A British plane engine company – dubbed the heir to Concorde – has seen more than £200m wiped off its value by a major investor as it struggles to raise funding.
Schroders cut the value of its stake in Reaction Engines by 87pc, the fund manager said. It suggested that slow revenue growth meant the Oxfordshire company would need more time to break even.
Reaction Engines has secured investment from Rolls-Royce, BAE Systems and the Government.
It is developing a hybrid jet and rocket engine, known as Sabre, which could lead to hypersonic space planes travelling at speeds of up to 19,000mph and offer flights from Britain to Australia in four hours.
The company’s groundbreaking pre-cooling technology prevents its engines from overheating as they get up to speed before activating the rocket portion of a flight.
Reaction Engines has sought to raise new funds after missing financial forecasts.
Schroders, which took part in a £40m funding round last year, owns a 4.1pc stake in the company, according to Companies House records. The group said it had revalued its stake from £10.6m in December 2023 to £1.4m at the end of June 2024.
On that basis, the company’s total value has fallen from £256m to £33.8m.
The company has raised more than £150m to date and has secured research and development grants from the British and American governments. Other investors include a United Arab Emirates’ sovereign wealth fund.
“Despite steps to commercialise its heat-exchanger technology and recent contract awards, revenue growth at Reaction Engines has been slower than management anticipated, and the company will require further investment and time to become cash positive,” Schroders said.
“Reaction Engines has appointed advisers to raise additional funds from new and existing investors.”
Rolls-Royce has said it was among the companies involved in the fundraising talks.
Philip Dunne, the Reaction Engines chairman and a former defence minister, has said that financing conditions were more difficult than when the company last raised funds in 2022.
He told investors earlier this year that the company had cut jobs and that it had made a loss last year.
As well as offering the possibility of hypersonic travel, Reaction Engines’ cooling technology has been tested by military customers. The group recently announced that its technology was being tested by BAE Systems on naval ships to recover waste heat and to cool exhausts.
It is also working with US company Echogen Power Systems to produce high-efficiency heat pumps.
Schroders’ stake in Reaction Engines is a legacy of an investment originally made by fund manager Neil Woodford.
His trust, Woodford Patient Capital Trust, had been one of the original backers of Reaction Engines. Schroders took over running the trust in 2019 after the collapse of Mr Woodford’s funds empire. The Woodford trust was rebranded to Schroders Capital Global Innovation Trust.
A spokesman for Reaction Engines declined to comment on Schroders’ writedown.