The priority is the wellbeing of the children, your daughter should report immediately, even if it risks the friendship.
Your daughter, if she lives in the UK, has these options to report her concerns.
She can contact:
The local authority child protection team – even outside normal office hours
The police – call 999 in an emergency or otherwise 101
The Child Exploitation and Online Protection Centre (CEOP). This is the UK’s national police agency for dealing with child protection, particularly online abuse.
Other agencies which come into contact with children, for example, the child’s school, GP or youth worker.
The children's school will no doubt have noticed how sad the children are, but don't have enough information to involve social services. Your daughter can help to complete the picture and the school can alert the appropriate authorities.
The longer she leaves it, the more lasting emotional and physical damage done to these children. I have worked with children in similar circumstances, it breaks my heart to read this.
Once the children are safe, your daughter can then focus on supporting her friend.