Nearly £1 billion was wiped off the market value of Yell yesterday after the publisher of the Yellow Pages stunned the City with a profits warning that sent its shares crashing by more than 20 per cent.

Yell, whose American phone directory is its biggest revenue generator, downgraded its US sales growth forecasts for this year from 10 per cent to 3 per cent. The company blamed “aggressive” pricing tactics by its US rivals for the warning.

The trading statement, which sent shares tumbling 124p to 488½p, alarmed analysts, who described the size and speed of the deceleration in revenues as “very surprising” and cast doubt on the potential for growth in the US because of uncertainty in the sector.

Yellow Book USA, Yell’s US version of the phone directory, has a 12 per cent share of the $15 billion (£7.5 billion) US market and accounts for almost half of Yell’s total revenue.

Yell attributed the warning, which came less than a month ahead of its full-year results statement, to the introduction of massive price discounts and rapid regional expansion by existing competitors, as well as a flurry of new start-ups entering the sector.

However, the group admitted that the recent intensity was a symptom of serious competitive pressures that had existed for some time, adding that conditions left the market ripe for consolidation and takeovers.

Commenting on the revenue drop, John Davis, the chief financial officer, said: “There have been competitive pressures in the US for some time, although these recently increased in intensity. New competitors and medium-sized private equity groups have launched aggressive discounting strategies and expanded into other territories. We are disappointed, but others are hurting too. The competition is likely to lead to a shake-out and further consolidation within the sector.”

Yell, which was sold to Hicks Muse in 2001 by BT and which listed in London in 2003, is understood to have appointed Goldman Sachs as an adviser in a move that analysts view as a defensive strategy in case of renewed private equity interest. Yell yesterday denied that the group had received offers from potential bidders.

Mr Davis said that the group had no intention of attempting to close the revenue shortfall and would continue to invest in the US.

Yell bought Yellow Book for $665 million in 1999. It is the biggest independent Yellow Pages group in the US but only the fifth biggest overall, behind similar publishers that are backed by US telecoms groups.

Yell, which is also the biggest European publisher of classified directories, added that revenue growth at its UK and Spanish operations was in line with expectations.

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