The Telegraph has revealed a £278m black hole in its finances as a result of loans extracted by the Barclay family which are unlikely ever to be repaid.
Attempts to trace the cash via a network of companies controlled by the Barclay family have been unsuccessful as part of a review of seven years of potentially irregular transactions that has drawn interest from criminal investigators.
Specialists from HMRC and the National Crime Agency, which acts as an information clearing house for financial authorities including the Serious Fraud Office, have been in contact with the company and its advisers. It has not been disclosed if investigations have been launched and the Barclay family declined to comment.
The £278m, recorded as a “provision” in accounts for 2023 newly filed at Companies House, pushed The Telegraph to a record loss of £245m last year despite what its leaders said was a strong underlying performance.
The sum includes more than £200m extracted as loans on annual amounts in the tens of millions, as well as more than £20m in fees related to the ownership crisis that has gripped the business since last summer. A further £55m relates to a corporate loan.
The losses on paper came despite rises in turnover and underlying earnings that were driven by growth in digital subscriptions and advertising. The Telegraph’s independent directors, brought in when the Barclay family lost control a year ago, said the underlying business remains healthy.
Turnover increased by 5pc to £268m, within which digital subscription revenue was up 18pc and digital advertising 33pc. Total subscriptions, which include print and digital, puzzles and “bonus” free subscriptions, topped one million after climbing more than 300,000.
Overall, 42pc of turnover was drawn from digital subscriptions and advertising, up from 28pc in the previous year. Underlying earnings, excluding exceptional costs triggered by the ownership crisis, were £60m, up 28pc.
Anna Jones, chief executive of Telegraph Media Group since January, said: “2023 reinforced the strength and resilience of Telegraph Media Group as a business. The substantial growth in our operating profit, pre-exceptional items, last year was driven by significant advances in both digital advertising and digital subscription revenue.”
“Against a backdrop of uncertainty surrounding its future ownership, the business has continued to excel and be recognised for its successes.”
In April, The Telegraph won news website of the year for the second year running at the Press Awards, the industry’s most prestigious prizes.
Ownership saga
The success came after Lloyds Banking Group seized control of the business as part of a dispute with the Barclay family over overdue loans of £1.2bn that were secured against it. The lender then installed independent directors, who still oversee the company and have been aware of the intercompany loan issue for some months.
Lloyds planned to sell The Telegraph via an auction which was derailed in December when the Barclay family repaid their debt in full. Most of the cash came from new borrowing from Sheikh Mansour bin Zayed Al Nahyan, the deputy prime minister of the UAE.
The Barclay family regained ownership of The Telegraph but not control after ministers intervened. RedBird IMI, a private equity vehicle that acted as a conduit for Sheikh Mansour’s money, planned to convert its £600m lending into ownership of The Telegraph and The Spectator magazine.
It was ultimately blocked this year after a cross-party outcry prompted legislation to ban foreign state influence over British newspapers and websites. RedBird IMI is now preparing a second auction for the coming weeks.
In the accounts, the independent directors, led by chairman Mike McTighe, alongside Steven Welch and Boudewijn Wentink, said: “As part of the receivership and sale processes in the year, a detailed review of historic transactions was undertaken in respect of amounts paid to, and received from, group companies and related parties.
“The review identified potential irregularities in the recording of such transactions and although there have been no changes to the assets and liabilities recorded, there is a potential risk of future possible claims against the company in respect of such transactions.”
Nick Hugh, the former chief executive, who was also director of Telegraph Media Group, left before the accounts were prepared. He declined to comment on concerns over the movements of money. He was not a director of any Barclay family companies further up a chain that led to the British Virgin Islands, via Jersey.
The accounts reveal Mr Hugh’s overall remuneration doubled to £2m last year, a figure thought to have been boosted by his departure and a bonus scheme linked to a target of one million subscriptions by the end of 2023.
The largest contributor to the increase in subscriptions was the £13m acquisition of the Chelsea Magazine Company (CMC), a specialist publisher of lifestyle titles including The English Garden and Classic Boat. According to accounts for Press Acquisitions Limited, The Telegraph’s parent company, CMC made a loss of £500k last year.
The independent directors’ own investigations have been unable to determine the destination of the cash borrowed from The Telegraph outside its immediate ownership chain. The Barclay family are also owners of the online retailer Very Group and until recently Yodel, a heavily loss-making parcel courier.