Flaga Group hf. - Company Announcement

- Profit warning due to impairment of goodwill

The Board of Directors of Flaga Group announces today that the Company has     
decided to do an impairment of goodwill which will have significant negative
impact on the fourth quarter results and the Annual Accounts for the year
2007. 

An estimated impairment of approximately USD 11.5 million will be made on      
goodwill associated with Flaga's acquisition of Medcare Systems U.S. in 2002
(now known as Embla Systems). Impairment will not be made on goodwill
associated with the acquisition of Sleeptech in 2004, which will continue to be
recorded on the Company's Balance Sheet. 

The information contained in this announcement is only a preliminary estimate  
performed by the management of the Company and is not based on audited or
reviewed figures. Flaga Group will publish its Annual Account for 2007 on 27
March 2008. 

For further information, please contact:	
David Baker, CEO, tel: +1 303 962 1780 
Criss Sakala, CFO, tel: + 1 303 962 1781