UK tech stocks to watch

Wise (previously known as TransferWise) is a London-based fintech company that offers digital payments services on a global level. It was founded in 2010 and has over 10m customers to date, offering them to hold and convert over 50 currencies on the app with no hidden fees. Wise is authorised and regulated by the FCA in the UK and has 17 offices across the world.

Wise had its IPO in July 2021, debuting on the London Stock Exchange and closed at a slightly higher price than where it initially started trading on its first trading day due to positive investor interest. Its IPO came after a successful financial year, where Wise reported a revenue growth from £179m in 2019 to £302.6m in 2020. It has been profitable since 2017, recording a net profit of £21.3m in 2020, and has a revenue compound annual growth rate (CAGR) of 54%. Wise has since partnered with other financial institutions such as Monzo and Bolt and boasts investors like Richard Branson and Max Levchin.

Market cap: £9.56bn
2020 revenue: £302.6m
P/E ratio: 312.5

Ocado is a FTSE 100 stock that develops software, robotics and automation systems for online retailers across the world such as Morrisons (UK), Alcampo (Spain), Kroger (US), Coles (Australia), and AEON (Japan). The company, which was founded in 2000, uses robot-operated systems to pick out products in warehouses, which are then shipped to customers. An innovative company, it is one of the only grocery chains in the world to incorporate AI within its services, reducing operating costs and improving efficiency that would not be possible with a human workforce.

Ocado performed particularly well throughout 2020 given the Covid-19 crisis, which caused many traditional supermarkets to move their services online. In fact, Marks & Spencer paid £750m in September 2020 to acquire a 50% share of Ocado’s business in a joint venture named Ocado Retail. Revenue for the company stands at £2.33bn in 2020, up from £1.76bn in 2019, and Ocado is working with its partnered supermarkets to build more automated warehouses in the near future.

Market cap: £13.88bn
2020 revenue: £2.3bn
P/E ratio: N/A

Softcat is a leading provider of IT infrastructure within both the public and corporate sectors. The company was founded in 1993 and is headquartered in Marlow, with additional offices across the UK and Ireland. It has over 12,300 customers. Softcat provides services such as business intelligence and analytics, software licensing, end user computing and mobility, asset management and networking and security.

Softcat stock is listed on the FTSE 250 index as one of the largest companies in the UK. Softcat’s revenue in 2020 equalled £1.08bn, up 9% from the previous year. It also recorded a gross profit of £235.7m and operating profit growth of 11%, where its customer base was up by 300. Half year reports show that growth is also up by roughly the same figures for 2021, so keep an eye on Softcat’s financials.

Market cap: £3.74bn
2020 revenue: £1.1bn
P/E ratio: 42.19

Darktrace is a cybersecurity stock that uses artificial intelligence (AI) to identify cyber threats within its clients software. It was founded in 2013 and has headquarters in an area of Cambridge that has been dubbed ‘Silicon Fen’, due to its tech-heavy focus on software and electronics companies. Darktrace uses self-learning technology to detect and autonomously respond to cyber-attacks in real time, which usually involve operational technology (OT) environments such as SCADA systems and IT networks. Darktrace has over 44 offices worldwide.

The company has experienced rapid revenue growth over recent years, recording an increase of 45% from £57.7m in 2018 to £144.8m in 2020, although it hasn’t yet made a profit on a pre-tax or operating basis. It also saw its client base grow substantially from around 1,600 to 4,700 in the same time period. Some of Darktrace’s clients include Coca-Cola, Rolls-Royce and the NHS.

Market cap: £4.83bn
2020 revenue: £144.8m
P/E ratio: N/A

Kainos Group is a software company founded in 1986 and headquartered in Belfast. It provides digital technology solutions and Workday deployments that allow organisations to work more efficiently at a faster pace. The company offers a range of services to do with cloud and engineering, data and AI, intelligent automation, and service and experience design, which are primarily used within the financial services, education, government, and healthcare and life sciences industries. Kainos has offices worldwide and is one of HR platform Workday’s main implementation partners. It is listed on the FTSE 250 stock index.

2020 represented the tenth consecutive year of revenue growth for Kainos, expanding by 17.5% organically to £178.8m. Pre-tax profit also increased by 9% and sales orders were up by 42% to £243.6m. In particular, the company saw growth in international revenues, as well as commercial and SaaS-related services. Some of Kaino’s biggest customers include names like Netflix, HP and Diageo, as well as the UK Home Office and NHS.

Market cap: £2.05bn
2020 revenue: £178.8m
P/E ratio: 52.40

Blue Prism is a multinational software company that specialises in AI and robotic process automation (RPA) for use in workplaces. The purpose of its ‘digital workers’ is to create a more agile workforce and tackle complex tasks and activities whenever needed. The tool is based on Java programming language and it claims to reduce the need for labour while being more cost-effective. Blue Prism was founded in 2001 and has headquarters in Warrington.

Blue Prism’s software is employed by a number of well-known international companies, particularly within the finance and business industries, including Wells Fargo, Fannie Mae and Dentsu International. The company’s annual report for 2020 showed a 46% increase in revenue from £96.8m to £141.4m, with a strong improvement in cash generation that was driven by business performance and operational savings related to Covid-19. Blue Prism is looking at a potential second stock listing in the US as a result of the strong financial year.

Market cap: £818.40m
2020 revenue: £141.4m
P/E ratio: N/A

Trustpilot is a Danish consumer review website that currently hosts over 120m reviews for almost 530,000 websites. Founded in 2007 in Copenhagen, the aim of Trustpilot is to bring businesses and consumers together to build trust around a particular product or service and to create better experiences. Trustpilot has witness rapid growth over the past few years and is now a constituent of the FTSE 250 index, despite only having its IPO in March 2021.

The company reported revenues of $102m in 2020, which is an annual compound growth of over 30% since 2013. This may be due to the Covid-19 crisis as users are consistently spending more time online and the e-commerce sector growth has subsequently accelerated. Trustpilot’s revenue is expected to grow faster than 20% per year if the company continues to perform at its current pace, according to analysts at Simply Wall St.

Market cap: £1.44bn
2020 revenue: $102.0m
P/E ratio: N/A

Avast is a leading Czech cybersecurity company that was founded in 1988 and has headquarters in Prague. The company researches and develops security software, machine learning and artificial intelligence for over 435m customers. Some of its products and services include IT security solutions, antivirus software and cloud-based security, which can be used on any type of device. Avast has the second-largest market share among anti-malware applications worldwide and operates in 25 offices.

Avast is dual listed on the London and Prague stock exchanges and it is a constituent of the FTSE 100 index. As the demand to work from home increases, this could signal a promising future for Avast, and the stock hasn’t wavered throughout the pandemic. 2020 witnessed revenue growth of 7.9% to $892.9m with an increase in cash flows and a resilient balance sheet. For the financial year of 2021, the company projected in its annual report that it will once again generate organic revenue growth in the range of 6-8%.

Market cap: £5.97bn
2020 revenue: $892.9m
P/E ratio: 49.75

Sage Group is an accountancy SaaS company that focuses on small to medium businesses and self-employed customers. Based in Newcastle, the company was founded in 1981 and is a market leader for integrated accounting, payroll and payment systems. It is the world’s third-largest supplier of enterprise planning software behind Oracle and SAP, and it has also started to sell subscription-based software to bring in recurring revenue.

As Sage transitions into a subscription-based service, it reported a slight drop in performance in 2020. Organic recurring revenue growth slipped from 11.2% the previous year to 8.5%, as well as regular organic revenue growth, which dropped from 6.0% to 3.7%. However, Sage still boasts a strong balance sheet and is managing to record positive growth percentages rather than negative declines, and it also recorded an increase in its subscription revenues, which grew by 21% to almost £1.14bn.

Market cap: £7.43bn
2020 revenue: £1.9bn
P/E ratio: 35.24