Cruden has reported a significant decline in revenue after a strategic pivot away from contracting work.
- The Edinburgh-based group decided to move away from construction contracts due to unsustainable risk transfer.
- The company’s focus has shifted towards building its own homes and engaging in partnership models.
- Despite a drop in turnover, Cruden returned to profitability with £917,000 before tax.
- The restructuring costs impacted profits, and turnover fell from £198.3m to £132.6m.
The Scottish housebuilder, Cruden, has announced a substantial drop in its revenue following a strategic decision to reduce its involvement in contracting work. This shift came at the end of 2023 when the company decided to step back from construction contracts, which were perceived as carrying ‘unsustainable risk transfer’. The firm articulated that this strategic manoeuvre was aimed at focusing on building its own homes and forming partnership models, which are seen as more sustainable and profitable paths forward.
Cruden’s latest financial records indicate a return to profitability, reporting a pre-tax profit of £917,000 for the year ending 31 March 2024, a notable recovery from a £12 million loss in the previous financial year. The company suggested that if not for certain ‘exceptional restructuring costs’, profits would have been higher, amounting to £2.6 million. While turnover dramatically fell by a third, from £198.3 million to £132.6 million, the firm remains optimistic about its strategic direction.
The company acknowledged that a substantial portion of its recent turnover—£88 million—was derived from ‘competitive tender construction’ projects, which it is currently phasing out. This reduction in contracting work also resulted in a significant decrease in the workforce, from an average of 507 employees to 344 over the last financial year, with the total wage bill reducing from £28.8 million to £20.9 million. Similarly, the remuneration of the highest-paid director decreased marginally from £322,000 to £313,000.
In the strategic report, Cruden’s group secretary, Paula Dimond, defended the company’s pivot by suggesting that this shift rebalances risk transfer, previously skewed against building contractors in long-term and complex projects. The strategic realignment significantly reduces dependency on competitively tendered projects, thereby improving overall quality of turnover, albeit with reduced figures.
Despite the challenges induced by inflation and interest rate fluctuations, which have impacted both the construction and housebuilding sectors, Dimond expressed confidence in the underlying demand for new housing. She optimistically hinted that a reduction in interest rates in August might stimulate sales activity, potentially marking the beginning of a more active market.
Cruden’s strategic realignment promises sustainability despite a short-term decline in turnover.
