In the same way that an hour is skipped in many places at the beginning of Daylight Saving Time every year (and the offset changes, e.g. from UTC–5 to UTC–4),
on this particular instant, in Iceland, 28 minutes were skipped because Iceland changed from the offset of Reykjavik’s mean solar time, rounded to the nearest minute (UTC–1:28) to the offset of Reykjavik’s mean solar time, rounded to the nearest hour (UTC–1).
So only from that moment on, Iceland was using UTC–1.
Those two facts aren’t connected. At the time that those 28 minutes were skipped, Iceland was using the equivalent of UTC-01:00.