INVESTORS have wiped around £250 million off the market worth of Wood Group which suffered a 62 per cent slump in profits amid grim conditions in the North Sea where it sees no sign of improvement.

The Aberdeen-based engineering giant made just $34 million (£27m) bottom line profit in 2016 compared with $90m in the preceding year as it felt the impact of big cuts in spending by the oil and gas firms it works for.

Chief executive Robin Watson highlighted the scale of the challenge the company is facing in the North Sea following a dramatic drop in activity since the crude price plunge started in 2014.

“Budgets are so tight and constrained that activity levels have significantly reduced over the last two years,” said Mr Watson.

He added: “From an activity perspective we don’t see any sign of improvement through 2017.”

Mr Watson’s comments will dim hopes that the partial recovery in crude prices since November may herald a recovery in the North Sea, where Wood Group has cut thousands of jobs in the last two years.

Asked about the outlook for 2018 he said: “It’s too soon to say, it’s just such a stressed basin.”

Mr Watson said he hoped Wood was “at the bottom” in terms of job losses in the North Sea, noting it has no further redundancy programmes planned.

Employee numbers dropped in December as existing initiatives worked through.

Yesterday’s update contained signs life is tougher in the North Sea than in other areas, even following sustained moves by oil and gas firms to increase efficiency in what has long been seen as a high cost area.

Wood is one of many services companies that have felt the impact of moves by the firms that control North Sea fields to squeeze cost out of the supply chain.

Wood Group’s average monthly number of employees in the UK fell by around 20 per cent to 7,169 in 2016 from 8,907 the preceding year. The average monthly number of employees increased in the USA, to 10,736 from 10,082.

The company has seen activity increase in the onshore shale market in the USA following the recent decision by Opec countries to limit production to support the market.

Wood is working on a range of big developments in the Gulf of Mexico.

It sees potential to increase activity in the Asia Pacific region and in the Middle East, but remains cautious on the near term outlook for the oil and gas market. overall

The group will increase the full year dividend for 2016 by 10 per cent to 33.3 cents per share, from 30.3 cents.

Mr Watson noted the increase was implemented under a policy introduced in 2014 before the downturn in the sector. Wood had been “out of synch.” with competitors.

The dividend has been the subject of regular and lengthy discussions at the group.“We felt that we had committed to it in 2014 so we had to honour it,” said Mr Watson.

The company said: “Following successive 10 per cent annual increases in the dividend, we intend to pursue a progressive dividend policy going forward, taking into account cash flows and earnings.”

Wood will consider making acquisitions to support growth.

In the results announcement, Wood said it felt the benefit in 2016 of the early and decisive action it had taken to reduce costs.

Underlying headcount, excluding acquisitions, fell 36 per cent over the last two financial years.

Group revenues dropped 16 per cent annually, to $4.9bn in 2016. UK continuing revenues plunged 40 per cent to $867m.

Wood incurred $89m exceptional charges in respect of Ethos Enegy following a challenging year for the turbines venture and $66m restructuring costs.

Earnings before interest, tax and amortisation fell 22.8 per cent to $363m, in line with expectations, from $470m.

Asked about the possibility of a second referendum on independence for Scotland being called in 2018, Mr Watson said the company would not comment on political questions.

The group intends to keep its headquarters in Aberdeen.

Wood Group shares closed down eight per cent, 65p at 753p. That left it with a market capitalisation of around £2.9bn.

Analysts at Credit Suisse said the worst of the downturn appeared to be behind Wood Group. They do not expect any further significant restructuring.