CTT-Correios de Portugal

Investor Presentation • Feb 20, 2019

FULL YEAR 2018 RESULTS Transformation Year

20 February 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 2018 results. As a consequence thereof, this document may not be dis 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 supplement 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 obligation to publicly update or revis contained in this document. Consequently, the Company does not assume liability for this document if it is used for a purpose other than the above. No express or implied representation, warranty or undertaking is made as t placed on, the accuracy, completeness or correctness of the information or the opinions or statements expressed herein. Neither the Company nor its subsidiaries, affiliates, directors, employees or advisors assume liabilit negligence 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 co 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 subsi 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 responsibl about, and observing any such restrictions. Moreover, the recipients of this document are invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Secu 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 regard to any d 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 dire performance, the business strategy, the management plans and objectives concerning future operations and investments are forward-looking statements. Statements that include the words "expects", "estimates", "foresees", "pr "plans","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 and unknown risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results, performance or achievements to diff 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 growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and requlatory 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 u 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 di 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 neither represent a commitment regarding the models and plans to be implemented, nor are the 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 obligation to publicly update or revise any forward-looking st result of new information, future events or otherwise.

1. Key highlights

1. Key financials

2. Business units

RECURRING EBITDA GUIDANCE DELIVERED, AS A RESULT OF REVENUES GROWTH AND A STABILISATION OF THE COST BASE

MAIL PERFORMANCE UNDERPINNED BY STRONG MIX EFFECT; THE POSITIVE EVOLUTION IN THE GROWTH LEVERS CONTINUED; SAVINGS & INSURANCE PLACEMENTS RECOVERED THROUGHOUT THE YEAR

Mail recurring revenues breakdown

Parcels volumes

Savings & insurance products placements

Banco CTT current accounts, customer deposits & credit to clients¹

$\rightarrow$ Deposits (E million) $\rightarrow$ Current accounts (thousands) $\rightarrow$ Credit (Emillion)

¹CreditplacedbyBancoCTT on its own Balance Sheet, net of impairments.

THE OPERATIONAL TRANSFORMATION PLAN COSTS SAVINGS & CAPITAL GAINS EXCEEDED THE FULL-YEAR OBJECTIVES

KEY FINANCIAL INDICATORS REGISTERED GRADUAL IMPROVEMENT AS THE YEAR PROGRESSED

Key recurring¹ financials; $\epsilon$ million; % change vs. prior year

^<sup>1 Excludingnon-recurring items affecting EBITDA of - £8.8m in 2017 and - £16.1m in 2018.

NET PROFIT IMPACTED BY RESTRUCTURING COSTS RELATED TO THE OPERATIONAL TRANSFORMATION PLAN

Financial and operational performance

$\epsilon$ million, except when otherwise indicated

		Quarter			Full year
Financial indicators	4Q17	4Q18	$\Delta\%$	2017	2018	$\Delta\%$
Recurring revenues	180.0	183.2	$+1.8%$	697.9	708.0	$+1.4%$
Recurring operating costs $1$	158.2	157.8	$-0.2%$	608.0	617.6	$+1.6%$
Recurring EBITDA 1		21.8 25.4	$+16.7%$	89.9	90.4	$+0.6%$
Reported Net profit		9.7 7.8	$+25.5%$	27.3	19.6	$-28.0\%$
Addressed mail [≡ _≌ (million items) - se		Unaddressed mail (million items)	La Express & Parcels Coo (million items)		Savings & insurance	Banco CTT credit to $clients$ ( $\in$ million)
2018 volumes 680.7		427.3	37.3		3.7	248.0
vs. 2017 $-7.6%$		$-13.2%$	$+12.3%$		$-35.0%$	$+212.6%$

¹ Excludingnon-recurring items affecting EBITDA of + €0.1m and + €3.2m in 4Q17 and 4Q18, respectively. Excludingnon-recurring items affecting EBITDA of - €8.8m and - €16.1m in 2017 and 2018, respectively.

THE EXPECTED REVENUES SOFTNESS IN FINANCIAL SERVICES WAS MORE THAN OFFSET BY SOLID PROGRESS IN THE GROWTH LEVERS

• Mail returned to growth, supported by a very strong positive mix effect and 4.1% average price increase, which fully offset the higher-than-expected volumes decline

• Express & Parcels growth accelerated on the back of solid volumes growth in Portugal (11.7%) & Spain (13.1%), and the Transporta acquisition (+€5.1m)
• Banco CTT revenues grew mainly due to net interest income expansion, as total deposits and net mortgage lending book reached €884m & €238m, respectively
• 35.8% decline in subscriptions led to €12.2m drop in the revenues from public debt products, the principal driver of the decrease in Financial Services revenues

THE RECURRING OPERATING COSTS INCREASED DUE TO GROWTH IN ACTIVITY, DECLINING IN THE STAFF CATEGORY AS A RESULT OF THE OPERATIONAL TRANSFORMATION PLAN HR OPTIMISATION INITIATIVES

• Recurring ES&S costs increased by €16.1m, €15.0m of which were direct costs associated with growth, predominantly in the Express & Parcels activity in Portugal & Spain. Savings were realised in rents & buildings (€1.8m) and external IT (€1.6m) costs
• Recurring staff costs declined €7.2m as OTP HR optimisation initiatives more than offset the salary revision (+€2.6m impact) negotiated with the unions. €3.5m positive impact from the reduction in certain employee long-term benefits
• The large majority ( $\epsilon$ 20.5m) of the non-recurring costs related to the Operational Transformation Plan were indemnities associated with negotiated staff exits

THE RECURRING EBITDA GROWTH REFLECTS AN UNDERLYING TREND OF SUSTAINED IMPROVEMENT TROUGHOUT THE YEAR

• Solid EBITDA performance in Mail, as the reduction in the recurring cost base and strong pricing / positive revenues mix effect more than offset the structural decline in volumes

FSEBITDA decreased due to the decline in public debt revenues with high incremental margin. Banco CTT EBITDA declined mainly as a result of higher marketing costs

OPERATING CASH FLOW GENERATION IMPACTED BY NON-RECURRING ITEMS RELATED TO THE

OPERATIONAL TRANSFORMATION PLAN

Cash flow			Balance sheet - 31 December 2018
$\epsilon$ million; change vs. prior year			€ million; % change vs. 31 December 2017
	Adjusted (Excl. FS float & Banco CTT deposits and financial assets)			1,769	1,769 €201m Financial Services payables
	2018	Δ	Cash & cash equivalents	€423m	$(-25.6%)$
From operating activities	31.8	$-12.6$		$(-32.6%)$
Operating cash flow, excl. Banco CTT	35.7	$-27.5$
Banco CTT operating cash flow	$-3.9$	$+15.0$			Banco CTT deposits €899m
From investing activities	$-16.4$	$-10.6$	Banco CTT financial assets	€818m	& other fin. liabilities $(+41.1\%)$
Capex payments (excl. Banco CTT)	$-22.2$	$+3.1$	& credit	$(+81.9\%)$
Banco CTT Capex payments	$-6.2$	$-0.3$
Other	12.0	$-13.4$	Other current assets $1$ ,		€210m Other current liabilities
Operating free cash flow	15.3	$-23.2$	Employee benefits tax credit (€73m; -3.7%)	€185m $(+3.4\%)$	$(+1.4\%)$ Financial debt (€31m; +197.3%)
From financing activities	$-36.3$	$+35.7$	Other non-current assets		€262m Employee benefits 2 $(-3.1\%)$
of which Dividends	$-57.0$	$+15.0$	$(687m; +11.9\%)$	€183m	∧Non-current liabilities (€19m; -34.7%) £147m
Net change in cash	$-21.0$	$+12.3$	PP&E	$(-8.4\%)$	Equity $(-20.2%)$
				Assets	Liabilities & Equity

■ Cash flow from operating activities impacted by €31.2m of indemnity payments related to the OTP (of which €11.6m related to 2017 provisions paid in 2018)

■ Capex reached €30.7m (+€2.1m), mainly due to investment in IT systems (€22.8m); cash capex payments stood at €28.4m (+€2.8m)

■ Net financial own cash totaled €122m, of which €61m of Banco CTT's own cash = (Cash & cash equivalents of €423m - Net Financial Services payables of €195m - Banco CTT deposits & other fin. liabilities of €899m + Banco CTT fin. assets & credit & other of €824m - Short & long-term debt of €31m)

¹ Including Financial Services receivables of €4m and €6m as at Dec-17 and Dec-18, respectively. ² Including current and non-current liabilities.

1. Key highlights

2. Key financials

3. Business units

MAIL: STRONG EXPANSION OF THE RECURRING EBITDA MARGIN AS A RESULT OF REVENUES GROWTH

COUPLED WITH EFFICIENCY IMPROVEMENTS

$N/D$

$+4.7\%$ +4.1%

165.0 680.7

$-8.9\%$ $-7.6\%$

4Q18 2018

vs. 4Q17 | 2017

140.6 585.8

$-7.4\%$ – 6.6%

$14.7|57.8$

$-23.2\%$ $-15.7\%$

$9.7$ | 37.2

$-4.1\%$ $-8.9\%$

$110.5|427.3$

$-10.8\%$ $-13.2\%$

EXPRESS & PARCELS: DOUBLE-DIGIT VOLUMES AND REVENUES GROWTH, DRIVEN PREDOMINANTLY BY

E-COMMERCE

Recurring revenues		Operating costs	EBITDA
€ million; % change vs. prior year		$\epsilon$ million	$\epsilon$ million
$-$ Portugal & other 1	€94.0m (+14.9%)	+11.0% $\leftarrow$
- Parcels	$£67.8m (+7.8%)$	$- - 149.1$ 147.9	$\rightarrow$
$-Cargo \& Logistics2$	€15.9m (+53.6%)		3.3
- Banking network	€6.3m $(+22.2%)$	$135.1 -- + -$
$-$ Other 2	€4.1m $(+16.8%)$	133.3	2.1
$-Spain$	€55.3m (+8.1%)		$\mathscr{P}$ 1.3 2.2%
- Mozambique	€1.8m (+18.4%)		$\bullet$
Total	€151.2m (+12.3%)		1.0%
Total excl. Transporta	€137.2m (+9.2%)	2017 2018	2018 2017 $\begin{array}{cccccccccccccc} - & - & - & - & - & - & - & - & - & - & - & - & - & - & - & - & - & - & - &$ $-0.5$

Portugal excl. Metric Total Spain Mozambique Portugal Transporta $10.2$ 37.3 $4.8|17.5$ $0.02|0.06$ 4Q18 2018 $5.4|19.8$ $4.8|17.3$ vs. 4Q17 | 2017 $+4.8\%$ + 12.3% $+4.5\%$ +11.7% $+11.0\%$ + 10.3% $+5.2\%$ + 13.1% $-13.7\%$ $-12.0\%$

¹ Including revenues from intra-group transactions with companies of other business units and other operating income of Portugal, Spain and Mozambique. ² Including Transporta revenues (€13.8m in Cargo & Logistics and €0.3m in Other in 2018).

BANCO CTT: NET INTEREST MARGIN EXPANSION SPURRED BY CONTINUED GROWTH IN ALL CUSTOMER VOLUMES METRICS

Recurring revenues		Operating costs	EBITDA	$\overline{\mathbb{L}}$
$\epsilon$ million; change vs. prior year		$\epsilon$ million	$\epsilon$ million	Mortgage credit growth €172m (E54m in 4Q)
- Net interest income	€7.9m (+€4.5m)	$+22.0\%$ 41.7
- Interest income	€8.6m (+ $€4.4$ m)	40.8		$\Box$
- Interest expense	€0.7m $(-£0.1m)$	$37.2 - - - -$		Consumer credit
- Fees & commissions income	€5.0m (+ $€0.8$ m)	33.4		growth 2
$-$ Consumer credit 1 and insurance	€1.2m ( $-€0.9m$ )			€42m $(E11m)$ in 4Q)
- Own products	€3.8m $(+£1.7m)$		$-14.9$
- Payshop & other	€10.7m (-€0.3m)		$-17.3$ $-18.1$	$\overline{\mathsf{E}}$
Total	€23.6m (+ $€5.0m$ )		$-18.7$ $-15.8%$	Current accounts
		2017 2018	2017 2018	348k
	Selected Banco CTT Balance Sheet indicators	$\Box$ Recurring --- Reported	Recurring $-$ - Reported	(122kin 2018)
Metric	Assets $(E \text{ million})$		Consolidated Equity Deposits (€ million)

Metric		Assets ( $\in$ million)			Deposits ( $\in$ million)		Consolidated Equity
(non consolidated)	Cash & equivalents	Investments	Credit to clients $3$	of which Mortgage	Term (incl. savings)	Sight	( $\in$ million) / CET 1 (%) (fully implemented)
31-Dec-18	250.8	454.1	248.0	238.4	212.3	671.7	89.5/23.4%
vs. 31-Dec-17	$-25.6%$	$+69.9\%$	+212.6%	$+260.8%$	$+0.8%$	$+64.4%$	$+17.2\%$ / -3.1p.p.
				_ _ _ _ _ _

¹ Consumer credit & credit cards sold in partnership with BNP Paribas Personal Finance (Cetelem). The FY17 revenues included a fixed commission fee of €0.8m from an insurance provider for the launch of sale of insurance ² Amount outside CTT's Balance Sheet, representing the amount of credit placed in FY18, in partnership with BNP Paribas Personal Finance (Cetelem). ³Net of impairments.

Deposits

€884m (€265m in 2018)

FINANCIAL SERVICES: SAVINGS PLACEMENTS REGISTERED A STRONG RECOVERY IN 4Q18, AS PRIOR

$+15.9\%$ -32.9%

vs. 4Q17 | 2017

TREASURY CERTIFICATES ISSUES STARTED TO MATURE, BUT UNABLE TO OFFSET 9 MONTHS OF DECLINES

$-6.1\%$ $-5.5\%$

$+4.7\%$ -8.5%

2019 OUTLOOK

dil

Increase in revenues, supported by organic $\&$ inorganic impacts in the growth levers

Decline in addressed mail volumes expected to be in the -6% to -8% range

Reaffirming the additional c.€15m of rec. op. cost savings expected from the OTP. Net non-recurring items of c.€15m

Growth in organic recurring EBITDA¹, reflecting continued efficiency improvements. Additionally, expecting a positive contribution from the 321 Crédito acquisition

€55m of Capex, €25m of which related to and in line with previously communicated OTP modernisation and automation initiatives

Consistent with the declared shareholder remuneration policy, the Board of Directors to propose FY18 dividend of $\epsilon$ 0.10 / share

INCOME STATEMENT

$\epsilon$ million		Reported -			Recurring $1 -$	Reported with Banco CTT under equity method 2
	2017	2018		2017	2018	2017	2018
Revenues	714.3	717.5		697.9	708.0	702.8	701.4
Operating costs	633.1	643.1		608.0	617.6	603.0	609.0
EBITDA	81.1	74.4		89.9	90.4	99.8	92.5
EBITDA margin	11.4%	10.4%		12.9%	12.8%	14.2%	13.2%
Depreciations, amortisations, impairments & provisions	34.0	35.7		29.7	33.4	31.1	31.7
EBIT	47.1	38.7		60.2	57.0	68.7	60.7
Financial income / (costs)	$-5.0$	$-5.5$		$-5.0$	$-5.5$	$-5.0$	$-5.5$
Associated companies - gains / (losses)	0.0	$-0.8$		0.0	$-0.8$	$-17.2$	$-18.3$
Earnings before taxes (EBT)	42.1	32.4		55.2	50.8	46.6	37.0
Income tax for the period	15.0	12.8		19.6	20.0	19.4	17.3
Non-controlling interests	$-0.1$	0.0		$-0.1$	0.0	$-0.1$	0.0
Net profit attributable to equity holders	27.3	19.6		35.7	30.8	27.3	19.6

¹ Recurring Net profit excludes non-recurring revenues and costs and considers the effective tax rate of CTT for the period.
² Payshop migrated to Banco CTT business unit in Jan-18 (proforma figures presented for 2017)

BALANCE SHEET

		With Banco CTT under equity method $1$
31-Dec-17	31-Dec-18	31-Dec-17	31-Dec-18
678.5	1,026.4	413.4	405.8
930.3	742.4	557.3	456.9
1,608.8	1,768.8	970.7	862.7
184.0	146.8	184.0	146.8
1,424.8	1,622.1	786.8	715.9
282.7	288.3	282.7	288.2
1,142.0	1,333.8	504.1	427.7
1,608.8	1,768.8	970.7	862.7
		CTT

CASH FLOW STATEMENT

$\epsilon$ million; change vs. prior year	Reported			Adjusted 1
				(Excl. FS float & Banco CTT deposits and fin. assets)
	2018	Δ		2018	Δ
From operating activities	59.1	$-231.9$		31.8	$-12.6$
Cash flow excl. Banco CTT				$35.7 -$	$-27.5$	Impacted by €31.2m
Banco CTT cash flow				$-3.9$	$+15.0$	of indemnities payments related to
From investing activities	$-200.7$	$+39.7$		$-16.4$	$-10.6$	the OTP
Capex payments (excl. Banco CTT)	$-22.2$	$+3.1$		$-22.2$	$+3.1$
Banco CTT Capex payments	$-6.2$	$-0.3$		$-6.2$	$-0.3$
Banco CTT financial assets 2	$-184.3$	$+50.4$
Other	12.0	$-13.4$		12.0	$-13.4$
Operating free cash flow	$-141.5$	$-192.2$		15.3	$-23.2$
From financing activities	$-36.3$	$+35.7$		$-36.3$	$+35.7$
of which Dividends	$-57.0$	$+15.0$		$-57.0$	$+15.0$
Other 3	$-26.3$	$-55.6$		0.0	$-0.1$
Net change in cash	$-204.1$	$-212.1$		$-21.0$	$+12.3$

¹ Cash flow from operating and investing activities excluding changes in Net Financial Services payables and the following items from the Cash flow statement, all of them relating to the Banco CTT financial activity: "Ba

² Including Investment securities and other banking financial assets held by Banco CTT.

³ These figures were not considered under Cash and equivalents in the Cash flow statement. However, they are included in Cash and equivalents on the Balance Sheet. These amounts correspond to the change in sight deposits Banco CTT / clearing of cheques of Banco CTT, and impairment of sight and term deposits.

NON-RECURRING ITEMS AFFECTING EBITDA & EBIT

$\epsilon$ million		Non-recurring
	2017	items 2018
Recurring EBITDA	89.9	90.4
Non-recurring items affecting EBITDA	8.8	16.1	Including $\epsilon$ 9.3m from R. da Palma and other real estate assets sales
Revenues	16.3	9.4
Staff costs	14.7	20.7	Including €20.5m of indemnities related to the OTP
ES&S & other op. costs	10.5	4.8	Including €3.8m of strategic studies, €1.1m of
Reported EBITDA	81.1	74.4	which related to the OTP
Recurring EBIT	60.2	57.0
Non-recurring costs affecting only EBIT	4.3	2.3
Provisions (reinforcements / reductions)	1.3	$2.2 -$	Including €1.4m provision related to a fine by the Spanish Competition Authority
Impairments and D&A (losses / reductions)	3.0	0.1
Non-recurring items affecting EBITDA & EBIT	13.1	18.4
Reported EBIT	47.1	38.7

ESTIMATED IMPACTS OF IFRS 16 ON THE 2018 RESULTS (FULL RETROSPECTIVE METHOD ADOPTED)

$\epsilon$ million	2018
	As reported	Under IFRS 16	Estimated impacts of IFRS 16
Revenues	717.5	717.5	$\left( =\right)$ None
Operating costs	643.1	$\lceil -1610.8 \rceil$	Decrease, as operating costs related to leases are $\overline{\phantom{0}}$ recognised as depreciations and interest costs
EBITDA	74.4	$\lceil$ - 106.7	$\blacktriangle$ Increase due to lower operating costs (leases)
Depreciations, amortisations, impairments & provisions	35.7	$[\sim] 61.0$	Increase due to additional depreciations of capitalised $\mathbf \Omega$ rights of use assets (RoU)
EBIT	38.7	$[\sim]$ 45.6	Increase, as operating lease costs are replaced by 6 depreciations and interest costs, the latter below EBIT
Financial income / (costs)	$-5.5$	$[-]$ -9.7	Increase due to leases interest costs component 6 booked in finance costs
Income tax for the period	12.8	$[\sim]$ 13.7	Lower during the initial years due to higher interest costs
Net profit attributable to equity holders	19.6	$[-] 21.5$	Whilst neutral over time, timing effect due to higher interest costs during the initial years

• Main P&L effects: leases impact depreciations and interest costs; increase in EBITDA and EBIT (as above), long-term neutral to Net profit

■ Main Balance Sheet effects: all leases on Balance Sheet; increase in both tangible assets (RoU) & Net debt (other than financial) of ~€100m

di

CTT Investor Relations

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