Pre-tax profit at the fit-out, property and regional contracting firm jumped 34% in the year to 31 December 1998 despite an £800 000 drop in profit from its regional businesses.
The company's profit rose from £7.26m in 1997 to £9.76m in 1998. Turnover was up 28% to £425m.
Chief executive John Morgan said one regional business had taken on contracts at insufficient margins, but no clients had been let down. He refused to name the firm.
"We had one business that had some growing pains. It grew too quickly before people had bedded in properly. The management is doing a good job in trying to sort it out and it wouldn't really help them in their task to name the company."
It is understood the problems cost the company about £300 000.
Morgan downplayed the difficulties: "When you have nine businesses, it is unlikely that they will be firing on all cylinders at the same time."
He said he expected turnover from regional contracting to grow 30% in the coming year, which should take Morgan Sindall over the £500m-turnover barrier.
Profits from the regional businesses were also hit by a £300 000 charge to set up Braybon, a maintenance business aimed at the social housing market.
"There is a lot happening in the social housing sector. We think it looks exciting but it's a small start at the moment."
The company's Morgan Lovell and Overbury fit-out businesses recovered from a dip in 1997, contributing £6.3m to profit on a turnover of £162.9m. He said the fit-out businesses' profit margins were running at about 4%, whereas the top margin in regional business was about 2.5%.
Morgan Sindall had £28.4m in cash in the bank at the end of 1998. Morgan said the company was on the look-out for more acquisitions. "We are looking at a lot of different possibilities but we are miles from doing anything at the moment.
"We want to continue to be a group that's a bit different to the others and hopefully come up with some new angles to keep our momentum growing."
Morgan Sindall's property division made a profit of £1.5m on a turnover of £7m.
Morgan hinted that the company was unlikely to expand its portfolio much further.
"We've always said that property is a secondary activity for us. We are fairly cautious about it. Over the past year, the property we have looked at is too expensive."
Morgan said there was no sign of a downturn.
"We think there must be a recession because retailing and manufacturing are having a bad time." However, he added that the firm was finding more work on hospitals and schools, and its enquiry levels were high.