Shore Capital buys executive jet despite 29% dive in profits

Shore Capital, the UK stockbroker, bought a corporate jet for 10.2m in 2007, a year in which the company's profits fell by 29 per cent.

Shore Capital owns 80 per cent of the Challenger 300 medium-haul aircraft with Howard Shore, the company's founder and executive chairman, taking a 20 per cent personal stake.

The eight-seater plane was bought in December using a $16,965,000 (8,552,660) bank loan paying an interest rate of 1 per cent above three-month US dollar Libor. The plane is listed in the "fixtures and equipment additions" column under "property, plant and equipment" in the company's annual report.

The company is said to use the jet to transport senior executives to visit its operations in Germany and Eastern Europe, though Mr Shore also uses the jet for his personal use. Shore Capital has a number of joint ventures in Germany, where it runs the Puma Brandenburg real estate fund.

An industry source said that Mr Shore had undertaken to pay fully all costs incurred on a pro rata basis. Shore is also said to hire out the plane when it is not in use by the company or Mr Shore, and could choose to buy more planes to expand that line of business.

The fuel-efficient jet is said to have proved a good investment so far because the rising price of Challenger 300s is offsetting depreciation, on which the company gets tax breaks.

Shore Capital declined to comment on the purchase.

The jet was bought in December at the end of a year when Shore's pre-tax profit dropped to 14.3m and the company froze its dividend. Corporate jets are generally frowned upon by investors, who regard them as a luxury for the benefit of executives. Barclays, which makes nearly half its profit outside the UK, does not own a corporate jet and instead charters aircraft when necessary.

The corporate jet market is booming as the business world goes global. In 1998 Warren Buffett, the world's richest man, invested in Net Jets, which sells shares of aircraft for corporate use, to tap into the expanding market.

Use of corporate aircraft has embarrassed business leaders before. Sir Fred Goodwin's reputation as a cost cutter took a knock in 2003 when it was revealed that the Royal Bank of Scotland chief executive and other top employees used a Dassault Falcon 900 which was owned by RBS. The bank has always said that the plane is part of its aircraft leasing business.

Greg Hutchings resigned as chief executive of Tomkins in 2001 amid allegations about his use of corporate jets, although he was subsequently exonerated of any wrongdoing.

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