ION Platform - Refocus - Positioning

All,

Please find our existing analysis on ION Platform here.

As flagged previously, we were waiting for a more compelling entry point before initiating a long position. We have re-listened to the mammoth conference call to reconfirm key points, and, following the recent modest sell-off, we believe now is the right time to take a position.

Investment rationale:

- We are taking a 5% position in the 6.875% September 2032 euro bonds at 78.75, yielding 12%. We updated our model following the Q1 results in early May and, while our assumptions remain more conservative than management’s, we continue to forecast deleveraging over the medium term.

- The bonds trade predominantly on a yield basis and, with no near-term maturities and improving disclosure from the Company, we were comfortable waiting for the right level. At current prices, we view the risk-reward as skewed to the upside, particularly given the significant short interest ahead of the Q1 results. The Company’s willingness to repurchase bonds and its improving investor engagement materially reduce the risk of severe downside. From these levels, we see downside limited to a few points, implying yields widening to around 13 to 14%. A sustained repricing towards rating-consistent levels will require clear evidence of realised synergies and, as such, near-term upside is likely capped at around 5 points, consistent with yield compression to the 9 to 10% range.

Follow-up:

- ION Platform remains a topical name with clients from both a long and short perspective. We have received a high volume of questions and discussions broadly falls into three areas.

- Cash leakage: This remains the most significant concern and a clear impediment to faster deleveraging. Management guided to total cash distributions to HoldCo of $350 to 400m in FY26, with the majority already paid in Q1 due to the pull forward of deferred consideration. For the remainder of FY26, leakage should be materially lower, largely comprising c. $75m of HoldCo interest and c. $50 to 100m of residual deferred consideration. Beyond FY26, deferred consideration steps down sharply, becoming materially lower in FY27 and minimal by FY28, pointing to a more predictable and structurally lower level of ongoing cash leakage. This remains an issue over the coming quarters and will require continued improvement in disclosure.

- Bond buybacks: Several clients have asked which bonds were repurchased. Based on disclosure and management commentary, we infer that activity has been concentrated in the 2028 and 2029 bonds. Management confirmed that c. $200m of notional debt has been repurchased to date, with c. $170m settled at the reporting date, at discounts to par. The debt has not been cancelled and currently sits at the parent entity.

- AI risk: We take a different view from some clients and see AI as an opportunity rather than a threat. While AI may place pricing pressure on certain products, the deep integration of ION Platform’s services within client systems supports a highly sticky customer base. AI enhances the ability to deliver more bespoke and embedded solutions, further strengthening client dependency rather than undermining it.

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009
www.sarria.co.uk