Hammonds has had a truly dreadful year, even after two years of falling profit. Its accounts, finally released at the end of July following a review by new auditors PricewaterhouseCoopers (PwC), revealed a turnover of £127.6m and average PEP of £204,000.

The 25 per cent drop in reported profit is extraordinary, but what is worse for Hammonds is that PwC's audit also produced adjustments to the 2004 draft accounts. Changes to the 2004-05 opening balance sheet and to accounting policies highlighted an £8.1m charge, after estimated tax of 40 per cent, which will be carried forward to future years and deducted from partner profits.

Most of the drop in profit came from a shocking performance in the UK. Only the Leeds office hit budget and UK income was down 2.5 per cent. Offsetting that was a strong international showing, with income from Hammonds' European and Hong Kong offices up 26.2 per cent.

In practice area terms, the corporate finance department was the only one to improve on 2004, with its fees rising by 14 per cent. In contrast, construction and finance (incorporating insolvency and tax) per- formed very badly and was hit by a stream of partner departures over the year. Construction was down 27 per cent and finance 18 per cent.

New managing partner Peter Crossley, who has made an impressive start to his tenure, has a mammoth task ahead to bring Hammonds' profit in line with its competitors'. This year will be key to that task.