Water coming out, so pumps ok then i suspect?
Yes.
Run the engine until it reaches normal operating temperature. Tests done on a cold engine usually show lower readings. Remove the HT leads and take out all the spark plugs. The ignition system MUST then be disabled. If this isn't done it will continue to generate high tension voltages into the HT leads which will have nowhere to go with the plugs out. These high voltages will find another route to earth and can damage the ignition system or even the car's ECU. Unplug the low tension connections to the coil or to the distributor. If you aren't sure how to disable the ignition system on your own car then check with a dealer before you start. It is also good practise to unplug the fuel injectors or disable the fuel pump, especially on cars fitted with a catalytic convertor. This prevents unburned fuel getting into the exhaust system during the test. Screw the gauge into cylinder 1 and rest it somewhere you can see the dial while you crank the engine. Open the throttle fully either by pressing the accelerator or wedging the linkage open under the bonnet. If the throttle isn't open then air can't get into the cylinder and the readings will be far too low. Crank the engine until the gauge stops rising and count the revolutions while you do so. It should normally take no more than 10 engine revolutions (5 compression cycles) to get a full reading. You can count the cycles by watching the gauge too - each jump of the needle is one compression stroke. Write down the final reading and also make a mental note of how quickly the gauge rose on the first few cycles. Then just repeat for the other cylinders. Make sure that each cylinder reaches its highest reading after the same number of engine revolutions. If all readings are good then the test can end there. If any cylinders are low then a "wet" test can be done. This involves squirting a few ccs of oil into the cylinder and repeating the test. The oil will help seal bad rings and increase the reading but won't affect it if the problem lies in the valves or head gasket.