Is Steven Cunningham going to become the next Alan Sugar of consumer electronics? The short answer is that it is far too early to tell. But Mr Cunningham's AIM-quoted Centurion Electronics is potentially as well-placed in a rapidly growing segment of the electronics market as Amstrad was during the 1980s personal computer boom. If Mr Cunningham comes anywhere near replicating Amstrad's success, investors can look forward to outsize gains.
Few people have heard of Centurion or its founder and 41 per cent shareholder. But there are uncanny parallels between Mr Cunningham and Sir Alan Sugar. Aged 37, Mr Cunningham went to school in Enfield, north London, not a million miles from Sir Alan's stamping ground in Hackney, east London. Both found their calling in sales and marketing. Mr Cunningham started as a photocopier salesman in the City and Sir Alan cut his teeth selling car aerials in the market stalls of Petticoat Lane.
Mr Cunningham, as chairman and chief executive, has positioned Centurion for the emerging market for in-car entertainment systems such as flat screens, DVD players, and portable connectivity devices that enable popular games consoles to be used while on the move. Its products are mainly aimed at backseat passengers and should be a godsend for harassed parents on long journeys with a carload of kids.
The company, floated on the stock market last Christmas, claims pole position in the UK in-car entertainment market, ahead of Alpine, Pioneer, Sony and Philips. Centurion designs, markets and distributes products under its own brand, leaving the manufacture to Asian electronics sub-contractors.
Its products can be fitted at the car maker factory to order, or in the after-market at a dealer's showroom. A separate range of portable so-called "plug and play" systems can be plugged into a cigarette lighter socket in a car, caravan or boat.
The market for in-car entertainment and navigation systems is expected to grow rapidly as miniaturisation, new technology and car-makers' desire to introduce optional accessories helps to drive demand. The after-market of in-car entertainment systems grew eight-fold to about £235m in three years, experts say.
Mr Cunningham says one of the group's key strengths is its ability to integrate small, flat screens and other devices into headrests, the car roof or other parts of the interior. It also has the know-how to develop products compatible with a car's electronic systems, power supply and wiring. "Many of our rivals are focusing on developing information systems for the driver, but we are concentrating on leisure and entertainment products," he says.
Centurion has signed up big names, including BMW, Toyota and Nissan, to offer its products as optional accessories. The group is also in talks with many more manufacturers. Separately, its products are sold through Argos, Currys, Dixons and Halfords. Among motor dealers, it has Pendragon and CD Bramalls as its partners. On average, its products cost £350. Rival systems can cost £1,500.
Given that Centurion is reaching consumers through many channels, growth is likely to be explosive. Although Centurion, with a £14m market value, is still small, its results are already beginning to demonstrate the scale of its market opportunity. Maiden interim profits, reported in May, surged 211 per cent to £398,000 on a 95 per cent increase in turnover to £2.8m.
Those figures put the company on course at least to double taxable profits to £1.4m for the year ended 30 June, not yet reported. Taxable profits of £3m in 2004 also look achievable. For now, the group has sufficient resources to fund its growth. It had more than £1m cash at the half-year and recently moved into new premises of 25,000 sq ft in Welwyn Garden City, Hertfordshire.
The shares have more than doubled since they were floated at 30p last December, but canny fund managers such as Katie Potts of Herald continue to mop up the shares.
At 65p, the shares are valued at an undemanding eight times expected earnings for 2003 and offer a dividend yield of 1.3 per cent. Although small companies can trip if they fail to manage their rapid growth, Centurion's rating is low enough to justify the risk. Climb aboard.
Neil Thapar is equity strategist at the stockbroker DurlacherReuse content