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February 17, 2016

Media analyst: Operating profit of £51m and FT sale price mean Telegraph group could fetch up to £800m

By William Turvill

A media analyst has suggested Telegraph Media Group could be sold for between £600-800m.

The Barclay family has denied the publishing company, which they acquired along with The Spectator for £665m in 2004, is for sale.

But rumours about a possible sale among staff were strengthened earlier this month when chief executive Murdoch MacLennan told staff professional services firm Deloitte was conducting a “strategic review” of the business.

And media analyst Alex DeGroote, of broking firm Peel Hunt, has told Press Gazette: “If you appoint Deloitte to do an internal review, people will put two and two together.”

The Guardian has today reported that unaudited accounts show Telegraph Media Group recorded an operating profit of £51m last year – down from £55m in 2014 – on a turnover of £319m.

DeGroote said: “If you take the £51m as a base-case profit for the group, I would have thought you’re looking for a figure of between £600-800m.”

As well as the operating profit, DeGroote said this estimate also took into account the £844m price Japanese company Nikkei paid Pearson to acquire the Financial Times Group last year. This was around 35 times the adjusted operaring profit of the FT.

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Last week, a Peel Hunt investor document noted that The Independent and Independent on Sunday were believed to have been informally on the market along with the i, which has been told to Johnston Press. However, the newspapers were not sold and are to be closed next month.

DeGroote suggested the Barclay family would have more luck selling the Telegraph, which he described as a "trophy asset".

He said:  “For all its faults, for all its reputation of being ‘mature’ and a bit middle England, it has fantastic brand value, it speaks to a very important demographic and it has political influence.

"You couldn’t recreate that easily. The Telegraph, in my opinion, really conforms to the term ‘trophy asset’ – in a way that The Independent sadly never would.”

While the Telegraph's operating profit is believed to have fallen last year, DeGroote suggested that profit may be of secondary importance to some potential buyers.

He said: "A sovereign wealth fund would never have bought The Independent, but they would buy the Telegraph. Why? Because it speaks to permanence, it speaks to a stratum of British society, it speaks to British influence.”

DeGroote suggested the Telegraph would be well placed for a roll-out across other English-speaking territories and, along with other media groups, to expand into offering television services.

He also highlighted the Telegraph's ability to combine profitability with "political influence and societal influence".

He added: “It speaks to who the next owner will be. If the next owner is a sovereign wealth fund or a Chinese billionaire, up to a point, I don’t think the profitability is a big issue.”

Picture: Shutterstock

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