Xero announces cost-reduction program to drive disciplined growth

Xero Limited (ASX: XRO) has announced a cost-reduction program, which includes streamlining its business, reducing 700-800 roles globally, and re-investing in key strategic areas. The objective of the restructuring is to achieve a balance between the growth and profitability of the business, while also creating greater operating leverage to capitalize on the substantial growth potential offered by cloud accounting. These changes will enable the company to deliver better value to customers and generate long-term shareholder value.

The program involves reshaping the company's organisational structure by reducing 700-800 roles across its business, which will reduce operating costs and improve profitability. Xero has set a target of achieving an operating expense to revenue ratio of approximately 75% for FY24. As part of its cost-reduction program, Xero is planning to exit its cloud-based lending platform, Waddle, which it acquired in 2020. This move is expected to lead to a write-down of AU$30-40 million in FY23. Despite this decision, the company remains dedicated to its small business platform strategy.

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