CONTENTS
Financial Highlights | 2 |
Corporate Information | 3 |
Management Discussion and Analysis | 6 |
Directors' Report | 13 |
Condensed Consolidated Statement of | 22 |
Profit or Loss and Other Comprehensive Income | |
Condensed Consolidated Statement of Financial Position | 24 |
Condensed Consolidated Statement of Changes in Equity | 26 |
Condensed Consolidated Statement of Cash Flows | 27 |
Notes to Condensed Consolidated Financial Statements | 29 |
FINANCIAL HIGHLIGHTS
HIGHLIGHTS OF 2020 INTERIM RESULTS
For the six-month period ended June 30, 2020 (the "Period" or the "First Half of the Year"), results of China ITS (Holdings) Co., Ltd. (the "Company") and its subsidiaries (collectively the "Group") are as follows:
- The Group recorded RMB358.5 million from the new contracts signed, representing a decrease of 1.3% compared to the same period last year.
- Revenue of RMB237.1 million was generated, representing a decrease of 38.0% compared to the same period last year.
- As of June 30, 2020, the Group recorded RMB898.9 million from backlog, representing an increase of 7.0% compared to the end of the previous year.
- The Group generated gross profit of RMB53.9 million, which decreased by 34.6% compared to the same period last year, and recorded gross profit margin of 22.8%, representing an increase of 1.2 percentage points compared to the same period last year.
- The profit attributable to owners of the parent of the Company amounted to RMB39.4 million as compared to the profit of RMB13.7 million (restated) for the same period last year, representing an increase of 187.6% compared to the same period last year.
02 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
CORPORATE INFORMATION
BOARD OF DIRECTORS
Executive Directors
Mr. Liao Jie (chairman of the Board) Mr. Jiang Hailin (chief executive officer)
NOMINATION COMMITTEE
Mr. Zhou Jianmin (committee chairman) Mr. Ye Zhou
Mr. Wang Dong
Independent Non-executive Directors
Mr. Ye Zhou
Mr. Wang Dong (CICPA, CIMA, AAIA, CGMA)
Mr. Zhou Jianmin
COMPANY SECRETARY
Mr. Leung Ming Shu (FCCA, FCPA)
AUTHORIZED REPRESENTATIVES
Mr. Jiang Hailin
Suite 102, 1st Unit, 8th building
1 Balizhuang Beili, Haidian District Beijing
China
Mr. Leung Ming Shu (FCCA, FCPA)
Flat 1, 3/F, Block A
Ventris Place
19-23 Ventris Road
Happy Valley
Hong Kong
AUDIT COMMITTEE
Mr. Wang Dong (CICPA, CIMA, AAIA, CGMA) (committee chairman)
Mr. Zhou Jianmin
Mr. Ye Zhou
REMUNERATION COMMITTEE
Mr. Ye Zhou (committee chairman)
Mr. Wang Dong (CICPA, CIMA, AAIA, CGMA)
Mr. Zhou Jianmin
REGISTERED OFFICE
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
HEAD OFFICE IN THE PRC
Building 204, No. A10,
Jiuxianqiao North Road,
Chaoyang District
Beijing 100015, China
PRINCIPAL PLACE OF BUSINESS IN HONG KONG
8/F., Golden Star Building 20-24 Lockhart Road Wanchai
Hong Kong
COMPANY WEBSITE
www.its.cn
PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE
SMP Partners (Cayman) Limited 3rd Floor, Royal Bank House
24 Shedden Road, George Town
Grand Cayman KY1-1110
Cayman Islands
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 03 |
CORPORATE INFORMATION
HONG KONG BRANCH SHARE
REGISTRAR AND TRANSFER OFFICE
Union Registrars Limited
Suites 3301-04, 33/F
Two Chinachem Exchange Square
338 King's Road
North Point
Hong Kong
AUDITOR
Mazars CPA Limited
Certified Public Accountants
42/F., Central Plaza
18 Harbour Road
Wanchai
Hong Kong
PRINCIPAL BANKERS
Bank of Beijing Co., Ltd. Beijing Branch Cuiweilu sub-branch China Everbright Bank Co., Ltd. Beijing Branch
Xicheng sub-branch
China Guangfa Bank Co., Ltd. Beijing Branch Yuetan sub-branch
Fubon Bank (China) Co., Ltd. Tianjin Branch
Ping An Bank Co., Ltd. Shanghai Pilot Free Trade Zone Branch Shengjing Bank Beijing Branch Guanyuan sub-branch Xiamen International Bank Co., Ltd. Beijing
Zhongguancun sub-branch
China Minsheng Banking Corp., Ltd. Beijing Branch Sales Department
Shanghai Huarui Bank Co., Ltd.
China Construction Bank Hong Kong Branch Shanghai Pudong Development Bank Co., Ltd. Beijing Xuanwu sub-branch
LEGAL ADVISOR
Luk & Partners
In Association with Morgan, Lewis & Bockius Suites 1902-09, 19th Floor
Edinburgh Tower, The Landmark
15 Queen's Road Central, Hong Kong
LISTING EXCHANGE INFORMATION
Place of listing: Main Board of The Stock Exchange of Hong Kong Limited Stock code: 1900
Board lot: 1000 shares
04 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
CORPORATE INFORMATION
KEY SUBSIDIARIES
"Aproud Technology" | Beijing Aproud Technology Co., Ltd. |
(北京亞邦偉業技術有限公司) | |
"CEEC" | CEECGLOBAL LIMITED |
(世波工程有限公司) | |
"CIC Infrastructure" | CIC Infrastructure Industry Investment Limited |
(中智基礎產業投資有限公司) | |
"CIC Information" | CIC Information Technology Company Limited |
"Haotian Jiajie" | Beijing Haotian Jiajie Technology Co., Ltd. |
(北京昊天佳捷科技有限公司) | |
"Hongrui Dake" | Beijing Hongrui Dake Technology Co., Ltd. |
(北京宏瑞達科科技有限公司) | |
"Jiangsu Zhongzhi Transportation" | Jiangsu Zhongzhi Transportation Technology Co., Ltd. |
(江蘇中智交通科技有限公司) | |
"Jiangsu Zhongzhi Ruixin" | Jiangsu Zhongzhi Ruixin IOT Technology Co., Ltd. |
(江蘇中智瑞信物聯科技有限公司) | |
"Zhongzhi Runbang" | Beijing Zhongzhi Runbang Technology Co., Ltd. |
(北京中智潤邦科技有限公司) | |
"Zhixun Tiancheng" | Beijing Zhixun Tiancheng Technology Co., Ltd. |
(北京智訊天成技術有限公司) | |
"Zhongtian Runbang" | Zhongtian Runbang Information Technology Co., Ltd. |
(中天潤邦信息技術有限公司) | |
"Tibet Intelligent Aviation" | Tibet Intelligent Aviation Transportation Technology Co., Ltd. |
(西藏智航交通科技有限公司) | |
"Chengdu Zhongzhi Runbang" | Chengdu Zhongzhi Runbang Transportation Technology Co., Ltd. |
(成都中智潤邦交通技術有限公司) | |
"Jiangsu Zhixun Tiancheng" | Jiangsu Zhixun Tiancheng Technology Co., Ltd. |
(江蘇智訊天成技術有限公司) | |
"Myanmar Ahlone" | Myanmar Ahlone Power Plant Company Limited |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 05 |
MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW OF THE OVERALL OPERATION OF THE COMPANY DURING THE REPORTING PERIOD
In the First Half of the Year, the Group recorded RMB358.5 million from new contracts signed, representing a decrease of 1.3% compared to the same period last year. The Group generated revenue of RMB237.1 million, representing a decrease of 38.0% compared to the same period last year, and as of June 30, 2020, the Group recorded RMB898.9 million from backlog, representing an increase of 7.0% compared to the end of the previous year. The Group generated gross profit of RMB53.9 million, which decreased by 34.6% compared to the same period last year, and recorded gross profit margin of 22.8%, increased from 21.6% for the same period last year. The profit attributable to owners of the parent of the Company amounted to RMB39.4 million for the First Half of the Year compared to the profit of RMB13.7 million (restated) for the same period last year.
BUSINESS AND FINANCIAL REVIEW
The Company and its subsidiaries (the "Group") is mainly a provider of products, specialised solutions and services related to infrastructure technology in the PRC and overseas. The main businesses of this Group are as follows:
- Products and specialised solutions business (the "Products and Specialised Solutions") - in the field of infrastructure construction such as railways and electric power, the Group sells products and specialised solutions to meet customers' needs according to their requirements. It mainly includes: railway communication products, energy-base products, power communication products, power transmission and transformation equipment, power generation equipment, etc.; and
- Value-addedoperation and services business (the "Value-addedOperation and Services") - We provide value- added services such as maintenance services, network optimization and network planning, and technical consulting for the products related to the communication system for railway customers, as well as the planning and technical consulting services of the infrastructure construction in relation to electric power such as power plant construction and power grid renovation for electric power customers, and power plant investment, construction and operation.
Business Review
For the First Half of the Year, the COVID-19 pandemic broke out on a large scale in China and the world. Affected by this, the global economy went down, and the Group took active and effective response measures immediately. For the railway sector business, the Group leveraged its own technical and services advantages and made full use of Internet technology to provide customers with remote technical support services to ensure safe railway operation and improve customers satisfaction. At the same time, in response to the pandemic, the Railway sector timely launched a solution of electronic passenger tickets, which became a business highlight in the First Half of the Year. The overseas energy sector overcame the impact of the pandemic and ensured that the power plant construction project was completed and started grid-connected power generation in the First Half of the Year according to the original plan. For the company management, the Group actively organized online learning for management and employees in February 2020, during which the domestic pandemic was the worst, to improve the overall quality of the Group's personnel. The Group also actively organized the resumption of work and production as well as pandemic prevention and control, and adopted the work mode of combining remote office and on-site office, so as to ensure that the work was not affected to the maximum extent, and all expenses were also controlled to the lowest level.
06 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
Business Review (continued)
- The railway sector business was affected in the short term, but contract reserves were abundant
Products and specialised solutions are the principal business of the Group, and the Group is one of the largest providers in this segment. Affected by the COVID-19 pandemic, the delivery of some projects in the First Half of the Year was delayed, and recognized revenues of the Group decreased significantly. Although affected by the COVID-19 pandemic in the First Half of the Year, the national railway fixed asset investment in the first quarter decreased by 21% year-on-year, and the overall performance of the railway communication segment declined; however, through our own competitive advantages, the Group still maintained a high market share in products and specialised solutions business in the railway communication segment. The number of new contracts signed in the First Half of the Year was slightly lower than the same period last year. At the same time, the Group's backlog increased slightly compared with the end of previous year. On the whole, the COVID-19 pandemic has a short-term impact on the Group's products and specialised solutions business, with little impact in the future.
The intelligent value-added operation and services business of railway communication system is the key development business of the Group. Due to the high technical threshold, certain industry experience and expertise are required. This business has expanded to most nationwide railways bureaus and covered the railway backbone network by virtue of the Group's platform advantages and self-developed intelligent maintenance system. In the Second Half of the Year, the Group will endeavor to expand diversified professional technical services to ensure that the impact of the COVID-19 pandemic will be kept to a small extent. - The self-built power plant was put into operation for power generation, and the electric power business was steadily promoted
The Group signed the ALONE 151,000-kilowatt power plant project in Yangon, Myanmar in 2019, with a total investment of approximately RMB400 million. The power plant was put into trial operation and started grid-connected power generation in May 2020. The smooth progress of the project was a successful step taken by the Group in the field of electric power infrastructure, and it had also laid a solid foundation for the Group to further and solidly explore the infrastructure market in Southeast Asia.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 07 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
FINANCIAL REVIEW
Revenue
For the First Half of the Year, the Group generated revenue as follows:
Six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Revenue by business model | ||
Products and specialised solutions | 193,102 | 338,288 |
Value-added operation and services | 43,968 | 44,118 |
Elimination | - | - |
Total | 237,070 | 382,406 |
- Products and specialised solutions
For the First Half of the Year, revenue of RMB193.1 million was recognised from the products and specialised solutions business, representing a decrease of RMB145.2 million compared to the same period last year, and decreased by 42.9%. The business recorded RMB322.9 million from new contracts signed, representing a decrease of RMB3.3 million compared to the same period last year and the amount of backlog as of the end of the Period was RMB843.9 million, representing an increase of RMB70.2 million compared to the end of the previous year.
The decrease in revenue was due to the delay in the delivery of some projects, resulting from the significant impact of the COVID-19 pandemic on the resumption of work and production for enterprises in the First Half of the Year. - Value-addedoperation and services
Revenue recognised from the value-added operation and services business for the First Half of the Year was RMB44.0 million, representing a decrease of RMB0.1 million compared to the same period last year, and decreased by 0.3%. The business recorded RMB35.6 million from new contracts signed, representing a decrease of RMB1.5 million compared to the same period last year and the amount of backlog as of the end of the Period was RMB55.0 million, representing a decrease of RMB11.4 million compared to the end of the previous year.
Although the revenue in the First Half of the Year was the same as that of the same period last year, the value-added operation and service business of the railway sector was affected by the COVID-19 pandemic, and the implementation of some projects was delayed, and revenue decreased by RMB13.2 million compared with the same period last year. Meanwhile, the Group's self-built power plant was put into operation in the First Half of the Year, the revenue of value- added operation and service of electric power business increased by RMB13.1 million compared with the same period last year.
08 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
FINANCIAL REVIEW (continued)
Gross Profit and the Gross Profit Margin
The Group generated gross profit of RMB53.9 million in the First Half of the Year, representing a decrease of RMB28.5 million compared to the same period last year. Gross profit margin increased from 21.6% for the same period last year to 22.8% for the First Half of the Year.
Six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Gross profit and the Gross Profit Margin by business model | ||
Products and specialised solutions | 33,714 | 61,546 |
Margin % | 17.5% | 18.2% |
Value-added operation and services | 20,229 | 20,912 |
Margin % | 46.0% | 47.4% |
Elimination | - | - |
Total | 53,943 | 82,458 |
Margin | 22.8% | 21.6% |
- Products and specialised solutions
For the First Half of the Year, gross profit of RMB33.7 million was recognized from the products and specialised solutions business, representing a decrease of RMB27.8 million compared to the same period last year. The gross profit margin was 17.5%, representing a decrease of 0.7 percentage points compared to the same period last year. The decrease in gross profit was due to the decrease in revenue from the business in the First Half of the Year. - Value-addedoperation and services
Gross profit recognized from the value-added operation and services business for the First Half of the Year was RMB20.2 million, representing a decrease of RMB0.7 million compared to the same period last year. The gross profit margin of value- added operation and services was 46.0%, representing a decrease of 1.4 percentage points compared to the same period last year. The gross profit and gross profit margin of this business in the First Half of the Year remained at the same level compared to the same period last year.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 09 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
FINANCIAL REVIEW (continued)
Other Income and Gains
For the First Half of the Year, other income and gains were approximately RMB16.2 million, mainly including: 1. The impairment loss of approximately RMB6.0 million in the previous year recovered by the Group; 2. the compensation income from equity investment counterparties for not fulfilling their committed performance in relation to the equity investment held by the Group was approximately RMB4.3 million; 3. the rental income of the investment properties was approximately RMB2.5 million; 4. the government grants income was approximately RMB2.0 million; 5. and the financial assets dividend income was approximately RMB1.2 million.
Selling and Administration Expense and Impairment Losses
For the First Half of the Year, selling and administration expense and impairment losses were approximately RMB72.1 million, representing an increase of RMB8.0 million as compared to the same period last year.
-
Selling and administration expense which was related to daily operational activities
For the First Half of the Year, selling and administration expense which was related to daily operational activities was
RMB56.5 million as compared to RMB70.7 million for the same period last year, decreased by RMB14.2 million compared to the same period last year. The decrease was mainly due to the impact of the COVID-19 pandemic in the First Half of the Year, the reduction in employee travel frequency led to a reduction in travel expenses; the government reduced corporate social insurance, which led to a reduction in social insurance costs; and the reduction in the number of full-time employees led to a decrease in wages and salaries. - Impairment losses
The impairment losses for the First Half of the Year were RMB15.6 million as compared to reversal from impairment losses of RMB6.6 million for the same period last year.
Finance Revenue and Finance Cost
Finance revenue mainly comprised of interest income and finance cost mainly comprised of interest expenses for interest-bearing bank loan. The net financial expenses represented the finance cost minus finance revenue. For the First Half of the Year, the net financial expense was RMB16.2 million, which represented an increase of RMB12.8 million compared to the same period last year. This was mainly due to the decrease of RMB11.0 million in interest income for the First Half of the Year compared to the same period last year.
Share of Loss of Joint Venture/Associates
For the First Half of the Year, share of loss of investment entities was approximately RMB0.1 million, as compared to the profit of RMB2.0 million for the same period last year.
Proceeds from Disposal of Financial Assets
For the First Half of the Year, the Group disposed part of equity in an equity investment and obtained a profit of RMB4.4 million.
10 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
FINANCIAL REVIEW (continued)
Profit or Loss through Fair Value Changes
For the First Half of the Year, influenced by the market fluctuations, the Group's equity investments in Forever Opensource (stock code: 834415), CNBM Technology (stock code: 834082), and Shenzhen Hopeland led to the profit of RMB65.0 million through fair value changes, as compared to the loss of RMB4.7 million for the same period last year, representing an increase of RMB69.7 million in profit compared to the same period last year.
Income Tax Expenses
The total income tax expenses for the First Half of the Year were RMB7.8 million, which were RMB4.0 million for the same period last year.
Profit for the Period
For the First Half of the Year, the profit attributable to owners of the parent of the Company amounted to RMB39.4 million as compared to the profit of RMB13.7 million (restated) for the same period last year, representing an increase of 187.6% compared to the same period last year.
Inventory Turnover Days
The inventories of the Group mainly comprised of the products and spare parts related to railway communication. For the First Half of the Year, the inventory turnover days were 86 days (the same period last year: 31 days). The change was due to the delay in project delivery due to the impact of the COVID-19 pandemic in the First Half of the Year.
Trade Receivables Turnover Days
For the First Half of the Year, the trade receivables turnover days were 294 days (the same period last year: 389 days).
Contract Assets/Contract Liabilities Turnover Days
For the First Half of the Year, the contract assets/contract liabilities turnover days were 86 days (the same period last year: 43 days).
Trade Payables Turnover Days
For the First Half of the Year, the trade payables turnover days were 174 days (the same period last year: 192 days).
Liquidity and Financial Resources
The Group's principal sources of working capital included cash flow from operating activities, bank and other borrowings. As of June 30, 2020, the Group's current ratio (current assets divided by current liabilities) was 1.6 (as of December 31, 2019: 1.6). The Group's financial position remains healthy.
As of June 30, 2020, the Group was in a net negative cash position(1) of RMB362.5 million (as at the end of the previous year: negative RMB269.7 million), decreased by RMB92.8 million compared to the end of the previous year. As at June 30, 2020, the Group's gearing ratio was 0.1%, increased by 5.7 percentage points from -5.6% as at the end of the previous year.
- Net cash included cash and cash equivalents, interest-bearing bank borrowings and pledged deposits.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 11 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND FINANCIAL REVIEW (continued)
FINANCIAL REVIEW (continued)
Contingent Liabilities
As at June 30, 2020, the Group had no material contingent liability.
Charges on Group Assets
As at June 30, 2020, in addition to the pledged deposits of approximately RMB306.6 million (as at December 31, 2019: RMB319.6 million), the Group pledged a building with a net carrying amount of approximately RMB206.3 million, real estate with an appraised value of approximately RMB73.5 million, trade receivables with a carrying amount of RMB19.7 million, and equity in a subsidiary (as at the end of the previous year, the Group pledged a building with a net carrying amount of approximately RMB208.5 million and equity in a subsidiary to banks to secure banking facilities granted to the Group) to banks to secure banking facilities granted to the Group. Save as disclosed above, as at June 30, 2020, the Group had no other assets charged to financial institution.
IMPORTANT EVENTS SUBSEQUENT TO THE PERIOD
There was no important event affecting the Company nor any of its subsidiaries from June 30, 2020 to the date of this report.
MATERIAL ACQUISITIONS OF SUBSIDIARIES AND ASSOCIATES
During the Period, the Group did not have any significant acquisition.
DELAY IN SETTLEMENT OF THE OUTSTANDING AMOUNTS
Reference is made to the announcements of Company dated 9 April, 2018, 3 May, 2018, 2 July, 2018, 1 July, 2019, 8 May, 2020, 30 June, 2020 and 31 August, 2020 (the "Announcements") and the circular of the Company dated 6 September, 2018 (the "Circular") in connection with the very substantial disposal and connected transaction (the "VSD") of the Company as disclosed in the Announcements and the Circular.
The consideration for the VSD and other amounts in connection with the VSD payable (the "Outstanding Amounts") by the purchaser, its owners and other associates (together, the "Purchaser Group") to the Group and the interest accrued thereon have not been fully settled by the Purchaser Group. As disclosed in the Announcement, the Outstanding Amounts and the interest accrued thereon as at 30 June 2019 totaled approximately RMB340.8 million. As at June 30, 2020, RMB34.2 million of the Outstanding Amounts has been settled, and the amount of the Outstanding Amount and the interest accrued thereon totaled approximately RMB319.0 million.
The Company is in the process of negotiating with the Purchaser Group to further vary the payment terms of the Outstanding Amounts.
12 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
DIRECTORS' REPORT
The board of directors (individually, a "Director", or collectively, the "Board") of China ITS (Holdings) Co., Ltd. (the "Company") presents its report together with the unaudited consolidated results of the Company and its subsidiaries (collectively, the "Group") for the six-month period ended June 30, 2020.
INTERIM DIVIDEND
The Board did not recommend the payment of an interim dividend for the six-month period ended June 30, 2020.
REVIEW BY AUDIT COMMITTEE
The audit committee of the Company has reviewed the accounting principles and practices, the internal control and financial reporting matters of the Company, and the unaudited interim results of the Group for the six-month period ended June 30, 2020 together with the management of the Company.
DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
Save as disclosed below, as at June 30, 2020, none of the Directors and chief executive of the Company had any interests or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (the "SFO")) which were required to be notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as contained in Appendix 10 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), to be notified to the Company and the Stock Exchange:
Approximate | ||||
percentage of | ||||
shareholdings | ||||
as at June 30, | ||||
Name of Director | Nature of interest | Securities(4) | 2020(3) | |
Mr. Liao Jie(1) | Beneficial owner/Interest of a controlled corporation | 146,494,077 (L) | 8.86% | (L) |
Mr. Jiang Hailin(2) | Beneficial owner/Beneficiary of the Fino Trust | 647,768,625 (L) | 39.16% | (L) |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 13 |
DIRECTORS' REPORT
DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES (continued)
Notes:
- 40,735,874 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Liao Jie on January 18, 2012 under the Share Option Scheme. Mr. Liao Jie is also deemed to be interested in the 105,758,203 Shares held by Joyful Business, which is wholly-owned by Mr. Liao Jie.
- 1,855,848 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Jiang Hailin on January 18, 2012 under the Share Option
Scheme.
Mr. Jiang Hailin was also interested in all the Shares in which Fino Trust was interested as a beneficiary of Fino Trust. As the beneficial owner of Fino Investments Limited ("Fino Investments"), Fino Trust is deemed to be interested in all the Shares in which Fino Investments is interested. Mr. Jiang Hailin beneficially and directly owns 18,853,876 Shares, which are part of the 645,912,777 Shares in which Fino Trust is deemed to be interested. - (L) denotes long positions.
DIRECTORS' RIGHTS TO ACQUIRE SHARES
Save as otherwise disclosed in the sub-section headed "Pre-IPO Share Incentive Scheme/Share Option Scheme" below, at no time during the six-month period ended June 30, 2020, was the Company or any of its subsidiaries or its holding company or any of the subsidiaries of the Company's holding company a party to any arrangement to enable the Directors or the chief executive of the Company or their respective associates to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate and none of the Directors and chief executive, or their spouse and children under the age of 18, had any right to subscribe for the securities of the Company, or had exercised any such right during such period.
PRE-IPO SHARE INCENTIVE SCHEME/SHARE OPTION SCHEME
The terms of the Pre-IPO Share Incentive Scheme and the Share Option Scheme were disclosed in the section headed "Other information - Pre-IPO Share Incentive Scheme" and "Other information - Share Option Scheme" respectively, in Appendix VI to the prospectus of the Company dated June 30, 2010 (the "Prospectus").
1. Pre-IPO Share Incentive Scheme
China ITS Co., Ltd. adopted the Pre-IPO Share Incentive Scheme on December 28, 2008. The purpose of the Pre-IPO Share Incentive Scheme is to recognize and reward the contribution of certain eligible participants to the growth and development of the business(es) of the Group.
Options to subscribe for an aggregate of 116,653,105 Shares was conditionally granted by China ITS Co., Ltd. under the Pre-IPO Share Incentive Scheme.
All of the options under the Pre-IPO Share Incentive Scheme were expired by June 30, 2018.
14 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
DIRECTORS' REPORT
PRE-IPO SHARE INCENTIVE SCHEME/SHARE OPTION SCHEME (continued)
2. Share Option Scheme
The Company conditionally adopted the Share Option Scheme on June 18, 2010 and the Share Option Scheme became effective as at the date of listing of the Company on July 15, 2010 (the "Listing Date"). The purpose of the Share Option Scheme is to enable the Company to grant options to eligible participants as incentives or rewards for their contribution or potential contribution to the Group.
The Board may, at its absolute discretion, offer an option to eligible participant to subscribe for the shares at an exercise price and subject to the other terms of the Share Option Scheme.
The total number of shares issued and to be issued upon the exercise of the options granted to or to be granted to each eligible participant under the Share Option Scheme and any other schemes of the Company or any of its subsidiaries (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the Shares in issue.
The Share Option Scheme will remain in force for a period of 10 years from the Listing Date and ending on the tenth anniversary of the Listing Date. Under the Share Option Scheme, each option has an exercise period not exceeding 10 years from the date of grant.
As at the Listing Date, the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes of the Company (the "Share Option Scheme Limit") shall not in aggregate exceed 155,029,633 Shares of the Company, being 10% of the total number of Shares in issue immediately prior to the date on which dealings in the Shares commenced on the Stock Exchange.
On January 18, 2012, the Board resolved to grant share options under the Share Option Scheme to 191 grantees, which includes certain Directors, chief executive, substantial shareholders and employees of the Company to subscribe for an aggregate of 155,000,000 Shares. For further details of the abovementioned grant of share options, please refer to the announcement of the Company on January 18, 2012.
Following the grant of share options on January 18, 2012, the remaining mandate not utilized under the above Share Option Scheme Limit is 29,633 Shares. On February 29, 2012, shareholders of the Company approved the refreshment of the Share Option Scheme Limit for the purpose of future grants of share options to the eligible participants under the Share Option Scheme.Under the refreshed Share Option Scheme Limit, the total number of Shares which may be issued upon exercise of options which may be granted under the Share Option Scheme and any other share option scheme(s) of the Company shall not exceed 10% of the total number of Shares of the Company in issue at the date of passing the relevant resolutions on refreshment of the Share Option Scheme Limit, i.e. 161,281,776 Shares. Options previously granted under the Share Option Scheme (including those outstanding, cancelled, lapsed in accordance with the terms of the Share Option Scheme or exercised options and those options granted on January 18, 2012) will not be counted for the purpose of calculating the 10% refreshed Share Option Scheme Limit.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 15 |
DIRECTORS' REPORT
PRE-IPO SHARE INCENTIVE SCHEME/SHARE OPTION SCHEME (continued)
2. Share Option Scheme (continued)
Movement of the options granted under the Share Option Scheme during the six-month period ended June 30, 2020 is as follows:
Lapsed or | |||||||||
Exercised | cancelled | ||||||||
during the | during the | ||||||||
Outstanding | six-month | six-month | |||||||
as at | period ended | period ended | Outstanding | Exercise price | |||||
Vesting | Expiry | January 1, | June 30, | June 30, | as at June 30, | per share | |||
Grantee | Grant date(1) | start date | date | 2020 | 2020 | 2020 | 2020 | (HK$) | |
Mr. Jiang Hailin | 18/01/2012 | 19/04/2012 | Note (2) | 77,203 | - | - | 77,203 | 1.05 | |
(Executive Director, | 18/01/2012 | 19/07/2012 | Note (2) | 77,203 | - | - | 77,203 | 1.05 | |
Chief Executive Officer) | 18/01/2012 | 19/10/2012 | Note (2) | 77,203 | - | - | 77,203 | 1.05 | |
18/01/2012 | 19/01/2013 | Note (2) | 77,203 | - | - | 77,203 | 1.05 | ||
18/01/2012 | 19/04/2013 | Note (2) | 154,592 | - | - | 154,592 | 1.05 | ||
18/01/2012 | 19/07/2013 | Note (2) | 154,592 | - | - | 154,592 | 1.05 | ||
18/01/2012 | 19/10/2013 | Note (2) | 154,592 | - | - | 154,592 | 1.05 | ||
18/01/2012 | 19/01/2014 | Note (2) | 154,592 | - | - | 154,592 | 1.05 | ||
18/01/2012 | 19/04/2014 | Note (2) | 231,981 | - | - | 231,981 | 1.05 | ||
18/01/2012 | 19/07/2014 | Note (2) | 231,981 | - | - | 231,981 | 1.05 | ||
18/01/2012 | 19/10/2014 | Note (2) | 231,981 | - | - | 231,981 | 1.05 | ||
18/01/2012 | 19/01/2015 | Note (2) | 232,725 | - | - | 232,725 | 1.05 | ||
Sub-total | 1,855,848 | - | - | 1,855,848 | |||||
Mr. Liao Jie(3) | 18/01/2012 | 19/04/2012 | Note (2) | 1,694,612 | - | - | 1,694,612 | 1.05 | |
(Executive Director, | 18/01/2012 | 19/07/2012 | Note (2) | 1,694,612 | - | - | 1,694,612 | 1.05 | |
Chairman) | 18/01/2012 | 19/10/2012 | Note (2) | 1,694,612 | - | - | 1,694,612 | 1.05 | |
18/01/2012 | 19/01/2013 | Note (2) | 1,694,612 | - | - | 1,694,612 | 1.05 | ||
18/01/2012 | 19/04/2013 | Note (2) | 3,393,298 | - | - | 3,393,298 | 1.05 | ||
18/01/2012 | 19/07/2013 | Note (2) | 3,393,298 | - | - | 3,393,298 | 1.05 | ||
18/01/2012 | 19/10/2013 | Note (2) | 3,393,298 | - | - | 3,393,298 | 1.05 | ||
18/01/2012 | 19/01/2014 | Note (2) | 3,393,298 | - | - | 3,393,298 | 1.05 | ||
18/01/2012 | 19/04/2014 | Note (2) | 5,091,984 | - | - | 5,091,984 | 1.05 | ||
18/01/2012 | 19/07/2014 | Note (2) | 5,091,984 | - | - | 5,091,984 | 1.05 | ||
18/01/2012 | 19/10/2014 | Note (2) | 5,091,984 | - | - | 5,091,984 | 1.05 | ||
18/01/2012 | 19/01/2015 | Note (2) | 5,108,282 | - | - | 5,108,282 | 1.05 | ||
Sub-total | 40,735,874 | - | - | 40,735,874 | |||||
16 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
DIRECTORS' REPORT
PRE-IPO SHARE INCENTIVE SCHEME/SHARE OPTION SCHEME (continued)
2. Share Option Scheme (continued)
Lapsed or | ||||||||
Exercised | cancelled | |||||||
during the | during the | |||||||
Outstanding | six-month | six-month | ||||||
as at | period ended | period ended | Outstanding | Exercise price | ||||
Vesting | Expiry | January 1, | June 30, | June 30, | as at June 30, | per share | ||
Grantee | Grant date(1) | start date | date | 2020 | 2020 | 2020 | 2020 | (HK$) |
Others | 18/01/2012 | 19/04/2012 | Note (2) | 1,042,925 | - | - | 1,042,925 | 1.05 |
18/01/2012 | 19/07/2012 | Note (2) | 1,042,925 | - | - | 1,042,925 | 1.05 | |
18/01/2012 | 19/10/2012 | Note (2) | 1,042,925 | - | - | 1,042,925 | 1.05 | |
18/01/2012 | 19/01/2013 | Note (2) | 1,042,925 | - | - | 1,042,925 | 1.05 | |
18/01/2012 | 19/04/2013 | Note (2) | 1,534,348 | - | - | 1,534,348 | 1.05 | |
18/01/2012 | 19/07/2013 | Note (2) | 1,534,348 | - | - | 1,534,348 | 1.05 | |
18/01/2012 | 19/10/2013 | Note (2) | 1,534,348 | - | - | 1,534,348 | 1.05 | |
18/01/2012 | 19/01/2014 | Note (2) | 1,534,348 | - | - | 1,534,348 | 1.05 | |
18/01/2012 | 19/04/2014 | Note (2) | 2,025,760 | - | - | 2,025,760 | 1.05 | |
18/01/2012 | 19/07/2014 | Note (2) | 2,025,760 | - | - | 2,025,760 | 1.05 | |
18/01/2012 | 19/10/2014 | Note (2) | 2,025,760 | - | - | 2,025,760 | 1.05 | |
18/01/2012 | 19/01/2015 | Note (2) | 2,032,911 | - | - | 2,032,911 | 1.05 | |
Sub-total | 18,419,283 | - | - | 18,419,283 | ||||
TOTAL: | 61,011,005 | - | - | 61,011,005 | ||||
Notes:
- The closing price of the Company's shares immediately before the grant date (i.e. January 18, 2012) of share options was HK$1.05.
- Expiry date of these share options shall be the earlier of: (i) the date on which the share option lapses in accordance with the Share Option Scheme or (ii) the date falling ten (10) years from the date of acceptance by the grantee.
- The total number of Shares to be issued upon exercise of the share options granted to Mr. Liao Jie would exceed 1% of the Shares in issue in the 12-month period up to and including the date of the grant. Such further grant of share options to Mr. Liao Jie was approved by shareholders of the Company in an extraordinary general meeting on February 29, 2012.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 17 |
DIRECTORS' REPORT
SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES
As at the June 30, 2020, so far as is known to any Director or chief executive of the Company, other than a Director or chief executive of the Company, the following persons had interests or short positions in the Shares and underlying shares of the Company which would fall to be disclosed to the issuer under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who is, directly or indirectly, interested in ten per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:
Percentage to | ||||
Company's | ||||
Long position/ | Number of | issued share | ||
Name | Capacity | Short position | Shares | capital |
Holdco(1) | Beneficiary owner | Long position | 645,912,777 | 39.05% |
Best Partners(2) | Interest of controlled corporation | Long position | 645,912,777 | 39.05% |
Fino Investments(3) | Interest of controlled corporation | Long position | 645,912,777 | 39.05% |
Tesco Investments(4) | Interest of controlled corporation | Long position | 645,912,777 | 39.05% |
Credit Suisse Trust Limited(3)(4) | Trustee | Long position | 645,912,777 | 39.05% |
Central Huijin Investment Ltd. | Security interest | Long position | 215,000,000 | 12.99% |
China Construction Bank Corporation | Security interest | Long position | 215,000,000 | 12.99% |
Joyful Business Holdings Limited(5) | Beneficial owner | Long position | 105,758,203 | 6.39% |
Penbay Investments Limited(6) | Beneficial owner | Long position | 98,613,367 | 5.96% |
Chen Qi | Interest of controlled corporation | Long position | 98,613,367 | 5.96% |
18 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
DIRECTORS' REPORT
SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES (continued)
Notes:
-
As disclosed in the prospectus of the Company dated June 30, 2010, to facilitate the management and operation of the Company, certain major shareholders of the
Company have entered into voting agreements delegating their voting rights in the Company to Holdco prior to the listing of the Company, and Holdco has been a controlling shareholder (as defined under the Listing Rules) of the Company since the listing of the Company in 2010. In connection with this arrangement and as a result of previous restructuring exercises of the Group, as at the Latest Practicable Date, Holdco, Pride Spirit Company Limited, Sea Best Investments Limited, Joy Bright Success Limited, Gouver Investments Limited, Kang Yang Holdings Limited, Huaxin Investments Limited, Rockyjing Investment Limited, Key Trade Holdings Limited, Best Partners Development Limited, Joyful Business Holdings Limited, Mr. Liao Jie, Mr. Liao Daoxun, Ms. Wu Yurui, Mr. Jiang Hailin, Mr. Wang Jing, Mr. Liang Shiping, Ms. Wu Chunhong, Mr. Zhao Lisen, Mr. Zhang Qian, Mr. Guan Xiong, Mr. Zheng Hui, Mr. Lv Xilin, Ms. Wang Li, Mr. Dang Kulun, Mr. Pan Jianguo and Mr. Jing
Yang, were parties to a series of shareholders voting agreements (the "Shareholders Voting Agreements"), pursuant to which each of the parties (other than
Holdco) to the Shareholder Voting Agreements has authorized Holdco to exercise their voting rights in the Company on their behalves.
As at June 30, 2020, Holdco is entitled to exercise or control the exercise of the voting rights of a total of 645,912,777 Shares, representing the aggregate number of Shares held by all of the parties to the Shareholder Voting Agreements. Holdco is wholly-owned by Best Partners. Two of our Directors Mr. Jiang Hailin and Mr. Liao
Jie are also directors of Holdco. - The issued share capital of Best Partners is held as to 91.2015% by Fino Investments Limited and as to 8.7985% by Tesco Investments Limited. By virtue of the Shareholder Voting Agreements, Best Partners Development Limited is deemed to be controlled by Fino Investments Limited and Tesco Investments Limited. Our
Directors Mr. Liao Jie is also a director of Best Partners. - Fino Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Fino Trust, namely Mr. Liao Daoxun, Ms. Wu Yurui, Mr. Liang Shiping, Mr. Jiang Hailin and Ms. Wu Chunhong. The Fino Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.
-
Tesco Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Tesco Trust, namely Mr. Wang Jing, Mr. Zhang Qian, Mr. Guan Xiong, Mr. Zheng Hui and Ms.
Wang Li. The Tesco Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore. - Joyful Business Holdings Limited is wholly-owned by Mr. Liao Jie. Mr. Liao Jie is the sole director of Joyful Business.
- Penbay Investments Limited is controlled by Mr. Chen Qi and therefore Mr. Chen Qi is deemed to be interested in the 98,613,367 shares of the Company beneficially owned by Penbay Investments Limited.
Save as disclosed in the paragraphs headed "Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures" and "Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares" above, as at June 30, 2020, no Director or proposed director is a director or employee of a company which has an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 19 |
DIRECTORS' REPORT
EMPLOYMENT AND EMOLUMENT POLICIES
As at June 30, 2020, the Group had 307 full-time employees. The emolument policy of the employees of the Group is set up by the Board on the basis of individual performance, the nature and responsibilities of the individual concerned and the performance of our Group and market conditions.
In addition, the Company has adopted the Pre-IPO Share Incentive Scheme and the Share Option Scheme as an incentive for Directors and eligible employees.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the six-month period ended June 30, 2020, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the listed securities of the Company.
CORPORATE GOVERNANCE
The Company places high value on its corporate governance practice and the Board firmly believes that a good corporate governance practice can improve accountability and transparency for the benefit of its shareholders.
The Company has adopted the code provisions contained in the code of corporate governance practices (the "CG Code") set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The Company has complied with the code provisions in the CG Code throughout the six-month period ended June 30, 2020.
DIRECTORS' SECURITIES TRANSACTIONS
The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Listing Rules (the "Model Code") as the standards for the Directors' dealings in the securities of the Company. Having made specific enquiry of all Directors, the Directors have confirmed that they have complied with the required standard set out in the Model Code during the six-month period ended June 30, 2020.
AUDIT COMMITTEE
The audit committee of the Company was established on June 18, 2010 with effect from the listing of the Company. The current terms of reference of the audit committee have been adopted by the Company on December 22, 2015 in compliance with the CG Code. The primary duties of the audit committee are, among other things, to review and supervise the financial reporting process and internal control systems of the Company.
The audit committee comprises three independent non-executive Directors, being Mr. Wang Dong, Mr. Ye Zhou and Mr. Zhou Jianmin. The audit committee is chaired by Mr. Wang Dong.
The audit committee has reviewed the accounting principles and practices adopted by the Group and discussed with the management of the Company on financial reporting matters including a review of the unaudited interim financial information of the Group for the six months ended June 30, 2020.
20 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
DIRECTORS' REPORT
REMUNERATION COMMITTEE
The Company has established a remuneration committee on June 18, 2010 with effect from the listing of the Company. The current terms of reference of the remuneration committee have been adopted on March 28, 2012 in compliance with the CG Code.
The primary duties of the remuneration committee is to evaluate and make recommendations to the Board regarding the compensation of the Directors. In addition, the remuneration committee conducts reviews of the performance, and determines the compensation structure of senior management of the Group.
The remuneration committee comprises three independent non-executive Directors, being Mr. Ye Zhou, Mr. Wang Dong and Mr. Zhou Jianmin. The remuneration committee is chaired by Mr. Ye Zhou.
NOMINATION COMMITTEE
The Company established a nomination committee on June 18, 2010 with effect from the listing of the Company. The current terms of reference of the nomination committee have been adopted on March 28, 2012 in compliance with the CG Code.
The primary duty of the nomination committee is to make recommendations to the Board regarding candidates to fill vacancies on the board of directors.
The nomination committee comprises three independent non-executive Directors, being Mr. Zhou Jianmin, Mr. Ye Zhou and Mr. Wang Dong. The nomination committee is chaired by Mr. Zhou Jianmin.
CHANGES TO INFORMATION IN RESPECT OF DIRECTORS
In the six months ended June 30, 2020, there were no changes to information related to Directors of the Company that is required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.
On behalf of the Board of Directors
China ITS (Holdings) Co., Ltd.
Liao Jie
Chairman
Beijing, August 27, 2020
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 21 |
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME
For the six-month period ended June 30, 2020
For the six-month period | ||||
ended June 30, | ||||
2020 | 2019 | |||
Notes | RMB'000 | RMB'000 | ||
Unaudited | Unaudited | |||
(Restated) | ||||
REVENUE | 4 | 237,070 | 382,406 | |
Cost of revenue | 6 | (183,127) | (299,948) | |
Gross profit | 53,943 | 82,458 | ||
Other income and gains | 5 | 93,177 | 25,753 | |
Selling, distribution and administrative expenses | (56,912) | (64,042) | ||
Impairment losses on financial and contract assets, net | (15,569) | - | ||
Other expenses | (121) | (4,868) | ||
Finance costs | (23,784) | (21,974) | ||
Share of profits and losses of: | ||||
Joint ventures | - | 2,621 | ||
Associates | (84) | (634) | ||
PROFIT BEFORE TAX | 6 | 50,650 | 19,314 | |
Income tax expense | 7 | (7,838) | (3,961) | |
PROFIT FOR THE PERIOD | 42,812 | 15,353 | ||
Attributable to: | ||||
Owners of the Company | 39,449 | 13,653 | ||
Non-controlling interests | 3,363 | 1,700 | ||
42,812 | 15,353 | |||
EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF | ||||
THE COMPANY | RMB | RMB | ||
Unaudited | Unaudited | |||
Basic | 8 | 0.02 | 0.01 | |
Diluted | 8 | 0.02 | 0.01 | |
22 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME
For the six-month period ended June 30, 2020
For the six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Unaudited | |
(Restated) | ||
PROFIT FOR THE PERIOD | 42,812 | 15,353 |
OTHER COMPREHENSIVE INCOME/(LOSS) | ||
Other comprehensive income/(loss) that may be reclassified to | ||
profit or loss in subsequent periods: | ||
Exchange differences on translation of foreign operations | 9,495 | (9,705) |
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD | 9,495 | (9,705) |
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 52,307 | 5,648 |
Attributable to: | ||
Owners of the Company | 48,349 | 3,945 |
Non-controlling interests | 3,958 | 1,703 |
52,307 | 5,648 | |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 23 |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at June 30, 2020
June 30, | December 31, | ||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Audited | ||
(Restated) | |||
NON-CURRENT ASSETS | |||
Prepayment for acquisition of property and equipment | - | 124,708 | |
Property and equipment | 10 | 475,538 | 251,158 |
Investment properties | 83,710 | 83,710 | |
Goodwill | 11 | 222,622 | 222,622 |
Other intangible assets | 35,168 | 38,717 | |
Investments in joint ventures | - | 2,067 | |
Investments in associates | 1,943 | 2,027 | |
Contingent consideration | - | 6,479 | |
Financial assets at fair value through profit or loss | 241,371 | 182,977 | |
Loan receivables | 14 | 30,000 | 30,000 |
Pledged deposits | 16 | - | 70,000 |
Total non-current assets | 1,090,352 | 1,014,465 | |
CURRENT ASSETS | |||
Inventories | 12 | 297,863 | 206,684 |
Contract assets | 15 | 476,075 | 449,616 |
Contingent consideration | 6,479 | - | |
Trade and bills receivables | 13 | 610,287 | 909,025 |
Prepayments, deposits and other receivables | 14 | 512,022 | 473,419 |
Amounts due from related parties | 23 | 361,186 | 386,096 |
Pledged deposits | 16 | 306,574 | 249,617 |
Cash and cash equivalents | 16 | 126,901 | 258,722 |
Total current assets | 2,697,387 | 2,933,179 | |
24 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at June 30, 2020
June 30, | December 31, | ||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Audited | ||
(Restated) | |||
CURRENT LIABILITIES | |||
Trade and bills payables | 17 | 317,739 | 388,251 |
Contract liabilities, other payables and accruals | 18 | 586,990 | 671,954 |
Interest-bearing bank borrowings | 19 | 755,677 | 701,767 |
Amounts due to related parties | 23 | - | 4,769 |
Income tax payable | 30,836 | 31,244 | |
Total current liabilities | 1,691,242 | 1,797,985 | |
NET CURRENT ASSETS | 1,006,145 | 1,135,194 | |
TOTAL ASSETS LESS CURRENT LIABILITIES | 2,096,497 | 2,149,659 | |
NON-CURRENT LIABILITIES | |||
Interest-bearing bank borrowings | 19 | 40,250 | 146,250 |
Deferred tax liabilities | 9,460 | 8,929 | |
Total non-current liabilities | 49,710 | 155,179 | |
Net assets | 2,046,787 | 1,994,480 | |
EQUITY | |||
Equity attributable to owners of the Company | |||
Share capital | 20 | 290 | 290 |
Reserves | 2,014,009 | 1,965,660 | |
2,014,299 | 1,965,950 | ||
Non-controlling interests | 32,488 | 28,530 | |
Total equity | 2,046,787 | 1,994,480 | |
Liao Jie | Jiang Hailin |
Director | Director |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 25 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six-month period ended June 30, 2020
Attributable to owners of the Company | ||||||||||
Asset | Exchange | Non- | ||||||||
Share | Share | Statutory | Capital | revaluation | fluctuation | Retained | controlling | |||
capital | premium | reserve | reserve | reserve | reserve | earnings | Total | interests | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At January 1, 2019 | 290 | 1,088,725 | 167,404 | 598,627 | 7,782 | (89,455) | 257,316 | 2,030,689 | - | 2,030,689 |
Profit for the period (restated) | - | - | - | - | - | - | 13,653 | 13,653 | 1,700 | 15,353 |
Other comprehensive loss for the period: | ||||||||||
Exchange differences on translation of | ||||||||||
foreign operations | - | - | - | - | - | (9,708) | - | (9,708) | 3 | (9,705) |
Total comprehensive income/(loss) | ||||||||||
for the period | - | - | - | - | - | (9,708) | 13,653 | 3,945 | 1,703 | 5,648 |
Non-controlling interests arising from | ||||||||||
business combination | - | - | - | - | - | - | - | - | 6,541 | 6,541 |
At June 30, 2019 (unaudited) | 290 | 1,088,725 | 167,404 | 598,627 | 7,782 | (99,163) | 270,969 | 2,034,634 | 8,244 | 2,042,878 |
Attributable to owners of the Company | ||||||||||
Asset | Exchange | Non- | ||||||||
Share | Share | Statutory | Capital | revaluation | fluctuation | Retained | controlling | |||
capital | premium | reserve | reserve | reserve | reserve | earnings | Total | interests | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At January 1, 2020 | 290 | 1,088,725 | 191,274 | 594,028 | 7,782 | (101,690) | 193,574 | 1,973,983 | 13,468 | 1,987,451 |
Adjustment (note 22) | - | - | - | - | - | - | (8,033) | (8,033) | 15,062 | 7,029 |
At January 1, 2020, as restated | 290 | 1,088,725* | 191,274* | 594,028* | 7,782* | (101,690)* | 185,541* | 1,965,950 | 28,530 | 1,994,480 |
Profit for the period | - | - | - | - | - | - | 39,449 | 39,449 | 3,363 | 42,812 |
Other comprehensive income | ||||||||||
for the period: | ||||||||||
Exchange differences on translation | ||||||||||
of foreign operations | - | - | - | - | - | 8,900 | - | 8,900 | 595 | 9,495 |
Total comprehensive income | ||||||||||
for the period | - | - | - | - | - | 8,900 | 39,449 | 48,349 | 3,958 | 52,307 |
Transfer from retained earnings | - | - | 15,863 | - | - | - | (15,863) | - | - | - |
At June 30, 2020 (unaudited) | 290 | 1,088,725* | 207,137* | 594,028* | 7,782* | (92,790)* | 209,127* | 2,014,299 | 32,488 | 2,046,787 |
- These reserve accounts comprise the reserves of RMB2,014,009,000 (December 31, 2019: RMB1,965,660,000 (restated)) in the condensed consolidated statement of financial position as at June 30, 2020.
26 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six-month period ended June 30, 2020
For the six-month period | |||
ended June 30, | |||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Unaudited | ||
(Restated) | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Profit before tax | 50,650 | 19,314 | |
Adjustments for: | |||
Depreciation and amortisation | 10,788 | 6,695 | |
Gain on disposal of financial assets at fair value through profit or loss | (4,355) | - | |
Impairment of financial assets included in prepayment, | |||
deposits and other receivables | 18,341 | - | |
Reversal of impairment of trade receivables | (2,612) | (6,403) | |
Reversal of impairment of contracts assets | (160) | (209) | |
Share of profits and losses of joint ventures and associates | 84 | (1,986) | |
Changes in fair value of financial assets at fair value through profit or loss | (64,993) | 4,730 | |
Dividend income from financial assets at fair value through profit or loss | (1,186) | - | |
Finance income | (7,609) | (18,555) | |
Finance costs | 23,784 | 21,974 | |
22,732 | 25,560 | ||
Changes in assets and liabilities: | |||
Inventories | (104,014) | (117,666) | |
Contracts assets | (26,299) | 76,672 | |
Trade and bills receivables | 301,350 | 153,869 | |
Prepayments, deposits and other receivables | (58,650) | 183,957 | |
Amounts due from related parties | 24,910 | 26,125 | |
Pledged deposits | (88,757) | 55,708 | |
Trade and bills payables | (70,512) | (291,176) | |
Contract liabilities, other payables and accruals | (84,964) | 144,443 | |
Amounts due to related parties | (4,769) | (26,125) | |
Cash (used in) generated from operations | (88,973) | 231,367 | |
Interest paid | (23,784) | (15,252) | |
Interest received | 11,382 | 1,991 | |
Income tax paid | (7,715) | (13,149) | |
Net cash flows (used in) generated from operating activities | (109,090) | 204,957 | |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 27 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six-month period ended June 30, 2020
For the six-month period | |||
ended June 30, | |||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Unaudited | ||
(Restated) | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchases of items of property and equipment | (93,922) | (522) | |
Dividend received from investments | 1,186 | - | |
Disposal of financial assets at fair value through profit or loss | 10,954 | - | |
Additions to other intangible assets | (154) | (532) | |
Acquisition of a subsidiary | 22 | - | (44,151) |
Net cash flows used in investing activities | (81,936) | (45,205) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from interest-bearing bank borrowings | 310,933 | 47,269 | |
Repayment of interest-bearing bank borrowings | (363,023) | (87,970) | |
Decrease/(Increase) in pledged deposits for bank loans | 101,800 | (55,708) | |
Net cash flows generated from (used in) financing activities | 49,710 | (96,409) | |
Net (decrease)/increase in cash and cash equivalents | (141,316) | 63,343 | |
Effect of foreign exchange rate changes, net | 9,495 | (1,909) | |
Cash and cash equivalents at beginning of period | 258,722 | 82,399 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 16 | 126,901 | 143,833 |
28 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
1. CORPORATE AND GROUP INFORMATION
China ITS (Holdings) Co., Ltd. (the "Company") was incorporated as an exempted company with limited liability in the Cayman Islands on February 20, 2008. The registered address of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, the Cayman Islands. The Company's principal place of business in Hong Kong is at 8/F., Golden Star Building, 20-24 Lockhart Road, Wanchai. The principal executive office of the Company is located at Building 204, No. A10, Jiuxianqiao North Road, Chaoyang District, Beijing, 100015, the People's Republic of China (the "PRC").
The Company and its subsidiaries (the "Group") is mainly a provider of products and specialised solutions and services related to infrastructure technology in the PRC and overseas. During the six-month period ended June 30, 2020, the main businesses of the Group are as follows:
- Products and specialised solutions business (the "Products and Specialised Solutions") - in the field of infrastructure construction such as railways and electric power, the Group sells products and specialised solutions to meet customers' needs according to their requirements. It mainly includes: railway communication products, energy- base products, power communication products, power transmission and transformation equipment, power generation equipment, etc.; and
- Value-addedoperation and services business (the "Value-addedOperation and Services") - We provide value-added services such as maintenance services, network optimization and network planning, and technical consulting for the products related to the communication system for railway customers, as well as the planning and technical consulting services of the infrastructure construction in relation to electric power such as power plant construction and power grid renovation for electric power customers, and power plant investment, construction and operation.
2. BASIS OF PRESENTATION AND CHANGES IN ACCOUNTING POLICIES
Basis of presentation
The unaudited interim condensed consolidated financial statements of the Group for the six-month period ended June 30, 2020 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting and the disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
The unaudited interim condensed consolidated financial statements of the Group do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended December 31, 2019. The unaudited interim condensed consolidated financial statements are presented in Renminbi ("RMB") and all values are rounded to the nearest thousands, except when otherwise indicated.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 29 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
2. BASIS OF PRESENTATION AND CHANGES IN ACCOUNTING POLICIES (continued)
Impact of new/revised International Financial Reporting Standards ("IFRSs")
The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those used in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2019, except for the adoption of following new/revised IFRSs that are effective for the Group's financial year beginning on January 1, 2020.
Amendments to IAS 1 and IAS 8 | Definition of Material |
Amendments to IFRS 9, IAS 39 and IFRS 7 | Interest Rate Benchmark Reform |
Amendments to IFRS 3 | Definition of a Business |
The adoption of the new/revised IFRSs did not result in substantial changes to the Group's accounting policies and amounts reported for the six-month period ended June 30, 2020 and prior years.
3. OPERATING SEGMENT INFORMATION
For management purpose, the Group has the following operating segments based on its business units:
- Products and specialised solutions business (the "Products and Specialised Solutions") - in the field of infrastructure construction such as railways and electric power, the Group sells products and specialised solutions to meet customers' needs according to their requirements. It mainly includes: railway communication products, energy- base products, power communication products, power transmission and transformation equipment, power generation equipment, etc.; and
- Value-addedoperation and services business (the "Value-addedOperation and Services") - We provide value-added services such as maintenance services, network optimization and network planning, and technical consulting for the products related to the communication system for railway customers, as well as the planning and technical consulting services of the infrastructure construction in relation to electric power such as power plant construction and power grid renovation for electric power customers, and power plant investment, construction and operation.
Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit, which is a measure of adjusted profit/loss before tax. The adjusted profit/loss before tax is measured consistently with the Group's profit/loss before tax except that finance income, finance costs, exchange differences, changes in fair value of financial assets at fair value through profit or loss as well as head office and corporate income and expenses are excluded from this measurement.
30 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
3. OPERATING SEGMENT INFORMATION (continued)
Intersegment sales are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.
Products and | Value-added | ||
For the six-month period ended June 30, 2020 | specialised | operation | |
(Unaudited) | solutions | and services | Total |
RMB'000 | RMB'000 | RMB'000 | |
Segment revenue | |||
Sales to external customers | 193,102 | 43,968 | 237,070 |
Segment results | 18,788 | 20,231 | 39,019 |
Reconciliation: | |||
Finance income | 7,609 | ||
Finance costs | (23,784) | ||
Changes in fair value of financial assets at fair value through | |||
profit or loss | 64,993 | ||
Corporate and other unallocated expenses | (37,187) | ||
Profit before tax | 50,650 | ||
Other segment information: | |||
Share of losses of associates | (84) | - | (84) |
Impairment losses | 13,286 | 2,283 | 15,569 |
Depreciation and amortisation | 8,342 | 2,446 | 10,788 |
Capital expenditure* | 10,270 | 234,857 | 245,127 |
- Capital expenditure represents the additions to property and equipment and intangible assets.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 31 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
3. OPERATING SEGMENT INFORMATION (continued)
Products and | Value-added | ||
specialised | operation | ||
For the six-month period ended June 30, 2019 (Unaudited) | Solutions | and services | Total |
RMB'000 | RMB'000 | RMB'000 | |
(Restated) | |||
Segment revenue | |||
Sales to external customers | 338,288 | 44,118 | 382,406 |
Segment results | 22,307 | 20,911 | 43,218 |
Reconciliation: | |||
Finance income | 18,555 | ||
Finance costs | (21,974) | ||
Foreign exchange losses | (121) | ||
Changes in fair value of financial assets at fair value through | |||
profit or loss | (4,730) | ||
Corporate and other unallocated expenses | (15,634) | ||
Profit before tax | 19,314 | ||
Other segment information: | |||
Share of profits of joint ventures | 2,621 | - | 2,621 |
Share of losses of associates | (634) | - | (634) |
Impairment losses | (6,129) | (483) | (6,612) |
Depreciation and amortisation | 4,574 | 1,607 | 6,181 |
Capital expenditure* | 1,006 | 474 | 1,480 |
32 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
4. REVENUE
An analysis of revenue is as follows:
For the six-month period
ended June 30,
2020 2019
RMB'000 RMB'000
Unaudited Unaudited
Revenue from contracts with customers within IFRS 15 | 237,070 | 382,406 |
- Disaggregated revenue information
For the six-month period ended June 30, 2020 (Unaudited)
Products and | Value-added | ||
specialised | operation | ||
Segments | solutions | and services | Total |
RMB'000 | RMB'000 | RMB'000 | |
Type of goods or services | |||
Sale of products and provision of specialised solutions | 193,102 | - | 193,102 |
Maintenance services | - | 43,968 | 43,968 |
Total revenue from contracts with customers | 193,102 | 43,968 | 237,070 |
Geographical markets | |||
Mainland China | 210,882 | ||
Others | 26,188 | ||
Revenue from contracts with customers | 237,070 | ||
Timing of revenue recognition | |||
Goods and services transferred at a point in time | 97,603 | - | 97,603 |
Goods and services transferred over time | 95,499 | 43,968 | 139,467 |
Revenue from contracts with customers | 193,102 | 43,968 | 237,070 |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 33 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
4. REVENUE (continued)
- Disaggregated revenue information (continued)
For the six-month period ended June 30, 2019 (Unaudited)
Products and | Value-added | |||||
specialised | operation | |||||
Segments | solutions | and services | Total | |||
RMB'000 | RMB'000 | RMB'000 | ||||
Type of goods or services | ||||||
Sale of products and provision of specialised solutions | 338,288 | - | 338,288 | |||
Maintenance services | - | 44,118 | 44,118 | |||
Total revenue from contracts with customers | 338,288 | 44,118 | 382,406 | |||
Geographical markets | ||||||
Mainland China | 352,338 | |||||
Others | 30,068 | |||||
Total revenue from contracts with customers | 382,406 | |||||
Timing of revenue recognition | ||||||
Goods and services transferred at a point in time | 62,932 | - | 62,932 | |||
Goods and services transferred over time | 275,356 | 44,118 | 319,474 | |||
Total revenue from contracts with customers | 338,288 | 44,118 | 382,406 | |||
5. OTHER INCOME AND GAINS | ||||||
For the six-month period | ||||||
ended June 30, | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Unaudited | Unaudited | |||||
Finance income | 7,609 | 18,555 | ||||
Gross rental income | 2,505 | 6,331 | ||||
Dividend income from financial assets at fair value through profit or loss | 1,186 | - | ||||
Changes in fair value of financial assets at fair value through profit or loss | 64,993 | - | ||||
Gain on disposal of financial assets at fair value through profit or loss | 4,355 | - | ||||
Government grants* | 2,013 | - | ||||
Bad debts recovered | 5,953 | - | ||||
Others | 4,563 | 867 | ||||
93,177 | 25,753 | |||||
- The government grants have been received by the Group as subsidies for business activities of the Group. There are no unfulfilled conditions or contingencies relating to these grants.
34 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
6. PROFIT BEFORE TAX
The Group's profit before tax is arrived at after charging/(crediting):
For the six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Unaudited | |
(Restated) | ||
Cost of inventories | 183,127 | 299,948 |
Depreciation | 7,429 | 6,144 |
Amortisation of intangible assets, including in selling, distribution and | ||
administrative expenses | 3,359 | 551 |
10,788 | 6,695 | |
Wages and salaries | 23,318 | 24,368 |
Pension scheme contributions (defined contribution scheme) | 2,714 | 3,305 |
Social insurance costs and staff welfare | 3,798 | 4,182 |
29,830 | 31,855 | |
Reversal of impairment of trade receivables | (2,612) | (6,403) |
Reversal of impairment of contract assets | (160) | (209) |
Impairment of financial assets included in prepayments, deposits and | ||
other receivables | 18,341 | - |
Short-term lease payments | 1,672 | 2,111 |
Auditors' remuneration | 2,990 | 2,619 |
Changes in fair value of financial assets at fair value through profit or loss | (64,993) | 4,730 |
Rental income on investment properties | (2,505) | (6,331) |
Exchange losses, net | 364 | 121 |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 35 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
7. INCOME TAX
The Group is subject to income tax on an entity basis on profit arising in or derived from the tax jurisdictions in which members of the Group are domiciled and operate. The determination of current and deferred income taxes was based on the enacted tax rates.
Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands.
PRC subsidiaries of the Group are subject to PRC Enterprise Income Tax at a rate 25% (June 30, 2019: 25%) on their respective taxable income, except for those subsidiaries which are qualified as High and New Technology Enterprises and are entitled to 15% (June 30, 2019: 15%) preferential income tax rate.
No provision for Hong Kong profits tax has been made for the six-month period ended June 30, 2020 (June 30, 2019: nil), as the Group had no assessable profits arising in Hong Kong for the period.
The Group is subject to withholding tax in Myanmar at the rate of 2.5% (June 30, 2019: 2.5%) on the service income charged to the companies in Myanmar by non-Myanmar subsidiaries.
According to PRC tax regulations, from January 1, 2008 onwards, non-resident enterprises without an establishment or place of business in the PRC or which have an establishment or place of business but the relevant income is not effectively connected with the establishment or a place of business in the PRC, are subject to withholding tax at the rate of 10% on various types of passive income such as dividends derived from entities in the PRC. Distributions of the pre-2008 earnings are exempted from the above-mentioned withholding tax. As at June 30, 2020, no deferred tax liabilities have been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group's subsidiaries established in Mainland China (2019: nil). In the opinion of the directors, it is not probable that these subsidiaries will distribute such earnings in the foreseeable future.
The major components of income tax expense are as follows: | ||
For the six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Unaudited | |
Current income tax: | ||
PRC Enterprise Income Tax | 6,838 | 5,296 |
Others | 468 | 115 |
Deferred income tax: | ||
Origination and reversal of temporary differences | 532 | (1,450) |
Income tax expense | 7,838 | 3,961 |
36 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
8. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY
Basic earnings per share is calculated by dividing the profit for the period attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the six-month periods ended June 30, 2020 and 2019.
The calculation of the diluted earnings per share is based on the profit for the period attributable to owners of the Company, and the weighted average number of ordinary shares in issue during the six-month periods ended June 30, 2020 and 2019, as used in the basic earnings per share calculation, plus the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed conversion of all the dilutive potential ordinary shares into ordinary shares.
Diluted earnings per share is the same as basic earnings per share for the six-month periods ended June 30, 2020 and 2019 as the share options have an anti-dilutive effect.
For the six-month period
ended June 30,
2020 2019
RMB'000 RMB'000
Unaudited Unaudited
(Restated)
Earnings | ||
Profit attributable to owners of the Company | 39,449 | 13,653 |
For the six-month period | ||
ended June 30, | ||
2020 | 2019 | |
Unaudited | Unaudited | |
Shares | ||
Weighted average number of shares in issue | 1,654,024,868 | 1,654,024,868 |
9. DIVIDENDS PROPOSED
No dividend was declared or proposed by the Company for the six-month period ended June 30, 2020 (June 30, 2019: nil).
10. PROPERTY AND EQUIPMENT
During the six-month period ended June 30, 2020, the Group purchased equipment with a cost of RMB93,922,000 (June 30, 2019: RMB522,000).
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 37 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
11. | GOODWILL | ||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
(Restated) | |||
At beginning of period/year | 222,622 | 274,027 | |
Addition (note 22) | - | 46,411 | |
222,622 | 320,438 | ||
Impairment | - | (97,816) | |
At end of period/year | 222,622 | 222,622 | |
12. | INVENTORIES | ||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Properties | 50,866 | 50,208 | |
Materials, parts and equipment | 246,997 | 156,476 | |
297,863 | 206,684 | ||
38 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
13. TRADE AND BILLS RECEIVABLES
June 30, | December 31, | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Audited | |
Trade receivables | 608,187 | 744,692 |
Impairment | (68,436) | (77,806) |
539,751 | 666,886 | |
Bills receivable | 70,536 | 242,139 |
610,287 | 909,025 | |
Trade receivables, which are non-interest-bearing, are recognised and carried at the original invoiced amount less any loss allowance. Trade receivables generally have credit terms ranging from 30 days to 180 days.
In view of the fact that the Group's trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its balances of trade receivables.
An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:
June 30, | December 31, | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Audited | |
Less than 6 months | 100,096 | 199,283 |
6 months to 1 year | 176,876 | 264,444 |
1 year to 2 years | 142,156 | 98,013 |
2 years to 3 years | 61,583 | 62,677 |
Over 3 years | 59,040 | 42,469 |
539,751 | 666,886 | |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 39 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
13. TRADE AND BILLS RECEIVABLES (continued)
The movements in the impairment of trade receivables are as follows: | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
At beginning of period/year | 77,806 | 75,437 | |
(Reversal of impairment loss)/impairment loss | (2,612) | 1,815 | |
Amount written off as uncollectible | (6,758) | - | |
Acquisition of a subsidiary | - | 554 | |
At end of period/year | 68,436 | 77,806 | |
14. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Prepayments to suppliers for purchases of goods | 287,050 | 279,961 | |
Loan receivables (Note) | 61,250 | 71,306 | |
Tender deposits | 33,988 | 31,760 | |
Contract deposits | 32,752 | 30,674 | |
Advances to staff | 34,914 | 31,822 | |
Interest receivable | 8,921 | 12,694 | |
Dividend receivable | 3,571 | 3,571 | |
Others | 122,881 | 91,464 | |
585,327 | 553,252 | ||
Impairment | (43,305) | (49,833) | |
542,022 | 503,419 | ||
Less: loan receivables - non-current (Note) | 30,000 | 30,000 | |
512,022 | 473,419 | ||
Note: The balance represents loans to other companies which are unsecured, repayable within one year and interest-free except for a loan of RMB30,000,000 (December 31, 2019: RMB30,000,000) to an independent third party which is repayable in 2023, bears interest at a rate of 8% per annum and is secured by the pledge of the shares of Forever Opensource Co, Ltd. ("Forever Opensource")*.
- On April 14, 2020, the Group entered into a pledge release agreement pursuant to which the parties agreed to release the pledge of the shares of Forever Opensource and the borrower shall provide security with the value equivalent to the pledged shares of Forever Opensource within 180 days.
40 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
14. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES (continued)
The movements in the impairment of prepayments, deposits and other receivables are as follows: | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
At beginning of period/year | 49,833 | 34,391 | |
Additions | 18,341 | 21,607 | |
Write-off | (24,869) | (6,165) | |
At end of period/year | 43,305 | 49,833 | |
15. CONTRACT ASSETS | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Contract assets arising from: | |||
Products and specialised solutions | 478,497 | 450,844 | |
Maintenance services | 27,096 | 28,450 | |
505,593 | 479,294 | ||
Impairment | (29,518) | (29,678) | |
476,075 | 449,616 | ||
The movements in the impairment of contract assets are as follows: | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
At beginning of period/year | 29,678 | 31,841 | |
Reversal | (160) | (2,163) | |
At end of period/year | 29,518 | 29,678 | |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 41 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
16. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Cash and bank balances | 126,901 | 258,722 | |
Pledged deposits | |||
- Current deposits | 306,574 | 249,617 | |
- Non-current deposits | - | 70,000 | |
433,475 | 578,339 | ||
Less: Pledged and fixed deposits for | |||
- Maturity over 3 months | (45,313) | (47,066) | |
- Letter of guarantee for projects | (25,798) | (29,952) | |
- Bills payables | (104,694) | (9,994) | |
- Interest-bearing bank borrowings (note 19) | (130,006) | (231,806) | |
- Tenders | (763) | (799) | |
Cash and cash equivalents | 126,901 | 258,722 | |
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances and pledged deposits are deposited with creditworthy banks with no recent history of default.
The cash and bank balances and pledged deposits of the Group denominated in RMB amounted to RMB380,294,000 (RMB380,276,000 in Mainland China and RMB18,000 in overseas) as at June 30, 2020 (December 31, 2019 RMB389,914,000 in total). In Mainland China, RMB is not freely convertible into other currencies. However, under Mainland China's Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.
42 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
17. TRADE AND BILLS PAYABLES
An ageing analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:
June 30, | December 31, | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Audited | |
Current or less than 1 year | 271,878 | 286,496 |
1 to 2 years | 24,644 | 76,539 |
Over 2 years | 21,217 | 25,216 |
317,739 | 388,251 | |
Trade payables are non-interest-bearing and generally have credit terms ranging from 1 to 360 days.
18. CONTRACT LIABILITIES, OTHER PAYABLES AND ACCRUALS
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Contract liabilities (a) | 363,518 | 357,009 | |
Business advance deposits | 24,094 | 34,973 | |
Staff costs and welfare accruals | 34,234 | 17,175 | |
Other borrowings | 39,524 | 133,128 | |
Other taxes payable | 96,309 | 103,931 | |
Interest payables | 2,131 | 2,206 | |
Others | 27,180 | 23,532 | |
586,990 | 671,954 | ||
(a) Details of contract liabilities are as follows: | |||
June 30, | December 31, | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Unaudited | Audited | ||
Short-term advances received from customers | |||
Products and specialised solutions | 358,888 | 350,110 | |
Maintenance services | 4,630 | 6,899 | |
Total contract liabilities | 363,518 | 357,009 | |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 43 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
19. INTEREST-BEARING BANK BORROWINGS
June 30, 2020 | December 31, 2019 | |||
Effective | RMB'000 | Effective | RMB'000 | |
Interest rate (%) | Unaudited | Interest rate (%) | Audited | |
Current | ||||
Short term bank loans - secured | 2.8-9.0 | 407,190 | 2.8-7.0 | 548,216 |
Bills receivable discounted or endorsed | 0-5.4 | 348,487 | 0-4.1 | 153,551 |
755,677 | 701,767 | |||
Non-current | ||||
Long term bank loans - secured | LPR+15 | 40,250 | HIBOR/4.1-5.7 | 146,250 |
40,250 | 146,250 | |||
795,927 | 848,017 | |||
Notes:
-
Bank loans of RMB113.7 million as at June 30, 2020 (December 31, 2019: RMB224.4 million) were secured by pledged deposits of RMB130.0 million (December
31, 2019: RMB232.0 million) of the Group (note 16). - Bank loans of RMB3.5 million as at June 30, 2020 (December 31, 2019: RMB30.0 million) were guaranteed by the Company. Bank loans of nil as at June 30,
2020 (December 31, 2019: RMB160 million) were guaranteed by a subsidiary of King Victory, which is an associate of the two executive directors, Jiang Hailin and Liao Jie and one of the controlling shareholders of the Company. - Current bank loans of RMB230.0 million as at June 30, 2020 (December 31, 2019: RMB230.0 million) were secured by properties of the Group with a carrying
amount of RMB206.3 million (December 31, 2019: RMB208.5 million), and shares of Aproud Technology, a subsidiary of the Company. - Current bank loans of RMB59.8 million and non-current bank loans of RMB40.3 million (December 31, 2019: in aggregate RMB50 million) were secured by
properties and accounts receivable of the Group with a carrying amount of RMB73.5 million (December 31, 2019: RMB73.5 million) and RMB19.7 million
(December 31, 2019: nil) and a corporate guarantee by Zhixun Tiancheng.
44 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
20. SHARE CAPITAL
June 30, December 31,
2020 2019
RMB'000 RMB'000
Unaudited Audited
Issued and fully paid: | ||
1,654,024,868 ordinary shares of HK$0.0002 each | 290 | 290 |
21. SHARE OPTION SCHEME
On January 18, 2012, the board of directors resolved to grant share options under the share option scheme adopted by the Company on June 18, 2010 to 191 grantees, which included executive directors, independent non-executive directors and certain employees of the Group to subscribe for an aggregate of 155,000,000 ordinary shares. A total of 155,000,000 share options would be vested over twelve quarterly instalments from three months after the grant date provided these grantees remain in service at the respective vesting dates. The exercise price is HK$1.05 per share. There are no cash settlement alternatives.
There was no share option expense recognised during the six-month period ended June 30, 2020 (June 30, 2019: nil).
There was no movement in the number of outstanding share options during the six-month period ended June 30, 2020. The following table illustrates the number and weighted average exercise price ("WAEP") of the share options as at June 30, 2020:
WAEP | ||
Number | RMB | |
'000 | per share | |
Outstanding as at June 30, 2020 and December 31, 2019 | 61,011 | 1.05 |
Exercisable as at June 30, 2020 and December 31, 2019 | 61,011 | 1.05 |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 45 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
22. BUSINESS COMBINATION
On May 13, 2019, the Group entered into a share purchase agreement with the vendors, pursuant to which the Group shall acquire 58% equity interest in CEECGlobal Limited ("CEEC") at a cash consideration of RMB85,840,000 (the "Acquisition"). The vendors warrant to the Group that in respect of the two years ended December 31, 2019 and 2020 (the "Profit Guarantee Period"), the aggregate audited consolidated profits after tax of CEEC subgroup for the Profit Guarantee Period shall be no less than RMB62,000,000. If the guaranteed profits during the Profit Guarantee Period are not achieved, the Group is entitled to a compensation amount ("Profit Guarantee"), details of which are set out in the Company's announcement dated May 13, 2019. The Acquisition was completed in late May 2019.
The initial accounting for the Acquisition was provisional for the year ended December 31, 2019 mainly because the valuations of the intangible assets acquired and the consideration transferred had not been completed. The valuations were finalised during the six-month period ended June 30, 2020 and the following adjustments were made to the amounts of the assets acquired and liabilities assumed, as well as the amount of non-controlling interest recognised at the date of the Acquisition:
As reported | Adjustments | Adjusted | |
RMB'000 | RMB'000 | RMB'000 | |
Cash and cash equivalents | 1,689 | - | 1,689 |
Trade and bills receivables | 29,535 | - | 29,535 |
Prepayment, deposits and other receivables | 39,243 | - | 39,243 |
Property and equipment | 22 | - | 22 |
Intangible assets | - | 32,779 | 32,779 |
Trade and other payables | (58,074) | - | (58,074) |
Total identifiable net assets at fair value | 12,415 | 32,779 | 45,194 |
Non-controlling interests | (5,215) | (11,681) | (16,896) |
Goodwill on Acquisition | 78,640 | (32,229) | 46,411 |
Consideration for the Acquisition | 85,840 | (11,131) | 74,709 |
Cash consideration | 85,840 | - | 85,840 |
Contingent consideration | - | (11,131) | (11,131) |
Consideration for the Acquisition | 85,840 | (11,131) | 74,709 |
46 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
22. BUSINESS COMBINATION (continued)
In addition, the following table summarises the impact of the valuations on the condensed consolidated statement of financial position as at December 31, 2019:
As reported | Adjustments | Adjusted | |
RMB'000 | RMB'000 | RMB'000 | |
NON-CURRENT ASSETS | |||
Goodwill | 254,851 | (32,229) | 222,622 |
Other intangible assets | 5,938 | 32,779 | 38,717 |
Contingent consideration | - | 6,479 | 6,479 |
EQUITY | |||
Equity attributable to owners of the Company | |||
Reserves | 1,973,693 | (8,033) | 1,965,660 |
Non-controlling interests | 13,468 | 15,062 | 28,530 |
23. RELATED PARTY TRANSACTIONS
In addition to the transactions or balances as detailed elsewhere in the unaudited interim condensed consolidated financial statements, the Group had the following major transactions with related parties during the six-month period ended June 30, 2020:
For the six-month period | |||
ended June 30, | |||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Unaudited | ||
King Victory and its affiliates | |||
Rental income | (i) | 1,968 | 2,411 |
Sale of products | (ii) | - | 984 |
Interest income | (iii) | 6,146 | 12,361 |
Joint ventures | |||
Sale of products | (ii) | 7,464 | - |
Associate | |||
Rental income | (i) | 29 | - |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 47 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
23. RELATED PARTY TRANSACTIONS (continued)
June 30, | December 31, | ||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
Unaudited | Audited | ||
Due from related parties | |||
Associates | (iv) | 5,046 | 4,869 |
King Victory and its affiliates | (v) | 356,140 | 381,227 |
Total | 361,186 | 386,096 | |
Due to related parties | |||
Associates | (iv) | - | - |
Joint ventures | (iv) | - | 4,615 |
King Victory and its affiliates | (iv) | - | 154 |
- | 4,769 | ||
Notes:
- The rental income from associates and King Victory and its affiliates arose from the rental of the Company's office building, and was based on prices mutually agreed by both parties.
- The sales to King Victory and its affiliates and joint ventures were made on prices mutually agreed by both parties.
- The interest income arose from the outstanding receivables due from King Victory and its affiliates which was caused by the disposal of certain subsidiaries by the Company in 2016 and was due in June 30, 2019.
- The amounts due are unsecured, non-interest bearing and repayable on demand.
- As at June 30, 2020, RMB319 million (December 31, 2019: RMB347 million) was secured by the pledge of 50.56% equity interests in Beijing RHY Technology
Development Co., Ltd.. The interest rates was 3.804% to 7.068% (June 30, 2019: 3.487% to 6.479%).
48 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
23. RELATED PARTY TRANSACTIONS (continued)
Compensation of key management personnel of the Group
For the six-month period | ||
ended June 30, | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Unaudited | |
Salaries, bonuses, allowances and benefits in kind | 1,265 | 1,009 |
Pension plan contributions | 11 | 72 |
Total compensation paid to key management personnel | 1,276 | 1,081 |
24. PLEDGE OF ASSETS
Details of the Group's bank borrowings, which are secured by the assets of the Group, are included in note 19 to the unaudited interim condensed consolidated financial statements.
25. OPERATING LEASE COMMITMENTS
As lessor
The Group leases its investment properties and offices properties to certain independent third parties and a related party, with leases negotiated for terms of six months to three years.
Below is a maturity analysis of undiscounted lease payments to be received from the leasing of investment properties and offices properties.
June 30, December 31,
2020 2019
RMB'000 RMB'000
Unaudited Audited
Year 1 | 5,223 | 13,632 |
Year 2 | 1,354 | 5,205 |
Year 3 | 920 | 1,215 |
Undiscounted lease payments to be received | 7,497 | 20,052 |
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 49 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
26. CAPITAL COMMITMENTS
As at June 30, 2020, the Group had the following capital commitments:
June 30, December 31,
2020 2019
RMB'000 RMB'000
Unaudited Audited
Contracted, but not provided for equipment | 202,702 | 223,740 |
27. FAIR VALUE OF FINANCIAL INSTRUMENTS
Valuation processes
The Group's finance department headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The finance department reports directly to the chief financial officer and the audit committee. At each reporting date, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer.
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group's financial instruments measured at fair value as at June 30, 2020:
Fair value measurement using | ||||
Quoted prices | Significant | Significant | ||
in active | observable | unobservable | ||
markets | inputs | inputs | ||
As at June 30, 2020 (Unaudited) | (Level 1) | (Level 2) | (Level 3) | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Financial assets at fair value through | ||||
profit or loss | 36,349 | 182,642 | 22,380 | 241,371 |
Contingent consideration | - | - | 6,479 | 6,479 |
Fair value measurement using | ||||
Quoted prices | Significant | Significant | ||
in active | observable | unobservable | ||
markets | inputs | inputs | ||
As at December 31, 2019 (Audited) | (Level 1) | (Level 2) | (Level 3) | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Restated) | ||||
Financial assets at fair value through | ||||
profit or loss | 29,897 | 120,669 | 32,411 | 182,977 |
Contingent consideration | - | - | 6,479 | 6,479 |
50 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
27. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Movements in level 3 fair value measurements
June 30, | December 31, | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
Unaudited | Audited | |
(Restated) | ||
At beginning of period/year | 38,890 | 42,790 |
Addition | - | 6,479 |
Disposal | - | (9,444) |
Total gains and losses in profit or loss | (10,031) | (935) |
At end of period/year | 28,859 | 38,890 |
During the six-month period ended June 30, 2020, there were no transfers of fair value measurement between level 1 and level 2 and no transfer into or out of level 3 (December 31, 2019: nil).
Quantitative information of the significant unobservable inputs used in level 3 fair value measurements
The fair values of unlisted equity investments at fair value through profit or loss have been estimated using a market-based valuation technique based on assumptions that are not supported by observable market prices or rates. The valuation requires the directors to determine comparable public companies (peers) based on industry, size, leverage and strategy, and calculates an appropriate price multiple, such as enterprise value to earnings before interest, taxes, depreciation and amortisation ("EV/EBITDA") multiple and price to earnings ("P/E") multiple, for each comparable company identified. The multiple is calculated by dividing the enterprise value of the comparable company by an earnings measure. The multiple is then discounted for considerations such as illiquidity and size differences between the comparable companies based on company-specific facts and circumstances. The discounted multiple is applied to the corresponding earnings measure of the unlisted equity investments to measure the fair value. The directors believe that the estimated fair values resulting from the valuation technique, which are recorded in the condensed consolidated statement of financial position, and the related changes in fair values, which are recorded in profit or loss, are reasonable, and that they were the most appropriate values at the end of the reporting period.
The fair value of the contingent consideration is estimated based on the expected profit of CEEC for the year ending December 31, 2020.
China ITS (Holdings) Co., Ltd. Interim Report 2020 | 51 |
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 2020
27. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Quantitative information of the significant unobservable inputs used in level 3 fair value measurements (continued)
Significant | Sensitivity of fair | |||
Valuation technique | unobservable input | Range | value to the input | |
Unlisted equity | Market Approach | Average EV/EBITDA | 27.65 | 1% increase/decrease in multiple |
investments | multiple of peers | (December 31, 2019: 19.9) | would result in increase/decrease | |
in fair value by RMB218,000 | ||||
(December 31, 2019: RMB319,000) | ||||
Discount for lack of | 35% | 1% increase/decrease in discount | ||
market ability | (December 31, 2019: 35%) | would result in decrease/increase | ||
in fair value by RMB218,000 | ||||
(December 31, 2019: RMB319,000) | ||||
Profit Guarantee | Net Income Model | Expected profit of CEEC | N/A | 1% increase/decrease in expected profit |
would result in decrease/increase | ||||
in fair value by RMB923,000 | ||||
(December 31, 2019: RMB923,000) |
The discount for lack of marketability represents the amounts of premiums and discounts determined by the Group that market participants would take into account when pricing the investments.
28. APPROVAL OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim condensed consolidated financial statements were approved and authorised for issue by the board of directors on August 27, 2020.
52 | China ITS (Holdings) Co., Ltd. Interim Report 2020 |
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
China ITS (Holdings) Co. Ltd. published this content on 18 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 September 2020 22:29:02 UTC