BAE Systems has announced a drop in annual profits from £796 million to £760 million and has warned that the Government's full commitment to the Eurofighter Typhoon programme is vital to its future.

After years of delay, the first of the new generation strike fighter planes are now being delivered to the RAF from BAE's Lancashire sites at Samlesbury and Warton.

But in a statement to shareholders, the company has underlined the importance of the Ministry of Defence confirming all 236 Typhoons it has provisionally ordered.

Lancashire-born chairman Sir Richard Evans, who is retiring later this year, said BAE profits would be restrained until negotiations on the next phase of the development of the Typhoon are concluded.

"In order to determine the way forward and remove uncertainty, a key objective remains to conclude the negotiations with regard to the next phase of Typhoon weapon system development and the second tranche of production aircraft," said Mr Evans.

The aircraft, which is being developed for air forces in the UK, Germany, Italy and Spain, is facing uncertainty due to Ministry of Defence budget cuts.

Analysts are widely expecting the Government to cut the 88 Eurofighters it plans to buy in the third tranche, which consists of a total of 236 jets.

Chief executive Mike Turner, however, was confident none of the four partner nations in the Eurofighter programme is looking to cut the number of fighter aircraft on order.