Five Top Turnaround Plays: Aviva plc, Rolls-Royce Holding PLC, RSA Insurance Group plc, Serco Group plc And Flybe Group PLC

Aviva plc (LON: AV), Rolls-Royce Holding PLC (LON: RR), RSA Insurance Group plc (LON: RSA), Serco Group plc (LON: SRP) and Flybe Group PLC (LON: FLYB) are working hard to return to growth.

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With a cash-rich balance sheet and devoted management team, Flybe’s (LSE: FLYB) drastic turnaround plan is well under way.

The company has cut loss-making routes from its roster and is selling off unwanted assets. Additionally, the carrier has inked code-sharing deals with major international airlines to increase the appeal of its services. 

That said, analysts believe that Flybe’s turnaround won’t take off this year, but forecasts suggest that the company’s earnings will start to fly during 2016. Based on current figures, Flybe is trading at a 2016 P/E of 9.7.

Earnings are set to expand over 200% during 2016 suggesting that the company is trading at a 2017 P/E of only 3.9. 

Drastic measures 

RSA’s (LSE: RSA) turnaround is being orchestrated by Stephen Hester, who had the unenviable job of trying to rebuild RBS after the financial crisis. 

Hester has been praised by some of RSA’s top investors for his work turning around the company. Since he took over, assets have been sold, and RSA’s balance sheet has been strengthened. 

The group is set to report its first full-year profit for two years this year. The company is currently trading at a forward P/E of 14.3. Earnings growth of 8% is expected this year. RSA is trading at a 2016 P/E of 12.6. 

Struggling for cash 

Troubled outsourcer Serco (LSE: SRP) has been forced to conduct a deeply discounted rights issue to stave off bankruptcy. A broad restructuring has also taken place. 

Serco is working hard to turn things around, but only the brave-hearted should bet on the company. At present, the group is trading at a forward P/E of 49. Earnings are set to fall a further 11% during 2016, which means that Serco is trading at a 2016 P/E of 52. 

Plenty of mistakes

In the past, Rolls-Royce (LSE: RR) has been described by some of its shareholders as “intent on destroying shareholder equity”. But now, the company is trying to undo past mistakes. 

The group is looking to slash around 5% of its workforce in an attempt to improve returns and re-ignite earnings growth.

However, according to City figures Rolls’ turnaround won’t take place until next year.

Earnings are set to fall by 9% this year and grow by 6% during 2016. Rolls is trading at a rather daunting 2016 P/E of 15.6, which does not leave much room for error if the company’s turnaround fails to meet its objectives. 


Alongside Aviva’s (LSE: AV) first-quarter results, management reported that the company’s turnaround was “on track and ahead of schedule”. 

The insurer reported a 14% increase in the value of new business during the first quarter, as the rising demand for equity release products offset slowing annuity sales. 

And these results do not reflect Aviva’s £5.6bn merger with Friends Life. The deal has created one of the UK’s largest insurance groups with over 16m customers and £340bn of assets under management. 

Aviva’s plan is to concentrate on integrating the two businesses over the next year or so. After integration, Aviva’s management is looking to expand its Chinese business

City analysts expect Aviva’s earnings to fall slightly this year as the company concentrates on integrating Friends. However, earnings growth of 13% is expected during 2016.

Aviva is trading at a 2016 P/E of 10 and is set to support a dividend yield of 4.7% next year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns shares of Flybe Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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