CTT-Correios de Portugal

Earnings Release • Mar 15, 2016

CTT – Correios de Portugal, S.A.

Full Year 2015 Results Presentation

Strong year while preparing the new growth era in Financial Services: Banco CTT

15 March 2016

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 2015 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 obligation to publicly update or revise any of the information 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 to, and no reliance shall be 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 liability of any kind, whether for 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 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 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 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 regard 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. 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. 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 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.

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 statements, whether as a result of new information, future events or otherwise.

01. Key highlights

1. Business units performance

3

1. 2016 Outlook

2. Appendix

Important 2015 milestones

RECEIVED AN UPFRONT PAYMENT OF €15 MILLION

4

ITS OPERATIONAL EFFICIENCY

NEW COMPANY AGREEMENT and revised HEALTHCARE PLAN, enabling a sustainable level of benefits ANNUAL GENERAL SHAREHOLDERS MEETING approved the payment of a gross dividend per share of €0.465 UPDATED PRICES corresponding to an estimated AVERAGE 2015 PRICE INCREASE OF ~4.0% AGREEMENT SIGNED WITH THE GOVERNMENT to install up to 300 CITIZEN'S BUREAU AREAS in two years THE GOVERNMENT UPDATED (REDUCED) THE INTEREST RATES offered on public savings and treasury certificates Beginning of the development of CORE BANKING SYSTEM FOR BANCO CTT (Misys & Deloitte) HUMAN RESOURCES OPTIMISATION initiated at the subsidiary TOURLINE EXPRESS in order to INCREASE CAPITAL MARKETS DAY, where CTT presented an UPDATE ON ITS STRATEGY, FOCUSED ON BANCO CTT'S STRATEGY AND AMBITION START OF THE ACTIVITY OF BANCO CTT with the launch of a head office branch (soft opening) for CTT employees to prepare systems and operations COMMERCIAL REGISTRATION OF BANCO CTT and appointment of governing bodies BANK OF PORTUGAL formalised the final authorisation for the SET-UP OF BANCO CTT 2015 As per the terms of the MOU SIGNED WITH ALTICE, CTT Conclusion of the process of INTEGRATION of the Mail and Express & Parcels DISTRIBUTION NETWORKS

2015 guidance largely accomplished

5

OUTLOOK	2015 RESULTS
Growth in revenues, supported also by MoU with Altice Addressed mail volumes decline in the -3% / -4% range, •  better than the -5% initial target (1H15 upgrade) Double-digit volumes growth in Express & Parcels • (Portugal), driven by e-commerce growth	Recurring revenues grow by 1.3%, supported by strong performance of the Mail business unit and also by MoU with Altice  Addressed mail volumes decline 3.2% (lower bound of the range guidance)  Single-digit overall volumes growth in Express & Parcels despite the strong double-digit growth in e-commerce volumes
 Decline in like-for-like recurring costs (excluding Banco CTT project)	Like-for-like recurring costs (excluding Banco CTT project) decline by 0.8%
 High single-digit growth in like-for-like recurring EBITDA (excluding Banco CTT project)	Like-for-like recurring EBITDA (excluding Banco CTT project) grows by 10.3
 Total spending (capex and opex) in Banco CTT project of up to €30m	Banco CTT project spending of €23.2m (lower than target, partially related to soft opening strategy). Cash position of CTT not affected

Policy of stable growth of dividend

Minimum dividend of €0.47 per share (€70.5m for 150m shares outstanding) for the financial year 2015

The Board will propose a dividend of €0.47 per share (€70.5m),

a 6.8% growth on a recurring basis

Solid recurring 2015 financial results despite Banco CTT project costs

Financial and operational performance

€ million, except when indicated otherwise

	Including Banco CTT project		Excluding Banco CTT project (like-for-like) 4
Financial indicators:	2014	2015	Δ%	2015	Δ%
Recurring revenues 1	717.8	727.2	+1.3%	727.2	+1.3%
Recurring operating costs 2	582.7	583.2	+0.1%	578.2	-0.8%
Recurring EBITDA 1,2	135.1	144.0	+6.6%	149.0	+10.3%
Recurring net profit 3	72.5	81.6	+12.5%	85.2	+17.5%
Reported net profit	77.2	72.1	-6.6%	5 80.9	+4.8%

Metric	Addressed mail (m items)	Unaddressed mail (m items)	Parcels (m items)	Savings flows (€bn) / # of ops. (m) 6
2015 volumes	814.7	473.4	28.5	5.3 / 536.3
2015 vs. 2014	-3.2%	-6.7%	+3.2%	-20.5% / -7.5%

¹ Excluding non-recurring revenues of €1.0m in 2014.

² Excluding amortisation, depreciation, provisions, impairment losses and non-recurring costs affecting EBITDA of -€59.5m in 2014 and €9.4m in 2015, €6.4m of the latter related to Banco CTT project set-up costs.

³ Considers the nominal tax rate of CTT.

⁴ Excluding Banco CTT business unit costs and Banco CTT project costs booked in the Financial Services business unit.

⁵ Considers the corporate tax rate of Banco CTT and the effective tax rate of the year at CTT.

⁶ Amount of savings & insurance placements and redemptions / Number of savings & insurance placements and redemptions operations.

Diversified portfolio supports growth with positive impact from all businesses

• Mail positively impacted by lower than expected addressed mail volumes decline, growth in advertising mail and other revenues, and revenues from Express & Parcels network integration (+€2.8m)
• E&P benefits from volumes growth in Portugal and Mozambique and growth in other revenues
• FS supported by growth in savings & insurance revenues (+€2.4m), outstanding stock fees and other revenues

Key highlights

Recurring costs remain flat despite recurring variable remuneration and Banco CTT project

• Staff costs increase mainly due to the reintroduction of the variable remuneration as a recurring cost (+€9.7m) and the increase in the fixed salaries (+€3.9m), partly offset by lower healthcare costs (-€3.9m) as a result of the revision of the healthcare plan
• ES&S costs decrease mainly due to lower outsourcing costs as a result of the revised IT and communication services contracts (-€14.7m) and also the partial impact of Mail and E&P networks integration

¹ Excluding amortisation, depreciation, provisions, impairment losses and non-recurring costs affecting EBITDA of -€59.5m in 2014 and €9.4m in 2015, €6.4m of the latter related to Banco CTT project set-up costs. ² Excluding Banco CTT project recurring op. costs: €5.0m in 2015 (€4.7m booked in the Banco CTT business unit and €0.4m in the FS business unit), of which €2.3m staff costs and €2.8m ES&S costs and other costs. ³ Booked in the Banco CTT business unit (€4.7m) and in the Financial Services business unit (€0.4m).

Key highlights

The majority of the 2015 non-recurring costs are associated with the Banco CTT set-up

¹ Excluding amortisation, depreciation, provisions and impairment losses. 9

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs.

Recurring EBITDA grows by 6.6% to €144.0m, driven mainly by efficiency projects

Recurring EBITDA grows by 10.3% on a like-for-like basis

¹Including €0.4m Banco CTT project recurring operating costs booked in the Financial Services business unit.

² Excluding -€4.7m Banco CTT recurring EBITDA.

³ Excluding total non-recurring revenues of €1.0m in 2014 and non-recurring operating costs affecting EBITDA of -€59.5m in 2014 and €9.4m in 2015, €6.4m of the latter related to Banco CTT project set-up costs.

⁴ Excluding Banco CTT project recurring op. costs: €5.0m in 2015 (€4.7m booked in the Banco CTT business unit and €0.4m in the FS business unit), of which €2.3m staff costs and €2.8m ES&S costs and other costs. ⁵ Booked in the Banco CTT business unit (€4.7m) and in the Financial Services business unit (€0.4m).

Cash flow generation supports higher capex and dividend payments

Dividend not affected by Banco CTT launch, as committed

The Board will propose a dividend of €70.5m (€0.47 per share), a 6.8% increase vs. the prior year recurring dividend base

¹Cash flow from operating activities excluding increase in Net Financial Services payables of €77.6m (2014) and decrease of €61.0m (2015). Cash at end of period excluding Net Financial Services payables of €385.7m (2014) and €324.7m (2015).

² Capex payments presented in table. 2015 capex was €32.3m, 95% above that of 2014 (€16.6m).

3 Including -€0.7m change in consolidation perimeter in 2014.

Key highlights

Strong cash position maintained in a year of high investment

Adjusted cash at the end of the period ¹

€ million

High cash flow generation enables CTT to keep its strong cash position stable in a year of relevant investment in preparation of the launch of Banco CTT

¹ Cash and cash equivalents excluding net Financial Services payables of €385.7m (Dec-14) and €324.7m (Dec-15). 2 Includes €5.3m of P&L tax benefits (VAT) to be recovered in 2016.

Net cash grows to €83m

Balance Sheet – December 2015

€ million; % change vs. Dec-14

Balance sheet optimisation initiatives to continue

01. Key highlights

1. Business units performance

2. 2016 Outlook

04. Appendix

New business unit created – Banco CTT

¹ Banco CTT costs in 2015 are booked partly in the new Banco CTT business unit and partly in the Financial Service business unit.

1 Mail benefits from lower volumes decline and growth in advertising & other revenues

¹Including +€2.8m of revenues that result from the network integration with CTT Expresso, +€1.8m from the MoU with Altice and +€3.6m from the improvements made in the VAT deduction methodology procedures in 2015. ² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including variable remuneration as recurring operating cost in 2015.

³ Million items.

⁴ USO, excluding international inbound mail.

Business units performance

2 Tourline restructuring overshadows the double-digit profitability in Portugal

1 Including internal and other revenues, and internal transactions with Spain and Mozambique. Including +€1.8m from the MoU with Altice in 2015.

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including variable remuneration as recurring cost in 2015.

³ Million items.

⁴Change in methodology, comparison to 2014 not meaningful.

Business units performance

3 Financial Services benefits from growth in revenues and lower sales incentives

1 Includes +€1.8m from the MoU with Altice and +€1.8m from the improvements made in the VAT deduction methodology procedures in 2015.

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including variable remuneration as recurring cost in 2015.

³€0.4m Banco CTT project op. costs booked in the Financial Services business unit (the remaining €4.7m Banco CTT project recurring operating costs are booked in Banco CTT business unit).

⁴ Amount of savings & insurance products placements and redemptions (€ billion) – €4.3bn of placements and €1.0bn of redemptions in 2015 / # of savings & insurance products placements and redemptions ops. (million). ⁵ Million operations.

⁶ € million, new credit production, including consumer credit & credit cards.

Business units performance

4 Banco CTT project spending remained within the €30m target

Due to soft opening in 2015, the kick-off media campaign will occur in 2016

Opening on 18 March

01. Key highlights

1. Business units performance

03. 2016 Outlook

04. Appendix

2016 Outlook

The industry transformation trends are expected to continue to impact CTT in 2016

2016 Outlook

CTT continues to have a well-defined strategy leveraging on its competitive skills and advantages

2016 Outlook

Capital Markets Day guidance reaffirmed

Revenues & volumes

• Growth in revenues, supported by Banco CTT launch:
• o Decline in addressed mail volumes [-3% / -5%], dependent of the growth of GDP
• o Banco CTT 2016 focus to be on customer acquisitions (account openings)
• o Banco CTT launch with marginal incremental revenues in 2016 to support growth
• Operating costs Recurring costs (excluding Banco CTT) to reduce:
• o Full benefit of network integration and optimisation, new IT infrastructure and HR initiatives
• o Additional efficiency measures under development
• Operating costs to be impacted by Banco CTT (~€20m recurring costs and ~€8m non-rec. costs)

Earnings & dividend

• Recurring EBITDA (excluding Banco CTT) to grow by mid-single digits, positively impacted by optimisation measures implemented
• Stable growth of dividend supported by strong cash flow generation linked to Balance Sheet optimisation measures
• Capex of ~€40m, ~€20m of which related to Banco CTT

01. Key highlights

1. Business units performance

2. 2016 Outlook

04. Appendix

Appendix

Non-recurring items affecting the results

Non-recurring items

€ million

	2014	2015	∆ (€m)
Reported EBITDA	195.6	134.6	-61.1
Non-recurring items affecting EBITDA	-60.5	9.4	69.9
Revenues	-1.0	0.0	1.0
Staff costs	-62.4	0.0	62.4
ES&S & other op. costs	2.9	9.4	6.5	Banco CTT project set-up costs: €6.4m
Recurring EBITDA	135.1	144.0	8.9	Tourline debt write-off: €1.0m

Reported EBIT	135.4	109.9	-25.5
Non-recurring costs affecting only EBIT	36.6	0.4	-36.2
Provisions (net movement)	11.6	0.0	-11.6
Labour contingencies	4.9	-0.5	-5.4
Onerous contracts	6.7	0.5	-6.2
Impairment of investments	-0.2	-0.2	0.0
Restructuring for network optimisation	6.3	1.2	-5.1
Goodwill and investment impairment	18.9	-0.6	-19.5
Non-recurring items affecting EBITDA & EBIT	-23.9	9.8	33.7
Recurring EBIT	111.5	119.8	8.2

CTT Investor Relations

Upcoming Events:

17 Mar. – London – roadshow with BPI 21 Mar. – Edinburgh – roadshow with Jefferies 31 Mar. – Madrid – roadshow with Haitong 6 Apr. – London – Barclays Select Series Leisure and Transp. Corp. Day 7 Apr. – Paris - 29th ESN European Conference with Caixa BI 11 Apr. – New York – roadshow with JP Morgan 12 Apr. – Boston – roadshow with Investec

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