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2011 was a year of great progress for the Company. We saw accelerated organic growth in our core business and supplemented this with two significant acquisitions. With continued improvement in our financial performance and achievement of key operational milestones, I am pleased with our development. I wanted to use this opportunity to reflect on some of these matters whilst looking forward to our prospects in 2012.
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At euNetworks we believe that bandwidth changes everything.It is the essential enabler of the digital age. It underpins the Internet. It connects individuals to each other, businesses to consumers, enterprises to enterprises, governments to citizens and people the world in new and unexpected ways. We believe that every business can benefit from bandwidth without limits.
In many ways, this can be seen as a contrarian view. For years the telecoms industry has been focused on bandwidth being the bottleneck in Wide Area Networks. Further, equipment and networks have been designed in a way to minimise the use of bandwidth. Our view is that just doesn't make sense any more. The Internet has been as transformative a step in society as the printing press and the internal combustion engine. The content is out there and the nature of business has been radically overhauled with different channels, different markets and different methods. The nature of consumption has fundamentally changed. Yet despite this, there remains this idea that it is in a business' interest to throttle bandwidth and limit content consumption. Meanwhile, across every industry sector there are examples of how companies who have embraced the Internet and its possibilities have thrived and become leaders in their space. Bandwidth is an absolutely key enabler of this.
At euNetworks we deliver bandwidth from the ground up, enabling our customers through our deep metropolitan fibre networks. We seek to deliver a superior customer experience based upon those
facilities based networks, our commitment to great data integrity and our fantastic people. We seek to be the low cost producer in our space by keeping our production system as lean and as simpleas possible. We are a bandwidth infrastructure company. We area facilities based telecommunications company, horizontally integrated and with unique assets that are hard for others to replicate. Of the 15 city networks we own, we have 13 operational today in Western Europe covering Germany, the Netherlands, France, the United Kingdom and Ireland. In each of these 13 cities, we have a duct network of between one and six ducts, through which our fibre optic cables run. We operate a very thin slice of the overall communications stack. Our portfolio is focused upon Dark Fibre, Wavelengths, Ethernet, Internet Protocol (IP) services and Colocation.
Today we seek to leverage our assets to the benefit of our customers and generate a superior return for our shareholders. Our key focus is moving our business to scale. And at scale, our goal is for the business to reach an adjusted EBITDA margin of 45% and operating free cash flow of 15%. From the capital we spend, 85% of this will be on success based projects, meaning a high rate of return on that spend. As I have mentioned before, we seek to deploy capital efficiently. It fuels our growth.
2011 saw accelerated growth in our core business. Headline recurring revenues grew 75%, and like for like recurring revenue growth in our core network services (excluding LambdaNet and TeraGate) of Fibre, Wavelengths and Ethernet was 26%. Total new sales order contracts reached €54.5m, increasing 96% from 2010. Our financial services and wholesale customers attributed to a good portion of that growth, but we also began to see deeper penetration into alternative segments such as media, advertising and corporates. We expect these trends to increase across further segments in 2012.
As I noted last year, distributed data and the mobility of data are the two dominant generic demand drivers. Distributed data covers a range of services from straight Data Centre deployment through Cloud Computing in its every varietal. Latency, security and compliance are fundamental to the delivery of these services and fibre based services are the best way to serve those needs. We see these distributed architectures further accelerating in 2012.
Data mobility is intrinsically linked in the business environment, but also has its consumer application. The crossover has an interesting challenge for businesses, with the trend of Bring Your Own Device (BYOD) creating all sorts of opportunities and complications for businesses today. For companies like us however, the ever-increasing ‘always-on' connectivity is a positive trend. The Chief Executive at one of our comparable companies in the United States recently described how they support a college which has 30,000 students, but more than 70,000 connected devices. In last year's message, I spoke of the surge in mobile data growth, which accelerated in 2011. I am very pleased to say we have begun to benefit from that growth, and are supporting mobile operators with fibre based network roll outs.
As well as strong performance growing our business organically and indeed, strong demand for our services going into 2012, we also grew our business inorganically for the first time in 2011. I thank our Shareholders who supported us through this process, extending us a loan to fund this activity. We closed the LambdaNet acquisition in May 2011 and at the same time launched a Rights Issue to pay back shareholder loans, accumulated and associated interest and fund working capital. LambdaNet was a strategic acquisition for euNetworks, creating value by increasing our addressable market with an expanded customer base. Immediate scale was enabled across our German operations, while offering the opportunity to reduce network expense and leverage the combined networks. The TeraGate acquisition, which closed in July 2011, was enabled as a result of acquiring LambdaNet. This business delivered further customers and product capability. Our German operations and our overall business is much bigger than it was this time last year and I am hugely encouraged by the team's ability to integrate the three businesses while continuing to drive organic growth.
Our Operations function is fundamental to our customer experience and our ability to retain revenue as we move forward. As I have consistently stated since joining euNetworks, our relentless pursuit is to link good data to processes to systems to platforms in a way that is without friction. The net outcome of that is we will scale effectively, while maintaining our lean production system. We will also deliver a fantastic customer experience. We continue to make progress and our force.com platform remains at the heart of our operations.
One of our core values is ‘We are here for our customers. We understand that they put their trust in us and we never forget it'. This is fundamental to our business, and fundamental to why we do what we do - bandwidth without limits. Our German sales team leader describes how on a Friday night he picks his son up from Basketball practice at 1830 in winter months. It's dark, he is young and it's not a particularly safe environment. Yet every Friday night he comes running out of his training and expects his Dad to be there waiting for him. There is never any doubt in his mind. That's how we like our customers to thinks of us - they never doubt us because they never need to. We're always there. Our network enables them. And our systems and delivery platform underpin all of that.
Our team grew significantly in 2011, with acquisitions driving a good deal of that growth. The most notable addition to euNetworks in 2011 was John Scarano, co-founder of Zayo Group in the United States. John joined us in January and was instrumental through the process of due diligence, negotiations and closing both acquisitions in Germany. In 4Q 2011 he became Executive Vice President responsible for Finance, Operations and Corporate Development. On 1 January 2012, John was also appointed to the position of Vice Chairman and an Executive Director to our Board of Directors. John is based in our London headquarters.
Finally the values we hold as a company remain fundamental to our development. I appreciate that there is some repetition in this year's message, but we do believe our values are fundamental. They guide the way we make decisions. However great our assets, our data, or our processes, without everyone in our company living and breathing the same core beliefs, and understanding why we are here, what and how we deliver to our customers, we will never maximise the value that we could create.
Our values are these:
I consider that we have made a great deal of progress in 2011 and are building a great business for our shareholders, our people, and the communities in which we operate. That work will continue and accelerate in 2012. We all thank you for your support.
Chief Executive Officer
