Scottish housebuilder Cruden has reported a sharp fall in revenue after deciding to reduce its contracting work.
At the end of 2023 the Edinburgh-based group said it would move away from construction contracts after being burned by “unsustainable risk transfer”. The firm said it would instead focus on building its own homes and operating in partnership models.
Now the group’s latest accounts show that is has returned to profit, making £917,00 before tax in the year to 31 March 2024 – an improvement on the £12m loss in its preceding financial year. Cruden would have made £2.6m profit if not for “exceptional restructuring costs”, it said.
However, turnover dropped by a third, from £198.3m to £132.6m. The firm also admitted that more than half of its most recent turnover – £88m – was formed of “competitive tender construction” projects that it is discontinuing.
Cruden’s average number of employees during its latest financial year fell from 507 to 344, with its total wage bill falling from £28.8m to £20.9m. Its highest-paid director saw a small drop in their total renumeration, from £322,000 to £313,000.
In a strategic report accompanying the results, Cruden group secretary Paula Dimond defended the company’s pivot away from construction contracting, suggesting that it was now better placed to remain profitable.
“This strategy rebalanced the risk transfer from employer to contractor whereby the construction tender marketplace was previously operating with an inequitable and unsustainable risk transfer to building contractors, especially on long-term contracts involving larger and/or more complex projects,” she said.
“This strategic change on how the business interfaces with the market, now fully implemented, has significantly reduced the group’s reliance on competitively tendered projects within its construction business, resulting in reduced turnover […] but delivering better quality turnover.”
She added: “This approach to procuring new construction contracts has proven to be the right approach for the group and appropriate in current market conditions.”
Dimond added that while the construction and housebuilding sectors have been buffeted by macroeconomic factors including inflation and interest rate rises, there remained an underlying demand for new housing, and August’s fall in interest rates could be the start of increased sales activity.
