CTT-Correios de Portugal

Investor Presentation • Mar 16, 2020

We go further to bring the world ofer

RESULTS PRESENTATION 2019

Disclaimer

DISCLAIMER

This document has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the full year 2019 results. As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason or purpose without the express and prior written consent of CTT. This document (i) may contain summarised information and be subject to amendments and supplements, and (ii) the information contained herein has not been verified, reviewed nor audited by any of the Company's advisors or auditors.

Except as required by applicable law, CTT does not undertake any oblicly update or revise any of the information contained in this document. Consequently, the Company does not assume liability for this document f it is used for a purpose other than the above. No express or implied representation, warranty or undertaking is made as to, and no reliance shall be placed on, the accuracy, completeness of the information or the opinions or statements expressed herein. Neither the Company nor its subsidiaries, directors, employees or advisors assume liability of any kind, whether for neqligence or any other reason, for any damage or loss arising from any use of this document or its contents. Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement.

This document has an informative nature and does not constitute, nor must it be interpreted as, an offer to sell, issue, exchange or buy any financial instruments (namely any securities issued by CTT or by any of its subsidiaries or affiliates), nor a solicitation of any kind by CTT, its subsidiaries or affiliates. Distribution of this document in certain jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. Moreover, the recipients of this documentare invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Securities Exchange Commission's website (www.cmvm.pt). In particular, the contents of this presentation shall be read and understood in light of the financial information disclosed by CTT, through such means, which prevail in reqard to any data presented in this document. By attending the meeting where this presentation is made and reading this document, you agree to be bound by the foregoing restrictions.

FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements. All the statements herein which are not historical facts, including, but not limited to, statements expressing our current opinion or, as applicable, those of our directors regarding the financial performance, the business strategy, the management plans and objectives concerning future operations and investments are forward-looking statements that include the words "expects", "estimates", "foresees", "predicts", "intends", "believes", "anticipates", "will", "targets", "may", "would", "could", "continues" and similar statements of a future or forward-looking nature identify forward-looking statements.

All forward-looking statements included herein involve known risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results, performance or achievements to differ materially from those indicated in these statements. Any forward-looking statements in this document reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the results of our operations, growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and regulatory conditions).

Although CTT believes that the assumptions beyond such forward-looking statements are reasonable when made, any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of CTT, what could cause the models, objectives, plans, estimates and / or projections to be materially reviewed and / or actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Forward-looking statements (in particular, the objectives, estimates and projections as well as the corresponding assumptions) do neitherrepresent a commitment regarding the models and plans to be implemented, nor are they guarantees of future performance, nor have they been reviewed by the auditors of CTT. You are cautioned not to place undue reliance on the forward-looking statements herein.

All forward-looking statements included herein speak only as at the date of this presentation. Except as required by applicable law, CTT does not undertake any oblicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

We go further Im Ampilion

We go further to bring the world closer.

2019 – a year of transition

Changes in the leadership of the Company provide an impulse and a new direction

Revenues growth accelerates (+1.4% in 2018)

EBITDA quidance delivered (€90.4m in 2018)

€16.5m

Operating costs savings exceeded the OTP 1 full year objective (€15.0m initial objective)

Mail revenues remain resilient

Despite an acceleration of addressed mail volumes decline to-9.1%

Parcels volumes growth in Portugal

Leading to increases in transport & distribution costs to resolve capacity bottlenecks

€3.7m

Landmark year for Banco CTT

With 321 Crédito fully absorbed, positive EBITDA is reached in the fourth year of operation

€4.0bn

Very strong savings performance

Financial Services business area resuming a sound contribution

Growth in higher-value mail revenues mitigates the impact of volumes decline

Mail revenues

€ million; % change vs. prior year

€484.6m -2.1% vs. prior year

• International inbound mail revenues increased by +20.4% to €44.7m, driven by e-commerce
• · Solid performance by international outbound mail, benefiting from a positive contribution (+€5.3m) from the legislative elections

Portuguese parcels and public debt placements display strong growth dynamics

Parcels volumes

% change vs. prior year

• · Portuguese parcels volumes growth accelerated further in 4Q19, benefiting from a very pronounced holidays shopping effect and large customer wins
• Spain impacted by the loss of a large customer (excluding that effect, volumes would have grown slightly in 4Q19)

Public debt placements

€ million; % change vs. prior year

· Public debt products placements totaled €3.9bn (+51.9%), evidencing the Retail Network's proximity to the population and its continued ability to capture savings

Banco CTT customer funds and credit growth accelerate, boosted by new partnerships and 321 Crédito

Current accounts & customer funds

Current accounts (thousands); Customer funds (€ million); cumulative

• Seamless integration with partners for the sale of products and services: retirement funds placements reaching double-digit new production market share in one year

Credit to clients

• 321 Crédito acquisition provided a significant boost to the lending book and improved the loan-to-deposit ratio to 69.0%

Transformation

The Operational Transformation Plan costs savings exceed the full year objective

Asset sales Cash proceeds & capital gains

Sustainability

Alignment with the UN Sustainable Development Goals

Carbon Emissions

CO2e tonnes (scopes 1+2+3) vs. 2013 base year (CTT science-based target)

Decrease in energy consumption

Mainly driven by the decrease in electricity

315

Ecological vehicles in fleet

The largest ecological transport and distribution fleet in Portugal

-2.5%

Increase in training hours

251k hours with 88% of the employees participating

+47%

Voluntary work initiatives

22 corporate voluntary social & environmental initiatives. Participation of 358 volunteers, for a total of 1,548 hours

CO

3 ACTION

We go further in Innovation

We go further to bring the world closer.

Full year financial indicators exhibit material improvement

Key financial indicators

€ million; % change vs. prior year

		Quarter			Year
	4Q18	4Q19	4%	FY18	FY19	4%
Revenues 1	183.2	200.7	+9.6%	708.0	740.3	+4.6%
Operating costs 1	157.8	172.5	+9.3%	617.6	638.8	+3.4%
EBITDA *	25.4	28.2	+11.0%	90.4	101.5	+12.2%
EBITDA including IFRS 16	32.8	34.6	+5.6%	122.7	128.3	+4.6%
Specific items	-2.1	2.2	+207.5%	18.4	18.2	-0.9%
EBIT	19.0	13.0	-31.3%	45.6	47.3	+3.7%
Net profit attributable to equity holders	10.1	6.3	-36.9%	21.5	29.2	+35.8%
Free cash flow	29.4	16.2	-45.0%	15.0	32.3	+115.1%

+35.8% FY19 Net profit growth

· Positively impacted by a onetime corporate tax refund of €6.8m as a result of a favourable Tax Authority decision on the deduction of the tax loss on CTT Expresso's sale of Tourline in 2016

1 Excluding Specific items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions.

Growth in revenues underpinned by organic & inorganic evolution in Banco CTT and strong performance by Financial Services

Revenues

• Strong positive mix effect in Mail and +1.5% effective price increase were unable to fully offset the impact of the -9.1% addressed mail volumes decline
• · Holiday season shopping drove +16.9% parcels revenues growth in 4Q19 in Portugal. Spainaffected by the loss of a large client with - € 7.9m impact on full year revenues

Revenues breakdown

€ million; excluding specific items; % change vs. prior year

• · Banco CTT business unit revenues, excluding 321 Crédito, grew by €8.3m (+24.5%), on the back of increases in NII (+€4.9m) and fees & commissions income (+€4.0m)
• · Notable increase in public debt products placements to €3.9bn (+51.9%) drove high double-digit Financial Services revenues growth

1 IncludingCentral Structure. 'n 2019 and r2010 production in the partis on the most serville with increasurity with in incided in the model by incess on in and Series 32 Ledity world be model by incess

Operating costs increase organically & inorganically in the growth areas

Staff cost, excluding 321 Crédit, increased y €7.6m² (2018). he Company recognised gains relation of the libility associated with the morthy life annuity (-E.S.Sm) and the updated lability (+E.1.m). Excluding these effects, costs growth was €3.0m (+0.3%), as savings from negtitated staff exis (€7.2m) were offset y rew admissions & temporary hiring in the growth areas, and salary increases & career progressions agreed with the unions

* ES&S costs excluding 321 Crédito, grev by € 4.0m) were offsetby increases intransport & distribution pelated to parcels volumes growthin Portugal (+€5.8m) and legislative elections (+€3.4m)

4 Excluding Specificitems & IFRS 16 impacts, depreciation, impairments and provisions. ² Including Central Structure.

EBITDA growth supported by the organic & inorganic contribution of banking and financial services

EBITDA 1 breakdown

The Balance Sheet reflects the increased importance of Banco CTT in the consolidated figures

Balance Sheet – 31 December 2019

€ million; % change vs. 31 December 2018 (restated – including IFRS 16)

Free cash flow more than doubles, preserving the positive net cash position of CTT in a year of significant investment

Cash flow

Net financial debt 1

€ million

(+) Cash & cash equivalents	443
(-) Net Financial Services & other payables	239
(-) Banco CTT liabilities, net	60
(-) Other	28
(=) Own cash	115
(-) Financial debt	91
(=) Net cash position	24
(-) Leases liabilities (IFRS 16)	84
Net financial debt 1	60

We go further with pinfidence

We go further to bring the world closer.

2020 outlook

Celebrating 500 years of history with Net profit at Banco CTT and margin improvement in Express & Parcels Guidance provided excludes any possible impact from Covid-19

New universal postal service concession

CTT has formally announced its intent to be the new universal service concessionaire, of a more sustainable concession contract

Addressed mail volumes decline

Expected decline to be in the -6% to -8% range. E-substitution driven decline in transactional mail. Special impacts: +2 working days

Capex of €40m

Forecasted double-digit parcels growth entails an accelerated investment programme to increase automation and eliminate capacity bottlenecks in Express & Parcels

Mid single-digit revenues growth

Supported by organic developments in the growth levers and the contribution of 321 Crédito

EBITDA of ≥€110m and high single-digit EBIT growth

Reflecting improvements in Express & Parcels and Banco CTT, and continued efficiency measures

Sound increase in dividend

• The Board of Directors will propose a dividend of €0.11 per
• share for the 2019 financial year (increase of 10% vs. prior
• year), payable in May 2020

We go further in Excellence

We go further to bring the world closer.

Mail revenues remained resilient despite a challenging volumes development

	EBITDA 1,2	EBIT 1,3
	€ million	€ million
€406.4m (-1.6%)	-9.5%
€23.0m (-5.1%)	78.5	-21.1%
€14.5m (-1.8%)		55.0
€10.3m (+7.4%)		43.4
€6.5m (-5.2%)
€30.4m (+0.3%)
€490.9m (-1.6%)	FY18 FY19	FY18 FY19
		86.7

Mail volumes by type (m items)

Metric	Avg. mail prices	Addressed mail	Transactional	Advertising	Editorial	Unaddressed mail
FY19	N/D	619.0	536.0 -	48.2 ・・・・・・ of which	34.8	521.4
vs. FY18	+1.5%	-9.1%		36.8 (+9.3%) -8.5% Internationalinbound -16.5%	-6.5% -	+22.0%

1 Including Central Structure.

2 Excluding Specificitems & IFRS 16 impacts, depreciation, amortisation, impairments and provisions.

3 Including Specific items & IFRS 16 impacts, depreciation, impairments and provisions.

0.06

-12.0%

Parcels growth in Portugal gave rise to increases in transport & distribution costs to resolve capacity bottlenecks. Spain impacted by the loss of a key account

Express & Parcels revenues			EBITDA -		EBIT 2
€ million; % change vs. prior year			€ million		€ million
Portugal	€98.2m (+7.4%)		7.7	-17.3%	-54.6% 4.2
Parcels	€75.0m (+10.7%)	Portugal		6.3
Cargo	€12.4m (-2.8%)				1.9
Banking network	€6.7m (+5.3%)
Logistics	€3.1m (+1.5%)
Other	€0.9m (-33.2%)			-96.5%	-64.9%
Spain	€51.8m (-6.8%)	Spain
Mozambique	€2.4m (+23.0%)		-4.5		-8.6
Total	€152.4m (+2.4%)			-8.9	-14.2
Express & Parcels volumes by region (m items)			FY18	FY19	FY18 FY19
Metric	Total	Portugal		Spain	Mozambique

+11.2%

15.8

-9.8%

Metric	l otal	Portugal
FY19	37.8	22.0

+1.3%

1 Excluding Specificitems & IFRS 16 impacts, depreciation, impairments and provisions. 2 Including Specific items & IFRS 16 impacts, depreciation, impairments and provisions.

vs. FY18

Landmark year for Banco CTT, achieving positive EBITDA in the fourth year since its launch

Banco CTT revenues 1		EBITDA ²	EBIT 3
€ million; change vs. prior year		€ million	€ million
Net interest income	€12.7m (+€4.9m)	>>	/ 2.3
Interest income	€13.6m (+€5.1m)	3.7
Interest expense	-€0.9m (-€0.2m)		-4.9
Fees & commissions income	€8.9m (+€4.0m)
Own products	€5.5m (+€1.8m)
Consumer credit & insurance	€3.4m (+€2.2m)
Payments & other	€20.2m (-€0.6m)	-12.9	-17.7
321 Crédito	€21.0m (+€21.0m)	FY18 FY19	FY18 FY19
Total	€62.9m (+€29.3m)

Selected Banco CTT Balance Sheet indicators

Metric	Assets (€m)	Cash & equivalents	Investments	Credit to clients Customer deposits (net of impairments) (Em)		Equity (€m) / CET 1 Fully implemented (%)
31-Dec-19	1.665.9	206.7	456.4	885.8		1 461kcurrent	211.4 / 19.1%
vs. 31-Dec-18	+66.3%	-20.5%	+0.5%	+257.1%	accounts		+136.1% / -4.3 p.p.

Part of the payments services of the hing and increating the proceded by increations and of the Sance CTT basiness with 120, promonity of 100, promonity of 100, promon 2 Excluding Specificitems & IFRS 16 impacts, depreciation, impairments and provisions.

3 Including Specificitems & IFRS 16 impacts, depreciation, impairments and provisions.

Strong performance by Financial Services, capturing €4.0bn of savings & insurance placements

Financial Services revenues 1		EBITDA <	EBIT 3
€ million; % change vs. prior year		€ million	€ million
Savings & Insurance	€26.9m (+42.1%)	62.1 21.6	+64.8% 21.0
Money orders	€5.6m (-8.6%)
Payments	€1.2m (+1.7%)	13.3	12.7
Other	€0.4m (-29.4%)
Total	€34.1m (+27.2%)
		FY18 FY19	FY18 FY19

Financial Services volumes by type

Metric	Savings & insurance flows (€bn)	Placements		Redemptions	Money orders (m ops.)
FY19	4.8	4.0 (2014) - 1	of which	0.9	14.2
vs. FY18	+29.7%	+47.3% publicdebt	3.9 (+51.9%)	-15.8%	-9.4%

Part of the payments services of the libring and including Mesters integraed studiors and the Sanc CTT basines uning QS (promorigures preserved to P128). 2 Excluding Specificitems & IFRS 16 impacts, depreciation, impairments and provisions.

3 Including Specificitems & IFRS 16 impacts, depreciation, impairments and provisions.

	Reported		With Banco CTT under equity method +
	FY18	FY19	FY18	FY19
Revenues	708.0	740.3	692.0	695.3
Operating costs	617.6	638.8	584.3	593.0
EBITDA	90.4	101.5	107.7	102.3
EBITDA including IFRS 16	122.7	128.3	139.3	128.5
Depreciation, amortisation, impairments & provisions	58.7	62.8	54.0	55.1
of which IFRS 16 impact	25.4	21.6	24.6	21.0
Specific items	18.4	18.2	17.5	16.7
EBIT	45.6	47.3	67.7	56.7
Net financial income / (costs)	-9.7	-10.4	-9.6	-10.3
of which IFRS 16 impact	-4.2	-3.7	-4.2	-3.6
Associated companies - gains / (losses)	-0.8	-1.4	-18.3	-9.4
Earnings before taxes	35.1	35.5	39.7	37.0
Net profit attributable to equity holders	21.5	29.2	21.5	29.2

•

¹ Part of the payments services of the Financial Services business unit (billing and invoicing, Western Union transfers, integrated solutions and tolls) migrated to the Banco CTT business unit in 1Q19 (proforma figures presented for FY18).

	Reported		With Banco CTT under equity method 1
	31-Dec-18	31-Dec-19	31-Dec-18	31-Dec-19
Non-current assets	1,108.1	1,734.7	486.6	615.8
Current assets	746.3	778.8	456.9	456.9
Assets	1,854.5	2,513.4	943.5	1,072.8
Equity	135.9	131.4	135.9	131.4
Liabilities	1,718.6	2,382.0	807.6	941.3
Non-current liabilities	364.3	512.8	363.5	432.0
Current liabilities	1,354.3	1,869.2	444.1	509.3
Equity and Liabilities	1,854.5	2,513.4	943.5	1,072.8

•

¹ Part of the payments services of the Financial Services business unit (billing and invoicing, Western Union transfers, integrated solutions and tolls) migrated to the Banco CTT business unit in 1Q19 (proforma figures presented for FY18).

Free cash flow generation more than doubled vs. prior year

Cash flow

€ million	Reported			With Banco CTT under equity method 1
	FY18	FY19	419 / 18	FY18	FY19	419 / 18
EBITDA	90.4	101.5	11.0	107.7	102.3	-5.4
Specific items affecting EBITDA	16.1	16.8	0.8	15.2	15.3	0.1
Capex	30.7	45.4	14.8	23.4	39.0	15.6
Change in working capital	-10.0	5.3	15.3	-14.3	3.9	18.2
Operating cash flow	33.7	44.5	10.8	54.7	51.9	-2.8
Tax	-7.1	2.2	9.3	-17.8	5.2	23.1
Employee benefits	-11.6	-14.4	-2.8	-11.6	-14.4	-2.8
Free cash flow	15.0	32.3	17.3	25.3	42.7	17.5
Debt (principal + interest)	20.9	59.3	38.4	20.9	59.3	38.4
Dividends	-57.0	-15.0	42.0	-57.0	-15.0	42.0
Financial investments	-1.4	-114.4	-113.0	-26.4	-133.6	-107.2
Changes to the consolidation perimeter		6.8	6.8
Net change in own cash	-22.4	-30.9	-8.5	-37.2	-46.5	-9.4
Change in liabilities FS & other & Banco CTT (net)	-155.4	30.9	186.3	-69.4	37.4	106.8
Change in other	-26.3	20.3	46.5	0.0	0.0	0.0
Net change in cash	-204.1	20.3	224.4	-106.6	-9.2	97.4

€32.3m Free cash flow

· €44.5m operating cash flow in a year marked by significant investment

1 Part of the payments services of the Financial Services business unit (billing and invoicing, Western Union transfers, integrated solutions and tolls) migrated to the Banco CTT business unit in 1Q19 (proforma figures presented for FY18).

Specific items relate to the transformation & M&A processes and regulatory costs

Specific items

€ million

	FY18	FY19
EBIT excluding Specific items	64.0	65.5
Specific items	18.4	18.2
Revenues	-9.4	-0.6
Staff costs	20.7	11.9
ES&S & other op. costs	4.8	ટે રે
Provisions	2.2	0.0
Impairments and D&A	0.1	1.4
EBIT	45.6	47.3

€18.2m Specific items

• · €12.4m related to the Operational Transformation Plan (OTP)
• €11.9m of staff costs, of which €10.8m of indemnities related to negotiated staff exits, in the context of the OTP
• · €5.6m of ES&S & other op. costs, of which €5.0m of M&A costs & strategic studies: €1.5m related to the 321 Crédito acquisition, €1.6m related to the OTP and €1.6m related to the new regulatory measures

CTT – Correios de Portugal, S.A. Investor Relations

Contacts: Phone: +351 210 471 087 E-mail: investors@ctt.pt

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