UBS has downgraded its rating for engineering support services firm Cape from ‘buy’ to ‘neutral’, saying that fine-tuning the business model has highlighted more downside.

‘We reiterated our ‘buy’ rating on Cape after the company’s profit warning on November 12th (albeit with a caveat that uncertainties remained) citing the underlying steady business in the UK and the potential for recovery under the new CEO.

‘While we still think those positive points hold, recent newsflow on Australia, further refinements of our model and considerations of the long-term investment case have turned us more cautious and so we downgrade the stock to ‘neutral’,’ the broker said in research report on Friday.

A new management team is now in place but UBS said that ‘unknown unknowns’ still remain.

With legacy issues still being uncovered, the broker said it cannot be certain of the outlook until the completion of a full review, which Cape expects in March.

The broker has cut next year’s earnings per share (EPS) forecasts by 6% and reduced its target price for the shares from 265p to 210p.

Shares were down 2.31% at 195.15p.

BC