BAT share price: Tobacco group to take £436m charge after Quebec ruling

British American Tobacco Group (LON:BATS) will take about a £436 million charge to its income statement this year following last week’s court ruling in Quebec, the tobacco maker has said. The Court of Appeal did not overturn a smoking class action lawsuit judgment made against the group’s Canadian unit. 

BAT’s share price meanwhile has surged in London today, having gained 1.60 percent to 2,917.50p as of 09:38 GMT. The shares are outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.22 percent higher at 7,150.33 points.

BAT to take £436m charge

BAT announced in a statement today that as part of the 2015 court decision, upheld by the Quebec Court of Appeal last week, its subsidiary Imperial Tobacco Canada was required to place CAD758 million (approximately £436 million) in escrow, the final payment of which was made in 2017. The blue-chip tobacco maker explained that following last week’s judgement, the unit’s board of directors had “determined that the asset's recoverability is, under IFRS, less than virtually certain”. 

The FTSE 100 group said that as a result, a provision of approximately £436 million will be charged to its consolidated income statement in 2019, and will be treated as an adjusting expense. BAT, however, assured investors that there will be no impact from the charge to the ratio of adjusted net debt to adjusted EBITDA, with this decision having no impact to cash flow in the current year.

Analyst ratings update

JPMorgan Chase & Co reaffirmed its ‘overweight’ rating on the tobacco maker yesterday, without specifying a price target on the shares. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average price target of 3,868.67p.

As of 10:21 GMT, Tuesday, 05 March, British American Tobacco plc share price is 2,917.50p.