Inflation Constrains Pollard’s Net Income Despite Revenue Expansion

Pollard Bank Note Company, despite robust sales throughout the year, establishing a record for earnings, saw its profits decrease in comparison to 2021 due to inflationary pressures in its instant ticketing division.

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Inflation Constrains Pollard’s Net Income Despite Revenue Expansion
Pollard Bank Note Company’s revenue for the three months ending December 31, the final quarter, was C$126.9 million (£78 million/€87.5 million/$92.3 million), an increase of 8.9% from the same period last year, which was C$116.5 million, itself a quarterly record.

The growth was propelled by strong sales in the company’s charitable lottery, electronic gaming systems, and lottery divisions, which were not significantly affected by consumer pressures during the year.

“Consumer demand for most of our business lines remained very robust in 2022,” said John Pollard, co-CEO of Pollard. “Demand for charitable lottery for all paper products, including pull tabs and bingo paper, remains strong, with revenue up 21% from 2021 and 50% from 2020, now well ahead of our pre-pandemic revenue.”

These factors were also the reason for the company’s quarterly net income more than doubling to $10.5 million, compared to $5.2 million in the final quarter of 2021.

Profit Margin Reduced
However, on a full-year basis, the supplier’s net income actually decreased 2% from $19.7 million to $19.3 million.

The firms modified earnings before interest, taxes, depreciation, and amortization (EBITDA) also dropped by 4% annually, from $84 million to $80.5 million.

Although the company achieved record sales, the decrease in profitability was mainly attributed to the difficulties faced by the firm’s immediate ticketing division, which was more vulnerable to inflation compared to other aspects of the business.

The company repeatedly highlighted this issue throughout its financial reports for the year.

Specifically, raw material costs, such as paper and ink, rose considerably, and they were also affected by increasing packaging and transportation costs. According to Pollard Tickets, many input costs soared by 30% to 50%.

The company’s overall cost of goods sold increased by 8.8% for the entire year, from $368.2 million to $400.5 million. The company stated that the $32.3 million increase was primarily due to the aforementioned price hikes in the instant ticketing division.

“Our immediate ticketing customer agreements are primarily long-term fixed-price contracts,” said John Pollard. “Therefore, in the short term, we haven’t been able to transfer these significant cost increases, and our instant ticketing margins have suffered a substantial blow.

“These input cost increases were implemented gradually throughout the year, resulting in a negative impact on profits that intensified over time.”

Although Pollard Lottery Corporation has not encountered any additional price hikes in this domain thus far in 2023, the organization reminds that this does not imply price increases will not occur.

The company highlights that the substantial price increases that transpired in 2022 were implemented gradually throughout the year, with most of the elevated costs being absorbed by the conclusion of 2022. Year-on-year, its manufacturing expenses will be higher in 2023, reflecting these ongoing higher cost levels throughout the year.

**Future Prospects**

As per the company’s statement, it perceives “substantial opportunities” in the online lottery market both in the short and long term. Pollard Lottery Corporation is engaged in serving this segment through its subsidiary NeoPollard, a joint venture with NeoGames.

Through this joint venture, the company has been engaged in providing online lottery games since 2014, when it initially secured a contract with the Michigan Lottery.

The company states that while growth in online lotteries in the US has been a gradual process, it believes that “with our recent significant investments in cutting-edge online lottery platforms and game content libraries, we believe Pollard is well-positioned to take advantage of these opportunities.”

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