In a week when the CBI Industrial Trends survey indicated that life had got a bit easier for manufacturers, employee-owned Tullis Russell reported a recession-beating rise in profits that showed there is still life in unfancied Scottish industries like paper-making. This week's SME Focus highlights the success of another manufacturer that has also been around for more than 100 years, and which discovered a new lease of life after following Tullis Russell's lead on the ownership front.

Name: Fred Bowden.

Age: 44.

What is your business called? Woollard & Henry Ltd.

Where is it based? Dyce, Aberdeenshire.

What does it produce, what services does it offer? We are a renowned manufacturer of dandy rolls - a cylindrical mechanism for putting watermarks and designs on paper. We also provide ancillary equipment for the paper industry and offer a watermark design and consultation service. We have recently diversified into light engineering products for the oil industry.

The company won a Queen's Award for Enterprise in April.

To whom does it sell? The company exports to 22 countries, and supplies to three of the four major banknote producers in the world. In recent years, we have further developed our expertise in manufacturing and fabrication which has allowed us to move into the oil and gas sector where we now supply personnel transfer devices and we see further growth opportunities in this area.

What is its turnover? £3m.

How many employees does it have? 33.

When was it formed? The business was established in 1878.

Why did you take the plunge? The company has a long tradition, but in 2002, following the retirement of Alistair Henry, the company's major shareholder, the employees were facing a period of major uncertainty. With the closure of the business a distinct possibility, an approach was received from the Baxi Partnership to fund an employee buyout, and this has helped ensure continuation and growth of the business. Employee ownership has helped us to involve all our people in the business and to more effectively utilise the expertise built up over many years. At the onset of the buyout, the outlook wasn't particularly rosy, as we were in a difficult and declining market. However, by involving people in the development and implementation of strategic options for growth, we have enhanced our skills, identified new markets, and diversified into different product offerings. The company is now very successful, and our people are benefiting from that success.

What were you doing before you took the plunge? I was working for the Tullis Russell Group, a Fife-based employee-owned company, and so was familiar with both the ethos of employee ownership and Woollard & Henry's core market.

How did you raise the start-up funding? The Managing Director of Baxi Partnership, David Erdal, had moved his family business Tullis Russell Group into employee ownership and he was aware of the succession issue facing Woollard & Henry. Baxi Partnership Ltd offer an investment fund and saw that although the company was facing difficulties in what was a declining market, there was potential in the skilled and committed workforce. The Baxi Partnership provided the funding on a medium to long-term arrangement, allowing the employees to buy the company. In effect this was a highly leveraged buyout with the debt attached to the company rather than to individual employees.

What was your biggest break? Without doubt, when the employee buyout was completed, and we knew that our future was in our hands. It wasn't easy - it took quite a culture change going from a closely managed family business to one in which the employees are the owners. We had to find ways to involve people in the decisions of the business and keep people informed as to company performance. The efforts invested in communication have more than paid off. Our success now is all down to how our people understand our business, our customers and delivering our strategy.

What was your worst moment? Our most difficult times were in the early years immediately following the buyout when we were making losses and were trying to develop new products and markets.

What do you most enjoy about running the business? Compared to a privately owned business we have a high level of employee involvement, but we still need to ensure the business is run in a professional manner where management take the decisions. We still need to generate profits and it's what we do with the profits that differentiates us from many privately owned businesses.

There is a responsibility to inform and engage with employees. We currently hold a weekly meeting which everyone attends, so all employees are kept informed on strategy, performance and other key issues. This does involve a commitment to internal communications, but I see that as a positive process and one that leads to motivated employees - after all, it is in all our interest that the business is as successful as it can be.

What do you least enjoy? The extensive travel involved in servicing our overseas markets. I prefer the day-to-day contact with people in the business.

What is your biggest bugbear? Despite recognition that the employee-owned business model demonstrates success and sustainability, and is supported by all political parties, there are few tangible benefits or incentives for companies being employee owned. The benefits are recognised but there is no real support.

What are your ambitions for the firm? To continue our growth and standing as a world-class supplier in our traditional markets, but also to strengthen our efforts in diversifying into other sectors - we have to remain creative and be competitive. We take great pride in what we do, and in the fact we are a successful local business operating globally. I'd like to see the company continue to innovate and retain our reputation for quality. Business success allows us to offer rewarding careers for young people in the north-east of Scotland looking to gain worthwhile skills.

What are your five top priorities? Growth, innovation and diversification... Creating a great place to work... Allowing employees to realise their value in the company.

What single thing would most help?

The global economic situation to improve, opening up potential markets again and in turn help alleviate the current financial constraints felt throughout the industry.

What could the Westminster and/or Scottish governments do that would most help? By allowing the current Share Incentive Plan structure to have long-term holdings of shares and not force the shares to be distributed. This would simplify and strengthen the structures and security of ownership and improve the tax effectiveness of the process. In the States they have experienced a vast growth in employee-owned companies on the back of offering significant tax breaks to companies adopting this model.

At the Scottish level, it would be good to see more support and assistance available for companies who are providing sustainable prosperity and employment within their communities.

The profits from employee-owned companies tend to stay within the community, rather than go to remote, external shareholders.

What has been the most valuable lesson you've learned? Ensure that everyone within the company understands and supports the business strategy, so that there is clear focus and direction.

How do you relax? When I get the chance I like to read, and I also am a keen football fan. I can also turn my hand to various DIY projects when the need arises.