BAE Systems, the British maker of military equipment, announced a drop in annual net profit on Thursday but said it expected government defence spending to remain a priority.

Profit after tax dropped 6.5 percent to �854 million ($1.19 billion, 967 million euros) in 2017 compared with a year earlier, with the group hit by a sizeable impairment linked to its cyber security unit, BAE said in an earnings statement.

Group revenue meanwhile grew 3.0 percent to �18.32 billion.

"With an improving outlook for defence budgets in a number of our markets, we are well placed to generate good returns for shareholders," said chief executive Charles Woodburn.

Late last year, BAE said it planned to axe 2,000 jobs, mainly owing to weaker demand for Hawk and Eurofighter Typhoon fighter jets.

On Thursday, BAE said that "defence and security remains a priority for the UK government".

BAE's share price was down 2.0 percent at 589.40 pence in early deals on London's benchmark FTSE 100 index, which was lower by one percent overall.

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