Telegraph Media Group: trophy status could trump fundamental value

The Barclay family, the billionaire proprietors of The Daily Telegraph, a conservative UK newspaper, are making headlines of their own. Their holding company, B.UK, is under pressure from Lloyds Bank to settle decade-long borrowings. Calling in debts reportedly worth £1bn, Lloyds Banking Group put the Telegraph’s offshore parent into receivership on Wednesday. AlixPartners have been appointed as receivers to oversee an asset sale.

The Telegraph is not some wannabe new media business, à la Vice or BuzzFeed News, both of which have failed financially. Revenues, subscribers and profits at UK-registered Press Acquisitions Ltd were all growing when its 2021 accounts were filed last May. The 2022 accounts have yet to appear at Companies House, making external valuation trickier. Still, The Telegraph’s trophy status could earn it a multiple above the norm.

Sales grew 4 per cent to £245mn in 2021, and within that digital subscription revenues were up 40 per cent. Ebitda and operating profit margins were 16 per cent and 10 per cent respectively. The group’s weekly magazine The Spectator also performs well and could be sold off separately. 

The older, wealthier demographic that reads and subscribes to The Telegraph is another plus for some advertisers. Profit margins have been growing with a digital transformation plan. Sales from subscriptions are approaching half of total revenues.

A list of potential buyers includes Mirror owner Reach, Rupert Murdoch’s News UK or Daily Mail owner DMGT. The latter was taken private by its owner Lord Rothermere in 2021. But Reach’s financial difficulties and News UK’s ownership of The Times diminishes their chances. Axel Springer had expressed interest when the Barclay brothers purchased it. Another is hedge fund manager Paul Marshall, co-owner of “anti-woke” GB News.

Even putting The Telegraph and the Daily Mail newspapers together could pique regulators’ attention due to a combined 35 per cent share of national newspaper advertising revenues, says media analyst Ian Whittaker.

A buyer might well pay up. DMGT traded between 10 to 15 times ebitda five years before delisting. On Lex estimates, a 12.5 times 2023 ebitda multiple values TMG at about £600mn. The Barclays paid £665mn in 2004, worth over £1bn in today’s money. Given its trophy status, that latter figure could well be hit.