CTT-Correios de Portugal

Investor Presentation • Dec 19, 2017

The postal sector is undergoing a process of fast diversification, with CTT still at the early stage of this transformation

The continued electronic substitution is impacting revenues as CTT is still very dependent on mail

▪ The decline of addressed mail volumes accelerated in recent quarters, putting pressure on revenues, only partially offset by mix and price effect

The Mail operating costs have been under pressure given CTT's commitment to the USO and the support to the growth businesses

Mail operating costs have been under pressure:

• Compliance with OQSI and 9 out of 11 quality indicators as at 30 September 2017, despite significant volumes decline in 9M17
• Growth businesses (E&P and Banco CTT) operating in the CTT Retail and Distribution networks

1 Indicators computed by an external provider (PWC). OQSI and individual quality indicators are provisional and subject to change. Final numbers calculated only at year end. Significant upside potential exists in the e-commerce market, which remains underpenetrated in Portugal and Spain

Banco CTT: a fast growing "start-up", very well received by the population

CTT's parcels and banking businesses are growing, but their contribution to profitability still requires time

¹ Recurring EBITDA ("like-for-like") excludes the impacts on Recurring EBITDA of the Altice contract in 9M16 (+€2.5m) and the Transporta acquisition in 9M17 (-€0.7m)

Overall, results have been under pressure since mid-2016, making a sizeable operational transformation plan a necessity

Recurring EBITDA & Net Profit

€ million

• Results have been under pressure in 2016 & 2017 due to worse than expected mail volumes decline and increase in operating costs
• The contribution to profitability of E&P is still very limited and Banco CTT continues on its path towards breakeven

Therefore, CTT will implement a sizeable operational transformation plan focused on the postal business to improve profitability, reinforce quality of service and sustain the mid-term transformation of the Company

Ambitious operational transformation plan to improve profitability levels, complying with all regulatory obligations

Adjust HR policies and deepen the ES&S cost reduction efforts

• Adjust remuneration & incentive schemes
• Further reduce costs not related to the growth businesses
• Adopt stricter expenses policies and control processes EXECUTION MODEL

Reinforce HR optimisation programme and rationalise non-core assets

• Further elimination of redundancies
• Rationalise non-core assets (real estate)

Optimise the Retail Network maintaining proximity to the citizens

• Optimise the Retail Network footprint by converting into postal agencies or closing post offices with low customer demand
• Further develop the 3rd party managed postal agencies model

3

1

2

4

Reengineer the Distribution Network to improve operational efficiency

• Redesign the Distribution Network footprint to adjust to new volumes and items mix
• Streamline the transportation and fleet network
• Improve productivity of sorting and sequencing
• Reduce absenteeism and improve workforce flexibility

AND GOVERNANCE

• Reinforcement of the Executive Committee to provide increased focus on the execution of the plan
• Ongoing engagement of the Executive Committee and follow-up at Board level – Implementation Monitoring Committee – lead by the Chairman and comprising of Non-Executive Board Members (incl. the Member of the Board representing shareholders)

The operational transformation plan addresses a large part of the CTT cost base, across all cost categories

FY16 recurring operating costs

€ million

Board of Directors and staff compensation

1

• 25% reduction of fixed compensation for the Chairman and the CEO and 15% reduction for the remaining Executive and Non-Executive Board Members in 2018 (vs. current levels)
• No variable compensation for the Executive Committee relative to 2018 (neither in 2017)
• Limitation of non-mandatory salary increases for staff in 2018
• Strong reduction of staff variable compensation relative to 2017

ES&S (External Supplies & Services) costs

• Reduction of costs not related to the growth businesses, such as IT, leases, utilities, communications and fleet costs
• Supported by contract renegotiations and rationalisation of usage of services / premises

5 - 6 Rec. EBITDA impact (2020) Annual savings objective (€ million; 2020) Costs / savings realised (%) Reinforce HR optimisation programme Savings Non-recurring costs 70% 100% 100% 2018E 2019E 2020E 70% 30% 2017E Further elimination of redundancies Target reduction of ~200 permanent FTEs (~140 FTEs already accepted in the last weeks) Estimated costs of €14m (one-time)

• Sale of non-core assets, saving associated costs (~30 properties)
• Estimated proceeds (cash inflow) of €12m to €13m
• Current book value of €6m

3 Optimise the Retail Network maintaining proximity to the citizens

Optimise Retail Network Optimise the Retail Network footprint by converting into postal agencies or closing post offices with low customer demand

Estimated costs of €15m (one time)

Number of access points to remain stable, ensuring proximity to the citizens, quality of service and meeting regulatory requirements

Reengineer the Distribution Network to improve operational efficiency

Impact on FTEs & capex / associated costs

4

• Total estimated one-time (non-recurring) costs of €25m and incremental capex investment of €25m (the latter front-loaded in 2018/2019 to capture benefits in 2020)
• Contributions from initiatives 4.1. and 4.2. may vary, according to the execution, subject to the total objective reaching €21m to €25m annual savings in 2020
• Path of growth in parcels and logistics, essentially driven by e-commerce, will determine the offset of part of the FTE reduction in Mail

¹ PDOs – Postal Delivery Offices; ²As of September 2017, permanent employees were ~6,200 and fixed-term contracts of ~950. However, September fixed-term contracts number was impacted by seasonality effect – at year end the number is expected to be ~500 FTEs.

The operational transformation plan is expected to have strong contribution to the recurring EBITDA, counteracting the impact of the mail volumes decline

Up to €45m recurring EBITDA impact

• One-time costs of c.€55m • Incremental capex of c.€25m The operational transformation plan is expected to have up to €45m positive contribution to recurring EBITDA from 2020 onwards and help counteract the continued structural decline of the Mail business

Restructure the postal business

• Adjust fixed-cost structure to midterm needs
• Maintain high operational standards

Reinforce HR optimisation programme and rationalise non-core assets

Optimise the Retail Network maintaining proximity to the citizens

Reengineer the Distribution Network to improve operational efficiency

Transform and grow nonpostal businesses

• Modernise the business model
• Leverage on existing platforms
• Continue to invest in current capabilities

Continue Banco CTT's path towards breakeven

Grow above market in parcels and value-added services (mail & parcels)

Upgrade technology and data management platform (analytics, digitalisation)

The operational transformation plan will prepare the next wave of growth and operational efficiency at CTT, but will impact dividend policy in the short term

• The Board of Directors reaffirms its commitment to propose a FY17 dividend of €0.38 per share, payable in 2018
• During the investment period of the operational transformation plan (2018- 2019), the Board of Directors intends to propose that the Company implements a policy of aligning dividend payments with Net Income, also supplemented by the utilisation of distributable reserves
• The planned measures are expected to generate a positive impact on recurring EBITDA starting from next year, counteracting the mail volumes decline (despite one-time associated costs)
• The focus on diversification is preserved the Company continues to develop its Express & Parcels and Banking businesses, the growth levers for the future

INFORMATION PURPOSES

This information to the market and the general public has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") and is disclosed under the terms and for the purposes of article 248 of the Portuguese Securities Code and other legislation in force and is also available on CTT Investor Relations website at http://www.ctt.pt/ctt-e-investidores/relacoes-cominvestidores/comunicados.html?com.dotmarketing.htmlpage.language=1.

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. 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. Should anyone intend to acquire or sell any financial instruments related to CTT, at any time, any transaction or investment shall be made on the basis of its own judgement and of professional advice and this document shall not be deemed or perceived as any kind of financial or other advice or consulting.

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 obligation to publicly update or revise the information contained in this document. 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 Securities Market Commission's website (www.cmvm.pt). In particular, the contents of this document shall be read and understood in light of the financial information disclosed by CTT, through such means, which prevail in regard to any data presented in this document.

To the fullest extent allowed by law, neither the Company nor its subsidiaries, affiliates, directors, employees or advisors assume liability of any kind, whether for negligence or any other reason, for any damage or loss arising from the access to or the use of this document or its contents.

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 estimates or, as applicable, those of our directors regarding the financial and operational performance, the business and operational strategy, the management plans, targets and objectives concerning future operations, business and investments are forward-looking statements. Statements that include the words "expects", "estimates", "foresees", "predicts", "intends", "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 differ materially from those indicated in these statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. 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, financial condition, strategy and liquidity, and the overall environment and economic, legal or technological trends or conditions (specifically, market and sector 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 neither represent 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.

In particular, the dividends policy contained herein was approved at the date hereof by the Board of Directors of CTT being, however, subject to the actual profits allocation proposals (which are, in all cases, conditioned to the required approvals of the competent corporate bodies at each time). Such dividend policy may be changed in the future, if necessary, in order to reflect, inter alia, changes to the business strategy and capital needs, being the potential future dividends dependent upon the conditions at each time in place, including inter alia the Company's net income on a consolidated and individual basis, revenues, financial and operational performance, financial situation, reserves, availability of funds legally distributable and future prospects. Thus being, no assurance or commitment is given that in a certain year dividends are or will be proposed, declared and/or distributed.

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