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The body of an elderly German hostage who was murdered by Islamic State group militants has been found, the Philippine government said on Sunday. 

The Abu Sayyaf - a kidnap-for-ransom network that has pledged allegiance to the IS - beheaded Jurgen Kantner, 70, last week after its demands for 30 million pesos ($600,000) were not met. 

Military officials said marines found Kantner's body on Saturday evening in the militants' remote southern island stronghold of Sulu.

"The Philippine government is deeply saddened but resolved as ever to respond to the recent discovery of the body of Mr. Jurgen Kantner," President Rodrigo Duterte's spokesman Ernesto Abella said in a statement.

Troops have clashed with the Abu Sayyaf in recent days, leaving 29 soldiers injured and 14 militants dead, according to the military which says it has been unable to recover the bodies of slain guerrillas.  

"It was not easy to find it because of the fighting with the Abu Sayyaf kidnap group that resulted in the wounding of 29 of our men and in the wounding of many of the enemy," said Colonel Cirilito Sobejana, head of an anti-terror task force in the southern islands.

He said the government was arranging with the German embassy to repatriate Kantner's body for burial.

Kantner's yacht, the Rockall, was found drifting on 7 November off the southern Philippines with the body of his female companion, Sabine Merz, who had been shot. The Abu Sayyaf claimed the kidnapping.

Kantner's remains are in a military hospital morgue in Sulu while officials prepare documentation for transporting the body, authorities said. 

President Rodrigo Duterte has apologised for failing to save Kantner and said the military had stepped up operations against the militants. 

The Abu Sayyaf, established with seed money from Osama bin Laden's al-Qaeda network, has been kidnapping foreigners and locals for decades and holding them for ransom.

It is believed to still hold at least 19 foreigners and six Filipino hostages.

The group, blamed for the nation's worst terrorist attacks, has used the support of local communities, millions of dollars in ransom and collusion with corrupt local officials to defy decades of military operations.