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Why the Sigma (ASX:SIG) share price is jumping higher

The Sigma Healthcare Ltd (ASX:SIG) share price is going up after upgrading its EBITDA profit guidance for FY22.

The Sigma Healthcare Ltd (ASX: SIG) share price is going up after upgrading its profit guidance for FY22.

Sigma is a pharmacy and distribution business. The Amcal pharmacy business is a key profit generator for the company.

Sigma’s profit upgrade

The healthcare business announced that after a late flow of demand for some COVID-related products – rapid antigen tests – it is expecting its underlying EBITDA (EBITDA explained) for the year ending 31 January 2022 to beat previous guidance.

Underlying EBITDA is now expected to be 10% to 15% higher than last year. That compares to the previous guidance in December of around 10% down.

Shift to NPAT

Sigma also said that with much of its investment in infrastructure and transformation close to completion, and to simplify its financial reporting, it is going to shift the focus from underlying EBITDA to reported net profit after tax (NPAT). I think this could be a useful thing for investors to get a better understanding of the value of the Sigma share price.

NPAT guidance

The company is expecting reported NPAT to be a loss of between $5 million to $10 million for the year. It explained this is largely due to the software as a service (SaaS) accounting policy change (of more than $30 million) in the current year.

The improved position due to rapid antigen tests was partially offset by other costs including the implementation of its enterprise resource planning (ERP) solution and related business disruption, as well as the impact of the closure of its Rowville Distribution Centre in late January.

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