* Forecasts 2017 core earnings of 470-480 million pounds
* Firm will adjust business model to cope with environment
* Shares fall up to 21 pct (Adds detail, CEO comments, updates shares)
LONDON, Oct 17 (Reuters) - Shares in Merlin Entertainments , operator of tourist attractions such as London's Madame Tussauds waxworks, tumbled around 20 percent on Tuesday after the company warned on profits after a series of militant attacks in Britain.
Merlin, which also runs the London Eye, Sea Life and theme parks such as Alton Towers in Britain, said it would not meet current market expectations for core earnings in 2017.
The stock fell up to 21 percent, wiping about 920 million pounds ($1.2 billion) off Merlin's market capitalisation.
Britain has seen five attacks since March, described by police as terrorism, and security fears have had a particular impact on domestic visitor numbers.
"The spate of terror attacks witnessed in the UK marked an inflection point in Midway London (attractions) and UK theme park trading," said Chief Executive Nick Varney.
"Poor weather in Northern Europe and extreme weather in Italy and Florida also impacted peak season trading."
Merlin forecast core earnings for 2017 of 470-480 million pounds. That compares to analysts' average forecast prior to the update of 490 million pounds and 433 million pounds made in 2016.
The company said trading in recent weeks had remained mixed and group like-for-like revenue growth for 2017 was now expected to be "approximately flat" on 2016.
"BATTEN DOWN HATCHES"
The group said it would respond to a volatile market environment and underlying cost pressures, such as labour, by switching its investment around.
It would reduce spending on its existing attractions by 100 million pounds over the 2018-21 period, redirecting the funds into adding more accommodation and on productivity initiatives, such as automated kiosks and back office IT systems.
"We will effectively batten down the hatches and re-direct capital to areas where we know we can grow this business successfully and get good returns on capital," Varney said.
He said Merlin's revised model would deliver 25 percent of its growth from the existing estate and 75 percent from new business development, rather than the traditional 50/50 split.
"The worry is that the decision to reduce investment in standing assets risks hitting attendance levels in future years," said Steve Clayton, manager of Hargreaves Lansdown's Select UK Growth Shares fund, which holds Merlin stock.
For the 40 weeks to Oct. 7, Merlin's like-for-like revenue was up just 0.3 percent. That reflected weaker trading at its London attractions and European theme parks, where like-for-like revenue fell 1.0 percent and 2.1 percent respectively.
Total revenue growth over the 40 weeks was 12.4 percent at actual exchange rates, driven by new business, including the opening of LEGOLAND Japan, five new Midway attractions, and 381 new accommodation rooms.
($1 = 0.7543 pounds) (Editing by Keith Weir)