Hello, and welcome to today's Rolls-Royce Holdings PLC 2014 full year results fixed income conference call. Throughout this call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. Just to remind you, this call is being recorded. Today, I am pleased to present David Smith, Group CFO. Please begin.
Good afternoon, everybody, and thank you for taking the time to join us today. Some of you will have already heard our webcast this morning, so I won't go through the results in detail. Clearly, 2014 was not an easy year for Rolls-Royce, and we know it wasn't an easy year for some of our investors either. Nonetheless, we did meet the guidance for 2014 given in October. Our order book grew 5% excluding the energy business, and that shows the continued customer confidence that underpins our strong medium-term growth prospects. We have today also given new 2015 guidance for revenue, profit, and a number of other factors. In the interest of simplicity and transparency, we are now providing guidance in terms of absolute numerical ranges instead of percentage changes. We've guided 2015 revenue to between GBP 13.4 billion and GBP 14.4 billion, and profit to between GBP 1.4 billion and GBP 1.55 billion.
We see free cash flow at around GBP 200 million, plus or minus GBP 150 million. We do expect continued headwinds on free cash flow as we scale up the civil engine business and continue to utilize customer deposits, particularly partially offset by the early benefits of the action we're taking on costs and cash, such as our focus on inventory. We expect both CapEx and net R&D will be lower in both absolute terms and over time as a percentage of revenue. Our guidance has been based on 2014 FX rates, and therefore assumes no currency effects, either adverse or favorable. We expect underlying restructuring charges to be around GBP 90 million-GBP 100 million. That is about GBP 60 million lower than in 2014. As in 2014, we expect performance delivery to be weighted towards the second half of the year. Our balance sheet remains strong.
This is important because it gives us the ability to withstand the shocks and turbulence which sometimes occur in our industry, and clearly provides confidence to our customers who are buying products that will remain in service for decades and will require decades of aftermarket support, and they do look to our credit ratings. I'm confident and excited about the future growth that we can deliver. However, we must manage the transformation of our industrial base that's required to deliver it very carefully. In the near term, refocus and double our cash and cost activities to help counter some of the increased uncertainty that surround us at the moment. That won't be easy, but I've done this before in other companies. It takes time, but now we have the whole team focused on it. Thank you for your attention, and I look forward to your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, could you please press 0 and then 1 on your phone keypad now in order to enter the queue. After you're announced, just ask your question. If you find that question has been answered before it's your turn to speak, just press 0 and then 2 to cancel. There'll be a brief pause while questions are being registered. Our first question is from the line of Samuel Morton at Credit Suisse. Please go ahead. Your line is open.
Hi, good afternoon. I did not get the chance to listen to the call earlier. I just wanted a little bit more detail on the free cash flow guidance. I was trying to understand what makes the swing factor so big relatively, maybe what factors we should think about changing that free cash flow, either higher or lower. Secondly, I was hoping that you might be able to give us an update on the pension deficit. I could see the numbers in the release today, but I just wondered when there might be a review coming up. Thanks a lot.
Okay. If I take the first question first around cash flow, maybe as you went on the call I'll give you a little bit more context also to the guidance that we gave. Essentially, I would say that in the aerospace side of the business, we will still see growth on the civil side, we'll still see stronger revenue and margins on defense. We've guided a little bit lower on the marine and power system sides of the business, that really reflects, I think, the uncertainty around the oil price at the moment. Marine in particular has a reasonable exposure to the oil and gas sectors, particularly in the offshore markets. We have seen already, we expect probably to see further deferrals of orders, particularly I think around the servicing of equipment in that sector, a reduction in discretionary spend.
As we then try and translate that into cash flow guidance, we've got a couple of things going on. In the civil side of the business, the growth that we will see during 2015 is primarily on products that are being launched, the XWB engine and the Trent 1000. They are not cash generative at the moment in terms of the initial OE sale. In fact, there will be cash losses on some of those engines. Therefore, when we think about our mix of business, that is a negative on cash. We also have the majority of our restructuring spend in 2015, some of which was booked as an accrual last year, but that will really occur mainly in the first half of this year. Thirdly, around our marine business because, again, we see some risk of deferral of orders.
We've been quite cautious around deposits from customers and what we would expect to come. All of that really impacts on our cash guidance. Around the pensions deficit, we have updated, obviously, the data within the balance sheet. There is a surplus on the U.K. funds, very significant surplus on the U.K. funds, which are primarily defined benefit funds. On the overseas funds, some of those are funded, some of those are not, but there is a deficit of about GBP 1.1 billion, I think it is, on that side. Our net pension surplus is still around GBP 600 million. In terms of the next actuarial assessments of those, I'm just going to turn to my colleagues.
The largest fund, the Rolls-Royce pension fund, the next evaluation's this year. That would expect to be concluded at the end of the year.
Right. I hope that answers your question, Sam.
Sorry, I think that was off the second comment. If you could just repeat or paraphrase what was said, that would be great.
The largest U.K. pension fund, there is an actuarial assessment update this year.
Okay, that's great. Thanks a lot.
Just to remind all participants that if you wish to ask a question, could you please press zero and then one on your phone keypad now in order to enter the queue? Then after I announce you, simply ask the question, and if your question has been answered, just press zero and two to cancel. There'll be a further pause while questions are being registered. As there are no further questions at this stage, may I please pass the call back to you to close?
Thank you very much for your attention, and I hope the material that we sent out also will be very helpful to you. Thank you very much, I'm sure we'll talk again in the interim. Thank you.
This now concludes the call. Thank you very much for attending. You may now disconnect your line.