CTT-Correios de Portugal

Earnings Release • May 2, 2018

CTT-Correios de Portugal

1018 Results Presentation

CTT - Correios de Portugal, S.A. 2 May 2018

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 1^st quarter 2018 results. As a consequence thereof, this document may not be 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.

I KEY HIGHLIGHTS

$GOS$

by Transporta

SOLID EBITDA GENERATION IN A QUARTER MARKED BY SEASONAL COMPARISON EFFECTS

$-0.8%$

Mail

adiusted fo

working dav

$-0.5%$

Mail & other

€11 7m

of FY18 savings secured

$+4.1%$

$E22.7m$

total

total

Recurring op. costs stabilise in Mail & Central Structure (grew 2.7% in 2017) and increase as a result of growth in activity in Banco CTT and E&P

Operational Transformation Plan exceeding initial expectations

€11.7m of FY18 recurring cost savings already secured (of €13.8m target), to become more visible in the P&L from 2018

€1.9m impact of delay of price increase to Apr-18, to be recovered in subsequent quarters with a projected 4.7% average price increase

Recurring EBITDA generation in a quarter with difficult seasonal comparison effects

¹ Payshop business migrated to Banco CTT Business Unit in Jan-18.

2Draft decisions ref. changes to the quality of service criteria applicable to the provision of the Universal Postal Service (USO) as of 1 July 2018 until end of 2020, and criteria for the Formulation of the USO Pricing fo

ADDRESSED MAIL VOLUMES DECLINE HIGHER THAN THE GUIDANCE RANGE DUE TO SEASONAL EFFECTS; STRONG ACTIVITY IN THE GROWTH BUSINESSES CONTINUES

¹Including credit placed by Banco CTT on its own Balance Sheet and the total gross outstanding balance of credit placed by Banco CTT branches (outside Banco CTT's Balance Sheet), in partnership with BNP Paribas Personal

PLACEMENT WEAKENED IN THE MONTHS FOLLOWING THE REDUCTION IN THE REMUNERATION RATE OF PUBLIC DEBT PRODUCTS; CTT IS IMPLEMENTING MEASURES TO COUNTERACT THIS TREND AND ENERGISE DEMAND

CTT's response

• Two advertising campaigns to reinforce the attractiveness of the new public debt products vs. bank deposits
• New incentives scheme in the Retail Network for the placement of public debt products
• Initial indications are positive: daily average public debt products placements in Apr-18 c. 15% above those of 1Q18
• New savings products in the pipeline to be launched during 2018

Monthly average of Savings & Insurance products placements

bancocl

II STRATEGIC UPDATE & OPERATIONAL TRANSFORMATION PLAN

SEVERAL INITIATIVES ARE BEING IMPLEMENTED ALONG THE FIVE PILLARS OF THE EXPRESS & PARCELS STRATEGY

¹ Credit products placements, including credit placed by Banco CTT on its own BS and the total gross outstanding balance of credit placed by Banco CTT branches (outside Banco CTT's BS), in partnership with BNP Paribas Pe ² Independent study, conducted by Universidade Nova de Lisboa.

THE STRATEGY FOR BANCO CTT IS BASED ON FOUR KEY PILLARS

• The Portuguese population shows preference for Banco CTT when asked about which bank they intend to open a new account $1$
• $\bigoplus$ Expand Banco CTT's footprint, by acquiring new clients, accounts and deposits
• $\bigodot$ Invest in digital channels and maintain the simplicity and transparency of the offer

The credit market is on its way to recovering to pre-crisis levels and continues to grow rapidly

$\bigodot$ Accelerate the origination of credit to clients - mortgage loans and consumer credit

Speed up cross-selling by monetising CTT's customer base and launching new product offers

• $\bullet$ In 2017, the bank launched the new insurance offer
• $\bigodot$ New product offers are being prepared

Opportunity to renew the value proposition of payments in the digital context

Integrated Payshop into Banco CTT

$\bigodot$ Modernise current payments offer

OPERATIONAL TRANSFORMATION PLAN EXECUTION EXCEEDING INITIAL EXPECTATIONS

¹ FY18 estimated recurring operating cost savings (unless otherwise indicated), taking into account initiatives already implemented until 30 April 2018.

COST REDUCTIONS IN LINE; HR OPTIMISATION INITIATIVE EXCEEDING TARGET

$-1$ $-1$

		FY18 savings secured 1	FY18 Savings objective
Adjust HR policies and deepen the ES&S cost reduction efforts	• No variable compensation for the Executive Committee for 2017 & 2018 • Reduction in fixed compensation for the Board members in 2018 $(vs. Dec-17 level)$ • Renegotiation of contracts for IT, buildings leases and maintenance, fleet and transport of valuables	€3.4m	€3.7m
Reinforce HR optimisation programme and rationalise non- core assets	224 negotiated exits in this area so far, 161 in 2017 with further 63 in 2018 • Negotiations for the sale of non-core assets underway, with capital gains expected to be above the FY18 savings objective	€6.8m Negotiations underway	€3.9m €5.2 $m2$

DISTRIBUTION NETWORK INITIATIVE ADVANCING IN LINE WITH THE ORIGINAL PLAN

	FY18 savings secured 1	FY18 savings objective
• First wave of converting into postal agencies or closing post offices with Optimise the Retail low customer demand completed Network maintaining • Although the timeline and savings from this stream may suffer some proximity to the IП adjustments, given the current environment, this will not undermine the citizens overall plan's 2020 savings objective, which remains intact	€0.8m	€3.9m
Reengineer the Project launched in 1Q18 , the large majority of savings to occur in 2019 $\&$ 2020 Distribution Network to improve • To date, detected and implemented some quick wins operational efficiency	€0.7m	€2.3m
Total recurring operating cost savings	€11.7m	€13.8m

S ctt

E cit

$\overline{6}$

III KEY FINANCIALS

There

QUARTERLY NET PROFIT IMPACTED BY THE RESTRUCTURING COSTS OF THE OPERATIONAL TRANSFORMATION PLAN

$-6.6%$

1Q18 financial and operational performance

$\epsilon$ million, except when otherwise indicated

vs. 1Q17

			Reported			Recurring 1
Financial indicators		1Q17	1Q18	$\Delta\%$	1Q17	1Q18	$\Delta\%$
Revenues		177.0	176.9	$-0.0%$	177.0	176.9	$-0.0%$
Operating costs		152.1	158.5	$+4.3%$	148.9	154.2	$+3.6%$
EBITDA		24.9	18.4	$-26.0%$	28.0	22.7	$-18.9%$
Net profit		10.3	5.4	$-48.2%$	15.0	10.9	$-27.4%$
Ε	Addressed mail $\mathbb E$ (million items)		Unaddressed mail (million items)	Land Parcels Land (million items)		E Savings & insurance ■ flows (€ billion)	Banco CTT current accounts (thousand)
1018 volumes	185.2		100.3	8.8		0.8	254.9

$+20.8%$

$-61.5%$

$+124%$

$-9.1%$

STRONG EXPRESS & PARCELS AND BANCO CTT REVENUES GROWTH OFFSET THE DECLINE OF THE LEGACY BUSINESSES

• Mail & other revenues influenced by seasonal effects (Easter and -2 working days in the quarter), resulting in addressed mail volumes decline of -9.1%, -6.1% when adjusted for the loss of working days. Those effects were partially offset by 2.5% average price increase in the quarter (carry-over from 2017, as the 2018 price increase came into effect on 2 April), strong positive mix impact (growth in international mail +€2.3m) and higher lottery sales (+€1.2m), which were suspended in 1Q17
• " The growth levers Express & Parcels and Banco CTT continued to post strong increases in volumes and revenues. E&P volumes grew significantly in Portugal (+32.2%, +12.3%) excl. Transporta) and in Spain (9.8%). Banco CTT revenues grew €1.1m (+28.8%), as a result of net interest margin expansion
• 64.2% decline in subscriptions led to €6.0m decline in the commissions from public debt products, impacting Financial Services revenues

¹ Payshopbusiness migrated to Banco CTT Business Unit in Jan-18 (proformafigures presented for 1Q17 for this product line). ² Including income related to CTT Central Structure and Intragroup Eliminations amounting to - £9.6m in 1Q17 and - £10.4m in 1Q18.

RECURRING OPERATING COSTS UNDER CONTROL, INCREASING ONLY AS A RESULT OF GROWTH IN ACTIVITY AND THE TRANSPORTA ACQUISITION

• The increase in activity in the growth businesses was responsible for the overall increase in operating costs, in particular: $+ \epsilon$ 3.9m increase in op. costs in Transporta (acquired in 2017), increase in transport and distribution costs in E&P, excl. Transporta (+€1.4m) due to growth of volumes and increase in costs at Banco CTT related to the increase in activity (+€1.1m). Additionally, due to the suspension of the sale of lottery products in the Retail Network in 1Q17, the recurring op. costs related with this product increased in 1Q18 (+€1.0m)
• On the other hand, costs stabilised or decreased in Mail and FS and Central Structure as a result of €1.6m decline in Staff costs in those areas, of which €0.8m related to the decline in sales incentives in FS (as a direct result of lower sales of public debt products)
• Non-recurring op. costs were almost fully related to the Operational Transformation Plan, of which €3.7m were indemnities related to headcount reductions

EBITDA EVOLUTION REFLECTS THE LOSS OF HIGH INCREMENTAL MARGIN PRODUCT REVENUES IN FINANCIAL SERVICES AND LESS WORKING DAYS IN THE MAIL BUSINESS

• Stable EBITDA performance in Mail as the stabilisation of the recurring cost base and a solid pricing / mix effect almost fully offset the challenging seasonal impacts on volumes
• Express & Parcels EBITDA growth reflects the improvement at Tourline subsidiary in Spain and growth in Portugal
• Financial Services EBITDA declined markedly, due to the loss of revenues with very high incremental margin

THE ADJUSTED CASH FLOW WAS INFLUENCED BY THE PAYMENT OF INDEMNITIES BOOKED BOTH IN 4Q17 AND IN 1Q18, AS PART OF THE OPERATIONAL TRANSFORMATION PLAN

Cash flow

$\epsilon$ million; % change vs. prior year

	Reported			(Excl. FS float & Banco CTT deposits and fin. assets)
	1Q17	1Q18	∆%	1Q17	1Q18	∆%	€14.7m indemnities
From operating activities	27.1	$-40.4$	$\prec$	12.1	$-2.5$	$-121.1%$	payments
Cashflow excl. FS & Banco CTT				15.2	$-4.4$	$-129.0\%$
Banco CTT cash flow				$-3.1$	1.9	160.0%	Seasonal payments
From investing activities	$-53.4$	$-63.9$	$-19.7%$	$-13.6$	$-12.6$	$+7.6%$	of end of year capex
Capex payments	$-14.2$	$-13.2$	$+7.3%$	$-14.2$	$-13.2$	$+7.3%$
of which Banco CTT				$-1.1$	$-3.0$	$-185.0\%$
Banco CTT financial assets	$-39.8$	$-51.3$	$-29.0%$
Other	0.5	0.5	$-0.7%$	0.5	0.5	$-0.7%$
Operating free cash flow	$-26.3$	$-104.3$	$-296.8\%$	$-1.6$	$-15.2$	<<
From financing activities	$-0.6$	$-0.2$	$+71.0%$	$-0.6$	$-0.2$	$+71.0%$
of which Dividends	$\overline{\phantom{a}}$		$\overline{\phantom{m}}$			$\overline{\phantom{a}}$
Other	$-2.5$	$-27.2$	$\prec$		$\overline{\phantom{0}}$	-
Net change in cash	$-29.5$	$-131.7$	$\prec$	$-2.2$	$-15.4$	$\prec$

Capex and indemnities accounted in 1Q18 were €5.0m and €3.7m respectively, substantially below the payments related to these items

1 Cash flow from operating and investing activities excluding changes in Net Financial Services payables of - €43.5m (1Q17) and - €49.4m (1Q18), and the following items from the CF statement, all of them relating to Banco and other loans", "Credit to bank clients", third parties' "Other operating assets and liabilities" regarding Banco CTT, "Investments in securities", "Deposits at the Bank of Portugal" and "Other banking financial assets".

THE BALANCE SHEET REFLECTS THE INCREASING WEIGHT OF BANCO CTT IN THE BUSINESS AND THE HIGH NET FINANCIAL CASH POSITION

Balance Sheet - 31 March 2018

€ million; % change vs. 31 December 2017

N BUSINESS

MAIL: SEASONAL EFFECTS ON MAIL VOLUMES ALMOST FULLY OFFSET BY PRICING AND STRONG POSITIVE PRODUCT REVENUES MIX

¹ Other revenues include + €1.2m of revenues from lottery sales, which were suspended in 1Q17; similarly operating costs include + €1.0m in CGS related to this product in 1Q18, which were not present in 1Q17. ²Millionitems.

EXPRESS & PARCELS: E&P BEGINNING TO SHOW SIGNIFICANT CONTRIBUTION TO REVENUES GROWTH, AS A RESULT OF VERY HEALTHY VOLUMES EVOLUTION BOTH IN PORTUGAL AND IN SPAIN

Operating costs EBITDA 1Q18 Revenues by region $\epsilon$ million $\epsilon$ million $\epsilon$ million; % change vs. prior year $20.1$ $-360^\circ$ €22.8m (+€5.2m; +29.7%) $-$ Portugal & other¹ €16.6m (+€1.7m; +11.4%) 36.1 $-$ Parcels $35.8$ $0.7$ $-Cargo \&$ Logistics² €3.7m (+€3.3m; >>) - Banking network €1.5m (+€0.2m; +16.4%) $30.1$ 29.9 0.5 $-$ Other² €0.9m (+€0.0m; +0.6%) $-Spain$ €13.3m (+€1.3m; +10.8%) $1.9%$ €0.4m (+€0.0m; +6.1%) - Mozambique $0.2$ €36.5m (+€6.5m; +21.8%) $0.5%$ Total $-0.1 - 1017$ Total excl. Transporta 1Q17 1Q18 1Q18 €33.2m (+€3.2m; +10.8%) Recurring $-$ - Reported Recurring $-$ - Reported $-\bullet$ Rec. EBITDA Margin E&P volumes³ by region Portugal excl. Total Metric Portugal Spain Mozambique Transporta 8.8 4.8 $4.1$ 4.0 $0.02$ 1Q18 $+12.3%$

$+32.2%$

$+9.8%$

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 in 1Q18 (€3.2m in Cargo & Logistics and €0.1m in other).

$+20.8%$

vs. 1Q17

$-4.7%$

FINANCIAL SERVICES: THE LOSS OF HIGH INCREMENTAL MARGIN PUBLIC DEBT PRODUCTS REVENUES IMPACTED THE FINANCIAL SERVICES PROFITABILITY

Metric	Savings & insurance placements $(\in$ bn)	Payments $(m$ ops)	Money orders & transfers $(m$ ops)	Credit $(\epsilon m$ ; excl. Banco CTT)
1Q18	0.5	6.4	4.4	1.1
vs. 1017	$-61.7%$	$-6.2%$	$-3.9\%$	$-47.8\%$

¹ Payshop business migrated to Banco CTT Business Unit in Jan-18 (proforma figures presented for 1Q17 for this product line).

BANCO CTT: THE REVENUES GROWTH OF BANCO CTT REFLECTS THE EXPANSION OF THE NET INTEREST MARGIN, AS LIQUIDITY IS BEING DEPLOYED IN HIGHER YIELDING ASSETS, INCLUDING CREDIT

¹ Payshop business migrated to Banco CTT Business Unitin Jan-18 (proforma figures presented for 1Q17). Payshop stand-alone EBITDA was €1.5m in 1Q17 and €1.4m in 1Q18. ² Partnership with BNP Paribas Personal Finance (Cetelem).

³ Amount outside Banco CTT's Balance Sheet, representing the total gross outstanding balance of credit placed by Banco CTT branches in 1018, in partnership with BNP Paribas Personal Finance (Cetelem).

V APPENDIX

ctt

CONSOLIDATED RESULTS

$\epsilon$ million	Reported		Recurring 1 -				Reported with Banco CTT under equity method 2
	1Q17	1Q18		1Q17	1Q18	1Q17	1Q18
Revenues	177.0	176.9		177.0	176.9	174.7	173.7
Operating costs	152.1	158.5		148.9	154.2	144.9	150.9
EBITDA	24.9	18.4		28.0	22.7	29.8	22.8
EBITDA margin	14.1%	10.4%		15.8%	12.8%	17.1%	13.1%
Depreciations, amortisations, impairments & provisions	$-7.3$	$-8.8$		$-6.6$	$-6.7$	$-6.7$	$-8.1$
EBIT	17.6	9.6		21.4	16.0	23.1	14.7
Financial income / (costs)	$-1.1$	$-1.4$		$-1.1$	$-1.4$	$-1.1$	$-1.4$
Associated companies - gains / (losses)	0.0	0.1		0.0	0.1	$-4.5$	$-3.9$
Earnings before taxes (EBT)	16.5	8.4		20.3	14.7	17.5	9.4
Income tax for the period	6.2	3.0		5.4	3.9	7.2	4.0
Non-controlling interests	0.0	0.0		0.0	0.0	0.0	0.0
Net profit attributable to equity holders	10.3	5.4		15.0	10.9	10.3	5.4

¹ Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.
² Payshopbusiness migrated to Banco CTT Business Unitin Jan-18 (proformafigures presented for 1Q

BALANCE SHEET

$\epsilon$ million		CTT			With Banco CTT under equity method 1
	31-Dec-17	31-Mar-18		31-Dec-17	31-Mar-18
Non-current assets	678.5	776.1		413.4	424.7
Current assets	930.3	818.3		557.3	481.6
Assets	1,608.8	1,594.5		970.7	906.3
Equity	184.0	187.9		184.0	187.9
Liabilities	1,424.8	1,406.5		786.8	718.4
Non-current liabilities	282.7	270.9		282.7	270.8
Current liabilities	1,142.0	1,135.7		504.1	447.6
Equity and Liabilities	1,608.8	1,594.5		970.7	906.3

NON-RECURRING ITEMS AFFECTING EBITDA PREDOMINANTLY RELATED TO THE OPERATIONAL TRANSFORMATION PLAN

$\epsilon$ million		Non-recurring items
	1Q17	1Q18
Recurring EBITDA	28.0	22.7
Non-recurring items affecting EBITDA	3.1	4.3	€3.7m indemnities related to the
Revenues	0.0	0.0	Operational Transformation Plan
Staff costs	1.1	3.7
ES&S & other op. costs	2.0	0.6
Reported EBITDA	24.9	18.4	€0.4m of strategic studies
Recurring EBIT	21.4	16.0
Non-recurring costs affecting only EBIT	0.7	2.0
Provisions (reinforcements / reductions)	0.0	1.7	€1.4m provision related to Spanish Competition Authority charge
Impairments and D&A (losses / reductions)	0.7	0.3
Non-recurring items affecting EBITDA & EBIT	3.8	6.4
Reported EBIT	17.6	9.6

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