Chemring facing SFO criminal investigation
One of Chemring’s subsidiaries voluntarily reported two ‘specific historic contracts’ leading to the investigation.
The Serious Fraud Office (SFO) has launched a criminal investigation into alleged money laundering, bribery and corruption linked to business conducted by Chemring and one of its subsidiaries.
It comes after one of Chemring’s subsidiaries voluntarily reported two “specific historic contracts”, according to a note in the company’s full-year results released on Thursday, adding that the concerns involved intermediaries “who previously represented” CTSL and its “predecessor companies”.
The first contract was awarded prior to the group’s ownership of the business now known as Chemring Technology Solutions Limited (CTSL), while the second took place in 2011.
Investigation opened into Chemring Group PLC and its subsidiary, Chemring Technology Solutions Limited (CTSL) following self-report https://t.co/4PjiQpMuNr— Serious Fraud Office (@UKSFO) January 18, 2018
However, Chemring said that neither of the two incidents “are considered to be material in the context of the group”.
In its own release, the SFO said: “The SFO has opened a criminal investigation into bribery, corruption and money laundering arising from the conduct of business by Chemring Group plc and its subsidiary, CTSL, including any officers, employees, agents and persons associated with them.
“We can make no further comment as the investigation is live.”
Chemring said it is “too early” to determine the outcome of the SFO’s investigation but said it is fully co-operating with authorities and would provide further updates “when appropriate”.
CTSL is one of the group’s UK-based subsidiaries.
Separately, Chemring said it is battling a dispute over the pricing of historic contracts fulfilled by its Alloy Surfaces Company for the US army.
Chemring said it expects a decision to be issued in about two years following its hearing last April, which could result in a charge of up to £12 million.
“A provision of £1.1 million … exists to cover estimated legal costs for the group with regards to this issue,” Chemring said.
Details of the probe and dispute were announced as Chemring released its full-year results, showing a 15% rise in revenues to £547.5 million for the 12 months ending October 31, as its US market started to recover from a “long period of decline”.
Underlying operating profit rose 14% to £55.4 million, as it highlighted an improvement in “consistency of production” and manufacturing yields across the business as it pushed ahead with a restructuring programme that has included closing and merging some of its manufacturing facilities.
Statutory pre-tax profits, however, plunged 50% to £4 million when accounting for exceptional items including costs of acquisitions and disposals, restructuring and impairments.
Going forward, Chemring said it expects growth of 3% per year across its international markets except for the UK, where it said the weaker pound and “major platform acquisitions” were “constraining” spending.
It also noted that low oil prices have resulted in new programmes and procurements being delayed in the Middle East.
Chemring said trading at the start of 2018 has been in line with expectations.
The group’s chief executive Michael Flowers said: “In 2017 the group continued to build on its improved performance of recent years, delivering strong results that exceeded expectations from both a financial and operational performance perspective.
“Significant progress has been made on the Operational Excellence Programme, with tangible sustainable results already delivered and further improvement in the pipeline.”