Finance director John Davis said the telephone directories and website firm, led by chief executive John Condron, would save £75million by cutting the dividend to 5.7p a share.

Yell plunged 55p to 154p, despite reporting good growth for the year to March. Revenues rose 7 per cent to £2.2billion and pre-tax profits 25 per cent to £311million. The company spread the gloom by warning the half-year dividend might also be halved.

It added there could be no guidance beyond the first quarter because of “considerable downward pressure from the tougher economic conditions”.

Davis said the dividend cut was vital for “financial flexibility” and the money saved would be invested in the business.

Yell is looking to build its internet operations in the teeth of fierce competition. It also has £3.8billion of debt.

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