China ITS : INTERIM RESULTS ANNOUNCEMENT FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2020

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China ITS (Holdings) Co., Ltd.

中 国 智 能 交 通 系 统（控 股）有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1900)

INTERIM RESULTS ANNOUNCEMENT FOR

THE SIX-MONTH PERIOD ENDED JUNE 30, 2020

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.

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND 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
	- 2 -

For the six-month period

ended June 30,

20202019

Notes 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

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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		475,538		251,158
Investment properties		83,710		83,710
Goodwill		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		30,000		30,000
Pledged deposits	12	-	70,000
Total non-current assets		1,090,352		1,014,465
CURRENT ASSETS
Inventories		297,863		206,684
Contract assets	11	476,075	449,616
Contingent consideration		6,479	-
Trade and bills receivables	10	610,287	909,025
Prepayments, deposits and other receivables		512,022	473,419
Amounts due from related parties		361,186	386,096
Pledged deposits	12	306,574	249,617
Cash and cash equivalents	12	126,901	258,722
Total current assets		2,697,387		2,933,179

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		June 30,	December 31,
		2020	2019
	Notes	RMB'000	RMB'000
		Unaudited	Audited
				(Restated)
CURRENT LIABILITIES
Trade and bills payables	13	317,739	388,251
Contract liabilities, other payables and accruals		586,990	671,954
Interest-bearing bank borrowings		755,677	701,767
Amounts due to related parties		-	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		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		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

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NOTES TO 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, 20-24Lockhart 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-monthperiod ended June 30, 2020, the main businesses of the Group are as follows:
2. 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 mainly sells products and provides specialised solutions that meet the needs of customers, which mainly include railway communication products, energy-base products, power communication products, power transmission and transformation equipment, power generation equipment; and
   2. Value-addedoperation and services business (the "Value-addedOperation and Services") - We provide value-addedservices 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.
3. 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.
   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.

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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 mainly sells products and provides specialised solutions that meet the needs of customers, which mainly include railway communication products, energy-base products, power communication products, power transmission and transformation equipment and power generation equipment; and
2. Value-addedoperation and services business (the "Value-addedOperation and Services") - We provide value-addedservices 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.

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
	specialised	operation and
For the six-month period ended June 30, 2020 (Unaudited)	solutions	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.

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	Products and	Value-added
	specialised	operation and
For the six-month period ended June 30, 2019 (Unaudited)	solutions	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

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4. REVENUE

An analysis of revenue is as follows:

For the six-month period

ended June 30,

20202019

RMB'000 RMB'000

Unaudited Unaudited

Revenue from contracts with customers within IFRS 15			237,070	382,406
(i) Disaggregated revenue information
For the six-month period ended June 30, 2020
	Products and	Value-added
	specialised	operation and
Segments	solutions	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

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For the six-month period ended June 30, 2019
	Products and	Value-added
	specialised	operation and
Segments	solutions	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.

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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
Impairment of trade receivables	(2,612)	(6,403)
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

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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-residententerprises 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-2008earnings are exempted from the above-mentionedwithholding 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

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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

1. DIVIDENDS PROPOSED
   No dividend was declared or proposed by the Company for the six-month period ended June 30, 2020 (June
   30, 2019: nil).
2. 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.

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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
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
11. 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

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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
12. 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	(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.

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13. 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.

14. 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 RMB62.0 million. 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-controllinginterest 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

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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

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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, we sell Products and specialised solutions to customers according to their needs. It mainly includes: railway communication products, energy-base products, power communication products, power transmission and transformation equipment, and power generation equipment; 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.

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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.

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 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-addedoperation 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.

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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.

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.

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1. 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-addedoperation 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.

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%

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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-addedoperation 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.

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 held by the Group for not fulfilling their committed performance 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-timeemployees 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.

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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.

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.

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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 RMB92.8million 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.

Contingent Liabilities

As at June 30, 2020, the Group had no material contingent liability.

Charges on Group Assets

As at June 30, 2020, except for 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 announcement.

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MATERIAL ACQUISITIONS OF SUBSIDIARIES AND ASSOCIATES

During the Period, the Group did not have any significant acquisition.

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.

INTERIM DIVIDEND

The Board did not recommend the payment of an interim dividend.

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 also 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-monthperiod 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 of 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.

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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.

PUBLICATION OF THE 2020 INTERIM REPORT

The 2020 Interim Report of the Company containing all the information as required under Appendix 16 of the Listing Rules will be dispatched to the shareholders and available on the Company's website at www.its.cn and the Stock Exchange's website at www.hkexnews.hk in due course.

ACKNOWLEDGEMENT

The Chairman of the Company would like to thank the Board, management and all members of our staff for their commitment and diligence. The Chairman of the Company would also like to thank our shareholders and business associates for their strong support to the Group.

By Order of the Board

China ITS (Holdings) Co., Ltd.

Liao Jie

Chairman

Beijing, August 27, 2020

As at the date of this announcement, the executive Directors of the Company are Mr. Liao Jie and Mr. Jiang Hailin and the independent non-executive Directors of the Company are Mr. Ye Zhou, Mr. Wang Dong and Mr. Zhou Jianmin.

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