Grainger Annual Report 2021

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FY2021 Annual Report · Grainger

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A better
quality of
living

ANNUAL REPORT
AND ACCOUNTS 2021

S TR ATEG I C RE P O RT

Our purpose

Chairman’s statement

Chief Executive’s statement

The shape and strength of our business

Marketplace

Business model

Key performance indicators

A better quality of living

Financial review

A sustainable approach to creating value

Section 172 statement

Task Force on Climate-related
Financial Disclosures

Risk management

Principal risks and uncertainties

Viability statement

G OV E RN A N C E

Chairman’s introduction to governance

Leadership and purpose

Division of responsibility

Composition, succession and evaluation

Audit, risk and control

Remuneration

Directors’ report

FI N A N C I A L S TATE M E NT S

Independent auditor’s report

Consolidated income statement

Consolidated statement
of comprehensive income

Consolidated statement
of financial position

Consolidated statement
of changes in equity

Consolidated statement of cash flows

Notes to the financial statements

Parent company statement
of financial position

Parent company statement
of changes in equity

Notes to the parent company
financial statements

104

110

111

112

113

114

115

157

158

159

EPRA performance measures (unaudited) 164

Five year record

OTH E R I N FO RM ATI O N

Alternative performance measures

Shareholders’ information

Glossary of terms

Advisers

168

169

170

171

172

CH A IRM A N

M A R K C L A R E ,

1
“Grainger has once again delivered
a robust performance.”

H E L E N G O R D O N ,

CEO

“Grainger is in a strong position
and continues to grow.”

RO B E R T H U D S O N ,

CH IEF FIN A N CI A L
O FFI CER

“Grainger’s focus on delivering
our growth strategy has continued
unabated.”

S U S TA I N A B I L I T Y

A N D E S G S TAT E M E N T 38
Our sustainability strategy focuses
on the areas most material to our
business and our stakeholders.

Our purpose is to provide high-quality
rental homes and great customer
service. It’s about renting homes that
give people the best possible experience
through our deep understanding of
our customers’ wants and needs
and our commitment to innovation,
wellbeing and creating places where
people feel part of a community.

We aim to enrich people’s lives
and provide them with
A better quality of living.

STRATEGIC REPORTC H A I RM A N ’ S S TATE M E NT

Continued growth from a position
of strength, demonstrating
the resilience of the business

We have continued to make good progress across all areas of ESG
including our four long-term ESG commitments. We set out the
details of this within the ESG section of this report starting on
page 38. We remain committed to improving diversity within the
organisation and are making positive headway through our
Diversity and Inclusion Programme. We are also encouraging
greater diversity within our sector by working with young people in
educational settings, and we continue to attract and support more
diverse and inclusive communities within our buildings. To provide
additional focus at Board level on these important topics we are
establishing a new committee of the Board, the Responsible
Business Committee, which will focus on all aspects of ESG.

During the year we have successfully rolled out key elements
of our technology platform and we have already seen real
benefits coming through, especially against a backdrop of having
to operate virtually at times during the year. Over the coming
years we expect to see further benefits including efficiencies and
scalability, and continued enhancements to the experience we
deliver for our customers.

During the year we saw Vanessa Simms leave the Company as
previously announced, and Rob Hudson replace her as Group
CFO. Rob joined the Board on 1 September and brings a wealth
of experience from the real estate sector. Carol Hui joined the
Board on 1 October as Non-Executive Director and will be Chair
of the new Responsible Business Committee. Carol brings
experience from a number of sectors and has been responsible
for delivering ESG strategies elsewhere. At the AGM in February
2022, Andrew Carr-Locke will be stepping down from the Board
by rotation and we are very grateful for his service as both Senior
Independent Director and the Chair of the Audit Committee.
Andrew has made an invaluable contribution over the last seven
years and we wish him every success in the future.

The proposed final dividend for the year is 3.32p per share,
reflecting our policy of distributing 50% of our net rental income,
taking the total dividend for the year to 5.15p per share.
This reflects the growth in net rental income from new schemes
offset by the acceleration of our asset recycling initiatives
combined with lower occupancy levels due to the Covid-19
restrictions affecting the lettings market earlier in the year.

As we look ahead, Grainger’s path is clear. The Board will continue
to focus on accelerating growth within the private rented sector
in the UK, building on its strong foundations, delivering great
homes, great places and great service to its customers.

Mark Clare
Chairman

17 November 2021

Dear Shareholders,

Grainger has once again delivered a robust financial
performance and has continued to successfully
execute on its well-established growth strategy,
despite economic disruption and a challenging
market due to Covid-19 lockdowns.

The business demonstrated strong resilience throughout the
pandemic maintaining strong rental collection rates and driving
occupancy levels back up towards normalised levels by the year
end as lockdown restrictions were eased. The business also
capitalised on the strong sales market by increasing its rate of
asset recycling to support new investment. This, together with
another very successful equity raise of £209m gross proceeds,
has allowed the business to step up investment with a number
of additional acquisitions, added to its growing pipeline. Once
again, the Board is very grateful for the support our Shareholders
have provided to the Company’s growth strategy.

Over the course of the year, Grainger has delivered over 1,300
new, high-quality rental homes. A record year for the business
and, importantly, each of these six new schemes are leasing up
ahead of expectations.

We spoke last year of the great responsibility being a landlord
brings with it and the importance we place on health and safety
through our own Live.Safe programme. Our focus, commitment
and work in this area remains a top priority. We continue to show
our leadership in our design specification and have been
recognised for our leading approach to health and safety
and fire safety, specifically, by the UK Government’s Industry
Safety Steering Group.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

CHIEF E XECUTIVE’ S STATEMENT

Robust performance
and a record year
of delivery

Income

Capital

Like-for-like rental growth

EPRA NTA

1.0%

-195bps
(FY20: 3.0%)

297pps

+4%
(FY20: 285pps)

Net rental income

Loan to value

£70.6m

-4%
(FY19: £73.6m)

30.4%

-301bps
(FY20: 33.4%)

Adjusted earnings

Total property return

£83.5m

+2%
(FY20: £81.8m)

7.5%

+209bps
(FY20: 5.4%)

Profit before tax

IFRS net assets

£152.1m

+53%
(FY20: £99.1m)1

234pps

+9%
(FY20: 214pps)1

Dividend per share

EPRA NDV

5.15p

-6%
(FY20: 5.47p)

284pps

+4%
(FY20: 273pps)1

I am pleased to report that your Company is
in a strong position and has continued to
grow despite the challenges of the past year.
The demand for our homes and the delivery
of new schemes means our growth strategy
has continued unabated. We delivered a
record number of new homes and leased
these swiftly whilst also recovering
occupancy across our whole PRS portfolio.
We are focused on continually improving the
homes we provide by enhancing our offer to
our customers, achieving a collective purpose
of ‘Renting homes, enriching lives’.

We added six further schemes, totalling 1,304 great
rental homes, to our portfolio.

Our successful equity placing in September, which was heavily
over-subscribed, has enabled us to continue our expansion and
bring forward and commit to new schemes.

For the year we delivered growth in Adjusted Earnings up 2% to
£83.5m, growth in the value of our portfolio with EPRA NTA up
4% to 297p per share, and passing net rental income was up to
£81m at the year end. Reported net rental income for the year
was £70.6m, reflecting the investment disposals we made and
the reduced occupancy we experienced during the year caused
by the pandemic, at the time of writing this has now been
recovered. We are pleased to maintain our total dividend
distribution of £36.9m (FY20: £36.8m) with a proposed final
dividend of 3.32p per share.

1 Restated following change in accounting policy as a result of the IFRIC interpretation
of IAS38 relating to development costs on Software as a Service. See Note 38 for an
explanation of prior year restatements.

* Additional information and definitions for all KPIs are included at pages 20 and 21.

We are set to accelerate our well-established growth trajectory,
with a £1.9bn pipeline which will see our net rental income grow by
2.5 times, and creating a high-quality portfolio for future growth.

STRATEGIC REPORTC H I E F E X EC U TI V E ’ S S TATE M E NT CO NTIN U ED

Our growth strategy continues to be the right one

Our strategy of investing in high-quality mid-market private
rental homes in target cities across the UK, remains the right
strategy for Grainger.

The UK rental market (or private rented sector) remains a highly
attractive sector to invest in. It proved resilient during the
pandemic. In fact, consumer rental trends we identified a few years
ago have accelerated during the pandemic in favour of our product
of high-quality homes and more professional customer service.

We allocate capital based on insights, data and research to
determine which cities to invest in. This has proven successful as
demonstrated by the resilience of our portfolio and the successful
lease up of our new buildings. Our business has benefited from this
strategy by having the right product in the right places.

Our strategy of
investing in high-
quality mid-market
private rental homes in
target cities across the
UK remains the right
strategy for Grainger.

Our three strategic focus areas that we set out in 2016:
(1) grow rents, (2) simplify and focus, and (3) build on our
experience, remain relevant today.

H E L E N G O R D O N ,

CEO

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Establishing scale is important for us as a business. It enables us
to enhance both returns to Shareholders, and importantly it also
enables us to enhance our offer to our customers and all our
stakeholders. That is why we are focused on growth, driving net
rental income and dividend. Today, our net rental income is more
than double what it was when we set out our strategy, and our
growing pipeline, supported by our recent equity placing, will see
net rental income more than double again, supporting dividend
growth of the same magnitude.

Our guiding values align to our strategy

Our values, as set out below, are our guiding principles for the
business. They have been developed by our employees so that
they complement and align with our strategy, taking account of
our customers and communities. By embedding these values,
we believe we will be a better, stronger business, delivering better
service and homes to more customers, support to our communities
and drive better returns for Shareholders and importantly being
a business people want to work in.

People at the heart

One of our core guiding values is ‘People at the heart’. This value
guides how we think about our customers but also employees,
which is wide-ranging from employee attraction and retention
through to mental health, wellbeing, professional development
and diversity. We are especially proud of the work of our
employee-led Diversity & Inclusion Network, and the foundations
we continue to lay to support gender and ethnicity diversity
across the business.

Once again, the Grainger team have demonstrated exceptional
commitment to our customers, our colleagues and the
Grainger business.

During the year we took the opportunity to further simplify the
business by selling assets which we felt would not deliver for our
Shareholders and our customers in the longer term into a strong
market. Whilst this reduced net rental income in the short term,
it will also reduce capital expenditure and vacancy in the
portfolio over the long term and ensure a high-quality portfolio.

We are grateful to our Shareholders for their overwhelming
support for our equity placing in September, which enabled
us to bring forward our growth plans even further by securing
new acquisitions.

Building on our experience

Maintaining our position as market leader remains a strategic
focus for us. Our experience and heritage as a responsible,
residential landlord in the UK since 1912 provides us a strong
foundation for future growth. Our growth plans are coupled with
a continued focus on what makes a good experience of renting
while continually refining our business model and operating
platform, focusing on scalability and efficiencies. This enables us
to outperform and outcompete. And as we grow, our business
model and operating platform has been designed so that our
central cost base does not significantly increase, so that as our
net rental income grows over the coming years this will lead to
compounding of returns and significant growth to our earnings.

Our values

Every home
matters

People at
the heart

Leading
the way

Exceeding
expectations

Resident Services Manager

STRATEGIC REPORTC H I E F E X EC U TI V E ’ S S TATE M E NT CO N T INUED

Resident Services team at The Filaments, Manchester

At the start of the financial year we were able to return to our
offices and the levels of staff engagement were high in all areas
of the business, but by the end of the first quarter we were in a
second lockdown. I was proud of the way the business swiftly
responded, showing no sign of complacency or resignation but
rising to the challenge of serving our customers well.

Our frontline Resident Services teams in our build-to-rent
properties stayed in place and supported our customers, many of
whom were working from home. The teams provided additional
services and enhanced health and safety regimes.

Our office-based teams returned over the summer and by the
end of September we saw between 75% and 95% of our
colleagues return to our offices, with high levels of engagement
and enthusiasm to create and support our next stage of growth.

Our ‘People at the heart’ value helps guide our customer service
strategy. Using data and insight, including direct, independently-
gathered customer feedback, we have in-depth knowledge and
understanding of our customers, their wants, needs and
preferences. And this insight and data informs our decision-
making, from capital allocation, through to design, operations
and marketing.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Securing a future for all

We strongly believe that Grainger is a force for good, providing
high-quality homes, with high service standards, to the mid-
market, in a country with a housing shortage and an inadequate
rental offering generally. But our ESG ambitions reach far beyond
this, with stretching commitments and targets relating to carbon
reductions, social impact and diversity.

Throughout the business, from the Board through to on-site
operational teams and supply chain partners, we are challenging
ourselves to do more, embedding ESG and responsible business
objectives in every team and in every process and decision.

Our leading ESG strategy and efforts will help secure Grainger’s
future as a responsible business and will help secure a brighter
future for all our stakeholders. We were pleased to be a
commercial partner for the COP26 Built Environment Virtual
Pavilion. This year, our sustainability and ESG efforts were
recognised again through multiple awards and benchmarks,
including achieving a Gold Award for EPRA’s Sustainability
Best Practice Reporting for the eighth consecutive year.
We have also maintained our sector leading Prime Rating on
the ISS ESG assessment.

We were awarded an A rating on the GRESB Public Disclosure
Assessment, and were the highest scoring UK residential
organisation. Grainger contributed to the development of the
British Property Federation’s Residential ESG Guidance and the
UK Apartment Association’s ESG Best Practice Guide, which seek
to increase consistency of ESG performance and reporting across
the private rented sector.

Enhancing our platform to enable occupancy to outperform

The business proved exceptionally resilient during the course of
the pandemic with rent collections averaging between 97% and
99%. The restrictions put in place due to the coronavirus
pandemic did lead to reduced lettings activity and we entered
this financial year at reduced occupancy levels.

We addressed this by building our own in-house leasing team,
refurbishing and enhancing our older rental properties when
voids occurred.

In February this year we launched our customer Service Desk
available to all residents but particularly those who have less
access to an on-site Resident Services team.

The in-house leasing team enabled us to respond quickly to the
surge of enquiries as the market opened up over the Summer.
We achieved record numbers of lettings across the country.

By the end of September we were close to fully recovering
occupancy at 94% and shortly thereafter were back to a stabilised
occupancy of 95% on our PRS portfolio. In addition, we
outperformed against our expectations on the lease up of all our
new assets, totalling over 1,300 new rental homes which were
91.5% let by the end of October.

We continued to invest in our technology platform, CONNECT,
during the year. Our digital leasing capability has been expanded
to the entirety of our PRS portfolio, and we have introduced new,
market-leading technology supporting customer relationship
management, our repairs process and supply chain, asset
management and data reporting. In addition to enhancing our
platform and boosting our occupancy levels, this will support
our future growth, and enable us to deliver a better service,
more efficiently.

Our new CFO, Rob Hudson, joined in late August replacing
Vanessa Simms who left in late April. Vanessa worked with me on
the repositioning of Grainger over the past five years, and I thank
her for her friendship, contribution and support during this time.

Delivering Shareholder returns

Our strategy is delivering for Shareholders and our robust results
demonstrate resilient performance during the pandemic.

Rent collection was high, new lettings outperformed and voids
were successfully reduced. Our rental growth was lower than in
previous years reflecting our desire to retain customers and
encourage occupancy over rental growth. We expect our ability to
increase rents while maintaining high retention rates to return in
future years.

Our early investment sales timed to capitalise on a healthy
investment market reduced overall income, however as we go into
our next year our exceptional lease up of new schemes places us in
a great position to continue to grow rents substantially.

Through these actions, we saw an increase in Adjusted Earnings
and a notable increase in the value of our portfolio with EPRA NTA
up 4% to 297p. And as we deliver our pipeline of new schemes the
growth in net rental income will drive growth in our dividend, and
will generate compounded growth in earnings as we leverage up
on our operating platform.

An exceptional year of new openings

During the year we launched five new schemes and acquired one
stabilised scheme, our largest delivery to date and our new homes
are performing ahead of expectations. Our scheme Gatehouse
Apartments in Southampton was let in four months at rents ahead
of expectations. Our schemes in London were launched in July and
August and are leasing well and our central Leeds project, The
Headline, has beaten leasing velocity records, reaching stabilised
levels within 3.5 months. These new developments are homes that
the Grainger team are very proud of, they represent years of hard
work and attention to detail and as our residents settle into these
new communities the feedback has been extremely positive.

Board visits and engagement

I am grateful for the commitment of the Grainger Board in
supporting the growth of the business by being responsive and
agile. Despite the restrictions of lockdown, the Board visited two
new Grainger schemes during the year in Southampton and
London. The interest, enthusiasm and engagement is a boost to
the frontline operational team.

The strength of the Grainger team

We have further strengthened our team with senior appointments
during the year. John Blanshard, our Director of Operations joined
us in March from Unite, the student housing provider, and has a
strong operational and customer focused background.

Rob brings a wealth of real estate experience from his previous
roles at British Land and as CFO and Interim CEO of St Modwen.
He also has a strong technology and data background from his
tenure at Experian.

As the market leader, Grainger paves the way when it comes to
influencing and shaping the future of the rental homes market in
the UK. Our longer-term tenancies, inclusive super-fast WiFi and
pet- friendly policies are just some of the ways that we are providing
our customers with better value and a better rental experience.

We are building a business our employees and Shareholders can
be proud of. We have a clear strategy and commitment to quality
and service which guides us. We are building communities where
we can support people to have a better quality of life.

Helen Gordon
CEO

17 November 2021

For more information on

Our data and research led strategy, see page 13

Our offering to customers and stakeholders, see page 18

Our diversity and inclusion activities, see page 40

Our capital allocation decision-making, see page 13

Our ESG strategy and ambitions, see page 43

STRATEGIC REPORTTH E S H A PE A N D S TRE N G TH O F O U R B U S I N E S S

The shape and strength
of our business

We are the UK’s leading listed provider of private rental homes.
We design, own and operate rental homes across the country.

109

years in operation

20,000+

customers

322

employees

£3.1bn

portfolio

9,727

homes

£81m

passing net
rental income

A snapshot of our PRS portfolio

Apex Gardens, London

The Headline, Leeds

Gatehouse Apartments, Southampton

Springfield House, London

Kew Bridge Court, London

The Filaments, Salford, Greater Manchester

The Forge, Newcastle

Windlass Apartments, London

Berewood, Hampshire

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Private Rental Homes

We have over 7,000 private rental homes across the country,
and a further 8,950 in our pipeline.

We offer a broad mix of well-located properties with good
value rents from modern apartments to suburban houses in
a variety of styles. Our new buildings are built to the highest
standards and technical specification and unlike many
landlords, we manage our properties in-house to ensure
the best customer experience.

7,174

PRS homes

£2.1bn

portfolio valuation

98%

average rent collection

5.1%

average gross yield

PRS1 as strong as ever…

Huge market potential,
only 3% of PRS homes
are owned by institutional
landlords

Growing demand in PRS
since 2000

See our Marketplace
on pages 16 and 17

1 Private Rented Sector.

Regulated
Tenancy Homes

We own and manage 2,553 regulated tenancy homes across
the UK. These are historic tenancy agreements that were
created before 1989, where the tenant has the right to reside
for life. Rents are set at levels below the open market by
independent local rent officers, but the capital gain on the
eventual sale is significant. When these properties are vacated,
we typically sell them, generating significant cash flow each
year, providing funding for growth in our PRS portfolio.

Providing predictable cashflow
to fund PRS…

2,553

homes valued at £968m

18-20%

valuation uplift on vacancy

7.3%

properties sold on vacancy

+3.6%

annualised rental growth

Institutional landlords

Private landlords

Source:IPF

PRS Households, England

+119%

5000

4000

3000

2000

1000

2000

Source:English Housing Survey 2019/20

2020

0909

STRATEGIC REPORTTH E S H A PE A N D S TRE N G TH O F O U R B U S I N E S S CO N T INUED

Providing the best
rental experience

– We provide a digitised rental experience via our CONNECT
technology platform, enabling scalable growth and an
enhanced rental experience for our customers.

– We are enriching lives by providing higher standards and
a market-leading rental offering including pet-friendly and
longer-term tenancies.

– Live.Safe is our industry-leading health and safety programme.

See Our Feature Stories
on pages 23 to 31

4 in 5

residents “really like” their Grainger home

Over 82%

of online reviews by our PRS customers
were 5 star this year

A clear, strategic
growth plan

We set out a strategy in 2016 to reshape the business and
focus our investment in our PRS assets. This remains just
as relevant today.

This strategy is underpinned by three pillars (1) to grow
rents, (2) simplify the business and (3) build on our
experience as a leading, responsible residential landlord.
The business today is much simpler than it was, but we
continue to look for efficiencies that will improve
performance.

Our focus on growing rents and being the best and
most responsible landlord remain our top priorities.
This strategy is designed to deliver significant growth
in dividend and net asset values over the coming years.

This year more than ever, we’ve been delivering homes,
creating more value and enriching renters’ lives.

£1.9bn

pipeline

8,373

new mid-market rental homes
in our pipeline

2.5x

projected potential
net rental growth, post-pipeline

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Grow rentsSimplify and focusBuild on our experienceCommitted to ESG

Purpose driven, guided by our core values with a clear
strategic vision.

Renting has often fallen short for renters in the UK.
We are working hard to change that by providing better
homes, better service and better value to our customers
with high-quality, mid-market rental homes delivered by
our leading operational platform and an ambitious ESG
strategy coupled with stretching long-term commitments.

People

Assets

Environment

We are committed to being a great
employer to our people, a great landlord
to our customers, and to delivering
long-term social value to communities.

We are committed to creating high-
quality homes that attract customers
and retain them to help deliver long-term
value to our stakeholders.

Aligned to our goal of protecting the
long-term future of our business,
we are committed to enhancing our
environmental impact.

See our ESG report
on page 38 and 39

Partner
of choice

People want to work with us, and we are making
great progress on schemes we are delivering in
partnership – including Millet Place in partnership
with the Local Pension Partnership, Wellesley with
the Defence Infrastructure Organisation and
Weavers Yard in Newbury with West Berkshire
Council and Network Rail.

We also continue to make good progress on the
schemes in our partnership with TfL.

Millet Place in partnership with the LPP

STRATEGIC REPORTTH E S H A PE A N D S TRE N G TH O F O U R B U S I N E S S CO N T INUED
TH E S H A PE A N D S TRE N G TH O F O U R B U S I N E S S CO N T INUED

Focused on people

With unique values

Our employees, customers, communities, suppliers and
investors are critical stakeholders who all enable us to deliver
on our vision and strategy. We constantly capture feedback
from all our stakeholders to inform our business decisions.

Driving forward a positive Diversity & Inclusion agenda for
future talent, employees, our Board and customers alike.

Our purpose to provide high-quality rental homes and great
customer service is underpinned by our unique values.

80%

response rate to Best
Companies Index employee
engagement survey

Every home matters
We’re passionate about
providing every customer
with a great place to rent
that they are proud to
call home.

People at the heart
We want our customers to feel
safe, secure and happy in their
homes. We provide levels of
comfort, service, flexibility that
make their lives easier.

39%

of employees have over
five years’ service

5,175

hours of training delivered
to Grainger employees

See our People section
on pages 40 and 41

Leading the way
We want to give people the
best renting experience and
never stop finding innovative,
smart and creative ways to
stay in front and be
responsible landlords.

Exceeding expectations
We’ve been a professional landlord
for over 100 years, but we never rest
on our laurels. We always endeavour
to go beyond expectations to deliver
more to our customers, each other,
our investors and our partners.

Strong financials

– Investment Grade credit rating

– Robust balance sheet management

– Strong operational cashflows

– Clear future earnings growth

– Enabling us to deliver on our plans and ambitions

Earnings and dividend growth over the last ten years (pence)

Adjusted diluted EPS

Dividend per share

18p

15p

12p

See our Financial Report
on pages 32 to 37

‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

‘20

‘21

£641m

headroom available

30.4%

loan to value

5.6 years

average debt maturity
(incl. extension options)

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Our capital allocation strategy

Knowledge and insight help ensure our real estate portfolio
delivers strong performance. Our approach to PRS investment
is to use data at both the macro- and micro-level, combined with
our staff’s own market knowledge, to focus on areas with the
strongest growth potential.

At the macro-level, we assess cities on their demographic,
economic and real estate fundamentals, to ensure that we invest
in prosperous, dynamic areas that will deliver growing customer
demand and rental growth across the real estate cycle.

At the micro-level, we build a full understanding of the
surroundings. We use a geographical information system

(‘GIS’) to build an accurate picture of local amenities, walkability,
public transport, access to employment centres and green
space – confirming it’s an attractive location for customers.

The two-way approach combined with input from our
investment and development teams, enables us to leverage
their market experience and knowledge and drive decision-
making that reflects a balance of top-down analysis and real-
time market dynamics.

Another critical pillar of our approach is the ability as a large-
scale operator to use feed-back from our customers to better
inform and optimise the design of our buildings and services.

Our city strategy

Southampton

Cardiff

Bristol

Manchester

Leeds

Derby

Birmingham

Nottingham

Sheffield

Newcastle

Milton Keynes

London

Macro-analysis of key
demographic, economic
and real estate
fundamentals

Feedback from
customer
operating
platform

A growing
portfolio of
attractive,
resilient and
evolving assets

Growth potential

Schemes secured

Target locations

Under review

Not under consideration

Leveraging
in-house expertise
and market
knowledge

GIS analysis of
local market
dynamics and
liveability

s
l
a
t
n
e
m
a
d
n
u
F
y
l
p
p
u
S
/
d
n
a
m
e
D

Research-led investing

378

local authorities
analysed

cities analysed

success factors

economic datasets

STRATEGIC REPORT

TH E S H A PE A N D S TRE N G TH O F O U R B U S I N E S S CO N T INUED

A clustered portfolio & pipeline strategy

PR S P O RTFO LI O

PI PE LI N E P O RTFO LI O

7,174

homes

8,373

homes

Including homes in the planning and legals
stage, and projected TfL partnership homes

PR S VA LU E

PI PE LI N E VA LU E

£2.1bn

£1.9bn

G EO G R APHIC BRE AKD OWN O F OUR
E XISTING P O RTFO LIO BY NUMBER
O F HO MES

Central London

Outer London

South East

South West

East & Midlands

North West

Other regions

21%

10%

19%

32%

Regional Portfolio
N U M B E R O F H O M E S

1
2
0

Manchester & Liverpool 2
1,927
Newcastle
380
East Midlands
348 Queens Road, Nottingham
259 Becketwell, Derby
Birmingham
158 Gilders Yard
375 Exchange Square
West & Wales
508
307 Copper Works, Cardiff
231 Millwrights Place, Bristol
South
497
232 Weavers Yard, Newbury
98 Guildford Station
Leeds & Sheffield
587
216 The Pin Yard, Leeds
284 Well Meadow, Sheffield
Milton Keynes
139
261 Enigma Square, YMCA

2
2
0
2

3
2
0
2

4
2
0
2

5
2
0
2

Key

Operational schemes

Pipeline schemes

Newcastle

Leeds

Liverpool

Manchester

Sheffield

Nottingham

Derby

Birmingham

Cardiff

Bristol

Milton Keynes

London

Newbury

Guildford

Southampton

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

1
2
0
2

2
2
0
2

3
2
0
2

4
2
0
2

5
2
0
2

London Portfolio
N U M B E R O F H O M E S

North London
TBC Arnos Grove
TBC Cockfosters
North East London
163 Apex Gardens
108 Windlass Apartments
East London
134 Argo Apartments
100 Abbeville Apartments
146 Canning Town 2
132 Canning Town 3
TBC Limmo Peninsula
London City fringe
90 Ability Towers
101 Ability Plaza
85 Springfield House
122 Other
South East London
208 The Gardens
324 Besson street
Inner London
56 Shillington Old School
100 Mitre Road
215 Waterloo Estate
TBC Montford Place
TBC Nine Elms
West London
98 Kew Bridge Court
401 Merrick Place
TBC Southall Sidings

13 14

Kew Gardens

We employ a cluster strategy,
investing in assets within relatively
close proximities, which enable us
to drive operational efficiencies,
driving down costs while also
enhancing the service we can
provide to our residents.

Key

Operational development

Pipeline development

TfL partnership

Cluster

Cockfosters

Arnos Grove

Seven Sisters

15
Dalston Junction
11

Angel

Old Street

Liverpool Street

Waterloo

Oval

Battersea Park

New Cross

16
Peckham Rye

Barking

8
Canning Town

Woolwich Arsenal

STRATEGIC REPORTM A RK E TPL AC E

Our market
The fundamentals in the
UK rental market remain strong
During the pandemic, the UK Private Rented Sector (‘PRS’) has further demonstrated its
strong underlying fundamentals, with demand proving robust despite sharp economic
challenges, and rents continuing to increase.

RE NT S H AV E IN CRE A S E D, A N D
PRO PE RTIE S A RE LE A S IN G Q U I CK LY

Although Q2 2020 saw a sharp increase in the time to let
a property in the UK, from that point onwards we have
seen very strong demand, with the time to let a property
(according to Rightmove) falling to just 19 days by Q3 2021.
This has been reflected in rental growth over the period,
with UK rents seeing growth of 2% in the year2 to July.
Most major cities have continued to see positive rental
growth despite office-based employees working from
home for much of the year.

Rightmove – time-to-let – days

London

5
1
0
2
1
Q

5
1
0
2
2
Q

5
1
0
2
3
Q

5
1
0
2
4
Q

6
1
0
2
1
Q

6
1
0
2
2
Q

6
1
0
2
3
Q

6
1
0
2
4
Q

7
1
0
2
1
Q

7
1
0
2
2
Q

7
1
0
2
3
Q

7
1
0
2
4
Q

8
1
0
2
1
Q

8
1
0
2
2
Q

8
1
0
2
3
Q

8
1
0
2
4
Q

9
1
0
2
1
Q

9
1
0
2
2
Q

9
1
0
2
3
Q

9
1
0
2
4
Q

0
2
0
2
1
Q

0
2
0
2
2
Q

0
2
0
2
3
Q

0
2
0
2
4
Q

1
2
0
2
1
Q

1
2
0
2
2
Q

1
2
0
2
3
Q

SU PPLY RE M A IN S CO N S TR A IN E D

2020 saw a sharp fall in new homes completed,
down to 148,000, from 178,000 the previous year,
well below the Government’s housebuilding target
for England of 300,000 homes p.a. This structural deficit is
set to continue with only 130,000 new housing starts being
seen in 2020, and the first half of 2021 only seeing 90,000.

Permanent dwellings completed, England

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0
1
0
2

England
Housebuilding
Target p.a.

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
2
0
2

PRI VATE RE NTA L D E M A N D CO NTIN U E S
TO G ROW, WH ILE A H O US IN G SU PPLY
S H O RTFA LL CO NTIN U E S

The demand for homes, particularly private rented homes,
in the UK continues to grow. This growing demand is
contrasted by a severe housing supply shortfall that has
characterised the UK housing markets for decades and is
set to continue.

A resilient market

The private rental market’s long history of low volatility
and stability continued to hold true despite the economic
disruption caused by the Covid-19 pandemic. With millions
of office workers mandated to work from home, demand for
well-managed, high-quality homes strengthened. In fact,
overall market conditions improved, something borne out
by rent collection in the build-to-rent (‘BTR’) sector. Knight
Frank data shows that rent collection within the BTR sector
has not fallen below 95% at any point during the pandemic1,
while Grainger’s average rent collection in our PRS portfolio
was 98% for the year.

98% v 95%

Rent collection, Grainger
compared to market baseline

1 Knight Frank Research, March-20 to August-21.
2 Source: Hometrack/Zoopla

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Homes have never been so important
The pandemic has reinforced the importance of our homes and the communities
we live in. Research shows that those residents in BTR properties have really valued
having a quality home during a difficult time. Given strong political backing,
the professional private rented sector has plenty of room for growth.

PA N D E M I C H A S RE IN FO RCE D TH E
B E N E FIT S O F H I G H - Q UA LIT Y RE NTA L
ACCO M M O DATI O N

A major impact of the pandemic and the associated
lockdowns has been to reinforce to people how important
their living space is to them, not just in a practical sense but
in the effect it has on their overall happiness and wellbeing.
At Grainger our long-term BTR strategy has been to meet
renters’ desire for high-quality homes and provide a great
service to our customers in a sector that has grown steadily
over the past 20 years, but that has often failed to provide
homes that meet renters’ expectations.

Data from HomeViews’ 2021 National Build-to-Rent Report
looking at residents’ reviews of BTR homes wholly-owned
by professional landlords and investors, compared to rental
homes owned by private individual landlords, demonstrates
the extent to which the BTR sector was adept at maintaining
its customers’ happiness during the pandemic, with resident
sentiment remaining positive throughout. BTR developments
outperformed in every category measured, including value,
management and design.

BTR outperforms in all
categories according to renters

(HomeViews 2021 Build to Rent Report)

TH E RE I S S TRO N G P O LITI C A L SU PP O RT
FO R A PRO FE SS I O N A L PRIVATE RE NTE D
S EC TO R , A N D A SU B S TA NTI A L M A RK E T
O PP O RTU N IT Y

The Government and opposition parties all favour a PRS
characterised by high-quality and good service standards.
There is a significant market for Grainger to address. Recent
years have seen the Government restrict the amount of
Income Tax relief private landlords receive on residential
property finance costs to the basic rate of tax, alongside the
introduction of a 3% stamp duty surcharge on the purchase
of additional properties – both impacting the attractiveness
of the sector to smaller private landlords. As smaller private
landlords are squeezed, there is a real opportunity for larger
BTR landlords to grow market share. The current supply of
BTR developments is estimated to total only 1.3% of total
PRS households in the UK3. In contrast, data from the US
Census Bureau suggests that for-profit businesses control
around 19% of US rental properties4.

Management

Value

Design

Facilities

Location

3 Grainger analysis of data from BPF, Savills, English Housing Survey, Scottish Household
Survey, StatsWales – Dwelling stock estimates, and Northern Ireland Housing Statistics.

4 Census Bureau, “Rental Housing Finance Survey,” 2018; Pew Research Centre Analysis.

CITIE S A RE D R AWIN G RE S ID E NT S
BACK WITH TH E IR S TRO N G
CU LTU R A L A N D LE I SU RE O FFE RS

Although the pandemic generated some debate regarding
the future of cities and urbanisation, early signs suggest that
people have eagerly returned to cities to enjoy the culture and
leisure opportunities on offer. Rental activity has been strong
through August and September in London, and Grainger has
seen a significant uplift in leasing enquiries over the period.

STRATEGIC REPORTB U S I N E S S M O D E L

Our fully integrated business model
and operating platform set us apart
from our competitors

Inputs

Our people
People are at the heart of everything we
do. With a real diversity of skills across
the business our people are passionate
about quality, service and making
a real difference for our residents.

Technology
Leading the way with technology,
supporting our sustainable growth and
enhancing the customer experience.

Data insight & knowledge
Driven by in-house research we have
a wealth of data, expertise and
knowledge we leverage, providing
competitive advantage.

Read more on page 43

Our sustainability focus areas and our supporting commitments respond to the key risks and opportunities we have identified including:

– Delivering on our company’s purpose by developing high-quality
homes that are affordable for local people and using our growth
plans to enhance the positive social impact we create.

– To ensure our workforce is as diverse and inclusive as possible
to deliver the highest levels of customer service to our diverse
customer base.

– The critical importance of protecting the health, safety and

wellbeing of our residents and all stakeholders.

– Growing expectations from our employees, investors and
customers to deliver a just transition to a net zero carbon
UK economy by 2050.

GRAINGER PLC A N N UA L R E P O R T A N D ACCO U N T S 2 021

Our long-term
ESG commitments:

We are progressing well against the long-term
commitments we set in 2019.

Long-term commitment

Headline achievements from 2021

Key workstreams for 2022

Measure and deliver positive social
value contribution to our customers
and local communities.

We have completed an assessment of the
areas where we are delivering social value
for our stakeholders and defined our social
value priorities.

We will assess and report the social
value delivered by a typical Grainger
operational BTR asset.

See page 41

Ensure Grainger’s workforce is
reflective of society.

Our employee-led Diversity & Inclusion
Network has progressed with a series of
engagement activities.

See page 40

We have developed a new digital self-reporting
system to improve the accuracy and coverage
of our workforce diversity data.

Deliver enhanced investment
decisions through incorporating ESG
considerations including risks, costs
and returns.

We developed our action plan to report in
alignment with the recommendations of the
Task Force on Climate-related Financial
Disclosures (‘TCFD’), issuing our first report.

Achieve net zero carbon for the
operation of our buildings by 2030.

See page 45

Following the Government’s consultation
on increasing minimum energy efficiency
standards to EPC band C by 2025, we have
defined our strategy for achieving this across
our portfolios.

We further developed our roadmap to
achieving net zero carbon for the operation
of our buildings and explored options to expand
the scope of our commitment to quantify and
reduce emissions from our value chain.

See page 43

We will review approaches to measure
and benchmark Grainger’s diversity
and inclusion performance and we will
put in place a bespoke diversity talent
identification and mentoring
programme.

We will complete climate scenario
analysis for our portfolio to enhance
reporting on physical climate-related
risks, and will issue our first full report in
alignment with the recommendations
of the TCFD.

We will further develop our strategy
to measure and reduce tenant carbon
emissions.

STRATEGIC REPORTA S U S TA I N A B LE A PPROAC H TO C RE ATI N G VA LU E CO N T INUED

Our people

Ethnicity

Embedding inclusivity

Our employee-led Diversity & Inclusion Network – which was
established in 2020 – continued to thrive and helped maintain
employee engagement during the Covid-19 related lockdowns.

We celebrated a range of events including a Diwali cookalong
and held engagement campaigns on Black History Month,
International Women’s Day and Pride Month with content
and activities shared in our offices and our buildings.

We have provided diversity and inclusion awareness training
to all staff and we have hosted a number of learning hours with
expert speakers from external organisations designed to raise
awareness of specific diversity and inclusion topics. This included
an inspiring session from charity Mermaids which supports
gender-diverse children and their families.

This year we undertook a review of our approach to tracking
workforce diversity data and have implemented a new digital
system to enable all employees to self-report data covering a
broader range of diversity characteristics. This is designed to
improve the accuracy and coverage of our workforce diversity
data, supporting us to better track our progress.

We also introduced some new diversity and inclusion-related
questions in our annual Best Companies employee engagement
survey. The results suggested 81% of survey respondents feel
Grainger takes diversity and inclusion seriously and 83% feel they
can be themselves at work.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Gender

Executive
Directors
(Main Board)

Executive
Directors

Senior
Managers

Managers

Associate

Support

1
1

Graduates

On Site

White 87%

Mixed 1%

Asian or Asian British 6%

Black or Black British 4%

Other 2%

45%

322
Total
employees

55%

Male

Female

Our new apprenticeship programme in partnership with
The Apprentice Academy is designed to recruit local young
people into roles in our Resident Services teams and two new
roles have been created this year. Our Resident Services
Apprentices will experience the whole lifecycle of onsite
duties at our build-to-rent sites, and will work towards the
qualification of Level 3 Housing/Property Management,
which upon completion will enable them to join the Institute
of Residential Property Management.

Using our skills to give something back

Grainger became a signatory of the LandAid pro bono
programme to use our people’s skills to give back. We supported
on three pro bono projects during the year, helping charities with
projects from lease negotiations to building surveys.

We are a founding partner of the LandAid First Step Campaign
which aims to help young people take the first step out of
homelessness, by increasing the provision of emergency
accommodation. Through the programme, Grainger is providing
financial support and pro bono advice to an accommodation
project for YMCA North Tyneside, close to our Newcastle home.

Developing our senior leaders

Our first cohort of future leaders completed a nine month
course designed to prepare them for senior roles in our business.
The course touched on diverse topics from confidence to Board
readiness and 45% of participants were female. Participants were
also tasked with undertaking a group project for the Executive
Committee to review the potential impact of a key piece of
emerging legislation and its potential impact on the business,
providing an opportunity to deploy their leadership skills and
work collaboratively on a strategic business project.

Nurturing new talent

We also enhanced our programmes to recruit new talent into
the property industry, working with our joint venture partner
Transport for London to create a new educational engagement
programme to inspire young Londoners into careers into
property, and sponsoring a bursary for a disadvantaged student
to undertake a real estate degree through the Worshipful
Company of Chartered Surveyors.

Resident Services Manager at Gatehouse Apartments

Introducing our social value priorities

Grainger has reviewed all the ways we generate social value to our stakeholders. We have prioritised the key areas to focus on to
enhance the value we create and enable this to be consistently measured and communicated:

Providing homes
that matter

We play a key role in
alleviating the housing
crisis and delivering
high-quality homes.

Supporting
our people

Enhancing our
residents’ wellbeing

Building inclusive
communities

Creating positive
local impact

We enhance the
wellbeing of our
employees and provide
an inclusive workplace.

We enrich the lives
and wellbeing of
our residents and
communities.

We create a sense of
belonging and community
within and around
our buildings.

We partner with our
supply chain to create
jobs for local people and
support local businesses.

STRATEGIC REPORTA S U S TA I N A B LE A PPROAC H TO C RE ATI N G VA LU E CO N T INUED

Assets

Our design specification for build-to-rent developments
ensures we set high standards of sustainability for all
our new buildings.

Our new schemes feature specific design innovations that
minimise our environmental impact, maximise the wellbeing
of our residents and are bespoke to the building’s design
and location:

Generating renewable energy on-site
is a key contributor to Grainger’s net zero
carbon commitment. The solar array
at Gatehouse Apartments, Southampton
is our largest yet with over 400 panels
and will generate enough energy
to power approximately 10% of the
building’s energy.

Safety is a key concern for our residents
and safety features are incorporated
into all Grainger’s buildings, with regular
reviews of site safety undertaken.
Apex Gardens, North London is designed
to maximise safety for our residents,
achieving a Gold Award on the Secured
by Design certification scheme.

As climate change increases temperatures,
we are integrating features to minimise
overheating without using active
cooling. These innovative side vents at
Windlass Apartments, North London
are designed to maintain a comfortable
environment for our residents.

Partnering with our supply chain

This year we introduced enhanced sustainability criteria for key
spend areas and launched new partnerships with key suppliers
for specific sustainability-related products and services.

This included a preferred supplier agreement with PodPoint to
install electric vehicle chargepoints and a partnership with AO
to ensure we purchase energy efficient appliances consistently
across our portfolio and responsibly dispose of old appliances.

We reviewed and enhanced our contractor management
processes and policies covering areas including modern slavery.

Upskilling our teams to deliver the highest standards
of health and safety

We rolled out a comprehensive behaviour-based health and
safety training programme to employees which covered topics
from Construction Design and Management to electrical safety.
This was piloted by our on-site Resident Services teams who
ensure we continue to maintain the highest health and safety
standards in our buildings.

Bolstering our office-based mental health champions network,
Mental Health First Aid training was delivered to customer facing
staff in our buildings to aid our teams in supporting the mental
wellbeing of our residents.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Environment

Reducing our
energy consumption

Renewable energy

Grainger takes our commitment to tackling climate change
seriously and has committed to reducing our Scope 1 and 2
emissions to net zero by 2030. Our approach to reducing our
emissions to net zero aligns to the UK Green Building Council’s
framework definition for net zero carbon buildings and follows
the energy hierarchy to be lean, be clean and be green:

Be Lean – Reducing our energy consumption

We undertake refurbishments of the common parts of Grainger’s
properties which upgrade the lighting and where required the
building fabric. These refurbishments typically result in an overall
30-50% reduction in energy consumption.

Between 2020 and 2021, we completed major refurbishments on
six properties, achieving reductions in energy consumption on all
buildings, with overall reductions of up to 51% and year-on-year
savings of up to 23%.

Be Clean – Supplying energy efficiently

For existing assets that have communal gas heating and that
we plan to own for the long term, we are removing these
gas systems or replacing them with electric or low carbon
alternatives.

We reviewed and updated our specification for new schemes,
and where possible we specify fossil fuel free heating systems
for our pipeline projects.

Be Green – Renewable energy

Currently Grainger purchases renewable electricity for all
landlord supplies and transfers properties onto this contract as
quickly as possible upon completion, with 84% of supplies now
renewable. Where possible we use available roof space for solar
PV and now have seven assets generating renewable energy.

We are rolling out a renewable void energy programme to place
all void homes onto a renewable electricity tariff. In addition to
contributing to the reduction of Grainger’s carbon footprint
when the energy used in these homes is temporarily within
Grainger’s control, we hope this will encourage residents to
remain on a renewable tariff, reducing their emissions.

Advocating for industry wide change

Alongside reducing our own emissions, Grainger is committed to
supporting our sector in developing a consistent and leading
approach to meeting the net zero carbon transition. We have
undertaken a number of political and industry engagement
activities, including meeting with the Housing Minister to discuss
the industry’s approach to net zero carbon.

Grainger participated in the UK Green Building Council’s Whole
Life Carbon Task Group to develop a roadmap for reducing whole
life carbon from the built environment. We have also supported
the development of the British Property Federation’s Residential
ESG Guidance and the UK Apartment Association’s ESG Best
Practice Guide. We were proud commercial partners of the built
environment virtual pavilion, Build Better Now, at the COP26
climate change conference.

Taking action on Scope 3 emissions

Customers’ emissions

Embodied carbon

Grainger’s customers purchase their own energy which falls within our
Scope 3 emissions. We estimate this makes up a significant proportion
of the energy consumption in our buildings and are therefore
committed to helping our customers reduce their energy and
associated emissions by:

– Undertaking refurbishments to meet higher energy efficiency standards.
– Installing energy efficient appliances in our homes.
– Providing guidance and encouraging behaviour change amongst

our customer base.

Grainger’s strategy to invest in new build-to-rent developments has an
associated embodied carbon impact. Often Grainger uses a forward
funded model for development which reduces the influence and
control we can have over the carbon generated from our buildings’
design and development. We therefore focus on selecting long-lasting
materials which reduce the lifecycle carbon during the operational
stage. We are engaging with our development partners to improve our
knowledge on the embodied carbon generated by current projects and
identify reduction opportunities.

STRATEGIC REPORTS EC TI O N 172

Section 172 statement

The Board takes its responsibilities to all stakeholders seriously,
and has acted consistently to promote the long-term success of
the Company for the benefit of Shareholders, whilst having due
regard to the matters set out in section 172(1)(a) to (f) of the
Companies Act 2006.

An overview of the key channels and processes used for
engagement with our stakeholders and outcomes from this
engagement during the year are set out on page 61.

A summary of the Board’s activity and how matters raised
through engagement have been considered in key decisions
taken during the year is provided on pages 62 and 63.

Section 172 matter

Overview

FY21 comment

Relevant disclosures

The Board undertook a
comprehensive review and
update of the business’s long-term
strategy during the year.

Business model
pages 18 and 19

The long term

Employees

Grainger is committed to being
a long-term investor in homes
and communities, and
delivering long-term success
to our Shareholders.

Employees are at the heart of
our business and our people
strategy focuses on delivering
the highest levels of learning
and development, wellbeing
and inclusion.

Business relationships
with suppliers,
customers
and partners

The relationships with our key
partners and suppliers are critical to
our ability to deliver and maintain
high-quality rental homes. Strong
relationships with our customers
supports retention and creates a
community within our buildings.

Janette Bell has been designated
as the Non-Executive Director
responsible for employee
engagement and consultation and
undertook a review of employee
engagement with the HR Director,
attended regular all staff calls and
D&I network meetings, site visits
and delivered a presentation to
our future leaders cohort.

The Board considered reports
on the management of our
suppliers, alternative supplier
arrangements and the overhaul
of our approach to procurement.

The community
and the environment

We consider communities to
encompass those created within
our buildings as well as those
around them, and actively seek
ways to promote thriving
communities and to minimise our
impact on the environment.

The Board received biannual
updates on progress against
Grainger’s long-term ESG
commitments and the Company’s
net zero carbon transition plan was
a key topic on the agenda for the
Board’s 2021 strategy review.

High standards
of business conduct

Grainger is proud to be a FTSE4Good
business and adheres to the highest
standards of business conduct in
interactions with all our stakeholders.

Our values set the standards
of conduct for all involved in
our organisation and the roll-out
of our new values continued in
FY21 with an on-going
engagement campaign.

Shareholders

We conduct regular direct
engagement with our Shareholders
through a range of channels, and
ensure key issues raised are factored
into strategic decision-making.

This year we continued our extensive
programme of investor engagement,
re-instating face to face contact
where safe and appropriate to do so,
including as part of our successful
equity placing exercise.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Our people
pages 40 and 41

Suppliers
page 63

Sustainability
pages 38 to 43

Our values
page 23

Governance
page 54

Shareholder
engagement
page 64

TA S K FO RC E O N C LI M ATE - RE L ATE D FI N A N C I A L D I S C LO S U RE S

TCFD summary

Grainger is a supporter of the Task Force on Climate-related
Financial Disclosures and is committed to assessing, managing
and reporting climate-related risks. Below is a summary aligned
to the recommendations of the TCFD. More detailed information
on climate-related risks and opportunities is reported in our
annual public response to the CDP climate change programme.

Governance

Ultimate responsibility for all sustainability issues including
climate-related issues lies with Grainger’s Chief Executive and the
Executive team. A biannual sustainability update is provided to
Grainger’s Board and Executive Committee, which includes an
update on climate-related issues.

Grainger’s Audit Committee undertakes an annual review of the
Company’s principal risks including climate change – see page 51.
Climate-related risks are reviewed quarterly at relevant
management committees including the Investment Committee,
Development Board and Operations Board.

Strategy

The key climate-related risks and opportunities identified by the
organisation are:

Short-term
Transition • Costs and technology

implications of meeting
increased legislation such
as Minimum Energy
Efficiency Standards and
Future Homes Standard.

Medium-Long-term
• Impacts of overheating
and energy efficiency on
customer demand.

• Increased revenues
from development
opportunities.

• Increased access to capital
from responsible investors.

Physical

• Increased risk of flooding. • Increased severity and
frequency of extreme
weather events.

The impact of these risks and opportunities on Grainger’s
strategy and financial planning include undertaking enhanced
due diligence of climate-related risks at acquisition, integrating
climate-related considerations within our asset recycling
strategy, and investing in refurbishments to improve the energy
efficiency of our buildings.

Grainger proactively communicates our ESG performance to
development partners and investors to maximise opportunities
to attract additional investment. We have developed a
sustainable finance framework which will be published shortly.
We have commissioned some climate-related scenario analysis to
assess the resilience of the Company’s portfolios and will report
on the findings in our 2022 TCFD Report.

Risk Management

Climate related risks are identified using both a ‘bottom up’
and ‘top down’ approach through asset-level due diligence,
portfolio-level risk reviews and our corporate risk management
framework. We apply our ‘three lines of defence’ model to the
management of climate change risk, which this year included
an internal audit of sustainability.

For more details on the Company’s overall approach to risk
management including management of climate change risk,
refer to principal risks and uncertainties on page 51.

Metrics and targets

For details on Grainger’s target to achieve net zero carbon for
the operation of its buildings by 2030, refer to page 43. Scope 1,
2 and 3 greenhouse gas (‘GHG’) emissions are reported in the
Streamlined Energy and Carbon Report on pages 100 and 101.

The metrics used by the organisation to assess climate-related
risks and opportunities include:

1,226

market-based GHG
emissions

85%

of PRS properties
rated EPC band A-C

57%

of build-to-rent properties
have low carbon heating

84%

of electricity purchased
was renewable

62%

less CO2 produced on
average by Grainger
properties compared
to a typical home

STRATEGIC REPORTRI S K M A N AG E M E NT

Effective risk management contributing
to delivering sustainable growth

Our risk management framework is designed to identify
the principal risks to our business and ensure that they
are being appropriately monitored, suitable controls are
in place and the required actions have clear ownership
and accountability.

Risk management approach

Risk management is fundamental for meeting our operational
and strategic objectives. The competitive market we operate in
requires effective decision-making, ensuring we properly assess
risks, apply controls and calculate returns. We have accepted that
our influence over external factors can be limited and we have
demonstrated resilience to risks by focusing on internal controls
and mitigants. This is supported by maintaining adequate
disaster recovery and business continuity procedures.

Our overall risk management ethos is to give appropriate balance
to being responsive, forward-looking, consistent and accountable.
At Grainger, we seek to do this by applying and reinforcing our
risk management culture across the business and by adopting
a ‘three lines of defence’ model throughout the business (see
diagram on page 47). As our PRS strategy progresses, it is
fundamental that our risk management systems and controls
are aligned and evolve accordingly.

2021 has demonstrated Grainger’s resilience as a business in
the context of economic uncertainty arising from the Covid-19
pandemic. Throughout this period, our mature risk management
framework has shown its in-built flexibility which is able to adapt
to a swiftly changing environment.

Rigorous risk assessment

We consider a range of risk categories, including strategic,
market, financial, legal or regulatory, operational, IT, project and
people. We identify individual risks using both a ‘bottom-up’
and a ‘top-down’ approach.

We determine the potential probability and impact of each risk
and give it a gross (before mitigation) and net (after mitigation)
score. This identifies which risks depend heavily on internal
mitigating controls, and those that require further treatment.

We use a risk-scoring matrix to ensure we take a consistent
approach when assessing their overall impact. For risks in
operational areas, we base their likelihood on how often they
occur in a rolling 12-month period. We record their impact and
likelihood scores in departmental risk registers. These risk
registers are regularly reviewed reflecting our adaptability
where required. The appropriate internal committee reviews
these registers at least quarterly. We then collate a Group top
risk report for consideration by the Executive Committee and
Audit Committee.

This process has identified ten principal risks which we monitor
accordingly (see pages 48 to 51). Overall, there has been an
increase in the likelihood and potential impact of a number of
the principal risks over the year. This prudent assessment has
been reached considering wider economic uncertainty and other
external factors, balanced against Grainger’s resilience as a
business and the need for good quality homes in the UK.
The diagram below illustrates these movements.

M A PPI N G O U R K E Y RI S K S A N D M OV E M E NT

Current principal risk areas

1 Market and transactional

2 Financial

3 Regulatory

People

Supplier

6 Health and safety

7 Development

8 Cyber and information security

9 Customers

10 Climate change

Indicates risk movement from last year

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

d
o
o
h
i
l
e
k
L

Impact

We have a structured approach to the identification and
assessment of emerging risks. Our internal committees are
tasked with identifying risks on the horizon which may develop
or already exist but are difficult to quantify. We use a ‘risk radar’
to capture these risks which are monitored continuously and
reviewed regularly.

To promote a broader and deeper understanding of the risks we
face we have continued to consider the interconnectivity of our
key risks and also how one risk arising can increase the likelihood
and/or impact of another risk. This holistic view has allowed us to
consider if key controls already in place were sufficient or not, and
also whether these controls were in contradiction of one another.

Risk control framework and appetite

The Board has ultimate responsibility for Grainger’s risk
management and internal control systems, and for determining the
Group’s risk appetite. The detailed assessment of risk appetite for
our principal risks remains the same for 2021 and the Board adopts
a generally low tolerance for risk, particularly for regulatory and
reputational matters. Regarding development risk, a medium risk
appetite is tolerated by the Board in order to continue to capitalise
on the substantial opportunity within the PRS, particularly in
relation to build-to-rent schemes.

The Board approves the risk management framework developed
by the Executive Committee. Our internal governance structure
complements our evolution to a ‘three lines of defence’ model,
with a view to having clear divisions between each line. This
framework includes various management committees, with
dedicated risk registers, overseeing key investment, operational
and corporate functions.

The management committees and the Executive Committee
examine the identified risks, reported controls, mitigation and the
principal risk report. The Audit Committee supports the Board by
monitoring and reviewing the control processes and mitigation
for the identified risks.

It also ensures we reconsider the principal risks. We monitor the
internal control framework for these risks through the Internal
Audit monitoring plan and the resulting audit outcomes.

For more information on internal controls, please refer to
page 75.

Assurance on risk controls is provided by internal management
information, internal audits, external audits and Board oversight.
We also hold assurance maps for our principal and operational
risks. A key focus over the last year has been updating our process
documentation to reflect the changes arising from delivery of the
next phase of the CONNECT platform whilst ensuring the
ownership of controls within Grainger’s first line.

We have an externally supported whistleblowing hotline that our
people can use anonymously if they do not wish to use our other
processes for raising concerns.

The data protection activities of the business have been
integrated into Grainger’s business as usual processes overseen
by the Data Protection Committee, consisting of senior people
from across the key areas of the business. The Board and Audit
Committee are updated regularly on matters arising and
activities undertaken to develop our data protection compliance
regime. Our health and safety initiative, Live.Safe, which embeds
a culture that puts health and safety at the heart of everything
that we do, has remained a priority, especially in response to the
Covid-19 pandemic.

Looking forward to 2022, whilst there continues to be economic
uncertainty, the application of a robust risk management
framework and controls will continue to be fundamentally
important, as well as having the flexibility to adapt to changing
external conditions. We also expect that we will see the benefits
and efficiencies of our technology platform, CONNECT, fully
embedded into the business. This technology has introduced
a range of changes to our processes and procedures.

RI S K CO NTRO L FR A M E WO RK

Board and Audit Committee

Executive Committee

First
line of defence

Second
line of defence

Third
line of defence

Management and financial controls

Risk management and compliance

Internal audit

Policy, procedure and RACMs

Executive deep dives

Risk-based review/audit

Understanding of risk management

Key performance indicators

Specialist third-party reviews

Oversight by
management committees

E
x
t
e
r
n
a
l

A
u
d
i
t

STRATEGIC REPORT
PRI N C I PA L RI S K S A N D U N C E RTA I NTI E S

Managing our
principal risks
and uncertainties

The Directors have systematically assessed the Group’s principal
risks. They have considered them across four years, which aligns
with our viability statement on page 52.

Principal risks, uncertainties and opportunities

Risks are considered by the Board as an intrinsic part of strategy
setting and consideration of new opportunities.

Covid-19 and Brexit

In 2020 we provided examples of the measures we took in
response to Covid-19 in relation to our key stakeholder groups.
This year we have included commentary within each principal risk
to describe the impacts of Covid-19 on our principal risks
together with appropriate mitigants.

On 1 January 2021 the new relationship between the UK and the
EU began. The ‘transition period’ ended on 31 December 2020
which kept most pre-departure agreements in place. The EU-UK
Trade and Cooperation Agreement which came into force on
1 May 2021 takes its place. Our preparations for Brexit began in
2016 and included engaging with our supply chain to identify
those materials and parts that are sourced from the EU, and
assessing alternative non-EU suppliers and/or holding sufficient
reserves of stock. It is unclear whether the recent challenges for
the UK supply chain and skills shortages have arisen due to
Brexit, Covid-19 or a combination of both.

Over the last year and going forward, we continue to scrutinise
the impact of Covid-19 and Brexit on our supply chain, and the
consequential impact this may have on our business, in particular
our development schemes and the related construction costs.
Brexit remains a risk to the business in the context of wider
geo-political and economic uncertainty, and the impact this may
have on the real estate/supply and capital markets. This being so,
the potential risks of Brexit are specified in respect of a number
of our principal risks.

Free movement and immigration rules have changed and some
sectors have reported labour shortages. Notwithstanding this
uncertainty, the Board continues to hold the view that the
on-going material lack of supply of homes in the UK substantially
mitigates the risks to Grainger that may arise from the post-Brexit
transition period. Our opinion is that the Company’s exposure to
this risk is not materially higher than similar UK-focused businesses.
We have previously conducted analysis to assess those areas
where Brexit would have an impact on our operations.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Impact on our
business model

Originate

Invest

Operate

Impact on
our strategy

Grow
rents

Simplify
and focus

Build on our
experience

Cultural link
to values

Every home
matters

People at
the heart

Leading
the way

Exceeding
expectations

1 M A RK E T A N D

TR A N S AC TI O N A L

INCREASED

Risk description
A recession or significant slow-down
in the UK economic recovery, leading
to flat or negative valuation
movements and/or stagflation
pursuant to an external factor, such
as a new wave or variant of Covid-19
leading to disruptive domestic or
international restrictions/measures.

Impact on strategy
An economic downturn leads to a
lack of appetite from investors for
assets being disposed of as part of
our asset recycling strategy. Pressure
on rental levels; falling asset values;
subsequent investment constraints
on further investment into the PRS;
covenant compliance risk; unable
to provide Shareholders with
sustainable returns in the long term.

Key mitigants
• We have actively transitioned

the business to reduce reliance
on trading income and house
price inflation.

• Average salaries have historically

tracked the rate of inflation,
thus mitigating increases in the
cost of living.

• Increased competition in the PRS/

BTR market is beneficial for
evidencing and driving market
valuations.

• We have a high proportion of
liquid and diverse assets to
enable sales where necessary,
as was shown clearly in the last
economic downturn.

• We have a geographically diverse
portfolio and exercise active asset
management to enhance returns
and have target towns and cities
for future investment.

• Focus on PRS potentially leverages
greater customer flexibility and
lower overall financial commitment
compared with home ownership.
Renting could be attractive for
customers during uncertain
economic periods.

Impact on our
business model

Originate

Invest

Operate

Impact on
our strategy

Grow
rents

Simplify
and focus

Build on our
experience

Cultural link
to values

Every home
matters

People at
the heart

Leading
the way

Exceeding
expectations

2 FI N A N C I A L

3 REG U L ATO RY

4 PEO PLE

UNCHANGED

INCREASED

Risk description
The inability to obtain sufficient
finance to fund our growth strategy
and operations arising from external
factors/events (including, but not
limited to the Covid-19 pandemic)
which impacts the ability to fund the
delivery of the strategy and maintain
a strong capital structure.

Impact on strategy
Lack of availability from credit
markets and cash resources; breach
of loan and bond covenants; adverse
movement in interest rates could
have an unacceptable impact on the
cost of new debt; inability to fund
acquisitions at the relevant time.

Key mitigants
• We have a strong balance sheet
position enhanced by the recent
equity placing.

• We carry out detailed financial
viability sensitivity testing and
develop clear mitigation and
contingency plans.

• We closely monitor our banking
covenants and our performance
against credit rating criteria and
use this information to drive
decision making.

• We conduct our business within

Board-approved capital operating
guidelines and interest rate
hedging policy.

• We have a diversity of financing
sources and strong relationships
with lenders. We engage early
with lenders prior to loan in order
to mitigate against refinancing
risk and monitor the availability
of finance.

• We maintain sufficient levels of

headroom to fund our transactions
and development pipeline.

• Due to our close monitoring of the
transactional pipeline, we have a
degree of control over the timing
and number of new acquisitions, to
reduce cash outflows if needed.
• Our strategic focus is to increase
income credentials to provide
greater interest cover.

Risk description
Failure to meet current regulatory
obligations and adapt to ongoing
requirements of changing policy
proposals for example, difficulty in
removing problematic tenants or
H&S/building regulation changes.

Our ability to forward look and
prepare for the future, understanding
complexities of a changing regulatory
landscape in which we operate.

Impact on strategy
Fines, penalties and sanctions;
damage to reputation; loss of
operational efficiency and
competitiveness; increased costs;
reduction in market opportunities;
impact on ability to finance
opportunities; reduced ability to
generate rents; inability to build
competitive PRS portfolio.

Risk description
Failure to attract, retain, and develop
an inclusive and diverse workforce to
ensure we have the right skills in the
right place at the right time to deliver
our strategy, heightened by an
ever-increasing competitive job
marketplace.

Failure to deliver an effective
roadmap to return to office working.

Failure to retain our talented
employees by providing development
opportunities, workplace flexibility, a
sense of purpose and remuneration.

Impact on strategy
Reduced ability to achieve business
plan and strategy; reduced control;
inability to grow market share of the
PRS; failure to innovate and evolve
to maintain competitiveness in a
customer-driven market; damage to
reputation; increased staff turnover.

Key mitigants
• Our position as the UK’s foremost
PRS provider brings a cultural
ethos of leadership and
best practice.

• We have an on-going programme
of management and staff training.

• We have invested in employing
specialist legal, compliance and
corporate affairs teams which
monitor and advise internally,
review the regulatory horizon and
have close involvement with well
established leading industry bodies.

• We work closely with expert law
firms and other professional
services organisations who keep
us updated about forthcoming
changes to the regulatory
framework.

• We have strict asset management
controls and compliance processes
which can also adapt to change.

Key mitigants
• Because of lockdown we have
introduced remote working,
improved communications with
colleagues and are using the
lessons we have learned from
lockdown to influence our hybrid
working approach.

• We listen to our colleagues’ views
and opinions by undertaking twice
yearly employee engagement
surveys as well as ad-hoc surveys
on specific issues and act upon
the findings.

• We have a talent identification

process and have succession plans
for key colleagues known as our
future leaders programme.

• We have a programme of learning
and development for colleagues.
• We carry out regular performance

reviews and appraisals of
colleagues to identify
opportunities to develop, and
internal career progression.

• We undertake regular reviews of
our benefit structure against the
external market to ensure we
remain competitive.

• Committed to raising awareness

and encouraging diversity amongst
the workforce through a diversity
network initiative.

• We have appointed a Board

member with specific
responsibilities on employee
engagement.

STRATEGIC REPORT

PRI N C I PA L RI S K S A N D U N C E RTA I NTI E S CO N T INUED

Impact on our
business model

Originate

Invest

Operate

Impact on
our strategy

Grow
rents

Simplify
and focus

Build on our
experience

Cultural link
to values

Every home
matters

People at
the heart

Leading
the way

Exceeding
expectations

5 S U PPLI E R

6 H E A LTH A N D S A FE T Y

7 D E V E LO PM E NT

INCREASED

UNCHANGED

INCREASED

Risk description
A significant failure within, or by, a key
third-party supplier or contractor.

Supply chain disruption caused by
our Procurement Strategy evolving
to align with our CONNECT platform,
leading to a change in the way we
will engage and interact with our
supply chain.

Impact on strategy
Reputational damage; increased
costs; inability to achieve
performance objectives; legal action
and regulatory sanctions; customer
dissatisfaction; a restriction on ability
to grow platform; negative impact on
organisational or portfolio growth
plans; increased Grainger workload to
reschedule reactive and/or planned
maintenance in a timely manner.

Key mitigants
• We have engaged with our current
supply chain from an early stage
to ensure they understand the
impacts of our CONNECT platform.

• Our Procurement Strategy

promotes having a diverse range of
suppliers to reduce reliance on any
one organisation. Consideration of
locally based suppliers aligns with
our sustainability approach. This is
applied across our range of
suppliers including repairs and
maintenance, law firms and other
professional services.

• Our Procurement Strategy sets

our intent towards internal controls
and management systems
regarding contractors/suppliers,
which include counterparty reviews
and covenant strength assessments
are well developed.
• Dedicated contractor

management role to oversee
relationships supported by a
Contractor Management Policy
to set behaviours.

• We work closely with a number
of legal specialists appointed on
their experience of understanding
our business and can provide
appropriate advice.

Risk description
A significant health and safety
incident, in particular a fire or gas
safety incident or near-miss
occurrence, owing to inadequate
or inappropriately implemented
procedures.

Our reputation as a leading
landlord impacted by our ability
and responsibility to understand
and follow fire safety and building
control requirements to protect
our residents. Ensuring the
performance of our portfolio aligns
to our Environmental, Social and
Governance standards.

Impact on strategy
Harm to customers, employees,
contractors, or visitors; possible
legal action or fine; subsequent
reputational damage. Reduced
investor interest.

Key mitigants
• We have clear governance

structures in place for health and
safety. The Board sets the direction,
monitors and reviews performance
and delegates responsibility to the
senior management team for
ensuring a positive health and
safety culture. Fire safety and the
changes in this field receives
substantial focus from the Board
and across the business.
• We have strengthened the

oversight of our Health and Safety
actions by the introduction of an
oversight committee.

• Our health and safety management
system is supported by Live.Safe
our initiative to promote a positive
health and safety culture.
• Our improved technology

platform, CONNECT, delivers
efficient recording and reporting.
• Our specialist Health and Safety
team empower colleagues by
providing information and training.
• Our risk management framework
applies a system of close oversight
and reporting of health and
safety matters.

• Our finance team supports in

• We have planned and reactive

understanding the financial due
diligence of our supply chain through
regular dialogue and reviews.

• Our supply chains and availability of
labour have adapted well to the
impacts of the economic uncertainty
caused by Covid-19 and Brexit.

maintenance measures in place,
which assess gas, electrical,
water, asbestos, fire and
mechanical services.

• We regularly review innovative

energy sources.

Risk description
We allocate a portion of our capital
to development activities which may
be complex and potentially bring
multiple related risks.

Increased costs including build cost
inflation, labour and material
shortages under potential quality
standards due to Brexit and Covid-19
Conditions.

Impact on strategy
Exposure to risk of cost overrun, cost
inflation, income shortfall and yield
expansion, affecting achievement of
the strategy and returns in
developing rent schemes.

Key mitigants
• We monitor the capital we

deploy to development matters
carefully, following capital
allocation guidelines.

• We carry out thorough due

diligence and in-depth research
before committing to a scheme,
ensuring we have a good
understanding of the context, the
contractor and its supply chain.

• We proactively monitor cost

inflation, rents and yields to allow us
to identify trends and understand
any negative risk impact.
• We enter into fixed price

contracts with our supply chain
for construction.

• We employ an experienced team
with specialist development skills
and have established relationships
with expert advisers and
development partners.
• We have well established

governance structures which
provide strong oversight to our
development schemes, applying
the skills of our in-house
development management
experts, together with qualified
external consultants and
professionals.

• As part of our PRS strategy,

the portfolio of development
schemes now focuses on build-to-
rent assets and does not seek
speculative returns from
investing in development that
is solely for sale.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

8 C Y B E R A N D

I N FO RM ATI O N
S EC U RIT Y

9 C U S TO M E R S

10 C LI M ATE C H A N G E

INCREASED

Risk description
The breach of confidential data or
technology disruption due to an
internal or external attack on our
information systems and data or
by internal security control failure.
The investment to improve our
technology to deliver our CONNECT
platform has heightened this risk on
Cloud SaaS Solutions and complex
API integrations.

Impact on strategy
Financial loss; fines; reputational
damage; operational and business
disruption; loss of customers; loss of
employees; share price devaluation;
inability to serve our customers,
manage our properties and conduct
our business; competitive
disadvantage; inability to meet
contractual obligations.

Key mitigants
• We employ an experienced IT team
and have reviewed our resources to
ensure we have the correct roles to
achieve our strategy.

• We engage external advisers to
carry out regular penetration
testing to ensure our systems
are robust.

• We ensure our colleagues receive
adequate training on security
awareness to protect our data
and assets.

• We have implemented a Security
Information Event Management
system which delivers security
analytics, alert detection and
threat visibility.

• We have appointed a Cloud

Security partner to implement a
security improvement programme
and to ensure our CONNECT
platform is well understood,
resilient and protected now and in
the future.

Risk description
Our ability to successfully retain our
customers caused by a failure to fulfil
our customer proposition and our
service standards, and customers
have wider choice offerings.

Impact on strategy
Negative publicity; increased
complaints; poor customer
experience; reputational damage;
loss of customers; lower rental
increases and higher voids.

Key mitigants
• We have created a dedicated
customer Service Desk with a
single phone number for residents
to raise queries.

• Embedding our ESG strategy

across our business and
throughout the customer
experience.

• We continue to manage and

support individual circumstances
arising from the pandemic.
• We have a leading operating
platform with substantial
experience in managing a portfolio
of approximately £3.1bn of assets
and of meeting the requirements
of our residential customers.

• Our operating model is designed to
provide a platform for optimising a
customer-focused strategy.

• Our proactive asset management

means we can gather greater asset
and customer knowledge.

• We carry out customer service-
focused reviews measuring
customer preferences and
satisfaction levels.

• We monitor customer feedback

through several channels, such as
Google reviews.

• Our employees receive customer

service training and their
performance is measured against
key metrics.

Risk description
The impacts of climate change on
Grainger’s business and operations;
including: an extreme weather event;
adaption to changes in weather
patterns; the cost and feasibility of
transitioning our existing portfolio to
a zero-carbon economy whilst
ensuring our new build portfolio
meets our ESG standards; customer
preference for more energy efficient
properties and growing stakeholder
expectations.

Impact on strategy
Business disruption; infrastructure
damage; communication network
damage; increased insurance costs;
reputational damage; increased wear
and tear on buildings; cost of
investment adaptation measures.

Decreased asset value; asset
impairment or early retirement
of existing assets.

Key mitigants
• Our Business Continuity

Programme is overseen by our
Crisis Management team and
regularly tested.

• We work closely with Government
bodies and are members of leading
industry bodies who help us to
understand emerging energy
developments.

• Due diligence of assets includes

physical risks such as flood/
subsidence and transition risks.
• We carry out portfolio modelling
as part of our acquisition and
disposals strategy which is
informed by our ESG ambitions.
• We are a responsible business with

a strong commitment to minimising
our negative environmental
impacts and achieving net zero
carbon for the operation of our
buildings by 2030.

• We have a detailed climate change
and sustainability strategy and
roadmap, to support us to achieve
net zero carbon targets and the
requirements of TCFD.

STRATEGIC REPORT

The sensitivity analysis involved modelling a number of scenarios.
The most extreme downturn scenario, reflecting a severe
economic downturn and extended Covid-19 pandemic,
incorporated the following assumptions:

– Reducing property valuations by 20%.

– Reducing rental levels with lower PRS occupancy (-15%)

and lower growth (-20%).

– Cost inflation for construction and operating costs of 15%.

– Interest rates increase by 3% for the duration of the review
period and a downgrade in our credit rating is assumed.

Throughout this downside scenario, the Group had sufficient
resources to remain in operation and compliant with its banking
covenants. This scenario testing, together with the Group’s
strong financial position, current rent collection and lettings
evidence, and mitigating actions available including selling assets
and deferring non-committed capital expenditure, supports the
Group’s ability to continue to meet its liabilities as they fall due.

Based on the Board’s assessment, 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 to September 2025.

Our 2021 Strategic
Report from pages 1 to
52, has been reviewed
and approved by the
Board of Directors on
17 November 2021.

Rob Hudson
Chief Financial Officer

V I A B I LIT Y S TATE M E NT

In accordance with the 2018 UK Corporate Governance Code,
the Board has assessed the prospects of the Group over a longer
period than the 12 months required by the ‘Going Concern’
provision. In doing so, the Board conducted the review
considering the Group’s financial position, business strategy and
the potential impact of our principal risks and future prospects.

The strategic plan is reviewed and approved by the Board each
year, with year one forming the budget for the next financial year.
This plan provides a basis for settling all detailed financial
budgets and strategic actions that are subsequently used by
the Board to monitor performance and the Remuneration
Committee to set targets for the annual incentive.

The Board has reviewed its strategic and financial plans in detail
and believes that a viability assessment period to September
2025 is appropriate, given this covers the period of the detailed
strategy review and incorporates both the timescales for
investments and returns currently considered as being secured.

The Group’s business model has proven to be strong and resilient
throughout the different economic cycles even with higher levels
of gearing and over the long term, with consistent demonstration
through its ability to sell assets and let vacant properties to
provide stable income returns and cash generation, even during
challenging market conditions. Currently the Group directly owns
£2.9bn of residential property assets of a relatively granular
nature which are relatively liquid, as proven throughout previous
property cycles.

The Group would remain viable even in the event of severe and
sustained house price deflation as it would be able to accelerate
the natural conversion of our assets to cash including the sale
of tenanted assets and reduce or suspend development and
acquisition activity. Only an unprecedented and continued
long-term decline in residential property valuations, significant
reduction in rental income and lack of liquidity in UK residential
property markets is a scenario that could conceivably cause a
material threat to the Group. In this situation, the Group has the
option to continue to let assets to generate income and protect
overall asset value.

The financing risks of the Group are also considered to have an
impact on the Group’s financial viability. The two principal
financing risks for the Group are the Group’s ability to replace
expiring debt facilities and adverse movements in interest rates.
The Group has been successful in securing longer-term funding
to deliver the secured PRS pipeline and has prepared the strategic
plan on this basis. In addition, the Group continues to manage its
hedge exposure with interest rate swaps, caps and fixed rate
facilities matching almost 100% of its debt liability and maturity.

The viability assessment was made with the Group strategy
forming the base case and then recognising the principal risks
that could have an impact on the future performance of the
Company. These risks consider changes to the macro-economic
environment including the impact of the Covid-19 pandemic.
The planning process incorporates severe scenario planning,
with the amalgamation of multiple risks which may result from
political and economic uncertainty, including sensitivities to
rental level, asset valuations, financing and costs, to assess
impact and longer-term viability of the Company.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

The Board promotes the
long-term sustainable success
of the Company by leading by
example, promoting the culture
of the business and ensuring
effective engagement with,
and considering the interests
of our stakeholders.

M A R K C L A R E ,

CH A I RM A N

G
O
V
E
R
N
A
N
C
E

GOVERNANCE

Chairman’s introduction to governance

Leadership and purpose

Division of responsibility

Composition, succession and evaluation

Audit, risk and control

Remuneration

Directors’ report

C H A I RM A N ’ S I NTRO D U C TI O N TO G OV E RN A N C E

A strong governance framework
ensures we lead the business
effectively, whilst considering the
interests of all our stakeholders

H I G H LI G HT S

• Oversight and leadership of the response to the continuing challenges presented to the business by Covid-19 and Brexit.

• Full compliance with the Corporate Governance Code during the year.

• Oversight and approval of successful equity raise to fund capital investment.

• Board review of strategy.

• Appointment of new Non-Executive Director focusing on ESG and establishing a new Responsible Business Committee.

• The Board visited our assets and met our team.

• Appointment of new CFO and Director of Operations.

• Focus on the wellbeing of staff and customers.

IN TH I S RE P O RT

Leadership and purpose

The Board’s primary function is to promote the long-term
sustainable success of the Company. It does this by leading by
example, promoting the culture of the business and ensuring
effective engagement with, and considering the interests of
stakeholders. More information can be found on pages 56 to 65.

Division of responsibility

The Board ensures that the Company has the correct balance
of Executive and Non-Executive Directors in order to lead the
Company effectively, with clear definition of the respective
responsibilities of the Board and the executive leadership of
the Company. Please see pages 66 and 67 for more details.

Composition, succession and evaluation

The Board maintains an appropriate balance of skills,
experience and knowledge to ensure that it can effectively
lead and govern the Company. Effective evaluation of Board
performance and succession planning are crucial in this.
To find out more please see pages 68 to 71.

Audit, risk and control

The Board sets the Company’s strategy, taking account of
the need to balance risk and reward. With the oversight of
the Board, the Audit Committee has established formal and
transparent processes to oversee the independence and
effectiveness of internal and external audit functions.
Pages 72 to 77 provide details of these activities.

Remuneration

Our Remuneration Policy aims to ensure that the Executive
team is appropriately and fairly incentivised, and aligned
with long-term, sustainable strategic execution. We also
monitor wider colleague remuneration across the business.
More information is available at pages 78 to 98.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Dear Shareholders,

The Directors and I are committed to applying
effective corporate governance and promoting the
highest standards of behaviour and values throughout
the Company.

I am therefore pleased to introduce this year’s corporate
governance report, in which we describe our governance
arrangements, the operation of the Board and its committees,
and how the Board discharged its responsibilities.

The disruption caused by the Covid-19 pandemic has continued
throughout the period of this report. The Company’s priorities
for this period have been the wellbeing of our customers and
employees whilst protecting the interests for our Shareholders.

The Board continued to operate as normal. We used technology
to meet remotely and safely, and later in the year met in person
when permitted to do so, to maintain close oversight of the
business and its operations. As a result, we were able to provide
strong support to the management team based on robust
scenario planning whilst considering the needs of all the
Company’s stakeholders. This year and next will see substantial
changes to the composition of the Board. Rob Hudson, our new
CFO, joined the Company at the end of August and I have already
been impressed by his drive and enthusiasm for the business.
Andrew Carr-Locke will retire from the Company at the 2022
AGM, after completing nearly seven years’ service. I want to
formally thank Andrew for his substantial contribution to the
Board during this period.

Grainger continues to
increase the scale of its
PRS business and deliver
operational excellence
through its culture,
people and investment
in technology.

We also welcomed Carol Hui to the Board in October. Carol
will oversee the establishment of the Company’s Responsible
Business Committee and become chair of it. This Committee will
provide Board-level oversight of the delivery of the Company’s
ESG strategy including its 2030 ‘net zero in operations’
commitment and its diversity and inclusion plans.

This year, many of our customers have spent significant periods
in their homes and this has increased their expectations. Meeting
these expectations is a challenge that has been embraced by
both our ‘front-line’ and home or office-based employees.

Colleagues have utilised new technologies and shared best
practice, fostering an environment of mutual encouragement
and support across the business. The Board will continue to
encourage such behaviour and monitor employee and customer
surveys for tangible evidence of progress in these areas.
The Board conducted an assessment of the Company’s strategy
in June of this year. We looked at the potential to accelerate our
growth strategy, how we can enhance our customer service
proposition, the ideal mix of funding to finance our growth and
how we can develop and enhance our ESG activities.

Good governance also means ensuring we have rigorous risk
management and controls in place and we have reviewed and
strengthened our approach in this area, particularly via an
enhancement of our Internal Audit function. The application
of the skills and experience of the Directors, coupled with the
wide-ranging work of the Audit Committee, provides strong
governance for the benefit of all our stakeholders. To learn
more about our Board activity in 2021, please see page 59.

Mark Clare
Chairman

17 November 2021

GOVERNANCELE A D E R S H I P A N D PU RP O S E

Executive Committee

Audit Committee

Remuneration Committee

Nominations Committee

Committee Chairman

1. Mark Clare
Non-Executive Chairman
N R
Appointment: Appointed
Chairman in February 2017

Skills, competence and
experience: Mark has wide-
ranging experience in a number of
sectors and extensive knowledge
of the residential property market.
He has substantial plc-level
experience and is senior
independent director of United
Utilities Group plc, senior
independent director of Wickes
Group plc and a non-executive
director of Premier Marinas
Holdings Limited. Mark was
previously chief executive of
Barratt Developments plc from
2006 to 2015, and is a former
trustee of the Building Research
Establishment and the UK Green
Building Council. Prior to joining
Barratt, he was an executive
director of Centrica plc and held a
number of senior roles within both
Centrica plc and British Gas.
Mark has also been a non-
executive director of Ladbrokes
Coral Group plc and BAA plc, the
airports operator.

Tenure: 4 years and 7 months

2. Helen Gordon
Chief Executive
E

3. Robert Hudson
Chief Financial Officer
E

Appointment: Appointed to
the Board in November 2015

Appointment: Appointed to
the Board in August 2021

Skills, competence and
experience: Rob has over 25 years’
experience in finance. Rob was
previously the chief finance and
operations officer and interim chief
executive of St Modwen plc, where
he worked from 2015 to 2021.
Prior to that, Rob was the group
financial controller at British Land
plc from 2011 to 2015. Rob joined
PriceWaterhouseCoopers on
graduation, then moved to
Experian plc in 2000 where he held
a number of senior financial roles,
including global finance director of
its Decision Analytics business and
UK finance director. Rob is a
qualified chartered accountant.

Tenure: 1 month

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
the senior independent non-
executive director of Derwent
London plc, vice chairman of EPRA
and a board member of the British
Property Federation, of which she
is the former President, having
stepped down in 2020 at the end
of her term. She 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 & General
Investment Management, Railtrack
and John Laing Developments.

Tenure: 5 years and 10 months

4. Justin Read
Non-Executive Director
A N R

Appointment: Appointed to
the Board in February 2017

Skills, competence and
experience: Justin has substantial
experience in real estate and
corporate finance. Justin is a
non-executive director of Ibstock
plc, Affinity Water Limited and
Marshall of Cambridge (Holdings)
Limited, chairing the audit
committee of all three companies,
and the remuneration committee
of Marshall. Justin is an
independent member of the
Investment Committee of the
Logistics pan-European real estate
fund and was group finance
director of SEGRO plc from
August 2011 to December 2016.
Between 2008 and 2011, Justin
was group finance director at
Speedy Hire plc. Prior to this, he
spent 13 years in a variety of roles
at Hanson plc, including deputy
finance director, managing director
of Hanson Continental Europe,
head of corporate development,
head of risk management and
group treasurer.

Tenure: 4 years and 7 months

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

5. Andrew Carr-Locke
Non-Executive Director
A N R
Appointment: Appointed to
the Board in March 2015 and
appointed as Senior Independent
Director in February 2018

Skills, competence and
experience: Andrew has
substantial experience in senior
finance positions in listed
companies, particularly in 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, where he led the
refocus of the company’s strategy.
He has previously held non-
executive directorships at Dairy
Crest plc, Royal Mail Holdings,
Venture Production and AWG.

Tenure: 6 years and 6 months

6. Rob Wilkinson
Non-Executive Director
A N R

7. Janette Bell
Non-Executive Director
A N R

Appointment: Appointed to
the Board in October 2015

Appointment: Appointed to
the Board in February 2019

Skills, competence and
experience: Rob has substantial
experience in real estate and
corporate finance.

He is a chartered accountant and
the chief executive of AEW Europe,
a leading European real estate
investment manager. Rob is also a
management board member of
INREV and chairman of its Fund
Manager Advisory Council. He is
chairman of the Green Rating
Alliance. Prior to joining AEW
Europe in 2009, Rob was a
managing director with the
Goodman Group and also held
investment banking positions at
UBS and Eurohypo.

Tenure: 5 years and 11 months

Skills, competence and
experience: Janette is the
Non-Executive Director
responsible for employee
engagement. Janette is the
managing director of FirstBus, part
of FirstGroup plc. Janette held the
position of chief executive officer at
P&O Ferries from January 2018 to
September 2020. Janette is an
experienced board director, with a
breadth of operational experience
in customer centric organisations.
She was sales & marketing director
for Hammerson plc and has also
worked in senior customer strategy
and marketing positions at PwC,
Tesco and Centrica, where she was
sales and marketing director of
British Gas Services.

Tenure: 2 years and 9 months

8. Carol Hui
Non-Executive Director
A N R
Appointment: Appointed to
the Board in October 2021

Skills, competence and
experience: Carol is a non-
executive director of Breedon
Group plc, where she is the
designated non-executive director
for sustainability. Carol is also a
non-executive director of the
British Tourist Authority, where
she chairs the audit and risk
committees. Carol was the
non-executive chair of Robert
Walters plc until 2020. In an
executive capacity, Carol’s most
recent role was as chief of staff
and general counsel at Heathrow
Airport Holdings Limited from
which she stepped down in
Summer 2021 and has previously
served in senior positions in oil and
gas, logistics and infrastructure
companies. She was also a
corporate finance lawyer at
Slaughter and May.

Tenure: newly appointed

GOVERNANCELE A D E R S H I P A N D PU RP O S E CO N T INUED

Purpose

Grainger’s purpose is to enrich lives by providing high-quality
rental homes and great customer service.

The Board keeps this purpose in mind when considering all
decisions it takes.

Culture

The Board believes that the culture of a business, in conjunction
with its values, is vitally important to its successful long-term
performance and is integral to all that we do, including
governance. How the Board members, particularly the Executive
team, conduct themselves sets the culture within the Company.

The Board assesses and monitors the culture of the business to
ensure that policy, practices and behaviour throughout are aligned
with the Company’s purpose, values and strategy. In November
2020, the Board received a detailed presentation from the HR
Director on culture and engagement and how it supports our
strategy. The Board was informed of our employee engagement
survey results, highlighting what we do well and the areas where
the Company and its senior management can improve.

We provide further details on our culture and employee
engagement on page 61. During the year, the Board and I have
also spent time with our people from across the business and took
these opportunities to gauge their views on the business, the
strategy and its implementation.

We firmly believe that the culture of the Company is strong and
has enabled us to perform well in these very challenging market
conditions. Our people understand and support the strategic
direction of the business and are focused on delivering it.

Stakeholder engagement

The Board believes that good engagement with stakeholders and
investors is key to understanding their views. We are also supportive
of the emphasis the Code puts on the wider stakeholder group,
particularly the Board’s duty under Section 172 of the Companies
Act 2006. In order to achieve our aim of being the UK’s leading
residential landlord, we keep in contact with our people, customers,
suppliers and investors to ensure that we harness their views and
communicate the Company’s progress. Please see page 44 for our
Section 172 Statement and page 61 for examples of our work with
our stakeholder groups.

Specifically, regarding our investors, Helen Gordon, Rob Hudson
and the previous CFO and interim Group Finance Director had over
250 meetings with the Company’s Shareholders and analysts
throughout the year. In particular, during 2021, the equity raise
entailed a substantial degree of engagement with our investors as is
appropriate for a material transaction of that nature. We have also
been in regular communication with our investors regarding the
impact of Covid-19 on the Company.

Balance of Directors (as at the date of this report)

Male

Female

63%

37%

Chairman

Executive Directors

Non-Executive Directors

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Compliance with the 2018 Corporate Governance Code

The governance rules applying to all UK companies on the
Official List of the UK Listing Authority are set out in the Code,
published by the Financial Reporting Council (‘FRC’). You can
obtain copies of the Code from www.frc.org.uk. The Board fully
supports the principles set out in the Code and confirms we have
complied with all its provisions throughout the financial year
ended 30 September 2021.

This report sets out Grainger’s governance policies and practices
and includes details of how the Company applies the principles and
complies with the provisions of the Code.

As required by the Code, this report describes our activities and
key achievements during the year, giving Shareholders and
stakeholders the necessary information to evaluate how the
Code’s Principles have been applied.

Information flow

The Chairman and the Company Secretary ensure the Directors
receive clear, timely information on all relevant matters. Board
papers are circulated well in advance of meetings to ensure there
is adequate time for them to be read and to facilitate robust and
informed discussion.

The papers contain the CEO’s review, Finance review, reports on
each business area, key figures and papers on specific topics of
interest to the Board. Minutes of the Executive Committee meetings
and detailed financial and other supporting information are also
provided. The Board received presentations throughout the year
from various departments across the business and from external
advisers on subjects including financing, regulatory issues for listed
companies, business valuation, ESG and customer feedback.
The papers also contain information on how stakeholder interests
have been taken into account when considering decisions taken by
the Company.

Effectiveness

The standard Board schedule sets six formal meetings
throughout the year, one of which was a two day off-site session
specifically focused on a review of the Company’s longer-term
strategy. This year, there was an additional meeting in December
to review business issues, including the succession of the CFO
and additional meetings in July and August to review and
authorise the equity raise completed in September.

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 CEO. They review the list of reserved matters and annual
plan regularly, to ensure they are properly covered, together with
other key issues as required. At each Board meeting, the CEO
provides a review of the business, setting out how it has been
progressing against strategic objectives and details of any issues
arising. In addition, items that require formal Board approval are
circulated in advance with all supporting paperwork to aid
appropriate decisions.

As soon as it was able to the Board spent time visiting our new
Gatehouse Apartments building in Southampton this year and
the September Board Meeting was held at our Millet Place
development. The Board met staff at both sites.

The table on the following page shows examples of the subjects
and matters the Board debated and considered throughout
the year.

Attendance table to 30 September 2021

Board meetings 2020/21

Executive Directors

Helen Gordon

Vanessa Simms

Rob Hudson

Non-Executive Directors

Mark Clare

Andrew Carr-Locke

Rob Wilkinson

Justin Read

Janette Bell

Meetings
attended
9
4
1

Meetings eligible
to attend
9
4
1

October

November

December

Board meeting

Site visit

January

February

March

Meetings
attended

Meetings eligible
to attend

April

May

June

9
9
9
9
9

July

August

September

B OA RD AC TIV IT Y: How the Board spent its time

Strategic 25%

People and culture 15%

Financial 20%

• Carried out an in-depth review of

Grainger’s strategy . It considered further
opportunities for growth in the current
PRS market, the development business
and operational and financial strategy.
• Received market update reports and
presentations from JPMC regarding
performance in relation to the market
and peer group companies.

• Considered competitor activity in the

PRS sector.

• Monitored the economic, legislative

and geo-political landscape, received
and considered papers on the developing
impact of Covid-19 and the UK’s
departure from the EU and the end of the
transition period.

• Considered the ESG strategy for the

business, including our ‘path to net zero
carbon’, which is now an integral part of
our business, and reviewed progress
reports throughout the year.

• Reviewed and signed off the community

engagement plan.

• Received reports on the activities to
increase the diversity of the business
including the activities of the Employee
Diversity & Inclusion Network.

• Reviewed the culture of the business and
employee engagement. This included the
HR Director presenting the results of the
annual employee engagement survey to
the Board.

• Oversaw the process for the appointments
of the new CFO, Director of Operations and
Non-Executive Director.

• Reviewed reports and updates on the

health, safety and wellbeing of our people
and customers, particularly during the
Covid-19 lockdowns.

• Reviewed and discussed the requirement
of the Code in relation to the employee
voice being ‘heard’ in the boardroom and
the received updates from Janette Bell as
the Non-Executive Director responsible
for this.

• Received reports on the continuing impact
of Covid-19 on the Company, particularly
around arrears and void levels.

• Reviewed the Group’s debt and capital
structure, including the equity raise in
September 2021.

• Considered the Group’s financial

performance throughout the year.

• Agreed the continued application of the

dividend policy.

• Compared corporate and operating
overheads to the business plan.

• Monitored performance of the agreed

KPIs for the business.

• Received reports on interaction

with the credit ratings agencies and
insurance providers.

Governance 10%

Transactions 15%

Operations 15%

• Undertook and considered an internal
evaluation of the Board’s effectiveness.

• Received briefings on regulatory and

governance issues.

• Considered Shareholder relations, in

particular the feedback from investors and
analysts in connection with the 2020 full
year results and the 2021 interim results.
• Received three reports on development
of the ESG strategy and our activities in
this area.

• Received reports from the Nominations,
Audit and Remuneration Committees.

• Reviewed reports on the progress of our
development schemes proceeding in
partnership with TfL.

• Considered health and safety matters

including a presentation from the Health
and Safety Director.

• Considered material transactions and

• Closely monitored and inputted into the

business opportunities including, among
others, our PRS schemes in Cardiff, Bristol,
Newcastle and London.

• Received reports on the progression of our
existing development projects in the UK.
• Considered the ESG impact of prospective

transactions.

progress of our technology change project,
CONNECT.

• Received reports on strategy and

developments from the Company’s
affordable housing arm, Grainger Trust.
• Considered management of our suppliers,

alternative supplier arrangements.

• Received reports from consultants on our
customer service performance and other
operational KPIs.

• Oversaw a plan to put our ESG strategy

into action.

GOVERNANCELE A D E R S H I P A N D PU RP O S E CO N T INUED

How the Board understands
and responds to the needs
of our stakeholders

The Board takes the interests of stakeholders into
account when making decisions. The relevance
of each stakeholder group may increase or
decrease by reference to the issue in question,
so the Board seeks to understand the needs and
priorities of each group during its deliberations.
This, together with the combination of the
consideration of long-term consequences of
decisions and the maintenance of our reputation
for high standards of business conduct, is integral
to the way the Board operates.

We have continued to embed stakeholder interests into the
culture and operating model of our business. Papers presented
to decision making committees include a section on
stakeholders’ interests.

A key focus for the Board over the last year has been our ESG
activities. The Board received presentations and held discussions
in relation to our strategies in this area. The Board considered the
actions necessary to take the strategy forward in the coming
year. The two key areas which impacted on stakeholders were
our net zero carbon and our social value priorities.

For net zero carbon they key focus was on our customers and
how we can measure and reduce emissions from our residents’
use of energy in our properties.

For the social value priorities the Board considered the
expectations of all stakeholders and was heavily involved in
shaping the priorities. For more information on this please see
page 41.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Customers
• Considered how we can assist our
customers in dealing with the continuing
impacts of Covid-19.

• Reviewed and fed back on plans to
improve customer service.

• More detail on how Grainger delivered

for its customers is included on
page 62.

Local communities
• Reviewed reports on Grainger’s
engagement with local communities
including the new partnership with North
Tyneside YMCA.

• Considered schemes in which Grainger
participated at development sites.

Shareholders
• Reviewed and considered reports
of meetings with investors.

• Considered questions and
comments from analysts.

• Facilitated the opportunity to ask
questions at the ‘virtual’ AGM.

• More detail on Grainger’s engagement
with Shareholders is included on
page 64.

Suppliers
• Considered reports on key supplier
relationships and performance and
alternative supplier plans.

• Reviewed the results of audits of key supplier

compliance with anti-bribery and modern
slavery policies.

• More detail on Grainger’s engagement with
suppliers is included on page 63.

Grainger plc
Board

Employees
• Monitored employee engagement
survey results.

Government
• Considered reports on Grainger’s
contributions to Government matters.

• Oversaw Grainger’s relationships with key
local authority partners.

• Reviewed reports on meetings

with Government, shadow government
and party officials.

• Received presentations from the HR Director

on skills and resources for meeting our
strategic objectives.

• Considered the gender pay gap for the business
and means to address it.

• Engagement with employees at office and site visits.

• Received reports on the activity of the Employee
Diversity & Inclusion Network.

• More detail on Grainger’s engagement with
employee is included on page 63.

GOVERNANCELE A D E R S H I P A N D PU RP O S E CO N T INUED

How the business understands
and responds to the needs
of our stakeholders

Customers

Shareholders

Local communities

Employees

Suppliers

Government

Stakeholder expectations

For Grainger to provide
safe, high-quality homes
and good service, whilst
responding to their
needs promptly.

How we engage

We offer a wide range of customer
communication channels. Each resident
has a dedicated point of contact and we
encourage our team members to build
long-lasting relationships with them.
Additionally, customer touch points include
a customer care line and a transparent
complaints procedure. We regularly survey
our BTR customers to understand how we
can improve our service and run customer
focus groups to tailor the design of our
buildings to our customers’ needs.

We have created a customer Service Desk
call centre to act a single point of contact for
our customers to simplify and enhance their
engagements with the Company.

Outcomes and examples

• The average length of stay for PRS

customers was 28 months.

• Reduction of 27% in customer

complaints received.

• 4 in 5 customers surveyed “really like”
their Grainger home (FY20: 4 in 5).

• Introduced new dedicated Service Desk to
be primary point of contact for residents.

• Invested in further training for Resident
Services Managers including customer
service, management and mental health
first aid training.

For Grainger to generate
long-term, sustainable
attractive total returns and
to meet Environmental,
Social and Governance
(‘ESG’) expectations.

For Grainger to act responsibly
and make a positive impact to
the local area while listening
to and taking on board local
views, preferences and
concerns.

For work to be fulfilling

and rewarding. To be fairly

treated, recognised and

remunerated. To operate

in a safe and comfortable

For us to act with integrity

and professionalism, pay

For Grainger to act responsibly

as an employer and as a

promptly and ensure that we

housing provider. To support

are protecting the rights of all

Government in delivering its

those employed through our

objectives such as increasing

environment, with learning

supply chain.

and development

opportunities.

provision of high-quality

homes and meeting its net

zero carbon ambitions.

We run a comprehensive investor relations
programme. Activities include investor
roadshows, conferences, trading updates
and property tours. Key engagement events
are reported on page 64.

Extensive local engagement and
consultation concerning assets and
developments via events, residents’
meetings, direct communications
and newsletters.

We ensure that we are available and
accessible to the investment community,

We respond annually to a range of ESG
benchmarks, as reported on page 22.

We support local businesses and charities,
sponsor local sports and cultural activities
and engage with local authorities.

We encourage communities to develop
within and around our buildings, through
organising residents’ events and building
relationships with the local community.
All of our people have access to our
community engagement blueprint guidance
and relevant training.

• During the year in review, we had
205 investor meetings (including
group meetings).

• Over 60 pieces of analyst coverage.

• 12 investor conferences/events attended.

• Hosted three investor roadshows.

• Increased geographic outreach and

continued to diversify the geographic
representation among Shareholders
(see page 65).

• Further broadened our Shareholder base.

• Conducted shareholder visits to our

new sites.

• Piloted development of bespoke

community engagement plans for
Grainger assets to implement our
Community Engagement Blueprint.

• Founding partner of the LandAid First
Step Appeal to provide emergency
accommodation for young people
facing homelessness.

• Delivered three pro bono projects

for charities.

• Over 550 residents and community
events held throughout the year.

Regular two-way engagement includes

biannual employee engagement surveys,

monthly cascade meetings from senior

Regular supply chain reviews and customer

satisfaction surveys to ensure regulatory

compliance and service levels, including

management, monthly all-staff update calls

matters related to data protection, health

Regular contributions to Government

consultations and regular feedback on

Government policies. Numerous meetings

with Government and shadow government

with the CEO, and our intranet platform.

and safety, and modern slavery.

ministers, and officials.

We have a Non-Executive Director

responsible for employee engagement.

Strategic partnership board with our largest

City engagement strategy designed to

repairs and maintenance partner, which

engage with key stakeholders and map local

Feedback is also gathered following specific

meets quarterly.

issues in areas targeted for investment.

activities such as training and through a

biannual performance review process.

We organise a range of employee events,

including campaigns from our employee-led

Diversity & Inclusion Network and charity

fundraising events.

Set standards for suppliers on framework

agreements, requiring registration

with Constructionline.

Partnerships with local authorities in our

targeted investment locations and local

authority outreach in collaboration with

industry bodies.

• Continued not to furlough any

• Introduced new facilities management

• Extensive engagement through

employees, and to implement Covid-19

and purchase to pay systems.

employee engagement strategy focused

on communication, innovation

and improvement.

• Completed first cohort of Grainger’s

future leaders programme.

• Behaviour based Health & Safety training

roll out underway and completed by 87%

of employees as at FY21.

• Invested in recruiting new diverse talent

into the industry, sponsoring a university

bursary scheme and schools engagement

programme.

• Contractor management reviews

undertaken for all major contractors.

• Focused on prompt payment during

Covid-19, reducing average days to make

payment to 18 days.

• Commenced new partnerships with AO

for appliances and PodPoint for electric

vehicle charging infrastructure.

• Enhanced supplier Health & Safety audits,

with 12 audits undertaken in the year.

• Zero RIDDOR reportable incidents.

private meetings, correspondence

and property tours with Government

ministers and officials and via British

Property Federation. We engaged on the

Residential Property Developers Tax, the

Building Safety Levy, the Renters Reform

Bill and other proposed legislation.

• Engagement with Mayor of London and

the Greater London Authority, directly

and indirectly via London First.

• Hosted the Housing Minister at the Forge,

• Gave the leader of Southampton City

Council and his team a tour of Gatehouse

Newcastle.

Apartments.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Customers

Shareholders

Local communities

Employees

Suppliers

Government

Stakeholder expectations

For Grainger to provide

safe, high-quality homes

and good service, whilst

responding to their

needs promptly.

How we engage

We offer a wide range of customer

communication channels. Each resident

has a dedicated point of contact and we

encourage our team members to build

long-lasting relationships with them.

Additionally, customer touch points include

a customer care line and a transparent

complaints procedure. We regularly survey

our BTR customers to understand how we

can improve our service and run customer

focus groups to tailor the design of our

buildings to our customers’ needs.

We have created a customer Service Desk

call centre to act a single point of contact for

our customers to simplify and enhance their

engagements with the Company.

Outcomes and examples

For Grainger to generate

long-term, sustainable

attractive total returns and

to meet Environmental,

Social and Governance

(‘ESG’) expectations.

For Grainger to act responsibly

and make a positive impact to

the local area while listening

to and taking on board local

views, preferences and

concerns.

For work to be fulfilling
and rewarding. To be fairly
treated, recognised and
remunerated. To operate
in a safe and comfortable
environment, with learning
and development
opportunities.

For us to act with integrity
and professionalism, pay
promptly and ensure that we
are protecting the rights of all
those employed through our
supply chain.

For Grainger to act responsibly
as an employer and as a
housing provider. To support
Government in delivering its
objectives such as increasing
provision of high-quality
homes and meeting its net
zero carbon ambitions.

We run a comprehensive investor relations

programme. Activities include investor

roadshows, conferences, trading updates

Extensive local engagement and

consultation concerning assets and

developments via events, residents’

and property tours. Key engagement events

meetings, direct communications

are reported on page 64.

and newsletters.

Regular two-way engagement includes
biannual employee engagement surveys,
monthly cascade meetings from senior
management, monthly all-staff update calls
with the CEO, and our intranet platform.

Regular supply chain reviews and customer
satisfaction surveys to ensure regulatory
compliance and service levels, including
matters related to data protection, health
and safety, and modern slavery.

Regular contributions to Government
consultations and regular feedback on
Government policies. Numerous meetings
with Government and shadow government
ministers, and officials.

We ensure that we are available and

accessible to the investment community,

We respond annually to a range of ESG

benchmarks, as reported on page 22.

We support local businesses and charities,

sponsor local sports and cultural activities

and engage with local authorities.

We encourage communities to develop

within and around our buildings, through

organising residents’ events and building

relationships with the local community.

All of our people have access to our

community engagement blueprint guidance

and relevant training.

We have a Non-Executive Director
responsible for employee engagement.
Feedback is also gathered following specific
activities such as training and through a
biannual performance review process.

We organise a range of employee events,
including campaigns from our employee-led
Diversity & Inclusion Network and charity
fundraising events.

Strategic partnership board with our largest
repairs and maintenance partner, which
meets quarterly.

City engagement strategy designed to
engage with key stakeholders and map local
issues in areas targeted for investment.

Set standards for suppliers on framework
agreements, requiring registration
with Constructionline.

Partnerships with local authorities in our
targeted investment locations and local
authority outreach in collaboration with
industry bodies.

• The average length of stay for PRS

customers was 28 months.

• Reduction of 27% in customer

complaints received.

• During the year in review, we had

205 investor meetings (including

group meetings).

• Over 60 pieces of analyst coverage.

• 4 in 5 customers surveyed “really like”

• 12 investor conferences/events attended.

their Grainger home (FY20: 4 in 5).

• Introduced new dedicated Service Desk to

be primary point of contact for residents.

• Invested in further training for Resident

Services Managers including customer

service, management and mental health

first aid training.

• Hosted three investor roadshows.

• Increased geographic outreach and

continued to diversify the geographic

representation among Shareholders

(see page 65).

• Further broadened our Shareholder base.

• Conducted shareholder visits to our

new sites.

• Piloted development of bespoke

community engagement plans for

Grainger assets to implement our

Community Engagement Blueprint.

• Founding partner of the LandAid First

Step Appeal to provide emergency

accommodation for young people

facing homelessness.

• Delivered three pro bono projects

for charities.

• Over 550 residents and community

events held throughout the year.

• Continued not to furlough any

• Introduced new facilities management

• Extensive engagement through

employees, and to implement Covid-19
employee engagement strategy focused
on communication, innovation
and improvement.

• Completed first cohort of Grainger’s

future leaders programme.

• Behaviour based Health & Safety training
roll out underway and completed by 87%
of employees as at FY21.

• Invested in recruiting new diverse talent
into the industry, sponsoring a university
bursary scheme and schools engagement
programme.

and purchase to pay systems.

• Contractor management reviews

undertaken for all major contractors.

• Focused on prompt payment during

Covid-19, reducing average days to make
payment to 18 days.

• Commenced new partnerships with AO
for appliances and PodPoint for electric
vehicle charging infrastructure.

• Enhanced supplier Health & Safety audits,

with 12 audits undertaken in the year.

• Zero RIDDOR reportable incidents.

private meetings, correspondence
and property tours with Government
ministers and officials and via British
Property Federation. We engaged on the
Residential Property Developers Tax, the
Building Safety Levy, the Renters Reform
Bill and other proposed legislation.

• Engagement with Mayor of London and
the Greater London Authority, directly
and indirectly via London First.

• Hosted the Housing Minister at the Forge,

Newcastle.

• Gave the leader of Southampton City

Council and his team a tour of Gatehouse
Apartments.

GOVERNANCELE A D E R S H I P A N D PU RP O S E CO N T INUED

Key Shareholder events 2020/21

An on-going dialogue with our
Shareholders is fundamental to
ensuring that there is an understanding
of the strategy and governance of the
business, and that the Board is aware of
the issues and concerns of our investors.
In this section of the report we highlight
the key activities of our Shareholder
engagement programme throughout
the year.

N OV E M B E R /
D EC E M B E R
2 02 0

JA N UA RY/
FE B RUA RY
2 021

• Virtual Full Year Results Presentation and live webcast.

• Virtual Full Year Results Investor Roadshow – London and

internationally.

• Virtual AGM.

• Virtual Barclays European Real Estate Conference.

M A RC H /
A PRI L
2 021

• Virtual Kempen New York Conference.

• Virtual Citi Conference UK.

• Virtual Berenberg Corporate Conference.

• Virtual Bank of America Real Estate Conference.

M AY/J U N E
2 021

J U LY/
AU G U S T
2 021

• Virtual Half Year Results Presentation.

• Virtual Half Year Results Roadshow London and Internationally.

• Virtual Kempen Investor Conference.

• Virtual Morgan Stanley European Real Estate Conference.

• Virtual EPRA Asia Week Conference.

• Investor Property Tours at Windlass Apartments and Apex

Gardens.

S E P TE M B E R
2 021

• Virtual meetings with investors regarding the equity placing.

• Virtual Bank of America 2021 Global Real Estate Conference.

• Virtual EPRA Investor Conference.

Substantial shareholdings

At 30 September 2021 and 29 October 2021 (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.

30 September
2021

29 October
2021

Holding
million

Holding
%

Holding
million

Holding
%

59.7
37.1

29.0
23.1
18.7
24.9

8.1
5.0

3.9
3.1
2.5
3.4

59.5
37.0

29.1
23.4
23.1
22.9

8.0
5.0

3.9
3.2
3.1
3.1

BlackRock Inc
The Vanguard Group Inc

Norges Bank Investment
Management
FMR LLC
Cohen & Steers inc.
Abrdn plc

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Over 250 investor meetings
Attendance at investor meetings

Chief Executive
Chief Financial Officer/Interim Group Finance Director
Senior executive

92%
90%
99%

Shareholders by region

UK 36%

USA 21%

Netherlands 7%

Republic of Ireland 5%

Luxembourg 5%

Norway 4%

Canada 4%

France 2%

Austria 2%

Other 14%

Relations with Shareholders

The Group’s website includes a comprehensive investor
relations section, containing all Regulatory News Service (‘RNS’)
announcements, share price information, annual documents
available for download and similar materials.

We send out the Notice of Meeting and Annual Report and
Accounts at least 20 working days before the meeting. We hold
separate votes for each proposed resolution. A proxy count is
given in each case. Grainger includes, as standard, a ‘vote
withheld’ category, in line with best practice. Shareholders can
also lodge their votes through the CREST system.

The Board believes that understanding the views of its
Shareholders is a fundamental principle of good corporate
governance. Strong engagement with stakeholders and investors
is key to achieving this.

Investor relations are based on the financial reporting calendar,
with additional engagement when considered beneficial to
the Company. We have held more than 250 meetings with
Shareholders, analysts and potential investors in the year.
Helen Gordon, Rob Hudson, the interim Group Finance Director,
the previous CFO and other senior staff members held the vast
majority of these meetings and manage the Group’s investor
relations programme with the Director of Corporate Affairs.
We always seek feedback at these meetings and present it to
the Board. In addition, the Company Secretary engaged with
a combination of fund managers and corporate governance
officers of the Company’s major Shareholders before the 2021
AGM. We anticipate a similar pre-AGM engagement process will
take place in 2022.

This Summer we hosted a number of our key investors
at tours of our new Windlass Apartments and Apex Gardens
sites in London, highlighting our market leading, customer-
service focused rental offerings. We received positive
feedback, particularly around the amenity spaces available
to customers.

GOVERNANCED I V I S I O N O F RE S P O N S I B I LIT Y

Governance framework

Grainger plc
Board
Responsible to the Company’s
Shareholders for the long-term success of
the Group, its strategy, its values and its
governance. Provides leadership of the Group
and, either directly or by the operation of Board
committees and delegated authority, applies
independent judgement on matters of
strategy, performance, resources (including
key appointments), the overall approach
to risk management and internal
control, culture and standards
of behaviour.

Audit
Committee
Responsible for overseeing the Company’s
financial statements and reporting.
Reviews the work of internal and external
auditors and matters of significant
judgement by management. It reviews the
risk management framework and the
integrity of the risk management and
internal control systems.

Remuneration
Committee
Responsible for determining Remuneration
Policy and level of reward for the Executive
Directors and senior managers to align their
interests with those of the Shareholders.

Nominations
Committee
Reviews the structure, size and
composition of the Board and its
committees. Oversees succession
planning for Directors and Executive
Committee members. It leads the process
for appointing Board Directors.

Executive Committee
This Committee operates under the direction and authority
of the Chief Executive. It makes key decisions on matters
to ensure achievement of strategic plans, reviews strategic
initiatives, ratifies executive decisions and considers the
key business risks. It is supported by sub-committees,
each focusing on an area of the business.

Management
Committee

Responsible for
the day-to-day
management of
the business and
ensuring all senior
leaders are briefed
on business activity
and priorities.

Investment
Committee

Reviews and
approves material
transactions,
allocates
investment capital
and proposes
investment hurdle
rates for
Board approval.

Finance
Committee

Operations
Board

Development
Board

Responsible for
financial matters
across the Group,
which include
accounting,
financial reporting,
tax, treasury,
corporate and
commercial finance,
and financial
support for
the business.

Responsible
for executing
operations strategy,
performance
management,
risk management
and governance
across the
operating business.

Responsible for
the strategy
implementation,
performance
management,
risk management
and governance
in relation to
the development
business.

Health
and Safety
Committee

Responsible for
overseeing and
executing health
and safety
compliance
activities across
the business.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

RO LE S A N D RE S P O N S I B I LITI E S O F D I REC TO R S

Role

Chairman

Responsibilities

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 process and is responsible for ensuring a constructive
relationship between Executive and Non-Executive Directors and for fostering open debate with an
appropriate balance of challenge and support. In accordance with the Code, the posts of Chairman
and Chief Executive are separate, with their roles and responsibilities clearly established, set out in
writing and agreed by the Board.

Responsible for running the business and implementing the Board’s decisions. She recommends the
strategy to the Board and is responsible for implementing it. She chairs a regular meeting with the
Chief Financial Officer and the additional members of the Executive Committee.

Responsible for the financial stewardship of the Group’s resources through compliance and good
judgement. He provides financial leadership in the implementation of the strategic business plan
and alignment with financial objectives.

Chief Executive

Chief Financial Officer

Non-Executive Directors

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, competence 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;

® satisfy themselves that financial information is accurate, and that financial
controls and systems of risk management are rigorous and secure; and
® oversee the Company’s ESG, non-financial KPIs and employee voice

programmes via the Responsible Business Committee.

A copy of the standard letter of appointment for a Non-Executive Director
is available from the Company Secretary. During the year, the Non-
Executive Directors meet periodically without the Executive Directors
present and also without the Chairman.

Senior Independent Director

Acts as a sounding board for the Chairman and serves as an intermediary for the other Directors
where necessary. The Senior Independent Director will meet Shareholders if they have concerns,
and where contact through the normal channels has not resolved the issue or is inappropriate.
The Senior Independent Director leads the annual performance review of the Chairman.

GOVERNANCECO M P O S ITI O N , S U CC E S S I O N A N D E VA LUATI O N
TH E N O M I N ATI O N S CO M M IT TE E RE P O RT

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

M A R K C L A R E ,

CH A I RM A N O F T H E
N O M I N AT I O N S CO M M I T T EE

Attendance table

Non-Executive Directors

Mark Clare
(Committee Chairman)

Andrew Carr-Locke

Rob Wilkinson

Justin Read

Janette Bell

Member
since

February 2017

March 2015

May 2017

March 2017

February 2019

Meetings
attended

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Dear Shareholders,

I am pleased to present the Nominations Committee
report for 2021 which details the main activities we
undertook during the year. This was a particularly
busy year for the Committee with appointment of Rob
Hudson as CFO and Carol Hui as Non-Executive Director.

The Nominations Committee plays a fundamental role in
ensuring we select and recommend 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.

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, considering length
of service of the Board as a whole and looking for membership
to be regularly refreshed;

• maintain an effective succession plan for Board and senior

management;

• identify and nominate, for the approval of the Board,
candidates to fill Board vacancies, and ensure that
appointments to the Board are subject to a formal, rigorous
and transparent procedure;

• ensure that both appointments and succession plans are

based on merit and objective criteria and promote diversity
of gender, social and ethnic backgrounds and cognitive and
personal strengths;

• review annually the time commitment required of Non-

Executive Directors;

• make recommendations to the Board, in consultation with

the respective Committee Chairmen, regarding membership
of the three Board Committees; and

• conduct an annual evaluation of the Board, considering its
composition, diversity and how effectively members work
together to achieve objectives and whether each Director
continues to contribute effectively.

How the Committee spent its time

30%

15%

25%

30%

Non-Executive
Director succession
and balance
of skills 30%

Executive and
senior management
succession and
pipeline 30%

Committee
composition 25%

Governance 15%

Process for Board appointments

Search consultants

Before making an appointment, the Nominations Committee will
evaluate the balance of skills, knowledge and experience currently
on the Board. Following this, a specification of the personal
attributes, experience and capabilities required to perform the
relevant appointment is produced. In circumstances where
external recruitment or benchmarking of an internal candidate is
appropriate, an independent external search consultancy will be
engaged to support the process. A recommendation is then made
to the Board concerning the appointment of any Director.
The Committee also supports the Board in the appointment of
the Company Secretary when required.

Vanessa Simms gave notice to the Company in October 2020 of
her resignation as CFO to the Board. It was agreed with Vanessa
that she would continue to work at Grainger and serve on the
Board until April 2021. Consequent to this, the Committee led
a thorough external search to identify an appropriate successor
to Vanessa, and following unanimous recommendation by
the Committee to the Board, Rob Hudson was selected as
the Company’s CFO and his appointment was finalised and
announced in February 2021. Rob took up his role in late
August 2021.

Andrew Carr-Locke will retire from the Board at the AGM in
February 2022, by which time he will have completed seven years’
service. Consequently, Andrew will also be relinquishing his
position as Senior Independent Director, Chairmanship of the
Audit Committee and membership of the Nominations and
Remuneration Committees at that time.

The Committee led a thorough external search to identify an
appropriate new Non-Executive Director. One of the key attributes
sought was experience of, and enthusiasm for, ESG, especially
diversity and inclusion. Following unanimous recommendation by
the Committee to the Board, Carol Hui was selected and took up
her role on 1 October 2021.

The Committee engaged the Russell Reynolds, an independent
executive search consultancy, for the recruitment of both Rob
Hudson and Carol Hui. The Board confirms that Russell Reynolds
is not connected with the Company in any other way.

Board composition and independence

In accordance with the Code, all current Directors, with the
exception of Andrew Carr-Locke, will stand for election or re-
election at the 2022 Annual General Meeting (‘AGM’).

Main activities of the Committee during the year

The Committee met formally on four occasions during the year
to 30 September 2021, supplemented by other discussions to
support the work of the Committee. At the formal meetings the
Committee considered a number of standing agenda items
relating to its key responsibilities detailed above. In applying those
responsibilities, the Committee made decisions on a range of
matters during the year, the most significant of which are
referenced in this report.

Invitations to attend Committee meetings extend to the CEO, HR
Director and others as necessary and appropriate. Details of the
Directors are set out on pages 56 and 57 together with a summary
of their experience and skills.

The Board reviews Non-Executive Director independence annually,
and takes into account each 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 and this remains
the case. The Board considers all the Non-Executive Directors to
be independent.

Board performance evaluation

This year, an external review having been undertaken last year,
the evaluation of Board effectiveness was carried out internally.
The review concluded that the Board and its committees were
operating effectively. A selection of the key findings and
recommendations are set out below.

External Board evaluation cycle

Year 1 2021 Internal

Year 2 2022 Internal

Year 3 2023 External

Year 4 2024 Internal

A selection of the key findings from the 2021 internal Board evaluation:

Findings

• The Board has performed well during a difficult time and adapted well to remote working. Key business priorities were identified and there was

a good level of contribution from members.

• The Board is well organised. The size of Board papers has been improved following previous feedback.
• Health and Safety has been given appropriately increased prominence.
• The strategy day was well constructed and organised.
• The Chair was effective, particularly in bringing Shareholder views into consideration in taking critical decisions.
• Succession has been a key focus.

Principal recommendations

• More presentations should be given at, and guests invited to attend, Board meetings.
• More detail in Board papers in relation to employee recruitment and turnover. Further analysis in that regard would be beneficial.
• ESG should be given greater prominence and have more Board involvement in the coming year.
• Succession decisions should include greater consideration of internal promotions.

GOVERNANCECO M P O S ITI O N , S U CC E S S I O N A N D E VA LUATI O N
TH E N O M I N ATI O N S CO M M IT TE E RE P O RT CO N T INUED

Induction and professional development

Rob Hudson and Carol Hui were appointed to the Board this
calendar year. They both undertook a comprehensive induction
programme of meetings with senior Grainger team members,
key contacts from our brokers, bankers, valuers, consultants
and auditors.

The Board is updated on a range of matters throughout the year.
Subjects include the business of the Group, legal and regulatory
responsibilities of the Company (including updates to the
legislative landscape) and changes to accounting requirements.
This takes the form of presentations by Grainger senior
management and external advisers, and Board papers and
briefing materials.

We also expect individual Directors to identify 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.

Non-Executive Directors

Janette Bell is designated Non-Executive Director to lead
employee engagement and represent the voice of the employee
in the boardroom.

There is significant engagement between the Board and
employees, via the Executive Directors, including regular all-staff
calls, new starter breakfasts, all-staff conferences and the ability
to ask the CEO questions via the Company intranet. The Board
also receives regular briefings from the HR Director on the
results of staff surveys.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

As part of her role, Janette reviewed the engagement surveys in
detail with the HR Director, attended a number of meetings of
the Employee Diversity & Inclusion Network and a number of the
regular all-staff calls. Janette also met staff on site visits to
Bristol and Berewood.

In future our activities in this area will be overseen by the
Company’s Responsible Business Committee.

Committee Changes

In light of the forthcoming retirement of Andrew Carr-Locke, a
review of the membership of the Committees was undertaken.
It is our policy to have all Non-Executive Directors as members of
all of the Board Committees, as we have a small Board and we
consider that this arrangement gives good visibility across the
Company’s activities. In line with this policy Carol Hui has been
appointed as a member of the Nomination, Remuneration and
Audit Committees.

When Andrew retires, Justin Read will assume his responsibilities
as the Senior Independent Director and Chairman of the Audit
Committee. Justin has been a Director of Grainger for nearly five
years and is an experienced audit committee chair, fulfilling the
role at three other companies currently.

Having been a member of the Remuneration Committee for
over two years, and in light of the experience and familiarity
with the Company’s approach in this area provided by this,
Janette Bell will take over from Justin as Chairman of the
Remuneration Committee.

Time commitment

The Board, supported by the Nominations Committee, carefully
considered the external commitments of the Chairman and each
of the Non-Executive Directors. The Board is satisfied that each
Director committed enough time to be able to fulfil their duties
and has capacity to continue doing so.

Re-election of Directors

We continue to adopt the recommendations of the Code that
all Directors offer themselves for re-election annually, even
though the Company’s Articles of Association only require this
every three years. Therefore, all current Directors, except for
Andrew Carr-Locke, will stand for election or re-election at the
2022 AGM.

In light of the performance evaluation, the Board recommends
that all Directors proposed are so elected or re-elected.

Access to independent advice

All Directors have access to the advice and services of the
Company Secretary, who ensures we follow Board processes
and maintain high corporate governance standards. Any Director
who considers it appropriate may take independent, professional
advice at the Company’s expense. None of the Directors did so
in the current year.

Balance of knowledge, skills and experience

The Directors have wide-ranging experience as senior business
people. The Board has particular expertise in finance, property
and the listed company environment. Carol Hui adds expertise
in the fields of sustainability, legal, governance and diversity
and inclusion.

Mark Clare
Chairman of the Nominations Committee

17 November 2021

Carol Hui will oversee the establishment of the Company’s
Responsible Business Committee and become Chair of it.
This Committee will provide Board-level oversight of the delivery
of the Company’s ESG strategy including its 2030 ‘net zero in
operations’ commitment, its employee engagement and voice
in the boardroom commitments and its diversity and inclusion
plans. To read more about our activities and plans in this area,
please see page 40.

Diversity

The Directors are committed to having a diverse group of
employees. This starts with having a balanced Board which
includes diversity of perspectives, skills, knowledge and
background. For gender diversity specifically, the Board
continues to support the aspiration of the Hampton-Alexander
Review to promote greater female representation on listed
company boards.

We have instructed our recruitment agents to provide us with a
diverse range of candidates. We make all appointments to the
Grainger Board on merit, and within this context the Directors
will continue to follow best practice on the issue of diversity as it
develops further. At the date of this report, female representation
at Board level was at 38%. The current level exceeds the 33% level
recommended by the Hampton-Alexander Review. The objective
for the Board and the Committee is to consistently have at least
one-third of the Board being female Directors.

Page 40 contains further details of diversity matters
across Grainger.

The Board is also mindful of the Parker Review regarding ethnic
diversity on UK boards that was published in 2017. The Review
recommends that each FTSE 250 board should have at least one
director of colour by 2024. Following the appointment of Carol
Hui, the Board meets the recommendation of the Parker Review,
three years in advance of this requirement.

Grainger launched its Employee Diversity & Inclusion Network
in May 2020, and it has gone from strength to strength in the
last year. Activities over the past year have included external
and internal presentations and educational activities around
Black History Month, International Women’s Day and Pride
Month. Grainger is a member of Real Estate Balance. Grainger
has joined the Company of Chartered Surveyors’ social mobility
scheme, which provides support to students to start a career in
real estate. We are funding a bursary for a young person from
a disadvantaged background to attend university through the
Worshipful Company of Chartered Surveyors. More details on
the activities of this employee led network can be found at
page 40.

Succession planning

The Committee received a detailed presentation from the HR
Director in relation to our succession plans for key people in the
business and related retention strategies for them. Specifically
with regard to succession planning of senior executives, a
number of senior appointments were made during the year,
including John Blanshard as Director of Operations reflecting
our on-going investment in and commitment to enhancing
customer service, in line with our strategy.

The Committee also received a presentation from the HR
Director in relation to the Company’s talent management
initiative, which seeks to identify and prepare future leaders
of the business.

GOVERNANCEAU D IT, RI S K A N D CO NTRO L
AU D IT CO M M IT TE E RE P O RT

The Audit Committee

comprised four
independent Non-
Executive Directors,
chaired by the Senior
Independent Director.

A N D R E W C A R R - LO C K E ,

CH A I RM A N O F T H E
AU D I T CO M M I T T EE

Attendance table

Non-Executive Directors

Andrew Carr-Locke

Rob Wilkinson

Justin Read

Janette Bell

Member
since

March 2015

February 2016

March 2017

February 2019

Meetings
attended

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Dear Shareholders,

I am pleased to present the Audit Committee report
for the year ended 30 September 2021, which will be
my final report before I retire from the Board.

The challenges presented by Covid-19 during the year, have
continued to make the Committee’s role within the Company’s
governance framework, including supporting the Board in risk
management, internal control and financial reporting of
significant importance.

The Company has continued to strengthen its risk and control
environment throughout this period. We have dedicated
significant time and resource over the past year to embed
PricewaterhouseCoopers as our Internal Auditors and develop
and enhance our Internal Audit approach. The new model is
a co-sourced model where we use PwC and internal resource.
The Grainger employed internal auditor undertakes audits,
including on-site audits and report to PwC and use their Internal
Audit methodology. The Committee examined a number of
options and concluded that this approach offered us the best
combination of access to PwC’s expertise with the direct
knowledge and involvement of an employee.

This report provides an overview of the significant issues the
Committee considered, and its assessment of the Annual Report
and Accounts as a whole, including how we have reviewed the
narrative reporting to ensure it is an accurate reflection of the
financial statements.

Governance

As a matter of course, the Committee considers its terms of
reference each year, taking into account changes to Grainger
and to external governance requirements. In this regard, we have
during the course of the year been mindful of the requirements
of the new Code, which applied to the Company for the first time
this financial year. We were also mindful of the BEIS consultation
on proposals for restoring trust in audit and corporate
governance and the likely changes arising from this.

Risk and controls

A key responsibility of the Committee is ensuring that the
Company operates an effective risk assessment and management
process and has an appropriately robust control framework in
place. We were helped by the newly appointed Internal Audit
team at PwC, which reported directly to us, and which worked
to an agreed plan to ensure controls were effective.

How the Committee spent its time

10%

30%

Financial
reporting 30%

Internal control
and audit 30%

Risk management
and compliance 30%

Governance 10%

The Covid-19 pandemic has continued to affect the Company
this year, monitoring the effects of this has been a key issue
for the Committee.

The Committee has also supported the Board in considering
the principal risks and appetite of the Company. We undertook
a thorough review of the control environment during this period
and it remained robust. We provide details of the
risk management framework, principal risks and key mitigants
on pages 46 to 51.

Technology

Grainger is continuing to invest in technology to facilitate its
strategy as the market leader in the PRS. CONNECT, our leading
operating platform, seeks to put automation and risk
management at its heart, and it is this integration and increase
of preventative controls which gives further assurance to us
as an Audit Committee that the robust framework will continue
to be enhanced as the CONNECT programme is fully realised.

Financial statements

One of the Committee’s other key responsibilities which we
carried out during the year is ensuring the Group’s published
financial statements show a true and fair view and are consistent
with accounting and governance requirements. We also considered
the viability statement closely, having regard to the continued
progress of the implementation of our rental market strategy and
the overall strategic horizon. This included interrogating the financial
models and related sensitivity analysis of various economic
scenarios and amalgamations of these scenarios. In addition, we
have concentrated on the fair, balanced and understandable
requirements for the Annual Report.

In this regard, we are helped by receiving a number of
appropriate papers from the Chief Financial Officer, the Interim
Group Finance Director and their teams, and by the independent
work of our internal and external auditors.

As well as our planned work programme, we respond to key
matters as they arise. A prime example of this during the year
was the liquidity issues which could have arisen from the effects
of Covid-19 and the response to it, and stress testing of this.

Auditors

The standard of auditing is of crucial importance to Grainger and
the Committee has received briefings and carefully considered
the further developments in this area in the last 12 months.

The Committee is cognisant of the Department for Business, Energy
and Industrial Strategy’s policy paper on restoring trust in audit and
corporate governance. The Committee is broadly supportive of the
direction and goals of audit practice reform and will continue to
monitor evolution in this area of practice. We are making early
preparations to keep the Company in line with best practice.

I believe the regular constructive challenge and engagement
with management, the external auditor and the Internal Audit
team, together with the timely receipt of high-quality reports
and information from them, has enabled the Committee to
discharge its duties and responsibilities effectively, during
what has been another exceptional year.

Significant matters relating to the Group’s 2021
financial statements

The most significant matters considered by the Committee
and discussed with the external auditor in relation to the
Group’s 2021 financial statements were as follows:

1 Property valuations

Property valuation continues to be the most significant
matter for consideration. In this respect, we received reports
and presentations directly from the valuers and management
on the assumptions utilised in valuing the Group’s property
assets, the suggested discount rates for reversionary assets
and the valuations. We considered the prevailing valuation
methodology and process.

We were content, after close scrutiny and debate, with the
assumptions and judgements applied to the valuations.
We also considered that the external valuers were sufficiently
independent and capable and presented directly to the
Committee. KPMG also independently reviews the valuation
process and results. The results of the valuations form the basis
of management’s assessment to support the carrying value of
investments in subsidiary companies by the parent company.

2 Recoverability of inventories

Management utilise the valuation information referred
to above to perform an assessment of recoverability of
inventories. The valuations include references to comparable
market evidence of similar transactions along with the Group’s
own evidence and experience in sales of similar assets.
Along with our assessment of property valuations, we have
considered management’s assessment of recoverability
of inventories and are satisfied that the approach adopted,
and results, are appropriate.

3 Intangible assets – development costs of Software
as a Service (SaaS)

During the year, the Group revised its accounting policy in
relation to intangible assets as a result of the IFRIC agenda
decision regarding configuration and customisation costs
incurred in implementing (SaaS). This resulted in a prior year
restatement with costs expensed to the consolidated income
statement that had previously been capitalised as outlined
in Note 38 to the Financial Statements. The change in the
accounting policy and treatment of expenditure has been
reviewed by both management and KPMG and presented
to the Committee. The Committee are satisfied with the
approach adopted and consider this to be an adjusting item
to be excluded from the Group’s adjusted earnings on the
basis that configuration and customisation costs of SaaS
products at the current level will not form part of the
normal ongoing cost base of the business.

As mentioned above, this will be my final year as Chairman of
the Committee, as I will be retiring at the 2022 AGM. I have very
much enjoyed my role and believe that we have significantly
strengthened Grainger’s risk and control processes during this
period. I would like to recognise the input of the other members
of the Committee and Grainger’s Finance and Legal teams for
their high standard of support and our internal and external
auditors for their thorough approach.

Andrew Carr-Locke
Chairman of the Audit Committee

17 November 2021

GOVERNANCEAU D IT, RI S K A N D CO NTRO L
AU D IT CO M M IT TE E RE P O RT CO N T INUED

Invitations to attend meetings

Fair, balanced and understandable

There is a standing invitation to the Chairman of the Board and
the Executive Directors, who in turn attended all of the
Committee’s meetings during the year. The Director of Group
Finance and representatives of the internal and external auditors
also attended meetings of the Committee, and both sets of
auditors met privately with the Committee during the year. Our
valuers attend Committee meetings to explain their
methodology, processes and conclusions directly.

Role, responsibilities and experience

The Committee’s role and responsibilities are concerned with
financial reporting, narrative reporting, whistleblowing and fraud,
internal control and risk management systems, internal audit and
external audit.

Andrew Carr-Locke, Rob Wilkinson and Justin Read have recent
and relevant financial experience as required by the Code. The
Committee as a whole has the competence relevant to the
sector in which it operates. Please refer to pages 56 and 57 for
skills and experience of the Directors and page 68 for the
Nominations Committee report.

Terms of reference

The Committee’s terms of reference are approved by the Board.
We updated them in readiness for the new Code coming into
force and confirmed during the year that they continued to be
appropriate. We propose to continue our annual review of the
terms of reference going forward. The Committee’s terms of
reference comply with the Code and they can be found on the
Group’s website.

Objectives

The Board has delegated authority to the Committee to oversee
and review the:

– Group’s financial reporting process;

– system of internal control and management of business risks;

– internal audit process;

– external audit process and relationship with the external

auditor; and

– Company’s process for monitoring compliance with applicable

laws and external regulations.

Final responsibility for financial reporting, compliance with laws
and regulations and risk management rests with the Board,
to which the Committee reports regularly.

Meetings

The Committee’s main work follows a structured programme of
activity agreed at the start of the year. As well as its main work,
the Committee undertakes additional work in response to the
evolving audit landscape. Page 76 shows a non-exhaustive list
highlighting the Committee’s work during the year under review.

The Committee has undertaken a detailed review in assessing
whether the 2021 Annual Report and Accounts is fair, balanced
and understandable, and whether it provides the necessary
information to Shareholders to assess the Group’s performance,
business model and strategy. The Committee reviewed and
made suggestions about the processes put in place by
management to provide the necessary assurance that they have
made the appropriate disclosures. The Committee considered
management’s assessment of items included in the financial
statements and the prominence given to those items. This review
also included receiving a final draft of the Annual Report in
advance of the November 2021 Committee meeting. This was
accompanied by a reminder of the areas the Committee should
focus on having regard to the Audit Committee Institute
guidance, and how it can be applied to the draft Annual Report.
The Committee, and subsequently the Board, were satisfied that,
taken as a whole, the 2021 Annual Report and Accounts is fair,
balanced and understandable.

Going concern and financial viability

The Committee reviewed the appropriateness of adopting the going
concern basis of accounting in preparing the full year financial
statements and assessed whether the business was viable in
accordance with the requirements of the Code. The assessment
included a review of the principal risks facing the Group, their
financial impact, how they were managed, the availability of finance
and covenant compliance, together with a discussion as to the
appropriate period for assessment and consideration of the financial
impact of Covid-19 in future. The Group’s viability statement is on
page 52.

External auditor objectivity and independence

The objectivity and independence of the external auditor are
critical to the integrity of the Group’s audit. During the year, the
Committee reviewed the external auditor’s own policies and
procedures for safeguarding its objectivity and independence.
There are no contractual restrictions on the Group appointing an
external auditor. On three occasions during the year the audit
engagement partner made representations to the Committee as
to the external auditor’s independence. This also confirmed that
KPMG’s reward and remuneration structure includes no
incentives for the audit partner to cross-sell non-audit services to
audit clients. KPMG duly applies the requirement to rotate audit
partners every five years. The current partner has been in
position for two years.

The Committee appraised KPMG’s performance by assessing its
audit plan, the quality and consistency of its team and reports
received and discussions held with the Committee. The
Committee considered the FRC’s guidance and noted the steps
taken by KPMG in this regard which include having a separate
Audit Board. In addition, we received feedback from the finance
team. We also considered the tone of KPMG’s relationship with
the Executive, which we assessed as constructive and
professional yet independent and robust.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

In respect of KPMG’s independence, the Committee applies its
policy for the use of external auditors for non-audit services.
This policy substantially restricts the types of non-audit services
that can be rendered and specifies the limited circumstances in
which an engagement can be made.

Services the external auditor is prohibited from providing to the
Group include, amongst others:

The Committee monitors the performance of the external auditor,
providing an in-depth evaluation of its performance following the
external audit, and then makes a recommendation to the Board.
When considering the appropriateness of the re-appointment of
KPMG, we considered in our review, the ratio of audit to non-audit
fees and the effectiveness of the audit process, together with
other relevant review processes. We were satisfied that we should
recommend the re-appointment of KPMG.

– bookkeeping and preparing financial information;

– the design, supply or implementation of financial

information systems;

– appraisal or valuation services;

– internal audit services; and

– actuarial services.

Regarding potentially permitted non-audit services, key criteria
that must be evidenced to the Committee’s satisfaction is that
the external auditor is best suited to undertake the relevant
services and that the engagement will not jeopardise external
auditor independence.

The engagement of KPMG for the provision of non-audit services
requires prior approval from the Audit Committee Chairman.

The non-audit services provided by KPMG, set out in the table
below, related primarily to the reporting accountant work
required for the issue of the corporate bond and was approved by
the Committee in 2021. In making their decision, the Committee
was duly satisfied that the:

– key criteria noted above had been satisfied;

– non-audit services policy had been applied; and

– appointments were in the best interests of the Company and

its stakeholders.

The Committee considered the FRC Revised Ethical Standard
2019 and noted that this activity is permitted. The Committee
was also satisfied that the overall levels of audit related and
non-audit fees were not of a material level relative to the income
of the external auditor firm as a whole.

External auditor tenure

The Company confirms that it has complied with the
Competition and Markets Authority’s Order for the year. KPMG
have been the Company’s auditors for six years and as such the
Committee was satisfied that it was not optimal to tender
external audit services in the current year. The Committee noted
that a competitive tender for the external auditor must be held
no later than 2025.

Internal controls

The Board, assisted by the Audit Committee, is responsible for
reviewing the operation and effectiveness of the Group’s internal
controls. This internal control system is designed to manage risks
as far as possible, acknowledging that no system can eliminate
the risk of failure to achieve business objectives entirely. The
Board did not identify any significant failings or weaknesses in
the year.

The Board is also responsible for ensuring that appropriate
systems are in place to enable it to identify, assess and manage
key risks. The preparation of financial statements and the wider
financial reporting process and control system are monitored by
the adoption of an internal control framework to address
principal financial reporting risks. The Code requires us to carry
out a robust assessment of emerging risks as well as principal
risks, explain in the Annual Report what procedures are in place
to identify emerging risks and explain how these risks are being
managed or mitigated. Please see pages 46 to 51 for details of
how we addressed the requirements.

The effectiveness of the controls is evaluated by a combination
of review by all of the Grainger management committees and
boards, and the internal and external auditors.

The performance of the Committee is reviewed as part of the
Board effectiveness review, more information on which can be
found at page 69.

The on-going implementation of our PRS focused strategy has
involved the recruitment of on-site Resident Services Managers
(‘RSMs’). Following our work last year on reviewing the tasks that
RSMs would be expected to undertake routinely as part of their
job role, this year we have begun to conduct on-site audits to
ensure that our market-leading operating platform is working as
envisaged. As more sites are launched it is important that staff
are trained and apply processes consistently and that the
Committee have assurances that this is the case.

Schedule of fees paid to KPMG

Statutory audit of Grainger Group
Total audit fees
Half year review
Non-statutory certificate on
Berewood Development site
Total non-audit fees

Year ended
30 September 2021
£

475,000
475,000
37,000

10,000
47,000

GOVERNANCEAU D IT, RI S K A N D CO NTRO L
AU D IT CO M M IT TE E RE P O RT CO N T INUED

Internal Audit

PwC is appointed by the Company as
Internal Auditor. Internal Audit focuses on
the areas of greatest risk to the Company.
Audits are considered during an annual
audit planning cycle. This is informed by
the results of current and previous audit
testing, the Company’s strategy,
performance and the risk management
process. Additional audits may be
identified during the year in response to
changing priorities and requirements.

The Committee approves the plan
and monitors progress accordingly.
All Internal Audit findings are graded,
appropriate remedial actions agreed,
and progress monitored and reported
to the Committee.

Internal Audit has a direct reporting line
to the Chairman of the Audit Committee.
We assess the effectiveness of Internal
Audit by reviewing its reports, feedback
from the Chief Financial Officer, and
through meetings with the Audit
Committee without management
being present.

The Internal Audit programme for 2021
included reviews of:

– Development and refurbishment;

– Lettings and on-boarding customers;

– Revenue and collections;

– IT operations;

– Tax and payroll functions;

– Cyber penetration testing;

– Data protection

– Governance of CONNECT; and

– RACM spot checks.

The Internal Audit plan for 2022 has a
particular focus on the BEIS white paper
proposals and preparations for a UK
Sarbanes-Oxley regime.

K E Y AC TI V ITI E S:

N OV E M B E R
2 02 0

• Received a presentation from the independent external valuers

of Grainger’s reversionary and market rented assets.

• Considered and received matters relating to the 2020 full year,

FE B RUA RY
2 021

M AY
2 021

S E P TE M B E R
2 021

including:
® management’s summary of the accounting positions;
® KPMG’s year end audit report;
® going concern review of the business; and
® the draft Annual Report and Accounts.

• Considered KPMG’s independence and recommended to the

Board KPMG’s re-appointment.

• Received an audit plan update and Internal Audit reports on:

® residential services;
® RACM and process review; and
® UK internal controls.

• In respect of risk, considered:
® a compliance update; and
® interconnectivity of risks.

• Reviewed the Company’s Modern Slavery Statement.
• Considered KPMG’s plan for its review of the 2021

half year results.

• Reviewed and approved the Committee’s terms of reference.
• Conducted a post-completion review of the Brook Place

development scheme.

• Carried out a detailed evaluation of the performance of the
external auditors. Considered them to be effective and also
identified certain areas for future improvement.

• Reviewed and approved the tax policy.
• Reviewed the production of the 2020 Annual Report

and Accounts.

• Considered issues regarding the 2020 half year results, including:
® the draft half year financial statements and announcement;
® management’s judgements and assessment;
® KPMG’s half year review report; and
® feedback from the valuer half year reports.

• Received Internal Audit reports on:

® health and safety;
® sustainability
® RACM reviews
® site audit reports; and
® Considered a report on the BEIS White Paper on Governance

and Audit reform.

• Considered the 2021 draft viability statement and related analysis.
• Considered KPMG’s audit strategy memorandum and
engagement regarding the audit for the full year 2021.
• Considered and approved the forward Internal Audit plan.
• Reviewed the timetable for production of the Annual Report

and Accounts.

• Received Internal Audit reports on:

® block management;
® renewals;
® site audits;
® penetration testing;
® RACM ‘spot checks’; and
® progress of completing actions from previous internal audits.

• Reviewed reports on:

® principal and emerging risks;
® whistleblowing;
® internal control framework; and
® legal and regulatory compliance.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

RE M U N E R ATI O N
RE M U N E R ATI O N CO M M IT TE E RE P O RT

Our focus this year

has been on ensuring pay
is appropriately aligned
with the Company’s
performance.

J U S T I N R E A D,

CH A I RM A N O F T H E REM U N ER AT I O N CO M M I T T EE

CO NTE NT S

1. Annual statement

2. Directors’ Remuneration Policy

Single total figure of remuneration for each Director

4. Annual bonus awards –

performance assessment for 2021

LTIP awards – performance assessment for 2021

Share scheme interests awarded during the year

Payments for loss of office and to past Directors

8. Appointment of Rob Hudson

9. Directors’ shareholdings and share interests

10. Performance graph and table

11. Chief Executive single figure

12. Percentage change in remuneration

of Chief Executive and employees

13. Chief Executive pay ratio

14. Relative importance of spend on pay

15. Statement of implementation of

Remuneration Policy for 2022

16. Directors’ service agreements
and letters of appointment

17. Details of the Remuneration Committee,
advisers to the Committee and their fees

18. Statement of voting at general meeting

Dear Shareholders,

I am pleased to present on behalf of the Board the
Directors’ Remuneration report for the year ended
30 September 2021.

As in previous years, the report has been divided into the
following three sections:

– This Annual Statement, which summarises the remuneration
outcomes in the year to 30 September 2021, the key decisions
taken by the Remuneration Committee during the year and
how the Directors’ Remuneration Policy (‘Policy’) will be
operated in the current financial year (being the final year of
the three-year policy);

– A summary of the Policy, which sets out the remuneration

policy for Executive and Non-Executive Directors, which was
approved by Shareholders at the 2020 AGM; and

– The Annual Report on Remuneration, which discloses how

the Policy was implemented in the year to 30 September 2021
and how the Policy will be operated in the year to
30 September 2022.

2021 performance and reward

Grainger has delivered a robust financial performance and has
continued to successfully execute on its well-established growth
strategy, despite economic disruption and a challenging market
due to Covid-19. The Company demonstrated resilience
throughout the pandemic, maintaining strong rental collection
rates and driving occupancy levels back up towards normalised
levels by the year end as lockdown restrictions were eased.
The Company also capitalised on the strong sales market by
increasing its rate of asset recycling to support new investment.
This, together with another successful equity raise of £209m gross
proceeds, has allowed the business to step up investment with a
number of additional acquisitions added to its growing pipeline.

The 2021 annual bonus was subject to a combination of PRS net
rental income (35%), adjusted earnings (35%), and strategic targets
(30%). These measures, consistent with those used in the prior
year, were combined to ensure there remained a continued focus
on improving profit and rental income growth and focusing on key
non-financial deliverables which underpin our strategy. This includes
strategic objectives relating to ESG. Focus on these measures will
continue to be a key element of the Executive’s objectives.

In respect of performance, we achieved PRS net rental Income
(‘NRI’) of £51.9m and adjusted earnings of £83.5m.

The performance against PRS NRI was above threshold but
below target and adjusted earnings was above target but below
the maximum. When combined with the performance against
the strategic targets, annual bonus was calculated at 66.6% of
the maximum available. Full disclosure of the actual targets set,
and performance against those targets, is on pages 88 and 89.
For Rob Hudson, who joined the Company on 31 August 2021,
a pro rata bonus is payable to reflect the final month of the
financial year he was in situ.

The 2018 LTIP award will vest on 12 December 2021 based on
three-year performance, with 50% measured against absolute
Total Property Return (‘TPR’) and 50% measured against relative
Total Shareholder Return (‘TSR’). The annual average growth in
TPR was 6.0% p.a. which is above the threshold of 5% p.a. but
below the maximum of 9% p.a. This will result in 43.0% vesting of
this part of the award. The TSR performance period will end on
12 December 2021 after this report has been signed off.

GOVERNANCERE M U N E R ATI O N
A N N UA L S TATE M E NT CO N T INUED

Based on performance to 29 October 2021, the Company is
ranking just above the median against the real estate TSR peer
group and this level of performance would result in 42.9% vesting
for this part of the award. Therefore, based on interim testing
prior to the end of the performance period, around 43.0% of
the 2018 LTIP award is expected to vest.

The Committee believes these outcomes are appropriate and
reflect the performance of the business over the relevant
performance periods. Therefore, no discretion has been applied
to the formulaic outcomes. The Committee also took into
account the continuation of the dividend and that the Company
did not take any Government support during the financial year
or make any pandemic related redundancies.

Board changes
Change of Chief Financial Officer

Following Vanessa Simms’ resignation from the Board in October
2020, the Nominations Committee led a thorough external search
to identify an appropriate successor to Vanessa and, following
unanimous recommendation by the Committee, the Board
announced the appointment of Rob Hudson on 18 February 2021.

As discussed at the time of his appointment, Rob’s salary was set
at £410,000. While the Committee is conscious that this is higher
than his predecessor’s salary (£348,750), the Committee believes
that the salary positioning is appropriate for the following reasons:

– Real Estate experience: A key objective of the Board was to
appoint an individual of high calibre with direct real estate
experience. Rob joined Grainger from a FTSE 250 Real Estate
sector company (St Modwen plc) and as such, has considerable
experience of being CFO of a listed Real Estate company.

– Broad experience: Rob is a seasoned board director and with
over 26 years’ experience in finance and real estate. At his
previous employer, Rob served as CFO from 2015 to 2020,
stepping into the role of interim chief executive between April
and November 2020, and, immediately prior to joining Grainger,
holding the position of chief finance and operations officer.

– Market alignment: In order to meet our requirements, and for
Rob to join Grainger, it was essential to offer a market aligned
joining salary reflecting the current size and complexity of
Grainger. The market assessment was confirmed during the
recruitment process.

– Previous remuneration: Rob joined from a smaller FTSE 250

business and his starting salary is c.9% higher than his previous
one which was effective from January 2020, c.14 months
before we announced his joining. A modest increase to his
previous salary was required to recruit him, which also
considered the lower bonus opportunity on offer at Grainger.

– Vanessa’s salary had been initially established at a time

(February 2016) when Grainger’s market capitalisation was less
than half of its current market cap. Vanessa’s annual salary
increases never exceeded those of the wider workforce.

How the Committee spent its time

20%

15%

20%

15%

Governance and reporting 20%

Investor communication 15%

Executive share plans 15%

Performance monitoring and review 15%

Senior management remuneration and retention 15%

Implementation of the Remuneration Policy 20%

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Committee considerations

Consistent with the six factors set out in Provision 40 of the 2018
UK Corporate Governance Code, when determining Executive
Director Remuneration Policy and practices, the Committee has
continued to address the following:

– Clarity – the Policy is well understood by our Directors and
has been clearly articulated to Shareholders and proxy
voting agencies.

– Simplicity – the current market standard remuneration

structure is simple and well understood. We have purposefully
avoided any complex structures which have the potential to
deliver unintended outcomes.

– Risk – our Policy and approach to target setting seek to

discourage inappropriate risk-taking. Measures are a blend
of Shareholder return; financial and non-financial objectives
and the targets are appropriately stretching. Malus and
clawback provisions apply.

– Predictability – executives’ incentive arrangements are subject
to individual participation caps. An indication of the range of
values in packages is provided in the reward scenario charts on
page 79.

– Proportionality – there is a clear link between individual

awards, delivery of strategy and our long-term performance.

– Alignment to culture – pay and policies cascade down the
organisation and are fully aligned to Grainger’s culture.

Rob forfeited remuneration upon leaving his previous employment
and in line with our Policy, he has been compensated for this on
a like-for-like basis.

Full details of the buyout arrangement, and Vanessa Simms’
leaving arrangements, are set out in the Annual Report on
Remuneration.

Applying the Policy in 2021/22

2022 is the final year of our three-year Policy. The Committee will
apply the Policy as follows in the current financial year.

Base salaries

For 2021/22, Executive Director base salaries will be increased by
2% with effect from 1 January 2022, in line with the majority
employee population. This is lower than the average salary
increase of 2.5% which will be awarded to junior employees.

Although the Committee noted that the CFO was appointed on
31 August 2021, his salary increase (effective January 2022)
reflects that he accepted the offer in February 2021 (as per the
18 February 2021 announcement) and Grainger’s salary review
policy, whereby individuals commencing employment prior to
15 September are eligible for a salary review at the following
1 January review date.

Pension provision

The current Policy includes a pension contribution for Executive
Directors of 15% of salary with any new appointments receiving
a contribution in line with the workforce rate of 10% of salary.

The Committee is aware of calls from investors for alignment
for incumbent directors and as such, the CEO has agreed to
reduce her pension to 10% of salary from 1 January 2023.
The CFO’s pension contribution was aligned to the workforce
contribution rate of 10% of salary from appointment.

Annual bonus

Annual bonus will continue to be capped at 140% of salary
for the CEO and 120% of salary for the CFO with performance
metrics continuing to be based on PRS net rental income (35%),
adjusted earnings (35%) and strategic objectives (30%).
One quarter of any bonus earned will continue to be subject to
deferral into the Company’s shares for the period of three years.

Long Term Incentive Plan

The 2021/22 LTIP grant for the CEO and CFO will be over shares
with a face value of 200% and 175% of salary respectively.
Rather than the performance targets being skewed towards
relative TSR as in the previous two years, an equal weighting will
apply to the three performance metrics. Accordingly, one third
will be based on each of relative TSR, PRS Secured Investment
and Total Property Return.

We introduced PRS Secured Investment as an LTIP metric in
2019/20 to incentivise delivery of the future PRS investment
pipeline; it is about building scale and improving the consistency
of returns in the medium term and the measure has worked well in
getting executives to deliver against this goal. We are upweighting
this measure from 25% to 33.3% in order to increase further
management focus on this area. To guard against concerns that
this may lead to a diminution of investment returns, we are
applying a similar increase in the TPR target weighting.

The Committee appreciates that relative returns remain
important for investors and thus the TSR target is retained, albeit
at 33.3%. Whilst we will also retain the requirement for upper
quintile TSR performance to achieve maximum pay-out for this
element of the LTIP, the Committee notes that the Grainger
business model, which aims to deliver steady and sustainable
returns for shareholders, can put management at a disadvantage
relative to other real estate peer group sub-sectors whose
performance and share prices are more volatile.

The proposed change reflects the Committee’s view that the
performance metrics are of equal importance in respect of
incentivising and rewarding long-term performance.

Other share schemes

The Remuneration Committee believes in broader share
participation and ownership across the employee population
and is exploring extending LTIP participation to other senior
employees.

In addition, Grainger continues to operate the SAYE and SIP
share schemes in line with the principle of broad employee share
ownership and regularly encourages employees to become
owners in the Company, by providing frequent awareness
sessions, annual presentations, Q&A sessions and assistance in
joining available share schemes. A total of 67,117 ordinary shares
were purchased at a price of 301.6p per share on 28 September
2021 (‘Free Shares’). The Free Shares were allocated to all
employees participating in the SIP as Free Shares and registered
in the name of Link Asset Services Trustees Ltd.

We look forward to your support on the resolution relating to
remuneration at the AGM on 9 February 2022.

Justin Read
Chairman of the Remuneration Committee

17 November 2021

GOVERNANCERE M U N E R ATI O N
RE M U N E R ATI O N P O LI C Y

This part of the Directors’ Remuneration report sets out a summary of the Directors’ Remuneration Policy (the ‘Policy’) which was
approved by Shareholders at the 2020 Annual General Meeting and shall be in place for three years. The Policy approved by
Shareholders can be found in the 2019 Annual Report and Accounts.

The following table summarises the main elements of the Executive Directors’ Remuneration Policy, the key features of each
element, their purpose and linkage to our strategy. Details of the remuneration arrangements for the Non-Executive Directors
are set out on page 86.

Base salary

Purpose and link
to strategy

To enable the recruitment and retention of individuals of the necessary calibre to execute the Company’s
business strategy.

Operation

Reviewed annually and typically effective from 1 January. Changes to salary levels will take into account the:

– role, experience, responsibilities and personal performance;
– average change in total workforce salary;
– total organisational salary budgets; and
– Company performance and other economic or market conditions.

Salaries are benchmarked periodically and are set by reference to companies of a similar size and complexity.

Opportunity

Salaries will be eligible for increases during the three-year period that the Remuneration Policy operates.

During this time, salaries may be increased each year (in percentage of salary terms) in line with increases granted to
the wider workforce.

Increases beyond those granted to the wider workforce (in percentage of salary terms) may be awarded in certain
circumstances such as where there is a change in responsibility, experience or a significant increase in the scale of the
role and/or size, value and/or complexity of the Company.

Where new joiners or recent promotions have been placed on a below market rate of pay initially, a series of increases
above those granted to the wider workforce (in percentage of salary terms) may be given over the following few years’
subject to individual performance and development in the role.

Framework to assess
performance

The Committee considers individual salaries at the appropriate Committee meeting each year after having due regard to
the factors noted in operating the salary policy.

Benefits

Purpose and link
to strategy

Operation

To aid recruitment and retention of high-quality executives.

Executive Directors may receive a benefit package which includes a car allowance, private medical insurance,
life assurance, ill health income protection, travel insurance and health check-up.

Other ancillary benefits (including relocation expenses) may be offered, as required.

Opportunity

There is no maximum as the value of benefits may vary from year to year depending on the cost to the Company
from third-party providers.

Framework to assess
performance

N/A

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Pension

Purpose and link
to strategy

Operation

Opportunity

To aid recruitment and retention of high-quality executives and enable long-term savings through pension provision.

The Company may contribute directly into an occupational pension scheme (an Executive Director’s personal pension)
or pay a salary supplement in lieu of pension. If appropriate, a salary sacrifice arrangement can apply.

The pension contribution or allowance is based on 15% of basic salary for the current Directors. For any new Executive
Director appointments to the Board, the Committee will align pension provision (in percentage of salary terms) to the
majority workforce level.

Framework to assess
performance

N/A

Annual bonus

Purpose and link
to strategy

To reward and incentivise the achievement of annual targets linked to the delivery of the Company’s strategic priorities
for the year.

Operation

Bonus measures and targets are reviewed annually and any payout is determined by the Committee after the end of the
financial year, based on performance against targets set for the financial period.

Up to 75% of any bonus that becomes payable is paid in cash with the remainder deferred into shares for three years.
Deferred bonus share awards typically vest subject to continued employment.

Individuals may be able to receive a dividend equivalent payment on deferred bonus shares at the time of vesting equal to
the value of dividends which would have accrued during the vesting period. The dividend equivalent payment may assume
the reinvestment of dividends on a cumulative basis.

Opportunity

Maximum bonus potential is capped at:

– 140% of salary for the Chief Executive; and
– 120% of salary for other Executive Directors.

Framework to assess
performance

Bonus performance measures are set annually and will be predominantly based on challenging financial targets set in line
with the Group’s strategic priorities and tailored to each individual role as appropriate, for example, targets relating to
adjusted earnings. For a minority of the bonus, strategic or operational objectives may operate.

The Committee has the discretion to vary the performance measures used from year to year depending on the
economic conditions and strategic priorities at the start of each year. Details of the performance measures used for the
current year and targets set for the year under review and performance against them will be provided in the Annual
Report on Remuneration.

For financial targets, and where practicable in respect of operational or strategic targets, bonus starts to accrue once
the threshold target is met (0% payable) rising on a graduated scale to 100% for stretch performance.

The Committee may adjust bonus outcomes, based on the application of the bonus formula set at the start of the
relevant year, if it considers the quantum to be inconsistent with the performance of the Company, business or individual
during the year. For the avoidance of doubt this can be to zero and bonuses may not exceed the maximum levels detailed
above. Any use of such discretion would be detailed in the Annual Report on Remuneration.

In the event that there was (i) a misstatement of the Company’s results; (ii) a miscalculation or an assessment of any
performance conditions that was based on incorrect information; (iii) misconduct on behalf of an individual,
(iv) the occurrence of an insolvency or administration event; (v) reputational damage; or (vi) serious health and safety
events; malus and/or clawback provisions may apply (to the extent to which the Committee considers that the relevant
individual was involved (directly or through oversight) in such events) for three years from the date of payment of any
bonus or the grant of any deferred bonus share award (which may be extended by the Remuneration Committee for a
further two years to allow an investigation to take place).

GOVERNANCERE M U N E R ATI O N
RE M U N E R ATI O N P O LI C Y CO N T INUED

Long Term Incentive Plan (‘LTIP’)

Purpose and link
to strategy

Operation

To incentivise and reward the delivery of strategic priorities and sustained performance over the longer term.

To provide greater alignment with Shareholders’ interests.

The LTIP provides for awards of free shares (i.e. either conditional shares or nil-cost options) normally on an annual
basis which are eligible to vest after three years subject to continued service and the achievement of challenging
performance conditions.

Vested awards are subject to a two-year post-vesting holding period. In exceptional circumstances such as due to
regulatory or legal reasons, vested awards may also be settled in cash.

Dividend equivalent payments may be made on vested LTIP awards and may assume the reinvestment of dividends,
on a cumulative basis.

Opportunity

Following the approval of this Policy, awards in any financial year are capped at:

– 200% of salary for the Chief Executive; and
– 175% of basic salary for other Executive Directors.

Framework to assess
performance

The Committee may set such performance conditions on LTIP awards as it considers appropriate (whether financial or
non-financial). The choice of measures and their weightings will be determined prior to each grant.

25% of awards will vest for threshold performance with full vesting taking place for equalling, or exceeding, the maximum
performance targets. No awards vest for performance below threshold. A graduated vesting scale operates between
threshold and maximum performance levels.

The Committee may adjust LTIP vesting outcomes, based on the result of testing the performance condition, if it
considers the quantum to be inconsistent with the performance of the Company, business or individual during the
three-year performance period. For the avoidance of doubt this can be to zero. Any use of such discretion would be
detailed in the Annual Report on Remuneration.

In the event that there was (i) a misstatement of the Company’s results; (ii) a miscalculation or an assessment of any
performance conditions based on incorrect information; (iii) misconduct on behalf of an individual, (iv) the occurrence of
an insolvency or administration event, (v) reputational damage, or (vi) serious health and safety events, malus and/or
clawback provisions may apply (to the extent to which the Committee considers that the relevant individual was involved
(directly or through oversight) in such events) for three years from an award becoming eligible to vest (which may be
extended by the Remuneration Committee for a further two years to allow an investigation to take place).

Savings related share schemes

Purpose and link
to strategy

Operation

To encourage employees to make a long-term investment in the Company’s shares.

All employees, including the Executive Directors, are eligible to participate on the same terms 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.

Opportunity

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 up
to 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 may 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).

Dividend payments on SIP shares are reinvested and must be held in trust for three years.

Framework to assess
performance

N/A

Shareholding guidelines

Under the Shareholding Guidelines, Executive Directors are expected to build up over time a shareholding equivalent to 200% of
their base salary. Executive Directors are required to retain all the after-tax number of vested LTIP and deferred bonus awards to
satisfy the guideline. In addition, the Committee’s general expectation is that the guideline will be met within five years of its
introduction, although the Committee reserves the right to take into account vesting levels and personal circumstances when
assessing progress against the guideline.

A post cessation shareholding guideline operates. From the 2020 AGM, Executive Directors are expected to retain the lower of actual
shares held and shares equal to 200% of salary for two years post cessation in respect of shares which vest from grants of deferred
bonus and LTIP awards since the approval of this Policy. Buyout awards and own shares purchased are excluded from this.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Notes to the future Policy for Executive Directors
Choice of performance measures and approach to target setting

The annual bonus measures are selected to provide direct alignment with the short-term operational targets of the Company. Care is
taken to ensure that the short-term performance measures are always supportive of the long-term objectives. This is especially
important in a business which has a long-term investment horizon. The LTIP performance measures are selected to ensure that the
Executives are encouraged in, and appropriately rewarded for, delivering against the Company’s key long-term strategic goals so as
to ensure a clear and transparent alignment of interests between Executives and Shareholders and the generation of long-term
sustainable returns. The performance metrics that are used for annual bonus and long-term incentive plans are normally a sub-set of
the Group’s KPIs.

Discretion

The Committee operates the annual bonus plan, LTIP and all-employee plans according to their respective rules and in accordance
with the relevant Listing Rules and HMRC rules consistent with market practice. The Committee retains discretion, within the confines
and opportunity detailed above, in a number of respects with the operation and administration of these plans. These include:

– the individual(s) participating in the plans;

– the timing of grant of award and/or payment;

– the size of an award and/or payment;

– the determination of vesting;

– dealing with a change of control (e.g. the timing of testing performance targets) or restructuring;

– determination of a ‘good/bad leaver’ for incentive plan purposes based on the rules of each plan and the appropriate treatment chosen;

– adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends);

– the annual review of performance conditions for the annual bonus plan and LTIP; and

– the ability to adjust incentive outcomes, based on the result of testing the performance condition, if it considers the quantum

to be inconsistent with the performance of the Company, business or individual.

The Committee also retains the ability to adjust the targets, and/or set different measures and alter weightings for the annual bonus
plan and to adjust targets for the LTIP if events occur (e.g. material divestment of a Group business) which cause it to determine that
the conditions are no longer appropriate and the amendment is required so that the conditions achieve their original purpose and are
not materially less difficult to satisfy.

Reward scenarios for Executive Directors

The Company’s Remuneration Policy results in a significant proportion of remuneration received by Executive Directors being
dependent on Company performance. The composition and total value of the Executive Directors’ remuneration package for the
financial year 2021/22 at minimum, on-target, maximum performance and maximum with share price growth scenarios are set out in
the charts below.

Assumptions used in determining the level of payout under given scenarios are as follows:

– Minimum = base salary at 1 January 2022, estimated 2021/22 benefits and pension contribution of 15% of salary for the CEO

and 10% of salary for the CFO (fixed pay).

– On-target = 60% payable of the 2022 annual bonus and 62.5% vesting of the 2022 LTIP awards.

– Maximum = 100% payable of the 2022 annual bonus and 100% vesting of the 2022 LTIP awards (based on a face value of 200%

of salary for the CEO and 175% of salary for the CFO).

– Maximum with share price growth = as per maximum but with a 50% share price growth assumed on LTIP awards.

Chief Financial Officer

Chief Executive Officer

£3,500

£3,000

£2,500

£2,000

£1,500

£1,000

£500

£2,035

£1,677

£1,211

37%

24%

39%

£467

100%

43%

29%

28%

18%

35%

24%

23%

£3,500

£3,000

£2,500

£2,000

£1,500

£1,000

£500

£2,854

£2,343

£1,673

38%

26%

36%

£604

100%

43%

31%

26%

18%

36%

25%

21%

Min

Target

Max

Max with
growth

Min

Target

Max

Max with
growth

Total Fixed Remuneration
Annual Bonus

PSP
Share Price Growth

Total Fixed Remuneration
Annual Bonus

PSP
Share Price Growth

GOVERNANCERE M U N E R ATI O N
RE M U N E R ATI O N P O LI C Y CO N T INUED

How the Executive Directors’ Remuneration Policy relates to
the wider Group

The Remuneration Policy provides an overview of the structure
that operates for the Company’s Executive Directors and senior
executive population. However, it is highlighted that there are
differences in quantum within this determined by the size and
scope of individual positions.

Carol Hui was appointed to the Board on 1 October 2021. As well
as joining the Remuneration Committee, Carol will oversee the
establishment of the Company’s Responsible Business
Committee and become chair of it. This Committee will provide
Board-level oversight of the delivery of the company’s ESG
strategy including its 2030 ‘net zero in operations’ commitment
and its diversity and inclusion plans.

The Committee is made aware of pay structures across the
Group when setting the Remuneration Policy for Executive
Directors. The key difference is that, overall, the Remuneration
Policy for Executive Directors is more heavily weighted towards
variable pay than for other employees.

Base salaries are operated under the same Policy as detailed in
the Remuneration Policy table with any comparator groups used
as a reference point. The Committee considers the general basic
salary increase for the broader Company (if any) when
determining the annual salary review for the Executive Directors.

The LTIP is operated at the most senior tiers of Executives,
as this arrangement is reserved for those anticipated as having
the greatest potential to influence Company level performance.

However, the Committee believes in wider employee share
ownership and promotes this through the operation of the HMRC
tax approved all-employee share schemes which are open to all
UK employees.

How the views of employees are taken into account

The Committee takes due account of remuneration structures
elsewhere in the Group when setting pay for the Executive
Directors. For example, consideration is given to the overall
salary increase budget and the incentive structures that operate
across the Company.

The Chief Executive Officer holds ‘all employee’ conference calls
to give our people an overview of Company strategy and provide
our people with the opportunity to ask any questions. In addition,
the CEO and Board members regularly visit offices and meet
with our people to gauge overall opinions.

The CEO has regular meetings with our people including
breakfast meetings with new employees. Annual employee
engagement surveys and half year interim annual pulse surveys
are carried out, the results of which are presented to the Board
by the HR Director. A session was also held to discuss how the
executive pay aligned with the wider company pay policy.

In addition, as noted on page 70 Janette Bell has been
designated as the Non-Executive Director for employee
engagement and consultation.

How the views of Shareholders are taken into account

The Remuneration Committee considers Shareholder feedback
received in relation to the AGM each year and guidance from
Shareholder representative bodies more generally. This feedback,
plus any additional feedback received during any meetings
held with Shareholders from time to time, is then considered as
part of the Committee’s on-going review of Remuneration Policy
(as has been the case in relation to the proposed Policy changes).
In respect of the 2020 AGM, feedback received was positive and
is reflected in the voting outcome.

During 2021, the Remuneration Committee considered feedback
from certain investors on pension alignment for Executive
Directors and has agreed with the CEO that the CEO’s pension
will reduce to the workforce rate from 1 January 2023.

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 Remuneration
Policy table.

Base salary will be set at a level appropriate to the role and the
experience of the Executive Director being appointed. In certain
cases, this may include setting a salary below the market rate but
with an agreement on future increases up to the market rate, in
line with increased experience and/or responsibilities, subject to
good performance, where it is considered appropriate. Pension
provision, in percentage of salary terms, will be aligned to the
general workforce level.

The maximum level of variable remuneration which may be
granted (excluding buyout awards as referred to below) is an
annual bonus of 140% of salary and LTIP award of 200% of
salary (as per the limits in the Policy table).

In relation to external appointments, the Committee may offer
compensation that it considers appropriate to take account of
awards and benefits that will or may be forfeited on resignation
from a previous position. Such compensation would reflect the
performance requirements, timing and such other specific
matters as the Committee 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 Executive Director.
If the Executive 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
Executive Director, the Policy set out above would apply from
the date of promotion but there would be no retrospective
application of the Policy in relation to existing incentive awards
or remuneration arrangements. Accordingly, prevailing elements
of the remuneration package for an existing employee would be
honoured and form part of the on-going remuneration of the
employee. These would be disclosed to Shareholders in the
following year’s Annual Report on Remuneration.

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.
Additional fees are payable for the chairmanship of the Audit and
Remuneration Committees and for the additional responsibilities
of the Senior Independent Director.

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If treated as a good leaver, awards will be eligible to vest subject to
performance conditions, which will be measured over the original
performance period (unless the Committee elected to test
performance to the date of cessation of employment), and be
subject to a pro rata reduction (unless the Committee considered
it inappropriate to do so) to reflect the proportion of the vesting
period actually served. Where awards vest within two years of
cessation, the post vesting holding period will continue to apply
until the second anniversary of cessation. There will be no holding
period for awards vesting more than two years after cessation.

Any LTIP awards which vest pre-cessation but which are still
subject to the two-year holding period will need to be retained
by the individual (either on a post-tax basis or as unexercised
awards) post cessation, until the relevant two-year holding
period has expired.

With regard to the deferral of annual bonus, deferred share
bonus awards will normally lapse on cessation of employment
other than where an Executive Director is a ‘good leaver’
(as detailed above) with awards then vesting on the normal
vesting date.

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 HMRC approved share plans, awards may vest or be
exercisable on or following termination of employment in certain
good leaver circumstances, where permissible, in accordance
with the rules of the plan and relevant legislation.

External appointments

Executive Directors are permitted to accept external non-
executive appointments with the prior approval of the Board.
It is normal practice for Executive Directors to retain fees
provided for non-executive appointments.

Directors’ service contracts and provision on payment for
loss of office

Executive Directors’ service contracts are terminable by the
Company on up to one year’s notice and by the Director on at
least six months’ notice.

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
Executive 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 Executive Director
during the contractual notice period. The policy is that, as is
considered appropriate at the time, the departing Executive
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 also
seek to apply the principle of mitigation where possible so as to
reduce any termination payment to a leaving Executive Director,
having had regard to the circumstances.

In addition, the Committee may also make payments in relation
to any statutory entitlements, to settle any claim against
the Company (e.g. in relation to breach of statutory employment
rights or wrongful dismissal) or make a modest provision in
respect of legal costs or outplacement fees.

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.

With regard to annual bonus for a departing Executive Director,
if employment ends by reason of redundancy, retirement with
the agreement of the Company, ill health or disability or death,
or any other reason as determined by the Committee (i.e. the
individual is a ‘good leaver’), the Executive Director may be
considered for a bonus payment. If the termination is for any
other reason, any entitlement to bonus would normally lapse.
Under any circumstance, it is the Committee’s policy to ensure
that any bonus payment reflects the departing Executive
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 be subject to a pro rata reduction for the portion of
the relevant bonus year that the individual was employed.

The treatment for share-based incentives granted to an Executive
Director will be determined based on the relevant plan rules.
The default treatment will be for outstanding awards to lapse on
cessation of employment. In relation to awards granted under
the Company’s long term incentive plans, in certain prescribed
circumstances, such as death, injury or disability, redundancy,
transfer or sale of the employing company, retirement with the
Company’s agreement or other circumstances at the discretion of
the Committee (reflecting the circumstances that prevail at the
time), ‘good leaver’ status may be applied.

GOVERNANCERE M U N E R ATI O N
RE M U N E R ATI O N P O LI C Y CO N T INUED

Non-Executive Directors’ letters of appointment

The Chairman and Non-Executive Directors have letters of appointment for an initial fixed term of three years subject to earlier
termination by either party on written notice. In each case, this term can be extended by mutual agreement. Non-Executive Directors
have no entitlement to contractual termination payments. The dates of the initial appointments of the Non-Executive Directors are
set out in the Annual Report on Remuneration.

Non-Executive Directors’ fees

The policy on Non-Executive Directors’ fees is set out below:

Non-Executive Directors

Purpose and link
to strategy

To provide a competitive fee which will attract those high-calibre individuals who, through their experience, can further
the interests of the Group through their stewardship and contribution to strategic development.

Operation

The fees for Non-Executive Directors (including the Chairman) are typically reviewed every second year or more
frequently if required.

Fee levels are set by reference to the expected time commitment and responsibility and are periodically benchmarked
against relevant market comparators as appropriate reflecting the size and nature of the role.

The Chairman and Non-Executive Directors are paid an annual fee which is paid at least monthly in cash and do not
participate in any of the Company’s incentive arrangements or receive any pension provision.

The Non-Executive Directors receive a basic Board fee, with additional fees payable for chairmanship of the Company’s
key Committees and for performing the Senior Independent Director role.

All Non-Executive Directors are reimbursed for travel and related business expenses reasonably incurred in performing
their duties.

The Committee recommends the remuneration of the Chairman to the Board.

The Chairman’s fee is determined by the Committee (during which the Chairman has no part in discussions) and recommended
by it to the Board. The Non-Executive Directors’ fees are determined by the Chairman and the Executive Directors.

Opportunity

Fee levels will be eligible for increases during the period that the Remuneration Policy operates to ensure that they
continue to appropriately recognise the time commitment of the role, increases to fee levels for Non-Executive Directors
in general and fee levels in companies of a similar size and complexity.

Framework to assess
performance

N/A

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

RE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N

This Annual Report on Remuneration sets out details of how the Company’s Remuneration Policy for Directors was implemented
during the financial year ended 30 September 2021. This report has been prepared in accordance with the provisions of the
Companies Act 2006 and related Regulations. An advisory resolution to approve this report (and the Annual Statement) will be put to
Shareholders at the AGM on 9 February 2022.

3. Single total figure of remuneration for each Director

The remuneration of Directors showing the breakdown between components with comparative figures for 2020 is shown below.

This table and the details set out in Notes 3 to 9 on pages 87 to 93 of this report have been audited by KPMG LLP.

2021

Executive Directors
Helen Gordon
Rob Hudson
Vanessa Simms

Non-Executive Directors5
Mark Clare
Andrew Carr-Locke
Justin Read
Janette Bell
Rob Wilkinson

Totals

Salary
and fees1
£’000

Taxable
benefits2
£’000

Share
incentive
Plan
£’000

Annual
bonus3
£’000

LTIP
awards4
£’000

Pension
benefits
£’000

Total Fixed

Total
£’000

Remuneration6
£’000

Total Variable
Remuneration7
£’000

Other8

499
36
197
732

168
66
58
53
48
393
1,125

16
1
9
26

–
–
–
–
–
–
26

3
–
–
3

–
–
–
–
–
–
3

467
27
–
494

–
–
–
–
–
–
494

520
–
–
520

–
–
–
–
–
–
520

75
4
30
109

–
–
–
–
–
–
109

–
389
–
389

–
–
–
–
–
–
389

1,580
457
236
2,273

168
66
58
53
48
393
2,666

593
41
236
870

168
66
58
53
48
393
1,263

987
416
–
1,403

–
–
–
–
–
–
1,403

1 The CEO’s and former CFO’s salaries during the year under review increased by 1.5% in line with the wider employee population from 1 January 2021. At 1 January 2021, Helen Gordon’s base

salary was £501,329 and Vanessa Simms’ base salary was £348,750. Rob Hudson’s salary upon joining Grainger on 31 August 2021 was set at £410,000.

2 Taxable benefits comprise of a car allowance and private medical insurance.
3 In line with the Remuneration Policy, 25% of the bonus is deferred into shares for three years. No bonus was payable to Vanessa Simms for part of the year she was in employment due to her

resignation in October 2020.

4 Please see Note 5 on page 90 for information in relation to the LTIP awards that are due to vest in December 2021. The TSR performance period ends in December 2021 and the performance

outcome for this part of the award is based on performance to 29 October 2021 and is therefore indicative. The value of the LTIP awards has been estimated based on the three-month average
share price to 30 September 2021. The amount also includes the value of dividend accrued being £22,227 for Helen Gordon. £146,182 of Helen Gordon’s LTIP value is attributable to share price
appreciation. No discretion will be applied to the vesting outcomes as a result of changes in share price movements.

5 The fees for Non-Executive Directors reflect payments in relation to any chairmanship roles (as applicable during the year under review or the preceding year) and in some cases pro rata

adjustments are made to reflect the changes in respect of such roles being taken part way through the relevant year. Carol Hui joined the Board as a Non-Executive Director following the year
end and has not therefore been included in the 2021 single figure table.

6 Comprises the aggregate of total salary and fees, taxable benefits, share incentive plan awards and pension benefits.
7 Comprises total annual bonus and LTIP awards.
8 Rob Hudson will receive cash payments of £369,668 and £19,724 to compensate for forfeited 2021 bonus and sharesave awards in respect of his previous employment. Further details are

shown on page 91. These amounts will be paid in December 2021 and the net of tax proceeds from the share save element will be used to purchase shares in Grainger.

2020

Executive Directors
Helen Gordon
Vanessa Simms

Non-Executive Directors5
Mark Clare
Andrew Carr-Locke
Justin Read
Janette Bell
Rob Wilkinson

Totals

Salary
and fees1
£’000

Taxable
benefits2
£’000

Share
incentive
Plan
£’000

Annual
bonus3
£’000

LTIP
awards4
£’000

Pension
benefits
£’000

Total
£’000

Total Fixed

Remuneration6
£’000

Total Variable
Remuneration7
£’000

491
342
833

168
66
58
53
48
393
1,226

16
16
32

–
–
–
–
–
–
32

2
2
4

–
–
–
–
–
–
4

484
–
484

–
–
–
–
–
–
484

621
321
942

–
–
–
–
–
–
942

74
51
125

–
–
–
–
–
–
125

1,688
732
2,420

168
66
58
53
48
393
2,813

583
411
994

168
66
58
53
48
393
1,387

1,105
321
1,426

–
–
–
–
–
–
1,426

1 Executive Directors’ salaries during the year increased by 2.5% in line with the wider employee population from 1 January 2020. At 1 January 2020, Helen Gordon’s base salary was £493,920

and Vanessa Simms’ base salary was £343,596.

2 Taxable benefits comprised of a car allowance and private medical insurance.
3 In line with the Remuneration Policy, 25% of the bonus was deferred into shares for three years. No bonus was payable to Vanessa Simms due to her resignation in October 2020.
4 The vesting value of the LTIP awards in last year’s report were estimated. These values have been updated to reflect the share price on the date of vesting of £2.772.
5 The fees for Non-Executive Directors reflect payments in relation to any chairmanship roles (as applicable during the year under review or the preceding year) and in some cases pro rata

adjustments are made to reflect the changes in respect of such roles being taken part way through the relevant year.

6 Comprises total salary and fees, taxable benefits, share incentive plan and pension benefits.
7 Comprises total annual bonus and LTIP awards.

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

4. Annual bonus awards – performance assessment for 2021

In determining the bonus outcomes for 2021, the Committee took into account the Company’s financial performance and
achievements against key short-term objectives established at the beginning of the year. 70% of the bonus was based on adjusted
earnings and PRS NRI performance (with equal weightings) with the remainder based on achievement against non-financial,
operational objectives. The targets applying to each financial measure and performance against the targets for 2021 are set out in
the table below.

Financial performance (70% of the 2021 annual bonus opportunity)

Measure

Weighting

Threshold
(0% out-turn)

Target
(60% out-turn)

Maximum
(100% out-turn)

2021
performance

Out-turn (% of
max element)

Adjusted earnings

35%

£70.7m

£78.5m

£86.4m

£83.5m

Bonus
85.5%

Measure

PRS NRI

Weighting

Threshold
(0% out-turn)

Target
(60% out-turn)

Maximum
(100% out-turn)

2021
performance

Out-turn (% of
max element)

35%

£50.7m

£53.4m

£56.1m

£52.6m

Bonus
41.8%

Payouts for performance between threshold and target and between target and maximum is determined on a straight-line basis.

The performance for PRS NRI includes £51.9m NRI, along with £0.7m liquidated and ascertained damages (‘LADs’) recorded to
compensate the Group for lost rental income resulting from the delayed completion of construction contracts in accordance with
the treatment agreed at the time the targets were set. For statutory reporting purposes, these are included within fees and
other income.

As a result of performance against the financial objectives, a bonus of 44.6% out of 70% became payable.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Non-financial performance (30% of the 2021 annual bonus opportunity)

In respect of the personal performance targets set for the Chief Executive, these were set against a range of operational objectives
at the start of the year. The targets set were aligned to Grainger’s corporate objectives. On joining the business, the Chief Financial
Officer also assumed the same objectives in order to align with the Chief Executive.

Chief Executive and Chief Financial Officer

Objective

Measure

Performance assessment

1. Customer Service

Design and establish a central resident services
call centre

Achieved in full (2%) with the customer Service
Desk being established in February 2021

2. ESG

Achieve material increase in NPS, Google reviews
and feedback response rate from customers

Partially achieved (4% out of 6%) with NPS
improving materially and level of customer
responses increasing over five times the prior year

Design and implement new customer
management system for those PRS blocks
where there is no on-site Grainger management

Achieved in part (1% out of 2%) with customer
service fully designed and partially launched
by the financial year end

Demonstrable progress of requisite workstreams
in order to comply with TCFD requirements

Achieved in full (1%) with progress specified
on page 45

Complete all EPC data compilation across portfolio
and analysis/planning pursuant to such data

Achieved in part (1% out of 2%) with EPC ratings
undertaken and analysis/planning ongoing

Revise design brief and produce sustainability
guide for all our developments

Achieved in full (1%) with the updated brief
issued in the year

Clear evidence of community engagement
activities from Grainger staff

Achieved in full (1%) with detailed case studies
specified on page 27 and over 200 events
undertaken during the year, particularly
around wellbeing

3. Technology/CONNECT

Launch/completion of next phase of technological
constituents of the project in accordance with
programme

Achieved in full (7%) including launch of digital
lead to lease, customer payment system, supplier
purchase to pay system and use of data analytics

4. People

New operational leadership in place with
supporting structure

Achieved in full (2%) with new leadership team
in place including Director of Operations, Director
of Onboarding and Director of Leasing

Increase employee engagement and satisfaction
to “One to Watch” level target

Engagement score increased materially on prior
year but short of stretch target (0% our of 2%)

Commence workforce diversity analysis
and implementation of diversity strategy
for all recruitment

Achieved in relation senior appointments made
during the year, with application to all workforce to
be fully completed (0% of out of 1%)

5. Quality Control

Design and implement Resident Services team
quality control and assurance testing

Achieved in full (2%) with internal auditor appointed
to carry out reviews, assurance scheme designed
and audit of 5 PRS sites carried out

Pursuant to the above assessment, totalling the above percentage outcomes, the Committee determined that 22% of the maximum
30% of this part of the bonus would be payable and was appropriate in the circumstances.

It is the Committee’s approach to view the performance in the round at the end of the year. The Committee believes a total bonus of
66.6% of the maximum bonus opportunity is representative of performance during the year.

Helen Gordon

Rob Hudson

Bonus opportunity

140% of salary
120% of salary
(pro rated to reflect joining date of 31 August 2021)

1 The deferred bonus share awards will be granted after the announcement of annual results.

2021
bonus payable
(out of 100%
maximum)

Bonus earned
– payable
in cash

Bonus earned
– deferred
in shares for
three years1

66.6%

£350,340

£116,780

66.6%

£20,465

£6,822

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

5. LTIP awards – performance assessment for 2021
LTIP awards vesting in December 2021

The awards made to Executive Directors in December 2018, and which are due to vest on 12 December 2021, are based on a 50%
relative TSR condition and 50% TPR condition measured over a three-year period. Performance against the vesting schedule can be
summarised as follows:

Measure

Weighting

Threshold
(25% vesting)

Maximum
(100% vesting)

Actual
performance

Relative TSR versus the constituents of
the FTSE 350 Real Estate Supersector

50%

Median
ranking

Upper quartile
ranking or better

TPR (annual average growth)

50%

5% p.a.

9% p.a.

TSR of 29.8%
currently places
Grainger between
median and
upper quartile
6.0% p.a.

Out-turn
(% of max
element)

LTIP
42.9%

(estimated)

43.0%

At the time of signing off this report, the TSR performance period has not concluded. Based on performance to 29 October 2021,
Grainger is ranked between median and upper quartile. This gives an indicative vesting of 42.9% for this part of the award. Actual
vesting will be based on performance to third anniversary of grant (12 December 2021) and the actual performance and vesting
outcome will be shown in next year’s report. Under the TPR measure, annual average growth of 6.0% p.a. over the three-year period
resulted in 43.0% of this part of the award vesting. In aggregate, 43.0% of the December 2018 LTIP award is on track to vest in
December 2021.

The value of these awards shown in the single figure table are based on the average three-month share price to 30 September 2021
of 309.6p. These values include dividend equivalent to the value of £22,227 for Helen Gordon. These awards are subject to a two-year
holding period.

LTIP awards vested in December 2020

The awards made to Executive Directors in December 2017, and which vested on 11 December 2020, were based 50% on relative TSR
and 50% on TPR.

Grainger ranked within the upper quartile of the TSR peer group which resulted in 100% of this part of the award vesting. Annual
growth in TPR of 5.5% p.a. over the three-year period resulted in 33.7% of this part of the award vesting. In aggregate, 66.9% of the
December 2017 LTIP award vested in December 2020. The value of these awards shown in the revised 2020 single figure table
included in this Annual Report and Accounts is based on the share price at the date of vesting (11 December 2020) and also includes
the dividend equivalent payment on the vested awards.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

6. Share scheme interests awarded during the year

Helen Gordon

LTIP share awards
(10 December 2020)

DBSP share awards
(10 December 2020)

Number

350,496

Face value
£’000

988

Number

43,397

Face value
£’000

121

The face value of LTIP share awards for Helen Gordon (200% of salary) is based on a price of 281.84p, being the average share price
for the five business days immediately preceding the award being made on 10 December 2020.

The awards will be eligible to vest three years after grant, dependent upon continued employment and satisfying performance
criteria. Half of the award is subject to a relative TSR condition (measured against a group of real estate companies), 25% subject to
a TPR condition and the remaining 25% subject to a Secured PRS investment condition.

The relative TSR performance condition requires Grainger’s three-year relative TSR performance versus the comparator group to be
at least at median for 25% of this part of the award to vest, with vesting then increasing on a straight-line basis to 100% for upper
quintile relative TSR performance. The TPR performance condition requires annual three-year growth in TPR to be above 5% p.a.
for 25% of this part of the award to vest, with vesting then increasing on a straight-line basis to 100% for 8% p.a. growth or better.
Following vesting, a two-year holding period is applied on vested shares.

The Secured PRS Investment condition is based on a sliding scale of targets based on aggregate three-year investment with 25%
vesting for achieving threshold and vesting increasing on a straight line basis until a maximum stretch target is achieved. In relation to
the Secured PRS Investment measure, performance after one year into the three-year performance period is on track for threshold
vesting, assuming further PRS investments are secured during the remainder of the period.

The face value of the deferred bonus share plan (‘DBSP’) awards for Helen Gordon relates to a 25% deferral of the 2020 annual bonus
into Company shares, is based on a price of 279.07p, being the average share price for the three business days immediately preceding
the award being made on 10 December 2020. The awards will be eligible to vest in three years subject to continued employment.

7. Payments for loss of office and to past Directors

Vanessa Simms gave the Board notice of her intention to leave Grainger on 28 October 2020 and she stepped off the Board and
ceased employment on 23 April 2021. Vanessa forfeited her 2020 and 2021 annual bonuses and her outstanding and unvested LTIP
and DBSP share awards upon cessation (see Note 6 above for details of vested awards during the year).

Vanessa was paid her salary and received pension and benefits until her date of departure and no payment in lieu of notice was paid.

8. Appointment of Rob Hudson

Rob Hudson joined Grainger’s Board as CFO on 31 August 2021. The Committee determined Rob’s base salary taking into account
the external recruitment market for CFOs with direct real estate experience, the experience, expertise and calibre of the executive
and typical salaries in the FTSE 250. The other elements of Rob’s package are in line with our Directors’ Remuneration Policy and
include a workforce aligned pension contribution rate.

In compensation for remuneration forfeited upon Rob’s resignation from his previous employer, the following awards were granted.
These awards will vest no earlier than the original vesting dates of those forfeited and the exchange has been based on the relevant
share prices on the date of the announcement of appointment (18 February 2021).

2019 LTIP award1
2020 LTIP award2
2021 LTIP award3

Date of grant

11 October 2021
11 October 2021
11 October 2021

Number of
Grainger awards
granted

93,380
184,537
271,987

Vesting date

20 February 2022
11 March 2023
1 February 2024

Face value of award
(based on Grainger share price
on 18 February 2021)

£246,334
£486,808
£717,500

1 The performance measurement for these awards were undertaken and the number of awards being granted reflects the performance outcome at Rob’s previous employer (50% vesting).

These awards will vest subject to continued employment only.

2 These awards vest subject to the performance conditions attached to the Grainger LTIP awards made in February 2020 (50% on relative TSR, 25% on Total Property Return and 25% on

Secured PRS Investment).

3 These awards replace a 2021 LTIP grant that Rob Hudson would have received had he remained in employment with his previous employer. These awards vest subject to the performance

conditions attached to the Grainger LTIP awards made in December 2020 (50% on relative TSR, 25% on Total Property Return and 25% on Secured PRS Investment).

The above awards will be subject to a two-year holding period post vesting and dividends equivalents may accrue from the date of
grant to the earlier of the exercise date and the expiry of the relevant two-year post-vesting holding period.

In addition, Rob Hudson will receive cash payments of £369,668 and £19,724 to compensate for forfeited 2021 bonus and sharesave
awards. These amounts will be paid in the December 2021 payroll and the net of tax sharesave element will be used to purchase
shares in Grainger. These amounts have been included in the single figure table for 2021.

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

9. Directors’ shareholdings and share interests
Performance share awards

Helen Gordon

Rob Hudson

Vanessa Simms

LTIP shares1
LTIP shares2
LTIP shares
LTIP shares3
LTIP shares3
DBSP2
DBSP
DBSP
DBSP
LTIP shares
LTIP shares
LTIP shares
LTIP shares1
LTIP shares
LTIP shares
LTIP shares
DBSP
DBSP
DBSP

Awards1
granted

Maximum
award
Number

Awards
vested
Number

Awards
lapsed
Number

Maximum
outstanding
awards at
30 Sep 2021
Number

Market price
at date of
vesting
(p)

09-Feb-17
11-Dec-17
12-Dec-18
06-Feb-20
10-Dec-20
11-Dec-17
12-Dec-18
10-Dec-19
10-Dec-20
11-Oct-21
11-Oct-21
11-Oct-21
09-Feb-17
11-Dec-17
12-Dec-18
06-Feb-20
11-Dec-17
12-Dec-18
10-Dec-19

364,254
316,297
374,640
330,116
350,496
37,681
55,256
16,429
43,397
93,380
184,537
271,987
188,235
163,453
193,602
200,940
23,210
33,863
9,796

130,403
211,500
–
–
–
37,681
–
–
–
–
–
–
67,388
109,297
–
–
23,210
–
–

233,851
104,797
–
–
–
–
–
–
–
–
–
–
120,847
54,156
193,602
200,940
–
33,863
9,796

–
–
374,640
330,116
350,496
–
55,256
16,429
43,397
93,380
184,537
271,987
–
–
–
–
–
–
–

310.0
277.2
–
–
–
277.2
–
–
–
–
–
–
310.0
277.2
–
–
277.2
–
–

Vesting
date

09-Feb-20
11-Dec-20
12-Dec-21
06-Feb-23
10-Dec-23
11-Dec-20
12-Dec-21
10-Dec-22
10-Dec-20
20-Feb-22
11-Mar-23
01-Feb-24
09-Feb-20
11-Dec-20
–
–
11-Dec-20
–
–

1 LTIP shares vested on 9 February 2020 and exercised during the year under review.
2 LTIP shares vested in December 2020 but are unexercised at the date of this report. These will remain capable of exercise in accordance with the scheme rules.
3 In relation to the Secured PRS Investment measure, performance after one year (in relation to 10 December 2020 award) and two years (in relation to 6 February 2020 award) into the three-year
performance period is on track for threshold vesting, assuming further PRS investments are secured during the remainder of the period.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

All employee share options under SAYE

Granted
in year

Lapsed
during
year

Share
options at
1 Oct 2020 Number

Grant
price

(p) Number

Number

Exercise
price
(p)

Market
price on
exercise
(p)

Gains on
exercise
of share
options
(£)

Share
options at
30 Sep
2021

Exercise
price
(p)

Earliest
exercise
date

Latest
exercise
date

Helen
Gordon
Vanessa
Simms

SAYE

9,326

7,346

–

(7,346)

–

9,326

193.00

01-Sep-22 01-Mar-23

–

The closing trade share price on 30 September 2021 was 305p. The highest trade share price during the year was 335p and the lowest
was 259.6p.

All-employee share awards under the SIP

Executive Directors
Helen Gordon
Vanessa Simms

Ordinary shares of 5p each

1 Oct 2020
shares

30 Sept 20211
shares

5,917
5,571

7,642
5,887

1 Since 30 September 2021, Helen Gordon acquired shares in the Company through the Grainger Employee Share Incentive Scheme (1,725 ordinary 5p shares).

Shareholding at 30 September 2021

Directors share interests and shareholding requirements are set out below. In order that their interests are aligned with those of
Shareholders, Executive Directors are expected to build up and maintain a personal shareholding equal to 200% of basic salary in the
Company. The table below sets out the Directors’ interests in shares.

In thousands (‘000)

Executive Directors
Helen Gordon
Rob Hudson
Non-Executive Directors
Andrew Carr-Locke
Rob Wilkinson
Mark Clare
Justin Read
Janette Bell

Beneficially
owned shares at
30 Sep
20211

Vested but
unexercised
share awards

Unvested
share awards

Total interests
held at
30 Sep
20212

Total interests
held at
30 Sep
2020

Shareholding
as % of basic
salary3

318
113

15
21
161
21
2

249
–

–
–
–
–
–

1,180
550

1,747
663

–
–
–
–
–

1,521
–

15
21
161
21
2

274
84

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

1 Rob Hudson purchased 112,900 ordinary 5p shares on joining Grainger.
2 The total interests include beneficially owned shares, shares held in the SIP trust, vested but unexercised shares and unvested share awards.
3 The value of shares held (calculated as at 30 September 2021 when the share price was 305p) includes shares owned beneficially, vested but unexercised share awards (on a post-tax basis)
and those purchased under the SIP. If unvested DBSP awards (which vest subject to continued employment only) and the December 2018 LTIP awards (due to vest in December 2021 for
which performance has already been tested and estimated in respect of the TSR condition) were to be included, the value of shares held (on a post-tax basis) would rise to 363% of basic salary
in the case of Helen Gordon. If non-performance buyout awards were to be included, the value of shares held (on a post-tax basis) would rise to 121% of basic salary in the case of Rob Hudson.

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

10. Performance graph
Total Shareholder return

This graph shows the percentage change by 30 September 2021 of £100 invested in Grainger plc on 30 September 2011 compared
with the value of £100 invested separately in both the FTSE 250 Index and the FTSE 350 Real Estate Supersector Index.

500%

450%

400%

350%

300%

250%

200%

150%

100%

50%

30/09/2011

30/09/2012

30/09/2013

30/09/2014

30/09/2015

30/09/2016

30/09/2017

30/09/2018

30/09/2019

30/09/2020

30/09/2021

Grainger plc

FTSE 250 Total Return Index

FTSE 350 Real Estate Supersector Total Return Index

Source: Datastream (a Reﬁnitiv product)

11. Chief Executive single figure

2021
20201
2019
2018
2017
20162
2016
2015
2014
2013
2012

Helen Gordon
Helen Gordon
Helen Gordon
Helen Gordon
Helen Gordon
Helen Gordon (from 4 January 2016)
Andrew Cunningham (to 4 January 2016)
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham
Andrew Cunningham

Chief Executive
single figure of
total remuneration
£’000

Annual variable
element award rates
against maximum
opportunity
%

Long-term incentive
vesting rates against
maximum
opportunity
%

1,580
1,688
1,185
1,174
985
882
376
2,185
2,477
2,519
733

67
70
27
72
61
73
–
–
64
63
19

43
67
36
8
N/A
N/A
–
98
100
100
–

1 The total remuneration has been restated following the update to the 2020 single figure table.
2 Helen Gordon’s single figure of total remuneration includes a period when she was Chief Executive designate, during which Andrew Cunningham was Chief Executive. Accordingly, there is an

element of double counting in her single figure of total remuneration for 2016.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

12. Percentage change in remuneration of Chief Executive and employees

The percentage change in remuneration between 2020 and 2021, excluding LTIP and pension contributions, for the Chief Executive,
Chief Financial Officer, Non-Executive Directors and for the average of all other employees in the Group was as follows:

Percentage change 2019-2020

Percentage change 2020-21

Executive Directors

Helen Gordon
Vanessa Simms1
Rob Hudson

Base
salary

2.5%
2.5%
–

Taxable
Benefits

0.1%
0.1%
–

Annual
bonus

162.3%
(100.0)%
–

1 No bonus is payable to Vanessa Simms due to her resignation in October 2020.

Non-Executive Directors
Mark Clare
Andrew Carr-Locke
Justin Read
Janette Bell
Rob Wilkinson

Employee population

13. Chief Executive Pay Ratio

2.5%
2.5%
2.5%
2.5%
2.5%

2.8%

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

Base
salary

1.5%
1.5%
–

1.5%
1.5%
1.5%
1.5%
1.5%

Taxable
Benefits

(0.2)%
(43.1)%
–

Annual
bonus

(3.6)%
–
–

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

0.8%

13.7%

(0.7)%

33.3%

The table below compares the 2021 single total figure of remuneration for the CEO as shown in Note 3 on page 87 with the Group’s
employees paid at the 25th, 50th and 75th percentiles:

Financial Year

Method

25th percentile

50th percentile (median)

75th percentile

2021

2020

48:1
Total pay and benefits £32,711
Salary £25,000

58:1
Total pay and benefits £29,968
Salary £27,708

33:1

20:1

Total pay and benefits £48,540
Salary £42,923
39:1
Total pay and benefits £44,748
Salary £37,898

Total pay and benefits £80,586
Salary £64,720
23:1
Total pay and benefits £76,196
Salary £63,338

Our calculations were made on 11 November 2021 using Option A as the most statistically accurate method. This is the second year
we have published our pay ratios.

In undertaking our calculations, no adjustments were made to the figures other than determining the FTE remuneration for all
employees within the Group over the financial year. No non-salary employee remuneration components have been omitted. Joiners,
leavers, employees on a period of statutory leave (such as maternity, paternity and shared parental leave) and long-term absences
during the financial year were excluded.

Total FTE remuneration was calculated on the same basis as the CEO single figure table and includes annual base salary, taxable
benefits (private medical insurance, car allowance), matching shares under our Share Incentive Plan, annual bonus for performance
delivered in the financial year and paid in December 2021, employer pension contributions, and taxable share plans.

The Committee considers that the median CEO pay ratio is consistent with the pay, reward and progression policies available to our
employees. We operate an in-house service model, directly employing colleagues for on-site roles in our growing portfolio of
developments and our employee population at this level will continue to increase as we resource appropriately. It is therefore difficult
to compare our ratios with those in the property industry who do not operate under a similar model.

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

14. Relative importance of spend on pay

The difference in actual expenditure between 2020 and 2021 on remuneration for all employees, in comparison to profit before
tax and distributions to Shareholders by way of dividend, is set out in the charts below. Profit before tax is considered to be an
appropriate financial metric as it is not impacted by changes in tax rates which are outside of the direct control of the Company.

Profit before tax

(£m)

+£53.0m
+53.5%
2021: £152.1m

(2020(restated):£99.1m)

Dividend

(£m)

+£0.1m
+0.3%
2021: £36.9m

(2020: £36.8m)

Total employee pay

(£m)

+£1.7m
+8.3%
2021: £22.2m

(2020: £20.5m)

15. Statement of implementation of Remuneration Policy for 2022
Base salary

For 2021/22, Executive Director base salaries will be increased by 2% with effect from 1 January 2022, in line with the typical increase
given to the majority employee population. In addition, a significant proportion of employees below the senior management level will
receive a 2.5% increase in their base salaries. In respect of Rob Hudson, his increase takes into account the 11 months between the
announcement of his arrival and the 1 January 2022 salary increase date.

Annual bonus

The structure and metrics to operate for the 2022 annual bonus are as follows:

– Chief Executive: 140% of salary

– Chief Financial Officer: 120% of salary

The table below sets out the performance measures and their respective weightings for 2022:

Metric

PRS NRI

Adjusted earnings

Strategic objectives

Weighting

Rationale and description

35%

30%

Rental income from PRS after property operating expenses incentivises management to focus on
growing income and reducing cost.
Incentivises operational success in achieving rental growth, income from sales and reduction in
operational and finance costs relative to a challenging budget.
Each of the headline metrics is underpinned by defined measurable milestones or a range of targets
set with reference to budgeted objectives. These are consistent with the strategy and targeted
objectives for the year agreed by the Board. There will be a continued focus on ESG matters as well as
operational objectives. Due to matters of commercial sensitivity it would not be in the interests of the
Company to disclose the precise operational targets for the annual bonus at the date of production of
this report. Details of the objectives and the performance achieved will be disclosed retrospectively in
the 2022 Annual Report.

In line with our Policy, 25% of any bonus earned will be delivered as a deferred bonus share award which will vest after three years.

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

LTIP

It is expected that the LTIP awards to be made to the Executive Directors in the year ending 30 September 2022 will be at the levels
detailed below and subject to a two-year holding period:

– Chief Executive: 200% of salary

– Chief Financial Officer: 175% of salary

The performance measures to apply for the 2022 LTIP will be the same as last year but the weightings have been changed.
The revised weightings for 2022 reflects the Committee’s view that the performance metrics are of equal importance in respect
of incentivising and rewarding long-term performance:

Metric

Weighting

Targets

Relative TSR (versus a bespoke group
of real estate peers)

33.3%

TPR

33.3%

Secured PRS Investment1

33.3%

Ranking
Below median
Median
Upper quintile
TPR
<5% p.a.
5% p.a.
8% p.a.

Performance level
Below threshold
Threshold
Maximum
Performance level
Below threshold
Threshold
Maximum
The actual targets are considered to be commercially sensitive at this time, but a
qualitative assessment of progress will be provided in the 2022 and 2023 remuneration
reports and full retrospective disclosure of the targets and achievement will be set out in
the 2024 report.

Vesting
0%
25%
100%
Vesting
0%
25%
100%

1 Secured PRS Investment (effectively the Company’s pipeline of future development opportunities) provides management with a clear focus on driving growth in long-term PRS Rental Income

and on achieving greater scale and operating efficiency. The Committee will evaluate the quality of investments when determining the PRS Investment vesting outcome. Firstly, the
Committee will consider the extent to which there was any material unapproved variation from the basis upon which any individual scheme was initially approved. Secondly, a post investment
review will be undertaken to ensure that investments remain of sufficient quality in light of then current market conditions. If the Committee has concerns on either front, it may take
appropriate corrective action, which could include disregarding any particular investment for the purposes of the overall target.

The Committee is satisfied that the LTIP targets are appropriately stretching. The TSR measure requires upper quintile performance
for full vesting. The TPR range is challenging in light of current market conditions and the PRS Secured Investment measure will
require exceptional performance in a more competitive market.

The Committee will retain the right to reduce overall pay outcomes if it considers the variable pay result does not reflect broader
Company performance over the relevant performance periods.

Non-Executive Directors’ fees

The Non-Executive Directors’ (‘NED’) fee levels will increase in line with the typical increase given to the wider employee population,
i.e. 2% with effect from 1 January 2022. Current fee levels are as follows:

Basic Non-Executive Director fee
Additional fee for chairing Board committee
Additional fee for Senior Independent Director duties
Additional fee for Voice of Employee in the Boardroom
Chairman’s fee

1 January
2022

£49,876
£10,082
£8,489
£5,306
£175,095

1 January
2021

£48,898
£9,884
£8,323
£5,202
£171,662

16. Directors’ service agreements and letters of appointment

Executive Directors

Helen Gordon
Rob Hudson

Contract commencement date

November 2015
31 August 2021

Notice period

12 months
6 months

Non-Executive Directors

Date of initial appointment

Mark Clare
Andrew Carr-Locke
Rob Wilkinson
Justin Read
Janette Bell

February 2017
March 2015
October 2015
February 2017
February 2019

GOVERNANCERE M U N E R ATI O N
A N N UA L RE P O RT O N RE M U N E R ATI O N CO N T INUED

17. Details of the Remuneration Committee, advisers to the Committee and their fees

The Remuneration Committee currently comprises five 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

Justin Read (Committee Chairman since February 2018)
Mark Clare
Janette Bell
Andrew Carr-Locke
Rob Wilkinson

Member since

May 2017
May 2017
May 2019
April 2015
May 2017

Meetings
attended

Meetings
eligible
to attend

4
4
4
4
4

The Company Secretary, the 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 Committee also met outside the
meetings to discuss the new Remuneration Policy.

FIT Remuneration Consultants LLP were appointed by the Remuneration Committee to provide advice on executive remuneration
matters. Total fees paid or payable (as applicable) to FIT for services to the Committee during the 2021 financial year were £65,412.50
(2020: £62,000). FIT are signatories 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 its
advisers is independent and objective.

18. Statement of voting at general meeting

At the AGMs held on 10 February 2021 and 5 February 2020, the Directors’ Remuneration report and Policy received the following
votes from Shareholders.

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

Directors’ Remuneration report (2021)

Remuneration Policy (2020)

Total number
of votes

496,051,659
40,229,166
536,280,825
2,653,615

% of
votes cast

Total number
of votes

% of
votes cast

92.5
7.5
100

442,988,159
43,071,700
486,059,859
2,394,110

91.14
8.86
100

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

D I REC TO R S’ RE P O RT

In accordance with the UK Financial Conduct Authority’s Listing
Rules (‘LR’), the information to be included in the Annual Report
and Accounts, where applicable under LR 9.8.4, is set out in Note
15 to the financial statements on page 131 in relation to the
dividend waiver arrangements.

Information incorporated by reference

The Corporate Governance Statement on pages 54 to 98 forms
part of this Directors’ report and is incorporated into this
Directors’ report by reference.

Directors’ interests in significant contracts

No Directors were materially interested in any contract
of significance.

Directors’ conflicts of interest

A possible conflict of interest has arisen pursuant to Rob
Wilkinson’s position as chief executive officer of AEW, being a real
estate investment fund, which was recently mandated by a client
to invest in build-to-rent opportunities in the UK. Rob notified Mark
Clare of the possible conflict in June of this year. The Board has the
desire for Rob to continue as a Non-Executive Director of Grainger
due to the substantial contribution he makes to the Company
bringing expertise, skills and experience in areas including real
estate, investment, finance and business leadership. To ensure
compliance with the Companies Act, the Grainger Articles of
Association and the Code, at the June Board meeting, the Board
formally resolved to grant the authorisation of Rob Wilkinson’s
potential conflict of interest subject to conditions including Rob
not being provided with Board papers which directly or indirectly
address BTR opportunities and removing himself from Board
discussions and votes on these. This framework is to be reviewed in
not more than six months intervals to assess its effectiveness and
whether improvements can be made to it.

Statement of Directors’ responsibilities in respect of the
Annual Report and the financial statements

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 international accounting standards in conformity
with the requirements of the Companies Act 2006 and applicable
law and have elected to prepare the parent Company financial
statements in accordance with UK accounting standards and
applicable law, including FRS 101 Reduced Disclosure Framework.
In addition the Group financial statements are required under the
UK Disclosure Guidance and Transparency Rules to be prepared in
accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.

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:

– for the Group financial statements, state whether they have
been prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union;

– 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;

– assess the Group and parent company’s ability to continue as a

going concern, disclosing, as applicable, matters related to
going concern; and

– use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent company or to
cease operations, or have no realistic alternative but to do so.

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 are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and 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 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 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.

Financial risk management

– select suitable accounting policies and then apply them

Details are included in Note 27 to the financial statements.

consistently;

– make judgements and estimates that are reasonable, relevant,

reliable and prudent;

GOVERNANCED I REC TO R S’ RE P O RT CO N T INUED

Directors’ indemnities and insurance

The Company has in place contractual entitlements for the Directors of the Company and its subsidiaries to claim indemnification
by the Company for certain liabilities they might incur in the course of their duties. We have established these arrangements, which
constitute qualifying third-party indemnity provision and qualifying pension scheme indemnity provision, 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. The Company also maintains an appropriate level of Directors’ and
officers’ liability insurance.

Sustainability

Comprehensive disclosure on the Company’s Environmental, Social and Governance performance is available on our website at
www.graingerplc.co.uk/responsibility.

Streamlined Energy and Carbon Reporting Disclosure

Scope 1 and 2 Global GHG emissions data for period 1 October 2020 to 30 September 2021:

Emissions from

Scope 1 (Fuel combustion in vehicles and buildings)
Scope 2 (Electricity)
Total footprint

Company’s chosen intensity measurement:

Emissions reported above per £m value
of assets under management1
Emissions reported above per owned unit2
Emissions reported above per employee3

2020
location-
based

2021
location-
based

989
863
1,853

0.696
0.219
6.094

1,014
838
1,851

0.618
0.199
5.749

Scope 3 Global GHG emissions data for period 1 October 2020 to 30 September 2021:

Emissions (tonnes of CO2e) from

Fuel and energy-related activities4
Business travel (air, rail and vehicles)
Estimated tenant energy use (tCO2)5
Grainger office occupation (landlord-obtained)6

Tonnes of CO2e

Trend
location-
based

2%
-3%
-0.1%

2020
market-
based

989
230
1,220

2021
market-
based

1,014
212
1,226

Trend
market-
based

2%
-8%
1%

-11%
-9%
-6%

0.457
0.144
4.004

0.409
0.132
3.807

2020

268
33
23,767
24

2021

239
22
21,101
31

-10%
-8%
-5%

Trend

-11%
-32%
-11%
26%

1 Value of assets under management (‘AUM’) on the last day of the financial year, expressed in £m.
2 Number of owned units on the last day of the financial year within the scope of data collection, including units owned in Joint Ventures that are within Grainger’s operational control.
3 Total number of employees of Grainger plc on the last day of the financial year.
4 Includes WTT emissions from fuels and electricity transmission and distribution losses.
5 This has been estimated based on a sample of Energy Performance Certificates (‘EPCs’) and reported in CO2 only. This figure includes homes in Tribe Apartments, which are supplied energy via
centralised biomass boilers, the emissions from which are already included in Scope 1.
6 Includes landlord-obtained emissions for London Bridge office only.

Underlying global energy use data for period 1 October 2020 to 30 September 2021:

Energy use (kWh)

Electricity
Natural gas
District heating1
Biomass1
Transport fuel
Total energy use

2020

2021

Trend

3,811,147
5,439,960
17,070
1,037,437
281,275
10,586,888

4,046,542
5,588,538
25,979
951,877
265,185
10,878,122

6%
3%
52%
-8%
-6%
3%

1 For the current and previous (recalculated) years footprints, biomass and district heating have been included which was not the case in previous years.

Summary

As a quoted company incorporated in the UK, Grainger complies with the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018. Grainger reports all material GHG emissions using ‘tonnes of CO2 equivalent’ (‘tCO2e’) as the unit of measurement
and reports energy use in kWh. Our reporting period is 1 October 2020 to 30 September 2021 and we report energy use and emissions
for the previous year to show trends.

100

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

We report on all energy use and GHG emissions for the
operations within the boundaries of our financial statements.
Energy use and emissions for Residential – mortgages (‘CHARM’)
are not within Grainger’s operational control and are excluded.
All energy use and emissions data relates to emissions in the UK
and offshore area.

In 2021 we increased the scope of our energy use and GHG
reporting to include consumption and emissions from recent
acquisitions and newly completed developments. A small
number of recently developed properties are excluded from our
reporting because data is not yet available, and we will gather
data in 2022 and include them in our future reporting.

Between 2020 and 2021, energy consumption from our property
portfolio has increased by 6%. Grainger’s total location-based
GHG emissions have decreased by 0.1%, and market-based
emissions have increased by 1%.

Trends

The increase in energy consumption can be attributed to the
impacts of Covid-19 and an increase in the number of residents
working from home.

Our Scope 1 emissions have increased by 2%, this is driven by an
increase in natural gas consumption across the portfolio, likely
linked to increased home heating during winter 2020/21 due to
lockdowns. The decrease in market-based electricity-related
emissions can be credited to the greater coverage of REGO
backed supplies.

In addition, emissions relating to Grainger’s business travel have
decreased due to a reduction in air miles travelled.

Methodology

Grainger uses the GHG Protocol Corporate Standard (revised
edition), Government Environmental Reporting Guidelines 2019
and ISO14064: Part 1 standard for its reporting, using the
operational control approach.

We have used the UK Government Conversion Factors for
Company Reporting 2021 for emissions calculations, including
location-based Scope 2 reporting. For our market-based emissions
we have used contractual instruments where there is data readily
available and if unavailable, the Association of Issuing Bodies
European Residual Mixes 2020 for market-based reporting for
2021. We used emissions factors from the same sources in 2020.
We have reported on all energy use and emissions sources
required under the regulations.

We purchase 100% renewable electricity tariffs for 84% of our
portfolio properties, which has resulted in lower Scope 2
emissions using the market-based approach compared to the
location-based approach. Where no contractual data is available,
we use residual mix emissions factors.

Scope 1 data

This includes landlord-obtained gas and biomass heating
consumed in common areas and by tenants on an unmetered
basis, gas consumed in Grainger’s offices, as well as fuel
consumption in vehicles owned or leased by Grainger. Fugitive
emissions are not included as they have been assessed
to be immaterial.

Scope 2 data

This includes landlord-obtained electricity and district heating
consumed in common areas and by tenants on an unmetered
basis as well as electricity consumed by Grainger in its offices.

Scope 3 data

This includes estimated emissions from electricity used by
Grainger’s tenants in its buildings based on EPC analysis and
extrapolation. Well-to-tank emissions from fuels and emissions
from the transmission and distribution of Grainger’s electricity
are included. We also report emissions from business travel and
landlord obtained electricity recharged to Grainger for one
occupied office (London Bridge).

Energy use data

This includes purchased electricity, natural gas and transport
fuels (petrol and diesel, which have been converted to kWh from
mileage records using the UK Government conversion factors).
Grainger has solar photovoltaic panels generating electricity on a
number of properties, but the energy generated is exported to
the grid and is unable to be reported.

Restatements and estimation

We have recalculated emissions for 2020 as we have been able to
obtain more accurate and complete data for Scope 1 and Scope
2 emissions from energy consumption in our property portfolios.

Where Grainger-obtained utility consumption data is partially
unavailable or unreliable for an asset, estimation has been
undertaken by extrapolating, first using data from the current
reporting period and if unavailable, data from the previous
reporting period. For 2021 26% of energy from fuels for Scope 1
emissions and 18% of electricity for Scope 2 emissions data has
been estimated.

Intensity metrics

We have used three intensity metrics: emissions by market
value of AUM (tCO2e/£m value of AUM), emissions per the
number of owned units (tCO2e/owned unit) and emissions per
number of employees (tCO2e/employee) to align with our
financial reporting.

The value of AUM has increased between 2020 and 2021. This,
coupled with only a minor increase in combined Scope 1 and
Scope 2 market-based emissions, has caused a decrease in the
emissions by market value of AUM by 10%. Due to the
completion of several new developments, there has been an
increase in the number of units owned by Grainger, and our asset
recycling programme is focused on divesting older, less efficient
properties. As a result, we have continued to decrease emissions
per owned unit. Thirdly, there has been an increase in the number
of employees, which coupled with the reduction in emissions has
resulted in a 5% decrease in the emissions per employee.

Energy efficiency measures

As part of our long-term asset management activities, we
undertake comprehensive refurbishments to the common parts
of our buildings and have a programme of rolling refurbishments
for units. These refurbishments include a number of energy
efficiency measures. For common parts a typical refurbishment
includes a lighting upgrade with installation of lighting controls,
and fabric upgrades where required. We have undertaken major
refurbishments to the common parts of three assets this year,
and three in the previous year and have identified significant
reductions in energy consumption at all six of these buildings in
the year-on-year figures.

Refurbishments undertaken to individual units include many
energy efficiency improvements including window replacements,
installation of more efficient heating systems and insulation.

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The resulting reductions in energy consumption are experienced
by our customers in their directly-purchased energy usage,
and are reflected in our estimated tenant energy use. We have
estimated emissions from tenant energy use using two
methodologies, carbon emissions reported on EPCs and
Government energy consumption data, which both result in
similar estimated emissions.

Third-party review

EcoAct, an Atos Company has reviewed and analysed the data
provided by Grainger (note: this does not represent formal
assurance) and has carried out calculations in-line with best
practice (see Methodology section).

A more detailed breakdown of our energy consumption and
carbon footprint for our property portfolios and the
methodology used is available in our EPRA Sustainability
Performance Measures Report, available on our website at
www.graingerplc.co.uk/responsibility.

Health and safety

Grainger has a well-developed health and safety management
system for the internal and external control of health and safety
risks, managed by the Health and Safety Director. This includes
using online risk management systems for identifying, mitigating
and reporting real-time health and safety management
information. The Health and Safety Committee is responsible
for overseeing health and safety management. It consists of
members of staff from across the organisation. The Committee
continues to monitor legal compliance in health and safety
through audit and implementation of improvements, to enable
the Group to become ‘best in class’. Further oversight is also
carried out by the Operations Board. In addition, a health and
safety report is provided to each meeting of the Board of
Directors, and the Health and Safety Director gives a
presentation to the Board at least once a year.

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 their
employment within the Company continues, and that we arrange
appropriate training where necessary. It is Company policy that the
training, career development and promotion of disabled persons
should, as far as possible, be identical to that of other employees.

Employee engagement

The Group places considerable value on the engagement of its
employees and has continued its practice of keeping them
informed on and involved in business and strategic matters,
for example through team meetings, presentations by senior
management and regular all-staff conference calls hosted by the
Executives. Janette Bell has been appointed as the designated
Non-Executive Director to represent the employee voice in the
boardroom. For more information on our people, see page 40.

Independent auditor and disclosure of information to auditor

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

Political donations

In accordance with the Company’s policy, we made no political
donations in 2021 (2020: £nil).

Takeover directive

On a change of control, the main bank facility (included in Note
26 to the financial statements) will become repayable should
alternative terms for continuing the facilities not be agreed with
the lenders within 45 days. In addition, the corporate bond (also
referred to in Note 26) may become repayable following a
change of control. 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

17 November 2021

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FINANCIAL
STATEMENTS

Independent auditor’s report

Consolidated income statement

Consolidated statement
of comprehensive income

Consolidated statement
of financial position

Consolidated statement
of changes in equity

Consolidated statement of cash flows

Notes to the financial statements

Parent company statement
of financial position

Parent company statement
of changes in equity

Notes to the parent company
financial statements

104

110

111

112

113

114

115

157

158

159

EPRA performance measures (unaudited) 164

Five year record

168

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I N D E PE N D E NT AU D ITO R ’ S RE P O RT TO TH E
M E M B E R S O F G R A I N G E R PLC

1. Our opinion is unmodified

We have audited the financial statements of Grainger plc (“the Company”) for the year ended 30 September 2021 which comprise the
Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial
Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Parent Company Statement
of Financial Position, the Parent Company Statement of Changes in Equity, and the related notes, including the accounting policies in
note 1.

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

2021 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 in

conformity with the requirements of the Companies Act 2006;

– the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including

FRS 101 Reduced Disclosure Framework; 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 to the extent applicable.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were first appointed as auditor by the shareholders on 6 February 2015. The period of total uninterrupted engagement is for the
seven financial years ended 30 September 2021. We have fulfilled our ethical responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were provided.

Overview

Materiality:

Group financial statements as a whole
Coverage

£30.0m (2020 :£28.0m) 0.9% (2020: 0.9%) of total assets
100% (2020:100%) of Group total asset

Key audit matters

Recurring risks

Valuation of properties
Recoverability of parent company’s investment in subsidiaries

vs 2020

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2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at
our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities,
our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

Valuation of
properties

Investment properties:
(£2,179.2 million;
2020: £1,778.9m)

Trading properties at
EPRA market value
(APM) £1,130.7 million;
2020: £1,190.8 million)

Refer to page 73 (Audit
Committee Report),
page 117-120
(accounting policies)
and pages 124-125 and
132 (financial
disclosures).

The risk

Subjective valuation:

The valuation approach adopted by the Directors
varies between portfolios:

• For properties let into the private rental market, and

the majority of affordable housing properties,
valuation is derived by applying a gross initial yield to
the estimated rental value of the property. Yield is
based on market evidence and is an inherently
judgemental input. There is a risk that applying an
inappropriate yield could lead to a difference in
valuation material. For properties under construction
which are to be let into the private rental market a
consistent valuation methodology is adopted.
Additional adjustments are then made for capital
expenditure not yet incurred and development and
stabilisation risk. There is an additional risk that these
adjustments could be inappropriate and result in a
material difference in valuation.

• For individual properties, valuation is determined by

estimating vacant possession (“VP”) value and
applying a discount to reflect the fact that the
property is tenanted. The VP value and the discount
applied are estimated with reference to comparable
evidence, which in some cases may be limited. This
means the valuation is inherently subjective and
susceptible to misstatement.

• Residential trading property is carried in the

statement of financial position at the lower of cost
and net realisable value. The Group does, however,
in its principal non-GAAP net asset value measures,
include trading property at market value, derived
using the same valuation methods as set out above.

• For the Tricomm portfolio and shared ownership

affordable housing valuation is based on a
discounted cash flow model produced by an
external valuer. There is a risk that the house price
inflation (“HPI”) and discount rate assumptions
could be inappropriate which could lead to a
material misstatement in valuation.

The effect of these matters is that, as part of our risk
assessment, we determined that the valuation of
investment properties has a high degree of
estimation uncertainty, with a potential range of
outcomes greater than our materiality for the
financial statements as a whole, and possibly many
times that amount. The financial statements Note 2
disclose the sensitivity estimated by the Group.

Our response

Our procedures in respect of all property types identified included:

• Methodologies: with the assistance of our own property
valuation specialists, challenging the methodologies used
for the specific portfolios with reference to market practice.
• Sensitivity analysis: performing sensitivity analyses over

the assumptions and considering the outcomes with reference
to benchmarks to identify the key assumptions affecting
the valuation.

• Assessing valuers’ credentials: assessing the objectivity,

professional qualifications and experience of the external valuers
engaged by the Group, through discussion with them and by
reading their valuation reports.

• Attendance at Group valuation meetings: attending the

Group’s meetings with their external valuer and challenging the
market evidence presented by the valuer with the help of our
own property valuation specialists.

• Historical comparisons: comparing the 2020 year end valuation

with the sales price achieved for property sales in the year.
• Assessing transparency: assessing whether the Group’s

disclosure about the sensitivity of fair value changes in key
assumptions reflected the uncertainties inherent in the
property valuations.

Our additional procedures in respect of private rental sector
properties, and the majority of affordable housing properties
included:

• Yield rates: with the assistance of our property valuation
specialists, challenging the yield rates applied using our
understanding of the nature of the assets and comparing to
available market data.

Our additional procedures in respect of properties under construction
which are to be let into the private rental market, included:

• Test of details: for a sample of properties, agreeing the

adjustments made for capital expenditure not yet incurred to the
latest supplier funding assessment.

• Our valuation expertise: using our property valuation specialists,
critically assessing the adjustments made for development and
stabilisation risk with reference to sector practice.

Our additional procedures in respect of individual properties included:

• Comparing valuations: challenging the inputs used in valuations

and comparing valuations to recent comparable transactions.

Our additional procedures in respect of the Tricomm portfolio and
the shared ownership affordable housing properties included:

• Benchmarking assumptions: comparing the HPI assumption

included in the discounted cash flow model to market indices and
discount rates to market information including gilts and
benchmarked risk premiums.

We performed the tests above rather than seeking to rely on any of
the company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.

Our Results

We found the resulting valuation of properties to be acceptable.

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Recoverability of
parent company’s
investment in
subsidiaries

(£1,226.8 million;
2020: £1,178.1m)

Refer to page 159
(accounting policy)
and page 160 (financial
disclosures).

The risk

Low risk, high value

The carrying amount of the parent company’s
investment in subsidiaries represents 56% (2020: 60%)
of the Company’s total assets. Their recoverability is
not at a high risk of significant misstatement or subject
to significant judgement. However, due to their
materiality in the context of the parent company
financial statements, this is considered to be the area
that had the greatest effect on our overall parent
company audit.

Our response

We performed the tests below rather than seeking to rely on any of
the company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.

Our procedures included:

• Test of details: comparing the carrying amount of 100% of

investments with the relevant subsidiaries financial statements
and current year draft balance sheets to identify whether their
net assets, being an approximation of their recoverable amount,
were in excess of their carrying amount.

• Assessing transparency: Assessing the adequacy of the parent
company’s disclosures in respect of the investment in subsidiaries.

Our results

We found the Group’s assessment of the recoverability of
investment in subsidiaries to be acceptable.

We continue to perform procedures over the recoverability of inventories. However, given the continuing large reversionary surplus on
the Group’s Trading Properties and the continuing change in the composition of the Group’s balance sheet towards Investment
Properties, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.

We continue to perform procedures over Going concern. However given the significant headroom available and share issue in the year
we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our
report this year.

3. Our application of materiality and an overview of the scope of our audit

Materiality for the group financial statements as a whole was set at £30.0m (2020: £28.0m), determined with a reference to a
benchmark of total assets (of which it represents 0.9% (2020: 0.9%)).

In addition, we applied a materiality of £3.5m (2020: £3.5m) and performance materiality of £2.6m (2020: £2.6m) to specific income
statement accounts, namely gross rental income, profit on disposal of trading properties, administrative expenses, fees and other
income, other expenses, income from financial interest in property assets, finance costs, finance income, share of profit of associates and
share of profit of joint ventures for which we believe misstatement of a lesser amount than materiality for the financial statements as a
whole could be reasonably expected to influence the Company’s members’ assessment of the financial performance of the Group.

Materiality for the parent company financial statements as a whole was set at £17.0m (2020: £17.0m) determined with a reference to a
benchmark of company net assets of which it represented 1.3% (2020: 1.5%).

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2020 : 75%)
of materiality for the financial statements as a whole, which equates to £22.5m (2020 : £21m) for the group and £12.75m (2020 :
£12.75m) for the parent company.

We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an
elevated level of risk.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.0m (2020: £1.0m) in
addition to other identified misstatements that warranted reporting on qualitative grounds.

The Group team performed the audit of the Group as if it were a single aggregated set of financial information. The audit was performed
using the materiality levels set out above and covered 100% of Group revenue, Group profit before tax and Group total assets
(2020: 100% of Group revenue, Group profit before tax and Group total assets).

Total assets
£3,272.2m (2020: £2,970.1m)

Group Materiality
£30.0m (2020: £28.0m)

Group total assets £3,272.2m
Group materiality £30.0m

£30.0m
Whole ﬁnancial
statements materiality
(2020: £28.0m)

£1.0m
Misstatements reported
to the Audit Committee
(2020: £1.0m)

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4. Going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is
realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s financial resources or ability to continue operations over the going concern
period. The risk that we considered most likely to adversely affect the Group’s available financial resources over this period was the
impact of the COVID-19 pandemic on both demand in the private rental sector and the valuation of property assets.

We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by comparing
severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial
resources and covenants indicated by the Group’s financial forecasts. We also assessed the completeness of the going concern disclosure.

Our conclusions based on this work:

– we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;

– we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or

conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going
concern for the going concern period;

– we have nothing material to add or draw attention to in relation to the Directors’ statement in note 1 to the financial statements on
the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and
Company’s use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and

– the related statement under the Listing Rules set out on page 52 is materially consistent with the financial statements and our

audit knowledge.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the
Company will continue in operation.

5. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

– Enquiring of directors and the audit committee, as to the Group’s high-level policies and procedures to prevent and detect fraud, as

well as whether they have knowledge of any actual, suspected or alleged fraud.

– Reading Board and Audit Committee minutes.

– Considering remuneration incentive schemes and performance targets for directors.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.

As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform procedures to
address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular the risk that
disposals of trading property are recorded in the wrong period and the risk that Group management may be in a position to make
inappropriate accounting entries.

We did not identify any additional fraud risks.

We also performed procedures including:

– Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation.

These included those posted to unusual accounts.

– Assessing significant accounting estimates for bias.

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements
from our general commercial and sector experience, through discussion with the directors and other management (as required by
auditing standards), and from inspection of the group’s regulatory and legal correspondence and discussed with the directors and
other management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our
assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying
with regulatory requirements.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance
throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

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Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial distributable profits
legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures
on the related financial statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect: health and safety, landlord regulation and certain aspects of company
legislation recognising the nature of the Group’s activities. Auditing standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence,
an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance
with all laws and regulations.

6. We have nothing to report on the other information in the Annual Report

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except
as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other information.

Strategic report and directors’ report

Based solely on our work on the other information:

– we have not identified material misstatements in the strategic report and the directors’ report;

– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

– in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation to:

– the directors’ confirmation within the Viability Statement on page 52 that they have carried out a robust assessment of the emerging and

principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;

– the Principal Risks and Uncertainties disclosures describing these risks and explaining how they are being managed and mitigated; and

– the directors’ explanation in the Viability Statement of how they have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be appropriate, and their statement as to whether 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 period of their
assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We are also required to review the Viability Statement, set out on page 52 under the Listing Rules. Based on the above procedures, we
have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As
we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgments
that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our audit knowledge.

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Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our
audit knowledge:

– 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 position and performance, business
model and strategy;

– the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee

considered in relation to the financial statements, and how these issues were addressed; and

– the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal

control systems.

We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the
UK Corporate Governance Code specified by the Listing Rules for our review, and to report to you if a corporate governance statement
has not been prepared by the company. We have nothing to report in these respects.

Based solely on our work on the other information described above:

– with respect to the Corporate Governance Statement disclosures about internal control and risk management systems in relation to

financial reporting processes and about share capital structures:

– we have not identified material misstatements therein; and the information therein is consistent with the financial statements; and

– in our opinion, the Corporate Governance Statement has been prepared in accordance with relevant rules of the Disclosure Guidance

and Transparency Rules of the Financial Conduct Authority.

7. We have nothing to report on the other matters on which we are required to report by exception

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

– we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities
Directors’ responsibilities

As explained more fully in their statement set out on page 99, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditors responsibilities.

9. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Richard Kelly (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, Canary Wharf
London E14 5GL

17 November 2021

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FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
CO N S O LI DATE D I N CO M E S TATE M E NT
FO R T HE Y E A R END ED 3 0 SEP T EMB ER

Group revenue
Net rental income
Profit on disposal of trading property
Profit on disposal of investment property
Income from financial interest in property assets
Fees and other income
Administrative expenses
Other expenses
Impairment of inventories to net realisable value
Operating profit
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 loss of joint ventures after tax
Profit before tax
Tax charge
Profit for the year attributable to the owners of the Company
Basic earnings per share
Diluted earnings per share

Footnote for Consolidated Financial Statements
1 See Note 38 for an explanation of the prior year restatement.

Notes

5
6
7
8
20
9

12
12
18
19
11
13

15
15

2021
£m

248.9
70.6
68.6
1.5
7.2
5.1
(38.5)
(0.6)
(0.1)
113.8
76.8
(3.8)
(35.4)
0.2
0.8
(0.3)
152.1
(42.6)
109.5
16.2p
16.1p

2020
(restated)1
£m

214.0
73.6
61.6
2.3
5.2
7.5
(40.4)
(2.4)
(0.7)
106.7
29.8
(1.4)
(34.9)
0.4
0.1
(1.6)
99.1
(16.3)
82.8
12.8p
12.7p

110

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

CO N S O LI DATE D S TATE M E NT O F CO M PRE H E N S I V E I N CO M E
FO R T HE Y E A R END ED 3 0 SEP T EMB ER

Profit for the year
Items that will not be transferred to the consolidated income statement:
Actuarial gain/(loss) on BPT Limited defined benefit pension scheme
Items that may be or are reclassified to the consolidated income statement:
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 the consolidated income statement
Tax relating to items that may be or are reclassified to the consolidated income statement

Total tax relating to components of other comprehensive income
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

1 See Note 38 for an explanation of the prior year restatement.

Notes

13
13

2021
£m

109.5

5.3

16.1
21.4

(1.0)
(2.8)

(3.8)
17.6

2020
(restated)1
£m

82.8

(1.2)

(3.3)
(4.5)

0.3
1.0

1.3
(3.2)

127.1

79.6

111

FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
CO N S O LI DATE D S TATE M E NT O F FI N A N C I A L P O S ITI O N
A S AT 3 0 SEP T EMB ER

ASSETS
Non-current assets
Investment property
Property, plant and equipment
Investment in associates
Investment in joint ventures
Financial interest in property assets
Retirement benefits
Deferred tax assets
Intangible assets

Current assets
Inventories – trading property
Trade and other receivables
Current tax assets
Cash and cash equivalents

Total assets
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Trade and other payables
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
EQUITY
Issued share capital
Share premium account
Merger reserve
Capital redemption reserve
Cash flow hedge reserve
Retained earnings
TOTAL EQUITY

30 September
2021
£m

Notes

30 September
2020
(restated)1
£m

1 October
2019
(restated)1
£m

16
17
18
19
20
28
13
21

22
23

26
25
28
24
13

25
24

31
32

2,179.2
1.4
15.5
29.4
71.7
3.5
3.7
0.5
2,304.9

595.2
38.5
16.0
317.6
967.3
3,272.2

1,347.5
0.6
–
1.1
69.5
1,418.7

–
109.8
0.2
–
4.5
114.5
1,533.2
1,739.0

37.1
817.3
20.1
0.3
(3.3)
867.5
1,739.0

1,778.9
2.0
14.7
27.3
73.3
–
8.9
0.8
1,905.9

657.4
31.3
6.4
369.1
1,064.2
2,970.1

1,391.9
1.3
2.4
1.2
36.1
1,432.9

–
73.3
0.3
–
20.6
94.2
1,527.1
1,443.0

33.8
616.3
20.1
0.3
(16.6)
789.1
1,443.0

1,574.6
0.3
11.7
21.6
76.4
–
5.6
1.2
1,691.4

700.0
40.5
–
189.3
929.8
2,621.2

1,176.8
–
1.7
1.2
32.7
1,212.4

100.0
73.6
0.4
4.0
17.3
195.3
1,407.7
1,213.5

30.7
436.5
20.1
0.3
(14.3)
740.2
1,213.5

1 See Note 38 for an explanation of the prior year restatement.

The financial statements on pages 110 to 156 were approved by the Board of Directors on 17 November 2021 and were signed
on their behalf by:

Helen Gordon
Director

Rob Hudson
Director

Company registration number: 125575

112

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

CO N S O LI DATE D S TATE M E NT O F C H A N G E S I N EQ U IT Y

Balance as at

1 October 2019, as previously reported
Impact of change in accounting policy
Restated balance at 1 October 2019
Profit for the year as restated
Other comprehensive loss for the year
Total comprehensive income
Issue of share capital
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid
IFRS 16 transition adjustment
Total transactions with owners recorded directly
in equity
Balance as at 30 September 2020 as restated
Profit for the year
Other comprehensive income for the year
Total comprehensive income
Issue of share capital
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid
Total transactions with owners recorded directly
in equity
Balance as at 30 September 2021

Notes

3, 38

29
29
29
30
14
3

29
29
29
30
14

Issued
share
capital
£m

Share
premium
account
£m

Merger
reserve
£m

Capital
redemption
reserve
£m

Cash flow
hedge
reserve
£m

Retained
earnings
£m

Total
equity
£m

30.7
–
30.7
–
–
–
3.1
–
–
–
–
–

3.1
33.8
–
–
–
3.3
–
–
–
–

3.3
37.1

436.5
–
436.5
–
–
–
179.4
0.4
–
–
–
–

179.8
616.3
–
–
–
200.8
0.2
–
–
–

201.0
817.3

20.1
–
20.1
–
–
–
–
–
–
–
–
–

–
20.1
–
–
–
–
–
–
–
–

–
20.1

0.3
–
0.3
–
–
–
–
–
–
–
–
–

–
0.3
–
–
–
–
–
–
–
–

–
0.3

(14.3)
–
(14.3)
–
(2.3)
(2.3)
–
–
–
–
–
–

–
(16.6)
–
13.3
13.3
–
–
–
–
–

–
(3.3)

750.2
(10.0)
740.2
82.8
(0.9)
81.9
–
–
(0.1)
1.1
(33.5)
(0.5)

(33.0)
789.1
109.5
4.3
113.8
–
–
(0.3)
1.7
(36.8)

1,223.5
(10.0)
1,213.5
82.8
(3.2)
79.6
182.5
0.4
(0.1)
1.1
(33.5)
(0.5)

149.9
1,443.0
109.5
17.6
127.1
204.1
0.2
(0.3)
1.7
(36.8)

(35.4)
867.5

168.9
1,739.0

113

FINANCIAL STATEMENTSNotes

11
16
12
18, 19
8
30

20
13

8
20
19
18, 19
16

29
29
29

27
27

2021
£m

109.5
1.2
(76.8)
35.2
(0.5)
(1.5)
1.7
3.8
(7.2)
42.6
108.0
(6.9)
48.0
(0.2)
62.2
211.1
(45.6)
(16.9)
(0.6)
148.0

40.3
8.8
(0.8)
(1.6)
(362.3)
(0.3)
(315.9)

204.1
0.2
(0.3)
30.0
–
(3.8)
(77.0)
(36.8)
116.4
(51.5)
369.1
317.6

2020
(restated)1
£m

82.8
1.2
(29.8)
34.5
1.5
(2.3)
1.1
1.4
(5.2)
16.3
101.5
9.7
3.8
(0.1)
29.5
144.4
(37.4)
(25.4)
(0.5)
81.1

36.2
8.3
(5.5)
(4.7)
(195.3)
(0.3)
(161.3)

182.5
0.4
(0.1)
697.0
(4.9)
(1.4)
(580.0)
(33.5)
260.0
179.8
189.3
369.1

FI N A N C I A L S TATE M E NT S
CO N S O LI DATE D S TATE M E NT O F C A S H FLOW S
FO R T HE Y E A R END ED 3 0 SEP T EMB ER

Cash flow from operating activities
Profit for the year
Depreciation and amortisation
Net valuation gains on investment property
Net finance costs
Share of (profit)/loss of associates and joint ventures
Profit on disposal of investment property
Share-based payments charge
Change in fair value of derivatives
Income from financial interest in property assets
Tax
Cash generated from operating activities before changes in working capital
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions for liabilities and charges
Decrease in inventories
Cash generated from operating activities
Interest paid
Tax paid
Payments to defined benefit pension scheme
Net cash inflow from operating activities
Cash flow from investing activities
Proceeds from sale of investment property
Proceeds from financial interest in property assets
Investment in joint ventures
Loans advanced to associates and joint ventures
Acquisition of investment property
Acquisition of property, plant and equipment and intangible assets
Net cash outflow from investing activities
Cash flow from financing activities
Net proceeds from issue of share capital
Award of SAYE shares
Purchase of own shares
Proceeds from new borrowings
Payment of loan costs
Settlement of derivative contracts
Repayment of borrowings
Dividends paid
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

1 See Note 38 for an explanation of the prior year restatement.

114

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FI N A N C I A L S TATE M E NT S
N OTE S TO TH E FI N A N C I A L S TATE M E NT S

Accounting policies

Accounting policies applicable throughout the financial statements are shown below. Accounting policies that are specific
to a component of the financial statements have been incorporated in the relevant note.

(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. 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 the Group.

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; and financial interest in property assets.

The Group financial statements for the year ended 30 September 2021 have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 (‘Adopted IFRS’), IFRIC interpretations and
with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union. The Company has prepared its company financial statements in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (‘FRS 101’), which are presented on pages 157 to 163.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
group financial statements except for Impact of IFRIC: Configuration or Customisation Costs in Cloud Computing Arrangements
(IAS 38 Intangible Assets).

The Group and Company financial statements are presented in millions of Pounds Sterling (£m) because that is the currency of the
principal economic environment in which the Group operates.

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. Given the significant impact of Covid-19 on the macro-economic conditions in which the Group is operating,
the Directors have placed a particular focus on the appropriateness of adopting the going concern basis in preparing the financial
statements for the year ended 30 September 2021.

The financial position of the Group, including details of its financing and capital structure, is set out in the financial review on pages 32 to
37. In making the going concern assessment, the Directors have considered the Group’s principal risks (see pages 48 to 51) and their
impact on financial performance. The Directors have assessed the future funding commitments of the Group and compared these to
the level of committed loan facilities and cash resources over the medium term. In making this assessment, consideration has been given
to compliance with borrowing covenants along with the uncertainty inherent in future financial forecasts and, where applicable, severe
sensitivities have been applied to the key factors affecting financial performance for the Group.

The going concern assessment is based on the Group’s viability model to the end of March 2023, which exceeds the required
period of assessment of at least 12 months, and considers a severe downside scenario including a potential extreme longer-term
impact of Covid-19, reflecting the following key assumptions:

– Reducing PRS occupancy to 80% by 31 March 2023

– Contraction in rental levels of 5% p.a.

– Reducing property valuations by 5% p.a., driven by either yield expansion or house price deflation

– 15% development cost inflation

– Operating cost inflation of 15% p.a.

– An increase in finance costs of between 1.25% and 3.0% from 1 October 2021

No new financing is assumed in the assessment period, but existing facilities are assumed to remain available. Even in this severe
downside scenario, the Group has sufficient cash reserves, with the loan-to-value covenant remaining no higher than 51% (facility
maximum covenant ranges between 70% - 75%) and interest cover above 2.22x (facility minimum covenant ranges between 1.35x
- 1.75x) for the period to March 2023, which covers the required period of at least 12 months from the date of authorisation of
these financial statements.

Based on these considerations, together with available market information and the Directors’ experience of the Group’s property
portfolio and markets, the Directors continue to adopt the going concern basis in preparing the accounts for the year ended
30 September 2021.

115

FINANCIAL STATEMENTS1.

Accounting policies continued

(b) Basis of consolidation

i) Subsidiaries – Subsidiaries are all 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.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to
the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to
the extent that there is no evidence of impairment. Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.

ii) 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 not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. 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 details are provided in Note 18 and Note 19).

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 joint venture and associate results for the 12 months to 30 September 2021 and the financial position as
at that date have been equity accounted in these financial statements.

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.

iii) 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. Consideration is also given to the concentration test permitted under IFRS
3 Business Combinations.

When the acquisition of a subsidiary does not represent a business, it is accounted for as an acquisition of assets 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.

A business combination may also require the recognition of identifiable intangible assets by the Group. An intangible asset is
deemed to be identifiable if it is able to be separated or divided from the other assets acquired in the business combination
and sold, licensed or exchanged for something else of value, even if the intention to do so is not present on behalf of the Group.
Where an intangible asset is not individually separable, it may still meet the separability criterion if it is separable in combination
with a related contract, identifiable asset or liability.

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 the 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 of a business are
expensed in the consolidated income statement under the heading ‘Other expenses’.

Goodwill on acquisition of subsidiaries is included within this caption in the consolidated 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.

116

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED(c) Adoption of new and revised International Financial Reporting Standards and interpretations

The following new standards, amendments to standards and interpretations were issued in the year. The most significant of these,
and the impact on the Group’s accounting, are set out below:

i) IFRIC: Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS 38 Intangible Assets)

In April 2021, the IFRS Interpretations Committee published accounting guidance for configuration and customisation expenditure
relating to cloud computing arrangements, including Software as a Service (‘SaaS’). The guidance recognises differences in
accounting treatment for SaaS expenditure between functionality that is broadly available to the software supplier’s general
customer base and functionality that is restricted to a specific user. The Committee has clarified the position that expenditure can
only be capitalised to the extent a SaaS customer has the power to obtain the future economic benefits by restricting others
access to those benefits, otherwise expenditure in relation to developing SaaS for use should be expensed.

Following the interpretation being published, the Group has reviewed and revised its accounting policy in relation to intangible
assets (Note 21) which includes accounting for computer software. This has resulted in reclassifying relevant expenditure that was
previously capitalised as an intangible asset and expensing this to the income statement as administrative expenses. Comparatives
have been restated as relevant, with the impact of the restatement set out in Note 38.

A number of new standards and amendments to standards have been issued but are not yet effective for the Group and have not
been early adopted. The application of these new standards and amendments are not expected to have a material impact on the
Group’s financial statements.

Critical accounting estimates and judgements

The Group’s significant accounting policies are stated in the relevant notes to the Group financial statements. The preparation of
financial statements requires management to exercise judgement in applying the Group’s accounting policies. It also requires the
use of estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and assumptions
are reviewed on an on-going basis with revisions recognised in the period in which the estimates are revised and in any future periods
affected.

The areas involving a higher degree of judgement or complexity are set out below.

Estimates
1) Valuation of property assets

Residential trading property is carried in the statement of financial position at the lower of cost and net realisable value and
investment property is carried at fair value. The Group does, however, in its principal non-GAAP net asset value measures, EPRA
NRV, EPRA NTA and EPRA NDV, include trading property at market value. The adjustment in the value of trading property is the
difference between the statutory book value and its market value as set out in Note 4. For investment property, market value is
the same as fair value. In respect of trading properties, market valuation is the key assumption in determining the net realisable
value of those properties.

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. This includes details of key estimates and assumptions, along with
which independent professional adviser has been utilised to determine valuations for each asset category. In all cases, forming
these valuations inherently includes elements of judgement and subjectivity with regard to the selection of unobservable inputs.

The methodology for the year end valuation process for capitalised yield-based valuations is consistent with the prior year. This is
considered to be the most appropriate method for valuing assets that are likely to be held as long-term investments and represents
59% of our property assets relating primarily to PRS blocks, including new build PRS assets.

The remaining 41% of property assets are based on current house prices, reflecting the prevailing market conditions as at the
reporting date.

117

FINANCIAL STATEMENTS2.

Critical accounting estimates and judgements continued

Notes

PRS
£m

Reversionary
£m

Other
£m

Total
£m

% of properties for
which external valuer
provides valuation

Valuer

Trading property
Investment property
Financial asset (CHARM)
Total statutory book value
Trading property
Residential
Developments
Total trading property
Investment property

Residential
Developments
New build PRS
Affordable housing
Tricomm Housing
Total investment property
Financial asset (CHARM)1
Total assets at market value
Statutory book value
Market value adjustment2
Total assets at market value
Net revaluation gain recognised in the income
statement for wholly-owned properties
Net revaluation gain relating to joint ventures
and associates3
Net revaluation gain recognised in the year3

118.1
2,156.2
–
2,274.3

205.4
–
205.4

730.6
93.7
1,026.2
170.4
135.3
2,156.2
–
2,361.6
2,274.3
87.3
2,361.6

76.8

0.9
77.7

(i)
(ii)

(i)
(ii)
(iii)
(iv)
(v)

(vi)

(vii)

451.9
23.0
71.7
546.6

872.9
–
872.9

23.0
–
–
–
–
23.0
71.7
967.6
546.6
421.0
967.6

–

–
–

25.2
–
–
25.2

–
52.4
52.4

–
–
–
–
–
–
–
52.4
25.2
27.2
52.4

–

–
–

595.2
2,179.2
71.7
2,846.1

1,078.3

Allsop LLP
52.4 CBRE Limited

1,130.7

753.6

Allsop LLP/
CBRE Limited
93.7 CBRE Limited
1,026.2 CBRE Limited
Allsop LLP
Allsop LLP

Allsop LLP

170.4
135.3
2,179.2
71.7
3,381.6
2,846.1
535.5
3,381.6

76.8

0.9
77.7

78%
85%

100%
100%
97%
100%
100%

100%

1 Allsop provide vacant possession values used by the Directors to value the financial asset in accordance with the accounting policy set out in Note 20.
2 The market value adjustment 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.
3 Includes the Group’s share of joint ventures and associates revaluation gain after tax.

i) Residential

Trading property: The Group’s own in-house qualified team provided a vacant possession value for the majority of the Group’s
residential properties as at 30 September 2021. A structured sample of these in-house valuations was reviewed by Allsop LLP,
an external independent valuer. Valuing the large number of properties in this 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 with those of the external
valuer, around 73% 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.

Allsop LLP has provided the Directors with the following opinion on the Directors’ Valuation:

Property held in the residential portfolio was valued as at 30 September 2021 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. Allsop LLP valued approximately 80% of the
residential 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 recommends a discount to apply to the vacant possession valuations to establish the market value of each property,
with the discounts ranging from 15% to 19%. The discounts are established by tenancy type and region and are based on evidence
gathered by Allsop LLP from recent transactional market evidence. The Directors have adopted the discounts recommended by
Allsop LLP.

Investment property: PRS blocks are valued on an income capitalisation basis, having regard to prevailing market conditions and
evidence, and with close regard to the relativity between the market value and the aggregate vacant possession value. The valuation
has been prepared in accordance with RICS Professional Valuation Standards where fair value is the same as market value. CBRE
Limited valued 70% of residential investment property, with Allsop LLP valuing 13% on this basis. Gross yields adopted in the
valuations broadly range from 4.2% to 7.0%.

118

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDThe remaining 17% of residential property is valued in line with the trading property approach, with older properties and groups
of individual units valued by Allsop LLP on a discount to vacant possession value basis on the assumption these assets would be
sold individually. Residential reversionary assets discounts adopted ranged from 15% to 19%, whilst the residential PRS discount
to vacant possession value was 95%.

ii) Developments

Trading property: Development trading property of £52.4m relates to the Group’s legacy strategic land assets. The current market
value has been assessed by CBRE Limited. Their valuation, representing 85% of total value, is on the basis of fair value as defined
in the RICS Professional Valuation Standards where fair value is the same as market value. The remaining 15% of the portfolio is
a Directors’ Valuation.

Investment property: CBRE Limited assessed the fair value of the direct development schemes in the course of construction.
These schemes are valued on an income capitalisation basis, with gross yields adopted in the valuations ranging from 5.1% to 6.5%.
As the assets are under construction, the valuation takes into account estimated costs required to reach completion.

iii) New build PRS – CBRE Limited assessed the fair value of the completed assets and assets in the course of construction.

The principal approach was to value the properties on an income capitalisation basis, having regard to prevailing market conditions
and evidence, and with close regard to the relativity between the market value and the aggregate vacant possession value.

Where applicable, estimated costs required to complete construction have been taken into account. The valuation has been
prepared in accordance with RICS Professional Valuation Standards where fair value is the same as market value.

The primary unobservable input within the valuation relate to assumptions for gross yields adopted with respect to comparable
market evidence, with gross yields ranging from 4.6% to 6.0% across the portfolio. For assets under construction, a discount
to market value to reflect stabilisation and construction risk in the remaining build process is applied on an asset by asset basis
depending on stage of completion.

iv) Affordable housing – For properties let on affordable rents, social rents or sold on shared ownership leases, Allsop LLP valued
the assets on the basis of Existing Use Value for Social Housing (‘EUV-SH’) in line with RICS Global Standards. Properties subject
to intermediate rents have been valued at market value as these assets are not restricted as social housing in perpetuity.

The primary unobservable input within the valuation relates to assumptions for the income capitalisation rate of net rent,
which is determined on a tenure basis. The gross yields adopted for 30 September 2021 valuations range from 4.3% to 4.8%.

v) Tricomm Housing – Allsop LLP provided an investment valuation as at 30 September 2021 for 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.
The investment valuation is in accordance with RICS Professional Valuation Standards, and is based on a discounted cash flow model.

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: 2.00% in 2022, 2.50% in 2023, and 2.75% thereafter.
The discount rates applied to the cash flows range between 2.95% (core income) and 6.80% (on reversion).

vi) Financial asset (CHARM) – The valuation methodology adopted for the CHARM asset is set out in Note 20 to the financial
statements. CHARM is valued using projected cash flows and applies key unobservable inputs being house price inflation and
discount rates.

As such it is classified as a level 3 asset (Note 27). The assumptions used to value the asset reflect an increase in house prices of
between 3.27% and 6.91% p.a. A discount rate of 3.5% has been applied to the interest income and a rate of 6.5% has been applied
to the projected proceeds from sales of the underlying properties, reflecting the risk profile of each individual income stream.

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.

vii) Joint ventures and associates – For Vesta LP, Avison Young (UK) Limited valued the asset on the same basis described for
completed new build PRS assets. Property assets in other joint ventures including the Connected Living London Group and
Lewisham Grainger Holdings LLP are held at cost reflecting the current early stages of each development.

The Directors consider the valuations provided by external valuers to be representative of fair value.

As required by RICS Professional Valuation Standards, 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.

119

FINANCIAL STATEMENTS2.
2)

Critical accounting estimates and judgements continued
Net realisable value of trading property

The Group’s residential trading properties are carried in the consolidated statement of financial position at the lower of cost and net
realisable value.

Net realisable value is the net sales proceeds which the Group expects on sale of a property with vacant possession, with vacant
possession being determined in line with the approach detailed in Note 2.1i). The Group has a net realisable value provision of £6.5m
as at 30 September 2021 (2020: £7.2m). The provision includes specific properties which are vacant and properties expected to
become vacant in the future on the assumption of an average annual vacancy rate of c.8% over the next ten years. Consideration
has been given in respect of house price inflation, being the primary assumption relevant to this calculation, with the provision
for properties expected to become vacant in future assuming nil inflation over the next ten years.

Sensitivity analysis

Changes to key assumptions could impact both the income and financial position of the Group. The impact of changes to key
assumptions is considered for the valuation of property assets and the net realisable value of trading property using a range
of reasonable changes and have been applied to asset categories where sensitivities could have the largest impact. The Group
measures its market risk exposure internally by running various sensitivity analyses. The Directors consider that the range of
potential movements set out in the table below represent reasonably possible changes.

The table below sets out potential impacts that may result from changes to certain assumptions:

Residential (trading property)

Residential (investment property)
Developments (investment property)
New build PRS
Affordable housing
Tricomm Housing
Tricomm Housing

Financial asset (CHARM)
Financial asset (CHARM)

5.0% change in house prices (NRV
provision impact)
0.10% change in gross yield
0.10% change in gross yield
0.10% change in gross yield
0.10% change in gross yield
5.0% change in house prices
0.25% change in discount rate

5.0% change in house prices
0.25% change in discount rate

Judgements
1) Distinction between investment and trading property

Increase

Decrease

Income
statement
impact
£m

Statement of
financial
position
impact
£m

Income
statement
impact
£m

Statement of
financial
position
impact
£m

1.9
(12.1)
(2.0)
(22.4)
(4.2)
6.4

(1.8)
2.9
(1.2)

1.9
(12.1)
(2.0)
(22.4)
(4.2)
6.4

(1.8)
2.9
(1.2)

2.4
12.5
2.0
23.3
4.4
(6.4)

1.8
(2.9)
1.2

2.4
12.5
2.0
23.3
4.4
(6.4)

1.8
(2.9)
1.2

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 either to 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. The classification of the Group’s properties is a significant judgement which directly impacts the statutory net asset
position, as trading properties are held at the lower of cost and net realisable value, whilst investment properties are held at fair
value, with gains or losses taken through the consolidated income statement.

2) Asset acquisition

In line with the Group’s accounting policy on business combinations the Group has considered whether the acquisition of MREF III
Forth Banks Property Sarl and its subsidiary MREF III Newcastle Operations Limited (collectively referred to as ‘The Forge’)
constituted a business combination or an asset acquisition. The Group concluded the acquisition constituted an asset acquisition
in line with the optional concentration test permitted under IFRS 3, Business Combinations.

120

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED3.

Analysis of profit before tax

The table below details adjusted earnings, which is one of Grainger’s key performance indicators. The metric is utilised as a key
measure to aid understanding of the performance of the continuing business and excludes valuation movements and other
adjustments, that are one-off in nature, which do not form part of the normal on-going revenue or costs of the business and,
either individually or in aggregate, are material to the reported Group results.

£m

Group revenue
Net rental income
Profit on disposal of trading property
Profit on disposal of investment property
Income from financial interest
in property assets
Fees and other income
Administrative expenses
Other expenses
Impairment of inventories
to net realisable value
Operating profit
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 loss of joint ventures after tax
Profit before tax
Tax charge
Profit for the year attributable
to the owners of the Company
Diluted adjusted earnings per share

Statutory

Valuation

Other
adjustments

Adjusted
earnings

Statutory

Valuation

Other
adjustments

Adjusted
earnings

2021

2020
(restated)1

–
–
(0.8)
–

(2.3)
–
–
–

0.1
(3.0)
(76.8)
–
–
–
(0.9)
–
(80.7)

–
–
–
–

–
–
8.3
–

–
8.3
–
3.8
–
–
–
–
12.1

248.9
70.6
68.6
1.5

7.2
5.1
(38.5)
(0.6)

(0.1)
113.8
76.8
(3.8)
(35.4)
0.2
0.8
(0.3)
152.1
(42.6)

109.5

248.9
70.6
67.8
1.5

4.9
5.1
(30.2)
(0.6)

–
119.1
–
–
(35.4)
0.2
(0.1)
(0.3)
83.5

9.9p

214.0
73.6
61.6
2.3

5.2
7.5
(40.4)
(2.4)

(0.7)
106.7
29.8
(1.4)
(34.9)
0.4
0.1
(1.6)
99.1
(16.3)

82.8

–
–
(0.3)
–

(0.1)
–
–
–

0.7
0.3
(29.8)
–
–
–
(0.2)
–
(29.7)

(4.0)
–
–
–

–
(4.0)
11.7
1.8

–
9.5
–
1.4
0.5
–
–
1.0
12.4

210.0
73.6
61.3
2.3

5.1
3.5
(28.7)
(0.6)

–
116.5
–
–
(34.4)
0.4
(0.1)
(0.6)
81.8

10.2p

1 See Note 38 for an explanation of the prior year restatement.

Profit before tax in the adjusted columns above of £83.5m (2020: £81.8m) is the adjusted earnings of the Group. Adjusted earnings
per share assumes tax of £15.9m (2020: £15.5m) in line with the standard rate of UK Corporation Tax of 19.0% (2020: 19.0%), divided
by the weighted average number of shares as shown in Note 15. The Group’s IFRS statutory earnings per share is also detailed in
Note 15.

The classification of amounts as other adjustments is a judgement made by management and is a matter referred to the Audit
Committee for approval prior to issuing the financial statements. The £12.1m cost within other adjustments in 2021 comprises
£8.3m software development costs following the change in accounting policy and £3.8m refinancing costs. In 2020, the net £12.4m
cost within other adjustments comprised £2.7m income relating to historic non-core business, offset by £11.7m reclassification of
software development costs following the change in accounting policy (Note 1(c)), £2.4m costs related to refinancing activity and
£1.0m restructuring costs. These transactions do not form part of the Group’s ongoing activities and, as such, have been classified
as other adjustments.

121

FINANCIAL STATEMENTS4.

Segmental information

Accounting policy

IFRS 8, Operating Segments requires operating segments to be identified based upon the Group’s internal reporting to the
Chief Operating Decision Maker (‘CODM’) so that the CODM can make decisions about resources to be allocated to segments
and assess their performance. The Group’s CODM are the Executive Directors.

The two significant segments for the Group are PRS and Reversionary. The PRS segment includes stabilised PRS assets as well
as PRS under construction due to direct development and forward funding arrangements, both for wholly-owned assets and the
Group’s interest in joint ventures and associates as relevant. The Reversionary segment includes regulated tenancies, as well as
CHARM. The Other segment includes legacy strategic land and development arrangements, along with administrative expenses.

The key operating performance measure of profit or loss used by the CODM is adjusted earnings before tax, valuation and other
adjustments.

The principal net asset value (‘NAV’) measure reviewed by the CODM is EPRA NTA which is considered to become the most relevant,
and therefore the primary NAV measure for the Group. EPRA NTA reflects the tax that will crystallise in relation to the trading
portfolio, whilst excluding the volatility of mark to market movements on fixed rate debt and derivatives which are unlikely to be
realised. Other NAV measures include EPRA NRV and EPRA NDV which we report alongside EPRA NTA. A full description and
reconciliation of these measures is included in the EPRA performance measure section on pages 164 to 167 of this report.

Information relating to the Group’s operating segments is set out in the tables below. The tables distinguish between adjusted
earnings on a segmental basis. Valuation and other adjustments are not reviewed by the CODM on a segmental basis and should
be read in conjunction with Note 3.

2021 Income statement

£m

Group revenue
Segment revenue – external
Net rental income
Profit on disposal of trading property
Profit on disposal of investment property
Income from financial interest in property assets
Fees and other income
Administrative expenses
Other expenses
Net finance costs
Share of trading loss of joint ventures and associates after tax
Adjusted earnings
Valuation movements
Other adjustments
Profit before tax

PRS

Reversionary

78.8

138.7

51.9
(0.1)
1.3
–
4.7
–
(0.6)
(24.5)
(0.3)
32.4

18.4
66.1
0.2
4.9
–
–
–
(9.9)
–
79.7

Other

31.4

0.3
1.8
–
–
0.4
(30.2)
–
(0.8)
(0.1)
(28.6)

Total

248.9

70.6
67.8
1.5
4.9
5.1
(30.2)
(0.6)
(35.2)
(0.4)
83.5
80.7
(12.1)
152.1

A reconciliation from adjusted earnings to adjusted EPRA earnings is detailed in the table below, with further details shown in the
EPRA performance measures on page 164:

£m

Adjusted earnings
Profit on disposal of investment property
Previously recognised profit through EPRA market value measures
Adjusted EPRA earnings

PRS

Reversionary

32.4
(1.3)
–
31.1

79.7
(0.2)
(59.4)
20.1

Other

(28.6)
–
3.4
(25.2)

Total

83.5
(1.5)
(56.0)
26.0

122

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED2020 Income statement (restated)1

£m

1 See Note 38 for an explanation of the prior year restatement.

PRS

Reversionary

77.9

128.4

53.8
(0.1)
2.0
–
2.9
–
(0.6)
(21.9)
(0.5)
35.6

19.6
57.2
0.3
5.1
–
–
–
(11.4)
–
70.8

Other

3.7

0.2
4.2
–
–
0.6
(28.7)
–
(0.7)
(0.2)
(24.6)

A reconciliation from adjusted earnings to adjusted EPRA earnings is detailed in the table below:

£m

Adjusted earnings
Profit on disposal of investment property
Previously recognised profit through EPRA market value measures
Adjusted EPRA earnings

PRS

Reversionary

35.6
(2.0)
–
33.6

70.8
(0.3)
(53.4)
17.1

Other

(24.6)
–
–
(24.6)

Total

210.0

73.6
61.3
2.3
5.1
3.5
(28.7)
(0.6)
(34.0)
(0.7)
81.8
29.7
(12.4)
99.1

Total

81.8
(2.3)
(53.4)
26.1

Segmental assets

The net asset value measures reviewed by the CODM are EPRA NRV, EPRA NTA and EPRA NDV. These measures reflect the current
market value of trading property owned by the Group rather than the lower of historical cost and net realisable value. These measures
are considered to be a more relevant reflection of the value of the assets owned by the Group.

EPRA NRV is the Group’s 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.

EPRA NTA assumes that entities buy and sell assets, thereby crystallising certain levels of deferred tax liabilities. For the Group,
deferred tax in relation to revaluations of its trading portfolio is taken into account by applying the expected rate of tax to the
adjustment that increases the value of trading stock from its statutory accounts value of the lower of cost and net realisable value,
to its market value. The measure also excludes all intangible assets on the statutory balance sheet, including goodwill.

EPRA NDV reverses some of the adjustments made between statutory net assets, EPRA NRV and EPRA NTA. 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 investment property revaluations excluded from EPRA NRV and EPRA NTA are also reversed,
as is the intangible adjustment in respect of EPRA NTA, except for goodwill which remains excluded. In addition, adjustments are
made to net assets to reflect the fair value, net of deferred tax, of the Group’s fixed rate debt.

Total Accounting Return (NTA basis) of 5.5% is calculated from the closing EPRA NTA of 297p per share plus the dividend of 5.15p per
share for the year, divided by the opening EPRA NTA of 286p per share, which has been adjusted for the September 2021 equity raise.

These measures are set out below by segment along with a reconciliation to the summarised statutory statement of financial
position. Additional EPRA disclosures are included on pages 164 to 167.

123

FINANCIAL STATEMENTS Segmental information continued

4.
2021 Segment net assets

£m

Total segment net assets (statutory)
Total segment net assets (EPRA NRV)
Total segment net assets (EPRA NTA)
Total segment net assets (EPRA NDV)

2021 Reconciliation of EPRA NAV measures

PRS

Reversionary

1,484.7
1,637.4
1,608.5
1,550.2

256.1
677.8
571.8
571.8

Other

(1.8)
34.8
27.5
(10.9)

Total

Pence per share

1,739.0
2,350.0
2,207.8
2,111.1

234p
316p
297p
284p

£m

Investment property
Investment in joint ventures and
associates
Financial interest in property assets
Inventories – trading property
Cash and cash equivalents
Other assets
Total assets
Interest-bearing loans and borrowings
Deferred and contingent tax liabilities
Other liabilities
Total liabilities
Net assets

Statutory
balance sheet

Adjustments to
market value,
deferred tax
and derivatives

EPRA NRV
balance sheet

Adjustments to
deferred and
contingent tax
and intangibles

EPRA NTA
balance sheet

Adjustments to
derivatives,
fixed rate debt
and intangibles

EPRA NDV
balance sheet

2,179.2

–

2,179.2

–

2,179.2

–

2,179.2

44.9
71.7
595.2
317.6
63.6
3,272.2
(1,347.5)
(69.5)
(116.2)
(1,533.2)
1,739.0

–
–
535.5
–
4.9
540.4
–
66.1
4.5
70.6
611.0

44.9
71.7
1,130.7
317.6
68.5
3,812.6
(1,347.5)
(3.4)
(111.7)
(1,462.6)
2,350.0

–
–
–
–
(0.5)
(0.5)
–
(141.7)
–
(141.7)
(142.2)

44.9
71.7
1,130.7
317.6
68.0
3,812.1
(1,347.5)
(145.1)
(111.7)
(1,604.3)
2,207.8

–
–
–
–
12.8
12.8
(46.7)
(58.3)
(4.5)
(109.5)
(96.7)

44.9
71.7
1,130.7
317.6
80.8
3,824.9
(1,394.2)
(203.4)
(116.2)
(1,713.8)
2,111.1

In order to provide further analysis, the following table sets out EPRA NTA by segment:

£m

EPRA NTA
Investment property
Investment in joint ventures and associates
Financial interest in property assets
Inventories – trading property
Cash and cash equivalents
Other assets
Total segment EPRA NTA assets
Interest-bearing loans and borrowings
Deferred and contingent tax liabilities
Other liabilities
Total segment EPRA NTA liabilities
Net EPRA NTA assets

2020 Segment net assets (restated)1

£m

Total segment net assets (statutory)
Total segment net assets (EPRA NRV)
Total segment net assets (EPRA NTA)
Total segment net assets (EPRA NDV)

1 See Note 38 for an explanation of the prior year restatement.

PRS

Reversionary

Other

Total

2,156.2
26.9
–
205.4
212.5
6.0
2,607.0
(901.8)
(28.9)
(67.8)
(998.5)
1,608.5

PRS

Reversionary

1,169.6
1,291.2
1,266.8
1,242.3

252.0
696.1
611.4
611.4

23.0
–
71.7
872.9
89.7
9.5
1,066.8
(380.4)
(106.0)
(8.6)
(495.0)
571.8

Other

21.4
45.5
44.6
(11.2)

–
18.0
–
52.4
15.4
52.5
138.3
(65.3)
(10.2)
(35.3)
(110.8)
27.5

2,179.2
44.9
71.7
1,130.7
317.6
68.0
3,812.1
(1,347.5)
(145.1)
(111.7)
(1,604.3)
2,207.8

Total Pence per share

1,443.0
2,032.8
1,922.8
1,842.5

214
301
285
273

124

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED2020 Reconciliation of EPRA NAV measures (restated)1

£m

Statutory
balance sheet

Adjustments to
market value,
deferred tax
and derivatives

EPRA NRV
balance sheet

Adjustments to
deferred and
contingent tax
and intangibles

EPRA NTA
balance sheet

Adjustments to
derivatives,
fixed rate debt
and intangibles

EPRA NDV
balance sheet

1,778.9

–

1,778.9

–

1,778.9

–

1,778.9

42.0
73.3
657.4
369.1
49.4
2,970.1
(1,391.9)
(36.1)
(99.1)
(1,527.1)
1,443.0

–
–
533.4
–
3.5
536.9
–
32.3
20.6
52.9
589.8

42.0
73.3
1,190.8
369.1
52.9
3,507.0
(1,391.9)
(3.8)
(78.5)
(1,474.2)
2,032.8

–
–
–
–
(0.8)
(0.8)
–
(109.2)
–
(109.2)
(110.0)

42.0
73.3
1,190.8
369.1
52.1
3,506.2
(1,391.9)
(113.0)
(78.5)
(1,583.4)
1,922.8

–
–
–
–
13.5
13.5
(48.7)
(24.5)
(20.6)
(93.8)
(80.3)

42.0
73.3
1,190.8
369.1
65.6
3,519.7
(1,440.6)
(137.5)
(99.1)
(1,677.2)
1,842.5

1 See Note 38 for an explanation of the prior year restatement.

In order to provide further analysis, the following table sets out restated EPRA NTA by segment:

£m

Group revenue

Accounting policy

PRS

Reversionary

Other

Total

1,755.9
25.0
–
201.9
237.3
1.6
2,221.7
(895.1)
(24.5)
(35.3)
(954.9)
1,266.8

23.0
–
73.3
944.3
124.2
7.0
1,171.8
(468.3)
(84.7)
(7.4)
(560.4)
611.4

–
17.0
–
44.6
7.6
43.5
112.7
(28.5)
(3.8)
(35.8)
(68.1)
44.6

1,778.9
42.0
73.3
1,190.8
369.1
52.1
3,506.2
(1,391.9)
(113.0)
(78.5)
(1,583.4)
1,922.8

Revenue is measured at the fair value of the consideration received or receivable and is stated net of sales taxes and value
added taxes. Gross proceeds from disposal of trading property and fees and other income are recognised in accordance with
IFRS 15. Gross rental income is recognised in accordance with IFRS 16.

Gross rental income (Note 6)
Gross proceeds from disposal of trading property (Note 7)
Fees and other income (Note 9)

2021
£m

97.4
146.4
5.1
248.9

2020
£m

99.3
107.2
7.5
214.0

125

FINANCIAL STATEMENTS6. Net rental income

Accounting policy

Gross rental income is recognised on a straight-line basis over the lease term on an accruals basis. Directly attributable property
management, repair and maintenance costs are deducted from gross rental income to determine net rental income.

Gross rental income
Property operating expenses

7. Profit on disposal of trading property

Accounting policy

2021
£m

97.4
(26.8)
70.6

2020
£m

99.3
(25.7)
73.6

Property is regarded as sold when performance obligations have been met and control has been transferred to the buyer. This is
generally deemed to be on legal completion as at this point the buyer is able to determine the use of the property and has rights
to any cash inflows or outflows in respect of the property. 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 such other
basis that provides an appropriate allocation of costs.

Contract revenue and expenses are recognised over time in the consolidated income statement, with performance obligations
satisfied continually across the period in which the asset is created or enhanced. Control of the asset is transferred to the customer
across the construction period rather than upon completion of the asset in its entirety as, per the contract in place, this is when
the customer gains their residual interest. The input method used to measure progress is the value of work completed, denoted
by the costs incurred to date, and revenue is subsequently recognised at the margin stipulated in the contract. This is also when
the Group become entitled to the consideration arising from the contract. Revenues are recognised as contract assets in trade
and other receivables (Note 23) and are recovered on completion of the development.

Gross proceeds from disposal of trading property
Selling costs
Net proceeds from disposal of trading property
Carrying value of trading property sold (Note 22)

Profit on disposal of investment property

Accounting policy

2021
£m

146.4
(3.1)
143.3
(74.7)
68.6

Investment property is regarded as sold when the recipient obtains control of the property, which is generally deemed to be
on legal completion. Profits or losses are calculated by reference to the carrying value of the property sold.

Gross proceeds from disposal of investment property
Selling costs
Net proceeds from disposal of investment property
Carrying value of investment property sold (Note 16)

2021
£m

41.5
(1.2)
40.3
(38.8)
1.5

2020
£m

107.2
(2.3)
104.9
(43.3)
61.6

2020
£m

36.9
(0.7)
36.2
(33.9)
2.3

126

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FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED9.

Fees and other income

Property and asset management fee income
Other sundry income

2021
£m

2.6
2.5
5.1

2020
£m

2.2
5.3
7.5

Included within other sundry income in the current year is £1.6m (2020: £1.3m) liquidated and ascertained damages (‘LADs’) recorded
to compensate the Group for lost rental income resulting from the delayed completion of construction contracts. Included within
other sundry income in the prior year is £1.6m recorded in relation to the settlement of historic legal matters with respect to the
Group’s interest in the Czech Republic and £2.4m following the resolution of a legal claim related to a previous corporate transaction.

10. Employees

Wages and salaries
Social security costs
Other pension costs – defined contribution scheme (Note 28)
Share-based payments (Note 30)

The average monthly number of Group employees during the year (including Executive Directors) was:

Operations
Shared services
Group

2021
£m

17.5
1.8
1.2
1.7
22.2

2020
£m

16.5
1.8
1.1
1.1
20.5

2021
Number

2020
Number

197
86
11
294

177
86
12
275

Details of Directors’ remuneration, including pension costs, share options and interests in the LTIP, are provided in the audited section
of the Remuneration Committee report on pages 77 to 98.

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.

Aggregate Directors’ remuneration
Aggregate amount of gains on exercise of share options
Aggregate amount of money or assets received or receivable under scheme interests

2021
£’000

2,146
–
942
3,088

None of the Directors (2020: none) were members of the Group defined benefit scheme or the defined contribution scheme.

Key management compensation

Short-term employee benefits
Post-employment benefits
Share-based payments

2021
£m

6.5
0.4
1.3
8.2

2020
£’000

1,871
12
651
2,534

2020
£m

5.7
0.4
1.0
7.1

Key management figures shown above include Executive and Non-Executive Directors and all internal Directors of specific functions.

127

FINANCIAL STATEMENTS2021
£m

2020
(restated)1
£m

0.9

0.3
0.7
0.2
0.5

0.8

0.4
1.4
0.2
0.5

2021
£’000

2020
£’000

190
285
475
37
–
10
47
522

160
240
400
36
50
8
94
494

2020
£m

23.3
2.1
14.6
(8.4)
3.3
34.9

(0.4)
(0.4)
34.5

11. Profit before tax

Profit before tax is stated after charging:
Depreciation of property, plant and equipment

Amortisation of intangible assets
Bad debt expense
Operating lease payments
Auditor’s remuneration (see below)

1 See Note 38 for an explanation of the prior year restatement.

The remuneration paid to KPMG LLP, the Group’s auditor, is disclosed below:

Auditor’s remuneration

Services as auditor to the Company
Services as auditor to Group subsidiaries
Group audit fees
Audit related assurance services
Services related to corporate finance transactions
Other assurance services
Non-audit fees
Total fees

The relevant proportion of amounts paid to the auditor for the audit of the financial statements of joint ventures is £16,830
(2020: £15,300).

12. Finance costs and income

Finance costs
Bank loans and mortgages
Non-bank financial institution
Corporate bond
Interest capitalised under IAS 23
Other finance costs

Finance income
Other interest receivable

Net finance costs

2021
£m

17.0
2.1
22.5
(10.0)
3.8
35.4

(0.2)
(0.2)
35.2

128

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED13. Tax

Accounting policy

The taxation charge for the year represents the sum of the tax currently payable and deferred tax. The charge is recognised in the
income statement and statement of comprehensive income according to the accounting treatment of the related transaction.

Current tax payable or receivable is based on the taxable income for the period and any adjustment in respect of prior periods
and is calculated using tax rates that have been enacted or substantively enacted at the end of the reporting period.

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 at the end of the reporting period 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 tax 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.

The tax charge for the year of £42.6m (2020 (restated): £16.3m) recognised in the consolidated income statement comprises:

Current tax
Corporation tax on profit
Adjustments relating to prior years

Deferred tax
Origination and reversal of temporary differences
Adjustments relating to prior years

Total tax charge for the year

1 See Note 38 for an explanation of the prior year restatement.

2021
£m

11.4
(3.7)
7.7

33.4
1.5
34.9
42.6

2020
(restated)1
£m

20.3
(5.3)
15.0

(0.3)
1.6
1.3
16.3

The 2021 current tax adjustments relating to prior years reflect adjustments which have been included in submitted tax returns,
while deferred tax adjustments relate primarily to adjustments to investment properties and capital allowances.

The Group works in an open and transparent manner and maintains a regular dialogue with HM Revenue and Customs. This approach is
consistent with the “low risk” rating we have been awarded by HM Revenue and Customs and to which the Group is committed.

The Group’s results for this year are taxed at an effective rate of 19.0% (2020: 19.0%).

129

FINANCIAL STATEMENTS13. Tax continued
The tax charge for the year is higher (2020: lower) than the charge for the year derived by applying the standard rate of corporation
tax in the UK of 19.0% (2020: 19.0%) to the profit before tax. The differences are explained below:

Profit before tax
Income tax at a rate of 19.0% (2020: 19.0%)
Expenses not deductible for tax purposes
Share of joint ventures/associates after tax
Difference between tax and accounting profit on disposal of fixed assets and investments
Impact of changes in tax rates
Other temporary differences
Adjustment in respect of prior periods
Amounts recognised in the income statement

1 See Note 38 for an explanation of the prior year restatement.

2021
£m

152.1
28.9
(0.1)
(0.1)
–
16.1
–
(2.2)
42.6

2020
(restated)1
£m

99.1
18.8
0.3
0.1
(3.2)
3.5
0.5
(3.7)
16.3

In addition to the above, a deferred tax charge of £3.8m (2020: credit of £1.3m) was recognised within other comprehensive income
comprising:

Actuarial gain/(loss) on BPT Limited pension scheme
Fair value movement in cash flow hedges
Amounts recognised in other comprehensive income

Deferred tax balances comprise temporary differences attributable to:

Deferred tax assets
Short-term temporary differences
Losses carried forward
Actuarial deficit on BPT Limited pension scheme
Fair value movement in derivative financial instruments

Deferred tax liabilities
Trading property uplift to fair value on business combinations
Investment property revaluation
Short-term temporary differences
Fair value movement in financial interest in property assets

Total deferred tax

1 See Note 38 for an explanation of the prior year restatement.

2021
£m

1.0
2.8
3.8

2020
£m

(0.3)
(1.0)
(1.3)

2021
£m

2020
(restated)1
£m

2.1
0.2
0.2
1.2
3.7

(7.8)
(55.7)
(4.6)
(1.4)
(69.5)
(65.8)

2.2
1.5
1.2
4.0
8.9

(7.9)
(25.0)
(2.0)
(1.2)
(36.1)
(27.2)

Deferred tax has been calculated at a rate of 25.0% (2020: 19.0%) in line with the enacted main rate of corporation tax applicable
from 1 April 2023.

In addition to the tax amounts shown above, contingent tax based on EPRA market value measures, being tax on the difference
between the carrying value of trading properties in the statement of financial position and their market value, has not been
recognised by the Group. This contingent tax amounts to £133.9m, calculated at 25.0% (2020: £101.3m, calculated at 19.0%),
and will be realised as the properties are sold.

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 a period 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.

130

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED14. Dividends

Accounting policy

Dividends are recognised through equity when approved by the Company’s Shareholders or on payment, whichever is earlier.

Dividends paid in the year are shown below:

Ordinary dividends on equity shares:
Final dividend for the year ended 30 September 2019 – 3.46p per share
Interim dividend for the year ended 30 September 2020 – 1.83p per share
Final dividend for the year ended 30 September 2020 – 3.64p per share

Interim dividend for the year ended 30 September 2021 – 1.83p per share

2021
£m

–
–
24.5

12.3
36.8

2020
£m

21.2
12.3
–

–
33.5

Subject to approval at the AGM, the final dividend of 3.32p per share (gross) amounting to £24.6m will be paid on 14 February 2022
to Shareholders on the register at the close of business on 31 December 2021. Shareholders will again be offered the option to
participate in a dividend reinvestment plan and the last day for election is 24 January 2022. An interim dividend of 1.83p per share
amounting to a total of £12.3m was paid to Shareholders on 2 July 2021.

15. Earnings per share

Accounting policy
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 Plan (‘LTIP’) and Deferred Bonus Plan (‘DBP’)
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 LTIP and DBP, based upon the number of shares that would be issued if 30 September 2021 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 2021

Profit for
the year
£m

Weighted
average
number of
shares
(millions)

30 September 2020
(restated)1

Earnings
per share
(pence)

Profit for
the year
£m

Weighted
average
number of
shares
(millions)

109.5

677.7

16.2

82.8

649.1

–

2.7

109.5

680.4

(0.1)

16.1

–

2.6

82.8

651.7

Earnings
per share
(pence)

12.8

(0.1)

12.7

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

1 See Note 38 for an explanation of the prior year restatement.

131

FINANCIAL STATEMENTS16. Investment property

Accounting policy

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.
Investment property falls within Level 3 of the fair value hierarchy as defined by IFRS 13. Further details are given in Note 27.

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 repair and
maintenance costs are charged to the consolidated 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 consolidated
income statement of the period in which they arise.

When the Group begins to redevelop an existing trading property for continued future use as an investment property, the
property is transferred to investment property and held as a non-current asset. The property is remeasured to fair value
as at the date of the transfer with any gain or loss being taken to the income statement.

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 consolidated income statement of the period in which this occurs.

Opening balance
Acquisitions
Capital expenditure – completed assets
Capital expenditure – assets under construction
Total additions
Transfer from inventories
Disposals (Note 8)
Net valuation gains
Closing balance

2021
£m

1,778.9
78.0
22.8
261.5
362.3
–
(38.8)
76.8
2,179.2

2020
£m

1,574.6
37.7
11.4
146.2
195.3
13.1
(33.9)
29.8
1,778.9

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 judgements’.

The historical cost of the Group’s investment property as at 30 September 2021 is £1,943.4m (2020: £1,618.3m).

Direct property repair and maintenance costs arising from investment property that generated rental income during the year were
£19.1m (2020: £14.7m).

17. Property, plant and equipment

Accounting policy

Property, plant and equipment are stated at cost less residual value and depreciation and comprise fixtures, fittings and
equipment. Depreciation is charged to the income statement on a straight-line basis over the estimated useful life ranging
from 3–5 years.

132

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED18. Investment in associates

Opening balance
Share of profit for the year
Loans advanced to associates
Closing balance

2021
£m

14.7
0.8
–
15.5

2020
£m

11.7
0.1
2.9
14.7

The closing balance comprises share of net assets of £0.9m (2020: £0.1m) and net loans due from associates of £14.6m
(2020: £14.6m). At the balance sheet date, there is no expectation of any material credit losses on loans due.

As at 30 September 2021, the Group’s interest in active associates was as follows:

Vesta LP

% of ordinary share
capital held

20.0

Country of incorporation

Accounting period end

30 September

In relation to the Group’s investment in associates, the aggregated assets, liabilities, revenues and profit or loss of associates is
shown below:

2021 Summarised income statement

£m

Net rental income and other income
Administration and other expenses
Operating loss
Revaluation gains on investment property
Profit before tax
Tax
Profit after tax

2021 Summarised statement of financial position

£m

Investment property
Current assets
Total assets
Current liabilities
Net assets

Vesta LP

–
(0.5)
(0.5)
4.3
3.8
–
3.8

Vesta LP

75.1
4.0
79.1
(74.2)
4.9

133

FINANCIAL STATEMENTS2020 Summarised income statement

£m

Net rental income and other income
Administration and other expenses
Operating loss
Revaluation gains on investment property
Profit before tax
Tax
Profit after tax

2020 Summarised statement of financial position

£m

Investment property
Current assets
Total assets
Current liabilities
Net assets

19. Investment in joint ventures

Opening balance
Share of loss for the year
Further investment1
Loans advanced to joint ventures
Closing balance

Vesta LP

(0.4)
(0.1)
(0.5)
1.2
0.7
(0.2)
0.5

Vesta LP

72.1
2.7
74.8
(74.1)
0.7

2020
£m

21.6
(1.6)
5.5
1.8
27.3

2021
£m

27.3
(0.3)
0.8
1.6
29.4

1 Grainger invested £0.8m into Connected Living London (BTR) Limited in the year (2020: £5.5m).

The closing balance comprises share of net assets of £8.5m (2020: £8.0m) and net loans due from joint ventures of £20.9m
(2020: £19.3m). At the balance sheet date, there is no expectation of any material credit losses on loans due.

At 30 September 2021, the Group’s interest in active joint ventures was as follows:

Connected Living London (BTR) Limited
Curzon Park Limited
Helical Grainger (Holdings) Limited
Lewisham Grainger Holdings LLP

% of ordinary share

capital held Country of incorporation

Accounting period end

51
50
50
50

UK
UK
UK
UK

30 September
31 March
31 March
30 September

Helical Grainger (Holdings) Limited is in liquidation as at 30 September 2021.

134

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED19. Investment in joint ventures continued
In relation to the Group’s investment in joint ventures, the aggregated assets, liabilities, revenues and profit or loss are shown below:

2021 Summarised income statement

£m

Administration and other expenses
Loss before tax
Tax
Loss after tax

2021 Summarised statement of financial position

Investment property
Current assets
Total assets
Current liabilities
Net assets

2020 Summarised income statement

£m

Administration and other expenses
Loss before tax
Tax
Loss after tax

2020 Summarised statement of financial position

Investment property
Current assets
Total assets
Current liabilities
Net assets

Connected
Living London
(BTR) Limited

Curzon Park
Limited

Helical
Grainger
(Holdings)
Limited

Lewisham
Grainger
Holdings LLP

(0.3)
(0.3)
–
(0.3)

17.6
2.4
20.0
(3.1)
16.9

(0.1)
(0.1)
–
(0.1)

–
36.7
36.7
(36.7)
–

–
–
–
–

–
–
–
–
–

(0.1)
(0.1)
–
(0.1)

3.7
–
3.7
(3.9)
(0.2)

Connected
Living London
(BTR) Limited

Curzon Park
Limited

Helical
Grainger
(Holdings)
Limited

Lewisham
Grainger
Holdings LLP

CCZ a.s.1

(0.8)
(0.8)
–
(0.8)

14.5
3.7
18.2
(2.6)
15.6

(0.7)
(0.7)
(1.8)
(2.5)

–
36.5
36.5
(36.5)
–

–
–
–
–

–
–
–
–
–

–
–
–
–

2.9
–
2.9
(2.9)
–

–
–
–
–

–
–
–
–
–

Total

(0.5)
(0.5)
–
(0.5)

21.3
39.1
60.4
(43.7)
16.7

Total

(1.5)
(1.5)
(1.8)
(3.3)

17.4
40.2
57.6
(42.0)
15.6

1 CCZ a.s., the Group’s joint venture interest in the Czech Republic has been liquidated following resolution of outstanding matters.

20. Financial interest in property assets (‘CHARM’ portfolio)

Accounting policy

The CHARM portfolio is a financial interest in equity mortgages held by the Church of England Pensions Board as mortgagee.
It is accounted for under IFRS 9 and is measured at fair value through profit and loss.

It is initially recognised at fair value and subsequently carried at fair value. Subsequent to initial recognition, the net change in
value recorded is as follows: i) cash received from the instrument in the year is deducted from the carrying value of the assets;
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 arising from ii) above is recorded
through the consolidated income statement and is shown on the line ‘Income from financial interest in property assets’.

Opening balance
Cash received from the instrument
Amounts taken to income statement
Closing balance

2021
£m

73.3
(8.8)
7.2
71.7

2020
£m

76.4
(8.3)
5.2
73.3

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 judgements’, and the financial asset is included within the fair value
hierarchy within Note 27.

135

FINANCIAL STATEMENTS21. Intangible assets

Accounting policy

Intangible assets comprise computer software and goodwill.

Costs incurred in relation to computer software that the Group has exclusive right of use to are capitalised and amortised on a
straight-line basis over the estimated useful lives of the assets from the date they are available for use. The effective life is
assessed in accordance with the period that the Group expects benefits from its investment in technology to be consumed.
Amortisation is charged to the consolidated income statement.

Costs incurred in relation to computer software that the Group does not have exclusive right of use to, including its Software as a
Service (‘SaaS’) arrangements, are not accounted for as intangible assets. Configuration and customisation costs incurred prior to
receiving services are prepaid and expensed to the Consolidated Income Statement once the service is in use. All other expenditure
in relation to non-exclusive SaaS is expensed to the Consolidated Income Statement as incurred.

Goodwill is tested for impairment based on a value in use calculation at each reporting date.

Opening balance
Amortisation
Closing balance

1 See Note 38 for an explanation of the prior year restatement.

2021
£m

0.8
(0.3)
0.5

2020
(restated)1
£m

1.2
(0.4)
0.8

Following the IFRS Interpretations Committee publishing accounting guidance for configuration and customisation expenditure
relating to Software as a Service arrangements, the Group has reviewed and revised its accounting policy in relation to intangible
assets which includes accounting for computer software. This has resulted in reclassifying relevant expenditure that was previously
capitalised as an intangible asset and expensing this to the income statement as administrative expenses.

The impact of this change is outlined in Note 38.

22. Inventories – trading property

Accounting policy

Tenanted residential properties held-for-sale in the normal course of business within the PRS and Reversionary segments
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.

Legacy land and development property held within the Other 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 sales proceeds that the Group expects on sale of a property or current market value net
of associated selling costs.

Opening balance
Additions
Transfer to investment property
Disposals (Note 7)
Impairment of inventories to net realisable value
Closing balance

2021
£m

657.4
12.6
–
(74.7)
(0.1)
595.2

2020
£m

700.0
14.5
(13.1)
(43.3)
(0.7)
657.4

The closing balance above reflects the lower of historical cost and net realisable value of inventory owned by the Group rather than
the current market value. Market value is considered to be a more relevant reflection of the value of inventory owned by the Group.
The segmental allocation of PRS, Reversionary and Development inventory, as well as additional information including their market
value is detailed in Note 4.

136

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDInformation relating to the judgements and assumptions adopted by management in relation to inventories is set out in Note 2
‘Critical accounting estimates and judgements’. 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.

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 is unlikely to be within the 12 months subsequent to the balance sheet date and any payments are likely
to be spread over a number of years.

Amounts relating to inventories that have been recognised as an expense in the consolidated income statement are as follows:

Carrying value of trading property sold (Note 7)
Impairment of inventories to net realisable value

23. Trade and other receivables

Accounting policy

2021
£m

74.7
0.1

2020
£m

43.3
0.7

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 an expectation
of cash shortfalls over the expected life of the amounts due. The movement in the provision is recognised in the consolidated
income statement.

Rent and other tenant receivables
Deduct: Provision for impairment
Rent and other tenant receivables – net
Contract assets
Other receivables
Prepayments
Closing balance

2021
£m

5.7
(2.3)
3.4
2.6
29.8
2.7
38.5

2020
£m

4.8
(2.4)
2.4
3.3
23.0
2.6
31.3

The Group’s assessment of expected credit losses involves estimation given its forward-looking nature. This is not considered to be
an area of significant judgement or estimation due to the balance of gross rent and other tenant receivables of £5.7m (2020: £4.8m).
Assumptions used in the forward-looking assessment are continually reviewed to take into account likely rent deferrals.

At the balance sheet date, there is no expectation of any material credit losses on contract assets.

Other receivables include £10.4m (2020: £9.3m) due from land sales, which is receivable no later than September 2022.

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 27 ‘Financial risk management and derivative financial instruments’.

24. Provisions for other liabilities and charges

Accounting policy

Provisions are recognised when: i) the Group has a present obligation as a result of a past event; ii) it is probable that an outflow
of resources will be required to settle the obligation; and iii) a reliable estimate can be made of the amount of the obligation.

137

FINANCIAL STATEMENTS25. Trade and other payables

Accounting policy

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method. Refer to Note 35 for accounting policy in relation to lease liabilities.

Current liabilities
Deposits received
Trade payables
Lease liabilities (Note 35)
Tax and social security costs
Accruals
Deferred income

Non-current liabilities
Lease liabilities (Note 35)

Total trade and other payables

2021
£m

2020
£m

9.1
16.3
0.7
4.9
72.6
6.2
109.8

0.6
0.6
110.4

7.2
16.4
0.9
0.5
44.2
4.1
73.3

1.3
1.3
74.6

Within accruals, £43.7m comprises accrued expenditure in respect of ongoing construction activities (2020: £28.4m).

26. Interest-bearing loans and borrowings

Accounting policy

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 consolidated 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 consolidated statement of financial position date.

Non-current liabilities
Bank loans – Pounds Sterling
Bank loans – Euros
Non-bank financial institution
Corporate bonds
Closing balance

(a) Bank loans

2021
£m

2020
£m

306.5
0.9
346.6
693.5
1,347.5

352.2
0.9
346.2
692.6
1,391.9

Sterling bank loans include variable rate loans bearing interest at rates between 1.6% and 1.8% above LIBOR and Euro bank loans
include variable rate loans bearing interest at a rate of 1.6% above EURIBOR.

The weighted average variable interest rate on bank loans as at 30 September 2021 was 1.7% (2020: 1.7%). Bank loans are secured
by fixed and floating charges over specific property and other assets of the Group.

Unamortised costs in relation to bank loans of £3.5m (2020: £4.8m) will be amortised over the life of the loans to which they relate.

138

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED26. Interest-bearing loans and borrowings continued
(b) Non-bank financial institution

£350.0m is funded by fixed rates loans from Rothesay Life PLC across three tranches: £75.0m maturing July 2026, £75.0m maturing
October 2027 and £200.0m maturing July 2029.

The weighted average interest rate on non-bank loans as at 30 September 2021 was 2.4% (2020: 2.4%). Unamortised costs in relation
to these fixed rate loans of £3.3m (2020: £3.8m) will be amortised over the life of the loans to which they relate.

In 2020, the Group issued a new ten-year £350.0m corporate bond at 3.0% due July 2030. In 2018, the Group issued a ten-year
£350.0m corporate bond at 3.375% due April 2028.

As at 30 September 2021 unamortised costs in relation to the corporate bonds stood at £3.9m (2020: £4.5m), and the outstanding
discount was £2.6m (2020: £2.9m).

(d) Other loans and borrowings information

The above analyses of loans and borrowings are net of unamortised loan issue costs and the discount on issuance of the corporate
bonds. As at 30 September 2021, unamortised costs totalled £10.7m (2020: £13.1m) and the outstanding discount was £2.6m
(2020: £2.9m).

In accordance with IAS 7 Statement of Cash Flows, the Group is required to detail any changes in liabilities that arise from financing
activities throughout the year. These changes are detailed below.

2021

2020

£m

Opening balance
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Transaction costs related to loans and borrowings
Total changes from financing cash flows
Other changes
Gross interest accrued
Gross interest paid
Amortisation of borrowing costs net of premiums
Changes to fair value of derivatives through profit
and loss
Changes in fair value of derivatives through
hedging reserve
Total other changes
Closing balance

Loans and
borrowings

Interest
payable

1,391.9

8.7

30.0
(77.0)
–
(47.0)

–
–
2.6

–

–
2.6
1,347.5

–
–
–
–

45.7
(45.6)
–

–

–
0.1
8.8

Derivatives used for
hedging the liabilities
from financing
activities

Assets

Liabilities

Loans and
borrowings

Interest
payable

Assets

Liabilities

–

–
–
–
–

–
–
–

–

–
–
–

20.6

1,276.8

6.4

–
–
–
–

–
–
–

–

697.0
(580.0)
(3.1)
113.9

–
–
1.2

–

(16.1)
(16.1)
4.5

–
1.2
1,391.9

–
–
–
–

39.7
(37.4)
–

–

–
2.3
8.7

–

–
–
–
–

–
–
–

–

–
–
–

17.3

–
–
–
–

–
–
–

–

3.3
3.3
20.6

139

FINANCIAL STATEMENTS27. Financial risk management and derivative financial instruments

Accounting policy
Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments
with original maturities of three months or less.

Derivative financial instruments

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 consolidated income statement, unless the derivatives qualify for cash flow hedge accounting, and have been
designated as such, 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 is immediately transferred to the consolidated income statement.

Fair value estimation

The fair values of interest rate derivatives are based on a discounted cash flow model using market information.

Derecognition of financial assets and liabilities

Derecognition is the point at which the Group removes an asset or liability from its consolidated 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 asset
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 fair value through profit and loss (previously 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.

140

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDCategories 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:

£m

Non-current assets
Financial interest in property assets
Current assets
Trade and other receivables
excluding prepayments
Cash and cash equivalents
Total financial assets

£m

Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current liabilities
Trade and other payables
Derivative financial instruments
Total financial liabilities
Net financial assets/(liabilities)

£m

Non-current assets
Financial interest in property assets
Current assets
Trade and other receivables
excluding prepayments
Cash and cash equivalents
Total financial assets

£m

2021

Loans and
receivables/
cash and
cash
equivalents

Assets at
fair value
through
profit and
loss

–

71.7

35.8
317.6
353.4

–
–
71.7

Derivatives
used for
hedging

Other
financial
assets

Total book
value

Fair value
adjustment

Fair value

–

–
–
–

–

–
–
–

71.7

35.8
317.6
425.1

–

–
–
–

71.7

35.8
317.6
425.1

Loans and
receivables/
cash and
cash
equivalents

Liabilities at
fair value
through
profit and
loss

Derivatives
used for
hedging

Other
financial
liabilities at
amortised
cost

Total book
value

Fair value
adjustment

Fair value

–
–

–
–
–
353.4

–
–

–
–
–
71.7

Loans and
receivables/
cash and
cash
equivalents

Assets at
fair value
through
profit and
loss

–

73.3

28.7
369.1
397.8

–
–
73.3

–
–

0.6
1,347.5

–
4.5
4.5
(4.5)

109.8
–
1,457.9
(1,457.9)

2020

109.8
4.5
1,462.4
(1,037.3)

–
46.7

–
–
46.7
(46.7)

0.6
1,394.2

109.8
4.5
1,509.1
(1,084.0)

Derivatives
used for
hedging

Other
financial
assets

Total book
value

Fair value
adjustment

Fair value

–

–
–
–

–

–
–
–

73.3

28.7
369.1
471.1

–

–
–
–

73.3

28.7
369.1
471.1

Loans and
receivables/
cash and
cash
equivalents

Liabilities at
fair value
through
profit and
loss

Derivatives
used for
hedging

Other
financial
liabilities at
amortised
cost

Total book
value

Fair value
adjustment

Fair value

–
–

–
–
–
397.8

–
–

–
–
–
73.3

–
–

1.3
1,391.9

–
20.6
20.6
(20.6)

73.3
–
1,466.5
(1,466.5)

73.3
20.6
1,487.1
(1,016.0)

–
48.7

–
–
48.7
(48.7)

1.3
1,440.6

73.3
20.6
1,535.8
(1,064.7)

141

FINANCIAL STATEMENTS
27. Financial risk management and derivative financial instruments continued
The fair value difference relates to the Group’s corporate bonds and the non-bank loans, which are stated at amortised cost in
the consolidated statement of financial position. The fair value of the bonds is calculated as £740.0m (2020: £737.7m) based on
quoted prices in traded markets. The fair value of the non-bank loans is calculated as £356.7m (2020: £361.0m) and is calculated
by independent financial advisers (Centrus Group) by reference to quoted iBoxx index rates. There is no requirement under IFRS 9
to revalue these loans to fair value in the consolidated statement of financial position.

Included in cash above is £11.2m (2020: £9.1m) relating to cash held on behalf of tenants, leaseholders and clients comprising
service charge amounts, sinking fund balances, tenant deposits and cash held on behalf of joint ventures. These cash amounts are
held by the Group in client bank accounts and are excluded from net debt. In addition, £43.9m (2020: £41.5m) of the cash balance
is restricted in use by underlying financing arrangements comprising either reserve fund amounts or amounts where the release
of cash is contingent upon proof of qualifying expenditure or quarterly cash waterfalls.

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. Group treasury reports to the Audit 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, credit availability risk, house price risk in relation to the Tricomm
Housing portfolio and our financial interest in property assets, and capital risk.

Financial risk factors
1)

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 (CHARM) relates to a financial interest in equity mortgages held by the Church of
England Pensions Board. The Group’s 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.

The Group sometimes enters into land sales contracts under which a proportion of the consideration is deferred and recognised
within other receivables (Note 23). Each purchaser is subject to financial due diligence prior to sale. At 30 September 2021, £10.4m
(2020: £9.3m) was outstanding.

The Group also has credit risk relating to trade receivables. Under IFRS 9, the Group is required to provide for any expected credit
losses arising from trade receivables. 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 are 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 £6.9m (2020: £5.7m) 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 £3.4m, we consider
£nil to be not due and not impaired. All of the £29.8m other receivables balance and all of the £2.6m contract assets are considered
not due and not impaired.

As at 30 September 2021, tenant arrears of £2.3m within trade receivables were impaired and fully provided for (2020: £2.4m).
The impaired receivables are based on a review of expected credit losses, which is detailed in Note 23. Impaired receivables and
receivables not considered to be impaired are not material to the financial statements and, therefore, no further analysis is provided.

142

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDThe 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 2021, the fair value of all interest rate derivatives that had a positive
value was £nil (2020: £nil).

At 30 September 2021, the combined credit exposure arising from cash held at banks, money market deposits and interest rate swaps
was £317.6m (2020: £369.1m), which represents 9.7% (2020: 12.4%) 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

2021
£m

316.4
1.2
317.6

2020
£m

367.6
1.5
369.1

At the year end, £240.5m was placed on deposit (2020: £173.3m) at effective interest rates between 0.0% and 0.4% (2020: 0.0%
and 0.2%). 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 2021 (2020: £1.0m).

Liquidity risk

The Group ensures that it maintains continuity and flexibility through a spread of maturities.

Although the Group’s core funding is subject to covenants requiring certain levels of LTV with respect to the entities in the Group of
obligors, and to maintaining a certain level of interest cover at the Group level, the loans are not secured directly against any property
allowing operational flexibility.

The Group ensures that it maintains sufficient cash for operational requirements at all times. 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 highly cash generative from its sales of vacant properties, gross rents and
management fees. In adverse trading conditions, tenanted and other sales can be increased and new acquisitions can be stopped.
Consequently, the Group is able to reduce gearing (‘LTV’) levels and improve liquidity quickly.

The Group’s credit rating is currently provided by Fitch and S&P. Fitch and S&P’s most recent assessments on the Group were issued
on 18 December 2020 and 27 January 2021 respectively during the on-going Covid-19 pandemic. Fitch assigned the Group a long-
term issuer default rating of ‘BBB-‘ and the Group’s Corporate Bonds’ senior secured issue ratings of ‘BBB’. S&P affirmed the Group’s
long-term issuer default rating of ‘BB+’ and the Group’s Corporate Bonds’ senior secured issue ratings of ‘BBB-‘. Both Fitch & S&P
assigned the Group’s credit outlook as ‘Stable’. The Group’s stable credit outlook suggests there is currently very little risk of a credit
rating downgrade to the Group. The Group monitors rating agency metrics to ensure we maintain or improve upon the Group’s
current credit ratings. The Group’s stable credit outlook suggests there is currently very little risk of a credit rating downgrade to
the Group.

In the event of a credit rating downgrade, there may be an increase in the coupon payable on the Group’s Corporate Bonds should
the senior secured issue rating fall below BBB-. However, the coupon would revert to the original coupon payable should the credit
rating recover to BBB- or higher. This could result in an increase in the Group’s annual interest charge of £8.7m. This increase in
interest costs would also affect the Group’s interest cover financial covenant. However there is significant headroom on our facility
financial covenants and the Group has determined that we would remain compliant and retain significant covenant headroom
despite this increase in interest costs. No other debt facilities or financial covenants of the Group would be affected by a credit
rating downgrade.

The Group’s fixed rate borrowings are stated at amortised cost in the financial statements and there is currently no requirement
under IFRS 9 to revalue these borrowings in the financial statements of the Group. Therefore, there would be no impact to the
Group’s measurement of borrowings in the event of a credit rating downgrade.

In accordance with IFRS 13, the Group measures derivatives at fair value including the effect of counterparty credit risk. Where
derivatives have been designated in a cash flow hedge relationship, the Group carries out hedge effectiveness testing in accordance
with IFRS 9. In the event of a credit rating downgrade, there may be an impact on the fair value of the Group’s derivative contracts
as the credit quality of the Group decreases which may give rise to a requirement to recognise some hedge ineffectiveness in the
financial statements. However, in accordance with hedge effectiveness requirements under IFRS 9, credit valuation adjustments
included in the measurement of derivative fair values would need to dominate movements in fair value before creating hedge
ineffectiveness. The Group does not consider that a credit rating downgrade will impact derivative fair values and give rise to
a material level of hedge ineffectiveness.

143

FINANCIAL STATEMENTSTotal

1,347.5
255.8
4.9
110.4

1,391.9
292.5
21.4
74.6

2020
£m

–
332.1
–
332.1

971.8
81.1
(0.1)
–

1,045.5
111.6
1.0
–

2021
£m

–
379.1
–
379.1

27. Financial risk management and derivative financial instruments continued
The following table analyses the Group’s financial liabilities and net-settled derivative financial liabilities at the consolidated
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 using yield curves as at 30 September 2021.

£m

At 30 September 2021
Interest-bearing loans and borrowings (Note 26)
Interest on borrowings
Interest on derivatives
Trade and other payables
At 30 September 2020
Interest-bearing loans and borrowings (Note 26)
Interest on borrowings
Interest on derivatives
Trade and other payables

Less than
1 year

Between
1 and
2 years

Between
2 and
5 years

More than
5 years

–
38.4
2.8
109.8

–
37.8
3.9
73.3

84.8
39.3
1.2
0.6

–
38.1
5.3
0.7

290.9
97.0
1.0
–

346.4
105.0
11.2
0.6

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
Over five years

3) Market risk

The Group is exposed to market risk through interest rates, the availability of credit and house price movements relating to the
Tricomm Housing portfolio and the CHARM portfolio. 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.

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 following table presents the Group’s assets and liabilities that are measured at fair value:

£m

Level 3
CHARM
Investment property

Level 2
Interest rate swaps – in cash flow hedge accounting relationships

2021

2020

Assets

Liabilities

Assets

Liabilities

71.7
2,179.2
2,250.9

–
–

–
–
–

4.5
4.5

73.3
1,778.9
1,852.2

–
–

–
–
–

20.6
20.6

The significant unobservable inputs affecting the carrying value of the CHARM portfolio are house price inflation and discount rates.
Assumptions used are detailed in Note 2 and reconciliation of movements and amounts recognised in the consolidated income
statement are detailed in Note 20.

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FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED
The investment valuations provided by Allsop LLP and CBRE Limited are based on the RICS Professional Valuation Standards,
but include a number of unobservable inputs and other valuation assumptions and are detailed in Note 2.

The fair value of swaps and caps were valued in-house by a specialised treasury management system, using first a discounted cash
flow model and market information. The fair value 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 and caps
are observable, they all fall within Level 2.

Interest rate swaps and caps are all classified as either current assets or current liabilities.

The notional principal amount of the outstanding interest rate swap and cap contracts as at 30 September 2021 was £306.3m
(2020: £357.1m).

In accordance with IFRS 9, the Group has reviewed its interest rate hedges. In the absence of hedge accounting, movements
in fair value are taken directly to the consolidated 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 the cash flow hedge reserve via other
comprehensive income.

The reconciliation between opening and closing balances for Level 3 is detailed in the table below:

Assets – Level 3

Opening balance
Amounts taken to income statement
Other movements
Closing balance

2021
£m

1,852.2
84.0
314.7
2,250.9

2020
£m

1,651.0
34.6
166.6
1,852.2

The following assets and liabilities are excluded from the above table as fair value is not the accounting basis for the Group’s financial
statements, but is the basis for the Group’s EPRA NRV, EPRA NTA and EPRA NDV measures:

£m

Accounting basis

Classification if fair valued

Book value

Fair value

Book value

Fair value

Inventories – trading property Lower of cost and net

Corporate bonds
Non-bank loans

realisable value
Amortised cost
Amortised cost

Level 3
Level 1
Level 3

595.2
700.0
350.0

1,130.7
740.0
356.7

657.4
700.0
350.0

1,190.8
737.7
361.0

2021

2020

(a) 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 and caps. 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 account 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 IFRS 9 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 30% of expected borrowing. As at 30 September 2021, 100% (2020: 100%) 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 £nil (2020: £0.4m). Similarly, a 1% decrease would increase annual profits by £nil (2020: £0.4m).

Based on the Group’s interest rate profile at the statement of financial position date, a 1% increase in interest rates would increase
the Group’s equity by £6.8m (2020: £12.5m). Similarly, a 1% decrease would decrease the Group’s equity by £6.8m (2020: £12.5m).

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 IFRS 9, these movements in fair value are
recognised directly in other comprehensive income rather than the consolidated income statement.

As at 30 September 2021, the market value of derivatives designated as cash flow hedges under IFRS 9 is a net liability of
£4.5m (2020: net liability of £20.6m). No amount is recognised within the income statement for ineffectiveness of cash flow
hedges (2020: £nil). The fair value movement on derivatives not in hedge accounting relationships resulted in a charge of £nil
(2020: £nil) in the consolidated income statement.

At 30 September 2021, the market value of derivatives not designated as cash flow hedges under IFRS 9 is £nil (2020: £nil).
The cash flows occur and enter in the determination of profit and loss until the maturity of the hedged debt.

145

FINANCIAL STATEMENTS27. Financial risk management and derivative financial instruments continued
The table below summarises debt hedged:

Hedged debt

Hedged debt maturing:
Within one year
Between one and two years
Between two and five years
Over five years

2021
£m

–
–
306.3
–
306.3

2020
£m

–
–
357.1
–
357.1

Interest rate profile – including the effect of derivatives and amortisation of issue costs:

Weighted
average
interest
rate
%

Average
maturity
years1

3.1
3.4
2.0
3.1

7.4
2.7
2.7
5.5

2021

Sterling
£m

1,050.0
306.3
3.7
1,360.0

Euros
£m

Gross debt
total
£m

–
–
0.9
0.9

1,050.0
306.3
4.6
1,360.9

Weighted
average
interest
rate
%

3.1
3.1
1.4
3.1

Average
maturity
years

8.4
3.7
3.7
6.5

2020

Sterling
£m

1,050.0
357.1
–
1,407.1

Euros
£m

Gross debt
total
£m

–
–
0.8
0.8

1,050.0
357.1
0.8
1,407.9

Fixed rate
Hedged rate
Variable rate

1 Average maturity years excluding extension options. Including extension options, average maturity years is 5.6 years (2020: 6.6 years).

At 30 September 2021, the fixed interest rates on the interest rate swap contracts vary from 0.69% to 1.68% (2020: 0.69% to 1.82%);
the weighted average rates are shown in the table above.

(b) 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 30 September 2021, the Group had available headroom of £641.0m, with the
next debt maturity not until November 2022.

(c) 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.

(d) 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 (‘LTV’). The current capital
structure of the Group comprises a mix of debt and equity. Debt is typically 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 LTV and ICR. The covenants operate on a facility
by facility basis, with maximum LTV ranges between 70% – 75% and minimum ICR cover of 1.35x – 1.75x. As at 30 September 2021,
Group LTV was 30.4% (see page 33 for calculation) and Group ICR was 3.4x, with minimum headroom being a 25.6% increase in LTV
and 0.4x reduction in ICR based on individual facilities. The Board regularly reviews all current and projected future levels to monitor
anticipated compliance and available headroom against key thresholds. LTV 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 deems a range of LTV
of up to 45% 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 2021,
the weighted average cost of debt was 3.1% (2020: 3.1%). Investment and development opportunities are evaluated using a risk
adjusted WACC in order to ensure long-term Shareholder value is created.

146

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FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED28. Pension costs

Accounting policy

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 future accrual of benefits 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 consolidated 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.

The defined benefit obligation is valued by projecting the best estimate of future benefit outgoings (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 consolidated statement of financial position date.

The pension scheme assets comprise investments in equities, bonds and cash, managed by Rathbones Investment Management
Limited and insurance policies managed by Friends Life. These assets are measured at fair value in the statement of financial
position.

The amount shown in the statement of financial position is the net of the present value of the defined benefit obligation and
the fair value of the scheme assets. When there is a surplus the Group considers the requirements of IFRIC 14 and whether there
is economic benefit available as a refund of this surplus, or through a reduction in future contributions. When an unconditional
right to future economic benefit exists, there is no restriction on the amount of surplus recognised.

There are no current or past service costs as the scheme is closed to new members and future accrual. 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.

(a) 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 funds do 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 77 to 98. The pension cost charge in these financial statements represents contributions payable
by the Group.

The charge of £1.2m (2020: £1.1m) is included within employee remuneration in Note 10.

(b) Defined benefit scheme

In addition to the above, the Group also operates a final salary defined benefit pension scheme, the BPT Retirement Benefits Scheme.
The assets of the scheme are held separately in funds administered by Trustees and are invested with Rathbones Investment
Management Limited, 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. No benefits have accrued since 30 June 2003, although active members retain

a final salary link.

– Deferred members: former employees of the Group.

– 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
Consumer Prices Index (‘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 Credit Method. The approximate overall duration of the
scheme’s defined benefit obligation as at 30 September 2021 was 18 years.

147

FINANCIAL STATEMENTS28. Pension costs continued
The IAS 19 calculations for disclosure purposes have been based upon the results of the actuarial valuation carried out as at
1 July 2019, updated to 30 September 2021, by a qualified independent actuary.

i) Principal actuarial assumptions under IAS 19 (p.a.)

Discount rate
Retail Price Index (‘RPI’) inflation
Consumer Prices Index (‘CPI’) inflation
Salary increases
Rate of increase of pensions in payment
Rate of increase for deferred pensioners

ii) Demographic assumptions

2021
%

2.10
3.70
2.90
4.20
5.00
2.90

2020
%

1.50
3.05
2.25
3.55
5.00
2.25

2020

2021

Mortality tables for pensioners

Mortality tables for non-pensioners

S2PA base tables CMI 2020 mortality
projections 1.25% p.a. long-term rate
As for pensioners

S2PA base tables CMI 2019 mortality
projections 1.25% p.a. long-term rate
As for pensioners

iii) Life expectancies

Life expectancy for a current 60-year-old (years)
Life expectancy at age 60 for an individual aged 45 (years)

Risks

Through the scheme, the Group is exposed to a number of risks:

30 September 2021

30 September 2020

Male

86
87

Female

88
89

Male

86
87

Female

88
89

– 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.

148

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FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDMarket value of scheme assets

The assets of the scheme are invested in a diversified portfolio as follows:

Equities
Bonds
Cash
Insurance policies
Total value of assets
The actual return on assets over the year was:

30 September 2021

30 September 2020

Market value
£m

% of total
scheme assets

Market value
£m

% of total
scheme assets

17.7
12.7
0.5
3.0
33.9
2.9

52
38
1
9
100

14.8
12.7
0.7
3.3
31.5
0.4

47
40
2
11
100

The assets of the scheme are held with Rathbones Investment Management Limited 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.

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
Actuarial 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 (gain)/loss on changes in financial assumptions
Benefits paid
Value of defined benefit obligation at the end of the year

Amounts recognised in the consolidated statement of comprehensive income:

Actuarial return on assets less interest
Actuarial gain/(loss) on defined benefit obligation

2021
£m

31.5
0.5
0.6
2.4
(1.1)
33.9

2021
£m

33.9
0.5
(2.9)
(1.1)
30.4

2021
£m

2.4
2.9
5.3

2020
£m

32.8
0.5
0.5
(0.1)
(2.2)
31.5

2020
£m

34.5
0.5
1.1
(2.2)
33.9

2020
£m

(0.1)
(1.1)
(1.2)

The gain shown in the above table of £5.3m (2020: loss of £1.2m) has been included in the consolidated statement of comprehensive
income on page 111.

In line with paragraph 23 of IFRIC 14, no additional liability is recognised as the additional contributions under the funding plan will
reduce the future contributions into the scheme.

149

FINANCIAL STATEMENTS28. Pension costs continued
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 2019. This valuation revealed a funding shortfall of £1.7m. As a result of this
valuation, the Group agreed to extend the existing recovery plan with the Trustees to pay additional contributions to eliminate the
deficit by 30 June 2022. Based on this plan, the Group expects to pay £0.6m p.a. to the scheme until 30 June 2022.

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 0.25% p.a.

Increase/(decrease) in deficit of £1.3m/(£1.4m)

Salary movement of 0.25% p.a.

Increase/(decrease) in deficit of £nil/(£nil)

Life expectancies movement of one year

Increase/(decrease) in deficit of £0.9m/(£0.9m)

29. Issued share capital

Accounting policy

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.

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.

Issue of share capital

In September 2021, the Group issued 67,379,369 new shares at an issue price of 310.0p raising a total amount of £204.1m net of costs.
The shares were issued with a nominal value of £0.05p per share. This increased share capital by £3.3m and the share premium
account by £200.8m.

Allotted, called-up and fully paid:
742,776,681 (2020: 675,284,566) ordinary shares of 5p each

2021
£m

37.1

2020
£m

33.8

During the year, The Grainger Employee Benefit Trust has not acquired any shares (2020: none). The Group paid £0.3m (2020: £0.1m)
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 £0.3m (2020: £0.1m) has been deducted from retained earnings within Shareholders’ equity.

As at 30 September 2021, share capital included 445,184 (2020: 976,381) shares held by The Grainger Employee Benefit Trust and
1,506,300 (2020: 1,506,300) shares held by Grainger plc as treasury shares. The total of these shares is 1,951,484 (2020: 2,482,681)
with a nominal value of £97,574 (2020: £124,134) and a market value as at 30 September 2021 of £6.0m (2020: £7.4m).

Movements in issued share capital during the year and the previous year were as follows:

At 30 September 2019
Issue of shares under the equity raise
Options exercised under the SAYE scheme (Note 30)
At 30 September 2020
Issue of shares under the equity raise
Options exercised under the SAYE scheme (Note 30)
At 30 September 2021

150

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Number

613,788,451
61,200,000
296,115
675,284,566
67,379,369
112,746
742,776,681

Nominal value
£’000

30,689
3,060
15
33,764
3,369
6
37,139

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Share-based payments

Accounting policy

The Group operates a number of equity-settled, share-based compensation plans comprising awards under a Long-Term Incentive
Plan (‘LTIP’), 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
consolidated 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.

Share awards

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 (£)

LTIP

DBSP

DBP

EDBP

SAYE

10 December
2020
Market-based

10 December
2020
Non-market-
based

10 December
2020

1 July 2021
3-year
scheme

1 July 2021
5-year
scheme

–
–

3
7
2.76
(0.1)
N/A
26.8
1.43

–
–

3
7
2.76
(0.1)
N/A
26.8
2.76

–
–

3
3
2.76
N/A
1.9
N/A
2.76

–
–

1-3
3
2.76
N/A
1.9
N/A
2.76

–
–

1-5
3
2.76
N/A
1.9
N/A
2.76

–
2.34

3
–
2.85
0.2
1.9
22.4
0.60

–
2.34

5
–
2.85
0.4
1.9
23.4
0.67

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 consolidated income statement is £1.7m (2020: £1.1m).

(a) LTIP scheme

For the awards granted in or after February 2020, 50% of the awards under the LTIP scheme are subject to an absolute Total
Shareholder Return performance condition measured over three years from the date of grant, 25% are subject to annual growth in
Total Property Return measured over three years from the date of grant, and the final 25% are subject to achieving Secured PRS
Investment targets measured over three years from the date of grant.

For previous grants, 50% of the awards are subject to an absolute total shareholder return performance condition and 50% are
subject to annual growth in Total Property Return, both measured over three years from the date of grant. The movement in LTIP
awards during the year is as follows:

Awards

LTIP
11 December 2017
12 December 2018
26 September 2018
6 February 2020
10 December 2020
Total

Opening
balance

Awards
granted

Awards
vested

Awards
lapsed

Closing
balance

560,789
779,989
66,598
745,567
–
2,152,943

–
–
–
–
578,250
578,250

(163,486)
–
–
–
–
(163,486)

(185,803)
(193,602)
–
(200,940)
–
(580,345)

211,500
586,387
66,598
544,627
578,250
1,987,362

151

FINANCIAL STATEMENTS30. Share-based payments continued
(b) DBP scheme

Awards granted under the DBSP relate to the compulsory deferral of 25% of any bonus paid to Executive Directors as described
in the Remuneration Committee report. Shares granted in this scheme have no further performance conditions other than
continued employment. There is a three-year vesting period from the date of grant, after which time participants can choose
to exercise their awards.

Awards granted under the DBP scheme have no specific performance conditions other than 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.

In addition to the DBP scheme, an enhanced DBP scheme (‘EDBP’) is 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.

The movement in DBP/EDBP awards during the year is as follows:

Awards

DBSP
1 December 2017
12 December 2018
1 December 2019
10 December 2020
DBP
21 December 2017
17 December 2018
17 December 2019
10 December 2020
EDBP
12 January 2016
11 January 2017
21 December 2017
17 December 2018
17 December 2019
10 December 2020
Total

Opening
balance

Awards
granted

Awards
exercised

Awards
lapsed

Closing
balance

93,327
112,439
53,359
–

33,140
35,320
26,058
–

40,736
60,020
36,826
86,582
82,184
–
659,991

–
–
–
73,854

–
–
–
34,298

–
–
–
–
–
98,534
206,686

(55,646)
–
–
–

(33,140)
–
–
–

(34,585)
–
–
(9,372)
(9,751)
(8,426)
(150,920)

–
(33,863)
(9,796)
–

–
–
–
–

(6,151)
–
–
–
(15,261)
(22,616)
(87,687)

37,681
78,576
43,563
73,854

–
35,320
26,058
34,298

–
60,020
36,826
77,210
57,172
67,492
628,070

152

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED(c) SAYE share option scheme

Awards under the SAYE scheme have been valued at fair value using a Black-Scholes valuation model. The number of shares subject
to options as at 30 September 2021, the periods in which they were granted and the periods in which they may be exercised and the
movement during the year are given below:

SAYE
2015
2016
2017
2018
2019
2020
2021

Weighted average exercise price (pence per share)

Exercise price
(pence)1

Exercise
period

Opening
balance

Awards
granted

Awards
exercised

156.6
150.7
189.9
228.6
193.0
245.0
234.0

2018-21
2019-22
2020-23
2021-24
2022-25
2023-26
2024-27

5,746
59,897
53,498
62,362
335,962
275,065
–
792,530
210.2

–
–
–
–
–
–
128,812
128,812
234.0

(5,746)
(33,331)
(16,571)
(46,975)
(6,778)
(3,345)
–
(112,746)
194.6

Awards
lapsed/
cancelled

–
(695)
(448)
(3,982)
(56,199)
(40,481)
–
(101,805)
214.8

Closing
balance

–
25,871
36,479
11,405
272,985
231,239
128,812
706,791
173.7

1 Exercise prices have been adjusted to reflect the impact of the 2019 rights issue.

For those share options exercised during the year, the weighted average share price at the date of exercise was 299.1p (2020: 302.4p).
For share options outstanding at the end of the year, the weighted average remaining contractual life was 1.9 years (2020: 2.3 years).
There were 38,674 (2020: 21,186) share options exercisable at the year end with a weighted average exercise price of 175.2p
(2020: 180.9p).

(d) SIP scheme

Awards under the SIP scheme have been based on the share price at the date of the award.

31. Changes in equity

The consolidated statement of changes in equity is shown on page 113. Further information relating to reserves is provided below.
Movements on the retained earnings reserve are set out in Note 32.

(a) 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.

(b) Cash flow hedge reserve

The fair value movements on those derivative financial instruments qualifying for hedge accounting under IFRS 9 are taken to this
reserve net of tax.

32. Movement in retained earnings

The retained earnings reserve comprises various elements, including:

Treasury shares bought back and cancelled

Included within retained earnings at 30 September 2021 is a balance of £7.8m (2020: £7.8m) relating to treasury shares bought back
and cancelled.

Investment in own shares

Included within retained earnings at 30 September 2021 is a balance of £1.1.m (2020: £3.3m) relating to investments in own shares.

33. List of subsidiaries, joint ventures and associates

A full list of all subsidiaries, joint ventures, associates and other related undertakings as at 30 September 2021 is set out in the Notes
to the parent company financial statements on pages 162 to 163.

153

FINANCIAL STATEMENTS34. Related party transactions

During the year ended 30 September 2021, the Group transacted with its associates and joint ventures (details of which are set out
in Notes 18 and 19). The Group provides a number of services to its associates and joint ventures. 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:

£’000

Connected Living London (BTR) Limited
Lewisham Grainger Holdings LLP
Vesta LP

Curzon Park Limited
Lewisham Grainger Holdings LLP
Vesta LP

2021

Fees
recognised

Year end
balance

Fees
recognised

1,588
930
275
2,793

1,211
319
559
2,089

2021

Interest
recognised
£’000

–
–
–
–

Year end
loan
balance
£m

18.1
2.8
14.6
35.5

Interest
rate
%

Interest
recognised
£’000

Nil
Nil
Nil

–
–
–
–

736
270
184
1,190

Year end
loan
balance
£m

17.0
2.3
14.6
33.9

2020

Year end
balance

557
611
139
1,307

2020

Interest
rate
%

Nil
Nil
Nil

Details of the Group’s other related parties are provided in Note 10 in relation to key management compensation and Note 28
in relation to the Group’s retirement benefit pension scheme.

35. Leases

Accounting policy

i) Group as lessor – Rental income from operating leases is recognised on a straight-line basis over the lease term. The net
present value of ground rents receivable is, in the opinion of the Directors, immaterial. Accordingly, ground rents receivable are
taken to the consolidated income statement on a straight-line basis over the period of the lease. Properties leased out to tenants
are included in the consolidated statement of financial position as either investment property or as trading property under
inventories.

ii) Group as lessee – The Group occupies a number of its offices as a lessee. The net present value of the lease liabilities is
recorded in the consolidated statement of financial position within trade and other payables. The leased office space is included
in the consolidated statement of financial position as a right-of-use asset in property, plant and equipment and depreciated over
the life of the lease.

154

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED35. Leases continued
(a) Group as lessor

The future aggregate minimum lease payments due to 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

2021
£m

14.6
23.8
77.0
115.4

2020
£m

14.5
28.1
78.0
120.6

There are no contingent rents recognised within net rental income in 2021 or 2020 relating to properties where the Group acts as a
lessor of assets under operating leases. The Group’s non-cancellable operating leases include regulated tenancies 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 in respect of these regulated tenancies and so these are excluded from the above analysis.

(b) Group as lessee

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

2021
£m

0.7
0.6
–
1.3

2020
£m

0.9
1.3
–
2.2

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.

36. Contingent liabilities

Properties in certain subsidiary companies form a ‘guarantee group’ with a market value of £2,132.7m and provide the security for
the Group’s core debt facility and Corporate Bonds.

Barclays Bank PLC and Lloyds Bank PLC have provided guarantees under performance bonds. As at 30 September 2021, total
guarantees amounted to £4.5m (2020: £5.2m).

37. Capital commitments

The Group has current commitments under a number of its PRS projects. The Group’s commitments, including its relevant share
of commitments to joint ventures and associates, are as follows:

Wholly-owned Group subsidiaries
Associates:
Vesta LP

2021
£m

869.8

–
869.8

2020
£m

797.1

0.2
797.3

155

FINANCIAL STATEMENTS38. Prior year restatement

In April 2021, the IFRS Interpretations Committee published accounting guidance for configuration and customisation expenditure
relating to cloud computing arrangements, including Software as a Service (‘SaaS’). The guidance recognises differences in
accounting treatment for SaaS expenditure between functionality that is broadly available to the software supplier’s general
customer base and functionality that is restricted to a specific user. The Committee has clarified the position that expenditure can
only be capitalised to the extent a SaaS customer has the power to obtain the future economic benefits by restricting others access
to those benefits, otherwise expenditure in relation to developing SaaS for use should be expensed.

Following the interpretation being published, the Group has reviewed and revised its accounting policy in relation to intangible assets
which includes accounting for computer software. This has resulted in reclassifying relevant expenditure that was previously
capitalised as an intangible asset and expensing this to the income statement as administrative expenses.

The impact of this change is outlined below:

Consolidated income statement impact
Administrative expenses
Profit before tax
Tax charge
Profit for the period attributable to the owners of the Company

Basic Earnings per share
Diluted Earnings per share

Consolidated statement of financial position impact
Expense SaaS configuration and customisation costs
Reversal of amortisation on SaaS configuration and customisation costs
Intangible assets
Deferred tax assets
Total non-current assets
Deferred tax liabilities
Total non-current liabilities
Net assets
Retained earnings
Total equity

2020
(previously
reported)
£m

Restatement

2020
restated

(28.7)
110.8
(18.0)
92.8

14.3p
14.2p

–
–
22.5
7.8
1,926.5
36.7
1,433.5
1,463.0
809.1
1,463.0

(11.7)
(11.7)
1.7
(10.0)

-1.5p
-1.5p

(22.0)
0.3
(21.7)
1.1
(20.6)
(0.6)
(0.6)
(20.0)
(20.0)
(20.0)

(40.4)
99.1
(16.3)
82.8

12.8p
12.7p

(22.0)
0.3
0.8
8.9
1,905.9
36.1
1,432.9
1,443.0
789.1
1,443.0

156

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUEDFI N A N C I A L S TATE M E NT S
PA RE NT CO M PA N Y S TATE M E NT O F FI N A N C I A L P O S ITI O N
A S AT 3 0 SEP T EMB ER

Fixed assets
Investments
Current assets
Trade and other receivables
Cash at bank and in hand

Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Interest-bearing loans and borrowings
NET ASSETS
Capital and reserves
Issued share capital
Share premium account
Capital redemption reserve
Retained earnings
TOTAL EQUITY

Notes

2021
£m

2020
£m

1,226.8

1,178.1

735.5
240.7
976.2
(48.7)
927.5
2,154.3

(832.7)
1,321.6

37.1
817.3
0.3
466.9
1,321.6

587.8
181.4
769.2
(8.8)
760.4
1,938.5

(831.6)
1,106.9

33.8
616.3
0.3
456.5
1,106.9

The financial statements on pages 157 to 163 were approved by the Board of Directors on 17 November 2021 and were signed
on their behalf by:

Helen Gordon
Director

Rob Hudson
Director

157

FINANCIAL STATEMENTS

PA RE NT CO M PA N Y S TATE M E NT O F C H A N G E S I N EQ U IT Y

Balance as at 1 October 2019
Profit for the year
Issue of share capital
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid
Balance as at 30 September 2020
Profit for the year
Issue of share capital
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid
Balance as at 30 September 2021

Issued share
capital
£m

Share
premium
£m

Capital
redemption
reserve
£m

Retained
earnings
£m

Total equity
£m

30.7
–
3.1
–
–
–
–
33.8
–
3.3
–
–
–
–
37.1

436.5
–
179.4
0.4
–
–
–
616.3
–
200.8
0.2
–
–
–
817.3

0.3
–
–
–
–
–
–
0.3
–
–
–
–
–
–
0.3

234.4
254.6
–
–
(0.1)
1.1
(33.5)
456.5
45.8
–
–
(0.3)
1.7
(36.8)
466.9

701.9
254.6
182.5
0.4
(0.1)
1.1
(33.5)
1,106.9
45.8
204.1
0.2
(0.3)
1.7
(36.8)
1,321.6

158

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
N OTE S TO TH E PA RE NT CO M PA N Y FI N A N C I A L S TATE M E NT S

Company accounting policies

(a) Basis of preparation

The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS 101’). The financial statements have been prepared on a going concern basis under the historical cost
convention, in accordance with the Companies Act 2006.

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
international accounting standards in conformity with the requirements of the Companies Act 2006 (‘Adopted IFRSs’), but makes
amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS
101 disclosure exemptions has been taken.

The exemptions that have been applied in the preparation of these financial statements are as follows:

– A cash flow statement and related notes have not been presented.

– Disclosures in respect of new standards and interpretations that have been issued but which are not yet effective have not

been provided.

– Disclosures in respect of transactions with wholly-owned subsidiaries have not been made.

– Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instruments:

Disclosures have not been made.

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 profit for the year was £45.8m (2020: profit of £254.6m). These financial statements present
information about the Company as an individual undertaking and not about its Group.

The following accounting policies have been applied consistently in dealing with items that are considered material in relation
to the Company’s financial statements.

(b) 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. The net recoverable amount is determined by the statutory net assets of the subsidiary,
adjusted for fair value movements relating to trading property which is held at cost, as well as an associated deferred tax charge
on the fair value adjustments. This approach provides the most relevant indication of the net recoverable amount of a subsidiary
as it provides a fair value net asset position as at the date of assessment. To the extent that the assessment of the recoverable
amount improves due to changes in economic conditions or estimates, impairment provisions are reversed, with all provision
movements recognised in profit and loss.

Corporation tax is provided on taxable profits or losses at the current rate.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the end of the reporting
period, 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 that date.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences
are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the end of the reporting
period. Deferred tax is measured on a non-discounted basis.

(d) 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.

(e) Share-based payments

Under the share-based compensation arrangements set out in Note 30 to the Group financial statements, 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.

(f) 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.

159

FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
N OTE S TO TH E PA RE NT CO M PA N Y FI N A N C I A L S TATE M E NT S CO N T INUED

Investments

Cost of investment

At 1 October
Additions
At 30 September

Impairment

At 1 October
Additional provisions
Reversal of impairment provisions
At 30 September
Net carrying value

2021
£m

1,250.0
52.3
1,302.3

2021
£m

71.9
3.8
(0.2)
75.5
1,226.8

2020
£m

919.6
330.4
1,250.0

2020
£m

257.8
0.4
(186.3)
71.9
1,178.1

The Directors believe that the carrying value of the investments is supported by their recoverable amount which reflects the fair
value of the property portfolio. The recoverable amount is not regarded as a significant estimate in itself as it is based on the
underlying valuation of the property portfolio. The impact of changes to key assumptions to the valuation of the property portfolio is
shown in note 2 of the group financial statements.

After an assessment of recoverable amount a net impairment of £3.6m (2020: net impairment reversal of £185.9m) has been made,
principally due to a reduction in the net assets of one of the Group’s intermediary holding companies following distributions made in
the year. The impairment reversal in the prior year reflected a change to the estimate used previously in relation to internal property
restructuring activities. The overall impact on the Group’s consolidated results is £nil.

A list of the subsidiaries of the Company is contained within Note 8 on pages 162 and 163.

Trade and other receivables

Amounts owed by Group undertakings

2021
£m

735.5
735.5

2020
£m

587.8
587.8

Amounts due in both 2021 and 2020 are all due within one year. At the balance sheet date, there is no expectation of any material
credit losses on amounts owed by Group undertakings.

Creditors: amounts falling due within one year

Amounts owed to Group undertakings
Tax and social security costs
Accruals and deferred income

Amounts owed to Group undertakings are unsecured, bear no interest, and are repayable on demand.

2021
£m

39.9
0.4
8.4
48.7

2020
£m

–
0.9
7.9
8.8

160

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

Interest-bearing loans and borrowings

Variable rate – loans
Unamortised issue costs

Corporate bonds
Unamortised issue costs

Unamortised bond discount
Total interest-bearing loans and borrowings

2021
£m

140.0
(0.8)
139.2
700.0
(3.9)
696.1
(2.6)
832.7

2020
£m

140.0
(1.0)
139.0
700.0
(4.5)
695.5
(2.9)
831.6

The variable rate loans are secured by floating charges over the assets of the Group. The loans bear interest at rates between 1.6%
and 1.8% (2020: Between 1.6% and 1.8%) over LIBOR.

In 2020, the Group issued a new ten-year £350.0m corporate bond at 3.0% due July 2030. In 2018, the Group issued a ten-year
£350.0m corporate bond at 3.375% due April 2028.

As at 30 September 2021 unamortised costs in relation to the corporate bonds stood at £3.9m (2020: £4.5m), and the outstanding
discount was £2.6m (2020: £2.9m).

Issued share capital

Allotted, called-up and fully paid:
742,776,681 (2020: 675,284,566) ordinary shares of 5p each

2021
£m

37.1

2020
£m

33.8

Details of movements in issued share capital during the year and the previous year are provided in Note 29 to the Group financial
statements on page 150.

Details of share options and awards granted by the Company are provided in Note 30 to the Group financial statements on pages 151
to 153 and discussed within the Remuneration Committee’s report on pages 77 to 98.

7. Other information
Dividends

The Company’s dividend policy is aligned to our strategy to grow rental income, with 50% of net rental income being distributed.
Around one-third of the payment is made through the interim dividend based on half year results, with the balance paid through the
final dividend, subject to approval at the AGM. The Company has distributable reserves of £394.5m to support this policy. Information
on dividends paid and declared is given in Note 14 to the Group financial statements on page 131.

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.

161

FINANCIAL STATEMENTS

FI N A N C I A L S TATE M E NT S
N OTE S TO TH E PA RE NT CO M PA N Y FI N A N C I A L S TATE M E NT S CO N T INUED

List of subsidiaries, associates and joint ventures

A full list of the Group’s subsidiaries as at 30 September 2021 is set out below:

Company

% effective
holding

Direct/
Indirect

Company

Indirect

Indirect
Indirect

Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect

6, Rue Eugène Ruppert, L-2453, Luxembourg
MREF III Forth Banks Property S.à r.l.
100%
Broxden House, Lamberkine Drive, Perth, PH1 1RA
Faside Estates Limited3
100%
Langwood Properties Limited3
100%
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
19 Ifield Road Management Limited3
100%
36 Finborough Road Management Limited3
100%
45 Ifield Road Management Limited3
67%
100%
Atlantic Metropolitan (U.K.) Limited
100%
BPT (Assured Homes) Limited
100%
BPT (Bradford Property Trust) Limited
100%
BPT (Residential Investments) Limited
100%
BPT Limited
Berewood Estate Management Limited1,3
100%
Brierley Green Management Company Limited3 100%
Bromley No.1 Holdings Limited3
100%
Bromley No 1 Limited3
100%
100%
Bromley Property Holdings Limited
100%
Bromley Property Investments Limited
100%
Cambridge Place Management Company
Limited3
Chrisdell Limited3
100%
City North 5 Limited3
100%
City North Group Limited3
100%
City North Properties Limited3
100%
Connected Living London Limited
100%
Crofton Estate Management Company Limited3 100%
100%
Crossco (No. 103) Limited
100%
Derwent Developments (Curzon) Limited
100%
Derwent Developments Limited
Derwent Nominees (No 2) Limited3
100%
Frincon Holdings 1986 Limited3
100%
Frincon Holdings Limited3
100%
100%
GIP Limited
Globe Brothers Estates Limited3
100%
100%
Grainger (Aldershot) Limited
100%
Grainger (Clapham) Limited
100%
Grainger (Hadston) Limited
100%
Grainger (Hallsville) Limited
100%
Grainger (Hallsville Block D1) Limited
100%
Grainger (Hornsey) Limited
Grainger (London) Limited3
100%
100%
Grainger (Octavia Hill) Limited
Grainger (Peachey) Limited3
100%
100%
Grainger Asset Management Limited
100%
Grainger Bradley Limited
100%
Grainger Development Management Limited
100%
Grainger Developments Limited
Grainger Employees Limited
100%
Grainger Enfranchisement No. 1 (2012) Limited3100%
Grainger Enfranchisement No. 2 (2012) Limited3100%
100%
Grainger Europe (No. 3) Limited
100%
Grainger Europe (No. 4) Limited
100%
Grainger European Ventures Limited Liability
Partnership3

Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Direct
Indirect
Direct
Direct
Direct
Indirect
Indirect
Direct
Direct
Indirect

162

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

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 Invest No.1
Limited Liability Partnership
Grainger Invest No.2
Limited Liability Partnership
Grainger K&C Lettings Limited3
Grainger Kensington & Chelsea Limited
Grainger Land & Regeneration Limited
Grainger Maidenhead Limited
Grainger Newbury Limited
Grainger OCCC Limited
Grainger Pearl Holdings Limited
Grainger Pearl Limited
Grainger Pearl (Salford) Limited
Grainger Pimlico Limited
Grainger Properties Limited
Grainger Property Services Limited3
Grainger PRS Limited3
Grainger RAMP Limited
Grainger Real Estate Limited3
Grainger REIT 1 Limited3
Grainger REIT 2 Limited3
Grainger REIT 3 Limited3
Grainger Residential Limited
Grainger Residential Management Limited
Grainger Seven Sisters Limited
Grainger Southwark Limited
Grainger Treasury Property
Investments Limited Partnership
Grainger Treasury Property (2006)
Limited Liability Partnership
Grainger Tribe Limited
Grainger Trust Limited
Grainger Unitholder No 1 Limited
Greit Limited3
GRIP REIT PLC
GRIP UK Holdings Limited
GRIP UK Property Developments Limited
GRIP UK Property Investments Limited
H I Tricomm Holdings Limited
Harborne Tenants Limited3
Hill Farm (Batheaston) Management
Company Limited1,3
Infrastructure Investors Defence Housing
(Bristol) Limited3
Ingleby Court Management Limited3
Jesmond Place Management Limited3
Kings Dock Mill (Liverpool) Management
Company Limited1,3
Macaulay & Porteus Management
Company Limited1,3

% effective
holding

Direct/
Indirect

100%
100%
100%
100%
100%
100%
100%
100%

Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect

100%

Indirect

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Direct
Direct
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Direct
Indirect
Indirect
Indirect

100%

Indirect

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Direct
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect

100%

Indirect

100%
70%
100%

Indirect
Indirect
Indirect

100%

Indirect

Company

% effective
holding

Direct/
Indirect

Company

% effective
holding

Direct/
Indirect

Indirect
Indirect
Indirect

100%
100%
100%

Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
Manor Court (Solihull) Management Limited3
Margrave Estates Limited
Mariners Park Estate North Management
Company Limited3
MREF III Newcastle Operations Limited
N & D London Investments3
N & D London Limited3
N & D Properties (Midlands) Limited3
Northumberland & Durham
Property Trust Limited
Oakleigh House (Sale) Management
Company Limited3
Park Developments (Liverpool) Limited3
100%
Park Estates (Liverpool) Limited3
100%
Park Estates Investments (Liverpool) Limited3 100%
100%
PHA Limited

100%
100%
100%
100%
100%

69%

Indirect
Indirect
Indirect
Direct
Indirect

Indirect

Indirect
Indirect
Indirect
Indirect

Portland House Holdings Limited
Residential Leases Limited3

100%
100%

Indirect
Indirect

100%

100%
100%
100%
100%
100%

Residential Tenancies Limited3
Rotation Finance Limited3
Suburban Homes Limited3
The Bradford Property Trust Limited3
The Owners of the Middlesbrough
Estate Limited3
The Sandwarren Management
Company Limited3
Tricomm Housing (Holdings) Limited
Tricomm Housing Limited
Victoria Court (Southport) Limited3
Wansbeck Lodge Management Limited3
Warren Court Limited
Warwick Square Management
Company Limited3
West Waterlooville Developments Limited
Eschersheimer Landstraße 14, 60322 Frankfurt am Main
Grainger FRM GmbH

100%
100%
100%
100%
100%
100%

100%

Indirect
Direct
Indirect
Indirect
Indirect

Indirect

Indirect
Indirect
Indirect
Indirect
Indirect
Indirect

Indirect

A full list of the Group’s associates as at 30 September 2021 is set out below:

Company

% effective
holding

Direct/
Indirect

Company

% effective
holding

Direct/
Indirect

Indirect

1a Dorchester Court, Greenlands Road, Staines, TW18 4LS
Dorchester Court (Staines)
Residents Association Limited
8 Five Acres, Kings Langley, Hertfordshire, WD4 9JU
Trevor Square Garden
Management Company Limited
31 Radipole Road, Parsons Green, Fulham, London, SW6 5DN
Stagestar Limited3
33 Albert Square, London, SW8 1BZ
33 Albert Square Management
Company Limited

10%

25%

Indirect

33%

59 Granville Road, St Margarets Bay, Dover, CT15 6DT
86 Holland Park Freehold Limited
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
Mariners Park Estate South
Management Company Limited3
Sixty-Two Stanhope Gardens Limited3
Vesta (General Partner) Limited3
Vesta Limited Partnership
Portmill House, Portmill Lane, Hitchin, SG5 1DJ
Redoubt Close Management Limited3

20%
30%
20%

Indirect
Indirect
Indirect

Indirect

A full list of the Group’s joint ventures as at 30 September 2021 is set out below:

Company

% effective
holding

Direct/
Indirect

Company

% effective
holding

Direct/
Indirect

50%

Indirect

7a Howick Place, London, SW1P 1DZ
Curzon Park Limited
16a Castlebar Road, London, W5 2DP
16 Castlebar Road Management
Company Limited3
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
1 Ifield Road Management Limited3
50%
31-37 Disbrowe Road Freehold Company Limited3 50%
174 Bishops Road Limited1,3
50%
50%
Besson Street Limited Liability Partnership
Besson Street Second Member Limited3
50%
51%
Connected Living London (BTR) Limited
51%
Connected Living London (RP) Limited
51%
Connected Living London (Limmo) Limited
51%
Connected Living London (Southall) Limited
Connected Living London (OpCo) Limited3
51%

Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect

51%

Connected Living London (Nine Elms) Limited 51%
Connected Living London (Woolwich) Limited 51%
Connected Living London
(Arnos Grove) Limited
Connected Living London
(Cockfosters) Limited
Connected Living London
(Montford Place) Limited
Lewisham Grainger Holdings Limited
Liability Partnership3
50%
Sandown (Whitley Bay) Management Limited3 51%
Wellesley Residents Trust Limited1,3
50%
Devonshire House, 60 Goswell Road, London, EC1M 7AD
Helical Grainger (Holdings) Limited2
King Street Developments
(Hammersmith) Limited2

50%

51%

Indirect
Indirect

Indirect

Indirect
Indirect
Indirect

Indirect

All subsidiaries, associates and joint ventures are incorporated in the UK except where the registered office indicates otherwise.

1 Company limited by guarantee.
2 In liquidation.
3 Company is non-active.

163

FINANCIAL STATEMENTS
FI N A N C I A L S TATE M E NT S
E PR A PE RFO RM A N C E M E A S U RE S (U N AU D ITE D)

Introduction

The European Public Real Estate Association (‘EPRA’) is the body that represents Europe’s listed property companies. The association
sets out guidelines and recommendations to facilitate consistency in listed real estate reporting, in turn allowing stakeholders
to compare companies on a like-for-like basis. As a member of EPRA, the Group is supportive of EPRA’s initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations (‘EPRA BPR’) guidelines. The most recent guidelines, updated
in October 2019, have been adopted by the Group.

The EPRA performance measures and definitions are set out below:

Performance measure

1) EPRA Earnings

2) EPRA NRV

3) EPRA NTA

4) EPRA NDV

5i) EPRA Net Initial Yield (‘NIY’)

5ii) EPRA ‘topped-up’ yield

6) EPRA Vacancy Rate
7) 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.
EPRA NRV adjusted to include deferred tax on assets that may be sold by the business and exclude
intangible assets.
EPRA NRV adjusted to include the fair values of i) financial instruments, ii) debt and iii) deferred taxes. EPRA
NDV excludes goodwill recognised on a company’s statutory balance sheet.
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.

The Group continues to have a substantial trading portfolio and a significant portion of its cost base is related to trading activities. It is
therefore not appropriate to eliminate profits on disposal of trading property as recognised on the consolidated income statement.

An adjustment to profits on disposal of trading property has been made with reference to trading property revaluation gains
previously recognised in the EPRA NAV measures. This adjustment has been made to EPRA Earnings so that earnings are marked
to market. This adjustment has also been applied to adjusted EPRA Cost Ratio to appropriately reflect the Group’s cost base.

2021

£26.0m
3.1p
£2,350.0m
316p
£2,207.8m
297p
£2,111.1m
284p
2.8%
3.8%
5.3%
31.1%
28.6%

2020
(restated)1

£26.1m
3.2p
£2,032.8m
301p
£1,922.8m
285p
£1,842.5m
273p
2.9%
4.0%
4.0%
29.1%
27.8%

Summary

Adjusted EPRA Earnings
Adjusted EPRA Earnings per share
EPRA NRV
EPRA NRV per share
EPRA NTA
EPRA NTA per share
EPRA NDV
EPRA NDV per share
EPRA Net Initial Yield (‘NIY’)
Adjusted EPRA NIY
EPRA Vacancy Rate
Adjusted EPRA Cost Ratio (including direct vacancy costs)
Adjusted EPRA Cost Ratio (excluding direct vacancy costs)

1 See Note 38 for an explanation of the prior year restatement.

164

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

EPRA Earnings

ii)

Earnings per IFRS income statement
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties,
i)
development properties held for investment and
other interests
Profits or losses on disposal of investment properties,
development properties held for investment and
other interests
Profits or losses on sales of trading properties including
impairment charges in respect of trading properties
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

iii)

vii) Acquisition costs on share deals and non-controlling

joint venture interests

Adjustments i) to viii) in respect of joint ventures
Non-controlling interests in respect of the above
Other adjustments in respect of adjusted earnings

viii) Deferred tax in respect of EPRA adjustments
ix)
x)
xi)
Adjusted EPRA Earnings/Earnings per share
Adjusted EPRA Earnings per share after tax

1 See Note 38 for an explanation of the prior year restatement.

2021

2020
(restated)1

Earnings
£m

152.1

Shares
millions

680.4

Pence per
share

22.3

Earnings
£m

99.1

Shares
millions

651.7

Pence per
share

15.2

(79.1)

(1.5)

(56.7)
–
–

3.8

–
–
(0.9)
–
8.3
26.0

–

–
–
–

–

–
–
–
–
–
680.4

(11.6)

(29.9)

(0.2)

(8.3)
–
–

0.5

–
–
(0.1)
–
1.2
3.8
3.1

(2.3)

(53.0)
–
–

1.9

–
–
(0.2)
–
10.5
26.1

–

–
–
–

–

–
–
–
–
–
651.7

(4.6)

(0.4)

(8.1)
–
–

0.3

–
–
–
–
1.6
4.0
3.2

Adjusted EPRA Earnings have been divided by the average number of shares shown in Note 15 to the Group financial statements
to calculate earnings per share. Adjusted EPRA Earnings per share after tax is calculated using the standard rate of UK Corporation
Tax of 19.0% (2020: 19.0%).

165

FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
E PR A PE RFO RM A N C E M E A S U RE S (U N AU D ITE D) CO N T INUED

EPRA NRV, EPRA NTA and EPRA NDV

2021

2020
(restated)1

EPRA NRV
£m
1,739.0

EPRA NTA
£m
1,739.0

EPRA NDV
£m
1,739.0

EPRA NRV
£m

EPRA NTA
£m

EPRA NDV
£m

1,443.0

–
1,739.0

–
–
6.0
–
543.3
2,288.3

58.3
3.4
–
–
–

–
–
–
2,350.0
742.8
316

–
1,739.0

–
–
6.0
–
401.6
2,146.6

58.3
3.4
–
(0.5)
–

–
–
–
2,207.8
742.8
297

–
1,739.0

–
–
6.0
–
401.6
2,146.6

–
–
–
(0.5)
–

(35.0)
–
–
2,111.1
742.8
284

–
1,443.0

–
–
7.4
–
541.3
1,991.7

24.4
16.7
–
–
–

–
–
–
2,032.8
675.3
301

–
1,443.0

–
–
7.4
–
432.1
1,882.5

24.4
16.7
–
(0.5)
(0.3)

–
–
–
1,922.8
675.3
285

–
1,443.0

–
–
7.4
–
432.1
1,882.5

–
–
–
(0.5)
–

(39.5)
–
–
1,842.5
675.3
273

Hybrid Instruments

IFRS Equity attributable to Shareholders
Include/Exclude:
i)
Diluted NAV
Include:
ii.a) Revaluation of IP (if IAS 40 cost option is used)
ii.b) Revaluation of IPUC (if IAS 40 cost option is used)
ii.c) Revaluation of other non-current investments
iii)
iv)

Revaluation of tenant leases held as finance leases
Revaluation of trading properties

Deferred tax in relation to fair value gains of IP
Fair value of financial instruments

Diluted NAV at Fair Value
Exclude:
v)
vi)
vii) Goodwill as a result of deferred tax
viii.a) Goodwill as per the IFRS balance sheet
viii.b) Intangible as per the IFRS balance sheet
Include:
ix)
x)
xi)
NAV
Fully diluted number of shares
NAV pence per share

Fair value of fixed interest rate debt
Revalue of intangibles to fair value
Real estate transfer tax

1 See Note 38 for an explanation of the prior year restatement.

166

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

EPRA NIY

Investment property – wholly-owned
Investment property – share of JVs/Funds
Trading property (including share of JVs)
Less: developments
Completed property portfolio
Allowance for estimated purchasers’ costs
Gross up completed property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
EPRA NIY
Gross up completed property portfolio valuation
Adjustments to completed property portfolio in respect of regulated tenancies
Adjusted gross up completed property portfolio valuation
Annualised net rents
Adjustments to annualised cash passing rental income in respect of newly completed
developments and refurbishment activity
Adjustments to property outgoings in respect of newly completed developments and
refurbishment activity
Adjustments to annualised cash passing rental income in respect of regulated tenancies
Adjustments to property outgoings in respect of regulated tenancies
Adjusted annualised net rents
Adjusted EPRA NIY

5. EPRA Cost Ratio

Administrative expenses
Property operating expenses
Share of joint ventures expenses
Management fees
Other operating income/recharges intended to cover overhead expenses
Exclude:
Investment property depreciation
Ground rent costs
EPRA Costs (including direct vacancy costs)
Direct vacancy costs
EPRA Costs (excluding direct vacancy costs)
Gross rental income
Less: ground rent income
Add: share of joint ventures (gross rental income less ground rents)
Add: adjustment in respect of profits or losses on sales of properties
Gross Rental Income and Trading Profits
Adjusted EPRA Cost Ratio (including direct vacancy costs)
Adjusted EPRA Cost Ratio (excluding direct vacancy costs)

2021
£m

2,179.2
25.9
1,130.7
(400.9)
2,934.9
–
2,934.9
124.6
(43.7)
80.9
2.8%
2,934.9
(910.9)
2,024.0
80.9

14.2

(4.1)
(21.5)
4.6
74.1
3.7%

2021
£m

30.2
26.8
0.3
(5.1)
–

–
(0.3)
51.9
(4.1)
47.8
97.4
(0.6)
0.2
70.1
167.1
31.1%
28.6%

A
A/B

a
a/b

C
A/C
B/C

2020
£m

1,778.9
23.3
1,190.8
(490.4)
2,502.6
–
2,502.6
97.0
(25.2)
71.8
2.9%
2,502.6
(967.3)
1,535.3
71.8

11.7

(3.2)
(24.5)
6.0
61.8
4.0%

2020
£m

28.7
25.7
0.7
(7.5)
–

–
(0.3)
47.3
(2.1)
45.2
99.3
(0.6)
–
63.9
162.6
29.1%
27.8%

167

FINANCIAL STATEMENTSFI N A N C I A L S TATE M E NT S
FI V E Y E A R RECO RD
FO R T HE Y E A R END ED 3 0 SEP T EMB ER 2021

Group revenue
Gross proceeds from property sales
Gross rental income
Net rental income
Gross fee income
Adjusted earnings
Operating profit
Profit before tax
Profit after tax
Dividends paid

Basic earnings per share
Dividends per share

EPRA NRV per share
EPRA NTA per share
EPRA NDV per share
Share price at 30 September

Return on Capital Employed (‘ROCE’)
Total Accounting Return – NDV basis (‘ROSE’)
Total Accounting Return – NTA basis
Total Property Return (‘TPR’)

2017
£m

2018
£m

2019
£m

264.7
214.5
54.6
40.4
5.1
74.4
98.5
86.3
73.5
19.3

Pence

16.0
4.4

Pence

309.7
271.2
273.7
242.4

5.2
7.3
6.0
6.7

270.7
209.5
59.2
43.8
6.5
94.0
116.5
100.7
87.4
20.8

Pence

19.0
4.8

Pence

314.4
283.2
285.5
271.1

5.3
6.1
3.9
6.0

222.8
193.1
85.9
63.5
3.8
82.5
112.6
131.3
114.9
25.2

Pence

19.9
5.2

Pence

296.7
278.3
271.4
246.0

3.8
4.4
3.7
5.0

2020

(restated)1

£m

214.0
144.1
99.3
73.6
2.2
81.8
116.5
99.1
82.8
33.5

Pence

12.8
5.5

Pence

301.0
284.7
272.8
297.2

4.1
3.4
3.6
5.4

2021
£m

248.9
187.9
97.4
70.6
2.6
83.5
119.1
152.1
109.5
36.8

Pence

16.2
5.2

Pence

316.4
297.2
284.2
305.0

6.3
4.0
5.5
7.5

1 The 2020 results in the table above have been restated in order to be comparable with 2021 results following the April 2021 IFRS Interpretations Committee publication of accounting guidance

for configuration and customisation expenditure relating to Software as a Service arrangements . All other years are as previously reported and have not been restated.

168

G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

OTH E R I N FO RM ATI O N
A LTE RN ATI V E PE RFO RM A N C E M E A S U RE S
FO R T HE Y E A R END ED 3 0 SEP T EMB ER 2021

Performance measure

Definition

Loan to Value (‘LTV’)

Ratio of net debt to the market value of properties and property related assets.

Gross debt
Cash (excluding client cash) (Note 27)
Net debt
Market value of properties
Other property related assets
Total market value of properties and property related assets
LTV

2021
£m

1,347.5
(305.7)
1,041.8
3,309.9
121.1
3,431.0
30.4%

2020
£m

1,391.9
(359.8)
1,032.1
2,969.7
121.4
3,091.1
33.4%

Total Property Return (‘TPR’)

A performance measure which represents the change in gross asset value, net of capital expenditure incurred,
plus property related net income, expressed as a percentage of opening gross asset value.

Net rental income
Profit on disposal of trading property
Previously recognised profit through EPRA market value measures
Profit on disposal of investment property
Income from financial interest in property assets
Net valuation gains on investment property
Net valuation gains on trading property
Property return
Investment property – opening balance
Financial interest in property assets – opening balance
Inventories – trading property – opening balance
Total opening gross assets
TPR

2021
£m

70.6
68.6
(56.0)
1.5
7.2
76.8
58.7
227.4
1,778.9
73.3
1,190.8
3,043.0
7.5%

2020
£m

73.6
61.6
(53.4)
2.3
5.2
29.8
37.3
156.4
1,574.6
76.4
1,248.8
2,899.8
5.4%

169

OTHER INFORMATIONOTH E R I N FO RM ATI O N
S H A RE H O LD E R S’ I N FO RM ATI O N

Financial calendar

AGM
Payment of 2021 final dividend
Announcement of 2022 interim results
Announcement of 2022 final results

Share price

9 February 2022
14 February 2022
12 May 2022
17 November 2022

During the year ended 30 September 2021, the range of the closing mid-market prices of the Company’s ordinary shares were:

Price at 30 September 2021
Lowest price during the year
Highest price during the year

305.0p
259.6p
335.0p

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:

Link Group
Central Square
10th Floor
29 Wellington Street
Leeds
LS1 4DL

Share dealing service

A share dealing service is available to existing Shareholders to buy or sell the Company’s shares via Link 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: https://ww2.linkgroup.eu/share-deal/ – online
dealing +44 (0) 371 664 0445 (calls are charged at the standard geographical rate and will vary by provider. Calls outside the UK
are charged at the applicable international rate. Lines are open Monday to Friday, 8am to 4:30pm) – 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.

Company secretary and registered office

Adam McGhin
Grainger plc
Citygate
St James’ Boulevard
Newcastle upon Tyne
NE1 4JE

Company registration number 125575

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OTHER INFORMATIONOTH E R I N FO RM ATI O N
G LO S S A RY O F TE RM S

Adjusted earnings

Goodwill

Regulated tenancy

Profit before tax before valuation
movements and other adjustments that
are considered to be one-off in nature,
which do not form part of the normal
on-going revenue or costs of the business.

Cap

Financial instrument which, in return for
a fee, guarantees an upper limit for the
interest rate on a loan.

CHARM

The CHARM portfolio is a financial interest
in equity mortgages held by the Church of
England Pensions Board as mortgagee.

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.

On acquisition of a company, the
difference between the fair value of
net assets acquired and the fair value
of the purchase price paid.

Hedging

The use of financial instruments to
protect against interest rate movements.

Interest cover ratio (‘ICR’)

Profit on ordinary activities before interest
and tax divided by net interest payable.

Investment value or market value

Open market value of a property subject
to relevant tenancy in place.

Like-for-like rental growth (‘LFL’)

The change in gross rental income in a
period as a result of tenant renewals or
a change in tenant. Applies to changes
in gross rents on a comparable basis
and excludes the impact of acquisitions,
disposals and changes resulting from
refurbishments.

Earnings Per Share (‘EPS’)

Loan to Value (‘LTV’)

Profit after tax attributable to
Shareholders divided by the weighted
average number of shares in issue in
the year.

Ratio of net debt to the market value
of properties and property related assets.
This is the primary gearing metric for
the Group.

European Public Real Estate
Association (‘EPRA’)

A not-for-profit association with a
membership of Europe’s leading property
companies, investors and consultants
which strives to establish best practices
in accounting, reporting and corporate
governance and to provide high-quality
information to investors. EPRA published
its latest Best Practices Recommendations
in October 2019. Further information,
including definitions and measures
adopted by Grainger can be found
on pages 164 to 167.

Net Initial Yield (‘NIY’)

Annualised net passing rents as a
percentage of the property’s open
market value.

Net Rental Income (‘NRI’)

Gross rental income less property
operating expenses, ground rents
paid and service charge expenditure.

Net Asset Value (‘NAV’)

Net assets divided by the number
of ordinary shares in issue as at the
balance sheet date.

Estimated Rental Value (‘ERV’)

The market rental value of lettable
space as determined by the Group’s
external valuers at the balance sheet
date. For properties which have not
yet reached practical completion,
ERV is determined by management’s
assessment of market rents.

EU IFRS

International Financial Reporting
Standards, as adopted by the EU,
mandatory for UK-listed companies for
accounting periods ending on
or after 31 December 2005.

Occupancy

The passing rent from PRS stabilised let
units as a proportion of PRS stabilised PRI
as at a specific point in time.

Passing rent

The annual rental income receivable on
a property as at the balance sheet date.

Potential Rental Income (‘PRI’)

Passing rent from let units plus ERV on
vacant units.

Private Rented Sector (‘PRS’)

Housing tenure classification that relates
to residential units owned by the private
sector to provide rental accommodation.
This excludes units owned by Government
authorities and housing associations.

Tenancy regulated under the 1977 Rent
Act. Rent (usually sub-market) is set
by the rent officer and the tenant has
security of tenure.

Return on Capital Employed (‘ROCE’)

Operating profit after net valuation
movements on investment properties
plus the share of results from joint
ventures/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.

Stabilised

Classification of existing property, newly
completed property or property acquired
once it achieves 95% occupancy. Once an
asset is designated as stabilised the
classification is retained whilst it is held
by the Group for future rental income.

Swap

Financial instrument to protect against
interest rate movements.

Tenanted residential

Activity covering the acquisition,
renting out and subsequent sale (usually
on vacancy) of residential units subject
to a tenancy agreement.

Total Accounting Return/Return on
Shareholder Equity (‘ROSE’).

The growth in the net asset value of
the Group plus dividends paid in the
year, calculated as a percentage of
the opening net asset value.

Total Property Return (‘TPR’)

A performance measure which
represents the change in gross asset
value, net of capital expenditure incurred,
plus property related net income,
expressed as a percentage of opening
gross asset value.

Total Shareholder Return (‘TSR’)

Return attributable to Shareholders
on the basis of share price growth
with dividends reinvested.

Vacant Possession (‘VP’) value

Open market value of a property
free from any tenancy.

Weighted Average Cost of Capital
(‘WACC’)

The weighted average cost of funding the
Group’s activities through a combination
of Shareholders’ funds and debt.

171

OTHER INFORMATIONOTH E R I N FO RM ATI O N
A DV I S E R S

Solicitors

Registrars and transfer office

Freshfields Bruckhaus Deringer
100 Bishopsgate
London
EC2P 2SR

Financial public relations

Camarco
3rd Floor
Cannongate House
62-64 Cannon Street
London
EC4N 6AE

Banking

Clearing Bank and Facility Agent
Barclays Bank PLC

Other bankers

Aareal Bank AG
AIB Group (UK) PLC
Handelsbanken PLC
HSBC Bank PLC
HSBC UK Bank PLC
Lloyds Bank Corporate Markets PLC
National Westminster Bank PLC
Natwest Markets PLC
Santander UK PLC
Wells Fargo Bank NA

Independent auditor

KPMG LLP Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL

Stockbrokers

JP Morgan Cazenove Limited
25 Bank Street
London
E14 5JP

Numis Securities Limited
45 Gresham Street
London
EC2V 7BF

Link Group
Central Square
10th Floor
29 Wellington Street
Leeds
LS1 4DL

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 7940 9500

Birmingham

The Circle
Harborne
Birmingham
B17 9DY

Greater Manchester

5 & 6 Waterman Walk
Clippers Quay
Salford
M50 3BP

Aldershot

Smith Dorrien House
Queens Avenue
Wellesley
Aldershot
Hampshire
GU11 2BT

View our website

www.graingerplc.co.uk

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G R A I N G E R P L C A N N UA L R E P O R T A N D ACCO U N T S 2 021

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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 7940 9500

Birmingham
The Circle
Harborne
Birmingham
B17 9DY

Greater Manchester
5 & 6 Waterman Walk
Clippers Quay
Salford
M50 3BP

Aldershot
Smith Dorrien House
Queens Avenue
Wellesley
Aldershot
Hampshire
GU11 2BT