust Limited
The Chancel Management Company 
Limited
The Farm Housing Enterprise Limited
The Grainger Trust Employee Trustee 
Limited
The Owners of the Middlesbrough 
Estate 
The Sandwarren Management 
Company Limited
The Tilt Estate Company Limited
Trafford Park Dwellings Limited
Tricomm Housing (Holdings) Limited
Tricomm Housing Limited
Vesta (General Partner) Limited
Victoria Court (Southport) Limited
Walworth Investment Properties 
Limited
Wansbeck Lodge Management  
Limited
Warren Court Limited
Warwick Square Management Company 
Limited
West Waterlooville Developments 
Limited
1 Iﬁeld Road Management Limited
19 Iﬁeld Road Management Limited

Company
31-37 Disbrowe Road Freehold 
Company Limited
36 Finborough Road Management 
Limited
45 Iﬁeld Road Management Limited
86 Holland Park Freehold Limited
CCY a.s.
CCZ a.s.
Prazsky Projekt a.s.
Franco Rhein-Main 1 V.mbH
Franco Rhein-Main 2 V.mbH
Franco Rhein-Main 3 V.mbH
G & G GmbH
Grainger Deutschland GmbH
Grainger FRM GmbH
Grainger FRM General Partner GmbH
Grainger Portfolio 3 GmbH
Grainger Recklinhausen Portfolio 
one GmbH
Grainger Recklinhausen Portfolio 
two GmbH
Grainger Stuttgart Portfolio one 
GmbH & Co. Kg
Grainger Stuttgart Portfolio two 
GmbH & Co. Kg
Retirement Housing Management 
(Guernsey) Limited
The Capital Appreciation Trust Limited
Retirement Housing Management 
(Isle of Man) Limited
The Capital Appreciation Trust (Isle of 
Man) Limited
G:Res 1 Limited
G:Res-Co4 Limited
GRIP NomCo1 Limited
GRIP NomCo2 Limited
GRIP NomCo3 Limited
GRIP NomCo4 Limited
GRIP NomCo5 Limited
GRIP NomCo6 Limited
GRIP NomCo7 Limited
GRIP NomCo8 Limited
GRIP Unit Trust
GRIP Unit Trust 1
GRIP Unit Trust 2
GRIP Unit Trust 6
The Grainger Residential Property 
Unit Trust
Grainger Luxembourg Germany 
Holdings S.a.r.l.
MH Grainger JV Sarl

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

147

Proportion of 
nominal value of 
ordinary shares 
held by:
Company 
%

Group  
%

Country of  
incorporation

United Kingdom

50%

United Kingdom
United Kingdom
United Kingdom
Czechoslovakia
Czechoslovakia
Czechoslovakia
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany

100%
67%
67%
50%
50%
50%
99.9%
99.9%
99.9%
25%
100%
24.9%
100%
100%

Germany

99.9%

Germany

99.9%

Germany

Germany

Guernsey
Guernsey

25%

25%

100%
100%

Isle of Man

100%

Isle of Man
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey

100%
26.2%
24.9%
24.9%
24.9%
24.9%
24.9%
24.9%
24.9%
22.2%
22.2%
24.9%
24.9%
24.9%
22%

Jersey

24.9%

Luxembourg
Luxembourg

100%
22%

 
148

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

36. RELATED PARTY TRANSACTIONS

During the year ended 30 September 2015, the Group transacted with its joint ventures and associates (details of which are set out 
in Notes 20 and 21). The Group provides a number of services to its joint ventures and associates. These include property and asset 
management services for which the Group receives fee income. The related party transactions recognised in the income statement and 
statement of ﬁnancial position are as follows:

GRIP Unit Trust
Stuttgart Portfolios
New Sovereign Reversions Limited
Walworth Investment Properties Limited

2015 
Fees 
recognised 
£’000
3,398
924
704
40
5,066

2015 
Year end 
balance 
£’000
1,527
–
–
40
1,567

2014 
Fees 
recognised 
£’000
3,131
956
1,051
40
5,178

2014 
Year end 
balance 
£’000
933
–
193
40
1,166

As described in Note 21, on 1 June 2015, the Group sold its 50% equity interest in New Sovereign Reversions Limited to Lone Star Real 
Estate Fund III. The fees shown in the table above represent asset management fees earned by the Group from 1 October 2014 up to 
completion on 1 June 2015.

GRIP Unit Trust
MH Grainger JV Sarl
Stuttgart Portfolios

New Sovereign Reversions Limited
Czech Republic combined*
Curzon Park Limited*
King Street Developments (Hammersmith) Limited
Walworth Investment Properties Limited
Vesta LP

2015 
Interest  
recognised 
£’000
1,010
97
11

2015 
Year end loan  
balance 
£m
24.1
–
–

(12)
–
–
–
456
–
1,562

–
6.9
19.5
5.9
6.6
0.1
63.1

2015 
Interest 
rate  
%
4.75
7.50
8.00
LIBOR + 
2.35
1.25
Nil
Nil
7.00
Nil

2014 
Interest  
recognised 
£’000
1,100
812
60

2014 
Year end loan  
balance 
£m
31.6
9.6
0.6

(23)
–
–
–
455
–
2,404

(0.6)
7.4
18.6
3.2
6.8
–
77.2

2014 
Interest 
rate 
%
4.75
7.50
8.00
LIBOR + 
2.35 
1.25
Nil
Nil
7.00
–

*   The amount disclosed above is the gross loan amount. Some provisions have been made against the loans. See Notes 20 and 21 for details of carrying value. Accordingly, interest, where 

charged, has not been recognised in the income statement in either year although the amounts involved are immaterial.

The Group’s key management are the only other related party. Details of key management compensation is provided in Note 12.

37. OPERATING LEASE COMMITMENTS

The future aggregate minimum lease payments payable by the Group under non-cancellable operating leases are as follows:

Operating lease payments due:
  Not later than one year
  Later than one year and not later than ﬁve years
  Later than ﬁve years

2015  
£m

2014  
£m

1.1
4.3
1.9
7.3

1.3
3.3
1.7
6.3

 
 
 
 
 
 
i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

149

Operating lease payments represent the lease payments made in the year relating to renting of ofﬁce space used by the Group, car leases 
under contract hire arrangements and operating lease payments relating to ofﬁce equipment such as photocopiers. Leases relating to 
ofﬁce space used by the Group have initial terms of varying lengths, between one and ten years. 

Rent reviews generally take place every ﬁve years. Contract hire car leases generally have a three-year term. There are no other signiﬁcant 

operating lease arrangements requiring disclosure under IAS 17. 

38. CONTINGENT LIABILITIES

The properties in certain subsidiary companies forming a ‘guarantee Group’ with a market value of £1,281m provide the security for the 
Group’s core debt facility. 

Barclays Bank plc and Lloyds Bank plc have provided guarantees under performance bonds relating to the Group’s UK Development 

division. As at 30 September 2015, total guarantees amounted to £2.8m (2014: £2.9m).

The Group has an obligation, under an agreement for sale in relation to its land at West Waterlooville, to pay further consideration 

should the site value exceed certain pre-agreed amounts. It also has an obligation under a proﬁt sharing agreement to share proﬁts above 
an agreed threshold. It is not possible to determine the amount or timing of any such future payments due to the long-term nature of 
the site’s development and the associated uncertainties. However, our current best estimate is that the earliest payment under these 
arrangements will not be before October/November 2016 and any payments are likely to be spread over a number of years.

As explained in more detail in Note 21, there is uncertainty relating to the future of the site at Curzon Park in which the Group has a 50% 
joint venture interest. Should the value of the site, together with any compensation received, be insufﬁcient to recover the carrying value of 
our investment, the Group may incur further charges in excess of those provided in these ﬁnancial statements, in respect of obligations to 
the joint venture. 

39. ASSETS CLASSIFIED AS HELD-FOR-SALE

The Group identiﬁed certain of its investment properties as held-for-sale in 2014 in accordance with the criteria set out in IFRS 5. 

Included on the face of the consolidated statement of ﬁnancial position are total assets of £nil (2014: £3.4m) classiﬁed as held-for-sale. 

The movement in the year is set out below:

Opening balance – investment property
Disposals
Transfer from investment property
Transfer from investment in joint ventures
Sale of investment in joint ventures (see Note 21)
Transfer to investment property
Foreign exchange movement
Closing balance

40. BUSINESS COMBINATION

2015  
£m
3.4
(3.8)
6.9
14.0
(14.0)
(6.5)
–
–

2014  
£m
9.9
(8.6)
2.3
–
–
(0.1)
(0.1)
3.4

Acquisition of Equity Release (Increments) Limited
In January 2014, the Group sold Equity Release (Increments) Limited (‘ERIL’), a Retirement Solutions subsidiary owning a home reversions 
portfolio, to Clifden Holdings Limited (‘CHL’). The terms of sale included deferred consideration of £35.1m (40% of the total consideration) 
which was required to be paid no later than January 2015. CHL intended to fund the payment of the deferred consideration from the 
proceeds of a securitisation which they subsequently failed to execute. As a result, CHL failed to pay the deferred consideration when it 
fell due.

As a result of CHL’s failure to settle the outstanding receivable, the Group exercised its rights to appoint administrators of CHL and to 

re-acquire ERIL for a nominal value of £1 on 2 April 2015.

The acquisition is of a business capable of being conducted and managed for the purpose of providing economic beneﬁt to the Group. 

Accordingly, the Directors consider this transaction to be a business combination.

 
150

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE FINANCIAL STATEMENTS Continued

40. BUSINESS COMBINATION Continued

Assets acquired and liabilities assumed
The fair value of the identiﬁable assets and liabilities of ERIL as at the date of acquisition were:

Inventories – trading property
Trade and other receivables
Cash and cash equivalents
Deferred tax asset

Accruals and deferred income
Other creditors
Interest-bearing loans and borrowings
Deferred tax liability

Total identiﬁable net assets at fair value
Purchase consideration transferred

Fair value recognised on 
acquisition 
£m
96.5
0.1
0.6
1.9
99.1
1.0
3.0
73.7
2.1
79.8
19.3
19.3

The purchase consideration transferred of £19.3m represents that part of the deferred consideration receivable of £35.1m that was 
recoverable from the fair value of the business acquired as shown above.

The balance of the deferred consideration receivable of £15.8m has been impaired and written off as a charge in the consolidated 

income statement under the heading ‘Impairment of deferred consideration receivable’.

The costs of the acquisition of £2.4m have been expensed in the consolidated income statement within the heading ‘Other expenses’.
The overall charge on re-acquisition of ERIL is therefore £18.2m and this has been charged to the consolidated income statement and is 

shown within non-recurring items in Note 3.

From the date of acquisition, ERIL has contributed £nil to the proﬁt after tax and £5.2m to Group revenue. If the combination had taken 

place at the beginning of the ﬁnancial year, we estimate, on a pro forma basis, that the proﬁt after tax for the Group would have been 
£41.0m and Group revenue would have been £252.4m.

41. CAPITAL COMMITMENTS

The Group has current commitments under a number of its development projects totalling £63.1m as at 30 September 2015 
(2014: £54.5m).

42. POST BALANCE SHEET EVENT

On 18 November 2015, the Group, along with its joint venture partner, Heitman, exchanged contracts for the sale of its interest in  
MH Grainger JV Sarl and its interest in Grainger Stuttgart Portfolio one GmbH & Co KG and Grainger Stuttgart Portfolio two  
GmbH & Co KG. Completion of the sale is anticipated to take place by 31 December 2015 subject to regulatory approval by Germany’s 
Federal Cartel Ofﬁce. Sales proceeds are expected to be c.€48m (c.£34m) which should generate a proﬁt on sale of c.€16m (c.£11m).
On 1 October 2015 an amendment and restatement of the Grainger Invest Property portfolio bank facility was concluded with the 

existing banks, HSBC and Santander. The facility of £150m increases the Group’s overall bank facilities by £30m.

Parent company balance sheet

As at 30 September 2015
Fixed assets
Investments

Current assets
Debtors
Cash at bank and in hand

Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Interest-bearing loans and borrowings
Net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve 
Proﬁt and loss account
Total Shareholders’ funds

151

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Notes

2015 
£m

2014  
£m

2

3

4

6

7

8

8

8

934.4

928.3

30.2
5.3
35.5
204.5
(169.0)
765.4

371.2
394.2

20.9
110.7
0.3
262.3
394.2

32.4
4.8
37.2
167.5
(130.3)
798.0

370.5
427.5

20.9
110.4
0.3
295.9
427.5

The ﬁnancial statements on pages 151 to 155 were approved by the Board of Directors on 19 November 2015 and were signed on their 
behalf by:

Andrew R Cunningham 
Director 

Mark Greenwood 
Director

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
152

Grainger plc / Annual Report and Accounts 2015 / Financials

Notes to the parent company ﬁnancial statements

1. ACCOUNTING POLICIES

(a) Basis of preparation
The ﬁnancial statements have been 
prepared on a going concern basis under 
the historical cost convention, in accordance 
with the Companies Act 2006 and 
applicable UK accounting standards.

The Company has taken the exemption 

allowed under Section 408 of the 
Companies Act 2006 from the requirement 
to present its own proﬁt and loss account. 
The loss for the year was £20.5m 
(2014: £4.8m). These ﬁnancial statements 
present information about the Company 
as an individual undertaking and not about 
its Group.

The Company has taken advantage of 

the exemption in FRS 8 ‘Related Party 
Transactions’, from the requirement to 
disclose such transactions on the grounds 
that it has presented its own consolidated 
ﬁnancial statements.

(b) Accounting policies
The Company ﬁnancial statements have 
been prepared under UK GAAP rather 
than under IFRS that has been adopted for 
Group reporting. The following accounting 
policies have been applied consistently 
in dealing with items that are considered 
material in relation to the Company’s 
ﬁnancial statements.

(c) Investments
Investments in subsidiaries are carried at 
historical cost less provision for impairment 
based upon an assessment of the net 
recoverable amount of each investment. 
To the extent that the assessment of 
recoverable amount improves due to 
change in economic conditions, impairment 
provisions are reversed. 

(d) Tax
Corporation tax is provided on taxable 
proﬁts or losses at the current rate.

Deferred tax is recognised in respect of 
all timing differences that have originated 
but not reversed at the balance sheet date, 
where transactions or events that result in 
an obligation to pay more tax in the future 
or a right to pay less tax in the future have 
occurred at the balance sheet date.

Deferred tax is measured at the average 
tax rates that are expected to apply in the 
periods in which the timing differences 
are expected to reverse, based on tax 
rates and laws that have been enacted or 
substantively enacted by the balance sheet 
date. Deferred tax is measured on a non-
discounted basis.

(e) Own shares including treasury shares
Transactions of The Grainger 
Employee Beneﬁt Trusts are included 
in the Company’s ﬁnancial statements. 
The purchase of shares in the Company by 
each trust and any treasury shares bought 
back by the Company are debited direct 
to equity.

(f) Convertible bond
The £112m, 3.625% convertible bond, due 
2014, was issued in May 2007. Interest is 
payable semi-annually. Unless previously 
redeemed, converted, purchased or 
cancelled the bond was convertible at any 
time up to 12 May 2014 into fully paid 
up ordinary shares at a conversion price 
of £4.68. The convertible bond was a 
compound ﬁnancial instrument and the 
carrying amount had been allocated to 
its equity and liability components in the 
Company’s balance sheet. The liability 
component had been determined by 
measuring the fair value of a similar liability 
that does not have an associated equity 
component. The discount rate used for this 
was based on a rate of 7.5% compounded 

semi-annually. The liability component 
had been deducted from the fair value 
of the compound ﬁnancial instrument 
as a whole and the residual element had 
been assigned to the equity component. 
The liability element was subsequently 
measured at amortised cost using the 
effective interest rate method. The nominal 
value of the bond was repaid in full in May 
2014 with no option to convert taken.

(g) Share-based payments
Under the share-based compensation 
arrangements set out in Note 1(k)
(iii) on page 92 and Note 32 on page 
143, employees of Grainger Employees 
Limited have been awarded options 
and conditional shares in the Company. 
These share-based arrangements have 
been treated as equity-settled in the 
consolidated ﬁnancial statements. In the 
Company’s ﬁnancial statements, the share-
based payment charge has been added to 
the cost of investment in subsidiaries with 
a corresponding adjustment to equity.

(h) Borrowings
Borrowings are initially recognised at the 
fair value of consideration received, net of 
transaction costs incurred. Borrowings are 
subsequently stated at amortised cost. 
Any difference between the proceeds (net 
of transaction costs) and the redemption 
value is recognised in the income statement 
over the period of the borrowings using the 
effective interest method. 

Borrowings are classiﬁed as current 

liabilities unless the Group has an 
unconditional right to defer settlement of 
the liability for at least 12 months after the 
statement of ﬁnancial position date. 

2. INVESTMENTS

Cost of investment
At 1 October 
Additions
Disposals
At 30 September 

153

2015  
£m
1,017.5
4.0
–
1,021.5

2014  
£m
1,018.8
–
(1.3)
1,017.5

Included within additions of £4.0m in 2015 is an investment in Greit Limited of £2.0m. The remaining balance relates to share-
based payments.

Impairment
At 1 October
Additional provision
Write back of provisions
At 30 September 
Net carrying value

2015 
£m
89.2
–
(2.1)
87.1
934.4

2014 
£m 
107.2
0.1
(18.1)
89.2
928.3

The Directors believe that the carrying value of the investments is supported by their underlying net assets. After an assessment of net 
recoverable value a net impairment write back of £2.1m (2014: write back of £18.1m) has been made. A list of the subsidiaries of the 
Company is contained within Note 35 on pages 145-147.

3. DEBTORS

Amounts owed by Group undertakings
Other debtors

Debtors in both 2015 and 2014 are all due within one year. 

4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Bank loans and overdrafts
Amounts owed to Group undertakings
Other tax and social security costs
Accruals and deferred income

Amounts owed to Group undertakings are interest free and are repayable on demand.

2015  
£m
28.9
1.3
30.2

2015  
£m
–
200.1
–
4.4
204.5

2014  
£m
30.4
2.0
32.4

2014  
£m
6.0
155.7
1.3
4.5
167.5

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
154

Grainger plc / Annual Report and Accounts 2015 / Financials

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS Continued

5. CONVERTIBLE BOND

Opening balance
Amortised during the year
Repaid during the year

Unamortised issue costs
Closing balance

In May 2014, the convertible bond term reached maturity and the nominal value was repaid in full.

6. INTEREST-BEARING LOANS AND BORROWINGS 

Variable rate – Pounds Sterling
Unamortised issue costs

5% Guaranteed Secured Bonds due 2020
Unamortised issue costs

Unamortised bond premium
Total interest-bearing loans and borrowing

2015  
£m
–
–
–

–
–

2015  
£m
100.0
(0.6)
99.4
275.0
(3.9)
271.1
0.7
371.2

2014  
£m
24.3
0.6
(24.9)

–
–

2014  
£m
100.0
(0.7) 
99.3
275.0
(4.6)
270.4
0.8
370.5

The variable rate loan is secured by ﬂoating charges over the assets of the Group. The loan bears interest at 4% (2014: 4%) over LIBOR. 
The amount due in more than ﬁve years is £60.0m (2014: £100.0m). 

The £275m, 5.0% secured corporate bond, due December 2020, was issued in the ﬁnancial year ended September 2014. The primary 
issue was £200m issued at par in November 2013 with a secondary tap issue in August 2014 of £75m issued at 101.125%. The premium 
on the tap issue is being amortised to the income statement using the effective interest rate method.

7. CALLED-UP SHARE CAPITAL

Allotted, called-up and fully paid
418,256,902 (2014: 417,792,510) ordinary shares of 5p each

2015  
£m

2014  
£m

20.9

20.9

During the year, The Grainger Employee Beneﬁt Trust acquired 2,000,000 shares at a cost of £4.1m (2014: 1,000,000 shares at a cost of 
£2.1m). The Group paid £0.6m (2014: £0.5m) to the share incentive plan during the year for the purchase of matching shares and free 
shares in the scheme. The total cost of acquiring own shares of £4.7m (2014: £2.1m) has been deducted from retained earnings within 
Shareholders’ equity. 

As at 30 September 2015, share capital included 3,656,096 (2014: 3,651,092) shares held by The Grainger Employee Beneﬁt Trust and 
1,506,300 (2014: 1,506,300) shares held by Grainger plc as treasury shares. The total of these shares is 5,162,396 (2014: 5,157,392) with a 
nominal value of £258,120 (2014: £257,870) and a market value as at 30 September 2015 of £12.3m (2014: £9.6m). 

 
 
 
Movements in issued share capital during the year and the previous year were as follows:

At 1 October 2013
Options exercised under the SAYE scheme
At 30 September 2014
Options exercised under the SAYE scheme
At 30 September 2015

155

Nominal 
value 
£’000
20,826
64
20,890
23
20,913

Number
416,529,484
1,263,026
417,792,510
464,392
418,256,902

Details of share options and awards granted by the Company are provided in Note 31 on pages 141 and 142 and discussed within the 
Remuneration Committee’s report on pages 55 to 73.

8. RESERVES

At 1 October 2014
Loss for the year
Share-based payments charge
Purchase of own shares
Award of SAYE shares
Dividends paid
At 30 September 2015

9. OTHER INFORMATION

Share 
premium 
£m
110.4
–
–
–
0.3
–
110.7

Capital 
redemption 
reserve 
£m
0.3
–
–
–
–
–
0.3

Proﬁt and 
loss account 
£m
295.9
(20.5)
2.0
(4.7)
–
(10.4)
262.3

Share capital
£m
20.9
–
–
–
–
–
20.9

Total 
£m
427.5
(20.5)
2.0
(4.7)
0.3
(10.4)
394.2

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

Dividends
Information on dividends paid and declared is given in Note 16 of the Group ﬁnancial statements on page 114.

Directors’ share options and share awards
Details of the Directors’ share options and of their share awards are set out in the Remuneration Committee’s report.

 
156

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA performance measures

1. INTRODUCTION

The EPRA Best Practice Recommendations (EPRA BPR) were issued by EPRA’s Reporting and Accounting Committee in August 2011 and 
the guidance has subsequently been updated in December 2014. Included within EPRA BPR are six EPRA Performance Measures deemed 
to be of key importance to investors in property companies and which aim to encourage more consistent and widespread disclosure. 
The EPRA Performance Measures are set out below:

Performance Measure
1) EPRA Earnings

2) EPRA NAV

3) EPRA NNNAV

4i) EPRA Net Initial Yield (NIY)

4ii) EPRA ‘topped-up’ yield

5) EPRA Vacancy Rate
6) EPRA Cost Ratios

Deﬁnition
Recurring earnings from core operational activities. This is a key measure of a company’s 
underlying operating results providing an indication of the extent to which current dividend 
payments are supported by earnings.
Net asset value adjusted to include properties and other investment interests at fair value and to 
exclude certain items not expected to crystallise in a long-term property business model. This 
measure is consistent with NAV as deﬁned and disclosed in the Financial review and in Note 4 to 
the Group ﬁnancial statements.
EPRA NAV adjusted to include the fair values of i) ﬁnancial instruments, ii) debt and iii) deferred 
taxes. This measure is consistent with NNNAV as deﬁned and disclosed in the Financial review 
and in Note 4 to the Group ﬁnancial statements.
Annualised rental income based on cash rents at the balance sheet date, less non-recoverable 
property expenses, divided by the market value of the property, increased with (estimated) 
purchasers’ costs.
This measure incorporates an adjustment to EPRA NIY in respect of the expiration of rent-free 
periods (or other unexpired lease incentives such as discounted rent periods and step rents).
Estimated Market Rent Value (ERV) of vacant space divided by ERV of the whole portfolio.
This measure includes all administrative and operating expenses including share of joint ventures’ 
overheads and operating expenses, net of any service fees, all divided by gross rental income.

Grainger is supportive of EPRA’s initiative and, in this report, is disclosing against ﬁve of the EPRA measures, EPRA Earnings, EPRA Net 
Asset Value (NAV) and EPRA Triple Net Asset Value (NNNAV), EPRA Net Initial Yield (NIY) and EPRA Vacancy Rate. EPRA topped-up NIY 
is not appropriate to Grainger’s business. The EPRA Cost Ratios, too, is less relevant to Grainger as it is distorted by the fact that in our 
reversionary portfolio rental levels range between a sub-market rent are a zero rent. The Group continues to disclose other KPIs and 
operational measures in this report, including an efﬁciency ratio which measures administrative and operating costs, net of fee income, 
as a proportion of the value of assets under management, which it believes are more appropriate to its business and these are shown in 
the Strategic report.

In relation to EPRA NIY and EPRA vacancy rate, the ﬁgures shown are in respect of the Grainger wholly-owned market rented assets 

only. Not included in these numbers are Grainger’s wholly-owned reversionary assets or any assets within joint ventures or associates.

The EPRA measures being reported and the calculation of EPRA earnings, EPRA NAV, EPRA NNNAV and EPRA NIY are set out below:

157

EPRA Earnings
EPRA Earnings per share 
EPRA NAV
EPRA NAV per share
EPRA NNNAV 
EPRA NNNAV per share
EPRA Net Initial Yield (NIY)1
EPRA Vacancy Rate1

2015 
15.1m
3.7p

2014 
£33.5m
8.1p
£1,334.1m £1,214.3m
291p
£1,101.5m £1,010.9m
242p
4.5%
4.5%

263p
4.7%
4.1%

319p

1   Excludes property that is vacant and is being marketed for sale. The 2015 vacancy rate is adversely impacted by a higher than normal level of vacancies in Germany as we upgrade our 

FRM portfolio.

2. EPRA EARNINGS

Earnings per IFRS income statement
Adjustments to calculate EPRA Earnings, exclude:
i)  Changes in value of investment properties, 

development properties held for investment and 
other interests

ii)  Proﬁts or losses on disposal of investment properties, 
development properties held for investment and 
other interests

iii)  Proﬁts or losses on sales of trading properties 
including impairment charges in respect of 
trading properties1

iv)  Tax on proﬁts or losses on disposals
v)  Negative goodwill/goodwill impairment
vi)  Changes in fair value of ﬁnancial instruments and 

associated close-out costs

vii)  Acquisition costs on share deals and non-controlling 

joint venture interests

viii) Purchase of debt at a discount
ix)  Deferred tax in respect of EPRA adjustments
x)  Adjustments i) to viii) in respect of joint ventures
xi)  Minority interests in respect of the above
EPRA Earnings/Earnings per share

Earnings 
£m
42.7

2015

Shares 
(millions)
412.4

Pence per 
share
10.4

Earnings 
£m
74.7

2014

Shares 
(millions)
411.8

Pence per 
share
18.1

(13.9)

(0.5)

1.2
–
–

5.8

–
–
1.4
(21.6)
–
15.1

–

–

–
–
–

–

–
–
–
–
–
412.4

(3.4)

(1.5)

(0.1)

(0.8)

0.3
–
–

1.4

–
–
0.3
(5.2)
–
3.7

(0.8)
–
–

(1.2)

–
–
0.7
(37.6)
–
33.5

–

–

–
–
–

–

–
–
–
–
–
411.8

(0.4)

(0.2)

(0.2)
–
–

(0.3)

–
–
0.2
(9.1)
–
8.1

1   Sales of trading property is a fundamental part of Grainger’s business model. Therefore, it is not appropriate to show any measure of earnings that excludes proﬁt on sale of trading property 

and so no adjustment has been made for this in the table above. The adjustment made in this item relates to an impairment provision made against trading stock (2014: reversal of an 
impairment provision).

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
158

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA PERFORMANCE MEASURES Continued

3. EPRA NET ASSET VALUE (NAV)

NAV from the ﬁnancial statements
Include:
i.a) Revaluation of investment property
i.b) Revaluation of investment property under construction
i.c) Revaluation of other non-current investments
ii) Revaluation of tenant leases held as ﬁnance leases
iii) Revaluation of trading properties
iv) Value of own shares1
Exclude:
v) Fair value of ﬁnancial instruments
vi.a) Deferred tax
vi.b) Goodwill as a result of deferred tax
Include/exclude:
Adjustments i) to v) above in respect of joint 
venture interests
EPRA NAV/EPRA NAV per share

2015

Net assets 
£m
564.9

Shares 
(millions)
418.3

NAV pence 
per share
135

Net assets 
£m
536.8

2014

Shares 
(millions)
417.8

NAV pence 
per share
128

–
–
–
–
687.7
12.3

26.8
30.0
–

–
–
–
–
–
–

–
–
–

12.4
1,334.1

–
418.3

–
–
–
–
165
3

6
7
–

3
319

–
–
–
–
596.9
9.6

38.4
23.6
–

–
–
–
–
–
–

–
–
–

9.0
1,214.3

–
417.8

–
–
–
–
144
2

9
6
–

2
291

1. The Grainger measures of NAV and NAV per share disclosed in Note 4 to the ﬁnancial statements is equal to the EPRA NAV presented above. The adjustment to add the value of the Group’s 
own shares is recognised as these shares do have a market value and this has been the historical basis of the Group’s calculation. In addition, the number of shares used in the NAV calculation 
is the total number of shares in issue including those held by the Company in treasury or trust for the purposes of settling future share awards. This should be a close representation of the 
fully diluted number of shares and so is very unlikely to produce materially different NAV measures.

4. EPRA TRIPLE NET ASSET VALUE (NNNAV)

EPRA NAV
Include:
i) Fair value of ﬁnancial instruments
ii) Fair value of debt
iii) Deferred tax
EPRA NNNAV/EPRA NNNAV per share

2015

Net assets 
£m
1,334.1

Shares 
(millions)
418.3

NAV pence 
per share
319

Net assets 
£m
1,214.3

2014

Shares 
(millions)
417.8

NAV pence 
per share
291

(27.9)
(25.8)
(178.9)
1,101.5

–
–
–
418.3

(7)
(6)
(43)
263

(38.5)
(14.0)
(150.9)
1,010.9

–
–
–
417.8

(9)
(3)
(37)
242

 
 
 
 
 
 
 
 
 
 
 
 
5. EPRA NET INITIAL YIELD (NIY)

Market value of wholly-owned market rented assets1
Allowance for estimated purchasers’ costs
Grossed up market value of wholly-owned market rented assets
Annualised passing rental income
Property outgoings
Annualised net rents
EPRA NIY

159

2014  
£m
393.4
12.0
405.4
26.5
(8.4)
18.1
4.5%

2015  
£m
499.3
13.6
512.9
32.4
(8.2)
24.2
4.7%

1.  Based on Grainger’s wholly-owned market rented portfolio of property assets which has a market value as at 30 September 2015 of £542m (2014: £432m) but excluding interests in garages, 

ground rents and land amounting to £43m (2014: £39m).

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
160

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA Sustainability Performance Measures

Methodology
We have reported on all EPRA Sustainability Performance Measures, using the EPRA Best Practices Recommendations on Sustainability 
Reporting 2nd Version, the main requirements of the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) 
and emissions factors from the UK Government’s Conversion Factors for Company Reporting 2015 and 2014. We have used the GHG 
Protocol’s location-based methodology for conversion factors for Scope 2 emissions.

Organisational boundary
We have used the Operational Control boundary approach for all Sustainability Performance Measures. Data is reported for our property 
investment portfolio and own occupied ofﬁces. Our property investment portfolio includes our UK Residential portfolio, our Germany 
Residential portfolio and the GRIP Fund. 

Reporting on landlord and tenant consumption
Grainger only reports on landlord-obtained energy, water and waste consumption. Data on tenant consumption is not available, however 
we report estimated tenant carbon dioxide emissions in our Mandatory Greenhouse Gas statement on page 35.

Coverage
Where we are not able to include 100% of all assets within our operational control in our reporting for a Sustainability Performance 
Measure, we have speciﬁed the level of data coverage. 

Energy and greenhouse gas notes
Greenhouse gas emissions are calculated using the UK Government’s conversion factors for Company Reporting 2015 and 2014. 
Transmission and distribution losses are reported as Scope 3 emissions. Greenhouse gas emissions are reported as metric tonnes CO2 
equivalent (t CO2e) and greenhouse gas intensity is reported as kilogrammes of CO2 equivalent (kg CO2e). Greenhouse gas emissions for 
German electricity consumption and transmission and distribution are reported in carbon dioxide (CO2) only as per the UK Government’s 
conversion factors for Company Reporting 2015 and 2014. The unit of measurement for natural gas consumption has been updated 
from 100s of cubic feet as a default to the actual known unit of measurement and natural gas consumption data for 2014 has been 
restated accordingly. 

Estimation of landlord-obtained utility consumption
Where data for Grainger-obtained utility consumption is missing or unreliable, we have used the following estimation methodology:
 – Where data is available for the same period (quarter) for the previous reporting year, we have estimated missing utility consumption using 

the daily consumption rate from the previous year.

 – Where data is not available for the same period (quarter) for the previous reporting year, we have estimated missing utility consumption 

using the daily consumption rate from all previous quarters in the current reporting year. 

 – Where insufﬁcient previous data was available, we have excluded the property from reporting.

We have only estimated data to ﬁll gaps using known consumption from other periods for the metered supply in question. We have 
disclosed the proportion of total disclosed data that is estimated in the data notes that accompany each Performance Measure.

161

Absolute and like-for-like energy and GHG emissions for Own Ofﬁce Occupation

2014

2015

Absolute 
consumption

Like-for-like  
consumption

Absolute  
consumption

Like-for-like  
consumption

Absolute  
trend

Like-for- 
like trend

Elec-Abs: Total electricity consumption; DH&C-Abs: Total district heating & cooling consumption;  
Fuels-Abs: Total fuel consumption; Elec-Lﬂ: Life-for-life electricity consumption;  
DH&C-Lﬂ: Like-for-like District heating & cooling; Fuels-Lﬂ: Like-for-like fuel consumption (annual kWh) GRI G4-EN3
UK Ofﬁces

Total electricity submetered to 
Grainger by its landlord
Total energy consumed from district 
heating and cooling submetered to 
Grainger by its landlord
Total energy consumption from fuels 
submetered to Grainger by its landlord
Coverage of applicable properties
Total electricity submetered to 
Grainger by its landlord
Total energy consumed from district 
heating and cooling submetered to 
Grainger by its landlord
Total energy consumption from fuels 
submetered to Grainger by its landlord
Coverage of applicable properties
Total electricity submetered to 
Grainger by its landlord
Total energy consumed from district 
heating and cooling submetered to 
Grainger by its landlord

Total energy consumption from fuels 
submetered to Grainger by its landlord

German Ofﬁces

Grand Total

503,979 

350,317

475,105

380,310

-6%

9%

–

–

–

–

–
6 of 6

–
3 of 6

–
4 of 4

–
3 of 4

–

–

–

–

40,574

40,574

39,232

39,232

-3%

-3%

–

–

–

–

–
1 of 1

–
1 of 1

–
1 of 1

–
1 of 1

–

–

–

–

554,553

390,890

514,337

419,541

-6%

7%

Energy-Int: Building Energy Intensity (kWh per employee per year) GRI: CRE1
Building Energy Intensity for all energy 
UK Ofﬁces
submetered to Grainger by its landlord
Building Energy Intensity for all energy 
submetered to Grainger by its landlord
Building Energy Intensity for all energy 
submetered to Grainger by its landlord

German Ofﬁces

Grand Total

1,967

2,135

1,916

N/A 

N/A 

N/A 

–

–

–

–

–

–

1,760

1,783

1,761

–

–

N/A

N/A

N/A

–

–

-8%

-16%

-10%

–

–

N/A

N/A

N/A

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
 
 
 
 
 
 
 
162

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA SUSTAINABILITY PERFORMANCE MEASURES Continued

Absolute and like-for-like energy and GHG emissions for Own Ofﬁce Occupation Continued

2014

2015

Absolute 
consumption

Like-for-like  
consumption

Absolute  
consumption

Like-for-like  
consumption

Absolute  
trend

Like-for- 
like trend

GHG-Dir-Abs: Total direct greenhouse gas (GHG) emissions; GHG-Indir-Abs: Total indirect greenhouse gas (GHG) emissions; 
GHG-Dir-Lﬂ: Like-for-like direct greenhouse gas emissions; GHG-Indir-Lﬂ: Like-for-like indirect greenhouse gas emissions 
(annual metric tonnes CO2e) GRI G4-EN15 and G4-EN16
UK Ofﬁces

Total direct GHG emissions  
(GHG Protocol Scope 1)
Total indirect GHG emissions  
(GHG Protocol Scope 2)
Total indirect GHG emissions  
(GHG Protocol Scope 3)
Coverage of applicable properties
Total direct GHG emissions  
(GHG Protocol Scope 1)
Total indirect GHG emissions  
(GHG Protocol Scope 2)
Total indirect GHG emissions  
(GHG Protocol Scope 3)
Coverage of applicable properties
Total direct GHG emissions  
(GHG Protocol Scope 1)
Total indirect GHG emissions  
(GHG Protocol Scope 2)
Total indirect GHG emissions  
(GHG Protocol Scope 3)

German Ofﬁces

Grand Total

–

242

–

169

–

223

–

179

21
6 of 6

15
3 of 6

19
4 of 4

15
3 of 4

–

19

1
1 of 1

–

261

22

–

19

1
1 of 1

–

188

16

–

19

1
1 of 1

–

242

20

–

19

1
1 of 1

–

198

16

–

-8%

-11%

–

-3%

-11%

–

-7%

-11%

GHG-Int: Greenhouse gas (GHG) intensity from building energy consumption (kg CO2e per employee per year) GRI: CRE3
UK Ofﬁces

German Ofﬁces

Grand Total

Building GHG Intensity  
(GHG Protocol Scopes 1 and 2)
Building GHG Intensity  
(GHG Protocol Scopes 1 and 2)
Building GHG Intensity  
(GHG Protocol Scopes 1 and 2)

920

1,009

926

N/A

N/A

N/A

826

844

829

N/A

N/A

N/A

-10%

-16%

-10%

–

6%

2%

–

-3%

-11%

–

5%

1%

N/A

N/A

N/A

 
 
 
 
 
 
 
 
163

Data coverage notes for occupied ofﬁces
Absolute energy and GHG emissions: 13% of data is estimated. Our London ofﬁces in Knightsbridge and Putney were closed in April and 
May 2014 and a new consolidated London Bridge ofﬁce was opened in April 2014. Consumption has been reported for the period of the 
reporting year that each ofﬁce was occupied by Grainger.
Like-for-like energy and GHG emissions: 0.4% of data is estimated. Due to ofﬁce consolidation in 2014, there are only three UK ofﬁces 
that have been occupied for two full reporting years: Newcastle, Birmingham and Altrincham. Our Frankfurt ofﬁce in Germany has also 
been occupied for two full reporting years. Putney and Knightsbridge are no longer occupied by Grainger and the London Bridge ofﬁce 
opened in April 2014, therefore these three properties have been excluded from like-for-like reporting. 

Absolute energy, GHG emissions and water consumption for owned assets by portfolio; Building Energy Intensity, 
GHG Intensity and Water Intensity by portfolio

2014

2015

Absolute  
consumption

Coverage of  
applicable  
properties

Absolute  
consumption

Coverage of  
applicable  
properties

Trend

GRIP Fund

1,100,288 254of 254 

Elec-Abs: Total electricity consumption; DH&C-Abs: Total district heating & cooling consumption;  
Fuel-Abs: Total fuel consumption (annual kWh) GRI: G4-EN3
Grainger obtained electricity
UK Residential 
portfolio 
Total energy consumed from district heating 
and cooling
–
Total energy consumption from Grainger obtained fuels  1,701,085
1,701,085
Grainger obtained natural gas
Grainger obtained electricity
496,724
Total energy consumed from district heating 
and cooling
Total energy consumption from Grainger obtained fuels 
Grainger obtained natural gas
Grainger obtained electricity
Total energy consumed from district heating 
and cooling
Total energy consumption from Grainger obtained fuels 
Grainger obtained natural gas
Grainger obtained electricity
Total energy consumed from district heating 
and cooling

N/A
N/A
N/A
2,725,095 939 of 940

N/A
3 of 3
3 of 3
1,128,083 598 of 598

N/A
6 of 6
6 of 6
87 of 88

German  
Residential 
portfolio

–
93,611
93,611

Grand Total

–
–
–

856,333 245 of 245

–
1,791,770
1,791,770
537,481

N/A
6 of 6
6 of 6
85 of 86

–
82,167
82,167

N/A
3 of 3
3 of 3
1,087,397 602 of 602

–
–
–

N/A
N/A
N/A
2,481,211 932 of 933

–
Total energy consumption from Grainger obtained fuels  1,794,696
1,794,696
Grainger obtained natural gas

N/A
9 of 9
9 of 9

–
1,873,938
1,873,938

N/A
9 of 9
9 of 9

-22%

–
5%
5%
8%

–
-12%
-12%
-4%

–
–
–
-9%

–
4%
4%

Energy-Int: Building Energy Intensity (kWh per £m value of assets under management per year) GRI: CRE1
1,334
Building Energy Intensity for all Grainger-obtained building energy

1,431

N/A

N/A

-7%

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
164

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA SUSTAINABILITY PERFORMANCE MEASURES Continued

Absolute energy, GHG emissions and water consumption for owned assets by portfolio; Building Energy Intensity,  
GHG Intensity and Water Intensity by portfolio Continued

2014

2015

Absolute  
consumption

Coverage of  
applicable  
properties

Absolute  
consumption

Coverage of  
applicable  
properties

Trend

GHG-Dir-Abs: Total direct greenhouse gas (GHG) emissions; GHG-Indir-Abs: Total indirect greenhouse gas (GHG) emissions 
(annual metric tonnes CO2e) GRI G4-EN15 and G4-EN16
UK Residential 
portfolio 

Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)

314
6 of 6
526 254 of 254
46 254 of 254
3 of 3
17
87 of 88
239
87 of 88
21
N/A
–
534 598 of 598
27 598 of 598
9 of 9
332
1,299 939 of 940
94 939 of 940

331
6 of 6
404 245 of 245
34 245 of 245
3 of 3
15
85 of 86
253
85 of 86
21
N/A
–
514 602 of 602
24 602 of 602
346
9 of 9
1,171 932 of 933
80 932 of 933

5%
-23%
-26%
-12%
6%
2%
–
-4%
-11%
4%
-10%
-15%

GRIP Fund

German  
Residential 
portfolio

Grand Total 

GHG-Int: Greenhouse gas (GHG) intensity from building energy consumption (kg CO2e per £m value of assets under 
management per year) GRI: CRE3
GHG Intensity

Greenhouse gas intensity for all Grainger obtained 
building energy (GHG Protocol Scopes 1 & 2)

516

N/A

465

N/A

-10%

Water-Abs: Total water consumption annual cubic metres (m3) GRI: G4-EN8
GRIP Fund
Grand Total

Grainger obtained water consumption
Total water consumption

2,398
2,398

4 of 4
4 of 4

26
26

1 of 1
1 of 1

-99%
-99%

Water-Int: Building Water Intensity (m3 per £m value of assets under management per year) GRI: CRE2
Building Water 
Intensity

Building Water Intensity for all Grainger 
obtained water

N/A

0.8

0.008

N/A

-99%

Data coverage notes for owned assets
We report on Grainger-obtained electricity, fuel and water consumption for applicable properties with common areas; the proportion 
of estimation and exclusions due to missing data are listed in detail below. Grainger does not report on energy or water consumed by 
tenants. All annual consumption is reported as the portfolio stood at year end for the period from 1 October 2014 to 30 September 2015. 
We have used the market value of assets under management as our main intensity Performance Measure as this is also what we use to 

measure our business efﬁciency KPI as reported in our Strategic report.
Absolute energy and GHG emissions: 4% of electricity consumption data has been estimated. 1% of fuels consumption data has 
been estimated. No properties have been excluded from electricity consumption for the UK Residential portfolio. One property has 
been excluded from reporting for the GRIP Fund because there was no conﬁrmed electricity supplier and so consumption could not 
be calculated. 
Absolute water: 8% of water consumption data has been estimated. There are no properties excluded from reporting. 
Water consumption data is not available for our German Residential portfolio for the reporting year.

165

Like-for-like energy, GHG emissions and water consumption for owned assets by portfolio

2014

2015

Like-for-like 
consumption

Coverage of  
applicable  
properties

Like-for-like  
consumption

Coverage of  
applicable  
properties

Trend

Elec-Lﬂ: Like-for-like total electricity consumption; DH&C-Lﬂ: Like-for-like district heating and cooling consumption; 
Fuels-Lﬂ: Like-for-like fuel consumption (annual kWh) GRI: G4-EN3

UK Residential 
portfolio 

GRIP Fund

German  
Residential 
portfolio

Grand Total

Grainger obtained electricity
Total energy consumed from district heating 
and cooling
Total energy consumption from Grainger 
obtained fuels 
Grainger obtained natural gas
Grainger obtained electricity
Total energy consumed from district heating  
and cooling
Total energy consumption from Grainger  
obtained fuels 
Grainger obtained natural gas
Grainger obtained electricity
Total energy consumed from district heating  
and cooling
Total energy consumption from Grainger  
obtained fuels 
Grainger obtained natural gas
Grainger obtained electricity
Total energy consumed from district heating 
and cooling
Total energy consumption from Grainger 
obtained fuels 
Grainger obtained natural gas

909,441 207 of 207

792,327 207 0f 207

-13%

–

N/A

–

N/A

1,701,085
1,701,085
492,573

6 of 6
3 of 3
81 of 82

1,791,770
1,791,770
534,632

6 of 6
3 of 3
81 of 82

–

N/A

–

N/A

–

5%
5%
9%

–

93,611
93,611

3 of 3
3 of 3
1,128,083 597 of 597

82,167
82,167

3 of 3
3 of 3
1,080,868 597 of 597

-12%
-12%
-4%

–

N/A

N/A

–

–
–

N/A
N/A
2,530,096 885 of 886

–
–

N/A
N/A
2,407,828 885 of 886

–

N/A

–

N/A

1,794,696
1,794,696

9 of 9
9 of 9

1,873,938
1,873,938

9 of 9
9 of 9

–
–
-5%

–

4%
4%

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
166

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA SUSTAINABILITY PERFORMANCE MEASURES Continued

GHG-Dir-Lﬂ: Like-for-like total direct greenhouse gas (GHG) emissions; GHG-Indir-LfL: Like-for-like total indirect greenhouse gas 
(GHG) emissions (annual metric tonnes CO2e) GRI: G4-EN15 and G4-EN16

UK Residential 
portfolio

GRIP Fund

German  
Residential 
portfolio

Grand Total

Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)
Total direct GHG emissions (GHG Protocol Scope 1)
Total indirect GHG emissions (GHG Protocol Scope 2)
Total indirect GHG emissions (GHG Protocol Scope 3)

2014

2015

Coverage of  
applicable  
Like-for-like 
properties
consumption
6 of 6 
314
433 207 of 207 
38 207 of 207 
3 of 3
17
81 of 82
237
81 of 82
21
N/A
–
534 597 of 597
27 597 of 597
 9 of 9 
332
1,203  890 of 891 
86  890 of 891

Coverage of  
applicable  
Like-for-like  
properties
consumption
6 of 6
331
373 207 of 207
31 207 of 207
3 of 3
15
81 of 82
252
81 of 82
21
N/A
–
511 597 of 597
24 597 of 597
9 of 9
346
1,137 890 0f 891
77 890 of 891

Trend
5%
-14%
-16%
-12%
6%
3%
–
-4%
-11%
4%
-6%
-10%

Water-Lﬂ: Like-for-like total water consumption annual cubic metres (m3) GRI: G4-EN8
GRIP Fund
Grand Total

Grainger obtained water consumption
Total water consumption

10
10

1 of 1
1 of 1

18
18

1 of 1
1 of 1

68%
68%

Data coverage notes for owned assets
Like-for-like energy and GHG emissions: 4% of like-for-like electricity consumption data has been estimated. 1% of like-for-like fuel 
consumption data has been estimated. One property has been excluded from reporting for the GRIP Fund because there was no 
conﬁrmed electricity supplier and so consumption could not be calculated. 
Like-for-like water: 0% of water consumption data has been estimated. There are no properties excluded from reporting.

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

167

Total weight of waste by disposal route and like-for-like total weight of waste by disposal route for owned assets

2014

2015

Absolute 
tonnes

Proportion

Like-for-like

Absolute 
tonnes

Proportion Like-for-like

Absolute 
trend

Like-for- 
like trend

Waste-Abs: Total weight of waste by disposal route; Waste-Lﬂ: Like-for-like weight of waste by disposal route  
(annual metric tonnes and proportion by disposal route) GRI: G4-EN23
GRIP Fund

Total
Recycled
Incineration (with and 
without energy recovery)
Landﬁll (non-hazardous)
Hazardous Waste 
Treatment Facility
Coverage of applicable 
properties
Total
Recycled
Incineration (with and 
without energy recovery)
Landﬁll (non-hazardous)
Hazardous Waste 
Treatment Facility
Coverage of applicable 
properties
Total
Recycled
Incineration (with and 
without energy recovery)
Landﬁll (non-hazardous)
Hazardous Waste 
Treatment Facility
Coverage of applicable 
properties

375
131

188
56

–

11 of 13
375
131

188
56

–

11 of 13
35
26

–
9

–

6 of 7

N/A
N/A

375
131

N/A
N/A

N/A

188
56

–

11 of 13 
N/A
N/A

11 of 13
375
131

N/A
N/A

N/A

27
21

N/A
6

N/A

188
56

–

11 of 13
10
7

–
3

–

2 of 7

4 of 5

35%

50%
15%

–

35%

50%
15%

–

74%

–
26%

–

–

375
131

188
56

–

11 of 13
375
131

188
56

–

11 of 13
7
6

1

–

3 of 5

35%

50%
15%

–

35%

50%
15%

–

67%

–
33%

–

–

0%
0%

0%
0%

–

0%
0%

0%
0%

–

0%
0%

0%
0%

–

0%
0%

0%
0%

–

-71%
-74%

–
-64%

-75%
-74%

–
-78%

–

–

Grand Total

Own ofﬁce 
occupation

Data coverage notes for owned assets

Absolute waste
UK Residential portfolio: Waste management is not provided by Grainger for its UK Residential portfolio, so there is no data to report.
GRIP Fund: Waste data is gathered for all properties in the GRIP Fund portfolio where Grainger has waste management contracts in place, 
excluding Bethnal Green and West Tenter Street where it was not possible to convert the available waste data into weight. 100% of data 
is estimated because data is not gathered by waste management contractors for actual weight of waste generated by Grainger-owned 
properties. Waste weight in metric tonnes is calculated from bin volume in litres using the WRAP waste conversion factor 20 03 01 for 
mixed municipal waste, rather than actual weight measurements at each property. Proportion of waste by disposal route is based on 
statistics for each applicable waste management contractor as a whole and is not speciﬁc to Grainger properties. Food waste for three 
properties has been excluded because it was not possible to calculate weight from the data provided.

 
 
 
 
 
 
 
168

Grainger plc / Annual Report and Accounts 2015 / Financials

EPRA SUSTAINABILITY PERFORMANCE MEASURES Continued

Like-for-like waste
GRIP Fund: All applicable properties are included in like-for-like reporting.

Data coverage notes for occupied ofﬁces

Absolute waste
Annual ﬁgures are estimated from an audit of actual waste weight produced by each ofﬁce on a minimum of two separate days during 
the reporting year. Total weight was calculated for the 255 working days per year, excluding bank holidays and weekends. 62% of data 
was estimated. Cardboard waste at our London ofﬁce has been excluded because it was not possible to calculate weight from the data 
provided. Waste data was not measured at our German occupied ofﬁce.

Like-for-like waste
Due to ofﬁce consolidation in 2014, there are only three UK ofﬁces that have been occupied for two full reporting years: Newcastle, 
Birmingham and Altrincham. All are included in like-for-like reporting.

Cert-Tot Type and number of sustainably certiﬁed assets GRI: G4-CRE8

Type of certiﬁcation
Mandatory certiﬁcations
Voluntary certiﬁcations

Name of certiﬁcation
EU Energy Performance Certiﬁcate
Code for Sustainable Homes (Level 4)

Data coverage notes for owned assets

Number of  
UK properties  
certiﬁed
2,252
104

Percentage of  
UK properties  
certiﬁed

Coverage of 
applicable 
properties
23% 2,252 of 9,973
104 of 104
100%

Data is not available for our German Residential portfolio for the reporting year. Applicable properties for mandatory certiﬁcations include 
all Grainger-owned units. Applicable properties for voluntary certiﬁcations include all units developed in the reporting year.

Five year record

FOR THE YEAR ENDED 30 SEPTEMBER 2015

Revenue
Gross proceeds from property sales 
Gross rental income
Gross fee income
Operating proﬁt before valuation and non-recurring items (OPBVM)
Proﬁt/(loss) before tax
Proﬁt after tax
Dividends taken to equity

Earnings per share
Dividends per share

Gross net asset value per share 
Triple net asset value per share
Share price at 30 September

Return on capital employed (ROCE)
Return on shareholder equity (ROSE)

2011  
£m
296.2
217.0
86.3
6.9
126.2
26.1
39.1
4.9

Pence 
9.5
1.8

Pence 
216.2
153.3
86.6

%
6.5
11.1

2012  
£m
311.4
250.5
89.8
10.0
126.4
(1.7)
0.4
7.6

Pence 
0.1
1.9

Pence 
223.0
157.1
107.7

%
5.9
3.8

2013  
£m
283.2
347.1
71.3
12.5
107.6
64.3
53.6
8.0

Pence 
13.1
2.0

Pence 
242.0
194.7
174.8

%
8.1
25.2

2014  
£m
319.1
267.2
57.4
12.3
107.5
81.1
74.7
8.5

Pence 
18.1
2.5

Pence 
290.6
242.0
185.5

%
17.0
25.6

169

2015  
£m
244.1
187.4
58.7
7.5
101.9
50.0
42.7
10.4

Pence 
10.4
2.8

Pence 
319.0
263.4
238.0

%
9.5
10.0

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

 
 
Company Secretary and 
registered ofﬁce
Adam McGhin
Citygate
St James’ Boulevard
Newcastle upon Tyne
NE1 4JE

Company registration number 125575

170

Grainger plc / Annual Report and Accounts 2015 / Financials

Shareholders’ information

Financial calendar

AGM 
Payment of 2015  
ﬁnal dividend 
Announcement of 2015 
interim results 
Announcement of 2015  
ﬁnal results 

10 February 
2016
12 February 
2016

May 2016
November 
2016

Share price
During the year ended 30 September 2015, 
the range of the closing mid-market prices 
of the Company’s ordinary shares were:

Price at 30 September 2015
Lowest price during the year
Highest price during the year

238.0p
171.6p
254.0p

Daily information on the Company’s share 
price can be obtained on our website 
www.graingerplc.co.uk or by telephone 
from FT Cityline on 09058 171 690. 
Please note that FT Cityline is a 
chargeable service.

Capital gains tax
The market value of the Company’s shares 
for capital gains tax purposes at 31 March 
1982 was 2.03p.

Website
Website address www.graingerplc.co.uk

Shareholders’ enquiries
All administrative enquiries relating to 
shareholdings (for example, notiﬁcation of 
change of address, loss of share certiﬁcates, 
dividend payments) should be addressed to 
the Company’s registrar at:
Capita IRG plc
Northern House
Woodsome Park
Fenay Bridge
Huddersﬁeld
West Yorkshire
HD8 0LA

Share dealing service
A share dealing service is available to 
existing Shareholders to buy or sell the 
Company’s shares via Capita Share Dealing 
Services. Online and telephone dealing 
facilities provide an easy to access and 
simple to use service.

For further information on this service, 

or to buy or sell shares, please contact: 
www.capitadeal.com – online dealing 
0870 458 4577 – telephone dealing
Please note that the Directors of the 
Company are not seeking to encourage 
Shareholders to either buy or sell their 
shares. Shareholders in any doubt as to 
what action to take are recommended to 
seek ﬁnancial advice from an independent 
ﬁnancial adviser authorised by the Financial 
Services and Markets Act 2000.

Glossary of terms

PROPERTY 

Assured periodic tenancy (‘APT’)
Market-rented tenancy arising from 
succession from a regulated tenancy. 
Tenant has security of tenure. 

Assured shorthold tenancy (‘AST’)
Market-rented tenancy where landlord 
may obtain possession if appropriate notice 
is served.

Assured tenancy (‘AT’)
Market-rented tenancy where tenant has 
the right to renew.

Investment value (‘IV’) or market value
Open market value of a property subject to 
relevant tenancy in place.

Home reversion
Rent free tenancy where tenant has the 
right of occupation until possession is 
forfeited (usually on death). If the tenant 
retains an equity interest in the property 
this is a partial life tenancy. 

PRS
Private rented sector.

Regulated tenancy
Tenancy regulated under the 1977 Rent 
Act. Rent (usually sub-market) is set by the 
rent ofﬁcer and the tenant has security 
of tenure.

Tenanted residential (‘TR’)
Activity covering the acquisition, renting 
out and subsequent sale (usually on 
vacancy) of residential units subject to a 
tenancy agreement.

Vacant possession value (‘VP’ or ‘VPV’)
Open market value of a property free from 
any tenancy.

171

i

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
i
a
l
s

FINANCIAL

Cap
Financial instrument which, in return for 
a fee, guarantees an upper limit for the 
interest rate on a loan. 

Contingent tax
The amount of tax that would be payable 
should trading property be sold at the 
market value shown in the market value 
balance sheet.

Dividend cover
Earnings per share divided by dividends 
per share.

Earnings per share (‘EPS’)
Proﬁt after tax attributable to shareholders 
divided by the weighted average number of 
shares in issue in the year.

Gearing
The ratio of borrowings, net of cash, to 
market net asset value.

Goodwill
On acquisition of a company, the difference 
between the fair value of net assets 
acquired and the fair value of the purchase 
price paid.

Gross net asset value (‘NAV’)
Shareholders’ funds adjusted for the 
market value of property assets held as 
stock but before deduction for deferred 
tax on property revaluations and before 
adjustments for the fair value of derivatives.

 
CORPORATE

IFRS
International Financial Reporting Standards, 
mandatory for UK-listed companies for 
accounting periods ending on or after 
31 December 2005. 

172

Grainger plc / Annual Report and Accounts 2015 / Financials

GLOSSARY OF TERMS Continued

FINANCIAL Continued

Hedging
The use of ﬁnancial instruments to protect 
against interest rate movements.

Interest cover
Proﬁt on ordinary activities before interest 
and tax divided by net interest payable. 

Loan to value (‘LTV’)
Ratio of net debt to the market value 
of properties.

Recurring Proﬁt
Proﬁt before tax before valuation 
movements and non-recurring items.

Operating Proﬁt before Valuation 
Movements (‘OPBVM’)
Operating proﬁt before valuation 
movements and non-recurring items. 
Net net net asset value (triple net or 
’NNNAV’)
Gross NAV adjusted for deferred tax and 
those contingent tax liabilities which would 
accrue if assets were sold at market value 
and for the fair value of long-term debt 
and derivatives.

Return on capital employed
Operating proﬁt after net valuation 
movements on investment properties plus 
the share of results from joint venture/
associates plus the movement on the 
uplift of trading stock to market value as 
a percentage of opening gross capital 
deﬁned as investment property, ﬁnancial 
interest in property assets (CHARM), 
investment in joint venture/associates and 
trading stock at market value.

Return on shareholders’ equity
Growth in NNNAV in the year plus the 
dividend per share relating to each year 
as a percentage of opening NNNAV.

Swap
Financial instrument to protect against 
interest rate movements.

Total shareholder return (‘TSR’)
Return attributable to shareholders on 
the basis of share price growth with 
dividends reinvested.

Weighted average cost of capital 
(‘WACC’)
The weighted average cost of funding the 
Group’s activities through a combination of 
shareholders’ funds and debt.

Advisers

Solicitors
Freshﬁelds Bruckhaus Deringer
65 Fleet Street
London
EC4Y 1HS

Financial public relations
FTI Consulting 
200 Aldersgate 
Aldersgate Street
London 
EC1A 4HD

Banking
Clearing Bank and Facility Agent
Barclays Bank PLC

Other bankers
Allied Irish Banks plc
Deutsche Pfandbriefbank AG
HSBC Bank plc
HSH Nordbank AG
Hypothekenbank Frankfurt AG
Lloyds Bank plc
Nationwide Building Society
Santander UK plc 
SEB AG
The Royal Bank of Scotland plc
UniCredit Bank AG
Aaeral Bank AG
Corealcredit Bank AG
InvestKredit Bank AG
NRW Bank
Deutsche Bank AG
Frankfurter Volksbank
National Westminster Bank

Independent auditors
KPMG LLP
Chartered Accountants 
15 Canada Square
Canary Wharf
London
E14 5GL

173

Stockbrokers
JP Morgan Cazenove Limited
25 Bank Street
London
E14 5JP
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT

Registrars and transfer ofﬁce
Capita Registers plc
Northern House
Woodsome Park
Fenay Bridge
Huddersﬁeld
West Yorkshire
HD8 0LA

DESIGNED AND PRODUCED  
BY RADLEY YELDAR

www.ry.com

CORPORATE ADDRESSES

NEWCASTLE
Citygate
St James’ Boulevard
Newcastle upon Tyne
NE1 4JE
Tel: 0191 261 1819

LONDON
1 London Bridge
3rd Floor East
London
SE1 9BG
Tel: 020 7795 4700

BIRMINGHAM
The Circle
Harborne
Birmingham
B17 9DY

MANCHESTER
St John’s House
Barrington Road
Altrincham
Cheshire
WA14 1TJ

LUXEMBOURG
16 Avenue Pasteur
L-2310
Luxembourg

GERMANY
Weissfrauenstrasse 12-16
60311 Frankfurt am Main
Hesse
Germany

View our website
www.graingerplc.co.uk