There was never a grade for PE here.
You had your 3 hours a week, and you took part.
At the end of a term there would be a school report, which would list your grades and such from all your subjects.
But for PE, it was just a comment on your behaviour/focus/willingness to learn.
My first secondary school also split the classes into two, with the more active and interested children in group 1, and everyone else in group 2 (although there were still active and interested people in Group 2, but there was a cap on how many students could be in the class, so they were just put in group 2).
Group 2 had a lot of laze-abouts (myself included for most games, although I didn't mind gymnastics or athletics too much, but wasn't keen on Rugby or Football), but the majority of people still did things throughout the year.
My second secondary school seemed more focussed on PE and we had much much more choice in what games/sports we did, which was nicer and meant there were fewer lazy people, since almost everyone could get interested in something.
So, I did Tennis and Table Tennis, Badminton, Football (I had more friends who were casual about it so it was always a laugh, rather than before when we'd have to play against some wanker who took it too seriously), and others.
We were still never graded though.
You only got graded if you took PE as a qualification, such as GCSE or A Level.