Bovis Homes has set aside £7m to compensate customers who were sold houses that were unfinished and had electrical and plumbing faults.
The house builder said the recent experiences of a significant number of customers "fell below the high standards they rightly expected".
To tackle the problem Bovis is introducing a series of measures to improve customer service.
It announced a 3% fall in pre-tax profits for last year to £154.7m.
However, revenue was up 11% to £1,1bn and the number of homes completed rose 1% to 3,977.
Shares slid more than 8% to 772p.
In its results statement Bovis said its "ambitious growth strategy" over the past five years had led to "progressively developing operational challenges".
"Our customer service standards have been declining for some time and combined with the delays to production towards the year end, we have entered 2017 with a high level of customer service issues," said interim chief executive Earl Sibley.
"Our customer service proposition has failed to ensure that all of our customers receive the expected high standard of care," he added.
The company said its production processes had not been "sufficiently robust" to cope with its growth strategy and resources shortages in the industry.
Also it said it had not designed and resourced its customers service proposition and process appropriately to "deliver a 'customer first' culture".
Chairman Ian Tyler said the measures the group was introducing to tackle the customer service problems meant Bovis would complete 10% to 15% fewer houses in 2017 compared with last year, before returning to normal levels.
"The fundamentals of the business remain strong, with our market positioning reflected in our high quality southern biased land bank," he said.
In January David Ritchie stepped down as chief executive after eight years in the role, weeks after warning over profits.