AECON GROUP INC 9 1 INVEST IN AECONS PEOPLE AND THEIR SAFETY The Company is committed to the development of its employees in order to build upon its leadership position in the sector and drive to be Canadas premier construction and infrastructure development company This cornerstone is especially important as competition in Canada for skilled workers engineers and project managers can be intense and given the reality of the aging workforce within the sector competition for skilled workers is unlikely to abate in the short or mediumterm Initiatives are being undertaken to strengthen practices at both the corporate and business segments related to recruitment training leadership development and building a performance and learning culture Aecon University is being introduced as an innovative vehicle for employees to access the full range of learning technical and development opportunities across the Company Aecons investment in its employees was recognized again in 2012 by Aon Hewitt as one of the 50 Best Employers in Canada for the sixth straight year and was also ranked in the Globe and Mail Top 100 Employers A companys ability to demonstrate that it has industryleading safety programs and a culture that puts safety frst is an important differentiator for companies in the construction industry For many clients most notably in the resources sector a contractors demonstrated commitment to safety throughout the organization is as important to selecting a contractor as their commitment to schedule quality and price This focus on safety is one of the reasons that maintaining and strengthening its industry leading safety program and culture is a key element of Aecons business strategy 2012 was a record year in safety performance for Aecon and is the result of an ongoing emphasis on safety as a core value and strategy 2 PROFITABILITY Aecon is one of the most diverse companies in its industry able to selfperform a wide variety of construction contracting and infrastructure development services and to offer clients a single solution to their needs with turnkey capabilities embodied in the One Aecon strategy This approach allows Aecon to focus on enhancing client value and competing for business on the basis of more than just price A key component of Aecons operational diversity strategy is the development of its vertical and horizontal integration capabilities The ability to selfperform services required at virtually every stage of a project from site clearing to fnal construction often including complete procurement services is a growing competitive advantage for Aecon The depth and breadth of Aecons capabilities also allow it to participate in projects beyond the scope of any one discipline or division Further leveraging capabilities and ensuring collaboration across diverse businesses allows for synergies and cost savings for both Aecon and its clients through economies of scale and resource sharing The Company has set out a target of reaching a 9 per cent EBITDA margin in 2015 which is guided by a focus on the bottom line rather than just topline growth focus on cash management and on operational metrics to manage business performance in line with worldclass margins and thereby delivering shareholder value 3 BUILDING PARTNERSHIPS AND ALLIANCES The construction and infrastructure development industry in Canada has experienced several important changes in the competitive landscape in recent years as well as having a broad range of larger multiyear multidisciplined project opportunities in both the public and private sectors Aecon has developed a strategy of building strong partnerships and alliances including joint ventures and public private partnerships The resulting importance within the industry of a companys ability to develop and manage creative relationships and alliances has provided opportunities for innovative companies such as Aecon to grow their business Over 40 per cent of Aecons revenue comes from larger more complex projects over 100 million Aecons partnering skills have enabled it to capitalize on a number of opportunities such as its participation in the Air Rail Link project in Toronto the Lower Mattagami hydroelectric project in Northern Ontario the Waneta Dam project in British Columbia the Darlington refurbishment project in Ontario and the ring road project in Edmonton These and other alliances have given Aecon access to projects that are beyond any one contractors capabilities to deliver alone These partnerships also provide Aecon and its partners with an opportunity for exchanging and optimizing best practices with others in the industry As an example the Companys joint venture in the mainline pipeline business has already met with success and through another joint venture is actively pursuing transmission opportunities in Western Canada 4 FOCUS ON EXECUTION PERFORMANCE OPERATIONAL DISCIPLINE AND RISK MANAGEMENT The ability to effectively identify mitigate and manage the construction risk inherent in every project it undertakes and the ability to deliver those projects in a manner that appropriately protects the safety of employees stakeholders and the public are key elements of success in the construction industry Developing industry leading capabilities in these areas is a fundamental part of Aecons strategy Aecon has established a detailed set of project criteria and risk management practices that are continuously reviewed updated and improved From the criteria set for selecting the projects it bids to the evaluation of project risks and appropriate mitigation measures to project pricing and the senior management approval processes a bid must go through risk management is a strategic and operational priority for Aecon An important element of Aecons risk management strategy is the ongoing monitoring of projects under construction to ensure that the risk management plan established at the bid stage of the project remains suffcient and is being effectively implemented To assist in this effort Aecon has established a project controls team consisting of some of Aecons most experienced and knowledgeable staff whose mandate is to ensure that complex projects are provided with stateoftheart management controls for contract administration cost control scheduling and other best practices This team also reviews the status of key projects against a set of predetermined criteria and ensures that the project is meeting its fnancial and risk management objectives