Security concerns after attacks in Europe were deterring families and school groups from London, despite the weaker pound making the city better value for overseas visitors, Chief Executive Nick Varney said.

The world's second-biggest visitor attractions group behind Walt Disney said its London sites, which include the London Dungeon and London Eye, said its earnings margin for its city centre attractions would be in the "mid thirties" this year, a downgrade from its previous expectation of about 40 percent.

Year-to-date revenue at the group's indoor attractions fell 0.4 percent on a like-for-like basis, it said. But its resort theme parks performed better, helped by improving visitor numbers to Britain's Alton Towers.

Five people were seriously injured in a crash at the park in June 2015. Merlin was fined 5 million pounds this week, after pleading guilty in April to breaching health and safety rules.

In September last year, it said it might be another two years before visitor numbers there recovered to previous levels.

"We saw our mainstream market of families and thrill seekers coming back," Varney said on Thursday.

"Our Resort Theme Parks Operating Group is now showing year on year revenue growth, reflecting the ongoing recovery in trading at Alton Towers."

But London in particular continued to suppress overall trading performance, he said.

Its Madame Tussauds waxworks in Shanghai also had a tough summer after the Shanghai Disney Resort opened in June, he said.

"We are going to bear down on operating costs, but in markets like London and Shanghai we need to spend more on marketing to hold our share," he said.

The group reported 1.3 percent like-for-like growth in the 38 weeks to Sept.17, short of forecasts of 1.5 percent.

Its shares, which had risen 23 percent in the last 12 months, were trading down 4.6 percent at 448 pence after the earnings update, which prompted Barclays to reduce its earnings per share forecast by 3 percent to 20 pence.

Revenue from its Legoland parks grew 2.2 percent on a like-for-like basis, missing market forecasts, as concerns about the Zika virus hit demand at its Florida site.

(Editing by Kate Holton and Susan Thomas)

By Paul Sandle