CTT-Correios de Portugal

Earnings Release • Jul 25, 2019

THE P RESULTS

CTT - Correios de Portugal, S.A. 25 July 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 1st half 2019 results. As a consequence thereof, this document may not be disc 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.

highlights

1H19 registered several important milestones, aimed at strengthening the Company and enhancing its growth potential

Transformational 2Q19 for Banco CTT with the integration of 321 Crédito, volumes advancing well in savings placements, recovering in mail and domestic parcels

Transformational quarter for the Banco CTT business unit ¹ with the integration of 321 Crédito

Savings & insurance placements continue to grow strongly (+37.5%), from a higher base

Operational Transformation Plan FY19 operating costs savings objective practically secured (€14.2m of savings $vs \in 15.0m$ plan)

Net financial cash position impacted by the closing of the 321 Crédito acquisition and the dividend payment

Seasonal effects impacted the addressed mail volumes evolution in 1H19; parcels volumes begin to recover in Portugal

Addressed mail volumes affected by 2 less working days in the period; better seasonal and comparison factors are expected in the second half of the year

Portugal parcels volumes begin to recover in 2019 after an uncharacteristically weak 1019. Spain is impacted by the full loss of a large customer (excluding this effect volumes would have grown +9.1% in 1H19)

$6\phantom{1}6$

The 321 Crédito acquisition spurs a new growth phase for Banco CTT; public debt products placements continue at a robust pace

19.7

23.6

$5.1$

18.5

1H19

1.8

1H19

1H18

321 Crédito

2Q18

2Q19

1Q18

1Q19

Banco CTT business unit revenues growth underpinned by organic developments and the inorganic contribution from 321 Crédito in 2Q19

$\overline{7}$

The successful execution of the Operational Transformation Plan starts to manifest itself in the evolution of the operating costs

• Operational Transformation Plan (OTP) FY19 objective practically secured: €14.2m of operating costs savings secured vs objective of €15.0m. €9.0m of OTP savings already impacting the 1H19 P&L
• As part of the OTP, and in line with the Company's policy of disposal of non-strategic assets when the necessary market conditions are met, CTT will implement an optimisation of its real estate portfolio in 2H19
• Specific items of €11.7m in 1H19 mainly related to negotiated staff exits ( $\epsilon$ 6.8m) and M&A costs & strategic studies ( $\epsilon$ 4.1m)

Strategic priorities update

$\left| \begin{array}{c} \blacksquare & \blacksquare \ \blacksquare & \blacksquare \end{array}\right|$ Mail

$\checkmark$ Continue to implement the OTP, to exceed the communicated targets

$\checkmark$ Focus on achieving incremental operating costs savings, to be presented with 3Q19 results

✓ Stricter policy in negotiated staff exit costs

READ Express & Parcels

√ New Tourline mgmt. team, with local, sector & turnaround experience

$\checkmark$ Focus on organic growth coupled with operational efficiency measures

$\checkmark$ 18-24 month turnaround & costs optimisation programme, to be presented with 3Q19 results

Banco CTT

$\checkmark$ Focus on monetising the existing client base & increasing profitability

√ Integration of 321 Crédito, in order to realise the identified synergies

$\checkmark$ Reaffirming EBITDA break-even in 2H19 & Net profit break-even in 2020

Updated FY19 EBITDA guidance: €100m to €105m, including the contribution of 321 Crédito Updated FY19 Capex guidance: €45m, a reduction of €10m vs initial target of €55m Voluntary reductions of Board remunerations of 25% for CEO & Chairman and 15% for the remaining Board members

FY19 targets

• $\blacktriangleright$ Banco CTT has been very well accepted by the population, having attracted more than 450k customers and more than €1.1bn in deposits
• $\blacktriangleright$ 321 Crédito enables the 2H19 EBITDA break-even and launches a new growth phase for Banco CTT
• Expands the bank's credit portfolio to $\blacktriangleright$ > €800m by the end of the year
• D Enables the optimisation of Banco CTT's Balance sheet, by combining its proven deposit-taking capabilities with a specialised consumer credit platform to reach Loan-to-deposit ratio of >70% by the end of the year

financials

The second quarter registered improvements in almost all relevant financial metrics

Financial performance

$\epsilon$ million, % change vs prior year

		Quarter			Half
Key financial indicators	2Q18	2Q19	$\Delta\%$	1H18	1H19	$\Delta\%$
Revenues	178.2	178.1	$-0.0%$	355.1	355.0	$-0.0%$
Operating costs $1$	154.8	152.7	$-1.3%$	309.1	308.6	$-0.1%$
EBITDA	23.3	25.4	$+8.7%$	46.1	46.4	$+0.7%$
IFRS 16 impact on EBITDA	7.9	6.8	$-13.8%$	16.7	13.7	$-17.6%$
EBITDA including IFRS 16	31.2	32.2	$+3.1%$	62.7	60.1	$-4.2%$
Specific items	10.9	6.1	$-43.7%$	17.2	11.7	$-32.2%$
EBIT	6.6	11.0	$+67.8%$	18.1	19.7	$+8.9%$
Net profit	1.5	5.3	$+254.6%$	7.4	9.0	$+21.0%$

The decline in Mail revenues was offset by organic and inorganic growth in Banco CTT and Financial Services business units

Positive mix effect in Mail and effective +2.4% price increase in the period unable to offset addressed mail volumes decline of -10.3%, impacted by 2 less working days

• Express & Parcels revenues remained flat, mainly due to the performance in Spain, impacted by the full loss of a large customer in 2019
• Banco CTT business unit revenues grew strongly, driven by net interest (+€1.8m) and fees & commissions (+€1.4m) income growth & the inorganic contribution of 321 Crédito
• The strong recovery in Financial Services continued, on the back of +62.5% growth in public debt certificates placements

Operating costs remained flat, despite the acquisition of 321 Crédito, due to the positive impacts of the Operational Transformation Plan

• Staff costs declined €1.5m (-0.9%) to €168.3m excluding 321 Crédito
• ES&S declined -€1.7m (-1.4%) to €125.3m excluding 321 Crédito, mainly as a result of reductions in facilities & fleet costs (-€3.2m), partially offset by increases in transport & distribution (+ $\epsilon$ 1.0m) and regulatory (+ $\epsilon$ 0.6m) costs

EBITDA evolution underpinned by profitability improvements in Financial Services and Banco CTT

The Balance sheet reflects the integration of 321 Crédito as well as the impacts of the adoption of IFRS 16 - in fixed tangible assets, equity and financial debt

Balance sheet - 30 June 2019

€ million; % change vs 31 December 2018

Net financial cash position of ~€0m (excluding leases liabilities), after the payment for the acquisition of 321 Crédito

Net financial cash (debt)¹

$\epsilon$ million

(+) Cash & cash equivalents	364
(-) Financial Services payables, net	214
(-) Banco CTT liabilities, net	67
$(-)$ Other	16
(=) Own cash	67
(-) Financial debt (excl. leases)	68
(-) Leases liabilities (IFRS 16)	90
Net financial cash (debt)

business units

A challenging semester for Mail; better seasonal and comparison factors are expected in the second half of the year

$E$ BIT 2

$\epsilon$ million

$\mathbf{F} = \mathbf{N}$ Mail volumes by type (mitems)

Metric	Avg. mail prices	Addressed mail	Transactional	Advertising	Editorial	Unaddressed mail
1H19	N/D	320.6	279.0	24.4	17.3	237.6
vs 1H18	$+2.4%$	$-8.8\%$ adj. for $-10.3\%$ working days	$-9.3%$	$-20.4%$	$-9.7%$	$+12.5%$

1H18

1H19

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

² Including Specific items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions.

Express & Parcels revenues and profitability penalised by the loss of a key account in Spain, representing > 10% of revenues

,
1H19 E&P revenues

€ million; % change vs prior year

- Portugal	€45.9m $(+3.9%)$
– Parcels	€34.5m $(+5.9%)$
– Cargo	€6.5m $(+1.4%)$
- Banking network	€3.3m $(+5.7%)$
– Logistics	€1.4m $(-3.0%)$
– Other	€0.2m $(-72.3%)$
- Spain	€25.9m $(-6.3%)$
– Mozambique	€1.0m $(+4.2%)$
Total	€72.8m $(+0.1%)$

DE&P volumes by region (mitems)

Metric	Total	Portugal	Portugal (excl. Cargo)	Spain	Mozambique
1H19	17.7	9.8	8.3	7.8	0.03
vs 1H18	$-1.8%$	$+4.1%$	$+2.6%$	$-8.2%$ +9.1% excl. loss of key	$-12.5%$
.				account

¹ Excluding Specific Items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions. ² Including Specific Items & IFRS 16, depreciation, amortisation, impairments and provisions.

321 Crédito acquisition and growth in net interest income & commissions boost Banco CTT revenues and profitability

1H19 Banco CTT revenues¹

$\epsilon$ million; % change vs prior year

- Net interest income	€5.1m $(+£1.8m)$
- Interest income	€5.5m $(+£1.8m)$
- Interest expense	$-E0.4m (+E0.0m)$
$-$ Fees & commissions income	€3.6m (+€1.4m)
$-$ Own products	€2.3m $(+€0.7m)$
– Consumer credit & insurance	€1.2m (+€0.7m)
- Payments & other	€9.8m $(-€0.4m)$
-321 Crédito	€5.1m ( $+$ €5.1m)
Total	€23.6m $(+£7.8m)$

1H19

FRIT3

$\epsilon$ million

Selected Banco CTT Balance Sheet indicators

Metric (Consolidated)	Assets $(\epsilon m)$	Credit to clients lash & equivalents าvestments (net of impairments)				Equity ( $\epsilon$ m) / CET 1 (%) 4
$30$ -Jun-19	1,486.9	199.3	440.8	736.7	1,063.6 408k current	192.1 / 18.3%
vs 31-Dec-18	$+48.4\%$	$-23.4%$	$-2.9%$	$+197.0\%$	accounts $+20.3%$	$+114.6\%$ / -5.1 p.p.

1H18

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 p ² Excluding Specific items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions.

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

⁴Fully implemented.

Financial Services profitability benefited from the continued recovery in public debt certificates placements coupled with robust costs control

1H19 1H18

EE FS volumes by type

Metric	Savings & insurance flows $(\epsilon$ bn)	Placements	Redemptions	Money orders $(m$ ops)
1H19	2.2	1.8	0.4	7.4
vs 1H18	$+31.6%$	+55.6%	$-19.2%$	$-9.5%$

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 p ² Excluding Specific items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions. ³ Including Specific items & IFRS 16 impacts, depreciation, amortisation, impairments and provisions.

appendix

Income statement

$\epsilon$ million	Reported		Reported with Banco CTT under equity method 1
	1H18	1H19	1H18	1H19
Revenues	355.1	355.0	348.0	340.3
Operating costs	292.4	294.9	277.1	275.0
EBITDA (incl. IFRS 16 impact)	62.7	60.1	71.0	65.3
of which, IFRS 16 impact:	16.7	13.7	16.3	13.5
EBITDA (excl. IFRS 16 impact)	46.1	46.4	54.7	51.8
Depreciation, amortisation, impairments & provisions	27.4	28.7	25.6	25.8
of which, IFRS 16 impact:	12.9	11.1	12.5	10.8
Specific items	17.2	11.7	17.1	10.5
EBIT	18.1	19.7	28.3	29.1
Financial income / (costs)	$-4.9$	$-4.8$	$-4.9$	$-4.8$
of which, IFRS 16 impact:	$-2.1$	$-1.9$	$-2.1$	$-1.9$
Associated companies - gains / (losses)	0.1	$-0.2$	$-7.9$	$-7.6$
Earnings before taxes (EBT)	13.3	14.7	15.5	16.6
Income tax for the period	5.9	5.7	8.1	7.6
Non-controlling interests	0.0	0.0	0.0	0.0
Net profit attributable to equity holders	7.4	9.0	7.4	9.0

Balance sheet

$\epsilon$ million		CTT			With Banco CTT under equity method 1
	31-Dec-18	30-Jun-19	31-Dec-18		30-Jun-19
Non-current assets	1,108.1	1,576.2		486.6	580.9
Current assets	746.3	715.8		456.9	426.3
Assets	1,854.5	2,292.0		943.5	1,007.2
Equity	135.9	129.7		135.9	129.7
Liabilities	1,718.6	2,162.2		807.6	877.5
Non-current liabilities	364.3	488.9		363.5	388.7
Current liabilities	1,354.3	1,673.4		444.1	488.8
Equity and Liabilities	1,854.5	2,292.0		943.5	1,007.2

n flow:	Reported				With Banco CTT under equity method 1
$\epsilon$ million	1H18	1H19	$\triangle 19/18$	1H18		1H19	$\triangle 19/18$
EBITDA	46.1	46.4	0.3		54.7	51.8	$-2.8$
Specific items affecting EBITDA	$-15.1$	$-11.7$	3.4	$-14.9$		$-10.5$	4.4
Capex	$-8.3$	$-14.7$	$-6.4$		$-5.2$	$-12.0$	$-6.8$
Change in Working capital	$-28.1$	$-12.8$	15.3	$-28.4$		$-19.2$	9.1
Operating cash flow	$-5.3$	7.3	12.6		6.2	10.1	4.0
Tax	$-2.0$	$-1.6$	0.4		$-7.6$	0.1	7.7
Employee benefits	$-7.0$	$-6.7$	0.3		$-7.0$	$-6.7$	0.3
Free cash flow	$-14.3$	$-1.0$	13.2		$-8.4$	3.6	12.0
Debt (principal + interest)	$-7.9$	36.7	44.6		$-7.9$	36.7	44.6
Dividends	$-57.0$	$-15.0$	42.0	$-57.0$		$-15.0$	42.0
Financial investments	$\overline{\phantom{a}}$	$-112.9$	$-112.9$	$-25.0$		$-112.2$	$-87.2$
Changes to the consolidation perimeter	$\qquad \qquad$	6.8	6.8		$\overline{\phantom{a}}$
Net change in own cash	$-79.1$	$-85.4$	$-6.3$	$-98.3$		$-86.8$	11.5
$\Delta$ Liabilities related to Financial Services & Banco CTT (net)	70.6	18.4	$-52.2$	136.5		18.7	$-117.9$
Other	$-26.5$	8.0	34.5		$-0.1$	$-0.0$	0.1
Net change in cash	$-35.1$	$-59.0$	$-23.9$		38.2	$-68.2$	$-106.3$

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 p

Cashflo

Specific items

$\epsilon$ million		Specific items
	1H18	1H19
EBIT	35.3	31.4
Specific items affecting EBIT	17.2	11.7
Revenues	$-0.0$	$-0.2$	Of which €6.8m of indemnities related to negotiated staff exits
Staff costs	13.3	7.5
ES&S & other op. costs	1.7	4.4	Of which €4.1m of M&A costs & strategic studies, of which €1.2m related to the 321 Crédito
Provisions	1.7		acquisition, €1.6m related to the Operational Transformation Plan
Impairments and D&A	0.4		and €1.0m related to new regulatory measures
EBIT including Specific items	18.1	19.7

Investor Relations

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

CTT - Correios de Portugal, S.A.