Operating expenses increased by GBP 0.2 million in the year, largely as a result of an increase in professional fees associated with managing our existing royalty portfolio and exploring new royalty opportunities. This increase in professional fees was offset somewhat by the decision not to award the Executive Directors an annual bonus this year.
A reduction in finance income of GBP 0.8 million in the year, largely as a result of the cessation of interest bearing royalty instruments, along with no change in the amortisation of the Amapa royalty, resulted in an operating profit of GBP 9.3 million in the year, compared to GBP 31.8 million in 2011 (restated).
In spite of very difficult equity markets, the Group realised gains of GBP 7.3 million (2011: GBP 20.3 million) from its mining and exploration interests in the year. The Group continued its strategy of taking equity stakes in strategic opportunities with the prospect of potential royalties. Where royalties cease to be a financing option, the Group will seek to dispose of the particular equity investment in a manner that is profitable to the Group, while minimising disruption to the investee company. The reduction in gains compared to those achieved in 2011 largely reflects the difficulties in the junior mining equity markets over the last year.
Other losses of GBP 4.2 million reflect write downs in the mining and exploration interests of GBP 3.7 million which the Directors consider to be impaired. Further information can be found in note 3. The losses of GBP 4.3 million in 2011 largely represented provisions in respect to amounts receivable from royalty instruments, though GBP 0.8 million of this was recovered in 2011. Other income represents returns from the Groups mining and exploration interests.
Overall this resulted in profit before tax for the year of GBP 14.2 million compared to GBP 48.5 million (restated) reported in 2011. Allowing for a tax charge of GBP 4.2 million (2011: GBP 12.2 million (restated)), profit after tax was GBP 10.0 million (2011: GBP 36.3 million (restated)) which translates to an earnings per share of 9.27p (2011: 33.51p (restated)).
Balance sheet
----------------------------------------------------------------- RestatedAsset summary GBP '000 2012 2011-----------------------------------------------------------------Coal royalties (Kestrel and Crinum)(i) 170,995 165,967Royalty instruments(ii) 24,032 24,736Intangibles - royalties(iii) 70,477 68,334-----------------------------------------------------------------Total royalty assets 265,504 259,037-----------------------------------------------------------------Mining and exploration interests 55,793 64,551Cash 24,036 32,197Other intangibles (deferred exploration costs) 931 804Other 7,204 14,450-----------------------------------------------------------------Total assets 353,468 371,039-----------------------------------------------------------------(i) Coal royalties relate to the Group's entitlement to royalties from theKestrel and Crinum mines. As the Group owns the physical right to theminerals in its coal royalties, its royalty entitlement is treated asproperty, plant and equipment, as such it is carried at fair value ascalculated by an independent consultant.(ii) Royalty instruments represent the Group's royalties which arestructured as debentures. As these are financial assets they are carried attheir fair value on the balance sheet.(iii) Intangibles - royalties are carried at amortised cost. Though theexpected future cash flows from these royalties may enhance significantlypost investment, accounting rules prevent the Group from reflecting this onthe balance sheet.
