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

(CICPA, CIMA, AAIA, CGMA)

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:

  1. 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
  2. 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.

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China ITS (Holdings) Co., Ltd. Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS AND FINANCIAL REVIEW (continued)

Business Review (continued)

  1. 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.
  2. 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

  1. 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.
  2. 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.

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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%

  1. 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.
  2. 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.

  1. 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.
  2. 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.

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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.

  1. 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:

  1. 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.
  2. 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.
  3. (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.

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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:

  1. 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.
  2. 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.
  3. 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Joyful Business Holdings Limited is wholly-owned by Mr. Liao Jie. Mr. Liao Jie is the sole director of Joyful Business.
  6. 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:

  1. 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
  2. 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:

  1. 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
  2. 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

  1. 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)

  1. 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:

  1. 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).
  2. 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.
  3. 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.
  4. 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:

  1. 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.
  2. The sales to King Victory and its affiliates and joint ventures were made on prices mutually agreed by both parties.
  3. 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.
  4. The amounts due are unsecured, non-interest bearing and repayable on demand.
  5. 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

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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