BAT share price surges as tobacco group takes £436 million charge

British American Tobacco Group (BAT) will take a £436 million charge to its 2019 income statement following a "disappointing" court decision in Quebec last week.

The tobacco maker said it was disappointed after the Canadian court of appeal did not overturn a smoking class action lawsuit judgment previously made against the group’s Canadian unit.

Court of appeal decision

As part of the original 2015 court decision by the Quebec court of appeal, its subsidiary Imperial Tobacco Canada was required to pay roughly £436 million in damages to compensate smokers for health problems.

In a statement on Wednesday, BAT said that the unit’s board of directors had “determined that the asset's recoverability is, under IFRS, less than virtually certain”.

The tobacco company also said that £436 million will be charged to its consolidated income statement in 2019 and will be treated as an adjusting expense.

BAT said it was disappointed with the decision and intended to appeal to Canada’s supreme court.

‘We are still of the view that this decision is wrong — ignoring the reality that both adult consumers and government have known about the risk associated with smoking for decades. As a result, we believe it should be overturned,’ the company said.

The judgment follows a decade-long challenge against British American Tobacco’s Canadian subsidiary, Imperial Tobacco Canada as well as Philip Morris International’s and Japan Tobacco International’s Canadian subsidiaries.

BAT share price surges

Upon the news on Wednesday, BAT's share price surged in London, gaining 1.60% to 2,91750 p with the shares outperforming the broader UK market.