The Serious Fraud Office (SFO) said Chemring Technology Solutions (CTSL), which is also being investigated, had handed a report to the authority and that it would examine "the conduct of business by Chemring Group and CTSL including ... officers, employees, agents and persons."

It declined to comment further during a live investigation.

Chemring, which designs and makes products such as decoys, flares, detonators, grenades and signalling and electronic intelligence equipment, said CTSL's voluntary report related to two historic contracts.

One dated from before the CTSL business was acquired and the second from 2011, Chemring said in a statement. Neither were "considered material in the context of the group", it said.

However the company, which said it would continue to cooperate with authorities, said it was too early to predict the outcome of the investigation.

Shares in Chemring, which earlier posted full-year results, fell as low as 167.2 pence before recovering to trade 3.2 percent higher at 183p by 1130 GMT.

(Reporting by Kirstin Ridley; editing by Alexander Smith)

By Kirstin Ridley