Annual Report
and Accounts 2022
better
quality renting
Rent well Live well
In this report
Strategic report
Chair’s statement
Chief Executive’s statement
Our stories of the year
The shape and strength of
our business
Marketplace
Business model
Key performance indicators
Non-financial/ESG KPIs
Our values
Chief Financial Officer review
ESG introduction
Our people
Assets
Task force on Climate-related
Financial Disclosures
Section 172
Risk management
Principal risks and uncertainties
Viability statement
Governance
Chair's introduction to governance
Leadership and purpose
Division of responsibility
Composition, succession
and evaluation
Responsible business
Audit, risk and control
Remuneration
Directors’ report
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
EPRA performance measures
(unaudited)
Five-year record
Other information
Alternative performance measures
Shareholders’ information
Glossary of terms
Advisers
02
03
08
16
24
26
28
30
31
32
38
40
42
44
51
52
54
58
60
62
70
72
76
78
83
103
108
115
116
117
118
119
120
158
158
159
164
168
169
170
171
172
Grainger plc Annual Report and Accounts 2022
02
03
32
Mark Clare,
Chair
Helen Gordon,
CEO
Robert Hudson,
Chief Financial Officer
“I believe that these
results are a testament
to the hard work of the
whole Grainger team.”
“Grainger is in a position
of strength.”
“A year of excellent
operational performance.”
1
People want to rent a home
from someone they trust,
someone who cares for
their wellbeing and does
the right thing. We are the
UK’s leading provider of
private rental homes with
the aim of delivering
a better quality of
living for our
customers.
Helping through
tough times
See more on pages 10 and 11.
People
at the
heart
Putting customers
first
See more
on pages
12 and 13.
Living a
greener
life
See more on pages 8 and 9.
See more on
pages 14 and 15.
Annual Report and Accounts 2022 Grainger plcStrategic report 2
Chair’s statement
Dear Shareholders,
I am pleased to report that, having demonstrated
real resilience during the pandemic, Grainger
has performed exceptionally well over the past
year, driving a significant improvement in our key
performance metrics.
Driven by record levels of occupancy, strong rental growth and
portfolio growth, with 669 new homes added during the year,
the business has delivered its strongest net rental income yet.
Capital values also performed well, reflecting recovery in the
market, the focus on high-quality assets and the Company’s
strict investment discipline. I believe that these results are a
testament to the hard work of the whole Grainger team.
As the UK’s leading residential landlord with a 110-year
heritage, we are fully committed to our role as a responsible
business. Acknowledging the importance of this, this year we
established a Board-level Responsible Business Committee,
chaired by Carol Hui, overseeing our growing and ambitious ESG
programme which is focused on reducing carbon emissions,
improving diversity and job satisfaction in our workforce and
delivering great communities and service for our customers.
The health and safety of our colleagues and customers
remained of the highest importance to us, as demonstrated by
our refreshed and updated Live.Safe programme, and our fire
safety enhancement projects.
During the year the Board visited a number of properties,
meeting Grainger colleagues and customers and was
encouraged by what it saw. We regularly received and
considered Shareholder and other stakeholder feedback,
all of which support the Board's desire to operate to very
high standards of corporate governance.
The Board also looked closely at customer feedback and the
delivery of the Company’s Customer Experience Programme,
supported by its investment in new technology. We are pleased
with the progress made in delivering an industry leading
customer experience, which will deliver better outcomes for
our customers and greater value for our Shareholders.
The Board was very pleased to learn of the progress made to
employee satisfaction scores, following the comprehensive
action plan that was put in place at the beginning of the year.
It is fully recognised that this progress is key to delivering further
improvements in customer satisfaction over the longer term.
Given the strong financial performance of the Company, the
proposed final dividend for the year is 3.89p per share, in line
with our policy to distribute the equivalent of 50% of net rental
income. This will take our total dividend for the year to 5.97p per
share, an increase of 16% from last year.
Looking forward, whilst it is clear that there is some uncertainty
ahead, given the strong performance this year, our strong
balance sheet and disciplined approach to investment, the
Company is well positioned for the future. The strength of its
fully funded mid-term pipeline also provides confidence that the
Company can continue to deliver its growth strategy.
The Board and I will continue to focus on ensuring that the
Company’s growth strategy remains intact while being mindful
of the macro environment. The Board’s priority will be to see
that the business continues to build on its strong core purpose
and values, maintains a robust and disciplined approach to
investment, and builds on its heritage of being a great landlord
and providing a great place to work.
Mark Clare
Chair
16 November 2022
Grainger plc Annual Report and Accounts 2022 Chief Executive’s statement
3
Income
Capital
Like-for-like rental growth
EPRA NTA
4.7%
+372bps
(FY21: 1.0%)
Net rental income
£86.3m
+22%
(FY21: £70.6m)
Adjusted earnings
£93.5m
+12%
(FY21: £83.5m)
317pps
+7%
(FY21: 297pps)
Loan to value
33.4%
+304bps
(FY21: 30.4%)
Total Property Return
7.5%
+2bps
(FY21: 7.5%)
Profit before tax
£298.6m
+96%
(FY21: £152.1m)
IFRS net assets
265pps
+13%
(FY21: 234pps)
Dividend per share
EPRA NDV
5.97p
+16%
(FY21: 5.15p)
334pps
+18%
(FY21: 284pps)
Additional information and definitions for all KPIs are included
on pages 27 and 28.
A year of strong
performance, with
growth de-risked
and locked-in
Once again, I am pleased to report a very successful year
for your Company. In 2022, we delivered a record increase in
income, occupancy, lease up of our new schemes and rental
growth. In addition we have secured and de-risked our medium-
term growth. All of this puts Grainger in a position of strength to
take advantage of the increasing demand for renting homes in
the UK.
As the UK has emerged from the Covid-19 pandemic, the
foundations we laid over previous years have enabled us to
outperform. Demand for renting over the past year accelerated
significantly across all our key markets, while our high-
quality homes and scalable operating platform supported
the exceptional growth rate in our income and our portfolio.
We have delivered record levels of occupancy, rental growth
and high levels of customer retention.
Our committed pipeline of new homes is funded, with
permissions granted and costs fixed. This committed pipeline
amounts to £953m of investment to deliver 3,658 new build-to-
rent homes representing £47m of additional net rental income
over the next four years, and gives us excellent visibility over our
future earnings potential over the medium-term.
We know that, for many, home ownership has been put on
hold and we are committed to ensuring that the experience of
renting we provide at Grainger will be life enriching and fun.
Annual Report and Accounts 2022 Grainger plcStrategic report 4
Chief Executive’s statement (continued)
We delivered a record
increase in income,
occupancy, lease up of our
new schemes and rental
growth. In addition we
have secured and de-risked
our medium-term growth.
All of this puts Grainger
in a position of strength
to take advantage of the
increasing demand for
renting homes in the UK.”
Helen Gordon
CEO
A year of strong performance
During the pandemic we performed resiliently, with like-for-like
rental growth positive throughout, rent collection averaging
98% and occupancy held at above 90%. Since then, we drove
a very swift return to normal levels of occupancy and, indeed,
by March achieved record levels. The speed of recovery was
enabled by the investment we made in our technology platform,
CONNECT, and in our in-house leasing team.
Through the course of the year, rental growth continued to build
month on month, achieving an average of 4.7% across our whole
portfolio, 4.8% in our Private Rented Sector ('PRS') portfolio and
4.6% in our regulated tenancy portfolio (FY21: 1.0% overall, PRS
0.3%, Regulated 3.6%). Overall, we grew net rental income by
22% to £86.3m (FY21: £70.6m), and therefore our proposed final
dividend will be 3.89p per share, reflecting a total dividend of
5.97p per share (FY21: 5.15pps) a 16% increase.
On our capital returns, the growth in our income led to the value
of our portfolio showing strong valuation growth. Our EPRA
Net Tangible Assets ('NTA'), grew strongly by 20p or 7% to 317p,
reflecting the quality and attractiveness of our properties.
Total Property Return for the business for the year was 7.5%
(FY21: 7.5%).
Grainger plc Annual Report and Accounts 2022 Growth locked-in and de-risked, with optionality on
longer-term commitments
Our committed pipeline is locked-in and de-risked and will
deliver further net rental income growth next year and in the
years that follow.
Our £1.8bn secured pipeline of 6,838 build-to-rent homes
includes those projects that we have committed to, which
represent £953m of investment, 3,658 homes and £47m NRI
over the next four years, and those projects that we have the
option to proceed with but which we have not yet committed
to, representing £241m of investment, 769 homes and £10m
potential NRI.
The remaining projects in our secured pipeline are
predominantly schemes that are direct development projects
where we have the option of choosing when to proceed,
enabling us to manage the interplay between our financial
commitments and the market appropriately.
Disciplined capital allocation
We have a strong commitment to discipline in our investment
decisions. This includes our financial policies ensuring we have
a solid balance sheet, the stringent ESG criteria we apply to
all our decisions, the locational targeting we undertake, the
detailed research we do for each of our investments, and our
policy of putting the funding in place before committing to any
new investments.
These all put us in a very strong position financially, and ensures
we are investing in the right assets in the right locations.
5
Delivering a great customer experience
Our success is predicated on our customers choosing to rent and
live with us. This means ensuring that we have great homes and
an industry leading customer service offering.
We know that when our customers have a positive rental
experience with us, they want to stay for longer, they are more
willing to pay an appropriate rent in line with the quality of
product and service they receive, and they tell others about
their positive experience with Grainger.
All of this translates into stronger, more reliable rental
income for your business, and ultimately increased dividends
for Shareholders.
We know there is much more to the experience of renting than
a high-quality apartment, which is why we have invested this
year in our enhanced Customer Experience Programme, which
leverages our research, insight and data to inform how we can
continually improve our offering, delivering a better customer
experience and better value.
Every member of the Grainger team, whether external
customer facing or not, has undertaken a bespoke customer
experience training programme. This is already showing
results in enhanced customer feedback and with a 16 point
improvement in our net promoter score to 34, one of our
measures of customer satisfaction.
Other initiatives include:
1.
2.
3.
Rolling out our customer app, MyGrainger, across our
whole PRS property portfolio, which enables customers
to log repairs or maintenance requests and allows us to
communicate more easily with them;
Continual investment in our customer engagement
programme to better understand what it means to deliver
great customer service ‘The Grainger Way’;
An engaging campaign to help our customers ‘Live a
Greener Life’, helping them reduce their energy bills and
also taking some early steps towards reducing our Scope 3
carbon emissions.
Annual Report and Accounts 2022 Grainger plcStrategic report 6
Chief Executive’s statement (continued)
Committed to our responsibility as a market
leading landlord
We are proud of our 110-year heritage of being a responsible
and market leading residential landlord.
Our purpose of ‘Renting homes, Enriching lives’ and our core
values guide every one of our decisions.
Our ambitious ESG programme reflects this, where we are
proactively driving a significant reduction in carbon emissions
across Scopes 1, 2 and 3, and making a positive, long-lasting
impact locally. Reflecting our commitment, this year we
established a new Board-level Responsible Business Committee,
overseeing ESG and Employee Voice. For more information
see pages 76 and 77. I am pleased that our new Non-Executive
Director, Carol Hui, has taken Chairmanship of this committee.
Highlights during the year:
– A 26% reduction in our Scope 1 & 2 carbon emissions per £m
of assets under management (market-based methodology)
– Investing further in the energy efficiency of our properties,
with 87% of our PRS portfolio now with the highest ratings
(EPC ratings of A to C), providing considerable savings on
energy costs for our customers
– Making significant progress on measuring Scope 3 emissions
– Donating six homes, free-of-charge, to Ukrainian refugee
families, where they can live together and support each other
Health and safety
Health and safety is an absolute priority in our business of
creating and providing homes to thousands of people across the
country. Our exemplary Live.Safe programme ensures that we
have in place the most robust health and safety regime possible.
From the investment and development process through to
ongoing operations and our Company safety culture, our
Live.Safe programme supports our commitment to being a
long-term responsible landlord, protecting our customers, our
people and our reputation. This year the Building Safety Act
came into force. At Grainger we contributed insights to the work
of Dame Judith Hackitt and have gone beyond the requirements
of the Act by employing additional resources to provide a
greater depth of experience to our onsite teams in protecting
the health and safety of our customers and employees.
Every home
matters
Renting
homes,
Enriching
lives
People at
the heart
Leading
the way
Exceeding
expectations
Our people make the business
I am extremely proud of the very special colleagues I have
at Grainger. The success of this business and the quality of
our customer service is down to the care and hard work of
our people. One of Grainger’s core values is 'People at the
heart' and this applies to our employees and our customers.
After a challenging time supporting our customers during the
pandemic, the Grainger team responded swiftly to the uptick
in demand as life returned to normal and to the new launches
during the year.
From all the feedback we receive from our customers, it is clear
that what makes their experience great when renting with
Grainger is our team. Our interactions with our customers and
the service we provide is what truly makes the difference.
It’s therefore hugely important that we focus a great deal of our
energy on supporting our colleagues and ensuring that we are a
great place to work.
At the end of last year our HR Director, Peter Tonathy, who had
worked with me as we repositioned Grainger, retired and I would
like to thank him for his dedication to building the Grainger
team. Our new Chief People Officer, Michelle Boothroyd, joined
us at the start of 2022 and has refocused her team and set out
Grainger’s People Strategy.
I am convinced that our commitment to a strong corporate
culture and good working practices will ensure many talented
colleagues will develop their careers at Grainger.
We are mindful of the financial stress felt by our employees
which is why we moved swiftly in August of this year to
support our colleagues during these difficult times, and made
a one-off payment of £1,000 to all employees, excluding the
Executive Committee.
Grainger plc Annual Report and Accounts 2022 7
Through our many feedback channels and surveys for
colleagues, they tell us what they’re thinking and how
they’re feeling, and in response we tailor our policies, our
communications, our support and our business to respond.
This year, I am very pleased to report that in an independent
review by Best Companies we moved from One to Watch to One
Star status in our annual employee survey. This is a significant
achievement that signifies ‘very good’ levels of workplace
engagement and is a great milestone for Grainger.
Ensuring Grainger continues to be an inclusive and welcoming
work environment for everyone from any background also
continues to be a core focus for us. We have introduced more
robust methods for measuring, tracking and understanding
the makeup of our workforce, so we can tailor and target our
initiatives and efforts when it comes to diversity and inclusion.
I am pleased to report that our gender pay gap has narrowed
and that we have increased female representation in more
senior roles during the year.
Concluding remarks and outlook
The business delivered another strong performance last year,
and we are in a resilient position for the year to come. I am
confident that we will continue to perform well despite the
ongoing economic uncertainty ahead.
Our market benefits from continuing positive tailwinds, with
demand for renting rising, constrained supply and a resilient
customer base. The inflation-linked characteristics of our
asset class, coupled with our high-quality properties, scalable
operating platform and unrivalled data, insight and analytics
gives me the confidence for our continued strong performance.
Despite the macro environment, we have locked-in and de-
risked our medium-term growth, enabling us to continue our
growth trajectory and deliver into a strong occupational market.
This successful year has been delivered by a talented and
committed team at Grainger. I would like to thank the Grainger
team and the Grainger Board for their hard work and dedication
in building a business employees and Shareholders can be
proud of.
Helen Gordon
CEO
16 November 2022
See
our Stories
of the year overleaf.
Annual Report and Accounts 2022 Grainger plcStrategic report 8
Our stories of the year
Living a greener
life
Our customer engagement
campaign to help residents
reduce their energy costs
A large proportion of our Scope 3
emissions relates to the energy that our
customers use within their homes; and
whilst we have no direct control over their
energy usage as they contract directly
with their energy suppliers, helping our
residents live greener is a key focus for us,
forming part of our wider ESG strategy
and Net Zero Transition Plan, and helping
our customers save on their energy bills.
Grainger plc Annual Report and Accounts 2022
How we are enabling greener living
This year we engaged the whole business – colleagues and customers – to come up with innovative ideas to help
our customers live a greener life, and we have selected the best of those ideas and are taking them forward.
9
Greener
buildings
Grainger buildings
set the standard for
sustainable buildings
– 87% EPC ratings C and above
(for PRS properties)
– Updated design specification with
more energy efficient components
– Exploring opportunities to reduce
embodied carbon, including
undertaking Whole Life Carbon
assessments on our direct
development projects
– Review of landscaping specification
and introducing greater
biodiversity initiatives
– Community gardens being introduced
at eligible sites
– Roll-out of green enhancements
to existing buildings such as replacing
gas boilers with modern, energy
efficient heating systems
87% of our PRS portfolio
has an EPC rating of A,
B or C, compared to less
than half of the wider
rental market, which
can help customers save
significantly on their
energy bill every year.”*
* JLL analysis on average annual energy bills
by EPC band.
Energy – Energy saving campaigns
– Introduction of Green Leases
to enable enhanced energy
data capture and analysis
and events
Grainger helps
residents to
manage their
energy consumption
– Scope 3 customer emissions
data gathering pilot begun
– Scope 3 customer emissions
strategy devised for roll out
in FY23
Engagement
and awareness
Transparent knowledge -
sharing and measuring
of success
– Survey of residents to understand
their priorities and preferred
green initiatives
– Incorporated greener life content into
residents' guides and communications
– Introduced Living a Greener Life
events in our buildings
Waste and recycling
Grainger facilitates
easy recycling
– Enhancing recycling facilities
at our sites
– Providing recycling collections for
additional waste streams
– Recycling themed communications,
campaigns and events
– Organised charity collections and
clothes drives at our buildings
Supporting local
Grainger enables residents
to buy local
– Aligned commercial leasing strategy on all
commercial premises within our PRS schemes
– As an example, in Manchester, we are working
with local independent businesses, including:
Bee Orchid, Cult Coffee & Barbers, Inner West
Coffee and Joule Craft Brew
– Partnerships and discounts with local businesses
Annual Report and Accounts 2022 Grainger plcStrategic report 10
Our stories of the year
Helping
through
tough
times
Our response to the
rising cost of living
As household costs rise, Grainger has
looked to help where it can, with both
customers and colleagues. For our
customers, that means we are reaffirming
the many added value elements we
include in the rent, sharing cost saving
tips and guidance, and have a team on
hand to provide support to those who
need it. At the same time, we know our
colleagues are also feeling the pinch,
so we’re looking after them too, including
making a cost of living payment during
the year.
Grainger plc Annual Report and Accounts 2022
What Grainger is doing to help
11
Financial
support and
guidance
Grainger colleagues are specially
trained so that they are able to support
customers who are struggling financially,
knowing where to direct them to find
help and advice. We look to work with
our customers whose circumstances
change or who need that little bit of extra
support, potentially finding alternative
accommodation or putting in place
payment plans for them, for example.
Added value for customers
75%
of Grainger’s properties cost
less than £1,500 per month to
rent, affordable to a dual income
household each earning a little
over £25,000 a year.
Grainger’s customers, on average, pay
less than 30% of their income on rent,
the accepted level of affordability in
the UK.
With the rising cost of living a concern
for many, renters can potentially save
thousands of pounds each year by
renting at Grainger. We use a range of
support tools to help our customers,
including:
Energy efficient homes
With 87% of our homes having an
EPC rating of A-C, our residents can
potentially save thousands of pounds
each year when compared with renting
a property with an EPC rating of F or G
Free superfast broadband internet
Our WiFi is fast and switched on from
the day you move in. Importantly, it’s also
included within the rent, saving hundreds
of pounds a year
Free gyms
Complete with the latest fitness
equipment and often open 24/7, when
you rent with Grainger you can cancel
your gym membership, providing savings
of hundreds of pounds a year
Co-working space
With co-working space available in all
BTR sites, Grainger residents can choose
to work in our spaces throughout the day
and night, providing an alternative to a
shared workspace, an office or their home
Local business discounts
We partner with local businesses to
offer discounts and promotions to our
customers, saving them money while
providing the businesses with a platform
Re-use and recycling
As part of our communities we support
our customers to share and re-use pre-
loved items through our community
corner, clothes recycling and swap shops
It's so encouraging in these
unpredictable times to find such
dedicated and genuine people that
show empathy within this industry.”
Mandy
A Grainger resident
Helping those
in hardship
Keen to make a difference, our
charitable efforts included:
– Donated six homes for free for a year
to six Ukrainian refugee families,
worth more than £150,000 (pictured)
– LandAid charity SleepOut event: a
dozen colleagues slept outside on a
cold March night, raising £8,000 to
help end youth homelessness
– Part-funded the refurbishment of
the YMCA North Tyneside shelter for
young people at risk of homelessness
Annual Report and Accounts 2022 Grainger plcStrategic report 12
Our stories of the year
Puttingcustomers
first
Grainger’s multi-year
Customer Experience
Programme
Through extensive research, analysing
our customer journey and mapping
customer satisfaction insight across each
key customer touchpoint, we identified
key areas where we could improve our
customers’ rental experience. From this,
we created our Customer Experience
Programme, which takes the great homes
that we provide, builds on brilliant basics,
enhancing our service culture across
the business and better communicates
our strengths and personality to
our customers.
I rate the app. The parcel
service notifications are
excellent, I enjoy that contact
information is upfront and
centre, and making service
repairs will be much easier.”
Jo
A Grainger resident
Grainger plc Annual Report and Accounts 2022
How we’re focusing on customers
How we’re focusing on customers
13
Focus areas this year
– A frictionless 5 star lettings process
– The Grainger service style enhances my everyday
– My home is maintained brilliantly
– Living a greener life
– Communications make me trust/want to live with Grainger
– Leading the way with technology: digitising the customer experience through CONNECT
Our goal
To provide a customer
experience that is best
in class, that
differentiates us from
our competitors and
delivers on our
purpose, Renting
Homes, Enriching Lives.
If I could give them
ten stars I would!”
Amara
A Grainger resident
Key actions
• Customer service style training
for all colleagues, including the
Executive Committee; and training
our own in-house customer service
style trainers through our Train the
Trainer programme
• MyGrainger resident app rolled out
across our entire PRS portfolio
• ‘Back to the floor’ days for Executive
Committee members
• Resident events programme including
the summer Grainger Festival
• Improved customer communications
from leads to renewals
• Improved how we gather customer
satisfaction insight at each
key touchpoint
• Customer service enhancements
through CONNECT
We rented with
Grainger for three
years and always
appreciated their
diligence and quick
replies. They went out
of their way to assist
us when there were
issues and also set
up events to ensure
residents felt heard
and seen.”
Chelsea
A Grainger resident
+16pt
increase in PRS customer
Net Promoter Score to 34
Annual Report and Accounts 2022 Grainger plcStrategic report 14 Our stories of the year
14
at the
People
Peopleheart
A property business,
powered by people
Led by our CEO Helen Gordon and our
Chief People Officer Michelle Boothroyd,
our People Strategy focuses on providing
our colleagues with the best work
experience and engendering a strong
Company culture. It is wide ranging, from
the beginning of the colleague journey
at recruitment and covers Diversity &
Inclusion, Learning & Development,
Engagement, Technology & Systems
and Reward & Recognition.
Grainger plc Annual Report and Accounts 2022
How we provide the best place to work
Initiatives
15
Putting people at the heart
We have a comprehensive programme
of activity and initiatives to support
our colleagues. These include our
Graduate Programme, Future
Leaders Programme, Flexible
Managers training programme,
Executive Leadership Coaching,
Grainger Mentorship Programme,
and our new Grainger Diverse Talent
Acceleration Programme.
We are proud to have achieved a 'Very
Good' rating in the Best Companies
Employee Survey, demonstrating high
levels of engagement and achieving
this milestone ahead of schedule.
We ensure that we are listening and
acting on colleague feedback, including:
– Bi-annual employee engagement
surveys with detailed follow up action
plans, and numerous mini surveys
throughout the year
– Employee conferences where we
seek ideas and feedback from every
colleague from across the business
and devise a detailed follow-up action
plan for each idea put forward
– An improved Performance
Review process encouraging
two-way dialogue and a focus on
professional development
This year we focused further on
colleague wellbeing initiatives,
including:
– Hybrid Working Policy for office-
based colleagues
– Publicising available employee
benefits more widely
– Wellbeing sessions and private
consultations for colleagues by
Harley Street nutritionist Kate Cook
– Events for Mental Health Awareness
Week, including Blue Monday
Blackout, where we gave every
employee an extra hour off in
the morning to take some time
for themselves
Celebrating diversity and welcoming inclusion
Helping young people
into real estate careers
We are committed to providing
opportunities to a diverse range of
people, with initiatives including:
– Bursary Scheme, sponsoring a student
from a disadvantaged background
in their studies with the Worshipful
Company of Chartered Surveyors
– School Engagement Programme in
partnership with Transport for London
Very Good
rating by colleagues in our annual survey
by Best Companies.
Highlights included:
– World Cuisine Day, enjoying food
from colleagues’ home countries
– A week-long campaign to raise
awareness and educate colleagues
and customers about hearing loss,
partnering with the Hearing Dogs for
Deaf People charity
– A month-long series of events
to celebrate Pride Month with
colleagues and customers across our
offices and properties
– Established our own internal Working
Parents Network, for colleagues to
get together to share experiences
and swap tips and tricks
– Celebrated Black History Month with
a number of events and activities,
all delivered by our colleague-led
working group
Cost of living
payment for
all colleagues
Grainger awarded all colleagues across
the business, excluding the senior
executive team, a special, one-off
£1,000 cost of living payment during
the summer, in addition to the normal
pay and bonus review process at the
end of each calendar year.
£1,000
Our commitment to being an
organisation that welcomes colleagues
and customers from all walks of life
remains central in our minds. We ran
our first Diversity questionnaire for all
colleagues to complete, providing us
with greater understanding and insight
about the diversity of our colleagues.
This will enable us to ensure we can
align our D&I efforts to what matters
to us most.
Our employee-led Diversity & Inclusion
(D&I) Network, with Rob Hudson, CFO,
as Executive Sponsor, was very active
during the year.
Annual Report and Accounts 2022 Grainger plcStrategic report 16
The shape and strength of our business
The shape and strength
of our business
We are the UK’s leading listed provider of private rental homes.
We own and operate rental homes across the country.
110
years in operation
20,000+
customers
9,669
operational homes
6,838
pipeline homes
Our newest BTR schemes
Gilders Yard, Birmingham
Weavers Yard, Newbury
Pin Yard, Leeds
The Headline, Leeds
Apex Gardens, London
Windlass Apartments, London
The Forge, Newcastle
The Filaments, Manchester
Gatehouse Apartments, Southampton
Grainger plc Annual Report and Accounts 2022 17
Private rental homes
We have over 7,500 private rental homes across the country,
and a further c.7,000 in our pipeline.
Within our portfolio, we offer a broad mix of well-located homes
from modern apartments to suburban houses, all leased at
mid-market rents. 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 possible.
7,538
PRS homes
98%
occupancy
£2.3bn
portfolio valuation
4.7%
like-for-like
rental growth
Our strategic transition toward PRS
Private rental homes
Regulated tenancy homes
Enigma Square, Milton Keynes
£0.4bn
FY15
£2.3bn
Today
£4.1bn
Post pipeline
Regulated tenancy homes
We own and manage 2,131 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.
£881m
portfolio value
6.8%
properties sold
on vacancy
15-17%
valuation uplift
on vacancy
3.9%
sales prices achieved
above valuation
Solihull, Birmingham
Annual Report and Accounts 2022 Grainger plcStrategic report 18
The shape and strength of our business (continued)
Our strategy
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 we have
continued to deliver high-quality homes, create more
value and enrich our customers’ lives.
The presentation highlighted the resilience and
sophistication of Grainger’s procedures, processes
and operating platform, and how each element
comes together seamlessly to inform investment
and capital allocation decisions, improve the
customer experience, drive valuations and
increase operating margins.”
Berenberg, commenting on Grainger's Capital Markets Day in Leeds in July
Success from a strong financial footing
Grow rents
Simplify
and focus
Build on our
experience
We are on a strong financial footing, with a robust balance
sheet including low leverage and a low cost of debt which is
97% hedged. In the severest of downside scenarios, our LTV
target range of 40-45% is set for our LTV covenant of 70-75%
to withstand a c.50% fall in values.
Funding is in place for our short to medium-term growth
through our committed, fixed priced pipeline. In addition,
we have the additional source of funding through our asset
recycling programme giving us optionality on additional growth
through our secured but not yet committed projects.
Key strengths
Historic strong cash generation through cycles
£663m
of healthy headroom
33.4%
LTV
Low cost of debt at 3.1%, and 97% fixed through hedging
Insulated from severe downturn scenarios;
our LTV target range of 40-45% is set for our LTV
covenant of 70-75% to withstand a c.50% fall in values
See our Financial Report
on pages 32 to 37.
Grainger plc Annual Report and Accounts 2022 A disciplined approach to capital allocation
We aim to deliver superior Shareholder returns that are long
term and resilient by investing in the UK private rented sector.
We are directly investing in high-quality, energy efficient assets
in the best locations using in-house proprietary research
and leveraging our leading operating platform delivering
market outperformance.
19
Investment strategy
– target cities
Our investment process begins with
comprehensive research by our in-
house research team to identify cities
and locations with the greatest rental
demand and greatest growth prospects.
We target these locations and allocate
our capital in a disciplined manner in line
with our discerning investment criteria.
Mid-market positioning
Cluster strategy
Our properties are priced within the
mid-market, enabling us to appeal to the
widest pool of rental demand. Our rents
are set at prices that represent good
value within the market and that are
accessible to local residents and
local salaries.
When we identify a suitable location, we
look to build scale through a cluster of
schemes within relatively close proximity.
This enables us to capitalise on the
opportunity and high demand whilst also
generating management efficiencies and
enhancing the service offering.
Regional growth
Multiple routes to market
ESG integration
Having established our regional strategy
in 2017, we are unique in the sector for
our national presence. In addition to
providing a well-balanced portfolio, our
regional growth provides us with first
mover advantage in a number of locations.
It also provides our customers with greater
flexibility should they choose to relocate.
We have multiple routes to market,
providing greater flexibility than many
of our competitors. Our proven track
record as a reliable and trusted partner
makes Grainger an attractive option for
potential partners. Other routes include:
Forward Funding, Direct Development,
Strategic Land, Corporate/Portfolio,
or a Tenanted Acquisition.
ESG criteria are integrated into our
investment decision-making processes,
and include physical and transition
climate-related risks, such as flood risk,
overheating risk, Energy Performance
Certificate ratings and accessibility.
Annual Report and Accounts 2022 Grainger plcStrategic report 20
The shape and strength of our business (continued)
Creating the UK’s leading rental portfolio
PRS portfolio
7,538
homes
Pipeline portfolio
6,838
homes
Including homes in the planning
and legals stage, and projected
TfL partnership homes
PRS value
Pipeline value
£2.3bn
£1.8bn
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
Regional PRS portfolio
Number of homes
2
2
0
Manchester & Liverpool 2
1,895
Newcastle
380
East Midlands
348 The Barnum,
Nottingham
259 The Condor, Derby
Birmingham
168
375 Exchange Sq,
Birmingham
West & Wales
514
307 Copper Works, Cardiff
231 Millwrights Place, Bristol
468 Redcliff Qtr, Bristol
South East
1,339
261 Enigma Square,
Milton Keynes
150 West Way Sq, Oxford
232 Weavers Yard, Newbury
98 The Mint, Guildford
Leeds & Sheffield
811
284 Tilt Works, Sheffield
South West
230 Exmouth Junction,
Exeter
Geographic breakdown of our existing PRS
portfolio by number of homes
Central London
Outer London
South East
South West
East & Midlands
North West
Other regions
16%
14%
18%
7%
4%
25%
16%
Key
Operational schemes
Secured pipeline schemes
Connected Living
London schemes
Newcastle
Liverpool
Manchester
Leeds
Sheffield
Nottingham
Derby
Birmingham
Cardiff
Bristol
Milton Keynes
Oxford
Newbury
London
Guildford
Exeter
Southampton
Grainger plc Annual Report and Accounts 2022 Creating the UK’s leading rental portfolio
London portfolio
Number of homes
North London
162 Arnos Grove
351 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
London City fringe
90 Ability Towers
101 Ability Plaza
85
122 Other
South East London
208 The Gardens
324 Besson Street
Inner London
56
100 Mitre Road
215 Waterloo Estate
139 Montford Place
479 Nine Elms
West London
98 Kew Bridge Court
401 Merrick Place
460 Southall Sidings
Shillington Old School
Springfield House
13 14
1
2
3
4
5
6
7
8
10
11
12
15
16
17
18
19
20
21
22
23
24
25
21
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
Through our growing national
presence, we have developed
a series of well-balanced,
operationally efficient clusters
across the country.
2
Cockfosters
1
Arnos Grove
4
3
Seven Sisters
12
15
Dalston Junction
11
13
14
10
Angel
Old Street
Liverpool Street
20
19
Waterloo
21
Oval
17
New Cross
16
Peckham Rye
6
Barking
5
7
8
Canning Town
Woolwich Arsenal
24
25
23
Kew Gardens
22
Battersea Park
18
Clapham Junction
Annual Report and Accounts 2022 Grainger plcStrategic report 22
The shape and strength of our business (continued)
Our market leading and scalable operating platform
Our business model and scalable in-house operating platform
sets us apart from the competition. As we grow, we create
more and more operational efficiencies across the portfolio.
Through technology and CONNECT we are delivering effective
and efficient internal processes, whilst also enhancing the
overall experience for our customers.
Our team deliver a level of personal service to customers
that takes the hassle out of renting, adding huge value to the
overall experience.
In-house operating model
When you rent with Grainger you deal directly with the Grainger
team. From leasing to move-in, renewals right through to move-
out, the Grainger team are there for our customers. By bringing
the majority of our leasing in-house we are improving the overall
customer experience, creating a positive first impression and a
seamless transition from prospect to resident.
Our bespoke training programmes ensure a consistently
high standard of delivery with research showing that our
onsite teams are a real differentiator, positively impacting a
resident’s stay.
Customer Experience Programme
Our Customer Experience Programme builds on the brilliant
basics we offer by creating a service culture that is embedded
across the entire business and that puts our customers
front and centre. This programme is informed by a wealth of
customer data and insight across each key touch-point within
our customer journey and aims to drive continual improvement.
Responsible management
As a responsible landlord, health and safety is our absolute
priority. Through our Live.Safe programme, we are leading
the way in health and safety, taking a proactive approach
and continuously reviewing processes and enhancing safety
elements within our buildings. Our colleagues are all regularly
trained in health and safety matters and our health and safety
team drive compliance and engagement in this area.
Leading through technology
Through our investment in CONNECT, we’ve created a digital
solution that puts the entire rental process online and an app
that enables customers to book appointments with our team,
log a repair or maintenance request, book an amenity space,
or find out more about the local area.
Behind the scenes, technology supports the efficient running of
all business functions as we scale-up, linking everything from
marketing to payment processing, giving more control and
greater efficiency.
Knowledge and insight
With over 110 years’ experience, we have developed a wealth
of knowledge and expertise as a landlord. Our business is driven
by data and analytics. This insight enables us to identify the
best locations, to drive performance, and to have a deeper
understanding of our customers, their wants and needs.
We use this insight to continuously improve our offering,
drive satisfaction and ultimately retention.
Grainger plc Annual Report and Accounts 2022 23
Being a responsible business
Grainger has always had a strong social purpose and being a
responsible business is central to who we are, our strategy and
our core product of mid-market rental homes.
Our ESG strategy sets out our ambitions to create desirable,
healthy and energy efficient homes for our residents, to deliver
positive outcomes for our people and our communities, and to
secure a strong future for our business, our sector and the wider
environment in which we operate.
See our ESG Report
on pages 38 and 39.
Community
Sustainable design and net zero carbon
We recognise the value of supporting the communities where
we operate and providing our employees with the opportunity
to give back. We undertake extensive community engagement
and investment around our assets and development sites,
partnering with local community organisations.
We are committed to meeting sustainability best practice in the
design of our homes, and review our schemes against leading
sustainability standards, with a pilot of the Home Quality Mark,
a best practice sustainability certification for new homes,
planned on some future developments.
As part of our commitment to building vibrant new
communities, our onsite teams work closely with local
independent businesses, showcasing them to residents through
our resident events and working with them to offer unique
discounts to our residents, providing a benefit for all.
Through our roadmap to net zero by 2030 we have increased
our focus on Scope 3 emissions, running pilots to measure
customer emissions and to understand opportunities to
measure and reduce embodied carbon.
Living a greener life
Energy efficiency
People
Our ‘Living a Greener Life’ engagement
strategy is helping our customers join us
on our net zero journey.
Our PRS homes are highly energy
efficient with 87% being EPC rated
A-C, making them more affordable for
our customers.
We are committed to being a great
employer to our people, a great landlord
to our customers, and a great support to
the wider community.
Annual Report and Accounts 2022 Grainger plcStrategic report 24
Marketplace
Our market
The long-term structural drivers
supporting the rental market
remain strong
The rental market remains underpinned by strong long-
term fundamentals, with an undersupply of homes,
particularly good quality rental homes, whilst demand for
renting continues to accelerate as the trend of renting for
longer continues.
The UK’s population continues to grow significantly, whilst
housing delivery numbers remain well behind, creating a
backlog of demand.
As the chart below demonstrates, each and every measure of
new housing supply is running below the recognised level of
housebuilding supply required to meet demand.
Housing supply well below demand
Net additional dwellings
Council tax stock
New dwelling EPCs
Building control completions
England housebuilding target pa
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
0
1
-
9
0
0
2
1
1
-
0
1
0
2
2
1
-
1
1
0
2
3
1
-
2
1
0
2
4
1
-
3
1
0
2
5
1
-
4
1
0
2
6
1
-
5
1
0
2
7
1
-
6
1
0
2
8
1
-
7
1
0
2
9
1
-
8
1
0
2
0
2
-
9
1
0
2
1
2
-
0
2
0
2
2
2
-
1
2
0
2
Source: Department for Levelling Up, Housing and Communities
Structural shift from small,
private landlords towards
large-scale professional landlords
Despite the growth in the sector of late, build-to-rent
landlords still only represent c.1.5% of the market, providing
a significant structural opportunity as the market shifts away
from small, private landlords to build-to-rent,
large-scale professional landlords, such as Grainger.
This structural shift is not only supported by shifting
consumer demand and growing service expectations but is
also being accelerated by recent Government regulatory and
tax changes which are disincentivising small landlords and
leading to a continued reduction in their market share.
The attractiveness of the sector to institutional capital,
however, continues to be illustrated by high levels of
investment from major UK and overseas investors.
JLL annual build-to-rent investment volumes (£bn)
BTR only 1.5% of homes in 5m UK private rented sector
7
6
5
4
3
2
1
0
1.3
0.4
2013
2012
Source: JLL
Build-to-rent
Rest of PRS
6.1
4.9
4.5
4.7
3.4
2.7
2.4
2.2
1.9
2014
2015
2016
2017
2018
2019
2020
2021 Q1-Q3
2022
Source: BPF/Savills
Grainger plc Annual Report and Accounts 2022 25
Attractive investment
characteristics – an
inflation hedge, with rents
tracking wage inflation
over the longer term
The supply-demand dynamics of the sector
provide a strong foundation for pricing and
values, but most importantly, private rents
in the UK have historically tracked both
wages and general prices in the long run.
Recently, however, we have seen rents fall
behind these measures, opening the door
for future growth.
Rental market prospects are
bright as multiple drivers
support the ongoing structural
shift towards build-to-rent,
large-scale, professional
landlords.”
Private rents vs inflation, index - Jan-2010 =100
Private rents England (ONS)
CPI
Total pay (ONS)
150
140
130
120
110
100
90
80
70
60
50
0
1
-
n
a
J
0
1
-
y
a
M
0
1
-
p
e
S
1
1
-
n
a
J
1
1
-
y
a
M
1
1
-
p
e
S
2
1
-
n
a
J
2
1
-
y
a
M
2
1
-
p
e
S
3
1
-
n
a
J
3
1
-
y
a
M
3
1
-
p
e
S
4
1
-
n
a
J
4
1
-
y
a
M
4
1
-
p
e
S
5
1
-
n
a
J
5
1
-
y
a
M
5
1
-
p
e
S
6
1
-
n
a
J
6
1
-
y
a
M
6
1
-
p
e
S
7
1
-
n
a
J
7
1
-
y
a
M
7
1
-
p
e
S
8
1
-
n
a
J
8
1
-
y
a
M
8
1
-
p
e
S
9
1
-
n
a
J
9
1
-
y
a
M
9
1
-
p
e
S
0
2
-
n
a
J
0
2
-
y
a
M
0
2
-
p
e
S
1
2
-
n
a
J
1
2
-
y
a
M
1
2
-
p
e
S
2
2
-
n
a
J
2
2
-
y
a
M
Source: ONS
Annual Report and Accounts 2022 Grainger plcStrategic report
26
Business model
Our market leading, fully integrated,
scalable operating platform sets us
apart from the competition
We have a fully integrated platform from origination and investment
through development all the way to operations.
The inputs to our operating platform
Our people
Technology
Data insight and knowledge
People are at the heart of what we do.
And we are all driven and committed to
delivering great homes and great service
to our residents.
Leading the way through CONNECT, our
technology platform, supporting our
sustainable growth and enhancing our
customer experience.
Driven by in-house research we have a
wealth of data, expertise and knowledge,
enabling us to maintain our market
leading position.
Read more on pages 40 and 41.
Read more on page 22.
Read more on page 22.
Our relationships
Our property portfolio and pipeline
Financial capital
Building direct, positive relationships with
our residents, suppliers and partners to
deliver long-term, sustainable value.
With a portfolio of c.10,000 operational
rental homes and a pipeline of c.7,000
rental homes in the strongest cities and
towns, we have the UK’s leading rental
housing portfolio.
A strong balance sheet, robust capital
structure and disciplined approach
to investment, we are in a position of
resilience to ensure sustainable returns.
Read more on pages 66 to 69.
Read more on pages 20 and 21.
Read more on pages 32 to 37.
Outputs
Shareholders
Other stakeholders
Dividend per share
5.97p
EPRA NTA
317pps
Read more on pages 28 and 29.
Customers
9/10
customers really like
their Grainger home
Communities
570+
resident events
Employees
82%
response rate to
our employee
engagement survey
Employees
87%
of all employees are
Shareholders
Grainger plc Annual Report and Accounts 2022 27
How we create value
Our fully integrated business model and operating platform ensures we are investing
in, designing and operating the best possible homes while providing great service.
Great homes and great service means higher customer satisfaction, higher occupancy,
better rental growth and better valuations, enabling us to deliver market leading,
sustainable returns for our Shareholders, and a positive impact for all stakeholders.
Planning, design
and delivery
Research-backed
investing
Direct control over the delivery and
quality of our pipeline of new homes
Selecting the strongest locations
and the best assets
iginat e
r
O
I
n
v
e
s
t
Renting
homes,
Enriching
lives
Opera t
e
Scalable
platform
Through technology, our market
leading operating platform is scalable
to support our continued growth
Annual Report and Accounts 2022 Grainger plcStrategic report 28
Key performance indicators
Driving income returns
Our key performance indicators (‘KPIs’) are aligned to the
business strategy. These measures are used by the Board and
senior management to actively monitor business performance.
Link to strategy
Grow rents
Simplify and focus
Build on our experience
Net rental income
(£m)
PRS rental growth
(%)
86.3
4.8
73.6
70.6
63.5
43.8
3.4
3.0
2.5
0.3
Property operating
cost (gross to net) (%)
28.9
27.6
26.0 26.1 25.9
Adjusted earnings
(£m)
Profit before tax
(£m)
94.0
93.5
82.5 81.8 83.5
298.6
152.1
131.3
100.7
99.1
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
KPI definition
Gross rental income
after deducting property
operating expenses.
KPI definition
Like-for-like average
growth of rents across our
PRS portfolio.
KPI definition
Property operating costs
expressed as a percentage
of gross rental income.
Comment
Increase of 22% due to
a combination of higher
average occupancy
(£3.9m), PRS investment
(£12.0m) and rental
growth (£2.8m) offset by
disposals (-£3.0m).
Comment
4.8% like-for-like growth
in our PRS rental income,
with strong growth in
London and the regions.
Comment
Gross to net performance
reflects the level of new
launches completed in
the year, as we continue
to stabilise new openings.
Stabilised gross to net
performance on existing
assets is 25.5%, and in line
with prior years.
KPI definition
Profit before tax,
valuation movements on
investment assets and
derivatives, 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.
Comment
Increase of 12% delivered
due to growth in net
rental income.
KPI definition
Profit before tax is a
statutory IFRS measure
as presented in the
Group’s consolidated
income statement.
Comment
Increase of 96% driven
by strong valuation
gains, including property
reclassifications
and growth in net
rental income.
Link to strategy
Link to strategy
Link to strategy
Link to strategy
Link to strategy
Notes
See Note 6 to the
financial statements.
Notes
See Glossary on page
171 for definition and
calculation basis.
Notes
See Note 6 to the
financial statements.
Notes
See Note 3 to the
financial statements
for explanation and
for reconciliation to
statutory measures.
Notes
See consolidated
Group income statement
on page 115.
Grainger plc Annual Report and Accounts 2022 Delivering capital returns
29
EPRA NTA
(pps)
EPRA NDV
(pps)
Total Property
Return (‘TPR’) (%)
Loan to value
(‘LTV’) (%)
Cost of debt
(average) (%)
317
297
274 278 285
270 272 273
284
334
7.5 7.5
37.1 37.1
6.0
5.4
5.0
33.4
33.4
30.4
3.4
3.2 3.1 3.1 3.1
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
KPI definition
EPRA NTA (Net Tangible
Assets) is the market
value of property assets
after deducting deferred
tax on trading assets,
excluding intangible
assets and derivatives.
KPI definition
EPRA NDV (Net Disposal
Value) is EPRA NTA after
deducting deferred tax
on investment property
revaluations and including
market value adjustments
of debt and derivatives.
KPI definition
TPR is the change in
gross asset value (net
of capital expenditure),
plus property related net
income, expressed as a
percentage of opening
gross asset value.
KPI definition
Ratio of net debt to
the market value
of properties on a
consolidated Group basis.
KPI definition
Average cost of debt for
the year including costs
and commitment fees.
Comment
20p growth in the year,
primarily driven by
valuation uplift.
Comment
50p growth in FY22
reflecting strong
trading and valuation
performance, as well
as market movements
in fixed rate debt
and derivatives.
Comment
Returns of 7.5%
demonstrating strong
overall returns from
valuation growth in our
property portfolio.
Comment
LTV remains in a strong
position with a modest
increase reflecting
reinvestment of disposal
proceeds into our
BTR pipeline.
Comment
Average cost of debt
maintained at 3.1% as
we lock into favourable
rates for longer term with
average debt maturity
now at 6.5 years, including
extension options.
Link to strategy
Link to strategy
Link to strategy
Link to strategy
Link to strategy
Notes
See page 36 for further
detail on EPRA NTA
and page 164 for EPRA
performance measures.
Notes
See Note 4 to the
financial statements for
reconciliation to statutory
measures and EPRA
performance measures
from page 164.
Notes
See Alternative
Performance
Measures on page 169
for calculation.
Notes
See Alternative
Performance
Measures on page 169
for calculation.
Notes
See Note 27 to the
financial statements
for further detail
regarding capital
risk management.
Annual Report and Accounts 2022 Grainger plcStrategic report 30
Non-financial/ESG KPIs
Non-financial and ESG KPIs
Link to strategy
Grow rents
Simplify and focus
Build on our experience
tainability strategy pillar
Our customers and communities
Our people
Our impact on the environment
We continue to invest in our customer
experience programme and in training
our teams to ensure a consistent service
delivery and continuous enhancements
to our service offering.
With people at the heart of our business,
positive employee engagement
underpins the successful delivery
of our strategy and our strong
financial performance.
We are committed to creating thriving
communities that help attract and
retain customers and benefit those
living and working in the areas close to
our schemes.
This year we continued to invest in
the wellbeing and development of
our workforce, and our independent
employee engagement survey
demonstrated high levels of
employee engagement.
Aligned to our goal of protecting the
long-term future of our business,
we are committed to decarbonising
Grainger's business in alignment with
the net zero transition. Our strategy to
improve the energy efficiency of our
properties to minimum EPC rating C is
progressing well and supports our net
zero carbon commitment.
30 months
average length of stay
for PRS customers
Very Good
rating by colleagues in our annual
survey by Best Companies
1,058 tonnes
of CO2e
Scope 1 & 2 carbon emissions
(market-based methodology)
86%
of all Google reviews by customers
were 5 star
82%
response rate to our employee
engagement survey
-26%
reduction in Scope 1 & 2 market-based
carbon emissions per £m AUM
570+
resident and community events
87%
of eligible employees (12 months+
employment) are Shareholders
87%
EPC ratings ‘C’ and above
(for PRS properties)
Link to strategy
Link to strategy
Link to strategy
Grainger plc Annual Report and Accounts 2022
Our values
Our purpose and values
Our values direct how we make choices,
perform at our best and set Grainger apart
for our customers, employees, investors
and partners.
31
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
People at
the heart
Every home
matters
Renting
homes,
Enriching
lives
Exceeding
expectations
Leading
the way
Every home matters
People at the heart
Leading the way
Exceeding expectations
We are passionate about
providing every customer with
a great place to rent that they
can make their genuine home.
Because we know how much
a good home matters to
everyone’s quality of life.
We want our customers to
feel safe, secure and happy
in their homes and to stay
renting with us for as long as
they wish.
Which is why we put people at
the centre of all our thinking –
in how we create and operate
Grainger homes.
We are ambitious about
giving people the best renting
experience and never stop
finding smart and creative
ways to help them enjoy
renting with us.
We know that leading the
way in our sector helps our
Company performance and
our customers get more from
their lives.
We’ve been a professional
landlord for over 110 years, so
we know what we’re doing and
what our customers need to
enjoy their homes fully.
We take ownership of
what we do and go beyond
expectation, to deliver more
to our customers, each other,
our investors and partners.
Annual Report and Accounts 2022 Grainger plc
32
Chief Financial Officer review
Financial review
In a year that has seen excellent operational performance,
Grainger’s in-house operational model has ensured that we
capitalised on strong rental demand whilst continuing to deliver
operational efficiencies. Our high-quality mid-market build-
to-rent homes generated exceptionally strong demand in the
period which has seen us deliver record occupancy at 98%,
and strong like-for-like rental growth of 4.7% which continues
to accelerate.
The 22% increase in net rental income was driven by this
exceptional operational and leasing performance combined
with the delivery of our new pipeline schemes. With a strong
sales performance and a continued focus on cost control, we
delivered continued earnings growth with adjusted earnings of
£93.5m, up 12%.
We secured further pipeline opportunities earlier in the year
amounting to 1,019 homes across three schemes and three land
sites which provide optionality over future growth. Our growth
strategy has always been combined with a prudent approach
to balance sheet management, and with an LTV of 33.4% and
£663m of headroom we are in a strong place for the year ahead.
The proposed final dividend for the year is 3.89p per share,
taking the total dividend for the year to 5.97p per share, up 16%
reflecting the strength of our business model.
Grainger plc Annual Report and Accounts 2022 33
FY21
1.0%
£70.6m
£83.5m
£152.1m
5.15p
FY21
297p
7.5%
5.5%
£1,042m
30.4%
3.1%
FY22
4.7%
£86.3m
£93.5m
£298.6m
5.97p
FY22
317p
7.5%
8.8%
£1,262m
33.4%
3.1%
Change
+372 bps
+22%
+12%
+96%
+16%
Change
+7%
+2 bps
+330 bps
+21%
+304 bps
+1 bps
Financial highlights
Income return
Rental growth (like-for-like)
Net rental income (Note 6)
Adjusted earnings (Note 3)
Profit before tax (Note 3)
Dividend per share (Note 14)
Capital return
EPRA NTA per share (Note 4)
Total Property Return
Total Accounting Return (NTA basis) (Note 4)
Net debt
Group LTV
Cost of debt (average)
In a year that has seen
excellent operational
performance, Grainger’s
in-house operational
model has ensured that we
capitalised on strong rental
demand whilst continuing
to deliver operational
efficiencies.”
Rob Hudson
CFO
+22%
Net rental income
+4.7%
Rental growth (like-for-like)
Annual Report and Accounts 2022 Grainger plcStrategic report 34
Chief Financial Officer review (continued)
Income statement
The strong performance in the period is reflected in adjusted
earnings increasing by +12% to £93.5m (FY21: £83.5m). We have
delivered significant growth in net rental income in FY22,
driven by strong like-for-like rental growth and the delivery
of our pipeline. Future growth is locked-in as our fully funded
committed pipeline converts into rental income, with the total
secured pipeline delivering a c.70% increase in net rents over
time. This will result in significant margin improvement and
a doubling of recurring EPRA earnings compared to FY22.
Residential sales profits were robust and in line with plan at
£63.3m (FY21: £67.5m) reflecting the natural run off of vacant
sales in our regulated tenancy portfolio over time.
Rental income
(£m)
Income statement (£m)
Net rental income
Profit on sale of assets –
residential
Profit on sale of assets –
development
CHARM income (Note 20)
Management fees
Overheads
Pre-contract costs
Joint ventures and associates
Net finance costs
Adjusted earnings
Valuation movements
Other valuation movements1
Other adjustments
Profit before tax
FY21
70.6
67.5
1.8
4.9
5.1
(30.2)
(0.6)
(0.4)
(35.2)
83.5
80.7
–
(12.1)
152.1
FY22
86.3
63.3
2.0
4.8
4.4
(31.8)
(0.8)
(1.4)
(33.3)
93.5
133.4
81.2
(9.5)
298.6
Change
+22%
(6)%
+11%
(2)%
(14)%
+5%
+33%
+250%
(5)%
+12%
+65%
(21)%
+96%
1 Profit before tax includes an £81.2m valuation uplift from one-off transfers from trading
property to investment property in FY22. The transfer does not impact the market value
of properties reflected in EPRA measures, but does increase EPRA NTA by 3pps following
the reclassification of £20.3m deferred and contingent tax.
+22%
+£3.9m
£86.3m
£70.6m
£(3.0)m
+£12.0m
+£2.8m
Total l4l
PRS l4l
Regs l4l
+4.7%
+4.8%
+4.6%
90
80
70
60
50
40
FY21
Net rental
income
Rental income
Disposals
PRS
investment
Rental
growth
Occupancy
FY22
Net rental
income
Net rental income was up +22% during the year at £86.3m
(FY21: £70.6m) due to increased occupancy (+£3.9m), £2.8m
like-for-like rental growth and £12.0m PRS investment, offset by
disposals (-£3.0m).
During the year we delivered 669 units (FY21 1,304) across
four schemes, all of which were fully stabilised at the year
end. Passing rent at the end of FY22 was £91m. FY23 pipeline
deliveries of 1,640 homes will deliver c.£17m net rent once
stabilised, however given they are largely H2 weighted the lease
up mostly benefits FY24. With a view to moving towards REIT
conversion, we expect to see an increased level of disposals
during FY23.
The rental market has been particularly strong in the period
with rent collection levels at 98%, like-for-like growth strong
at 4.7% (FY21: 1.0%), comprised of 4.8% rental growth in our
PRS portfolio (FY21: 0.3%) and 4.6% in our regulated tenancy
portfolio (FY21: 3.6%). Rental growth was much stronger in
H2 at 5.5% (H1:3.5%) as rental growth continued to accelerate
throughout the year. Above long-term average rental growth is
expected to continue into FY23.
Grainger plc Annual Report and Accounts 2022
35
Sales and development activity
Our residential sales had a strong year delivering £63.3m of
profit (FY21: £67.5m) from revenues of £148.7m (FY21: £157.2m)
and continue to provide a key element of funding for our PRS
growth. We delivered £32.4m of profit from vacant property
sales (FY21: £39.6m) from revenues of £73.9m (FY21: £75.5m)
and sales of tenanted properties delivered £30.9m of profit
(FY21: £27.9m) from revenues of £74.8m (FY21: £81.7m).
The prices achieved were 3.9% (FY21: 2.6%) ahead of
previous valuations.
FY21
FY22
Sales (£m)
Revenue
Profit
Revenue
Profit
Residential sales on vacancy
Tenanted and other sales
Residential sales total
Development activity
Overall sales
75.5
81.7
157.2
30.6
187.8
39.6
27.9
67.5
1.8
69.3
73.9
74.8
148.7
26.0
174.7
32.4
30.9
63.3
2.0
65.3
Market value balance sheet (£m)
FY21
FY22
Residential – PRS
Residential – regulated tenancies
Residential – mortgages (CHARM)
Forward funded – PRS work in progress
Development work in progress
Investment in JVs/associates
Total investments
Net debt
Other liabilities
EPRA NRV
Deferred and contingent tax – trading assets
EPRA NTA
Deferred and contingent tax – investment assets
Fair value of fixed rate debt and derivatives
EPRA NDV
EPRA NRV pence per share
EPRA NTA pence per share
EPRA NDV pence per share
2,024
896
72
244
146
45
3,427
(1,042)
(35)
2,350
(142)
2,208
(59)
(38)
2,111
316
297
284
2,189
812
69
466
182
55
3,773
(1,262)
(41)
2,470
(111)
2,359
(116)
240
2,483
333
317
334
Balance sheet
Our balance sheet remains in a strong position with LTV of
33.4% (FY21: 30.4%) which is below our target range of 40%-
45%, a level that was set to withstand a c.50% fall in values
and gives us plenty of headroom in our financial covenants
which range from 70%-75% maximum LTV. Our policy of
having our capex commitments fully funded upfront means we
have significant available headroom of £663m (FY21: £641m).
We also have the ability to flex our disposals to manage debt
levels going forward. Our PRS portfolio now makes up 73%
(FY21: 69%) of our overall asset base.
Annual Report and Accounts 2022 Grainger plcStrategic report 36
Chief Financial Officer review (continued)
EPRA NTA increased by 7% during the year to 317p per share
(FY21: 297p per share). Our valuation uplift of 21pps was the
major driver of this growth with earnings adding 3pps, offset by
dividend payments of 5pps.
EPRA NDV increased by 18% with our high levels of fixed rate
or hedged debt resulting in a £240m mark to market value of
our debt.
EPRA net tangible assets (NTA)
Pence per share
3p
+21p
+1p
(3)p
(5)p
3p
+7%
317p
+13p
(5)p
(5)p
297p
Total +4.4%
+4.6%
PRS
Regs +4.1%
+4.0%
Dev
310
300
290
280
270
260
FY21 EPRA
NTA
Net rents,
fees & income
Overheads
Finance costs
Valuations
Sales profit
Tax & other
Dividends
Asset
transfers*
FY22 EPRA
NTA
* Transfer of properties from trading property to investment property generating £20.3m contingent tax reclassification (see Note 2, page 125).
Property portfolio performance
Our overall portfolio value growth was 4.4% (FY21: 4.5%) with
our operational PRS portfolio increasing by 4.6% (FY21: 3.4%)
and our regulated portfolio delivering 4.1% valuation growth
(FY21: 3.7%). ERV growth at 3.1% was the primary driver of
valuation growth in our PRS portfolio with yields relatively flat.
Our regional regulated portfolio saw strong valuation growth
at 7.5% ahead of the London regulated portfolio at 3.5%.
Portfolio
Region
Capital
value
Total valuation
movement
PRS
London & SE
Regions
PRS total
Regulated Tenancies London & SE
Regions
Regulated total
Development
Operational
portfolio
Total portfolio
£m
£m
1,262
927
2,189
680
132
812
3,001
648
3,649
37
59
96
22
11
33
129
28
157
%
3.1%
6.8%
4.6%
3.5%
7.5%
4.1%
4.5%
4.0%
4.4%
Our capital structure
remains in a strong
position with LTV at
33.4%, cash and available
facilities of £663m and no
significant refinancing
requirements until 2027.”
Rob Hudson
CFO
Grainger plc Annual Report and Accounts 2022 Financing and capital structure
Our capital structure remains in a strong position with LTV at
33.4% (FY21: 30.4%), cash and available facilities of £663m
(FY21: £641m) which more than covers our committed
pipeline and no significant refinancing requirements until 2027.
In August, we successfully refinanced our bank Revolving Credit
Facility ('RCF') and term debt, increasing to £575m from £500m
and maintaining margins.
The average cost of debt remained flat at 3.1% (FY21: 3.1%)
during the period. We have hedged 97% of our interest rate risk
with an average maturity of six years and expect a marginal
increase in interest cost of c.20bps in FY23.
Net debt for the year was £1,262m (FY21: £1,042m) with £94m
of operational cash flows, £110m of proceeds from asset
recycling, offset by £347m of investment in our PRS pipeline.
For FY23 we expect similar levels of reinvestment into our PRS
pipeline in line with the delivery of our strategy, together with an
increased level of recycling in line with our ambition for future
REIT conversion.
Net debt
Loan to value
Cost of debt
Headroom
Weighted average facility maturity (years)
Hedging
FY21
£1,042m
30.4%
3.1%
£641m
5.6
100%
FY22
£1,262m
33.4%
3.1%
£663m
6.5
97%
37
3.1%
Average cost of debt
6 years
hedge maturity
Summary and outlook
FY22 was a year of very strong performance with good
growth in rental income, earnings and dividend. With a fully
funded, committed pipeline which has construction and
finance costs fixed, we have clear visibility over the next four
years of future growth and see our strong forecast earnings
growth unchanged.
Our strong balance sheet, fully funded pipeline and fixed cost
debt gives real strength to our capital structure. We have
significant flexibility and liquidity in our balance sheet that
will enable us to maintain our prudent approach to leverage
whatever the macro-economic outlook, and will be well placed
to take advantage of any opportunities that arise.
Rob Hudson
Chief Financial Officer
16 November 2022
Annual Report and Accounts 2022 Grainger plcStrategic report 38
ESG Introduction
Grainger’s
approach tosustainability
Sustainability is fully integrated into the business’s strategy
and our operations, informing the initiatives we put in place
to support our people, our approach to investment and asset
management, and the processes we use to design and operate
our buildings.
Our material issues
Our strategy is informed by the sustainability risks and
opportunities identified as being most impactful to Grainger
and our stakeholders through regular materiality reviews.
In 2022 we conducted stakeholder engagement with our
residents and our employees to understand their sustainability
priorities and inform the workstreams we focused on during
the year. This included our ‘Living a Greener Life’ engagement
campaign designed to support our residents to ‘live greener’ and
reduce their environmental impacts and utility bills see page 9.
Energy and carbon remains a key focus for Grainger. We are
committed to transitioning our business to net zero in alignment
with the UK Government’s net zero carbon target, and have
made good progress on the implementation of our net zero
carbon roadmap.
Monitoring progress
Our sustainability strategic pillars are supported by Grainger’s
long-term ESG commitments and key performance indicators
used to monitor our progress. Our newly established
Responsible Business Committee reviewed progress against the
business’s long-term ESG commitments and key sustainability
workstreams (see Responsible Business Committee report on
pages 76 - 77).
Responses to key risks and opportunities were also reviewed at
regular meetings of Grainger’s internal Committees including
Investment Committee, Operations Board and Development
Board. These included:
– Investment Committee reviewed the green and social
investment criteria included in Grainger’s Sustainable Finance
Framework and assessed potential acquisitions against
specific ESG criteria
– Operations Board considered the strategy for measuring
customer energy data and associated Scope 3 GHG emissions
– Development Board considered the business’s approach to
measuring and reducing embodied carbon
We are also driven by a strong social purpose and this year we
undertook a pilot assessment of the social impact generated by
a typical Grainger building, to further refine how we measure
the benefits of Grainger homes to our residents and local
community stakeholders.
Our plans for 2023 include continuing our progress towards
measuring actual Scope 3 emissions, by enhancing our
understanding of the energy used by our customers in their
homes, and developing our strategy to reduce embodied
carbon from our development projects.
Grainger plc Annual Report and Accounts 2022 39
Find out
more
Social value
pilot page 41.
Diversity
and
inclusion
page 77.
Progress against our long-term commitments
Sustainability
strategy pillar
Long-term
commitments
Headline achievements
from 2022
Key workstreams
for 2023
Material ESG
risks and
opportunities
People –
Treating people
positively
Measure and deliver
positive social value
contribution to our
customers and local
communities.
Ensure Grainger's
workforce is
reflective of society.
Develop Grainger's
social impact
framework.
Providing homes
that are affordable
to local people.
Undertake a
review of external
Diversity & Inclusion
benchmarks with
a view to selecting
and progressing
with one.
Protecting the
health, safety
and wellbeing
of colleagues
and customers.
We have assessed the social
value delivered by a typical
operational BTR asset to inform
how we measure the social
impact of our portfolio.
Workforce diversity tracking
has improved the accuracy
and coverage of our workforce
diversity data, to inform the
development of our Diversity &
Inclusion Strategy.
We introduced a new mentoring
scheme and Diverse Talent
Acceleration Programme to
support the growth of our
colleagues.
Assets –
Creating
desirable,
healthy homes
Deliver enhanced
investment
decisions through
incorporating ESG
considerations
including risks,
costs and returns.
We defined our costed pathway
to increasing energy efficiency
standards across our portfolio
to EPC band C by 2025, which we
are underway in actioning with
87% of PRS properties currently
rated EPC C or above.
Climate scenario analysis was
undertaken to assess the
physical climate risks material
to Grainger’s portfolio and we
produced Grainger’s first full
TCFD Report.
Grainger's Sustainable Finance
Framework was finalised and
approved.
Create asset level
sustainability action
plans for Grainger's
long-term hold
assets.
Enhancing the
energy efficiency
and ESG
performance of
existing assets.
TCFD
Report page
44.
Physical climate-
related risks to
our portfolio
and potential
investments from
flooding, extreme
weather events and
chronic temperature
change.
Environment –
Securing our
future
Achieve net zero
carbon for our
operations by 2030.
We continued to implement our
roadmap to net zero carbon by
2030. This year we increased
our focus on Scope 3 emissions
with pilots to measure customer
emissions and to understand
opportunities to measure and
reduce embodied carbon on our
developments.
Our ‘Living a Greener Life’
engagement strategy was
developed to help our customers
join us on our net zero journey.
Define Grainger's
strategy to measure
and reduce
embodied carbon.
Plan Grainger's
long-term roadmap
to net zero Scope 3
emissions.
Continue the
implementation of
our Living a Greener
Life programme.
Transitioning
Grainger’s business
to net zero carbon,
including meeting
increased energy
and carbon
building standards,
eliminating
fossil fuels and
meeting market
expectations.
Living a
Greener Life
page 9.
Net zero
carbon page
43.
Annual Report and Accounts 2022 Grainger plcStrategic report 40
Our people
We have completed our project to track the diversity of
Grainger’s workforce, with a high response rate of 71%.
The findings have helped shape the focus areas for our
Diversity & Inclusion approach, and include that 27% of our
colleagues are primary carers for a child or children under 18.
To support our colleagues:
- We are members of Carers UK which provides support,
guidance and resources to colleagues via an external platform
- The D&I Network has launched a Working Parents Group
- We have a hybrid working policy with core office days and
flexibility around days worked from home
Our age profile indicates we have a multi-generational workforce.
Ethnicity
White
82.3%
Asian or Asian British
8.6%
Black or Black British
3.5%
Mixed or Multiple Ethnic 2.6%
Other Ethnic Group
0.4%
Prefer to self describe
1.3%
Prefer not to say
1.3%
This data is for all employees who completed the Company's
workforce diversity tracking questionnaire in July 2022, which
had a response rate of 71%. Analysis of this data identified a
significant difference in ethnic diversity between locations. In
Grainger's Newcastle office, the workforce is reflective of the
local population which is less ethnically diverse than other
regions. There are much higher levels of ethnic diversity within
Grainger's London workforce and amongst our customer-facing
site-based teams.
Gender
Executive
Directors
(Main Board)
Executive
Committee
1
1
2
9
154
342
Total
employees
188
60
52
Senior
Managers
15
5
Managers
Associate
Support
Graduates
2
1
Onsite
18
20
46
40
29
41
The Executive Directors are members of the Executive
Committee but not included in the above figures.
Male
Female
People
Listening and acting on feedback
We value the thoughts and views of our colleagues and provide
multiple channels for them to share feedback, suggestions or
ask a question.
This year, through our employee conferences, engagement
surveys, All Company Calls, newsletter and intranet, we have
gathered a great deal of insight and ideas from our colleagues.
In each case, the feedback has been collated, recorded and
turned into an action plan with a clear feedback loop back to
our colleagues. As an example, with the business growing,
we were advised that colleagues would benefit from a better
understanding of what all teams and functions in the business
do, so we created a platform for teams to introduce themselves
and showcase what they do through our various internal
communication channels.
Very Good
rating by colleagues in our annual survey
by Best Companies.
In listening and responding to feedback from colleagues, we
will enhance their overall experience working at Grainger with a
positive knock on effect for the benefit of our customers.
Engendering an inclusive and welcoming
working environment
Our employee-led Diversity & Inclusion Network continues
to undertake awareness-raising activities and campaigns
for both colleagues and residents. Its membership has been
bolstered by additional representation from our Resident
Services Teams who ensure the campaigns are highlighted
in Grainger’s buildings.
Grainger plc Annual Report and Accounts 2022 Supporting our colleagues to achieve their goals
Grainger’s Diverse Talent Acceleration Programme is
supporting participants with bespoke support and coaching to
help them take the next steps in their careers. Our first cohort
of Future Leaders has now completed its two-year development
programme, with many achieving internal career progression
over this period.
Grainger’s Mentoring Programme – Our mentoring scheme
has proven successful, with 20 colleagues involved as mentors
and mentees. Prior to its launch, a training session was provided
by an external consultancy to enable all participants to get the
maximum benefit from the programme. The diverse group of
participants included representation from all levels including
our Executive Committee and feedback from colleagues has
been positive.
Mentoring at Grainger
is a two-way street - it
provides an opportunity for
mentors to share relevant
knowledge and experience
with their mentees; but we
also learn from those we
counsel - their aspirations,
their challenges and
immediate priorities.”
Paul
Grainger colleague
Employee conferences – This year we were pleased to be
able to host in-person employee conferences, attended by our
employees, which provided opportunities for colleagues to
reconnect with each other and input to some the business’s
key projects, including our Customer Experience Programme,
‘Living a Greener Life’ engagement campaign and Grainger’s
People Strategy.
Colleague wellbeing – We continued our focus on supporting
colleague wellbeing, with a series of workshops from an
external professional nutritionist, a campaign focused on
helping colleagues get the most out of the Company’s
wellbeing benefits and regular lunch and learns covering
topics from mental health to menopause.
Giving something back is part of Grainger’s core values, and
we were pleased to reintroduce in-person volunteering and
charitable activities and to continue our involvement in the
Education Engagement Partnership with Transport for London
which in its first year has delivered 16 events, supporting 915
students. Grainger was also proud to donate homes for a year
to six Ukrainian refugee families in Grainger Trust’s Poppy
Apartments, Millet Place, worth over £150,000.
Please also see 'People at the
heart' on pages 14 to 15.
41
Delivering positive social impact
Grainger's social value programme is designed to measure
and communicate our contribution to the communities within
and around our buildings. This year we undertook a pilot
assessment to understand the typical social impact created by
Grainger's build-to-rent homes, using Brook Place in Sheffield as
an example.
Brook Place is home to 356 residents in 237 rental homes, and
was the first development in the city designed specifically for
renters. As with all Grainger’s build-to-rent developments,
Brook Place offers residents more than just an apartment, with
amenity space including a 24-hour gym, co-working space,
bookable dining room, residents lounge and three roof terraces.
Brook Place also has a commercial tenant, R1SE yoga studio
which provides complimentary online classes to Grainger’s
residents and employees across the UK.
Brook Place is positively perceived by the local community,
with survey results suggesting people admire the design of
the building, the area around it feels safe and more accessible,
and the building has enhanced the mood of the area.
Grainger’s onsite Resident Services Team are focused on
creating a thriving community for our residents, with a
range of events including charity coffee mornings, cooking
competitions, Easter egg hunts, Halloween parties, online
competitions, Valentines celebrations and even events for
our pet population. The team have sought to build strong
relationships with local charities and the local business
community, and this is demonstrated in the spend Grainger’s
residents have contributed to the local area, with additional
footfall contributing to an estimated additional annual spend
of £338,000.
Most importantly, our residents continue to enjoy living at Brook
Place with a Net Promoter Score of +44. Their feedback is taken
on board to the building’s design and operation, such as the
recent introduction of a community garden.
Grainger has also acquired the site next door to Brook Place,
which has potential for up to c.250 PRS homes, and we plan to
use the learnings from this assessment to feed into the design of
the new scheme.
22%
of increase in local
business footfall
attributable to
Brook Place
6
Full Time Equivalent
(“FTE”) jobs created
directly and indirectly
by Brook Place
c.£490k
Gross Value Added
(“GVA”) created on
an annual basis by
Brook Place
Annual Report and Accounts 2022 Grainger plcStrategic report 42
Assets
The amenity space has been constructed using engineered oak
wood panelling, locally manufactured Foresso worktops created
from timber offcuts and wasted wood, terrazzo tiling created
using 40% recycled materials and resource efficient flooring
containing recycled content.
Whilst the building’s design has protected its heritage, it also
includes modern technologies to minimise its environmental
impacts, with PV panels on the roof of the new buildings and
rainwater recycling in place in the communal gardens.
Creating homes, designed to enable greener, better living
Pin Yard, Grainger’s latest development in Leeds, has been
designed to deliver positive environmental and social benefits
to our residents.
Master switches by the door in each apartment enable residents
to turn off all the lights when they leave their home, saving
energy and costs. The energy for the communal areas in the
building is partially supplied through PV panels located on the
roof, and the building is fossil-fuel free with all-electric heating
and hot water.
Our Community Corner provides a space for residents to share
things that are important to them, for our Resident Services
Team to share tips and benefits, and to signpost local businesses
offering discounts to our residents. To help residents recycle
their unwanted items to a good home, we have introduced a
clothing bank collecting donations for textile recycling charity
White Rose, which raises funds in support of the Aegis Trust.
We recently held a successful swap shop event for residents to
exchange pre-loved items.
The outdoor courtyard is ideal for residents with pets and
provides a welcoming space for residents to spend time
together. It is regularly used for events, such as The Pin Yard
festival which helped residents get to know each other whilst
enjoying music, refreshments and stalls from local businesses.
Assets
Bringing a historic building back into use
Gilders Yard, Grainger’s first build-to-rent development in
Birmingham, delivers high-quality new homes whilst also
preserving a listed building. Located in the city’s Jewellery
Quarter - on the former site of a renowned Birmingham
jewellery maker - the site’s history has been carefully
considered throughout the building’s design.
The scheme combines new and restored buildings,
incorporating different architectures, with the new buildings
specifically designed to blend in with the area’s industrial
heritage. The original factory has been preserved and forms
the centrepiece of the new development, with elements of the
original factory, such as exposed brick and metalwork featuring
within several of the new homes and the development’s name
also being inspired by the technique of gilding that was used to
apply fine gold powder to the trinkets produced on the site.
The building’s amenity spaces, which include a gym, co-working
space and residents lounge, also feature an internal display
showcasing a collection of original enamelled cufflinks, tie clips
and enamelled brooches from the archive of the former factory.
Protecting the Grade II listed building and refurbishing and
reusing other building elements onsite was a fundamental
part of the construction process. The embodied carbon of the
development has been substantially reduced through the use of
a timber frame for three of the four blocks, retention of a brick
façade, refurbishment of a brick substation which was converted
into an apartment, and the salvage and reuse of paving slabs in
the courtyard.
Grainger plc Annual Report and Accounts 2022 Environment
43
Environment
Progress towards our net zero carbon commitment
We are making good progress towards our commitment to
achieve net zero carbon for our operations by 2030, by taking
action in the following areas:
– Improving energy efficiency
– Transitioning away from fossil fuels
– Generating and purchasing renewable energy
We continue to focus on enhancing the energy efficiency of
existing assets. We have now mapped and costed our pathway
to achieving a minimum EPC rating of C for the remainder of our
PRS portfolio (currently 87% rated C or above), leaving Grainger
well placed to comply with potential future minimum energy
efficiency standards and enabling us to plan improvement works
into our long-term refurbishment programmes.
Grainger’s refurbishment programme to upgrade the communal
areas of our properties continues with major projects completed
at five assets over the last two years to upgrade fabric, replace
windows and install energy efficient lighting systems.
A full refurbishment of our head office in Newcastle has
achieved a year-on-year reduction in energy consumption of
23%. The fit out implemented the recommendations made in an
external energy audit, whilst providing a functional, stylish and
collaborative space for our colleagues.
All new developments completed this year feature PV panels
with the renewable energy generated supplying the communal
areas of the buildings. We continue to increase the proportion
of renewable energy purchased and agreed a new green
gas contract during the year to supply our buildings with
biomethane certified by the green gas certification scheme.
Tackling the challenge of measuring Scope 3 emissions
One of the most significant challenges impacting both
Grainger’s and the residential sector’s ability to set science-
based carbon reduction targets and measure progress to net
zero is the challenge of accessing our customers' energy data
whilst complying with data protection regulations. For many
years we have been estimating carbon emissions from
Grainger’s customers' energy use in our buildings, and reporting
these annually in our Streamlined Energy and Carbon Report
(see page 104). However, being able to measure the actual
energy used throughout the building would allow Grainger to
identify where our emissions reduction activities are having the
most impact.
This year we developed our strategy to measure customer
emissions, and have already made progress with understanding
energy use and carbon across our build-to -rent portfolio.
Our analysis to date shows that Grainger’s properties are
operating more efficiently than they are predicted to be on
their Energy Performance Certificates. Across our portfolio,
data from Energy Performance Certificates suggests Grainger’s
homes use, on average, 65% less energy than a typical home
and we are looking forward to continuing our journey towards
measuring actual emissions generated across our portfolio.
We undertook a deep dive of embodied carbon to review
best practice across the residential sector and measure the
embodied carbon of Grainger’s Direct Development projects.
The opportunities identified to reduce embodied carbon will
be considered in the next stage of design. Examples include
the findings from a structural embodied carbon assessment of
Grainger and Transport for London’s Connected Living London
Arnos Grove scheme, which identified potential to replace all
building piles with a raft foundation, saving c.10 kgCO2/m2 GIA
(equivalent to more than 2,000 tonnes of carbon).
Annual Report and Accounts 2022 Grainger plcStrategic report 44
Task Force on Climate-related Financial Disclosures
TCFD summary
Introduction
Grainger is a TCFD supporter and is committed to assessing,
managing and reporting climate-related risks.
Grainger also responds annually to the CDP Climate Change
Programme and our responses are publicly available at:
https://www.cdp.net/en/responses
This TCFD Report summarises Grainger’s response to the TCFD
recommendations. Climate-related information is also reported
elsewhere in this Annual Report, and is signposted in the
following table.
The climate-related impacts of Grainger's property
portfolio are reported in the EPRA Sustainability
Report published on Grainger's website at:
https://corporate.graingerplc.co.uk/responsibility
TCFD recommendations
Description
Section
Governance
Board oversight of
climate-related risks
and opportunities
Grainger's Board oversees progress against the Company's sustainability strategy, including climate-
related risks and opportunities. Grainger’s Audit Committee undertakes twice-yearly review of
the Company’s principal risks including climate change. Grainger's Responsible Business Committee
oversees progress against the Company's climate-related objectives and workstreams.
Audit
Committee
report
page 78.
Management’s role in
assessing and managing
climate-related risks
and opportunities
Ultimate responsibility for all sustainability matters including climate-related issues lies with
Grainger’s Chief Executive and the Executive team. To better understand inhibitors and
opportunities to our strategy, we have conducted a detailed climate-related risk assessment
involving the senior management team. Our forward-looking risk taxonomy drives a stronger
focus on emerging risks including the transition to net zero. This supports our managers to
prioritise risks that matter most and take sound and strategic business decisions.
Page 45.
Strategy
Climate-related risks and
opportunities over short,
medium, and long term
Climate-related risks are reported within Principal risks. Material risks and opportunities affecting
the business over the short term include increasing regulation and flood risk and over the medium
to long-term include chronic temperature change and impacts on customer and investor demand.
Risk page
52.
The impact on
the organisation’s
businesses, strategy,
and financial planning
Climate-related risks are considered in property development, acquisition, refurbishment and
recycling decisions. The business’s transition to net zero is considered in strategic and financial
planning with increased investment planned to improve Grainger’s long-term hold portfolio.
Page 47.
Resilience of the
organisation’s strategy,
based on different
climate-related scenarios
Grainger has assessed the organisation’s property portfolio against two climate-related
scenarios over three timeframes. The strategic focus on developing net zero ready build-to-
rent properties and upgrading the energy efficiency and quality of our long-term hold portfolio
supports the Company’s long-term resilience.
Page 47.
Risk management
Processes for identifying,
assessing, and managing
climate-related risks
and integration of those
processes into the risk
management framework
Metrics and targets
Metrics to manage
climate-related risks
and opportunities
Disclosure of Scope 1, 2
and where appropriate
Scope 3 and related risks
Targets used by the
organisation to manage
climate-related risks and
opportunities
The detailed climate-related risk assessment identified a number of transitional and physical
risks and opportunities. Those risks have been prioritised over the short, medium and long-term
and appropriate actions put in place.
Risk page 57.
Climate-related risks are reviewed quarterly at relevant management committees including
the Investment Committee, Finance Committee, Development Board and Operations Board.
Assurance on climate-related risks forms part of our internal audit plan.
The Key Performance Indicators used to manage climate-related risks and opportunities are
reported on page 30.
KPIs
page 30.
Grainger reports Scope 1, 2 and 3 GHG emissions in our Streamlined Energy and Carbon Report
on page 104.
SECR
Statement
page 104.
Grainger has committed to achieving net zero carbon for Scope 1 and Scope 2 GHG emissions
by 2030. Progress towards our target is reported on page 39.
ESG
page 39.
Grainger sets annual ESG objectives linked to Executive remuneration, and progress against
these objectives is reported on page 94.
Grainger plc Annual Report and Accounts 2022 45
Governance
Board oversight of climate-related risks and opportunities
Climate-related risks and opportunities are scheduled
agenda items at twice-yearly meetings of the Board
Responsible Business and Audit Committees, both of which
include all Board members. The Board Responsible Business
Committee receives an update on ESG strategy and specific
related action plans, reviews progress against climate-related
targets and objectives and receives a standing update on the
external environment, which includes current and potential
legislation and findings from stakeholder engagement,
including those related to climate matters.
The Audit Committee reviews the business’s principal and
emerging risks twice yearly, which includes climate-related risks.
The Board and members of the Executive team consider
climate-related issues when setting objectives, in budget
setting and through the Board’s annual strategic review
of the business. The Board monitors progress against the
business’s ESG objectives and key strategic climate-related
workstreams, including progress towards Grainger’s net
zero carbon commitment see page 39 at all meetings of the
Responsible Business Committee. Climate-related issues are also
considered by the Board and Executive team in key investment
and divestment decision-making and in allocating major
capital expenditure.
Board competency in relation to ESG including climate-related
matters is considered through the assessments of skills and
experience undertaken upon each appointment to the Board
and as part of the annual Nominations Committee review.
Management’s role in assessing and managing climate-related
risks and opportunities
The Board has assigned responsibility for management of
climate-related issues to the Chief Executive and Executive team.
Executive Committee members are allocated ownership for the
business’s ESG objectives, including climate-related objectives.
An ESG update which includes climate-related issues is a standing
agenda item at twice-yearly meetings of Grainger’s Executive
Committee and progress against the business’s ESG objectives is
reported at twice-monthly Executive Committee meetings.
Governance of climate-related risks and opportunities
Climate-related issues are considered within the Company's risk
management framework which is overseen by the Executive
Committee and Audit Committee. The Company's principal
risks, which include climate change, are presented by the
Risk Manager to the Audit Committee and to the Executive
Committee twice yearly. They are also considered at meetings
of various sub-committees which report into the Executive
Committee, including the Investment Committee which
considers climate-related risks related to property acquisitions
and the Development Board which considers environmental
risks and opportunities on development projects. The Chief
Executive attends meetings of these sub-committees.
Examples of the key climate-related risks and opportunities
discussed at these Committees during 2022 include:
– Investment Committee reviewed climate-related risks and
opportunities for potential acquisitions, refurbishments
and disposals
– The plans for the refurbishment of Grainger's Newcastle head
office including reuse and recycling of furniture and energy
efficient lighting were considered at various Committees
– Finance Committee reviewed and approved the business's
Sustainable Finance Framework
– Executive Committee considered the strategy to roll-out
green lease clauses and collect customer energy data to
calculate customer emissions
The Director of Corporate Affairs holds day-to-day oversight
of assessing and managing climate-related risks and
opportunities and reports to the Chief Executive. The Head
of Sustainability & CSR reports to the Director of Corporate
Affairs. Their responsibilities include overseeing the Company's
sustainability strategy and ensuring its implementation, and
monitoring progress towards Grainger’s net zero carbon
commitment. The Head of Sustainability & CSR assesses and
manages the opportunities and risks to Grainger arising from
climate-related issues as well as broader sustainability issues on
a day-to-day basis, and develops action plans to manage specific
climate-related risks and opportunities, which are discussed
and approved by the Responsible Business Committee and
Executive Committee.
Board Responsible Business Committee
Board Audit Committee
Material climate-related risks and opportunities and strategic
implications discussed twice yearly
Principal risks including climate change are discussed at Audit
Committee meetings twice yearly
Grainger's Executive team
Chief Executive has overall responsibility for ESG matters
ESG updates presented at twice-yearly Executive Committee meetings
Principal risks presented at quarterly Executive Committee meetings
Director of Corporate Affairs
Risk Manager
Reports into Chief Executive and provides
regular ESG updates
Reports into Executive Committee and provides
regular risk updates
Responsible for day-to-day identification and management of climate-related risks and opportunities
Head of Sustainability & CSR
Annual Report and Accounts 2022 Grainger plcStrategic report 46
Task Force on Climate-related Financial Disclosures (continued)
Strategy
Climate-related risks and opportunities Grainger has identified
over the short, medium, and long term
Grainger applies its standard risk time horizons to all risks
including climate-related risks. Operational risks are short-term,
up to two-years; tactical risks are medium-term, up to five years
and strategic risks are long-term, beyond five years. Grainger is
a long-term investor in our assets and therefore we consider
long-term risks over the full asset lifecycle, which can extend to
100 years or beyond.
The company’s corporate risk framework is used to determine
which risks have a material financial impact. The framework
uses a scoring tool to consistently assess the impact of all
risks including climate-related risks. It uses definitions for five
different levels of risk assessed for impact and probability.
Risks allocated to the top two categories (‘major’ and
‘extreme’) would have a substantial financial (£500k+) and/
or strategic impact on the business. For more information
on these assessments please refer to our CDP response at:
https://www.cdp.net/en/responses
The potential climate-related risks and opportunities we have identified that could have a material financial impact on the
organisation are:
Category
Risk / opportunity
Timeline
Business response
Transition
Costs and technology implications of meeting
increased legislation such as Minimum Energy Efficiency
Regulations and Future Homes Standard
Short-term – Strategy developed to ensure compliance with future
potential Minimum Energy Efficiency Regulations
– Specification for new developments aligned to Future
Homes Standard
Increased revenues from development opportunities
Short-term – Grainger’s ESG approach including climate-related
Increased access to capital from responsible investors
Short-term – Sustainable Finance Framework
– Extensive ESG disclosure to investors
Increasing energy costs
Short-term – Energy broker partnership and central energy contracts
strategies is integrated into bid documentation
for potential developments and in reporting to
development partners
for Grainger procured energy
– Refurbishments programme to increase
energy efficiency
– Investing in energy efficient buildings and reducing our
customers energy bills
Impact on investor demand for non-compliant assets
Short-term – Climate-related criteria integrated into asset
Impacts of heat stress and energy efficiency on
customer demand
investment and recycling strategies
– EPC Plan C Strategy to enhance the energy efficiency
of our assets and ensure compliance
Long-term – Due diligence of acquisitions and existing assets
includes climate risks and energy efficiency
– Refurbishments programme to increase
energy efficiency
– Customer awareness campaigns to influence behaviour
Physical
Increased risk of flooding
Short-term – Due diligence of acquisitions and existing assets
Increased severity and frequency of extreme
weather events
Medium-
term
includes flood risk
– Mitigation strategies including flood management
plans in operation at assets with identified potential risk
– Comprehensive Business Continuity Programme
in place
– Due diligence of acquisitions and existing assets
includes physical climate risks
– Mitigation strategies in operation at assets with
identified potential risk
Grainger plc Annual Report and Accounts 2022 47
Impact of climate-related risks and opportunities on Grainger’s
business, strategy, and financial planning
The impacts of climate-related risks and opportunities on
Grainger’s business include:
• Products and services: Increased wear and tear on
buildings; increased asset values following refurbishments
• Adaptation and mitigation activities: Increased
investment in adaptation measures for assets with
potential climate-related risks; increased insurance costs
• Investment in research and development: Increased
investment in piloting low carbon heating technologies
• Operations and supply chain: Business disruption;
infrastructure damage; communication network damage;
reputational damage
• Acquisitions or divestments: Increased investment in
new developments; increased asset recycling
• Access to capital: Increased access to green finance
from responsible investors and lenders
Potential climate-related risks and opportunities impact
Grainger’s business strategies around development, acquisitions,
refurbishment and asset recycling. Climate-related issues are
considered in the development and review of these strategies
and as part of the annual strategic review of the business.
Changes made to Grainger’s strategies in response to potential
climate-related risks and opportunities include enhanced asset
due diligence pre-acquisition or pre-development, a bespoke
specification for new developments, increased recycling of
assets and investment in refurbishments to enhance the energy
efficiency of assets.
The potential impacts on the Company’s financial position and
financial performance include:
• Increased costs related to insurance, energy procurement,
investment adaptation measures and compliance
with regulation
• Increased revenues from rental income and sales for assets
that have undergone energy efficiency improvements
• Increased assets related to increased values of existing
properties and increased investment in new developments
• Reduction in assets from business disruption and
infrastructure damage associated with any potential
extreme weather event
• Potential for decreased asset values or early retirement of
assets due to physical climate-related risks or any potential
non-compliance with climate regulation
• Increased access to capital from responsible lenders
and investors
Grainger’s long-term financial planning includes estimates of
the costs required to improve assets up to our expectations of
future requirements, for example to comply with future building
regulations, to meet customer expectations and to mitigate any
identified potential physical climate-related risks. The timeline
for this is up to ten years to align with the Company’s pipeline.
The external valuations of Grainger’s assets reflect climate-
related considerations including the costs to improve buildings
to future regulatory requirements.
Grainger has committed to achieving net zero carbon for Scope
1 and Scope 2 GHG emissions by 2030 and our net zero carbon
roadmap sets out our approach to achieve this through:
– Be Lean – Reducing our energy consumption through
energy efficiency refurbishments
– Be Clean – Supplying energy efficiently through replacing
fossil fuel heating systems with low carbon alternatives
– Be Green – Procuring and generating renewable energy
Full details are published in our net zero carbon roadmap
available on our website at www.graingerplc.co.uk/responsibility
Resilience of Grainger’s strategy, taking into consideration
different climate-related scenarios
Grainger is supportive of the UK Government’s target to
transition to a net zero carbon economy consistent with a 2°C
or lower scenario by 2050 and is aligning our business strategies
to this transition. As a long-term investor in real estate assets
which could be vulnerable to physical climate-related risks,
Grainger has also considered a scenario consistent with
increased physical climate-related risks.
In 2022, Willis Towers Watson undertook a physical climate
risk assessment of the Company’s long-term hold portfolio,
assessing asset exposure to a range of acute and chronic climate
risks. The assessment used the following climate scenarios
published by the Intergovernmental Panel for Climate Change:
– RCP 2.6 which aims to keep global warming at +1.5°C (below
2°C) above pre-industrial temperatures. This requires prompt
and significant reduction of GHG emissions
– RCP 8.5 which assumes minimal abatement of GHG and
associated global warming of 4°C over the longer term
These scenarios were considered over three timelines:
the current position, short-term (2030s) and mid to long-term
(2050s and beyond).
The assessment identified some acute risk exposure to flood
and windstorm risks. Windstorm risk is typical for the UK and
could affect all assets with moderate intensity. The Company’s
strategy to invest in urban locations results in some exposure
to flood risk in locations such as Bristol, Leeds and London
and one asset in Southampton is exposed to storm surge.
Affected assets have appropriate mitigations incorporated into
their design and operation.
Under a high emissions scenario from the 2050s, drought stress
and heat stress increase and become a moderate risk which
could impact water scarcity and customer wellbeing, however
in the short term or under a low emissions scenario, these risks
are relatively low. Subsidence conditions also increase beyond
2050 under both emissions scenarios. We will continue to assess
potential risks in due diligence for future acquisitions and to
make appropriate adaptations where required.
We have assessed the business’s exposure to transition risks
and believe the business’s strategy to sell older, less efficient
assets and invest in building highly efficient build-to-rent
properties and upgrading our long-term hold PRS assets
leaves us well-placed to meet the requirements of the net zero
transition. Climate change has informed our asset management
strategies and we have put policies and processes in place to
align to future climate-related regulation and transition our
portfolio away from fossil fuels, such as our strategy to achieve
EPC on our PRS portfolio and our net zero carbon roadmap.
We therefore consider the business’s current strategy to be
resilient under both climate scenarios.
Annual Report and Accounts 2022 Grainger plcStrategic report 48
Task Force on Climate-related Financial Disclosures (continued)
Risk management
Processes for identifying, assessing and managing
climate-related risks
Climate change is considered to be a principal risk affecting
long-term decisions made by the Company such as decisions
on investments and divestments. Therefore it is considered in a
broad context within the business’s corporate strategy and as
part of our corporate risk management framework.
Grainger identifies climate-related risks and opportunities both
from within the Company through direct staff experience and
engagement, and from external sources, including through
engagement with industry bodies that Grainger is a member
of, our investors and partners, and through advice from our
external sustainability consultants.
Corporate climate-related risks are identified and assessed
through a number of channels including:
1. Periodic sustainability materiality reviews, which include
engagement with investors, customers and other
stakeholders to identify the most material sustainability-
related risks and opportunities to the business
2. Sustainability target-setting, monitoring and reporting
processes – through internal workshops and meetings of the
Board Responsible Business Committee
3. Regular monitoring of current and emerging legislation
4. Ongoing monitoring of sustainability risks by business
division managers through corporate risk registers and risk
management reviews
5. Regular meetings of the business's Executive Committee
and Management Committee, where business division
managers feedback risks identified by their division that
impact the Company or a specific business unit.
Portfolio and asset level climate-related risks and opportunities
are identified and assessed through due diligence for new
acquisitions and risk assessments for existing assets which cover
specific climate-related risks such as energy efficiency ratings of
properties and physical climate risks:
1. For new acquisitions - review of sustainability risks for new
acquisitions is undertaken by the Investment Committee.
Geographical location plays an important part in the
identification of physical risks during the due diligence
process through the use of things such as flood and
overheating risk assessments, and transition risks are
identified through additional research and evaluation, such
as assessing the proximity of the asset to public transport
links using WalkScore ratings, and reviewing its energy
efficiency ratings. Where a risk is identified, the experienced
acquisitions team would work closely with the local
planning authority and the developer to agree appropriate
mitigation strategies
2. For existing assets - risks are identified through compiling
and analysing data on specific property attributes, such as
flood risk, subsidence risk and energy efficiency ratings via
data obtained from our insurance broker and recorded from
property surveys. This data would typically be analysed
annually and is used to inform asset management decision
making and the business's asset recycling strategy.
Grainger’s risk control framework applies a ‘three lines
of defence’ model with clear divisions between each line.
The Board of Directors approves the risk management
framework and the Audit Committee supports the Board by
monitoring and reviewing the control processes and mitigation
for the identified risks.
The processes for managing climate-related risks depend on the
specific risk identified but include:
1. Business continuity programme which protects the business
against potential impacts from extreme weather events
2. Membership of industry bodies including the British
Property Federation and UK Green Building Council who
assist us with understanding and influencing emerging
regulatory requirements
3.
Implementation of specific mitigation and adaptation
measures at assets identified as being exposed to climate-
related risks
4. Comprehensive ESG strategy, commitments and reporting.
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 52.
Grainger plc Annual Report and Accounts 2022 49
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Metrics and targets
Metrics used by Grainger to assess climate related risks and opportunities
Grainger assesses climate-related risks and opportunities through the following Key Performance Indicators:
Metric category
GHG emissions
GHG emissions
GHG emissions
Transition risks
Transition risks
Transition risks
Climate-related opportunities
Transition risks
Physical risks
Physical risks
Capital deployment
Climate-related opportunities
Metric
FY21
FY22
GHG emissions (Scope 1 + 2)
GHG emissions (Scope 3)
GHG emissions per unit (based
on emissions reported on EPC
certificates)
% of build-to-rent properties with
low carbon heating systems
Energy consumption
Renewable energy consumption
Renewable energy generation
EPC Ratings
Value of assets in locations with
medium or high exposure to
flooding
Value of assets in locations
with high or very high baseline
water stress1
Investment in energy efficiency
improvements
% revenues from ‘low carbon’
products (defined as PRS
properties with EPC Rating B
and above)
1,398 tonnes Co2e
21,758 tonnes Co2e
2.2 tonnes Co2 per unit
1,058 tonnes Co2e
20,093 tonnes Co2e
2.1 tonnes Co2 per unit
61% of build-to-rent properties
68% of build-to-rent properties
11,424 MWh
12,033 MWh
84% renewable energy purchased 88% renewable energy purchased
39 MWh
85% of PRS properties rated EPC
Band A-C
£452m
120 MWh
87% of PRS properties rated EPC
Band A-C
£532m
£1,007m
£1,065m
£7.6m
38.0%
£10.5m
48.6%
1 Baseline water stress is assessed through the World Resources Institute's Aqueduct water risk atlas which measures the ratio of total water withdrawals to available renewable surface and
groundwater supplies. Water stress as defined by UK regulations and used by the Environment Agency is where ‘current household demand for water is a high proportion of the current
effective rainfall which is available to meet that demand. Or, the future household demand for water is likely to be a high proportion of the effective rainfall which is likely to be available
to meet that demand’. The water stress methodology takes a long-term view of the availability and the demand for public water supply, rather than a snapshot of shorter or peak periods.
It accounts for future population growth, climate change, environmental needs and increased resilience. It reflects and supports the commitments that water companies have made to
reduce leakage and water consumption. In the latest assessment by the Environment Agency in 2021, 15 of the 23 areas in England were classed as ‘seriously water stressed’.
Additional disclosures on the Company’s environmental performance for its property portfolios is provided in the EPRA
sustainability reports available on the website at: www.graingerplc.co.uk/responsibility
Annual Report and Accounts 2022 Grainger plc
50 Task Force on Climate-related Financial Disclosures (continued)
Task Force on Climate-related Financial Disclosures (continued)
Scope 1, 2 and 3 GHG emissions and related risks
Grainger reports Scope 1, 2 and 3 GHG emissions in our
Streamlined Energy and Carbon Report on page 104.
Emissions have been calculated in line with the GHG Protocol
Corporate Standard and include emissions for the preceding
period and industry specific efficiency ratios to support
trend analysis. Scope 1 and 2 GHG emissions are externally
verified and the verification statements are published on the
Company's website.
Grainger’s customers purchase their own energy and data
privacy laws make it challenging to obtain actual customer
energy data to measure Scope 3 emissions. Grainger has used
a consistent methodology to estimate Scope 3 emissions for
many years, using the estimated household carbon emissions
data reported on the Energy Performance Certificates ('EPCs')
for the properties owned by Grainger. This data is reported in
our Streamlined Energy and Carbon Report on page 104.
This year we developed a GDPR compliant strategy to obtain
actual customer emissions data and plan to improve the
accuracy of the estimated customer emissions we report
in future by extrapolating actual customer energy data.
The analysis of actual data gathered to date suggests that the
typical emissions generated by Grainger’s customers is lower
than the estimated data reported on the EPCs. For more details
on our customer emissions strategy and ‘Living a Greener Life’
campaign, see pages 8 and 9.
Targets used by Grainger to manage climate-related risks
and opportunities
Grainger has committed to achieving net zero carbon for Scope
1 and 2 GHG emissions by 2030. Progress towards our target
is reported on page 39. This is an absolute target measured
against a 2019 baseline. Grainger’s net zero carbon roadmap
sets out our key objectives and actions towards achieving this
target. Examples include:
– Improve energy efficiency - Ensure 100% of eligible PRS
properties achieve EPC Rating C or above by 2025
– Supply energy efficiently - Eliminate communal fossil fuel
heating systems in Grainger’s buildings by 2030
– Renewable energy procurement - Achieve 100%
renewable energy procurement by 2025
Grainger is committed to transitioning to net zero carbon in
alignment with the UK Government’s 2050 target and with the
goals of the Paris Agreement. Although, we are currently unable
to set a science-based Scope 3 emissions reduction target due
to the challenges with obtaining actual customer data where
we currently estimate it based on EPC data, we intend to set this
target once our baseline emissions have been established.
Grainger sets annual ESG objectives aligned to the business’s
long-term ESG commitments. Performance against the ESG
objectives, including climate-related objectives, informs the non-
financial performance assessment for the bonus opportunity
for the Chief Executive and Chief Financial Officer. This year
the specific metrics linked to Executive remuneration included
devising our strategy to measure customer emissions and
compiling our costed pathway to achieving EPC C on our PRS
portfolio. Refer to the Directors' Remuneration report on
page 94.
Compliance statement
Grainger confirms that:
1. We believe our climate related financial disclosures for the
year ended 30 September 2022 are consistent with the Task
Force on Climate-related Financial Disclosures (“TCFD”)
Recommendations and Recommended Disclosures (as
defined in Appendix 1 of the Financial Conduct Authority
Listing Rules), noting that our Scope 3 emissions disclosure
relating to tenant emissions is estimated based on EPC data
due to the nature of the leases which do not historically
provide access to tenant energy data for the landlord
2. Our annual disclosure is contained in the pages above,
please also see the sustainability section on pages 38 and 39
and our website
3. We believe that the detail of these climate related financial
disclosures is conveyed in a decision-useful format to the
users of this report.
Grainger plc Annual Report and Accounts 2022 Section 172
51
Section 172 Statement
Engagement with our stakeholders
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 66. 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 68 and 69.
Section 172 matter
Overview
FY22 comment
Relevant disclosures
The long term
Employees
Business relationships
with suppliers, customers
and partners
The community
and the environment
High standards
of business conduct
Shareholders
Grainger is committed to being a
long-term investor in homes and
communities, and delivering long-
term success to our Shareholders.
The Board undertook a
comprehensive review and
update of the business’s long-term
strategy during the year.
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.
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.
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.
Carol Hui has been designated
as the Non-Executive Director
responsible for employee
engagement and consultation.
This year a programme of
workshops was held with colleagues
from departments across the
business to provide feedback.
The business’s updated People
Strategy was presented to
the Board at the annual
strategic review.
The Board considered reports on
the management of our suppliers,
alternative supplier arrangements
and the review of our approach
to procurement.
The Board received regular reports
on the business’s Customer
Experience Programme.
A new Board Responsible Business
Committee was established
to oversee community and
environmental matters and
biannual updates on progress
against Grainger’s long-term
ESG commitments, its approach
to net zero carbon and charity
were provided.
Business model
pages 26 and 27.
Our people
pages 40 and 41.
Suppliers
page 69.
Sustainability
pages 38 and 39.
Responsible Business
Committee report
pages 76 and 77.
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 our values were
a key feature in our Company-
wide customer service style
training programme.
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 which included over
400 meetings, 13 conferences and
a Capital Markets Day with over 50
investors in attendance.
Our values
page 31.
Governance
pages 59 to 106.
Shareholder
engagement
page 66.
Annual Report and Accounts 2022 Grainger plcStrategic report 52
Risk management
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 robust disaster recovery and
business continuity procedures, which were tested during the
lockdown measures arising from the Covid-19 pandemic.
Our forward-looking risk management ethos drives a stronger
focus on emerging risks that are rapidly becoming a challenge
to our business including the transition to net zero. Our approach 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 in the way
we do business and by adopting a ‘three lines of defence’ model
throughout the business (see diagram on page 53). As our PRS
strategy progresses, it is fundamental that our risk management
systems and controls are aligned and evolve accordingly.
Our mature risk management framework has shown its in-built
flexibility which is capable of adapting to a swiftly changing
environment ensuring we were well prepared for the economic
challenges facing the UK throughout 2022. This included the
combined impact of Covid-19, Brexit and Ukrainian war, leading
to inflation, an economic slowdown, rising interest rates and cost
of living challenges for our customers. A resilient customer base,
high-quality homes, fixed debt and rental growth in line with
wage growth providing a hedge against inflation has provided
confidence in the outlook for our business.
Mapping our key risks and movement
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. This year we have conducted
a detailed materiality assessment of climate-related risks and
opportunities (see page 57).
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 54 to 57). Two of the principal risks have
increased in their impact assessment, whilst four have increased
in their likelihood assessment and four remain unchanged.
This prudent assessment has been reached after evaluating the
inherent risks to the Company’s business model created by the
impact of rising energy costs and the increasing cost of living
on demand in the private rental sector; the economic recession
and its potential to cause a reduction in sales activity and a
property market crash, negatively impacting the valuation of
property assets; rising interest costs and the potential for reduced
appetite from lenders and for new equity and significant cost
inflation leading to increased costs on new developments and/or
construction delays. The diagram below illustrates this assessment.
Current principal risk areas
1 Market and transactional
2 Financial
3 Regulatory
4 People
5 Supplier
6 Health and safety
7 Development
8 Cyber and information security
9 Customers
10 Climate change
Indicates risk movement from last year
d
o
o
h
i
l
e
k
L
i
1
5
3
9
7
8
6
4
10
2
Impact
Grainger plc Annual Report and Accounts 2022
53
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 better understand inhibitors and opportunities to our
strategy arising from climate-related risks, a risk deep dive was
undertaken during 2022. Climate-related risks are inherently
more complex and long-term in nature than most traditional
business risks, and with the requirements set by the Taskforce
on Climate related Financial Disclosures (‘TCFD’) moving up
the agenda, we felt it was an opportune time to carry out a
comprehensive climate-related risk review exercise. The results
can be found on page 46. Climate change is also one of the
Group’s key principal risks (see page 57).
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. Throughout 2022 we have conducted
a detailed assessment of risk appetite for our principal risks,
validating a conscious recognition and acceptance of the risk/
reward trade off in pursuit of our strategy. 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 78.
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.
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 form part of
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.
Looking forward to 2023, we will continue to closely monitor the
external environment and whilst the UK economy returned to
its pre-pandemic size, new shocks have hit the global economy.
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.
Risk control framework
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
Annual Report and Accounts 2022 Grainger plcStrategic report
54
Principal risks and uncertainties
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 58.
Market and
transactional
Principal risks, uncertainties and opportunities
Risks are considered by the Board as an intrinsic part of
strategy setting and consideration of new opportunities.
Increased
UK outlook
2022 has seen sharp rises in inflation as economic supply
capacity affected by the Covid-19 lockdowns, Brexit and the
war in Ukraine, struggles to react to the demand arising from
the lifting of restrictions. Disruption to global supply chains,
shortages of workers and materials and a boom in demand
after lockdown have led to the cost of living soaring around
the world. In the UK, trade disruption has been added to by
Brexit. An energy price shock, exacerbated by Russia’s invasion
of Ukraine and the resulting sanctions, has heightened risk
and uncertainty.
In 2021 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 mitigants we have in place which has
provided the preparedness and resilience we have needed.
Our simple business model has proven resilient and allowed us
to focus on decisions that are needed for the future such as our
path towards net zero. Robust scenario models enable us to
plan effectively for our future and manage risk.
Our preparedness for Brexit 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
those risks most likely to impact our business model and
disrupt operations; the impact of rising energy costs and the
increasing cost of living on demand in the private rental sector;
the economic recession and its potential to cause a reduction in
sales activity and a property market crash, negatively impacting
the valuation of property assets; and significant cost inflation
leading to increased costs on new developments and/or
construction delays.
Risk description
Rising inflation and interest rates highlights
both the rising cost of living for households
and surging cost pressures on businesses
leading to a slowdown in the UK economic
recovery following the pandemic.
Impact on strategy
The impact of rising energy costs and the
rising cost of living on demand in the private
rental sector.
The economic recession and reduction in
availability of finance and increasing interest
rates and its potential to cause a reduction
in sales activity and a property market
crash, negatively impacting the valuation of
property assets.
Significant cost inflation leading to increased
costs on new developments and/or delays.
Reduced consumer and investor confidence.
Tighter financial conditions set by banks
including rising costs and more limited
availability of finance. Insufficient time and
resources to satisfy our growth strategy.
Key mitigants
– We have actively transitioned the
business to reduce reliance on trading
income and house price inflation
– Our regulated tenancies have provided
a resilient nature of income and are
appealing to investors due to the inherent
discount to vacant possession and a higher
level of certainty around rental growth
– The unmodernised nature of our regulated
stock is always appealing to potential
purchasers on individual asset sales
– 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 with the resilient nature of
mid-market rents, potentially leverages
greater customer flexibility and lower
overall financial commitment compared
with home ownership. Renting could be
attractive for customers during uncertain
economic periods, and rental growth
has historically tracked wage growth,
providing a hedge against inflation
Grainger plc Annual Report and Accounts 2022
55
Impact on our business model
Impact on our strategy
Cultural link to values
Originate
Invest
Operate
Grow rents
Simplify and focus
Build on our experience
Every home matters
People at the heart
Leading the way
Exceeding expectations
Financial
Regulatory
People
Increased
Increased
Unchanged
Risk description
The inability to obtain sufficient finance,
and rising interest rates, arising from
the external macro-environment which
impacts the ability to fund the delivery of
the growth 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
– Occupancy and rental growth recovered
quickly post-pandemic with strong rental
collections and renewals
– 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 have a Funding Capacity Strategy
and 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
– We refinanced our bank lending in 2022,
locking in interest rates and increasing
our weighted average debt maturity
to 6.5 years. Our interest rates are very
highly hedged giving protection against
rising rates
– 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
to provide greater interest cover. We have
optionality over multiple sources of funding
with the ongoing disposals of our regulated
tenancies in addition to debt and equity
with the ability to flex between sources
– We have a policy of fully funding in
advance our committed development
pipeline, giving financial assurance
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 or uncertainty around
rent controls, duration of tenancies and
other tenant-friendly measures.
Our ability to forward look and prepare for
the future, understanding complexities of
a changing regulatory landscape in which
we operate.
Impact on strategy
Creation of costly obligations affecting our
ability to operate profitably; 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.
Key mitigants
– Our position as the UK’s foremost
PRS provider brings a cultural ethos of
leadership and best practice
– Our corporate governance structure
ensures we have the framework and
oversight to assess our obligations
– 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
Risk description
Failure to attract, retain, and develop an
inclusive and diverse workforce to ensure
we drive business transformation at a time
of business growth.
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
– We have introduced remote working;
we listened to colleagues' feedback
throughout a trial hybrid working period
and used the lessons we learned to
formalise a hybrid working approach.
To improve communication and
collaboration we have introduced core
Company days as part of this 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
leader’s 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 for
internal career progression
– We undertake regular reviews of our
benefit structure against the external
market to ensure we remain competitive
– We are committed to raising awareness
and encouraging diversity amongst
the workforce through a diversity
network initiative
– We have a Board member with specific
responsibilities on employee engagement
– We paid employees a £1,000 one-off cash
award to help with the rising cost of living
Annual Report and Accounts 2022 Grainger plcStrategic report
56
Principal risks and uncertainties (continued)
Supplier
Health and safety
Development
Increased
Unchanged
Increased
Risk description
Unprecedented pressures created by
Covid-19, Brexit, and the latest military
conflict in the Ukraine, destabilising the
economic environment and impacting on
logistics and supply chain activities leading
to a significant failure within, or by, a key
third-party supplier or contractor.
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
– Our procurement approach and policy
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 approach and policy
sets our intent towards internal controls
and management systems regarding
contractors/suppliers, which include
counterparty reviews, and covenant
strength assessments are well developed
– The approach ensures that key
relationships are highlighted and are
managed to a high standard. We work
closely with a number of legal specialists
appointed on their experience of
understanding our business and ability to
provide appropriate advice
– Our finance team supports in
understanding the financial due diligence
of our supply chain through regular
dialogue and reviews
– We work closely with our supply chains
to understand any impacts caused by the
economic uncertainty
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.
Risk description
We allocate a portion of our capital to
development activities which may be
complex and potentially bring multiple
related risks.
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.
Increased costs including build cost
inflation, labour and material shortages.
Reduction in value through
economic climate.
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 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
– Our health and safety management
system is supported by Live.Safe, our
initiative to promote a positive health
and safety culture. All staff undertake a
Safety Climate survey annually
– Our improved technology platform,
CONNECT, delivers efficient recording
and reporting
– Our risk management framework applies
a system of close oversight and reporting
of health and safety matters
– We have planned and reactive
maintenance measures in place, which
assess gas, electrical, water, asbestos,
fire and mechanical services
– We have recruited a dedicated Head of
Building Safety
Key mitigants
– We monitor the capital we deploy
to development matters carefully,
following capital allocation guidelines
and updating hurdle rates to reflect
prevailing economic conditions
– 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
– We are working closely with our key
supply chain partners to understand the
complexities of any disruptions including
labour shortages, Brexit trade barriers
and global supply problems
Grainger plc Annual Report and Accounts 2022
57
Impact on our business model
Impact on our strategy
Cultural link to values
Originate
Invest
Operate
Grow rents
Simplify and focus
Build on our experience
Every home matters
People at the heart
Leading the way
Exceeding expectations
Cyber and
information security
Customer satisfaction
Climate change
Unchanged
Unchanged
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 delivery of our
technology platform has heightened this
risk on Cloud SaaS Solutions and complex
API integrations, which broadens our
attack surface.
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 have implemented an online Cyber
Security training and awareness system
for all colleagues
– We have implemented a Security
Information Event Management system
which delivers security analytics, alert
detection and threat visibility
– We have a Cloud Security partner
responsible for our security improvement
programme and to ensure our
technology platform is well understood,
resilient and protected now and in
the future
– We have implemented a new suite of
Information Security and Data Protection
policies to align to best practice standard
ISO 27001
Risk description
Our ability to successfully retain our
customers caused by a failure to fulfil
our customer proposition and our service
standards, amidst a backdrop of cost of
living rises.
Impact on strategy
Negative publicity; increased complaints;
poor customer experience; reputational
damage; loss of customers; lower rental
increases; rent arrears and higher voids.
Key mitigants
– The UK rental market continues to have
a hugely attractive outlook that favours
the professional, large-scale landlord
– The pandemic highlighted the
importance of having a safe, high-quality
home to live in, reinforced by a period of
strong renewals
– We have 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
– Through our technology platform we
have an improved lettings journey for all
customers making it easier to lease and
renew with us
– We continue to manage and support
individual circumstances arising from the
economic uncertainties
– We have a leading operating platform
with substantial experience in managing
a portfolio of approximately £3.2bn 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;
adaptation 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 and investor 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.
Additional capital expenditure to
adapt buildings, increased disclosure
requirements, tougher building standards.
Risk to Company brand and reputation
and associated impact on securing and
maintaining investment.
Key mitigants
– We are a responsible business with
a strong commitment to minimising
any negative environmental impacts
and comprehensive disclosure on our
performance in alignment with TCFD
– We have a detailed climate change and
sustainability strategy and roadmap, to
support us to achieve net zero carbon for
the operation of our buildings by 2030
– 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 and
building developments
– Due diligence of assets includes
physical risks such as flood/
subsidence and transition risks
such as energy performance
– We carry out portfolio modelling and our
investment and recycling plans as part
of our acquisition and disposals strategy
which is informed by our ESG ambitions
Annual Report and Accounts 2022 Grainger plcStrategic report
58
Viability statement
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. The Board conducted the review considering
the Group’s financial position, business strategy, the current
economic environment and the potential impact of our principal
risks and future prospects. In doing so, the Board has 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 strategic plan is reviewed and approved by the Board
each year, with year one forming the budget for the next
financial year. This plan is regularly reviewed to ensure it
remains reflective of current operating and macro-economic
environments and provides a basis for setting all detailed
financial budgets and strategic actions that are subsequently
used by the Board to measure and 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
2026 is appropriate, given this covers the period of the detailed
strategy review and incorporates both the timescales for
the significant majority of investments and returns currently
considered as being secured and committed.
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 £3.1bn of residential property
assets, many of which are of a relatively granular nature
which are attractive to investors, 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. The Group has recently completed
refinance and extension of its core funding arrangements,
increasing total facilities to £1.965m with an average maturity
of 6.5 years including extension options. At 30 September 2022,
£1.374m was drawn, demonstrating the significant headroom
available. During the period of this review, £75m is due to
mature in April 2025 (with extension options available), and
a further £75m in July 2026. In addition, the Group continues
to manage its hedge exposure with interest rate swaps and
fixed rate facilities matching almost all of its debt liability and
maturity. The Group has put in place hedging facilities covering
expected drawings to ensure it remains sufficiently hedged until
beyond the period of this review.
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. The base case reflects the Groups assessment of the
current operating environment and these risks consider further
changes to the macro-economic environment. 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.
The sensitivity analysis involved modelling a number
of scenarios. The most extreme downturn scenario,
reflecting a severe economic downturn, incorporated the
following assumptions:
– Reducing rental levels with lower PRS occupancy (-15%)
and lower growth (-15%), impacting both income and
property valuations;
– In addition to the valuation impact of reducing rental levels,
further reductions to property valuations by 22%;
– Cost inflation for construction and operating costs of 20%;
and
– Interest rates increase by 5% for the duration of the review
period and a downgrade in our credit rating is assumed,
causing the coupon rates of our two corporate bonds to
each step up by 1.25%.
The amalgamation of these severe scenarios leads to an overall
reduction in asset value of c.37% over the review period. Even at
these levels and before any mitigating actions, LTV remains
compliant with banking covenants through the period of
this review.
Throughout this downside scenario, the Group had sufficient
resources to remain in operation and compliant with its
significant 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 2026.
Our 2022 Strategic
Report from pages 1
to 58, has been reviewed
and approved by the
Board of Directors on
16 November 2022.
Rob Hudson
Chief Financial Officer
Grainger plc Annual Report and Accounts 2022 59
G
o
v
e
r
n
a
n
c
e
Governance
Chair’s introduction to governance
Leadership and purpose
Division of responsibility
Composition, succession and evaluation
Responsible business
Audit, risk and control
Remuneration
Directors’ report
60
62
70
72
76
78
83
103
Annual Report and Accounts 2022 Grainger plc
60
Chair’s introduction to governance
A strong governance framework
ensures we lead the business
effectively, whilst considering
the interests of all our stakeholders
In this report
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 62 to 69.
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 70 and 71 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 72 to 75.
Responsible business
The Board provides oversight of the delivery of the Company’s ESG
strategy including its 2030 ‘net zero in operations’ commitment
and its diversity and inclusion plans. Please see pages 76 and 77 for
more details of our actions in this arena.
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 78 to 82 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 83 to 102.
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.
While the disruption caused by the Covid-19 pandemic has
receded throughout the period of this report, the environment
of uncertainty has persisted, with the war in Ukraine and the
rising cost of living presenting serious challenges to the wider
economy. The Company’s priorities for this period have been
ensuring that we are well prepared to deal with these challenges
while protecting the wellbeing of our customers and colleagues.
The lifting of the remaining Covid-19 restrictions in early 2022
allowed the Board to meet in person again and to resume
our regular visits to the Company’s assets and meet its staff.
Consequently, we were able to provide strong, in-person
support to the management team. We have considered and
debated various challenging scenarios, taking into account the
interests of all the Company’s stakeholders. We believe that the
Company is well placed to meet the challenges presented and
will continue to demonstrate its fundamental resilience.
This year will see further changes to the composition of the
Board. Rob Wilkinson will retire from the Company at the
2023 AGM, after completing over seven years’ service. I want
to formally thank Rob for his substantial contribution to the
Board during this period.
We look forward to welcoming Michael Brodtman to the Board
on 1 January 2023. Michael will bring significant experience in
the property sector and I expect him to add significant value to
our growth and development plans.
This year, we have focused heavily on our customer service
offering, training all of our employees in ‘The Grainger Service
Style’. The wellbeing of our customers has also been at the
centre of our activities this year as we refreshed our Live.Safe
programme, created our ‘Living a Greener Life’ initiative and
engaged with the requirements of the Building Safety Act.
Our offering supports customers with the cost of living issues
that they are experiencing, including by offering energy efficient
lower carbon homes. We are also taking a responsible approach
to rent reviews.
Grainger plc Annual Report and Accounts 2022 61
Our CONNECT operating platform has now transitioned
to business as usual and we continue to optimise this to
enhance the scalability of our operating platform. The Board is
maintaining close oversight of how the investment made in this
platform will be used in future to improve service, reduce cost
and enhance customer experience.
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. The Board
also considered the People Strategy for the year, following
recruitment of the Chief People Officer. The Board has overseen
the Company’s efforts to support our colleagues in dealing with
the cost of living issues, approving a payment to all staff below
Executive Committee level.
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, bedding in the changes
made to 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 2022, please see page 65.
Mark Clare
Chair
16 November 2022
Grainger continues to
increase the scale of its
PRS business and deliver
operational excellence
through its culture,
people and investment
in technology.”
Highlights
1. Oversight and leadership of the response to the
continuing challenges presented to the business
by Covid-19, the war in Ukraine and the rising cost
of living.
2. Compliance with the Corporate Governance Code
during the year.
3. Oversight of the Company’s ‘Living a Greener
Life’ and Customer Experience Programme.
4. Board review of strategy.
5. Replaced the Chairs of the Audit and
Remuneration Committees.
6. Appointment of new Non-Executive Director
with significant property investment experience.
8. The Board visited our assets and met our team.
9. Focus on the wellbeing of staff and customers.
GovernanceAnnual Report and Accounts 2022 Grainger plc 62
Leadership and purpose
1.
2.
3.
E
A
R
N
Executive Committee
Audit Committee
Remuneration Committee
Nominations Committee
B Responsible Business Committee
Committee Chair
Balance of Directors (as
at the date of this report)
58%
Male
42%
Female
Chair
Executive Directors
Non-Executive Directors
1. Mark Clare
Non-Executive Chair
2. Helen Gordon
Chief Executive
3. Robert Hudson
Chief Financial Officer
N R B
Appointment
Appointed Chair
in February 2017
E
E
Appointment
Appointed to the Board
in November 2015
Appointment
Appointed to the Board
in August 2021
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 chair of
Ricardo plc, senior independent
director of Wickes Group plc
and a non-executive director
of Premier Marinas Holdings
Limited. Mark was 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 United
Utilities Group plc, Ladbrokes
Coral Group plc and BAA plc,
the airports operator.
Tenure
5 years and 7 months
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, a non-executive director
of Business LDN, vice chair 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
6 years and 10 months
Skills, competence
and experience
Rob has over 27 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 year and 1 month
Grainger plc Annual Report and Accounts 2022 63
4.
6.
5.
7.
4. Justin Read
Non-Executive Director
5. Rob Wilkinson
Non-Executive Director
6. Janette Bell
Non-Executive Director
7. Carol Hui
Non-Executive Director
A N R B
A N R B
A N R B
A N R B
Appointment
Appointed to the Board
in February 2017 and appointed
as Senior Independent Director in
February 2022
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. Justin is
an independent member of the
Investment Committee of the
Logistis 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
5 years and 7 months
Appointment
Appointed to the Board
in October 2015
Appointment
Appointed to the Board
in February 2019
Appointment
Appointed to the Board
in October 2021
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 chair
of its Fund Manager Advisory
Council. He is chair 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
6 years and 11 months
Skills, competence
and experience
Janette is the managing director
of FirstBus, part of FirstGroup
plc. She is a director of the
Confederation of Passenger
Transport. 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
3 years and 9 months
Skills, competence
and experience
Carol has substantial non-
executive experience in a
wide range of sectors and has
particular expertise in law,
sustainability and infrastructure.
Carol is a non-executive director
of Breedon Group plc, where she
is the chair of the sustainability
committee. Carol is also a
non-executive director of the
British Tourist Authority, where
she chairs the audit and risk
committees, a non-executive
director of the Lord Chamberlain’s
Committee in the Royal
Household and a board trustee
of Christian Aid. 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, stepping down in August
2021. Carol has served in senior
positions in oil and gas, logistics
and infrastructure companies.
She was also a corporate finance
lawyer at Slaughter and May.
Tenure
1 year
GovernanceAnnual Report and Accounts 2022 Grainger plc 64
Leadership and purpose (continued)
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 2021, the Board received a detailed presentation
from the Interim 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. The Board monitored activities
to increase diversity and inclusion. The Responsible Business
Committee provided details of our employee engagement
plans to the Board.
We report further details on our culture and employee
engagement on page 66. During the year, the Board and I
have also spent time with our people from across the business,
on site visits and took these opportunities to gauge their
views on the business, the strategy and its implementation.
The Board received the results of a review from the Chair of the
Responsible Business Committee on employee engagement
activities. We have assisted our employees in transitioning back
from remote working, adopting a hybrid working policy, seeking
to allow employees to experience the best of both methods
of working.
The Board oversaw and received reports on the roll out of the
Company’s customer service style training programme, which
was undertaken by all staff. This was part of our wider customer
experience programme. As the Company grows, particularly
in the number of its onsite employees, it is a central part of our
People Strategy that we embed our values and culture across
all of our locations. It is a key part of the role of our new Chief
People Officer to ensure that we recruit the right personalities
to ingrain our culture.
All members of our Executive Committee are participating in a
‘back to the floor’ programme to give them direct experience of
front line staff and customer engagement.
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 51 for our Section 172 Statement and
page 66 for examples of our work with our stakeholder groups.
Specifically, regarding our investors, Helen Gordon and
Rob Hudson had over 400 meetings with the Company’s
Shareholders and analysts throughout the year.
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 2022, except for Code provision 38
for which non-compliance existed for the whole year in respect
of the Executive pension equalisation issue referred to on
page 100.
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 Chair 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 were two additional meetings; in March
to review and authorise the buyout of the interest of our partner
at our Berewood development site; and in August to approve
the re-financing of the Company’s core debt facilities.
The Board has a list of matters reserved to it, and a rolling
annual plan of items for discussion, agreed between the Chair
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.
Grainger plc Annual Report and Accounts 2022 65
The Board spent time visiting our buildings, The Forge,
in Newcastle and The Headline and Pin Yard in Leeds.
The Board met staff at these sites.
The Board activity table below shows examples of the subjects
and matters the Board debated and considered throughout
the year.
Attendance table to 30 September 2022
Executive Directors
Helen Gordon
Rob Hudson
Non-Executive Directors
Mark Clare
Andrew Carr-Locke
Rob Wilkinson
Justin Read
Janette Bell
Carol Hui
Meetings
attended
8
8
Meetings eligible
to attend
8
8
Meetings
attended
Meetings eligible
to attend
8
2
71
8
8
8
8
2
8
8
8
8
1 Rob Wilkinson was unable to attend the June Board meeting due to attending his
daughter’s graduation.
Board activity: How the Board spent its time
Board meetings 2021/22
Board meeting
Site visit
October
November
December
January
February
March
April
May
June
July
August
September
Strategic 25%
• 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 the customer service proposition.
• 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 the rising cost of living and the
war in Ukraine.
• 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.
Governance 10%
• 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
2021 full year results and the 2022
interim results.
• Received reports on development of the
ESG strategy and our activities in this
area, particularly the ‘Living a Greener
Life’ initiative.
• Received reports from the Nominations,
Audit, Remuneration and Responsible
Business Committees.
People and culture 15%
• Received reports on the activities to
increase the diversity of the business
including the activities of the Employee
Diversity & Inclusion Network.
• Received reports on roundtables
with employees.
• Reviewed the culture of the business and
employee engagement. This included
the Interim HR Director presenting
the results of the annual employee
engagement survey to the Board.
• Oversaw the process for the
appointments of the new Chief People
Officer and Non-Executive Director.
• Reviewed reports and updates on the
health, safety and wellbeing of our
people and customers.
Financial 20%
• Reviewed the Company’s debt and
capital structure.
• Reviewed the Company’s
financing plans.
• Considered the Group’s financial
performance throughout the year.
• Agreed the continued application of the
dividend policy.
• Monitored performance of the agreed
KPIs for the business.
• Received reports on interaction
with the credit ratings agencies and
insurance providers.
Transactions 15%
• Reviewed reports on the progress of our
development schemes proceeding in
partnership with TfL.
• Considered material transactions and
business opportunities including, among
others, our PRS schemes in Birmingham,
Leeds, London and Southampton.
• Received reports on the progression of
our existing development projects in
the UK.
• Considered the ESG impact of
prospective transactions.
Operations 15%
• Considered health and safety matters.
• Closely monitored and inputted into the
business optimisation work around the
roll out of our operating platform.
• Received reports on strategy and
developments from the Company’s
affordable housing arm, Grainger Trust.
• Considered management of
our suppliers, and alternative
supplier arrangements.
• Received reports from consultants on
our customer service performance and
other operational KPIs.
• Oversaw the development of Grainger’s
customer service skills programme.
GovernanceAnnual Report and Accounts 2022 Grainger plc
66
Leadership and purpose (continued)
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 developing
our ESG activities. The Board received presentations and held
discussions in relation to our activities in this area. The Board
reviewed the actions taken to progress our strategy in this area,
including the ‘Living a Greener Life’ initiative and our ‘Journey to
Net Zero’ strategy.
For net zero carbon, the key focus was on our customers and
how we can measure and reduce emissions from our residents’
use of energy in our properties. The Company is taking action to
‘green’ its standard tenancy agreements, including by inserting
agreements around sharing consumption data.
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.
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 68.
Shareholders
• Reviewed and considered reports
of meetings with investors.
• Considered questions and
comments from analysts.
• More detail on Grainger’s
engagement with Shareholders
is included on page 68.
Grainger plc
Board
Suppliers
• Considered reports on key supplier relationships
and performance and alternative supplier plans.
• Reviewed the Company’s procurement strategy
and approach to supply chain management.
• More detail on Grainger’s engagement with
suppliers is included on page 69.
Local communities
• Reviewed reports on
Grainger’s engagement with
local communities.
• Considered schemes in which
Grainger participated at
development sites.
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.
Employees
• Monitored employee engagement survey results.
• Received presentations from the CPO 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
employees is included on page 69.
Grainger plc Annual Report and Accounts 2022 67
Key Shareholder events 2021/22
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.
October 2021
• Closed period
April 2022
• Closed period
Substantial shareholdings
At 30 September 2022 and 31 October 2022 (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
2022
31 October
2022
Holding
m
Holding
%
Holding
m
Holding
%
Norges Bank Investment
Management
BlackRock Inc
The Vanguard Group Inc
MFS Investment Management
Legal & General Investment
Management
FMR LLC
67.7
66.3
35.9
27.4
25.1
27.2
9.1
9.0
4.8
3.7
3.4
3.7
67.7
66.4
36.4
27.4
25.6
24.4
9.1
9.0
4.9
3.7
3.4
3.3
November 2021
May 2022
Relations with Shareholders
• Company Results Roadshow
• Berenberg Real Estate
Conference (Paris)
• UBS Global Real Estate
Conference (London)
January 2022
• Peel Hunt/Davy US
Conference (virtual)
• Barclays Global Real Estate
Conference (virtual)
• Peel Hunt ESG Conference
February 2022
• AGM (Newcastle)
March 2022
• Company Results Roadshow
• Kempen Real Estate
Conference (Amsterdam)
June 2022
• Morgan Stanley Europe
& EEMEA Property
Conference (London)
July 2022
• Company Capital Markets
Day (Leeds)
September 2022
• EPRA Annual Conference
(Paris)
• Bank of America Real Estate
• Citi Global Real Estate CEO
Conference (New York)
Conference (Miami)
• JP Morgan Small & Mid Cap
Conference (virtual)
• Bank of America EMEA Real
Estate Conference (London)
• Berenberg UK Corporate
Conference (UK)
Shareholder by region
UK
42%
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 400 meetings with
Shareholders, analysts and potential investors in the year.
Helen Gordon, Rob Hudson 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 2022
AGM. We anticipate a similar pre-AGM engagement process will
take place in 2023.
Over 400 investor meetings
Attendance at investor meetings
Chief Executive
Chief Financial Officer
Senior executive
92%
92%
99%
US/Canada
31%
Capital Markets Day
Europe
Rest of the world
22%
5%
This Summer we hosted a number of our key investors at The
Headline and Pin Yard sites in Leeds, highlighting our market
leading, customer-service focused rental offerings and platform.
We received positive feedback, particularly around the amenity
spaces and the strength of our in-house operating platform.
GovernanceAnnual Report and Accounts 2022 Grainger plc 68
Leadership and purpose (continued)
How the business understands
and responds to the needs
of our stakeholders
s
n
o
i
t
a
t
c
e
p
x
e
r
e
d
l
o
h
e
k
a
t
S
e
g
a
g
n
e
e
w
w
o
H
s
e
l
p
m
a
x
e
&
s
e
m
o
c
t
u
O
Customers
Shareholders
Local communities
For Grainger to provide
safe, high-quality homes
and good service, whilst
responding to their
needs promptly.
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.
Understanding our customers and their
needs, and communicating effectively with
them, is essential to providing the great
homes and service that we aim to deliver.
Our customer insight programme provides
us with this essential knowledge and is
factored into the decisions we take, the
buildings we create and how we operate.
We use multiple communication channels
and methods to reflect the wide range of
customers we have.
Our far-reaching Customer Experience
Programme is to designed to continually
enhance and improve the Grainger rental
experience for our customers. It includes
bespoke customer service training for the
entire business including our Executives.
We have a comprehensive investor
relations programme, which we build upon
and extend each year. Activities include
investor roadshows, conferences, trading
updates, property tours and capital
markets days. Key engagement events are
reported on page 67. We ensure that we are
both accessible and approachable and that
we respond promptly to all queries.
We respond annually to a range of ESG
benchmarks, as reported on page 30.
Grainger seeks to develop thriving
communities both within and around our
buildings. We conduct extensive local
engagement and consultation around
our assets and developments via events,
meetings, and direct communications.
Supporting local is one of the goals of
our Customer Experience Programme.
We engage with local authorities and create
partnerships to support local businesses
and charities.
Our Residents Events Committee
ensures our residents feel at home in
their community through organising
local activities and events and building
relationships with the local community.
– Comprehensive customer insight
– During the year in review, we had
– Pilot undertaken to measure social value
programme including surveys, NPS
tracking, online review tracking,
focus groups and data analysis
– New resident app for all PRS customers
– Customer service training for
all colleagues
– PRS Customer Net Promoter Scores
increased by +16 points to 34
– 9 in 10 PRS customers surveyed say they
‘Really Like’ their Grainger home
– PRS average length of stay of 30 months
over 400 investor meetings (including
group meetings)
– Received over 50 pieces of analyst
coverage, with 10 analysts
covering Grainger
– 13 investor conferences/events attended
– Hosted two investor roadshows, a
Capital Markets Day in Leeds with
50 investors in attendance and 13
property tours
from Grainger BTR assets
– Reviewed our charitable investment
programme and continued our support
to LandAid and YMCA North Tyneside
– Grainger colleagues volunteered
delivering employment and skills
workshops through the TfL Education
Engagement Partnership
– Provided six homes rent free to refugee
families from Ukraine
– Over 570 residents and community
events held throughout the year
Grainger plc Annual Report and Accounts 2022
69
Colleagues
Suppliers
Government
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.
Our colleague’s experience of working
at Grainger is critical to our ongoing
success. We actively seek feedback and
listen to our colleagues and base our
activity programme upon that feedback.
Our internal engagement programme
includes surveys, company-wide calls
hosted by our CEO, our internal newsletter
and our intranet. We organise a range of
events for colleagues, including campaigns
from our employee-led Diversity & Inclusion
Network and charity fundraising events.
Carol Hui, a Non-Executive Director
and Chair of the Responsible Business
Committee, is responsible for Employee
Voice, including employee engagement.
Our key suppliers and partners are carefully
managed to deliver agreed service levels
and positive customer outcomes.
Our robust supplier selection process,
which is supported by ConstructionLine
and incorporates our CONNECT system,
including Risk Radar services.
Proactive contractor management ensures
regulatory, health and safety and modern
slavery compliance.
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.
As the UK’s leading landlord, we take
a front-footed, proactive approach to
engagement with the UK Government,
politicians from all parties and other
relevant public bodies, such as Homes
England and the Greater London Authority.
We respond to relevant Government
consultations, meet with Ministers,
officials and politicians on important
topics affecting our sector and actively
participate and contribute to our industry
trade associations, the British Property
Federation, Business London and others.
– Achieved ‘Very Good’ rating in our
annual employee survey, run by
Best Companies
– High levels of colleague engagement
evidenced by above average, high
response rates to feedback surveys
– Invested in additional procurement
and supply chain team personnel
and capability
– Enhanced processes and policies
introduced to manage group
wide expenditure
– Regional conferences held in Newcastle,
– Key contractors segmented and
Manchester and London
– Colleague-led internal roundtable
events on a variety of topics including
hearing loss and disability, International
Women’s Day and working parents
– Introduced a weekly internal newsletter
– Monthly company-wide virtual calls led
managed proactively to drive positive
customer outcomes
– Consistently paying suppliers within our
standard 30 day terms
– Regular supplier health and safety audits
completed, with 12 audits undertaken
within the year
by our CEO, Helen Gordon
– Zero RIDDOR reportable incidents
– Extensive engagement including through
private meetings, correspondence
and property tours with Government
ministers and officials and via British
Property Federation
– We successfully argued for our and the
build to rent sector’s exemption from the
Residential Property Developers Tax and
the Cladding Pledge which was primarily
aimed at housebuilders and those
developers with leaseholders
– We engaged on the Building Safety Levy,
the Renters Reform White Paper and
other proposed legislation
GovernanceAnnual Report and Accounts 2022 Grainger plc 70
Division of responsibility
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.
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.
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.
Responsible
Business Committee
Oversees the development
and implementation of
strategies and policies in all
areas of responsible business
including climate change,
environmental, social,
sustainability, employee
engagement and diversity
and inclusion.
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 and IT
Committee
Responsible for
financial and IT
matters across
the Group, which
include accounting,
financial reporting,
tax, treasury,
corporate and
commercial finance,
procurement
and IT issues
for the business.
Operations
Board
Responsible
for executing
operations
strategy,
performance
management,
risk management
and governance
across the
operating
business.
Development
Board
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.
Grainger plc Annual Report and Accounts 2022 71
Roles and responsibilities of directors
Role
Chair
Responsibilities
Responsible for running the Board and ensuring its effectiveness. The Chief Executive reports to
the Chair, as does the Company Secretary, on matters of corporate governance. The Chair 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 Chair 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 Chair.
Senior Independent Director
Acts as a sounding board for the Chair 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 Chair.
GovernanceAnnual Report and Accounts 2022 Grainger plc 72
Composition, succession and evaluation
The Nominations Committee report
Dear Shareholders,
I am pleased to present the Nominations Committee
report for 2022 which details the main activities we
undertook during the year.
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 and works closely with the Responsible
Business Committee with regard to the wider diversity and
inclusion strategy and agenda;
• review annually the time commitment required of
Non-Executive Directors;
• make recommendations to the Board, in consultation with the
respective committee Chairs, regarding membership of the
four 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
Non-Executive
Director succession
and balance of skills
35%
Executive and
senior management
succession and
pipeline
Committee
composition
Governance
30%
20%
15%
The Nominations
Committee currently
comprises the Chair
of the Board and four
independent Non-
Executive Directors.”
Mark Clare
Chair of the Nominations Committee
Attendance table
Non-Executive
Directors
Mark Clare
(Committee Chair)
Member
since
February 2017
Andrew Carr-Locke
March 2015
Justin Read
March 2017
Rob Wilkinson
May 2017
Janette Bell
February 2019
Carol Hui
October 2021
Meetings
attended
2
1
2
2
2
2
Grainger plc Annual Report and Accounts 2022 73
Process for Board appointments
Main activities of the Committee during the year
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.
Rob Wilkinson will retire from the Board at the AGM in February
2023, by which time he will have completed seven years’ service.
The Committee led a thorough external search to identify
an appropriate new Non-Executive Director. One of the key
attributes sought was experience of real estate, to replace Rob’s
knowledge in this area. Following unanimous recommendation
by the Committee to the Board, Michael Brodtman was selected
and will take up his role on 1 January 2023.
Search consultants
The Committee engaged Spencer Stuart, an independent
executive search consultancy, for the recruitment of Michael
Brodtman to the Board. The Board confirms that Spencer Stuart
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 Rob Wilkinson, will stand for election or re-election
at the 2023 Annual General Meeting (‘AGM’).
The Committee met formally on two occasions during the year
to 30 September 2022, 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,
Chief People Officer (‘CPO’) and others as necessary and
appropriate. Details of the Directors are set out on pages 62 and
63 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 Chair.
The Board considers all the Non-Executive Directors to
be independent.
Board performance evaluation
An external review having been undertaken last year, this 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.
GovernanceAnnual Report and Accounts 2022 Grainger plc 74
Composition, succession and evaluation
The Nominations Committee report (continued)
External Board evaluation cycle
Year 1
2022 Internal
Year 2
2023 External
Year 3
2024 Internal
Year 4
2025 Internal
A selection of the key findings from the 2022 internal Board evaluation
Findings
• The quality and comprehensiveness of the Board papers remains reassuringly high
but sometimes papers are too long.
• The Board is well organised, and meetings have had a good level of contribution.
Management remains on top of its brief.
• The investor relations strategy is clear and the Board has appropriate oversight of
key stakeholder groups. Brokers could be invited in future to some Board meetings to
provide insight on City attitude and market appetite for new equity.
• The Chair received good feedback, particularly in allowing contributions from
Board members and has very good working relationships with the senior
management team.
• While there is a greater understanding of people and culture, there is still more work
that needs to be done to drive change. The extent to which we are entering a period
of greater risk needs to be monitored in terms of staff turnover and other measures
so action can be taken if required.
• Good progress has been made with the establishment of the Responsible
Business Committee.
Principal recommendations
• Board dinners or lunches should be used
wherever possible to create a more open
environment for more debate on certain
key topics.
• More could be done to make stakeholders
feel ‘involved’ by giving them insight and
visibility on how their needs are considered.
• Staff turnover needs to be monitored so
action can be taken if required.
• Establish long-term targets and delivery
programmes to tackle longer term issues
like embedded carbon.
Induction and professional development
Committee changes
Carol Hui’s induction programme has been completed, involving
a comprehensive 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, external and internal auditors and other
professional 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
Carol Hui chairs the newly formed Responsible Business
Committee and she has taken on responsibility for employee
engagement and to represent the voice of the employee in
the boardroom. See pages 76 and 77 for more details on
these activities.
In light of the forthcoming retirement of Rob Wilkinson, 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, Michael
Brodtman will be appointed as a member of the Nomination,
Remuneration, Audit and Responsible Business Committees
upon joining in January 2023.
As advised in last year’s report, Justin Read has assumed the
responsibilities of the Senior Independent Director and Chair
of the Audit Committee and Janette Bell has taken over as
Chair of the Remuneration Committee. Carol Hui has overseen
the establishment of the Company’s Responsible Business
Committee and become its Chair. All of the Non-Executive
Directors were appointed to this Committee, in accordance
with our policy of all being members of all Board committees.
To read more about our activities and plans in this area, please
see page 76.
I believe that all of those taking up new roles have settled into
these well.
Grainger plc Annual Report and Accounts 2022 Diversity
Re-election of Directors
75
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 Rob
Wilkinson, will stand for election or re-election at the 2023 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. Michael Brodtman will
add expertise in the fields of property valuation and operation,
gained during his 40 year career with CBRE.
Mark Clare
Chair of the Nominations Committee
16 November 2022
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 43%. 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.
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. The Board meets the
recommendation of the Parker Review.
The responsibility for diversity and inclusion across Grainger’s
wider employee basis is now within the remit of the newly
formed Responsible Business Committee. For details on the
activities in this area, please see pages 76 and 77.
Succession planning
The Committee received a detailed presentation from the CPO
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 Eliza
Pattinson as Director of Operations and Asset Management,
Michelle Boothroyd as CPO and Steven Clark as Director
of Investments, reflecting our on-going investment in and
commitment to our employees and our investment pipeline,
in line with our strategy.
The Committee also received presentations from the CPO in
relation to the Company’s talent management initiative, which
seeks to identify and prepare future leaders of the business
and the Diverse Talent Acceleration Programme under which
we are identifying individuals from diverse backgrounds and
supporting them in developing and progressing their careers at
Grainger. This includes putting in place learning opportunities
and interventions which add the most value, including
external coaching.
Time commitment
The Board, supported by the Nominations Committee, carefully
considered the external commitments of the Chair 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.
GovernanceAnnual Report and Accounts 2022 Grainger plc 76
Responsible Business Committee
The Responsible
Business Committee
has allowed the Board
to allocate more
time to focusing on
strategic ESG issues.”
Carol Hui
Chair of the Responsible Business Committee
Dear Shareholders,
I am pleased to present Grainger’s first Responsible
Business Committee report. Established in March
2022, the Committee oversees a broad remit of
responsible business topics including climate
change, environmental, sustainability, social
impact, employee engagement and diversity and
inclusion. This report summarises the main activities
undertaken during the Committee’s first year.
Key focus areas during 2022
During the year, the Committee reviewed reports from
management detailing how the Company is progressing
towards net zero transition and how it is listening and
responding to its stakeholders, including helping its customers
save energy and minimise their cost of living, supporting
the wellbeing of employees and having a positive impact on
local communities.
The Committee also had the opportunity to see some of the
business’s environmental and social campaigns and innovations
in action at site visits to The Headline and Pin Yard in Leeds.
Key responsibilities
The key responsibilities of the Committee include:
• Agreeing and measuring progress against the Company’s
sustainability strategy, commitments and targets
• Overseeing and monitoring the development and
implementation of the Company’s net zero carbon
transition plan
• Monitoring the areas and activities likely to impact
Grainger’s performance and reputation as a
responsible business
• Reviewing and approving responsible business-related
How the Committee spent its time
policies and disclosures
Net zero carbon
ESG progress
Diversity
& inclusion
Voice of the
colleague
Community and
social impact
30%
30%
15%
15%
10%
• Monitoring stakeholder engagement
• Gathering and considering the views of the workforce
• Monitoring the development and implementation
of the Company’s Diversity & Inclusion Strategy,
plans and commitments
• Monitoring charitable and employee volunteering activities
• Supporting the Audit Committee in reviewing responsible
business-related risks and controls and the Remuneration
Committee in setting responsible business-related
Group objectives
Meetings
attended
The full terms of reference for the Committee
are available on Grainger’s website at:
https://corporate.graingerplc.co.uk/investors/governance/
board-committees?tab=responsible-business-committee.
2
2
2
2
2
The establishment of the Committee has allowed the Board
to allocate more time to discuss strategic ESG topics.
For more information on ESG topics,
please refer to page 38.
Attendance table
Non-Executive
Directors
Carol Hui
(Committee Chair)
Janette Bell
Mark Clare
Justin Read
Member
since
March 2022
March 2022
March 2022
March 2022
Rob Wilkinson
March 2022
Grainger plc Annual Report and Accounts 2022 77
ESG progress
The Committee assessed progress against the Group 2022 ESG
objectives reported on page 39 in the ESG section and page
94 in the Directors’ Remuneration report and workstreams in
support of the business’s long-term ESG commitments.
Net zero transition
The Committee reviewed the business’s strategies in relation
to the net zero transition, including progress made towards the
Company’s net zero carbon roadmap, its pathway to achieving
future Minimum Energy Efficiency Standards and the business’s
long-term plans to transition away from gas. The Committee
was pleased to review the successful achievement of the
Company’s ESG objectives to develop a strategy for measuring
Scope 3 customer emissions and to devise the action plan to
achieve EPC Rating of C or above across the PRS portfolio
(reported on page 39 in the ESG section).
A key challenge discussed in the year was how the business
should tackle embodied carbon from development activity
without impacting project viability. The Committee agreed a
review of best practice across the build-to-rent sector would
be useful to inform Grainger’s approach. The findings from this
review were presented to the Committee by Grainger’s Director
of Land and Development and the Committee agreed a key
objective for 2023 would be to define the business’s strategy
for measuring and reducing embodied carbon.
Customer engagement to reduce environmental impact
A particular focus during the year was the business’s ‘Living
a Greener Life’ customer engagement campaign which is
designed to raise awareness and help residents reduce their
environmental impact and support them in reducing their
energy bills. The Committee heard from the teams involved in
delivering the campaign in Grainger’s buildings and considered
feedback from Grainger’s customers. Supporting this
campaign, the Board reviewed Grainger’s plans to measure
actual customer energy data in a GDPR compliant manner.
For more information see page 50.
Community and social impact
The Board reviewed the Company’s current community and
charity programme and considered opportunities for the
business to enhance the positive social impact it creates through
combining its charity and community engagement activities.
Diversity & inclusion
We are committed to creating an inclusive culture for all our
colleagues and we want to build a diverse workforce that is
representative of the communities in which we live, work and
operate. We want a workplace where everyone feels that
they belong, that their individual characteristics are valued
and celebrated, and they feel that they can bring their ‘whole-
self’ to work every day. And we want all of our buildings and
communities to be inclusive places to live where everyone
feels welcome. We have a well-established employee led D&I
network who have delivered a range of engagement events,
celebrating diversity.
To support this commitment, we launched our first Diversity &
Inclusion employee data questionnaire which was completed
by 71% of colleagues and provided greater insight into our
colleague demographic. We also ran a series of initiatives
aimed at supporting diversity and inclusion amongst our
resident communities.
Our mentoring programme launched earlier in the year and
training was provided to participants, with a range of mentors
and mentees across different roles and teams taking part in
the scheme, which has been successful. We are continuing to
deliver our diverse talent programme with bespoke support and
coaching to help develop colleagues with their career aspirations.
The newly created Diversity and Inclusion Steering Committee,
chaired by our CFO Rob Hudson and made up of Executive
Committee members, Michelle Boothroyd, Chief People Officer,
Kurt Mueller, Director of Corporate Affairs and David Prescott,
Director of Strategy and Corporate Finance, and is leading our
strategic framework on D&I, working closely with the employee-
led network. Please refer to pages 15 and 40 for highlights from
the D&I Network during the year.
Voice of the colleague
Following the establishment of the Responsible Business
Committee, the Employee Voice has been led by me
as Grainger’s designated Non-Executive Director with
responsibility as the Chair of the Committee. Our approach to
support colleague engagement is designed to enable colleagues
to speak up, share their feedback and contribute views on
what they are experiencing from an engagement perspective.
During 2022, I held three round table events which were
held in person as an open forum for colleagues to share their
feedback, contribute ideas which support engagement and
enabled speaking up in a safe environment. Colleagues who
joined the focus groups represented a range of different roles
across Grainger and shared their feedback on how best to
improve communication. Their insight has been incorporated
into future engagement plans as part of our broader listening
strategy. Please see page 40 of the People section for more
examples around actions taken following the round table
feedback sessions.
A deep dive into our employee survey engagement results
was delivered by our Chief People Officer which gave further
insight into our culture across the Grainger teams and will
continue to be shared with the Committee at both full and
pulse survey points. Analysis and colleague feedback from the
survey resulted in actions plans being devised for each area of
the business including communication, wellbeing initiatives and
specific questions on D&I included in staff survey as noted on
page 40 of the People section.
Looking ahead
The Committee’s key activities for 2023 will include further
monitoring and challenging progress against ESG objectives,
approving Grainger’s net zero carbon transition plan and
Diversity & Inclusion strategy.
Carol Hui
Chair of the Responsible Business Committee
16 November 2022
GovernanceAnnual Report and Accounts 2022 Grainger plc 78
Audit, risk and control
Audit Committee report
Dear Shareholders,
I am pleased to present the Audit Committee report
for the year ended 30 September 2022, which will be
my first report since assuming the role of Chair of the
Committee in February 2022.
Firstly, I would like to acknowledge the significant contribution
of the previous Chair, Andrew Carr-Locke, who has left the
Committee in a strong position.
The Company and its business has proved to be highly
resilient in a challenging and uncertain wider economic
environment. The Committee’s role within the Company’s
governance framework, including supporting the Board in risk
management, internal control and financial reporting remains of
fundamental importance.
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 emerging requirements of the BEIS overhaul of the
corporate governance regime.
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 Internal Audit team
at PwC, which reported directly to us, and which worked to an
agreed plan to ensure controls were effective. This year we have
spent time reviewing our risk appetite and tolerance across
our principal risks, including a deep dive on climate change.
Please see page 57 for more information on this.
The Company has performed strongly this year in an uncertain
economic environment.
The Committee has also supported the Board in considering the
principal risks 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 52 to 57.
How the Committee spent its time
Financial reporting
30%
Internal control
and audit
Risk management
and compliance
Governance
30%
30%
10%
The Audit Committee
currently comprises
four independent Non-
Executive Directors,
chaired by the Senior
Independent Director.”
Justin Read
Chair of the Audit Committee
Attendance table
Non-Executive
Directors
Rob Wilkinson
Member
since
February 2016
Andrew Carr-Locke
March 2015
Justin Read
Janette Bell
Carol Hui
March 2017
February 2019
October 2021
Meetings
attended
4
2
4
4
4
Grainger plc Annual Report and Accounts 2022 79
Significant matters relating to the Group’s
2022 financial statements
The most significant matters considered by the Committee
and discussed with the external auditor in relation to the
Group’s 2022 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. Inventories comprise mainly residential trading
property held for sale in the normal course of business.
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.
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, the overall strategic horizon and
the current uncertainties of the UK and global economic and
political environments. 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 and
his team, 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 undertaking a comprehensive review of the potential
impact of the Buildings Safety Act 2022 and the potential
remedial work required to historic developments and making
appropriate provisions for 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 proposed overhaul of the UK
Corporate Governance Code and the replacement of the FRC
with the Audit, Reporting and Governance Authority (‘ARGA’).
The Committee is broadly supportive of the direction and goals
of audit practice reform and will continue to monitor evolution
of guidance in this area of practice. We are making early
preparations to keep the Company in line with best practice
and expected forthcoming regulatory requirements.
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.
Preparations are underway for our audit tender process
and audit partner rotation of which more detail is provided on
pages 80 and 81.
Justin Read
Chair of the Audit Committee
16 November 2022
GovernanceAnnual Report and Accounts 2022 Grainger plc 80
Audit, risk and control
Audit Committee report (continued)
Invitations to attend meetings
Fair, balanced and understandable
There is a standing invitation to the Chair 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.
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 62 and 63 for skills and
experience of the Directors and page 75 for the Nominations
Committee report.
Terms of reference
The Committee’s terms of reference are approved by the
Board. We 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 82 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 2022 Annual Report and Accounts is fair, balanced
and understandable, and whether it provides the necessary
information to Shareholders to assess the Group’s position and
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 2022 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 2022 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.
The Group’s viability statement is on page 58.
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. This will be the fourth audit
conducted under the current partner. In preparation for the next
mandatory rotation, the Committee has overseen the process of
appointing a new audit partner to enable an effective handover
period and ensure a smooth transition from Richard Kelly.
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.
Grainger plc Annual Report and Accounts 2022 81
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:
– 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 Chair.
The non-audit services provided by KPMG, set out in the table
below, related primarily to their review of our half year reporting.
This was approved by the Committee in 2022. 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.
Following this years’ audit, KPMG will have been the Group’s
auditor for eight years and as such the Committee was satisfied
that it was not necessary to tender external audit services in the
current year. However, the Committee noted that a competitive
tender for the external auditor must be held no later than
2024. Cognisant of this, the Committee has commenced a
tender process. The Committee considered the requirement
for a 12-month cooling off period prior to taking up an audit
appointment. The Company has interactions with all of the
potential tender participants to some extent. By undertaking
the tender in 2023 this will enable the successful participant to
confirm independence prior to taking up the position for their
first audit in 2025. 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.
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 52 to 57 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 74.
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.
Schedule of fees paid to KPMG
Statutory audit of Grainger Group
Total audit fees
Half year review
Total non-audit fees
Year ended
30 September 2022
£
486,000
486,000
40,000
40,000
GovernanceAnnual Report and Accounts 2022 Grainger plc 82
Audit, risk and control
Audit Committee report (continued)
Key activities
November 2021
• Received a presentation from the independent external valuers of
Grainger’s reversionary and market rented assets.
• Considered and received matters relating to the 2021 full year,
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:
– cash collections; and
– site audit of Hawkins & George.
February 2022
• Received an internal audit plan update and review of the provision
of services in future and Internal Audit reports on:
– onboarding;
– acquisitions;
– site audit of Clippers Quay; and
– internal controls and UK SoX.
• In respect of risk, considered:
– a compliance update; and
– data protection compliance regime.
• Reviewed the Company’s Modern Slavery Statement.
• Considered KPMG’s plan for its review of the 2022 half
year results.
• Reviewed and approved the Committee’s terms of reference.
• Conducted a post-completion review of the Clippers Quay and
Gatehouse Apartments development schemes.
• Carried out a detailed evaluation of the performance of the
external auditors. Considered it to be effective and also identified
certain areas for future improvement.
May 2022
• Considered issues regarding the 2022 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:
– business continuity;
– corporate governance;
– RACM reviews;
– IT key controls and cyber security;
– site audit reports on Pontoon Dock, Windlass Apartments and
The Filaments; and
• Considered a report on the BEIS reforms.
• Considered planning and approach around the 2022 external audit.
• Received a proposal for the audit tender exercise.
September 2022
• Considered the 2022 draft viability statement and
related analysis.
• Considered KPMG’s audit strategy memorandum and
engagement regarding the audit for the full year 2022.
• Received an update on the audit tender process.
• Considered and approved the forward Internal Audit plan.
• Reviewed the timetable for production of the Annual Report
and Accounts.
• Received Internal Audit reports on:
– corporate governance;
– business continuity management;
– promise to pay;
– cyber attack prevention;
– site audits for The Headline, Berewood and Wellesley; and
– progress of completing actions from previous internal audits.
• Reviewed reports on:
– principal and emerging risks, including climate change risk;
– whistleblowing;
– internal control framework; and
– legal and regulatory compliance.
• Received an update on the BEIS reforms.
• Considered the TCFD report contents and expected assurance.
Internal Audit has a direct reporting line to the Chair 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 Internal Audit without
management being present.
The Internal Audit programme for 2022 included reviews of:
– Cash collections
– On-boarding customers
– Acquisitions
– Internal controls maturity assessment
– Business continuity
– Corporate governance
– IT controls and cyber security
– RACM spot checks
– Site audits at a number of BTR sites
The Internal Audit plan for 2023 has a particular focus on:
– Insurance
– Human Resources and Wellbeing
– Sales
– Lettings
– Development – new build and refurbishment
– Payroll
– Treasury
– Cyber security
– Fraud risk
– RACM spot checks
– Site audits continuation rolling programme
Grainger plc Annual Report and Accounts 2022 Remuneration
Directors' Remuneration report
83
Dear Shareholders,
I am pleased to present on behalf of the Board the
Directors’ Remuneration report for the year ended
30 September 2022, my first since taking over as
Chair of the Remuneration Committee. As in previous
years, the report has been divided into the following
three sections:
– This Annual Statement, which summarises the remuneration
outcomes for the year ended 30 September 2022, the key
decisions taken by the Remuneration Committee during the
year and how the proposed Directors’ Remuneration Policy
will be operated in the following financial year;
– The Remuneration Policy (‘Policy’), which sets out the
remuneration policy for Executive and Non-Executive
Directors for which Shareholder approval will be sought at the
2023 AGM given that the current Policy is nearing the end of
its three-year life; and
– The Annual Report on Remuneration, which discloses how
the Policy was implemented in the year to 30 September
2022 and how the Policy will be operated in the year to
30 September 2023.
2022 performance and reward
Grainger has delivered an exceptional financial performance
including a record increase in income, lease up in new schemes,
occupancy, rental growth and secured and de-risked our
near-term growth. The Company is in a position of strength
to take advantage of the increase in demand for renting in
the UK. We have developed an ambitious ESG programme
designed to drive a significant reduction in carbon emissions.
We have strengthened our health and safety regime and
delivered substantial improvements in customer experience
and employee engagement.
The 2022 annual bonus was made up of a combination of
PRS net rental income (35%), adjusted earnings (35%), and
strategic targets (30% – of which one third were ESG targets).
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 whilst focusing on
key non-financial deliverables (including ESG) which underpin
our strategy.
In respect of performance, we achieved PRS net rental income
(‘NRI’) of £70.8m and adjusted earnings of £93.5m.
The strong performance of the business resulted in both the
PRS NRI and adjusted earnings measures being achieved
in full. When combined with the performance against the
strategic targets, annual bonus was calculated at 98% of the
maximum available. Full disclosure of the actual targets set,
and performance against those targets, is on page 93.
The 2020 LTIP award granted to Helen Gordon will vest on
6 February 2023 based on three-year performance, with 50%
measured against relative Total Shareholder Return (‘TSR’)
over the three years from grant and 25% each measured
against absolute Total Property Return (‘TPR’) and Secured PRS
Investment targets over the three years ended 30 September
2022. As disclosed in last year’s Directors’ Remuneration report,
Rob Hudson received a Recruitment Award, part of which is
assessed based on the performance criteria attached to the
2020 LTIP award. The estimated TSR vesting of 46.1% (noting
that the three year TSR performance period ends in February
2023), TPR vesting of 69.9% and Secured PRS Investment
vesting of 100% is expected to result in c.65.5% of the 2020
LTIP/Recruitment Award vesting.
Our focus this year
has been on reviewing
our Policy to ensure it
remains appropriate
and aligned to our
strategy.”
Janette Bell
Chair of the Remuneration Committee
Contents
Annual statement
Directors’ Remuneration Policy
Single total figure of remuneration for each Director
Annual bonus awards – performance assessment for 2021
LTIP awards – performance assessment for 2021
Share awards granted during the year
Payments for loss of office and to past Directors
Directors’ shareholdings and share interests
Performance graph and table
Chief Executive single figure
Percentage change in remuneration of Chief Executive
and employees
Chief Executive pay ratio
Relative importance of spend on pay
Statement of implementation of Remuneration Policy
for 2022
Directors’ service agreements and letters of appointment
Details of the Remuneration Committee, advisers to the
Committee and their fees
Statement of voting at general meeting
83
86
92
93
95
96
97
97
98
99
99
99
100
100
102
102
102
GovernanceAnnual Report and Accounts 2022 Grainger plc 84
Remuneration
Directors' Remuneration report (continued)
The Committee believes these bonus and LTIP outcomes are
appropriate and reflect the very strong performance of the
business over the relevant performance periods. Therefore, no
discretion has been applied to the formulaic outcomes.
Remuneration Policy changes
Since the Committee continues to believe that the current
Policy remains appropriate, no changes are being proposed to
either Policy structure or overall incentive quantum. However,
the Committee wishes to make a small number of minor
changes to the Policy wording as follows:
– To reduce the maximum pension provision from 15% to
10% of salary for all Executive Directors (both incumbents
and new appointments). As previously disclosed, the CEO’s
pension provision will be reduced from 15% to 10% of salary
from 1 January 2023 in line with the CFO’s pension and the
workforce more generally;
– To make specific reference to the use of ESG performance
metrics in the annual bonus and LTIP sections of the summary
Policy table; and
– To set the maximum bonus potential in the summary Policy
table to 140% of salary for all Executive Directors, which
previously referred to a 140% maximum bonus potential
for the CEO and 120% for “other Executive Directors”.
While there is no current intention to increase the CFO’s
annual bonus potential from the current 120% of salary, the
Committee would like the flexibility to align it to the CEO’s
140% of salary bonus potential going forwards, albeit major
Shareholders and the main Shareholder representatives
would be consulted in advance if implementing this change
was considered to be appropriate during the next three-year
life of the new Policy.
Applying the Policy in 2022/23
Details of the Committee’s proposed implementation of the
Policy in respect of the year ending 30 September 2023 are set
out below.
Executive Director base salary levels
Helen Gordon joined Grainger as CEO in November 2015
and embarked on an ambitious and clear plan to refocus the
Company on investment in the UK private rented sector and
to become the UK’s largest listed residential landlord whilst
delivering attractive returns for our Shareholders. Grainger’s
three strategic focus areas, which were set out in 2016, were
to: (i) grow rents; (ii) simplify and focus; and (iii) build on our
experience as a responsible and high-performing landlord,
and these remain very relevant today.
Grainger’s execution of this strategy has been very successful.
Over Helen’s tenure there has been a significant increase in:
– Net rental income +c.184%, (FY22 passing rent: £91m from
FY15: £32m)
– EPRA earnings +£49.8m, (FY22: £30.7m from FY15:
-£19.1m)
– Wholly owned PRS homes +c.325%, (FY22: 7,384 from
FY15: 1,739)
– Gross asset value +c.54%, (FY22: £3.7bn from FY15: £2.4bn)
– Market capitalisation +c.100%, (current: c.£1.7bn from
January 2016: c.£870m)
We have a secured pipeline to deliver a further 4,001 homes
and a further c.£52m of rental income.
During this period the greater scale and reach of the
business has also led to greater scrutiny, regulation and
political engagement.
Helen’s base salary upon joining Grainger was set at £460,000
and has increased on average by c.1.5% p.a. over the last seven
years, with annual increases generally at or below workforce
increases. However, Helen’s salary is now positioned well below
market and it is clear to the Committee that her pay has not
kept pace with Grainger’s increased size and complexity or its
strong operational and financial performance.
Given the above, and noting that the PRS marketplace is
extremely competitive, the Remuneration Committee feels
that it is essential that Helen is paid fairly for the CEO role and
that her base salary reflects her outstanding performance,
leadership and stature in the real estate sector. Further, unless
we maintain salaries at an appropriate level, we are at risk of
salary compression below CEO level, which will impact our
ability to recruit successfully into our leadership team.
The Committee has to date taken a prudent approach to
executive pay increases, taking into account the views of
our stakeholders and noting the scrutiny and challenge
resulting from above workforce increases to Executive
Director remuneration. However, we believe corrective action
is now required to ensure Helen is paid fairly and to avoid
potential issues in the future. The Committee therefore
proposes that Helen’s salary is increased in two stages to:
(i) £557,500 from 1 January 2023 (a c.9% increase); and (ii)
£591,000 from 1 January 2024 (a c.6% increase). The 2024
increase would be subject to continuing strong individual and
Company performance.
The Committee has not taken this decision lightly. It is very
aware of the sensitivity to making material salary increases
in the current environment. Shareholders will note that we
have sought to mitigate concerns around a single large salary
increase by implementing the increase across 2023 and 2024.
As the 2024 increase is not guaranteed, it also ensures that the
Committee is able to consider performance and contribution
over the next year before the 2024 increase is awarded.
It is expected that any future increases from 2025 would be
aligned to/or below, the general workforce increase.
The Committee uses benchmark data with caution. However,
as part of the review and to provide a sense check on salary
levels, the Committee undertook a review of market levels in
May 2022 and considered two UK peer groups. The first was
a sector group comprising Grainger’s FTSE 350 Real Estate
peers. The median market capitalisation of the group was
broadly equal to Grainger’s market capitalisation and the
median CEO base salary of the group was £580,000 (noting
that this was based on salaries disclosed in early 2022 which
arguably understates the current position, which is now closer
to £600,000, given current Executive Director salary inflation of
c.3-5%). The second group comprised FTSE 250 companies with
a broadly similar market cap and the median CEO base salary of
this group was £625,000 (again, noting that this was based on
salaries disclosed in early 2022 which arguably understates the
current position which is closer to £650,000).
In addition, and as detailed below, noting that no changes will be
made to annual bonus provision (capped at 140% of salary) and
LTIP awards (200% of salary) and that Helen’s pension will be
workforce aligned to 10% of salary (from 15%) from 1 January
2023, total remuneration (at target and at maximum levels of
performance) from 1 January 2024 will be broadly in line with
market norms.
Grainger plc Annual Report and Accounts 2022 85
How the Committee spent its time
Governance and reporting 10%
Investor communication
10%
Executive share plans
Performance monitoring
and review
Senior management
remuneration and
retention
Directors’ Remuneration
Policy review
Implementation of the
Remuneration Policy
Wider employee
remuneration and cost
of living
10%
10%
15%
25%
10%
10%
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 current and proposed 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 current and proposed 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 89.
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 Hudson’s salary as CFO (currently £418,200) will be
increased by the average workforce increase of 5% from
1 January 2023 to reflect his very strong start since joining
the business in September 2021.
Annual bonus performance metrics
Annual bonus potential for the year ending 30 September
2023 will remain at 140% of salary for the CEO and 120% of
salary for the CFO, with 75% payable in cash and 25% deferred
into shares.
70% of the bonus will continue to be based on adjusted earnings
and PRS net rental income targets weighted equally. However,
rather than the remaining 30% being based solely on a set of
strategic and operational targets, 10% of bonus potential will be
based solely on ESG-related targets and the remaining 20% will
be based on a smaller number of key strategic and operational
measures. The targets, and the performance against them, will
be disclosed in next year’s Directors’ Remuneration report.
Long Term Incentive Plan
It is expected that LTIP awards will continue to be granted
over shares equal in value of up to 200% of salary for the CEO
and 175% of salary for the CFO although the Committee will
take into account the share price at grant prior to finalising
grant levels. The Board has made significant progress on
Grainger’s ESG proposition, and the Committee now intends
to develop aligned ESG performance metrics and targets over
the next c.12 months for inclusion in the December 2023 LTIP
grant. As such, targets for the next LTIP awards expected to
be granted in December 2022 will be based on PRS Secured
Investment (33.3%), relative Total Shareholder Return (‘TSR’)
(33.3%) and a property income return measure (33.3%).
The Secured PRS Investment condition will continue to be
based on aggregate three-year Secured PRS Investment
opportunities with 25% vesting for achieving threshold
increasing on a straight-line basis until a maximum stretch
target is achieved. However, our ambitious growth agenda is
always combined with a prudent approach to balance sheet
management. As such, given the current uncertain environment
impacting the raising of equity to finance new acquisitions,
and the risks of raising debt to grow Secured PRS Investment
at this time, the Committee has agreed that the PRS Secured
Investment target range for the LTIP cycle 2022/23-2024/25
should assume funding solely from our ongoing asset recycling
programme, operational cash flow generation and with LTV
in mind. However, should the equity markets reopen, and we
generate proceeds from debt or equity in the period, the related
investments will either be excluded from the assessment of
performance against the original targets, or the target range
would be increased to reflect the funding to ensure the targets
remain at least as stretching as the original ones.
In respect of the relative TSR target, the Committee proposes
to align the vesting schedule to market given that quantum
is in line with sector peers. As such, rather than the current
median (25% of this part of an award vests) to upper quintile
(100% of this part of an award vests) range, future LTIP awards
will operate a more normal median to upper quartile vesting
range. The TSR comparator group will continue to be based on
a bespoke group of real estate peers. The real estate peer group
is made up of companies from a diverse set of sub-sectors with
different investment characteristics and levels of cyclicality. It is
felt that a typical median to upper quartile vesting schedule
is more appropriate for Grainger given our sustainable return
profile and lower share price volatility versus other listed real
estate peers.
In respect of the property return target, given the uncertainty
affecting capital values in the short term and the difficulty in
setting a robust 3-year TPR target range, the Committee has
agreed to replace TPR with a 3-year Total Property Income
Return (‘TPIR’) measure. At the time of signing off this report
the Remuneration Committee is deliberating over the TPIR
targets that will apply to the 2023 LTIP. An appropriately
challenging set of sliding scale targets will be set for this
measure and full details of the target range will be disclosed
in the RNS announcement at the time the awards are
granted. The Committee intends to revert to absolute TPR
(i.e. capital return plus income return) when market conditions
and short term clarity improve.
Employee remuneration
Although outside of the Shareholder approved Policy, given that
Executive Directors (and Executive Committee members) did
not participate, the Company paid employees a one-off cash
award of £1,000 in August 2022 to help with the rising cost of
living in the UK. This is in addition to the average workforce
increase of 5% from 1 January 2023.
We look forward to your support on the resolution relating to
remuneration at the AGM on 8 February 2023.
Janette Bell
Chair of the Remuneration Committee
16 November 2022
GovernanceAnnual Report and Accounts 2022 Grainger plc 86
Remuneration
Directors' Remuneration Policy
This part of the Directors’ Remuneration report sets out the Directors’ Remuneration Policy (the ‘Policy’) which, subject to
Shareholder approval at the 2023 Annual General Meeting, shall take binding effect from the date of that meeting and shall
be in place for the next three-year period unless a new Policy is presented to Shareholders before then. Subject to approval by
Shareholders, all payments to Directors during the Policy period will be consistent with the approved Policy.
The key differences between the Policy approved by Shareholders in 2020 and the 2023 Policy are as follows:
– The maximum pension provision has been reduced from 15% to 10% of salary for all Executive Directors (both incumbents
and new appointments). As previously disclosed, the CEO’s pension provision will be reduced from 15% to 10% of salary from
1 January 2023 in line with the CFO’s pension and the workforce more generally;
– Specific reference to the use of ESG performance metrics has been added to the Annual Bonus LTIP sections of the summary
Policy table; and
– The maximum bonus potential in the summary Policy table has been set at 140% of salary for all Executive Directors rather than
a 140% maximum bonus potential for the CEO and 120% for “other Executive Directors”.
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 92.
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) and will take into account 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
Pension
Purpose and link
to strategy
Operation
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.
Opportunity
10% of salary (workforce aligned).
Framework to assess
performance
N/A
Grainger plc Annual Report and Accounts 2022 87
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 normally 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
140% of salary.
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 portion of the bonus, strategic and operational and/or ESG 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 strategic and operational 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).
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
– 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 (including ESG). 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).
GovernanceAnnual Report and Accounts 2022 Grainger plc 88
Remuneration
Directors' Remuneration Policy (continued)
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 guidelines. In addition, the Committee’s general expectation is that the guidelines 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 guidelines.
A post cessation shareholding guideline operates. 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 made since the approval of the 2020 Policy at the 2020 AGM. Buyout awards and own shares purchased are excluded
from this.
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.
Grainger plc Annual Report and Accounts 2022 89
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.
Peer Group
In assessing Grainger’s pay practices, including structure, quantum and performance metrics and remuneration policies, the
Committee’s primary reference point are the following FTSE 350 Real Estate companies: Assura plc, British Land Company plc, Big
Yellow Group PLC, Capital & Regional plc, CLS Holdings plc, Derwent London plc, Great Portland Estates plc, Hammerson plc, Land
Securities Group PLC, London Metric Property Plc, Safestore Holdings plc, SEGRO plc, Shaftesbury PLC, Sirius Real Estate Limited ,
The Unite Group plc and Workspace Group PLC.
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 2022/23 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 2023, estimated 2022/23 benefits and pension contribution of 10% of salary (fixed pay).
– On-target = 60% payable of the 2023 annual bonus and 62.5% vesting of the 2023 LTIP awards.
– Maximum = 100% payable of the 2023 annual bonus (based on a maximum of 140% of salary for the CEO and assuming a 120%
of salary maximum for the CFO) and 100% vesting of the 2023 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 Executive Officer
Chief Financial Officer
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
0
£2,525
£1,794
39%
26%
35%
£629
100%
£3,083
18%
36%
25%
20%
44%
31%
25%
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
0
£2,180
£1,795
£1,296
37%
24%
39%
£500
100%
43%
29%
28%
18%
35%
24%
23%
Min
Target
Max
Max with
growth
Total fixed remuneration
Annual bonus
LTIP
Share price growth
Min
Target
Max
Max with
growth
Total fixed remuneration
Annual bonus
LTIP
Share price growth
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.
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.
GovernanceAnnual Report and Accounts 2022 Grainger plc 90
Remuneration
Directors' Remuneration Policy (continued)
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 Chief People Officer. A session was also held to
discuss how the executive pay aligned with the wider Company
pay policy.
In addition, as noted on page 74 Janette Bell was the designated
Non-Executive Director for employee engagement and
consultation until the 2022 AGM when Carol Hui took over that
role, as part of the Responsible Business Committee remit.
Carol Hui was appointed to the Board on 1 October 2021.
As well as joining the Remuneration, Audit and Nominations
Committees, Carol oversaw the establishment of the
Company’s Responsible Business Committee and became
Chair of it. This Committee provides 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.
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 2022 AGM, feedback
received was positive and is reflected in the voting outcome.
Major Shareholders and the main representative bodies were
consulted on the proposed changes to the Remuneration Policy
and its implementation for the year ending 30 September 2023
and it was clear that there were strong levels of support for the
proposals. No changes were required to the original proposals.
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 Chair, will be set at a competitive market level,
reflecting experience, responsibility and time commitment.
Additional fees are payable for the chairmanship of the Audit,
Remuneration and Responsible Business Committees and for
the additional responsibilities of the Senior Independent Director
and the Non-Executive Director for Employee Engagement.
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
Grainger plc Annual Report and Accounts 2022 91
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 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.
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.
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.
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.
Non-Executive Directors’ letters of appointment
The Chair 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 Chair) 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 Chair 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 Chair’s fee is determined by the Committee (during which the Chair has no part in discussions) and recommended by
it to the Board. The Non-Executive Directors’ fees are determined by the Chair 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
GovernanceAnnual Report and Accounts 2022 Grainger plc 92
Remuneration
Annual Report on Remuneration
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 2022. This report has been prepared in accordance with the provisions of the
Companies Act 2006 and related Regulations. A single advisory resolution to approve this report (and the Annual Statement)
will be put to Shareholders at the AGM on 8 February 2023.
3. Single total figure of remuneration for each Director
The remuneration of Directors showing the breakdown between components with comparative figures for 2021 is shown below.
This table and the details set out in Notes 3 to 9 on pages 92 to 98 of this report have been audited by KPMG LLP.
2022
Executive Directors
Helen Gordon
Rob Hudson
Non-Executive Directors5
Mark Clare
Andrew Carr-Locke
Justin Read
Janette Bell
Rob Wilkinson
Carol Hui
Totals
Salary
and fees1
£’000
Taxable
benefits2
£’000
Share
incentive
plan
£’000
Annual
bonus3
£’000
LTIP
awards4
£’000
Pension
benefits6
£’000
509
416
925
174
24
65
58
50
56
427
1,352
16
17
33
–
–
–
–
–
–
–
33
2
–
2
–
–
–
–
–
–
–
2
702
492
1,194
–
–
–
–
–
–
–
1,194
596
333
929
–
–
–
–
–
–
–
929
76
42
118
–
–
–
–
–
–
–
118
Total
£’000
1,901
1,300
3,201
174
24
65
58
50
56
427
3,628
Total Fixed
Remuneration7
£’000
Total Variable
Remuneration8
£’000
603
475
1,078
174
24
65
58
50
56
427
1,505
1,298
825
2,123
–
–
–
–
–
–
–
2,123
1 The CEO’s and former CFO’s salaries increased by 2% in line with the wider employee population from 1 January 2022. At 1 January 2022, Helen Gordon’s base salary was £511,356
and Rob Hudson’s base salary was £418,200.
In line with the Remuneration Policy, 25% of the bonus is deferred into shares for three years.
2 Taxable benefits comprised of a car allowance and private medical insurance.
3
4 Please see Note 5 on page 95 for information in respect of the LTIP and Recruitment awards that are due to vest in February 2023 and Recruitment awards which vested in February 2022.
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 from 1 October
2021. Andrew Carr-Locke stepped down from the Board at the 2022 AGM.
6 The amounts shown under pension benefits represent a salary supplement paid to the Directors in lieu of Company pension contributions.
7 Comprises the aggregate of total salary and fees, taxable benefits, share incentive plan awards and pension benefits.
8 Comprises the aggregate annual bonus and LTIP awards.
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
benefits9
£’000
Total
£’000
Total Fixed
Remuneration6
£’000
Total Variable
Remuneration7
£’000
Other8
499
36
197
732
171
67
59
54
49
400
1,132
16
1
9
26
–
–
–
–
–
–
26
3
–
–
3
–
–
–
–
–
–
3
467
27
–
494
–
–
–
–
–
–
494
571
–
–
571
–
–
–
–
–
–
571
75
4
30
109
–
–
–
–
–
–
109
–
389
–
389
–
–
–
–
–
–
389
1,631
457
236
2,324
171
67
59
54
49
400
2,724
593
41
236
870
171
67
59
54
49
400
1,270
1,038
416
–
1,454
–
–
–
–
–
–
1,454
1 The CEO’s and former CFO’s salaries 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 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 for part of the year she was in employment 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 303.2p.
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 was not therefore 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 received cash payments of £369,668 and £19,724 to compensate for forfeited 2021 bonus and sharesave awards in respect of his previous employment. These amounts were
paid in December 2021.
9 The amounts shown under pension benefits represent a salary supplement paid to the Directors in lieu of Company pension contributions.
Grainger plc Annual Report and Accounts 2022 93
4. Annual bonus awards – performance assessment for 2022
In determining the bonus outcomes for 2022, the Committee took into account the Company’s financial performance and
achievements against key strategic and operational 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
strategic objectives. The targets applying to each financial measure and performance against the targets for 2022 are set out in the
table below.
Financial performance (70% of the 2022 annual bonus opportunity)
Measure
Weighting
Threshold
(0% out-turn)
Target
(60% out-turn)
Maximum
(100% out-turn)
2022
performance
Out-turn (% of
max element)
Adjusted earnings
35%
£74.9m
£83.2m
£91.5m
£93.5m
Bonus
100%
Measure
PRS NRI
Weighting
Threshold
(0% out-turn)
Target
(60% out-turn)
Maximum
(100% out-turn)
2022
performance
Out-turn (% of
max element)
35%
£62.7m
£66.0m
£69.3m
£70.8m
Bonus
100%
Payouts for performance between threshold and target and between target and maximum are determined on a straight-line basis.
As a result of the strong performance against the financial objectives, the full bonus of 70% became payable.
Non-financial performance (30% of the 2022 annual bonus opportunity)
In respect of the strategic targets set for the Executive Directors, the targets and Committee’s assessment of performance against
the targets was as follows.
GovernanceAnnual Report and Accounts 2022 Grainger plc 94
Remuneration
Annual Report on Remuneration (continued)
Objective
Measure
Performance assessment
1. Customer
Service
Achieve a material increase in NPS Score, target range for 2022 being +20 to
+24 (2020: -2; 2021: +16)
Achieved in full (3%) with the NPS score
increasing to +34
Achieve an increase in customer retention (three year run rate 55.3% and
target for 2022 range being +2% to 5% (57.3% to 60.3%)
Achieved in full (3%) with 63.5%
retention achieved.
Customer touch points
a) Increase returns from 750 to 1,000+
b) Incorporate new touch points during the year
c) Analyse data to drive improvement plans
Initiate Scope 3 Tenants Emission Strategy (‘Living a green life’)
Strategy devised, GDPR compliant to be launched by year end
a) Strategy devised to engage with customers
b) Guides produced to help customers ‘live a greener life’
c) Residents asked to agree to share consumption data
d) Offer made for them to switch to green tariff
e) Metering strategy agreed to measure overall tenants’ consumption
Completion of (a) to (c) 1%, completion of all five actions 3%
Prepare business to issue first green finance bond
Deliver by year end
a) Full assessment of what is required to be agreed
b) Necessary actions to be put in place to issue bond
c) Independent assessment of readiness by external advisor
d) Issue bond if cost beneficial or neutral
Completion of (a) to (c), and (d) if beneficial /neutral
EPC improvement cost plan fully costed with actions agreed
Deliver by year end
a) To take the EPC findings for each asset and identify actions required
b) To cost those actions and decide feasibility
c) To devise an action plan by asset – improve or recycle
Diversity and inclusion measure. Measurement at end of financial year.
Design and implement a diverse talent acceleration programme to include:
– Diversity tracking
– Diversity talent identification
– Bespoke mentoring and skills course for mentors and mentees
Programme designed and identification of 5 rising stars from diverse
backgrounds and put through programme.
Deliver fully working customer portal rolled out by year end.
Functionality to include the following elements
a) Fault / maintenance reporting and tracking
b) Enhanced booking engine for services, amenities and events
c) Enhanced customer comms platform enabling queries, compliments,
complaints, announcements and information ensuring richer customer
communication
On target performance to include two of the above 1%,
maximum performance to include all three 2%.
Achieved in full as follows (3%)
a) As at mid-September 2022 – 1068
b) Two new touch points launched at
month 3 and month 8 of lease
c) Data insights helping retention and
servicing e.g. repairs and move in
Achieved in part (2% out of 3%).
All but d) achieved but d) dropped due to
energy pricing crisis
Achieved in full (2%) with step (a) to (c)
being included.
Achieved in full (2%) and reported to the
Board accordingly.
Achieved in part (1% out of 2%).
Longer-term mentoring programme
enacted and running into 2023.
Achieved in full (2%).
App live in Spring a) to c) all delivered
within the year.
Increase operations employee satisfaction. Measurement from year end
achieved in 2020 (577) and 2021 (587):
– Target for 2022 to be rated as one to watch with a score of 600 or above
Achieved in full (2%). Operation score was
at 657. Whole company reached 1 star
rating a year earlier than target.
Achieve recovery in occupancy levels.
Measurement to be taken at year end. Recovery from 94% (end of 2021)
to a maximum of 97% by end 2022.
(On target (95%) 1%, maximum (97%) 3%)
Achieved in full (3%) with occupancy level
at 98%.
2. ESG
3. Technology
4. People
5. Operations
6. Investment and
Development
Restructure acquisitions team to increase opportunities to invest and deliver
improvement in feasible prospects across the year. Three year run rate is
currently 24 per Annum. Increase run rate by between 10% and 20% (27 to
29 p.a.) (On target 1%, maximum 3%.)
Achieved in full (3%) with a 29 run rate
p.a.; seven new hires and one promotion
in the team.
Secure two further Direct Development opportunities and deliver two
new opportunities by year end (completion by year end to be achieved for
maximum opportunity)
Achieved in full (2%) having secured
Exeter and Sheffield development
opportunities.
Grainger plc Annual Report and Accounts 2022 95
The business wide focus on customer service, delivered through the Customer Experience Programme, has resulted in a step
change in the key customer and operations metrics. NPS has more than doubled to 34 and operations employee satisfaction
reached 657 enabling the whole company to reach a 1* rating a year earlier than target with both contributing to the record
occupancy level of 98% achieved in the year. Pursuant to the above assessment, totalling the above percentage outcomes,
the Committee determined that 28% 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 98% of the maximum bonus opportunity is representative of very strong performance during the year.
Helen Gordon
Rob Hudson
1 The deferred bonus share awards will be granted after the announcement of annual results.
5. LTIP/Recruitment awards vesting
LTIP awards vesting in February 2023
Bonus opportunity
140% of salary
120% of salary
2022
bonus payable
(out of 100%
maximum)
Bonus earned –
payable
in cash
Bonus earned
– deferred
in shares for
three years1
98%
98%
£526,185
£368,852
£175,395
£122,951
The LTIP award granted to Helen Gordon on 6 February 2020 which is due to vest on 6 February 2023, and Recruitment awards
granted to Rob Hudson on 11 October 2021 on similar terms (see next section) are based on a 50% relative TSR condition, a 25%
TPR condition and a 25% Secured PRS condition measured over 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 quintile
ranking
or better
TPR (annual average growth)
Secured PRS
Total estimated vesting
25%
25%
100%
5% p.a.
£650m
8% p.a.
£750m
TSR of 5.7%
currently
places
Grainger
between
median
and upper
quintile
6.8% p.a.
£823m
Out-turn
(% of max
element)
LTIP
46.1%
(estimated)
69.9%
100%
65.5%
At the time of signing off this report, the TSR performance period has not concluded. Based on performance to 18 October
2022, Grainger is ranked between median and upper quintile. This gives an indicative vesting of 46.1% for this part of the award.
Actual vesting will be based on performance over three years from grant (6 February 2020) and the actual performance,
vesting outcome and value of LTIP for single total figure of remuneration purposes will be shown in next year’s report.
The average TPR over three-year period was 6.8% (2020: 5.4%, 2021: 7.5%, 2022: 7.5%). This resulted in 69.9% of this part of the
award vesting.
The Secured PRS Investment metric is effectively a measure of the value of the Company’s pipeline of future development
opportunities and provides a clear focus on driving growth in the long-term . The metric and targets were agreed at the time of
grant on a cumulative threshold target of £650m and a maximum target of £750m for the three-year period ended 30 September
2022. The actual value of investment secured during the period was £823m and was made up of:
– £413m in FY20 (Canning Town 3, London; Capital Quarter, Cardiff; The Barnum, Nottingham; Exchange Square, Birmingham;
Waterloo, London; and Guildford Station, Guildford)
– £158m in FY21 (Millwrights Place, Bristol; Becketwell, Derby; and The Forge, Newcastle)
– £252m in FY22 (Exmouth Junction, Exeter; Redcliff Quarter, Bristol; and West Way Square, Oxford)
The Committee evaluated the quality of investments in determining the PRS Investment vesting outcome. Firstly, the Committee
considered 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 for stabilised assets was undertaken with regular monitoring of schemes to
ensure that investments remained of sufficient quality in light of then current market conditions.
GovernanceAnnual Report and Accounts 2022 Grainger plc 96
Remuneration
Annual Report on Remuneration (continued)
The estimated vesting is 65.5% of the total award. The value of these awards shown in the single figure table are as follows:
Executive Director
Helen Gordon1
Rob Hudson2
Shares granted
330,116
184,537
Number of
shares
expected
to lapse
113,903
63,672
Number of
shares
expected
to vest
Estimated value
of shares
vesting3
£’000
Face value of
shares expected
to vest4
£’000
216,213
120,865
596
333
647
362
Impact of
share price
at vesting5
£’000
(78)
(29)
1 LTIP award granted on 6 February 2020.
2 Recruitment award granted on 11 October 2022 with the same performance targets as the 6 February 2020 LTIP award.
3 Based on the average three-month share price to 30 September 2022 of 275.6p.
4 Based on the prevailing share price at the relevant grant date.
5 The difference between the value of the shares under awards vesting and the value of the shares at grant.
These awards are subject to a two-year post vesting holding period.
Recruitment awards vested in February 2022
Recruitment awards granted to Rob Hudson on 11 October 2021 over 93,380 shares vested on 20 February 2022. Vesting was
based on continued employment only.
LTIP awards vested in December 2021
The awards made to Executive Directors in December 2018, and which vested on 12 December 2021, were based 50% on relative
TSR and 50% on TPR.
Grainger ranked between median and the upper quartile of the TSR peer group which resulted in 52.18% of this part of the award
vesting. Annual growth in TPR of 6% p.a. over the three-year period resulted in 43% of this part of the award vesting. In aggregate,
47.59% of the December 2018 LTIP award vested in December 2021 compared to an estimated vesting of 43% disclosed in last
year's report. The value of these awards shown in the revised 2021 single figure table included in this Annual Report and Accounts
is based on the share price at the date of vesting (12 December 2021) and also includes the value of dividend equivalents on
vested awards.
6. Share awards granted during the year
The following LTIP and DBSP awards were granted to the CEO and CFO in the year ended 30 September 2022:
Helen Gordon
Rob Hudson
LTIP share awards
(16 December 2021)
DBSP share awards
(16 December 2021)
Number
325,665
233,045
Face value
£’000
1,003
718
Number
38,238
2,233
Face value
£’000
117
7
The face value of LTIP share awards for Helen Gordon (200% of salary) and Rob Hudson (175% of salary) is based on a price of
3.07p, being the average share price for the five business days immediately preceding the award being made on 16 December 2021.
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 (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.
The face value of the deferred bonus share plan (‘DBSP’) awards relates to a 25% deferral of the 2021 annual bonus into Company
shares, is based on a price of 3.05p, being the average share price for the three business days immediately preceding the award
being made on 16 December 2021. The awards will be eligible to vest in three years subject to continued employment.
Grainger plc Annual Report and Accounts 2022 97
In addition, and as detailed in last year’s Directors’ Remuneration report, the following share awards were granted in compensation
for remuneration forfeited upon Rob Hudson’s resignation from his previous employer:
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). Performance against these metrics is provided on page 95.
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.
7. Payments for loss of office and to past Directors
No payments for loss of office or payments to past Directors were made in the year ended 30 September 2022.
8. Directors’ shareholdings and share interests
Past share awards
Helen Gordon
Rob Hudson
LTIP shares
LTIP shares1
LTIP shares1
LTIP shares2
DBSP
DBSP
DBSP
DBSP
LTIP shares3
LTIP shares4
LTIP shares4
LTIP shares2
DBSP
Awards1
granted
Maximum
award
Number
Awards
vested
Number
Awards
lapsed
Number
Maximum
outstanding
awards at
30 Sep 2022
Number
Market price
at date of
vesting
(p)
12-Dec-18
06-Feb-20
10-Dec-20
16-Dec-21
12-Dec-18
10-Dec-19
10-Dec-20
16-Dec-21
11-Oct-21
11-Oct-21
11-Oct-21
16-Dec-21
16-Dec-21
374,640
330,116
350,496
325,665
55,256
16,429
43,397
38,238
93,380
184,537
271,987
233,045
2,233
178,291
–
–
–
55,256
–
–
–
93,380
–
–
–
–
196,349
–
–
–
–
–
–
–
–
–
–
–
–
–
330,116
350,496
325,665
–
16,429
43,397
38,238
–
184,537
271,987
233,045
2,233
303.2
–
–
–
303.2
–
–
–
278.6
–
–
–
–
Vesting
date
12-Dec-21
06-Feb-23
10-Dec-23
16-Dec-24
12-Dec-21
10-Dec-22
10-Dec-23
16-Dec-24
20-Feb-22
11-Mar-23
01-Feb-24
16-Dec-24
16-Dec-24
1
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.
2 Details of the December 2021 LTIP awards are set out in Section 6 (Share awards granted during the year) above.
3 LTIP shares vested in February 2022 but are unexercised at the date of this report. These will remain capable of exercise in accordance with the scheme rules.
4 Recruitment awards granted in respect of awards forfeited by Rob Hudson on leaving his previous employer. Details of the grants are set out in the September 2021 Remuneration report.
All-employee share options under SAYE
Granted
in year
Lapsed
during
year
Share
options at
1 Oct 2021 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
2022
Exercise
price
(p)
Earliest
exercise
date
Latest
exercise
date
Helen
Gordon
Rob
Hudson
SAYE
SAYE
SAYE
9,326
–
–
7,258
–
248.00
–
12,096
248.00
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,326
7,258
217.07
248.00
01-Sep-22 01-Mar-23
01-Mar-26
01-Sep-25
12,096
248.00
01-Sep-27
01-Mar-28
The closing trade share price on 30 September 2022 was 229.4p. The highest trade share price during the year was 319.2p and the
lowest was 229.4p.
GovernanceAnnual Report and Accounts 2022 Grainger plc 98
Remuneration
Annual Report on Remuneration (continued)
All-employee share awards under the SIP
Executive Directors
Helen Gordon
Ordinary shares of 5p each
1 Oct 2021
shares
30 Sept 20221
shares
7,642
8,862
1 Since 30 September 2022, Helen Gordon and Rob Hudson acquired shares in the Company through the Grainger Employee Share Incentive Scheme (132 and 130 each respectively of
ordinary 5p shares). Rob Hudson joined the scheme in October 2022, at the first opportunity following the 12 months service eligibility.
Shareholding at 30 September 2022
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
Rob Wilkinson
Mark Clare
Justin Read
Janette Bell
Carol Hui
Beneficially
owned shares at
30 Sep
2022
Vested but
unexercised
share awards
Unvested
share awards
Total interests
held at
30 Sep
20221
Total interests
held at
30 Sep
2021
Shareholding
as % of basic
salary2
592
113
44
161
21
2
–
9
93
–
–
–
–
–
1,112
797
–
–
–
–
–
1,713
1,003
44
161
21
2
–
1,747
663
21
161
21
2
–
268
89
N/A
N/A
N/A
N/A
N/A
1 The total interests include beneficially owned shares, shares held in the SIP trust, vested but unexercised shares and unvested share awards.
2 The value of shares held (calculated as at 30 September 2022 when the share price was 2.29p) 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 February 2020 LTIP awards (due to vest in February 2022 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 342.8% of basic salary in
the case of Helen Gordon. If unvested DBSP awards (which vest subject to continued employment only) and non-performance buyout awards were to be included, the value of shares held
(on a post-tax basis) would rise to 124.9% of basic salary in the case of Rob Hudson.
9. Performance graph
Total Shareholder Return
This graph shows the percentage change by 30 September 2022 of £100 invested in Grainger plc on 30 September 2012 compared
with the value of £100 invested separately in both the FTSE 250 Index and the FTSE 350 Real Estate Supersector Index.
400
350
300
250
200
150
100
50
0
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
30/09/2022
Grainger plc
FTSE 250 Total Index
FTSE 350 Real Estate Supersector
Source: Datastream (a Refinitiv product)
Grainger plc Annual Report and Accounts 2022 10. Chief Executive single figure
2022
2021
20201
2019
2018
2017
20162
2016
2015
2014
2013
Helen Gordon
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
99
Chief Executive
single figure of
total remuneration
£’000
Annual variable
element award rates
against maximum
opportunity
%
Long-term incentive
vesting rates
against maximum
opportunity
%
1,901
1,631
1,688
1,185
1,174
985
882
376
2,185
2,477
2,519
98
67
70
27
72
61
73
–
–
64
63
65
48
67
36
8
N/A
N/A
–
98
100
100
1 The total remuneration has been restated following the update to the 2021 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.
11. Percentage change in remuneration of Chief Executive and employees
The annual percentage change in remuneration over the last three years, 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
Percentage change 2021-22
Executive Directors
Helen Gordon
Vanessa Simms1
Rob Hudson2
Non-Executive Directors
Mark Clare
Andrew Carr-Locke3
Justin Read3
Janette Bell3
Rob Wilkinson
Carol Hui4
Employee population
Base
salary
Taxable
benefits
Annual
bonus
2.5%
2.5%
–
2.5%
2.5%
2.5%
2.5%
2.5%
N/A
2.8%
0.1%
0.1%
–
162.3%
(100.0)%
–
N/A
N/A
N/A
N/A
N/A
N/A
0.8%
N/A
N/A
N/A
N/A
N/A
N/A
13.7%
Base
salary
1.5%
1.5%
–
Taxable
benefits
(0.2)%
(43.1)%
–
Annual
bonus
(3.6)%
–
–
Base
salary
2.0%
–
2.0%
Taxable
benefits
(0.2)%
–
(0.4)%
Annual
bonus
50.2%
–
50.2%
1.5%
1.5%
1.5%
1.5%
1.5%
N/A
2.0%
N/A
N/A
N/A
N/A
N/A
N/A
(0.7)%
N/A
N/A
N/A
N/A
N/A
N/A
33.3%
2.0%
–
16.4%
10.8%
2.0%
N/A
2.5%
N/A
N/A
N/A
N/A
N/A
N/A
(0.8)%
N/A
N/A
N/A
N/A
N/A
N/A
4.6%
No bonus was payable to Vanessa Simms due to her resignation in October 2020.
1
2 Rob Hudson joined Grainger on 31 August 2021. The growth rates for base salary, taxable benefits and annual bonus have been annualised to reflect changes on a like-for-like basis.
3 Andrew Carr-Locke stepped down from the Board in February 2022. Justin Read was appointed Senior Independent Director and Chair of the Audit Committee, and Janette Bell has taken
over as Chair of the Remuneration Committee.
4 Carol Hui was appointed to the Board on 1 October 2021 and Chair of the Responsible Business Committee.
12. Chief Executive pay ratio
The table below compares the 2022 single total figure of remuneration for the CEO as shown in Note 3 on page 92 with the Group’s
employees paid at the 25th, 50th and 75th percentiles:
Financial year
Method
25th percentile
50th percentile (median)
75th percentile
2022
2021
2020
A
A
A
60:1
Total pay and benefits £31,831
Salary £25,241
48:1
Total pay and benefits £32,711
Salary £25,000
58:1
Total pay and benefits £29,968
Salary £27,708
40:1
Total pay and benefits £47,521
Salary £38,500
33:1
Total pay and benefits £48,540
Salary £42,923
39:1
Total pay and benefits £44,748
Salary £37,898
23:1
Total pay and benefits £81,690
Salary £72,116
20:1
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 2022 using Option A as the most statistically accurate method.
GovernanceAnnual Report and Accounts 2022 Grainger plc 100
Remuneration
Annual Report on Remuneration (continued)
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 2022, 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 onsite 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.
13. Relative importance of spend on pay
The difference in actual expenditure between 2021 and 2022 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)
+£146.5m
+96%
2022: £298.6m*
(2021: £152.1m)
* Includes £81.2m one-off impact resulting from
property reclassifications in 2022.
Dividend
(£m)
+£7.4m
+20%
2022: £44.2m
(2021: £36.8m)
Total employee pay
(£m)
+£4.2m
+19%
2022: £26.4m
(2021: £22.2m)
14. Statement of implementation of Remuneration Policy for 2023
Base salary
As detailed in the Annual Statement, it is intended that Helen Gordon’s salary will increase to: (i) £557,500 from 1 January 2023 (a
c.9% increase); and (ii) potentially £591,000 from 1 January 2024 (a c.6% increase). The 2024 increase will be subject to continuing
strong individual and Company performance. Rob Hudson’s salary (currently £418,200) will be increased by 5% to £439,110, in line
with the average workforce increase from 1 January 2023.
Pension
As previously disclosed, the CEO’s pension provision will be reduced from 15% to 10% of salary from 1 January 2023 in line with the
CFO’s pension and the workforce more generally.
Annual bonus
The structure and metrics to operate for the 2023 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 2023:
Weighting
Rationale and description
Metric
PRS NRI
Adjusted earnings
Strategic and Operational
objectives
35%
35%
20%
ESG
10%
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. 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.
Diversity and inclusion, employee satisfaction, charities and communities and developing carbon
reduction plans to align with our 2030 ‘net zero in operations’ commitment.
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.
Grainger plc Annual Report and Accounts 2022 101
LTIP
It is expected that the LTIP awards to be made to the Executive Directors in the year ending 30 September 2023 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 2023 LTIP will be as follows:
Metric
Weighting
Targets
Relative TSR (versus a
bespoke group of real
estate peers)1
33.3%
TPIR2
33.3%
Secured PRS Investment3
33.3%
Vesting
0%
25%
100%
Ranking
Below median
Median
Upper quartile
Performance level
Below threshold
Threshold
Maximum
At the time of signing off this report the Remuneration Committee is deliberating over the TPIR
targets that will apply to the 2023 LTIP. An appropriately challenging set of sliding scale targets
will be set for this measure and full details of the target range will be disclosed in the RNS
announcement at the time the awards are granted.
The actual targets are considered to be commercially sensitive at this time, but a qualitative
assessment of progress will be provided in the 2023 and 2024 remuneration reports and full
retrospective disclosure of the targets and achievement will be set out in the 2025 report.
1 The Committee wishes to align the relative TSR vesting schedule to market given that quantum is in line with sector peers. As such, rather than the median (25% of this part of an award
vests) to upper quintile (100% of this part of an award vests) range that has applied to the 2020, 2021 and 2022 awards, the 2023 LTIP awards will operate a more normal median to upper
quartile vesting range. The TSR comparator group will continue to be based on a bespoke group of real estate peers. It is felt that a typical median to upper quartile vesting schedule is more
appropriate for Grainger given our lower share price volatility versus other listed real estate peers.
2 Given the uncertainty affecting capital values in the short term and the difficulty in setting a robust 3-year TPR target range, the Committee has agreed to replace TPR with a 3-year TPIR.
The Committee intends to revert to an absolute TPR (i.e. capital return plus income return) when market conditions and short term clarity improve.
3 The Secured PRS Investment condition (effectively the Company’s pipeline of future development opportunities) will continue to be based on aggregate three-year Secured PRS
Investment opportunities with 25% vesting for achieving threshold increasing on a straight-line basis until a maximum stretch target is achieved. However, our ambitious growth agenda
is always combined with a prudent approach to balance sheet management. As such, given the current uncertain environment impacting the raising equity to finance new acquisitions,
and the risks of raising debt to grow Secured PRS Investment at this time, the Committee has agreed that the PRS Secured Investment target range for the LTIP cycle 2022/23-2024/25
should assume funding solely from our ongoing asset recycling programme, operational cash flow generation and with LTV in mind. However, should the equity markets reopen, and we
generate proceeds from debt or equity in the period, the related investments will either be excluded from the assessment of performance against the original targets, or the target range
would be increased to reflect the funding to ensure the targets remain at least as stretching as the original ones. The Committee will continue to 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 for stabilised assets will be undertaken with regular monitoring of schemes in progress 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. As per the last three LTIP grants, the three-year targets, performance and the ultimate vesting
percentage will be disclosed retrospectively.
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 by 6% with effect from 1 January 2023.
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 Non-Executive Director for Employee Engagement1
Chairman’s fee
1 January
2023
£52,869
£10,687
£8,998
N/A
£185,601
1 January
2022
£49,876
£10,082
£8,489
£5,306
£175,095
1 The responsibility for Employee Engagement now forms part of the role of the Chair of the Responsible Business Committee and is reflected in the fee for chairing that Board.
GovernanceAnnual Report and Accounts 2022 Grainger plc 102
Remuneration
Annual Report on Remuneration (continued)
15. 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
Rob Wilkinson
Justin Read
Janette Bell
Carol Hui
February 2017
October 2015
February 2017
February 2019
1 October 2021
16. Details of the Remuneration Committee, advisers to the Committee and their fees
The Remuneration Committee currently comprises the Company Chair and four independent Non-Executive Directors. Details of
the Directors who were members of the Committee during the year are as follows:
Committee member
Justin Read (Committee Chair to 9 February 2022)
Mark Clare
Janette Bell (Committee Chair from 9 February 2022)
Andrew Carr-Locke (Committee member to 9 February 2002)
Rob Wilkinson
Carol Hui (Committee member from 9 February 2022)
Member since
May 2017
May 2017
May 2019
April 2015
May 2017
November 2021
Meetings
attended
Meetings
eligible
to attend
5
5
5
2
5
5
5
5
5
2
5
5
The Company Secretary, the Chief People Officer 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 2022 financial year were £71,745
(2021: £65,413). 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.
17. Statement of voting at general meeting
At the AGMs held on 9 February 2022 and 5 February 2020, the Directors’ Remuneration report and Policy received the following
votes from Shareholders.
Directors’ Remuneration report (2022)
Remuneration Policy (2020)
Total number
of votes
573,781,746
35,211,603
608,993,349
23,498
% of
votes cast
Total number
of votes
% of
votes cast
94.22
5.78
100
442,988,159
43,071,700
486,059,859
2,394,110
91.14
8.86
100
For
Against
Total votes cast (for and against)
Votes withheld
Janette Bell
Chair of the Remuneration Committee
16 November 2022
Grainger plc Annual Report and Accounts 2022 Directors’ report
103
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 135 in relation to the
dividend waiver arrangements.
Information incorporated by reference
The Corporate Governance Statement on pages 59 to 106
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
Last year we highlighted a possible conflict of interest in relation
to Rob Wilkinson’s position as chief executive officer of AEW,
a real estate investment fund which had been mandated
by a client to invest in build-to-rent opportunities in the UK.
A plan has been in operation to manage this throughout the
year, 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 has been reviewed and considered to be
effective. The Committees upon which Rob sits are not those
which are affected by his potential conflict. As previously
advised, Rob will be retiring from the Board at the 2023 AGM.
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 UK-adopted international
accounting standards (IFRS) 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.
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 the Group’s profit or loss for that period.
In preparing each of the Group and parent Company financial
statements, the directors are required to:
– select suitable accounting policies and then apply
them consistently;
– make judgements and estimates that are reasonable,
relevant, reliable and prudent;
– for the Group financial statements, state whether they have
been prepared in accordance with UK-adopted international
accounting standards (IFRS);
– 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.
In accordance with Disclosure Guidance and Transparency Rule
4.1.14R, the financial statements will form part of the annual
financial report prepared using the single electronic reporting
format under the TD ESEF Regulation. The auditor’s report
on these financial statements provides no assurance over the
ESEF format.
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.
By order of the Board.
Rob Hudson
Director
16 November 2022
GovernanceAnnual Report and Accounts 2022 Grainger plc 104
Directors’ report (continued)
Financial risk management
Details are included in Note 27 to the financial statements.
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 2021 to 30 September 2022.
Scope 1 (Fuel combustion in vehicles and buildings)
Scope 2 (Electricity)
Total footprint
Figures may not add up due to rounding.
Company’s chosen intensity measurement:
Emissions reported above per £m value
of assets under management2
Emissions reported above per owned unit3
Emissions reported above per employee4
2021
location-
based
2022
location-
based
Trend
location-
based
1,151
1,005
2,156
810
959
1769
-30%
-5%
-18%
2021
market-
based
1,151
247
1,398
2022
market-
based1
810
249
1058
Trend
market-
based
-30%
0.6%
-24%
0.720
0.232
6.695
0.574
0.191
5.172
-20%
-18%
-23%
0.4669
0.1504
4.3430
0.3437
0.1141
3.0949
Scope 3 Global GHG emissions data for period 1 October 2021 to 30 September 2022.
Emissions (tonnes of CO2e) from
Fuel and energy-related activities5
Business travel (air, rail and vehicles)
Estimated tenant energy use (tCO2)6
Grainger office occupation (landlord-obtained)7
2021
613
17
21,101
27
2022
535
86
19,449
23
1 Location and market-based emissions reflect different accounting approaches to calculating electricity emissions. Location-based emissions are calculated based on an average emissions
intensity of the grid on which energy consumption occurs (UK). Market-based emissions are calculated using an emissions intensity specific to the energy that Grainger has purposely
chosen (e.g. renewable electricity).
2 Value of assets under management (‘AUM’) on the last day of the financial year, expressed in £m.
3 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.
4 Total number of employees of Grainger plc on the last day of the financial year.
5
6 This has been estimated based on Energy Performance Certificates (‘EPCs’) and reported in CO2 only.
7
Includes WTT emissions from fuels and electricity transmission and distribution losses.
Includes landlord-obtained emissions for London Bridge office only.
Underlying global energy use data for period 1 October 2021 to 30 September 2022.
Energy use (kWh)
Electricity
Natural gas
District heating
Biomass
Transport fuel
Total energy use
2021
2022
4,836,941
5,952,620
26,286
951,877
265,185
12,032,910
5,064,907
5,067,140
17,649
955,007
319,531
11,424,234
Trend
5%
-15%
-33%
0.3%
20%
-5%
-26%
-24%
-29%
Trend
-13%
415%
-8%
-13%
Grainger plc Annual Report and Accounts 2022 105
Summary
Scope 1 data
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 2021 to 30 September 2022 and we report
energy use and emissions for the previous year to show trends.
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 2022 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 2023 and include
them in our future reporting. Between 2021 and 2022, energy
consumption from our property portfolio, including transport
fuels, has decreased by 5%. Grainger’s total location-based GHG
emissions have decreased by 18%, and market-based emissions
have decreased by 24%.
Trends
The decrease in energy consumption can be attributed to
reductions in natural gas and district heating use. This reduction
is partially due to renovations on existing properties and also
due to the significant reductions in monthly average heating
degree days in the United Kingdom in 2022 compared to 2021.
Our Scope 1 emissions have decreased by 30%, due to the
decrease in natural gas use, in addition to Grainger switching
to a green gas tariff, which uses biogas instead of natural gas.
Market-based electricity-related emissions have remained
consistent, showing just a 0.6% increase, despite the increase in
electricity consumption, due to increased coverage of renewable
electricity at properties. Emissions relating to Grainger’s
business travel have increased this year – 2021 was more
significantly affected by covid-19 and so in 2022 business travel
activity has returned to a level closer to what would usually
be expected.
Methodology
Grainger uses the GHG Protocol Corporate Standard (revised
edition), Government Environmental Reporting Guidelines
2019 and ISO 14064: Part 1 standard for its reporting, using
the operational control approach. We have used the UK
Government Conversion Factors for Company Reporting 2022
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 2021 for market-based reporting for 2022.
We used emissions factors from the same sources in 2021.
We have reported on all energy use and emissions sources
required under the regulations. We purchase 100% renewable
electricity tariffs for 88% 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.
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 – during 2022 there were
no refrigerant top-ups across any locations.
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 customers 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 either
exported to the grid or supplies the communal parts of our
properties and the generation is unable to be reported.
Restatements and estimation
We have recalculated emissions for 2021 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 2022 <0.01% of energy from
fuels for Scope 1 emissions and 11% 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
2021 and 2022. This, coupled with the decrease in combined
Scope 1 and Scope 2 market-based emissions, has caused a
decrease in the emissions by market value of AUM by 26%.
New developments completed in the year were offset by our
asset recycling programme, which is focused on divesting older,
less efficient properties. The reduction in number of units,
coupled with emissions reductions, has resulted in a reduction in
emissions per owned unit, by 24%. There has been an increase
in the number of employees, which coupled with the reduction
in emissions has resulted in a 29% decrease in the emissions
per employee.
GovernanceAnnual Report and Accounts 2022 Grainger plc 106
Directors’ report (continued)
Energy efficiency measures
Health and safety
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 five assets over
the last two years, which included lighting upgrades, window
replacements and roof insulation. We have identified significant
reductions in energy consumption at these five assets where
works have been completed, achieving up to 24% savings
in the year-on-year figures. A major refurbishment was also
undertaken at Grainger’s head office in Newcastle during 2022,
achieving a reduction of 23% in yearly energy consumption.
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.
Refurbishments undertaken to individual units include
many energy efficiency improvements including window
replacements, installation of more efficient heating systems and
insulation. The resulting reductions in energy consumption are
experienced by our customers in their directly-purchased energy
usage, and are reflected in our estimated customer energy use
and emissions.
Customers’ energy use and emissions
Grainger’s customers purchase their own energy and data
privacy laws make it challenging to obtain actual customer
energy data which can be used to calculate actual Scope 3
emissions. Grainger has used a consistent methodology to
estimate Scope 3 emissions for many years, using the estimated
household carbon emissions data reported on the Energy
Performance Certificates (EPCs) for the properties owned by
Grainger. These figures estimate emissions based on a typical
household, and do not take into account actual resident usage
patterns. Grainger has a customer engagement campaign
‘Living a Greener Life’ which aims to engage our customers on
greener living and support them in reducing their environmental
impacts. Taking this and the demographics of our residents into
account, we would expect emissions from Grainger properties
to be lower than the typical household. This year we developed
a GDPR compliant strategy to obtain actual customer emissions
data and plan to improve the accuracy of the methodology used
to estimate emissions from our customers, by extrapolating
actual customer energy data for future reporting. The analysis
of actual data gathered to date suggests that the typical
emissions generated by Grainger’s customers is lower than
the estimated data reported on the EPCs. For more details on
our customer emissions strategy and ‘Living a Greener Life’
campaign, see page 9.
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). Following the
publication of this report, EcoAct will undertake verification
of the 2022 emissions data with a verification statement to
be published on our website. The verification statement for
Grainger’s 2021 emissions is available on Grainger’s website at
www.graingerplc.co.uk/responsibility.
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, also available on our website.
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. The newly established Responsible Business
Committee, chaired by Carol Hui, has assumed the employee
engagement and voice in the boardroom responsibility.
For more information on our people and the activities of the
Responsible Business Committee, see page 76.
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 2022 (2021: £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
16 November 2022
Grainger plc Annual Report and Accounts 2022 107
Annual Report and Accounts 2022 Grainger plc
Financial
statements
Independent auditor’s report
Consolidated income statement
108
115
Consolidated statement of comprehensive income 116
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
117
118
119
120
158
158
Notes to the parent company financial statements 159
EPRA performance measures (unaudited)
Five year record
164
168
Financial statements 108
Financial statements
Independent auditor's report to the members of Grainger plc
1. Our opinion is unmodified
We have audited the financial statements of Grainger plc (“the Company”) for the year ended 30th September 2022 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 on pages 120 to 122 for the Group and pages 159 to 160 for the parent company
financial statements.
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 30th
September 2022 and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
– 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.
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 5th February 2015. The period of total uninterrupted engagement is for
the eight financial years ended 30 September 2022. 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 in the year.
Overview
Materiality:
Group financial statements as a whole
Coverage
£32.0m (2021 :£30.0m) 0.9% (2021: 0.9%) of total assets
100% (2021:100%) of Group total assets
Key audit matters
Recurring risks
Valuation of properties
Recoverability of parent company’s investment in subsidiaries
vs 2021
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 (unchanged from 2021), 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.
Grainger plc Annual Report and Accounts 2022
109
Valuation of
properties
Investment properties:
(£2,775.9m;2021:
£2,179.2m)
Trading properties at
EPRA market value
(APM) £873.0m; 2021:
£1,130.7m)
Refer to page 79 (Audit
Committee Report),
pages 122-125 (critical
accounting estimates
and judgements)
and pages 135-136
and 139 (accounting
policies and
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 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 material difference
in valuation.
– 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 if required 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 corresponding property types.
– 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, we challenged the methodologies used for the specific
portfolios with reference to market practice.
– Sensitivity analysis: we performed sensitivity analyses over the
key assumptions and considered the outcomes with reference to
benchmarks to identify the key assumptions affecting the valuation.
– Assessing valuers’ credentials: we assessed 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: we attended the
Group’s meetings with their external valuers and challenged the
market evidence presented by the valuer with the help of our own
property valuation specialists.
– Historical comparisons: we compared the 2021 year end valuation
with the sales price achieved for property sales in the year.
– Assessing transparency: we assessed 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 affordable housing properties included:
– Yield rates: with the assistance of our property valuation specialists,
we challenged 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 third
party 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: we compared 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 Group'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 valuation of properties to be acceptable.
(2021: acceptable).
Annual Report and Accounts 2022 Grainger plcFinancial statements 110
Financial statements
Independent auditor's report to the members of Grainger plc (continued)
Recoverability of
parent company’s
investment in
subsidiaries
(£1,784.6m;
2021: £1,226.8m)
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 83% (2021: 56%) 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 parent 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: we compared the carrying amount of 100% of
investments with the relevant subsidiaries’ draft balance sheets to
identify whether their net assets, measured at fair value and being
an approximation of their recoverable amount, were in excess of
their carrying amount.
– Assessing transparency: we assessed the adequacy of the parent
company’s disclosures in respect of the investment in subsidiaries.
Our results
We found the balance of the Company’s investments in
subsidiaries and the related impairment charge to be acceptable
(2021: acceptable).
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 £32.0m (2021: £30.0m), determined with a reference to a
benchmark of total assets (of which it represents 0.9% (2021: 0.9%)).
In addition, we applied a materiality of £3.5m (2021: £3.5m) and performance materiality of £2.6m (2021: £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 (2021: £17.0m) determined with a reference to
a benchmark of parent company net assets of which it represented 1.3% (2021: 1.3%).
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% (2021: 75%) of materiality for the financial statements as a whole, which equates to £24.0m (2021: £22.5m) for the Group
and £12.75m (2021: £12.75m) for the parent company.
The scope of the audit work was predominately substantive as we placed limited reliance upon the Group's internal control over
financial reporting.
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 £1.6m (2021: £1.0m)
in addition to other identified misstatements that warranted reporting on qualitative grounds.
The scope of the audit work was predominantly substantive as we placed limited reliance upon the Group's internal control over
financial reporting.
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 (2021: 100% of Group revenue, Group profit before tax and Group total assets).
Total assets
£3,579.1m (2021: £3,272.2m)
Group Materiality
£32.0m (2021: £30.0m)
Group total assets £3,579.1m
Group materiality £32.0m
£32.0m
Whole financial
statements materiality
(2021: £30m)
£1.6m
Misstatements reported
to the Audit Committee
(2021: £1.0m)
Grainger plc Annual Report and Accounts 2022 111
4. The impact of climate change on our audit
In planning our audit we have considered the potential impacts of climate change on the Group’s business and its financial
statements. Climate change impacts the Group in a number of ways: through its own operations (including potential reputational
risk associated with the Group’s delivery of its climate related initiatives), through its portfolio of properties and the greater
emphasis on climate related narrative and disclosure in the Annual Report. The Group’s main potential exposure to climate
change in the financial statements is primarily through the carrying value of its properties as the key valuation assumptions and
estimates may be impacted by climate risks. As part of our audit we have made enquiries of Directors and the Group’s Corporate
Sustainability team to understand the extent of the potential impact of climate change risk on the Group’s financial statements
and the Group’s preparedness for this. We have performed a risk assessment of how the impact of climate change may affect the
financial statements and our audit, in particular with respect to the valuation of investment properties and net realisable value and
valuation of trading properties. Given that these valuations are largely based on comparable market evidence we assessed that the
impact of climate change was not a significant risk for our audit nor does it constitute a key audit matter. We held discussions with
our own climate change professionals to challenge our risk assessment. We have also read the Group’s disclosure of climate related
information in the front half of the Annual Report as set out on pages 44 to 50, and considered consistency with the financial
statements and our audit knowledge. We have not been engaged to provide assurance over the accuracy of these disclosures.
5. Going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have concluded that the Group’s and the Company’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 until at least the end of March 2024 (“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 and parent company's financial resources or ability to
continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and
parent company's available financial resources over this period were:
– A fall in customer demand and a rise in customer default as a result of economic downturn over the next two years.
– Material reductions in the valuation of investment property and trading property;
– Higher levels of counterparty risk;
– Higher levels of cost inflation; and
– Higher levels of interest rates on refinanced debt.
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 parent 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 both the Group and
parent company 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 same statements are 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 parent company will continue in operation.
Annual Report and Accounts 2022 Grainger plcFinancial statements 112
Financial statements
Independent auditor's report to the members of Grainger plc (continued)
6. 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; and
– 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 accounting 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; and
– 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.
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 noncompliance 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.
7. 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.
Grainger plc Annual Report and Accounts 2022 113
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 58 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 58 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 parent 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.
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. We have nothing to report in this respect.
8. 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.
Annual Report and Accounts 2022 Grainger plcFinancial statements 114
Financial statements
Independent auditor's report to the members of Grainger plc (continued)
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 103, 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 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 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/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial
report has been prepared in accordance with that format.
10. 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
16 November 2022
Grainger plc Annual Report and Accounts 2022 Financial statements
Consolidated income statement
For the year ended 30 September
115
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
Reversal of impairment / (impairment) of inventories to net realisable value
Operating profit
Net valuation gains on investment property
Net valuation gains on investment property reclassifications
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
Notes
5
6
7
8
20
9
22
16
2, 16
12
12
18
19
11
13
15
15
2022
£m
279.2
86.3
64.4
1.7
6.0
4.4
(31.8)
(10.3)
1.5
122.2
129.0
81.2
–
(34.6)
1.3
1.2
(1.7)
298.6
(69.2)
229.4
31.0p
30.9p
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
Annual Report and Accounts 2022 Grainger plcFinancial statements 116
Financial statements
Consolidated statement of comprehensive income
For the year ended 30 September
Profit for the year
Items that will not be transferred to the consolidated income statement:
Remeasurement of 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
Notes
3
28
13
13
2022
£m
229.4
5.7
47.3
53.0
(1.4)
(11.9)
(13.3)
39.7
2021
£m
109.5
5.3
16.1
21.4
(1.0)
(2.8)
(3.8)
17.6
269.1
127.1
Grainger plc Annual Report and Accounts 2022 Financial statements
Consolidated statement of financial position
As at 30 September
117
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
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Trade and other payables
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
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
Notes
2022
£m
2021
£m
16
17
18
19
20
28
13
21
22
23
27
27
26
25
24
13
26
25
24
27
29
31
31
32
2,775.9
4.2
16.7
38.5
69.1
9.8
1.2
0.5
2,915.9
453.8
40.5
56.5
16.5
95.9
663.2
3,579.1
1,317.6
2.2
1.1
136.9
1,457.8
40.0
105.9
8.6
–
154.5
1,612.3
1,966.8
37.1
817.6
20.1
0.3
32.1
1,059.6
1,966.8
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
The financial statements on pages 115 to 157 were approved by the Board of Directors on 16 November 2022 and were signed on
their behalf by:
Helen Gordon
Director
Rob Hudson
Director
Company registration number: 125575
Annual Report and Accounts 2022 Grainger plcFinancial statements
118
Financial statements
Consolidated statement of changes in equity
Issued
share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Cash flow
hedge
reserve
£m
Retained
earnings
£m
Notes
Balance as at 1 October 2020
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
Profit for the year
Other comprehensive income for the year
Total comprehensive income
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 2022
3
29
29
29
30
14
3
29
29
30
14
33.8
–
–
–
3.3
–
–
–
–
3.3
37.1
–
–
–
–
–
–
–
–
37.1
616.3
–
–
–
200.8
0.2
–
–
–
201.0
817.3
–
–
–
0.3
–
–
–
0.3
817.6
20.1
–
–
–
–
–
–
–
–
–
20.1
–
–
–
–
–
–
–
–
20.1
0.3
–
–
–
–
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
0.3
Total
equity
£m
1,443.0
109.5
17.6
127.1
204.1
0.2
(0.3)
1.7
(36.8)
168.9
1,739.0
229.4
39.7
269.1
0.3
(3.3)
1.7
(40.0)
(16.6)
–
13.3
13.3
–
–
–
–
–
–
(3.3)
–
35.4
35.4
–
–
–
–
789.1
109.5
4.3
113.8
–
–
(0.3)
1.7
(36.8)
(35.4)
867.5
229.4
4.3
233.7
–
(3.3)
1.7
(40.0)
–
32.1
(41.6)
1,059.6
(41.3)
1,966.8
Grainger plc Annual Report and Accounts 2022
Financial statements
Consolidated statement of cash flows
For the year ended 30 September
119
Cash flow from operating activities
Profit for the year
Depreciation and amortisation
Net valuation gains on investment property
Net valuation gains on investment property reclassifications
Net finance costs
Share of loss/(profit) 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 in trade and other receivables
Increase in trade and other payables
Increase/(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 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
Cash flows relating to new derivatives / settlement of derivatives
Repayment of borrowings
Dividends paid
Net cash (outflow)/inflow from financing activities
Net decrease 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
Notes
11
16
2, 16
12
18, 19
8
30
20
13
28
8
20
19
19
16
29
29
29
14
27
27
2022
£m
229.4
0.9
(129.0)
(81.2)
33.3
0.5
(1.7)
1.7
–
(6.0)
69.2
117.1
(1.9)
8.5
8.4
24.8
156.9
(42.0)
(12.3)
(0.6)
102.0
20.9
8.6
(6.4)
(4.4)
(289.2)
(3.7)
(274.2)
–
0.3
(3.3)
14.2
(6.1)
(13.7)
(0.9)
(40.0)
(49.5)
(221.7)
317.6
95.9
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
Annual Report and Accounts 2022 Grainger plcFinancial statements 120
Financial statements
Notes to the financial statements
1. 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 have been prepared and approved by the directors in accordance with UK-adopted international
accounting standards (IFRS) and applicable law. The Company has elected to prepare its parent company financial statements in
accordance with FRS 101; these are presented on pages 158 to 163.
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 market volatility and the impact 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 2022.
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
54 to 57) 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 forecasts to the end of March 2024, which exceeds the required period of assessment
of at least 12 months in order to be aligned to the Group’s interim reporting date, and uses the same forecasts considered by the
Group for the purposes of the Viability Statement. The assessment considers a severe downside scenario including a potential
extreme longer-term impact of Covid-19, reflecting the following key assumptions:
– Reducing PRS occupancy to 92% by 31 March 2024
– Contraction in rental levels of 3.75% p.a.
– Reducing property valuations by 19.5% by March 2024, driven by either yield expansion or house price deflation
– 20% development cost inflation
– Operating cost inflation of 20% p.a.
– An increase in SONIA rate of 5% from 1 October 2022
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 53% (facility
maximum covenant ranges between 70% – 75%) and interest cover above 2.45x (facility minimum covenant ranges between
1.35x – 1.75x) for the period to March 2024 to align with reporting periods, 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 2022.
Grainger plc Annual Report and Accounts 2022 121
(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 2022 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.
Annual Report and Accounts 2022 Grainger plcFinancial statements 122
Financial statements
Notes to the financial statements (continued)
1. Accounting policies continued
(c) Adoption of new and revised International Financial Reporting Standards and interpretations
The following new standards and amendments to standards were issued in the year and have no material impact on the
financial statements:
i) Amendments to IFRS 16, IAS 39, IFRS 4 and IFRS 9 – Interest Rate Benchmark Reform (Phase 2)
New interpretations and agenda decisions were issued in the year and the most significant of these, and the impact on the
Group's accounting, are set out below:
i)
IFRIC: Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows)
The agenda decision considered accounting for deposits subject to contractual restrictions on use. The Committee clarified the
position such that where an entity has a contractual obligation with a third party to keep a specified amount of cash in a separate
demand deposit for specified purposes, it will not meet the definition of cash and cash equivalents if it cannot be accessed on
demand. This agenda decision applies to deposits held in connection with facility arrangements. At 30 September 2022, deposits
amounting to £14.3m have restricted use and have been reflected in trade and other receivables, as set out in Note 23 on
page 140.
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.
2. 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
65% of our property assets relating primarily to PRS blocks, including new build PRS assets.
The remaining 35% of property assets are based on current house prices, reflecting the prevailing market conditions as at the
reporting date.
Where appropriate, sustainability and environmental matters are an integral part of the valuation approach. ‘Sustainability’ is taken
to mean the consideration of such matters as environment and climate change, health and well-being and corporate responsibility
that can or do impact on the valuation of an asset. In a valuation context, sustainability encompasses a wide range of physical,
social, environmental, and economic factors that can affect value. The range of issues includes key environmental risks, such as
flooding, energy efficiency and climate, as well as matters of design, configuration, accessibility, legislation, management, and
fiscal consideration.
Grainger plc Annual Report and Accounts 2022 123
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 recognised in the income
statement for wholly-owned properties
reclassified in the year
Net revaluation gain relating to joint ventures
and associates3
Net revaluation gain recognised in the year3
13.5
2,753.5
–
2,767.0
13.9
–
13.9
898.5
111.8
1,409.8
190.5
142.9
2,753.5
-
2,767.4
2,767.0
0.4
2,767.4
129.0
81.2
0.9
211.1
(i)
(ii)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
395.8
22.4
69.1
487.3
789.0
–
789.0
22.4
–
–
–
–
22.4
69.1
880.5
487.3
393.2
880.5
–
–
–
–
44.5
–
–
44.5
–
70.1
70.1
–
–
–
–
–
–
–
70.1
44.5
25.6
70.1
–
–
–
–
453.8
2,775.9
69.1
3,298.8
802.9
Allsop LLP
70.1 CBRE Limited
873.0
Allsop LLP/
CBRE Limited
920.9
111.8 CBRE Limited
1,409.8 CBRE Limited
Allsop LLP
Allsop LLP
Allsop LLP
190.5
142.9
2,775.9
69.1
3,718.0
3,298.8
419.2
3,718.0
129.0
81.2
0.9
211.1
75%
96%
100%
100%
96%
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 2022. 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 79% 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 2022 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 74% 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 17%. 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 69% of residential investment property, with Allsop LLP valuing 19% on this basis. Gross yields adopted
in the valuations broadly range from 4.5% to 7.2%.
Annual Report and Accounts 2022 Grainger plcFinancial statements 124
Financial statements
Notes to the financial statements (continued)
2. Critical accounting estimates and judgements continued
The remaining 12% 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 17%, whilst the residential PRS discount to
vacant possession value was 5%.
ii) Developments
Trading property: Development trading property of £70.1m relates to the Group’s legacy strategic land assets. The current market
value has been assessed by CBRE Limited. Their valuation, representing 96% 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 4% 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 4.9% to 6.4%.
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 5.7% 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 2022 valuations range from 4.2% to 4.6%.
v) Tricomm Housing – Allsop LLP provided an investment valuation as at 30 September 2022 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: -1.5% in 2023, 0.5% in 2024, and 2.5%-3.0% thereafter.
The discount rates applied to the cash flows range between 4.4% (core income) and 6.5% (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 0.17% and 7.79% p.a. A discount rate of 4.5% 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.
Grainger plc Annual Report and Accounts 2022 125
2) 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 £4.1m as at 30 September 2022 (2021: £6.5m). 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)
Residential (investment property)
Developments (investment property)
Developments (investment property)
New build PRS
New build PRS
Affordable housing
Affordable housing
Tricomm Housing
Tricomm Housing
Financial asset (CHARM)
Financial asset (CHARM)
10.0% change in house prices (NRV
provision impact)
0.50% change in gross yield
5.0% change in net rental income
0.50% change in gross yield
5.0% change in net rental income
0.50% change in gross yield
5.0% change in net rental income
0.50% change in gross yield
5.0% change in net rental income
10.0% change in house prices
0.75% change in discount rate
10.0% change in house prices
0.75% 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
2.3
(60.7)
32.7
(32.0)
17.0
(124.6)
73.8
(21.0)
9.5
9.1
(0.4)
5.7
(3.2)
2.3
(60.7)
32.7
(32.0)
17.0
(124.6)
73.8
(21.0)
9.5
9.1
(0.4)
5.7
(3.2)
(3.7)
75.1
(32.7)
39.7
(17.0)
150.2
(73.8)
27.0
(9.5)
(9.1)
0.4
(5.7)
3.4
(3.7)
75.1
(32.7)
39.7
(17.0)
150.2
(73.8)
27.0
(9.5)
(9.1)
0.4
(5.7)
3.4
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.
The Group continually reviews properties for changes in use that could subsequently change the classification of properties.
A change in use occurs if property meets, or ceases to meet, the definition of investment property which is more than a change in
management’s intentions. The fact patterns associated with changes in the way in which properties are utilised are considered on a
case by case basis and to the extent that a change in use is established, property reclassifications are reflected appropriately.
During the year, four property portfolios were reclassified from trading property to investment property where changes in use have
been identified. Trading property with a cost of £116.5m and market value of £197.7m has been reclassified as investment property,
resulting in valuations gains of £81.2m on reclassification which have been recognised in the consolidated income statement.
In addition, £20.3m contingent tax on trading property has been reclassified as deferred tax on investment property in our EPRA
NAV metrics which has increased EPRA NTA by 3p per share.
Annual Report and Accounts 2022 Grainger plcFinancial statements 126
Financial statements
Notes to the financial statements (continued)
3. 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
Reversal of impairment / (impairment) of
inventories to net realisable value
Operating profit
Net valuation gains on investment property
Net valuation gains on investment property
reclassifications
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 adjusted earnings per share
Diluted adjusted earnings per share
Statutory
Valuation
Other
adjustments
Adjusted
earnings
Statutory
Valuation
Other
adjustments
Adjusted
earnings
2022
2021
–
–
(0.8)
–
(1.2)
–
–
–
(1.5)
(3.5)
(129.0)
(81.2)
–
–
–
(0.9)
–
(214.6)
279.2
86.3
64.4
1.7
6.0
4.4
(31.8)
(10.3)
1.5
122.2
129.0
81.2
–
(34.6)
1.3
1.2
(1.7)
298.6
(69.2)
229.4
–
–
–
–
–
–
–
9.5
–
9.5
–
–
–
–
–
–
–
9.5
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
279.2
86.3
63.6
1.7
4.8
4.4
(31.8)
(0.8)
–
128.2
–
–
–
(34.6)
1.3
0.3
(1.7)
93.5
10.2p
10.2p
–
–
(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
67.8
1.5
4.9
5.1
(30.2)
(0.6)
–
119.1
–
–
–
(35.4)
0.2
(0.1)
(0.3)
83.5
10.0p
9.9p
Profit before tax in the adjusted columns above of £93.5m (2021: £83.5m) is the adjusted earnings of the Group. Adjusted earnings
per share assumes tax of £17.8m (2021: £15.9m) in line with the standard rate of UK Corporation Tax of 19.0% (2021: 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 £9.5m cost within other adjustments
in 2022 comprises fire safety expenses including remedial work in respect of legacy assets. In 2021, the £12.1m cost within other
adjustments comprises £8.3m software development costs following the change in accounting policy and £3.8m refinancing costs.
These transactions do not form part of the Group’s ongoing activities and, as such, have been classified as other adjustments.
4. Segmental information
(a) 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.
Grainger plc Annual Report and Accounts 2022 127
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.
2022 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
Valuation movements on investment property reclassifications
Other adjustments
Profit before tax
PRS
Reversionary
103.2
150.5
70.8
(0.1)
1.6
–
3.8
–
(0.8)
(24.7)
(1.4)
49.2
15.2
61.7
0.1
4.8
–
–
–
(7.8)
–
74.0
Other
25.5
0.3
2.0
–
–
0.6
(31.8)
–
(0.8)
–
(29.7)
Total
279.2
86.3
63.6
1.7
4.8
4.4
(31.8)
(0.8)
(33.3)
(1.4)
93.5
133.4
81.2
(9.5)
298.6
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
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
49.2
(1.6)
–
47.6
74.0
(0.1)
(58.2)
15.7
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
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
32.4
(1.3)
–
31.1
79.7
(0.2)
(59.4)
20.1
Other
(29.7)
–
(2.9)
(32.6)
Other
31.4
0.3
1.8
–
–
0.4
(30.2)
–
(0.8)
(0.1)
(28.6)
Other
(28.6)
–
3.4
(25.2)
Total
93.5
(1.7)
(61.1)
30.7
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
Total
83.5
(1.5)
(56.0)
26.0
Annual Report and Accounts 2022 Grainger plcFinancial statements 128
Financial statements
Notes to the financial statements (continued)
4. Segmental information continued
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 8.8% is calculated from the closing EPRA NTA of 317p per share plus the dividend of 5.97p
per share for the year, divided by the opening EPRA NTA of 297p per share.
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.
2022 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)
2022 Reconciliation of EPRA NAV measures
PRS
Reversionary
1,711.7
1,833.0
1,827.6
1,712.0
190.7
584.9
485.6
485.6
Other
64.4
52.7
45.8
285.4
Total
Pence per share
1,966.8
2,470.6
2,359.0
2,483.0
265p
333p
317p
334p
£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
Adjustments
to market
value, deferred
tax and
derivatives
Adjustments
to deferred
and contingent
tax and
intangibles
EPRA NRV
balance sheet
Statutory
balance sheet
Adjustments
to derivatives,
fixed rate
debt and
intangibles
EPRA NTA
balance sheet
EPRA NDV
balance sheet
2,775.9
–
2,775.9
–
2,775.9
–
2,775.9
55.2
69.1
453.8
95.9
129.2
3,579.1
(1,357.6)
(136.9)
(117.8)
(1,612.3)
1,966.8
–
–
419.2
–
(51.4)
367.8
–
136.0
–
136.0
503.8
55.2
69.1
873.0
95.9
77.8
3,946.9
(1,357.6)
(0.9)
(117.8)
(1,476.3)
2,470.6
–
–
–
–
(0.5)
(0.5)
–
(111.1)
–
(111.1)
(111.6)
55.2
69.1
873.0
95.9
77.3
3,946.4
(1,357.6)
(112.0)
(117.8)
(1,587.4)
2,359.0
–
–
–
–
56.5
56.5
263.0
(195.5)
–
67.5
124.0
55.2
69.1
873.0
95.9
133.8
4,002.9
(1,094.6)
(307.5)
(117.8)
(1,519.9)
2,483.0
Grainger plc Annual Report and Accounts 2022 129
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
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
Other
Total
2,753.5
37.1
–
13.9
71.2
16.2
2,891.9
(1,008.6)
(5.4)
(50.3)
(1,064.3)
1,827.6
PRS
Reversionary
1,484.7
1,637.4
1,608.5
1,550.2
256.1
677.8
571.8
571.8
22.4
–
69.1
789.0
22.4
11.7
914.6
(316.7)
(99.3)
(13.0)
(429.0)
485.6
Other
(1.8)
34.8
27.5
(10.9)
–
18.1
–
70.1
2.3
49.4
139.9
(32.3)
(7.3)
(54.5)
(94.1)
45.8
2,775.9
55.2
69.1
873.0
95.9
77.3
3,946.4
(1,357.6)
(112.0)
(117.8)
(1,587.4)
2,359.0
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 restated 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
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
23.0
–
71.7
872.9
89.7
9.5
1,066.8
(380.4)
(106.0)
(8.6)
(495.0)
571.8
–
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
Annual Report and Accounts 2022 Grainger plcFinancial statements 130
Financial statements
Notes to the financial statements (continued)
5. Group revenue
Accounting policy
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)
6. Net rental income
Accounting policy
2022
£m
121.4
153.4
4.4
279.2
2021
£m
97.4
146.4
5.1
248.9
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
2022
£m
121.4
(35.1)
86.3
2021
£m
97.4
(26.8)
70.6
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)
8. Profit on disposal of investment property
Accounting policy
2022
£m
153.4
(4.0)
149.4
(85.0)
64.4
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)
2022
£m
21.3
(0.4)
20.9
(19.2)
1.7
2021
£m
41.5
(1.2)
40.3
(38.8)
1.5
Grainger plc Annual Report and Accounts 2022 9. Fees and other income
Property and asset management fee income
Other sundry income
2022
£m
2.7
1.7
4.4
Included within other sundry income in the current year is £1.1m (2021: £1.6m) liquidated and ascertained damages (‘LADs’)
recorded to compensate the Group for lost rental income resulting from the delayed completion of construction contracts.
10. Employees
Wages and salaries
Social security costs
Other pension costs – defined contribution scheme (Note 28)
Share-based payments (Note 30)
2022
£m
20.9
2.4
1.4
1.7
26.4
131
2021
£m
2.6
2.5
5.1
2021
£m
17.5
1.8
1.2
1.7
22.2
The average monthly number of Group employees during the year (including Executive Directors) was:
Operations
Shared services
Group
2022
Number
2021
Number
222
92
14
328
197
86
11
294
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 83 to 102.
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
2022
£’000
2,723
8
571
3,302
None of the Directors (2021: 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
2022
£m
7.0
0.5
1.5
9.0
Key management figures shown above include Executive and Non-Executive Directors and all internal Directors of
specific functions.
2021
£’000
2,146
–
942
3,088
2021
£m
6.5
0.4
1.3
8.2
Annual Report and Accounts 2022 Grainger plcFinancial statements 132
Financial statements
Notes to the financial statements (continued)
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)
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
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 £18,000
(2021: £16,830).
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
Interest receivable from joint ventures (Note 34)
Other interest receivable
Net finance costs
2022
£m
18.4
2.1
22.6
(12.0)
3.5
34.6
(0.7)
(0.6)
(1.3)
33.3
2022
£m
0.9
–
1.7
0.2
0.5
2021
£m
0.9
0.3
0.7
0.2
0.5
2022
£’000
2021
£’000
229
257
486
40
–
40
526
190
285
475
37
10
47
522
2021
£m
17.0
2.1
22.5
(10.0)
3.8
35.4
–
(0.2)
(0.2)
35.2
Grainger plc Annual Report and Accounts 2022 133
13. 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 £69.2m (2021: £42.6m) 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
2022
£m
17.8
(5.2)
12.6
51.7
4.9
56.6
69.2
2021
£m
11.4
(3.7)
7.7
33.4
1.5
34.9
42.6
The 2022 current tax adjustments relating to prior years reflect adjustments which have been included in submitted tax returns and
represent movements between deferred and current tax in relation 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% (2021: 19.0%).
The tax charge for the year is higher (2021: higher) than the charge for the year derived by applying the standard rate of corporation
tax in the UK of 19.0% (2021: 19.0%) to the profit before tax. The differences are explained below:
Profit before tax
Income tax at a rate of 19.0% (2021: 19.0%)
Expenses not deductible for tax purposes
Share of joint ventures and associates after tax
Effect of new substantively enacted tax rates
Effect of future tax rates over current tax rates
Adjustment in respect of prior periods
Amounts recognised in the income statement
2022
£m
298.6
56.7
0.2
0.1
–
12.4
(0.2)
69.2
2021
£m
152.1
28.9
(0.1)
(0.1)
10.2
5.9
(2.2)
42.6
Annual Report and Accounts 2022 Grainger plcFinancial statements 134
Financial statements
Notes to the financial statements (continued)
13. Tax continued
In addition to the above, a deferred tax charge of £13.3m (2021: £3.8m) was recognised within other comprehensive
income comprising:
Remeasurement of BPT Limited defined benefit 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 defined benefit 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
Actuarial gain on BPT Limited defined benefit pension scheme
Fair value movement in derivative financial instruments
Total deferred tax
2022
£m
1.4
11.9
13.3
2022
£m
1.2
–
–
–
1.2
(6.3)
(108.9)
(8.6)
(1.2)
(1.2)
(10.7)
(136.9)
(135.7)
2021
£m
1.0
2.8
3.8
2021
£m
2.1
0.2
0.2
1.2
3.7
(7.8)
(55.7)
(4.6)
(1.4)
–
–
(69.5)
(65.8)
Deferred tax has been calculated at a rate of 25.0% (2021: 25.0%) 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 £104.8m, calculated at 25.0% (2021: £133.9m, calculated at 25.0%), 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.
14. 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 2020 – 3.64p per share
Interim dividend for the year ended 30 September 2021 – 1.83p per share
Final dividend for the year ended 30 September 2021 – 3.32p per share
Interim dividend for the year ended 30 September 2022 – 2.08p per share
2022
£m
–
–
24.6
15.4
40.0
2021
£m
24.5
12.3
–
–
36.8
Subject to approval at the AGM, the final dividend of 3.89p per share (gross) amounting to £28.8m will be paid on 14 February 2023
to Shareholders on the register at the close of business on 30 December 2022. Shareholders will again be offered the option to
participate in a dividend reinvestment plan and the last day for election is 24 January 2023. An interim dividend of 2.08p per share
amounting to a total of £15.4m was paid to Shareholders on 1 July 2022.
Grainger plc Annual Report and Accounts 2022 135
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 2022 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 2022
30 September 2021
Profit for
the year
£m
Weighted
average
number of
shares
(millions)
Earnings
per share
(pence)
Profit for
the year
£m
Weighted
average
number of
shares
(millions)
229.4
740.5
31.0
109.5
677.7
–
2.6
(0.1)
–
2.7
229.4
743.1
30.9
109.5
680.4
Earnings
per share
(pence)
16.2
(0.1)
16.1
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
16. 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 (Note 2, page 125)
Disposals (Note 8)
Net valuation gains on investment properties
Net valuation gains on investment property reclassifications (Note 2, page 125)
Closing balance
2022
£m
2,179.2
14.4
9.2
265.6
289.2
116.5
(19.2)
129.0
81.2
2,775.9
2021
£m
1,778.9
78.0
22.8
261.5
362.3
–
(38.8)
76.8
–
2,179.2
Annual Report and Accounts 2022 Grainger plcFinancial statements 136
Financial statements
Notes to the financial statements (continued)
16. Investment property continued
Information relating to the basis of valuation of investment property, the use of external independent valuers, and the judgements
and assumptions adopted by management is set out in Note 2 ‘Critical accounting estimates and judgements’.
The historical cost of the Group’s investment property as at 30 September 2022 is £2,315.0m (2021: £1,943.4m).
Direct property repair and maintenance costs arising from investment property that generated rental income during the year were
£4.4m (2021: £2.0m).
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.
18. Investment in associates
Opening balance
Share of profit for the year
Closing balance
2022
£m
15.5
1.2
16.7
2021
£m
14.7
0.8
15.5
The closing balance comprises share of net assets of £2.1m (2021: £0.9m) and net loans due from associates of £14.6m
(2021: £14.6m). At the balance sheet date, there is no expectation of any material credit losses on loans due.
As at 30 September 2022, 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
UK
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:
2022 Summarised income statement
£m
Net rental income and other income
Administration and other expenses
Operating profit
Revaluation gains on investment property
Profit before tax
Tax
Profit after tax
2022 Summarised statement of financial position
£m
Investment property
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Vesta LP
2.2
(0.5)
1.7
4.4
6.1
–
6.1
Vesta LP
79.5
5.7
85.2
(1.7)
(72.6)
(74.3)
10.9
Grainger plc Annual Report and Accounts 2022 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
Non-current liabilities
Total 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
137
Vesta LP
–
(0.5)
(0.5)
4.3
3.8
–
3.8
Vesta LP
75.1
4.0
79.1
(1.6)
(72.6)
(74.2)
4.9
2021
£m
27.3
(0.3)
0.8
1.6
29.4
2022
£m
29.4
(1.7)
6.4
4.4
38.5
1 Grainger invested £6.4m into Connected Living London (BTR) Limited in the year (2021: £0.8m).
The closing balance comprises share of net assets of £13.2m (2021: £8.5m) and net loans due from joint ventures of £25.3m
(2021: £20.9m). At the balance sheet date, there is no expectation of any material credit losses on loans due.
At 30 September 2022, the Group’s interest in active joint ventures was as follows:
Connected Living London (BTR) Limited
Curzon Park Limited
Lewisham Grainger Holdings LLP
% of ordinary share
capital held Country of incorporation
Accounting period end
51
50
50
UK
UK
UK
30 September
31 March
30 September
Annual Report and Accounts 2022 Grainger plcFinancial statements 138
Financial statements
Notes to the financial statements (continued)
19. 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:
2022 Summarised income statement
£m
Administration and other expenses
Loss before tax
Tax
Loss after tax
2022 Summarised statement of financial position
Investment property
Current assets
Total assets
Current liabilities
Net assets
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
1 Helical Grainger (Holdings) Limited was dissolved in the year.
Connected
Living London
(BTR) Limited
Curzon Park
Limited
Lewisham
Grainger
Holdings LLP
(3.3)
(3.3)
–
(3.3)
25.6
5.3
30.9
(4.7)
26.2
–
–
–
–
–
36.7
36.7
(36.7)
–
–
–
–
–
7.0
–
7.0
(7.2)
(0.2)
Connected
Living London
(BTR) Limited
Curzon Park
Limited
Helical
Grainger
(Holdings)
Limited1
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)
Total
(3.3)
(3.3)
–
(3.3)
32.6
42.0
74.6
(48.6)
26.0
Total
(0.5)
(0.5)
–
(0.5)
21.3
39.1
60.4
(43.7)
16.7
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
2022
£m
71.7
(8.6)
6.0
69.1
2021
£m
73.3
(8.8)
7.2
71.7
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.
Grainger plc Annual Report and Accounts 2022 139
21. 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.
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 (Note 2, page 125)
Disposals (Note 7)
Reversal of impairment / (impairment) of inventories to net realisable value
Closing balance
2022
£m
595.2
58.6
(116.5)
(85.0)
1.5
453.8
2021
£m
657.4
12.6
–
(74.7)
(0.1)
595.2
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.
Information 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.
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)
(Reversal of impairment) / impairment of inventories to net realisable value
2022
£m
85.0
(1.5)
2021
£m
74.7
0.1
Annual Report and Accounts 2022 Grainger plcFinancial statements 140
Financial statements
Notes to the financial statements (continued)
23. Trade and other receivables
Accounting policy
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
Restricted deposits1
Other receivables
Prepayments
Closing balance
2022
£m
4.7
(1.5)
3.2
1.9
14.3
17.1
4.0
40.5
2021
£m
5.7
(2.3)
3.4
2.6
–
29.8
2.7
38.5
1
In the prior year, the Group held £12.6m in restricted deposits within cash and cash equivalents. This balance is immaterial to the Group and as such prior year comparative figures have not
been restated.
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 £4.7m (2021: £5.7m).
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.
Restricted deposits arise from contracts with third parties that place restrictions on use of funds and cannot be accessed on
demand. These deposits are held in connection with facility arrangements and are released by the lender on a quarterly basis once
covenant compliance has been met.
In the prior year, other receivables included £10.4m due from land sales which have now been received.
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.
Current provisions for other liabilities and charges
Opening balance
Additions
Utilisation
Non-current provisions for other liabilities and charges
Opening balance
Utilisation
Total provisions for other liabilities and charges
2022
£m
0.2
8.7
(0.3)
8.6
1.1
–
1.1
9.7
2021
£m
0.3
–
(0.1)
0.2
1.2
(0.1)
1.1
1.3
Following an extensive review of legacy development projects, £8.7m for potential fire safety remediation costs has been provided
for, relating to a small number of legacy properties that Grainger historically had an involvement in developing and may require fire
safety related remediation works. A further £0.8m has been provided for in respect of loans to service charge accounts in respect of
fire safety remediation costs, which is recognised in trade and other receivables. Where appropriate, the Group is seeking recoveries
from contractors and insurers which may reduce the overall liability over time.
Grainger plc Annual Report and Accounts 2022 25. 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.
141
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
2022
£m
2021
£m
10.1
22.8
0.8
0.7
63.8
7.7
105.9
2.2
2.2
108.1
9.1
16.3
0.7
4.9
72.6
6.2
109.8
0.6
0.6
110.4
Within accruals, £43.0m comprises accrued expenditure in respect of ongoing construction activities (2021: £43.7m).
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.
Current liabilities
Bank loans – Pounds Sterling
Non-current liabilities
Bank loans – Pounds Sterling
Bank loans – Euros
Non-bank financial institution
Corporate bonds
Closing balance
(a) Bank loans
2022
£m
40.0
40.0
275.2
0.9
347.2
694.3
1,317.6
1,357.6
2021
£m
–
–
306.5
0.9
346.6
693.5
1,347.5
1,347.5
Sterling bank loans include variable rate loans bearing interest at rates between 1.5% and 1.8% above SONIA 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 2022 was 3.4% (2021: 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 £8.1m (2021: £3.5m) will be amortised over the life of the loans to which they relate.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 142
Financial statements
Notes to the financial statements (continued)
26. 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 2022 was 2.4% (2021: 2.4%). Unamortised costs in
relation to these fixed rate loans of £2.8m (2021: £3.3m) will be amortised over the life of the loans to which they relate.
(c) Corporate bonds
In 2018, the Group issued a ten-year £350.0m corporate bond at 3.375% due April 2028. In 2020, the Group issued a ten-year
£350.0m corporate bond at 3.0% due July 2030.
As at 30 September 2022 unamortised costs in relation to the corporate bonds stood at £3.5m (2021: £3.9m), and the outstanding
discount was £2.2m (2021: £2.6m).
(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 2022, unamortised costs totalled £14.4m (2021: £10.7m) and the outstanding discount was £2.2m
(2021: £2.6m).
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.
£m
Loans and
borrowings
Interest
payable
Assets
Liabilities
Loans and
borrowings
Interest
payable
Assets
Liabilities
2022
2021
Derivatives used for
hedging the liabilities
from financing
activities
Derivatives used for
hedging the liabilities
from financing
activities
Opening balance
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Transaction costs related to loans,
borrowings and derivatives
Total changes from financing cash flows
Other changes
Gross interest accrued
Gross interest paid
Amortisation of borrowing costs net of premiums
Changes in fair value of derivatives through
hedging reserve
Total other changes
Closing balance
1,347.5
8.8
14.2
(0.9)
(6.1)
7.2
–
–
2.9
–
2.9
1,357.6
–
–
–
–
42.2
(42.0)
–
–
0.2
9.0
–
–
–
13.7
13.7
–
–
–
42.8
42.8
56.5
4.5
1,391.9
8.7
–
–
–
4.5
–
–
–
30.0
(77.0)
–
(47.0)
–
–
2.6
(4.5)
(4.5)
–
–
2.6
1,347.5
–
–
–
–
45.7
(45.6)
–
–
0.1
8.8
–
–
–
–
–
–
–
–
–
–
–
20.6
–
–
–
–
–
–
–
(16.1)
(16.1)
4.5
Grainger plc Annual Report and Accounts 2022 143
27. 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. Demand deposits that cannot be accessed and have restrictions on use arising
from contracts with third parties are reflected in trade and other receivables.
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.
Categories of financial instruments
A summary of the classifications of the financial assets and liabilities held by the Group is set out in the following table:
£m
Non-current assets
Financial interest in property assets
Current assets
Trade and other receivables
excluding prepayments
Cash and cash equivalents
Derivative financial instruments
Total financial assets
£m
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total financial liabilities
Net financial assets/(liabilities)
2022
Loans and
receivables/
cash and
cash
equivalents
Assets at
fair value
through
profit and
loss
Derivatives
used for
hedging
Other
financial
assets
Total book
value
Fair value
adjustment
Fair value
–
69.1
–
36.5
95.9
–
132.4
–
–
–
69.1
–
–
56.5
56.5
–
–
–
–
–
69.1
36.5
95.9
56.5
258.0
–
–
–
–
–
69.1
36.5
95.9
56.5
258.0
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
–
–
–
–
–
132.4
–
–
–
–
–
69.1
–
–
–
–
–
56.5
2.2
1,317.6
2.2
1,317.6
105.9
40.0
1,465.7
(1,465.7)
105.9
40.0
1,465.7
(1,207.7)
–
(263.0)
–
–
(263.0)
263.0
2.2
1,054.6
105.9
40.0
1,202.7
(944.7)
Financial statementsAnnual Report and Accounts 2022 Grainger plc 144
Financial statements
Notes to the financial statements (continued)
27. Financial risk management and derivative financial instruments continued
2021
£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)
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
–
–
–
4.5
4.5
(4.5)
0.6
1,347.5
0.6
1,347.5
109.8
–
1,457.9
(1,457.9)
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)
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 £523.9m (2021: £740.0m) based on
quoted prices in traded markets. The fair value of the non-bank loans is calculated as £263.1m (2021: £356.7m) 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 £14.5m (2021: £11.2m) relating to cash held on behalf of tenants, leaseholders and clients comprising
service charge and 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, £8.6m (2021: £43.9m) of the cash balance is
restricted in use, either by underlying financing arrangements or other commercial agreements 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 and derivative financial
instruments. 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.
Grainger plc Annual Report and Accounts 2022
145
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 2022, £0.1m
(2021: £10.4m) 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 £8.2m (2021: £6.9m) are held that provide some security against rental arrears and property dilapidations caused
by the tenant. The Group does not hold any other collateral as security. Of the net trade receivables balance of £3.2m, we consider
£nil to be not due and not impaired. All of the £17.1m other receivables balance and all of the £1.9m contract assets are considered
not due and not impaired.
As at 30 September 2022, tenant arrears of £1.5m within trade receivables were impaired and fully provided for (2021: £2.3m).
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.
The credit risk on liquid funds and derivative financial instruments is managed through the Group’s policies of monitoring
counterparty exposure, monitoring the concentration of credit risk through the use of multiple counterparties and the use of
counterparties of good financial standing. At 30 September 2022, the fair value of all interest rate derivatives that had a positive value
was £56.5m (2021: £nil).
At 30 September 2022, the combined credit exposure arising from cash held at banks, money market deposits and interest rate
swaps was £152.4m (2021: £317.6m), which represents 4.3% (2021: 9.7%) 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
2022
£m
94.8
1.1
95.9
2021
£m
316.4
1.2
317.6
At the year end, £42.5m was placed on deposit (2021: £240.5m) at effective interest rates between 0.1% and 2.2% (2021: 0.0% and
0.4%). 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 2022 (2021: £1.0m).
2) 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 15 December 2021. 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.
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.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 146
Financial statements
Notes to the financial statements (continued)
27. Financial risk management and derivative financial instruments continued
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.
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 2022.
£m
At 30 September 2022
Interest-bearing loans and borrowings (Note 26)
Interest on borrowings
Interest on derivatives
Trade and other payables
At 30 September 2021
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
40.0
50.7
(12.6)
105.9
–
38.4
2.8
109.8
–
50.9
(16.9)
2.2
84.8
39.3
1.2
0.6
344.5
137.6
(23.2)
–
290.9
97.0
1.0
–
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
Total
1,357.6
291.2
(54.2)
108.1
1,347.5
255.8
4.9
110.4
2021
£m
–
379.1
–
379.1
973.1
52.0
(1.5)
–
971.8
81.1
(0.1)
–
2022
£m
–
590.8
–
590.8
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.
Grainger plc Annual Report and Accounts 2022 147
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
2022
2021
Assets
Liabilities
Assets
Liabilities
69.1
2,775.9
2,845.0
56.5
56.5
–
–
–
–
–
71.7
2,179.2
2,250.9
–
–
–
–
–
4.5
4.5
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.
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 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 2022 was £283.3m
(2021: £306.3m).
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
2022
£m
2,250.9
216.2
377.9
2,845.0
2021
£m
1,852.2
84.0
314.7
2,250.9
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
453.8
700.0
350.0
873.0
523.9
263.1
595.2
700.0
350.0
1,130.7
740.0
356.7
2022
2021
Financial statementsAnnual Report and Accounts 2022 Grainger plc 148
Financial statements
Notes to the financial statements (continued)
27. Financial risk management and derivative financial instruments continued
(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 2022, 97% (2021: 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% rise in interest rates would decrease
annual profits by £0.3m (2021: £nil). Similarly, a 1% fall would increase annual profits by £0.3m (2021: £nil).
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 £11.2m (2021: £6.8m). Similarly, a 1% fall would decrease the Group’s equity by £11.2m (2021: £6.8m).
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 2022, the market value of derivatives designated as cash flow hedges under IFRS 9 is a net asset of £56.5m
(2021: net liability of £4.5m). No amount is recognised within the income statement for ineffectiveness of cash flow hedges
(2021: £nil). The fair value movement on derivatives not in hedge accounting relationships resulted in a charge of £nil (2021: £nil) in
the consolidated income statement.
At 30 September 2022, the market value of derivatives not designated as cash flow hedges under IFRS 9 is £nil (2021: £nil). The cash
flows occur and enter in the determination of profit and loss until the maturity of the hedged debt.
The table below summarises debt hedged:
Hedged debt
Hedged debt maturing:
Within one year
Between one and two years
Between two and five years
Over five years
2022
£m
–
–
283.3
–
283.3
2021
£m
–
–
306.3
–
306.3
Interest rate profile – including the effect of derivatives and amortisation of issue costs:
Weighted
average
interest
rate
%
Average
maturity
years1
3.1
3.5
4.0
3.2
6.4
4.7
4.7
5.6
2022
Sterling
£m
1,050.0
283.3
40.0
1,373.3
Euros
£m
Gross debt
total
£m
–
–
0.9
0.9
1,050.0
283.3
40.9
1,374.2
Weighted
average
interest
rate
%
3.1
3.4
2.0
3.1
Average
maturity
years
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
Fixed rate
Hedged rate
Variable rate
1 Average maturity years excluding extension options. Including extension options, average maturity years is 6.5 years (2021: 5.6 years).
At 30 September 2022, the fixed interest rates on the interest rate swap contracts vary from 0.69% to 2.00% (2021: 0.69% to
1.68%); 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 diverse range of lenders and maintains
sufficient headroom through cash and committed borrowings. On 30 September 2022, the Group had available headroom of
£663.2m, with the next debt maturity not until June 2023.
Grainger plc Annual Report and Accounts 2022 149
(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 2022, Group LTV was 33.4% (see page 169 for calculation) and Group ICR was 3.8x, with minimum headroom being a
29.2% increase in LTV and 0.9x 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 2022, the
weighted average cost of debt was 3.1% (2021: 3.1%). Investment and development opportunities are evaluated using a risk adjusted
WACC in order to ensure long-term Shareholder value is created.
28. 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 83 to 102. The pension cost charge in these financial statements represents contributions
payable by the Group.
The charge of £1.4m (2021: £1.2m) is included within employee remuneration in Note 10.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 150
Financial statements
Notes to the financial statements (continued)
28. Pension costs continued
(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 2022 was 18 years.
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 2022, 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
Mortality tables for pensioners
Mortality tables for non-pensioners
iii) Life expectancies
2022
%
2021
%
5.0
3.8
3.0
4.3
5.0
3.0
2.1
3.7
2.9
4.2
5.0
2.9
2021
2022
S2PA base tables CMI 2021 mortality
projections 1.25% p.a. long-term rate
As for pensioners
S2PA base tables CMI 2020 mortality
projections 1.25% p.a. long-term rate
As for pensioners
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 2022
30 September 2021
Male
86
87
Female
89
90
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.
Grainger plc Annual Report and Accounts 2022 151
The Trustees and Group manage risks in the scheme through the following strategies:
– Diversification: investments are well diversified, such that the failure of any single investment would not have a material impact on
the overall level of assets.
– Investment strategy: the Trustees are required to review their investment strategy on a regular basis.
Market value of scheme assets
The assets of the scheme are invested in a diversified portfolio as follows:
Equities
Bonds
Cash
Insurance policies
Total value of assets
The actual return on assets over the year was:
30 September 2022
30 September 2021
Market value
£m
% of total
scheme assets
Market value
£m
% of total
scheme assets
13.9
10.7
1.9
2.3
28.8
(4.4)
48
37
7
8
100
17.7
12.7
0.5
3.0
33.9
2.9
52
38
1
9
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
Remeasurement of 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
Remeasurement of defined benefit obligation
2022
£m
33.9
0.6
0.6
(5.1)
(1.2)
28.8
2022
£m
30.4
0.6
(10.8)
(1.2)
19.0
2022
£m
(5.1)
10.8
5.7
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
The gain shown in the above table of £5.7m (2021: £5.3m) has been included in the consolidated statement of comprehensive income
on page 116.
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. For the surplus recognised, the Group considers there is economic benefit available
through a reduction in future contributions.
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. From July 2022, the Group continues to pay £0.6m p.a. pending agreement of future funding requirements.
A full actuarial valuation is currently in progress based on the scheme assets and liabilities as at 1 July 2022. The Group and the
Trustees will review the results of the valuation on completion.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 152
Financial statements
Notes to the financial statements (continued)
28. Pension costs continued
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 0.75% p.a.
Increase/(decrease) in deficit of £2.2m/(£2.5m)
Salary movement of 1.00% p.a.
Increase/(decrease) in deficit of £0.1m/(£0.1m)
Life expectancies movement of one year
Increase/(decrease) in deficit of £0.6m/(£0.6m)
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
Allotted, called-up and fully paid:
742,921,734 (2021: 742,776,681) ordinary shares of 5p each
2022
£m
37.1
2021
£m
37.1
During the year, The Grainger Employee Benefit Trust has acquired 1,000,000 shares at a cost of £3.2m (2021: none acquired).
The Group paid £0.1m (2021: £0.3m) 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 £3.3m (2021: £0.3m) has been deducted from retained earnings within
Shareholders’ equity.
As at 30 September 2022, share capital included 699,878 (2021: 445,184) shares held by The Grainger Employee Benefit Trust and
1,506,300 (2021: 1,506,300) shares held by Grainger plc as treasury shares. The total of these shares is 2,206,178 (2021: 1,951,484)
with a nominal value of £110,309 (2021: £97,574) and a market value as at 30 September 2022 of £5.1m (2021: £6.0m).
Movements in issued share capital during the year and the previous year were as follows:
At 30 September 2020
Issue of shares under the equity raise
Options exercised under the SAYE scheme (Note 30)
At 30 September 2021
Options exercised under the SAYE scheme (Note 30)
At 30 September 2022
Number
675,284,566
67,379,369
112,746
742,776,681
145,053
742,921,734
Nominal value
£’000
33,764
3,369
6
37,139
7
37,146
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.
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.
Grainger plc Annual Report and Accounts 2022
153
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
LTIP
DBSP
DBP
EDBP
SAYE
16
December
2021
Market-
based
16
December
2021
Non-
market-
based
28
September
2022
Market-
based
28
September
2022
Non-
market-
based
16
December
2021
16
December
2021
16
December
2021
1 July 2022
3-year
scheme
1 July 2022
5-year
scheme
466,342
-
466,342
-
30,856
-
30,856
-
110,866
-
40,800
-
17,864
-
203,952
2.48
75,527
2.48
3
7
3.06
0.5
N/A
26.8
1.56
3
7
3.06
0.5
N/A
26.8
3.06
3
7
2.26
0.5
N/A
26.8
1.56
3
7
2.26
0.5
N/A
26.8
2.26
3
3
3.06
N/A
1.9
N/A
3.06
1-3
3
3.06
N/A
1.9
N/A
3.06
1-5
3
3.06
N/A
1.9
N/A
3.06
3
–
2.81
1.9
1.9
24.3
0.59
5
–
2.81
1.9
1.9
23.7
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 (2021: £1.7m).
(a) LTIP scheme
For the awards granted in or after December 2021, 33% 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, 33% are subject to annual growth
in Total Property Return measured over three years from the date of grant, and the final 33% are subject to achieving Secured PRS
Investment targets measured over three years from the date of grant.
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
11 October 20211
16 December 2021
28 September 2022
Total
Opening
balance
Awards
granted
Awards
vested
Awards
lapsed
Closing
balance
211,500
586,387
66,598
544,627
578,250
–
–
–
1,987,362
–
–
–
–
–
549,904
932,684
61,712
1,544,300
(211,500)
(279,062)
–
–
–
–
–
–
(490,562)
–
(307,325)
(34,904)
(82,208)
(87,283)
–
(81,200)
–
(592,920)
–
–
31,694
462,419
490,967
549,904
851,484
61,712
2,448,180
1 The grant of LTIP awards made on 11 October 2022 was made to Rob Hudson as replacement of awards made by his previous employer. The fair value of these awards is based on the
assumptions relating to previous LTIP awards. See Note 8 of the remuneration report on page 91 of the prior year Annual Report and Accounts for further details.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 154
Financial statements
Notes to the financial statements (continued)
30. 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
16 December 2021
DBP
17 December 2018
17 December 2019
10 December 2020
16 December 2021
EDBP
11 January 2017
21 December 2017
17 December 2018
17 December 2019
10 December 2020
16 December 2021
Total
Opening
balance
Awards
granted
Awards
exercised
Awards
lapsed
Closing
balance
37,681
78,576
43,563
73,854
–
35,320
26,058
34,298
–
–
–
–
110,866
–
–
–
–
40,800
60,020
36,826
77,210
57,172
67,492
–
628,070
–
–
–
–
–
17,864
169,530
(37,681)
(78,576)
–
–
–
(35,320)
–
–
–
(53,016)
–
–
–
–
–
(204,593)
–
–
(10,676)
(12,541)
(4,911)
–
–
–
–
(7,004)
–
–
–
–
–
(35,132)
–
–
32,887
61,313
105,955
–
26,058
34,298
40,800
–
36,826
77,210
57,172
67,492
17,864
557,875
(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 2022, 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
2016
2017
2018
2019
2020
2021
2022
Exercise price
(pence)1
Exercise
period
Opening
balance
Awards
granted
Awards
exercised
Awards
lapsed/
cancelled
Closing
balance
150.7
189.9
228.6
193.0
245.0
234.0
248.0
2019-22
2020-23
2021-24
2022-25
2023-26
2024-27
2025-28
25,871
36,479
11,405
272,985
231,239
128,812
–
706,791
–
–
–
–
–
–
279,479
279,479
(25,871)
(9,632)
(11,405)
(94,472)
(3,673)
–
–
(145,053)
–
–
–
(44,289)
(31,022)
(11,611)
(2,177)
(89,099)
–
26,847
–
134,224
196,544
117,201
277,302
752,118
Weighted average exercise price
(pence per share)
1 Exercise prices have been adjusted to reflect the impact of the 2019 rights issue.
216.4
248.0
189.4
217.8
233.1
Grainger plc Annual Report and Accounts 2022 155
For those share options exercised during the year, the weighted average share price at the date of exercise was 274.6p (2021: 299.1p).
For share options outstanding at the end of the year, the weighted average remaining contractual life was 2.1 years (2021: 1.9
years). There were 115,995 (2021: 38,674) share options exercisable at the year end with a weighted average exercise price of 192.3p
(2021: 175.2p).
(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 118. 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 2022 is a balance of £7.8m (2021: £7.8m) relating to treasury shares bought back
and cancelled.
Investment in own shares
Included within retained earnings at 30 September 2022 is a balance of £0.9m (2021: £1.1m) 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 2022 is set out in the
Notes to the parent company financial statements on pages 162 to 163.
The following subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006 for
the year ended 30 September 2022.
Company
BPT Limited
Bromley No. 1 Holdings Limited
Bromley No 1 Limited
Bromley Property Holdings Limited
Crossco (No. 103) Limited
Derwent Developments (Curzon) Limited
Derwent Developments Limited
Grainger (Hadston) Limited
Grainger (Hallsville) Limited
Grainger (Hallsville Block D1) Limited
Grainger (Hornsey) Limited
Grainger Asset Management Limited
Grainger Development Management Limited
Grainger Developments Limited
Grainger Employees Limited
Companies House
registered number
Company
Companies House
registered number
00229269
04165737
00034359
04132693
02929000
05887266
01899218
04068791
11834099
12170837
04810257
04417232
03146573
06061419
05019636
Grainger Europe Limited
Grainger Finance (Tricomm) Limited
Grainger Homes (Gateshead) Limited
Grainger Housing & Developments Limited
Grainger Maidenhead Limited
Grainger Properties Limited
Grainger RAMP Limited
Grainger Real Estate Limited
Grainger Residential Management Limited
Grainger Treasury Property Investments LP
Grainger Tribe Limited
Margrave Estates Limited
MREF III Newcastle Operations Limited
Portland House Holdings Limited
West Waterlooville Developments Limited
05299283
08451352
05651808
02018842
03709575
03910945
07560835
04170173
04974627
LP011846
11055318
00332564
10606762
02421236
03047254
The parent company has guaranteed the debts and liabilities of the above subsidiaries as at 30 September 2022 in accordance
with Section 479C of the Companies Act 2006. The parent company has assessed the probability of loss under the guarantees
as remote.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 156
Financial statements
Notes to the financial statements (continued)
34. Related party transactions
During the year ended 30 September 2022, 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
2022
Fees
recognised
Year end
balance
Fees
recognised
1,303
319
743
2,365
2022
596
–
207
803
Interest
recognised
£’000
–
692
–
692
Year end
loan
balance
£m
18.1
7.2
14.6
39.9
Interest
rate
%
Interest
recognised
£’000
Nil
6.9
Nil
–
–
–
–
1,211
319
559
2,089
Year end
loan
balance
£m
18.1
2.8
14.6
35.5
2021
Year end
balance
1,588
930
275
2,793
2021
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.
(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
2022
£m
15.9
22.6
75.2
113.7
2021
£m
14.6
23.8
77.0
115.4
There are no contingent rents recognised within net rental income in 2022 or 2021 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.
Grainger plc Annual Report and Accounts 2022 157
(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
2022
£m
0.8
0.9
1.3
3.0
2021
£m
0.7
0.6
–
1.3
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 £2,389.4m 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 2022, total
guarantees amounted to £4.3m (2021: £4.5m).
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
38. Post balance sheet event
2022
£m
628.9
628.9
2021
£m
869.8
869.8
On 1 November 2022, the maturity date on a £40m sterling bank loan was extended by a further five years, with 2 x 1 year
extension options.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 158
Financial statements
Parent company statement of financial position and statement of changes in equity
As at 30 September
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
2022
£m
2021
£m
2
3
4
5
6
1,784.6
1,226.8
324.0
41.8
365.8
(8.3)
357.5
2,142.1
(831.9)
1,310.2
37.1
817.6
0.3
455.2
1,310.2
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
The financial statements on pages 158 to 163 were approved by the Board of Directors on 16 November 2022 and were signed on
their behalf by:
Helen Gordon
Director
Rob Hudson
Director
Parent company statement of changes in equity
Balance as at 1 October 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
Profit for the year
Award of SAYE shares
Purchase of own shares
Share-based payments charge
Dividends paid
Balance as at 30 September 2022
Issued share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total equity
£m
33.8
–
3.3
–
–
–
–
37.1
–
–
–
–
–
37.1
616.3
–
200.8
0.2
–
–
–
817.3
–
0.3
–
–
–
817.6
0.3
–
–
–
–
–
–
0.3
–
–
–
–
–
0.3
456.5
45.8
–
–
(0.3)
1.7
(36.8)
466.9
29.9
–
(3.3)
1.7
(40.0)
455.2
1,106.9
45.8
204.1
0.2
(0.3)
1.7
(36.8)
1,321.6
29.9
0.3
(3.3)
1.7
(40.0)
1,310.2
Grainger plc Annual Report and Accounts 2022 Financial statements
Notes to the parent company financial statements
159
1. 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 UK-
adopted international accounting standards (IFRS), 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.
– Paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based payment (details of the number and weighted average exercise prices
of share options, and how the fair value of goods or services received was determined).
– The requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures to disclose key management
personnel compensation.
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 £29.9m (2021: profit of £45.8m). 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) Going concern
The financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the
following reasons.
The company has net assets of £1,310.2m at 30 September 2022 and has generated a profit for the period then ended of
£29.9m. The Directors of Grainger plc manage the Group’s strategy and risks on a consolidated basis, rather than at an individual
entity level. Similarly, the financial and operating performance of the business is assessed at a Grainger plc operating segment
level. For these reasons, the Directors do not prepare cash flow forecasts at an individual entity level.
In making the going concern assessment, on a consolidated basis, the Directors have considered the Group’s principal risks
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.
Further details of the Group’s going concern assessment, including the key assumptions applied, is set out in Note 1(a) on
page 120.
Based on these considerations, the Directors continue to adopt a going concern basis in preparing the financial statements for
the year ended 30 September 2022.
(c) Investments
Investments in subsidiaries are carried at historical cost less provision for impairment based upon an assessment of the net
recoverable amount of each investment. 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.
Financial statementsAnnual Report and Accounts 2022 Grainger plc 160
Financial statements
Notes to the parent company financial statements (continued)
(d) Tax
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.
(e) Own shares including treasury shares
Transactions of The Grainger Employee Benefit Trusts are included in the Company’s financial statements. The purchase of
shares in the Company by each trust and any treasury shares bought back by the Company are debited direct to equity.
(f) 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.
(g) Borrowings
Borrowings are initially recognised at the fair value of consideration received, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value
is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least 12 months after the statement of financial position date.
2. Investments
Cost of investment
At 1 October
Additions
At 30 September
Impairment
At 1 October
Additional provisions
Reversal of impairment provisions
At 30 September
Net carrying value
2022
£m
1,302.3
1,447.7
2,750.0
2022
£m
75.5
890.0
(0.1)
965.4
1,784.6
2021
£m
1,250.0
52.3
1,302.3
2021
£m
71.9
3.8
(0.2)
75.5
1,226.8
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.
Additions during the year principally relate to an internal restructure of subsidiary undertakings, resulting in one of the Group’s
intermediary holding companies now being directly held by the parent company. After an assessment of recoverable amounts
a net impairment of £889.9m (2021: net impairment of £3.6m) has been made. The most significant element of the overall net
impairment was an impairment of £855.1m which resulted from a reduction in the net assets of BPT Limited and its subsidiary
undertakings, following distributions made in the year.
A list of the subsidiaries of the Company is contained within Note 9 on pages 162 to 163.
3. Trade and other receivables
Amounts owed by Group undertakings
Other receivables
2022
£m
323.4
0.6
324.0
2021
£m
735.5
–
735.5
Amounts due in both 2022 and 2021 are all due within one year. The Company’s assessment of expected credit losses on amounts
owed by Group undertakings is not considered to be an area of significant judgement or estimation due to sufficient liquidity in the
Group. As such, there is no expectation of any material credit losses at the balance sheet date.
Grainger plc Annual Report and Accounts 2022 4. 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.
5. 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
161
2022
£m
–
–
8.3
8.3
2022
£m
140.0
(2.4)
137.6
700.0
(3.5)
696.5
(2.2)
831.9
2021
£m
39.9
0.4
8.4
48.7
2021
£m
140.0
(0.8)
139.2
700.0
(3.9)
696.1
(2.6)
832.7
The variable rate loans are secured by floating charges over the assets of the Group. The loans bear interest at rates between 1.5%
and 1.8% over SONIA.
In 2018, the Group issued a ten-year £350.0m corporate bond at 3.375% due April 2028. In 2020, the Group issued a ten-year
£350.0m corporate bond at 3.0% due July 2030.
As at 30 September 2022 unamortised costs in relation to the corporate bonds stood at £3.5m (2021: £3.9m), and the outstanding
discount was £2.2m (2021: £2.6m).
6. Issued share capital
Allotted, called-up and fully paid:
742,921,734 (2021: 742,776,681) ordinary shares of 5p each
2022
£m
37.1
2021
£m
37.1
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 152.
Details of share options and awards granted by the Company are provided in Note 30 to the Group financial statements on pages
152 to 155 and discussed within the Remuneration Committee’s report on pages 83 to 102.
7. Contingent liabilities
The Company has guaranteed the debts and liabilities of certain of its subsidiaries as at 30 September 2022 in accordance with
Section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the guarantees as remote.
8. 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 £413.5m to support this policy.
Information on dividends paid and declared is given in Note 14 to the Group financial statements on page 134.
Subject to approval at the AGM, the final dividend of 3.89p per share (gross) amounting to £28.8m will be paid on 14 February 2023
to Shareholders on the register at the close of business on 30 December 2022. Shareholders will again be offered the option to
participate in a dividend reinvestment plan and the last day for election is 24 January 2023. An interim dividend of 2.08p per share
amounting to a total of £15.4m was paid to Shareholders on 1 July 2022.
Auditor's remuneration
Amounts receivable by the Company’s auditor and its associates in respect of services to the Company and its associates, other
than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed
on a consolidated basis in the consolidated financial statements.
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.
Financial statementsAnnual Report and Accounts 2022 Grainger plc
162
Financial statements
Notes to the parent company financial statements (continued)
9. List of subsidiaries, associates and joint ventures
A full list of the Group’s subsidiaries as at 30 September 2022 is set out below:
Company
% effective
holding
Direct/
Indirect
Company
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Broxden House, Lamberkine Drive, Perth, PH1 1RA
Faside Estates Limited2
100%
Langwood Properties Limited2
100%
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
19 Ifield Road Management Limited2
100%
36 Finborough Road Management Limited2
100%
45 Ifield Road Management Limited2
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 Limited1,2
100%
Brierley Green Management Company Limited2 100%
Bromley No.1 Holdings Limited2
100%
Bromley No 1 Limited2
100%
100%
Bromley Property Holdings Limited
100%
Bromley Property Investments Limited
100%
Cambridge Place Management Company
Limited2
Chrisdell Limited2
100%
City North 5 Limited2
100%
City North Group Limited2
100%
City North Properties Limited2
100%
Connected Living London Limited
100%
Crofton Estate Management Company Limited2 100%
100%
Crossco (No. 103) Limited
100%
Derwent Developments (Curzon) Limited
100%
Derwent Developments Limited
Derwent Nominees (No 2) Limited2
100%
Frincon Holdings 1986 Limited2
100%
Frincon Holdings Limited2
100%
100%
GIP Limited
Globe Brothers Estates Limited2
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) Limited2
100%
100%
Grainger (Octavia Hill) Limited
Grainger (Peachey) Limited2
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) Limited2100%
Grainger Enfranchisement No. 2 (2012) Limited2100%
100%
Grainger Europe (No. 3) Limited
100%
Grainger Europe (No. 4) Limited
100%
Grainger European Ventures Limited Liability
Partnership2
Grainger Europe Limited
Grainger Finance (Tricomm) Limited
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
Direct
Indirect
100%
100%
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 Limited2
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 Limited2
Grainger Properties Limited
Grainger Property Services Limited2
Grainger PRS Limited2
Grainger RAMP Limited
Grainger Real Estate Limited2
Grainger REIT 1 Limited2
Grainger REIT 2 Limited2
Grainger REIT 3 Limited2
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 Limited2
GRIP REIT PLC
GRIP UK Holdings Limited
GRIP UK Property Developments Limited
GRIP UK Property Investments Limited
H I Tricomm Holdings Limited
Harborne Tenants Limited2
Infrastructure Investors Defence Housing
(Bristol) Limited2
Ingleby Court Management Limited2
Jesmond Place Management Limited2
Kings Dock Mill (Liverpool) Management
Company Limited1,2
Macaulay & Porteus Management
Company Limited1,2
Manor Court (Solihull) Management Limited2
Margrave Estates Limited
Mariners Park Estate North Management
Company Limited2
% effective
holding
Direct/
Indirect
100%
100%
100%
100%
100%
100%
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%
100%
70%
100%
Direct
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
100%
Indirect
100%
100%
100%
Indirect
Indirect
Indirect
Grainger plc Annual Report and Accounts 2022 Company
% effective
holding
Direct/
Indirect
Company
% effective
holding
Direct/
Indirect
163
100%
100%
100%
100%
100%
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
MREF III Newcastle Operations Limited
N & D London Investments2
N & D London Limited2
N & D Properties (Midlands) Limited2
Northumberland & Durham
Property Trust Limited
Oakleigh House (Sale) Management
Company Limited2
Park Developments (Liverpool) Limited2
100%
Park Estates (Liverpool) Limited2
100%
Park Estates Investments (Liverpool) Limited2 100%
100%
PHA Limited
69%
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Portland House Holdings Limited
Residential Leases Limited2
Residential Tenancies Limited2
Rotation Finance Limited2
100%
100%
100%
100%
Indirect
Indirect
Indirect
Direct
100%
100%
100%
100%
Suburban Homes Limited2
The Bradford Property Trust Limited2
The Owners of the Middlesbrough
Estate Limited2
The Sandwarren Management
Company Limited2
Tricomm Housing (Holdings) Limited
Tricomm Housing Limited
Victoria Court (Southport) Limited2
Wansbeck Lodge Management Limited2
Warren Court Limited
Warwick Square Management
Company Limited2
West Waterlooville Developments Limited
Eschersheimer Landstraße 14, 60322 Frankfurt am Main
Grainger FRM GmbH
100%
100%
100%
100%
100%
100%
100%
100%
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
A full list of the Group’s associates as at 30 September 2022 is set out below:
Company
% effective
holding
Direct/
Indirect
Company
% effective
holding
Direct/
Indirect
Indirect
6%
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 Limited2
33 Albert Square, London, SW8 1BZ
33 Albert Square Management
Company Limited
25%
25%
7%
Indirect
Indirect
Indirect
7%
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
Mariners Park Estate South
Management Company Limited2
Sixty-Two Stanhope Gardens Limited2
Vesta (General Partner) Limited2
Vesta Limited Partnership
Portmill House, Portmill Lane, Hitchin, SG5 1DJ
Redoubt Close Management Limited2
20%
30%
20%
3%
Indirect
Indirect
Indirect
Indirect
Indirect
A full list of the Group’s joint ventures as at 30 September 2022 is set out below:
Company
% effective
holding
Direct/
Indirect
Company
% effective
holding
Direct/
Indirect
50%
50%
Indirect
Indirect
7a Howick Place, London, SW1P 1DZ
Curzon Park Limited
16a Castlebar Road, London, W5 2DP
16 Castlebar Road Management
Company Limited2
Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE
1 Ifield Road Management Limited2
25%
31-37 Disbrowe Road Freehold Company Limited2 50%
174 Bishops Road Limited1,2
50%
50%
Besson Street Limited Liability Partnership
Besson Street Second Member Limited2
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) Limited2
51%
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Connected Living London (Nine Elms) Limited 51%
51%
Connected Living London
(Woolwich) Limited2
51%
Connected Living London
(Arnos Grove) Limited
Connected Living London
(Cockfosters) Limited
Connected Living London
(Montford Place) Limited
Lewisham Grainger Holdings Limited
Liability Partnership2
50%
Sandown (Whitley Bay) Management Limited2 51%
Wellesley Residents Trust Limited1,2
50%
51%
51%
Indirect
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 Company is non-active.
Financial statementsAnnual Report and Accounts 2022 Grainger plc
164
Financial statements
EPRA performance measures (unaudited)
1. 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 February 2022, 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
8) EPRA LTV
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.
This measure includes all capital which is not equity as debt, irrespective of its IFRS classification, and is
based upon proportional consolidation, therefore including a company’s share in the net debt and net
assets of joint ventures and associates. Assets are included at fair value, net debt at nominal value.
The Group continues to have a substantial, albeit reducing, 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.
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)
EPRA LTV
Capital Expenditure
2022
2021
£30.7m
3.3p
£2,470.6m
333p
£2,359.0m
317p
£2,483.0m
334p
3.0%
3.7%
2.1%
34.0%
33.5%
36.0%
£353.5m
£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%
33.2%
£378.4m
Grainger plc Annual Report and Accounts 2022 2. 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
Tax on profits or losses on disposals
Negative goodwill/goodwill impairment
Changes in fair value of financial instruments
and associated close-out costs
iv)
v)
vi)
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
165
2022
Earnings
£m
Shares
millions
Pence per
share
Earnings
£m
298.6
743.1
40.1
152.1
2021
Shares
millions
680.4
Pence per
share
22.3
(211.4)
(1.7)
(63.4)
–
–
–
–
–
(0.9)
–
9.5
30.7
–
–
–
–
–
–
–
–
–
–
–
743.1
(28.4)
(79.1)
(0.2)
(8.5)
–
–
–
–
–
(0.1)
–
1.3
4.1
3.3
(1.5)
(56.7)
–
–
3.8
–
–
(0.9)
–
8.3
26.0
–
–
–
–
–
–
–
–
–
–
–
680.4
(11.6)
(0.2)
(8.3)
–
–
0.5
–
–
(0.1)
–
1.2
3.8
3.1
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% (2021: 19.0%).
3. EPRA NRV, EPRA NTA and EPRA NDV
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
2022
2021
EPRA NRV
£m
1,966.8
EPRA NTA
£m
1,966.8
EPRA NDV
£m
1,966.8
EPRA NRV
£m
EPRA NTA
£m
EPRA NDV
£m
1,739.0
1,739.0
1,739.0
–
1,966.8
–
–
5.1
–
425.5
2,397.4
115.6
(42.4)
–
–
–
–
–
–
2,470.6
742.9
333
–
1,966.8
–
–
5.1
–
314.4
2,286.3
115.6
(42.4)
–
(0.5)
–
–
–
–
2,359.0
742.9
317
–
1,966.8
–
–
5.1
–
314.4
2,286.3
–
–
–
(0.5)
–
197.2
–
–
2,483.0
742.9
334
–
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
Financial statementsAnnual Report and Accounts 2022 Grainger plc 166
Financial statements
EPRA performance measures (unaudited) continued
4. EPRA NIY
Investment property – wholly-owned
Investment property – share of JVs/Funds
Trading property (including share of JVs)
Less: developments
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 and share of joint
ventures
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 Vacancy Rate
Estimated rental value of vacant space
Estimated rental value of the whole portfolio
EPRA Vacancy Rate
2022
£m
2,775.9
32.4
873.0
(664.8)
3,016.5
124.8
(33.9)
90.9
3.0%
3,016.5
(811.5)
2,205.0
90.9
6.6
(1.9)
(18.9)
5.1
81.8
3.7%
2022
£m
2.0
95.7
2.1%
B
A
A/B
b
a
a/b
A
B
A/B
The vacancy rate reflects estimated rental values of the Group’s stabilised habitable PRS units as at the reporting date.
6. 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)
2022
£m
31.8
35.1
1.4
(2.7)
(1.7)
–
(0.2)
63.7
(0.9)
62.8
121.4
(0.6)
0.7
66.1
187.6
34.0%
33.5%
A
B
C
A/C
B/C
2021
£m
2,179.2
25.9
1,130.7
(400.9)
2,934.9
110.4
(29.5)
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
3.8
72.1
5.3%
2021
£m
30.2
26.8
0.3
(2.6)
(2.5)
–
(0.3)
51.9
(4.1)
47.8
97.4
(0.6)
0.2
70.1
167.1
31.1%
28.6%
Grainger plc Annual Report and Accounts 2022 167
7. EPRA LTV
£m
Borrowings from Financial Institutions
Bond loans
Net payables
Exclude:
Cash and cash equivalents
Net debt
Investment properties at fair value
Investment properties under development
Properties held for sale
Financial assets
Total property value
EPRA LTV %
£m
Borrowings from Financial Institutions
Bond loans
Net payables
Exclude:
Cash and cash equivalents
Net debt
Investment properties at fair value
Investment properties under development
Properties held for sale
Financial assets
Total property value
EPRA LTV %
8. Capital Expenditure
£m
Acquisitions
Development
Completed assets
Capitalised interest
Total Capital Expenditure
£m
Acquisitions
Development
Completed assets
Capitalised interest
Total Capital Expenditure
A
B
A/B
A
B
A/B
2022
Share of Joint
Ventures
Share of
Associates
–
–
6.0
(2.7)
3.3
–
16.5
–
–
16.5
20.0%
–
–
14.9
(1.1)
13.8
15.9
–
–
–
15.9
86.8%
2021
Share of Joint
Ventures
Share of
Associates
–
–
3.5
(1.2)
2.3
–
10.8
–
–
10.8
21.3%
–
–
14.1
–
14.1
15.0
–
–
–
15.0
94.0%
Group
674.2
700.0
67.6
(95.4)
1,346.4
2,197.7
578.2
873.0
109.0
3,757.9
35.8%
Group
660.8
700.0
71.9
(305.7)
1,127.0
1,841.6
337.6
1,130.7
107.2
3,417.1
33.0%
Combined
674.2
700.0
88.5
(99.2)
1,363.5
2,213.6
594.7
873.0
109.0
3,790.3
36.0%
Combined
660.8
700.0
89.5
(306.9)
1,143.4
1,856.6
348.4
1,130.7
107.2
3,442.9
33.2%
Trading
Properties
Investment
Properties
0.1
49.5
8.8
0.2
58.6
14.4
253.8
9.2
11.8
289.2
Trading
Properties
Investment
Properties
0.2
6.6
5.6
0.2
12.6
78.0
251.7
22.8
9.8
362.3
2022
Group
(excl Joint
Ventures)
14.5
303.3
18.0
12.0
347.8
2021
Group
(excl Joint
Ventures)
78.2
258.3
28.4
10.0
374.9
Share of Joint
Ventures
Combined
–
5.4
–
0.3
5.7
14.5
308.7
18.0
12.3
353.5
Share of Joint
Ventures
Combined
–
3.5
–
–
3.5
78.2
261.8
28.4
10.0
378.4
Financial statementsAnnual Report and Accounts 2022 Grainger plc 168
Financial statements
Five year record
For the year ended 30 September 2022
Group revenue
Gross proceeds from property sales
Gross rental income
Net rental income
Gross fee income
Adjusted earnings
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
Total Accounting Return – NTA basis
Total Property Return (‘TPR’)
2018
£m
2019
£m
270.7
209.5
59.2
43.8
6.5
94.0
100.7
87.4
20.8
Pence
19.0
4.8
Pence
314.4
273.5
270.1
271.1
%
3.9
6.0
222.8
193.1
85.9
63.5
3.8
82.5
131.3
114.9
25.2
Pence
19.9
5.2
Pence
296.7
278.3
271.5
246.0
%
3.7
5.0
20201
£m
214.0
144.1
99.3
73.6
2.2
81.8
99.1
82.8
33.5
Pence
12.8
5.5
Pence
301.0
284.7
272.8
297.2
%
3.6
5.4
2021
£m
2022
£m
248.9
187.9
97.4
70.6
2.6
83.5
152.1
109.5
36.8
Pence
16.2
5.2
Pence
316.4
297.2
284.2
305.0
%
5.5
7.5
279.2
174.7
121.4
86.3
2.7
93.5
298.6
229.4
40.0
Pence
31.0
6.0
Pence
332.6
317.5
334.2
229.4
%
8.8
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.
Grainger plc Annual Report and Accounts 2022 Other information
Alternative performance measures
For the year ended 30 September 2022
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)
Net debt
Market value of properties
Other property related assets
Total market value of properties and property related assets
LTV
169
O
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
2022
£m
1,357.6
(95.4)
1,262.2
3,648.9
127.8
3,776.7
33.4%
2021
£m
1,347.5
(305.7)
1,041.8
3,309.9
121.1
3,431.0
30.4%
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
2022
£m
86.3
64.4
(61.1)
1.7
6.0
129.0
26.0
252.3
2,179.2
71.7
1,130.7
3,381.6
7.5%
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%
Annual Report and Accounts 2022 Grainger plc
170
Other information
Shareholders' information
Financial calendar
AGM
Payment of 2022 final dividend
Announcement of 2023 interim results
Announcement of 2023 final results
Share price
8 February 2023
14 February 2023
11 May 2023
22 November 2023
During the year ended 30 September 2022, the range of the closing mid-market prices of the Company’s ordinary shares were:
Price at 30 September 2022
Lowest price during the year
Highest price during the year
229.4p
222.0p
319.2p
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
Grainger plc Annual Report and Accounts 2022 171
O
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
Other information
Glossary of terms
Adjusted earnings
Hedging
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.
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.
Loan to Value (‘LTV’)
Ratio of net debt to the market value
of properties and property related assets.
This is the primary gearing metric for
the Group.
Earnings Per Share (‘EPS’)
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.
Net Tangible Assets (‘NTA’)
NTA is the market value of property
assets after deducting deferred tax on
trading assets, and excluding intangible
assets and derivatives.
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
Profit after tax attributable to
Shareholders divided by the weighted
average number of shares in issue in
the year.
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 February 2022. Further information,
including definitions and measures
adopted by Grainger can be found
on pages 164 to 167.
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.
Goodwill
On acquisition of a company, the
difference between the fair value of
net assets acquired and the fair value
of the purchase price paid.
Tenancy regulated under the 1977 Rent
Act. Rent (usually sub-market) is set
by the rent officer and the tenant has
security of tenure.
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.
UK-adopted IFRS
International Financial Reporting
Standards, as adopted by the UK,
mandatory for UK-listed companies for
accounting periods ending on or after
1 January 2021.
Vacant Possession (‘VP’) value
Open market value of a property
free from any tenancy.
The annual rental income receivable on
a property as at the balance sheet date.
Weighted Average Cost of Capital
(‘WACC’)
The weighted average cost of funding the
Group’s activities through a combination
of Shareholders’ funds and debt.
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.
Annual Report and Accounts 2022 Grainger plc
172
Other information
Advisers
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
ABN Amro Bank N.V.
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
Grainger plc Annual Report and Accounts 2022 This report is printed on Novatech Matt, and made
from 100% Elemental Chlorine Free (ECF) pulp.
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Version 3.0, as published on 8 December 2022
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
www.graingerplc.co.uk