Financial statements

		2008	2007
	Note	£m	£m
Revenue	3	2,010	1,802
Operating expenses
Expenses and disbursements on client assignments		(285)	(259)
Staff costs	4	(729)	(663)
Depreciation and amortisation		(45)	(38)
Other operating expenses		(330)	(285)
Profit from operations	5	621	557
Finance income	6	68	39
Finance cost	6	(35)	(32)
Profit before tax		654	564
Tax	7	(2)	(2)
Profit for the year before partners’ profit shares		652	562
Provision for partner pensions for current partners		(12)	(3)
Profit available for discretionary division amongst partners	16	640	559

Analysis of profit available for distribution to partners and retired partners
	2008	2007
	£m	£m
Profit available for discretionary division amongst partners	640	559
Provision for partner pensions for current partners	12	3
Retired partner annuity cost	31	10
Total profit before partner and retired partner allocation	683	572

	2008	2007
	£m	£m
Actuarial (losses)/gains on defined benefit pension schemes	(11)	80
Exchange differences on translation of foreign operations	(2)	-
Net (expense)/income recognised directly in equity	(13)	80
Profit for the financial year	640	559
Total recognised income for the period attributable to partners	627	639

		2008	2007
	Note	£m	£m
Assets
Non-current assets
Property, plant and equipment	9	200	147
Intangible assets	10	11	13
Financial assets	11	33	71
		244	231
Current assets
Client and other receivables	12	661	582
Cash and cash equivalents		91	51
		752	633
Total assets		996	864
Liabilities
Current liabilities
Trade and other payables	13	199	183
Provisions	14	28	30
Partner capital	16	130	123
		357	336
Non-current liabilities
Retirement benefit obligation	19	67	74
Deferred tax	15	1	1
Provisions	14	511	490
		579	565
Equity
Partners’ other reserves	16	60	(37)
Total liabilities and equity		996	864

Partners’ interests
		2008	2007
	Note	£m	£m
The following balances relating to partners are included in the group balance sheet:
Partners’ capital	16	130	123
Amounts due from partners (included in current assets)	16	(46)	(26)
Provision for current partner annuities (included in non-current liabilities)	16	238	249
Partners’ other reserves	16	60	(37)
Total partners’ interests		382	309

The financial statements on pages 36 to 68 were approved by the Board on 21 July 2008.
Signed on behalf of the Board,

John Connolly
Senior Partner and Chief Executive

Bob Warburton
Managing Partner, Finance & Legal

	2008	2007
	£m	£m
Profit from operations	621	557
Adjustments for:
Depreciation, amortisation & impairment	45	38
Impairment of financial assets	1	(1)
Loss on disposal of property, plant and equipment	1	-
Increase in provisions	50	8
Decrease in retirement benefit obligations	(18)	(13)
Operating cash inflows before movements in working capital	700	589
(Increase)/decrease in receivables	(74)	44
Increase/(decrease) in payables	17	(36)
Cash generated by operations	643	597
Corporate taxes paid	(3)	(3)
Net cash flow from operating activities	640	594
Investing activities
Interest received	28	9
Proceeds on disposal of financial assets	43	3
Purchase of subsidiary	-	4
Proceeds on disposal of property, plant and equipment	6	7
Purchase of property, plant and equipment	(103)	(59)
Purchase of investments	(1)	-
Net cash used in investing activities	(27)	(36)
Financing activities
New loans	(5)	(2)
Payments to and on behalf of partners	(550)	(476)
Retirement benefits paid to former partners	(21)	(21)
Repayment of capital to former partners	(9)	(6)
Partners’ capital introduced	16	15
Interest paid	(4)	(5)
Decrease in bank overdrafts	-	(22)
Net cash used in financing activities	(573)	(517)
Net increase in cash and cash equivalents	40	41
Cash and cash equivalents at beginning of year	51	10
Cash and cash equivalents at end of year	91	51
Cash and cash equivalents comprise
Cash at bank	91	51

Annual Report 2008