£550m weapons maker probed over corruption
BULLETS maker Chemring is being investigated for potential bribery, corruption and money- laundering involving middlemen representing a UK subsidiary.
The Serious Fraud Office (SFO) probe centres on two contracts awarded to Chemring Technology Solutions (CTSL).
One contract dates from before the CTSL business was bought by Chemring, and the second dates from 2011. The probe started after CTSL flagged up the problems.
Fareham-based Chemring, which has revenue of nearly £550m, makes products for military use, police and governments. Its goods include flares, decoys, bomb detectors, grenades, shells, tear gas and bullets, and it employs about 2,500 people around the world. Industrial giants are increasingly under fire for corruption by middlemen. Last year Rolls- Royce paid a record £671m to settle bribery allegations. European plane maker Airbus is being probed by the SFO over its use of agents in jet deals.
The probe into Chemring appears to be on a smaller scale. Bosses said neither of the two contracts under investigation are considered ‘material in the context of the group’.
They added: ‘It is too early to predict the outcome of the investigation. The group continues to cooperate fully with the investigation, and will provide a further update as and when appropriate.’
The SFO said: ‘We have opened a criminal investigation into bribery, corruption and money-laundering arising from the conduct of business by Chemring Group and CTSL including any officers, employees, agents and persons associated with them. We can make no further comment as the investigation is live.’
CTSL reported £17.1m revenue in 2016, analysts said. It was created when Chemring bought BDL Systems, based in Dorset, which made radio frequency initiators and detonators, in 2006.
Chemring’s tear gas canisters were reportedly used by Egyptian forces battling pro-democracy protesters in 2011, although it said it had not directly supplied CS gas to Egypt since 1998, and its gas grenades were also reportedly used against pro-democracy activists in Hong Kong in 2014.
The probe emerged as Chemring posted a 15pc rise in revenue to £547.5m for the year ending October 31 and a 10pc rise in profits to £81m. It said most markets had improved, apart from the UK which accounts for only about 5pc of revenue.
The firm’s value rose tenfold between 2003 and 2011. But it slumped after orders dried up when the Iraq war ended.
In 2016 it went to shareholders for £80.8m in a new rights issue. It is now recovering and is hiking its dividend to 3p, compared to 1.3p last year.