Bermuda Aviation Services 2008 Chairman's Report

Hamilton, Bermuda, July 08, 2008 - A decline in net income; something we have not experienced in five years overshadowed the record revenues of 56 million and further progress made in our strategic initiative toward shaping bas into a well balanced and diversified organization. Performance this year was significantly impacted by one time charges of 697k relating to the sale of Crow Lane Bakery, restructuring cost at the executive level in excess of 200k, and the ongoing cost of litigation regarding the right to operate exclusively at the company's private jet facility. These one time costs of more than 900k, has supported our policy that having a well balanced portfolio can ensure profitability during difficult times.  Operating income for the year of 3.1 million was slightly ahead of last year on expenses that rose 27% to $30 million.  Net earnings of 2.4 million was off 30%.

Integration of our two recent acquisitions is near completion with Otis Bermuda Ltd. Performing to plan. CCS Ltd. However, whilst making great strides in increasing market share in a very competitive market, and contributing handsomely to our top line, fell short of our expected returns on revenues. Senior management has identified the steps needed to remedy this shortfall and fully expect next year to be more successful. Earnings in ASB were also lower as aircraft handlings declined.

Other uncontrollable factors were higher fuel prices which had a direct effect on the importation of goods and packages, the cost of delivery and the operation of our fleet of service vehicles. We were also hit with higher foreign exchange rates for goods imported from Europe, Canada and the U.K. income from operations of 3.4 million, slightly ahead of last year, was disappointing considering the 68% rise in revenue.

It is fully expected that the next year will be challenging. However with the information before us, the forecast for the next fiscal year is far brighter. We will of course continue to closely monitor and evaluate our portfolio of operating companies to determine how well we are positioned for growth and performance, and to determine where our next opportunity might be. The first two months of fiscal 2009 have already shown great improvement.

Our shares trade in a very narrow range over the past year, with the high being $6.50. We were very disappointed to, at times, see trades below $6.00. The board has taken the view that at that price, and even now it is undervalued. Hence our decision to institute a buy back program so that the company could realize the value. 

Although this has not been our best year in terms of performance, your board is more than pleased with the efforts of its new executive team. Ken in his new role of chief executive has risen admirably to the challenges.